Unreported / Non-Citable
Background
Gary Lee Cunningham alleged that criminals hacked his email and used artificial intelligence to clone his voice, inducing an accountant to transfer more than $20,000 from four partnership business accounts at PlainsCapital Bank to an account at Pathward National Association. Cunningham claimed that PlainsCapital knew about sophisticated fraud schemes but failed to warn him and that Pathward did not respond to his requests to return the funds.
An authorized signer on each PlainsCapital account had executed service agreements incorporating terms that permitted either the bank or customer to arbitrate claims concerning the accounts. The district court compelled arbitration and dismissed Cunningham’s claim against PlainsCapital. It separately dismissed the claim against Pathward for failure to allege wrongful or tortious conduct by that bank. Cunningham appealed, also seeking consideration of alleged new evidence and arguing that the district court should have considered his amended complaint.
The Court’s Holding
The Fifth Circuit affirmed the order compelling arbitration. Applying Texas contract law, the court held that the authorized signer had authority to act for the partnerships and execute the service agreements incorporating PlainsCapital’s arbitration provision. The resulting agreement was valid and covered Cunningham’s dispute.
The court nevertheless vacated the dismissal of the PlainsCapital claim because, after determining that the dispute belonged in arbitration, the district court should not have ruled on the claim’s merits. It remanded for the district court to decide whether to stay the case pending arbitration or dismiss that claim without prejudice on arbitrability grounds.
The court affirmed the dismissal of the Pathward claim because Cunningham did not plausibly allege wrongful conduct by Pathward. His amended complaint was filed eight days after Rule 15(a)(1)’s deadline, lacked consent or leave, and would not have cured the pleading deficiencies. The court also held that Cunningham forfeited his new-evidence argument by inadequately briefing it.
Key Takeaways
- An authorized account signer may bind a partnership to incorporated banking terms, including an arbitration agreement, under Texas law.
- After compelling arbitration, a court should not adjudicate the merits of the arbitrable claims; it should instead enter the procedurally appropriate stay or dismissal without prejudice.
- A pro se appellant must adequately brief an argument, and an untimely amended complaint requires consent or leave of court.
Why It Matters
The decision distinguishes between compelling arbitration and disposing of an arbitrable claim on its merits. Even when arbitration is required, a merits dismissal may be improper, leaving the district court to choose between a stay and a dismissal without prejudice when no party requested a stay.
The opinion also underscores that allegations of technologically sophisticated fraud do not dispense with ordinary pleading requirements. A complaint must connect each defendant to plausibly wrongful conduct, and pro se status does not excuse missed amendment deadlines or inadequate appellate briefing.