432 F.Supp.3d 735
E.D. Tenn.2020Background
- Plaintiffs opened Money Market Investment Accounts (MMIAs) with First National Bank of Gatlinburg in 1989 that promised a guaranteed 6.5% interest rate; FNB converted existing MMIAs into “Maintenance Accounts” in 1992 that plaintiffs retained believing the 6.5% rate would continue.
- FNB merged into BankFirst (1997), which merged into BB&T (2001); BB&T converted the accounts to Money Rate Savings Accounts (MRSAs) and provided a Bank Services Agreement to account holders.
- BB&T amended that agreement in 2004 and again in 2017; the 2017 Amendment added a broad arbitration clause and an explicit class-action waiver and stated continued account usage after notice constituted acceptance; BB&T sent notice and plaintiffs continued using accounts.
- BB&T honored the 6.5% rate until January 2018, when it notified account holders rates would drop (to 1.05% then later to standard tiers); plaintiffs sued BB&T for breach of contract in Tennessee state court on March 22, 2019; the case was removed to federal court.
- BB&T moved to dismiss and compel arbitration; the district court held plaintiffs assented to the 2017 arbitration clause by continuing to use their accounts after notice, found the clause not adhesive or unconscionable, concluded the parties delegated arbitrability to the arbitrator, and granted BB&T’s motion, dismissing the action without prejudice and ordering arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs agreed to arbitrate (formation/assent) | Plaintiffs never assented to arbitration and any change required by the original MMIA notice procedure was not followed | BB&T relied on the Bank Services Agreement and subsequent amendments, and plaintiffs accepted by continuing to use accounts after notice | Court: Continued use after notice constituted assent; 2017 Amendment governs |
| Whether arbitration clause is supported by consideration | Plaintiffs: no adequate consideration for mutual waiver and class waiver | BB&T: mutual promises to arbitrate provide adequate consideration | Court: Mutuality of promises is sufficient consideration |
| Whether arbitration provision is an unenforceable contract of adhesion or unconscionable | Plaintiffs: clause is adhesive, beyond expectations, and unconscionable because they had to keep account to preserve 6.5% rate | BB&T: standard bank form is not adhesive; plaintiffs could have closed accounts or sued earlier; clause not one-sided | Court: Not adhesive or unconscionable—plaintiffs had realistic alternatives and failed to timely object |
| Who decides arbitrability and scope of disputes | Plaintiffs implicitly ask court to decide arbitrability | BB&T: 2017 Amendment delegates arbitrability to arbitrator (clear delegation clause) | Court: Parties clearly and unmistakably delegated arbitrability to arbitrator; court declines to decide scope and compels arbitration |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (enforcement of arbitration agreements under the FAA)
- Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (distinguishing challenges to arbitration clause vs. whole contract)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (parties may contractually delegate arbitrability to arbitrator)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (FAA’s liberal federal policy favoring arbitration)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (court examines validity of arbitration agreements as contracts)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (presumption about who decides arbitrability; clear and unmistakable evidence required to delegate)
- Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967 (continued employment/use can constitute acceptance of arbitration provision under Tennessee law)
- Wallace v. Nat’l Bank of Commerce, 938 S.W.2d 684 (Tenn.) (bank deposit agreements not necessarily contracts of adhesion when alternatives exist)
- Pyburn v. Bill Heard Chevrolet, 63 S.W.3d 351 (Tenn. Ct. App.) (mutuality of promises is adequate consideration)