Studio 1220, Inc. v. Intralinks, Inc.

Background

The federal government created the Paycheck Protection Program to provide federally guaranteed emergency payroll loans during the COVID-19 pandemic. Bank of America NA processed applications and funded approved loans as a private lender participating in the program.

Informatech Consulting, Inc. and Studio 1220 submitted applications through Bank of America NA. They alleged that Bank of America improperly prioritized applications from larger businesses instead of following the program’s first-come, first-served principle. They sued Bank of America NA, Bank of America Corporation, its parent company, and Intralinks, the software company that supplied the online application portal.

All defendants moved to dismiss. The Bank of America defendants also moved to compel arbitration based on an arbitration provision in a deposit agreement associated with the plaintiffs’ bank accounts.

Arbitration involving Bank of America NA

The court first addressed whether the plaintiffs had entered into a contract containing an arbitration agreement. Bank of America NA submitted evidence describing its routine practice of providing deposit agreements to new business-account holders. It also submitted evidence that an account could not be opened without signing a signature card acknowledging receipt of the deposit agreement, along with a monthly balance sheet referring to the agreement as part of the account contract.

Informatech did not dispute the validity of the signature that Bank of America NA identified as being affixed to its signature card. Studio 1220 did not contest that it signed a deposit agreement. The court concluded that the evidence showed both plaintiffs signed deposit agreements and that enforceable contracts containing arbitration provisions existed.

The court also found that the current deposit agreement clearly and unmistakably delegated questions about whether the arbitration provision applied to the dispute to an arbitrator. Although the plaintiffs argued that the dispute likely fell outside the arbitration clause, the court held that the delegation provision required the arbitrator to decide that issue. The court therefore granted the motion to compel arbitration against Bank of America NA and dismissed the action as to that defendant without prejudice.

Bank of America Corporation

The court denied Bank of America Corporation’s motion to compel arbitration without prejudice. The corporation had not shown that, as a nonsignatory to the deposit agreement, it could invoke the agreement’s arbitration clause against the plaintiffs.

The court nevertheless granted the corporation’s motion to dismiss. The plaintiffs had not adequately alleged that Bank of America Corporation, rather than its subsidiary Bank of America NA, was responsible for the alleged misconduct. The court found that the plaintiffs’ reference to an agency-control test was only a conclusory legal statement and did not support liability against the two separate corporate entities.

Intralinks

The court granted Intralinks’s motion to dismiss. The plaintiffs had not adequately alleged that Intralinks, the software company providing the application-processing software, participated in or was responsible for the challenged conduct. The court stated that it appeared unlikely the plaintiffs could plausibly and in good faith state a claim against Intralinks, but granted leave to amend as a precaution.

Disposition

The court dismissed the action as to Bank of America NA without prejudice after granting the motion to compel arbitration. It dismissed the action as to Bank of America Corporation and Intralinks, with leave to amend. Any amended complaint was due within 21 days of the order, and those defendants were required to respond within 21 days after an amended complaint was filed. The court did not decide other problems identified in the complaint or the requested relief because the claims against Bank of America Corporation and Intralinks did not adequately allege misconduct at the pleading stage. The Bank of America defendants’ requests for judicial notice were denied as moot.