Not Everything Is Arbitrable Says 2-1 Majority of the Fifth Circuit
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In 2002, Shirley Douglas opened a checking account with Union Planters Bank. In connection with that account, which she closed in 2003, Ms. Douglas signed a signature card that provided for binding arbitration and delegated the issue of arbitrability to the arbiter.
That bank merged into Regions Bank (Regions) in 2005.
In 2007, Ms. Douglas was injured in a car accident. She alleges that her attorney embezzled her $500,000 settlement, and she sued Regions and another bank at which the attorney maintained accounts. Regions moved to compel arbitration based on Ms. Douglas’s agreement with Union Planters Bank. The District Court found that there was no ground for arbitration.
On appeal, in Douglas v. Regions Bank, two judges affirmed, while noting that the District Court had applied the wrong law. While the District Court apparently believed that Regions had never become a party to the arbitration provision at issue, the Circuit Court found that it had, but that the arbitration provision is irrelevant because Ms. Douglas’s claims do not relate to her account with Union Planters Bank. As the Court noted:
The mere existence of a delegation provision in the checking account’s arbitration agreement, however, cannot possibly bind Douglas to arbitrate gateway questions of arbitrability in all future disputes with the other party, no matter their origin.
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