Rudolph v. Wright Patt Credit Union

[Cite as Rudolph v. Wright Patt Credit Union, 2021-Ohio-2215.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
GREENE COUNTY
VINCENT RUDOLPH :
:
Plaintiff-Appellant : Appellate Case No. 2020-CA-50
:
v. : Trial Court Case No. 2020-CV-241
:
WRIGHT PATT CREDIT UNION : (Civil Appeal from
: Common Pleas Court)
Defendant-Appellee :
:
...........
OPINION
Rendered on the 30th day of June, 2021.
...........
ROBB S. STOKAR, Atty. Reg. No. 0091330, 2712 Observatory Avenue, Cincinnati, Ohio
45208
Attorney for Plaintiff-Appellant
DANIEL C. GIBSON, Atty. Reg. No. 0080129, 100 South Third Street, Columbus, Ohio
43215
and
JAMES R. BRANIT, pro hac vice, 303 West Madison Street, Suite 300, Chicago, Illinois
60606
Attorneys for Defendant-Appellee
.............
WELBAUM, J.
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{¶ 1} Plaintiff-Appellant, Vincent Rudolph, appeals from a judgment ordering the
case to arbitration. According to Rudolph, the trial court erred in ordering arbitration
because he and Defendant-Appellee, Wright Patt Credit Union, Inc. (“WPCU”), never
entered into an agreement to arbitrate, and WPCU was not permitted to add arbitration
provisions to its existing membership agreements. In addition, Rudolph contends that
he did not have actual or constructive notice of any modifications. Rudolph further
argues that a February 2019 membership agreement contained only a stray reference to
a non-existent dispute resolution section, which rendered it vague and unenforceable.
And finally, Rudolph contends that an arbitration provision in a July 2019 membership
agreement was both procedurally and substantively unconscionable.
{¶ 2} We disagree, and we find no error by the trial court. When Rudolph entered
into the original membership agreement with WPCU, he agreed to comply with any
amendments to the WPCU membership agreement and further agreed that WPCU could
change the terms of the agreement and other account documents at any time. Rudolph
also accepted the arbitration terms by continuing his membership in WPCU.
Furthermore, Rudolph had notice of changes to the agreement, as they were posted on
WPCU’s website, which Rudolph accessed. And finally, the arbitration provisions were
neither vague nor unconscionable. Accordingly, the judgment of the trial court will be
affirmed.
I. Facts and Course of Proceedings
{¶ 3} WPCU is a not-for-profit cooperative and financial institution which provides
its members with account and loan services. WPCU’s assets are owned by its members,
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who democratically control it. WPCU Motion to Dismiss or in the Alternative, Application
for Stay Pending Arbitration (“Motion to Dismiss”) (Aug. 10, 2020), and attached Affidavit
of Kim Riley, ¶ 2.
{¶ 4} In August 2017, Rudolph became a WPCU member. Affidavit of Vincent
Rudolph ¶ 3. At the time, Rudolph’s account was governed by the 2015 WPCU
Membership and Account Agreement. Affidavit of Christian A. Jenkins, ¶ 5; Ex. B
attached to the Jenkins’ Affidavit; and WPCU000224.1 The Agreement noted that it was
a legally binding document. Id. In addition, the Agreement stated that:
Your account type(s) and ownership features are designated on your
Account Card. By signing an Account Card, each of you, jointly and
severally, agree to the terms and conditions in this Agreement and Account
Card, which includes the Electronic Fund Transfers Disclosure, the Funds
Availability Policy Disclosure, the Truth-in-Savings Disclosure, the General
Fee Schedule, the Rate Sheet, and any account Receipt accompanying this
Agreement (collectively known as the “Account Documents”). Additionally,
you agree to comply with the Credit Union’s Articles of Incorporation and
Code of Regulations and membership conditions (collectively known as the
“Articles”) and any amendments to the Articles and Account Documents.
(Emphasis added.) Id.{¶ 5} The 2015 agreement contained 25 sections outlining various matters such
as account ownership, deposit requirements, overdrafts, and so forth. Section 15 was
1 For ease of reading, we will refer to the pages of the various membership agreements
by the WPCU designation, followed by page numbers as noted in the main text, i.e.,
“WPCU000224.”
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entitled “Notices” and stated, in pertinent part, as follows:
(b) Notice of Amendments. Except as prohibited by applicable law, we
may change the terms of this Agreement and the other Account Documents
at any time. We will notify you of any changes in terms, rates, or fees as
required by law. We reserve the right to waive any term in this Agreement.
Any such waiver shall not affect our right to future enforcement.
(c) Effect of Notice. Any written notice you give us is effective when we
receive it. Any written notice we give to you is effective when it is deposited
in the U.S. Mail, postage prepaid and addressed to you at your statement
mailing address. Notice to any account owner is considered notice to all
account owners.
(Emphasis sic.) WPCU000230, Section 15(b) and (c).
{¶ 6} The 2015 membership agreement did not contain any arbitration provisions.
Instead, it stated that “[a]ny action to enforce this Agreement shall be commenced in the
Common Pleas Court of Greene County, Ohio.” WPCU000232, Section 25.
{¶ 7} In addition to the membership provisions, the 2015 agreement also contained
a section called “Electronic Fund Transfers Disclosure,” which outlined a member’s rights
and responsibilities. Id. at WPCU000232-000233. This section discussed debit cards,
told members how to access their accounts electronically by using WPCU’s Online
Internet Account Service (“WPCU On-Line”), and provided information about reporting
errors. WPCU000233 at Section 5, and WPCU000234, Sections 7 and 10. Also
included was a statement that “Your designated account may also be governed by other
agreements between you and us and by our rules and regulations for your designated
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account.” WPCU000236, Section 14.
{¶ 8} Effective in January 2018, WPCU amended the membership agreement.
Jenkins’ Affidavit, Ex. C, WPCU000001-000021. This amended agreement stated that
“By opening or maintaining your Credit Union account on or after the effective date of this
Agreement, you agree that the terms and conditions contained in this Agreement will
govern your account and any services related to your account.” WPCU000002. WPCU
changed how the sections were organized and numbered and also added an arbitration
provision. Specifically, the January 2018 agreement stated:
3. Reporting Errors and Dispute Resolution
***
If you have a dispute with the Credit Union and we are not able to resolve
the dispute informally, you agree that the dispute will be resolved through
an arbitration process further detailed in the Dispute Resolution section of
the Account Agreement. If a claim is eligible to be resolved in small claims
court, you may pursue the claim in small claims court.
WPCU000007, Section 3. However, the agreement did not contain a Dispute Resolution
section.
{¶ 9} WPCU did not mail or email the January 2018 agreement to its members.
Instead, WPCU communicated with its members as a whole by posting documents on its
website. WPCU’s continuous practice has been to maintain current copies of its
Membership Agreement and Account Documents on its website. If members request
copies of agreements by calling WPCU or inquiring at a branch, WPCU will mail or email
the documents to them. Jenkins’ Affidavit, Ex. E (Deposition Excerpts of Kimberly Riley),
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p. 72. 120, 141, and 143; Motion to Dismiss, Riley Affidavit at ¶ 14.
{¶ 10} On December 4, 2018, Rudolph registered for online banking. In order to
do so, he had to consent to the terms of WPCU’s online banking agreement. Riley
Affidavit at ¶ 13 and 15, and Ex. 3 attached to the Riley Affidavit. Under the terms of the
online banking agreement, Rudolph agreed “ ‘to electronically view any changes in
disclosures, election information, or updates to WPCU products, services, and fees.’ ”
Id. at ¶ 14; Ex. 2 attached to the Riley Affidavit (WPCU 000170 – the WPCU Internet
Account Access Agreement, Optional Bill Pay Agreement and Disclosure Statement
dated July 27, 2017).
{¶ 11} WPCU again amended its member agreement in February 2019. Section
3 remained the same, requiring arbitration according to the agreement’s Dispute
Resolution section. Jenkins’ Affidavit, Ex. D, WPCU000028. Again, however, the
agreement did not contain a separate Dispute Resolution section.
{¶ 12} In 2019, WPCU issued two versions of the membership agreement. They
are identical other than an irrelevant part dealing with how WPCU handles personal
information. Riley Affidavit at ¶ 5 and Ex. 1 attached to the Affidavit. Version 1 was
posted on the website on July 31, 2019, and Version 2 was posted in October 2019.
Riley Affidavit at ¶ 8.
{¶ 13} These versions added additional information about arbitration. Again, the
agreement stated that “By opening or maintaining your Credit Union account on or after
the effective date of this Agreement, you agree that the terms and conditions contained
in this agreement will govern your account and any services related to your account.”
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Ex. 1 attached to the Riley Affidavit, WPCU000093 (Version 1).2
{¶ 14} Concerning arbitration, the 2019 agreement again required arbitration, but
added that the process was “further detailed in Section 8.25 Dispute Resolution and
Exhaustion of Administrative Remedies below.” WPCU000098, Section 3. This section
stated as follows:
8.25 Dispute Resolution and Exhaustion of Administrative Remedies
You understand and agree as a member of the Credit Union that member
service and satisfaction is our primary objective. The Credit Union would
not exist without its member/owners. A fundamental principle of member
services and satisfaction is to resolve all disputes with our members in a
friendly and non-adversarial basis. Therefore, the procedures outlined in
this Section are critically important to our overall mission of member
services and satisfaction.
Before you are permitted to proceed with a claim against the Credit Union
as outlined in Section 8.23 above, you must request resolution of your claim
in writing to the Credit Union by mandatory binding arbitration as outlined in
this Section. You must send your request to the Credit Union by certified
U.S. Mail to, “Wright-Patt Credit Union, Inc., c/o Legal Department, 3560
Pentagon Blvd., Beavercreek, OH 45431-1706. Your request must
conspicuously state, “REQUEST FOR ARBITRATION” near the top of the
document, and include your contact information, account number, and
2 Our references will be to Version 1, since the versions are virtually identical. Ex. 1 is
also the same document as Ex. F attached to the Affidavit of Christian A. Jenkins. See
Jenkins’ Affidavit.
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nature of your claim(s). The Credit Union shall have thirty (30) days after
receipt of your request to do any of the following: (1) request an in person
meeting with you to discuss your claims at our Corporate Headquarters or
other mutually agreeable location at our cost; (2) waive the right to
mandatory arbitration; or (3) agree to mandatory arbitration. If we elect to
meet with you in person and you are still not satisfied with the outcome of
the meeting then the Credit Union shall have thirty (30) days after the
meeting to notify you in writing of its decision regarding arbitration as
outlined in options (2) and (3) above. Further, you agree to resolve your
claim(s) with the Credit Union on an individual basis, and not participate in
a class action proceeding.
If the Credit Union waives the right to arbitration then you may proceed with
your claim as stated in Section 8.23 above. If the Credit Union agrees to
arbitration then the following provisions apply. All claims and disputes
arising under or relating to the Agreement are to be settled by binding
arbitration in the state of Ohio. The arbitration shall be conducted on a
confidential basis pursuant to the Commercial Arbitration Rules of the
American Arbitration Association. Any decision or award as a result of any
such arbitration proceeding shall be in writing and shall provide an
explanation for all conclusions of law and fact and shall include the
assessment of costs, expenses, and reasonable attorneys’ fees.
Consistent with said rules of the American Arbitration Association, the
prevailing party may request reimbursement of its reasonable attorneys’
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fees for conducting the arbitration. Further, you agree to split the costs of
the arbitration with the Credit Union regardless of the outcome of the
arbitration. Any such arbitration shall be conducted by an arbitrator
experienced in banking and shall include a written report of the arbitration
hearing. The parties reserve the right to object to any individual who is
employed by or affiliated with a competing organization or entity. An award
of arbitration may be confirmed by the Common Pleas Court of Greene
County, Ohio.
(Emphasis sic.) WPCU000111.
{¶ 15} On March 25, 2020, Rudolph filed a class action complaint against WPCU
in Greene County Common Pleas Court. The complaint sought money damages and
declaratory relief from WPCU based on its alleged unfair collection of overdraft fees that
were not actually withdrawn as alleged below. Class Action Complaint, ¶ 1. Essentially,
the challenged practice was outlined as follows:
19. * * * At the moment a debit card transaction is authorized on an
account with a sufficient positive balance to cover the debit transaction,
WPCU immediately reduces the consumer’s checking account for the
amount of the debit purchase, sets aside funds in the checking account to
cover that transaction, and as a result, the consumer’s displayed balance is
immediately adjusted to reflect that subtracted amount. As a result, when
such debit transactions are approved, customers’ accounts necessarily
have (and will always have) sufficient available funds available to cover
these transactions because WPCU has already sequestered these funds
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for payment.
20. However, WPCU still assesses harsh $19 OD Fees on many of
these transactions and misrepresents its practices in account documents.
21. Despite putting aside sufficient available funds for debit card
transactions at the time the transactions are authorized, WPCU later
assesses OD Fees on those same transactions when they purportedly
settle days later into a negative balance. These are APPSN [Authorize
Positive, Purportedly Settle Negative] Transactions.
22. WPCU maintains a running account balance in real-time,
tracking funds consumers have for immediate use. This running account
balance is adjusted in real- time to account for debit card transactions at the
precise instance they are made. When a customer makes a purchase with
a debit card, WPCU sequesters the funds needed to pay the transaction,
subtracting the dollar amount of the transaction from the customer’s
available balance. Such funds are not available for any other use by the
account holder, and such funds are specifically associated with a given
debit card transaction.
23. That means when any subsequent intervening transactions are
initiated on a checking account, they are compared against an account
balance that has already been reduced to account for any earlier debit
transactions. This means that subsequent transactions may properly incur
OD Fees due to the availability of the funds sequestered for debit card
transactions.
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24. Despite segregating and holding debit card funds off-limits to
cover other transactions, WPCU improperly charges OD Fees on these
APPSN transactions, although the APPSN transactions always have
available funds to be covered.
(Emphasis sic.) Complaint at p. 4-5, ¶ 19-24.
{¶ 16} According to the Complaint, WPCU had no justification for these practices,
other than to maximize revenue. Id. at p. 6, ¶ 26. As an example, Rudolph cited only
one transaction from his account – a transaction that occurred on August 24, 2019, when
WPCU assessed an overdraft fee of $19 for a debit card transaction that occurred on
August 23, 2019. Allegedly, the account had a positive balance when the transaction
was authorized, but did not have a positive balance the following day, when the debit was
to be paid. Id. at p. 12-13, ¶ 64. As Exhibit A to the Complaint, Rudolph attached the
February 2019 Account Agreement, which, as noted, called for arbitration but did not
contain the “Dispute Resolution” section that had been mentioned in Section 3 of the
Agreement.
{¶ 17} On August 6, 2020, the magistrate filed an order extending WPCU’s
pleading deadline and also setting an arbitration discovery and briefing schedule.
WPCU then filed a motion to dismiss, or alternatively for a stay pending arbitration. See
Motion to Dismiss. On October 30, 2020, Rudolph filed a response opposing the motion
to dismiss, and WPCU filed its reply on November 23, 2020.
{¶ 18} Subsequently, the trial court filed a decision and entry staying the matter
until arbitration concluded. Decision & Entry (Dec. 14, 2020). Rudolph timely appealed
from the trial court’s order.
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II. Alleged Error in Ordering Arbitration
{¶ 19} In a sole assignment of error, Rudolph states:
The Trial Court Erred by Granting WPCU’s Motion to Compel
Arbitration. See Decision and Entry on Motion to Dismiss, or in the
Alternative, Application to Stay Pending Arbitration.
A. Addition of Arbitration Agreement
{¶ 20} Rudolph makes several main points, which we will discuss out of order.
The first issue involves the trial court’s alleged error in finding that Rudolph had agreed
to the arbitration provision in the February 2019 Agreement because Rudolph attached
the agreement to the complaint. Rudolph argues that he attached this agreement to the
complaint only to show that a contract existed; he did not, thereby, admit that the provision
was valid or that he agreed to arbitrate.
{¶ 21} In our opinion, this argument is somewhat of a red herring, as the trial court
did not say that Rudolph had agreed to arbitrate because he attached the document to
the complaint. Instead, the court’s decision said only that “One ‘account document’ that
Rudolph alleges was breached is the Important Account Information effective in February,
2019.” Decision & Entry, p. 2. The court then reviewed the arbitration provision in that
particular agreement, holding it was clear and should be enforced. Id.
{¶ 22} Turning to more substantive matters, we have applied an abuse of
discretion standard in reviewing trial court decisions ruling on motions to stay the
proceedings pending arbitration. John A. Becker Co. v. Jedson Eng., Inc., 2018-Ohio-
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3924, 121 N.E.3d 788, ¶ 11 (2d Dist.).3 An abuse of discretion means “an attitude that
is unreasonable, arbitrary or unconscionable.” AAAA Ents., Inc. v. River Place
Community Urban Redevelopment Corp., 50 Ohio St.3d 157, 161, 553 N.E.2d 597(1990). “A decision is unreasonable if there is no sound reasoning process that would
support that decision. It is not enough that the reviewing court, were it deciding the issue
de novo, would not have found that reasoning process to be persuasive, perhaps in view
of countervailing reasoning processes that would support a contrary result.” Id. Accord
Brown v. Burnett, 2020-Ohio-297, 144 N.E.3d 475, ¶ 21 (2d Dist.). The issue here,
therefore, is whether the trial court’s decision was supported by sound reasoning.
{¶ 23} “Both the Ohio General Assembly and Ohio courts have expressed a strong
public policy favoring arbitration.” Hayes v. Oakridge Home, 122 Ohio St.3d 63, 2009-
Ohio-2054, 908 N.E.2d 408, ¶ 15, citing R.C. Chapter 2711 and Taylor Bldg., 117 Ohio
St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, at ¶ 27. (Other citation omitted). The
reasons for this policy include giving parties an economical and relatively quick means of
resolving disputes as well as easing the burden on court dockets. Id. As a result, courts
should resolve all doubt in favor of arbitration. Id.{¶ 24} R.C. 2711.02 permits courts to order arbitration. Under R.C. 2711.02(B):
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
3 Courts have held, however, that legal issues, like contract interpretation, should be
reviewed de novo. E.g. Alford v. Arbors at Gallipolis, 2018-Ohio-4653, 123 N.E.3d 305,
¶ 9 (4th Dist.). This makes sense, because the Supreme Court of Ohio has said that “the
proper standard of review of a determination whether an arbitration agreement is
enforceable in light of a claim of unconscionability is de novo, but any factual findings of
the trial court must be accorded appropriate deference.” Taylor Bldg. Corp. of Am. v.
Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 2.
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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.
{¶ 25} “When a party requests a stay under the statute, the first issue before the
trial court is whether there is a valid written agreement to arbitrate.” Reedy v. Cincinnati
Bengals, Inc., 143 Ohio App.3d 516, 520, 758 N.E.2d 678 (1st Dist.2001). “Whether the
parties have executed a valid written arbitration agreement is a matter of state contract
law. ‘A contract is generally defined as a promise, or a set of promises, actionable upon
breach. Essential elements of a contract include an offer, acceptance, contractual
capacity, consideration (the bargained for legal benefit and/or detriment), a manifestation
of mutual assent and legality of object and of consideration.’ ” Westerfield v. Three
Rivers Nursing & Rehab. Ctr., L.L.C., 2d Dist. Montgomery No. 25347, 2013-Ohio-512,
¶ 20, quoting Minster Farmers Coop. Exchange Co., Inc. v. Meyer, 117 Ohio St.3d 459,
2008-Ohio-1259, 884 N.E.2d 1056, ¶ 28. (Other citation omitted.)
{¶ 26} Based on our review, the trial court did not err in concluding that Rudolph
agreed to arbitration. First, while the 2015 agreement lacked an arbitration clause,
Rudolph did agree that “[e]xcept as prohibited by applicable law,” WPCU could “change
the terms of this Agreement and the other Account Documents at any time.”
WPCU000230, at Section 15(b). According to Rudolph, however, adding an arbitration
provision would not be a permissible change because it was not contemplated by the
original agreement and WPCU could not establish a meeting of the minds concerning
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such a new term. In this context, Rudolph focuses on the statement following the first
part of Section 15(b), i.e., that WPCU would notify Rudolph of “any changes in terms,
rates, or fees as required by law.” Id. To Rudolph, a “new" term is not a "change" in
terms.
{¶ 27} In support of his theory, Rudolph cites Maestle v. Best Buy Co., 8th Dist.
Cuyahoga No. 79827, 2005-Ohio-4120. In that case, the plaintiffs obtained Best Buy
card accounts with Bank One. Id. at ¶ 2. Two years later, Bank One contributed its
portfolio to a joint venture with General Electric (“G.E.”). Id. G.E. then sent all Best Buy
credit card holders a notice of a change in terms, among which was a comprehensive
arbitration clause. Id. Subsequently, the plaintiffs brought a class action against Bank
One and Best Buy, challenging finance and interest charges. Id. at ¶ 3. In responding,
these defendants claimed they were third-party beneficiaries of the G.E. arbitration
provision and asked the court to order arbitration. Id. at ¶ 4.
{¶ 28} After the trial court denied the defendants’ request to stay the proceedings
pending arbitration, they appealed. Id. at ¶ 4-5. On appeal, the defendants argued 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.” Id. at ¶ 14.
However, the court of appeals disagreed.
{¶ 29} Initially, the court noted that Ohio had not ruled on this specific issue and
that other jurisdictions had reached conflicting conclusions. Id. at ¶ 15. Some cases
relied on statutes authorizing credit-card companies to make unilateral changes, some
allowed amendments without statutory authorization, and some refused to permit addition
of arbitration clauses. Id. The court then considered two cases, one of which enforced
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an arbitration agreement that had been added, finding it was not procedurally
unconscionable. Id. at ¶ 16, discussing Bank One, N.A. v. Coates, 125 F.Supp.2d 819(S.D.Miss.2001). The second case, Badie v. Bank of America, 67 Cal.App.4th 779, 79
Cal.Rptr.2d 273 (Cal.App.1998), focused instead on ordinary contract principles and 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.” Id. at ¶ 17-18. The
Eighth District Court of Appeals declined to follow Coates and followed the contractual
interpretation in Badie instead. Id. at ¶ 19-23.
{¶ 30} The original contractual provision in Maestle stated that:
“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.”
Maestle, 8th Dist. Cuyahoga No. 79827, 2005-Ohio-4120, at ¶ 27.
{¶ 31} After reviewing this clause, the court concluded that “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.” Id. at ¶ 28. In contrast to Maestle, however, the
change provision in WPCU’s 2015 Agreement was not so limited and did not refer to any
specific types of changes.
{¶ 32} A federal district court has read Maestle “as imposing substantive limitations
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on the type of terms that may be added or amended pursuant to a change-of-terms
provision in a cardholder agreement.” Follman v. World Fin. Network Natl. Bank, 721
F.Supp.2d 158, 164 (E.D. N.Y. 2010). Nonetheless, Follman rejected a requirement that
the contract must allow the bank to add, rather than “change” terms. The court stressed
that “the issue is not whether defendant may add new terms, but whether the terms added
are the types of terms the contract contemplated defendant could add.” Id. at 165.
{¶ 33} Applying that framing of the issue, Maestle noted that the cardholder would
not have anticipated the addition of arbitration because “nowhere in the contract is there
a clause addressing forums of dispute.” Maestle at ¶ 28. In contrast, the 2015
Agreement between WPCU and Rudolph contained a section specifying where disputes
were to be filed. WPCU000232 at Section 25. Rudolph, therefore, could have
anticipated that WPCU might later change the agreement to add a different avenue of
dispute resolution.
{¶ 34} Furthermore, Maestle involved a credit card agreement, while the case
before us involves a deposit account. In this regard, R.C. 1109.05(B) states that:
At the time of opening a deposit account, a bank shall provide the
depositor a statement containing the existing terms and conditions of the
deposit contract. The statement may be set forth on the depositor's
signature card, which card may be electronic or in writing. Before effecting
any change in the terms and conditions of a deposit contract, a bank shall
provide notice, in written or electronic form, of the change to each depositor
with whom the bank has a deposit contract of the kind to be changed.
Depositors and any other owners of interests in deposit accounts shall be
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bound by all changes banks make in their deposit contracts.
(Emphasis added.)
{¶ 35} This statute is broad, referring to “any” and “all” changes. In contrast, the
statute in Maestle, R.C. 1109.20(D), only states that banks and borrowers “may specify
in their agreement any terms and conditions for modifying or amending the agreement.”
R.C. 1109.20(D) also does not state that borrowers shall be bound by the changes a bank
makes. Accordingly, WPCU was able to amend the terms in the 2015 agreement and
change the prior method of dispute resolution to arbitration.
{¶ 36} In arguing that the change in terms from the original contract was
impermissible, Rudolph has also directed us to the recent decision of the Sixth Circuit
Court of Appeals in Sevier Cty. Schools Fed. Credit Union v. Branch Banking & Tr. Co.,
990 F.3d 470 (6th Cir.2021). In Sevier, the plaintiffs opened money market accounts in
1989 under an agreement with First National Bank (“FNB”), which guaranteed the interest
rate would never fall below 6.5%. Id. at 473. The original agreement was only two
pages long and contained a provision that FNB may change the terms in the agreement
from time to time. Id.
{¶ 37} In 1997, FNB merged with another bank, which then merged with Branch
Banking & Trust Company (“BB&T”) in 2001. Id. After the merger, BB&T sent out a
Bank Services Agreement (“BSA”) which included an arbitration provision and also stated
that “continued use of an account after receipt of notice constituted acceptance of the
amendment.” Id. The agreement was amended in 2004 and in 2017, with the latter
amendment containing “massive changes” to the BSA, including the arbitration
requirements. Id. at 373-374. However, BB&T continued to pay the 6.5% interest from
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2001 until January 2018, when it told the account holders that the rate would be lowered
to 1.05% and would later be adjusted to standard balance tiers reflecting the industry’s
current rate. Id. at 474-475.
{¶ 38} After the plaintiffs filed a class action suit, the district court granted BB&T’s
motion to compel arbitration, and the plaintiffs then appealed. Id. at 475. On appeal,
the Sixth Circuit reversed, finding that while consideration existed for the changes, mutual
assent was lacking. Id. at 476. In this regard, the court stated that “[t]he proper question
is whether, upon assenting to the original two-page * * * agreement, such individuals and
organizations would reasonably expect their relationship to be governed – more than a
decade later – by new provisions unilaterally added by a successor bank to such an extent
that the BSA ultimately contained terms that materially changed the Plaintiffs’ rights and
obligations under the original agreement.” Id. at 478.
{¶ 39} A majority of the panel agreed with the plaintiffs’ assertion that “BB&T’s
discretion under the original change-of-terms provision to amend the terms is not
unlimited, but is subject to two requirements: (1) that any changes be reasonable, and (2)
that BB&T exercise its discretion to make such changes in a manner consistent with the
implied covenant of good faith and fair dealing.” Id. at 479. After noting that the contract
was one of adhesion, the majority found the arbitration change in terms unreasonable
“because BB&T provided the Plaintiffs with no opt-out opportunity. This left the Plaintiffs
with no choice other than to acquiesce to the new arbitration provision or to close their
high-yield savings accounts. And closing their accounts is a totally unreasonable option
because doing so would obviate the very essence of the Plaintiffs’ accounts – the promise
of a perpetual 6.5% annual interest rate.” Id. at 480. In addition, the majority concluded
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that the bank violated the implied covenant of good faith by acting unreasonably “when it
added the arbitration provision years after the Plaintiffs’ accounts were established by
FNB.” Id.
{¶ 40} Notably, the same circumstances do not exist here. As we indicated, the
2015 agreement, unlike the contract in Sevier, did discuss enforcement and dispute
resolution, so the change was not completely unanticipated. Furthermore, while WPCU
did not offer an option to “opt out” of arbitration, Rudolph could have terminated his
account and gone to another bank if he did not like the account terms. He would not
have suffered the kind of loss involved in Sevier. And finally, the arbitration provision
was not added decades after the original contract; it occurred less than three years after
Rudolph opened his account. As a result, the decision in Sevier, which is not binding on
Ohio courts, does not change our conclusion that WPCU could amend the terms in the
2015 Agreement and change the prior method of dispute resolution to arbitration. E.g.,
State v. Burnett, 93 Ohio St.3d 419, 424, 755 N.E.2d 857 (2001) (“state courts need not
follow lower federal court decisions”).
B. Notice
{¶ 41} Rudolph next argues that there was no meeting of the minds concerning the
February 2019 and July 2019 Membership Agreements (and hence the arbitration
provisions), because he never received copies of the agreements. In response, WPCU
contends that it did not have to give members notice of changes to the agreements before
they were made. Nonetheless, WPCU contends that Rudolph had actual or constructive
notice of the February 2019 and July 2019 agreements because they were posted on the
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WPCU website, and Rudolph had agreed to view disclosures online.
{¶ 42} Actual notice is self-explanatory. There is no contention here that Rudolph
had actual knowledge of these agreements. See Rudolph Affidavit, at ¶ 4; Riley
Deposition at p. 72. 140, and 141.
{¶ 43} “Constructive notice has been defined generally as knowledge of
‘circumstances which ought to have excited apprehension and inquiry in the mind of a
prudent and reasonable man.’ ” Weisbrodt v. Edward J. De Bartolo Corp., 2d Dist.
Montgomery No. 7831, 1983 WL 4890, *5 (Apr.14, 1983), quoting Varwig v. Railroad Co.,
54 Ohio St. 455, 468, 44 N.E. 94 (1896). Inquiry notice is similar to constructive notice
and again, concerns whether a reasonable person would have been alerted to make
inquiry. E.g., Doyle v. Ohio Co., 2d Dist. Clark No. 94-CA-16, 1994 WL 484205, *4 (Sept.
9, 1994).
{¶ 44} None of the agreements required WPCU to give members advance notice
of amendments. To the contrary, they all stated that WPCU would give notice “of
changes * * * as required by law.” WPCU00030 at Section 15(b). Rudolph has not
pointed to any law requiring a specific type of notice. We do note that R.C. 1109.05(B)
requires “notice in written or electronic form” before changes in the terms and conditions
of deposit contracts are made.
{¶ 45} As noted, the 2015 agreement provided that “[a]ny written notice we give to
you is effective when it is deposited in the U.S. Mail, postage prepaid and addressed to
you at your statement mailing address.” WPCU000239 at Section 15(c). This does not
require written notice concerning any particular matter, but based on this provision,
members might have anticipated receiving written notice of contractual changes.
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However, this was not the last provision on the subject.
{¶ 46} As indicated, Rudolph signed up for internet access in December 2018. As
part of the Internet Account Access Agreement, Rudolph agreed “TO ELECTRONICALLY
VIEW ANY CHANGES IN THE DISCLOSURES, ELECTION INFORMATION, OR
UPDATES TO WPCU PRODUCTS, SERVICES, AND FEES.” WPCU000170. The
Agreement further stated that:
WHEN YOU CANCEL ENROLLMENT IN ONLINE BANKING,
WPCU WILL RESUME MAILING ALL OF YOUR CORRESPONDENCE AS
ELECTED THROUGH THE U.S. POSTAL SERVICE AT NO ADDITIONAL
CHARGE TO YOU. IF YOU WOULD LIKE TO OBTAIN A PAPER COPY
OF THE EMAILED CORRESPONDENCE, WPCU WILL PROVIDE IT TO
YOU AT NO COST TO YOU. TO RECEIVE ONLINE BANKING SERVICE
YOU UNDERSTAND THAT YOU MUST HAVE ACCESS TO THE
NECESSARY HARDWARE AND SOFTWARE TO VIEW, PRINT OR
OTHERWISE ACCESS NECESSARY INFORMATION.
WPCU000170.
{¶ 47} After reading the above items, reasonable individuals would assume that
written notices would no longer be mailed to them, that they would have electronic access
to disclosures and updates to WPCU’s services, and that they would be expected to view
these matters electronically using their own computers.
{¶ 48} After Rudolph agreed to the Internet Account Access Agreement in
December 2018, WPCU amended the Membership Agreement a number of times and
posted those changes on its website. The online agreement as well as the February
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2019 and July 2019 Member Agreements clearly indicate that a member’s continued use
of the account expresses agreement to the terms and conditions. See WPCU000093
(“Acceptance of Terms” in July 2019 Agreement) and WPCU000023 (“Acceptance of
Terms” in February 2019 Agreement), which both state that “By opening or maintaining
your Credit Union account on or after the effective date of this Agreement, you agree that
the terms and conditions contained in this agreement will govern your account and any
services related to your account.” See also WPCU000185, Section 7 (Internet Account
Access Agreement), which states that “Your continued use of ONLINE SERVICE
constitutes acceptance of all changes to the terms and conditions of this Agreement.”
Rudolph, therefore, had constructive knowledge of the terms in the February 2019 and
July 2019 Membership Agreements.
{¶ 49} Rudolph claims he had no duty to view items posted on WPCU’s website.
However, we disagree. The law is well-established that parties to contracts are held to
have knowledge of the contract. “ ‘It will not do for a man to enter into a contract, and,
when called upon to respond to its obligations, to say that he did not read it when he
signed it, or did not know what it contained. If this were permitted, contracts would not
be worth the paper on which they are written.’ ” ABM Farms, Inc. v. Woods, 81 Ohio
St.3d 498, 503, 692 N.E.2d 574 (1998), quoting Upton v. Tribilcock, 91 U.S. 45, 50, 23
L.Ed. 203 (1875). When Rudolph registered for online banking, he had to accept, and
did accept, the terms of online banking. Riley Affidavit at ¶ 13-14. With this came the
ability and responsibility to review the Member Agreements that WPCU posted on its
website.
{¶ 50} According to Rudolph, he also lacked constructive notice because the
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agreements were not prominently displayed on the website and he had to click through
several links to find them. For example, the July 2019 Membership Agreement was
displayed on the website. Riley Deposition at p. 141-142. According to Riley, when an
individual logs into the WPCU website, there is a word that says “disclosures” that is a
hyperlink. If individuals click on the link, they are taken to a screen which says “Important
Account Information.” Under that heading, it says “please review these disclosures,” and
two bullet points follow. Riley Deposition at p. 186-187 and Ex. J, WPCU0255, attached
to Jenkins’ Affidavit. The bullet points say “General Fee Schedule” and “Important
Account Information,” which is the July 2019 Membership Agreement. Id. at WPCU0255
and Riley Deposition at p. 141.
{¶ 51} Rudolph contends the lack of prominence does not meet the requirements
of “browsewrap,” which courts have held requires reasonable notice of their existence.
In addition, Rudolph argues that very few of the member visits to the website are to view
the Membership Agreement; instead, 99.99% of visits are to access accounts.
{¶ 52} As a preliminary point, we do not believe “browsewrap” applies to this
situation. The terms “shrinkwrap,” “clickwrap,” and “browsewrap” refer to situations in
which consumers purchase or download products from the internet or obtain or purchase
access to internet databases of information. See Register.com, Inc. v. Verio, Inc., 356
F.3d 393, 429 (2d Cir.2004). During this process, consumers are asked to assent to
terms.
{¶ 53} “A shrinkwrap license typically involves (1) notice of a license agreement on
product packaging (i.e., the shrinkwrap), (2) presentation of the full license on documents
inside the package, and (3) prohibited access to the product without an express indication
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of acceptance. Generally, in the shrinkwrap context, the consumer does not manifest
assent to the shrinkwrap terms at the time of purchase; instead, the consumer manifests
assent to the terms by later actions,” like failing to seek a refund within a particular period
of time. Id. at 428.
{¶ 54} In contrast, “a ‘clickwrap’ license * * * presents the potential licensee (i.e.,
the end-user) ‘with a message on his or her computer screen, requiring that the user
manifest his or her assent to the terms of the license agreement by clicking on an icon.’
* * * Essentially, under a clickwrap arrangement, potential licensees are presented with
the proposed license terms and forced to expressly and unambiguously manifest either
assent or rejection prior to being given access to the product.” (Footnote omitted.) Id.,quoting Specht v. Netscape Communications Corp., 150 F.Supp.2d 585, 593-94
(S.D.N.Y.2001).
{¶ 55} “ ‘[A] browse wrap license is part of the web site[, e.g., license terms are
posted on a site's home page or are accessible by a prominently displayed hyperlink,]
and the user assents to the contract when the user visits the web site.’ ” Id., quoting
Pollstar v. Gigmania Ltd., No. CIV-F-00-5671, 2000 WL 33266437 (E.D.Cal. Oct.17,
2000). Furthermore, “a browsewrap agreement * * * may be formed simply by the
website visitor's use of the website and does not require any explicit manifestation of
assent before * * * using the website.” Traton News, LLC v. Traton Corp., 914 F.Supp.2d
901, 910, fn. 10 (S.D. Ohio 2012).4 Browsewrap agreements are “enforceable against a
website visitor who had constructive notice of a website's terms and conditions (usually
because they were prominently displayed), and repeatedly accesses that website.” Id.4 The term has been spelled as both “browsewrap” and “browse wrap.”
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at 909.
{¶ 56} If anything, the situation here is more akin to a “clickwrap.” In order to
access electronic banking, Rudolph had to agree to the terms governing access, which
included viewing disclosures and changes in WPCU’s services electronically.
Furthermore, Rudolph had already agreed that WPCU could unilaterally change its
Membership Agreement, and he continued to accept changes and the terms in the
agreement by continuing to use his account. However, as we said, we do not really think
these concepts apply here, as they seem to be more pertinent to product purchases or
licensing.
{¶ 57} “Multiple courts have held that clicking is an acceptable method to manifest
assent to the terms of an agreement.” (Citations omitted.) Ranazzi v. Amazon.com,
Inc., 2015-Ohio-4411, 46 N.E.3d 213, ¶ 12 (6th Dist.). In addition, “courts have upheld
such agreements where the disputed terms were contained in a hyperlink. * * * This is so
even where the user has failed to actually review the terms of use prior to manifesting
assent.” (Citations omitted.) Id. at ¶ 13. Accord Campinha-Bacote v. AT&T Corp.,
10th Dist. Franklin No. 16AP-889, 2017-Ohio-5608, ¶ 13. Finally, even if this case
involved a clickwrap or browsewrap situation, our conclusion would not differ, as the terms
were sufficiently conspicuous on the website, which Rudolph repeatedly accessed.
{¶ 58} Based on the preceding discussion, we reject Rudolph’s argument that he
lacked constructive knowledge of the arbitration terms in the February 2019 and July 2019
Membership Agreements.
C. Arbitration Per the February 2019 Agreement
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{¶ 59} Rudolph next contends that the trial court erred in finding the “stray”
arbitration reference in the February 2019 Agreement enforceable because it referred to
a dispute resolution section that did not exist in the document. There is no disagreement
about the fact that no such section appeared in this agreement. See WPCU000022-
000042.
{¶ 60} In Corrpro Cos. Inc. v. Bushman, 8th Dist. Cuyahoga No. 72432, 1997 WL
565959 (Sept. 11, 1997), the Eighth District Court of Appeals stressed that an
“ ‘enforceable arbitration provision need only show the parties’ intent to submit disputes
to arbitration. It does not require all the details of the arbitration process. * * * Arbitration
clauses do not need to be long or complex; and they are not required to specify the
arbitration methods to be employed.’ ” Id. at *1, quoting K.G. Quick & Assocs., Inc. v.
Phil Ross Organizational Seminars, Inc., 10th Dist. Franklin No. 89AP-1213, 1990 WL
80646 (June 4, 1990).
{¶ 61} According to the Eighth District, “[t]he touchstone of an enforceable
arbitration agreement is a clear expression of intent to resolve a dispute through
arbitration.” Id. “In addition, there is no requirement that an arbitration agreement be
signed by either party in order to be enforceable. * * * The only requirement is that the
arbitration agreement be reduced to writing.” (Citation omitted.) W.K. v. Farrell, 167
Ohio App.3d 14, 2006-Ohio-2676, 853 N.E.2d 728, ¶ 24 (2d Dist.), citing Brumm v.
McDonald & Co. Secs., Inc., 78 Ohio App.3d 96, 102, 603 N.E.2d 1141 (4th Dist.1992).
{¶ 62} As indicated above, the February 2019 Membership Agreement
unambiguously stated:
If you have a dispute with the Credit Union and we are not able to
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resolve the dispute informally, you agree that the dispute will be resolved
through an arbitration process further detailed in the Dispute Resolution
section of the Account Agreement. If a claim is eligible to be resolved in
small claims court, you may pursue the claim in small claims court.
(Emphasis added.) WPCU00028. Based on the wording, there is no doubt that
arbitration was intended.
{¶ 63} In finding the February 2019 agreement enforceable, the trial court relied
on Farrell. In that case, the employment application stated that “If employed by the
company, you and the company agree to utilize the company's binding and mandatory
alternative dispute resolution program to resolve certain workplace disputes.” Farrell,
167 Ohio App.3d 14, 2006-Ohio-2676, 853 N.E.2d 728, at ¶ 3. When the plaintiff
reported to work, she also signed a document stating that “I hereby agree to utilize the
Sterling Resolve Program to pursue any dispute, claim or controversy (‘claim’) against
Sterling.” Id. at ¶ 5. These statements do not significantly differ from the wording that
WPCU used.
{¶ 64} In arguing that the February 2019 agreement is unenforceable, Rudolph
contends that it is akin to the one used in Doe v. Vineyard Columbus, 10th Dist. Franklin
No. 13AP-599, 2014-Ohio-2617. In that case, the application for church membership
stated that “In order to accomplish the mission of Vineyard Church of Columbus, I commit
myself to the following practices: * * * 3. Committed to Vineyard Columbus' statements,
our strategy, our structure and Vineyard's disciplinary and dispute resolution process.”
Id. at ¶ 4. This statement is ambiguous, however. Being committed to a “practice” does
not necessarily mean that access to the court system is prohibited.
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{¶ 65} Based on the above discussion, we conclude that Rudolph had notice of a
clear intent to arbitrate all claims. And, by continuing to maintain his account, pursuant
to the “Acceptance of Terms” provision, and by continuing to use online banking, Rudolph
manifested his assent to the arbitration provision.
D. Unconscionability
{¶ 66} In his brief, Rudolph notes that the trial court relied strictly on the February
2019 Agreement and did not address the issue of whether the July 2019 Agreement was
unconscionable. Rudolph offers this agreement as an alternative basis for rejecting
arbitration, contending the 2019 Agreement was both procedural and substantively
unconscionable. Conversely, WPCU contends the July 2019 agreement was a binding
modification to the contract. WPCU Brief at p. 17.
{¶ 67} “Arbitration agreements are ‘valid, irrevocable, and enforceable, except
upon grounds that exist at law or in equity for the revocation of any contract.’ ” Taylor
Bldg., 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, at ¶ 33, quoting R.C.
2711.01(A). These grounds include unconscionability, which encompasses “both ‘ “an
absence of meaningful choice on the part of one of the parties together with contract
terms which are unreasonably favorable to the other party.” ’ ” Id. at ¶ 33-34, quoting
Lake Ridge Academy v. Carney, 66 Ohio St.3d 376, 383, 613 N.E.2d 183 (1993). (Other
citation omitted.) Furthermore, a “party asserting unconscionability of a contract bears
the burden of proving that the agreement is both procedurally and substantively
unconscionable.” Id. at ¶ 34.
{¶ 68} “[W]hen a party challenges an arbitration provision as unconscionable
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pursuant to R.C. 2711.01(A), the party must show that the arbitration clause itself is
unconscionable. If the court determines that the arbitration clause is enforceable, claims
of unconscionability that relate to the contract generally, rather than the arbitration clause
specifically, are properly left to the arbitrator in the first instance.” Id. at ¶ 42. On review,
“a determination whether an arbitration agreement is enforceable in light of a claim of
unconscionability is de novo, but any factual findings of the trial court must be accorded
appropriate deference.” Id. at ¶ 2. However, because the trial court in this case did not
make any factual findings, our review would be de novo.
1. Procedural Unconscionability
{¶ 69} In Taylor Bldg., the court stated that:
Procedural unconscionability considers the circumstances surrounding the
contracting parties’ bargaining, such as the parties’ “ ‘age, education,
intelligence, business acumen and experience, * * * who drafted the
contract, * * * whether alterations in the printed terms were possible, [and]
whether there were alternative sources of supply for the goods in
question.’ ” * * * “Factors which may contribute to a finding of
unconscionability in the bargaining process [i.e., procedural
unconscionability] include the following: belief by the stronger party that
there is no reasonable probability that the weaker party will fully perform the
contract; knowledge of the stronger party that the weaker party will be
unable to receive substantial benefits from the contract; knowledge of the
stronger party that the weaker party is unable reasonably to protect his
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interests by reason of physical or mental infirmities, ignorance, illiteracy or
inability to understand the language of the agreement, or similar factors.”
Restatement of the Law 2d, Contracts (1981), Section 208, Comment d.
Taylor Bldg., 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, at ¶ 44.
{¶ 70} The primary procedural factors Rudolph advances are that “WPCU is a
‘sophisticated financial institution,’ ” while he “is an ordinary consumer who ‘ha[s] difficulty
understanding’ the ‘substantial amount of legalese’ in Section 8.25” (the arbitration
agreement). Rudolph Brief, p. 21. Rudolph also mentions that WPCU had the ability
to unilaterally modify the agreements.
{¶ 71} However, “[m]ere inequality of bargaining power is insufficient to invalidate
an otherwise enforceable arbitration agreement.” Vanyo v. Clear Channel Worldwide,
156 Ohio App.3d 706, 2004-Ohio-1793, 808 N.E.2d 482, ¶ 19 (8th Dist.), citing Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991).
(Other citation omitted.) See also Hawkins v. O'Brien, 2d Dist. Montgomery No. 22490,
2009-Ohio-60, ¶ 24, citing Gilmer (“There must be some evidence that, in consequence
of the imbalance, the party in the weaker position was defrauded or coerced into
agreement to the arbitration clause.”). Here, Rudolph made no claim that he was
defrauded or coerced.
{¶ 72} In terms of unconscionability, “[t]he crucial question is whether ‘each party
to the contract, considering his obvious education or lack of it, [had] a reasonable
opportunity to understand the terms of the contract, or were the important terms hidden
in a maze of fine print * * *?’ ” Lake Ridge Academy, 66 Ohio St.3d at 383, 613 N.E.2d
183, quoting Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449 (D.C.Cir.1965).
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{¶ 73} In this vein, although Rudolph asserts that the arbitration provision in the
July 2019 Membership Agreement was procedurally unconscionable because he had
difficulty understanding the “legalese,” the important terms were not hidden in a maze of
fine print, and the language in Section 8.25 of the agreement was straightforward.
Specifically, this section said that “Before you are permitted to proceed with a claim
against the Credit Union as outlined in Section 8.23 above, you must request resolution
of your claim in writing to the Credit Union by mandatory binding arbitration as outlined in
this section.”
{¶ 74} In discussing procedural unconscionability, Taylor Bldg. considered
whether the contract was one of adhesion, while noting that “even a contract of adhesion
is not in all instances unconscionable per se.” Taylor Bldg. 117 Ohio St.3d 352, 2008-
Ohio-938, 884 N.E.2d 12, at ¶ 50.
{¶ 75} An adhesion contract is “a standardized form contract prepared by one
party, and offered to the weaker party, usually a consumer, who has no realistic choice
as to the contract terms.” Id., citing Black's Law Dictionary (8th Ed.2004) 342. It is true
that Rudolph did not have a choice of terms, but “[c]ontracts between a bank and its
customers are generally not considered adhesion contracts, as the parties are considered
to have equal bargaining power.” Creative Hardwood Floors, Inc. v. Schafer, 5th Dist.
Fairfield No. 97-CA-56, 1998 WL 515783, *5 (Mar. 24, 1998), citing Cent. Natl. Bank of
Cleveland v. Gallagher, 13 Ohio App.2d 115, 118, 234 N.E.2d 524 (8th Dist.1968). This
is because bank depositors are not generally restricted to dealing with a particular party,
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“but may exercise a choice of banks with which to do business.” Gallagher at 120.5
Here, Rudolph was not restricted to dealing with WPCU; he could have taken his business
to any bank.
{¶ 76} In light of the above discussion, we find no evidence of procedural
unconscionability. While this finding is fatal to Rudolph’s claim, we will briefly consider
his arguments about substantive unconscionability. See Taylor Bldg. at ¶ 53.
2. Substantive Unconscionability
{¶ 77} According to Rudolph, Section 8.25 was substantively unconscionable
because: (1) WPCU alone was allowed to decide if a matter would be arbitrated or
litigated; (2) arbitration costs were split regardless of the outcome, which was more than
he would expend litigating in court; and (3) his financial situation did not let him absorb
the cost of an individual arbitration.
{¶ 78} Assessing “whether a contract is substantively unconscionable involves
consideration of the terms of the agreement and whether they are commercially
reasonable.” Hayes, 122 Ohio St.3d 63, 2009-Ohio-2054, 908 N.E.2d 408, at ¶ 33, citing
John R. Davis Trust 8/12/05 v. Beggs, 10th Dist. Franklin No. 08AP-432, 2008-Ohio-6311,
¶ 13. (Other citation omitted.) In deciding whether contracts are substantively
unconscionable, courts consider the following factors: “the fairness of the terms, the
charge for the service rendered, the standard in the industry, and the ability to accurately
predict the extent of future liability.” Id., citing John R. Davis Trust at ¶ 13 and Collins v.
5 This may not necessarily be true in situations involving banks and issuance of consumer
credit agreements, which may have “some aspects of an adhesion contract.” E.g.,
Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 472, 700 N.E.2d 859 (1998).
-34-
Click Camera & Video, Inc., 86 Ohio App.3d 826, 834, 621 N.E.2d 1294 (2d Dist.1993).
However, the Supreme Court of Ohio has not adopted a “bright line set of factors”;
instead, “[t]he factors to be considered vary with the content of the agreement at issue.”
Id.{¶ 79} Concerning WPCU’s sole ability to decide if a matter would be litigated, “the
fact that a contractual provision is one-sided does not render it substantively
unconscionable per se.” Hayes at ¶ 36. As noted in Taylor Bldg., “the obligations of the
parties need not be exactly the same if the contract is supported by adequate
consideration.” Taylor Bldg., 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, at
¶ 66. Here, adequate consideration existed. Specifically, WPCU not only provided free
internet access to accounts, it also offered free mobile banking, free telephone and
automated teller access, free bill payment for consumer accounts, and no monthly fee for
Total Fair Checking accounts. See WPCU000097, Section 2.2; WPCU000175, Section
3; WPCU000190, Schedule I; and Complaint, Ex. B, p. 2.
{¶ 80} In his brief, Rudolph has directed our attention to Post v. ProCare
Automotive Serv. Solutions, 8th Dist. Cuyahoga No. 87646, 2007-Ohio-2106. In Post,
the court found a similar arbitration substantively unconscionable, because it let the
employer bypass arbitration, but limited employees to arbitration. Id. at ¶ 17. Post
involved claims that the employer had discriminated against the employee on the basis
of age. Id. at ¶ 2.
{¶ 81} The employment contract in question contained a clause requiring
arbitration, but also said that nothing in the same paragraph “shall be construed so as to
deny Employer's right and power to seek and obtain injunctive relief in a court of equity
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for any breach or threatened breach of Employee of any of his covenants contained in
Paragraph 6.” Id. at ¶ 4. Notably, the arbitration provision had the effect of depriving
the employee of his right under R.C. 4112.99 to sue for punitive damages and to collect
attorney fees, which the court stressed “can be a “significant portion of a plaintiff's award.”
Id. at ¶ 13.
{¶ 82} As a result, the majority of the panel stated that it was “not persuaded by
ProCare's assertion that this provision, which allows ProCare to use a judicial forum when
it is the plaintiff, but limits Anderson to arbitration when he is the plaintiff, is not
unconscionable." Id. at ¶ 17. Having concluded that the arbitration clause was
substantively unconscionable, the court remanded the matter for the trial court to hold a
hearing to decide if the arbitration clause was also procedurally unconscionable. Id. at
¶ 30.
{¶ 83} As a preliminary point, a substantial difference exists between foregoing a
statutory right to collect punitive damages and attorney fees, and the situation here, which
involves a civil claim for which attorney fees are not typically available. E.g., Wilborn v.
Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306, 906 N.E.2d 396, ¶ 7; Reagans v.
MountainHigh Coachworks, Inc., 117 Ohio St.3d 22, 2008-Ohio-271, 881 N.E.2d 245,
¶ 36.
{¶ 84} Furthermore, we are persuaded by the opinion of Judge Cooney, who
concurred in part and dissented in part in Post. Judge Cooney agreed with the decision
to reverse and remand the case to the trial court, but felt, instead, that arbitration should
be ordered. Post, 8th Dist. Cuyahoga No. 87646, 2007-Ohio-2106, at ¶ 37 (Cooney, J.,
concurring in part and dissenting in part). The basis of the dissent was that the arbitration
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agreement was not unconscionable. Id. at ¶ 58. In dissenting, Judge Cooney first
concluded that the plaintiff failed to meet his burden of proving procedural
unconscionability. Id. at ¶ 41-43. The judge then went on to discuss several aspects
of the alleged substantive unconscionability: fee-splitting; attorney fees; waiver of the right
to arbitrate; and the employment contract. Id. at ¶ 44-58.
{¶ 85} In the context of waiver of the right to arbitrate, Judge Cooney found it
significant that:
Merely because the employer need not arbitrate a claim for injunctive or
equitable relief involving trade secrets or competition does not make the
arbitration agreement unreasonable. Robbins v. Country Club Ret. Ctr. IV,
Inc., Belmont App. No. 04BE43, 2005-Ohio-1338. Anderson cites no
authority to support his claim that the arbitration clause is unenforceable
because it does not cover every type of possible lawsuit.
Id. at ¶ 54.
{¶ 86} During her discussion of the employment contract, Judge Cooney also
found the nature of the contract important. In this regard, the judge stressed that:
Additionally, this court has held, in the context of employment
contracts, when a candidate for employment is free to look elsewhere for
employment and is not otherwise forced to consent to the arbitration
agreement, the agreement to arbitrate is not unconscionable. * * * Because
a candidate for employment is free to seek employment elsewhere and is
not obligated to consent to the arbitration agreement, the agreement to
arbitrate is not unconscionable.
-37-
Id. at ¶ 56.
{¶ 87} As we mentioned, Rudolph was “free to look elsewhere” for banking
services. More significantly, as we also noted, Rudolph failed to meet his burden of
proving procedural unconscionability, which was fatal to his claim.
{¶ 88} Rudolph’s final argument in this regard was that “Section 8.25 is
substantively unconscionable because it requires consumers to ‘agree to evenly split the
costs of the arbitration with the Credit Union regardless of the outcome of the arbitration.’ ”
(Emphasis sic.) Rudolph Brief at p. 22. However, “the mere risk that a plaintiff would
be forced to pay exorbitant costs is too speculative to justify invalidation of the arbitration
agreement.” Taylor Bldg., 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, at ¶ 58.
“Without some evidence that a party would be precluded from bringing a claim, the cost
of arbitration, standing alone, is not a justifiable reason to find unconscionability.”
McCaskey v. Sanford-Brown College, 8th Dist. Cuyahoga No. 97261, 2012-Ohio-1543,
¶ 34.
{¶ 89} In McCaskey, the court emphasized that “[t]he Taylor court required specific
and individualized evidence that arbitration costs were unduly burdensome to the party
opposing it.” Id. at ¶ 32, citing Taylor Bldg. See also Handler v. Southerland Custom
Builders, Inc., 8th Dist. Cuyahoga No. 86956, 2006-Ohio-4371, ¶ 19 (noting that “because
homeowners failed to provide any evidence, other than initial fees, that the cost of
arbitration would exceed the cost of litigation, the arbitration clause cannot be said to be
substantively unconscionable on the basis of cost”).
{¶ 90} In Handler, the court also commented that:
Although the cost of arbitration may be high, so too is the cost of litigating a
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claim. Indeed, it is quite possible that litigation could result in substantial
legal fees and costs that, in the end, exceed the cost of arbitration. See
English v. Cornwall Quality Tools Company, Inc., Summit App. No. 22578,
2005-Ohio-6983, ¶ 17 (even when plaintiff provided specific estimates as to
various costs associated with arbitration, the court held that, in the absence
of “evidence of the expected cost differential between arbitration and
litigation,” the arbitration clause was enforceable).
Handler at ¶ 18. Accord Post, 8th Dist. Cuyahoga No. 87646, 2007-Ohio-2106, at ¶ 49
(Cooney, J., concurring in part and dissenting in part).
{¶ 91} In the case before us, Rudolph did not submit any evidence of his income
or the expected cost differential, beyond a mere statement that filing fees in Greene
County Common Pleas Court are $250 versus $876 for initiating commercial arbitration
with the American Association Arbitration (“AAA”). Memorandum in Opposition to Motion
to Dismiss, p. 16 and fn. 12 and 13.
{¶ 92} WPCU notes in its brief that Rudolph is mistaken in labeling this as
commercial arbitration, and that the cost for consumer filing with AAA is only $200.
WPCU Brief at p. 24 and fn. 1 and 2. However, this information was not brought to the
trial court’s attention, and we will not consider it. Nonetheless, there is not a substantial
difference in all these amounts, and as Handler noted, the cost of litigating cases may
well exceed the cost of arbitration. Accordingly, the arbitration agreement is not
substantively unconscionable.
{¶ 93} Based on the preceding discussion, Rudolph’s sole assignment of error is
overruled.
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III. Conclusion
{¶ 94} Rudolph’s assignment of error having been overruled, the judgment of the
trial court is affirmed.
.............
TUCKER, P.J. and HALL, J., concur.
Copies sent to:
Robb S. Stokar
Daniel C. Gibson
James R. Branit
Keith Gibson
Jeffrey D. Kaliel
Sophia Gold
Jeffrey Ostrow
Jonathan M. Streisfeld
Daniel Tropin
Hon. Michael A. Buckwalter