Minnesota Arbitration and the Account You Never Opened

A Minnesota consumer opens a checking account. Years later she learns the bank opened three more in her name — accounts she never applied for, on a signature card she never signed. She sues. The bank moves to compel arbitration, relying on the arbitration clause in the checking account she did open.

The instinct is that the motion should fail on the obvious ground: you cannot enforce a contract against someone for a transaction they never agreed to. Minnesota law contains a rule that looks exactly like that instinct — and it probably does not decide this case.

The distinction sounds academic and is dispositive. Minnesota’s rule is about whether a contract exists. The bank’s argument is about how far an existing contract reaches. Different questions, different tests — and Minnesota’s answer to the second is far less friendly to the consumer than its answer to the first. The story that prompted this piece — the same clause architecture, litigated to opposite postures in California and Utah — is here.

Who decides — a Minnesota judge or the arbitrator?

Start here, because if you lose this question you never reach the rest. Minn. Stat. § 572B.06(b) states the Minnesota default:

The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate, except in the case of a grievance arising under a collective bargaining agreement when an arbitrator shall decide.

Both halves of the fight — existence (“whether an agreement to arbitrate exists”) and scope (“or a controversy is subject to an agreement to arbitrate”) — are assigned to the court by the statute’s own words. The next subsection immediately gives some of it back. Section 572B.06(c):

An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.

And the nonwaivable-provisions section leaves a seam a bank drafter can use: § 572B.04(b)(1), which lists what parties may not vary before a dispute arises, protects “572B.06, subsection (a)” — not subsection (b). We have written about that seam and about the Minnesota Supreme Court’s delegation analysis in Glacier Park; rather than repeat it, see Minnesota keeps legislating against forced arbitration. The short version: a clause that clearly and unmistakably sends arbitrability to the arbitrator can move this question out of court, and bank deposit agreements are drafted to do exactly that.

So the first thing to read is not the “any dispute relating to” language. It is the sentence that says who decides what that language means.

The Minnesota rule that helps you: void versus voidable

Minnesota has a supreme court decision holding that some contract challenges belong in court no matter how broad the arbitration clause is. In Onvoy, Inc. v. SHAL, LLC, 669 N.W.2d 344 (Minn. 2003), Justice Meyer wrote for the court: “The court of appeals held that the claims must be arbitrated. We reverse.” The court adopted an exception to the federal severability rule of Prima Paint and stated it in one sentence:

[P]arties may not be compelled to arbitrate claims if they have alleged that the contract at issue never legally existed. Therefore, allegations that a contract is void may be heard by a court, even if not specifically directed to the arbitration clause, while allegations that a contract is voidable must be sent to arbitration.

The rationale is the intuitive one. Describing the federal decisions it followed, the court wrote: “These federal courts reason that parties should not be forced to arbitrate under an agreement that they allege never existed.”

The consumer-facing statement of the rule is in a footnote, and it is worth knowing that it is a footnote. In note 6, discussing criticism of mandatory arbitration in consumer contracts, the court wrote: “The rule we adopt today, allowing courts to retain jurisdiction over credible claims that a contract is void, leaves room for consumers to escape obvious abuses of power in contracting.”

Onvoy also confirms that state contract law does the work of deciding whether an agreement to arbitrate exists: “In determining whether a valid agreement to arbitrate exists, courts look to applicable state law, as long as the state law invoked applies to contracts generally and is not aimed at arbitration clauses specifically.”

Why Onvoy does not automatically win the case

Here is the complication, and papering over it would be dishonest.

Onvoy is a rule about existence — whether the contract containing the clause ever legally came into being. The consumer in our hypothetical is not saying that. She signed the checking account agreement, does not deny it, concedes it is valid, and is not asking a court to undo it. Her claim is that three other accounts were fabricated.

That makes her problem a scope problem: does a concededly valid clause in Agreement A reach claims about conduct involving Accounts B, C, and D? Onvoy’s void/voidable line does not answer it, because nothing in it is void. That gap is why the maneuver works. A bank does not need to defend the fabricated accounts as contracts. It only needs the real agreement — which the consumer will not disavow, because it is her money — to contain language wide enough to swallow disputes “relating in any way to” her accounts.

Onvoy makes it worse in one respect:

Parties who want the courts to retain jurisdiction over matters of contract formation, or any other particular issues they foresee may arise in the business relationship, must expressly state such an intent when drafting the arbitration clause in the contract.

That is a drafting instruction. Nobody handed a deposit account signature card has ever been in a position to follow it.

The Minnesota rule that hurts you: “relating to” is read broadly

Minnesota reads broad arbitration language broadly, and the leading case is a consumer’s problem, not a consumer’s friend.

Michael-Curry Cos. v. Knutson Shareholders Liquidating Trust, 449 N.W.2d 139 (Minn. 1989), asked whether a clause covering “[a]ny controversy or claim arising out of or relating to * * * the making” of a contract required arbitration of a claim that an amendment had been fraudulently induced. Justice Keith, for the court, said yes. The clause read:

13.01 Arbitration. Any controversy or claim arising out of, or relating to, this Agreement, or the making, performance, or interpretation thereof, shall be settled by arbitration * * *.

The test had two prongs: the clause must “either (1) specifically show that the parties intended to arbitrate fraud in the inducement, or (2) be ‘sufficiently broad to comprehend that the issue of fraudulent inducement be arbitrated.’” The clause never mentioned fraud and won anyway on the second prong. The court’s summary is the sentence a bank will quote at you:

It is difficult to see how the parties in this case could have drafted a “broader” agreement.

Two cautions. First, Michael-Curry was decided under the predecessor act, Minn. Stat. ch. 572, and applies the framework of Atcas v. Credit Clearing Corp. — which Onvoy later overruled to the extent it conflicts with governing federal precedent, noting in a footnote that Atcas “may still govern the rare agreements that do not involve interstate commerce.” Second, the opinion carries a warning aimed at the party resisting arbitration: the court was “concerned that parties often allege fraud in the inducement as a final attempt to avoid arbitration,” and emphasized that on an application to stay arbitration, “circumstances constituting fraud * * * shall be stated with particularity.” That tracks Minn. R. Civ. P. 9.02: “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.”

Translated: vague allegations that the bank “did something fraudulent” will not convert a scope case into an existence case. Particularized allegations about how a specific account came into being might.

The move that matters: make it a formation case, and know what Minnesota gives you if you do

If the consumer’s leverage is on the existence side, the practical question is what she can honestly put in issue.

Not the checking account. But the arbitration agreement is not always the one on the checking account signature card. In real deposit relationships, arbitration provisions arrive later — added by change-in-terms notice, carried over in a bank conversion, or attached to a separate online-access agreement — and each of those is a formation event with its own facts about notice and assent. Whether a particular customer ever formed that agreement is a question of contract formation, not of clause scope.

Federal practice shows what happens when a plaintiff frames it that way. Section 4 of the FAA provides:

If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof.

9 U.S.C. § 4. A federal court that finds a genuine fact dispute about the making of the agreement does not compel arbitration; it tries the issue — and the section goes on to give the party alleged to be in default the right to demand a jury on it.

Minnesota’s counterpart is different, and that matters before you choose a forum. Minn. Stat. § 572B.07(a) provides that where the refusing party opposes the motion, “the court shall proceed summarily to decide the issue,” and that “[i]f the court finds that there is no enforceable agreement, it may not order the parties to arbitrate.” Minnesota has the court decide. It does not route the making of the agreement to a jury.

Two more provisions belong in the same breath:

• § 572B.07(c): “The court may not refuse to order arbitration because the claim subject to arbitration lacks merit or grounds for the claim have not been established.” Do not expect the strength of the underlying fraud claim to help at this stage.
• § 572B.28(a)(1): an appeal may be taken from “an order denying a motion to compel arbitration.” The bank gets an immediate appeal if it loses the motion. That subsection’s list does not include an order granting one.

The jury-trial argument — and its actual pedigree

There is a Minnesota constitutional argument in this area, and it is routinely miscited. It is a concurrence, not the holding of the Minnesota Supreme Court.

In Onvoy, Justice Paul H. Anderson wrote separately, concurring, to say he was concerned “that too broad a construction of arbitration clause language when applied to issues such as the formation of the arbitration clause may deprive some individuals of their right to a trial by jury as guaranteed by the Seventh Amendment to the United States Constitution and Article I, Section 4 of the Minnesota Constitution.” He quoted the state provision, which provides in part:

The right of trial by jury shall remain inviolate, and shall extend to all cases at law without regard to the amount in controversy.

Minn. Const. art. I, § 4. His caution was aimed at exactly this situation:

When we construe arbitration clauses to encompass issues of contract formation, we need to be mindful of the potential for individuals to unknowingly and involuntarily waive their constitutional right to a trial by jury.

He tied it to the standard for waiving a constitutional right: “our courts must carefully scrutinize a waiver of the right of trial by jury to ascertain that it was done knowingly, voluntarily, and intelligently,” and “waiver of that right is not to be lightly presumed.”

Justice Anderson was explicit that the issue “is not directly before us in this case.” It is a signal, not a holding. Cite it as a concurrence or not at all — attributing it to “the Minnesota Supreme Court” is a misstatement of authority, and the kind of error a court remembers about a lawyer.

The route that goes around the clause entirely

Minnesota has one appellate decision in this space that a consumer lawyer should know, and it is not about clause interpretation at all. In State ex rel. Hatch v. Cross Country Bank, Inc., 703 N.W.2d 562 (Minn. App. 2005), the State sued a credit card issuer and its collector under the Uniform Deceptive Trade Practices Act, the Consumer Fraud Act, the Automatic Dialing-Announcing Devices Act, and for invasion of privacy. The bank moved to compel arbitration of the tort claim, arguing that the State — suing parens patriae — stood in the cardholders’ shoes and was bound by their arbitration clauses.

The court of appeals said no, starting from first principles: “Arbitration is a matter of contract, and a party that has not agreed to arbitrate a dispute cannot be required to arbitrate.” The State was not a party to the credit card agreement, “which binds only persons ‘who applied to [CCB] for … a credit card account.’” And on the FAA:

But, as noted in Waffle House, it is the language of the contract, not the FAA policy in favor of arbitration, that defines the scope of disputes subject to arbitration. “[N]othing in the statute authorizes a court to compel arbitration of any issues, or by any parties, that are not already covered in the agreement.”

The court held: “The FAA policy favoring arbitration of disputes does not compel the state to arbitrate its tort claim in this case, and the district court did not err by denying appellants’ motion to compel arbitration of the state’s claim for intrusion upon seclusion.”

The consequence is practical. The Minnesota Attorney General’s authority under Minn. Stat. § 8.31 is not conditioned on anyone’s consent: subdivision 1 directs the attorney general to investigate violations of the state’s consumer-protection statutes, and subdivision 3 vests the courts with jurisdiction, on the attorney general’s suit, “to prevent and restrain violations of those laws” and to impose civil penalties. A private arbitration clause cannot reach that. A consumer headed for a closed arbitration should ask whether the conduct is also a matter for the AG — and should read the private attorney general provision at § 8.31, subd. 3a, a fee-shifting private remedy for the same violations. On the underlying claims, see the Consumer Fraud Act and Deceptive Trade Practices Act.

What Minnesota law has not decided

We have found no Minnesota appellate decision resolving whether a valid arbitration clause in an agreement the customer did sign reaches claims arising from an account the customer never opened. That statement is the product of searching for one — across Minnesota Supreme Court and Court of Appeals decisions, for arbitration paired with unauthorized accounts, forged signatures, accounts opened without consent, and identity theft — and finding nothing on point. Read what follows as an open question, not a settled one. That is a reason to brief the threshold motion as if it were the case, because in this posture it usually is.

What this means if it happens to you

1. Get the whole contract history, not the current agreement. Arbitration provisions in deposit relationships are often added later or inherited through an acquisition. When and how the clause arrived is a formation fact, and formation facts are where the leverage is.
2. Read the delegation sentence before the “any dispute” sentence. If arbitrability is clearly and unmistakably delegated, the scope argument may never reach a judge.
3. Plead the account-opening facts with particularity. Michael-Curry and Minn. R. Civ. P. 9.02 point the same way; a generalized fraud allegation will not move a court.
4. Do not assume the fabricated accounts fall outside the clause because they should. In this posture, “should” has lost more than once.
5. Ask whether the same conduct supports an Attorney General referral, and preserve the individual claim while you do.
6. Watch the forum. Minnesota decides the making of an agreement summarily under § 572B.07(a); the FAA tries it under 9 U.S.C. § 4, with a jury available on demand.

For the clause features that decide these motions — breadth, delegation, class waivers, opt-out windows, and the nonwaivable floor in § 572B.04 — see what to look for in a Minnesota bank arbitration clause. For the federal frame, see our piece on the FAA and what you cannot agree to under Minnesota law. If the accounts have already damaged your credit, start with the steps for Minnesota identity-theft victims.

Madgett Law, LLC represents Minnesota consumers against banks, debt collectors, and credit reporting agencies, including the threshold fight over whether an arbitration clause reaches a claim at all. If a bank has moved to compel arbitration of a dispute about an account you did not open, send us a message or call 612-470-6529.

Sources: Minn. Stat. § 572B.06 (validity of agreement to arbitrate — subsection (b), court decides existence and scope; subsection (c), arbitrator decides conditions precedent and enforceability of a contract containing a valid agreement to arbitrate); § 572B.04 (effect of agreement; nonwaivable provisions — subsection (b)(1), which protects § 572B.06, subsection (a) and not subsection (b)); § 572B.07 (motion to compel or stay arbitration — subsection (a), “the court shall proceed summarily to decide the issue” and no order to arbitrate absent an enforceable agreement; subsection (c), no refusal to order arbitration for lack of merit); § 572B.28 (appeals — subsection (a)(1), appeal from an order denying a motion to compel arbitration); and § 8.31 (additional duties of attorney general — subdivision 1, duty to investigate; subdivision 3, injunctive relief and civil penalties; subdivision 3a, private remedies) — all Minnesota Office of the Revisor of Statutes. Minn. Const. art. I, § 4 (trial by jury), Minnesota Office of the Revisor of Statutes. Minn. R. Civ. P. 9.02 (fraud pleaded with particularity), Minnesota Office of the Revisor of Statutes, Minnesota Court Rules. Onvoy, Inc. v. SHAL, LLC, 669 N.W.2d 344 (Minn. Sept. 25, 2003) — majority opinion by Meyer, J. (reversing the court of appeals; adopting the void/voidable exception to Prima Paint; “parties should not be forced to arbitrate under an agreement that they allege never existed”; state law governs whether a valid agreement to arbitrate exists; drafting instruction that parties wanting courts to retain formation questions “must expressly state such an intent”; note 6, “credible claims that a contract is void”; note 7, Atcas “may still govern the rare agreements that do not involve interstate commerce”) and the separate opinion of Anderson, Paul H., J., concurring (jury-trial concerns; Minn. Const. art. I, § 4; waiver “not to be lightly presumed”), opinion text retrieved from the Caselaw Access Project. Michael-Curry Cos. v. Knutson Shareholders Liquidating Trust, 449 N.W.2d 139 (Minn. Dec. 15, 1989) (Keith, J.) (clause covering “the making” of the contract broad enough to send fraud in the inducement to arbitration; the two-prong test; “It is difficult to see how the parties in this case could have drafted a ‘broader’ agreement”; fraud must be stated with particularity on an application to stay), Caselaw Access Project. State ex rel. Hatch v. Cross Country Bank, Inc., 703 N.W.2d 562 (Minn. App. 2005) (Stoneburner, J.) (the State suing parens patriae is not bound by cardholders’ arbitration clauses; “it is the language of the contract, not the FAA policy in favor of arbitration, that defines the scope of disputes subject to arbitration,” quoting EEOC v. Waffle House, Inc., 534 U.S. 279 (2002)), Caselaw Access Project. 9 U.S.C. § 4 (summary trial, and jury demand, where the making of the arbitration agreement is in issue), Cornell Legal Information Institute. We searched Minnesota Supreme Court and Court of Appeals decisions for authority resolving whether a valid arbitration clause reaches claims arising from an account the customer never opened and found none; that search is described in the text.

This article is general legal information about Minnesota and federal law, not legal advice, and reading it does not create an attorney–client relationship. The central question it discusses is unresolved in Minnesota, and nothing here predicts how any court would rule on any particular arbitration clause, contract history, or set of facts. Whether the Federal Arbitration Act governs a given agreement, and what a particular clause covers, depend on the document and the transaction. No outcome is promised or implied.