CUNA Supports Golden 1 in Contracts Case
The California credit union is appealing to the U.S. Supreme Court a state court ruling over arbitration clauses.
CUNA announced Monday that it has filed a friend-of-the-court brief with the U.S. Supreme Court to support Golden 1 Credit Union’s attempt to make it easier for credit unions to amend contracts with members.
The case specifically refers to Golden 1’s attempt to enforce an arbitration agreement. California courts ruled that Golden 1 could not force arbitration because it did not meet its burden to show it had provided adequate notice to the member.
CUNA’s brief filed Oct. 13 stated that “operational uncertainty abounds in determining the enforceability of arbitration agreements added through mutual assent, including the notice-and-opportunity-to-opt-out process used by The Golden 1 Credit Union.”
The issue of arbitration came up after Golden 1 member Dwayne Burgardt contested overdraft fees by filing a class action suit Sept. 3, 2019 in Superior Court of California in Sacramento.
Burgardt requested a jury trial; Golden 1 moved to force the case into arbitration. The state court ruled in July 2020 against arbitration, which was upheld by a state appeals court in February. Golden 1 appealed the ruling to the California Supreme Court, which in May declined to review it. It appealed to the U.S. Supreme Court in September.
Meanwhile, Burgardt filed an amended complaint in the state court on Oct. 13, and a case management hearing has been postponed until August 2023.
The California appeals court ruling in February said that the threshold question for the Superior Court of California was whether there was an agreement to arbitrate.
The Superior Court of California examined the principles applied to “clickwrap” agreements on the internet, where a user has to click an “I agree” button to listed terms and conditions, compared with the “browsewrap” agreement used by Golden 1, where use constitutes agreement to terms and conditions accessible by a hyperlink on the web page.
The appeals court said the validity of a browsewrap agreement for notice depends on “whether the website puts a reasonable prudent user on inquiry notice of the contract terms, which in turn depends on the design of the website, i.e., how conspicuous were the website’s hyperlinks to the terms and conditions.”
The state court concluded that inserting a single hyperlink on a webpage not immediately visible on a customer’s online banking account was insufficient to put a customer on notice of the arbitration provision.
“Therefore, Golden 1 had not shown the existence of an enforceable arbitration provision,” the appeals court ruled.
CUNA said the issue is the process by which an arbitration agreement can be added to a contract. “More specifically, whether a membership agreement can subsequently be amended to include such a provision, providing the member has had an opportunity to opt-out,” a CUNA news release said.
CUNA’s brief stated the California court’s decision “is part of an accelerated movement to single out arbitration by constructing barriers, and, in some cases, making it impossible, to modify existing consumer agreements to add arbitration agreements.
“This morass of standards even trips sophisticated financial institutions with robust compliance programs, particularly when the new standards are applied after-the-fact,” the brief said. “The genesis of the confusion is plain: Certain states (and courts) harbor contempt for arbitration, which manifests in the adoption of anti-arbitration laws and rules.”