We pick up where the 4th Circuit left off a few weeks ago — with federal circuit courts finding ways to avoid enforcing arbitration agreements that are obtained years after litigation has commenced.
In Dasher v. RBC Bank (USA), __ F3d. ___, 2018 WL 832855 (11th Cir. Feb. 13, 2018), the plaintiffs alleged the bank had processed debit card transactions in such a way that it would increase overdraft charges. Although the date is not listed, the case appears to have begun in 2009. During the course of the litigation, the first bank was acquired by another bank (“new bank”) and issued new customer account agreements in 2012 which lacked arbitration agreements. A motion to compel based on the arbitration clause in the earlier agreement was denied, and the new bank appealed. At about the same time, the new bank sent customers an amended agreement that included an arbitration provision. The amended agreement was effective in February 2013.
The new bank lost its appeal. After the case was remanded to district court, the new bank again moved to compel arbitration, this time based on the February 2013 amendment. The motion was made in December of 2014. The district court denied the motion, finding the new bank had waived its right to arbitrate under the 2013 amendment.
On appeal, the 11th Circuit agreed that the new bank could not compel arbitration, but for a different reason. It held that the new bank failed to prove that the parties had agreed to the 2013 amendment. The opinion found that under North Carolina law, it could consider the parties’ words and actions to determine whether the parties intended to amend the 2012 customer agreement. And here, it concluded that the named plaintiff gave mixed responses to the proposed 2013 amendment. Through counsel, the named plaintiff was fighting the motion to arbitrate in the courts. But his “uncounseled response” was silence. The court was clearly bothered by the fact that the new bank sent its proposed amendment directly to all of its customers, without advising either the plaintiffs’ attorney or the court. Therefore, while it did not want to write “an ethics opinion,” it still refused to find the 2013 amendment was enforceable.
This is an important decision for many reasons. First, it offers future courts an alternative argument to “waiver” in situations like this one. (As the 4th Circuit decision showed, waiver didn’t seem to sit well.) Second, it offers an important reminder to defendants that courts do not take kindly to repeated motions to compel arbitration based on evolving arbitration agreements. While they may be willing to overlook it if the “redo” motion is due to a change in the legal landscape, that’s probably the only good reason. That means the left hand (the litigators and the in-house counsel overseeing them) always need to know what the right hand (whomever is deciding what goes in the customer contracts) is doing.
By Liz Kramer