Christina Kennedy and Emily Beer of Foley & Lardner have this article in Mondaq, discussing the Sixth Circuit’s recent decision in Sevier County Schools Federal Credit Union v. Branch Banking and Trust Company. As the authors explain, the case began when the defendant bank substantially lowered interest rates on certain investments despite an alleged promise that they would “never fall below 6.5%.” The lower court dismissed the plaintiffs’ putative class action, compelling arbitration. As the authors explain, the accounts
“also included a permissive arbitration clause that permitted either party to require that a dispute be resolved by arbitration. Sixteen years later, in 2017, the Bank sent out notice of a major overhaul to the [accounts], which included replacing the prior permissive arbitration clause with one mandating arbitration and including a broad class action waiver.”
Reversing the district court’s decision finding that the plaintiffs “manifested assent” to the changed arbitration provision by not objecting and and continuing to hold their accounts, the authors explain that the Sixth Circuit
“found that the new mandatory arbitration clause was not truly a modification of the original contemplated terms – it constituted the addition of an entirely new term. The court observed that banks do not have carte blanche to unilaterally make this type of change; rather, the subject matter of a modification must have been anticipated when the parties entered into the contract.”
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