In October of 1998, Kortum-Managhan applied for and received a Herberger’s credit card subject to a Revolving Credit Card Agreement. The agreement did not include an arbitration clause, but it did contain a provision stating that Herbergers was allowed to unilaterally change the agreement and specifying that the cardholder’s continued use of the card constituted agreement to the change.
In October of 1999, Herbergers’ mailed a notice of change in terms to Kortum-Managhan along with her monthly statement. The change included the following arbitration clause:
Arbitration for Disputes—No Jury Trials or Class Actions: This
paragraph 18 describes how all Claims . . . will be arbitrated instead of
litigated in court.
B. We OR you have the right to require that each Claim be resolved by
arbitration. A Claim will be arbitrated if (a) both we and you or (b) either
we or you, exercise the right to require that a Claim be arbitrated. If, for
example, we exercise our right to require that a Claim be resolved by
arbitration but you do not also exercise your right to require that the Claim
be arbitrated, the Claim will be resolved by arbitration. . . .
C. If we or you request arbitration of a Claim, we and you will not have the
right to litigate the Claim in court. This means (1) there will be no jury trial
on the Claim, (2) no pre-arbitration discovery except as the Rules permit,
and (3) no Claim may be arbitrated on a class-action basis, and neither we
nor you will have the right to participate as a representative or member of
any class of claimants pertaining to any Claim subject to arbitration.
Generally, the arbitrator’s decision will be final and binding. There are
other rights that you would have if you went to court that also may not be
available in arbitration.
In the underlying suit to this action, Herbergers’ filed a Motion to Compel Arbitration which was granted by the District Court. Kortum-Managhan argued that she was never advised, in any meaningful way, that she was waiving her fundamental constitutional rights to a jury trial and to access to the courts by her continued use of her Herbergers’ credit card.
Because the rights to trial by jury and access to the courts are fundamental constitutional rights, and deserve the highest level of court scrutiny and protection, their waiver must be proved to have been made voluntarily, knowingly, and intelligently. In order for a fundamental right to be effectively waived, a consumer must be informed of the consequences before personally consenting to the waiver. Kortum-Managhan, ¶ 26 (citing Kloss v. Edward D. Jones & Co., 2002 MT 129, ¶ 64).
The test to determine whether an individual deliberately, understandingly, and intelligently waived their fundamental constitutional rights to trial by jury and access to the courts is to consider the totality of a series of factors laid out in Kloss, ¶ 65. Under those factors, SCOMONT concluded that Kortum-Managhan’s right to a jury trial was not sufficiently waived. In fact, the Court said “that Herbergers, through the use of the ‘bill stuffer,’ attempted to lull [Kortum-Managhan] into agreeing to waive her constitutional rights and that attempting to change the terms of a contract through the use of a ‘bill stuffer’ is ‘sneaky and unfair.’” Kortum-Managhan, ¶ 31.
In closing, SCOMONT held that:
Based on the foregoing, we conclude that making a change in a credit agreement by way of a “bill stuffer” does not provide sufficient notice to the consumer on which acceptance of the unilateral change to a contract can be expressly or implicitly found. Consequently, Herbergers’ unilateral attempt to amend its original cardholder agreement to include an arbitration clause was ineffective.
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