Zachman v. Hudson Valley Federal Credit Union
49 F.4th 95
| 2d Cir. | 2022Background
- Plaintiff Nicole Zachman sued Hudson Valley Federal Credit Union (HVCU) alleging improper overdraft/NSF fees and sought class relief.
- HVCU added a mandatory arbitration clause and class-action waiver to its Account Agreement after Zachman opened her account in 2012.
- In October 2019 Zachman registered for HVCU online banking; registration required clicking to accept an Internet Banking Agreement that referenced and provided URLs to the Account Agreements.
- HVCU posted the revised Account Agreement on its website but did not send direct notice (no emails, banners, mailed notice, or newsletter disclosure); HVCU did not produce screenshots showing how the Internet Banking Agreement was presented during registration.
- The district court denied HVCU’s motion to compel arbitration, finding Zachman lacked actual or inquiry notice; the Second Circuit vacated and remanded because the record was insufficiently developed, particularly lacking visual evidence of the webpage presentation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides arbitrability | Court should decide whether a valid arbitration agreement exists | Arbitrator was delegated authority to decide arbitrability | Court decides existence of an arbitration agreement (district court proper factfinder) |
| Formation via Internet Banking (click/scrollwrap) | Zachman lacked notice of arbitration and never viewed Account Agreement | Zachman registered and clicked “I agree,” which incorporated Account Agreements by reference | Record insufficient to resolve assent; remand for further evidence or trial |
| Website publication as notice | Posting alone without direct notice did not put Zachman on inquiry notice | Posting of revised Agreement on website (and incorporation via links) could supply constructive notice | HVCU abandoned website-posting argument on appeal; district court erred by deciding inquiry notice without webpage screenshots; remand required |
| Continued use of account/debit card as assent | Continued use is insufficient to show assent to new terms | Continued use may demonstrate assent | District court correctly found usage alone insufficient, but overall arbitrability unresolved; remand needed |
Key Cases Cited
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (who decides arbitrability when delegation clause implicated)
- Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir. 2017) (if factual dispute about formation exists, remand for trial; web-contract notice standard)
- Nicosia v. Amazon.com, Inc., 834 F.3d 220 (2d Cir. 2016) (web-based contract notice depends on design and content of interface)
- Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012) (de novo review of denial of motion to compel arbitration; factual findings reviewed for clear error)
- Specht v. Netscape Commc’ns Corp., 306 F.3d 17 (2d Cir. 2002) (contract formation and whether offeree had notice of terms)
- PaineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (incorporation by reference principles under New York law)