David Johnson v. Keybank National Association
871 F.3d 1295
11th Cir.2017Background
- Johnson opened an account in 1991; he converted it to a joint account on Oct. 11, 2001 by signing a 2001 Signature Card that stated the new account was "subject to the Deposit Account Agreement" and acknowledged receipt of a copy.
- The 1997 Deposit Account Agreement (then governing new KeyBank accounts) contained an arbitration clause and a unilateral change‑in‑terms provision allowing amendment by notice (e.g., statement message).
- KeyBank mailed a 2004 Statement Message that amended the arbitration clause and provided an opt‑out; Johnson did not opt out and continued using the account.
- The operative agreement at issue is the 2009 Deposit Account Agreement (with arbitration, choice‑of‑law (Ohio), change‑in‑terms, discovery, attorneys’‑fees, cost‑allocation, and confidentiality provisions).
- District court denied KeyBank’s motion to compel arbitration, applying Washington law and finding the arbitration provision unconscionable; Eleventh Circuit reversed and remanded to compel arbitration, severing the confidentiality clause as unconscionable under Washington law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of arbitration agreement | Johnson: he never received/assented to the deposit agreement and thus never agreed to arbitrate | KeyBank: 2001 Signature Card incorporated the 1997 Agreement (with arbitration) by reference; later amendments adopted by notice | Held: Ohio law governs formation; the 2001 Card incorporated the 1997 Agreement and Johnson assented; no genuine fact dispute requiring trial |
| Choice of law for formation/enforceability | Johnson: Washington law should govern and is more favorable to him | KeyBank: parties’ contract selects Ohio law; choice is valid | Held: Parties’ selection of Ohio law controls formation (no conflict); Washington choice‑of‑law rules applied but no exception to displace Ohio for formation question |
| Unconscionability of 2009 arbitration provision | Johnson: clause is procedurally and substantively unconscionable (costs, discovery, confidentiality, unilateral amendment, attorneys’ fees) | KeyBank: clause is enforceable under FAA; consumer may choose forum (AAA or JAMS), JAMS consumer rules limit consumer fees, opt‑out notice was provided, severance clause exists | Held: Provision not procedurally unconscionable; most substantive challenges fail (costs, fees, discovery, amendment, attorneys’ fees); confidentiality clause is substantively unconscionable under Washington and severed; remainder enforceable under FAA |
| Illusoriness / mutuality (change‑in‑terms) | Johnson: KeyBank’s unilateral amendment right makes arbitration illusory and non‑mutual | KeyBank: change‑in‑terms limited by notice requirement and implied duty of good faith; core arbitration obligation fixed | Held: Change‑in‑terms does not make the arbitration clause illusory under Ohio or Washington law; mutuality preserved by fixed arbitration obligation and duty of good faith |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts state rules that unduly interfere with arbitration agreements)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (courts must treat arbitration agreements as valid under FAA unless generally applicable contract defenses apply)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (existence of arbitration agreement determined by ordinary state‑law contract principles)
- Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287 (2010) (courts must resolve gateway questions of formation when the making of the arbitration agreement is in dispute)
- Bazemore v. Jefferson Capital Sys., LLC, 827 F.3d 1325 (11th Cir. 2016) (summary‑judgment–like standard for deciding need for trial under FAA §4)
- In re Checking Account Overdraft Litigation, 754 F.3d 1290 (11th Cir. 2014) (class arbitration waiver consequence under Concepcion in this MDL context)
- Zuver v. Airtouch Communications, Inc., 103 P.3d 753 (Wash. 2004) (broad confidentiality clause in arbitration can be substantively unconscionable)