Land v. IU Credit Union

218 N.E.3d 1282

Tonia LAND, individually and on behalf of all others similarly situated, Appellant (Plaintiff below)

v.IU CREDIT UNION, Appellee (Defendant below).

Supreme Court Case No. 23S-CP-115

Supreme Court of Indiana.

Argued: June 29, 2023

Filed October 24, 2023

ATTORNEYS FOR APPELLANT: Tyler B. Ewigleben, Lisa M. LaFornara, Vess A. Miller, Lynn A. Toops, Cohen & Malad, LLP, Indianapolis, Indiana, Matthew R. Gutwein, DeLaney & DeLaney LLC, Indianapolis, Indiana, John Steinkamp, John Steinkamp & Associates, P.C., Indianapolis, Indiana

ATTORNEYS FOR APPELLEE: James R. Branit, Phillip G. Litchfield, Litchfield Cavo LLP, Chicago, Illinois

On Petition to Transfer from the Indiana Court of Appeals, No. 22A-CP-382

Goff, Justice.

A basic tenet of American contract law holds that "an offeror is master of his offer."¹ However, the offeror's control over the form of acceptance may be limited to protect the offeree's contractual freedom.² One such limitation arises when the offeror purports to dictate acceptance by the offeree's silence or inaction. While silence or inaction may, in exceptional circumstances, constitute acceptance, we find no such circumstances here. We thus reverse the trial court and remand for further proceedings consistent with this opinion.

Facts and Procedural History

The IU Credit Union (or IUCU) is a not-for-profit, member-owned financial cooperative that provides a variety of banking services. Tonia Land is a member of, and maintains at least two checking accounts with, IUCU. When she first became a member, Land received an "Account Agreement," the terms of which are "subject to change at any time" as permitted by law. App. Vol. II, p. 43. IUCU agreed to notify its members of any changes in the Agreement's terms, either by U.S. mail or (for those who agreed to receive notices electronically) by email.

When Land later registered for online banking for one of her checking accounts, she received by email a second agreement (referred to here as the Disclosure), which permitted IUCU to "modify the terms and conditions applicable to the Services from time to time" and to "send any notice to [Land] via email." Id. at 118. Under the terms of the Disclosure, Land is deemed to have received any such notice "three days after it is sent." Id. Land's agreement to these terms required her to click "Accept." Id. at 119.

In 2019, IUCU sent to its customers a proposed modification to the Agreement (referred to here as the Addendum). The terms of this Addendum (1) permitted either party to require arbitration to resolve disputes without the other party's consent and (2) prohibited members from initiating or joining a class-action lawsuit. Id. at 127. The Addendum also specified, under a heading in bold and in all-capital letters, the member's "right to opt out" of the arbitration Addendum if he or she so informed IUCU within 30 days of receiving notice. Id. To "opt out" required the member to send IUCU "written notice" at a specific address. Id. Otherwise, according to its terms, the Addendum became binding on the member.

Because Land maintains only one of her checking accounts online, IUCU sends her monthly statements and change-of-terms notices by regular U.S. mail and by email. IUCU adhered to this arrangement when sending her the Addendum. In the email it sent, the subject line used the same language used for monthly accounts statements, indicating only that a "New eStatement" was available "in Online Banking." Id. at 178. The body of the email itself mentioned nothing about the Addendum. But a link in the email would have directed Land to her five-page monthly account statement, the first page of which referenced the Addendum in bold, all-capital letters and directed her to review the updated terms "at the end of [the] statement." Id. at 123. The document Land received by regular U.S. mail consisted of a two-page monthly account statement, the first page of which likewise noted the Addendum in bold, all-capital letters and directed her to review the updated terms "included in this mailing." Id. at 212. Land claims to have seen neither version of the Addendum. And she never notified IUCU of her preference to opt out.

Land later filed a class-action complaint against IUCU, alleging wrongful assessment of overdraft fees, breach of contract, breach of duty of good faith and fair dealing, unjust enrichment, and a violation of Indiana's Deceptive Consumer Sales Act. Citing the Addendum, IUCU moved to compel individual (rather than class) arbitration. After a hearing, the trial court ruled in favor of IUCU, having found "an enforceable agreement to arbitrate" between the parties. Id. at 10.

On discretionary interlocutory appeal, the Court of Appeals reversed, holding that IUCU failed to provide reasonable notice to Land by either email or regular mail. Land v. IU Credit Union , 201 N.E.3d 246, 251 (Ind. Ct. App. 2022). As persuasive support, the panel relied in part on its then-vacated-but-not-yet-supplanted decision in Decker v. Star Financial Group, Inc. Id. at 249–50 (citing 187 N.E.3d 937 (Ind. Ct. App. 2022), vacated , 204 N.E.3d 918 (Ind. 2023) ). As an alternative ground for invalidating the Addendum, the panel held that Land's silence and inaction did not constitute acceptance under section 69 of the Restatement (Second) of Contracts. Id. at 253.

IUCU petitioned for transfer, which we granted, thus vacating the Court of Appeals opinion. See Ind. Appellate Rule 58(A).

Standard of Review

This Court reviews questions of contract interpretation de novo. Lake Imaging, LLC v. Franciscan All., Inc. , 182 N.E.3d 203, 206 (Ind. 2022). A de novo standard likewise applies to a trial court's decision on a motion to compel arbitration. Doe v. Carmel Operator, LLC , 160 N.E.3d 518, 521 (Ind. 2021).

Discussion and Decision

Indiana recognizes a strong policy interest in favor of enforcing arbitration agreements. Decker v. Star Fin. Grp., Inc. , 204 N.E.3d 918, 920 (Ind. 2023). But a presumption in favor of arbitration without first determining whether the parties agreed to such a method of dispute resolution threatens to "frustrate the parties’ intent and their freedom to contract." MPACT Const. Grp., LLC v. Superior Concrete Constructors, Inc. , 802 N.E.2d 901, 906 (Ind. 2004). The party seeking to compel arbitration carries the burden of showing the existence of an enforceable arbitration agreement. Progressive Se. Ins. Co. v. Empire Fire & Marine Ins. Co. , 88 N.E.3d 188, 197 (Ind. Ct. App. 2017). In deciding whether this burden has been met, courts apply ordinary principles of contract law. MPACT Const. , 802 N.E.2d at 906. So, an arbitration agreement, as with a typical contract, requires "offer, acceptance of the offer and consideration." Reitenour v. M/I Homes of Indiana, L.P. , 176 N.E.3d 505, 510–11 (Ind. Ct. App. 2021) (internal quotation marks and citation omitted). And while the parties may modify their contract, such modification, which amounts to a contract itself, requires all the elements of a contract. Stelko Elec., Inc. v. Taylor Cmty. Sch. Bldg. Corp. , 826 N.E.2d 152, 159 (Ind. Ct. App. 2005).

The parties here dispute the binding effect of the Addendum. Land argues that IUCU's failure to give reasonable notice, along with her silence in response to IUCU's offer, renders the Addendum invalid.³ IUCU, on the other hand, contends that it fulfilled its notice obligations by sending the Addendum to Land according to the terms of the Agreement and that Land's silence and inaction amounted to acceptance of the Addendum.

I. IUCU provided Land with reasonable notice of its offer to amend the Agreement.

On the issue of notice, IUCU's argument is twofold: First, IUCU challenges the applicable standard. And second, IUCU contends that its notice to Land sufficed as an offer to amend the Agreement. We address these arguments in turn.

A. A reasonableness standard applies to the interpretation of the parties’ agreed terms of notice.

IUCU first argues that, by relying on the vacated opinion in Decker , the Court of Appeals unjustifiably adopted a heightened standard for what constitutes sufficient notice under a contract. Pet. to Trans. at 13. While the contract itself in Decker spoke of "reasonable notice," IUCU contends, nothing in the court's opinion there suggests that such a standard is "now required as a matter of judicially created law" regardless of the terms of a contract. Id. at 14. Instead, IUCU submits, the Agreement and Disclosure set forth the agreed-upon terms for notice and it fulfilled those notice obligations. Id. at 13.

We disagree with IUCU's characterization of the issue.

The question is not whether a pure reasonableness standard always governs notice. This Court will "defend the freedom of contract by enforcing parties’ agreed terms," whether those terms call for notice by email, regular U.S. mail, or other means. See Care Grp. Heart Hosp., LLC v. Sawyer , 93 N.E.3d 745, 758 (Ind. 2018). Thus, insofar as the contracting parties agree on what constitutes effective notice, their agreement controls. But to the extent an agreement fails to define notice, this Court will apply a reasonableness standard as an exercise in contract interpretation.

Here, for example, the original Agreement's notice-of-amendment clause specified that members would receive an email informing them "that a new notice is available" for review. App. Vol. II, p. 43 (emphasis added). The Agreement thus defined what would constitute notice by email. The Agreement does not, however, define what constitutes "written notice," other than saying it is effective once properly mailed. Id. In analyzing whether IUCU complied with the Agreement's terms of notice by mail, we apply an "objective theory" of contract interpretation. See Akin v. Simons , 180 N.E.3d 366, 377 (Ind. Ct. App. 2021). In other words, it becomes a question of reasonableness for the courts to decide as a matter of law. See Indiana Farm Bureau Ins. Co. v. Harleysville Ins. Co. , 965...