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A woman who filed a class-action complaint against a credit union didn’t accept an addendum to an agreement that would have forced arbitration, a split Indiana Supreme Court has ruled in reversing a trial court’s decision.
Tonia Land is a member of IU Credit Union and maintains at least two checking accounts with the not-for-profit banking provider.
In an “Account Agreement” she received when she first became a member, the credit union agreed to notify its members of any changes in the agreement’s terms, either by mail or email.
When Land registered for one of her checking accounts, she received an email with a second agreement — a “Disclosure” — that permitted the credit union to “modify the terms and conditions applicable to the Services from time to time” and send notice via email. Under the terms of the disclosure, Land is deemed to have received any such notice three days after it is sent.
In 2019, the credit union sent customers a proposed modification to its agreement, which permitted either party to require arbitration to resolve disputes without the other party’s consent and prohibited members from initiating or joining a class-action lawsuit.
The addendum to the agreement also specified members had a right to opt out of the addendum if they informed the credit union within 30 days of receiving the notice. Members were required to send the credit union written notice; otherwise, the addendum would be binding.
Land maintains only one of her checking accounts online, so the credit union sends her monthly statements and change-of-terms notices by regular U.S. mail and by email. The credit union adhered to the arrangement when it sent the addendum.
But the email it sent had a subject line with the same language used for monthly account statements, indicating that only a “New eStatement” was available.
The body of the email didn’t mention the addendum, but a link in the email would have directed Land to her monthly account statement, the first page of which referenced the addendum.
The document Land received by U.S. mail consisted of a two-page monthly account statement, the first page of which also noted the addendum in bold, all-capital letters and directed her to review the updated terms “included in this mailing.”
Land claims to have seen neither version of the addendum and didn’t notify the credit union of her preference to opt out.
Land later filed a class-action complaint against the 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, citing the addendum, moved to compel individual arbitration.
After a hearing, the Monroe Circuit Court found in favor of the credit union, finding “an enforceable agreement to arbitrate” between the parties.
On interlocutory appeal, the Court of Appeals of Indiana reversed, holding the credit union failed to provide reasonable notice to Land by either email or regular mail. The Court of Appeals also ruled Land’s silence and inaction didn’t constitute acceptance under the Restatement (Second) of Contracts.
The credit union petitioned for transfer. The Supreme Court granted transfer in May and heard oral arguments in June.
A majority of justices ruled in favor of Land, finding that while the credit union gave her reasonable notice of its offer to amend the agreement, her subsequent silence and inaction didn’t amount to acceptance of the addendum. Thus, there was no enforceable agreement to arbitrate.
Justice Christopher Goff wrote the opinion, with Justices Geoffrey Slaughter and Derek Molter concurring, along with Indiana Chief Justice Loretta Rush.
Justice Mark Massa dissented with a separate opinion.
The credit union argued the Court of Appeals unjustifiably adopted a heightened standard for what constitutes sufficient notice under a contract.
The Supreme Court disagreed in part.
The email notice contained an “inconspicuous” subject line, the majority ruled.
However, the majority also ruled the credit union did provide Land with reasonable written notice of its offer to amend the agreement.
The majority disagreed with Land’s argument that the addendum was “buried” in the bank statement.
“Had Land simply glanced at the account statement, she would have easily seen the reference to the Addendum and the language directing her to ‘review the added language,’” the opinion says.
But that did not settle whether Land accepted the credit union’s offer.
In ruling in favor of Land on that point, the majority agreed with her argument that acceptance by silence is the exception rather than the rule.
Under the Restatement, the case for acceptance is strongest when the offeree’s “reliance is definite or substantial,” or when the offeree’s intent to accept is “objectively manifested though not communicated to the offeror.”
“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,” the opinion says. “In fact, by filing a class-action complaint with the trial court, Land’s actions point in the opposite direction.”
The case — Tonia Land, individually and on behalf of all others similarly situated v. IU Credit Union, 23S-CP-115 — was remanded for further proceedings.
Dissenting with a separate opinion, Justice Massa referenced an “almost identical” case that a different Court of Appeals panel decided on the same day it issued its opinion in the Land case.
The other case — Jeffery Neal, on behalf of himself and all others similarly situated v. Purdue Federal Credit Union, 22A-PL-762 — resulted in a ruling in favor of Purdue Federal Credit Union.
Massa wrote that he concurs in the reasoning of that panel, and that he’s concerned the majority’s decision could “upend long-accepted business practices of companies with large customer bases in Indiana.”
“The IU Credit Union provided Land an opportunity to opt out, without losing her banking privileges; all she had to do was send written notice within thirty days,” Massa wrote. “The option was neither burdensome nor unreasonable, but the consequences of our decision today may turn out to be both.”
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