Larsen v. Citibank/Keybank National Association 

2017 WL 4250074  United States Court of Appeals, Eleventh Circuit

Johnson filed a putative class action, alleging that Keybank manipulated debit card transactions to maximize fees. Keybank moved to compel arbitration. After two remands, the court denied Keybank’s motion to compel arbitration on the grounds of unconscionability and Keybank appealed.

The United States Court of Appeals for the Eleventh Circuit reversed and remanded the case to the district court with instructions to compel arbitration. The threshold issue was whether there was an agreement to arbitrate between Johnson and Keybank. Johnson opened his account with Keybank in 1991 and converted it to a joint account with his wife in 2001, signing a Signature Card that confirmed the account was subject to the bank’s 1997 Deposit Account Agreement. The 1997 Agreement included an arbitration provision and a provision that allowed for unilateral changes to the agreement with appropriate notice. The arbitration provision was updated in 2009. Johnson claimed the 1991 agreement, without an arbitration provision, applied to this matter. The Court found no genuine dispute of material fact that when Johnson signed the 2001 signature card, he agreed to be bound by the ’97 agreement (since updated), including the arbitration agreement.

Johnson argued that the 2009 agreement was unconscionable and illusory. The Court found no procedural unconscionability: Johnson had the chance to review the ’97 agreement, which clearly referenced arbitration and waiver of a jury trial, and amendments to the agreement were bold and clear, and included an opt-out. The Court found no substantive unconscionability: arbitration costs were not prohibitive, since Johnson could choose an arbitral forum that had a favorable cost-allocation framework; the attorneys’ fees clause provided no evidence that Keybank could recover attorneys’ fees from Johnson; while the 2009 agreement clause limiting discovery was one-sided, nothing in the record suggested that an arbitrator applying AAA or JAMS rules would be empowered in a manner to render the provision unconscionable; and Keybank’s ability to change the terms of the agreement required appropriate notice and the implied duty of good faith. Though the Court found substantive unconscionability with the clause to “keep confidential any decision of an arbitrator” because it created an informational advantage for Keybank that could discourage consumers from pursuing valid claims, the clause could be easily severed from the remainder of the agreement.

On Johnson’s argument that the change in terms rendered the 2009 Arbitration Provision illusory and unenforceable, the Court considered whether the contract “lacked consideration and mutuality of obligation” and found it did not. Keybank was required to provide consumers with notice prior to any amendments, and had a corresponding duty of good faith and fairness to the affected consumers.