The Power of Precision-Lessons from Lyles v. Santander Consumer USA, Inc

FOR YOUR PRACTICE | CASE NOTES

The Power of Precision: Lessons from Lyles v. Santander Consumer USA, Inc.

BY PAMELA LANGHAM, ESQ.

THE RECENT DECISION in Jabari Lyles v. Santander Consumer USA, Inc.1 by the Supreme Court of Maryland underscores the critical importance of precise contract drafting and the nuanced interpretation of assignment clauses. This case centered on a dispute over whether Santander Consumer USA, Inc. (Santander), as the assignee of a retail installment sales contract (RISC), could enforce an arbitration agreement contained in a separate buyer’s order. The Supreme Court of Maryland’s ruling, which reversed the Appellate Court of Maryland’s decision, ultimately hinged on the restrictive language in the RISC’s integration clause. This outcome demonstrates how meticulously drafted contractual provisions determine the scope of rights transferred in an assignment, reinforcing the need for clarity in legal agreements.

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Jabari Lyles v. Santander Consumer, No. 2, September Term, 2025.

FOR YOUR PRACTICE | CASE NOTES

The Power of Precision: Lessons from Lyles v. Santander Consumer USA, Inc.

BY PAMELA LANGHAM, ESQ.

THE RECENT DECISION in Jabari Lyles v. Santander Consumer USA, Inc.1 by the Supreme Court of Maryland underscores the critical importance of precise contract drafting and the nuanced interpretation of assignment clauses. This case centered on a dispute over whether Santander Consumer USA, Inc. (Santander), as the assignee of a retail installment sales contract (RISC), could enforce an arbitration agreement contained in a separate buyer’s order. The Supreme Court of Maryland’s ruling, which reversed the Appellate Court of Maryland’s decision, ultimately hinged on the restrictive language in the RISC’s integration clause. This outcome demonstrates how meticulously drafted contractual provisions determine the scope of rights transferred in an assignment, reinforcing the need for clarity in legal agreements.

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Jabari Lyles v. Santander Consumer, No. 2, September Term, 2025.

Facts

Decision

In October 2015, Jabari Lyles (Lyles) purchased a vehicle from Deer Automotive Group, LLC (Deer Automotive).

The transaction involved two key documents. The first was a purchase order (Buyer’s Order) containing a notice referencing a “separate arbitration agreement” that was supposedly incorporated by reference. It listed additional terms and conditions, including, among others, an irrevocable arbitration clause to settle “by binding arbitration” any controversy, claim, or dispute arising out of or relating to the purchase of the vehicle. The “separate arbitration agreement” was supposed to be attached to the Buyer’s Order, but Lyles claimed he never received a copy. The second document was an RISC, which outlined the financing terms but did not include an arbitration provision. The RISC was subsequently assigned to Santander.

Under § 3-207 of the Courts and Judicial Proceedings Article of the Annotated Code of Maryland, a circuit court is solely responsible for deciding, without involving a jury, if an arbitration agreement exists for the particular dispute.

A court must order arbitration if it finds that an arbitration agreement exists.

Lyles later filed a putative class action, alleging that Santander violated Maryland’s Credit Grantor Closed-End Credit Provisions by improperly charging and receiving convenience fees for the payments made on its loans. Two years later, Santander filed a motion to compel arbitration, arguing that it had the right to enforce the arbitration agreement referenced in the Buyer’s Order, even though the Buyer’s Order and the arbitration agreement were not explicitly assigned to Santander. Lyles opposed the motion, contending that he never signed or received a separate

The Supreme Court reversed the Appellate Court’s judgment, holding that Santander could not enforce the arbitration agreement against Lyles. The court first established that the arbitration clause—located in the Buyer’s Order only—was a binding obligation between Lyles and the dealership, Deer Automotive. The court then turned its attention to the interpretation of the contract language in the RISC. While the arbitration integration clause in the RISC defined the entire agreement between Deer Automotive and Lyles as the RISC and all other documents, including the Buyer’s Order, it contained a limiting provision regarding the assignee: “only this contract [the RISC] and the Addenda to this contract comprise the entire agreement between you and the assignee relating to this contract . . . “ Consequently, the RISC clearly defined the entire agreement between Lyles and Santander, as assignee, solely of the RISC and the addenda to the RISC, explicitly

This outcome demonstrates how meticulously drafted contractual provisions determine the scope of rights transferred in an assignment, reinforcing the need for clarity in legal agreements. arbitration agreement referenced in the Buyer’s Order and that Santander, as assignee of only the RISC, could not enforce the separate provision in the Buyer’s Order.

excluding all other documents, such as the Buyer’s Order containing the arbitration clause and agreement. Since the arbitration provisions were not included in the assignment, Santander lacked the authority to enforce them.

The circuit court granted Santander’s motion to compel arbitration, concluding that the Buyer’s Order and RISC constituted a single contract and that Santander, as assignee, obtained the right to enforce the arbitration agreement. The Appellate Court of Maryland (Appellate Court) affirmed, holding that the Buyer’s Order and RISC constitute a single contract. Lyles then petitioned the Supreme Court of Maryland for a writ of certiorari, which the Supreme Court granted.2

The court specifically rejected Santander’s position that the Buyer’s Order and RISC should be read together as a single contract, reasoning that such an interpretation would render the RISC integration clause meaningless, as the limited word “only” in the RISC’s integration clause would lose its significance. The court also distinguished this case from Rota-McLarty v. Santander Consumer USA, Inc., where the Fourth Circuit Court of Appeals held that Santander could enforce an arbitration provision in a

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Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690 (4th Cir. 2012).

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The case demonstrates that specific language in contracts, particularly integration and assignment provisions, can significantly affect the outcome and the scope of each party’s rights and obligations.

Buyer’s Order. The court noted that the RISC in Rota-McLarty did not contain a provision that explicitly limited the scope of the assignment, as the RISC in the Lyles case did.

In summary, the court concluded that the arbitration agreement in the Buyer’s Order was not part of the assignment to Santander, and thus Santander could not enforce it.

Conclusion This dispute between a vehicle purchaser and an assignee lender highlights the power of specific contractual language.

The central issue, an assignee’s right to enforce an arbitration clause from a separate, unassigned document, was resolved by the precision of the integration and assignment clauses.

The case demonstrates that specific language in contracts, particularly integration and assignment provisions, can significantly affect the outcome and the scope of each party’s rights and obligations. When contracts are assigned, the scope of the assignment is determined by the explicit language of the agreement. Not all rights and obligations under the original contract are automatically transferred to the assignee when there is conflicting language—stating otherwise. This case demonstrates the importance of attorneys carefully drafting assignment clauses to ensure clarity regarding the rights and obligations transferred.

While Maryland law favors arbitration, this ruling shows that courts will not enforce arbitration agreements if the contract language fails to support their proper assignment and enforcement by a third party. Attorneys must carefully draft assignment clauses to ensure absolute clarity regarding the full extent of rights and obligations being transferred.

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