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A credit union’s “persistent disavowal” of the arguments it raised on rehearing led the Indiana Supreme Court to reaffirm its prior ruling that the credit union cannot compel arbitration in a customer’s class-action.
However, the justices left open the possibility of one day revising the standard governing the offer and acceptance of unilateral contracts between businesses and consumers.
As he did in October, Justice Christopher Goff wrote for the high court Thursday in Tonia Land, individually and on behalf of all others similarly situated v. IU Credit Union, 23S-CP-115.
At issue is the class-action lawsuit that Tonia Land filed against IU Credit Union alleging wrongful assessment of overdraft fees, breach of contract, breach of duty of good faith and fair dealing, unjust enrichment, and a violation of Indiana’s Deceptive Consumer Sales Act.
The credit union moved to compel individual arbitration, arguing that Land had accepted an arbitration requirement when she did not opt out of that requirement within 30 days of receiving notice of it via email and mail.
The Monroe Circuit Court agreed, but the Court of Appeals of Indiana reversed.
In their original opinion, the majority justices also found that the arbitration requirement was not binding.
“Even assuming Land was aware of the offer to arbitrate (which she disputes), there’s no evidence of her ‘definite and substantial’ reliance on the proposed arbitration Addendum,” Goff wrote in October. “In fact, by filing a class-action complaint with the trial court, Land’s actions point in the opposite direction.”
The credit union then sought rehearing, arguing that the Supreme Court failed to address certain legal authorities and arguments raised on appeal and transfer.
“We hereby grant the petition to address these claims,” Goff wrote in Thursday’s rehearing opinion. “While we affirm our original opinion in full, we leave open the possibility, in some future case, of adopting a different standard governing the offer and acceptance of unilateral contracts between businesses and consumers.”
IU Credit Union’s first argument on rehearing was that the justices failed to address Cornell v. Desert Financial Credit Union, 524 P.3d 1133 (Ariz. 2023), and Section 3 of the Restatement of Consumer Contracts.
The credit union “faulted” the court for failing to consider those authorities in its opinion, prompting the justices to offer some advice in a footnote.
“While we appreciate vigorous legal advocacy,” the footnote says, “we strongly caution IUCU’s counsel against the indecorous tone of argument in their rehearing petition.”
Turning to the merits, the Indiana justices noted that in Cornell, the Arizona Supreme Court adopted Section 3 of the Restatement of Consumer Contracts, but only as to “on-going, at-will, consumer-business relationships” that “consist of the day-to-day offer and acceptance of unilateral contracts.”
“It would certainly be fair to characterize the relationship between Land and IUCU as an ‘on-going, at-will, consumer-business relationship,’” Goff wrote. “But IUCU, in that section of its appellee’s brief referred to in its notice of additional authorities, disclaimed — repeatedly — its authority under the original agreement’s change-in-terms clauses to ‘unilaterally impose the Arbitration [Addendum] on anyone.’ Those agreements, IUCU emphasized instead, were ‘necessarily bilateral,’ and the issue in this case, IUCU insisted, was ‘whether the parties can enter into a new contractual amendment regarding arbitration by establishing the three essential elements of any contract under standard contract law — offer, acceptance, and consideration.’
“This emphasis on the bilateral nature of the agreements aligns with IUCU’s reliance on Section 69 of the Restatement (Second) of Contracts, which recognizes a party’s silence as acceptance in only a few exceptional circumstances — and which we expressly based our holding on,” Goff continued. “By contrast, Section 3 of the RCC recognizes silence by acceptance as the default rule, so long as the offeree received reasonable notice and an opportunity to opt out without penalty and continued business with the offeror.
“To be sure, Section 3 of the RCC may very well offer ‘an effective modification procedure that fairly balances the public policies of economic efficiency and consumer protection.’ And we recognize the practical difficulties that businesses may face in securing affirmative consent to contract modifications from existing customers. For these reasons, we leave open the possibility of adopting Section 3 of the RCC in some future case. But, given IUCU’s arguments on appeal and on transfer, neither Section 3 of the RCC nor Cornell apply to this case. We thus did not improperly fail to consider those authorities.”
The credit union also argued that the justices failed to consider its “alternative” argument — that is, that it “properly applied” modification clauses to Land’s agreement “when it added an additional forum of arbitration to an already existing term establishing a forum for resolving disputes.”
But the justices rejected that argument, writing, “We view this claim as nothing more than a variation of IUCU’s first argument, signaling a labored attempt to litigate theories that IUCU expressly rejected on direct appeal.”
“We recognize the practical difficulties that businesses may face in securing affirmative consent to contract modifications from existing customers,” Goff wrote. “And for that reason, we leave open the possibility of adopting, in some future case, a different standard governing the offer and acceptance of unilateral contracts between businesses and consumers.
“But given IUCU’s emphasis on the bilateral nature of the agreements here, and its persistent disavowal of authority to unilaterally impose the arbitration Addendum, we find no merit in IUCU’s arguments on rehearing,” he concluded. “We thus affirm our original opinion in full.”
Justice Mark Massa dissented from the October opinion, but all justices concurred in Thursday’s opinion on rehearing.
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