Beneficial National Bank v. Payton

In 1925, Congress passed the Federal Arbitration Act.

Mr. Payton opened a revolving credit account with Beneficial National Bank ("Beneficial" which closed down in 2019).

Beneficial reserved the right to "change the terms" if customers received a notice within 30 days.

In 1995, Payton bought a satellite system using his Beneficial account.

In 1996, Beneficial notified all of its customers about a mandatory arbitration clause.

In 1999, Beneficial assigned its accounts to Household Bank. Household Bank also had an arbitration clause.

In 2001, Payton sued Beneficial & Household banks for "fraudulently" inducing his satellite purchase in a Mississippi trial court.

Beneficial & Household removed the suit to the United States District Court for the Southern District of Mississippi to compel arbitration under the Federal Arbitration Act.

Payton filed a motion to dismiss for lack of diversity jurisdiction; the district court denied Payton's mootion.

Is a mandatory arbitration clause added to a contract valid if the contract language allows changes to terms & the individual receives notice of the addition but doesn't object?

[Payton hadn't object to the arbitration notices sent to him.]

Yes. A mandatory arbitration clause added to a contract is valid if contract language allows changes to terms & the individual receives notice of the addition but doesn't object.