Eleventh Circuit orders arbitration in bank fees dispute

Michael P. Tremoglie Mar. 5, 2012, 1:15pm

ATLANTA (Legal Newsline) -- The U.S. Court of Appeals for the Eleventh Circuit in Atlanta has in a multidistrict litigation case involving the overdraft fee policy of SunTrust Bank, Atlanta.

The appellate court on March 1 ordered the case to arbitration in accordance with the contract. The district court had previously denied a motion by SunTrust to compel arbitration because it said the contract's arbitration clause was unconscionable.

The Jeffrey and Jeanette Buffington, on behalf of themselves and others, sued SunTrust in a Georgia state court for allegedly violating state law by collecting overdraft fees under its deposit agreement. The plaintiffs alleged a breach of contract and that SunTrust converted funds, acted unconscionably, and was unjustly enriched by assessing overdraft fees improperly on the Buffingtons' joint checking account.

They complained that SunTrust processed transactions deceptively to maximize overdraft fees and assessed overdraft fees when accounts contained sufficient funds to pay charges.

SunTrust removed the action to district court and made a motion to compel arbitration based on an arbitration clause contained in the deposit agreement. The district court denied the motion because it said the arbitration clause contained a class action waiver that made it substantively unconscionable.

The Buffingtons opposed the motion. They argued that the arbitration clause was unconscionable. They claimed that it was procedurally unconscionable because it was "not presented in a conspicuous manner." They also said SunTrust failed to present customers with a meaningful choice because arbitration was offered "on a take-it-or-leave-it basis." The plaintiffs also claimed unconscionability because they said their limited potential to recover damages was exceeded by the costs of arbitration - including the potential obligation to reimburse SunTrust for legal expenses.

The plaintiffs were referring to a provision in the contract that stated the prevailing party "shall be entitled to an award of the costs and expenses of the arbitration including an award of reasonable attorneys' fees" for any claims in which the party has prevailed, except as otherwise required by applicable law."

SunTrust maintained the arbitration clause was conscionable. It argued that the clause was "prominent and conspicuous." It also argued that the clause was substantively conscionable because the Buffingtons' potential recovery exceeded the $4,000 that they had accumulated in overdraft fees.

The district court ruled that the arbitration clause was unconscionable because two provisions in the clause shifted the risks of litigation unfairly on the plaintiffs.

But the Eleventh Circuit three-judge panel differed with the plaintiffs and the District Court. They said that the Federal Arbitration Act provides that an arbitration agreement is enforceable except when "upon such grounds as exist at law or in equity for [its] revocation."

The judges believed that the arbitration clause in the SunTrust agreement was neither procedurally nor substantively unconscionable and SunTrust was entitled to an order directing that such "arbitration proceed in the manner provided for" in the deposit agreement.

They said, "We reverse the order that denied the renewed motion of SunTrust to compel the Buffingtons to arbitration. We remand with instructions to compel arbitration."

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