The Supreme Court of Maryland issued a ruling in *Lyles v. Santander Consumer USA Inc.* that clarifies two important aspects of contract law: the limited role of circuit courts in arbitration disputes and the circumstances under which arbitration clauses transfer between contracts.
The case, argued on Sept. 8, 2025, and decided during the September Term 2025, involved Jabari Morese Lyles and Santander Consumer USA Inc. in a dispute that originated in the Circuit Court for Baltimore City. Justice Gould authored the opinion for the high court.
The court addressed the fundamental question of when arbitration agreements contained in one contract automatically apply to related contractual arrangements. The ruling establishes that assignment of a contract containing an arbitration clause does not automatically assign that arbitration provision to other related agreements unless the assignment language specifically addresses the arbitration clause.
Under Maryland law, specifically section 3-207 of the Courts and Judicial Proceedings Article of the Annotated Code of Maryland, circuit courts have a narrow role when faced with petitions to compel arbitration. The Supreme Court of Maryland emphasized that trial courts must limit their inquiry to determining whether an arbitration agreement exists for the specific dispute at hand, and this determination must be made without a jury.
This procedural clarification is significant because it streamlines the arbitration process by preventing lengthy factual disputes about the existence of arbitration agreements from proceeding to jury trial. Instead, judges must make these determinations as a matter of law based on the contractual documents presented.
The more complex aspect of the ruling dealt with contract interpretation when parties document their agreements across multiple instruments. The court held that while courts should reconcile and enforce the provisions of each instrument as much as possible, each contract maintains its distinct legal identity unless clearly merged through specific language.
The Supreme Court of Maryland recognized that two separate instruments can sometimes be read together as forming a single contract, but this interpretation depends heavily on the specific language used by the parties and their demonstrated intent. The court emphasized that automatic assignment does not occur simply because contracts are related or involve the same parties.
The assignment clause language becomes the critical factor in determining whether arbitration provisions transfer from one agreement to another. The court's analysis suggests that parties must use clear, specific language if they intend for arbitration clauses to apply across multiple contractual relationships.
This ruling has significant implications for consumer finance companies like Santander Consumer USA Inc., which often use multiple contracts and assignments in their business operations. The decision requires these companies to be more explicit in their contract drafting if they want arbitration clauses to apply broadly across related agreements.
For consumers, the ruling provides some protection against being bound by arbitration clauses they may not have specifically agreed to in each individual contract. The decision prevents companies from automatically extending arbitration requirements to new agreements simply by assigning existing contracts.
The case also highlights the ongoing tension between arbitration and traditional litigation in consumer disputes. While arbitration is generally faster and less expensive than court proceedings, consumer advocates often argue that arbitration clauses can limit consumers' legal rights and access to the courts.
The Supreme Court of Maryland's approach in *Lyles* reflects a careful balance between enforcing legitimate arbitration agreements while preventing their overextension beyond what parties actually agreed to. By requiring specific language for assignment of arbitration clauses, the court ensures that parties have clear notice of when they are giving up their right to jury trial.
The timing of this decision is particularly relevant as many industries increasingly rely on arbitration clauses in consumer contracts. The financial services industry, in particular, has faced scrutiny over the use of mandatory arbitration clauses that can limit consumers' ability to pursue class action lawsuits.
Legal practitioners representing both businesses and consumers will need to carefully review existing contract templates and assignment provisions in light of this ruling. Companies may need to revise their standard language to ensure arbitration clauses apply as intended across multiple agreements.
For circuit courts handling similar disputes, the *Lyles* decision provides clear guidance on the limited scope of judicial review when parties seek to compel arbitration. Judges must focus narrowly on whether a valid arbitration agreement exists for the specific dispute rather than conducting broader factual inquiries that might be appropriate for jury consideration.
The case represents another step in the ongoing evolution of arbitration law in Maryland and may influence how other state courts approach similar questions about the assignment and scope of arbitration clauses in multi-contract relationships.