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Court of Appeals of Indiana.

Jeffery NEAL, on behalf of himself and all others similarly situated, Appellant-Plaintiff, v. PURDUE FEDERAL CREDIT UNION, Appellee-Defendant

Court of Appeals Case No. 22A-PL-762

Decided: December 30, 2022

Attorneys for Appellant: Lynn A. Toops, Vess A. Miller, Lisa LaFornara, Tyler Ewigleben, Cohen & Malad, LLP, Indianapolis, Indiana Attorneys for Appellee: James R. Branit, Phillip G. Litchfield, Litchfield Cavo LLP, Chicago, Illinois

Case Summary

[1] A member of Purdue Federal Credit Union (PFCU) filed a proposed class-action complaint against PFCU regarding overdraft fees. Jeffrey Neal later replaced that member as the plaintiff and filed his own complaint. PFCU filed a motion to compel arbitration, which the trial court granted on the basis that Neal had failed to opt out of a proposed change to his account agreement with PFCU. Neal argues that the trial court erred. We affirm.

Facts and Procedural History 1

[2] The relevant facts are undisputed. PFCU “is a member-owned, not-for-profit cooperative and financial institution, which provides account and loan services to its members.” Appellant's App. Vol. 2 at 203. In September 2019, PFCU member Noah Shoaf filed a proposed class-action complaint alleging that PFCU improperly assessed and collected overdraft fees on its deposit accounts. In his amended complaint, which was filed in January 2020, Shoaf acknowledged that his checking account with PFCU was governed by a membership and account agreement (the Account Agreement), which contains the following relevant provisions:


b. Notice of Amendments. Except as otherwise prohibited by applicable law, the terms of this Agreement are subject to change at any time. [PFCU] will notify you of any changes in terms, rates or fees as required by law. We reserve the right to waive any term in this Agreement. Any such waiver shall not affect our right to enforce any right in the future.

c. Effect of Notice. Any written notice you give to us is effective when it is actually received by us. Any written notice we give to you is effective when it is deposited in the U.S. mail, postage prepaid and addressed to you at your statement mailing address or when placed in your eDocuments folder in online banking if you are enrolled in electronic statements, unless statute or regulation dictates otherwise․


b. Examination. You are responsible for examining each statement and reporting any irregularities to [PFCU]․


This Agreement is governed by the Bylaws of [PFCU], federal laws and regulations, the laws, including applicable principles of contract law, and regulations of the state of Indiana, and local clearinghouse rules, as amended from time to time. To the extent permitted by applicable law, you agree that any legal action regarding this Agreement shall be brought in Tippecanoe County, Indiana.

Id. at 53-54 (emphases added).

[3] In January 2020, PFCU mailed “to its members their respective December 2019 month and quarterly end statements.” Id. at 204. Included with the statement was the following two-sided document (the Arbitration Provision):

Id. at 226-27. In March 2020, PFCU filed an answer to Shoaf's amended complaint, in which PFCU did not invoke the Arbitration Provision.

[4] On December 18, 2020, Neal, who is also a PFCU member, filed a motion to intervene as a substitute class representative and for leave to amend the complaint. The motion stated that Shoaf, who never filed a motion to certify a class, wished to withdraw as class representative. On December 22, 2020, the trial court gave PFCU thirty days to object to Neal's motion. On January 21, 2021, PFCU filed a notice that it had no objection. On February 1, 2021, Neal filed his complaint, designated as a second amended complaint, in which he acknowledged that his checking account with PFCU was governed by the Account Agreement; he did not (and does not) claim that he was unaware of any of its terms.

[5] On March 10, 2021, PFCU filed a motion to compel arbitration, asserting that Neal accepted PFCU's offer to arbitrate by failing to opt out of the Arbitration Provision.2 Neal filed a response in opposition, asserting that no enforceable arbitration agreement existed and that PFCU had “waived its right to arbitrate by continuing to litigate in court for over a year and by consenting to” the filing of his complaint. Appellant's App. Vol. 3 at 12 (bolding omitted). The trial court held a hearing on the motion, during which Neal's counsel stated that “the fact that [Neal] received the notice” of the Arbitration Provision was “undisputed,” but that “the effectiveness of that notice [was] in dispute[.]” Tr. Vol. 2 at 9. In February 2022, the trial court issued an order granting PFCU's motion to compel and staying the proceedings. Neal now appeals.

Discussion and Decision

[6] We review de novo a trial court's ruling on a motion to compel arbitration. Doe v. Carmel Operator, LLC, 160 N.E.3d 518, 521 (Ind. 2021).3 “Both Indiana and federal law recognize a strong public policy favoring enforcement of arbitration agreements.” Tender Loving Care Mgmt., Inc. v. Sherls, 14 N.E.3d 67, 71 (Ind. Ct. App. 2014). This policy favoring arbitration comes into play “[o]nly after it has been determined that the parties agreed to arbitrate their disputes[.]” MPACT Constr. Grp., LLC v. Super. Concrete Constructors, Inc., 802 N.E.2d 901, 907 (Ind. 2004). “[A]rbitration is a matter of contract, and a party cannot be required to submit to arbitration unless the party has agreed to do so.” Watts Water Techs., Inc. v. State Farm Fire & Cas. Co., 66 N.E.3d 983, 988 (Ind. Ct. App. 2016). “Under Indiana contract law, the party seeking to compel arbitration has the burden of demonstrating the existence of an enforceable arbitration agreement.” Id. at 989. “Once the court is satisfied that the parties contracted to submit their dispute to arbitration, the court is required by statute to compel arbitration.” JK Harris & Co. v. Sandlin, 942 N.E.2d 875, 884 (Ind. Ct. App. 2011), trans. denied. See Ind. Code § 34-57-2-3 (requiring court to order arbitration if it finds that parties agreed to arbitrate).

[7] We first address Neal's potentially dispositive argument that PFCU waived its right to compel arbitration. “Even where a written agreement to submit a dispute to arbitration is valid and enforceable, ‘the right to require such arbitration may be waived by the parties.’ ” JK Harris, 942 N.E.2d at 884 (quoting Tamko Roofing Prods., Inc. v. Dilloway, 865 N.E.2d 1074, 1078 (Ind. Ct. App. 2007)). “Such a waiver need not be in express terms and may be implied by the acts, omissions or conduct of the parties. Whether a party has waived the right to arbitration depends primarily upon whether that party has acted inconsistently with its right to arbitrate.” Id. (quoting Tamko, 865 N.E.2d at 1078). “Waiver is a question of fact under the circumstances of each case.” Id. (quoting Tamko, 865 N.E.2d at 1078).

In determining if waiver has occurred, courts look at a variety of factors, including the timing of the arbitration request, if dispositive motions have been filed, and/or if a litigant is unfairly manipulating the judicial system by attempting to obtain a second bite at the apple due to an unfavorable ruling in another forum.

Id. (quoting Tamko, 865 N.E.2d at 1078).

[8] As he did below, Neal asserts that PFCU “affirmatively waived any right to compel arbitration by litigating this case for more than a year and affirmatively consenting to” the filing of his complaint. Appellant's Br. at 21. We disagree. PFCU litigated the case for more than a year against Shoaf, but PFCU filed its motion to compel arbitration less than six weeks after Neal replaced Shoaf as the plaintiff and filed his own complaint. We concur with PFCU's assertion that “while Shoaf was the plaintiff, only his individual rights and obligations were at issue, and not Neal's. Therefore, nothing that actually happened before Neal became a plaintiff would serve as evidence of any waiver of [PFCU's] right to arbitrate against Neal.” Appellee's Br. at 46. See Doe v. Adams, 53 N.E.3d 483, 491 (Ind. Ct. App. 2016) (quoting 11 Stephen E. Arthur & Jerome L. Withered, Indiana Practice Series: Civil Trial Practice § 18.4 (2015)) (“The general approach in Indiana is that ‘[b]efore certification, a purported class action is essentially an individual action in which the plaintiff wishes to assert claims as a class representative.’ ”), trans. denied. Neither Shoaf nor Neal ever sought to certify a class, and Neal cites no authority for the proposition that consenting to the substitution of a plaintiff constitutes a waiver of any potential defenses against the new plaintiff. In sum, even if PFCU acted inconsistently with any right it might have had to compel arbitration with Shoaf, the same cannot be said about Neal.4

[9] We now address Neal's argument that PFCU “failed to meet its burden of proving a valid agreement to arbitrate in the first place[.]” Appellant's Br. at 26. “When determining whether the parties have agreed to arbitrate a dispute, we apply ordinary contract principles governed by state law.” Green Tree Servicing, LLC v. Brough, 930 N.E.2d 1238, 1241 (Ind. Ct. App. 2010). “Construction of the terms of a written arbitration contract is a pure question of law, and we conduct a de novo review of the trial court's conclusions in that regard.” Id. (italics omitted). “In interpreting a contract, we give the language of the contract its plain and ordinary meaning[,]” and we “should attempt to determine the intent of the parties at the time the contract was made by examining the language used to express their rights and duties.” Id. at 1241-42.

[10] “A contract requires ‘offer, acceptance of the offer and consideration.’ ” Reitenour v. M/I Homes of Ind., L.P., 176 N.E.3d 505, 511 (Ind. Ct. App. 2021) (quoting Straub v. B.M.T. by Todd, 645 N.E.2d 597, 598 (Ind. 1994)). “If these elements are present, the parties are generally bound by the terms of the agreement.” Id. “The modification of a contract, since it is also a contract, requires all the requisite elements of a contract.” Hamlin v. Steward, 622 N.E.2d 535, 539 (Ind. Ct. App. 1993). “A mutual assent or a meeting of the minds on all essential elements or terms must exist in order to form a binding contract.” Pinnacle Comput. Servs., Inc. v. Ameritech Pub., Inc., 642 N.E.2d 1011, 1013 (Ind. Ct. App. 1994). “Generally, the validity of a contract is not dependent upon the signature of the parties, unless such is made a condition of the agreement.” Int'l Creative Mgmt., Inc. v. D & R Ent. Co., 670 N.E.2d 1305, 1312 (Ind. Ct. App. 1996), trans. denied (1997). “However, some form of assent to the terms of the contract is necessary.” Id. “Assent to the terms of a contract may be expressed by acts which manifest acceptance.” Id. “Whether a contract exists is a question of law.” Buskirk v. Buskirk, 86 N.E.3d 217, 223 (Ind. Ct. App. 2017).

[11] Pursuant to the Arbitration Provision, which Neal (through his counsel) admitted to receiving,5 PFCU proposed that either party could require, without the other's consent, the resolution of disputes relating to Neal's account by individual arbitration, instead of by the legal process mentioned in the Account Agreement. PFCU also offered Neal an opportunity to opt out of this proposal—that is, to express his lack of assent—by sending PFCU written notice within thirty days of receiving the Arbitration Provision. Neal failed to do so.

[12] Neal acknowledges that “silence can, in limited circumstances, be used to show a party accepted and assented to an offer[.]” Appellant's Br. at 29 (citing Muller v. Karns, 873 N.E.2d 652, 657-58 (Ind. Ct. App. 2007)) (citing Restatement (Second) of Contracts § 69(1) (1981)); see also Restatement (Second) of Contracts § 19(1) (“The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.”). Section 69 of the Restatement reads in relevant part,

(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only:

(a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.

(b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.

(c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept.

Neal asserts that “[n]one of those narrow exceptions applies here.” Appellant's Br. at 30.6

[13] We disagree. PFCU and Neal had previous dealings that resulted in the execution of the Account Agreement, which provided that its terms were subject to change at any time, that PFCU would notify Neal of any changes, and that any disputes regarding the agreement would be resolved by legal action in Tippecanoe County. PFCU's offer to change the dispute-resolution portion of the agreement explicitly stated that assent to the Arbitration Provision may be manifested by silence or inaction, and that Neal could opt out of the provision by giving written notice within thirty days without having to close his account.7 Under these circumstances, we conclude that it was reasonable that Neal should have notified PFCU if he did not intend to accept the offer, and that Neal accepted the offer by remaining silent and inactive past the deadline. See, e.g., Rivera-Colón v. AT&T Mobility P.R., Inc., 913 F.3d 200, 211, 213 n.4 (1st Cir. 2019) (relying in part on subsections 69(1)(b) and -(c) of Restatement in holding that longtime employee accepted employer's emailed offer to arbitrate disputes by remaining silent and failing to exercise opt-out rights by deadline: “Unlike the unsolicited offer-by-mail to which Rivera tries to liken this case, this wasn't an offer made by a stranger.”); Gupta v. Morgan Stanley Smith Barney, LLC, 934 F.3d 705, 713-14 (7th Cir. 2019) (citing, inter alia, subsection 69(1)(c) of Restatement and Rivera-Colón) (same result: “This case does not present an unsolicited offer-by-email from a stranger when the expectation of the offeree's response is rare, if not baseless.”); see also Versmesse v. AT&T Mobility LLC, No. 3:13 CV 171, 2014 WL 856447, at *6 (N.D. Ind. Mar. 4, 2014) (citing, inter alia, Int'l Creative Mgmt., 670 N.E.2d at 1312) (holding that employee assented to terms of emailed arbitration agreement by failing to opt out by deadline); Johnson v. Harvest Mgmt. Sub TRS Corp.—Holiday Retirement, No. 3:15-cv-00026-RLY-WGH, 2015 WL 5692567, at *4 (S.D. Ind. Sept. 25, 2015) (citing Versmesse) (same result with agreement sent to employee via postal service and posted on company website).8

[14] Finally, we address Neal's claim that PFCU's proposal to amend the Account Agreement with the Arbitration Provision violated a duty of good faith and fair dealing. We reject Neal's characterization of the Arbitration Provision as “unilateral,” given that he could have opted out of it without closing his account. Appellant's Br. at 48. In that vein, we also reject Neal's reliance on Sevier County Schools Federal Credit Union v. Branch Banking & Trust Co., 990 F.3d 470 (6th Cir. 2021), cert. denied (2022), because the arbitration provision found to be unreasonable in that case did not have an opt-out clause, and thus in order to reject it the plaintiffs would have had to close their accounts bearing “a perpetual 6.5% annual interest rate.” Id. at 480. Neal's assertion that the Sevier court would have found the provision in that case unreasonable even with an opt-out clause is inaccurate; the Sixth Circuit acknowledged that other courts had done so, but it did not say that it would have done so. Id.

[15] Neal cites no binding precedent for the proposition that Indiana credit unions owe potential or existing members a duty of good faith and fair dealing in forming a contract. Cf. Citadel Grp. Ltd. v. Wash. Reg'l Med. Ctr., 692 F.3d 580, 592 (7th Cir. 2012) (“Unlike the duty of good faith imposed on parties in contract performance, there is no inherent duty of good faith with respect to contract formation.”). Nor does he cite any binding precedent for the related assertion that PFCU had a duty to inform him and its other members of Shoaf's proposed class action, for which no class was ever certified. PFCU points out that the Arbitration Provision “specifically inform[ed] its members they would be unable to participate in any class action – including ‘currently existing’ class actions ‘REGARDLESS OF WHEN THE CAUSE OF ACTION’ was filed – if they did not opt out.” Appellee's Br. at 44. Based on the foregoing, we affirm the trial court's grant of PFCU's motion to compel arbitration.

[16] Affirmed.


2.   PFCU also asserted that Neal accepted its offer to arbitrate by continuing to use his checking account, and PFCU renews this assertion on appeal. See Appellee's Br. at 29 (citing Appellant's App. Vol. 2 at 226). As indicated above, however, the only acceptance-by-use provision appears in the notice regarding fee schedule changes. Appellant's App. Vol. 2 at 226. We need not determine whether acceptance by use would nevertheless apply to the Arbitration Provision as a matter of law.

3.   We remind PFCU's counsel that in an appellee's table of authorities, “[t]he authorities shall be listed alphabetically or numerically, as applicable.” Ind. Appellate Rule 46(A)(2), -(B).

4.   Neal asserts that after he became the plaintiff, PFCU produced “more than 1500 pages of class-wide transactional data relating to the case[,]” which he claims is “inconsistent with an intent to arbitrate individually.” Appellant's Br. at 24. PFCU observes that Neal offers “no evidentiary support for this allegation and instead refers only to his counsel's oral assertion at the Motion hearing[,]” and that “even if such production occurred, it must have been a carryover from Shoaf's discovery in compliance with [a] court order granting Shoaf's motion to compel discovery. After all, Neal never issued any discovery.” Appellee's Br. at 47.

5.   Given this admission, Neal's suggestion that he did not receive actual notice of the provision is not well taken. For the first time in this proceeding, Neal argues that the form and content of the Arbitration Provision were “not reasonably calculated to inform [him] that PFCU was adding a new arbitration provision or that he was required to take any action or be bound.” Appellant's Br. at 33. “It is well settled that an argument presented for the first time on appeal is waived for purposes of appellate review.” Waller v. City of Madison, 183 N.E.3d 324, 327 n.1 (Ind. Ct. App. 2022). “The rule of waiver in part protects the integrity of the trial court; it cannot be found to have erred as to an issue or argument that it never had an opportunity to consider.” GKC Ind. Theatres, Inc. v. Elk Retail Invs., LLC, 764 N.E.2d 647, 651 (Ind. Ct. App. 2002). Moreover, the primary case on which Neal relies for this argument was recently vacated by the Indiana Supreme Court. See Decker v. Star Fin. Grp., Inc., 187 N.E.3d 937 (Ind. Ct. App. 2022), trans. granted. In any event, Decker is easily distinguished in that the standalone hard copy of the Arbitration Provision in this case provided much more conspicuous notice of proposed changes than the virtual notice in Decker, which appeared on the thirteenth page of the plaintiffs’ monthly statement and was accessed via a link in an email that “did not mention changes to the account's Terms and Conditions.” Id. at 945.

6.   We note that the Indiana Supreme Court has not cited, let alone specifically adopted, this section of the Restatement, but neither party suggests that it runs counter to current Indiana law.

7.   Neal asserts that the Account Agreement “did not allow [PFCU] to add completely new terms[.]” Appellant's Br. at 39. The Arbitration Provision did not add completely new terms, but merely changed the parties’ forum for resolving their disputes. We are unpersuaded by the cases that Neal cites to the contrary, as well as by his suggestion that the Arbitration Provision is ambiguous on this point.

8.   Quoting comment (a) to section 69 of the Restatement, Neal emphasizes that “[a]cceptance by silence is exceptional” and that “[t]he mere receipt of an unsolicited offer does not impair the offeree's freedom of action or inaction or impose on him any duty to speak.” Appellant's Br. at 29. As explained above, this case involves more than the mere receipt of an unsolicited offer, and the foregoing facts imposed a duty on Neal to opt out of the Arbitration Provision if he did not intend to be bound by it.

Crone, Judge.

Bradford, C.J., and Pyle, J., concur.

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