Agreements to Arbitrate and Class Action Waivers: Details Matter

The First District Court of Appeal on August 28, 2024 ruled in Eglin Federal Credit Union v. Baird, et al., clear and conspicuous notice, as well as specific language, was necessary to add arbitration as a dispute resolution requirement and to waive the ability to seek class action treatment of a lawsuit. Eglin is a credit union that provides account and loan services to its members, including the Plaintiffs. When the Plaintiffs first became members, the governing contract did not contain an arbitration or class action provision. However, in October 2021 Eglin decided to add provisions to its customer contract requiring arbitration and prohibiting class actions.

Eglin notified its members by mailing a cover letter, the Arbitration Provision, the Class Action Waiver, and the opt-out form in late December 2021. The cover letter stated that continued use of the Eglin account would act as consent to the new provisions. After the changes took effect, Eglin sent out a routine email with a hyperlink to its quarterly newsletter, which mentioned that members had been mailed a notice about a new Arbitration Provision and Class Action Waiver amending the Membership and Account Terms and Conditions. However, the newsletter did not include the actual text of the new provisions or the opt-out form.  

One Plaintiff received the physical notice at her home and continued to use her Eglin account as usual. The second Plaintiff did not receive the physical notice but did receive the routine email with the newsletter hyperlink. Plaintiffs filed suit against Eglin, alleging improper fees, and sought class certification. Eglin moved to compel arbitration, pursuant to the new governing contract provisions.

Eglin argued on appeal that it provided one Plaintiff reasonable notice of its change to arbitration, but the First District Court of Appeal disagreed and stated that Eglin and this customer did not mutually agree to arbitrate. The court found that mutual assent was impossible without reasonable notice. Eglin argued that the “notice” was a hyperlink indicating that it would link to Eglin’s quarterly newsletter, which was buried in a routine email. There was no language indicating that Eglin had changed the terms of the agreement or that the customer should click on the hyperlink for important updates. Even if the Plaintiff had followed the link, the newsletter did not include the terms of the new arbitration and class action provisions.

However, the court did agree with Eglin’s argument that the second Plaintiff had received reasonable notice. She argued that the notice was insufficient due to its lack of clarity and conspicuousness, but the court determined that the mailing- which included a cover letter, the Arbitration Provision, the Class Action Waiver, and an opt-out form- constituted reasonable notice. By continuing to use her Eglin account after receiving this notice, the second Plaintiff consented to the new provisions. She had the opportunity to opt out or close her account but chose to continue, creating a valid and enforceable agreement to arbitrate.

While the court found a valid arbitration agreement, it concluded that the terms of the Arbitration Provision and the Class Action Waiver would not apply retroactively to the second Plaintiff’s claims either. The court emphasized that an arbitration provision can only apply to previously accrued claims when the language of the agreement clearly demonstrates the intent for retroactive application.  Importantly, this ruling allows both cases to proceed as class actions in Court if the Plaintiffs are able to satisfy class certification requirements.