2005 Ohio 4120 | Ohio Ct. App. | 2005
{¶ 3} Plaintiffs-appellees Maestle and Simmons (collectively "appellees") brought this putative class action against appellants, alleging breach of contract, fraud and violations of the Ohio Consumer Sales Practices Act, stemming from a "no interest" financing allegedly offered by Bank One to qualifying Best Buy customers. The complaint alleges that appellees were improperly assessed finance and interest charges on their Best Buy credit cards issued by Bank One. Appellees requested certification of a class on their claims.
{¶ 4} Appellants filed a motion, pursuant to R.C.
{¶ 5} Appellants appealed. In Maestle v. Best Buy Co.,
Cuyahoga App. No. 79827, 2002-Ohio-3769, this court reversed the trial court's decision and remanded the case, on a procedural issue, holding that R.C.
{¶ 6} The Supreme Court of Ohio heard the case by way of a certified conflict. See Maestle v. Best Buy Co.,
{¶ 10} Nevertheless, courts may not force parties to arbitrate disputes if the parties have not entered into a valid agreement to do so. See Boedeker v. Rogers (1999),
{¶ 12} Appellees' initial applications for credit from Bank One, however, state that he/she "agree[s] to abide by the terms of the account Agreement and Disclosure Statement which shall be issued by Bank One from time to time." The agreement and disclosure statement provides that the terms may be changed or amended "upon fifteen (15) days prior written notice if required by law."
{¶ 13} Appellants are seeking enforcement of an arbitration provision that was added by a subsequent company, GE Capital. GE Capital is not a party to the suit.1 Appellants argue that although they are not parties to the GE Capital agreement, they are intended third-party beneficiaries of this arbitration provision, because Bank One is a predecessor of GE Capital and Best Buy is a retailer. Appellants point to this provision in the agreement: "As solely used in this Arbitration Provision, the terms `we' and `us' shall for all purposes mean GE Capital Consumer Card Co.; all of its parents, wholly or majority owned subsidiaries, affiliates, predecessors, successors, and assigns; retailers; and all independent contractors, agents, employees, directors and representatives."
{¶ 14} Appellants argue, inter alia, that an arbitration clause may be unilaterally added to a cardholder agreement through the change-in-terms provision so long as they follow the proper procedure. Appellees contend that the change-in-terms provision does not contemplate wholly new terms and therefore the arbitration clause is invalid and unenforceable.
{¶ 16} Appellants argue that this case is similar to BankOne, N.A. v. Coates (S.D. Miss. 2001),
{¶ 17} Appellees urge this court to follow Badie v. Bank ofAmerica (1998),
{¶ 18} In Badie, the bank added an arbitration clause to its credit card agreements, giving notice of the addition in the body of a half-page bill stuffer mailed to cardholders with their monthly statement. The bank made the addition pursuant to a change-in-terms provision that permitted the bank to alter or terminate terms or conditions in the agreement upon notice, if required by law, to cardholders. The bank did not offer an opportunity to reject the addition of the arbitration clause. The bank argued that its actions were simply a type of contract modification and so long as it followed the proper procedure required in the change-in-terms provision, the arbitration clause was valid and enforceable. The court rejected the bank's argument, noting that standard contract modification cases involve changes that were "specifically identified in the original contracts as changes that might be made in the future under certain circumstances." Id. at 281. The court held that the arbitration clause was not binding because it was not the type of change contemplated by the parties when they signed the original contract.
{¶ 19} For the following reasons, this court agrees with the analysis and conclusion drawn in Badie and respectfully disagrees with the analysis and conclusion reached in Coates.
{¶ 21} Unlike Delaware's statute, which expressly permits banks to amend credit card agreements to add arbitration clauses "whether or not the amendment or the subject of the amendment was originally contemplated or addressed by the parties or is integral to the relationship between the parties," R.C.
{¶ 22} When there is a question as to whether a party has agreed to an arbitration clause, there is a presumption against arbitration. Spalsbury v. Hunter Realty, Inc., et al. (Nov. 30, 2000), Cuyahoga App. No. 76874, citing Council of SmallerEnters. v. Gates, McDonald Co. (1997),
{¶ 23} The issue of whether or not a party has agreed to arbitrate is determined on the basis of ordinary contract principles. Kegg v. Mansfield (Jan. 31, 2000), Stark App. No. 1999CA00167, citing Fox v. Merrill Lynch Co., Inc. (1978),
{¶ 24} "Ohio law continues to hold that the parties bind themselves by the plain and ordinary language used in the contract unless those words lead to a manifest absurdity."Convenient Food Mart, Inc. v. Countrywide Petroleum Co., etal., Cuyahoga App. No. 84722, 2005-Ohio-1994. This is an objective interpretation of contractual intent based on the words the parties chose to use in the contract. Id., citing Kelly v.Medical Life Ins. Co. (1987),
{¶ 25} In Nationwide Mutual Insurance Co. v. Marsh (1984),
{¶ 26} In the instant case, GE Capital sought to add an entirely new term to the original account agreements, which did not include any provision regarding the method or forum for resolving disputes. The question is what types of terms the contract allowed the bank to change, not whether the bank could add a new term. In other words, did the cardholders agree ahead of time to be bound by any term the appellants might choose to impose in the future?
{¶ 27} Here, the amendment provision in the original credit card agreement read: "Amendment: We may change or amend the terms of this Agreement upon fifteen (15) days prior written notice if required by law. Any change of amended fee, charge, interest rate, FINANCE CHARGE, ANNUAL PERCENTAGE RATE, or minimum payment amount, whether increased or decreased, may be effective to both the outstanding Account Balance and future transactions."
{¶ 28} Appellees could not anticipate that appellants, let alone a new third party, would amend the agreement to add an arbitration clause, since the amendment provision referenced only changes to payments, charges, fees and interest. Furthermore, nowhere in the contract is there a clause addressing forums of dispute. Therefore, we find that Bank One did not specify in their agreement whether they could change a customer's forum of dispute resolution in accordance with R.C.
{¶ 29} The trial court did not abuse its discretion when it denied the stay; therefore, we conclude that the arbitration clause is invalid and unenforceable. Appellants' sole assignment of error is overruled.
Judgment affirmed.
It is ordered that appellees recover of appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the Cuyahoga County Common Pleas Court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
Blackmon, A.J., and Celebrezze, Jr., J., concur.