Badie v. Bank of America

San Francisco Superior Court Case Number 944916

Case Type: Consumer Fraud, Unfair Business Practices

Status: Judgment for Plaintiffs on appeal

The Sturdevant Law Firm represented consumers, a consumer organization, and the Consumer Attorneys of California in this case that challenged Bank of America's attempt to impose unilaterally alternative dispute resolution ("ADR") on its checking and credit card account customers, thus depriving them of access to the courts and of their constitutional rights to trial by judge or jury. Plaintiffs challenged both the procedure utilized by the bank in imposing ADR on its customers as well as the substance of the bank's chosen ADR "agreements." The Bank's policy and procedure required no informed consent or signature; the policy was imposed automatically when a customer wrote a check or used a credit card. After nearly a four-week trial, the trial court upheld the bank's attempted modification of its contracts although finding no evidence that a substantial portion of the customers read or were aware of the arbitration/reference provisions.

In November 1998, the Court of Appeal reversed. It concluded that the ADR clause was a new material term to the agreement which required clear, unmistakable consent by the customer. It found that the bank breached the covenant of good faith and fair dealing, that the policy favoring arbitration does not come into play until there is found to be an enforceable agreement containing the arbitration clause and that the waiver of the constitutional right to a jury trial requires unambiguous consent. Badie v. Bank of America (1998) 67 Cal.App.4th 779, rev. denied.