DILLON v. BMO HARRIS BANK, N.A.; GENERATIONS FEDERAL CREDIT UNION; BAY CITIES BANK; AND FOUR OAKS BANK & TRUST COMPANY, NO. 14-1728

Decided: May 29, 2015

The Fourth Circuit held that the district court impermissibly denied appellants’ renewed motions to compel arbitration, vacated the order denying the renewed motions and remanded for further proceedings.

This case stemmed from a class action against the named group of Banks, where Dillon alleged that the Banks, because they allowed the transfer of funds from third-party lenders to and from Dillon’s bank account, facilitated the lenders’ illegal practices by giving them access to an electronic payment system, the Automated Clearing House Network. After Dillon initiated a lawsuit against the Banks, the Banks filed motions to compel arbitration and to stay further court proceedings. As a basis for their motions, the Banks asserted that Dillon agreed to arbitration as part of the application process for the loans. In response, Dillon argued that the Banks had not carried their burden of proof to show that he had agreed to arbitration since he argued that the loans were inadmissible hearsay due to their lack of physical signature and proof of authentication. The Banks, however, asserted that since the loan agreements were significant to Dillon’s case, that Dillon was the party who had signed the agreement in the first place, and that Dillon was merely questioning the Banks’ burden of proof and not the authenticity of the loans themselves, that it was proper for the loans to be admitted. Although the district court initially denied the Banks’ motions, the Banks attempted to cure their motions, by attempting to authenticate the loan documents. However, Dillon opposed the motion by saying that the district court had already “fully and finally” decided the issues, and the district court agreed, denying the motions for “failure to justify reconsideration,” and the Banks appealed.

The Fourth Circuit first discussed the Federal Arbitration Act (FAA), and its significance to the case, looking at both sections 3 and 4 of the FAA and examining how they provide for a hearing to resolve questions of material fact, and noting that section 16 allows for an appeal of a decision about a section 3 or 4 action. By looking at the FAA, the Fourth Circuit then determined that it did have jurisdiction to hear this case. Although Dillon argued that this was an appeal of an order denying reconsideration, the Court determined the Banks were seeking to enforce arbitration, and therefore section 16 applied. By examining the language in the Banks’ motions, the Court noted the explicit reference to “compel” and “stay,” which triggered sections 3 and 4, giving the court jurisdiction. After determining that it had jurisdiction, the Fourth Circuit then turned to the merits of the case, and determined that the lower court erred in deciding that the renewed motions were motions for reconsideration and denying them because of that. Although the Fourth Circuit allowed for two plausible reasons for the district court’s decision, but swiftly disposed of both of those reasons, stating that there is no rule that limits a party to only one motion under sections 3 and 4 of the FAA, and furthermore, the renewed motions presented different issues, so the law of the case rule was no longer applicable. Since the Fourth Circuit determined that the district court denied the Banks’ motions in a way that was inconsistent with the strong policy that favors arbitration, nor for any other plausible reason, the court vacated the order and remanded for further proceedings.

Full Opinion

Jennie Rischbieter

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