Following the Alabama Supreme Court’s decision last Friday in Moore-Dennis v. Franklin, Nos. 1131142, 1131176, Alabama lenders should immediately review their account agreements to ensure any amendments to those agreements will survive judicial scrutiny. This is especially true for any lenders who have used electronic means to notify account holders of an amendment.

When Joseph Franklin became a customer of PNC Bank, he received an account agreement in the mail. This agreement did not contain an arbitration provision, but it did provide that PNC could unilaterally amend the agreement by providing proper notice to Franklin. In 2013, Franklin’s niece, Tamara Franklin, suspected a PNC employee was stealing from him. At PNC’s urging, Tamara was added to Franklin’s account. At that time, Tamara changed Franklin’s email address but, according to her, did not consent to receive online notifications from PNC. Shortly after Tamara was added, PNC unilaterally amended the account agreement to add an arbitration provision. PNC communicated this change to Franklin and Tamara by posting a notice to Franklin’s online-banking profile. Later, when Franklin sued PNC for theft among other things, PNC moved to compel arbitration. The trial court denied this motion.

On appeal, Chief Judge Moore authored an opinion affirming the trial court. Judge Moore concluded that electronic notification of an arbitration agreement is insufficient to show that a customer was aware of the arbitration provision and had agreed to be bound by it. Instead, a bank must show that customer actually accessed the specific e-mail or visited the specific web page containing the arbitration provision. Though PNC had sent Tamara emails stating that Franklin’s bank statements were ready for review electronically, none of the e-mails contained the text of the arbitration provision, a link to the provision, or any indication that the message was important and would impact Franklin’s legal rights. Because PNC Bank had not proved that Tamara or Franklin had accessed an e-mail or visited a web page containing the arbitration provision, it had failed to show that there was a binding agreement to arbitrate Franklin’s claims.

Importantly, only one judge (Judge Parker) joined Chief Judge Moore’s opinion. Seven judges concurred in the result only. Judge Shaw, writing specially, explained that PNC’s account agreement appeared to require PNC to provide notice of an amendment by mail. Therefore, PNC’s electronic notice to Franklin was insufficient to amend that agreement and add the arbitration provision.

Because Chief Judge Moore’s opinion was only joined by one other justice, it is not binding upon lower courts. Still, lower courts that are already hostile to arbitration may adopt its reasoning and require lenders to show that a customer specifically accessed the email or webpage containing the arbitration provision. For that reason, lenders should review whether they could make this showing if required to do so. Even if Chief Judge Moore’s opinion is not followed by lower courts, Judge Shaw’s concurrence is a reminder that an amendment must be made according to the terms of the controlling account agreement. Thus, if a lender has used electronic means to notify its customers of an amendment to an account agreement, that lender should review the controlling agreement and determine whether such notice was effective. If there is doubt, it may be appropriate for the lender to resend proper notice to ensure the amendment will withstand judicial scrutiny.

The text of the opinion is available here.