Earlier this week, the Eleventh Circuit upheld a district court’s denial of a bank’s motion to compel arbitration. Dasher v. RBC Bank, No. 13-10257 (11th Cir. Feb. 10, 2014) (click here to see a copy of the decision). The underlying dispute involved customers who were suing a bank for allegedly excessive overdraft fees, and the original account agreement contained an arbitration clause. However, after another bank acquired the first bank, the acquiring company issued a new account agreement to the customers. Unlike the original account agreement, the new account agreement did not include an arbitration clause.
The district court found that the new agreement completely superseded the prior agreement, and consequently, there was no obligation to arbitrate. The Eleventh Circuit affirmed, and the appellate opinion contained a good discussion of the FAA’s presumption of arbitrability.
The bank argued that although there was uncertainty regarding the enforceability of the original agreement, the original agreement should be enforced because there is a presumption of arbitrability under the FAA. In response to these arguments from the bank, the Eleventh Circuit explained that the presumption of arbitrability under the FAA arises only when an agreement to arbitrate exists, and this presumption governs the interpretation of the scope of an existing arbitration agreement. In other words, an existing, valid arbitration agreement that is ambiguous in its scope should be interpreted broadly. However, the Eleventh Circuit reasoned that here, the debate is not over the scope of an arbitration agreement. Instead, the debate between the parties involved whether the new agreement superseded the original one, and this debate is really about the existence of an arbitration agreement, not the scope of an existing agreement. Hence, the FAA’s presumption of arbitrability does not apply.