Background
Three California businesses—Performance Jet Skis, WorldWideWebb Solutions, and A&F Logistics—filed a class action in California state court challenging Bank of America’s practice of charging various overdraft fees on business accounts. Each plaintiff had signed BANA’s standard Deposit Agreement, which contained dispute resolution provisions offering three pathways: binding arbitration (a “right” either party could invoke), a bench trial (the default if neither party compels arbitration), and judicial reference under California Code of Civil Procedure § 638 (available as an “exception” for claims brought in California state court).
After BANA removed the case to the Central District of California, it moved to compel arbitration. The plaintiffs countered by moving to compel judicial reference—a California-specific procedure where a court-appointed referee resolves the case with court oversight. The district court granted BANA’s motion and denied the plaintiffs’ motion, finding the contract unambiguous.
The Court’s Holding
The Ninth Circuit affirmed, holding that the Deposit Agreement’s dispute resolution provisions are unambiguous and that BANA’s reading is the most natural interpretation. The court found that the limiting clause—”If neither you nor we decide to compel arbitration”—separates the arbitration right from the other two resolution pathways (bench trial and judicial reference). The judicial reference “exception” for California state court claims is nested within the bench trial pathway, not the arbitration pathway.
The court offered several textual and practical reasons. Under California’s rule that specific provisions control over general ones, the limiting clause governs the general judicial reference exception that follows. Practically, judicial reference is a court-based process—referees act in lieu of judges in pending trial court actions—making it natural to read it as an alternative to a bench trial, not to arbitration. Additionally, treating judicial reference as an exception to the arbitration right would completely undermine that right, giving plaintiffs who file in California state court a first-mover advantage to avoid arbitration entirely.
Key Takeaways
- Bank of America’s standard business Deposit Agreement gives either party an unconditional right to compel arbitration that is not subject to a counter-motion for judicial reference.
- Judicial reference under CCP § 638 is a court-based process and properly understood as an alternative to a bench trial, not to arbitration.
- Under California contract interpretation, a limiting clause (“if neither party compels arbitration”) governs subsequent provisions about alternative resolution pathways as a specific provision controlling the general.
- Interpreting judicial reference as an exception to arbitration would give California-filing plaintiffs a first-mover advantage that “completely undermines” the contractual right to arbitrate.
Why It Matters
This decision is directly relevant to the many California small businesses that hold Bank of America business accounts and may be contemplating fee-related claims. The ruling forecloses a strategy of filing in California state court and invoking judicial reference under CCP § 638 to avoid arbitration. Once either party invokes the contractual right to arbitrate, that pathway controls regardless of the California-specific judicial reference option.
More broadly, the decision illustrates how courts interpret multi-pathway dispute resolution clauses in adhesion contracts. For businesses drafting or reviewing their banking agreements, it confirms that contractual arbitration rights are robust against competing procedural alternatives—even unique California procedures like judicial reference—when the contract structures arbitration as a freestanding right rather than one option among equals.