Canteen v. Charlotte Metro Credit Union
|Amicus Brief Writers
|Christopher Edwards Jordan Godwin Rachel Fuerst Taylor Rodney
|NC Supreme Court
Plaintiffs filed a putative class action alleging that the Credit Union charged unauthorized overdraft and non-sufficient funds fees. The Credit Union filed a motion to compel arbitration, which the trial court denied. The Court of Appeals (Dillon, J.) reversed, with a dissent by Judge Arrowood. Plaintiffs appealed to the Supreme Court.
The original deposit agreement did not include an arbitration clause, but purported to grant an unlimited power of unilateral amendment to the Credit Union. Pursuant to that power, the Credit Union subsequently added an arbitration clause to the agreement unilaterally.
NCAJ filed an amicus brief in support of Plaintiffs, arguing that the arbitration amendment in question was illusory and therefore unenforceable. As a result of the Credit Union’s amendment authority, terms could be changed at any time, including retroactively, such that customers could not even know what if any obligations they or the Credit Union were bound to perform. Numerous other states have held that similar arbitration clauses that can be changed at any time are illusory.
Although the Court could sever the amendments provision, this would not save the arbitration amendment. Without the power to make unilateral amendments, the Credit Union had no authority to add the arbitration clause in the first place. In any event, the arbitration amendment should fail for lack of consideration. All the Credit Union promised in order to add this amendment was to abide by the amendment itself. This promise is illusory as well, because the Credit Union retained the ability to amend the arbitration provisions whenever and however it saw fit. An illusory promise cannot serve as sufficient consideration.