Arbitration
Genesis Financial Solutions Inc. v. Ford
Date: Oct. 17, 2025
Issue: Whether the Federal Arbitration Act (FAA) preempts separate and heightened consideration requirements for arbitration clauses.
Case Summary: ABA filed an amicus brief supporting Genesis Financial Solutions Inc.’s certiorari petition asking the U.S. Supreme Court to reverse a Fourth Circuit ruling that invalidated an arbitration clause in a bank deposit agreement containing a general change-in-terms clause.
In 2023, Steve Ford brought a putative class action against Genesis alleging it marketed and collected on credit card loans and acted as lenders without the required licenses in violation of the Maryland Credit Service Business Act. Ford had a credit card issued by First Electronic Bank, serviced by Genesis, that included an arbitration clause and prohibited class actions. After failing to repay his balance, the debt was transferred to Spring Oaks Capital SPV LLC. Genesis moved the case to federal court and requested to compel arbitration, but Ford opposed, citing Maryland law that requires arbitration clauses to be treated as separate contracts with their own consideration.
Judge Deborah Boardman of the Maryland District Court denied Genesis’s motion to compel arbitration, ruling that Maryland law requires separate consideration to support an arbitration clause. Under the “Cheek Rule,” an arbitration agreement is unenforceable if it lacks mutuality of consideration and constitutes an illusory promise. The court rejected Genesis’s argument that the FAA preempts this rule, finding that Genesis’s ability to amend the arbitration clause through a change-of-terms provision rendered the mutual promises to arbitrate unenforceable. On appeal, a divided Fourth Circuit panel affirmed, holding that the FAA allows states to impose separate, heightened consideration requirements applicable only to arbitration clauses. The panel relied on the Cheek Rule to invalidate the credit card agreement before it, which included industry-standard arbitration and change-of-terms provisions. It reaffirmed that Maryland treats arbitration clauses as severable contracts requiring independent consideration. Genesis petitioned the U.S. Supreme Court for review.
In its petition Genesis made four main arguments. First, Genesis argued that the Fourth Circuit’s decision deepens conflict with decisions, from multiple courts of appeal. Second, Genesis argued that the Fourth Circuit’s decision was incorrect. Third, Genesis argued the question presented carries exceptionally important consequences for countless commercial contracts. Finally, Genesis argued that this case provides a perfect vehicle to resolve the question presented.
ABA urged the Supreme Court to grant Genesis’s certiorari petition. ABA underscored that the agreement struck down by the Fourth Circuit — containing an arbitration clause and general change-in-terms clause — was consistent with the general contractual structure employed in the credit card industry. ABA stressed that if the Fourth Circuit’s erroneous decision stands, this standard contractual structure would effectively be banned for Maryland businesses or out-of-state businesses dealing with Maryland consumers. In turn, this would unsettle widespread legal arrangements underpinning the credit card market. ABA noted that credit card lending operates on a national scale, and institutions doing business across state lines would be forced to navigate Maryland’s rule. Moreover, open-ended credit issuers must retain flexibility to adjust the terms of credit agreements and warned that the Fourth Circuit’s decision unevenly undermines the enforcement of valid arbitration clauses.
ABA also argued that requiring separate consideration for arbitration clauses violates the FAA. The FAA mandates equal treatment of arbitration agreements and permits invalidation only under general contract defenses like fraud or duress — not arbitration-specific rules. Yet the Cheek rule uniquely demands independent consideration for arbitration clauses, unlike any other contract term supported by the same exchange. The Fourth Circuit justified Cheek by citing Prima Paint, which allows arbitrators to decide challenges to a contract’s overall validity. But ABA argued that Cheek misapplies that principle by treating arbitration clauses as stand-alone contracts requiring separate consideration rather than relying on the main agreement’s consideration.
Bottom Line: The Fourth Circuit alone held that the FAA permits states to impose separate heightened consideration requirements that apply only to arbitration clauses. Every other appellate court, including the First, Second, Third, Sixth and Eighth Circuits, has held that the FAA preempts such requirements as improperly discriminating against arbitration clauses.
Document: Brief
