We suspect that banks deduct multiple transactions from a customer’s checking account in the order of greatest amount to least amount. If the customer overdrafts, that would maximize the bank’s profits.
In college, we occasionally overdrafted because we were too
absent-minded busy to keep a check register; Dad was not pleased. Whenever we received a bank statement, it was obvious that our bank had manipulated same-day withdrawals in the way that would yield the most fees.
Maxine Given sued her bank, M&T Bank Corporation, for similar behavior. Last week, the Eleventh Circuit Court of Appeals kicked Given's claim out of court and into arbitration under the terms of the M&T banking agreement delegation provision.
Given filed a putative class action against M&T after the bank hit her with $370 in overdraft fees. Given alleged that M&T, which charges $37 per overdraft incident, "manipulated and reordered" debits and credits to increase the bank's revenue from overdraft fees."
M&T's checking account contract provides that each dispute or controversy that arises out of, or is related to, a checking account must be submitted to binding arbitration. If any part of a relief request is not expressly stated as a dollar amount, the dispute or controversy will not be subject to arbitration. Any issue regarding whether a particular dispute or controversy is subject to arbitration will be decided by the arbitrator. (The last provision is known as a delegation provision.)
M&T filed a motion to compel arbitratration. The district court rejected the motion, noting that Given was asking, in part, for injunctive relief, so her claims were not within the scope of the arbitration agreement. M&T appealed, and the Eleventh Circuit Court of Appeals reversed.
The M&T contract includes a delegation provision, which means that Given agreed that an arbitrator must decide whether her claims are within the scope of the arbitration agreement. (Sidebar: It sounds circular, but the Eleventh Circuit Court of Appeals and the Supreme Court say it's legal.)
Plaintiffs love to find a way around an arbitration agreement and bring their claims to court, but attempting to completely circumvent arbitration when your client is bound by a delegation provision is a bad idea.
Think about it: if you have a client -- like Given -- who is already mad about unnecessary fees, how will she feel about paying your fees when her case is tossed out of court and into arbitration? This seems like a good way to provoke a complaint from an already-peeved plaintiff. Resist the temptation, and make your argument that the case should not be decided in binding arbitration ... to an arbitrator.
- In Re: Checking Account Overdraft Litigation (Eleventh Circuit Court of Appeals)
- Locate an ADR Professional (FindLaw's Market Center)
- Court Addresses Arbitrability and a "Delegation" Provision (FindLaw's Supreme Court Blog)
- It's Called 'Binding Arbitration' for a Reason (FindLaw's Tenth Circuit Blog)