Jeffery Pruett v. WESTconsin Credit Union

2023 WI App 57

COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION

Case No.: 2022AP887

Complete Title of Case:

JEFFERY PRUETT,

PLAINTIFF-RESPONDENT,

V.

WESTCONSIN CREDIT UNION,

DEFENDANT-APPELLANT.

Opinion Filed: October 24, 2023
Submitted on Briefs: February 22, 2023
Oral Argument:

JUDGES: Stark, P.J., Hruz and Gill, JJ.
Concurred:
Dissented:

Appellant
ATTORNEYS: On behalf of the defendant-appellant, the cause was submitted on the
briefs of John L. Pollock of Litchfield Cavo, LLP, Milwaukee, and
James R. Branit and Jason E. Hunter of Litchfield Cavo, LLP,
Chicago, Illinois, pro hac vice.

Respondent
ATTORNEYS: On behalf of the plaintiff-respondent, the cause was submitted on the
brief of Nathan E. DeLadurantey of DeLadurantey Law Office, LLC,
Brookfield, and Vess A. Miller of Cohen & Malad, LLP, Indianapolis,
Indiana, pro hac vice.
2023 WI App 57

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
October 24, 2023
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.

Appeal No. 2022AP887 Cir. Ct. No. 2021CV158

STATE OF WISCONSIN IN COURT OF APPEALS

JEFFERY PRUETT,

PLAINTIFF-RESPONDENT,

V.

WESTCONSIN CREDIT UNION,

DEFENDANT-APPELLANT.

APPEAL from an order of the circuit court for Dunn County: LUKE
WAGNER, Judge. Affirmed.

Before Stark, P.J., Hruz and Gill, JJ.

¶1 STARK, P.J. Jeffery Pruett filed a class action complaint alleging
that WESTconsin Credit Union (WCU) had improperly charged and collected fees
No. 2022AP887

from its members.1 In response, WCU filed a motion to compel arbitration based
upon an Arbitration and Class Action Waiver Agreement (the Arbitration Clause)
that WCU added to its Membership and Account Agreement (the Agreement) in
2021. The Arbitration Clause provided that either WCU or a member may compel
arbitration in a dispute between the parties, subject to some exceptions not relevant
here, and withdrew the right for its members to participate in a class action, as either
a class representative or a class member. The Arbitration Clause applied to “any
dispute between us concerning your Membership, your accounts, or the services or
products related to your accounts[,]” meaning, as WCU argues, the amendment had
retroactive application. (Emphasis added.) WCU alleges that Pruett received notice
of the Arbitration Clause, and it further argues that Pruett agreed to the amendment
by failing to opt out of its application using the specified procedure—i.e., Pruett’s
silence and continued use of his account signaled his assent to the Arbitration
Clause.

¶2 WCU appeals from the circuit court order denying its motion to
compel arbitration pursuant to WIS. STAT. § 788.02 (2021-22).2 The issues on
appeal, according to WCU, are whether: (1) WCU’s contractual authority to change
the terms of the Agreement permitted it to add the Arbitration Clause; (2) Pruett’s
failure to opt out of the Arbitration Clause and his continued use of his WCU
account constituted his agreement to the terms of the Arbitration Clause; (3) the
Arbitration Clause applies retroactively to claims that accrued before WCU added
the clause; (4) the retroactive application of the Arbitration Clause is unreasonable

1
WCU is a Wisconsin credit union with its headquarters in Menomonie, Wisconsin.
Pruett has been a WCU member since 1991.
2
All references to the Wisconsin Statutes are to the 2021-22 version unless otherwise
noted.

2
No. 2022AP887

and in violation of the contractual duty of good faith and fair dealing; and (5) the
language in the Agreement is sufficiently clear to allow an opportunity for a member
to timely opt out of the Arbitration Clause.

¶3 We conclude that WCU’s contractual authority to change the terms of
the Agreement did not permit it to add the Arbitration Clause, which we determine
contained new terms that the parties did not address or contemplate in the original
contract. Further, Pruett did not affirmatively assent to the Arbitration Clause by
his failure to opt out of its provisions and continued use of his account; therefore,
the clause cannot be enforced against Pruett. For the reasons that follow, we affirm
the circuit court’s decision.

BACKGROUND

¶4 Pruett commenced this class action lawsuit on July 19, 2021, alleging
that WCU improperly charged its members certain overdraft fees between 2017 and
2020. Pruett’s complaint alleged multiple counts of breach of contract, unjust
enrichment, and a violation of the Wisconsin Deceptive Trade Practices Act, under
WIS. STAT. § 100.18. Pruett sought monetary damages, restitution, and injunctive
and declaratory relief. The merits of those claims are not before us on appeal.

¶5 Instead, this appeal concerns the terms and conditions of the
Agreement and whether WCU’s 2021 modification of that Agreement requires that
the merits of this dispute be resolved by arbitration of only Pruett’s claims, rather
than by the circuit court in this class action lawsuit. As WCU explains, its
relationship with its members is governed by its bylaws as well as the terms and
conditions of the Agreement. It is undisputed that Pruett opened his account with
WCU in 1991, and he agreed to comply with the terms and conditions of the
Agreement at that time. It is also undisputed that at the time Pruett opened his

3
No. 2022AP887

account and at the time the improper fees alleged in the complaint were assessed,
there was no arbitration agreement between Pruett and WCU.3 The Agreement did,
however, include a “Notice of Amendments” section (hereinafter, change-of-terms
provision), which stated:

Except as prohibited by applicable law, we may change the
terms of this Agreement. We will notify you of any change
in terms, rates, or fees as required by law. We reserve the
right to waive any term of this Agreement. Any such waiver
shall not affect our right to future enforcement.

¶6 WCU claims that on or about April 27, 2021, it sent “notice of
changes to its membership agreement to its members,” which “advised members
that WCU was implementing an Arbitration and Class Action Waiver
Agreement … that would become effective 60 days after the member’s receipt of
the Notice.” WCU claims that the Arbitration Clause was permitted under the
“Notice of Amendments” clause of the May 2018 version of the Agreement in effect
at the time. The mailing sent to members included: (1) “a document titled
‘Important Information Regarding Your Account at [WCU]’” (the Notice); (2) the
amended Agreement; and (3) “the amended Electronic Fund Transfers Agreement
and Disclosure.” The Notice was sent to WCU’s members “at the valid, deliverable
mailing address on file for each member.”

¶7 The Notice informed members of “important changes” with the
Agreement, including the added Arbitration Clause.4 The Notice provided:

IMPORTANT: The Arbitration and Class Action
Waiver Agreement provision is effective within 60 days of
this notice (the “Effective Date”) unless you opt-out in
3
The record includes both a December 2016 and a May 2018 version of the Agreement,
neither of which reference arbitration.
4
The changes also included “[e]nhanced language” about overdraft and nonsufficient fund
fees charged by WCU.

4
No. 2022AP887

accordance with the specified opt-out process described at
Section 35c of the enclosed Account Agreement Arbitration
and Class Action Waiver Agreement. THE
ARBITRATION AND CLASS ACTION WAIVER
AGREEMENT APPLIES TO ALL CLAIMS THAT
ARE FILED OR INITIATED ON OR AFTER THE
EFFECTIVE DATE, EVEN IF THE CLAIM ARISES
OUT OF, AFFECTS, OR RELATES TO CONDUCT
THAT OCCURRED PRIOR TO THE EFFECTIVE
DATE. If a claim is filed or initiated prior to the Effective
Date, the Arbitration and Class Action Waiver Agreement
will not apply to such claim.

YOU WILL INDICATE YOUR AGREEMENT TO
THE ARBITRATION AGREEMENT AND CLASS
ACTION WAIVER BY (1) FAILING TO OPT-OUT AS
EXPLAINED AT SECTION 35C OF THE ENCLOSED
ACCOUNT AGREEMENT ARBITRATION AND CLASS
ACTION WAIVER AGREEMENT, AND
(2) CONTINUING YOUR MEMBERSHIP WITH
WESTCONSIN CREDIT UNION. ALL CHANGES ARE
EFFECTIVE AS OF APRIL 26, 2021.

¶8 The Arbitration Clause, in turn, detailed the terms of the added
provision and the opt-out procedure. Section 35.a. provided, in pertinent part, that

[e]xcept if you opt-out as provided in subsection (C) below,
either you or us may elect, without the other’s consent, to
require that any dispute between us concerning your
Membership, your accounts, or the services or products
related to your accounts and Membership be resolved by
binding arbitration, except for those disputes specifically
excluded below.

Section 35.b. further provided, in pertinent part: “Unless prohibited by applicable
law, arbitration will be solely brought in your individual capacity and be solely
between you and us. Neither you nor we have the right to participate in a class
action in court or arbitration, either as a class representative or class member.” The
Arbitration Clause explained that “[i]f you agree to be bound by the above
Arbitration and Class Action Waiver Agreement, then no action is needed on your
part.” It also included the procedure for opting out:

5
No. 2022AP887

If you do not agree to be bound by this Arbitration and Class
Action Waiver Agreement, you must send us written notice
that you want to opt out of this provision of your Account
Agreement within 60 days of account opening or within 60
days of receiving this notice, whichever is sooner.

¶9 Pruett asserts that he never agreed to the Arbitration Clause. He
averred, by affidavit, that he had “never before seen or read the Arbitration
Documents” and that he had “never signed or seen or heard anything about
arbitration from [WCU], and [he] never agreed to arbitration with” WCU.5
Accordingly, it is undisputed that Pruett took no action to opt out of the Arbitration
Clause.

¶10 On September 15, 2021, WCU filed its motion seeking to compel this
class action litigation to individual arbitration and stay court proceedings based on
the Arbitration Clause. As the circuit court observed, “WCU’s [m]otion attempts
to apply the April 2021 Arbitration Clause retroactively to the fees in [Pruett’s class
action] [c]omplaint that were assessed and collected in 2017, 2018, and 2020, to
require [Pruett] to arbitrate his claims for actions that occurred prior to the existence
of the Arbitration Clause.”

¶11 Pruett opposed the motion, arguing that WCU had failed to meet its
burden to show that a valid arbitration agreement was ever formed. Specifically,
Pruett argued that the Arbitration Clause was not a valid agreement to arbitrate for
numerous reasons, including that: (1) “at the time of the transactions WCU’s
agreement with customers did not contain an arbitration clause or any other
restriction on [Pruett’s] ability to file a class action in this [c]ourt”; (2) “WCU never
had authority under the original agreement to unilaterally add a wholly new term”

5
Although Pruett states that he never saw the Notice or amended Agreement, he does not
dispute (or does not present evidence in response to) WCU’s assertion that the documents were
mailed to him.

6
No. 2022AP887

because the “Notice of Amendments” clause uses “change” not “add”; (3) “the duty
of good faith and fair dealing prevented WCU from unilaterally adding an
arbitration provision never contemplated in the original agreement to re-capture
rights from” Pruett; (4) “WCU never provided reasonable notice of its addition of
the arbitration clause, so it cannot show silence or inaction constitutes assent and
agreement”; and (5) “WCU cannot show that [Pruett] not ‘opting out’ of the new
arbitration clause constitutes assent” based on WCU’s use of the phrase “whichever
is sooner” because the opening of his account in 1991 would have been the “sooner”
date, making timely opting out impossible. WCU replied, and each party submitted
affidavits and supplemental authority involving cases outside this jurisdiction
addressing similar factual situations.

¶12 After a nonevidentiary hearing, the circuit court entered its written
order denying WCU’s motion to compel arbitration. The court’s decision was based
on several factors. First, it concluded that WCU’s attempts “to apply the Arbitration
Clause retroactively to claims that accrued before the clause came into existence”
failed because “the language of the Arbitration Clause itself does not state that the
clause will apply retroactively to accrued claims.” WCU argued that the Notice,
which stated that the Arbitration Clause “applies to all claims that are filed or
initiated on or after the effective date, even if the claim arises out of, affects, or
relates to conduct that occurred prior to the effective date,” operated to apply the
Arbitration Clause retroactively to Pruett’s claims. (Formatting altered.) The court
disagreed, noting that “it is the language of the Arbitration Clause itself—not the
cover letter—that governs the parties’ agreement.” In general, the court found
“particularly persuasive” the reasoning of the Sixth Circuit Court of Appeals in
Sevier County Schools Federal Credit Union v. Branch Banking and Trust Co.,
990 F.3d 470 (6th Cir. 2021), which we discuss in further detail below.

7
No. 2022AP887

¶13 Next, the circuit court concluded that WCU’s attempts to apply the
Arbitration Clause retroactively were “not reasonable and would violate the duty of
good faith and fair dealing.” Finally, the court determined that Pruett’s failure to
opt out of the Arbitration Clause did not evidence his assent to be bound because
the deadline had already passed for Pruett to opt out at the time the Notice was
issued. WCU appeals.6

DISCUSSION

¶14 As noted above, on appeal, WCU presents five issues for our review.
The first question before us—one of first impression in this state—is whether the
change-of-terms provision in the parties’ Agreement provided WCU with the
contractual authority to unilaterally add the Arbitration Clause to the parties’
contract.

¶15 WCU’s briefing is ambiguous as to the second question—whether
Pruett’s failure to opt out of the Arbitration Clause and his continued use of his
WCU account constitutes his agreement to the terms of the Arbitration Clause.
WCU predominantly argues that the change-of-terms provision authorized it to add
the Arbitration Clause: “Specifically, [WCU] implemented the arbitration
provision pursuant to its previously agreed-upon authority to amend its Agreement
and provided Pruett with notice clearly directing his attention to the addition of the
arbitration provision, its application to ‘any dispute’ related to his membership and
accounts, and the opt-out procedure.” In general, then, WCU relies on what the
Agreement allowed it to do. Elsewhere, however, WCU argues that, wholly

6
A circuit court’s order denying a request to compel arbitration and stay a pending
lawsuit—a WIS. STAT. § 788.02 special proceeding—is final for purposes of appeal. L.G. v.
Aurora Residential Alts., Inc., 2019 WI 79, ¶¶1, 22, 26-27, 387 Wis. 2d 724, 929 N.W.2d 590.

8
No. 2022AP887

separate from the change-of-terms provision, WCU was authorized to modify its
contract with its members pursuant to general principles of contract law: “No
matter what the original contract provided, parties can certainly add new terms—
including arbitration provisions—by the same means they entered into a contract to
begin with: by offer, acceptance and consideration.” While this argument
seemingly relates more to the first question as opposed to the second, we will
nonetheless address both questions.

¶16 As to the first question, we conclude, for the reasons that follow, that
WCU’s contractual authority to “change the terms of this Agreement” did not
authorize it to unilaterally add the Arbitration Clause absent evidence that the
Arbitration Clause was the type of change contemplated by the parties at the time
of the original Agreement. No evidence has been presented that the Arbitration
Clause involved terms that were previously in the Agreement or were contemplated
by the parties at its inception. Therefore, WCU did not have the contractual
authority under the change-of-terms provision to unilaterally add the Arbitration
Clause, and the Arbitration Clause is not a part of WCU’s contract with Pruett.

¶17 As to the second question, to the extent WCU argues that Pruett’s
failure to opt out of the Arbitration Clause and his continued use of his WCU
account constitutes his assent to the modified Agreement, we disagree. WCU’s
purported offer to modify its Agreement with its members did not provide sufficient
clarity to reasonably convey to Pruett what was required such that we can infer
assent to the modification from his silence. Therefore, the Arbitration Clause may

9
No. 2022AP887

not be enforced against him.7 Accordingly, the circuit court properly denied WCU’s
motion to compel arbitration. See State v. Holt, 128 Wis. 2d 110, 124, 382 N.W.2d
679 (Ct. App. 1985) (we may affirm based on reasoning other than that used by the
circuit court if the court reached the proper result), superseded by statute on other
grounds, WIS. STAT. § 940.225(7).

I. The Law of Arbitration in Wisconsin

¶18 “[A]rbitration ordinarily is understood to refer to a proceeding
voluntarily undertaken by parties who want a dispute determined on the merits of
the case by an impartial decision maker of their choosing, which decision the parties
agree to accept as final and binding.” Stradinger v. Whitewater, 89 Wis. 2d 19, 31,
277 N.W.2d 827 (1979). Accordingly, “[a]rbitration agreements are ‘a matter of
contract.’” Midwest Neurosciences Assocs., LLC v. Great Lakes Neurosurgical
Assocs., LLC, 2018 WI 112, ¶40, 384 Wis. 2d 669, 920 N.W.2d 767 (citation
omitted); see also Employers Ins. of Wausau v. Jackson, 190 Wis. 2d 597, 610-11,
527 N.W.2d 681 (1995) (“[A]rbitration is meant to be a swift and inexpensive
process that is guided by a contractual agreement.”). As a result, arbitration
agreements—including the validity of such agreements—are subject to principles
of state contract law to determine whether an agreement to arbitrate has been formed

7
Given our decision on the first two questions, we conclude that it is unnecessary for us
to separately resolve the three remaining issues. WCU argued that the Arbitration Clause
“encompasses all claims and must therefore apply retroactively.” As noted above, the circuit court
did not agree. Because we conclude that there was no valid agreement to arbitrate between the
parties, we need not resolve the question of whether the Arbitration Clause would be retroactive.
For the purpose of our decision and based on WCU’s assertions, however, we will assume, without
deciding, that the Arbitration Clause would apply retroactively.

We resolve the two remaining issues—whether retroactive application of the Arbitration
Clause is unreasonable and in violation of the contractual duty of good faith and fair dealing and
whether the language in the Agreement is sufficiently clear to allow an opportunity for a member
to timely opt out of the clause—within our review of the first two questions.

10
No. 2022AP887

in the first instance and to determine the scope of the arbitration provision as
expressed by the language of the agreement. See Midwest Neurosciences Assocs.,
384 Wis. 2d 669, ¶45; Tinder v. Pinkerton Sec., 305 F.3d 728, 733-34 (7th Cir.
2002); Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (2009); see also
Employers Ins., 190 Wis. 2d at 611 n.5 (noting that Wisconsin courts may look to
“federal court interpretations” of the Federal Arbitration Act “as an aid in the
resolution” of cases regarding the Wisconsin Arbitration Act).

¶19 In its briefing before this court, WCU focuses on the admittedly strong
federal and Wisconsin policies favoring arbitration. See, e.g., Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625-26 (1985); First Weber
Grp., Inc. v. Synergy Real Est. Grp., LLC, 2015 WI 34, ¶24, 361 Wis. 2d 496, 860
N.W.2d 498. “Wisconsin’s ‘policy of encouraging arbitration as an alternative to
litigation,’ however, is not limitless.” Midwest Neurosciences Assocs., 384 Wis. 2d
669, ¶42 (citation omitted). “[P]arties cannot be ‘required to submit any dispute to
arbitration unless [they have] agreed to do so’” and “only those disputes that the
parties have agreed to so submit to arbitration are relegated to proceed in that
forum.” Id., ¶¶40, 43 (alteration in original; citations omitted); see also AT&T
Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 648 (1986) (“[A]
party cannot be required to submit to arbitration any dispute which he [or she] has
not agreed so to submit.” (citation omitted)); Morgan v. Sundance, Inc., 142 S. Ct.
1708, 1713 (2022) (“‘[P]olicy favoring arbitration’ does not authorize federal courts
to invent special, arbitration-preferring procedural rules.”). Thus, the policy
favoring arbitration applies only where the parties have indeed agreed to arbitration.
See Morgan, 142 S. Ct. at 1713 (“The federal policy is about treating arbitration
contracts like all others, not about fostering arbitration.”); Applied Energetics, Inc.
v. NewOak Cap. Mkts., LLC, 645 F.3d 522, 526 (2d Cir. 2011) (“In other words,

11
No. 2022AP887

while doubts concerning the scope of an arbitration clause should be resolved in
favor of arbitration, the presumption does not apply to disputes concerning whether
an agreement to arbitrate has been made.”).

¶20 A motion to compel arbitration, therefore, “involves issues of contract
interpretation and a determination of substantive arbitrability, questions of law we
review de novo.” Cirilli v. Country Ins. & Fin. Servs., 2009 WI App 167, ¶10, 322
Wis. 2d 238, 776 N.W.2d 272. A court, not an arbitrator, determines whether an
agreement to arbitrate has been formed. Midwest Neurosciences Assocs., 384
Wis. 2d 669, ¶¶43, 65. The burden to prove that the parties agreed to arbitration
rests with the moving party. See id., ¶80.

II. The Change-of-Terms Provision in the Agreement Did Not Authorize WCU to
Add the Arbitration Clause.

¶21 First, Pruett argues that WCU did not have the authority to add the
Arbitration Clause without his express agreement because “[t]he plain language of
WCU’s change-of-terms [c]lause permitted WCU only to unilaterally ‘change terms
of this Agreement,’ not to unilaterally ‘add new terms that are not the subject of this
Agreement,’ such as the Arbitration Clause.” Conversely, WCU argues that the
change-of-terms provision is not so limited; instead, changing or amending a
contract “necessarily includes adding new terms or removing old terms.” According
to WCU, the language of the change-of-terms provision was broad enough to
encompass adding the Arbitration Clause through the notice provisions in the
original Agreement.

¶22 Although the question before us is an issue of first impression in this
state, the issue itself is not a novel one and has been addressed by courts in other
jurisdictions. See State v. Muckerheide, 2007 WI 5, ¶7, 298 Wis. 2d 553, 725

12
No. 2022AP887

N.W.2d 930 (“Although a Wisconsin court may consider case law from such other
jurisdictions, obviously such case law is not binding precedent in Wisconsin, and a
Wisconsin court is not required to follow it.”). As noted above, the circuit court
relied on the Sixth Circuit’s decision in Sevier as persuasive authority in support of
its decision to deny WCU’s motion. In Sevier, the case also involved a later-added
arbitration provision where the account holders were notified of the amendment to
the terms of their agreement and told that continued use of their account with the
Branch Banking & Trust Company constituted acceptance. Sevier, 990 F.3d at 473-
74, 476-77. In reversing the district court’s order to compel arbitration, the Sixth
Circuit explained that the district court improperly “place[d] the burden on the
[consumers] to … object to a company’s unilaterally adopted arbitration policy or
risk being found to have agreed to it. This is not how contracts are formed.” Id. at
477-78 (citation omitted). According to the court, the company’s

discretion under the original change-of-terms provision to
amend the terms is not unlimited, but is subject to two
requirements: (1) that any changes be reasonable, and
(2) that [the company] exercise its discretion to make such
changes in a manner consistent with the implied covenant of
good faith and fair dealing.

Id. at 479.

¶23 The Sixth Circuit determined that neither of these requirements had
been satisfied. In addressing the reasonableness of the arbitration provision, the
Sixth Circuit observed that it “could not ‘assume … that notice alone, without some
affirmative evidence of the depositor’s consent, could bind a depositor to a
significant change regarding matters that were not addressed in the original contract
at all.’” Id. (citation omitted). The court also noted that there was no opt-out
provision available. Id. at 480. Further, it concluded that the late addition of the
arbitration provision violated the implied covenant of good faith and fair dealing

13
No. 2022AP887

because the provision was a significant change—deprivation of the right to a jury
trial and to select a judicial forum for dispute resolution—not contemplated in the
original contract. Id. at 480-81. The company “did not act reasonably when it added
the arbitration provision years after the Plaintiffs’ accounts were established by [its
predecessor], thus violating the implied covenant of good faith and fair dealing in
its attempt to use the original change-of-terms provision to force the Plaintiffs to
arbitrate.” Id. at 480.

¶24 In reaching its decision, the Sevier court relied heavily on Badie v.
Bank of America, 79 Cal. Rptr. 2d 273 (Cal. Ct. App. 1998). In Badie, the
California Courts of Appeal found that a similar change-in-terms provision did not
give the bank the right to add an arbitration provision to the account holder’s original
agreement. Id. at 278, 291. There, too, the bank added an arbitration clause to its
credit card agreements and gave notice via a mailing to cardholders in their monthly
statements. Id. at 275-76.

¶25 The Badie court explained that “a party with the unilateral right to
modify a contract” does not have “carte blanche to make any kind of change
whatsoever as long as a specified procedure is followed.” Id. at 281. Instead, the
change must be “a modification whose general subject matter was anticipated when
the contract was entered into.” Id.

Where, as in this case, a party has the unilateral right to
change the terms of a contract, it does not act in an
“objectively reasonable” manner when it attempts to
“recapture” a forgone opportunity by adding an entirely new
term which has no bearing on any subject, issue, right, or
obligation addressed in the original contract and which was
not within the reasonable contemplation of the parties when
the contract was entered into. That is particularly true where
the new term deprives the other party of the right to a jury
trial and the right to select a judicial forum for dispute
resolution.

14
No. 2022AP887

Id. at 284. According to the court, “there [was] nothing about the original terms
that would have alerted a customer to the possibility that the [b]ank might one day
in the future invoke the change of terms provision to add a clause that would allow
it to impose [alternative dispute resolution] on the customer.” Id. at 287. To the
contrary, “the method and forum for dispute resolution—a matter which is collateral
to that relationship—[was] not discussed at all” in the original agreement. Id.
Therefore, the court reasoned that it could not assume that “notice alone, without
some affirmative evidence of the depositor’s consent, could bind a depositor to a
significant change regarding matters that were not addressed in the original contract
at all.” Id. at 282.

¶26 Likewise, the court in Sears Roebuck & Co. v. Avery, 593 S.E.2d 424
(N.C. Ct. App. 2004), as cited by the circuit court and Pruett, also relied on the
reasoning in Badie to reach the same result. In Sears, the issue was whether Sears
Roebuck and Co. validly added an arbitration provision to the terms of its credit
card agreement. Sears, 593 S.E.2d at 426. The original agreement “contained a
‘Change of Terms’ provision” that stated: “As permitted by law, [Sears] has the
right to change any term or part of this agreement, including the rate of Finance
Charge, applicable to current and future balances. [Sears] will send me a written
notice of any such changes when required by law.” Id. The cardholder agreement
“made no reference to arbitration or any other dispute resolution procedures and did
not in any manner address the forum in which a customer could have disputes
resolved.” Id. As in this case, Sears averred that it sent this notice to the defendant
of the addition of an arbitration provision to the defendant’s credit card agreement,
but the defendant claimed that she was “unaware of any correspondence regarding
changes to her account.” See id.

15
No. 2022AP887

¶27 Applying Arizona law, as required by the credit card agreement, the
North Carolina Court of Appeals held, based on its review of Arizona appellate
decisions regarding standardized contracts and modifications to those contracts, that
“the Arizona appellate courts would adopt the same reasoning as the Badie court
and would reach the same result.” Sears, 593 S.E.2d at 428-29. The court observed
that, according to one commentator, “a breach of the requirement of good faith
occurs ‘when discretion is used to recapture opportunities forgone upon
contracting’” and that “[c]onsistent with good faith, a party may exercise a
discretionary power ‘for any purpose within the reasonable contemplation of the
parties at the time of formation—to capture opportunities that were preserved upon
entering the contract, interpreted objectively.’” Id. at 432 (citing Steven J. Burton,
Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 HARV.
L. REV. 369, 373 (1980)). This position, according to the court, is “consistent with
the definition of bad faith set out in the Restatement (Second) of Contracts 2d § 205
cmt. d (1981)[,]” which includes “abuse of a power to specify terms.” Sears, 593
S.E.2d at 432 (citation omitted).

¶28 As a result, the court concluded that reading the “Change of Terms”
provision to “permit Sears to add wholly new terms to its cardholder agreement”
“arguably would render the contract illusory” because one party would have the
power to unilaterally add any provisions. Id. Thus, it held that “the parties did not
intend that the ‘Change of Terms’ provision in the original agreement would allow
Sears to unilaterally add completely new terms that were outside the universe of the
subjects addressed in the original cardholder agreement.” Id. at 434. Therefore,
“[b]ecause the arbitration clause was a wholly new term that did not fall within the
universe of subjects included in the original agreement, [Sears] did not have

16
No. 2022AP887

authority under its ‘Change of Terms’ provision to condition continued use of its
credit card on acceptance of the arbitration clause.” Id.

¶29 In Maestle v. Best Buy Co., No. 79827, 2005-Ohio-4120, 2005 WL
1907282 (Ohio Ct. App. Aug. 11, 2005), also cited by Pruett, the Ohio Court of
Appeals reached the same conclusion. There, the original cardholder agreement
was amended, based on a change-of-terms provision, to include a “comprehensive
arbitration provision.” Id. at *1. The Maestle court ultimately concluded that the
change-of-terms provision did not authorize the addition of an arbitration clause, for
two reasons. First, “since the amendment provision referenced only changes to
payments, charges, fees and interest,” the cardholders could not anticipate amending
the agreement to add an arbitration clause. Id. at *6. Second, “nowhere in the
contract is there a clause addressing forums of dispute.” Id. Accordingly, the court
concluded that “there was no ‘meeting of the minds’ as to inclusion of the arbitration
clause at the inception of the contract.” Id.

¶30 The court in Follman v. World Financial Network National Bank,
721 F. Supp. 2d 158 (E.D.N.Y. 2010), as Pruett notes, reached the same result. That
case, too, involved a credit card account cardholder agreement. Id. at 159. As the
cardholder agreement contained a choice-of-law provision, the United States
District Court for the Eastern District of New York applied Ohio law, including the
Maestle decision, to determine whether a valid arbitration agreement existed
between the parties. Follman, 721 F. Supp. 2d at 161. In doing so, it noted that
“Maestle is properly read as imposing substantive limitations on the type of terms
that may be added or amended pursuant to a change-of-terms provision in a
cardholder agreement.” Follman, 721 F. Supp. 2d at 164. Importantly, the court
failed to find differences in the phrasing of the change-of-terms provisions
significant: “Unlike the change-of-terms provision before the Maestle court, the

17
No. 2022AP887

instant provision specifies that defendant may ‘add,’ in addition to change, the terms
of the cardholder agreement. The change-of-terms provision in Maestle, on the
other hand, only permitted the Bank to ‘change or amend,’ but not add, terms.”
Follman, 721 F. Supp. 2d at 165. According to the court, “the issue is not whether
defendant may add new terms, but whether the terms added are the types of terms
the contract contemplated defendant could add.” Id.

¶31 Further, the court refused to find a term in the original cardholder
agreement that “set out a cardholder’s liability for defendant’s attorneys’ fees and
court costs” sufficient to “have permitted plaintiff to anticipate the substantive
amendment to her rights that the added arbitration amendment effected.” Id. at 165-
66. According to the court, while the original cardholder agreement explained the
defendant’s rights in the event that it enforced those rights against a cardholder, the
agreement did not “address a cardholder’s dispute resolution rights against [the]
defendant” and therefore did not “address the same substantive rights that the
arbitration provision addresses.” Id. at 166. Thus, the court concluded that since
“the arbitration provision falls outside the scope of the universe of terms
contemplated by the original agreement, the change-of-terms provision did not
authorize defendant to add it. Accordingly, the arbitration amendment is not part of
the agreement between the parties, and defendant may not enforce the provision
against plaintiff.” Id.

¶32 Finally, Pruett cites to Canteen v. Charlotte Metro Credit Union, No.
21-CVS-6056, 2021 WL 7967397 (N.C. Super. Ct. Sept. 7, 2021). In Canteen, the
court addressed a substantially identical change-of-terms provision to the provision
at issue in this case. The court found that the use of the word “change” in the
provision referred to a “change in the terms of this Agreement,” but the provision
did not “use the word ‘add’ or indicate any power to unilaterally make a new

18
No. 2022AP887

agreement.” Id. at *5. According to the court, even if the distinction between
“change” and “add” rendered the provision ambiguous, the ambiguity would be
resolved against the drafter of the agreement—the credit union. Id. at *6. The court
further concluded that the credit union “unilaterally added the arbitration provision
without obtaining any affirmative assent”; therefore, the court could not

assume that [the plaintiff’s] silence constituted assent
because adding a clause stripping accountholders of the right
to a jury trial, which was not addressed in the original
agreement, is not objectively reasonable and was done to
“recapture a foregone opportunity,” particularly where [the
credit union] is attempting to enforce the clause retroactively
to past transactions and existing claims.

Id. at *7 (citations omitted).8

¶33 Based on the persuasive reasoning in the aforementioned cases, and
under the standard principles of contract law in Wisconsin, we agree with Pruett that
WCU’s change-of-terms provision in its Agreement did not authorize it to
unilaterally add the Arbitration Clause. “Contract interpretation generally seeks to
give effect to the parties’ intentions.” Tufail v. Midwest Hosp., LLC, 2013 WI 62,
¶25, 348 Wis. 2d 631, 833 N.W.2d 586. Thus, we begin with the language of the
Agreement. “Where the terms of a contract are clear and unambiguous, we construe
the contract according to its literal terms,” construing it “according to its plain or
ordinary meaning” and “consistent with ‘what a reasonable person would
understand the words to mean under the circumstances.’” Id., ¶¶26, 28 (citation
omitted). “We presume the parties’ intent is evidenced by the words they chose, if
those words are unambiguous.” Id., ¶26 (citation omitted). If, however, the terms
8
After the parties’ briefing in this case was complete, the North Carolina Court of Appeals
reversed the superior court’s decision in Canteen v. Charlotte Metro Credit Union, No. 21-CVS-
6056, 2021 WL 7967397 (N.C. Super. Ct. Sept. 7, 2021). See Canteen v. Charlotte Metro Credit
Union (Canteen II), 881 S.E.2d 753 (N.C. Ct. App. 2022). We discuss Canteen II in more detail
below.

19
No. 2022AP887

of the contract are ambiguous—in other words, “fairly susceptible of more than one
construction”—then “evidence extrinsic to the contract itself may be used to
determine the parties’ intent.” Id., ¶27 (citation omitted).

¶34 As noted above, the change-of-terms provision states that WCU “may
change the terms of this Agreement.” At issue, then, is the meaning of the word
“change.” The common definition of the word “change” suggests that something
must already exist in order for it to be changed: “to make different in some
particular,” “to make radically different,” “to give a different position, course, or
direction to,” “to replace with another,” “to make a shift from one to another,” and
“to undergo a modification of.” Change, MERRIAM-WEBSTER,
https://www.merriam-webster.com/dictionary/change (last visited October 10,
2023). Thus, according to the plain meaning of the change-of-terms provision in
the Agreement, the parties agreed that WCU was authorized to “make different,”
“replace,” or modify the terms that existed already in “this Agreement.” The
change-of-terms provision does not state that WCU may “add new terms.”

¶35 WCU disagrees, arguing that the “language explicitly advises
members that [WCU] could change the terms of the Agreement at any time” and
that Pruett’s “contention that ‘change’ and ‘amendment’ of the Agreement means
only alterations of existing terms is absurd.”9 In support, WCU cites to Rudolph v.
Wright Patt Credit Union, 175 N.E.3d 636 (Ohio Ct. App. 2021). There, the

9
WCU supports this contention by speculating that “[t]he Founding Fathers would be
surprised to learn that the procedure for adopting ‘amendments’ to the Constitution in Article V
was limited to changing already existing provisions in the Constitution.” WCU continues, “Clearly,
an amendment to the Constitution includes the possibility of adding entirely new terms, and the
same conclusion applies to amendments or changes to any contract or agreement.” We agree with
Pruett that this comparison is inapt. The construction and interpretation of a contract between
private parties is not reasonably analogous under the circumstances to amending the United States
Constitution under Article V.

20
No. 2022AP887

Second District Court of Appeals of Ohio upheld the lower court’s decision ordering
the case to arbitration after it determined that “while the 2015 agreement lacked an
arbitration clause, Rudolph did agree that ‘[e]xcept as prohibited by applicable law,’
[the credit union] could ‘change the terms of this Agreement and the other Account
Documents at any time.’” Id. at 646. The court was not persuaded by Rudolph’s
argument that a “new” term is not a “change” of terms. Id.

¶36 Citing decisions from other jurisdictions, the court noted that the
credit union’s 2015 agreement did not contain language limiting the specific types
of changes that could be made and noted that there was no legal requirement that
the contract state that a party may add new terms rather than simply change its terms.
Id. at 647. Accordingly, the court concluded that because “the 2015 agreement …
did discuss enforcement and dispute resolution, … the change was not completely
unanticipated” and the plaintiff “could have anticipated that [the credit union] might
later change the agreement to add a different avenue of dispute resolution” because
the agreement “contained a section specifying where disputes were to be filed.” Id.
at 647, 649.

¶37 Accordingly, WCU not only presents the semantic argument noted
above, but it also claims that alternative dispute resolution was contemplated in its
Agreement prior to the Arbitration Clause. WCU’s Agreement contains a
“Governing Law” provision, which states that the laws of Wisconsin govern the
Agreement and further states that “you agree that any legal action regarding this

21
No. 2022AP887

Agreement shall be brought in the county in which the Credit Union is located.” 10
Citing to Rudolph, WCU argues that “[b]ecause there is a section specifying where
disputes must be filed, Pruett should have anticipated that [WCU] would change the
Agreement to include an arbitration agreement so that legal actions would be
resolved in arbitration rather than in a civil court in a particular county.”

¶38 This issue was also addressed by the court in Canteen v. Charlotte
Metro Credit Union (Canteen II), 881 S.E.2d 753 (N.C. Ct. App. 2022). As noted
previously, see supra note 8, after the parties’ briefing in this case was complete,
the North Carolina Court of Appeals reversed the lower court’s decision in Canteen.
The basis for the court’s reversal was that the agreement in that case contained a
“Governing Law” provision, which is substantially identical to the governing law
provision in this case and which provided:

This Agreement is governed by … the laws … and
regulations of the state in which the credit union’s main
office is located …. As permitted by applicable law, you
agree that any legal action regarding this Agreement shall be
brought in the county in which the credit union is located.

Canteen II, 881 S.E.2d at 755. The court noted distinctions in the case law where
there was no mention of the method or forum for dispute resolutions. Id. at 756.
Ultimately, the court concluded that

10
Pruett notes that before the circuit court, WCU argued only the state law language—that
the laws of Wisconsin govern the Agreement—as a basis for why alternative dispute resolution was
previously contemplated. Now, Pruett asserts, WCU argues for the first time on appeal “that
additional language in the 2018 Agreement that ‘you agree that any legal action regarding this
Agreement shall be brought in the county in which the Credit Union is located,’ somehow made
alternative dispute resolution a ‘term of this Agreement.’” See State Farm Mut. Auto. Ins. Co. v.
Hunt, 2014 WI App 115, ¶32, 358 Wis. 2d 379, 856 N.W.2d 633 (“Arguments raised for the first
time on appeal are generally deemed forfeited.” (citation omitted)); State v. Rogers, 196 Wis. 2d
817, 827, 539 N.W.2d 897 (Ct. App. 1995) (“We will not, however, blindside trial courts with
reversals based on theories which did not originate in their forum.”). As we are affirming the circuit
court, we will not address the forfeiture issue further.

22
No. 2022AP887

the Agreement here did contain a ‘Governing Law’
provision, which outlined the appropriate choice of law and
forum for settling disputes. Plaintiff was therefore on notice
that [the credit union] could change this provision to allow
for disputes to be settled, not in the court where [the credit
union] was located, but rather in another forum, including
before an arbitrator.

Id.

¶39 We do not find the Canteen II majority’s reasoning persuasive. In
this case, we conclude that nothing in the Agreement allowed WCU to add either of
the new provisions requiring arbitration of disputes—if requested by WCU or a
member—or waiving class action lawsuits. Pursuant to the plain language of the
contract, the Agreement may be changed or modified where a term was previously
addressed in the Agreement, but WCU may not add entirely new terms not
contemplated by the parties. Accordingly, we do not agree with the Canteen II
court’s ultimate conclusion that the new term was a change—rather than an
addition—to the agreement, nor do we agree with the outcome in that case.

¶40 As that legal framework applies here, there is no question that the
contract provides that the laws of the State of Wisconsin apply to the Agreement;
however, that statement does not provide for a particular forum to resolve disputes.
Further, there is no question that under the Agreement any legal action shall be
brought in the county in which the credit union is located. But, again, the Arbitration
Clause does not change or modify either of those requirements. For example, the
Agreement was not modified to apply Illinois law or provide that matters could be
heard in all counties of this state, which would encompass modifications or changes
to the original Agreement.

¶41 Instead, the Arbitration Clause adds substantive limitations to the
manner in which a legal action may be heard and the type of claim that can be filed.

23
No. 2022AP887

The Arbitration Clause introduces additions to the contract limiting the rights of the
parties on issues that were not contemplated in the original Agreement—arbitration
and class actions—rather than amending existing terms. See RESTATEMENT
(SECOND) OF CONTRACTS § 211 cmt. f (AM. L. INST. 1981) (“Although customers
typically adhere to standardized agreements and are bound by them without even
appearing to know the standard terms in detail, they are not bound to unknown terms
which are beyond the range of reasonable expectation.”). As Pruett argues, “[a]
customer who agreed to a term involving the location of the court where he could
file suit would not reasonably understand that doing so would permit WCU to later
unilaterally remove the right to go to court at all.” See Sears, 593 S.E.2d at 434
(citing Badie, 79 Cal. Rptr. 2d at 289) (“Nothing in the original agreement would
have alerted [a party] that by allowing Sears to ‘change any term or part’ of the
agreement, ‘[the party] might someday be deemed to have agreed to give up the
right to a jury trial or to any judicial forum whatsoever.”). WCU’s suggestion that
this reading of the contract is “absurd” has no basis in law given, as Pruett notes,
that this “construction is the same one reached by the courts in Badie, Maestle,
Sears, and Sevier, and it uses the plain meanings of the words WCU chose.”11

¶42 Additionally, we find the dissent’s reasoning in Canteen II to be
particularly persuasive. The dissent explained that “the Agreement allowed [the
credit union] to ‘change the terms of this Agreement[,]’ and stated [the credit union]
would notify customers of ‘any change in terms,’ but did not put customers on notice

11
Even if an argument could be made that the change-in-terms provision in the Agreement
was ambiguous, that ambiguity would be construed against WCU. See Tufail v. Midwest Hosp.,
LLC, 2013 WI 62, ¶27, 348 Wis. 2d 631, 833 N.W.2d 586 (“A contract provision is ambiguous if
it is fairly susceptible of more than one construction.” (citation omitted)); Maryland Arms Ltd.
P’ship v. Connell, 2010 WI 64, ¶44, 326 Wis. 2d 300, 786 N.W.2d 15 (“The principle that
ambiguities are construed against the drafter is a ‘deeply rooted doctrine’ of contract
interpretation.” (citation omitted)).

24
No. 2022AP887

that it would add additional, uncontemplated terms.” Canteen II, 881 S.E.2d at 758
(Arrowood, J., dissenting) (second alteration in original). Importantly, the dissent
explained:

[N]othing in the Agreement allowed [the credit union] to add
new provisions to the Agreement and make those new
additions apply retroactively to protect their past actions.
The majority’s opinion improperly interprets the Agreement
to allow for this occurrence and sanctions such behavior by
allowing a financial institution to protect itself from actions
for which it is already being sued for in other litigation.

Id. (Arrowood, J., dissenting). The dissent noted that “[t]his view is consistent with
the previous holdings of the [c]ourt,” citing the court’s own prior decision in Sears
where the court concluded that “allowing Sears to ‘unilaterally insert’ a ‘wholly new
term’ would ‘ignore the requirement of good faith implied in all contracts of
adhesion[,]’ be contrary to ‘black letter contract law[,]’ and ‘render the contract
illusory.’” Canteen II, 881 S.E.2d at 758 (Arrowood, J., dissenting) (alterations in
original; quoting Sears, 593 S.E.2d at 432).

¶43 Here, by adding the Arbitration Clause to the Agreement and making
the added provisions retroactive—an act that was also of “particular concern” to the
circuit court—WCU is attempting to protect itself from actions for which it could
be liable under the original agreement.12 The Arbitration Clause also limits a
member’s ability to protect him- or herself—by allowing WCU to force
arbitration—and the member’s ability to protect other members—by removing the
option for class action lawsuits.

12
Importantly, Pruett argues that “[t]he purported new agreement also tacitly
acknowledged that WCU’s fee practices had violated its existing contract; the new agreement
expressly added terms allowing WCU to charge the very fees that [Pruett] has alleged were
improper under the then existing agreement.” See supra note 4.

25
No. 2022AP887

¶44 In Wisconsin, “every contract carries with it a duty of good faith and
fair dealing,” Kreckel v. Walbridge Aldinger Co., 2006 WI App 168, ¶20, 295
Wis. 2d 649, 721 N.W.2d 508, meaning “that a party [must] perform its obligations
and exercise its discretion under the contract in good faith,” Acheron Med. Supply,
LLC v. Cook Med. Inc., 958 F.3d 637, 645 (7th Cir. 2020). As other courts have
recognized, this requirement is not satisfied “when discretion is used to recapture
opportunities forgone upon contracting.” See Sears, 593 S.E.2d at 432; Sevier, 990
F.3d at 480-81; Badie, 79 Cal. Rptr. 2d at 284. Instead, we agree that “[a] party
may exercise a discretionary power ‘for any purpose within the reasonable
contemplation of the parties at the time of formation—to capture opportunities that
were preserved upon entering the contract, interpreted objectively.’” Sears, 593
S.E.2d at 432 (citation omitted).

¶45 We conclude that WCU did not act in good faith when it attempted to
add a new term to the original Agreement seeking to retroactively deprive another
party of a legal right.13 WCU’s contractual authority to “change the terms of this
Agreement” did not authorize it to unilaterally add the Arbitration Clause absent
evidence that the Arbitration Clause was the type of change contemplated by the
parties at the time of the original Agreement. For the reasons discussed above, we
are not convinced that anything reasonably related to the Arbitration Clause was
previously contemplated. Thus, we agree with the Sevier court’s analysis that
allowing WCU to add an uncontemplated term via the change-of-terms provision
would “place the burden on the [consumers] to … object to a company’s unilaterally

13
WCU argues that it did not violate the duty of good faith and fair dealing because “there
is no inherent duty of good faith with respect to contract formation.” See Hauer v. Union State
Bank of Wautoma, 192 Wis. 2d 576, 596, 532 N.W.2d 456 (Ct. App. 1995). As we consider this
issue with regard to the change-of-terms provision, we are not suggesting that WCU failed to act
in good faith with regard to contract formation. We will address this argument no further.

26
No. 2022AP887

adopted arbitration policy or risk being found to have agreed to it. This is not how
contracts are formed.” See Sevier, 990 F.3d at 477-78 (citation omitted). Under the
facts here, we cannot “assume … that notice alone, without some affirmative
evidence of [Pruett’s] consent, could bind [Pruett] to a significant change regarding
matters that were not addressed in the original contract at all,” especially where the
later-added Arbitration Clause sought to deprive Pruett of the right to a jury trial
and to select a judicial forum for dispute resolution.14 See id. at 479-81 (citing
Badie, 79 Cal. Rptr. 2d at 273).

¶46 Even if we construed the Agreement’s reference to the county in
which legal action shall be brought to qualify as a “term” evidencing that the parties
contemplated the addition set forth in the Arbitration Clause, we conclude that
WCU’s failure to act in good faith precludes that finding under the circumstances
here. WCU’s addition of the Arbitration Clause appears to have been undertaken
to “‘recapture’ a foregone opportunity,” see Sevier, 990 F.3d at 481 (citation
omitted), and protect WCU retroactively from alleged wrongdoing. Thus, WCU
was not authorized by the terms of the Agreement to unilaterally add the Arbitration
Clause, and something more than silence—i.e., affirmative assent—was required to
demonstrate that Pruett agreed to the new terms. See Midwest Neurosciences
Assocs., 384 Wis. 2d 669, ¶¶43-44 (“Arbitration is strictly ‘a matter of consent,’ and
thus ‘is a way to resolve those disputes—but only those disputes—that the parties
have agreed to submit to arbitration.’” (citation omitted)). Absent Pruett’s
affirmative assent, WCU failed to meet its burden to prove that an agreement to

14
To the extent it could be argued that the Sevier court’s reasoning hinged on the
unavailability of an opt-out provision, as we explain further below, the opt-out provision provided
by WCU was inoperable. Therefore, it does not factor into our analysis here.

27
No. 2022AP887

arbitrate was formed under the change-of-terms provision that would cover the
dispute in this case.

III. WCU Failed to Meet its Burden to Prove that Pruett Clearly Manifested
Assent to Arbitration.

¶47 Separate from the change-of-terms provision, WCU argues—
presumably in the alternative—that the Arbitration Clause was a proposed contract
modification that it invited its members to accept and that it provided members with
the opportunity to opt out of being bound to the modified terms. In Wisconsin, the
existence of an agreement to modify a contract is “established in the same way as
any other contract.” Kohlenberg v. American Plumbing Supply Co., 82 Wis. 2d
384, 393, 263 N.W.2d 496 (1978). “Modification must be made by the contracting
parties or someone duly authorized to modify, and one party to a contract cannot
alter its terms without the assent of the other parties; the minds of the parties must
meet as to the proposed modification.” Nelsen v. Farmers Mut. Auto. Ins. Co., 4
Wis. 2d 36, 55, 90 N.W.2d 123 (1958) (citation omitted).

While the parties to a contract may modify it by a
subsequent contract which is shown by their acts, the acts
which are relied upon to modify a prior contract must be
unequivocal in their character. Acts which are ambiguous in
their character, and which are consistent either with the
continued existence of the original contract, or with a
modification thereof, are not sufficient to establish a
modification.

Id. at 56 (citation omitted).

¶48 According to WCU, “[a]n assent or acceptance of a contract offer can
be manifested by deed as well as by word.” See Hoffman v. Ralston Purina Co.,
86 Wis. 2d 445, 454, 273 N.W.2d 214 (1979). Here, WCU argues that Pruett’s
“silence and inaction operate as an acceptance” because “previous dealings” make
it “reasonable that the offeree should notify the offeror if he [or she] does not intend

28
No. 2022AP887

to accept.” Id. at 457 (citation omitted); see also RESTATEMENT (SECOND) OF
CONTRACTS § 69 & cmt. d (AM. L. INST. 1981) (“[T]he offeree’s silence is
acceptance, regardless of his [or her] actual intent, unless both parties understand
that no acceptance is intended.”). WCU further explains that “[t]he Seventh Circuit
has held contracts offered on a take-it-or-leave-it basis are valid agreements for the
applicability of the” Federal Arbitration Act and that the Seventh Circuit, applying
Wisconsin law, has also held that continued use of a product or service constitutes
acceptance of the terms of an agreement, including an arbitration provision. See
Tickanen v. Harris & Harris, Ltd., 461 F. Supp. 2d 863, 867 (E.D. Wis. 2006);
Delonge v. Time Warner Cable Bus. LLC, No. 13-CV-0988, 2014 WL 3890766 at
*2 (E.D. Wis. Aug. 6, 2014); see also ProCD, Inc. v. Zeidenberg, 86 F.3d 1447,
1452 (7th Cir. 1996).

¶49 WCU claims that it “notified Pruett that to reject the offer, he had a
‘duty to speak’ by informing [WCU] of his intent to opt out. The Notice advised
Pruett that his silence and the continued use of his account would demonstrate assent
to the arbitration provision.” Therefore, argues WCU, “Pruett’s actions can only
reasonably be construed as acceptance of the Agreement as he was given a clear
offer to arbitrate, a reasonable opportunity to reject that offer, and instruction that
silence and continued use of his account reflected acceptance of the terms.”

¶50 It is undisputed that Pruett did not attempt to opt out of the Arbitration
Clause, and he continued to use his WCU account after receiving Notice.15 While
we acknowledge that, in certain circumstances, failure to opt out of an arbitration

15
There remains a dispute regarding whether Pruett received the Notice that was sent to
him by mail. Pruett denies receiving it, but WCU presented evidence that the Notice was mailed
to him. See supra note 5. For the purpose of this decision, we will assume, without deciding, that
Pruett received the Notice sent to him by WCU.

29
No. 2022AP887

provision can constitute acceptance, under the circumstance in this case, WCU’s
purported offer was not sufficiently clear to reasonably convey what was required
of Pruett to demonstrate his assent to, or rejection of, the modified terms. We agree
with Pruett and the circuit court that the deadline given by WCU to opt out of the
Arbitration Clause was unclear. In particular, the Arbitration Clause, drafted by
WCU, provided that Pruett could opt out of the clause by sending “written notice
that you want to opt out of this provision of your [a]ccount Agreement within 60
days of account opening or within 60 days of receiving this notice, whichever is
sooner.” (Emphasis added.) It is undisputed that Pruett opened his account in 1991
and that the Notice of the Arbitration Clause was sent in 2021. Accordingly, the
circuit court reasoned:

A reasonable person would understand that 2021 is “later”
than 1991, not “sooner.” Thus, a person could reasonably
conclude, based on the plain language chosen by WCU, that
[members] had 60 days from account opening, which is the
“sooner” date, to opt out. Yet doing so was impossible
because when [Pruett] opened his account in 1991 the
Arbitration Clause did not even exist.

The court found “that ‘sooner’ plainly means the earlier date.”

¶51 WCU disagrees with the circuit court’s interpretation, calling it
“absurd” and asserting that it creates an unreasonable result, and WCU provides its
own interpretation of the language. However, other courts have reached the same
result as the circuit court based on similar language. See Duling v. Mid Am. Credit
Union, 530 P.3d 737, 749-50 (Kan. Ct. App. 2022); Canteen, No. 21-CVS-6056,
2021 WL 7967397 at *9-10. Thus, it is clear that the language “whichever is
sooner” could reasonably be interpreted differently than argued by WCU, i.e., the
language is ambiguous. See Tufail, 348 Wis. 2d 631, ¶27.

30
No. 2022AP887

¶52 Contrary to WCU’s assertion, the language in the Notice that “[t]he
Arbitration and Class Action Waiver Agreement provision is effective within 60
days of this notice … unless you opt out” does not resolve the confusion. We still
must consider the documents together, and the Notice does not specifically clarify
the opt-out deadlines. Therefore, WCU’s proposed contract modification remains
unclear, and any ambiguity must be construed against WCU as the contract’s
drafter. See Maryland Arms Ltd. P’ship v. Connell, 2010 WI 64, ¶44, 326 Wis. 2d
300, 786 N.W.2d 15 (“The principle that ambiguities are construed against the
drafter is a ‘deeply rooted doctrine’ of contract interpretation.” (citation omitted)).

¶53 However, we need not consider the proper interpretation of the
“whichever is sooner” language in the opt-out provision. The fact that the opt-out
provision was ambiguous and must therefore be construed against WCU supports
our conclusion that WCU failed to demonstrate that Pruett assented to its offer to
add the Arbitration Clause to its Agreement by Pruett’s failure to opt out and by his
continued use of his account after receiving the Notice. It is reasonable to believe
Pruett may have thought it futile to opt out or that the opt-out provision did not apply
to him based on one interpretation of the opt-out provision’s language. As Pruett
argues, we cannot presume “Pruett assented by not doing something that was
impossible, i.e., by not sending in an opt out [notice] when the deadline given to do
so was already in the past.”

¶54 We do not suggest that WCU could never enter into an arbitration
agreement with its members, but the cases on which WCU relies—Tickanen,
Delonge, ProCD, Inc.—are all distinguishable. Here, Pruett could not opt out
because the language of the opt-out provision made that impossible. Further, even
if Pruett stopped using his account or closed it in an attempt to opt out, his efforts
would be unsuccessful. According to the Notice and WCU, the only way for Pruett

31
No. 2022AP887

to reject the Arbitration Clause was to opt out in writing, not close the account. Even
then, Pruett would still be responsible for the alleged improper charges and fees that
accrued prior to the Arbitration Clause being added to the Agreement due to the
Arbitration Clause becoming effective immediately and its retroactive application.

CONCLUSION

¶55 In conclusion, WCU has failed to meet its burden to demonstrate an
agreement to arbitrate. To the extent WCU argues it was authorized to unilaterally
add the Arbitration Clause to its member Agreement pursuant to the
change-of-terms provision, we conclude that the Arbitration Clause was not the type
of change contemplated by that provision at the time of the original contract.
Accordingly, the addition of the Arbitration Clause under the change-of-terms
provision—i.e., without requiring Pruett to assent—was unreasonable based on the
plain language of the provision and was a violation of the duty of good faith and fair
dealing. To the extent WCU argues that the Arbitration Clause was not a unilateral
addition but was instead an offer to modify the contract, we conclude that WCU did
not demonstrate Pruett’s consent to arbitrate by his failure to opt out and by
continuing to use his account. The terms of the opt-out provision were ambiguous,
and Pruett’s failure to opt out under the facts of this case did not constitute his assent
to the amended terms. Accordingly, the Arbitration Clause is not enforceable
against Pruett.

By the Court.—Order affirmed.

32