Elbert P. Tuttle Courthouse, U.S. Court of Appeals for the Eleventh Circuit. (Credit: Rebecca Breyer/ALM)
The U.S. Court of Appeals for the 11th Circuit denied a petition last week by a Florida credit union to rehear its case over an arbitration clause dispute with two businesses and their proposed class-action lawsuit regarding overdraft fees.
In May, a three-judge panel for the Atlanta-based appeals court upheld a lower court’s decision that denied an attempt by the $9 billion Space Coast Credit Union in Melbourne to enforce an arbitration clause in its master services agreement with Woodwerx LLC in Merritt Island, Fla., and True Touch Services LLC in Hiram, Ga.
In July, the credit union petitioned for a rehearing before the full 12-judge panel. Part of the argument made by attorneys for Space Coast was that the panel’s ruling set a concerning precedent that could be exploited by businesses and individuals seeking to avoid contractual commitments to arbitrate. They contended that the decision undermined the “totality-of-the-circumstances” standard that would have supported the credit union’s effort to compel arbitration.
The appeals court rejected the request for rehearing. The decision should clear the way for Woodwerx and True Touch Services to pursue their class-action lawsuit. The court did not provide a reason for the denial.
Lawyers for Space Coast and the businesses did not respond to CU Times’ request for comment.
This legal dispute began in March 2023 when Woodwerx filed an arbitration demand with the American Arbitration Association (AAA) over Space Coast’s debit card fees, including charges for transactions authorized with sufficient funds and “fees-on-fees” situations where prior fees, rather than transactions, triggered overdraft fees.
In April, the AAA declined to arbitrate the case, citing Space Coast’s failure to submit a consumer dispute resolution plan and pay the required fee. The credit union responded days later, expressing interest in arbitration and requesting clarification from AAA.
By June 7, Woodwerx and True Touch Services filed their proposed class action lawsuit against Space Coast in U.S. District Court in Orlando. Two days later, Space Coast submitted the required documents and payment to the AAA.
After Space Coast moved to compel arbitration over the fees dispute, U.S. District Court Judge Daniel C. Irick in Orlando ruled against the credit union because it had failed to perform its contractual obligations under the arbitration agreement. Specifically, the district court explained that the credit union had failed to take the steps necessary for the AAA arbitration until over a month after the AAA had declined Woodwerx’s arbitration demand. By delaying, the district court concluded, Space Coast waived its contractual right to arbitrate.
The Appeals Court agreed and affirmed the lower court’s ruling.
Peter Strozniak can be reached at pstrozniak@cutimes.com.
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