Class Action-Contract-Arbitration Clause

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WI Court of Appeals – District III

Case Name: Jeffery Pruett v. WESTconsin Credit Union

Case No.: 2022AP000887

Officials: Stark, P.J.

Focus: Class Action-Contract-Arbitration Clause

Pruett filed a class action complaint alleging that WESTconsin Credit Union (WCU) had improperly charged and collected fees from its members. In response, WCU filed a motion to compel arbitration based upon an Arbitration and Class Action Waiver Agreement (the Arbitration Clause) that WCU added to its Membership and Account Agreement (the Agreement) in 2021. The Arbitration Clause provided that either WCU or a member may compel arbitration in a dispute between the parties, subject to some exceptions not relevant here, and withdrew the right for its members to participate in a class action, as either a class representative or a class member. The Arbitration Clause applied to “any dispute between us concerning your Membership, your accounts, or the services or products related to your accounts[,]” meaning, as WCU argues, the amendment had retroactive application. (Emphasis added.) WCU alleges that Pruett received notice of the Arbitration Clause, and it further argues that Pruett agreed to the amendment by failing to opt out of its application using the specified procedure—i.e., Pruett’s silence and continued use of his account signaled his assent to the Arbitration Clause.

WCU appeals from the circuit court order denying its motion to compel arbitration pursuant to WIS. STAT. § 788.02 (2021-22).  The issues on appeal, according to WCU, are whether: (1) WCU’s contractual authority to change the terms of the Agreement permitted it to add the Arbitration Clause; (2) Pruett’s failure to opt out of the Arbitration Clause and his continued use of his WCU account constituted his agreement to the terms of the Arbitration Clause; (3) the Arbitration Clause applies retroactively to claims that accrued before WCU added the clause; (4) the retroactive application of the Arbitration Clause is unreasonable and in violation of the contractual duty of good faith and fair dealing; and (5) the language in the Agreement is sufficiently clear to allow an opportunity for a member to timely opt out of the Arbitration Clause.

The appeals court conclude that WCU’s contractual authority to change the terms of the Agreement did not permit it to add the Arbitration Clause, which it determines contained new terms that the parties did not address or contemplate in the original contract. Further, Pruett did not affirmatively assent to the Arbitration Clause by his failure to opt out of its provisions and continued use of his account; therefore, the clause cannot be enforced against Pruett.

Affirmed.

Decided 10/24/23

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