                   Case: 11-14319          Date Filed: 07/31/2012   Page: 1 of 10

                                                                       [DO NOT PUBLISH]



                      IN THE UNITED STATES COURT OF APPEALS

                                   FOR THE ELEVENTH CIRCUIT
                                    ________________________

                                            No. 11-14319
                                      ________________________

                               D.C. Docket Nos. 1:09-md-02036-JLK,
                                       1:10-cv-20820-JLK


In Re: CHECKING ACCOUNT OVERDRAFT LITIGATION

lllllllllllllMDL NO. 2036
____________________________________________

DORIS POWELL-PERRY,
Individually and on behalf of
all others similarly situated,
CURNIE SANDERS,

llllllllllllllllllllllllllllllllllllllll                             Plaintiffs - Appellees,

                                               versus

BRANCH BANKING AND TRUST COMPANY,

llllllllllllllllllllllllllllllllllllllll                       Defendant - Appellant.
                                      ________________________

                          Appeals from the United States District Court
                              for the Southern District of Florida
                                 ________________________
                                        (July 31, 2012)
              Case: 11-14319     Date Filed: 07/31/2012   Page: 2 of 10

Before WILSON, PRYOR and MARTIN, Circuit Judges.

PER CURIAM:
     Branch Banking and Trust Company (“BB&T”), a commercial bank,

appeals the district court’s denial of its motion to compel arbitration of a putative

class action brought by two of its customers, Doris Powell-Perry and Curnie

Sanders (collectively, “Plaintiffs”). Upon review of the district court’s order, the

arguments set forth in the briefs, after the benefit of oral argument, and having

considered our prior precedent on similar matters, we find that the district court

erred in not severing the unconscionable cost-and-fee-shifting provision of the

arbitration agreement. We therefore affirm the district court’s finding in part,

reverse in part, and remand to compel arbitration.

                                           I

      Plaintiffs allege that BB&T charged them overdraft fees for payments from

their checking accounts when the accounts contained sufficient funds to cover the

payments. Plaintiffs assert violations of the North Carolina Unfair and Deceptive

Trade Practices Act and common law claims of conversion, breach of the implied

covenant of good faith and fair dealing, and unjust enrichment. Plaintiffs’

allegations arise out of the Bank Services Agreement (BSA), which contains

BB&T’s standard checking account terms. Section B of the BSA is entitled



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“Arbitration Agreement” and is printed on the first two pages of the document.

Section D, entitled “Rules Applicable to All Accounts,” includes a paragraph

termed “Costs, Damages, and Attorneys’ Fees” which is printed on the fourteenth

page of the BSA. This paragraph contains a cost-and-fee-shifting provision:

      You agree to be liable to the Bank for any loss, costs, or expenses,
      including, without limitation, reasonable attorneys’ fees, the costs of
      litigation, and the costs to prepare or respond to subpoenas,
      depositions, child support enforcement matters, or other discovery
      that the Bank incurs as a result of any dispute involving your account.

(emphasis added). The paragraph also contains a set-off clause: “You authorize

the Bank to deduct any such loss, costs, or expenses from your account without

prior notice to you.”

      The Judicial Panel on Multidistrict Litigation transferred this case to the

Southern District of Florida. There, BB&T moved to compel arbitration of

Plaintiffs’ claims under the Federal Arbitration Act and pursuant to the arbitration

provision of the BSA. The district court denied the motion, BB&T appealed, and

we remanded the case for reconsideration in light of the Supreme Court’s

intervening decision in AT&T Mobility LLC v. Concepcion, 563 U.S. ___, 131 S.

Ct. 1740 (2011). On remand, the district court again denied BB&T’s motion to




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compel under North Carolina law.*

       In a published opinion, we recently addressed BB&T’s appeal from another

case in the same Multidistrict Litigation proceeding, Barras v. Branch Banking &

Trust Co, No. 11-14318, 2012 WL 2617585 (11th Cir. July 6, 2012). There, Lacy

Barras filed a putative class action against BB&T and brought claims based on the

BSA. In Barras, a panel of this court applied South Carolina law, id. at *1 n.5,

and found the BSA’s cost-and-fee-shifting provision was (1) part of the arbitration

provision, (2) unconscionable, and (3) severable from the arbitration provision of

the BSA, id. at *9.

       In this appeal, BB&T raises the same objections to the district court’s

dismissal as it did in Barras. Namely, BB&T argues:

       (1) that the question of whether the arbitration provision is
       enforceable must be resolved by an arbitrator; (2) that the cost-and-
       fee-shifting provision in the agreement that the district court held
       unconscionable does not apply to the arbitration provision; (3) that
       Concepcion prohibits application of [North Carolina’s]
       unconscionability doctrine to the arbitration provision; (4) that the
       cost-and-fee-shifting provision, in any event, is not unconscionable;
       and (5) that the cost-and-fee-shifting provision is severable from the
       arbitration provision.

Id. at *1.



       *
        The district court ruled that the arbitration agreement is governed by North Carolina law.
Neither party contests this ruling on appeal.

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                                          II

        We review a district court’s denial of a motion to compel arbitration de

novo. Jenkins v. First Am. Cash Advance of Ga., LLC, 400 F.3d 868, 873 (11th

Cir. 2005). Under the prior precedent rule, “we are bound to follow a binding

prior precedent unless and until it is overruled by this Court en banc or by the

Supreme Court.” Robinson v. Tyson Foods, Inc., 595 F.3d 1269, 1274 (11th Cir.

2010).

                                          III

        This case and Barras share a procedural and pleading history, so we are

bound by the panel’s decision in Barras insofar as it applies federal law.

Therefore, we find that BB&T waived its right to arbitrate the threshold issue of

unconscionability, Barras, 2012 WL 2617585, at *2, and that Plaintiffs failed to

adequately present their proposed alternate grounds for affirmance to the district

court, id. at *9 n.20. We also reject as unfounded Plaintiffs’ contention that the

purported moratorium on consumer-related disputes by the American Arbitration

Association (“AAA”) would prevent arbitration of this claim. Id. (citing 9 U.S.C.

§ 5).

                                          IV

        Upon review, we find that the district court properly applied North Carolina

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law when it found the cost-and-fee-shifting provision of the BSA unconscionable.

      First, the district court properly found that the cost-and-fee-shifting

provision formed a part of the arbitration agreement under North Carolina’s

principles of contract interpretation. See Robbins v. C.W. Myers Trading Post,

Inc., 117 S.E.2d 438, 440–41 (N.C. 1960) (stating that each clause is considered in

a contract and that all parts of the contract are to be given effect); Int’l Paper Co.

v. Corporex Constructors, Inc., 385 S.E.2d 553, 555–56 (N.C. Ct. App. 1989)

(same).

      Second, the district court properly considered Concepcion before applying

North Carolina’s defense of unconscionability to the BSA. Under Concepcion, a

court can only apply a state contract defense to an arbitration agreement if the

defense is generally applicable to all contracts, and does not only “derive [its]

meaning from the fact that an agreement to arbitrate is at issue.” Concepcion, 131

S. Ct. at 1746. North Carolina unconscionability law is properly applied to the

BSA because it is generally applicable to all contracts. See, e.g., Tillman v.

Commercial Credit Loans, Inc., 655 S.E.2d 362, 370, 374 (N.C. 2008) (plurality

opinion) (arbitration); Brenner v. Little Red Sch. House, Ltd., 274 S.E.2d 206, 211

(N.C. 1981) (school contract); Dawbarn v. Dawbarn, 625 S.E.2d 186, 190 (N.C.

Ct. App. 2006) (postnuptial agreement); King v. King, 442 S.E.2d 154, 157 (N.C.

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Ct. App. 1994) (divorce agreement); Rite Color Chem. Co., Inc. v. Velvet Textile

Co., 411 S.E.2d 645, 647–50 (N.C. Ct. App. 1992) (business contract).

      Finally, the district court did not err in determining that the cost-and-fee-

shifting provision of the arbitration agreement is unconscionable under North

Carolina law. The cost-and-fee-shifting provision of this contract, which requires

the BB&T customer to pay the bank’s costs in any dispute between the customer

and the bank regardless of who prevails, is “so oppressive that no reasonable

person would,” on the one hand, include it in a contract, “and no honest and fair

person would accept [it] on the other.” Brenner, 274 S.E.2d at 210. The cost-and-

fee-shifting provision is harsh, one-sided, oppressive, and contains an element of

surprise so as to “shock the judgment of a person of common sense.” Tillman, 655

S.E.2d at 369 (plurality opinion); id. at 374 (Edmunds, J., concurring); Brenner,

274 S.E.2d at 213. Thus, we affirm the district court’s finding that the cost-and-

fee-shifting provision was unconscionable under North Carolina law.

                                          V

      The district court erred when it determined that: (1) BB&T waived its right

to enforce the severability provision of the BSA, and (2) the set-off provision of

the BSA was unconscionable. We address each issue in turn.

                                          A

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      North Carolina allows for severance of a contract clause. “If the contract is

separable . . . and one part is reasonable, the courts will enforce the reasonable

provision.” Whittaker Gen. Med. Corp. v. Daniel, 379 S.E.2d 824, 828 (N.C.

1989); see also N.C. Gen. Stat. § 25-2-302(1) (“If the court as a matter of law

finds . . . any clause of the contract to have been unconscionable at the time it was

made the court may . . . enforce the remainder of the contract without the

unconscionable clause . . . .”). A contract provision is severable when the

enforceable provisions “are in no way dependent upon the enforcement of the

illegal provision for their validity.” Am. Nat’l Elec. Corp. v. Poythress

Commercial Contractors, Inc., 604 S.E.2d 315, 317 (N.C. Ct. App. 2004) (quoting

Rose v. Materials Co., 194 S.E.2d 521, 532 (N.C. 1973)). The arbitration

provision of the BSA may operate independently of the unconscionable cost-and-

fee-shifting provision because the rules of the AAA govern all aspects of an

arbitration, including cost apportionment. Thus, the arbitration provision is still

enforceable even without the cost-and-fee-shifting provision. Cf. Barras, 2012

WL 2617585, at *9 (applying South Carolina law).

      [The AAA] rules operate wholly independently of the cost-and-fee-
      shifting provision and would not be impaired by invalidating the cost-
      and-fee-shifting provision. Thus, the cost-and-fee-shifting provision
      does not pervade the arbitration agreement such that enforcing the
      arbitration provision without the cost-and-fee-shifting provision

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      would be impossible or would render the arbitration provision
      ineffectual.

Id. at * 9 (alteration and internal quotation marks omitted). Accordingly, we find

that the unconscionable cost-and-fee-shifting provision of the BSA severable from

the arbitration provision.

                                          B

      Plaintiffs argue that the set-off provision is unconscionable under North

Carolina law. However, North Carolina banking law allows banks to set off debts

owed by the depositor against funds in the account. N.C. Gen. Stat. § 25-9-

340(a); Roberts v. First-Citizens Bank & Trust Co., 478 S.E.2d 809, 812 (N.C. Ct.

App. 1996). Because the set-off provision is explicitly permitted by North

Carolina law, the set-off provision is not unconscionable.

                                         VI

      We affirm the district court’s determination that the unconscionable cost-

and-fee-shifting provision forms a part of the arbitration agreement, and reverse

the district court’s refusal to sever unconscionable sentence. We also reverse the

district court’s determination that the set-off provision is unconscionable.

Therefore, we reverse the district court’s dismissal of BB&T’s motion and

remand it with instructions to sever the unconscionable clause and compel



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arbitration.

AFFIRMED in part, REVERSED in part, and REMANDED with

instructions.




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