Monday, March 31, 2014
Eleventh Circuit Joins Others in Holding that Bank Agreement without Arbitration Clause Supersedes Prior Customer Agreement
Last month, the Eleventh Circuit Court of Appeals decided Dasher v. RBC Bank, in which Mr. Dasher alleges excessive overdraft fees and which is part of a larger multidistrict litigation pending in the Southern District of Florida. RBC Bank (RBC) moved to compel arbitration, and the District Court denied the motion.
The procedural history of the case is complicated. The parties' relationship was originally governed by a 2008 agreement (the RBC Agreement) which included an arbitration clause. Before the Supreme Court decided Concepcion, the District Court refused to enforce the arbitration clause because it made it impossible for Mr. Dasher and others to vindicate their rights. While the case was awaiting reconsideration after Concepcion, PNC Financial Services Group (PNC) aquired RBC and a 2012 PNC Agreement replaced the 2008 RBC Agreement which had previously governed the parties' relationship. The PNC agreement did not mention arbitration. The District Court ruled that the PNC Agreement applied to this litigation and that it superseded the RBC Agreement. The District Court thus again denied RBC's motion to compel arbitration, and the Eleventh Circuit affirmed on the same grounds.
While the Court acknowledged the general public policy in favor of arbitration, courts cannot compel arbitration where the parties have not agreed to arbitration. Here, the Court found that the parties expressed a "clear and definite intent" that the PNC Agreement superseded the RBC Agreement, and the former had no arbitration clause. The Court was unmoved by RBC's arguments that it had not waived its right to demand arbitration. There was no question of waiver where the right to demand arbitration did not exist in the relevant agreement. Similarly, the Court rejected RBC's argument that mere silence was not enough to overturn an arbitration clause. While RBC cited cases that seemed to support its position, those cases all involved new agreements that did not entirely supersede prior agreements. Two other Circuit Courts have addressed the issue in the context of superseding agreements, and both have held that an arbitration clause from a prior agreement is unenforceable, and the Sixth Circuit was especially clear that prior arbitration agreements are unenforceable even where the superseding agreement is silent on the subject.