In Canteen v. CMCU, the North Carolina Supreme Court ruled that businesses may amend their consumer contracts to require arbitration, so long as dispute resolution is discussed and anticipated in the original agreement. The opinion settled an issue of first impression in North Carolina. And, in the process, the Supreme Court affirmed that “change-of-terms provisions are a necessary and efficient way for companies to update contractual provisions without canceling accounts and renegotiating contractual terms every time modification may be required.”

Cranfill Sumner represented a credit union sued by a member for alleged overdraft fees. The member joined the credit union in 2014. At the time, the membership agreement stated that legal disputes shall be brought in the county where the credit union is located. It also allowed the credit union to amend the terms with notice to the member. In January 2021, the credit union amended its agreement to compel arbitration for certain claims. It sent the amendment notice to the plaintiff and gave her the chance to opt out. The plaintiff did not opt out and continued to use her account. Two months later, in March 2021, the plaintiff filed a class action lawsuit against the credit union in Mecklenburg County superior court. The superior court denied the credit union’s motion to compel arbitration, but the Court of Appeals reversed in a 2-1 decision. The plaintiff appealed to the Supreme Court from the dissent.

In a first of its kind decision, the Supreme Court held that change-of-terms clauses are allowed in North Carolina. Even so, the Court put parameters on their effectiveness. It noted that such clauses do not give one side the ability to add new terms to the contract. Instead, a change is only allowed if it relates to a term that was discussed and anticipated in the original agreement. In the process, the Supreme Court disagreed with the plaintiff’s argument that change-of-term clauses violate the implied covenant of good faith and fair dealing and render the contract illusory. The original credit union membership agreement included a dispute resolution term. As a result, the Court allowed the arbitration change and affirmed the Court of Appeals.

Steven Bader, Ryan Bolick and Mica Nguyen Worthy represented CMCU.

If you have questions about the Supreme Court’s decision, or agreements to arbitrate in general, please contact Cranfill Sumner.

The outcome of a particular case cannot be predicated upon a lawyer's or law firm's past results.