In sending an employment dispute to arbitration, the Maryland Special Court of Appeals held that the employer's unilateral right of modification did not render the parties' arbitration agreement void for lack of consideration because the employer had to give 30 days notice before exercising the right of modification.
In Harby ex rel. Brooks v. Wachovia Bank, N.A., No. 2758, 2007 WL 189371 (Md. Ct. Spec. App. Jan. 26, 2007), Edwards was the court-appointed guardian of property belonging to her minor son, Brooks. Using a $100,000 check payable to her son, Edwards opened an account at Wachovia Bank (Wachovia).
When opening the account, Edwards signed a Customer Access Agreement (Access Agreement), whereby she agreed to be bound by Wachovia's Deposit Agreement (Deposit Agreement). The Deposit Agreement contained a mandatory arbitration clause, but the Access Agreement made no reference to arbitration.
Several months later, when it was revealed that Edwards had been withdrawing money from the account without court approval, a substitute guardian, Harby, sued Edwards and Wachovia on the minor's behalf. Wachovia moved to compel arbitration pursuant to the Deposit Agreement. The trial court granted the motion.
On appeal, Harby argued that there was no acceptance of the arbitration agreement because the Access Agreement made no reference to arbitration and neither guardian signed the Deposit Agreement. In rejecting this argument, the Court cited Maryland case law establishing the rule that "a bank customer's signature on what is commonly known as a 'signature card' may constitute acceptance of terms and conditions in a separate depositary agreement."
Applying that rule, the Court held that by signing the Access Agreement (i.e., the signature card), Edwards agreed to be bound by the terms and conditions set forth in the Deposit Agreement, including the arbitration clause.
Harby also argued that the arbitration agreement was unenforceable for lack of consideration because the Deposit Agreement gave Wachovia a unilateral right to modify the agreement. In support of this argument, Harby cited Cheek v. United Healthcare of the Mid-Atlantic, Inc., 835 A.2d 656 (Md. 2003), which held that an employee was not bound by an arbitration agreement giving the employer a unilateral and unrestricted right of revocation because the employer's promise to arbitrate was illusory.
As the Court explained, the reach of the Cheek decision was limited by a subsequent decision holding that an employer's unilateral right of modification did not render an arbitration agreement unenforceable where the right of modification was subject to time limitations and notice requirements. See Holloman v. Circuit City Stores, Inc., 894 A.2d 547 (Md. 2006).
Since Wachovia had to give 30 days notice before exercising its right to modify the Deposit Agreement, the Court found that Wachovia's promise to arbitrate was not illusory and that the arbitration agreement was supported by adequate consideration. The Court thus affirmed the order compelling arbitration.
For reasons not clear from the record, no one raised the issue of whether the minor ever agreed to arbitrate or whether Edwards had authority to agree to arbitration on the minor's behalf. The New Jersey Supreme Court recently addressed this issue and relied on the strong public policy favoring arbitration in holding that a parent may agree to arbitration on a minor child's behalf. See Hojnowski v. Vans Skate Park, 901 A.2d 381 (N.J. 2006).