Reinsurance Focus

The 11th Circuit ruled that SunTrust Bank account holders must arbitrate claims against it for excessive overdraft fees pursuant to an arbitration clause in its depositor agreement. Plaintiffs alleged that SunTrust breached its contract, converted funds, acted unconscionably, and was unjustly enriched by deceptively processing transactions to maximize overdraft fees. Although the district court initially denied SunTrust’s Motion to Compel individual arbitration, finding the clause substantively unconscionable under Georgia state law because it contained a class action waiver, the 11th Circuit remanded SunTrust’s appeal in light of the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, which held that the Federal Arbitration Act (“FAA”) preempted a California state rule relating to the unconscionability of class arbitration waivers.

Upon SunTrust’s renewed motion, the district court again found the clause substantively unconscionable because its fee-shifting provisions disproportionately allocated the risks of loss in the dispute to the Plaintiffs. Reversing that decision, the 11th Circuit ruled that the bank was entitled under the FAA to arbitration “in the manner provided for in [its deposit] agreement” and held that the clause was “neither procedurally nor substantively unconscionable.” The court noted that arbitration agreements, even when entered by parties with unequal bargaining power, are not per se unconscionable under Georgia law, particularly when given equal prominence to other adhesion contract provisions. Additionally, 11th Circuit precedent and a Georgia statute affirm the legality and conscionability of SunTrust’s multi-party account setoff rights to collect fees. In re Checking Account Overdraft Litigation, No. 11-14316 (11th Cir. Mar. 1, 2012).

This post written by Rollie Goss.

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Plaintiff brought an action against a cruise line, claiming to have suffered injuries while working on the defendant’s ship. Pursuant to the removal provision of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”), 9 U.S.C. § 205, the defendant removed the action and moved to compel arbitration. The plaintiff claimed that the arbitration agreement was void as against public policy because its choice of law provision would preclude U.S. common law and statutory claims. In a prior Order the court granted the defendant’s motion to compel arbitration, noting that such a public policy defense could only be made after an arbitral award was ordered and expressing skepticism at the ultimate efficacy of the argument. The court later upheld its arbitration order upon new motion by the plaintiff, in which she claimed that her inability to afford the initial costs associated with arbitration justified vacating the previous order or requiring the defendant to pay those costs. The court found that because the plaintiff had the option of pursuing her claims through union representation, in which case the defendant would bear the initial costs, she failed to show the arbitration agreement was incapable of being performed. The parties later reached an amicable settlement. Tomevska v. NCL Bahamas Ltd., Case No. 10-23665 (USDC SD Fla. May 18, 2012).

This post written by Rollie Goss.

See our disclaimer.