Modern Perfection, LLC v. Bank of America, N.A., No. 23-1965 (4th Cir. 2025)

Summary

Fourth Circuit decision in Modern Perfection, LLC v. Bank of America, N.A., No. 23-1965, decided in 2025. Six small businesses entered into one contract with Bank of America for deposit accounts, which included an arbitration provision, and another for Paycheck Protection Program (PPP) loans, which did not include an arbitration clause. The United States District Court for the District of Maryland granted the bank's motion to compel arbitration and dismissed the complaint, concluding that the deposit agreements contained a valid and enforceable delegation clause. The Fourth Circuit affirmed, agreeing that the deposit agreements clearly and unmistakably delegated the question of arbitrability to the arbitrator.

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Full text

Modern Perfection, LLC v. Bank of America, N.A., No. 23-1965 (4th Cir. 2025)

Six small businesses entered into two contracts with Bank of America: one for deposit accounts, which included an arbitration provision, and another for Paycheck Protection Program (PPP) loans, which did not include an arbitration clause. When disputes arose regarding the bank's handling of the PPP loans, the businesses sued the bank in federal court. The bank moved to compel arbitration based on the deposit agreements. The United States District Court for the District of Maryland granted the bank's motion to compel arbitration and dismissed the complaint. The court concluded that the deposit agreements contained a valid and enforceable delegation clause, which required that any disputes about the arbitrability of the claims be decided by an arbitrator, not the court. The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision. The Fourth Circuit agreed that the deposit agreements clearly and unmistakably delegated the question of arbitrability to the arbitrator. The court noted that the businesses failed to properly raise any fourth-order disputes, which would involve determining which of the two contracts governed the arbitrability of the disputes. The court also found that the businesses did not specifically challenge the validity of the delegation clause itself, which is necessary to avoid its application. The Fourth Circuit held that the district court correctly compelled arbitration and dismissed the complaint, as the businesses did not request a stay of the proceedings pending arbitration. The court emphasized that the businesses' arguments about the scope of the arbitration provision were matters for the arbitrator to decide, given the valid delegation clause in the deposit agreements.

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