Arbitration
Performance Jet Skis LLC v. Bank of America N.A.
Date: May 15, 2026
Issue: Whether the district court erred in allowing Bank of America to arbitrate a dispute over its alleged overdraft fee practices.
Case Summary: In a unanimous decision, a Ninth Circuit panel ruled that BofA may arbitrate a dispute over its alleged overdraft fee practices.
In March 2024, three businesses (Plaintiffs) filed a class action against BofA challenging overdraft fee practices on business accounts. Each Plaintiff signed BofA’s standard Deposit Agreement, which includes dispute resolution provisions governing claims related to those accounts. The agreement allows either party to compel binding arbitration, provides for bench trials if arbitration is not invoked, and includes a California-specific option permitting either party to seek judicial reference under California Code of Civil Procedure §638. In a judicial reference proceeding, a court-appointed referee decides the dispute subject to court oversight.
After BofA removed the case to federal court, BofA moved to compel arbitration. Plaintiffs then moved to compel judicial reference under the agreement’s dispute resolution provisions. Judge Monica Ramirez Almadani of the Central District of California granted BofA’s motion and denied Plaintiffs’ motion. The court concluded that the contract language is unambiguous and rejected Plaintiffs’ argument that they could compel judicial reference after BofA invoked arbitration. The court therefore held that the agreement gives either party the right to compel arbitration.
On appeal, the Ninth Circuit affirmed. First, the panel concluded that the Deposit Agreement’s limiting clause—“if neither you nor we decide to compel arbitration” — applies to both bench trials and judicial reference provisions. The panel rejected Plaintiffs’ argument that they could seek judicial reference after BofA invoked arbitration. Instead, the panel held that the clause clearly separates arbitration from the agreement’s two judicial resolution options. Applying California contract law, the panel ruled that the specific limiting clause controls over more general judicial reference language.
Second, the panel concluded that the arbitration provision creates a contractual right that courts must enforce. The panel explained that the agreement treats arbitration differently from other dispute resolution options and that courts must interpret contracts to give effect to every provision. The panel also noted that California courts retain discretion to deny judicial reference even when parties agree to it. Accordingly, Plaintiffs’ interpretation would effectively eliminate BofA’s right to compel arbitration in California cases because Plaintiffs could always avoid arbitration by filing first and seeking judicial reference.
Bottom Line: The Ninth Circuit affirmed the district court’s order compelling arbitration of Plaintiffs’ class action challenging BofA’s alleged overdraft fee practices and held that Plaintiffs cannot avoid arbitration by seeking judicial reference after BofA invokes its contractual right under the deposit agreement.
Document: Opinion
