Authorized Signers May Bind Business Deposit Customers to Bank Arbitration Terms Incorporated by Reference; Post-Compulsion Disposition Must Be Stay or Dismissal Without Prejudice

Case: Cunningham v. PlainsCapital Bank
Court: United States Court of Appeals for the Fifth Circuit
Date: August 7, 2026 (per curiam; not designated for publication)

1. Introduction

This appeal arose from a pro se suit filed by Gary Lee Cunningham against two banks—PlainsCapital Bank and Pathward National Association—after criminals allegedly used hacked emails and artificial intelligence voice-cloning to induce Cunningham’s accountant to transfer more than $20,000 from four partnership business checking accounts at PlainsCapital into an account at Pathward.

The central issues were: (1) whether Cunningham’s claims against PlainsCapital were subject to arbitration based on account documents executed by an authorized signer; (2) whether the district court properly dismissed claims against Pathward for failure to state a claim; (3) whether subject-matter jurisdiction could be “assumed” where jurisdictional questions overlapped with the merits (notably under the Electronic Fund Transfer Act); and (4) whether Cunningham’s late-filed amended complaint should have been considered.

2. Summary of the Opinion

3. Analysis

3.1 Precedents Cited

A. Jurisdiction and the “intertwined merits” approach

• Yanez v. Dish Network, L.L.C. (140 F.4th 626 (5th Cir. 2025)) and United States v. Shkambi (993 F.3d 388 (5th Cir. 2021)) were invoked for the proposition that appellate courts must begin with jurisdiction and have an independent duty to confirm it.
• N.Y. Life Ins. Co. v. Deshotel (142 F.3d 873 (5th Cir. 1998)) supplied the Fifth Circuit’s articulation of its duty to examine both appellate and district-court jurisdiction.
• Singh v. Duane Morris LLP (538 F.3d 334 (5th Cir. 2008)) framed the standard of review (de novo) for a district court’s assumption of subject-matter jurisdiction.
• Montez v. Dep't of Navy (392 F.3d 147 (5th Cir. 2004)), Eubanks v. McCotter (802 F.2d 790 (5th Cir. 1986)), and Clark v. Tarrant Cnty. (798 F.2d 736 (5th Cir. 1986)) drove the holding that where the jurisdictional question is also a merits question—i.e., where the same statute supplies both the jurisdictional hook and the cause of action—the court should assume jurisdiction and resolve the dispute under Rule 12(b)(6) or Rule 56, not as a Rule 12(b)(1) jurisdictional dismissal.
• Frey v. First Nat'l Bank Sw. (602 F. App'x 164 (5th Cir. 2015)) was used to illustrate the merits/jurisdiction overlap under the Electronic Fund Transfer Act (“EFTA”): EFTA coverage turns on whether an account is established primarily for personal, family, or household purposes—an element that can simultaneously affect whether a federal claim exists and whether federal-question jurisdiction is properly invoked.
• Nationwide Mut. Ins. Co. v. Unauthorized Prac. of L. Comm. (283 F.3d 650 (5th Cir. 2002)) (quoting Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278 (5th Cir. 1993)) was cited for the presumption that dismissals are with prejudice unless the order states otherwise—important here because the panel ultimately required reconsideration of how the PlainsCapital claims were disposed after arbitration was compelled.

B. Pleading standards and Rule 12(b)(6)

• Dyer v. Houston (964 F.3d 374 (5th Cir. 2020)) was cited for the de novo standard of review for Rule 12(b)(6) dismissals.
• Ashcroft v. Iqbal (556 U.S. 662 (2009)) and Bell Atl. Corp. v. Twombly (550 U.S. 544 (2007)) supplied the “plausibility” framework: factual allegations must permit a reasonable inference of liability; legal conclusions and formulaic recitations do not suffice.

C. Arbitration formation, enforceability, and post-compulsion procedure

• Mertens v. Benelux Corp. (162 F.4th 492 (5th Cir. 2025)) and Yanez v. Dish Network, L.L.C. (140 F.4th 626 (5th Cir. 2025)) guided standards of review: de novo for compelling arbitration; clear error for related enforceability factfinding; and the two-step inquiry (valid agreement + scope).
• Texas formation principles were drawn from In re Bank One, N.A. (216 S.W.3d 825 (Tex. 2007)) (signature cards as valid contracts; incorporation by reference; presumption that signers know contents), relying on Am. Airlines Emps. Fed. Credit Union v. Martin (29 S.W.3d 86 (Tex. 2000)). The panel also noted Jureczki v. Bank One Tex., N.A. (75 F. App'x 272 (5th Cir. 2003)) for the general proposition that signing such banking documents forms a binding contract.
• Authority of an authorized signer to bind the customer was supported by Whitney Nat'l Bank v. Baker (122 S.W.3d 204 (Tex. App. 2003)), used to reject Cunningham’s argument that his partner lacked authority to commit the partnerships/partners to arbitration.
• AT&T Techs., Inc. v. Commc'ns. Workers of Am. (475 U.S. 643 (1986)) was used to police the boundary between arbitrability and merits: courts determining whether a dispute is arbitrable should not rule on the merits of underlying claims.
• The panel’s remand instructions were shaped by the Federal Arbitration Act, 9 U.S.C. § 3, and Smith v. Spizzirri (601 U.S. 472 (2024)), which held that when a party requests a stay pending arbitration, § 3 compels the court to stay.

D. Appellate forfeiture for inadequate briefing

• Rollins v. Home Depot USA (8 F.4th 393 (5th Cir. 2021)) provided the baseline: insufficiently briefed arguments are forfeited.
• Price v. Nunally (758 F. App'x 349 (5th Cir. 2019)) and Yohey v. Collins (985 F.2d 222 (5th Cir. 1993)) clarified that liberal construction for pro se litigants does not excuse inadequate appellate briefing.
• Although Cunningham cited Goodwin v. Johnson (224 F.3d 450 (5th Cir. 2000)), the panel held he failed to explain its applicability; thus the “new evidence” remand request was abandoned.

E. Amendment practice under Rule 15 and futility

• The panel applied Rule 15(a)(1)’s 21-day “as a matter of course” deadline running from the first Rule 12 motion, citing Bowling v. Dahlheimer (No. 20-40642, 2022 WL 670150 (5th Cir. Mar. 7, 2022)).
• Denial/ineffectiveness of amendment on futility grounds drew from Stripling v. Jordan Prod. Co. (234 F.3d 863 (5th Cir. 2000)) (citing Martin's Herend Imports, Inc. v. Diamond & Gem Trading U.S. Am. Co., 195 F.3d 765 (5th Cir. 1999)).

3.2 Legal Reasoning

A. Why arbitration was enforceable against Cunningham

The opinion turned on a straightforward contract chain. The accounts were business accounts owned by partnerships. The signature cards listed Cunningham, his partner Douglas Simpkins, and another individual as authorized signers. Simpkins executed an “Acceptance of Service Agreement” for electronic funds transfers/wires, agreeing to be bound by PlainsCapital’s Terms & Conditions. Those Terms & Conditions included an “Arbitration and Waiver of Jury Trial” provision broadly covering claims concerning the account and invoking the FAA.

Applying Texas law, the panel reasoned:

• Banking signature cards and related account-opening/service documents are enforceable contracts (In re Bank One, N.A.), and incorporated documents become part of the contract.
• Authorized signers can bind the account customer in account-related transactions. The Terms & Conditions expressly authorized “Authorized Signers” to act “in all transactions,” including selecting services and signing documentation to implement services.
• Because Simpkins was an authorized signer, he had authority to execute the service agreement and thereby incorporate the arbitration clause; the presumption that a signer knows the contents reinforced formation and assent.

B. Why dismissal of the PlainsCapital claims was vacated

After compelling arbitration, the district court declined to reach the merits. Nevertheless, it dismissed the PlainsCapital claims. The Fifth Circuit held that, once arbitrability is found, the district court should not adjudicate the merits (AT&T Techs., Inc. v. Commc'ns. Workers of Am.) and should ensure the case’s procedural posture aligns with the FAA.

Critically, the panel did not hold that a stay was mandatory in every case; instead, it focused on the presence or absence of a request for a stay under 9 U.S.C. § 3 as clarified by Smith v. Spizzirri. Because PlainsCapital did not request a stay, the panel remanded for the district court to choose the proper disposition: either (i) stay pending arbitration, or (ii) dismiss without prejudice on the basis of arbitration.

C. Why Pathward’s dismissal was affirmed

The complaint alleged wrongdoing by “criminals” and criticized PlainsCapital’s failure to warn/refund. But as to Pathward, the allegations were essentially that it did not respond to Cunningham’s correspondence requesting return of the funds. Under Iqbal/Twombly, the district court and Fifth Circuit concluded Cunningham pleaded no plausible wrongful or tortious conduct by Pathward itself. Accordingly, Rule 12(b)(6) dismissal was affirmed.

D. Why the “new evidence” remand request failed

The panel applied appellate forfeiture doctrine: Cunningham did not describe the evidence, explain timing, or connect authority to the relief sought. Citing Rollins v. Home Depot USA and pro se briefing standards from Price v. Nunally/Yohey v. Collins, it held the argument abandoned.

E. Why the amended complaint did not require reversal

Cunningham’s amended complaint was filed eight days after the Rule 15(a)(1) “as-of-right” deadline (measured from the first Rule 12 motion), and he neither obtained consent nor leave under Rule 15(a)(2). The panel additionally endorsed the district court’s view that amendment would have been futile as to the deficiencies ultimately identified, aligning with Stripling v. Jordan Prod. Co. and Martin's Herend Imports, Inc. v. Diamond & Gem Trading U.S. Am. Co..

3.3 Impact

• Banking and partnership account governance: The decision reinforces that, under Texas law and typical deposit-account terms, an authorized signer can bind the account owner (including partnerships) to arbitration provisions through service addenda incorporating general terms by reference—especially where the deposit contract expressly empowers authorized signers to select services and execute implementing documents.
• Arbitration procedure in federal court: The opinion underscores careful post-compulsion handling: district courts should avoid merits rulings and must choose an appropriate procedural endpoint consistent with the FAA, with Smith v. Spizzirri controlling when a stay is requested and with dismissal (if any) framed without prejudice when arbitration is the reason the judicial action cannot proceed.
• Pleading burdens in fraud-transfer scenarios: Even in sympathetic “AI voice-clone” theft narratives, claims against a receiving institution require plausible allegations of that institution’s wrongful conduct, not merely non-responsiveness or the fact that funds landed there.
• EFTA and business accounts: By treating EFTA coverage (consumer vs. business accounts) as intertwined with merits and thus not a threshold jurisdictional bar, the opinion provides a roadmap for how defendants may contest federal statutory applicability without forcing early Rule 12(b)(1) resolution.

4. Complex Concepts Simplified

• “Incorporation by reference”: A contract can make another document part of the deal by clearly referencing it (e.g., a service form stating the customer is “bound by” the bank’s Terms & Conditions). Courts treat the referenced terms as if written into the signed document.
• “Authorized signer” authority: For deposit accounts, an authorized signer is someone the account owner designates to transact on the account. If the governing documents authorize signers to select services and sign implementing paperwork, their signature can bind the account owner to terms like arbitration.
• FAA stay vs. dismissal: Under 9 U.S.C. § 3, if a party asks the court to pause (“stay”) the case while arbitration proceeds, the court must do so (Smith v. Spizzirri). When no stay is requested, courts sometimes dismiss; this opinion signals that any such dismissal should be without prejudice when arbitration is the basis.
• “Intertwined” jurisdiction and merits: Sometimes whether a federal statute applies (a merits element) also determines whether the court has a federal claim to hear. In that situation, courts may assume jurisdiction and decide the issue as a merits question (Rule 12(b)(6)/Rule 56), rather than dismissing for lack of jurisdiction.
• “Forfeiture/abandonment” on appeal: If an appellant mentions an argument but does not explain it with facts and law, the appellate court can treat it as abandoned—even for pro se litigants.
• Rule 15 amendment timing: After a defendant files a Rule 12 motion, a plaintiff generally has 21 days to amend once “as of course.” After that, amendment requires either the other side’s consent or the court’s permission.

5. Conclusion

Cunningham v. PlainsCapital Bank delivers two practical rules for federal litigation arising from bank-transfer fraud disputes: first, under Texas contract principles, an authorized account signer can bind partnership account customers to arbitration terms incorporated by reference through banking service documents; second, once arbitration is compelled, the district court should not dispose of claims on the merits and must align the case’s disposition with the FAA—staying proceedings when required or, at minimum, limiting any arbitration-based dismissal to one without prejudice. The opinion also reiterates rigorous pleading and appellate-briefing standards, even in technologically novel fraud contexts such as AI voice-cloning.