Court Opinion

ID: 9323101
Source: CourtListenerOpinion
Date Created: 2022-12-06 13:04:18.152991+00
Date Added: 2024-06-11T17:14:45.477499
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                      2022-NCCOA-779

                                          No. COA22-59

                                   Filed 6 December 2022

     Mecklenburg County, No. 21 CVS 6056

     LATOYA CANTEEN AND PAMELA PHILLIPS, Plaintiff-Appellees,

                 v.

     CHARLOTTE METRO CREDIT UNION, Defendant-Appellant.

           Appeal by Defendant-Appellant from Order entered 28 July 2021 by Judge

     George C. Bell in Mecklenburg County Superior Court. Heard in the Court of Appeals

     5 October 2022.

           Cohen & Malad, LLP, by Vess A. Miller, pro hac vice, and Van Kampen Law,
           PC, by Josh Van Kampen, for Plaintiff-Appellee.

           Cranfill Sumner, LLP, by Mica N. Worthy, Steven A. Bader, & Ryan D. Bolick,
           for Defendant-Appellant.

           DILLON, Judge.

¶1         Plaintiff Pamela Phillips was a deposit customer of Defendant Charlotte Metro

     Credit Union (“CMCU”).     Plaintiff commenced this action alleging that CMCU

     charged her numerous overdraft and non-sufficient funds fees that were not

     authorized by the deposit agreement (the “Agreement”).       Defendant appeals an

     interlocutory order denying its motion to compel arbitration. We reverse and remand.

                                     I.      Background
                        CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                      Opinion of the Court

¶2         In 2014, Plaintiff opened a checking account with CMCU, signing the

     Agreement. This Agreement provided that CMCU reserved the right to “change the

     terms of [the] agreement” and contemporaneously notify customers of any such

     modification.

¶3         From 2018 to 2020, CMCU allegedly charged Plaintiff fees not authorized by

     the Agreement.

¶4         In 2021, CMCU amended the Agreement to include provisions requiring any

     dispute thereunder to be decided through arbitration and waiving class actions (the

     “Amendment”).

¶5         In March 2021, Plaintiff commenced this class action against CMCU seeking

     monetary damages, restitution, and declaratory relief in connection with CMCU’s

     unauthorized overdraft fees. CMCU answered with a motion to stay and to compel

     arbitration, claiming that Plaintiff was bound by the terms of the Amendment.

¶6         The trial court entered an order denying CMCU’s motion.        CMCU timely

     appealed.

                                II.   Appellate Jurisdiction

¶7         This appeal is from an interlocutory order. Interlocutory orders are generally

     not immediately appealable; however, an interlocutory order which affects a

     substantial right is immediately appealable.       N.C. Gen. Stat. §§ 1-277(a), 7A-

     27(b)(3)(a) (2021). Our Court has held that an order denying arbitration affects a
                         CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                        Opinion of the Court

     substantial right and is, therefore, immediately appealable. Gay v. Saber Healthcare

     Grp., L.L.C., 271 N.C. App. 1, 5, 842 S.E.2d 635, 638 (2020). Therefore, we have

     appellate jurisdiction.

                                         III.   Analysis

¶8         Public policy favors settling disputes by means of arbitration. Cyclone Roofing

     Co. v. David M. LaFave Co., 312 N.C. 224, 229, 321 S.E.2d 872, 876 (1984). See also

     N.C. Gen. Stat. § 1-569.3 (2020). “However, before a dispute can be settled [by

     arbitration], there must first exist a valid agreement to arbitrate.” Routh v. Snap-

     On Corp., 108 N.C. App. 268, 271, 423 S.E.2d 791, 794 (1992). In determining

     whether a valid agreement to arbitrate exists, we are bound by the principles of

     general contract law. Southern Spindle v. Milliken & Co., 53 N.C. App. 785, 786, 281

     S.E.2d 734, 735 (1981).      There is no presumption favoring arbitration when

     addressing this threshold issue. Hager v. Smithfield E. Health Holdings, LLC, 264

     N.C. App. 350, 362, 826 S.E.2d 567, 576 (2019).

¶9         The Agreement executed by Plaintiff in 2014 contained a provision which

     provided the choice of law and procedure, including the appropriate forum, to resolve

     any disputes thereunder:

                  GOVERNING LAW – This Agreement is governed by . . .
                  the laws . . . and regulations of the state in which the credit
                  union’s main office is located . . . . As permitted by
                  applicable law, you agree that any legal action regarding
                  this Agreement shall be brought in the county in which the
                           CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                          Opinion of the Court

                     credit union is located.

       This signed Agreement also contained a provision allowing CMCU to change the

       terms of the Agreement by notifying Plaintiff of any such change:

                     Notice of Amendments. Except as prohibited by
                     applicable law, we may change the terms of this
                     Agreement. We will notify you, in a manner we deem
                     appropriate under the circumstances, of any changes in
                     terms, rates or fees as required by law. We reserve the
                     right to waive any terms of this Agreement. Any such
                     waiver shall not affect our right to future enforcement.

       The Agreement further provided that CMCU could provide said notice electronically.

¶ 10           Plaintiff assented to these provisions when she executed the Agreement in

       2014.

¶ 11           For three consecutive months in 2021, CMCU emailed Plaintiff her statement

       along with a notice of “Changes to the Membership and Account Agreements.” The

       email contained hyperlinks entitled “Information about Arbitration”, “Arbitration

       and Class Action Waiver” and “Membership and Account Agreement Change in

       Terms”, all under the heading “Additional Forms and Notices”. The email message

       itself was short, with the hyperlinks following a message regarding Plaintiff’s

       monthly account statement.

¶ 12           Plaintiff states that she never noticed these emails.   In any event, the

       “Arbitration and Class Action Waiver” hyperlink led to a 2-page document which

       contained a provision amending the Agreement to require arbitration and a provision
                           CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                          Opinion of the Court

       allowing Plaintiff a means to opt-out of the new arbitration provision.

¶ 13         Plaintiff did not notify CMCU that she was opting out of the arbitration

       provision and, otherwise, continued to use her checking account.

¶ 14         These above facts are undisputed.

¶ 15         We conclude that these facts show the existence of a binding arbitration

       agreement. The arbitration provision was a change to the forum selection procedure

       contained in the original Agreement. Plaintiff agreed to be notified by email of any

       such change. Plaintiff, in fact, was notified on three different occasions. And Plaintiff

       assented to the amendment by her failure to opt-out and her continued use of her

       checking account. Her failure to read the provisions is no excuse. See, e.g,, Davis v.

       Davis, 256 N.C. 468, 472, 124 S.E.2d 130, 133 (1962) (holding that a party who

       assents to the terms of an agreement is not excused by failure to read the terms).

¶ 16          Plaintiff argues, and the trial court held, CMCU’s contractual right to change

       the terms of the Agreement did not authorize CMCU to add provisions addressing an

       entirely new subject, such as arbitration. The trial court held that such addition was

       not contemplated and, otherwise, that CMCU was violating the covenant of good faith

       and fair dealing implied in every contract by adding a provision that was not in “the

       universe of terms included in its original [A]greement”, citing Sears Roebuck & Co. v.

       Avery, 163 N.C. App. 207, 221, 593 S.E.2d 424, 434 (2004). Indeed, we held in Sears

       that no valid arbitration agreement existed based on a unilateral amendment
                           CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                          Opinion of the Court

       because the original contract “made no reference to arbitration or any other dispute

       resolution procedures and did not in any manner address the forum in which a

       customer could have disputes resolved.” Id. at 208, 593 S.E.2d at 426 (applying

       Arizona law). Other courts have similarly held. See Badie v. Bank of Am., 67 Cal.

       App. 4th 779, 79 Cal. Rptr. 2d 273 (1998) (wherein the court denied defendant’s

       motion to compel arbitration because “[n]one of the agreements admitted into

       evidence contained any provision regarding the method or forum for resolving

       disputes”); Maestle v. Best Buy Co., 2005-Ohio-4120 (Ct. App.) (“the amendment

       provision referenced only changes to payments, charges, fees and interest… nowhere

       in the contract is there a clause addressing forums of dispute.”)

¶ 17         However, the Agreement here did contain a “Governing Law” provision, which

       outlined the appropriate choice of law and forum for settling disputes. Plaintiff was

       therefore on notice that CMCU could change this provision to allow for disputes to be

       settled, not in the court where CMCU was located, but rather in another forum,

       including before an arbitrator. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 519

       (1974) (“[a]n agreement to arbitrate before a specified tribunal is, in effect, a

       specialized kind of forum selection clause[.]”)

¶ 18         Indeed, other courts have enforced an arbitration provision where a bank

       customer was provided notice of an amendment containing the provision. Stiles v.

       Home Cable Concepts, 994 F. Supp. 1410 (M.D. Ala. 1998) (arbitration clause added
                          CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                         Opinion of the Court

       by amendment enforceable because original agreement contained a change-of-terms

       provision and plaintiff received notice of the amendment, yet failed to opt out); Bank

       One, N.A. v. Coates, 125 F. Supp. 2d 819 (S.D. Miss. 2001) (arbitration clause added

       by amendment enforceable where defendant received proper notice which made clear

       his option to accept or reject the clause and the amendment was not filled with

       legalese); Marsh v. First USA Bank, N.A., 103 F. Supp. 2d 909 (N.D. Tex. 2000)

       (arbitration clause added by amendment enforceable where cardmember was given

       reasonable notice of the arbitration amendment and failed to respond); Herrington v.

       Union Planters Bank, N.A., 113 F. Supp. 2d 1026, 1031 (S.D. Miss. 2000) (arbitration

       clause added by amendment enforceable where plaintiff agreed to a change of terms

       provision contained in the original deposit agreement).

¶ 19         We note Plaintiff’s contention that she did not receive adequate notice of the

       amendment. Plaintiff admits that CMCU notified her of the change three times by

       email, each entitled “Charlotte Metro CU Online Statement and Changes to

       Membership and Account Agreements are Available”. The notices were sent along

       with Plaintiff’s monthly statements. Information pertaining to the Amendment was

       contained in hyperlinks which unambiguously pertained to “arbitration” and “class

       action waiver”.

¶ 20         Plaintiff might not have read the email notifications. However, she agreed to

       be bound to amendments when notified of them by email. And our Court has long
                          CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                         Opinion of the Court

       held that “the law will not relieve one who can read and write from liability upon a

       written contract, upon the ground that he did not understand the purpose of the

       writing, or that he has made an improvident contract, when he could inform himself

       and has not done so.” Weaver v. St. Joseph, 187 N.C. App. 198, 213, 652 S.E.2d 701,

       712 (2007) (citation omitted) (internal quotation marks omitted). We have enforced

       an arbitration agreement despite the plaintiff’s argument that the agreement was

       unconscionable because notice was improper.              Westmoreland v. High Point

       Healthcare, 218 N.C. App. 76, 721 S.E.2d 712 (2012).

¶ 21         Here, not only did CMCU’s email notice include the text of the new

       amendment, but it also included a link to a thorough explanation in plain language.

       Even so, Plaintiff contends that CMCU “buried the arbitration and class action

       waiver provision under ‘Additional Forms and Notices’” in the email. After examining

       the notice email in its entirety, we do not find this argument persuasive. Both the

       “Information about Arbitration” and “Arbitration and Class Action Waiver” links are

       clearly visible in the body of the email. The subject line of the email further put

       Plaintiff on notice of the change in terms. Plaintiff opted-in to receive electronic

       notifications. She does not dispute that she received all three notice emails from

       CMCU. Although Plaintiff may take issue with the method in which notice was

       provided, we conclude that the notice was sufficient.

¶ 22         We further note that Plaintiff was given the right to opt out of the provisions
                          CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                         Opinion of the Court

       in the amendment yet failed to do so. Plaintiff claims that an ambiguity in the opt-

       out provision made it impossible for her to decline arbitration. This provision reads:

                    You have the right to opt out of this agreement to arbitrate
                    if you tell us within 30 days of the opening of your account
                    or the mailing of this notice, whichever is sooner.

       Plaintiff argues that because she opened her account in 2014 and the notice was not

       sent until 2021, this provision makes it impossible for her to opt out. We agree that

       this provision could be construed to suggest that Plaintiff’s right to opt out of the

       amendment expired in 2014, long before the amendment was even contemplated. But

       such a reading is nonsensical. As such, we construe the provision as to allow Plaintiff

       30 days from the date she received notice to opt out. Yet she failed to do so in this

       case.

                                         IV.    Conclusion

¶ 23           We reverse the trial court’s order denying CMCU’s motion to compel

       arbitration. We remand this matter, directing the trial court to stay this action

       pending arbitration.

               REVERSED AND REMANDED.

               Judge DIETZ concurs.

               Judge ARROWOOD dissents by separate opinion.
        No. COA22-59 – Canteen v. Charlotte Metro Credit Union

             ARROWOOD, Judge, dissenting.

¶ 24         I respectfully dissent from the majority’s holding that these facts show the

       existence of a binding arbitration agreement and that the trial court erred in denying

       CMCU’s motion to compel arbitration. Accordingly, I would hold the trial court’s

       order should be affirmed because there is no valid arbitration agreement.

¶ 25         It is well established by this Court that before a dispute can be settled by

       arbitration, “there must first exist a valid agreement to arbitrate.” Routh v. Snap-

       On Tools Corp., 108 N.C. App. 268, 271, 423 S.E.2d 791, 794 (1992) (citations

       omitted).   “The law of contracts governs the issue of whether there exists an

       agreement to arbitrate.” Id. (citations omitted). Therefore, “a party cannot be forced

       to submit to arbitration of any dispute unless he has agreed to do so.” Sloan Fin.

       Grp., Inc. v. Beckett, 159 N.C. App. 470, 478, 583 S.E.2d 325, 330 (2003), aff’d per

       curiam, 358 N.C. 146, 593 S.E.2d 583 (2004) (citation omitted). The responsibility of

       demonstrating a valid agreement exists is placed upon the party seeking arbitration.

       Routh, 108 N.C. App. at 271-72, 423 S.E.2d at 794.

¶ 26         Additionally, because arbitration agreements are governed by the principles of

       contracts, they are also subject to the implied covenants of good faith and fair dealing.

       See Bicycle Transit Auth., Inc. v. Bell, 314 N.C. 219, 228, 333 S.E.2d 299, 305 (1985)

       (citation omitted) (“In every contract there is an implied covenant of good faith and

       fair dealing that neither party will do anything which injures the right of the other

       to receive the benefits of the agreement.”). This responsibility is even more important
                            CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                      ARROWOOD, J., dissenting

       when an agreement “confers on one party a discretionary power affecting the rights

       of the other[.]” Mezzanotte v. Freeland, 20 N.C. App. 11, 17, 200 S.E.2d 410, 414

       (1973), cert. denied, 284 N.C. 616, 201 S.E.2d 689 (1974). However, a promise may

       be illusory where a promisor reserves “an unlimited right to determine the nature or

       extent of his performance[.]” Wellington-Sears & Co. v. Dize Awning & Tent Co., 196

       N.C. 748, 752, 147 S.E. 13, 15 (1929).

¶ 27          I agree with the trial court that CMCU had no authority to unilaterally alter

       the Agreement and add entirely new terms. In the present case, the Agreement

       between the parties, allowed the appellant to “change” certain terms and allowed

       them to serve those changes by electronic means. Specifically, the Agreement allowed

       CMCU to “change the terms of this Agreement[,]” and stated CMCU would notify

       customers of “any change in terms,” but did not put customers on notice that it would

       add additional, uncontemplated terms. (emphasis added)

¶ 28          Therefore, in my opinion, nothing in the Agreement allowed CMCU to add new

       provisions to the Agreement and make those new additions apply retroactively to

       protect their past actions.     The majority’s opinion improperly interprets the

       Agreement to allow for this occurrence and sanctions such behavior by allowing a

       financial institution to protect itself from actions for which it is already being sued

       for in other litigation.
                           CANTEEN V. CHARLOTTE METRO CREDIT UNION

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                                      ARROWOOD, J., dissenting

¶ 29          In addition even if the Agreement allowed CMCU to “add” new terms as

       opposed to changing current terms, which I do not believe it did, the cunning method

       in which CMCU attempted to do so (requiring its customers to click thru numerous

       links and forms to determine that it was attempting to add new terms to the

       Agreement), in my opinion, blatantly breached the covenants of good faith and fair

       dealing provisions inherent in every contract.        Furthermore, allowing CMCU

       unlimited authority to alter the terms of an established contract renders the contract

       illusory.

¶ 30          This view is consistent with the previous holdings of the Court, which the

       majority is required to follow under the holding set forth in In re Civil Penalties. 324

       N.C. 373, 384, 379 S.E.2d 30, 37 (1989) (citations omitted) (“Where a panel of the

       Court of Appeals has decided the same issue, albeit in a different case, a subsequent

       panel of the same court is bound by that precedent, unless it has been overturned by

       a higher court.”). Specifically, the majority’s holding violates the principal that

       allowing one party to an agreement to unilaterally alter the terms of the agreement

       is antithetical to the contractual principles of mutual assent and this Court’s

       contention that “a party cannot be forced to submit to arbitration of any dispute

       unless he has agreed to do so.” Sloan Fin. Grp., Inc., 159 N.C. App. at 478, 583 S.E.2d

       at 330 (emphasis added).
                          CANTEEN V. CHARLOTTE METRO CREDIT UNION

                                          2022-NCCOA-779

                                      ARROWOOD, J., dissenting

¶ 31         Other jurisdictions have found similarly. In Sears Roebuck and Company v.

       Avery, this Court, applying Arizona law, found that the plaintiff company could not

       unilaterally add an arbitration provision. 163 N.C. App. 207, 219, 593 S.E.2d 424,

       432 (2004).    In Sears Roebuck, the plaintiff company’s original contract with

       defendant did not contain an arbitration clause, but they later amended the

       agreement to change the terms. Id. at 212, 593 S.E.2d at 428.

¶ 32         However, this Court reasoned that allowing Sears to “unilaterally insert” a

       “wholly new term” would “ignore the requirement of good faith implied in all contracts

       of adhesion[,]” be contrary to “black letter contract law[,]” and “render the contract

       illusory.” Id. at 218-19, 593 S.E.2d at 432. Other courts have found similarly. Id. at

       219, 593 S.E.2d at 432-33 (citing Badie v. Bank of Am., 67 Cal. App. 4th 779, 783, 79

       Cal. Rptr. 2d 273, 275 (1998); Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1179

       (9th Cir. 2003), cert. denied, 540 U.S. 1160, 157 L. Ed. 2d 1204 (2004); Dumais v. Am.

       Golf Corp., 299 F.3d 1216, 1219 (10th Cir. 2002); Floss v. Ryan’s Family Steak Houses,

       Inc., 211 F.3d 306, 316 (6th Cir. 2000), cert. denied, 531 U.S. 1072, 148 L. Ed. 2d 664

       (2001)).

¶ 33         Because I believe that the majority’s view is violative of previous precedent of

       this Court and of the black letter principals of contract law I dissent. I would find

       there to be no mutual assent and thus no binding arbitration agreement and I would
                    CANTEEN V. CHARLOTTE METRO CREDIT UNION

                                    2022-NCCOA-779

                               ARROWOOD, J., dissenting

conclude the trial court was correct in denying CMCU’s motion to compel arbitration.

For the foregoing reasons, I would affirm the trial court’s order and I dissent.