Canteen v. Charlotte Metro Credit Union

• Court: Court of Appeals of North Carolina
• Decided: December 6, 2022
• Docket: 22-59
• Status: Published

Opinion

IN THE COURT OF APPEALS OF NORTH CAROLINA

2022-NCCOA-779

No. COA22-59

Filed 6 December 2022

Mecklenburg County, No. 21 CVS 6056

LATOYA CANTEEN AND PAMELA PHILLIPS, Plaintiff-Appellees,

v.

CHARLOTTE METRO CREDIT UNION, Defendant-Appellant.

Appeal by Defendant-Appellant from Order entered 28 July 2021 by Judge

George C. Bell in Mecklenburg County Superior Court. Heard in the Court of Appeals

5 October 2022.

Cohen & Malad, LLP, by Vess A. Miller, pro hac vice, and Van Kampen Law, PC, by Josh Van Kampen, for Plaintiff-Appellee.

Cranfill Sumner, LLP, by Mica N. Worthy, Steven A. Bader, & Ryan D. Bolick, for Defendant-Appellant.

DILLON, Judge.

¶1 Plaintiff Pamela Phillips was a deposit customer of Defendant Charlotte Metro

Credit Union (“CMCU”). Plaintiff commenced this action alleging that CMCU

charged her numerous overdraft and non-sufficient funds fees that were not

authorized by the deposit agreement (the “Agreement”). Defendant appeals an

interlocutory order denying its motion to compel arbitration. We reverse and remand.

I. Background CANTEEN V. CHARLOTTE METRO CREDIT UNION

Opinion of the Court

¶2 In 2014, Plaintiff opened a checking account with CMCU, signing the

Agreement. This Agreement provided that CMCU reserved the right to “change the

terms of [the] agreement” and contemporaneously notify customers of any such

modification.

¶3 From 2018 to 2020, CMCU allegedly charged Plaintiff fees not authorized by

the Agreement.

¶4 In 2021, CMCU amended the Agreement to include provisions requiring any

dispute thereunder to be decided through arbitration and waiving class actions (the

“Amendment”).

¶5 In March 2021, Plaintiff commenced this class action against CMCU seeking

monetary damages, restitution, and declaratory relief in connection with CMCU’s

unauthorized overdraft fees. CMCU answered with a motion to stay and to compel

arbitration, claiming that Plaintiff was bound by the terms of the Amendment.

¶6 The trial court entered an order denying CMCU’s motion. CMCU timely

appealed.

II. Appellate Jurisdiction

¶7 This appeal is from an interlocutory order. Interlocutory orders are generally

not immediately appealable; however, an interlocutory order which affects a

substantial right is immediately appealable. N.C. Gen. Stat. §§ 1-277(a), 7A-

27(b)(3)(a) (2021). Our Court has held that an order denying arbitration affects a CANTEEN V. CHARLOTTE METRO CREDIT UNION

substantial right and is, therefore, immediately appealable. Gay v. Saber Healthcare

Grp., L.L.C., 271 N.C. App. 1, 5, 842 S.E.2d 635, 638 (2020). Therefore, we have

appellate jurisdiction.

III. Analysis

¶8 Public policy favors settling disputes by means of arbitration. Cyclone Roofing

Co. v. David M. LaFave Co., 312 N.C. 224, 229, 321 S.E.2d 872, 876 (1984). See also

N.C. Gen. Stat. § 1-569.3 (2020). “However, before a dispute can be settled [by

arbitration], there must first exist a valid agreement to arbitrate.” Routh v. Snap-

On Corp., 108 N.C. App. 268, 271, 423 S.E.2d 791, 794 (1992). In determining

whether a valid agreement to arbitrate exists, we are bound by the principles of

general contract law. Southern Spindle v. Milliken & Co., 53 N.C. App. 785, 786, 281

S.E.2d 734, 735 (1981). There is no presumption favoring arbitration when

addressing this threshold issue. Hager v. Smithfield E. Health Holdings, LLC, 264

N.C. App. 350, 362, 826 S.E.2d 567, 576 (2019).

¶9 The Agreement executed by Plaintiff in 2014 contained a provision which

provided the choice of law and procedure, including the appropriate forum, to resolve

any disputes thereunder:

GOVERNING LAW – This Agreement is governed by . . . the laws . . . and regulations of the state in which the credit union’s main office is located . . . . As permitted by applicable law, you agree that any legal action regarding this Agreement shall be brought in the county in which the CANTEEN V. CHARLOTTE METRO CREDIT UNION

credit union is located.

This signed Agreement also contained a provision allowing CMCU to change the

terms of the Agreement by notifying Plaintiff of any such change:

Notice of Amendments. Except as prohibited by applicable law, we may change the terms of this Agreement. We will notify you, in a manner we deem appropriate under the circumstances, of any changes in terms, rates or fees as required by law. We reserve the right to waive any terms of this Agreement. Any such waiver shall not affect our right to future enforcement.

The Agreement further provided that CMCU could provide said notice electronically.

¶ 10 Plaintiff assented to these provisions when she executed the Agreement in

2014.

¶ 11 For three consecutive months in 2021, CMCU emailed Plaintiff her statement

along with a notice of “Changes to the Membership and Account Agreements.” The

email contained hyperlinks entitled “Information about Arbitration”, “Arbitration

and Class Action Waiver” and “Membership and Account Agreement Change in

Terms”, all under the heading “Additional Forms and Notices”. The email message

itself was short, with the hyperlinks following a message regarding Plaintiff’s

monthly account statement.

¶ 12 Plaintiff states that she never noticed these emails. In any event, the

“Arbitration and Class Action Waiver” hyperlink led to a 2-page document which

contained a provision amending the Agreement to require arbitration and a provision CANTEEN V. CHARLOTTE METRO CREDIT UNION

allowing Plaintiff a means to opt-out of the new arbitration provision.

¶ 13 Plaintiff did not notify CMCU that she was opting out of the arbitration

provision and, otherwise, continued to use her checking account.

¶ 14 These above facts are undisputed.

¶ 15 We conclude that these facts show the existence of a binding arbitration

agreement. The arbitration provision was a change to the forum selection procedure

contained in the original Agreement. Plaintiff agreed to be notified by email of any

such change. Plaintiff, in fact, was notified on three different occasions. And Plaintiff

assented to the amendment by her failure to opt-out and her continued use of her

checking account. Her failure to read the provisions is no excuse. See, e.g,, Davis v.

Davis, 256 N.C. 468, 472, 124 S.E.2d 130, 133 (1962) (holding that a party who

assents to the terms of an agreement is not excused by failure to read the terms).

¶ 16 Plaintiff argues, and the trial court held, CMCU’s contractual right to change

the terms of the Agreement did not authorize CMCU to add provisions addressing an

entirely new subject, such as arbitration. The trial court held that such addition was

not contemplated and, otherwise, that CMCU was violating the covenant of good faith

and fair dealing implied in every contract by adding a provision that was not in “the

universe of terms included in its original [A]greement”, citing Sears Roebuck & Co. v.

Avery, 163 N.C. App. 207, 221, 593 S.E.2d 424, 434 (2004). Indeed, we held in Sears

that no valid arbitration agreement existed based on a unilateral amendment CANTEEN V. CHARLOTTE METRO CREDIT UNION

because the original contract “made no reference to arbitration or any other dispute

resolution procedures and did not in any manner address the forum in which a

customer could have disputes resolved.” Id. at 208, 593 S.E.2d at 426 (applying

Arizona law). Other courts have similarly held. See Badie v. Bank of Am., 67 Cal.

App. 4th 779, 79 Cal. Rptr. 2d 273 (1998) (wherein the court denied defendant’s

motion to compel arbitration because “[n]one of the agreements admitted into

evidence contained any provision regarding the method or forum for resolving

disputes”); Maestle v. Best Buy Co., 2005-Ohio-4120 (Ct. App.) (“the amendment

provision referenced only changes to payments, charges, fees and interest… nowhere

in the contract is there a clause addressing forums of dispute.”)

¶ 17 However, the Agreement here did contain a “Governing Law” provision, which

outlined the appropriate choice of law and forum for settling disputes. Plaintiff was

therefore on notice that CMCU could change this provision to allow for disputes to be

settled, not in the court where CMCU was located, but rather in another forum,

including before an arbitrator. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 519

(1974) (“[a]n agreement to arbitrate before a specified tribunal is, in effect, a

specialized kind of forum selection clause[.]”)

¶ 18 Indeed, other courts have enforced an arbitration provision where a bank

customer was provided notice of an amendment containing the provision. Stiles v.

Home Cable Concepts, 994 F. Supp. 1410 (M.D. Ala. 1998) (arbitration clause added CANTEEN V. CHARLOTTE METRO CREDIT UNION

by amendment enforceable because original agreement contained a change-of-terms

provision and plaintiff received notice of the amendment, yet failed to opt out); Bank

One, N.A. v. Coates, 125 F. Supp. 2d 819 (S.D. Miss. 2001) (arbitration clause added

by amendment enforceable where defendant received proper notice which made clear

his option to accept or reject the clause and the amendment was not filled with

legalese); Marsh v. First USA Bank, N.A., 103 F. Supp. 2d 909 (N.D. Tex. 2000)

(arbitration clause added by amendment enforceable where cardmember was given

reasonable notice of the arbitration amendment and failed to respond); Herrington v.

Union Planters Bank, N.A., 113 F. Supp. 2d 1026, 1031 (S.D. Miss. 2000) (arbitration

clause added by amendment enforceable where plaintiff agreed to a change of terms

provision contained in the original deposit agreement).

¶ 19 We note Plaintiff’s contention that she did not receive adequate notice of the

amendment. Plaintiff admits that CMCU notified her of the change three times by

email, each entitled “Charlotte Metro CU Online Statement and Changes to

Membership and Account Agreements are Available”. The notices were sent along

with Plaintiff’s monthly statements. Information pertaining to the Amendment was

contained in hyperlinks which unambiguously pertained to “arbitration” and “class

action waiver”.

¶ 20 Plaintiff might not have read the email notifications. However, she agreed to

be bound to amendments when notified of them by email. And our Court has long CANTEEN V. CHARLOTTE METRO CREDIT UNION

held that “the law will not relieve one who can read and write from liability upon a

written contract, upon the ground that he did not understand the purpose of the

writing, or that he has made an improvident contract, when he could inform himself

and has not done so.” Weaver v. St. Joseph, 187 N.C. App. 198, 213, 652 S.E.2d 701,

712 (2007) (citation omitted) (internal quotation marks omitted). We have enforced

an arbitration agreement despite the plaintiff’s argument that the agreement was

unconscionable because notice was improper. Westmoreland v. High Point

Healthcare, 218 N.C. App. 76, 721 S.E.2d 712 (2012).

¶ 21 Here, not only did CMCU’s email notice include the text of the new

amendment, but it also included a link to a thorough explanation in plain language.

Even so, Plaintiff contends that CMCU “buried the arbitration and class action

waiver provision under ‘Additional Forms and Notices’” in the email. After examining

the notice email in its entirety, we do not find this argument persuasive. Both the

“Information about Arbitration” and “Arbitration and Class Action Waiver” links are

clearly visible in the body of the email. The subject line of the email further put

Plaintiff on notice of the change in terms. Plaintiff opted-in to receive electronic

notifications. She does not dispute that she received all three notice emails from

CMCU. Although Plaintiff may take issue with the method in which notice was

provided, we conclude that the notice was sufficient.

¶ 22 We further note that Plaintiff was given the right to opt out of the provisions CANTEEN V. CHARLOTTE METRO CREDIT UNION

in the amendment yet failed to do so. Plaintiff claims that an ambiguity in the opt-

out provision made it impossible for her to decline arbitration. This provision reads:

You have the right to opt out of this agreement to arbitrate if you tell us within 30 days of the opening of your account or the mailing of this notice, whichever is sooner.

Plaintiff argues that because she opened her account in 2014 and the notice was not

sent until 2021, this provision makes it impossible for her to opt out. We agree that

this provision could be construed to suggest that Plaintiff’s right to opt out of the

amendment expired in 2014, long before the amendment was even contemplated. But

such a reading is nonsensical. As such, we construe the provision as to allow Plaintiff

30 days from the date she received notice to opt out. Yet she failed to do so in this

case.

IV. Conclusion

¶ 23 We reverse the trial court’s order denying CMCU’s motion to compel

arbitration. We remand this matter, directing the trial court to stay this action

pending arbitration.

REVERSED AND REMANDED.

Judge DIETZ concurs.

Judge ARROWOOD dissents by separate opinion. No. COA22-59 – Canteen v. Charlotte Metro Credit Union

ARROWOOD, Judge, dissenting.

¶ 24 I respectfully dissent from the majority’s holding that these facts show the

existence of a binding arbitration agreement and that the trial court erred in denying

CMCU’s motion to compel arbitration. Accordingly, I would hold the trial court’s

order should be affirmed because there is no valid arbitration agreement.

¶ 25 It is well established by this Court that before a dispute can be settled by

arbitration, “there must first exist a valid agreement to arbitrate.” Routh v. Snap-

On Tools Corp., 108 N.C. App. 268, 271, 423 S.E.2d 791, 794 (1992) (citations

omitted). “The law of contracts governs the issue of whether there exists an

agreement to arbitrate.” Id. (citations omitted). Therefore, “a party cannot be forced

to submit to arbitration of any dispute unless he has agreed to do so.” Sloan Fin.

Grp., Inc. v. Beckett, 159 N.C. App. 470, 478, 583 S.E.2d 325, 330 (2003), aff’d per

curiam, 358 N.C. 146, 593 S.E.2d 583 (2004) (citation omitted). The responsibility of

demonstrating a valid agreement exists is placed upon the party seeking arbitration.

Routh, 108 N.C. App. at 271-72, 423 S.E.2d at 794.

¶ 26 Additionally, because arbitration agreements are governed by the principles of

contracts, they are also subject to the implied covenants of good faith and fair dealing.

See Bicycle Transit Auth., Inc. v. Bell, 314 N.C. 219, 228, 333 S.E.2d 299, 305 (1985)

(citation omitted) (“In every contract there is an implied covenant of good faith and

fair dealing that neither party will do anything which injures the right of the other

to receive the benefits of the agreement.”). This responsibility is even more important CANTEEN V. CHARLOTTE METRO CREDIT UNION

ARROWOOD, J., dissenting

when an agreement “confers on one party a discretionary power affecting the rights

of the other[.]” Mezzanotte v. Freeland, 20 N.C. App. 11, 17, 200 S.E.2d 410, 414

(1973), cert. denied, 284 N.C. 616, 201 S.E.2d 689 (1974). However, a promise may

be illusory where a promisor reserves “an unlimited right to determine the nature or

extent of his performance[.]” Wellington-Sears & Co. v. Dize Awning & Tent Co., 196

N.C. 748, 752, 147 S.E. 13, 15 (1929).

¶ 27 I agree with the trial court that CMCU had no authority to unilaterally alter

the Agreement and add entirely new terms. In the present case, the Agreement

between the parties, allowed the appellant to “change” certain terms and allowed

them to serve those changes by electronic means. Specifically, the Agreement allowed

CMCU to “change the terms of this Agreement[,]” and stated CMCU would notify

customers of “any change in terms,” but did not put customers on notice that it would

add additional, uncontemplated terms. (emphasis added)

¶ 28 Therefore, in my opinion, nothing in the Agreement allowed CMCU to add new

provisions to the Agreement and make those new additions apply retroactively to

protect their past actions. The majority’s opinion improperly interprets the

Agreement to allow for this occurrence and sanctions such behavior by allowing a

financial institution to protect itself from actions for which it is already being sued

for in other litigation. CANTEEN V. CHARLOTTE METRO CREDIT UNION

¶ 29 In addition even if the Agreement allowed CMCU to “add” new terms as

opposed to changing current terms, which I do not believe it did, the cunning method

in which CMCU attempted to do so (requiring its customers to click thru numerous

links and forms to determine that it was attempting to add new terms to the

Agreement), in my opinion, blatantly breached the covenants of good faith and fair

dealing provisions inherent in every contract. Furthermore, allowing CMCU

unlimited authority to alter the terms of an established contract renders the contract

illusory.

¶ 30 This view is consistent with the previous holdings of the Court, which the

majority is required to follow under the holding set forth in In re Civil Penalties. 324

N.C. 373, 384, 379 S.E.2d 30, 37 (1989) (citations omitted) (“Where a panel of the

Court of Appeals has decided the same issue, albeit in a different case, a subsequent

panel of the same court is bound by that precedent, unless it has been overturned by

a higher court.”). Specifically, the majority’s holding violates the principal that

allowing one party to an agreement to unilaterally alter the terms of the agreement

is antithetical to the contractual principles of mutual assent and this Court’s

contention that “a party cannot be forced to submit to arbitration of any dispute

unless he has agreed to do so.” Sloan Fin. Grp., Inc., 159 N.C. App. at 478, 583 S.E.2d

at 330 (emphasis added). CANTEEN V. CHARLOTTE METRO CREDIT UNION

¶ 31 Other jurisdictions have found similarly. In Sears Roebuck and Company v.

Avery, this Court, applying Arizona law, found that the plaintiff company could not

unilaterally add an arbitration provision. 163 N.C. App. 207, 219, 593 S.E.2d 424,

432 (2004). In Sears Roebuck, the plaintiff company’s original contract with

defendant did not contain an arbitration clause, but they later amended the

agreement to change the terms. Id. at 212, 593 S.E.2d at 428.

¶ 32 However, this Court reasoned that allowing Sears to “unilaterally insert” a

“wholly new term” would “ignore the requirement of good faith implied in all contracts

of adhesion[,]” be contrary to “black letter contract law[,]” and “render the contract

illusory.” Id. at 218-19, 593 S.E.2d at 432. Other courts have found similarly. Id. at

219, 593 S.E.2d at 432-33 (citing Badie v. Bank of Am., 67 Cal. App. 4th 779, 783, 79

Cal. Rptr. 2d 273, 275 (1998); Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1179

(9th Cir. 2003), cert. denied, 540 U.S. 1160, 157 L. Ed. 2d 1204 (2004); Dumais v. Am.

Golf Corp., 299 F.3d 1216, 1219 (10th Cir. 2002); Floss v. Ryan’s Family Steak Houses,

Inc., 211 F.3d 306, 316 (6th Cir. 2000), cert. denied, 531 U.S. 1072, 148 L. Ed. 2d 664

(2001)).

¶ 33 Because I believe that the majority’s view is violative of previous precedent of

this Court and of the black letter principals of contract law I dissent. I would find

there to be no mutual assent and thus no binding arbitration agreement and I would CANTEEN V. CHARLOTTE METRO CREDIT UNION

conclude the trial court was correct in denying CMCU’s motion to compel arbitration.

For the foregoing reasons, I would affirm the trial court’s order and I dissent.