## Facts

- In 1998, Santana N. Kortum-Managhan opened a store-branded Herbergers credit-card account after being offered a purchase discount; the application did not contain the cardholder agreement’s terms.
- The issuer later mailed a revolving credit card agreement that lacked an arbitration clause but included a unilateral change-in-terms provision stating terms could be changed and continued card use would constitute acceptance.
- Months later, the issuer mailed a “bill stuffer” with a monthly statement announcing changes, including a mandatory arbitration clause and a waiver of court and jury trial rights, stating continued card use would signify agreement.
- In 2004, Kortum-Managhan sued the card-related entities in Montana state court, alleging violations of the FDCPA and Montana consumer-protection statutes, including alleged inaccurate credit reporting.
- The defendants moved to dismiss and compel arbitration based on the bill-stuffer arbitration provision; the district court granted the motion, concluding continued card use manifested assent and waived a jury trial.

## Issues

1. Whether a creditor may impose a substantial new term (mandatory arbitration) by requiring the consumer to take affirmative steps to avoid being deemed to have accepted the change.
2. Whether a bill stuffer provides sufficient notice to produce a knowing, intelligent, and voluntary waiver of the consumer’s constitutional right to a jury trial.

## Decision

- The Montana Supreme Court reversed the order compelling arbitration and dismissing the complaint and remanded for further proceedings.
- The court resolved the appeal on the waiver/notice issue and did not reach the change-in-terms/assent issue.
- It held the bill stuffer did not provide adequate notice to obtain a knowing, intelligent, and voluntary waiver of the constitutional right to a jury trial; therefore, the arbitration clause was ineffective and unenforceable.

## Legal Principles

- Waiver of fundamental constitutional rights, including the right to a jury trial and access to the courts, must be knowing, intelligent, and voluntary; courts presume against waiver absent clear proof.
- In consumer adhesion contracts, enforcement of disputed terms is limited by the reasonable-expectations doctrine; burdensome or surprising terms outside an ordinary consumer’s expectations are disfavored.
- Passive notice mechanisms that treat silence or continued use as acceptance are insufficient to establish a constitutional waiver, even if a contract generally permits unilateral changes and deems continued use acceptance of modifications.
- A mailed bill stuffer included with routine statements is not a sufficiently conspicuous, targeted method to ensure the consumer understood the arbitration clause and the rights being relinquished.

## Conclusion

The court held that adding a mandatory arbitration clause through a bill stuffer and enforcing it based on continued card use did not satisfy the heightened requirement for a knowing and voluntary waiver of the right to a jury trial, so the arbitration provision could not be enforced and the case was returned to the trial court.


Kortum-Managhan v. Herbergers NBGL, 204 P.3d 693 (Mont. 2009)