Regional Bank Asks #SCOTUS for Federal Arbitration Act Preemption to Defeat a Class Action

The U.S. Supreme Court will consider a second arbitration case at its conference next week in a case in which a bank is asking the Court to reassert Federal Arbitration Act preemption to overturn Georgia state courts’ rulings that a class action suit could proceed despite the presence of a depositor agreement arbitration provision.

On Dec. 23, the Court posted on its docket page that it would consider hearing SunTrust Bank v. Bickerstaff, No. 25-585, where the bank states that the issue is “Whether the FAA preempts a state court rule permitting a proposed class representative to effectively opt out of arbitration on behalf of all unnamed class members notwithstanding contrary, express requirements in the  arbitration agreement.”

Suntrust Bank joins Feldman v. Sullivan, No. 25-240, for consideration at the Supreme Court's  Jan. 9 conference. Feldman, also added to the conference schedule just before Christmas, will focus on whether incorporating ADR provider rules into a contract gives an arbitrator the right to decide arbitrability and send a case to mass arbitration with multiple parties. For details on Feldman, see Sasha Hill, “Is it Arbitrable? #SCOTUS Considering Contractual Rules Incorporation and Parties' Intent,” CPR Speaks (Dec. 26) (available here).

In SunTrust—a 15-year-old state court litigation war about overdraft fees—the Court will consider whether it will hear a case in which Georgia courts have agreed that filing a class action suit qualifies as an opt-out from an arbitration obligation under a bank’s customer agreement.

The Nov. 14 cert petition by SunTrust Bank—now known as Truist Bank, which is a wholly owned subsidiary of Charlotte, N.C.’s Truist Financial Corp.—states that the lower court decisions violated the Supreme Court’s holdings that require equal treatment of arbitration agreements and contracts to combat hostility toward the ADR process.

But the bank’s petition piles on regarding the unequal treatment:  It states that the Georgia Supreme Court “held that by filing a class  action lawsuit, respondent [the original depositor-plaintiff, who died years ago] had tolled the contractual optout period for all other members of the proposed class who were ‘existing depositors’ at the time of the filing of the suit.” See Bickerstaff v. SunTrust Bank, 788 S.E.2d 787 (2016).

The result, the petition brief says, is that instead of backing away from its anti-arbitration stance, the state courts

have doubled down on that rule and certified an enormous class for a trial that the FAA says should never have happened. Only [the U.S. Supreme Court] can correct these manifest errors and ensure that Georgia does not remain a glaring exception to the FAA’s equal treatment mandate.

In fact, the Court in 2016 had denied cert on the question of whether the Georgia Supreme Court violated the FAA by reversing a lower court and allowing Bickerstaff’s filing to toll the arbitration opt-out for potential class members. SunTrust v. Bickerstaff, 580 U.S. 1020, 137 S. Ct. 571, 196 L. Ed. 2d 447 (2016).

Georgia’s trial and appellate courts added class members who had signed arbitration agreements after Bickerstaff’s in the face of SunTrust motions to compel. When the Georgia Supreme Court denied cert on those plaintiffs, SunTrust successor Truist filed the petition that the nation’s top Court has scheduled for January consideration. 

It asks the Court to reconsider the original Georgia Supreme Court decision “in light of  intervening precedent . . . holding that the FAA preempted state rules discriminating against arbitration.” The petitioner references arguments on the point the bank had made unsuccessfully seeking cert in the Georgia Supreme Court about Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 581 U.S. 246 (2017) (see “SCOTUS Says States Can’t Discriminate Against Arbitration, Directly or Indirectly,” CPR Speaks (May 16, 2017) (available here)),  and Viking River Cruises Inc. v. Moriana, 596 U.S. 639 (2022) (See Arjan Bir Singh Sodhi & Russ Bleemer, “Supreme Court Limits California’s PAGA Law on Employment Claims,” CPR Speaks (June 15, 2022) (available here)). 

The effect of the Geogia rulings “is to permit respondent to opt out of arbitration not only on behalf of himself, but also on behalf of all absent members of the putative class—regardless of whether those absent class members had complied with the agreement’s requirement of individualized notice,”  the petition states.

It continues:

The practical consequences of the Georgia Supreme Court’s wayward decision are substantial. In this case alone the rule has resulted in over 15 years of protracted and expensive litigation. And opt-out provisions remain important to arbitration agreements across the nation’s industries. Transforming them into on ramps to mass litigation upends settled expectations for the parties to those agreements. The Georgia Supreme Court’s rule also places enormous pressure on companies like SunTrust to forgo opt-out provisions entirely, even though such provisions promote consumer choice.

Charles Daniel Bickerstaff, as executor for the deceased original plaintiff, through his attorney waived a right of reply in the Supreme Court on behalf of the class. 

But on Dec. 18, the U.S. Chamber of Commerce, a frequent participant in appellate arbitration cases, filed a friend-of-the-court brief supporting a grant of certiorari, mirroring the reasons in the SunTrust cert petition about the Georgia rulings:

That reasoning is wrong and calls out for correction. Merely because the putative class held the same opt-out rights as the named plaintiff does not mean that they exercised them. It was therefore wrong of the Georgia Supreme Court to nullify the federally protected right to arbitration with respect to putative class members who had not opted out of arbitration. 

. . .

Judicial failure to honor clear opt-out provisions has far-reaching implications. If opt-out language is not respected, businesses have no way to enforce any arbitration agreement against any contracting partner who could someday be added to a class-action lawsuit.

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The author edits Alternatives to the High Cost of Litigation for the CPR Institute.

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