A New Jersey Appeals Court has affirmed a lower court’s ruling that deemed an arbitration provision was unenforceable because the defendant failed to follow its own contact in how amendments to the underlying agreement needed to be made. The court emphasized that arbitration clauses cannot be imposed through shortcuts when an institution’s own agreement sets stricter requirements for contract changes.
The background: The case was filed after the plaintiff, a long-time banking customer, brought a proposed class action alleging breach of contract, unjust enrichment, and violations of New Jersey’s Consumer Fraud Act. The claims centered on allegedly improper fees charged to the plaintiff and other customers.
- In response, the defendant sought to compel arbitration, relying on an arbitration provision it said had been added years earlier through an insert included with monthly account statements.
- The original account agreement, however, stated that it could “only be changed by written agreement properly executed” by both parties, while also containing a separate provision allowing certain amendments to be made by notice.
- The defendant argued that the arbitration clause was a permissible amendment and that the plaintiff accepted it by failing to opt out and by continuing to use the account.
The ruling: Both the trial court and the Appellate Division rejected the defendant’s arguments. The appeals court agreed that adding an arbitration clause was not a minor amendment, but a fundamental change that altered how disputes would be resolved and required a written agreement executed by both parties.
- The court found that the defendant could not rely on silence or continued account use as proof of assent when its own contract required more. As the panel put it, “We can derive no fair interpretation of the ‘written’ and ‘executed’ language… which would allow lawful imposition of a wholly new arbitration term by means of unilateral written notice by mail.”.
- The court was also unpersuaded by arguments that requiring signatures would be impractical for banks. Any such burden, the judges noted, flowed directly from the language the defendant chose to draft. Even if a signature were not required, the court said the record did not establish that the plaintiff actually received notice of the arbitration provision, pointing out that “evidence of office custom alone is insufficient” to prove mailing and receipt.
