Reversal: COA splits on bank’s failure to give reasonable notice of new arbitration clause

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A divided Court of Appeals of Indiana has reversed for a couple it found was not given reasonable notice by their bank of a new arbitration provision included in the terms and conditions attached to the end of their monthly electronic bank statement.

Cliff and Wendy Decker, who had a checking account with Star Financial Bank, filed a class action complaint against their bank regarding October 2019 overdraft fees they were charged – only to be met with a motion to compel arbitration.

Their issues stem from an email Star Financial sent the Deckers after the couple’s counsel began communicating with the bank’s attorney. The email directed the Deckers to their latest monthly statement, which they had already opted to receive electronically.

Although the email included links to the updated miscellaneous fee schedule and the privacy notice, the monthly statement did not mention changes to the account’s terms and conditions.

Near the end of the 14-page statement — which included 11 pages of account transactions and one page of check images — was a new arbitration and no class action clause addendum added to the checking account’s terms and conditions.

The Deckers didn’t see or review the addendum and continued to be customers of Star Financial. However, they filed the class action suit in March 2021.

Star Financial argued that all of the Deckers’ claims against it were “subject to mandatory individual arbitration pursuant to the parties’ written agreement to arbitrate.”

But the Deckers replied that they did not assent to the addendum because the terms and conditions allows for “changes” but not “additions.” They also argued that they were not reasonably notified of the changes and that the addition was made in bad faith.

The Allen Superior Court granted Star Financial’s motion to compel arbitration, ruling among other things that the word “change” in the agreement permitted Star Financial to add the arbitration provisions and that the addendum was clear.

A split appellate panel reversed that decision in Cliff Decker and Wendy Decker, individually and on behalf of all others similarly situated v. Star Financial Group, Inc., 21A-PL-2191.

The COA majority concluded that the “reasonable notice” must have been notice reasonably calculated to reach the intended audience. It pointed to Star Financial’s decision to provide notice to the Deckers by sending them an email with a link to the Deckers’ routine monthly statement, but with nothing in the email or monthly statement alerting that a time-sensitive modification was included.

“We note that customers do not have a deadline to review their monthly statements for a bank account, and a monthly statement is not a contract,” Judge Elizabeth Tavitas wrote, joined by Chief Judge Cale Bradford. “The Deckers would have found the arbitration provision only by scrolling to the end of the monthly statement, which they may or may not have reviewed within ten days.”

The Court of Appeals therefore concluded that the bank failed to provide the Deckers with reasonable notice and that the couple did not assent to the arbitration provision.

The trial court, thus, erred by granting Star Financial’s motion to compel,” the majority wrote in the reversal.

Judge Terry Crone dissented in a separate opinion in which he argued the Deckers should have read their bank statement in its entirety.

“The change notice was printed in bold type and capital letters and appeared in the account statement itself, not in an electronic version of a ‘bill stuffer.’ In my view, the Deckers’ failure to seasonably read the change notice does not relieve them from their contractual obligations,” Crone wrote in dissent. “If the time has come when the failure to read a written notice within ten days of receipt renders that notice unreasonable as a matter of law, then we have entered a new era of contract law with which I am unfamiliar.”

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