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The Indiana Supreme Court reversed and remanded a trial court’s motion to compel arbitration in a banking lawsuit involving improper overdraft fees.
Cliff and Wendy Decker filed a complaint against Star Financial Bank alleging the bank had collected improper overdraft fees.
After the Deckers sued, the bank cited an addendum and responded with a motion to compel arbitration, which the trial court granted.
However, the Indiana Supreme Court found the account agreement’s change-of-terms clause did not allow the bank to add the addendum.
In 2019, the Deckers were charged for an $37 overdraft fee, but their account was not overdrawn.
Almost a year later the Deckers’ counsel reached out to the bank and they responded with an email with bank statements of their checking account and other notices and disclosures relating to the term and conditions of their account.
The email included a two-page addendum that stated claims against the bank were subject to arbitration and could be brought only in a customer’s individual capacity.
It also stated that it would become effective within 10 days if the Deckers kept their account.
They hadn’t seen or reviewed the addendum, nor did they close their account.
Before they sued, the bank amended its terms and conditions adding an arbitration and no-class-action addendum to their clients account agreements, including the Deckers’.
The Deckers brought three issues to the court on appeal, the first being whether the bank buried notice of the addendum at the end of their monthly statement and thus did not provide the contractually required reasonable notice.
The second issue they brought was whether the account agreement’s change-of-terms clause did not allow the bank to add the addendum.
Finally, the Deckers questioned whether the continued use of their checking account did not manifest their assent to the addendum.
“Without expressing any opinion on the merits of the Deckers’ first and third arguments, we hold that the specific language of the account agreement’s change-of-terms clause did not permit the Bank to add the addendum. Thus, the addendum was not a valid amendment to the account agreement,” Justice Geoffrey Slaughter wrote.
The bank recalled to Section 10 of the account agreement in stating the addendum is valid and the clients have agreed to any new terms.
“If the changed term is authorized (see Section 10’s opening sentence) and the customer does not close the account (see its closing sentence), then the changed term becomes a “new term” in the updated agreement,” Slaughter wrote. “That is a far cry from saying that any “new term” is fair game and is necessarily a valid addition to an updated agreement.”
Justice Christopher Goff wrote a separate concurring opinion stating he agreed but would have come to the conclusion differently.
“In my view, the agreement—taken as a whole—permits the addition of an arbitration addendum. But, given the lack of reasonable opportunity to reject the addendum, the Deckers did not, as I see it, assent to a change in terms,” Goff wrote.
Goff found that, because the Deckers failed to close the account within 10 days it did not constitute assent to the addendum.
The case is Cliff Decker and Wendy Decker, Individually and on Behalf of all others Similarly Situated v. Star Financial Group, Inc., 22S-PL-305.
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