The Superior Court of Pennsylvania has affirmed a lower court’s ruling denying a defendant’s motion to compel arbitration in a class action over vehicle repossession notices, holding that the defendant never proved the plaintiffs actually received the document containing the arbitration provision.
The background: The plaintiffs each refinanced vehicle loans through the defendant, a credit union, and later filed a class action alleging the defendant failed to provide proper notice when it repossessed collateral.
- The loan documents the plaintiffs signed contained no arbitration provisions. The defendant instead pointed to its Member Service Agreement, which has two parts, only the first of which members actually sign.
- One plaintiff signed Part 1 in 2018, when it contained no arbitration provision and made no mention of a Part 2. The other plaintiff signed a revised Part 1 in early 2020, which acknowledged “receiving or being offered” Part 2. The arbitration provision appeared on page 29 of Part 2.
- The defendant said it mailed all existing members a notice when it updated the terms in 2019 and submitted an affidavit from its vice president of risk describing its “customary practice” of providing the full agreement to members. The affiant had no personal knowledge of any mailing to either plaintiff.
- The trial court overruled the defendant’s preliminary objections, finding no evidence, such as proof of mailing or an email receipt, that either plaintiff ever received Part 2.
The ruling: The Appeals Court affirmed, concluding the defendant failed to meet its burden of proving a valid agreement to arbitrate existed.
- A signature acknowledging “receiving or being offered” Part 2 was not enough, the court held, because an offer alone does not create a binding contract, and a party cannot accept terms contained in a document it never received.
- The affidavit did not trigger the mailbox rule’s presumption of delivery. Generic testimony about standard mailing procedures, without personal recollection of the specific mailing, falls short. As the court put it, “A presumption that a letter was received cannot be based on a presumption that the letter was mailed.”
- The defendant argued in the alternative that a separate loan one plaintiff had, which did contain an arbitration clause, was “legally linked” to the loan at issue through a cross-collateralization clause. The court rejected the argument because the defendant cited no case law to support it, noting it would not act as counsel for a party or scour the record to build its argument for it.
- The court also held that no evidentiary hearing was required, because the defendant never established a factual dispute over whether the plaintiffs received or agreed to the provision in the first place.
