District Court Rejects Bank’s Second Attempt to Compel Arbitration

Peter and Sut Fong, two brothers, opened a safe deposit box at a U.S. Bancorp (the Bank) branch in Sacramento in 2000. In 2021, for unknown reasons, the Bank drilled into the Fongs’ safe deposit box to discover its contents. The Fongs allege that when they were notified of this fact, they rushed to the bank, and they allege that valuables worth hundreds of thousands of dollars had been removed.  They filed a class-action complaint against the bank, alleging multiple causes of action and seeking to recover their property, damages, and restitution.

The District Court granted the Bank’s first motion to compel arbitration, but the Ninth Circuit reversed that decision. The main issue on was whether the Bank’s arbitration clause, contained in a “Safe Deposit Box Lease Agreement” (the Lease Agreement) set forth on pages 19 and 20 of a lengthy document entitled “Your Deposit Account Agreement” was incorporated by reference into a one-page “Consumer Safe Deposit Box Contract,” (the Contract) which stated “Renter(s) agrees to the terms of the ‘Safe Deposit Box Lease Agreement.’”

The Fongs signed the Contract in 2013 when they had to move safe deposit boxes because the Fongs’ key for their original box had been damaged. Although plaintiffs signed the Contract, they were not aware that they were entering into a new agreement, because all that was happening was that they were moving their valuables from one safe deposit box to another. They were never presented with the Lease Agreement, and they allege that it was not easily available to them. The Ninth Circuit thought the Fongs could reasonably believe that the Lease Agreement referenced in the Contract referred to something that they had agreed to back in 2000. They had no reason to seek review of the referenced Lease Agreement. After remand, the Bank then renewed its motion to compel based on new evidence. 

In Fong v. U.S. Bancorp, the District Court for the Eastern District of California denied the Bank’s renewed motion to compel arbitration. The main reason for the denial was that the new evidence wasn’t new. It had been in the Bank’s possession when the Bank filed its first motion to compel. Even if the Court did reach the merits, it would still deny the motion for the same reasons that the Ninth Circuit gave. When the Fongs signed the Contract in 2013, the Bank did not call the Lease agreement to their attention, nor did the Bank make it reasonably available to them.

As usual, I don’t know why litigation is better for the Fongs than arbitration. However, if as its defenders insist, arbitration is so great for everyone, why not make clear in the Contract that parties to the contract are agreeing to arbitration and thereby waiving their constitutional right to a civil jury and (presumably) the right to pursue a remedy through a collective action?