Decker v. Star Financial Group, Inc.

• Decision Date: 20 April 2022
• Docket Number: Court of Appeals Case No. 21A-PL-2191
• Parties: Cliff DECKER and Wendy Decker, individually and on behalf of all others similarly situated, Appellants-Plaintiffs, v. STAR FINANCIAL GROUP, INC., Appellee-Defendant.
• Court: Indiana Appellate Court

187 N.E.3d 937

Cliff DECKER and Wendy Decker, individually and on behalf of all others similarly situated, Appellants-Plaintiffs,

v.STAR FINANCIAL GROUP, INC., Appellee-Defendant.

Court of Appeals Case No. 21A-PL-2191

Court of Appeals of Indiana.

FILED April 20, 2022

Attorneys for Appellants: Irwin B. Levin, Vess A. Miller, Lynn A. Toops, Lisa M. LaFornara, Tyler B. Ewigleben, Cohen & Malad, LLP, Indianapolis, Indiana, John Steinkamp, John Steinkamp & Associates, P.C., Indianapolis, Indiana

Attorneys for Appellee: Scott S. Morrisson, Krieg Devault, LLP, Carmel, Indiana, Libby Yin Goodknight, Krieg Devault, LLP, Indianapolis, Indiana

Tavitas, Judge.

Case Summary

[1] Cliff Decker and Wendy Decker ("the Deckers"), individually and on behalf of all others similarly situated, brought a class action complaint against their bank, Star Financial Group, Inc. ("Star Financial"), for the allegedly improper assessment and collection of overdraft fees. The Deckers appeal the trial court's grant of a motion to compel arbitration filed by Star Financial. The arbitration provision was part of a modification of the Terms and Conditions of the account and was attached to the end of the Deckers’ monthly statement, which was provided electronically. The Deckers contend, in part, that they did not receive reasonable notice of the addition of the arbitration provision, and reasonable notice was required by the Terms and Conditions. We conclude that the Deckers did not receive reasonable notice of the arbitration provision and, thus, the trial court erred by granting Star Financial's motion to compel arbitration. Accordingly, we reverse and remand.

Issue

[2] The Deckers raise several issues. We find one issue dispositive and restate the issue as whether Star Financial provided the Deckers with reasonable notice of the addition of an arbitration provision to the Terms and Conditions of the Deckers’ account with Star Financial.

Facts

[3] Star Financial is the parent company of Star Financial Bank, and the Deckers had a checking account with Star Financial Bank. The Terms and Conditions of the account provided, in relevant part:

(2) Agreement. This document, along with any other documents we give you pertaining to your account(s), is a contract that establishes rules which control your account(s) with us....

* * * * *

(10) Amendments and Termination. We may change a term of this agreement. Rules governing changes in interest rates are provided separately in the Truth-in-Savings disclosure or in another document. For other changes, we will give you reasonable notice in writing or by any other method permitted by law.... Reasonable notice depends on the circumstances .... If we have notified you of a change in any term of your account and you continue to have your account after the effective date of the change, you have agreed to the new term(s).

Appellants’ App. Vol. II pp. 53, 57 (emphasis added).

[4] On October 17, 2019, Star Financial assessed a $37.00 overdraft fee against the Deckers, and the Deckers allege that the overdraft fee was improper. In approximately June 2020, the Deckers’ counsel contacted Star Financial's general counsel. They discussed Star Financial's overdraft fee practices, and the Deckers’ counsel emailed Star Financial's general counsel examples of complaints brought against other banks and credit unions for allegedly similar conduct.

[5] The Deckers are "e-statement customers, meaning they have directed [Star Financial] to send them their checking account statements and other notices and disclosures relating to the terms and conditions of their checking account via email." Id. at 86. On August 26, 2020, Star Financial sent the Deckers an email, which provided:

Id. at 215, 221. Although the email included links to the updated Miscellaneous Fee Schedule and the Privacy Notice, the email did not mention changes to the account's Terms and Conditions.

[6] When the Deckers logged into their account as directed by the email, they would have found a fourteen-page monthly statement, which contained: (1) eleven pages of information on transactions for the account; (2) a page of images of the checks; and (3) the following Arbitration and No Class Action Clause Addendum ("Addendum") on pages thirteen and fourteen of the statement:

Id. at 100-01. The monthly statement did not mention the revised Terms and Conditions except for the inclusion of the Addendum at the end of the statement. The Deckers did not see or review the Addendum and continued to be customers of Star Financial.

[7] The Deckers filed a class action complaint against Star Financial on March 18, 2021, regarding the overdraft fees. In April 2021, Star Financial filed a motion to compel arbitration and to dismiss the Deckers’ complaint. Star Financial argued that all of the Deckers’ claims against Star Financial are "subject to mandatory individual arbitration pursuant to the parties’ written agreement to arbitrate." Id. at 68. The Deckers filed a response and argued that the Deckers did not assent to the Addendum because: (1) the Terms and Conditions allows for "changes" but not "additions"; (2) the Addendum was made in bad faith or is unreasonable; and (3) the Deckers did not have "reasonable notice" of the Addendum. Id. at 112.

[8] After a hearing, the trial court granted Star Financial's motion to compel arbitration. The trial court found: (1) the word "change" in the Agreement permitted Star Financial to add the arbitration provisions; (2) the Addendum was clear and the Deckers accepted the terms of the Addendum by continuing to maintain their account with Star Financial; (3) the duty of good faith and fair dealing in the relationship between bank and checking account holder is recognized only where the alleged injury is fraud; and (4) Star Financial provided reasonable notice to the Deckers of the Addendum. Accordingly, the trial court granted Star Financial's motion to compel arbitration and dismiss the Deckers’ complaint.¹ The Deckers now appeal.

Analysis

[9] The Deckers appeal the trial court's grant of Star Financial's motion to compel arbitration. "A trial court's decision on a motion to compel arbitration is reviewed de novo." Doe v. Carmel Operator, LLC , 160 N.E.3d 518, 521 (Ind. 2021). Also, to the extent we must interpret the parties’ agreements, we apply a de novo standard of review to questions of contract interpretation. Lake Imaging, LLC v. Franciscan All., Inc. , 182 N.E.3d 203 (Ind. 2022).

[10] The Addendum provides that it is governed by the Federal Arbitration Act ("FAA"). Our Supreme Court has held, however, that the FAA "applies only if the parties agree to arbitrate." MPACT Const. Grp., LLC v. Superior Concrete Constructors, Inc. , 802 N.E.2d 901, 904 (Ind. 2004). "State law contract principles apply to determine whether parties have agreed to arbitrate." Earley v. Edward Jones & Co., LP , 105 N.E.3d 1094, 1099 (Ind. Ct. App. 2018).

[11] "Both Indiana law and federal law recognize a strong public policy interest in favor of enforcing arbitration agreements." Reitenour v. M/I Homes of Indiana, L.P. , 176 N.E.3d 505, 510 (Ind. Ct. App. 2021). Arbitration agreements "can keep legal costs down, ensure parties’ confidentiality, and provide a flexible alternative to the traditional court system." Carmel Operator , 160 N.E.3d at 520. "Therefore, if we are satisfied that the parties contracted to arbitrate their dispute, we will affirm the order compelling arbitration." Reitenour , 176 N.E.3d at 510. Under Indiana contract law, the party seeking to compel arbitration—here Star Financial—has the burden of demonstrating the existence of an enforceable arbitration agreement. Progressive Se. Ins. Co. v. Empire Fire & Marine Ins. Co. , 88 N.E.3d 188, 197 (Ind. Ct. App. 2017).

[12] In construing arbitration agreements, we resolve every doubt "in favor of arbitration, and the parties are bound to arbitrate all matters, not explicitly excluded, that reasonably fit within the language used." Nat'l Wine & Spirits, Inc. v. Ernst & Young, LLP , 976 N.E.2d 699, 706 (Ind. 2012), cert. denied , 569 U.S. 1018, 133 S. Ct. 2780, 186 L.Ed.2d 219 (2013). Our Supreme Court has held, however, that "imposing on parties a policy favoring arbitration before determining whether they agreed to arbitrate could frustrate the parties’ intent and their freedom to contract." MPACT Const. Grp. , 802 N.E.2d at 906. Our courts, thus, recognize that arbitration is a matter of contract, and "a party cannot be required to submit to arbitration unless the party has agreed to do so." Reitenour , 176 N.E.3d at 510.

[13] We note that, in general, an arbitration agreement, like a typical contract, requires "offer, acceptance of the offer and consideration." Reitenour , 176 N.E.3d at 511. "If these elements are present, the parties are generally bound by the terms of the agreement." Id. "A mutual assent or a meeting of the minds on all essential elements or terms must exist in order to form a binding contract." DiMizio v. Romo , 756 N.E.2d 1018, 1022 (Ind. Ct. App. 2001), trans. denied. "[A]ssent to those terms of a contract may be expressed by acts which manifest acceptance." Id. "If these elements are present, the parties are generally bound by the terms of the agreement." Reitenour , 176 N.E.3d at 511. "[A]rbitration agreements will not be extended by construction or implication." Showboat Marina Casino P'ship v. Tonn & Blank Const. , 790 N.E.2d 595, 598 (Ind. Ct. App. 2003).

[14] Star Financial attempted to modify the Terms and Conditions to add an arbitration provision. "[T]he modification of a contract, because it is also a contract, requires all of the requisite elements of a contract." AM Gen. LLC v. Armour , 46 N.E.3d 436, 443 (Ind. 2015). Thus, the Addendum to the Terms and Conditions is subject to the same scrutiny as any other modification of a contract. Our Courts have held that "the modification of a contract can be implied from the conduct of the parties." SWL, L.L.C. v. NextGear Cap.,...