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Court Denies Banks' Effort to Force Arbitration in Overdraft Fees Litigation
September 1, 2011
U.S. District Judge James Lawrence King denied renewed motions by Branch Banking & Trust Company, M&T Bank Corporation, Regions Financial Corporation, and SunTrust Banks to compel arbitration in the multidistrict bank overdraft fee litigation (In re: Checking Account Overdraft Litigation, MDL No. 2036).
Following the Court's denial of the banks' original motion to compel arbitration on May 10, 2010, the banks appealed. The Eleventh Circuit Court of Appeals remanded the case for consideration in light of the U.S. Supreme Court opinion in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). In Concepcion, by a 5 to 4 decision, the Supreme Court enforced a clause in an arbitration agreement prohibiting consumers from seeking to vindicate their rights through class actions. Lower courts had rejected AT&T Mobility's request, holding that the class-action ban was unconscionable under California law because it would exculpate the company from accountability for wrongdoing.
In reviewing the impact of Concepcion in the present litigation, Judge King found that "Concepcion has not relieved courts from their obligation to securitize arbitration agreements for enforceability on a case-by-case basis where one party resists arbitration; rather Concepcion provides guidance as to what court may consider when fulfilling that obligation."
The Court then analyzed the relevant arbitration agreements and found the agreements were unconscionable, and would not be enforced. In the case of the agreement between M&T Banks and its customers, the Court found the parties did not agree to arbitrate claims seeking both monetary and injunctive relief.
"The Court's order represents a tremendous victory for consumers in litigation of national significance and at a time when the ability of consumers to stop corporate misconduct has been placed in question by the Concepcion decision," commented Lieff Cabraser attorney Michael W. Sobol. "Judge King's order emphatically reaffirms that corporations cannot close the doors to the courthouse by forcing consumers to sign away their rights in one-sided and oppressive arbitration contracts."