[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MARCH 28, 2011
No. 09-15399
JOHN LEY
________________________ CLERK
D. C. Docket No. 09-23067-CV-JLK
FAITH GORDON,
on behalf of herself and all
others similarly situated,
Plaintiff-Appellee,
versus
BRANCH BANKING AND TRUST,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(March 28, 2011)
Before MARCUS and ANDERSON, Circuit Judges, and MILLS,* District Judge.
MARCUS, Circuit Judge:
*
Honorable Richard Mills, United States District Judge for the Central District of Illinois,
sitting by designation.
Branch Banking and Trust (“BB&T”) appeals the denial of its motion to
compel Faith Gordon to arbitrate her consumer complaint. The district court ruled
that the arbitration provision in Gordon’s contract was unenforceable because the
arbitration provision’s non-severable waiver of the right to a class action was
substantively unconscionable under Georgia law. After thorough review, we
affirm.
I.
In 2008, Gordon opened a consumer checking account with BB&T. The
Bank Services Agreement between Gordon and BB&T includes an arbitration
provision that applies to “[a]ny claim or dispute” between the parties. The
arbitration agreement empowers the arbitrator to “award all available remedies,”
including “attorneys’ fees and costs.” It also includes a class action waiver; by
signing the agreement, Gordon agreed to waive her right to participate in a class
action lawsuit or class action arbitration. The class action waiver is non-
severable; the arbitration agreement provides that “if the limitations on class
actions are struck in a proceeding brought on a class, representative or private
attorney general basis, . . . this entire arbitration provision . . . shall be null and
void in such proceeding.”
2
In May 2009, Gordon filed a putative class action complaint in Georgia
state court. Gordon’s complaint alleges that BB&T routinely posts charges
incurred to consumers’ accounts in order from largest to smallest amounts, even
when the larger charges occur days after the smaller charges. It claims that this
policy necessarily results in the unfair assessment of excessive overdraft charges.
The complaint asserts claims for breach of contract, conversion, unconscionability,
and unjust enrichment on behalf of Gordon and all BB&T account holders “who
incurred an overdraft charge despite their account having a sufficient balance of
actual funds to cover all debits that have been submitted to the bank for payment”
or “who incurred one or more overdraft charges based on BB&T's reordering of
charges.”
In June 2009, BB&T removed the case to the United States District Court
for the Northern District of Georgia under the Class Action Fairness Act, 28
U.S.C. § 1332(d)(2), and moved to compel Gordon to arbitrate her dispute on an
individual basis pursuant to the Bank Services Agreement. Gordon resisted
arbitration on the ground that the class action waiver was substantively
unconscionable under Georgia law, and therefore the arbitration provision as a
whole was unenforceable. The district court denied BB&T’s motion to compel
arbitration, ruling that the class action waiver in Gordon’s arbitration agreement
3
was unconscionable based on this Court’s decision in Dale v. Comcast Corp., 498
F.3d 1216 (11th Cir. 2007).
This case was then transferred to the Southern District of Florida and
consolidated by the Judicial Panel on Multi-District Litigation with other lawsuits
challenging various banks’ assessments of overdraft charges. Following the
transfer, BB&T moved the Florida district court for reconsideration of the order
issued by the Georgia district court denying its motion to compel arbitration.
BB&T’s motion for reconsideration was denied. Now BB&T appeals the denial of
its motion to compel arbitration and the denial of its motion for reconsideration.
II.
The Federal Arbitration Act provides that binding arbitration clauses are
enforceable, “save upon such grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2. “[G]enerally applicable contract
defenses, such as fraud, duress, or unconscionability, may be applied to invalidate
arbitration agreements without contravening [9 U.S.C.] § 2.” Doctor’s Assocs.,
Inc. v. Casarotto, 517 U.S. 681, 687 (1996). We look to state contract law to
determine whether an arbitration provision is unconscionable and therefore
unenforceable. See Dale, 498 F.3d at 1219 n.2; Bess v. Check Express, 294 F.3d
1298, 1306 (11th Cir. 2002) (“The FAA allows state law to invalidate an
4
arbitration agreement, provided the law at issue governs contracts generally and
not arbitration agreements specifically.”).
Georgia law recognizes both procedural unconscionability and substantive
unconscionability. See NEC Techs., Inc. v. Nelson, 478 S.E.2d 769, 771 (Ga.
1996). “Procedural unconscionability addresses the process of making the
contract, while substantive unconscionability looks to the contractual terms
themselves.” Id. Here, we consider the claim that the class action waiver is
substantively unconscionable -- that is, “‘whether, in the light of the general
commercial background and the commercial needs of the particular trade or case,
the clauses involved are so one-sided as to be unconscionable under the
circumstances existing at the time of the making of the contract.’” Id. (quoting
U.C.C. § 2-302 cmt. 1).
We are aware of no opinions of the Georgia Supreme Court or Georgia’s
appellate courts addressing the enforceability of a class action waiver. This Court
has applied Georgia law in addressing this issue on a few occasions but has not
adopted a bright-line rule. We have upheld class action waivers in some contexts,
see, e.g., Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1377-79 (11th
Cir. 2005); Jenkins v. First Am. Cash Advance of Ga., LLC, 400 F.3d 868, 878
(11th Cir. 2005), and have held such waivers to be substantively unconscionable
5
in other contexts. See Dale, 498 F.3d at 1224; Jones v. DirecTV, Inc., 381 F.
App’x 895, 897 (11th Cir. 2010) (unpublished). In Dale, we explained that “the
enforceability of a particular class action waiver in an arbitration agreement must
be determined on a case-by-case basis, considering the totality of the facts and
circumstances.” 498 F.3d at 1224. We listed circumstances that may be relevant
in any given case, including:
the fairness of the provisions, the cost to an individual plaintiff of
vindicating the claim when compared to the plaintiff’s potential
recovery, the ability to recover attorneys’ fees and other costs and
thus obtain legal representation to prosecute the underlying claim, the
practical [e]ffect the waiver will have on a company’s ability to
engage in unchecked market behavior, and related policy concerns.
Id.
The facts and circumstances of this case lead us to conclude that the class
action waiver is unconscionable. Gordon brings a consumer action challenging
BB&T’s assessment of overdraft fees. While the parties dispute the total amount
of Gordon’s potential recovery, it is undisputed that each overdraft fee is $35.1
Gordon’s anticipated recovery -- $35 multiplied by the number of times the fees
1
BB&T asserts that Gordon overdrew her account on fifty-nine separate occasions resulting
in overdraft fees of $2,285 (although we note that $35 multiplied by fifty-nine equals $2,065).
Gordon counters that she does not contest the propriety of at least some of the overdraft charges.
She therefore argues that her potential recovery is considerably less than $2,285. We need not
determine the precise amount in controversy in this case. Even if the value of Gordon’s claim is
$2,285, the costs of arbitration -- attorneys’ fees in particular -- would likely far exceed her potential
recovery.
6
were improperly charged to her account -- would be exceeded by attorneys’ fees
and other costs associated with individual arbitration. Most significantly, if
Gordon successfully prosecutes her claims, we cannot say it is certain, or even
likely, that she would be awarded expenses in an amount sufficient to recoup the
costs of arbitration. Georgia law permits, within the discretion of the fact-finder,
an award of attorneys’ fees and costs “where the defendant has acted in bad faith,
has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and
expense.” Ga. Code Ann. § 13-6-11. We held in Dale that the precatory nature of
attorneys’ fees under Ga. Code Ann. § 13-6-11 “does not provide the same
incentive for an attorney to represent an individual plaintiff as the automatic, or
likely, award of fees and costs available to a prevailing plaintiff” under statutes
that mandate an award of attorneys’ fees. 498 F.3d at 1223 (distinguishing
Jenkins and Caley on this basis). Accordingly, we conclude that Gordon would
probably be unable to secure adequate representation to prosecute her claims were
the class action waiver to be enforced.2
2
Gordon’s complaint states a claim for conversion, which, as an intentional tort, “invokes
a species of bad faith that entitles a person wronged to recover the expenses of litigation.” DeKalb
Cnty. v. McFarland, 203 S.E.2d 495, 499 (Ga. 1974). BB&T claims that Gordon’s greater likelihood
of obtaining attorneys’ fees under the intentional tort claim distinguishes this case from Dale. But
BB&T cannot get around the fact that Ga. Code Ann. § 13-6-11 is permissive; it leaves to the sound
discretion of the fact-finder whether to award fees and expenses, even where a plaintiff succeeds in
prosecuting a claim for an intentional tort. See, e.g., Multimedia Techs., Inc. v. Wilding, 586 S.E.2d
74, 80 (Ga. Ct. App. 2003) (declining to mandate an award of attorneys’ fees after successful
7
BB&T argues nevertheless that a provision in the contract permitting a party
to bring an action in small-claims court as an alternative to arbitration provides an
adequate avenue for consumers to advance their claims with minimal expense and
without the aid of an attorney. We agree that in some circumstances, the small-
claims forum would be a viable option for consumers seeking to bring claims that
a layperson may reasonably be expected to pursue without the assistance of an
attorney. Gordon’s claims, however, are plainly not of the kind that could be
effectively prosecuted without the benefit of attorney assistance. The heart of
Gordon’s Complaint is that BB&T “routinely enforces a policy whereby charges
incurred are posted to consumers’ accounts in order of largest to smallest amounts,
even when larger charges occur days after smaller charges.” The Bank Services
Agreement states that BB&T “may process items for payment” against a
customer’s account “in any order that [it] choose[s].” The Bank Services
Agreement further cautions the customer that “[t]his method . . . could result in
additional overdrafts” on the customer’s account. Recognizing this contractual
language, Gordon states in her Complaint that “[e]ven if Plaintiff was given
materials containing language that could possibly be interpreted to authorize or
disclose BB&T’s practices as described above, any such notice or authorization
prosecution of a conversion claim).
8
was inadequate and ineffective. Furthermore, BB&T’s reservation of discretion to
reorder transactions and assess overdraft fees is constrained by its obligation to
deal fairly and in good faith.” It is clear that in order to succeed in her claim,
Gordon must establish that notwithstanding the contractual language, BB&T’s
practice violates Georgia law regarding the obligation to deal fairly and in good
faith, which undeniably requires legal expertise and an understanding of both the
Uniform Commercial Code and Georgia common law. See Stuart Enters. Int’l,
Inc. v. Peykan, Inc., 555 S.E.2d 881, 883-84 (Ga. Ct. App. 2001) (noting the
implied covenant of good faith and fair dealing “modifies the meaning of all
explicit terms in a contract,” and has a basis in both statutory and common law).3
At oral argument, BB&T claimed that Gordon would have no difficulty in
mounting the factual allegata needed to support her claims without the assistance
of an attorney. Even assuming arguendo that BB&T is correct, however, Gordon
would still likely require an attorney to successfully marshal and prosecute the
complex legal arguments surrounding her factual showings. Under the particular
circumstances in this case, the availability of the small-claims forum does not
obviate our concern that enforcing the class action waiver would in effect prevent
3
We emphasize that the merits of Gordon’s underlying claims are not before us, and we
offer no opinion on their proper resolution.
9
consumers like Gordon from challenging the practices alleged to be unlawful in
her complaint.
III.
Notably, a panel of this Court recently upheld a class action waiver in a
consumer arbitration agreement in Cappuccitti v. DirecTV, Inc., 623 F.3d 1118
(11th Cir. 2010). We reiterated that the proper inquiry under Georgia law is
whether the class action waiver is unconscionable “under the circumstances
existing at the time of the making of the contract.” Id. at 1124 (quoting NEC
Techs., 478 S.E.2d at 771). “To answer that question the district court needed to
consider all of the remedies available to Cappuccitti under Georgia law at the
moment he contracted with DirecTV.” Id. at 1126. We concluded that
Cappuccitti had an extant statutory claim under the Georgia Fair Business
Practices Act (“FBPA”), Ga. Code Ann. §§ 10-1-390 et seq., which provides for
attorneys’ fees and costs,4 and therefore “attorney's fees and litigation expenses
4
Ga. Code Ann. § 10-1-399(d) provides:
If the court finds in any action that there has been a violation of [the FBPA],
the person injured by such violation shall, in addition to other relief provided
for in this Code section and irrespective of the amount in controversy, be
awarded reasonable attorneys' fees and expenses of litigation incurred in
connection with said action . . . .
10
would [have] be[en] available to him” had he but pleaded the claim. Cappuccitti,
623 F.3d at 1127.
In light of Cappuccitti, BB&T now argues for the first time in a notice of
supplemental authority that Gordon had a palpable claim under the FBPA at the
time she entered into a contract with BB&T, and that the mandatory award of
attorneys’ fees and costs inherent in a successful FBPA claim distinguishes the
appeal before us from Dale. As BB&T conceded at oral argument, it never raised
this issue in the district court or indeed in its initial or reply briefing to this Court.
BB&T raises the issue a day late and a dollar short. We have held
repeatedly that “an issue not raised in the district court and raised for the first time
in an appeal will not be considered by this court.” Access Now, Inc. v. Southwest
Airlines Co., 385 F.3d 1324, 1331 (11th Cir. 2004) (collecting cases) (quoting
Walker v. Jones, 10 F.3d 1569, 1572 (11th Cir. 1994), cert. denied, 511 U.S. 1111
(1994)).5 “The reason for this prohibition is plain: as a court of appeals, we review
5
We recognize that this rule is “not a jurisdictional limitation but merely a rule of practice.”
Dean Witter Reynolds, Inc. v. Fernandez, 741 F.2d 355, 360 (11th Cir. 1984). We therefore have
permitted the resolution of issues raised for the first time on appeal under five circumstances:
First, an appellate court will consider an issue not raised in the district court
if it involves a pure question of law, and if refusal to consider it would result
in a miscarriage of justice. Second, the rule may be relaxed where the
appellant raises an objection to an order which he had no opportunity to raise
at the district court level. Third, the rule does not bar consideration by the
appellate court in the first instance where the interest of substantial justice is
11
claims of judicial error in the trial courts.” Access Now, 385 F.3d at 1331. Here,
BB&T never gave the district court the opportunity to consider whether Gordon
had a palpable claim arising under the FBPA. Moreover, BB&T was on notice
about the possibility of raising the issue well before we decided Cappuccitti.
Indeed, a district court in the Northern District of Georgia had held in White v.
Wachovia Bank, N.A., 563 F. Supp. 2d 1358, 1369 (N.D. Ga. 2008), that
consumer checking account holders making substantially similar claims to those
alleged by Gordon here sufficiently stated a claim under the FBPA for purposes of
surviving a motion to dismiss.
But even if BB&T had properly raised its argument in the district court, it
would have abandoned the argument by failing to brief it on appeal. “Parties must
submit all issues on appeal in their initial briefs.” United States v. Nealy, 232 F.3d
825, 830 (11th Cir. 2000); Fed. R. App. P. 28(a)(5); 11th Cir. R. 28-1(h). A party
abandons an argument by failing to do so. See, e.g., United States v. Campa, 529
at stake. Fourth, a federal appellate court is justified in resolving an issue not
passed on below . . . where the proper resolution is beyond any doubt.
Finally, it may be appropriate to consider an issue first raised on appeal if that
issue presents significant questions of general impact or of great public
concern.
Access Now, 385 F.3d at 1332 (quoting Dean Witter Reynolds, 741 F.2d at 360-61 (footnotes and
internal citations omitted)) (alteration in original). As we see it, none of these exceptional
circumstances are met here.
12
F.3d 980, 989 (11th Cir. 2008) (arguments not made in a party’s initial brief are
abandoned); Greenbriar, Ltd. v. City of Alabaster, 881 F.2d 1570, 1573 n.6 (11th
Cir. 1989) (issue is abandoned on appeal when appellant “elaborates no arguments
on the merits as to th[e] issue in its initial or reply brief”). A claim that has been
abandoned need not be addressed by this Court. See Access Now, 385 F.3d at
1330 (holding that where an issue is abandoned, this Court “do[es] not address its
merits”); United States v. Jernigan, 341 F.3d 1273, 1283 n.8 (11th Cir. 2003)
(“Under our caselaw, a party seeking to raise a claim or issue on appeal must
plainly and prominently so indicate. Otherwise, the issue -- even if properly
preserved at trial -- will be considered abandoned.”). “Evaluating an issue on the
merits that has not been raised in the initial brief would undermine the very
adversarial nature of our appellate system,” Access Now, 385 F.3d at 1330,
because without full briefing, evaluation of the argument’s merits would
undermine appellants’ ability to control the issues raised and deprive appellees of
the opportunity to respond adequately.
When new authority arises after a brief is filed or after oral argument but
before a decision, the Federal Rules of Appellate Procedure permit parties to
submit supplemental notice of “pertinent and significant authorities” regarding
issues already developed in the briefs. Fed. R. App. P. 28(j). But Rule 28(j) does
13
not grant parties a license to raise wholly new issues, even when the issues arise
from intervening developments in the law. See McGinnis v. Ingram Equip. Co.,
918 F.2d 1491, 1495-96 (11th Cir. 1990) (holding waiver bars consideration of
“new arguments and issues not presented until a late stage of the proceedings,” as
distinguished from “new law that could be applied to arguments already
developed”). In sum, “parties cannot properly raise new issues at supplemental
briefing.” United States v. Levy, 416 F.3d 1273, 1275 (11th Cir. 2005) (quoting
Nealy, 232 F.3d at 830).
Because BB&T’s argument that Gordon could have pleaded an extant
statutory claim providing for mandatory attorneys’ fees is not properly before us,
we have no occasion to examine the breadth or impact of Cappuccitti. We
concede that if the argument had been properly raised, it would be a serious and
substantial one. But BB&T never raised it and we are not willing to take it up
now for the first time.
IV.
Like the district court, we believe that enforcing the class action waiver in
this case would prevent consumer checking account holders like Gordon from
obtaining needed representation to challenge practices by BB&T that may be
unlawful. Therefore, we hold that the district court did not err in denying BB&T’s
14
motion to compel arbitration, and in denying the motion for reconsideration. The
district courts’ orders are AFFIRMED.
15