Barras ex rel. v. Branch Banking & Trust Co. (In re Checking Account Overdraft Litig. MDL No. 2036)

• Decision Date: 06 July 2012
• Docket Number: No. 11–14318.,11–14318.
• Citation: 685 F.3d 1269,23 Fla. L. Weekly Fed. C 1267
• Court: U.S. Court of Appeals — Eleventh Circuit
• Parties: In re CHECKING ACCOUNT OVERDRAFT LITIGATION MDL NO. 2036. Lacy Barras, on behalf of herself and all others similarly situated, Plaintiff–Appellee, v. Branch Banking and Trust Company, a federally chartered thrift institution, Defendant–Appellant.

685 F.3d 1269

23 Fla. L. Weekly Fed. C 1267

In re CHECKING ACCOUNT OVERDRAFT LITIGATION MDL NO. 2036.Lacy Barras, on behalf of herself and all others similarly situated, Plaintiff–Appellee,

v.Branch Banking and Trust Company, a federally chartered thrift institution, Defendant–Appellant.

No. 11–14318.

United States Court of Appeals, Eleventh Circuit.

July 6, 2012.

Robert Cecil Gilbert, Grossman Roth, PA, Coral Gables, FL, Gary Walker Jackson, Jackson & McGee, LLP, Charlotte, NC, G. Franklin Lemond, Jr., Edward Adam Webb, Webb, Klase & Lemond, LLC, Atlanta, GA, Charles D. Marshall, Green Welling, PC, San Francisco, CA, Bruce Stephen Rogow, Bruce S. Rogow, PA, Fort Lauderdale, FL, for Plaintiff–Appellee.

William James Holley, II, Nancy H. Baughan, David B. Darden, Parker, Hudson,Rainer & Dobbs, LLP, Atlanta, GA, for Defendant–Appellant.

Appeal from the United States District Court for the Southern District of Florida.

Before CARNES, BARKETT and BLACK, Circuit Judges.

BARKETT, Circuit Judge:

Branch Banking & Trust Company (“BB&T”), a commercial bank, appeals the denial of its motion to compel arbitration of a putative class action brought by Lacy Barras, a customer of BB&T. Barras alleged in her complaint on behalf of herself and the class she seeks to represent that BB&T charged her and charges others overdraft fees for payments from checking accounts even when the account contains sufficient funds to cover the payments. She also alleges that BB&T supplies inaccurate and misleading information about account balances, and fails to notify customers about changes to BB&T's policies for processing checking account transactions, thereby increasing overdraft charges assessed against BB&T customers.

Barras asserts claims under the North Carolina Unfair Trade Practices Act for unfair and deceptive trade practices, breach of contract, breach of the covenant of good faith and fair dealing, and unconscionability, and seeks to certify a class of BB&T account holders who were likewise charged allegedly inflated overdraft fees on their checking accounts.¹

BB&T moved to compel arbitration of all of Barras's claims under 9 U.S.C. §§ 3² and 4# FN;B0033FN;B0044

I.

The BSA provides both parties a right to submit to arbitration “[a]ny claim or dispute (‘Claim’) ... arising from or relating in any way to [Barras's] account, this Agreement, or any transaction conducted with the Bank or any of its affiliates.” The “Claims” referred to “include Claims regarding the applicability of this provision or the validity of this or any prior agreement.” BB&T first argues that, pursuant to this “delegation clause,” the threshold issue of whether the arbitration provision is unenforceable because of the alleged unconscionability of the cost-and-fee-shifting provision should have been submitted to arbitration.

The district court determined that BB&T has waived its right to arbitrate the threshold issue of unconscionability. The district court based its conclusion on the fact that over a year prior, BB&T asked the district court to determine the question in its original motion to compel arbitration, and failed to move the court to allow an arbitrator to determine the unconscionability of the provision. Because Barras had incurred the expense of opposing the original motion as well as on appeal to this Court, the district court refused to allow BB&T to argue for the first time on remand that the arbitrator should determine the issue.

Notwithstanding that BB&T had already litigated this issue before the district court for over a year, BB&T argues that Rent–A–Center, West, Inc. v. Jackson, ––– U.S. ––––, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010), required the district court to submit the issue of enforceability to the arbitrator. We find this case inapplicable. The question of waiver was not before the Supreme Court in Rent–A–Center, as the defendant seeking arbitration in Rent–A–Center, unlike BB&T, argued consistently that this issue was assigned by agreement to the arbitrator. See130 S.Ct. at 2775. In contrast, BB&T litigated its case for over a year without moving the district court to submit the threshold issue of enforceability to the arbitrator; rather, it asked the district court to hold that the arbitration agreement was enforceable. Accordingly, we cannot say that the districtcourt erred in holding that BB&T had waived its right to arbitrate the threshold issue of unconscionability. See Hough v. Regions Fin. Corp., 672 F.3d 1224, 1228 (11th Cir.2012) (holding that party waived its right to submit question of unconscionability to arbitrator by litigating that issue before the district court).

Because we find that the district court did not err in refusing to submit the question of unconscionability to the arbitrator, we must now turn to the district court's substantive rulings on: (1) whether the cost-and-fee-shifting provision applies to the arbitration provision; and (2) if so, whether the FAA preempts South Carolina's doctrine of unconscionability.

II.

BB&T argues that the cost-and-fee-shifting provision does not apply to arbitration because the arbitration provision dictates that any arbitration under the BSA will be conducted according to a body of rules promulgated by the American Arbitration Association (“AAA”). Because the AAA rules include provisions pertaining to costs, BB&T argues these rules regarding costs must be deemed as the only ones applicable to arbitration.

However, the BSA also dictates the costs and fees allowable as a result of “any dispute” with Barras involving her bank account. The cost-and-fee-shifting provision provides, in relevant part:

COSTS, DAMAGES, AND ATTORNEYS' FEES. You agree to be liable to the Bank for any loss, costs, or expenses, including, without limitation, reasonable attorneys' fees, the costs of litigation, and the costs to prepare or respond to subpoenas, depositions, child support enforcement matters, or other discovery that the Bank incurs as a result of any dispute involving your account. You authorize the Bank to deduct any such loss, costs, or expenses from your account without prior notice to you.

Under South Carolina law,⁶ “[i]f [a] contracts language is clear and unambiguous, the language alone determines the contracts force and effect.” Schulmeyer v. State Farm Fire & Cas. Co., 353 S.C. 491, 579 S.E.2d 132, 134 (2003). A reviewing court “must consider the contract in its entirety and employ a construction that gives effect to the whole instrument and to each of its various parts and provisions.” Hardee v. Hardee, 348 S.C. 84, 558 S.E.2d 264, 267 (S.C.App.2001) (internal quotation marks omitted).⁷

According to the plain language of the BSA's cost-and-fee-shifting provision, that provision unambiguously requires Barras to bear “any loss, costs, or expenses ... that the Bank incurs as a result of any dispute involving [Barras's] account.” The plain language applies the cost-and-fee-shifting provision to arbitration, as arbitration is a type of “dispute,” and the broad language of the provision contains no limitation that would otherwise prevent its application to arbitration. See Schulmeyer, 579 S.E.2d at 134. Moreover, “giv[ing] effect to the whole instrument and to each of its various parts and provisions” requires us to interpret the arbitration provision and cost-and-fee-shifting provision as capable of operating in tandem and allowing BB&T to invoke its contractual cost-and-fee-shifting rights independently of the arbitration provision. See Hardee, 558 S.E.2d at 267.⁸ We find no error in the district court's conclusion that the cost-and-fee-shifting provision is applicable to costs arising from arbitration.

III.

Notwithstanding that the district court found the arbitration clause unconscionable, BB&T argues that, under Concepcion, the FAA preempts application of South Carolina's unconscionability doctrine to the arbitration provision in the BSA. Barras argues that although the FAA requires that “[a] written provision in any ... contract ... to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable,” it permits arbitration agreements to be invalidated “ upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2 (2006) (emphasis added). The question, then, is whether a determination that the relevant written provision here is unenforceable because it is unconscionable is a “ground[ ]” that “exist[s] at law or in equity for the revocation of any contract” in South Carolina. Id.

In Concepcion, the Supreme Court held that § 2 of the FAA prohibits the invalidation of an arbitration agreement according to a state law that made contractual waivers of class-wide arbitration unenforceable. See131 S.Ct. at 1753. The Court reasoned that, by requiring class-wide arbitration in instances where contracting parties had agreed only to individual arbitration, the state law increased the procedural complexity of any arbitration proceeding that occurred between the parties. See id. at 1751. The Court held that this feature of class-wide arbitration was inconsistent with the procedural flexibility and informality of individual arbitration. See id. In addition, the Court noted that class-wide arbitrations typically produce larger awards than individual arbitrations and that the FAA permits only limited review of arbitration awards. See id. at 1752. The Court held that this feature of class-wide arbitration conflicted with the degree of risk assumed by the defendant in entering into an arbitration agreement providing for only individual arbitration⁹ as well as with Congress's intentions in enacting the FAA. See id. (“We find it hard to believe that defendants would bet the company with no effective means of review, and even harder to believe that Congress would have intended to allow state courts to force such a decision.”).

Taking these features of class-wide arbitration into account, ...