The U.S. Court of Appeals for the Eleventh Circuit has ruled that a bank cannot force a customer into arbitration instead of litigation over a challenge to overdraft fees for debit card purchases.

“Arbitration, after all, 'is simply a matter of contract' such that parties cannot be required to arbitrate a matter unless they have agreed to arbitration,” said Judge Michael Melloy of the Eighth Circuit, sitting in by designation at the Eleventh Circuit and writing for a panel that included Judge Gerald Tjoflat and Julie Carnes.

The panel affirmed Senior Judge James King of the Southern District of Florida in denial of a motion to compel arbitration in Michael Dasher's case against RBC Bank, which became part of PNC Bank.

Melloy gave a concise summary of the underlying dispute: “Michael Dasher held a checking account with RBC and used a debit card for that account. Dasher asserts RBC failed to properly warn him of possible overdrafts at points of sale when he used his debit card. He also asserts RBC impermissibly rearranged the order of debit-card transactions so as to process larger transactions before smaller transactions. Through this practice, RBC more quickly drove account balances to zero, thus maximizing the number of separate overdrafts. RBC charged a fee for each overdraft, regardless of the size of the overdraft. By rearranging transactions in a manner that maximized the number of separate overdrafts, RBC maximized total fees charged to Dasher.”

Dasher's lawsuit was combined with those of many other customers in the checking account overdraft multidistrict litigation. RBC moved to compel arbitration. King denied the bank's motion. The bank appealed and lost, then tried with a different approach.

The Melloy opinion addressed the bank's sending customers an arbitration clause as an amendment to a prior agreement that had left arbitration out. The bank contended Dasher agreed to the amendment because he did not “opt out” of it.

Melloy said that won't fly for a couple of reasons. One, since Dasher was already litigating against arbitration, the bank had ample reason to know he opposed it, even though he didn't notice it in the fine print of the mass mailing. Second, since he was in litigation over the issue, the communication should have gone to his legal counsel.

“Importantly, PNC knew in no uncertain terms that Dasher was contesting arbitration and that he was represented by counsel specifically employed for the purpose of handling the matter of the overdraft litigation. Any communication must be understood in context, not viewed in the abstract. In this context, the risks of communicating directly with the opposing party as to a purportedly court-evicting amendment outside the presence of opposing counsel are manifest,” Melloy said.

Then the judge cited the American Bar Associations 2014 Model Rules of Professional Conduct: “In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter.”

The bank's legal team included Mark Levin of Ballard Spahr in Philadelphia, who participated in oral arguments.

Bruce Rogow of Fort Lauderdale represented Dasher at oral arguments.

The lawyers could not be reached. A spokeswoman for PNC said the bank has no comment.

Melloy refrained from endorsing either side's view of the situation. In footnotes, the judge said that Dasher's lawyers attributed the bank's failure to communicate through counsel to “ongoing litigation strategy.” But PNC “takes great umbrage at these characterizations,” arguing that the February 2013 arbitration amendment was unrelated to a court order the month before that denied the bank's attempt to enforce arbitration because its last customer agreement in 2012 left out the arbitration clause.

No judgment there, Melloy said. “We do not mean to suggest PNC's litigation counsel communicated directly with Dasher. Nor do we find it necessary to adopt Dasher's characterization of PNC's actions as purposeful avoidance of disclosure or nefarious sandbagging,” Melloy said. “Quite simply, we do not intend to write an ethics opinion. We merely find the failure to communicate through counsel material to the important question of whether Dasher agreed to accept the February 2013 amendment.”

And to that question, Melloy said no, Dasher did not agree to arbitrate. So the litigation continues.

The case is Dasher v. RBC Bank, which became PNC, No. 15-13871.