Gibbs v. Firefighters Community Credit Union , 2021 Ohio 2679 ( 2021 )

[Cite as Gibbs v. Firefighters Community Credit Union, 2021-Ohio-2679.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
RICHARD GIBBS, ET AL., :
Plaintiffs-Appellees, :
No. 109929
v. :
FIREFIGHTERS COMMUNITY :
CREDIT UNION,
Defendant-Appellant. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: August 5, 2021
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-19-927066
Appearances:
Branstetter, Stranch & Jennings, P.L.L.C., Alyson Steele
Beridon, Karla Campbell, Michael J. Wall, J. Gerard
Stranch, and Martin F. Schubert; Cohen & Malad, L.L.P.,
and Lynn A. Toops, for appellees.
Litchfield Cavo, L.L.P., James Branit, and Keith L. Gibson;
Bricker & Eckler, L.L.P., and Daniel C. Gibson, for
appellant.
SEAN C. GALLAGHER, P.J.:
Defendant-appellant Firefighters Community Credit Union
(“FFCCU”) appeals the decision of the trial court that denied its motion to stay the
action pending arbitration. Upon review, we affirm the decision of the trial court.
Background
On December 26, 2019, appellees Richard Gibbs, Randall L. Joy, and
Donna M. Joy (collectively “appellees”) filed a class-action complaint against
FFCCU. The complaint states that appellees have checking accounts at FFCCU and
alleges that FFCCU engages in practices of (1) charging ATM/VCC fees on
transactions that do not actually overdraw an account, and (2) charging two or more
returned item fees on the same item. The complaint includes class allegations and
raises claims for breach of contract, breach of the covenant of good faith and fair
dealing, and unjust enrichment.
In response to the complaint, FFCCU filed a motion to dismiss or, in
the alternative, application for stay pending arbitration pursuant to R.C. 2711.02(B).
FFCCU argued that appellees agreed to a change in terms and conditions to their
account agreements, which adopted an “Arbitration and Waiver of Class Action
Relief provision.” FFCCU provided an affidavit of an authorized representative who
averred that “[o]ne amendment to the Account Agreement that [FFCCU] notified
the members of was the inclusion of an arbitration and class action waiver provision,
effective August 21, 2019.” It was also averred that this notice was sent to email
addresses previously provided by appellees to FFCCU and that no failure to deliver
notices were received. FFCCU maintained that because appellees never opted out
of the Arbitration and Waiver of Class Action Relief provision, it became effective
and controls in this matter. Relevant hereto, the Account Agreement provided that
it “may be amended by Us at any time in which case We will provide You with a
notice of amendment as required by law or regulation,” and that the “Agreements
and Disclosures provided to You at the time you opened Your Account * * * may be
amended by Us from time to time in a manner as prescribed by law.”
The email that purportedly was sent to appellees on August 28, 2019,
contained the subject “We’ve updated our terms of services” and stated as follows:
Dear Valued Member,
We’re writing to let you know that we’ve updated our terms of service.
These updates apply to all members and accounts at Firefighters
Community Credit Union. We believe these updates will help us serve
all of our members better. The changes in terms are attached to this
email. We recommend that you familiarize yourself with these updated
agreements. As you continue to use FFCCU for your banking needs,
you agree to these updated terms. If you have any questions, please
don’t hesitate to contact us at * * *. We look forward to continuing to
serve you and to help you meet your financial goals.
(Emphasis added.)
This email indicated that the terms of service had been updated, and
nothing in the content of the email informed the recipient of the addition of the
Arbitration and Waiver of Class Action Relief provision or the ability to opt out.
Rather, the Notice of Change in Terms that was stated to “apply to all members” was
“attached to this email.” The attached Notice of Change in Terms included the
Arbitration and Waiver of Class Action Relief provision and opt-out requirements,
which were shown in a box.
In opposing FFCCU’s motion, appellees argued in part that they “did
not agree to the arbitration or waiver clauses because [they] * * * were not fully
informed * * *.” Appellees alleged in their opposition that the parties had been
engaged in presuit settlement discussions on a class-wide basis for months leading
up to the filing of the case and that the August 28, 2019 email informing members
of changes to the terms of service was sent after counsel for the Joys sent a presuit
demand letter on July 17, 2019. Appellees argued that because they did not make
an informed decision, there was no meeting of the minds and no agreement to
arbitrate or waiver of their right to participate in a class-action lawsuit or to a jury
trial. They maintained that their claims were governed by the 2018 account
agreement and that they are not subject to the added provisions under the 2019
agreement. Appellees also argued that at the time the notice was sent, FFCCU was
already aware of the claim against it and that the Joys were represented by class
counsel. Additionally, they argued that the added arbitration and class or jury
waiver clauses were unconscionable.
In its reply, FFCCU argued that the opposition included no admissible
evidence and that appellees did not dispute receiving the notice that was sent or their
failure to opt out of the arbitration requirement. FFCCU continued to maintain that
the 2019 agreement and its arbitration and waiver provisions applied in this matter.
FFCCU further argued that appellees failed to establish procedural or substantive
unconscionability.
Following a hearing on FFCCU’s motion, the trial court issued a
decision that denied the motion and found “plaintiffs’ claims may proceed as the
arbitration clause in issue is not enforceable against them.” The trial court
recognized the circumstances under which the change to the terms of service was
sent, including the active negotiations between the parties, and determined that
“there was no agreement to arbitrate because plaintiffs could not have made an
informed decision as to whether or not to opt out of the arbitration clause under
these factual circumstances.” The trial court specifically recognized that the “notice
of arbitration and class waiver provisions must be clear so that the parties can make
an informed decision” and that “the language used by defendants in the notice email
implied that all members already agreed to the updated terms.” In this regard, the
trial court determined as follows:
Further, the language used by defendant in the notice email implies
that all members have already agreed to the updated terms.
Defendant’s notice e-mail dated August 28, 2019 indicated that the
terms had already been updated and that members should familiarize
themselves with the updated terms because by continuing to use
defendant’s services, members had actually already agreed to the
terms. (See Def. Mem. Ex. 2. at 1. e-mail entitled “We’ve updated our
terms of service,” stating that “we recommend that you familiarize
yourself with these updated agreements” and “As you continue to use
FFCCU for your banking needs, you agree to these updated terms.”).
The trial court concluded that “there was no agreement to arbitrate”
and denied FFCCU’s motion. This appeal followed.
Law and Analysis
Under its sole assignment of error, FFCCU claims the trial court erred
by denying its motion to dismiss.
Initially, we address appellees’ contention that there is a lack of a final
appealable order because the trial court denied FFCCU’s motion to dismiss.
Although FFCCU styled its motion as a motion to dismiss, it requested in the
alternative that the case be stayed pending arbitration pursuant to R.C. 2711.02(B).
The trial court ultimately determined that the case was not subject to arbitration
because there was no agreement to arbitrate. Pursuant to R.C. 2711.02(C), “an order
under [R.C. 2711.02(B)] that grants or denies a stay of a trial of any action pending
arbitration * * * is a final order * * *.” Accordingly, “Ohio law authorizes appellate
review of such orders.” Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352,
2008-Ohio-938, 884 N.E.2d 12, ¶ 30.
R.C. 2711.02(B) requires a trial court to stay litigation pending
arbitration when certain conditions are met and provides as follows:
If any action is brought upon any issue referable to arbitration under
an agreement in writing for arbitration, the court in which the action is
pending, upon being satisfied that the issue involved in the action is
referable to arbitration under an agreement in writing for arbitration,
shall on application of one of the parties stay the trial of the action until
the arbitration of the issue has been had in accordance with the
agreement, provided the applicant for the stay is not in default in
proceeding with arbitration.
The standard of review for a trial court’s decision on whether to stay
a case pending arbitration under R.C. 2711.02(B) depends on the underlying issue
presented. McCaskey v. Sanford-Brown College, 8th Dist. Cuyahoga No. 97261,
2012-Ohio-1543, ¶ 7. Generally, an abuse-of-discretion standard has been applied
when there is a question such as whether a party has waived its right to arbitrate a
given dispute, and a de novo standard has been applied when reviewing whether a
party has agreed to arbitration or questions of unconscionability. Hedeen v. Autos
Direct Online, Inc., 2014-Ohio-4200, 19 N.E.3d 957, ¶ 9 (8th Dist.), citing McCaskey
at ¶ 7-8. “The existence of a contract is a question of law that we review de novo.”
Vogel v. Albi, 1st Dist. Hamilton No. C-190746, 2020-Ohio-5242, ¶ 21, citing N. Side
Bank & Trust Co. v. Trinity Aviation, L.L.C., 1st Dist. Hamilton Nos. C-190021 and
C-190023, 2020-Ohio-1470, ¶ 17. Accordingly, because we are reviewing the trial
court’s determination that there was no agreement to arbitrate, we apply a de novo
standard of review. See Hedeen at ¶ 9. However, any factual findings regarding the
circumstances surrounding the making of the contract should be reviewed with
great deference. See Benfield at ¶ 38.
Whether a party has agreed to arbitration is a matter of contract.
Maestle v. Best Buy Co., 8th Dist. Cuyahoga No. 79827, 2005-Ohio-4120, ¶ 10, citing
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131
L.Ed.2d 985 (1995); Palumbo v. Select Mgt. Holdings, Inc., 8th Dist. Cuyahoga No.
82900, 2003-Ohio-6045, ¶ 18. Therefore, when deciding whether a party has
agreed to arbitrate, courts should apply ordinary principles that govern the
formation of contracts. Seyfried v. O’Brien, 2017-Ohio-286, 81 N.E.3d 961, ¶ 19 (8th
Dist.), citing First Options at 944; Roberts v. KND Dev. 51, L.L.C., 8th Dist.
Cuyahoga No. 108473, 2020-Ohio-4986, ¶ 10, citing Avery v. Academy Invests.,
L.L.C., 8th Dist. Cuyahoga No. 107550, 2019-Ohio-3509, ¶ 9. “‘A valid arbitration
agreement, like any contract, requires an offer and acceptance that is supported by
consideration and is premised on the parties’ meeting of the minds as to the essential
terms of the agreement.’” Rousseau v. Setjo, L.L.C., 8th Dist. Cuyahoga No. 109237,
2020-Ohio-5002, ¶ 8, quoting Corl v. Thomas & King, 10th Dist. Franklin No.
05AP-1128, 2006-Ohio-2956, ¶ 8. A party with a unilateral right to modify a
contract does not have the right to make any kind of change whatsoever. Maestle at
¶ 20.
Although Ohio courts recognize a strong public policy favoring
arbitration, when deciding motions to compel arbitration, the proper focus is
whether the parties actually agreed to arbitrate the issue. Taylor v. Ernst & Young,
L.L.P., 130 Ohio St.3d 411, 2011-Ohio-5262, 958 N.E.2d 1203, ¶ 20. Because
arbitration is a matter of contract, a party cannot be required to submit to arbitration
any dispute which he or she has not agreed so to submit. See id. at ¶ 20; Maestle at
¶ 10, 22. “‘The party seeking to compel arbitration bears the burden of establishing
the existence of an enforceable arbitration agreement [with] the party against whom
the moving party seeks enforcement.’” Dorgham v. Woods Cove III, 8th Dist.
Cuyahoga No. 106838, 2018-Ohio-4876, ¶ 16, quoting Fifth Third Bank v. Senvisky,
8th Dist. Cuyahoga No. 100030, 2014-Ohio-1233, ¶ 11.
In this action, FFCCU sought to amend the agreement with its
customers to add an Arbitration and Waiver of Class Action Relief provision.
However, the record fails to demonstrate sufficient notice was sent such that there
was a “meeting of the minds” or an agreement as to the inclusion of the subject
provision. There is nothing to show that an arbitration provision was included in
the original account agreement, and the content of the email notice that was
purportedly sent to appellees did not provide any indication that the changes to the
account agreement involved the addition of the Arbitration and Waiver of Class
Action Relief provision. As stated by the Sixth Circuit in Sevier Cty. Schools Fed.
Credit Union v. Branch Banking & Trust Co., 990 F.3d 470, 15 (6th Cir.2021),
The proper question is whether, upon assenting to the original two-
page * * * agreement, such individuals * * * would reasonably expect
their relationship to be governed * * * by new provisions unilaterally
added * * * to such an extent that the [Bank Services Agreement]
ultimately contained terms that materially changed the Plaintiffs’
rights and obligations under the original agreement.
Despite the fact that the email notice indicated that “[t]he changes in
terms are attached to this email,” as the trial court aptly recognized, the language
used by the defendants in the email implied that all members had already agreed to
the updated terms. Likewise, the email notice stated as the subject, “We’ve updated
our terms of services,” and the email did not call attention to the arbitration
provision or opt-out requirements. Simply put, clear notice was not provided for
appellees to make an informed decision or to demonstrate they agreed to be bound
by the arbitration provision. Instead, “[t]he Plaintiffs were thus lulled into not
giving a thought to the unilateral addition of the arbitration provision * * *.” Id. at
24.
Although FFCCU spends much time arguing that appellees failed to
present admissible evidence to rebut their claim that proper notice of the provision
and opt-out requirements was provided, FFCCU had the burden of establishing
sufficient notice was sent and to establish the existence of an enforceable arbitration
agreement. FFCCU failed to meet its burden.1 Additionally, this case is
distinguishable from AT&T Mobility Servs., L.L.C. v. Boyd, N.D.Ohio No.
1:19cv2539, 2020 U.S. Dist. LEXIS 196141 (Oct. 22, 2020), which is relied on by
FFCCU. In stark contrast to this case, in Boyd, the email notice included a subject
line, “Action Required: Notice Regarding Arbitration Agreement,” and specifically
informed the recipient that the “Arbitration Agreement [is] linked to this email” and
included instruction for opting out in the content of the email. Id. at 4-5.2
We also are not persuaded by the supplemental authority filed by
FFCCU, which cites Qualls v. Wright Patt Credit Union, 2d Dist. Greene No. 2020-
CA-48, 2021-Ohio-2055, and Rudolph v. Wright Patt Credit Union, 2d Dist. Greene
No. 2020-CA-50, 2021-Ohio-2215.
1 We would be remiss not to point out that as was the case in Sevier, the
circumstances argued in this case present “the antithesis of good faith and fair dealing.”
Id. In light of the representation that active negotiations were occurring between the
parties at the time the email notification was sent, FFCCU arguably had knowledge that
appellees would have opted out of the provision had proper notice been given.
2 Joseph v. M.B.N.A. Am. Bank, N.A., 148 Ohio App.3d 660, 2002-Ohio-4090, 775
N.E.2d 550 (8th Dist.), is also distinguishable because it applied Delaware law, which
expressly permits banks to amend credit card agreements to add an arbitration clause
pursuant to Del.Code Ann., Title 5, Section 952(a), and proper notice of intent to amend
the credit card agreement to incorporate an arbitration provision was sent in a mailing to
card holders. Id. at ¶ 2, 9, 12.
In Qualls, the version of the membership agreement that was
attached to the complaint included the disputed arbitration clause, which had been
unilaterally added to the agreement by the credit union. The Second District Court
of Appeals determined that Qualls “acknowledged in his complaint that his and [the
credit union’s] contractual relationship was embodied in that Membership
Agreement and ‘related documentation.’” Id. at ¶ 86. The credit union, which had
reserved the right to change the terms of the agreement at any time, had posted new
versions of the agreement to its website and also asserted “it had mailed the July
2019 Membership Agreement to * * * the same mailing address Qualls had provided
to [the credit union] as his mailing address.” Id. at ¶ 10. The court found “Qualls
manifested his assent to the arbitration provision” by “continuing to maintain his
account * * * [and] by his continued use online banking.” Id. at ¶ 88. The Qualls
opinion contains little if any constructive legal analysis regarding notice of a
unilateral modification of an agreement to include an arbitration clause. Also,
unlike Qualls, in this case there was no physical mailing of the modified agreement
and appellees did not acknowledge the 2019 agreement was applicable in filing their
claims. Rather, appellees assert their claims are governed by the 2018 account
agreement, which is attached to the complaint, and maintain they are not subject to
the 2019 agreement containing the Arbitration and Waiver of Class Action Relief
provision that was unilaterally added by FFCCU without proper notice.
In Rudolph, the Second District Court of Appeals upheld a trial court’s
decision to enter a stay pending arbitration upon finding that the credit union could
make a unilateral change to a membership agreement to change the prior method
of dispute resolution to arbitration and that Rudolph had notice of changes to the
agreement because he had registered for online banking and accepted responsibility
to review the member agreements that the credit union posted on its website. See
id. at ¶ 49. Additionally, the court found “the terms were sufficiently conspicuous
on the website, which Rudolph repeatedly accessed.” Id. at ¶ 57. The decision in
Rudolph attempts to distinguish Maestle, 8th Dist. Cuyahoga No. 79827, 2005-
Ohio-4120, and Sevier, 990 F.3d 470. Rudolph is not controlling to our decision.
Under the circumstances presented, we find the decision in Coleman
v. Alaska USA Fed. Credit Union, D.Alaska No. 3:19-cv-0229-HRH, 2020 U.S. Dist.
LEXIS 3301 (Jan. 9, 2020), to be persuasive in this matter:
In order for plaintiff to have been bound by the terms of the arbitration
agreement, there must be some evidence that shows “that a reasonably
prudent user would have been on inquiry notice that [an arbitration]
agreement existed.” [Knutson v. Sirius XM Radio Inc., 771 F.3d 559,
569, (9th Cir.2014)]. “While failure to read a contract before agreeing
to its terms does not relieve a party of its obligations under the contract,
the onus must be on website owners to put users on notice of the terms
to which they wish to bind consumers.” Nguyen v. Barnes & Noble
Inc., 763 F.3d 1171, 1179 (9th Cir.2014) (internal citation omitted). As
the Seventh Circuit has explained, “we cannot presume that a person
who clicks on a box that appears on a computer screen has notice of all
contents not only of that page but of other content that requires further
action (scrolling, following a link, etc.).” Sgouros v. TransUnion Corp.,
817 F.3d 1029, 1035 (7th Cir.2016). Here, defendant’s pop notice made
no mention of the specific changes being made to the Account
Agreement. The notice failed to describe the update or call attention
to the new arbitration provision. Such notice is insufficient to put a
member on inquiry notice that an arbitration agreement was being
added to its contract with defendant. Requiring such notice is not
“[a]n arbitration-specific rule [that] would be preempted by the FAA,”
O’Connor v. Uber Technologies, Inc., 904 F.3d 1087, 1093 (9th
Cir.2018), as defendant argues. It is a necessary requirement for a
binding contract.
(Emphasis added.) Coleman at 13-15.
On the record before us, FFCCU cannot show that appellees clearly
agreed to the Arbitration and Waiver of Class Action Relief provision. Without
sufficient notice, there was no meeting of the minds and no binding agreement to
arbitrate. As the Supreme Court of Ohio has held, a party cannot be forced to
arbitrate a dispute that he or she did not agree to arbitrate. Taylor, 130 Ohio St.3d
411, 2011-Ohio-5262, 958 N.E.2d 1203, at ¶ 20. Therefore, we find no error in the
trial court’s denial of FFCCU’s motion for stay pending arbitration pursuant to R.C.
2711.02(B).
Finally, contrary to FFCCU’s argument, we do not find that the trial
court extended its ruling to all FFCCU members because class-action issues and
class certification had yet to be determined. Also, the trial court did not suggest the
arbitration provision was unconscionable; rather, it found no arbitration agreement
existed. We find no merit to any other arguments raised by appellant that are not
specifically addressed herein. The assignment of error is overruled.
Judgment affirmed.
It is ordered that appellees recover from appellant 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
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.
__________________________________
SEAN C. GALLAGHER, PRESIDING JUDGE
LARRY A. JONES, SR., J., and
EILEEN T. GALLAGHER, J., CONCUR