In affirming a judgment against a bank customer in a dispute regarding forged checks written by an employee, a California appellate court revisited California's take on "bill stuffer" amendments made to account holder agreements and affirmed that amendments regarding alternative dispute resolution processes cannot be made unilaterally.

In L&B Real Estate v. Wells Fargo Bank, N.A., No. B191120, 2008 WL 2486815 (Cal. Ct. App. June 23, 2008), L&B filed suit against Wells Fargo to recover approximately $774,000 in forged checks written by an L&B employee for the purpose of embezzling funds over the course of several years and drawn on multiple Wells Fargo bank accounts, the first of which was opened in 1993 and closed in 2001 prior to the opening of a second account in 2001.

Wells Fargo moved to compel arbitration based on a 2000 amendment sent to customers that added an alternative dispute resolution agreement, noted to supersede all prior customer agreements, and the same agreement contained in the 2001 account holder agreement. The Agreement called for the appointment of a referee in the event of an action filed in court where neither party requested arbitration.

The trial court granted Wells Fargo's motion and appointed a referee, who found in favor of Wells Fargo because L&B had failed to use reasonable care in examining its bank statements. The trial court granted judgment in accord with the referee's determination. After its motion for a new trial was denied, L&B appealed to this Court.

This Court found that L&B's claims as to the first account were not subject to the alternative dispute resolution agreement in the 2000 amendment. A bank cannot unilaterally amend the terms of an account to include an alternative dispute resolution process without the consent of the account holder. See Badie v. Bank of America, 67 Cal.App.4th 779 (1998).

Nor does it make a difference that the amendment claimed that account holder acceptance was implied by continued use. Nothing indicated to the customer that such an amendment would apply to transactions arising from a previous account which had been closed.

Moreover, the language used in the 2001 account holder agreement implied that the agreement only applied to the present account, as it referred to "this agreement" and to "dispute[s] arising under this Agreement".

Nonetheless, L&B was collaterally estopped from filing suit regarding the first account, as the matter had already been adjudicated. Accordingly, the trial court's judgment was affirmed.