By summary order issued March 4, 2016 in Hatemi v. M & T Bank, the Second Circuit reversed the district court’s denial of a motion to compel arbitration. The decision provides an interesting example of how an arbitration clause can cover disputes over related disputes, even when those disputes concern a separate agreement.
In Hatemi, the plaintiff claimed that he did not want overdraft protection and had never signed an overdraft protection agreement with the bank but that the bank had charged him fees for overdraft protection anyway. The report of the magistrate judge, which was accepted by the district court, recognized that the arbitration clause in the plaintiff’s account agreement was broad, but focused on the bank’s listing of certain agreements as the governing documents for the account. That list did not include any overdraft protection agreement—even though the bank generally had customers sign overdraft protection agreements in order to obtain overdraft protection. The bank’s motion to compel arbitration was denied, because the arbitration clause was held not to apply to the overdraft agreement that directly governed the customer’s obligation to pay overdraft protection fees.
The Second Circuit disagreed with this outcome, because it found that the parties’ arbitration clause was broad enough to cover any dispute related to the account or any services provided in connection with the account. The arbitration clause stated:
Each dispute or controversy that arises out of or is related to your account with us, or any service we provide in connection with your account or any matter relating to your or our rights and obligations provided for in this agreement or any other agreement between you and us relating to your accountor a service provided by us in connection with your account, whether based on statute, contract, tort, fraud, misrepresentation or any other legal or equitable theory, including any claim for interest and attorney’s fees, where applicable (any “Claim”) must be determined on an individual basis by binding arbitration in accordance with the Federal Arbitration Act (“FAA”—Title 9 of the United States Code) under the auspices of the American Arbitration Association (“AAA”).
The Second Circuit reasoned that issues concerning overdraft protection and the fees charged to that service were “indisputably related to Hatemi’s account and to a service provided in connection with his account.” Accordingly, it held that the arbitration clause in the account agreement “extends to the instant dispute regardless of whether the disputed overdraft protection agreement is incorporated into the Account Agreement or even exists.” The court added that any fact issues concerning whether the parties made an overdraft protection agreement could be raised and resolved in the arbitration itself.
This practical decision demonstrates that an arbitration clause should be interpreted as written and that, when an arbitration clause is broad, it can cover disputes that relate to the parties’ relationship, even including a dispute over the existence or non-existence of a separate agreement that did not contain an arbitration clause.
Keywords: alternative dispute resolution, litigation, adr, overdraft protection, broad arbitration clause, related agreement