chevron-down Created with Sketch Beta.
September 29, 2017 Practice Points

Eleventh Circuit Holds Arbitration Agreement, Class-Action Waiver Is Enforceable

The appeals court overturned the Florida district court’s ruling that a bank customer was not bound by a deposit agreement requiring individual arbitration.

By Jason Tompkins – September 29, 2017

This week, the Eleventh Circuit Court of Appeals held that a bank customer was bound by a deposit agreement requiring individual arbitration. The case began in 2010, when the plaintiff filed a putative class action alleging that the bank improperly manipulated the order in which debit-card transactions were posted to checking accounts to maximize overdraft fees. A district court in Florida denied the bank’s motion to compel arbitration on the basis that the agreement was unconscionable. The Eleventh Circuit reversed.

The plaintiff had an individual account with the bank since 1991. In 2001, he transferred that account into a joint account to be held with his wife. When he did so, he signed a deposit agreement, which along with subsequent updates, included a mandatory arbitration provision. The Eleventh Circuit held that, “[i]f we permitted Johnson to evade the commitment to arbitrate by claiming he did not investigate the terms to which his new account was subject before signing the 2001 Signature Card, few deposit agreements would ever be enforceable.”

On the regulatory side, the Consumer Financial Protection Bureau’s new arbitration rule, which went into effect earlier this month, prohibits class-action waivers in arbitration agreements, such as the one above. The U.S. House of Representatives voted to overturn the rule under the Congressional Review Act. A similar disapproval resolution was introduced in the Senate, but as of today, it appears unlikely to pass. Meanwhile, a group of trade organizations plan to challenge the rule in court.

Jason Tompkins is a partner with Balch & Bingham LLP in Birmingham, Alabama.

Copyright © 2017, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).