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+United State Dealt a 26 a are Vinia
+Mawyer v. Atl. Union Bank
+Decided Ape 7, 2022
+CIVIL 3:21cv726 (DJN)
+04-07-2022
+CASSANDRA MAWYER, individually and on
+behalf of all others similarly situated Plaintiff, v.
+ATLANTIC UNION BANK, Defendant.
+David J. Novak, United States District Judge.
+MEMORANDUM OPINION (GRANTING IN
+PART AND DENYING IN PART MOTION
+TO DISMISS)
+David J. Novak, United States District Judge.
+similarly situated against Defendant Atlantic
+Union Bank ("Defendant"). Plaintifis suit stems
+from a contract dispute regarding Defendant's fee
+practices for overdrafts. Plaintift alleges that
+Defendant violates the terms of its agreement with
+accountholders by charging multiple fees for
+multiple attempts to process a single payment
+instruction. This matter now comes before the
+Court on Defendant's Motion to Dismiss Plaintifis
+Class Action Petition (ECF No. 6). For the reasons
+set forth below, the Court hereby GRANTS IN
+PART and DENIES IN PART Defendant's
+Motion.'+
+1 Defendant has requested oral argument on
+the instant Motion, because of the parties'
+contradictory readings of the contract at
+issue. (Notice of Request for Hrg. (ECF
+No. 18).) The Court hereby DENIES
+Defendant's request and dispenses with oral
+argument, because the materials before it
+adequately present the facts and legal
+contentions, and argument would not aid
+the decisional process.
+1 BACKGROUND
+At this stage of the proceedings, the Court must
+accept as true the facts set forth in the Petition.
+Against this backdrop, the Court accepts the
+following facts as alleged for purposes of
+resolving the instant Motion. Ashcroft v. Iqbal,
+556 U.S. 662, 678 (2009).
+A. Factual Background
+Defendant is one of the largest banks based in
+Virginia, with locations spanning Virginia,
+Maryland and North Carolina. (Pct. 9 7.) Plaintiff
+maintains a checking account with Defendant.
+(Pet. 9 6.) Plaintifis account with Defendant is
+governed by a uniform contract entitled "Terms
+and Conditions of Your Account." (Account
+Agreement (ECF No. 1-1).) Plaintifi's account is
+also governed by a fee schedule, which outlines
+fees that Defendant may charge when certain
+enumerated events occur. (Fee Schedule (ECF No.
+1-2).) One of those events occurs when an
+accountholder lacks sufficient funds in her account
+to cover a transaction. In that situation, Defendant
+has two options: (1) it can cover the transaction
+and charge the accountholder a $38.00 "overdraft"
+fee, or, (2) it can return the payment request to the
+merchant and charge the accountholder a $38.00
+"non-sufficient funds" ("NSF") fee. (Account
+Agreement at 7; Fee Schedule at 1.)
+casetext
+
+Mawyer v. Ati. Union Bank CIVIL 3:21cv726 (DUN) (E.D. Va. Apr. 7, 2022)
+The parties dispute whether the contract allows
+Defendant to charge multiple fees on a single
+overdrawn transaction. The Fee Schedule states
+that a fee may be charged "per item":
+2 The Account Agreement and the Foe
+Schedule are collectively the "contract."
+OVERDRAFT FEES:
+Applies to overdrafts created by check,
+in-person withdrawal, ATM withdrawal,
+or other electronic means.
+Non-Sufficient
+Funds?
+Item).....
+(Per
+........$38.00
+Overdraft2
+(Per/tem)...
+........$38.00
+Transfers
+to
+Overdrafts.......
+Cover
+.......
+12.50
+(Non-sufficient funds and overdraft fees
+are not charged for items
+$1.00 or less or for items that cause an
+account balance to be overdrawn by
+$1.00 or less)
+2 *2 (Fee Schedule at 1.) The Account Agreement
+includes the following provision discussing
+"items":
+The law permits us to pay items (such as
+checks or drafts) drawn on your account in
+any order... To assist you in handling your
+account with us, we are providing you with
+the following information about how we
+process items: In general, ATM and debit
+card transactions will be posted in order of
+the date and time on which they occurred,
+if known, and before any checks written by
+you; certain other non-check transactions
+such as overdraft protection fees will be
+posted in order of dollar amount, from
+highest to lowest; and chocks will be paid
+in order of check number ...
+casetext
+The order in which items are paid is
+important if there is not enough money in
+your account to pay all of the items that
+are presented.... If an item is presented
+without sufficient funds in your account to
+pay it, we may, at our discretion, pay the
+item (creating an overdraft) or return the
+item (resulting in a NSF).
+(Account Agreement at 6-7.)
+Plaintift alleges that Defendant charges a fee each
+time a merchant presents an item for payment -
+regardless of whether Defendant
+previously
+returned it and charged a fee. (Pet. { 13.) For
+example, on October 1, 2021, Plaintifi made five
+payments in varying amounts, but Defendant
+returned them unpaid due to insufficient funds in
+Plaintift's account and charged a total fee of $190.
+(Oct. 1 Account Statement (ECF No. 7-1).) Then,
+on October 15, 2021, those five payments were
+presented again without Plaintiffs knowledge, and
+Defendant again returned them due to insufficient
+funds and charged another $190. (Oct. 15 Account
+Statement (ECF No. 7-2); Pet. 9 36.) Plaintift
+contends that the second fee is not only
+contractually prohibited, but also "deceptive."
+(Pct. 9 12.)
+B. Procedural History
+On November 18, 2021, Plaintiff filed a Class
+Action Petition against Defendant based on the
+above allegations. The Petition raises one count of
+breach of contract but advances two claims in
+support of the count. (Pet. 4| 57-68.) First, Plaintiff
+alleges that Defendant breached the express terms
+of the contract by charging multiple fees for each
+transaction. (Pet. { 60.) *3 Second, Plaintifi
+maintains that Defendant's conduct breached the
+implied covenant of good faith and fair dealing.
+(Pet. 11 61-66.)
+In response to Plaintiffs Petition, Defendant filed
+the instant Motion to Dismiss (ECF No. 6) on
+December 21, 2021. Plaintiff filed her Response in
+Opposition on January 21, 2022. (PL's Resp. in
+
+Mawyer v. Ati. Union Bank CIVIL 3:21cv726 (DJN) (E.D. Va. Apr. 7, 2022)|
+Opp'n To Def.'s Mot. to Dismiss ("Opp'n") (ECF
+No. 13).) Defendant filed its Reply on February 7,
+2022. (Reply in Supp. of Mot. to Dismiss Pl's
+Compl. ("Reply") (ECF No. 17).)
+Defendant asserts that the Court must dismiss
+Plaintift's Petition, because "the plain language of
+the contract" permits its fee practice. (Def's Brief
+in Supp. of Mot. to Dismiss ("Def.'s Mem.") at 7
+(ECF No. 7).) Defendant further contends that
+Plaintifts implied covenant of good faith and fair
+dealing claim should be dismissed because "her
+argument goes to the express terms of the
+contract," not the implied covenant of good faith
+and fair dealing. (Reply at 13.)
+II. STANDARD OF REVIEW
+A motion to dismiss pursuant to Rule 12(b)(6)
+tegts the
+sufficiency of a
+complaint
+counterclaim; it docs not serve as the means by
+which a court will resolve contests surrounding
+the facts, determine the merits of a claim, or
+address potential defenses. Republican Party of
+N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992).
+In considering a motion to dismiss, the Court will
+accept a plaintiffs well-pleaded allegations as true
+and view the facts in a light most favorable to the
+plaintift. Mylan Lab ys, Inc. v. Matkari, 7 F.3d
+1130, 1134 (4th Cir. 1993). However, "the tenet
+that a court must accept as true all of the
+allegations contained in a
+complaint Is
+inapplicable to legal conclusions." Iqbal, 556 U.S.
+at 678. *4
+Under the Federal Rules of Civil Procedure, a
+complaint or counterclaim must state facts
+sufficient to "give the defendant fair notice of
+what the … claim is and the grounds upon which it
+rests." Bell All Corp. v. Twombly, 550 U.S. 544,
+555 (2007) (quoting Conley v. Gibson, 355 U.S.
+41, 47 (1957)) (internal quotation marks omitted).
+As the Supreme Court opined in Twombly, a
+complaint or counterclaim must state "more than
+labels and conclusions" or a "formulaic recitation
+of the elements of a cause of action," though the
+law does not require "detailed factual allegations."
+casetext
+Id. (citations omitted). Ultimately, the "[factual
+allegations must be cnough to raise a right to relief
+above the speculative level," rendering the right
+"plausible on its face" rather than
+merely
+"conccivable." Id. at 555, 570. Thus, a complaint
+must assert more tacts then those
+"merely
+consistent with" the other party's liability. Id. at
+557. And the facts alleged must suffice to "state
+all the elements of [any] claim[s]." Bass v. E.I.
+DuPont de Nemours & Co., 324 F.3d 761, 765|
+(4th Cir. 2003) (first citing Dickson v. Microsoft
+Corp., 309 F.3d 193, 213 (4th Cir. 2002); and then
+citing lodice v. United States, 289 F.3d 270, 281
+(4th Cir. 2002)).
+For the purposes of deciding a motion to dismiss,
+the Court considers the factual allegations set forth
+in the Complaint. Phillips v. LCI Intl, Inc., 190
+F.3d 609, 618 (4th Cir. 1999). Additionally, the
+Court may consider documents attached to the
+Complaint, Fed.R.Civ.P. 10(c), as well as
+"documents incorporated into the complaint by
+reference, and matters of which a court may take
+judicial notice," Tellabs, Inc. v. Makor Issues &
+Rts., Ltd., 551 U.S. 308, 322 (2007). Where, as
+here, the Complaint expressly relies upon a
+document integral to the Complaint that the
+plaintiff did not attach, the Court can also consider
+§ that document on a motion *s to dismiss.' See Am.
+Chiropractic Ass'n v. Trigon Healthcare, Inc., 367
+F.3d 212, 234 (4th Cir. 2004) ("[When a
+defendant attaches a document to its motion to
+dismiss, 'a court may consider it in determining
+whether to dismiss the complaint [if] it was
+integral to and explicitly relied on in the complaint
+and [if] the plaintifis do not challenge its
+authenticity."' (quoting Phillips, 190 F.3d at 618)).
+Where the bare allegations of the Complaint
+conflict with any document incorporated therein,
+the document prevails. Fayetteville Invs. v. Com.
+Builders, Inc., 936 F.2d 1462, 1465 (4th Cir.
+1991).
+3 The Petition alleges that, in October 2021,
+Plaintiff was charged $ 1, 216 in NSF fees,
+according to her account statements. (Pet. 1
+
+Mawyer v. Ati. Union Bank CIVIL 3:21cv726 (DJN) (E.D. Va. Apr. 7, 2022)|
+30. Mithough to statemicais do bot
+provide specifics, Plaintift asserts "upon
+Information and betes trait ine majorly of
+ner ices came trom re-prescried stems that
+Decadent had previous returod and
+chargee a too. feet So., Betendant, for us
+part, has provided Plaintifis account
+statements from October 202. for the
+Court to consider. (October 1 Account
+Statement: October 15 Account Statement
+Detes Mom. at 41, and Plaintin does not
+appear to challenge their authenticity.
+Thus, the Court may consider such
+evidence at this stage
+III. ANALYSIS
+The Court will first address Defendant's argument
+that Plaintifis breach of contract claim must be
+dismissed, because the contract expressly permits
+its multiple fee practice. The Court will then
+evaluate Plaintift's claim that Defendant breached
+the implied covenant of good faith and fair
+6 dealing.* *6
+4 When adjudicating state law claims, a
+federal court must apply the law of the
+state in which they sit. United States v.
+Littie, 52 F.3d 495, 498 (E.D. Va. 1995)
+(citing Eric R.R. Co. : Tompkins, 304 U.S.
+64, 78 (1938)). In so doing, federal courts
+must use state law according to how the
+state's highest court has interpreted the law
+or anticipate how that court would rule.
+Horace Mann Ins Co. v. Ger Star Nat 7|
+Ins. Co., 514 F.3d 327, 329 (4th Cir. 2008).
+Here, Plaintiff brings claims for breach of
+contract and breach of the covenant of
+good faith and fair dealing, two state law
+claims, on behalf of herself and the
+putative class, so the Court must apply
+Virginia law. (Compl. 11 57-68.)
+breach of that obligation; and (3) injury or damage
+to the plaintiff caused by the breach of obligation."
+Filak v. George, 594 S.E.2d 610, 619 (Va. 2004).
+Defendant asserts that Plaintifis breach of contract
+claim talls on the mist clement because the
+contract "expressly permits the fees she
+challenges." (Def.'s Mem. at 1.) According to
+Defendant, because "checks" and "drafts" are
+"items" under the contract, and because the
+contract imposes a fee "per item," Defendant may
+charge a fee each time a merchant submits check
+or draft and the account has insufticient funds.
+(Def.'s Mem. at 8-10.) Stated differently,
+Defendant contends that an "item" is merely a
+"request for payment" submitted by a merchant.
+(Def.'s Mem. at 10 (emphasis added).) Under this
+reading, each resubmission of a chock or draft by a
+merchant constitutes a distinct "item" that
+Defendant can decide to pay (resulting in an
+overdraft) or return (resulting in an NSF).
+In response, Plaintiff cautions that such a reading
+would permit Defendant to impose enormous fees
+on accountholders without their knowledge, as a
+merchant could have multiple requests returned
+before an accountholder becomes aware of what
+happened. In her view, an "item" does not
+constitute a request for payment, but rather "an
+accountholder's instruction for payment." (Opp'n
+at 9 (emphasis added).) Under this interpretation,
+Defendant cannot charge multiple fees on a single
+returned check or draft, because a merchant's
+resubmission does not constitute a new "item."
+A. Plaintiff Has Stated a Claim for Breach of
+Contract.
+"The elements of a breach of contract action are
+(1) a legally enforceable obligation of a defendant
+to a plaintift; (2) the defendant's violation or
+Thus, at its core, the parties' dispute turns on what
+"item" means. If the Court finds its meaning
+ambiguous - that is, both Plaintiff' and Defendant's
+interpretations are reasonable - then the Court
+cannot dismiss Plaintifis breach of contract claim.
+7 *7 See Martin Marietta Corp. v. Int'l Telecomms.
+Satellite Org., 991 F.2d 94, 97 (4th Cir. 1992) ("
+[The construction of ambiguous contract
+provisions is a factual determination that precludes
+dismissal on a motion for failure to state a
+claim."); Info. Applications Grp., Inc. v
+Shkolnikov, 836 F.Supp.2d 400, 419 (E.D. Va.
+casetext
+
+Mawyer v. Ati. Union Bank CIVIL 3:21cv726 (DJN) (E.D. Va. Apr. 7, 2022)|
+2011) (denying a motion to dismiss because the
+defendant's argument required "the interpretation
+of ambiguous terms" in a contract).
+"Contractual provisions are ambiguous if they
+may be understood in more than one way or if
+they may be construed to refer to two or more
+things at the same time." Nextel Wip Lease Corp.
+v. Saunders, 666 S.E.2d 317, 321 (Va. 2008).
+However, "[a) contract is not ambiguous simply
+because the partics to the contract disagree about
+the meaning of its language." Pocahontas Mining
+LLC w. Jewell Ridge Coal Corp., 556 S.E.2d 769,
+771 (Va. 2002). Conflicting interpretations reveal
+an ambiguity only if the interpretations are
+"reasonable." Erie Ins. Exch. v. EPCMD 15, LLC,
+822 S.E.2d 351, 355 (Va. 2019). An interpretation
+is reasonable when it serves as one of two "equally
+possible" interpretations "given the text and
+context of the disputed provision." Id. at 356
+(citation and internal quotation marks omitted).
+When determining the reasonableness of an
+interpretation, the court must "constric the
+contract as a whole." Landsdowne Dev. Co. v.
+Xerox Realty Corp., 514 S.E.2d 157, 161 (Va.
+1999). The court should not emphasize isolated
+terms at the expense of the "larger contractual
+context." Babcock & Wilcox Co. v. Areva NP, Inc.,
+788 S.E.2d 237, 244 (Va. 2016). In the event that
+the contract bears an ambiguity, the court must
+construe it "against the drafter of the agreement."
+Martin & Martin, Inc. . Bradley Enters., Inc.,
+504 S.E.2d 849, 851 (Va. 1998).
+After careful consideration, the Court finds that
+the contract is ambiguous as to whether an item
+functions as a request for payment (as Defendant
+argues) or an accountholder's instruction to pay (as
+Plaintift argues). The contract does not make clear
+whether the *s resubmission of a previously
+returned item constitutes a new item, which would
+enable Defendant to charge another fee. (See Fee
+Schedule at 1 (imposing a fee "per item").) That
+an item could be a check or draft, as Defendant
+argues, does not resolve whether the same check
+or draft presented again is a separate item. See
+casetext
+Fludd v. S. State Bank, 2021 WL 4691587, at *11-
+12 (D.S.C. Oct. 7, 2021) (concluding that an
+account agreement was ambiguous, because its
+examples of "item" did not resolve whether a re-
+preschument or a previousy returnce Item
+constituted a new item). Indeed, the contract here
+reveals little about what makes an item distinct. It
+does not state that each request for payment by a
+merchant creates a new item, or that each
+instruction by the accountholder creates a new
+item; it merely permits the assessment of a foe"
+[ilf an item is presented without sufficient funds in
+your account to pay it." (Account Agreement at 7
+(emphasis added).) Defendant suggests that
+difficulty distinguishing between new submissions
+and resubmissions can arise, resulting in multiple
+items. (Def.'s Mem. at 2.) However, the contract
+indicates that each item has a date, amount, payce
+and
+unique
+identifying number (Account
+Agreement at 4), demonstrating that Defendant
+can discriminate between new submissions and
+resubmissions. At bottom, the Court finds
+Plaintift's and Defendant's arguments equally
+persuasive and plausible. Thus, an ambiguity
+exists, and the Court must read it against
+Defendant, as the drafter of the agreement.'
+9 Martin & Martin, Inc., 504 S.E.2d at 851. *9
+Defendant argues that Plaintiffs reading is not
+reasonable, because it relics on cases where "the
+contract at issue equated 'items' with 'transactions'
+for purposes of assessing overdraft or NSF fees."
+(Reply at 9.) In particular, Defendant targets
+Plaintifi's reliance on Fludd, where the district
+court found a similar account agreement
+ambiguous. 2021 WL 4691587, at *11-12.
+According to Defendant, "[alternating the use of
+the terms 'item' and 'transaction' in the contract at
+issue in Fludd resulted in ambiguity that simply
+does not exist under [Defendant]'s contract."
+(Reply at 9.) The Court disagrees. Both the
+contract in Fludd and the contract here use item
+and transaction interchangeably, creating an
+ambiguity. In Fludd, the contract stated, "if we do
+not authorize and pay an item then we will decline
+or return the transaction unpaid." 2021 WL
+
+Mawyer v. Ati. Union Bank CIVIL 3:21cv726 (DJN) (E.D. Va. Apr. 7, 2022)|
+4691587, at *11 (emphasis omitted). Here, the
+contract conflates "items" with "ATM and debit
+transactions" and "non-check transactions" right
+before it states that overdraft and NSF fees may be
+imposed on an "item." (Account Agreement at 6.)
+While such fact is not dispositive, it lends further
+credence to the Court's finding that Plaintifis
+interpretation is reasonable.
+5 Plaintift relics on several picoes of
+extrinsic evidence to support her breach of
+account agreements from lace olich
+account agreements ordinanty socchy that
+malapto Nst toes may be imposed oba
+sange transachon. (eel 31-99.) And
+Plaintifis Opposition
+Umtorm Commercial Lode and the
+National Automated Clearing House
+Association rules to bolster her ber
+interpretation of "item." (Opp'n at 9-10.)
+While courts may consider extrinsic
+evidence if a contract provision bears
+ambiguity, the resolution of that ambiguity
+yields a question of fact, Online Res. Corp.
+V. Lawlor, 736 S.2.2d 83b, 894 (Va. 2013).
+and courts may not resolve such questions
+at the motion to dismiss stage, Martin
+Marietta Corp., 991 F.2d at 97.
+Accordingly, because the contract here is
+ambiguous, the Court will not consider
+Plaintifis extrinsic evidence at this stage to
+resolve that ambiguity:
+Defendant relies heavily on Lambert v. Navy
+Federal Credit Union, 2019 WL 3843064 (E.D.
+Va. Aug. 14, 2019), to argue that the contract here
+unambiguously supports its reading (Def.'s Mem.
+at 12-15; Reply at 4-5, 10-11), but Lambert
+provides limited guidance. Although the court in
+Lambert concluded that similar contract language
+unambiguously permitted the multiple-fee practice
+at issue here, the parties there agreed that item
+meant a request for payment, so it logically
+followed that each request for payment by a
+merchant created a distinct item under the
+contract. 2019 WL 3843064, at *3. Here, by
+contrast, the parties vigorously dispute whether
+item means a request for payment by a merchant
+10 or an instruction to pay by the *10 accountholder.
+And as noted above, the contract language does
+not unambiguously resolve the dispute.
+Because of the lack of clarity regarding
+resubmission of a previously returned item
+constitutes the same or a separate item under the
+contract, and because the Court finds Plaintiffs
+and Defendant's interpretations equally plausible,
+the allegations supporting Plaintifis breach of
+contact claim can winstand Derendants Moron
+to Dismiss. Therefore, the Court will deny the
+Motion as to Plaintiff's breach of contract claim.
+B. Plaintiff Has Not Stated a Claim for Breach
+of the Implied Covenant of Good Faith and
+Fair Dealing.
+The Court tums next to Plaintiffs contention that
+Defendant breached the implied covenant of good
+faith and fair dealing. "Under Virginia law, every
+contract contains an implied covenant of good
+faith and fair dealing." Rogers v. Decne, 992
+F.Supp.2d 621, 633 (E.D. Va. Jan. 22, 2014). A
+breach of the implied covenant, however, "only
+gives rise to a breach of contract claim, not a
+scparate cause of action." Frank Brunckhorst Co.
+v. Coastal Atl., Inc., 542 F.Supp.2d 452, 462 (E.D.
+Va. 2008). A claim for breach of the implied
+covenant of good faith and fair dcaling requires "
+(1) a contractual relationship between the parties,
+and (2) a breach of the implied covenant."
+Enomoto v. Space Adventures, Ltd., 624 F.Supp.2d
+443, 450 (E.D. Va. 2009). Here, it is undisputed
+that a contractual relationship existed between the
+parties, so the only question is whether Plaintift
+has properly alleged a breach of the implied
+6 Because a claim for breach of the implied
+covenant of good faith and fair dealing
+does not fumish an independent cause of
+action, a party cannot raise it as a separate
+count in a complaint. Rogers, 992
+casetext
+
+Mawyer v. Ati. Union Bank CIVIL 3:21cv726 (DJN) (E.D. Va. Apr. 7, 2022)|
+r.supped de oss. But a many can raise the
+chaim 25 pan 0l a count tor becach of
+contract. Goodrich Corp. v. Baysks Vechs.
+LLC, 873 F.Supp.2d 736, 742 (E.D. Va.
+implied covenant of good faith and fair
+dealing as part of her breach of contract
+Tusco decide ceo roshane cons
+The implied covenant of good faith and fair
+dealing exists to protect a party's right "to reccive
+the benefits of the agreement." Drummond Coal
+Sales, Inc. v. Norfolk S. Ry. Co., 3 F.4th 605, 611
+(4th Cir. 2021) (quoting 23 Williston on Contracts
+§ 63:22 (4th ed. 2021)) (internal quotation marks
+omitted). To this end, the implied covenant
+prohibits a party from exercising "contractual
+discretion in bad faith, even when such discretion
+is vested solely in that party." Va. Vermiculite, Lid.
+v. W.R. Grace & Co.-Conn., 156 F.3d 535, 542
+(4th Cir. 1998). The implied covenant does not,
+however, "prevent a party from exercising its
+explicit contractual rights." Id. Accordingly, if a
+party possesses a discretionary power under the
+contract, "that party cannot act arbitrarily or
+unfairly" in exercising that discretion. Stoney
+Glen, LLC v. S. Bank & Trust Co., 944 F.Supp.2d
+460, 466 (E.D. Va. 2013). But if a party has a
+contract right, then "that party is only forbidden
+from acting dishonestly." Id.
+Plaintift contends that Defendant "uses its
+contractual discretion" to define "item" in a way
+"that violates common sense and reasonable
+consumer expectations" to charge more fees. (Pet.
+1 44.) Plaintiff further describes such practice as
+deceptive, given the contract's express terms. (Pet.
+€ 12.) Defendant, for its part, asserts that Plaintifis
+implied covenant claim must be dismissed because
+her argument goes to the "express language in the
+contract, not any implied discretion." (Reply at 13
+(emphasis omitted).) Given the language in the
+contract and the nature of Plaintifi s claim, the
+Court agrees with Defendant that Plaintiffs claim
+pertains to Defendant's express contractual rights
+and will dismiss her implied covenant claim.
+Defendant also alleges that the Court must
+dismiss Plaintiffs claim, because the
+contract expressly permitted its maltiple
+foo practice. (Def.'s Mem. at 16-18.) But as
+this Court has alrcady concluded, the
+contract is ambiguous on that issue.
+The contract does not just vest mere discretion in
+Defendant to define what qualifics as an item
+before charging a fee. Indeed, "every exercise of a
+12 contractual neht involves some •2 exercise of
+discretion." Stoney Glen, 944 F.Supp.2d at 467.
+However, the legal distinction between the two
+terms hinges on weter a contract reoutres that a
+party make a finding before exercising its
+contractual right. See, e.g., Id. at 469 (finding that
+plaintiff stated a plausible claim for breach of the
+implied covenant, because the contract gave
+defendant the right to terminate the agreement if it
+found that plaintiff made a misrepresentation); Va.
+Vermiculite, 156 F.3dat 541- 42 (holding that the
+district court erred in dismissing plaintift's implied
+covenant claim, because the contract granted "sole
+discretion" to defendant to determine whether to
+mine the land at issue and thus remit profits to
+plaintifts).
+Here, the contract states: "If an item is presented
+without sufficient funds in your account to pay it,
+we may, at our discretion, pay the item (creating
+an overdraft) or retum the item (resulting in a
+NSF)." (Account Agreement at 7.) Nothing in the
+contract tasks Defendant with the power to
+determine what qualifies as an item. It does not
+say, for instance, "If, as determined by Defendant,
+an item is presented." Nor does it say, "Defendant
+reserves the right to determine if a submission is
+an item." In fact, the contract attempts to define
+"item," suggesting that a submission either docs or
+does not constitute an item - and if a submission
+does not qualify as an item, Defendant violates the
+express terms of the contract if it charges a fee, not
+a discretionary power. (Account Agreement at 6
+casetext
+
+Mawyer v. Ati. Union Bank CIVIL 3:21cv726 (DJN) (E.D. Va. Apr. 7, 2022)|
+(using "checks," "drafts," "ATM and debit card
+transactions," and "non-check transactions"
+examples of "items.").)
+Importantly,
+the
+gives Defendant
+discretion in other areas related to processing
+items. but by contrast. It does not tumish
+Defendant discretion over what constitutes an
+item. The contract confers discretion on Defendant
+to choose what to do with an item once it is
+presented: pay the item (resulting in an overdratt
+fee) or retur the item (resulting in an NSF fce).
+But Plaintift does not allege that Defendant
+13 exercised tnis alscrcuon in bad ramn, as would "13.
+conceivably be the case if Defendant exclusively
+retured items to maximize fees. (See Pet. f 12
+(alleging that Defendant will charge "an NSF fee
+followed by an overdraft fee" on an item).) The
+contract also gives Defendant "unilateral and
+absolute discretion" to decide the order in which it
+processes items. (Account Agrement at 6
+(emphasis added).) But Plaintiff docs not allege
+that Defendant employs an ordering method that
+unfairly triggers more overdrafts. See, e.g., Fludd,
+2021 WL 4691587, at * 1 (alleging that the
+defendant employed an "available balance
+bookkeeping method" that "routinely [led] to an
+overdraft fee even though sufficient money
+remain|ed] in the account after a transaction (was]
+paid"). That the contract explicitly gives
+Defendant discretion in such areas but docs not
+state that Defendant has discretion to decide what
+constitutes an item further confirms that the
+contract does not vest Defendant with such
+discretion.
+Because Plaintiffs claim docs not turn on whether
+Defendant abused its discretion, but instead turns
+on whether Defendant has a contractual right to
+charge multiple fees (i.e., whether "item" means a
+request for payment or an instruction to pay),
+Plaintift can properly state a claim for breach of
+the implied duty of good faith and fair dealing
+only through alleging that Defendant acted
+dishonestly. See Stoney Glen, 944 F.Supp.2d at
+466 ("The duty can also be breached if the
+casetext
+purported exercise of a contractual right is
+dishonest, as opposed to merely arbitrary."
+(citation omitted)). The Petition, however, is
+devoid of factual allegations suggesting that
+Defendant acted dishonestly. First, the brunt of the
+Petition's allegations on this point are conclusory.
+(See Pet. 91 2, 5, 44, 46 (accusing Defendant of
+"misleadingly and deceptively misrepresent[ing)"
+its fee practices,
+orchestraung
+"improper
+scheme," violating "common sense and reasonable
+consumer expectations," and acting in "bad
+faith")); see also Iqbal, 556 U.S. at 681 (noting
+that "conclusory" allegations are "not entitled to
+14 be assumed true".. Second. " 4 the tact that thei
+contract is not as specific as other account
+agreements is not dishonest. See (Pet. 11 31-33
+(describing the contractual provisions that other
+banks include in their account agreements));
+Stoney Glen, 944 F.Supp.2d at 466 (holding that
+contravening standard business practices is not
+dishonest). And finally, the mere fact the Court
+finds the term "item" ambiguous does not provide
+the Court with sufficient reason to infer that
+Defendant intended to deceive accountholders to
+charge more fees - particularly when the contract
+attempts to define the term. Accordingly, the
+Court will grant Defendant's Motion to Dismiss
+with respect to Plaintiffs breach of the implied
+covenant of good faith and fair dealing claim.'
+8 On March 9, 2022, Plaintift filed a Notice
+of Supplemental Authority, in which she
+brings Watson v. Suffolk Federal Credit
+Union, 2022 WL. 523543 (E.D.N.Y.Feb
+22, 2022) to the Court's attention. (PI.S
+Notice of Supplemental Authority (*PI.'S
+Notice") (ECF No. 22).) In Watson, the
+plantitt sued Suttolk Federal Credit Unio
+for, among other claims, breach of contract
+and breach of the covenant of good faith
+and fair dealing, alleging the same sort of
+maltiple-tee claims at issue in the instan
+casc. Matson, 2022 WL 523345, at 12. 2
+Defendant points out in its Response to the
+Notice, the Eastern District of New York's
+rulings do not band this Lourt, and tho
+
+Mawyer v. Ati. Union Bank CIVIL 3:21cv726 (DJN) (E.D. Va. Apr. 7, 2022)
+Wazson court interpreted the claims in that
+casc under New York law - two factors that
+render Watson langely irrelevant to the
+instant case. (Resp. to Pl's Notice of
+Supplemental Authority at 1 (ECF No.
+23).) At any rate, the outcome in Watson
+does not change the Court's analysis,
+because, as here. the Matson court deemed
+the term "item" ambiguous and allowed the
+breach of contract claim to survive the
+motion to dismiss. Ratson, 2022 WL
+523543, at *4. The court also dismissed her
+implied covenant claim, as in this case, but
+did so because New York law does not
+perma amphod corcutes claims that sintoly
+duplicate breach of contract claims.
+Watson, 2022 WL. 523543, at *4.5.
+Additionally, the Court hereby DENIES
+15 Defendant's request for oral argument *15 on the
+Motion (ECF No. 18).
+Let the Clerk file a copy of this Memorandum
+Opinion electronically and notify all counsel of
+record.
+An appropriate Order will issue.
+16 It is so ORDERED. *16
+IV. CONCLUSION
+Plaintiff has pled sufficient facts to support her
+claim for breach of contract, but she has not pled
+sufficient facts to support her claim for breach of
+the implied covenant of good faith and fair
+dealing. Therefore, the Court hereby GRANTS IN
+PART AND DENIES IN PART Defendant's
+Motion to Dismiss. The Motion is GRANTED
+with respect to Plaintifis implied covenant of good
+faith and fair dealing claim and DENIED with
+respect to Plaintiff's breach of contract claim.
+casetext
+
+Civil No. 1:19-cv-103-LO-MSN
+UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Alexandria Division
+Lambert v. Navy Fed. Credit Union
+Decided Aug 14, 2019
+Plaintiff's insurance payment from her Navy
+Federal account (with Plaintiff's prior
+authorization) using an Automated Clearing
+House ("ACH") debit request. That request was
+rejected due to insufficient funds, and Plaintiff
+was charged a nonsufficient fund foc. Mutual of
+Omaha again submitted an ACH debit request for
+the same payment two days later. Navy Federal
+again rejected the request due to insufficient funds
+and charged Plaintiff with another nonsufficient
+fund fee. Plaintift challenges Navy Federal's
+assessment of the second nonsufficient fund foe,
+as she views Mutual of Omaha's original payment
+Civil No. 1:19-cv-103-LO-MSN
+08-14-2019
+RUBY LAMBERT, individually and on behalf of
+all others similarly situated, Plaintiff, v. NAVY
+FEDERAL CREDIT UNION, Defendant.
+Hon. Liam O'Grady
+MEMORANDUM OPINION AND ORDER
+This matter comes before the Court on
+Defendant's Motion to Dismiss for Failure to State
+a Claim (Dkt. 19). The Motion is fully briefed,
+and the Court heard oral argument on May 24,
+2019. For the reasons stated below, and for good
+cause shown, Defendant's Motion to Dismiss for
+Failure to State a Claim (Dkt. 19) is hereby
+GRANTED.
+I. BACKGROUND
+Plaintiff Ruby Lambert alleges that Defendant
+Navy Federal Credit Union charges multiple
+nonsufficient fund fees for multiple attempts to
+process a single payment request in violation of
+contractual language implying that only a single
+nonsufficient fund fee would ever be charged for a
+payment request, no matter how many times that
+payment request is declined for nonsufficient
+funds.
+Plaintift's contract with Navy Federal states that
+Navy Federal "may" assess "[a) fee" "for each
+returned debit item." Navy Fed. Credit Union
+Important Disclosures (hercinafter "Important
+Disclosures") at 4. Plaintiff's insurer, Mutual of
+2 Omaha, attempted to automatically *2 deduct
+brought two claims against Navy Federal: (1)
+breach of contract and the covenant of good faith
+and fair dealing under Virginia law, and (2)
+violation of North Carolina's Unfair and Deceptive
+Trade Practices Act.
+Defendant Navy Federal Credit Union has moved
+to dismiss both claims on preemption grounds and
+for failure to state a valid claim.
+II. LEGAL STANDARD
+To survive a motion to dismiss under Federal Rule
+of Civil Procedure 12(b)(6), a complaint must
+contain sufficient factual information to "state a
+claim to relief that is plausible on its face." Bell
+Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
+A motion to dismiss pursuant to Rule 12(b)(6)
+must be considered in combination with Rule 8(a)
+(2), which requires "a short and plain statement of
+the claim showing that the pleader is entitled to
+relief so as to "give the defendant fair notice of
+what the … claim is and the grounds upon which
+casetext
+
+Lambert v. Navy Fed. Credit Union Civil No. 1:19-cv-103-LO-MSN (E.D. Va. Aug. 14, 2019)
+it rests." Id. (quoting Conley v. Gibson, 355 U.S.
+41, 47 (1957)).
+While
+"detailed
+factual
+allegations" are not required, Rule 8 does demand
+that a plaintift provide more than mere labels and
+conclusions stating that the plaintiff is entitled to
+relief. Id. In evaluating whether a complaint states
+a plausible claim to relief, "although a court must
+accept as true all factual allegations contained in
+3 [the] complaint, *3 such deference is not accorded
+to legal conclusions stated therein." Walters v.
+McMahen, 684 F.3d 435, 439 (4th Cir. 2012).
+III. ANALYSIS
+A. Plaintifis Claims Are Partially Preempted.
+Defendant Navy Federal Credit Union argues
+Plaintift's claims are preempted by the National
+Credit
+Union
+Administration's
+("NCUA")
+regulations implementing the
+Federal Credit
+Union Act ("FCUA") and Truth in Savings Act
+("TISA"). State law claims may be preempted by
+Congress "either expressly through the statute or
+regulation's language or impliedly through its aim
+and structure." Whittington v. Mobiloil Fed. Credit
+Union, 2017 WL 6988193, at *6 (E.D. Tex. Sept.
+14, 2017) (citing Altria Grp., Inc. v. Good, 555
+U.S. 70, 76 (2008)).
+The relevant implementing regulations of the
+FCUA and TISA are contained in 12 C.F.R. parts
+701
+and /01.
+respectively.
+The FCUA's
+implementing regulations state:
+A Federal credit union may, consistent
+with this section, parts 707 and 740 of this
+subchapter, other federal law, and its
+contractual obligations, determine the
+types of fees or charges and other matters
+aflecting the opening, maintaining and
+closing of a share, share draft or share
+certificate account. State laws regulating
+such activities are not applicable to federal
+credit unions.
+12 C.F.R. § 701.35(c) (emphasis added). By its
+terms, § 701.35 "expressly provides that [federal
+credit unions] are authorized to determine, free
+casetext
+from state regulation, the types of disclosures, fees
+or charges" for their account offerings. 49 Fed.
+Reg. 46552-01, 46552 (Nov. 27, 1984) (emphasis
+added); see also 50 Fed. Reg. 4636-01, 4636 (Feb.
+1, 1985) (*This final rule provides that policies
+with respect to disclosures, toes or charges . . .
+shall be determined by [a federal credit union's]
+member-elected board of directors, free from
+regulatory restrictions."). Similarly, the TISA
+implementing regulations require federal credit
+unions to provide disclosures regarding "[the
+amount of any tee that may be imposed in
+connection with the account... and the conditions
+under which the fee may be imposed," 12 C.F.R. §
+707.4(b)(4), and expressly *4 preempt any "[s)tate
+law requirements that are inconsistent with the
+requirements of the TISA and [its implementing
+regulations]," 12 C.F.R. § 707.1(d) (emphasis
+added).
+Consistent with the language and purpose of these
+regulations, it is well established that state law
+claims regarding a federal credit union's failure to
+disclose certain fee practices or any perceived
+unfairess in the fee practices themselves are
+preempted. See, eg., Gutierrez v. Wells Fargo
+Bank, N.A., 704 F.3d 712, 725 (9th Cir. 2012)
+(finding that claims alleging the defendant's
+practice of posting debit-card transactions in high-
+to-low order was unfair were preempted because
+they would "preventl] or significantly interferel
+with a national bank's federally authorized power
+to choose a posting order"); id. at 726 (finding
+failure to disclose claim against a bank preempted
+because "[imposing liability for the bank's failure
+to sufficiently disclose its posting method leads to
+the same
+result as
+mandating specific
+disclosures"); Whittington, 2017 WL 6988193, at
+*9 (finding that the plaintiff's "attempts to use a
+state consumer law to dictate to a federal credit
+union what foes it may charge and how it may
+charge them" were preempted); id. at *10 ("[Ajny
+claims based on [Mobiloil Federal Credit Union's]
+alleged failure to make certain disclosures are
+preempted.").
+
+Lambert v. Navy Fed. Credit Union Civil No. 1:19-cv-103-LO-MSN (E.D. Va. Aug. 14, 2019)
+On the other hand, it is equally well established
+that truc breach of contract and anumative
+misrepresentation
+claims are not federally
+preempted, even if the result of those claims may
+affect a federal credit union's fee disclosures. See,
+e.g., Gutierrez, 704 F.3d at 726 (finding that the
+plaintift's
+claims "based on Wells Fargo's
+misleading statements about its posting method"
+under the fraudulent prong of California's Unfair
+Competition Law were not preempted because that
+law "does not impose disclosure requirements but
+merely prohibits statements that are likely to
+mislead the public"); Whittington, 2017 WL
+6988193, at *10-11 (finding a claim alleging a
+credit union affirmatively misrepresented that it
+assesses overdraft •s tees only when a customen
+has overdrawn his or her account not preempted);
+In re TD Bank, N.A., 150 F. Supp. 3d 593, 610
+(D.S.C. 2015) (*[B]reach of contract claims not
+premised on unfairness or bad faith theories but on
+genuine disputes about the terms of the contract
+and the parties' compliance therewith," are not
+preempted because "their impact on the bank's
+exercise of its powers is only incidental."
+(emphasis in original)); Hanjy v. Arvest Bank, 94
+F. Supp. 3d 1012, 1025 (E.D. Ark. 2015) (finding
+that the plaintifts' breach of contract and breach of
+the implied covenant of good faith and fair dealing
+claims were not preempted because the plaintiffs
+merely sought "to hold [the defendant bank] to the
+terms of its contracts*); Murr v. Capital One Bank
+(USA), N.A., 28 F. Supp. 3d 575, 583 (E.D. Va.
+2014) (rejecting the argument that the plaintiff's
+fraud claim was preempted by the National
+Banking Act because holding the defendant liable
+for fraud under state law would be "tantamount to
+imposing greater disclosure requirements").
+Here, Plaintiff alleges that Navy Federal does not
+assess fees as disclosed in its contract and that its
+actual fee assessment practice is unfair. To the
+extent Plaintift's claims allege only that Navy
+Federal has failed to comply with the express
+terms of the partics' contract or affirmatively
+misrepresented its fee practices, Plaintiff's claims
+are not preemptca unaer te amamative
+misrepresentation and true breach of contract line
+of cases. While federal credit unions have the
+discretion to determine foe practices and
+disclosures free from state regulation inconsistent
+with the FCUA, the TISA, and their implementing
+regulations, federal credit unions must still comply
+with the terms of their contracts related to fee
+practices and not affirmatively misrepresent those
+practices. To the extent Plaintift challenges a
+perceived failure to disclose, the specific language
+used in the disclosure, or the fairness of the fee
+practice itself, however, those arguments are
+6 clearly preempted. *6
+B. The Complaint Fails to State a Claim for
+Breach of Contract.
+Although Plaintiff's breach of contract claim is not
+entirely preempted, the Court finds that it must be
+dismissed for failure to state a claim because the
+contract unambiguously gives Navy Federal the
+contractual right to impose fees in the way that it
+did.
+Contracts must be construed as a whole without
+placing undue emphasis on isolated terms, Erie
+Ins. Exch. v. EPC MD 15, LLC, 297 Va. 21, 822
+S.E.2d 351, 356 (2019), or adding additional
+terms, Squire v. Va. Hous. Dev. Auth., 287 Va.
+507, 758 S.E.2d 55, 60 (2014). When the terms of
+a contract are "clear and unambiguous," courts are
+required to construe those terms "according to
+their plain meaning." Golding v. Floyd, 261 Va
+190, 192, 539 S.E.2d 745, 736 (2001). "The fact
+that one may hypothesize opposing interpretations
+of the same contractual provision does not
+necessarily render the contract ambiguous because
+... a contact is not ambiguous simply because the
+parties to the contract disagree about the meaning
+of its language." Erie, 822 S.E.2d at 356 (internal
+quotation marks omitted) (quoting Babcock &
+Wilcox Co. v. Areva NP, Inc., 292 Va. 165, 179,
+788 S.E.2d 237 (2016)). Instead, "conflicting
+interpretations reveal an ambiguity only where
+they are reasonable." Id.at 355. "If the text of the
+casetext
+
+Lambert v. Navy Fed. Credit Union Civil No. 1:19-cv-103-LO-MSN (E.D. Va. Aug. 14, 2019)
+agreement is unambiguous, then the court is
+without authority to resort to extrinsic evidence,"
+such as public confusion, "in interpreting its
+meaning." Schneider v. Cont'l Cas. Co., 989 F.2d
+728, 732 (4th Cir. 1993).
+While Plaintiff disagrees with Navy Federal's
+interpretation of "[a) fee may be assessed….. for
+each returned debit item," the Court agrees with
+Navy Federal that the provision is unambiguous
+and matches Navy Federal's practice.
+Both parties agree that an "item" is a request or
+invitation for payment. In disclosing the order in
+which transactons are posica to a members
+account, the contract lists all of the following as
+types of "items": "all money coming in (credits,
+deposits, cte.); ATM withdrawals; *7 debit card
+transactions, also called Point of Sale (POS);
+Automated Clearing House (ACH) debits; and
+checks written." Important Disclosures at 3
+(emphasis added). Thus, it is clear from the
+contract that ACH debit requests, such as the two
+submitted by Plaintifl's insurer, qualify as "debit
+items." The contract also warns Navy Federal
+Credit Union members that "[a]n ACH debit might
+be made as a result of an authorization you gave a
+third party to automatically transfer funds from
+your account to pay your monthly insurance
+premium, utility bills, or car payment," id. at 9, as
+happened when Plaintiff's insurer submitted the
+second request for payment.
+Plaintiff argues, however, that two ACH debit
+requests made by the same merchant, in the same
+amount, for the same purpose, are the same "debit
+item." In other words, Plaintiff argues that her
+insurer merely resubmitted the same "debit item"
+when it requested payment for the second time,
+rather a new debit item. In support of her
+interpretation, Plaintiff analogizes her insurer's
+requests for payment to a "chock[] that you have
+written but that ha(s] not yet cleared your
+account," which the disclosures refer to as a single
+item, id. at 5.
+Plaintiff's interpretation is unreasonable in light of
+the contract as a whole. When Plaintiff was
+charged the initial nonsufficient funds fee, it was
+because her insurer's request for payment (the
+"debit item") was returned. The contract specifics
+that "Navy Federal may return debits to the
+checking account (c.g., an ACH payment) if the
+amount of the debit exceeds funds available in the
+checking account" and assess "[a] fee" for the
+"returned debit item." Id. at 4 (emphasis added);
+see also id. at 5 ("If we do not pay an overdraft,
+your transaction will be declined and/or your
+check/ACH will be returned, unpaid." (emphasis
+added)). Plaintiff's insurer's first ACH debit
+request was not in the midst of being processed
+like a "check[] that you have written but that ha[s]
+not yet cleared your account," but rather was
+8 rejected just as a *8 bounced check would be.
+Navy Federal also did not keep Plaintift's insurer's
+unsuccessful first ACH request and attempt to
+reprocess the request on its own. It returned the
+request and waited for Plaintiff's insurer to submit
+another request for payment, which Navy Federal
+was then obligated to process.
+If a check was rejected and a second check was
+submitted by the same merchant, in the same
+amount, for the same purpose, and the second
+check was also rejected, the contract cicarly gives
+Navy Federal Credit Union the right to charge
+another foe. Id. at 4 ("A fee will be assessed ...
+for each refused check."). The analogous
+provision for debit items therefore also gives Navy
+Federal the right to charge a fee for each
+presentment of an ACH electronic request for
+payment, even if the request is by the same
+merchant, in the same amount, and for the same
+purpose.' Thus, rather than support Plaintift's
+position, the contract's check provisions support
+Navy Federal's interpretation of the contract and
+position that the contract is unambiguous. When
+Plaintifi's insurer "re-presented" the request for
+payment, it was a new ACH debit item - just as a
+second check would be a new check even if it was
+casetext
+
+Lambert v. Navy Fed. Credit Union Civil No. 1:19-cv-103-LO-MSN (E.D. Va. Aug. 14, 2019)
+by the same merchant, in the same amount, for the
+same purpose - and was therefore cligible for a fee
+when it was returned for nonsufficient funds.
+1 The nee of leafreed before check hurt
+retunned"
+before
+"debit
+item"
+inconsequential. When a check is retused.
+it may not always be returned. lor
+exampic, Navy Federal Credit Union may
+not mail a bounced check back to the
+member or payment requester. By contrast.
+the parties have represented that when
+electrone transactions.
+such an ACh
+debits, are rejected, they are returned via
+the same electronic transmission method.
+such as the ACH network
+Further, the sentence in dispute must be read in
+conjunction with the sentence immediately before
+it. The first sentence states: "Navy Federal may
+retum debits to the checking account (c.g., an
+ACH payment) if the amount of the debit exceeds
+funds available in the checking account." Id. at 4.
+The next sentence warns: "A fee may be assessed
+in the amount shown on Navy Federal's current
+Schedule of Fees and Charges for each returned
+9 debit item." *9 Id. (italics removed). Taken
+together, these sentences clearly provide that Navy
+Federal may return a debit item, such as an ACH
+debit, if there is not enough money in the account
+(the first sentence), and, if there is a return, Navy
+Federal may charge the member a fee for that
+returned debit transaction (the second sentence).
+Plaintift disagrees, arguing that "returned debit
+item" in the second sentence must mean something
+different than "returned debit" in the first sentence.
+At the hearing, Plaintiff conceded that without the
+inclusion of "item" in the second sentence,
+Plaintift would not have a claim. Yet, the Court
+finds that the use of "item" does not render the
+sentence ambiguous. As noted above, other
+provisions of the contract demonstrate that an
+"item" includes various types of transactions that
+would either add or subtract money from the
+account. The contract merely uses "debit" as an
+adjective to modify "item," just as "returned" is
+casetext
+used as an adjective to modify "debit item." Thus,
+"debit item" clearly refers to a transaction that
+attempts to withdraw money from the account,
+such as an ACH debit request, and the inclusion of
+item in retuirner dchit item" does not render the
+contract ambicuous.
+In conclusion, when the terms of the contract are
+read together and in context,
+the contract
+unambiguously provides that "each" time Navy
+Federal Credit Union "returns" a request for
+payment (a "debit item") for insufficient funds, a
+nonsufficient fund fee may be assessed without
+recaras to waetner une retumee acdit llem was a
+re-presentment of a previously rejected request.
+As a result, Navy Federal Credit Union did not
+breach the contract when it assessed the second
+nonsuflicient fund fee for Plaintifi's insurer's
+second ACH debit request.
+Because "[the
+Complaint's allegations make clear that no breach
+(of contract) occurred," the breach of contract
+claim must be dismissed for failure to state a
+claim. Hanback v. DRHI, Inc., 94 F. Supp. 3d 753,
+10 761 (E.D. Va. 2015). *10
+C. The Complaint Fails to State a Claim for
+Breach of the Covenant of Good Eaith and Fair
+Dealing.
+Plaintiff's breach of the covenant of good faith and
+fair dealing claim must also be dismissed for
+similar reasons.
+"Implicit in all contracts is a covenant of good
+faith and fair dealing in the course of contract
+performance." In re HSBC Bank, USA, N.A., Debit
+Card Overdraft Fee Litig., 1 F. Supp. 3d 34, 51
+(E.D.N.Y. 2014). The implied covenant prevents a
+party from exercising "contractual discretion in
+bad faith, even when such discretion is vested
+solely in that party," but it "does not prevent a
+party from exercising its explicit contractual
+rights." Va. Vermiculite, Lid. v. W.R. Grace & Co.-
+Conn., 156 F.3d 535, 542 (4th Cir. 1998)
+(emphasis in original). The relevant case law
+establishes that "(1) where a party has a clear
+contract right, even if its exercise would arguably
+
+Lambert v. Navy Fed. Credit Union Civil No. 1:19-cv-103-LO-MSN (E.D. Va. Aug. 14, 2019)
+be arbitrary, that party is only forbidden from
+acting dishonestly; (2) but where a party has
+discretion in performance, that party cannot act
+arbitrarily or unfairly." Stoney Glen, LLC v. S.
+Bank & Trust Co., 944 F. Supp. 2d 460, 466 (E.D.
+Va. 2013) (citations omitted).
+Courts have
+"explicitly rejected attempts to
+characterize the decision whether to exercise an
+accrued right
+as a mater
+discretion.'" Id. at 468. At the same time, however,
+courts have held that the implied covenant applies
+where the accrual of a contractual right depends
+on a party's exercise of contractual discretion
+rather than on objective facts. Id. at 469. In other
+words, "[a) party to a contract can flip a coin to
+decide whether to exercise an accrued right, but
+cannot flip a coin to determine whether a right has
+accrued." Id.
+In this case, Navy Federal's right to charge a fee
+depended on the existence of an objective fact:
+whether a debit item had been returned for
+nonsufficient funds. Thus, although the contract
+stated that Navy Federal "may" rather than "will"
+assess a fee for each returned debit item, Navy
+Federal had the contractual right to assess the
+11 challenged fee and, unlike in the cases *11 cited by
+Plaintift, had not exercised any contractual
+discretion in bad faith to cause that right to
+accrue? Plaintifi has also not plausibly alleged
+that Navy Federal exercised its contractual right to
+charge the fee dishonestly.
+2 In the cases Plaintiff relies upon, the breach
+molied coverant claims survived
+motions to dismiss because the banis
+exercised their contractual discretion to
+post debat wems in any order to maximie
+the accrual of their right to charge
+overdratt toes. See, c.g., Gutiere, 622 F.
+Supp. 2d at 954; In re HSBC Bank, 1 F.
+Vupp. vd at uro2
+Accordingly, Plaintiffs' breach of the covenant of
+good faith and fair dealing claim must be
+dismissed because Navy Federal honestly
+casetext
+exercised its contractual right to charge Plaintiff a
+nonsufficient fund fee for her insurer's second
+request for payment. Va. Vermiculite, 156 F.3d at
+542 ("[It is a basic principle of contract law in
+Virginia, as elsewhere, that... the duty of good
+faith does not prevent a party from exercising its
+explicit contractual rights..." (emphasis in
+original)); Riggs Nat'l Bank of Wash., D.C. v.
+Linch, 36 F.3d 370, 373 (4th Cir. 1994) (*An
+implied duty of good faith cannot be used to
+override or modify explicit contractual terms.");
+Wilkins v. United States, 2016 WL 2689042, at *4
+(E.D. Va. May 9, 2016) (dismissing implied
+covenant claim where the defendant
+"had the
+contractual right.. to engage in the actions
+alleged in the Complaint"); Bennett v. Bank of
+Am., NA., 2012 WL 1354546, at *11 (E.D. Va.
+Apr. 18, 2012) (dismissing implied covenant claim
+where the defendant bank exercised its contractual
+rights and it was not plausibly alleged that the
+bank "exercise[d] its contractual discretion in bad
+faith" (alteration and emphasis in original));
+Albayero v. Wells Fargo Bank, N.A., 2011 WL
+4748341, at *6 (E.D. Va. Oct. 5, 2011) (dismissing
+implied covenant claim where "the actions taken
+by Defendants merely amounted to an exercise of
+12 their contractual rights"). *12
+D. The Complaint Eails to State a Claim Under
+the North Carolina Unfair and Deceptive Trade
+Practices Act.
+Finally, Plaintiffs' North Carolina Unfair and
+Deceptive Trade Practices Act ("NC UDTPA")
+claim must be dismissed pursuant to the contract's
+choice-of-law provision.
+The contract specifics that "Navy Federal accounts
+are maintained and governed in accordance with
+federal law and the laws of the Commonwealth of
+Virginia, as amended." Important Disclosures at 7.
+The language of this provision, which is included
+in a sparate "Governing Laws" section, is
+sufficiently broad to preclude Plaintiff's NC
+UDTPA claim because the claim (a) concerns how
+Navy Federal "maintain(s)" Plaintift's "accounts"
+
+Lambert v. Navy Fed. Credit Union Civil No. 1:19-cv-103-LO-MSN (E.D. Va. Aug. 14, 2019)
+and interprets the account agreement, and (b)
+asserts identical allegations to Plaintift's breach of
+contract claims. Run Them Sweet, LLC v. CPA
+Glob. Ltd., 224 F. Supp. 3d 462, 465-69 (E.D. Va.
+2016) (Ellis, J.); Freedman v. Am. Online, Inc.,
+325 F. Supp. 2d 638, 653-54 (E.D. Va. 2004)
+(Ellis, J.); see also Hitachi Credit Am. Corp. v.
+Signet Bank, 166 F.3d 614, 628 (4th Cir. 1999)
+"Where a choice of law clause in the contract is
+sufficiently broad to encompass contract-related
+tort claims," courts should apply the clause as
+such.).
+Plaintift has also failed to show that enforcing the
+choice-of-law provision in this case "would be
+contrary to a fundamental policy of a state which
+has a materially greater interest than the chosen
+state." Projects Mgmt. Co. v. DynCorp Int'l, LLC,
+2014 U.S. Dist. LEXIS 41411, at *13 (E.D. Va.
+March 26, 2014) (quoting Restatement (Second)
+of Conflict of Laws § 187(2) (1971)). Although
+North Carolina's UDTPA permits claims against
+credit unions while Virginia's analogue statute
+docs not, "the enforcement of a choice-of-law
+provision that would apply a narrower consumer
+protection or deceptive trade practices statute does
+not amount to a violation of a fundamental public
+policy of another, more interested jurisdiction."
+Canon U.S.A., Inc. v. Cavin's Bus. Sols., Inc., 208
+F. Supp. 3d 494, 505 (E.D.N.Y. 2016) (dismissing
+13 NC *13 UDTPA claim pursuant to a choice-of-law
+provision); see also, Run Them Sweet, 224 F.
+Supp. 3d at 469 (dismissing a claim brought under
+California's unfair and deceptive trade practices
+statute pursuant to a Virginia choice-of-law
+provision because "there is no indication" that
+doing so "violates California public policy").
+North Carolina's UDTPA also does not have an
+anti-waiver provision that would indicate
+dismissing a NC UDTPA claim pursuant to a
+choice-of-law provision would violate North
+Carolina's policy. G.P.P., Inc. v. Guardian Prot.
+Prods., Inc., 2015 WL 3992878, at *18 (E.D. Cal.
+June 30, 2015) (dismissing a NC UDTPA claim
+pursuant to a choice-of-law provision because the
+parties did not "identify a choice-of-law exclusion
+or waiver provision in the statute"); see also Volvo
+Const. Equip. N. Am., Inc. v. CLM Equip. Co., 386
+F.3d 581, 608-09 (4th Cir. 2004) (noting that a
+fundamental policy analysis generally focuses on
+whether there is an anti-waiver provision in the
+statute or other statutory language suggesting the
+legislature intended the statute to embody
+fundamental policy, and finding that a choice-of-
+law provision barred a state law claim brought
+under a statute that had neither). To the contrary,
+the North Carolina Supreme Court has held that
+patues can waive inch tights unacr nort
+Carolina's UDTPA. See Ussery v. Branch Banking
+& Trust Co., 368 N.C. 325, 777 S.E.2d 272, 281
+(2015); United Labs., Inc. v. Kuykendall, 335 N.C.
+183, 437 S.E.2d 374, 381 n.6 (1993). Thus,
+dismissing Plaintift's NC UDPTA claim pursuant
+to the choice-of-law provision would not violate
+North Carolina's fundamental policy.
+Accordingly, Plaintiff's North Carolina Unfair and
+Deceptive Trade Practices Act claim will be
+dismissed pursuant to the contract's choice-of-law
+14 provision.' *14
+3 In Lloyd v. Navy Federal Credit Union, the
+United States District Court for the
+Southern District of California found the
+Virginia choice-of-law provision at issuc
+unenforocable as to the plaintifi's
+California consumer protection statutory
+claims because enforcing the provision
+would violate California's public policy.
+2018 WL 1757609, at *5-6 (S.D. Cal. Apr.
+12, 2018). The holding in Lloyd was based
+on (a) Califomia's fundamental public
+poisoy ta banoe of class actioes, which thal
+Calitornia statutes permit but the Virginia
+statutes do not, and (b) the express anti•
+waiver provision in onc of the California
+consumer cocccon statutes de laste,
+which stated that waivers
+unenforccable as contrary to public policy.
+Id. at *5. Because NC's UDTPA does not
+nave an anti-waver provision or any
+salicient that the abilly to bring sui
+casetext
+
+Lambert v. Navy Fed. Credit Union Civil No. 1:19-cv-103-LO-MSN (E.D. Va. Aug. 14, 2019)
+against a credit union is a fundamental
+policy of the stats, Lloyd does not apply to
+IV. CONCLUSION
+For the reasons stated above, and for good cause
+shown, Defendant's Motion to Dismiss for Failure
+to State a Claim (Dkt. 19) is hereby GRANTED.
+Finding that amendment would be futile,
+Plaintift's Complaint is hereby DISMISSED
+WITH PREJUDICE.
+It is SO ORDERED. August 14, 2019
+Alexandria, Virginia
+Liam O'Grady
+United States District Judge
+casetext
+
+Civil No. 21-cv-00534-LM
+2021-11-08
+Rita GRENIER and Edwin Grenier, Individually
+and on Behalf of All Others Similarly Situated v.
+GRANITE STATE CREDIT UNION, Does 1
+through S
+Elaine Kusel, Sherief Morsy, McCune Wright
+Arevalo LLP, Newark, NJ, Christine M. Craig,
+Shaheen & Gordon PA, Dover, NH, for Rita
+Grenier, Edwin Grenier. Bethany P. Minich,
+Litchfield Cavo, Lynnfield, MA, James R. Branit,
+Jason E. Hunter, Litchfield Cavo, Chicago, IL, for
+Granite State Credit Union.
+Landya McCafferty, United States District Judge
+20 *20
+Elaine Kusel, Shcrief Morsy, McCune Wright
+Arevalo LLP, Newark, NJ, Christine M. Craig,
+Shaheen & Gordon PA, Dover, NH, for Rita
+Grenier, Edwin Grenier.
+Bethany P. Minich, Litchfield Cavo, Lynnfield,
+MA, James R. Branit, Jason E. Hunter, Litchfield
+Cavo, Chicago, IL, for Granite State Credit Union.
+ORDER
+Landya McCafferty, United States District Judge
+Plaintifis Rita and Edwin Grenier bring this
+putative class action against Granite State Credit
+Union ("Granite") and "Does 1 through 5,"
+alleging injuries stemming from Granite's
+overdraft fees and policies. Plaintiffs allege that—
+casetext
+Civil 21-cy-00534-LM
+United States District Court, D. New Hampshire
+Grenier v. Granite State Credit Union
+570 F. Supp. 3d 18 (D.N.H. 2021)
+Decided Nov 8, 2021
+by not properly informing consumers how
+overdrafts are assessed-Granite has violated, and
+continues to violate, the Electronic Funds Transfer
+Act's, 15 U.S.C. § 1693 ("EFTA"), implementing
+regulations, 12 C.F.R. § 1005 et seg. ("Regulation
+E").
+Pending before the court is Granite's motion to
+dismiss (doc. no. 9) under Fed. R. Civ. P. 12(b)(6).
+For the following reasons, the motion is denied.
+STANDARD OF REVIEW
+Under Rule 12(b)(6), the court must accept the
+factual allegations in the complaint as true,
+construe reasonable inferences in the plaintiff's
+favor, and "determine whether the factual
+allegations in the plaintiff's complaint set forth a
+plausible claim upon which relief may be
+granted." Foley v. Wells Fargo Bank, N.A.., 772
+F.3d 63, 71 (1st Cir. 2014) (internal quotation
+marks omitted). A claim is facially plausible
+"when the plaintift pleads factual content that
+allows the court to draw the reasonable inference
+that the defendant is liable for the misconduct
+21 alleged." *21 Ashcroft v. Iqbal, 556 U.S. 662, 678,
+129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
+BACKGROUND
+Regulators, private litigants, and the courts have
+recently devoted significant attention to overdraft
+fees. See Chambers v. NASA Fed. Credit Union.
+222 F. Supp. 3d 1, 5-7 (D.D.C. 2016) (thoroughly
+outlining history). In 2009, the Federal Reserve
+Board' revised Regulation E to add a provision
+intended to "assist consumers in understanding
+how overdraft services provided by their
+
+Grenier v. Granite State Credit Union 570 F. Supp. 3d 18 (D.N.H. 2021)
+institutions operate and to ensure that consumers
+have the opportunity to limit the overdraft costs
+associated with ATM and onc-time debit card
+transactions where such services do not meet their
+needs." Electronic Fund Transfers, Final Rule, 74
+Fed. Reg. 59,033, 59,033 (Nov. 17, 2009).
+1 Congress reassigned respoasibility fer
+entorcing the EFTA from the Federal
+Roservo Board to the Consume Financial
+Protection Bureau in 2010. Sec Dodd.
+Frank Wall Streat Retorm and Consumen
+Protection Act of: 2010. Pub. L. No. 1.14
+203, Title X, § 1084, 124 Stat. 1376, 2081-
+Thus,
+Regulation E now requires financial
+institutions to obtain a customer's "affirmative
+consent" before charging overdraft fees on ATM
+or onc-time debit card transactions. 12 C.F.R. §
+1005.17(b)(1)(iii). To secure consent, institutions
+must use an opt-in notice that "describe[s] the
+institution's overdraft service." Id. at 1005.17(b)
+(I)(i). The notice must be "segregated from all
+other information," and "substantially similar" to a
+model form (Model Form A-9) provided by the
+Consumer Financial Protection Bureau. Id. at
+1005.17(b)(1)(i); (d). All disclosures must be
+"clear and readily understandable." 12 C.F.R. §
+1005.4(a)(1).
+Issues occur when a disclosure does not
+adequately convey how overdraft fees are
+assessed. There are two balances financial
+institutions can use to calculate whether the
+amount of money in an account dips below zero:
+either the "actual balance"? or the "available
+balance." The "actual balance" is the actual
+amount of money in an accountholder's account at
+any particular time. The "available balance," in
+contrast, is the actual amount of money in the
+account minus any "holds" on deposits and
+pending debits that have not yet been posted. For
+this reason, calculating overdrafts based on the
+available balance "often leads to more frequent
+overdrafts because there is less money available in
+the account due to holds and pending
+casetext
+transactions." Domann v. Summit Credit Union,
+No. 18-cv-1670-slc, 2018 WL 4374076 (W.D.
+Wis. Sept. 13, 2018) (citation omitted).
+- Courts also refer to "actual balance" as the
+"Tedger balance" or "current bulance."
+Thus, plaintiffs across America have filed a
+number
+of "virtually identical lawsuits"
+challenging institutions that use the available
+balance method where the opt-in notice does not
+explain how it assesses overdraft focs. Id.; sec,
+sg.. Tims y. LGE Cmty, Credit Union, 935 F.3d
+1228, 1239-40 (11th Cir. 2019) ; Adams v. Liberty.
+Bank. No.
+3:20-cv-01601(MPS), 2021 WL
+3726007 (D. Conn. Aug. 23, 2021); Wellington v.
+Empower Fed. Credit Union, 533 F. Supp. 3d 64
+(N.D.N.Y. 2021) ; Bettencourt v. Icanne D'Ars
+Credit Union, 370 F. Supp. 3d 258 (D. Mass.
+2019) ; Walbridge v. Northeast Credit Union, 299
+F. Supp. 3d 338 (D.N.H. 2018) ; Walker v.
+People's United Bank, 305 F. Supp. 3d 365 (D.
+Conn. 2018) ; Salls y Digital Fed. Credit Union.
+349 F. Supp. 3d 81 (D. Mass. 2018) ; Domann,
+22 2018 WL 4374076; *22 Ramirez v. Baxter Credit
+Union, No. 16-CV-03765-SI, 2017 WL 1064991
+(N.D. Cal. Mar. 21, 2017) ; Pinkston-Poling.v.
+Advia Credit Union, 227 F. Supp. 3d 848 (W.D.
+Mich. 2016) ; Chambers, 222 F. Supp. 3d 1.
+Plaintifis in this case bring one such lawsuit. They
+allege that Granite used a one-page notice entitled
+"What You Need to Know about Overdrafts and
+Overdraft Foes" (the "Opt-in Disclosure"). The
+Opt-in Disclosure states that an overdraft "occurs
+when you do not have enough money in your
+account to cover a transaction, but we pay it
+anyway." It docs not outline the distinction
+between the actual balance method and the
+available balance method. Thus, Plaintifts allege
+that Granite has violated, and continues to violate,
+Regulation E because the phrase "enough money"
+docs not specify whether Granite calculates
+overdrafts based on the actual balance or the
+available balance. Essentially, they argue that the
+Opt-in Disclosure docs not provide a "clear and
+
+Grenier v. Granite State Credit Union 570 F. Supp. 3d 18 (D.N.H. 2021)|
+readily
+understandable" explanation of "the
+institution's overdraft service." See 12 C.F.R. $
+1005.4(1)(1) ; 1005.17(b)(1)(i).
+DISCUSSION
+Granite moves to dismiss on the grounds that,
+first, it did not violate Regulation E and, second,
+that the EFTA's safe harbor provision, 15 U.S.C. §
+1693m(d)(2), insulates it from liability.
+I. Regulation E. Violation
+Granite first argues that when the Opt-in
+Disclosure is read in con uncuon win a cocument
+entitled "Terms and Conditions of Your Account"
+(the "Membership Agreement"), Granite satisfies
+Regulation E's disclosure requirements. Granite
+attaches the five-page Membership Agreement to
+its motion, and alleges it is the operative
+agreement governing Plaintiffs' relationship with
+Granite. The Membership Agreement states that
+Granite assesses overdrafts based on the available
+balance:
+Determining your available balance -
+We use the "available balance" method to
+determine whether your account is
+overdrawn, that is, whether there is enough
+money in your account to pay for a
+transaction. Importantly, your "available"
+balance may not be the same as your
+account's "actual" balance. This means an
+overdraft or an NSF [nonsufficient funds] |
+transaction could occur regardless of your
+account's actual balance.
+Doc. no. 9-3 at 1. It then proceeds to describe in
+further detail the difference between actual
+balance and available balance. See id. The
+Membership Agreement was not attached to or
+referenced in the complaint.'
+3 Granito alleges that Plantilis relento w
+the Membership Agreement in their
+complaint when they referenced a "Granite
+agroement." Doc. no. 9 at 2 n.l. As
+Plaintifis clarify, the "Granite agreement"
+Ween wester Wee no, weakne
+Even assuming that the Membership Agreement
+could be considered at the motion to dismiss stage,
+Plaintifi's have still plausibly alleged violations of
+Regulation E. Regulation E requires financial
+institutions to provide disclosures about their
+overdraft policies "segregated from all other
+information," i.e. in a standalone document. 12
+C.F.R. § 1005.17(b)(1)(i). Because Plaintift's
+allege that the Opt-in Disclosure is the segregated
+document, only it is relevant to Plaintifts' claim.
+The Membership Agreement is extrancous
+information, irrelevant to whether the Opt-in
+Disclosure itself-i.c., the segregated document—
+adequately explains Granite's overdraft policy. Sec
+Adams. 2021 WL 3726007, at *4 (refusing to
+23 consider extrancous *23 documents such as an
+Account Agreement on Rule 12(b)(6) motion, but
+holding that even if it could consider those
+documents, they would not make plaintifi's
+Regulation E claim any less plausible because
+Regulation E requires notice to be "segregated
+from all other information"); see also Wellington,
+533 F.Supp.3d at 69 (holding that even assuming
+extraneous evidence should be considered on a
+Rule 12(b)(6) motion, the plaintiff' still plausibly
+alleged violations of Regulation E).
+The cases Granite cites in support of its argument
+that the Opt-in Disclosure and the Membership
+Agreement should be read together are not
+persuasive. Those cases are all in the context of
+contract claims, for which it may be appropriate to
+construe multiple documents together. See. c.g.
+Tims, 935 F.3d at 1238 n.5 (citing state contract
+law for the proposition that "where multiple
+documents are executed at the same time in the
+course of a single transaction, they should be
+construed together"); Domann, 2018 WL
+4374076, at *6-7 ; Chambers, 222 F. Supp. 3d at
+11-12. Yet in cases where plaintifis allege both a
+contract claim and a Regulation E claim, courts
+will read the documents together for the contract
+casetext
+
+Grenier v. Granite State Credit Union 570 F. Supp. 3d 18 (D.N.H. 2021)|
+claim only, because Regulation E requires notice
+to be "segregated." See Ramirez v. Baxter Credit
+Union, 2017 WL 118859, at *8 (N.D.Cal. Jan. 12,
+2017). Thus, Tims, Domann, and Chambers do not
+help Granite's argument because here Plaintiffs do
+not allege breach of contract,
+and in tact
+specifically disavow any such claim. See doc. no.
+11 at 10.
+Looking only at the Opt-in Disclosure, then,
+Plaintifts plausibly state a claim that the phrase
+"enough money" does not adequately provide a
+"clear and readily understandable" explanation of
+"the institution's overdraft service." 12 C.F.R. §
+1005.4(1X1) ; 1005.17(b)(1)i). Countless courts
+examining virtually identical language have
+agreed. Scs. c.g, Tims. 935 F.3d at 1238
+(ambiguous whether disclosure that overdraft
+occurs "when you do not have enough money in
+your account to cover a transaction, but we pay it
+anyway" uses actual balance or available balance
+method); Wellington, 533 F.Supp.3d at 71 ;
+Bettencourt, 370 F. Supp. 3d at 262, 265 ;
+Walbridge, 299 F. Supp. 3d at 343 ; Salls, 349 F.
+Supp. 3d at 90 ; Pinkston-Poling, 227 F. Supp. 3d
+at 857 ; Walker, 305 F. Supp. 3d at 376. Thus,
+Plaintifis plausibly state a claim that Granite's
+Opt-in Disclosure violates Regulation E.
+II. Sate Harbor Provision
+Granite next argues that the EFTA's safe harbor
+provision insulates it from liability. The EFTA
+protects financial institutions from liability for
+"any failure to make disclosure in proper form ifa
+financial institution utilized an appropriate model
+clause issued by the Bureau or the Board." 15
+U.S.C. § 1693m(d)(2). Regulation E requires that
+notice "shall be substantially similar to Model
+Form A-9," which is promulgated by the
+Consumer Financial Protection Bureau. 12 C.F.R.
+§ 1005.17(d). Model Form A-9 states: "An
+overdraft occurs when you do not have enough
+money in your account to cover a transaction, but
+we pay it anyway." § 1005, App. A (emphasis in
+original).
+Courts across the country have
+arguments identical to Granite's argument here,
+and the vast majority have held that that using
+language identical to that in Model Form A-9 does
+not necessarly insulate a minancia. insatuton trom
+liability. See Tims, 935 F.3d at 1244 ; Adams.
+2021 WL 3726007, at *6-*8 ; Bettencourt, 370 F.
+Supp. 3d at 266; Salls, 349 F. Supp. 3d at 90-91 ;
+Walbridge, 299 F. Supp. 3d at 349 ; Smith, 2017
+24 WL 3597522, at *8; *24 Gunter v. United Fed.
+Credit Union, No. 3:15-cv-00483-MMD-WGC,
+2017 WL 4274196, at *3 (D. Nev. Sept. 25, 2017)
+; Ramirez, 2017 WL 118859, at *7 ; Pinkston:
+Poling, 227 F. Supp. 3d at 852. As one court
+reasoned, the safe harbor provision requires the
+use of an "appropriate model clause." Adams,
+2021 WL 3726007, at *7 (citing 15 U.S.C. $
+1693m(d)(2) ). If the language in Model Form A-9
+does not accurately describe a particular
+institution's overdraft service, then it is not
+"appropriate." Id, Indeed, "[i)f use of a model
+clause were, by itself, an impenetrable shield, a
+consumer would have no redress" when Model
+Form A-9 does not actually provide a "clear and
+readily understandable" description, 12 C.F.R.§
+1005.5, of an institution's overdraft services. Id.
+Granite cites two unreported district court cases
+holding otherwise. See Rader v. Sandia Lab. Fed.
+Credit Union, No.20-559 JAP/JHR, 2021 WL
+1533664, at *13-*14 (D.N.M. April 19, 2021) ;
+Tilley v, Mountain Am. Fed. Credit Union, No.
+2:17-cv-01120-JNP-BCW, 2018 WL 4600655, at
+*4-*6 (D. Utah Sept. 25, 2018). The court does
+not find the reasoning of these cases to be
+persuasive. Tilley, for example, cited a Northern
+District of Georgia case for the proposition the
+phrase "enough money" from the model form is
+not inaccurate when the financial institution
+calculates overdrafts based on an account's
+available balance. Tilley, 2018 WL 4600655, at *5
+(citing Tims v. LGE Cmty. Credit Union, No.
+1:15-cv-4279-TWT, 2017 WL 5133230, at *6
+(N.D. Ga. Nov 6, 2017), revd and remanded by.
+935 F.3d 1228 (11th Cir.2019) ). But the Eleventh
+casetext
+
+Grenler v. Granite State Credit Union 570 F. Supp. 3d 18 (D.N.H. 2021)
+Circuit later overturned that case on appeal,
+holding that using language from a model clause
+"docs not shield [a financial institution] for claims
+based on their failure to make adequate
+disclosures." Tims, 935 F.3d at 1243. The other
+case Granite cited, Rader, relied exclusively on
+Tilley's reasoning, without acknowledging that
+Tilley was predicated in part on reasoning that the
+Eleventh Circuit had overturned. See 2021 WL
+1533664, at *13-*14. Rather than following either
+of these cases, this court agrees with the sound
+reasoning of the Eleventh Circuit and the
+previously cited district court cases holding that
+the safe harbor provision did not defeat plaintiffs'
+claims.
+Thus, Plaintiffs have plausibly stated a claim that
+the clause from Model Form A-9 was not
+"appropriate" because the language did not
+describe Granite's overdraft policy in a "elcar and
+readily understandable" way. See Adams, 2021
+WL 3726007, at *8.
+CONCLUSION
+For these reasons, Granite's motion to dismiss
+(doc. no. 9) for failure to state a claim is denicd.
+SO ORDERED.
+casetext
+
+No. 17-14968
+08-27-2019
+Carol TIMS, Individually, and on behalf of all
+others similarly situated, Plaintiff' - Appellant, v.
+LGE
+COMMUNITY CREDIT UNION,
+Defendant - Appellee.
+Edward Adam Webb, G. Franklin Lemond, Jr.,
+Webb Klase & Lemond, LLC, Atlanta, GA,
+Richard D. McCune, McCune Wright, LLP,
+Redlands, CA, Taras Kihiczak, The Kick Law
+Firm, APC, Santa Monica, CA, for Plaintiff -
+Appellant. Stephen Paul Dunn, Brandon J. Wilson,
+Howard & Howard Attorneys, PLLC, Royal Oak,
+Mi, Kevin A. Maxim, The Maxim Law Firm, PC,
+Atlanta, GA, for Defendant - Appellee. Howard R.
+Rubin, Katten Muchin Rosenman, LLP,
+Washington, DC, for Amicus Curiac.
+JILL PRYOR, Circuit Judge
+1233*1233
+Edward Adam Webb, G. Franklin Lemond, Jr.,
+Webb Klase & Lemond, LLC, Atlanta, GA,
+Richard D. McCune, McCune Wright, LLP,
+Redlands, CA, Taras Kihiczak, The Kick Law
+Firm, APC, Santa Monica, CA, for Plaintiff -
+Appellant.
+Stephen Paul Dunn, Brandon J. Wilson, Howard
+& Howard Attorneys, PLLC, Royal Oak, MI,
+Kevin A. Maxim, The Maxim Law Firm, PC,
+Atlanta, GA, for Defendant - Appellee.
+No. 17-14968
+UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT
+Tims v. LGE Cmty. Credit Union
+935 F.3d 1228 (11th Cir. 2019)
+Decided Aug 27, 2019
+Howard R. Rubin, Katten Muchin Rosenman,
+LLP, Washington, DC, for Amicus Curiac.
+Before MARTIN, JILL PRYOR and JULIE
+CARNES, Circuit Judges.
+JILL PRYOR, Circuit Judge:
+According to Carol Tims, when she opened an
+account at LGE Community Credit Union, LGE
+promised to use one account balance calculation
+method in assessing overdraft foes against her
+account, but then used a different one, which
+resulted in more fees. Tims alleged that LGE
+agreed to impose overdraft fees only when her
+ledger balance the amount of money in her
+account without considering pending debits—-was
+insufficient to cover a transaction. She alleged that
+LGE broke that promise by assessing overdraft
+fees when, based on her ledger balance, there was
+enough money in her account to cover the
+1234 transaction in question, but based on her *1234
+available balance—the money in her account after
+considering pending debits and deposits-there
+was not.
+Tims sued LGE in district court for breach of
+contract, breach of the implied covenant of good
+faith and fair dealing, and violation of the
+Electronic Fund Transfer Act (EFTA), 15 U.S.C.
+$§ 1693 - 1693r. The district court dismissed her
+claims under Federal Rule of Civil Procedure
+12(b)(6) after determining that the two parties'
+agreements unambiguously permitted LGE to
+assess overdraft fees using the available balance
+calculation method.
+casetext
+
+Tims v. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)
+We disagree with the district court's interpretation
+of the contracts. Because we conclude that the
+agreements are ambiguous as to whether LGE
+could rely
+on an account's available balance,
+rather than its ledger balance, to assess overdraft
+fees, we reverse the district court's dismissal of the
+case and remand for further proceedings consistent
+with our opinion.
+I. BACKGROUND
+A. Congressional Regulation of
+Overdraft Fees After the Advent of
+Online Banking
+"Overdraft" is a banking term describing a deficit
+in a bank account caused by drawing more money
+than the account holds. Before the development of
+electronic fund transfer (EFT) systems, banks
+generally provided overdraft coverage for check
+transactions only. See Electronic Fund Transfers,
+74 Fed. Reg. 59,033, 59,033 (Nov. 17, 2009).
+When a bank customer overdrew her account by
+writing a check in an amount that exceeded the
+amount of funds in the account, her financial
+institution applied its discretion in deciding
+whether to honor the customer's draft, in effect
+extending a small line of credit to its customer and
+imposing a small fee for the convenience. Id.
+Online banking transformed how financial
+institutions handled overdrafts and overdraft fees.
+New EFT systems provided customers with more
+ways to make payments from their accounts,
+including automatic teller machine (ATM)
+withdrawals, debit card transactions, online
+purchases, and transfers to other accounts. Id.
+Most financial institutions chose to extend their
+overdraft coverage to all EFT transactions. Some
+further decided to cover automatically all
+overdrafts their customers might gencrate from
+their EFTs. Id. These changes had the benefit to
+financial institutions of "reduc(ing) cost[s]" from
+manually reviewing individual transactions and
+furthering "consistent treatment of consumers." Id.
+at 59,033 -34. But they came at a significant and
+sometimes unexpected cost to consumers:
+casetext
+financial institutions generally assessed a flat fee
+each time an overdraft occurred, sometimes
+charging additional fees-for each day an account
+remained
+overdrawn.
+for
+example,
+incrementally higher fees as the number of
+overdrafts increased. Id. at 59,033.
+Congress enacted EFTA with the aim of outlining
+the rights, responsibilities, and obligations of
+individuals and institutions using EFT systems. Id
+In EFTA's implementing regulations (Regulation
+E, 12 C.F.R. pt. 1005), Congress set out to "assist
+consumers in
+understanding how
+overdraft
+services provided by their institutions operate and
+to ensure that consumers have the opportunity to
+limit the overdraft costs associated with ATM and
+one-ume debit card transactions
+where such
+services do not mect their needs." Id. at 59,035.
+Doing away with the practice of automatic
+enrollment of consumers in overdraft coverage,
+Regulation E required financial institutions to
+secure consumers' "affirmative consent" to
+overdraft services through an opt-in notice. Id. at
+59,036. The opt-in notice was to be "segregated
+1235 from *1235 all other information[ ] describing the
+institution's overdraft service," 12 C.F.R. $
+1005.17(b)(1)(i), and be "substantially similar" to
+a model form (Model Form A-9) provided by the
+Federal Reserve, id. § 1005.17(d).
+"But the opt-in requirement and model form have
+not dispelled all the controversy and confusion
+surrounding overdraft fees." Chambers v NASA
+Fed. Credit Union, 222 F. Supp. 3d 1, 6 (D.D.C.
+2016). Model Form A-9 does not address which
+account balance calculation method a financial
+institution should use to determine whether a
+transaction results in an overdraft. See 12 C.F.R
+pt. 1005, app. A. Without any such provision in
+the model form, "some financial institutions have
+failed to disclose the balance calculation method
+that they use to determine whether a transaction
+results in an overdraft." Chambers, 222 F. Supp.
+3d at 6.
+
+Tims v. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)|
+In determining whether a customer has made a
+withdrawal or incurred a debit that exceeds the
+balance in her account—an overdraft-financial
+institutions typically use one of two methods of
+calculating the balance in a customer's account:
+the "ledger" balance method or the "available"
+balance method.
+The ledger balance method
+considers only settled transactions; the available
+balance method considers both settled transactions
+and authorized but not yet settled transactions, as
+well as deposits placed on hold that have not yet
+cleared. Consumer Fin. Prot. Bureau, Supervisory
+Highlights 8 (Winter 2015), available at
+https://files.consumerlinance.gov/f/201503_cfpb
+supervisory-highlights-winter-2015.pdf
+(last
+visited May 24, 2019). These two competing
+methods of calculating a consumer's balance and
+charging overdraft fees based on that balance lie at
+the heart of this case.
+B. Factual Background
+LGE allegedly charged Tims overdraft fees of $
+30.00 each on two occasions. Tims's complaint
+alleged that at the time LGE assessed the overdraft
+fees, her ledger balance was sufficient to cover
+each transaction. She alleged that LGE agroed to
+use the ledger balance calculation method in
+assessing overdraft fees, and so LGE's use of the
+available balance calculation method breached her
+agreements with LGE.
+LGE argues that its agreements with Tims
+unambiguously provided that LGE would use the
+available balance calculation method in imposing
+overdraft fees. LGE thus asserts that it did not
+breach its agreements by imposing fees based on
+Tims's available balance.
+There were two agreements between Tims and
+LGE: the "Opt-In Agreement" and the "Account
+Agreement." LGE asked consumers to sign the
+Opt-in Agreement to obtain their consent to LGE's
+overdraft policies. The Opt-In Agroement said
+little about which balance calculation method LGE
+employs, stating only that "[ajn overdraft occurs
+when you do not have enough money in your
+account to cover a transaction, but we pay it
+anyway." Doc. 29 at 44.'
+1 All citations in the form "Don, f" refer to
+numbere canesencedecor
+powde
+LGE adopted the Opt-in Agreement to comply
+with Regulation E, 12 C.F.R. § 1005.17. Again,
+Regulation E requires financial institutions to
+secure a consumer's "affirmative consent" before
+charging overdraft fees and stipulates that consent
+can be secured through use of an opt-in form
+"substantially similar" to Model Form A-9. Id.$
+1005.17(b)(1)(iii), (d). LGE's Opt-In Agreement is
+nearly an exact copy of Model Form A-9.
+Compare id. pt. 1005, app. A, with Doc. 29 at 44.
+The second agreement between Tims and LGE,
+1236the Account Agreement, contained *1236 a
+"Payment Order" provision explaining that in
+processing items drawn on a consumer's account,
+LGE's "policy is to pay (the items) as we receive
+them." Doc. 29 at 31. The Account Agreement
+went on to say, "[i]f an item is presented without
+sufficient funds in your account to pay it" or "if
+funds are not available to pay all of the items"
+presented for payment, LGE "may, at [its]
+discretion, pay" the item or items, creating an
+overdraft for which LGE will charge a fee. Id. at
+32.
+A separate provision in the Account Agreement,
+the "Funds Availability Disclosure," addressed the
+conditions under which funds were available for
+consumers' use. Id. at 37. In this provision, LGE
+explained that its general policy was "to make
+funds from your deposits available to you on the
+same business day that [LGE] receive[s] your
+deposit," but certain deposits would not be
+"available" to consumers until the second business
+day at the carliest. Id.
+C. Procedural History
+casetext
+
+Tims V. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)
+Tims brought this case as a consumer class action,
+asserting three claims against LGE that are the
+subject of this appeal." First, Tims alleged that
+LGE breached its Opt-In and Account Agreements
+by assessing overdraft fees using the available
+balance calculation method. Second, she alleged
+that LGE violated the implied covenant of good
+faith and fair dealing implicit in every contract
+under Georgia law.' Third, she alleged that LGE's
+practices failed to accurately describe its overdraft
+service as required by Regulation E, thus violating
+2 Tims also asserted claims apainst L.GE for
+unjust enchment and moncy had and
+received. On appeal, she does not argue
+that the distnct court erred in dismissing
+these claims, so we do not address them
+Co., 385 F.3d 1324, 1330 (11th Cir. 2004)
+(stating that a legal claim or argument that
+has not boon bricfed on anoenl is "deemed.
+abandoned and its marits wil not be
+addressed").
+3 The Account Agreement provided that
+Georgia law governs the contract. Because
+the parties agree that Geongia law applies
+here, we assume that it does. See Bahamas
+Sales Assoc., LLC v. Byers, 701 F.3d 1335,
+1342 (11th Cir. 2012) ("If the parties
+tigate the case under the assumption that a
+certain law applies, we will assume that
+law applies.")
+LGE filed a Rule 12(b)(6) motion to dismiss all
+claims, which the district court granted. Using
+Georgia's canons of contract construction, the
+district court determined that the agreements
+unambiguously permitted LGE to assess overdraft
+fees using the available balance calculation
+method. The court concluded that LGE had neither
+breached the parties' contract nor the covenant of
+good faith and fair dealing and that no EFTA
+violation had occurred. Tims timely appealed.
+II. STANDARD OF REVIEW
+We review de novo a district court's grant of a
+motion to dismiss for failure to state a claim under
+Federal Rule of Civil Procedure 12(b)(6). See
+Glover v. Liggett Grp., Inc. , 459 F.3d 1304, 1308
+(11th Cir. 2006). We accept factual allegations in
+the complaint as true and construe them in the
+light most favorable to the plaintiff. See Hill v
+White , 321 F.3d 1334, 1335 (11th Cir. 2003). To
+withstand a motion to dismiss under Rule 12(b)
+(6), a complaint must include "enough facts to
+state a claim to relief that is plausible on its face."
+Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570,
+127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim
+has facial plausibility when the plaintiff pleads
+factual content that allows the court to draw the
+reasonable inference that the defendant is liable
+for the misconduct alleged." Ashcroft v. Iqbal, 556
+U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868
+1237(2009).*1237 We review de novo the issue of
+whether a contract is ambiguous. See Frulla v
+CRA Holdings, Inc. , 543 F.3d 1247, 1252 (11th
+Cir. 2008). Questions of contract interpretation are
+pure questions of law, also reviewed de novo.
+Gibbs v. Air Canada, 810 F.2d 1529, 1532 (11th
+Cir. 1987).
+III. DISCUSSION
+Tims challenges the district court's dismissal of
+her claims against LGE for (1) breach of contract;
+(2) breach of the implied covenant of good faith
+and fair dealing; and (3) violation of Regulation E
+of EFTA. We consider these claims in turn.
+A. Tims Stated a Claim for Breach of
+Contract.
+To state a claim for breach of contract under
+Georgia law, Tims had to plausibly allege that
+LGE owed her a contractual obligation, then
+breached it, causing her damages. Norton v
+Budget Rent a Car Sis., Inc. , 307 Ga.App. 501,
+705 S.E.2d 305, 306 (2010). Tims alleged that
+LGE promised to calculate her account balance—
+and assess overdraft foes in light of that balance
+by considering only the ledger balance, then
+breached that promise by considering the available
+casetext
+
+Tims V. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)
+balance instead. We must interpret the two
+agreements between Tims and LGE to decide
+whether LGE had a contractual obligation to use
+the available balance calculation method or the
+ledger balance calculation method for unsettled
+withdrawals* in imposing overdraft fees.
+Ga.App. 101, 661 S.E.2d 578, 583 (2008) (internal
+quotation marks omitted). A contract is
+unambiguous when, after examining the contract
+as a whole and affording its words their plain
+meaning, "the contract is capable of only one
+reasonable interpretation." Id. (internal quotation
+marks omitted).
+4 The partics appear to agroc that, as to
+deposits, the Funds Availability Disclosure
+permits LGE to place holds on some types
+of deposits pending clearance of the
+deposit (ledger balance method), but that as
+to other types of deposits, LGE has agreed
+that the deposit will be made immediately
+availabic to the custoner available
+balance method). The dispate here
+concems how debit transactions are to be
+treated under the Opt-In Agreement and
+the Account Agreement, with lums arguing
+that the relevant documents indicate that
+the ledger method will be used and LGE
+arguing that the terms of the agreements
+provide for use of the available balance
+method.
+Under Georgia law, courts interpret contracts in
+three steps: first, the court determines whether the
+contract language is clear and unambiguous. If the
+language is clear, the court applies its plain
+meaning; if it is unelear, the court proceeds to step
+two. At step two, the court attempts to resolve the
+ambiguity using Georgia's canons of contract
+construction. If the ambiguity cannot be resolved
+using the canons, then the court proceeds to step
+three, where the parties' intent becomes a question
+of fact for the jury. City of Baldwin v. Woodward
+& Curran, Inc ., 293 Ga. 19, 743 S.E.2d 381, 389
+(2013).
+"The cardinal rule of construction is to ascertain
+the intention of the parties." Maiz v. Virani, 253
+F.3d 641, 659 (11th Cir. 2001) (alteration adopted)
+(internal quotation marks omitted). A contract is
+ambiguous when it "leavefs) the intent of the
+parties in question i.e., that intent is uncertain,
+unclcar, or is open to various interpretations."
+Capital Color Printing. Inc. v Ahern , 291
+1. The Plain Language of the Opt-In
+and
+Account
+Agreements
+Is
+Ambiguous as to Which Account
+Balance Calculation Method LGE
+Uses to Assess Overdraft Fees.
+Both parties argue that the Opt-In and Account
+1238 Agreements are unambiguous, *1238 but they
+disagree about which account balance calculation
+method the agreements unambiguously promised
+to use. Each party contends that the agreements'
+plain language clearly supports its own
+interpretation of LGE's balance calculation
+method. After careful review, we disagree with
+both partics that the agreements are unambiguous.
+We turn to the language of the Opt-In and Account
+Agreements and begin with the Opt-In
+Agreement.' In relevant part, the Opt-In
+Agreement explained that "[ajn overdraft occurs
+when you do not have enough money in your
+account to cover a transaction, but we pay it
+anyway." Doc. 29 at 44. Each party contends that
+interpretain of tiny sulanes calculation
+method. Tims argues that the phrase "enough
+money in your account" unambiguously referred
+to the ledger balance because the term "account" is
+presented without limitation or modification, such
+as a reference to "available" funds. LGE argues
+that "enough" unambiguously referred to the
+available balance. LGE consults the dictionary
+definition of the word "nough"-"occurring in
+such quantity, quality, or scope as to satisfy fully
+the demands, wants, or needs of a situation or of a
+proposed use or end"" —then points out that
+"enough" is synonymous with "available."
+Because "enough" and "available" are synonyms,
+casetext
+
+Tims v. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)|
+LGE argues, a consumer would understand merely
+by reading the word "enough" that LGE would
+take only a consumer's available funds into
+account in calculating the account's balance.
+S Under Gconzia law. " 'shhere multinle
+vernons deedence mende sanese
+too course of a singe transacton, they
+should be construed together.'" Curry v.
+State, 309 Ga.App. 338, 711 S.E.2d 314,
+313 (2011) (quoting Martinez a DaVita,
+Esc., 266 Ga.App. 723, 598 S.E.2d 334,
+337 (2004) ). Neither party disputes that
+Tims entered into the Onton and Account
+opence an decouts with Last
+Webster's Third New
+Intemational Drctionary 755 120021. In
+Georgia, "[when interpreting a contract,
+the language must be afforded its literal
+meaning and plain ardinary words given
+their
+[dictionaries may supply the plain and
+ordinary meaning of a word." Grange Mur.
+Cas. Co. v. Woodard, 861 F.3d 1224, 1231
+(11th Cir. 2017) (internal quotation marks
+omitted).
+We find neither argument persuasive. The Opt-In
+Agreement sheds no light on what "enough money
+in (an) account" means in the context of
+determining when an overdraft has occurred. Id.
+Both parties' arguments raise the question of how
+LGE determines what "enough money" is— is it
+chough money to cover only settled transactions
+or to cover authorized but not yet settled
+transactions as well? The Opt-in Agreement is
+thus ambiguous concerning the account balance
+calculation method LGE's overdraft service uses
+for unsettled debit transactions.
+The plain language of the Account Agreement is
+no more helpful. In describing LGE's overdraft
+service, the Account Agreement's Payment Order
+section stated that an overdraft occurs "[i]f an item
+is presented without sufficient funds in your
+account to pay it" or "if funds are not available to
+casetext
+pay all of the items." Id. at 32. The conditions
+under which deposits would be available for
+consumers' use were set forth in a separate section,
+the Funds Availability Disclosure. The Funds
+Availability Disclosure explained that LGE's
+"policy is to make funds from (the consumer's]
+deposits available to [the consumer) on the same
+business day" that LGE receives the deposit. Id. at
+37. It stipulated that consumers can immediately
+"withdraw funds" for most deposits, including
+cash, wire transfers, and money order deposits;
+1239 however, consumers must wait to 1239 "withdraw
+funds" under certain limited circumstances,
+including deposits of checks exceeding $ 5,000
+and deposits into repeatedly and recently
+overdrawn consumer accounts. Id. The Funds
+Availability Disclosure made no mention of debit
+transactions specifically, referring only to
+"withdrawals" gencrally. Id.
+Each party contends the language of this
+agreement, too, clearly requires the use of its
+favored account balance calculation method in
+charging overdraft fees. Tims argues that the
+phrase "sufficient funds," by itself, plainly refers
+to the ledger balance. She also argues that even
+though the Funds Availability Disclosure said
+some deposited funds will be considered
+unavailable to consumers for a period of time, it
+did not say whether or how the funds'
+unavailability relates to the financial institution's
+account balance calculation method for overdraft
+purposes. Finally, Tims points out that even
+though the Funds Availability Disclosure
+explained that certain deposits could not
+immediately be withdrawn by consumers, it said
+nothing about whether pending debits affected
+consumers' ability to withdraw funds.
+In an argument similar to the one it makes about
+the Opt-in Agreement, LGE asserts that
+"sufficient" is synonymous with "available," and
+so a consumer reading the word "available" and
+then the term "sufficient" in adjacent sentences
+would understand the Account Agreement as
+clearly referring to
+the available balance
+
+Tims V. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)
+calculation method. LGE also notes that the Funds
+Availability Disclosure stipulated that consumers
+could use funds only when they were "available,"
+a word also used in the Payment Order subsection
+of the Account Agreement describing when an
+overdraft occurs. See Doc. 29 at 32 (stating that an
+overdraft occurs "if funds are not available to pay
+all of the items").
+7 "Sufficicer" is defined as "(a)drquate; of
+such quality, number, foroc, or value as is
+necessary for a given purpose." Sufficient
+Black's Law Dictionary 1661 (10th ed.
+2014). "Available" is defined as "capable
+of use for the accomplishment of a
+purpose: immediately utilizable." Available
+• Webster's Third New Internationa,
+Dictionary 150 (2002).
+Neither argument persuades us. We cannot say the
+Account Agreement unambiguously articulated
+the account balance calculation method LGE uses
+for unsettled debit transactions. Nothing in the
+Account Agreement explained how LGE
+determines whether funds are "sufficient." Nor did
+the mere presence of the word "available" in the
+Account Agreement, in two separate subsections,
+clearly communicate that LGE would calculate a
+consumer's account balance for the purpose of
+assessing overdraft fees based on unsettled
+transactions. LGE "apparently assumes that the
+[consumer] will read the word 'available' in [two
+separate] sections spanning the [12]-page Account
+Agreement" and conclude that the financial
+institution uses the available balance calculation
+method in its overdraft service just because the
+agreement uses the term "available." Smith v. Bank
+of Hawaii , No. 16-00513 JMS-RLP, 2017 WL
+3597522, at *7 (D. Haw. Apr. 13, 2017). LGE
+assumes too much. As Tims points out, although
+the Account Agreement explained that certain
+deposits would not immediately be available to
+consumers, it did not explain that a pending debit
+would render funds unavailable to consumers.
+In the absence of anything in the Account
+Agreement addressing the account balance
+calculation method LGE used in its overdraft
+service for unsettled transactions and given the
+ambiguity of the terms "sufficient funds" and
+"available," the Account Agreement failed to
+clearly indicate which balance calculation method
+LGE was using to determine when an unsettled
+debit transaction would result in an assessment
+1240*1240 of overdraft fees. Other courts, confronting
+similar terms across subsections of similar account
+agreements, have agroed. See, e.g. , Pinkston-
+Poling v Advia Credit Union, 227 F. Supp. 3d
+848, 854-56, 856 n.4 (W.D. Mich. 2016) (deciding
+that the terms "enough money" and "sufficient
+funds" did not clearly indicate that an available
+balance method would be used in imposing
+overdraft foes); see also Walbridge v. Ne. Credit
+Union, 299 F. Supp. 3d 338, 343-46 (D.N.H.
+2018) (determining that the terms "enough
+money," "insufficient funds," and "nonsufficient
+funds" did not clearly indicate that an available
+balance method would be used in charging
+overdraft fees).
+Neither the Opt-In Agreement nor the Account
+Agreement clearly articulated which balance
+calculation method LGE was using to determine
+when unsettled transactions would trigger an
+overdraft. The contracts are ambiguous.
+2. The Agreements Remain
+Ambiguous
+Considering
+Georgias Cannot derang
+Construction.
+Having determined that the language of the Opt-In
+and Account Agreements is susceptible to two
+different constructions, we turn to the second step
+of contract interpretation under Gorgia law and
+attempt to resolve the ambiguity using Georgia's
+canons of construction.' Applying these canons,
+the district court determined that any ambiguity in
+the contracts could be resolved. The district court
+concluded that the use of the word "available" in
+the Account Agreement plainly referred to the
+casetext
+
+Tims V. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)
+available balance method for two reasons: first,
+based on the close proximity of the words
+"available" and "sufficient" in the Payment Order
+1241 subsection, *1241 and second, because "available"
+must be interpreted consistently throughout the
+Account Agreement, which uses the word in
+different subsections. We find neither reason
+compelling.
+8 Tims also asks us to construe the
+focusat as coatracts of adhcsion. n
+standardized comraces orcred on a "axe
+it or leave itbasis and under such
+appeal").
+In addition. Tims anoes that we should
+apply the coctrine of contra proverchiew,&
+canon of contract construction that
+counsels in favor of construing ambiguities
+in contract language against the drafter."
+Allen v: Thomas, 161 F.3d 667, 671 (Ilth
+Cir. 1998). Tuns licewise taako to peesenc
+this argument for appetinie rowiew. she
+mentioned the doctrine of congra
+provesentew only
+once. in the
+aforcincattonta footaote,
+advancing any argument that it applied. Ser
+Doc. 31 at 15 n.3 (noting only that
+ambig alties ta a contrace will be colstricd
+against the drafter' (alterations adopted)
+too dcsired produes or scarce except by
+acquiescing in the form contract," and ard
+"construed strictly against the drafter.
+Walton Elec. Membership Corp. v. Suyder,
+226 Ga.App. 673, 487 S.E.2₫ 613, 617 n.6
+(1997). Because she failed to clearly
+present this argument before the district
+court, we will not assess its merits here.
+See In ne Pan Am. World Airways, Inc.
+Maternity Loze Practices & Flighr
+Attendant Weight Program Litig. , 905 F.2d
+1451， 1402111tha 6a. .990. Ims contends
+that she presented the argument to the
+district court becausc her complaint stated
+that LGE drafted the agreements, which
+were adhesive in nature. Tims does not
+arguc, but we note, that she subsequently
+mentana the
+Licongia canon
+of
+construction regarding contracts of
+adhesion once, in a footnote in bes
+opposition to LUl's motion to dismiss.
+without advancing any argunsent that ber
+agroement with Lots was a contract of
+adhesion. Tims's description of the
+agreements and her brief reference without
+argument in a footnote was insuthcient to
+preserve the argument for appeal. See U.S.
+Sec. de Exchange Commit v. Big Apple
+Consulting USA, Inc., 783 F3d 786, 812
+(11th Cir. 2015) (explaining that a litigant's
+"fleeting footnote explaining" an argument
+to the district court in one sentence ... 1s
+insufficient to properly assert a claim on
+alcouns reverence in a roomote to the
+doctrine of contra proferentem was
+insufficient to preserve her argument for
+appeal, and we thus do not address it. See
+Big Apple Consulting USA, Inc. , 783 F.3d
+at 812.
+Our conclusion that Tims failed to preserve
+of the motion to dismiss does not foreclose
+her from raising these arguments in the
+district court at the summary judgment
+stage.
+First, the proximity of the word "available" to the
+word "sufficient" in the Payment Order subsection
+of the Account Agreement does not elcarly
+communicate that LGE would use an available
+balance calculation method when considering
+unsettled transactions in its overdraft service. As
+discussed above, the Account Agreement's
+Payment Order provision stated that LGE would
+assess overdraft fees if there were not "sufficient
+funds in your account to pay (an item]" and just
+after noting that its "payment policy ... may reduce
+the amount of overdraft….. fees you have to pay if
+funds are not available to pay all of the items."
+Doc. 29 at 32 (emphasis added). The district court
+concluded that the proximity of "sufficient" to
+"available" meant the words are somehow linked.
+See Doc. 67 at 11 ("By including the term
+casetext
+
+Tims V. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)
+'available' in such close proximity to the term
+'sufficient,' the parties indicate that they view
+both terms to be related."). No Georgia canon of
+contract construction supports this conclusion,
+however.' There is no rule that words in close
+proximity should be construed as related to one
+another without considering word order and
+context. And even if we agreed that the terms were
+related to one another, the related terms still did
+not unambiguously specify that LGE would apply
+the available balance calculation method to
+unscttled transactions in assessins overdrafts.
+consumer could reasonably understand the phrase
+"available ... sufficient funds" to refer to her ledger
+balance. tat avalable tunds are those mn nes
+account and sufficient to cover her draft. Thus,
+even read together, the terms "available" and
+"suflicient" fail to clearly communicate how
+unsettled transactions are treated in the balance
+calculation method LGE employs in its overdraft
+services. So the contract remains capable of two
+reasonable constructions.
+* The most comparablo Georgia canon of
+contract construction is the last antecedent
+canon, which provides that "[r)cferential
+and qualifying words and phrases, where
+no contrary intention appears, refer solely
+to the last antecedent." Deal & Coleman,
+294 Ga. 170, 751 S.E.2d 337, 342 (2013)
+(intemal quotation marks omitted); see also
+Key v Ga Dep's of Admin. Servs. , 340
+Ga.App. 534, 798 S.E.2d 37, 41 (2017)
+(canon applicable in contract as well as
+statutory construction). But the last
+antecedent rule does not apply here
+because "sufficient funds" is not a limiting
+clause or phrase and "available" is not a
+noan. See Barnhart v. Thomas, 540 U.S.
+20, 26, 124 S.Ct. 376, 157 L.Ed.2d 333
+20us) explaining that the oscinine apples
+to "limiting clause(s) or phrases)" that aro
+read as modifying only the noun or phrase
+Second, we disagree that the Account Agreement
+was neoessarily referring to an available balance
+calculation method for unsettled debit transactions
+based on the use of the word "available" in a
+runas Avalabilly Disclosure provision that
+addresses a completely ditterent matter. the
+availability of deposited funds.
+The Funds
+Availability Disclosure provision used variations
+of the word "available" more than 20 times—in
+nearly every sentence. But "available" was never
+used in conjunction with the word "balance." And
+"available" was never defined to exclude unsettled
+debit transactions for overdraft purposes. At best,
+this section equated "available" with "able to be
+withdrawn." See, e.g., Doc.
+29 at 37 ("This
+disclosure describes your ability to withdraw
+funds at LGE .... Our policy is to make funds from
+your deposits available to you on the same
+business day we receive your deposit."). LGE's
+explanation in the Funds Availability Disclosure
+provision for when deposited funds became
+1242"available" to consumers for withdrawal *1242
+simply did not address how LGE would treat
+unsettled debits when it calculated a consumer's
+balance for overdraft fee purposes.
+LGE's argument that the agreements clearly
+promised to use the available balance calculation
+method does not convince us, either. LGE asserts
+that the repeated use of the word "available"
+unambiguously communicated that overdraft fees
+would be assessed using the available balance
+method. To support its interpretation of the word
+"available," LGE cites to Chambers . 222 F. Supp.
+3d at 1. The dispute in Chambers, as in this case,
+concerned whether a credit union's Opt-in and
+Account Agreements obligated the credit union to
+use the ledger or the available balance method in
+its overdraft service. Id. at 10. The court dismissed
+Chambers's breach of contract claims after
+concluding that the Opt-In Agreement
+unambiguously stated that the credit union would
+use the available balance calculation method. Id.
+casetext
+
+Tims V. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)
+Several significant details distinguish Chambers
+from this case, however. Importantly, in Chambers
+, the Opt-In Agreement used the phrase "available
+balance." Id. In addition, the Account Agreement
+in Chambers contained a subsection addressing
+"Available Balances to Make Transactions," which
+linked the concept of available balance to the
+mechanics of when and how the bank would
+assess overdrafts. Id. at 10-11. Finally, the Opt-In
+Agreement in Chambers provided examples
+illustrating when an account would not have
+"enough money" and thus be subject to an
+overdraft. Id. at 10.
+None of those factors is present in this case. The
+agreements here did not use the phrase "available
+balance"; the Account Agreement nowhere
+explained the mechanics of how and when LGE
+would assess overdrafts, nor linked the concept of
+an "available balance" to those mechanics; and the
+Opt-In Agreement provided no examples
+illustrating when a consumer would not have
+"enough money" to cover a transaction and
+thereby trigger an overdraft. Because of these
+three distinctions, we cannot say the Opt-in and
+Account Agreements in this case clearly
+demonstrated the parties' intent that LGE would
+use the available balance calculation method when
+assessing overdraft foes. See Walbridge, 299 F.
+Supp. 3d at 345-46 (concluding based on the same
+three factors that the financial institution did not
+clearly communicate an intent to use the available
+balance in charging overdraft fees).
+Neither the Opt-In Agreement nor the Account
+Agreement read separately, nor the two
+agreements read together, clearly articulated
+LGE's balance calculation method for charging
+overdraft fees. Applying the Georgia canons of
+construction does nothing to clarify the contracts'
+ambiguity. Because the language remains
+ambiguous after considering both the plain
+language of the contracts and the Georgia canons
+of construction before us, '" the partics' intent will
+become a question for the jury should neither
+party be granted summary judgment. The district
+court therefore erred in dismissing Tims's claim
+for breach of contract.
+10 In note 8, supra, we noted that the doctrine
+of contra proferentem had not been
+preserved for purposes of our review but
+Tims could advance it during the summary
+judgment stage of litigation.
+B. Tims Stated a Claim Against LGE
+for Breach of the Covenant of Good
+Faith and Fair Dealing.
+Tims next argues that the district court erred in
+dismissing her claim that LGE breached the
+implied covenant of good faith and fair dealing
+1243 under Georgia law. We agree.*1243 Under Georgia
+law, "[c)very contract imposes upon each party a
+duty of good faith and fair dealing in its
+performance and enforcement." Brack v. Brownlee
+, 246 Ga. 818, 273 S.E.2d 390, 392 (1980)
+(internal quotation marks omitted). That implied
+promise "becomes a part of the provisions of the
+contract, but the covenant cannot be breached
+apart from the contract provisions [that] it
+modifies and therefore cannot provide an
+independent basis for liability." Myung Sung
+Presbyterian Church v. N. Am. Assoc. of Slavic
+Churches de Ministries, 291 Ga.App. 808, 662
+S.E.2d 745, 748 (2008). A plaintiff "must set forth
+facts showing a breach of an actual term of an
+agreement" to state a claim for breach of the
+implied duty of good faith and fair dealing. Am.
+Casual Dining. L.P. v. Moe's Sw. Grill, L.L.C. ,
+426 F. Supp. 2d 1356, 1370 (N.D. Ga. 2006).
+Given our conclusion on the breach of contract
+claim, Tims's allegations sufficiently "set forth
+facts showing a breach of an actual term of [the]
+agreement." Id. Tims alleged that LGE had a
+contractual obligation to use the ledger balance
+calculation method and breached that promise;
+therefore, Tims's claim for breach of the implied
+covenant of good faith and fair dealing has been
+properly pled. The district court erred in
+dismissing this claim.
+casetext
+10|
+
+Tims v. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)
+C. Tims Stated a Claim Against LGE
+for Violating EFTA.
+Tims alleges, and we think it plausible, that LGE
+violated EFTA Regulation E. Under EFTA,
+Congress charged the Federal Reserve Board-
+and, later, the Consumer Financial Protection
+Bureau (CFPB)-with promulgating regulations
+to carry out EFTA's purposes. 15 U.S.C. §
+1693b(a)(1) ; see also id. § 1693a(4)."' One of
+EFTA's central features is a requirement that
+financial institutions disclose "[the terms and
+conditions of electronic fund transfers involving a
+consumers account ... in accordance with the
+regulations of the" CFPB. Id. § 1693c(a).
+11 Congress reassigned responsibility for
+entorcing trin trom ine reectal Keichel
+Board to the CFPB in 2010. See Dodd-
+Frank Wall Street Reform and Consumer
+Protection Act of 2010, Pub. L. No. 111-
+203, Title X, § 1084, 124 Stat. 1376, 2081-
+831
+Regulation E is part of the CFPB's implementation
+of this requirement. Regulation E requires
+financial institutions to give consumers a "notice
+… describing the institution's overdraft service."
+12 C.F.R. § 1005.17(bX1)(i). The notice must be
+"substantially similar to Model Form A-9" and
+describe the "financial institution's overdraft
+service" in a "clcar and readily understandable"
+way. Id. § 1005.17(d)(1), 1005.4(a)(1). See also 15
+U.S.C. § 1693c (requiring financial institutions to
+make disclosures "in accordance with the
+regulations of the" CFPB
+"in readily
+understandable language"). Before financial
+institutions may charge overdraft fees, they must
+give consumers "a reasonable opportunity ... to
+affirmatively consent, or opt in, to the service." 12
+C.F.R. § 1005.17(b)(1)(ii). Congress created a
+private right of action for consumers against
+financial institutions that fail to provide proper
+notice describing their overdraft service. See 15
+U.S.C.§ 1693m. Congress further directed the
+CFPB to draft boilerplate language to help
+financial institutions "comply] with the disclosure
+casetext
+requirements" for overdraft services. 15 U.S.C.§
+1693(b). Model Form A-9, the template for LGE's
+Opt-In Agreement, was issued pursuant to this
+directive.
+As we have explained, the Opt-In Agreement LGE
+gave Tims is ambiguous because it could describe
+either the available or the ledger balance
+calculation method for unsettled debits. As a
+result, it is plausible that the notice does not
+1244 describe *1244 the overdraft service in a "clear and
+readily understandable" way. 12 C.F.R.
+1005.4(a)(1). It is also plausible that Tims had no
+reasonable opportunity to affirmatively consent to
+LGE's overdraft services. Id. § 1005.17(b)(1)(ii).
+Affirmative consent requires "plain and clear
+consent ... before certain acts or events, such as
+changes in policies that could impair an
+individual's rights or interests." Affirmative-
+Consent Requirement, Black's Law Dictionary
+(11th cd. 2019). A notice that does not adequately
+convey the circumstances in which a financial
+institution will charge overdraft fees may not
+provide a consumer all the information she needs
+to give plain and clear consent. Here, Tims
+plausibly did not have a reasonable opportunity to
+affirmatively consent because the notice gave her
+no way to know whether LGE would use the
+available balance or the ledger balance method to
+charge her overdraft fees.
+But that is not the end of the matter. Congress
+provided a safe harbor from EFTA liability for
+"any failure to make disclosure in proper form if a
+financial institution utilized an appropriate model
+clause issued by the" CFPB. 15 U.S.C. 8
+1693m(d)(2).!? The CFPB interprets the safe
+harbor to preclude liability "for failure to make
+disclosures in proper form" provided the
+institution "uses [the model form's] clauses
+accurately to reflect its services." 12 C.F.R. pt.
+1005, app. A ( Supp. I).
+12 The safe-harbor provision also shields
+financial institutions from liability for "any
+des done or omance la good tail in
+11
+
+Tims v. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)|
+consomally win any mule, regulaton, or
+interpretation thereof." 15 U.S.C.
+1693m(d)(1). LGE does not argue this
+provision precludes liability here, and we
+express as view on the matter.
+In its notice defining the term "overdraft," LGE
+copied verbatim the definition of that term
+provided in Model Form A-9: "[ajn overdratt
+occurs when you do not have enough money in
+your account to cover a transaction, but we pay it
+anyway." LGE seeks refuge in the safe harbor
+because, it argues, it used an appropriate model
+form to describe its overdraft service. We disagree
+that LGE is protected from liability by the safe
+harbor.
+LGE emphasizes that its form is accurate, and that
+may be so. After all, we have concluded it could
+correctly refer to either the ledger balance or the
+available balance method. But that does not
+conclude the inquiry.
+The relevant question is whether the claim Tims
+asserts is one for LGE's "failure to make
+disclosure in proper form." The answer must be
+no. The statute's text, which is where all statutory
+interpretation must begin, makes that much plain.
+See BedRoc Ltd., LLC v. United States , 541 U.S.
+176, 183, 124 S.Ct. 1587, 158 L.Ed.2d 338
+(2004). "Form" has many meanings, but it is best
+read here to refer to "[p)rocedure as determined or
+governed by custom or regulation," as distinct
+from content or substance. Webster's New College
+Dictionary 448 (3d cd. 2008); see also Form,
+Black's Law Dictionary (11th cd. 2019) (defining
+"form"
+as "[the outer shape, structure or
+configuration of something, as distinguished from
+its substance or matter" or an "[e]stablished ...
+procedure"); Form, Oxford English Dictionary (2d
+cd. 1989) (defining "in due or proper form" to
+mean "according to the rules or prescribed
+methods"). Thus, making disclosure in proper
+form means making the disclosure according to
+proper procedures.
+The safe-harbor provision
+insulares nancial instutions tom bria clams
+based on the means by which the institution has
+communicated its overdraft policy. But it does not
+shield them for claims based on their failure to
+make adequate disclosures. A financial institution
+1245 thus strays beyond the safe harbor when *1245|
+communications within its overdraft disclosure
+inadequately inform the consumer of the overdraft
+policy that the institution actually follows. See
+Berenson v. Nat'l Fin. Servs., LLC, 403 F. Supp.
+2d 133, 151 (D. Mass. 2005) (holding the safe
+harbor "insulates an institution only from a
+challenge as to the form-not the adequacy-of
+the disclosure").
+Regulation E sets out procedures for how financial
+institutions must present their disclosures. To
+comply with the regulation, financial institutions
+must make the disclosure "in writing, or if the
+consumer agrees, electronically" and must further
+"segregatel J" the notice "from all other
+information." 12 C.F.R. § 1005.17(b)(1)(i). The
+format of the notice required by § 1005.17(b(1)(i)
+must be "substantially similar to Model Form A-
+9." Id. § 1005.17(d). Financial institutions must
+also "(p)rovide[] the consumer with confirmation
+of the consumer's consent in writing, or if the
+consumer agrees, electronically." Id. § 1005.17(b)
+(D(iv). These provisions set out the "proper form"
+for presenting a disclosure.
+Tims does not allege LGE failed to do any of that.
+Instead, she challenges the substance of the Opt-In
+Agreement, which she says failed to give her
+enough information to give affirmative consent to
+LGE's overdraft service. As its text makes clear,
+the safe-harbor provision LGE invokes does not
+preclude liability when, as in this case, the content
+of the Regulation E disclosure is at issue. Because
+Tims challenges only LGE's failure to make an
+adequate disclosure, and not its failure to make the
+disclosure "in proper form," LGE cannot seck
+refuge under the safe harbor provision. This is so
+whether or not the form accurately describes the
+overdraft service. In this, our ruling is consistent
+with the great weight of district court authority to
+casetext
+12
+
+Tims V. LGE Cmty. Credit Union 935 F.3d 1228 (11th Cir. 2019)
+have considered the matter. See Salls v. Dig. Fed.
+Credit Union , 349 F. Supp. 3d 81, 91 (D. Mass
+2018) (collecting cases).
+Tims's complaint challenged the substance of
+LGE's Opt-In Agreement. Because the safe harbor
+does not protect financial institutions from
+challenges to the substance of Opt-In Agreements,
+Tims's EFTA claim survives a motion to dismiss,
+and the district court erred in granting the motion.
+IV. CONCLUSION
+For the foregoing reasons, we reverse the district
+court's order granting LGE's motion to dismiss
+and remand for further proceedings consistent
+with this opinion.
+REVERSED AND REMANDED.
+casetext
+
+20-cv-12061
+08-23-2021
+Veronica Gardner, Plaintiff, v. Flagstar Bank, FSB,
+Defendant.
+GERSHWIN A. DRAIN, UNITED STATES
+DISTRICT JUDGE
+OPINION AND ORDER GRANTING IN
+PART AND
+PART
+GERSHWIN A. DRAIN, UNITED STATES
+DISTRICT JUDGE
+1. Introduction
+On July 31, 2020, Plaintifi Veronica Gardner
+brought the instant action on bchalf of herself and
+all others similarly situated against Defendant
+Flagstar Bank, FSB ("'Flagstar" or "Bank"). ECF
+No. 1. Plaintiff filed her First Amended Complaint
+on October 6, 2020 and alleges that Defendant
+unlawfully assesses and collects overdraft fees on
+transactions.
+sometimes multiple times, in
+violation of the contract between the parties. Id.
+Plaintiff brings two state law claims for breach of
+contract and conversion. Id.
+Presently before the Court is Defendant's Motion
+to Dismiss. ECF No. 18. This matter is fully
+briefed. ECF Nos. 20, 23. Plaintiff also filed two
+Notices of Supplemental Authority. ECF Nos. 26,
+1 28. A hearing on this matter was held on *!
+August 11, 2021. For the reasons stated herein, the
+Court will GRANT IN PART and DENY IN
+PART Defendant's Motion to Dismiss [#18].
+casetext
+20-cv-12061
+United States District Court, E.D. Michigan, Southem Division
+Gardner v. Flagstar Bank, FSB
+Decided Aug 23, 2021
+II. Factual Background
+Plaintiff Veronica Gardner has a checking account
+with Defendant Flagstar Bank. ECF No. 14,
+PagelD.75. This relationship is governed by
+Account Agreement Documents ("Agreement")
+that include definitions, policies, and procedures
+concerning Plaintif's account. Id. Specifically, the
+Agreement contains various provisions regarding
+the assessment and payment of overdraft fees and
+insufficient funds fees (referred to by the parties as
+"ODINSF Fees"). ECF No. 14, PageID.66; ECF
+No. 18, PageID.148.
+Plaintiff's claims derive from two related but
+distinct actions by Defendant, which she terms
+"fee maximization practices" ECF No. 20,
+PageID.215. First, Plaintifi alleges that Defendant
+unlawfully charges overdraft fees on transactions
+referred to as "Authorize Positive, Purportedly
+Settle Negative
+Transactions"
+('APPSN
+Transactions*). ECF No. 14, PagelD.69. This
+occurs when an individual has made a transaction
+and a temporary authorization hold is placed on
+the account for the amount of that transaction. Id.
+This hold is in place while the merchant processes,
+and eventually settles, the transaction with
+Flagstar. Id.; ECF No. 18, PagelD.149. In these
+APPSN Transactions, there are always positive
+funds available in the account balance that cover
+2 this transaction, even though subsequent *2
+transactions put the account into a negative
+balance. Plaintiff emphasizes that "customers
+accounts will always have sufficient funds
+available to cover" the initial transaction made
+with a positive balance "bocause Flagstar Bank
+has already sequestered these funds for payment."
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021) |
+ECF No. 14, PagelD.69. Notwithstanding the
+initial positive balance when the funds were
+temporarily held, Plaintiff' states that "Flagstar
+Bank later assesses OD Fees on those same
+transactions when they purportedly settle days
+later into a negative balance." Id. at PagelD.69-70.
+This practice, Plaintiff alleges, is barred by the
+terms of the Agreement with Flagstar regarding
+overdraft fee assessments. However, Defendant
+maintains that the Agreement makes clear that this
+process may occur, and that the customer's balance
+is not assessed "unless or until the payment is
+posted, which typically takes up to two days."
+ECF No. 18, PagelD.162. Thus, the parties dispute
+whether the Agreement indicates that OD/NSF
+Fees will be assessed either at the point of the
+transaction's (1) initial authorization or (2)
+payment when the hold is released and the
+transaction is settled days later.
+Second, Plaintiff alleges that Defendant assesses
+multiple NSF Foes "on the same (often small
+dollar) electronic transactions or checks when
+reprocessed again and again after being returned
+for insufficient funds." ECF No. 20, PagelD.215.
+This process occurs after the initial authorization
+when the temporary hold is placed on positive
+funds. In these cases, the transaction is repeatedly
+3 processed by the bank *3 or a merchant, and an
+OD/NSF Fee is assessed per each processing
+request. ECF No. 14, PagelD.82. This dispute
+between the parties centers around the definition
+of the term "item" in the Agreement. Plaintifi
+alleges that the Agreement "expressly states that
+(only] a singular NSF Fee can be assessed on
+checks, ACH debits, and electronic payments,"
+and therefore the "same 'item' on an account
+cannot conccivably become a new one cach time it
+is rejected for payment then reprocessed,
+especially when-as here-Plaintiff Gardner took no
+action to resubmit them." Id. at PagelD.82, 84.
+Defendant maintains, however, that "the
+Agreement does not state that 'item' means only
+one presentment of a transaction," so the multiple
+assessments of NSF Fees in this circumstance are
+permitted by the Agreement.
+ECF No. 18,
+PagelD. 152.
+Plaintift accordingly filed the instant action
+against Flagstar Bank on July 31, 2020. ECF No.
+1. On October 6, 2020, Plaintift filed her First
+Amended Complaint and brings two claims for
+breach of contract, including breach of the
+covenant of good faith and fair dealing, and
+conversion under Michigan state law. ECF No. 14.
+III. Legal Standard
+Federal Rule of Civil Procedure 12(b)(6) allows a
+aisinct coun to maxe an assessment as to wncine.
+the plaintift has stated a claim upon which relief
+may be granted. See Fed.R.Civ.P. 12(b)(6). To
+withstand a motion to dismiss pursuant to Rule
+12(b)(6), a complaint must comply with the
+pleading requirements of Federal *4 Rule of Civil
+Procedure 8(a)(2). See Ashcroft v. Iqbal, 556 U.S.
+662, 677-78 (2009). Rule 8(a)(2) requires *a short
+and plain statement of the claim showing that the
+pleader is entitled to relief, in order to give the
+defendant fair notice of what the … claim is and
+the grounds upon which it rests." Bell Atl. Corp. v.
+Tiwombly, 550 U.S. 544, 555 (2007) (quotation
+marks omitted) (quoting Fed.R.Civ.P. 8(a)(2);
+Conley v. Gibson, 355 U.S. 41, 47 (1957)). To
+meet this standard, a complaint must contain
+sufficient factual matter, accepted as true, to "state
+a claim to relief that is plausible on its face."
+Tiwombly, 550 U.S. at 570; see also Iqbal, 556
+U.S. at 678-80 (applying the plausibility standard
+articulated in Twombly).
+When considering a Rule 12(b)(6) motion to
+dismiss, the Court must construe the complaint in
+a light most favorable to the plaintiff and accept
+all of his factual allegations as true. Lambert
+Hartman, 517 F.3d 433, 439 (6th Cir. 2008).
+While courts are required to accept the factual
+allegations in a complaint as true, Twombly, 550
+U.S. at 556, the presumption of truth does not
+apply to a claimant's legal conclusions. See Iqbal,
+556 U.S. at 678. Therefore, to survive a motion to
+casetext
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021)
+dismiss, the plaintiff's pleading for relief must
+provide "more than labels and conclusions, and a
+formulaic recitation of the clements of a cause of
+action will not do." Ass'n of Cleveland Fire
+Fighters v. City of Cleveland, 502 F.3d 545, 548
+(6th Cir. 2007) (quoting Twombly; 550 U.S. at
+5 555) (internal citations and quotations omitted). *s
+IV. Discussion
+In the present Motion, Defendant claims that
+Plaintift's First Amended Complaint should be
+dismissed in its entirety because the Agreement
+does not contain ambiguous language or permit
+conduct in violation of Defendant's obligations
+such that either a breach of contract or conversion
+claim may stand. Plaintiff maintains that she has
+pled facts sufficient to survive dismissal on both
+of her claims at this stage.
+A. Breach of Contract (Count 1)
+Count 1 of Plaintif's First Amended Complaint
+alleges that Defendant has breached provisions of
+the Agreement regarding overdraft fee assessment
+timing and frequency. Specifically, this claim
+asserts that Defendant is (1) improperly charging
+OD/NSF Fees on APPSN Transactions in
+contravention of the Agreement's language
+regarding overdrafts and available balances, and
+(2) improperly charging multiple OD/NSF Fees on
+singular transactions with multiple merchant
+presentments on overdrawn accounts.
+As an initial matter, Defendant claims that
+"Plaintif" has not identified any contract provision
+that has been violated by Flagstar," and thus her
+claim cannot be maintained for breach of contract.
+ECF No. 18, PageID.158. However, a review of
+Plaintift's First Amended Complaint does not
+support this assertion. While the text of Count I
+does not list specific contractual language, the
+6 First Amended Complaint * is replete with
+references to various provisions of the Agreement
+that were purportedly breached by Defendant
+when OD/NSF Fees were assessed against
+Plaintift: See, eg., ECF No. 14, PageID.75-77, 82-
+casetext
+84. Count 1 also expressly incorporates the
+preceding paragraphs of Plaintifi's First Amended
+Complaint prior to asserting the breach claim. Id.
+at PagelD.91. The Court thus declines to adopt
+Defendant's argument that the breach of contract
+claim is improper for failure to identify which
+terms of the Agreement were breached.
+1. APPSN Transactions
+In the First Amended Complaint, the Response,
+and the hearing on the matter, Plaintiff directs the
+Court to various provisions in the Agreement that
+are breached each time an APPSN Transaction
+occurs. One section broadly defines what balances
+and available funds include:
+Balance is the total amount of funds in
+account
+from
+your
+posted
+transactions.
+Available Balance is your Balance minus
+any pending debit card transactions
+and/or any outstanding holds (for
+example, holds on deposited checks,
+fraud/legal holds, or temporary debit
+authorization holds).
+Any checks you may have written or ACH
+transactions that have not posted to your
+account, Bounce Protection funds, or any
+funds from accounts(s) you have linked for
+overdraft (for example, deposit overdraft
+protection and/or overdraft line of credit)
+are not reflected in your Balance or
+Available Balance.
+*7 ECF No. 14-1, PageID.99 (emphasis added). In
+other words, a customer's Available Balance, from
+which he or she could make purchases with
+positive funds, do not include outstanding holds.
+Temporary debit authorization holds are defined
+and explained as follows:
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021) |
+A temporary debit authorization hold
+aftects your Available Balance - On debit
+card purchases, merchants may request a
+temporary debit authorization hold on your
+account for an amount that may differ from
+the actual amount of your purchase. This
+temporary debit authorization
+hold
+reduces your Available Balance unless
+and until: (1) we release it after two
+business days; or (2) before we release the
+temporary debit authorization hold, the
+merchant provides to us the actual amount
+of the purchase and we are able to adjust
+your account to reflect the actual purchase
+amount. Please note that adjustment may
+take more than two business days
+depending on when the merchant provides
+the actual amount of the purchase to us.
+If, at any time before the temporary debit
+authorization hold is released or the
+adjustment is made, a transaction is
+presented to us for payment in an amount
+greater than your then-existing Available
+Balance, the transaction presented for
+payment will be: (1) a non-sufficient funds
+(NSF) transaction if we do not pay it; (2)
+an overdraft transaction if we do pay it; or
+(3) declined if the transaction is a
+debit/ATM card purchase and you have not
+authorized us to pay overdrafts on your
+ATM and everyday debit card transactions.
+For nonsufficient funds or overdraft
+transactions, you will be charged an NSF
+fee according to the Fee Schedule. You
+will be charged the NSF fee even if you
+would have had sufficient funds in your
+account had the amount of the hold been
+equal to the actual amount of your
+transaction.
+Id. at PagelD.101 (emphasis added). Another
+provision in the Agreement similarly discusses
+these temporary debit authorizations and how the
+held funds may or may not be accessed by an
+account holder:
+casetext
+Purchases made using your Flagstar debit
+card or ATM card are subtracted from your
+designated Flagstar account. PIN based
+transactions gencrally are settled the same
+day. Signature based transactions, on the
+other hand, may
+take longer to settle. Therefore, a
+temporary debit authorization creates a
+hold on the account that reduces your
+Available Balance by the amount of the
+authorization, even if the amount of the
+transaction is more or less when it is
+finally posted. While pending, the
+temporary debit authorization hold could
+lead to
+other pending or future
+transactions (1) being returned for non
+sufficient funds if we do not pay them, (2)
+contributing to an overdraft if we do pay
+them, or (3) being declined if the
+transaction is a debit/ATM card purchase
+and you have not authorized us to pay
+overdrafts
+for
+debit/ATM
+card
+transactions.
+Id. at PagelD.117 (emphasis added).
+Plaintiff points to these provisions within the
+Agreement to illustrate how the temporary debit
+authorizations are described, specifically in
+relation to the hold authorizations with positive
+funds. Plaintift explains that "available funds are
+immediately placed on 'hold' for the transaction
+they were held for, and those held funds cannot be
+consumed by later made transactions-which is
+why Flagstar repeatedly warns accountholders that
+such later made transactions can (incur) OD Fees
+as a result of the held funds being unavailable."
+ECF No. 20, PagelD.231 (emphasis in original).
+The dispute in the instant matter, however, does
+not concern the assessment of OD Fees on
+subsequent transactions after a temporary debit
+authorization hold is placed; instead, Plaintiff
+asserts that nothing in the Agreement language
+permits Defendant to later charge an OD/NSF Fee
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021)
+on the funds that were sequestered within the
+temporary debit authorization hold when she
+makes her initial purchase, and thus the
+Agreement is ambiguous about overdraft fee
+9 assessments. *9
+In response, Defendant avers that Plaintiff is
+"contorting the Agreement's clear definitions of a
+customer's Balance and Available Balance[ and]
+twisting the Agreement's explanation of a
+"temporary debit authorization hold' to mean that
+money is physically set aside and depleted from
+Plaintift's Balance." ECF No. 18, PagelD.161.
+tenant
+alsa yrees
+with
+Plaintift's
+characterization of the temporary holds placed
+upon pending transactions and emphasizes that
+"[njowhere does the Agreement say that the hold
+removes money from the account, set aside money
+in that account, or posts the transaction to the
+Balance." Id. at PageID.162. Instead, Defendant
+asserts, the temporary hold simply confirms that a
+customer has sufficient funds at the time of
+authorization by a merchant, and the balance is
+settled when the payment is posted up to two days
+later. Id.
+Further, the parties disagree about when the
+assessment of an OD/NSF Fee is warranted under
+the Agreement when a temporary hold is deployed
+by Flagstar. This dispute centers around whether
+the assessment of fees is permitted at
+authorization-when Plaintift first makes her
+transaction and the temporary hold is placed-or
+whether
+the
+settlement/payment-when Flagstar later settles the
+transaction with the third-party merchant, posts
+the transaction to the account, and removes the
+hold. Plaintiff claims that the Agreement contains
+a "clear promise to accountholders that
+authorization is the key moment when overdraft
+fees on debit card transactions are determined"
+10 and cites to a provision in the Agreement •10
+stating that Flagstar may "honor withdrawal
+requests that overdraw your account." ECF No.
+20, PageID.232; ECF No. 14-1, PagelD.101.
+However, Defendant maintains that the Agreement
+casetext
+is clear that OD/NSF Fees are determined at the
+point of payment, when Flagstar settles the
+transaction with the merchant and posts it in
+Plaintiff's balance. ECF No. 18, PagelD.163.
+According to Defendant, this is expressly provided
+for in the Agreement:
+Your account is overdrawn when your
+Available Balance is less than zero. Onc
+way this can happen is if we pay an Item
+for more money than your Available
+Balance.
+ECF No. 14-1, PageID.104 (emphasis added).
+Thus, Defendant believes there are no ambiguitics
+in the Agreement and Plaintift is contorting clear
+contractual language about when OD/NSF Fees
+are assessed
+Whether contract language is clear or ambiguous
+is a question of law. Collins v. National General
+Ins. Co., 834 F.Supp.2d 632 (E.D. Mich. 2011). A
+contract is ambiguous if it is subject to two
+reasonable interpretations. See Citizens Ins. Co. of
+America v. MidMichigan Health ConnectCare
+Network Plan, 449 F.3d 688 (6th Cir. 2006)
+(quoting Boyer v. Douglas Components Corp., 986
+F.2d 999, 1003 (6th Cir.1993)). If the Court
+decides that the contract is ambiguous, then the
+meaning of the contract becomes a question of fact
+and dismissal of the claim is improper. See 51382
+Gratiot Ave. Holdings, LLC v. Chesterfield
+Development Co., LLC, 835 F.Supp.2d 384, 391
+11 (E.D. Mich. 2011). *11
+Federal courts across the country have been
+presented with similar or identical APPSN
+Transaction claims and have overwhelmingly
+denied dismissal motions on the grounds brought
+by Defendant and other financial institutions. In
+Roberts v. Capital One, N.A., 719 Fed.Appx. 33
+(2nd Cir. 2017), the Second Circuit found that the
+district court erred in dismissing a breach of
+contract claim that was predicated on a similar
+ambiguity about the timing of overdraft fee
+assessments by a bank. The Roberts court found
+unpersuasive the argument that the words "pay" or
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021) |
+"payment" as used in the contract clearly meant
+that the overdraft foes would be assessed at
+payment and settlement, not at authorization. Id. at
+36. Thus, the Second Circuit found that dismissal
+was improper because the definition of "payment"
+and when tees were assessed was ambiquous and
+sud cct to more man one microsciaton.
+(explaining that "it is equally reasonable to
+understand the term 'Overdraft' as referring to
+Capital One's election to make a payment, which
+would occur at the time of authorization (as
+asserted by Roberts), or as referring to the
+payment itself, which would occur at the time of
+settiement (as asserted by Capital One).").
+This Court is persuaded by the reasoning of the
+Second Circuit and other district courts who have
+recently considered this issue. For example, in
+Lloyd v. Navy Fed. Credit Union, No. 17-CV-
+1280-BAS-RBB, 2018 WL 1757609 (S.D. Cal.
+Apr. 12, 2018), the court found that a similar
+contractual provision regarding debit holds and
+overdraft fees was ambiguous and thus precluded
+12 dismissal of the breach *12 of contract claim. Id. at
+*7 ("The Account Agreements do not clearly
+identify how funds sequestered for a transaction
+authorized with positive funds are to be used when
+the transaction is paid … [the contract] can thus
+be fairly read to include either a consumer's
+transaction with a merchant (i.e., authorization of
+the transaction) or Navy Federal's transaction with
+a merchant (i.e., settlement with the merchant).").
+Other courts have notably arrived at similar
+conclusions. See, e.g., Lussoro v. Ocean Fin. Fed.
+Credit Union, 456 F.Supp.3d 474, 483 (E.D.N.Y.
+2020) (finding that the plaintiff stated a breach of
+contract claim because "[alt the very least, the
+Court finds that the language is ambiguous
+because the Contract does not define at what point
+in time an item 'is presented, i.e., whether an item
+is presented at the point of authorization, when a
+consumer is engaging in a transaction with a
+merchant, or at the point of settlement, when the
+merchant is seeking payment from the bank."); see
+also Precision Roofing of N. Fla. Inc. v
+casetext
+CenterState Bank, No. 3:20-CV-352-J-39JRK,
+2021 WL 3036354, at *2 (M.D. Fla. Feb. 22,
+2021) ("In this case, Plaintiff' sets forth a
+reasonable interpretation of the Terms
+and
+Conditions that would preclude Defendant from
+overdraft
+charges
+APPSN
+transactions. The language in other sections of the
+Terms and Conditions regarding how Defendant
+processes debit holds and imposes non-sufficient
+funds fees and overdraft fees arguably supports
+such an interpretation."); Hash v. First Fin.
+Bancorp, No. 1:20-CV-1321 RLM-MJD, 2021|
+13 WL 859736, at *7 (S.D. Ind. Mar. 8, 2021) *13
+(denying bank's dismissal motion and explaining
+that "[none of the contract sections cited by First
+Financial
+unambiguously
+establish that the
+contract allows First Financial to determine
+overdratt fees at settlement on the type of
+transactions on which Mr. Hash alleges he was
+improperly charged overdraft fees.").
+The instant matter presents analogous ambiguitics
+to the above-cited cases about when a transaction
+is "paid,
+"and if that payment occurs at
+authorization
+scitlement.
+Contrary
+Defendant's assertions, the Agreement is not
+unambiguously clear about whether an OD/NSF
+Fee may be assessed on an APPSN Transaction,
+and Plaintiff could reasonably understand the
+Agreement's terms to preclude Flagstar from
+assessine overdratt tees when the initia.
+transaction is made with a positive account
+balance. While Defendant's interpretation of the
+Agreement may be plausible here, so is Plaintiff's
+interpretation. See Roberts, 719 Fed.Appx. at 3637
+(*[I]t would hardly be implausible for a consumer
+to think that 'a transaction' refers to the
+consumer's transaction with a merchant, such that
+the assessment of whether their account holds
+sufficient funds refers to the funds available at the
+time that the consumer-merchant transaction is
+authorized by" the defendant bank, not when the
+transaction is settled days later.). This Court must
+construe Plaintiff's First Amended Complaint in
+the light most favorable to her, Lambert, 517 F.3d
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021) |
+at 439, and agrees that Flagstar's "preferred
+interpretation of the agreement makes little sense
+from the account-holder's point of view, as a
+14 reasonable
+consumer likely
+*14
+considers
+something to have been paid for when they swipe
+their debit card, not when their bank's back-office
+operations
+are
+compicted,"
+Roberts,
+719
+Fed.Appx. at 37.
+Further, it is well-established in this Circuit that a
+contract that is subicet to two regsonable
+interpretations is ambiguous and create an issue of
+fact precluding dismissal at this stage. See Citizens
+Ins. Co. of Am., 449 F.3d at 694; See In re Fifth
+Third Early Access Cash Advance Litig., 925 F.3d
+265, 276 (6th Cir. 2019); see also City of
+Wyandotte v. Consol. Rail Corp., 262 F.3d 581,
+585 (6th Cir. 2001) ("The rule of law that has
+emerged from D'Avanzo, one which guides our
+consideration of this case, is that '[a) contract is
+ambiguous if the language is susceptible to two or
+more
+reasonable
+interpretations."') (citing
+D'Avanzo v. Wise & Marsac, P.C., 223 Mich. App.
+314, 565 N.W.2d 915, 918 (1997)). Under this
+precedent, the Court finds that the Agreement may
+be reasonably interpreted to mean that overdraft
+fees are assessed at the time of authorization,
+under Plaintif's argument, or at the time of
+payment and settlement, under Defendant's
+argument. Thus, the instant matter presents
+ambiguities about when OD/NSF Fees may be
+assessed in APPSN Transactions under the
+existing contractual language. And because
+ambiguities exist, dismissal of the breach of
+contract claim is improper. See Roberts, 719
+Fed.Appx. at 36. The Court thus declines to
+dismiss the breach of contract claim in relation to
+16 APPSN Transactions. *15
+2. The Assessment of Multiple OD/NSF Fees on
+Single Transactions
+Plaintiff also challenges Defendant's assessment of
+multiple OD/NSF Fees on single transactions that
+are repcatedly processed by third-party merchants.
+Plaintift alleges that Defendant's conduct is not
+casetext
+permitted per the Agreement's provisions, and that
+only one overdraft fee may be assessed for the
+transaction made in a negative balance, not per
+each processing request. However, Defendant
+disputes this interpretation of the Agreement and
+states, "contrary to Plaintiff's assertion, each
+presentment of an Item can incur its own OD/NSF
+fec." ECF No. 18, PageID.165.
+This claim rests upon the term "item" as it is
+defined and utilized throughout the Agreement. It
+is first referenced at the beginning of the
+Agreement:
+Items are intended to rerer to any debits
+against your account and include, but are
+not limited to, withdrawal tickets, checks,
+transfers, electronic debits, imaged debits,
+wire transfers, ATM debits, ACH debits,
+bill pay debits, photo copy debits, bank
+gencrated debits, and debit card point of
+sale transactions.]
+Posted transactions are Items and/or
+deposits reflected in your Balance.
+Pending transactions are Items (for
+example, electronic debits, ACH debits,
+bill pay debits, bank generated debits),
+clectronic/ACH deposits, and debit card
+authorizations/holds that have been
+received by the bank but not yet posted to
+your Balance.
+ECF No. 14-1, PagelD.100 (emphasis added).
+Defendant avers that this provision makes clear
+that an "item" can include two separate
+presentments of the same transaction. ECF No. 18,
+PagelD.165 ("Based on the definition expressly
+provided *16 by the Agreement, an 'item' can be
+an ACH debit, and then an entirely new 'item' can
+be the same ACH debit presented as a new
+transaction."). This argument is purportedly
+supported by additional language later in the
+Agreement:
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021)
+We may determine whether your Available
+Balance is sufficient to pay an Item at any
+point between (1) the time an Item is
+presented to us or we roceive notice
+regarding the Item and (2) the time the
+Item is returned.
+ECF No. 14-1, PagelD.104 (emphasis added).
+Under Defendant's interpretation, this provision
+clearly indicates that the presentment of an
+"item"-which may include the same transaction
+presented multiple times-may incur multiple
+OD/NSF Fees.
+Plaintift, however, highlights other language that
+supports her claim that the Agreement's definition
+of "item" is ambiguous as to whether it becomes a
+new item upon reprocessing by a merchant. See
+ECF No. 20, PagelD.228. The Agreement
+provides, for example, that:
+We may refuse to pay an overdraft item at
+any time even though we may have
+previously paid overdrafts for you. For
+example, we typically do not pay overdraft
+items if your account is not in good
+standing as defined above, or, if based
+upon our review of your account
+management, we determine that you are
+using Bounce Protection excessively. You
+will be charged an NSF fee for each item
+returned.
+ECF No. 14-1, PagelD.108 (emphasis added).
+Additional provisions in the
+17 Agreement also state: *17
+Overdrafts above and beyond your
+established Bounce Protection Limit may
+result in checks or other items being
+returned to the payee. The NonSufficient
+Fee (NSF) will be charged per item and
+assessed to your account. An OD/NSF
+notice will be sent to notify you of items
+paid and/or returned. If the account is
+overdrawn, it may be subject to the current
+Consecutive Days Overdrawn (OD) fee.
+casetext
+Id. at PagelD.113. Plaintiff thus asserts that the
+"each item" and "per item" language presents, at
+the very least, an ambiguity as to whether Flagstar
+can charge multiple OD/NSF Fees on the same
+transaction.
+As with the APPSN Transactions litigation,
+numerous federal courts around the country have
+overwhelmingly permitted claims premised on
+ambiguous uses of the term "item" to proceed in
+cases against financial institutions. This Court
+finds particularly persuasive the analysis in Perks
+v. TD Bank, 444 F.Supp.3d 635 (S.D.N.Y. 2020),
+for example, which looked at an analogous
+contractual provision that stated "An 'item'
+includes an] ... ACH transaction….. and any
+other instruction or order for the payment,
+transfer, deposit or withdrawal of funds." Id. at
+640 (emphasis added). The Perks court held that it
+was plausible to read this provision as authorizing
+the defendant bank to only charge a single
+OD/NSF Fee, even though
+the bank's
+interpretation permitting multiple OD/NSF Fees
+was also a reasonable interpretation. Id. Here,
+Flagstar attempts to make the same argument by
+emphasizing the word "any" in the definition of
+"item" as evidence that each presentment can be
+individually considered an "item." ECF No. 18,
+PagelD.164-165. However, the Court agrees with
+18 the Perks analysis that Plaintiff's construction *18
+of the Agreement is also reasonable, and "the
+definition of 'item' is ambiguous with regard to
+whether a resubmission of an ACH transaction is a
+separate item or is a part of the same initial ACH
+transaction, and that ambiguity must be read in
+favor of Plaintifill at this stage." Perks, 444
+F.Supp.3d at 640.
+This conclusion has been repeatedly reached in
+additional cases that guide this Court's decision.
+See Chambers v. HSBC Bank USA, N.A., No. 19
+CIV. 10436 (ER), 2020 WL 7261155, at *4
+(S.D.N.Y. Dec. 10, 2020) (allowing a breach of
+contract claim to proceed because "the proposed
+interpretations of 'item' by HSBC and Chambers
+are both reasonable based on" the contract
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021)
+between the parties.); Wilkins v. Simmons Bank,
+No. 3:20-CV-116-DPM, 2020 WL 7249030, at *1
+(E.D. Ark. Dec. 9, 2020) (*The Court concludes
+that there is ambiguity in all this, and lurking in
+the Bank's 'per item' fee in particular. Is each try
+an item? Or is the entire transaction one item even
+though multiple tries are involved?"); Coleman v
+Alaska USA Fed. Credit Union, No. 3:19-CV-
+0229-HRH, 2020 WL 1866261, at *4 (D. Alaska
+Apr. 14, 2020) (finding that "[both parties'
+interpretations of the Account Agreement are
+plausible" as to whether the bank may charge
+multiple NSF fees each time a merchant presents
+the transaction for payment.).
+Here, the Court looks to the specific language of
+this Agreement between Gardner and Flagstar and
+finds that both interpretations of the Agreement
+and the definitional breadth of "item" are
+19 plausible, and thus an ambiguity exists. While +19
+Defendant argues that "Flagstar's assessment of an
+NSF/OD fee is tied to the circumstances
+surrounding each item (i.c., whether the item is
+returned), rather than the item itself, " an
+ambiguity still exists as to whether "item" can
+mean more than one presentment. ECF No. 23,
+PagelD.506 (emphasis in original). This is in
+contrast to Lambert v. Navy Fed. Credit Union,
+No. 1:19-CV-103-LO-MSN, 2019 WL 3843064
+(E.D. Va. Aug. 14, 2019), cited by Defendant,
+which contained more express contractual
+language placing a customer on notice that
+multiple fees may be assessed on the same
+underlying transaction. Id. at *4 ("The next
+sentence warns: 'A fee may be assessed in the
+amount shown on Navy Federal's current Schedule
+of Fees and Charges for each returned debit item.'
+Taken together, these sentences cicarly provide
+that Navy Federal may return a debit item, such as
+an ACH debit, if there is not enough money in the
+account, and, if there is a return, Navy Federal
+may charge the member a fee for that returned
+debit transaction.") (internal citations and
+parentheticals removed).
+Defendant's Agreement cannot be said to have the
+same clarity as the Lambert contract. Moreover,
+multiple courts have observed that when "other
+courts have found similar contractual language to
+be both unambiguous and ambiguous,' such case
+law is of limited guidance on a motion to
+dismiss." Chambers, No. 19 CIV. 10436 (ER),
+2020 WL 7261155 at *S (citing Coleman, No. 19
+Civ. 229 (HRH), 2020 WL 1866261 at *5). Thus,
+this Court maintains that the Agreement's
+20 language in *20 the instant case lends itself to two
+reasonable interpretations of "item" and whether
+the Agreement permits multiple OD/NSF Fees on
+all presentments or resubmissions associated with
+a single transaction. Accordingly, a contractual
+ambiguity exists precluding dismissal of the
+breach of contract claim.' See Citizens Ins. Co. of
+Am., 449 F.3d at 694.
+' Plaintiff also pleads a breach of the implied
+covenant of good taith and tair dcaling in
+the alternative to her breach of contract
+claim. See BCF No. 14, PagelD.91. At this
+stage of the litigation, the Court will allow
+Plaintiff to proceed with this claim in the
+alternative as permitted by Federal Rule of
+Civil Procedure 8. FED. R. CIV. P. 8(a)(2).
+The Court declines to engage in a merits
+determination of the alternative claim at
+this tine.
+B. Conversion (Count II)
+Plaintiff's second claim alleges that Defendant has
+unlawfully withdrawn funds and converted it for
+personal gain in its assessment of OD/NSF Fees
+on various transactions. Conversion is defined
+under Michigan law as "any distinct act of domain
+wrongfully exerted over another's personal
+property in denial of or inconsistent with the rights
+therein." Foremost Ins. Co. v. Allstate Ins. Co.,
+439 Mich. 378, 391 (1992). Defendant argues that
+Plaintifi cannot maintain this claim because
+Michigan law precludes conversion claims when
+the parties are in a debtor-creditor relationship,
+casetext
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021)
+and there is no tort duty established separate from
+the existing contractual dutics. The Court agrees
+21 with Defendant Flagstar. *21
+The cases cited by Plaintiff do not support the
+argument that her conversion claim can be
+maintained under Michigan law. The Michigan
+cases referenced in her Kesponse discuss
+Here, Plaintiff's First Amended Complaint alleges
+that the "money Defendant held for Plaintiff and
+class members were held in identifiable accounts
+and was still the property of Plaintiff and class
+members,
+"and that "[these deposits were
+bailments and the Defendant was a bailee." ECF
+No. 14, PagelD.94. However, as Defendant points
+out, the Sixth Circuit has held that conversion
+claims may not be maintained between a financial
+institution, like Defendant, and a depositor, like
+Plaintift:
+conversion claims that may arise from separate
+and distinct legal dutics outside contractual
+obligations-which is not the case here. See Check
+Reporting Servs., Inc. v. Michigan Nat. Bank-
+22 Lansing, 191 Mich.App. 614, 617, 22 *22 478
+N.W.2d 893, 896 (1991) (affirming grant of
+summary judgment on the conversion claim when
+the defendant "had the right to use the funds on
+deposit in [the plaintifi's] check purchase account
+as a setoff' against [the plaintiff's] obligations.");
+Hansman v. Imlay City State Bank, 121 Mich.App.
+Under Michigan law, a breach of a
+424, 426, 328 N. W.2d 653, 654 (1982) (discussing
+contractual obligation cannot support an
+the right to set off a plaintiff's checking account
+action in tort absent the "violation of a
+funds against the plaintift's indebtedness to the
+legal duty separate and distinct from the
+financial institution and holding that questions of
+contractual obligation." Rinaldo's Constr
+fact exist about the plaintiff's account ownership).
+Corp. v. Michigan Bell Tel. Co., 454 Mich.
+In the instant matter, Plaintift's cause of action
+65, 559 N.W.2d 647, 658 (1997). The
+does not involve Flagstar's right to set-off funds.
+relationship between a bank and its
+Instead, her claims clearly stem from an alleged
+depositor is one of a debtor-creditor.
+breach of contractual obligations under the
+Citizens Ins. Co. of Am. v. Delcamp Truck
+Agreement, and there are no duties separate and
+Ctr., Inc., 178 Mich.App. 570, 444 N. W.2d
+distinct from these obligations to support a
+210, 213 (1989). Accordingly, a claim of
+conversion claim arising in tort.
+conversion is only sustainable if the
+defendant bank obtained the moncy
+without the owner's consent to the creation
+of
+that
+debtorcreditor relationship.
+Comerica Bank v. Allied Comme'ns, Inc.,
+1997 WL 33353282, at *2 (Mich.Ct.App.
+Mar. 14, 1997) (holding that a defendant
+bank could not be held liable for a claim of
+conversion
+arising from its allegedly
+improper set-off of funds from the
+customer's bank account to pay down a
+debt owed to the bank where the customer
+had consented to the creation of a debtor-
+creditor relationship by depositing money
+with the bank).
+Spizizen v. Nat'l City Corp., 516 Fed.Appx. 426,
+429 (6th Cir. 2013).
+Further, courts within this District have dismissed
+conversion claims in nearly identical cases. In
+Lossia, for example, the district court found that
+the plaintifts consented to the creation of a debtor-
+creditor relationship when they opened and
+deposited money into a checking account at the
+financial institution. Lossia v. Flagstar Bancorp,
+Inc., No. 15-12540, 2016 WL. 520867, at *3 (E.D.
+Mich. Feb. 10, 2016) (Stech, J.). The district court
+noted that even though "plaintifis contend that
+they did not consent to a debtor-creditor
+relationship regarding the monies on which the
+fees were assessedl, I" the "proper focus of the
+23 consent is not the particular *23 monies deposited,
+but the intent to form a debtor-creditor
+relationship by depositing money with the bank."
+Id.
+casetext
+10
+
+Gardner v. Flagstar Bank, FSB 20-cv-12061 (E.D. Mich. Aug. 23, 2021)
+The sere if ud here with ages when a sendind as Denis Move to Diam
+Accordingly, Defendant's Motion to Dismiss will
+she opened her chocking account, deposited
+V. Conclusion
+money into her account, and proccoded to make
+various transactions using those funds.
+Furthermore, the claims within Plaintiff's First
+Amended Complaint are predicated on the
+For the reasons discussed herein, Defendant's
+Motion to Dismiss (#18] is GRANTED IN PART
+and DENIED IN PART.
+Agreement between the parties, which forms the
+25 IT IS SO ORDERED. *25
+basis of Defendant's contractual obligations.
+Plaintift has failed to plead a tort duty owed by
+Defendant that is separate and distinct from the
+parties' contractual relationship. Because "a tort
+action will not lie when based solely on the
+nonperformance of a contractual duty, " Plaintiff's
+conversion claim must therefore be dismissed.
+Lossia v. Flagstar Bancorp, Inc., No. 15-12540,
+2016 WL 520867, at *3 (E.D. Mich. Feb. 10,
+2016) (quoting Fultz v. Union-Com. Assocs., 470
+Mich. 460, 466, 683 N. W.2d 587, 591 (2004)).
+casetext
+11
+
+Cause No. 1:20-cv-1321 RLM-MJD
+UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION
+Hash v. First Fin. Bancorp
+Decided Mar 8, 2021
+Cause No. 1:20-cv-1321 RLM-MJD
+03-08-2021
+GREGORY HASH on behalf of himself and all
+others similarly situated, Plaintiff v. FIRST
+FINANCIAL BANCORP, Defendant
+Robert L. Miller, Jr. Judge, United States District
+Court
+ORDER
+Plaintift Gregory Hash, a checking accountholder
+at defendant First Financial Bancorp, sues First
+Financial on behalf of himself and a putative class
+for breach of contract (including breach covenant
+of good faith and fair dealing), and violation of the
+Indiana Deceptive Consumer Sales Act, Ind. Code
+§ 24-5-0.5-1 et seq. The court has jurisdiction
+under the Class Action Fairness Act of 2005, 28
+U.S.C. § 1332(d)(2) & (6), and the parties agree
+that Indiana law provides the rule of decision. Mr.
+Hash alleges that First Financial improperly
+charged him overdraft fees that weren't authorized
+by his checking account contract with First
+Financial. First Financial has moved to dismiss
+Mr. Hash's complaint for failure to state a claim
+upon which relief can be granted. The court heard
+argument on the motion on March 4 and now
+DENIES First Financial's motion [Doc. No. 17].
+2 *2
+I. Background
+Mr. Hash's complaint alleges that debit-card
+transactions occur in two parts. First, when a
+debit-card holder uses a debit card at the point of
+sale to complete a transaction, the merchant
+presents the transaction in real time to First
+Financial for authorization. If First Financial
+authorizes the transaction, the transaction will be
+completed at the point-of-sale. Whether First
+Financial authorizes or declines a transaction
+depends on whether (1) enough funds are
+available in the accountholder's checking account
+to cover the transaction, or (2) the accountholder
+clects to have First Financial cover the transaction
+(causing an overdraft).'
+1 First Financial includes an overdraft
+disclosure in their account contract that
+sayx First Financial will authorize and pay
+overdrafts for transactions made using a
+checking account number and automatic
+bill payments, but not for ATM
+transactions and All debit
+card
+transactions. First Financial will only
+authorize and pay overdrafts for ATM
+transactions and ATH debit card
+transactions if the accountholder is enrolled
+in the Courtesy Cash Plus service. Mr.
+Hash was carolled in the Courtesy Cash
+Plus service.
+Once First Financial authorizes the transaction, the
+amount of the transaction will be subtracted from
+the accountholder's available balance, meaning the
+balance that is available for immediate use. The
+available balance might differ from
+accountholder's current balance, which is the
+amount of money actually in the account. When a
+transaction is authorized at the point of sale, a
+"debit hold" in the amount of the transaction is
+placed on the accountholder's account and
+subtracted from the accountholder's available
+casetext
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)|
+balance. However, the amount of the debit hold
+isn't subtracted from his current balance during
+authorization. *
+Second, the transaction "settles"
+after it is
+authorized, meaning that the funds are actually
+transferred from the accountholder's account to the
+merchant. The transaction (the amount of the debit
+hold) is then subtracted from and reflected in the
+accountholder's current balance.
+First Financial charges a $37 overdraft fee if an
+accountholder overdraws his available balance.
+According
+to wic
+parties'
+overdrafts "occur when [an accountholder does]
+not have cnough money in (his] account to cover a
+transaction, but [First Financial] pay[s] it
+anyway."
+Mr. Hash filed his complaint challenging First
+Financial's practice of charging overdraft fees on
+Authorize Positive, Settle Negative Transactions
+("APSN transactions"). An APSN transaction
+occurs when a transaction is authorized and there
+are enough funds in the accountholder's available
+balance to cover the transaction at the point of
+sale, but later the transaction overdraws the
+account at settlement, triggering an overdraft fee.
+Mr. Hash alleges that these types of transactions
+should never occur on an account with a positive
+available balance because debit holds are placed
+transactions
+(effectively
+sequestering the funds needed to pay the
+transaction), so there should always be enough
+money in the account to cover the transactions
+when they settle. Compl. 11 11-17. According to
+the complaint, First Financial breaches the
+contract because the contract promises to only
+charge overdraft fees on transactions with
+insuflicient available funds, yet First Financial
+charges overdraft fees on transactions "for which
+there are sufficient funds available to cover the
+transactions throughout their lifecycle." Compl. 4
+4 *4 37. Regarding APSN transactions specifically,
+Mr. Hash alleges that First Financial uses the same
+debit-card
+transaction
+twice once
+casetext
+authorization
+and
+once
+at settement t
+determine if the transaction overdraws an account.
+Compl. 1 41-43. This
+practice allows First
+Financial to charge overdraft foes on transactions
+wat snouant nave causce an overaran Decause
+there were sufficient available funds at the time of
+authorization; as Mr. Hash sees it, the later
+"pseudo-event" of settlement has no bearing on
+whether there were sufficient available funds to
+cover a transaction when it was authored.r
+Hash alleges that he was assessed overdraft fees
+for debit-card transactions even though they were
+authorized when he had enough funds to pay for
+them. These overdraft fees are alleged to have
+violated the parties' contract, the implied duty of
+good faith and fair dealing, and the Indiana
+Deceptive Consumer Sales Act. Mr. Hash attached
+a copy of the contract to his complaint.
+To illustrate how a transaction could authorize
+positive but settle negative, assume you have $10
+in your bank account. On day one, you make a $7
+purchase that is authorized at the point of sale. The
+$7 is immediately deducted from your available
+balance, bringing the available balance to $3, but
+the transaction will take three days to settle, so
+your current balance remains at $10. On day two,
+you make a purchase for $11? that settles within
+hours, bringing your available balance to $-8 and
+s your current balance to $-1. The *5 second
+transaction prompts an overdraft fee of $37,
+leaving your available balance at the end of day
+two at $-45 and your current balance at S-38. On
+day three, the first S7 purchase finally settles, and
+the available and current balances are the same at
+$-45. At this point, First Financial charges another
+overdraft fee because the $7 transaction settled
+negative. Mr. Hash challenges this second
+overdraft fee on the $7 transaction because, at the
+ume or the wansacton. ne nac sumcient tunds to
+pay for the purchase.
+2 This transaction would still authorize (the
+purchase wouldnt be declingo: it call
+just overdran the account) in the
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)|
+accountolder was carolice in Lounesy
+Cash Plus. Mr. Bash wus mrolled in
+Courtesy Cash Plus.
+3 Me. Hash doesat dispute the assessancer or
+Mr. Hash says that the contract actually doesn't
+allow what the contract calls "Authorize Positive
+-Settle Negative" transactions; it bars them
+because First Financial promises to determine
+overdrafts at the moment of authorization. If
+overdrafts are determined at the time
+of
+authorization, APSN transactions should never
+trigger an overdraft fee because they are
+authorized on a positive balance. Mr. Hash also
+argues that the contract is ambiguous at best as to
+whether overdraft fees
+assessed
+autonzation or scuement, and because the
+meaning of an ambiguous contract term is a
+question of fact that must be answered in favor of
+the plaintifi at the motion to dismiss stage, Mr.
+Hash states a claim for breach of contract. First
+Financial is steadfast that the contract clearly
+explains that an overdraft occurs if the customer's
+balance is too low when transactions are presented
+for permanent payment and settlement, even of
+there was enough when the transaction was
+6 initially authorized. *6
+II. Standard of Review
+A court considering a defendant's motion to
+dismiss for failure to state a claim on which relief
+can be granted "take[s] as true all well-pleaded
+facts and allegations in the plaintiff's complaint,
+- and the plaintift is entitled to all reasonable
+inferences that can be drawn from the complaint."
+Bontkowski v. First Nat. Bank of Cicero, 998 F.2d
+459, 461 (7th Cir. 1993). "To survive a motion to
+dismiss, a complaint must contain sufficient
+factual matter, accepted as true, to 'state a claim to
+relief that is plausible on its face.' Ashcroft
+Igbal,
+556
+U.S.
+662,
+678 (2009). Factual
+allegations must give the defendant fair notice of
+the claims being asserted and the grounds upon
+which they rest and "be enough to raise a right to
+casetext
+relief above the speculative level on the
+assumption that all of the complaint's allegations
+are true." Bell Atlantic Corp. v. Twombly, 550
+U.S. 544, 545 (2007). "A claim has facial
+plausiomty wnch me plaiun picads tactual
+content that allows the court to draw the
+reasonable inference that the defendant is liable
+for the misconduct alleged." Ashcroft v. Iqbal, 556
+U.S. at 678. In other words, a complaint must give
+"enough details about the subject-matter of the
+case to present a story that holds together."
+McCauley v. City of Chicago, 671 F.3d 611, 616
+(7th Cir. 2011). A pleading that merely offers
+"labels and conclusions" or "a formulaic recitation
+of the elements of a cause of action will not do."
+7 Ashcroft v. Igbal, 556 U.S. at 678. *7
+III. Breach of Contract Claim
+Under Indiana law, "[the essential elements of a
+breach of contract action are the existenoe of a
+contract, the defendant's breach thereof, and
+damages." McVay v. Store House Comp., 289 F.
+Supp. 3d 892, 896 (S.D. Ind. 2017) (citing
+McCalment v. Eli Lilly_ & Co., 860 N.E.2d 884,
+894 (Ind. Ct. App. 2007)). To the extent that the
+allegations in a complaint contradict a contract
+that is attached to the complaint, the contract
+"trumps the allegations" and "the court is not
+required to credit the unsupported allegations." N.
+Ind. Gun & Outdoor Shows, Inc. v. City of S.
+Bend, 163 F.3d 449, 454 (7th Cir. 1998). "In fact,
+a plaintift may plead himself out of court by
+attaching documents to the complaint that indicate
+that he or she is not entitled to judgment." Id. at
+455.
+The partics agree that a contract exists, but dispute
+the defendant's breach of the parties' contract.
+Whether Mr. Hash has alleged a claim upon which
+relief can be granted depends on whether the
+contract allows First Financial's challenged
+conduct. First Financial determined that an
+overdraft occurred when Mr. Hash's debit-card
+transactions settled negative even though those
+transactions authorized positive. So, whether Mr.
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)|
+Hash has stated a claim upon which relief can be
+granted depends on whether the contract allows
+First Financial to determine overdrafts when
+transactions settle.
+A court's primary objective when interpreting a
+contract is "to give eflect to the intentions of the
+parties as expressed in the four corners of the
+instrument." Allen v. Cedar Real Estate Group.
+LLP. 236 F.3d 374, 381 (7th Cir. 2001) (citing
+Fetz. v. Phillips, 591 N.E.2d 644, 647 (Ind. Ct.
+8 App.1992)). *8 Interpretation of a contract is
+primarily a question of law. USA Life One Ins.
+Co. of Indiana v. Nuckolls, 682 N.E.2d 534, 538
+(Ind. 1997). If the contract is "clear and
+unambiguous, then it should be given its plain and
+ordinary meaning." Id. "The meaning of a contract
+is to be determined from an examination of all of
+its provisions, not from a consideration of
+individual words, phrases, or even paragraphs read
+alone." Art Country Squire. L.L.C. y. Inland
+Mortg, Corp., 745 N.E.2d 885, 889 (Ind. Ct. App.
+2001). A "contract term is not ambiguous merely
+because the parties disagree about the term's
+meaning." Roy_A. Miller & Sons, Inc. y. Industrial
+Hardwoods Corp, 775 N.E.2d 1168, 1173 (Ind.
+Ct. App. 2002). "An ambiguity exists only where
+reasonable people could come to different
+conclusions about the contract's meaning." Id.; see
+also Abbey Villas Dev. Corp. v. Site Contrs., Inc,
+716 N.E.2d 91, 100 (Ind. Ct. App. 1999) ("A
+contract is ambiguous when it is susceptible to
+more than one interpretation and reasonably
+intelligent persons would honestly differ as to its
+meaning.").
+If the contract contains language that is
+ambiguous, "then the court may apply the rules of
+construction in interpreting the language." Id. A
+patent ambiguity is one that "is apparent on the
+face of the instrument and arises from an
+inconsistency or inherent uncertainty of language
+used so that it either conveys no definite meaning
+or a confused meaning." Oxford Financial Group.
+Ltd. v. Evans, 795 N.E.2d 1135, 1143 (Ind. Ct.
+App. 2003). If the ambiguity in the contract is a
+casetext
+patent one, then extrinsic evidence isn't admissible
+to explain or remove the ambiguity, and the
+ambiguity presents a question of law. Id. A latent
+ambiguity is an "ambiguity that arises only upon
+anempung to imprement "y te contact, and the
+meaning of which can only be determined by
+reference to extrinsic evidence." Id. at 1144. If the
+ambiguity can't be resolved without the aid of a
+factual determination, then "the trier of fact must
+ascertain the facts necessary to construe the
+contract." E.g., Arrotin Plastic Materials of
+Indiana v. Wilmington Paper Corp., 865 N.E.2d
+1039, 1041 (Ind. Ct. App. 2007); see also Felker v
+Sw. Emergency Med. Serv., Inc., 521 F. Supp. 2d
+857, 867 (S.D. Ind. 2007) ("[T]he fact finder
+resolves latent ambiguity as a question of fact.").
+When there is ambiguity in a contract, it is
+construed against its drafter. MPACYT Const.
+GrouR. LLC v. Superior Concrete Constructors,
+Inc. 802 N.E.2d 901, 910 (Ind. 2004).
+First Financial identifies several sections of the
+contract that it argues unambiguously allow them
+to charge overdraft fees at settlement on all types
+of APSN transactions. These sections are analyzed
+in the sections that follow.
+1. "Authorize Positive - Settle
+Negative" Section
+First Financial's primary argument is that the
+contract's "Authorize Positive - Settle Negative"
+section makes it clear that overdrafts are
+determined at the time of settlement. That section
+reads in relevant part:
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)
+In order to determine whether your
+account is overdrawn, we use the Available
+Balance. ... When you make a point-of-
+sale transaction, a hold is placed on those
+funds at the time the transaction is
+authorized. If a point-of-sale hold expires
+and the point-of-sale transaction has not
+yet been paid, the amount being held is
+then returned to your Available Balance. If
+the point-of-sale transaction then comes
+through after the hold expires, because we
+have arcady authorized that transaction
+previously, we will honor the transaction.
+If you do not have sufficient funds in your
+account at the time we honor the
+transaction, the point-of-sale transaction
+will cause you to overdraw and, if you are
+opted into Courtesy Cash Plus, or the debit
+transaction is a recurring transaction, you
+may still incur an overdraft fee.
+The section gocs on to provide an example of how
+a transaction could be authorized on positive funds
+yet still settle negative and incur an overdraft fec
+because a debit hold expired.
+Mr. Hash argues that, while the section warns that
+a certain type of ASPN transaction can incur an
+overdraft fee, it docs so only in the limited
+circumstance of when the hold expires before the
+transaction settles. That isn't the only way an
+ASPN transaction can occur, and that wasn't the
+type of ASPN transaction Mr. Hash experienced.
+The holds on Mr. Hash's positively authorized
+transactions never expired, but were nevertheless
+charged with an overdraft fee when they settled.
+The "Authorize Positive - Settle Negative" section
+docsn't make it clear that First Financial can
+charge overdraft fees at settlement on all types of
+APSN transactions, and the factual scenario in
+which the section allows First Financial to assess
+overdraft fees at settlement docsn't apply to Mr.
+Hash's situation. Furthermore, the section states
+that First Financial uses the available balance to
+casetext
+determine whether an account is overdrawn. The
+available balance is the balance that is
+immediately affected when a point-of-sale
+transaction is authorized. Using the available
+balance to determine overdrafts implics that
+overdrafts are determined at authorization, not
+settlement. The "Authorize Positive - Settle
+Negative" section of the contract doesn't
+unambiguously allow First Financial to charge
+overdraft fees at settlement on every APSN
+11 transaction. *11
+2. "Authorize and Pay" Terms
+Next, the parties address the meaning of First
+Financial's use of the terms "authorize and pay."
+For example, a portion of the contract reads:
+You understand that we may, at our
+discretion, honor withdrawal requests that
+overdraw your account as part of our
+Courtesy Cash service. However, we will
+only authorize and pay overdrafts for
+ATM transactions or debit transactions if
+you specifically opted-in to Courtesy Cash
+Plus service, or there are available funds at
+the time of authorization.
+Mr. Hash argues these terms link authorization
+with paying overdrafts, appear many times in the
+contract and tell consumers that transactions are
+"paid"- creating overdrafts-at the time of
+authorization. First Financial says that "[this
+language simply details how First Financial's
+Courtesy Cash overdraft programs work and
+explains that First Financial will only 'authorize'
+ATM transactions and debit-card transactions and
+'pay overdrafts' for those transactions in two
+circumstances: (1) if the customer 'opted-in to
+Courtesy Cash Plus' or (2) if the customer has
+sufficient available funds at the time of
+authorization."
+This language docsn't help the customer
+understand whether overdrafts are determined at
+the time of authorization or settlement. The
+sentence might explain either of two scenarios.
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)
+First, if an accountholder opted into Courtesy
+Cash Plus, First Financial will authorize and pay
+overdrafts on ATM and debit transactions (instcad
+of declining the transaction at the point of sale).
+The "benefit" of Courtesy Cash Plus is that ATM
+and debit transactions that overdraw an account
+will be authorized instead of being declined. But
+12 that doesn't shed *12 light on whether overdraft
+fees are determined at the time of authorization or
+sett cment.
+PAYMENT ORDER OF ITEMS - The
+order in which items are paid from your
+account is important if there is not enough
+money in your account to pay all of the
+items that are presented. The payment
+order can affect the number of items
+overdrawn or returned unpaid and the
+amount of the fees you may be assessed.
+To assist you in managing your account,
+we are providing you with the following
+information regarding how we pay items.
+Second, if an accountholder has sufficient
+13 available funds at the time of authorization, First
+Financial will authorize and pay overdrafts on
+ATM and debit transactions, regardless of whether
+an accountholder opted-in to Courtesy Cash Plus.
+The "and pay overdrafts" portion could imply that
+overdrafts can occur on ATM and debit
+transactions authorized on sufficient funds,
+mcaning that overdrafts would be determined at
+settlement. But the "and pay overdrafts" also could
+reasonably be read as only applying to the first
+scenario when an accountholder opted into
+Courtesy Cash Plus. The terms are ambiguous and
+unheipful in determining if overdrafts are
+determined at authorization or settlement.
+3. "Payment Order of Items" Section
+First Financial argues that the "Payment Order of
+Items" section explains its policy is to pay when
+items are presented for "permanent payment" and
+explains the order in which various types of
+transactions are paid, stating repeatedly explains
+that transactions are paid "on the day presented for
+permanent payment." The section reads:
+*13
+? Our policy is to pay items being
+presented for permanent payment in the
+following order.
+casetext
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)
+6. Electronic Fund Transfers - in
+low to high dollar amount order on
+the day presented for permanent
+payment
+7. Checks paid at the teller window
+or to an FFB loan - in check
+number order on the day presented
+for permanent payment
+8. ACH transactions - in low to
+high dollar amount order on the
+day presented for permanent
+payment
+9. All other checks - in check
+1. Wire transfers - in low to high
+dollar amount order on the day
+number order on the day presented
+for permanent payment
+presented for permanent payment
+? Note: Items that are temporarily
+2. ATM transactions - in low to
+presented as a debit to your account may
+high dollar amount order on the
+day presented for permanent
+not permanently be paid in the same order
+as temporarily presented.
+payment
+If a check, item or transaction is presented
+3. Debit Card transactions
+authorized with a PIN (appcars as
+without sufficient funds in your account to
+"DBT CRID" on your statement) or
+pay it, we may, at our discretion, pay the
+item(s) (creating an overdraft).
+a person-to-person payment - in
+low to high dollar amount order on
+The section doesn't unambiguously establish that
+the day presented for permanent
+First Financial can assess overdraft fees at
+payment
+settlement; the section describes the order in
+4. Debit Card transactions
+14 which items *14 presented for permanent payment
+will be paid. The order in which transactions of
+authorized as a credit transaction
+the same category are paid is determined by their
+(appears as "POS DEB" on your
+amount at settlement, but that docsn't clarify
+statement) - in low to high dollar
+amount order on the day presented
+whether First Financial determines overdraft fees
+at authorization or settlement. The Payment Order
+for permanent payment
+of Items Section docsn't unambiguously allow
+5. Recurring Debit Card
+First Financial to charge overdraft fees at
+transactions - in low to high dollar
+settlement on every type of APSN transaction.
+amount order on the day presented
+for permanent payment
+casetext
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)
+First Financial also argues that the last sentence of
+the cited section shows that overdrafts are created
+when a transaction is presented with too little a
+balance in the customer's account to pay it. This,
+First Financial says, is exactly what happens in an
+APSN transaction.
+The strength of this argument depends on whether
+the word "presented" means "presented at
+settlement" as opposed to "presented for
+authorization."
+Ambiguitics
+exists
+when
+reasonable poople could differ as to the meaning
+of a contract. Abbey Villas Dev. Corp. v. Site
+Contrs., Inc., 716 N.E.2d 91, 100 (Ind. Ct. App.
+1999). Because reasonable people can difter as to
+what "presented" means, this section of the
+contract docsn't unambiguously allow First
+Financial to charge overdraft fees at settlement on
+every APSN transaction.
+4. Overdraft Disclosure
+The overdraft disclosure provides that: "An
+overdraft occurs when you do not have enough
+money in your account to cover a transaction, but
+we pay it anyways." First Financial argues that
+this language makes it clear that overdrafts are
+determined at settlement. Mr. Hash argues that the
+15 words "to *15 cover" are ambiguous because the
+sentence docsn't clarify whether an accountholder
+would need enough money to cover the
+transaction when it is authorized, or later when it
+setties.
+The overdraft disclosure isn't helpful in
+determining whether overdrafts are assessed at
+authorization or settiment. When an account is
+determined to be overdrawn is left unspecified,
+and it can't be said one way or the other from the
+context in which the section appears. The
+overdraft
+disclosure doesn't unambiguously
+establish that First Financial can assess overdraft
+foes at settlement on every APSN transaction.
+5. "Withdrawals" Section
+First Financial cites language in the contract's
+"Withdrawals" section that it says allows First
+Financial to assess overdraft fees at settlement.
+The section reads in relevant part:
+An nem may de retumea aner te runas
+from the deposit of that item are made
+available for withdrawal. In that case, we
+will reverse the credit of the item. We may
+determine the amount of available funds in
+your account for the purpose of deciding
+whether to return an item for insufficient
+funds at any time between the time we
+item or send a notice in licu of return. We
+need only make one determination, but if
+we choose to make a subsequent
+determination, the account balance at the
+subsequent time will determine whether
+there are insufficient available funds.
+First Financial argues that this section allows First
+Financial to determine the sufficiency of the
+customer's available funds at any time, or at many
+multiple times, between First Financial's reccipt of
+the item and First Financial's return of the item or
+payment and notification to the customer, and
+16 specifics that, in *16 any event, the account
+balance at the later time decides whether there are
+insufficient available funds.
+The court doesn't read this section the way First
+Financial does. The section describes how an
+account's available balance is determined in a very
+specific context: when an item, once deposited in
+an account, is returned after the funds from the
+deposit were aready made available for
+withdrawal. That scenario doesn't apply to Mr.
+Hash's situation; Mr. Hash didn't allege that he
+deposited an item that was subsequently returned
+after the funds of that item were already made
+available for withdrawal. The "withdrawals"
+section docsn't unambiguously allow First
+Financial to determine overdraft fees at settlement
+on every type of APSN transaction.
+***
+casetext
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)
+None of the contract sections cited by First
+Financial unambiguously
+establish
+that the
+contract allows First Financial to determine
+overdratt fees at settlement on the type of
+transactions on which Mr. Hash alleges he was
+improperly charged overdraft fees. The court must
+draw every reasonable inference in favor of the
+plaintiff on a motion to dismiss, and because the
+contract is ambiguous as to when First Financial
+overdraft tees on Mr. Hash's
+transactions, that ambiguity must be resolved in
+favor of Mr. Hash. The contract doesn't foreclose
+Mr. Hash's complaint, Mr. Hash states a claim
+upon which relicf can be granted, and First
+Financial's motion to dismiss Mr. Hash's breach of
+17 contract claim must be denied. *17
+IV. Breach of the Covenant of Good
+Faith and Fair Dealing
+Mr. Hash alleges that First Financial breach the
+covenant of good faith and fair dealing in the
+contract. Compl. 82. According to the complaint,
+First Financial "exploits contractual discretion to
+the detriment of accountholders" by "unfairly
+[extracting overdraft] Fees on transactions that no
+reasonable accountholder would believe could
+cause [overdraft] Fees." Compl. 9 47, 49.
+Indiana law imposes a generalized duty of good
+faith and fair dealing on bank account contracts
+because banks "offer customers contracts of
+adhesion, often with terms not readily discernable
+to a layperson. If the contract is ambiguous ...
+then the courts will impose such a duty of good
+faith and fair dealing." Old Nat. Bank v. Kelly, 31
+N.E.3d 522, 531 (Ind. Ct. App. 2015). The implied
+duty of good faith and fair dealing "requires that a
+party perform its obligations and exercise its
+discretion under the contract in good faith. But it
+does not require a party to undertake a new,
+affirmative obligation that the party never agreed
+to undertake." Acheron Med. Supply, LLC v.
+Cook Med. Inc., 958 F.3d 637, 645 (7th Cir.
+2020).
+First Financial argues that Mr. Hash's claim for
+breach of the implied duty of good faith and fair
+dealing must be dismissed simply because Mr.
+Hash hasn't stated a claim for breach of contract,
+and the implied duty of good faith and fair dealing
+doesn't require First Financial to do anything that
+the contract doesn't require it to do. First Financial
+argues that the implied duty of good faith and fair
+dealing doesn't revise the contract's plain terms.
+18 *18
+As already discussed, Mr. Hash's complaint states
+a claim for breach of contract, and the law requires
+Parthinancial to perrom
+obligations in good faith. Because all well-pleaded
+facts
+are assumed
+wue and all reasonadie
+interences on a motion to dismiss are drawn in
+favor of the plaintiff, Mr. Hash has stated a claim
+upon which relief can be granted, and First
+Financial's motion to dismiss Mr. Hash's claim for
+breach of the implied duty of good faith and fair
+dealing must be denied.
+V. Indiana Deceptive Consumer
+Sales Act Claim
+The complaint's second claim alleges that Mr.
+Hash suffered monctary damages as a result of
+First Financial's "unfair and deceptive acts and
+practices in violation of the [Indiana Deceptive
+Consumer Sales Act]." Compl. $ 96. Mr. Hash
+alleges that First Financial made representations
+about how it assessed overdraft fees on debit card
+transactions that didn't accurately reflect its true
+fee practices, and that these violations of the
+Indiana Deceptive Consumer Sales Act ("the Act")
+were "done as a part of a scheme, artifice, or
+device with intent to defraud or mislead, and
+therefore are incurable deceptive acts under [the
+Act]." Compl. 19 91-92.
+The Deceptive Consumer Sales Act is "a remedial
+statute that must be liberally construed and applied
+to promote its purposes and policies of protecting
+consumers from deceptive or unconscionable sales
+practices." Castagna v. Newmar Corp., 2016 WL
+3413770, at *6 (N.D. Ind. June 22,2016) (quoting
+casetext
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)|
+20 Kesling v. Hubler Nissan, 997 N.E.2d 327, 332
+19 (Ind. 2013); Ind. Code § 24-5- *19 0.5-1(a). The
+Act provides in relevant part that "[a] supplier
+may not commit an unfair, abusive, or deceptive
+acl, omission, or pracuce in connection win a
+consumer transaction. such an act. omission. on
+practice by a supplier is a violation of this chapter
+whether it occurs before, during, or after the
+tansacton. An act omission. I
+or practice
+prohibited by this section includes both implicit
+and explicit misrepresentations." Ind. Code § 24-
+5-0.5-3(a). The Act defines these representations
+as deceptive acts:
+(1) That such subject of a consumer
+transaction has sponsorship, approval,
+performance, characteristics, accessories,
+uses, or dencrits it does not have wnich the
+supplier knows or should reasonably know
+it does not have.
+(2) That such subject of a consumer
+transaction is of a particular standard,
+quality, grade, style, or model, if it is not
+and if the supplier knows or should
+reasonably know that it is not.
+Ind. Code § 24-5-0.5-3(b). The Act recognizes two
+types of doceptive acts: "uncured" deceptive acts,
+and "incurable" deceptive acts. Ind. Code § 24-5-
+0.5-2(a)(6)-(7). Mr. Hash alleges an incurable
+deceptive act, which is defined as "a deceptive act
+done by a supplier as part of a scheme, artifice, or
+device with intent to defraud or mislead." Ind.
+Code § 24-5-0.5-2(a)(8). "[Fjor actions under the
+Act that are 'grounded in fraud,' the specificity
+requirement of Rule 9(B) must be met."
+McKinney v. State, 693 N.E.2d 65, 71 (Ind. 1998).
+The pleading requirements of Indiana Trial Rule
+9(B) and Federal Rule of Civil Procedure 9(b) are
+the same. Fed. R. Civ. P. 9(b); Ind. Trial R. 9(B).
+Federal Rule of Civil Procedure 9(b) states: "In
+alleging fraud or mistake, a party must state with
+particularity the circumstances constituting fraud
+or mistake. Malice, intent, knowledge, and other
+conditions of a person's mind may be alleged
+generally." *20 "The primary purpose of the rule is
+to give the defendant 'fair notice' of the allegations
+against it." Thornton v. CMB Entm't, LLC, 309
+F.R.D. 465, 468 (S.D. Ind. 2015) (citing Vicom,
+Inc. v. Harbridge Merch. Servs,, Inc., 20 F.3d 771,
+777 (7th Cir. 1994)). "This means as a practical
+matter that [a plaintift] must identify the 'who,
+what, when, where, and how' of the alleged fraud."
+Benson v. Fannie May Confections Brands, Inc.,
+944 F.3d 639, 646 (7th Cir. 2019). "Conclusory
+allegations do not satisfy the requirements of Rule
+9(b) and subject the pleader to dismissal." Veal v.
+First Am. Bank, 914 F.2d 909, 913 (7th Cir. 1990).
+A claim under the Act "may not be brought more
+than two (2) years after the occurrence of the
+deceptive
+act." Ind. Code § 24-5-0.5-5(b).
+"Dismissing a complaint as untimely at the
+pleading stage is an unusual step, since a
+complaint need not anticipate and overcome
+affirmative defenses, such as the statute of
+limitations. But dismissal is appropriate when the
+plaintiff pleads himself out of court by alleging
+facts sufficient to establish the complaint's
+tardiness." Cancer Found, Inc. v. Cerberus Capital
+Mgmt., L.P. 559 F.3d 671, 674-675 (7th Cir.
+2009).
+The Act's statute of limitations is governed by an
+occurrence rule that is 'triggered by the date of
+each occurrence' of a deceptive act." Elward y
+Electrolux Home Products, Inc., 264 F. Supp. 3d
+877, 892 (N.D. Ill. 2017) (quoting State v. Classic
+Pool & Patio, Inc., 777 N.E.2d 1162, 1166 (Ind.
+Ct. App. 2002)). However, "the doctrine of
+fraudulent concealment can toll the statute of
+limitations when the defendant has "committed
+concealment or fraud of such character as to
+prevent inquiry, to clude investigation, or to
+21 mislead the plaintiff, *21 such as by concealing
+material facts so as to prevent the plaintifi from
+discovering a potential cause of action." Id. at 890
+(citing Doc v. Shults-Lewis Child and Services,
+Inc., 718 N.E.2d 738 (Ind. 1999)).
+casetext
+10
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)
+First Financial argues that Mr. Hash's claim for
+violations under the Act should be dismissed for
+three reasons. First, First Financial argues that
+assessing overdraft fees on ASPN transactions
+can't be a deceptive act because the contract
+allows First Financial to assess overdraft fees on
+APSN transactions. But as discussed in Part III,
+the contract's plain terms don't unambiguously
+make it clear that First Financial can assess
+overdraft fees on all APSN transactions.
+Second, First Financial argues that the complaint
+lacks the particularity needed to plead a plausible
+claim for an incurable deceptive act, and that Mr.
+Hash substitutes conclusory and legal conclusions
+for the factual allegations Rule 9(b) requires. But
+the complaint provides:
+la detailed explanation of the fee practice
+challenged (Compl. 91 11-17);
+¡ a detailed overview of the way First
+Financial allegedly processes debit-card
+transactions (Compl. 11 23-28);
+43. Upon information and belief,
+something more is going on: at the
+moment a debit card transaction is getting
+ready to settle, [First Financial] docs
+something new and unexpected during its
+nightly batch posting process. Specifically,
+[First Financial] releases the hold placed
+on funds for the transaction for a split
+second, putting money back into the
+account, then re-debits
+the
+same
+transaction a second time.
+44. This secret step allows (First Financial]
+to charge OD Fees on transactions that
+never caused an overdraft—-transactions
+that were authorized into sufficient funds
+and for which [First Financial] specifically
+set aside money to pay them.
+45. This discrepancy between [First
+Financial's] actual practices and the
+contract causes accountholders to incur
+more OD Fces than they should.
+¡ citations to contractual representations at
+issue (Compl. { 30-31);
+; descriptions of the way First Financial's
+actual practices allegedly differ from those
+representations (Compl. 9 37-45, 91); and
+i specific transactions for which First
+Financial allegedly charged improper
+overdraft fees (Compl. { 60).
+22 *22
+The complaint's factual allegations are more than
+sufficient to identify the who, what, when, where,
+and how of Mr. Hash's fraud claim, giving First
+Financial fair notice. In particular, paragraphs 43-
+46 read:
+46. In sum, there is a huge gap between
+practices as described in the account
+documents and [First Financials) actual
+practices.
+A plantiff gencrally can't satisfy the particularity
+requirement of Rule 9(b) with a complaint filed on
+information and belief, but that rule isn't ironclad:
+"the practice is permissible, so long as (1) the facts
+constituting the fraud are not accessible to the
+plaintift and (2) the plaintiff provides the grounds
+for his suspicions.' Pirelli Armstrong Tire Corp-
+Retiree Med. Benefits Tr. v. Walgreen Co., 631
+F.3d 436, 442 (7th Cir. 2011). Mr. Hash satisfies
+both requirements because the method by which
+First Financial actually determines and assesses
+overdraft fees isn't accessible to him, and he has
+provided grounds for his suspicions— namely, that
+he was charged overdraft fees on transactions even
+though he had sufficient available funds to pay for
+23 those transactions. *23
+casetext
+11
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)
+Finally, First Financial argues that Mr. Hash's
+claim is based on overdraft fecs assessed in 2015,
+nearly five years before he filed suit, so the
+Deceptive Consumer Sales Act's two-ycar statute
+of limitations bars his claim. Mr. Hash responds
+that the Act's statute of limitations should be tolled
+because First Financial committed incurable
+deceptive acts with the intent to defraud. He says,
+too, that tolling is proper because First Financial's
+violations of the Act are ongoing and continue to
+occur into the present because the allegedly
+improper overdraft fees are part of a larger scheme
+that continued from month-to-month and was
+deceptive.
+With respect to Mr. Hash's first argument, he
+alleges a "scheme to defraud" that involved a
+"secret step" that allowed First Financial to charge
+improper overdraft fecs. Compl. 9 43-46, 92. But
+the assessment of overdraft fees at settlement
+wasn't hidden; overdraft fees were allegedly
+determined at settlement and charged in violation
+of what was allowed under the contract. If the
+court were to find that "concealment" was
+sufficiently pleaded to toll the statute of
+limitations, the concealment would have to lie in
+the mechanics of how exactly First Financial
+assessed overdraft fees at settlement, not that
+overdraft fees assessed at settlement were
+unknown or hidden. It's too great a stretch to say
+that this is "concealment or fraud of such character
+as to prevent inquiry, to elude investigation, or to
+misicad the plaintift, such as by concealing
+material facts so as to prevent the plaintiff from
+discovering a potential cause of action." Elward y
+Electrolux Home Products, Inc., 264 F. Supp. at
+890 (citing Doc v. Shults-Lewis Child and
+24 Services, Inc., 718 N.E.2d 738 (Ind. 1999)). *24
+Mr. Hash's other argument supporting that his
+claims aren't time-barred is more availing: First
+Financial's violations of the Act are ongoing and
+25 continue to occur into the present because the
+improper overdraft foes are part of an ongoing
+scheme to defraud. The two relevant paragraphs
+from the complaint pertaining to an ongoing
+scheme are:
+92. [First Financial's) violations were
+willful and were done as part of a scheme,
+artifice, or device with intent to defraud or
+mislead,
+and therefore are
+incurable
+deceptive acts under the DCSA.
+***
+97. Plaintift and members of the Class
+seck actual damages plus interest on
+damages at the legal rate, as well as all
+other just and proper relief afforded by the
+DCSA. As redress for Defendant's
+repeated and ongoing violations, Plaintift"
+and members of the Class are entitled to,
+inter alia, actual damages, treble damages,
+attorneys' fees, and injunctive relief.
+Compl. Il 92, 97. This is cnough to plead an
+ongoing scheme that would toll the two-ycar
+statute of limitations. See, e.g., JUE-CWA Local
+201 v. Spark Encrgy LLC, 440 F. Supp. 3d 969,
+975 (N.D. Ind. 2020). First Financial responds
+that, by pleading an ongoing scheme, Mr. Hash
+has created a different problem-that he hasn't
+sufficiently pleaded the "when" requirement of
+Rule 9(b). Whether the "when" requirement of
+Rule 9(b) is pleaded with sufficient particularity
+depends on whether Mr. Hash's pleadings that he
+was charged improper and fraudulent overdraft
+fees in October 2015 in conjunction with his
+pleadings in paragraphs 92 and 97 are specific
+enough to allege that the fraud occurred within the
+past two years. Because Mr. Hash is entitled to
+every reasonable inference on a motion to dismiss,
+and because the Act is "a remedial statute that
+must be liberally construed and applied to promote
+its purposes and policies of protecting *25
+consumers from deceptive or unconscionable sales
+practices," Mr. Hash has met the pleading
+requirements of Rule 9(b) to state a claim for
+casetext
+12
+
+Hash v. First Fin. Bancorp Cause No. 1:20-cv-1321 RLM-MJD (S.D. Ind. Mar. 8, 2021)|
+fraud upon which relief can be granted. Castagna
+v. Newmar Corp., 2016 WL 3413770, at *6 (N.D.
+Ind. June 22,2016) (quoting Kesling v. Hubler
+Nissan, 997 N.E.2d 327, 332 (Ind. 2013)); see also
+Ind. Code § 24-5-0.5-1(a).
+VI. Conclusion
+For the foregoing reasons, the court DENIES First
+Financial's motion to dismiss [Doc. No. 17].
+SO ORDERED.
+ENTERED: March 8, 2021
+Is/ Robert L. Miller, Jr.
+Judge, United States District Court Distribution:
+All cloctronically registered counsel of record
+casetext
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 1 of 10|
+UNITED STATES DISTRICT COURT
+FOR THE DISTRICT OF NEW HAMPSHIRE
+Rita Grenier and Edwin Grenier, Individually
+and on Behalf of All Others Similarly Situated
+v.
+Granite State Credit Union,
+Does 1 through 5
+Civil No. 21-ev-00534-LM
+Opinion No. 2021 DH 172 P
+ORDER
+Plaintiffs Rita and Edwin Grenier bring this putative class action against
+Granite State Credit Union ("Granite") and "Does 1 through 5," alleging injuries
+stemming from Granite's overdraft fees and policies. Plaintiffs allege that-by not
+properly informing consumers how overdrafts are assessed Granite has violated,
+and continues to violate, the Electronic Funds Transfer Act's, 15 U.S.C. § 1693
+("EFTA"), implementing regulations, 12 C.F.R. § 1005 et seq. ("Regulation E").
+Pending before the court is Granite's motion to dismiss (doc. no. 9) under Fed.
+R. Civ. P. 12(b)(6). For the following reasons, the motion is denied.
+STANDARD OF REVIEW
+Under Rule 12(b)(6), the court must accept the factual allegations in the
+complaint as true, construe reasonable inferences in the plaintiff's favor, and
+"determine whether the factual allegations in the plaintiff's complaint set forth a
+plausible claim upon which relief may be granted." Foley v. Wells Fargo Bank,
+N.A., 772 F.3d 63, 71 (1st Cir. 2014) (internal quotation marks omitted). A claim is
+facially plausible "when the plaintiff pleads factual content that allows the court to
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 2 of 10
+draw the reasonable inference that the defendant is liable for the misconduct
+alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
+BACKGROUND
+Regulators, private litigants, and the courts have recently devoted significant
+attention to overdraft fees. See Chambers v. NASA Fed. Credit Union, 222 F. Supp.
+3d 1, 5-7 (D.D.C. 2016) (thoroughly outlining history). In 2009, the Federal Reserve
+Board' revised Regulation E to add a provision intended to "assist consumers in
+understanding how overdraft services provided by their institutions operate and to
+ensure that consumers have the opportunity to limit the overdraft costs associated
+with ATM and one-time debit card transactions where such services do not meet
+their needs." Electronic Fund Transfers, Final Rule, 74 Fed. Reg. 59,033, 59,033
+(Nov. 17, 2009).
+Thus, Regulation E now requires financial institutions to obtain a customer's
+"affirmative consent" before charging overdraft fees on ATM or one-time debit card
+transactions. 12 C.F.R. § 1005.17(b)(1)(iii). To secure consent, institutions must
+use an opt-in notice that "describe[s) the institution's overdraft service." Id. at
+1005.17(b)(1)(). The notice must be "segregated from all other information," and
+"substantially similar" to a model form (Model Form A-9) provided by the Consumer
+1 Congress reassigned responsibility for enforcing the EFTA from the Federal
+Reserve Board to the Consumer Financial Protection Bureau in 2010. See Dodd-
+Frank Wall Street Reform and Consumer Protection Act of 2010, Pub. L. No. 111-
+203, Title X, § 1084, 124 Stat. 1376, 2081-83.
+2
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 3 of 10
+Financial Protection Bureau. Id. at 1005.17(b)(1)(i); (d). All disclosures must be
+"clear and readily understandable." 12 C.F.R. § 1005.4(a)(1).
+Issues occur when a disclosure does not adequately convey how overdraft fees
+are assessed. There are two balances financial institutions can use to calculate
+whether the amount of money in an account dips below zero: either the "actual
+balance"? or the "available balance." The "actual balance" is the actual amount of
+money in an accountholder's account at any particular time. The "available
+balance," in contrast, is the actual amount of money in the account minus any
+"holds" on deposits and pending debits that have not yet been posted. For this
+reason, calculating overdrafts based on the available balance "often leads to more
+frequent overdrafts because there is less money available in the account due to
+holds and pending transactions." Domann v. Summit Credit Union, No. 18-cv-1670-
+slc, 2018 WL 4374076 (W.D. Wis. Sept. 13, 2018) (citation omitted).
+Thus, plaintifis across America have filed a number of "virtually identical
+lawsuits" challenging institutions that use the available balance method where the
+opt-in notice does not explain how it assesses overdraft fees. Id.; see, e.g., Tims v.
+LGE Cmty. Credit Union, 935 F.3d 1228, 1239-40 (11th Cir. 2019); Adams v.
+Liberty Bank, No. 3:20-cv-01601(MPS), 2021 WL 3726007 (D. Conn. Aug. 23, 2021);
+Wellington v. Empower Fed. Credit Union, -- F. Supp. 3d. --, 2021 WL 1377789
+(N.D.N.Y. Apr. 13, 2021); Bettencourt v. Jeanne D'Arc Credit Union, 370 F. Supp.
+2 Courts also refer to "actual balance" as the "ledger balance" or "current
+balance."
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 4 of 10|
+3d 258 (D. Mass. 2019); Walbridge v. Northeast Credit Union, 299 F. Supp. 3d 338
+(D.N.H. 2018); Walker v. People's United Bank, 305 F. Supp. 3d 365 (D. Conn.
+2018); Salls v Digital Fed. Credit Union, 349 F. Supp. 3d 81 (D. Mass. 2018);
+Domann, 2018 WL 4374076; Ramirez v. Baxtor Credit Union, No. 16-CV.-03765-ST,
+2017 WL 1064991 (N.D. Cal. Mar. 21, 2017); Pinkston-Poling v. Advia Credit Union,
+227 F. Supp. 3d 848 (W.D. Mich. 2016); Chambers, 222 F. Supp. 1.
+Plaintiffs in this case bring one such lawsuit. They allege that Granite used
+a one-page notice entitled "What You Need to Know about Overdrafts and Overdraft
+Fees" (the "Opt-in Disclosure"). The Opt-in Disclosure states that an overdraft
+"occurs when you do not have enough money in your account to cover a transaction,
+but we pay it anyway." It does not outline the distinction between the actual
+balance method and the available balance method. Thus, Plaintiffs allege that
+Granite has violated, and continues to violate, Regulation E because the phrase
+"enough money' does not specify whether Granite calculates overdrafts based on the
+actual balance or the available balance. Essentially, they argue that the Opt-in
+Disclosure does not provide a "clear and readily understandable" explanation of "the
+institution's overdraft service." See 12 C.F.R. § 1005.4(L)(1); 1005.17(b)(L)(i).
+DISCUSSION
+Granite moves to dismiss on the grounds that, first, it did not violate
+Regulation E and, second, that the EFTA's safe harbor provision, 15 U.S.C.
+§ 1693m(d)(2), insulates it from liability.
+4
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 5 of 10|
+Regulation E Violation
+Granite first argues that when the Opt-in Disclosure is read in conjunction
+with a document entitled "Terms and Conditions of Your Account" (the
+"Membership Agreement"), Granite satisfies Regulation E's disclosure
+requirements. Granite attaches the five-page Membership Agreement to its motion,
+and alleges it is the operative agreement governing Plaintifis relationship with
+Granite. The Membership Agreement states that Granite assesses overdrafts based
+on the available balance:
+Determining your available balance - We use the available
+balance" method to determine whether your account is overdrawn, that
+same as your account's "actual" balance. This means an overdraft or
+an NSF [nonsufficient funds] transaction could occur regardless of your
+account's actual balance.
+Doc. no. 9-3 at 1. It then proceeds to describe in further detail the difference
+between actual balance and available balance. See id. The Membership Agreement
+was not attached to—or referenced in—the complaint.?
+Even assuming that the Membership Agreement could be considered at the
+motion to dismiss stage, Plaintiffs have still plausibly alleged violations of
+Regulation E. Regulation E requires financial institutions to provide disclosures
+about their overdraft policies "segregated from all other information," i.e. in a
+3 Granite alleges that Plaintiffs referred to the Membership Agreement in their
+complaint when they referenced a "Granite agreement." Doc. no. 9 at 2 n.1. As
+Plaintiffs clarify, the "Granite agreement" referenced in the complaint is actually the
+Opt-in Disclosure. Doc. no. at 11 n.4.
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 6 of 10
+standalone document. 12 C.F.R. § 1005.17(b)(1)i). Because Plaintiffs allege that
+the Opt-in Disclosure is the segregated document, only it is relevant to Plaintiffs'
+claim. The Membership Agreement is extraneous information, irrelevant to
+whether the Opt-in Disclosure itself-i.e., the segregated document— adequately
+explains Granite's overdraft policy. See Adams, 2021 WL 3726007, at *4 (refusing
+to consider extraneous documents such as an Account Agreement on Rule 12(b)(6)
+motion, but holding that even if it could consider those documents, they would not
+make plaintiff's Regulation E claim any less plausible because Regulation E
+requires notice to be "segregated from all other information"); see also Wellington,
+2021 WL 1377789, at *4 (holding that even assuming extraneous evidence should be
+considered on a Rule 12(b)(6) motion, the plaintiff still plausibly alleged violations
+of Regulation E).
+The cases Granite cites in support of its argument that the Opt-in Disclosure
+and the Membership Agreement should be read together are not persuasive. Those
+cases are all in the context of contract claims, for which it may be appropriate to
+construe multiple documents together. See, e.g., Tims, 935 F.3d at 1238 n.5 (citing
+state contract law for the proposition that "where multiple documents are executed
+at the same time in the course of a single transaction, they should be construed
+together"); Domann, 2018 WL 3474076, at *6-7; Chambers, 222 F. Supp. 3d at 11-
+12. Yet in cases where plaintiffs allege both a contract claim and a Regulation E
+claim, courts will read the documents together for the contract claim only, because
+Regulation E requires notice to be "segregated." See Ramirez, 2017 WL 118859, at
+6
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 7 of 10
+*8. Thus, Tims, Domann, and Chambers do not help Granite's argument because
+here Plaintiffs do not allege breach of contract, and in fact specifically disavow any
+such claim. See doc. no. 11 at 10.
+Looking only at the Opt-in Disclosure, then, Plaintiffs plausibly state a claim
+that the phrase "enough money" does not adequately provide a "clear and readily
+understandable" explanation of "the institution's overdraft service." 12 C.F.R.
+§ 1005.4(1)(1); 1005.17(b)(1)(i). Countless courts examining virtually identical
+language have agreed. See, e.g., Tims, 935 F.3d at 1238 (ambiguous whether
+disclosure that overdraft occurs "when you do not have enough money in your
+account to cover a transaction, but we pay it anyway" uses actual balance or
+available balance method); Wellington, 2021 WL 1377789, at *5; Bettencourt, 370 F.
+Supp. 3d at 262, 265; Walbridge, 299 F. Supp. 3d at 343; Salls, 349 F. Supp. 3d at
+90; Pinkston-Poling, 227 F. Supp. 3d at 857; Walker, 305 F. Supp. 3d at 376. Thus,
+Plaintifis plausibly state a claim that Granite's Opt-in Disclosure violates
+Regulation E.
+II. Safe Harbor Provision
+Granite next argues that the EFTA's safe harbor provision insulates it from
+liability. The EFTA protects financial institutions from liability for "any failure to
+make disclosure in proper form if a financial institution utilized an appropriate
+model clause issued by the Bureau or the Board." 15 U.S.C. § 1693m(d)(2).
+Regulation E requires that notice "shall be substantially similar to Model Form A-
+9," which is promulgated by the Consumer Financial Protection Bureau. 12 C.F.R.
+7
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 8 of 10
+§ 1005.17d). Model Form A-9 states: "An overdraft occurs when you do not have
+enough money in your account to cover a transaction, but we pay it anyway."
+§1005, App. A (emphasis in original).
+Courts across the country have addressed arguments identical to Granite's
+argument here, and the vast majority have held that that using language identical
+to that in Model Form A-9 does not necessarily insulate a financial institution from
+liability. See Tims, 935 F.3d at 1244; Adams, 2021 WL 3726007, at *6-*8;
+Bettencourt, 370 F. Supp. 3d at 266; Salls, 349 F. Supp. 3d at 90-91; Walbridge, 299
+F. Supp. 3d at 349; Smith, 2017 WL 3597522, at *8; Gunter v. United Fed. Credit
+Union, No. 3:15-cv-00483-MMD-WGC, 2017 WL 4274196, at *3 (D. Nev. Sept. 25,
+2017); Ramirez, 2017 WL 118859, at *7; Pinkston-Poling, 227 F. Supp. 3d at 852.
+As one court reasoned, the safe harbor provision requires the use of an "appropriate
+model clause." Adams, 2021 WL 3726007, at *7 (citing 15 U.S.C. § 1693m(d)(2)). If
+the language in Model Form A-9 does not accurately describe a particular
+institution's overdraft service, then it is not "appropriate." Id. Indeed, "(i]f use of a
+model clause were, by itself, an impenetrable shield, a consumer would have no
+redress" when Model Form A-9 does not actually provide a "clear and readily
+understandable" description, 12 C.F.R. § 1005.5, of an institution's overdraft
+services. Id.
+Granite cites two unreported district court cases holding otherwise. See
+Rader v. Sandia Lab. Fed. Credit Union, No.20-559 JAP/JHR, 2021 WL 1533664, at
+*13-*14 (D.N.M. April 19, 2021); Tilley v. Mountain Am. Fed. Credit Union, No.
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 9 of 10
+2:17-cv-01120-JNP-BCW, 2018 WL 4600655, at *4-*6 (D. Utah Sept. 25, 2018). The
+court does not find the reasoning of these cases to be persuasive. Tilley, for
+example, cited a Northern District of Georgia case for the proposition the phrase
+"enough money" from the model form is not inaccurate when the financial
+institution calculates overdrafts based on an account's available balance. Tilley,
+2018 WL 4600655, at *5 (citing Tims v. LGE Cmty. Credit Union, No. 1:15-cv-4279.
+TWT, 2017 WL 5133230, at *6 (N.D. Ga. Nov 6, 2017), rev'd and remanded by 934
+F.3d 1228). But the Eleventh Circuit later overturned that case on appeal, holding
+that using language from a model clause "does not shield (a financial institution] for
+claims based on their failure to make adequate disclosures." Tims, 935 F.3d at
+1243. The other case Granite cited, Rader, relied exclusively on Tilley's reasoning,
+without acknowledging that Tilley was predicated in part on reasoning that the
+Eleventh Circuit had overturned. See 2021 WL 1533664, at *13-*14. Rather than
+following either of these cases, this court agrees with the sound reasoning of the
+Eleventh Cireuit and the previously cited district court cases holding that the safe
+harbor provision did not defeat plaintiffs' claims.
+Thus, Plaintiffs have plausibly stated a claim that the clause from Model
+Form A-9 was not "appropriate" because the language did not describe Granite's
+overdraft policy in a "clear and readily understandable" way. See Adams, 2021 WL
+3726007, at *8.
+9
+
+Case 1:21-cv-00534-LM Document 20 Filed 11/08/21 Page 10 of 10
+CONCLUSION
+For these reasons, Granite's motion to dismiss (doc. no. 9) for failure to state
+a claim is denied.
+SO ORDERED.
+United States District Judge
+November 8, 2021
+cc: Counsel of Record
+10
+
+NO. CIV-15-0913-HE
+UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA
+Parrish v. Arvest Bank
+Decided Jul 14, 2016
+NO. CIV-15-0913-HE
+07-14-2016
+SARAH LEE GOSSETT PARRISH, Plaintiff, v.
+ARVEST BANK, Defendant.
+JOE HEATON CHIEF U.S. DISTRICT JUDGE
+ORDER
+According to the complaint, plaintiff Sarah Lee
+Gossett Parrish ("Parrish") is a customer of
+defendant Arvest Bank ("Arvest") who has one or
+more accounts with Arvest. Parrish has filed this
+suit against Arvest on behalf of herself and all
+others similarly situated, alleging that Arvest
+deliberatcly sequences its transaction processing
+to maximize the bank's collection of fees for
+overdraft service or non-sufficient funds, to the
+detriment of its customers. Based on this, Parrish
+asserts seven claims:' (1) actual fraud, (2)
+constructive fraud, (3) false representation/deceit,
+(4) violation of the Oklahoma Consumer
+Protection Act, 15 Okla. Stat. § 751 st seq., (5)
+breach of fiduciary duty, (6) breach of contract,
+and (7) unjust enrichment. Arvest has moved to
+dismiss all of these claims under Federal Rule of
+Civil Procedure 12(b)(6) for failure to state a
+claim.
+" The complaint purports to assert an eiglah
+claim for punitive and exemplary damages,
+but that is not a separate cause of action.
+When evaluating a motion to dismiss for failure to
+state a claim under Rule 12(b)(6), the court
+accepts all well-pleaded factual allegations as true
+and views them in the light most favorable to the
+casetext
+plaintiff as the nonmoving party. S.E.C. v. Shields,
+2 744 F.3d 633, 640 (10th *2 Cir. 2014). Generally,
+the complaint need only present "a short and plain
+statement of the claim showing that the pleader is
+entitled to relief" Fed. R. Civ. P. 8(a)(2). The
+complaint must, however, contain "enough facts to
+state a claim to relief that is plausible on its face"
+and "raise a right to relief above the speculative
+level." Bell Atlantic Corp. v. Twombly, 550 U.S.
+544, 570, 555 (2007). *'A claim has facial
+plausibility when the plaintiff pleads factual
+content that allows the court to draw the
+reasonable inference that the defendant is liable
+for the misconduct alleged.'* Shields, 744 F.3d at
+640 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
+(2009)).
+Some claims, however, are subject to the pleading
+requirements of Rule 9(b), which requires a party
+alleging fraud or mistake to "state with
+particularity the circumstances constituting fraud
+or mistake." Although the claimant may gencrally
+allege the other party's state of mind in connection
+with the fraud or mistake, the complaint must still
+"set forth the time, place, and contents of the false
+representation, the identity of the party making the
+false statements and the consequences thereof."
+Toone v. Wells Fargo Bank, N.A., 716 F.3d 516,
+522 (10th Cir. 2013).
+The complaint alleges that Arvest provides ATM
+and check cards for customers to use in drawing
+on their accounts
+through point-of-sale
+transactions, and that it allows customers to
+complete electronic fund transfers and other
+banking activities through Arvest's website and
+mobile banking technology. It generally alleges
+
+Parrish v. Arvest Bank NO. CIV-15-0913-HE (W.D. Okla. Jul. 14, 2016)|
+that Arvest represents to its customers, through
+marketing materials and customer agreements, that
+these transactions post to customer accounts in the
+same order in which the transactions are made
+3 (i.c., *3 chronologically). The complaint further
+asserts that Arvest represents to customers that
+they can rely on the account information reflected
+on the bank's website or accessed by phone in
+determining whether they have sufficient funds for
+debit transactions.
+However, according to the complaint, transactions
+are actually posted to accounts in batches by
+transaction type at the end of each day, and those
+batches are deliberately sequenced so that
+transaction types with larger median amounts are
+debited carlier
+than
+smaillcr
+The
+complaint further alleges that, as a result, accounts
+incur more fees for overdrafts or for having
+insuflicient funds (collectively, "Overdraft Fees")
+than would be the case if the transactions were
+posted in chronological order.
+The first four claims in the complaint are for
+actual fraud, constructive fraud, deceit, and
+violation of the Oklahoma Consumer Protection
+Act (OCPA). Each of them rely on some form of
+alleged fraud and are hence subject to the pleading
+requirements of Rule 9(b) referenced above.
+The complaint generally alleges that Arvest made
+false representations by "stat[ing] to its customers
+that it would only apply [Overdraft Foes] when a
+customer overdrew his or her account and had
+insufficient funds in his or her account," and by
+representing that their reported account balances
+would be accurate. The complaint also asserts that
+Arvest made false representations in its standard
+Electronic Fund Transfers Agreement by stating
+debit card transactions would be applied to
+accounts "cach time" the card is used instead of in
+batches at the end of the day. Further, the
+complaint
+states
+that
+Arvest
+made
+misrepresentations by stating in marketing and
+4 promotional materials that customers can *4 avoid
+foes by
+"immediately
+record(ing]"
+each
+transaction they make. Id.
+General allegations like those involved here are
+insufucient to state a claim under Rile • Some ot
+the alleged representations do not even arguably
+constitute a false representation such as might be a
+basis for a fraud claim. For example, advice to
+customers tat wey can miimize
+Ices by
+immediately recording transactions in their own
+records is not only self-evidently accurate but,
+more importantly for present purposes, represents
+nothing about the way the bank books the
+transactions. A statement that a transaction will bo
+posted "each time" a card is used does not say or
+imply that the posting will be instantancous. Other
+allegations in the complaint assert fraud, but do so
+only in conclusory fashion, and are not specific
+representations sufticient to meet the heightened
+pleading standard of the rule. See Jensen y.
+America's Wholesale Lender, 425 F. App'x 761,
+763 (10th Cir. 2011) (requiring more to satisfy
+Rule 9(b) than gencral allegations of a defendant's
+"pattern and practice" of harming plaintiff through
+false representations). Moreover, the complaint
+does not set forth with particularity how Parrish
+relied on the alleged false representations or how
+that reliance led to injury. See Olds v. Bank of
+America N.A., 573 F. App'x 710, 711 (10th Cir.
+2014) (memorandum). Therefore, the claims for
+fraud, constructive fraud, deceit, and violation of
+the OCPA will be dismissed for failure to plead
+them with the particularity required by Rule 9(b),
+but with leave to amend granted except as to the
+5 OCPA claim.? *5
+2 Invest argues thar awendment would be
+futile, as the claims are preempted by
+federal law. However, while promption
+principles might proclude claims dinctly
+challenging the posting onder of items or
+similar matters subject to federal law,
+thase principles do not extend to
+preempting claims based on false or
+fraudulent representations about thane
+casetext
+
+Parrish v. Arvest Bank NO. CIV-15-0913-HE (W.D. Okla. Jul. 14, 2016)|
+practices. See Gutienez x Hells Parge
+Bask. MA, 704 F.3d 712, 726 (9th Car.
+Unanoma Union Connercial couc
+12A Okla. Star. § 4-101 er sog -, allows
+posting of news in any order sadle fals
+to precioe wese crats, Whieh are
+alecten to aegea misrepresslations
+about the posting wactices rather than the
+practices themselves.
+As to the OCPA claim, the statute does not extend
+to "(actions or transactions regulated under laws
+administered by the Corporation Commission or
+any other regulatory body or officer acting under
+statutory authority of this state or the United
+States ..." 15 Okla. Stat. § 754(2). The alleged
+activity at issue here is part of the business of
+banking, an activity that is heavily regulated by
+the Board of Governors of the Federal Reserve
+System, see 15 U.S.C. § 1693c (Electronic Fund
+Transfer Act); see also 12 C.F.R. § 205.7
+(Regulation E), the FDIC, and state banking
+authorities. The statute's "regulated activity"
+exemption is therefore applicable and bars
+plaintiff's OCPA claim. In light of that legal
+conclusion, amendment of the complaint as to that
+claim would de mutle.
+Plaintift's fifth claim alleges Arvest breached its
+fiduciary duty to plaintiff and its other customers
+by its conduct. Under Oklahoma law, the
+relationship between a bank and its customer is
+that of debtor and creditor. Beshara v. S. Nat'l
+Bank, 928 P.2d 280, 288 (Okla. 1996). The
+relationship between a bank and its customer is
+not viewed as fiduciary in nature unless there is an
+exoress written aureement to that chect. 6 Okla.
+Stat. § 425, or other special circumstances exist
+which support such a conclusion. Beshara, 928
+P.2d at 288. No basis for either exception is
+alleged here.
+As to the sixth claim, the complaint alleges that
+Arvest breached the contract which was formed
+when Parrish became a customer of Arvest and
+6 enrolled in electronic fund *6 transfer service (the
+casetext
+"EFT Agreement"). The EFT agreement attached
+to the comolant imposes on Arvest a contractual
+duty to provide access to telephone, online, and
+mobile banking services. It does not include a
+promise to post transactions mn any partcular orac.
+or to display account balances retlecting
+transactions posted in a particular order. The
+complaint asserts that Arvest breached the contract
+oy providing maccurate account balances, out it is
+not apparent what makes the balances inaccurate.
+Plaintiff's argument is essentially
+that an
+"accurate" balance is only one which reflects
+instantancous posung or transactions. But the
+agreement promises no such thing and there is no
+apparent reason for concluding that transactions
+posted by size or by some other batching process
+result in balances that are other than "accurate" for
+purposes of the agreement.
+Plaintiff also asserts a claim for unjust enrichment.
+Unjust enrichment results from a party's retention
+of a benefit that, "in equity and good conscience, it
+should not be allowed to retain." Harvell y.
+Goodyear Tire and Rubher Co., 164 P.3d 1028,
+1035 (Okla. 2006). In other words, a party secking
+to recover for unjust enrichment must show
+"enrichment to another, coupled with a resulting
+injustice." City_of Tulsa v, Bank of Oklahoma,
+N.A.. 280 P.3d 314, 319 (Okla. 2011) (internal
+citation and quotation marks omitted).
+Here, Parrish alleges that Arvest collected
+Overdraft Fees as a result of banking practices that
+were "unfair, unconscionable, and oppressive."
+Doc. No. 17, at 18. However, the complaint does
+not state a plausible basis for inferring that
+defendant's conduct meets that standard. As noted
+above, tere is no pasts alleyce for concluaing that
+Arvest breached its contract with its customers by
+the challenged practices, nor is there a basis stated
+for *7 treating its representations as to those
+practices as fraudulent. There is no basis alleged
+for finding a fiduciary duty between the parties
+that Arvest's conduct has arguably violated.
+Finally, there is no basis alleged for concluding
+that Arvest's procedures are contrary to applicable
+
+Parrish v. Arvest Bank NO. CIV-15-0913-HE (W.D. Okla. Jul. 14, 2016)|
+regulations or customary banking practice. In
+these circumstances, an unjust cnrichment claim is
+not stated.
+For the reasons indicated, the motion to dismiss
+[Doc. No. 30] is GRANTED and plaintiff's claims
+are DISMISSED. As the deficiencies in the
+claims other than the OCPA claim are potentially
+subject to being remedied by amendment, plaintifi
+is granted leave to file an amended complaint
+within twenty-one (21) days addressing the
+deficiencies if she can do so.
+IT IS SO ORDERED.
+Dated this 14th day of July, 2016.
+JOE HEATON
+CHIEF U.S. DISTRICT JUDGE
+casetext
+
+casetext
+Nos. 10-16959 10-17468 10-17689.
+2012-12-26
+Veronica GUTIERREZ; Erin Walker; William
+Smith, individually and on behalf of all others
+similarly situated, Plaintiffs-Appellees, v. WELLS
+FARGO
+BANK, NA, Defendant-Appellant.
+Veronica Gutierrez; Erin Walker; William Smith,
+individually and on behalf of all others similarly
+situated, Plaintifis-Appellees, v. Wells Fargo
+Bank, NA,
+Defendant-Appellant. Veronica
+Gutierrez, Erin Walker, Plaintifis-Appellants, and
+William Smith, individually and on behalf of all
+others similarly situated, Plaintiff, v. Wells Fargo
+Bank, NA, Defendant-Appellee.
+West's Ann. Cal.Bus. & Prof.Code § 17200 Jordan
+Elias, Richard M. Heimann, Roger N. Heller,
+Michacl W. Sobol (argued), and Alison M.
+Stocking, Lieff Cabraser Heimann & Bernstein,
+LLP, San Francisco, CA; Jac K. Kim and Richard
+D. McCune, McCune & Wright, LLP, Redlands,
+CA, for Plaintifis-Appellees.
+McKEOWN
+Nos. 10-16959
+United States Court of Appeals, Ninth Circuit.
+Gutierrez v. Wells Fargo Bank, NA
+704 F.3d 712 (9th Cir. 2012)
+Decided Des 26, 2012
+D. McCune, McCune & Wright, LLP, Rodlands,
+CA, for Plaintiffs-Appellces.
+Robert A. Long, Jr. (argued), Mark William
+Mosier, Keith A. Noreika, and Stuart C. Stock,
+Covington & Burling LLP, Washington, D.C.;
+David M. Jolley and Sonya D. Winner, Covington
+& Burling, LLP, San Francisco, CA; Emily
+Johnson Henn, Covington & Burling LLP,
+Redwood Shores, CA, for Defendant-Appellant.
+Limited on Preemption Grounds
+715 West's Ann.Cal.Bus. & Prof.Code § 17200*715
+Jordan Elias, Richard M. Heimann, Roger N.
+Heller, Michael W. Sobol (argued), and Alison M.
+Stocking, Lieft Cabraser Heimann & Bernstein,
+LLP, San Francisco, CA; Jac K. Kim and Richard
+Angeles, CA, for Amici Curiac American Bankers
+Association and California Bankers Association.
+Nina F. Simon, Washington, D.C., for Amici
+Curiac Center for Responsible Lending, Consumer
+Federation of America, California Reinvestment
+Coalition, and Law Foundation of Silicon Valley.
+Appeal from the United States District Court for
+the Northern District of California, William Alsup,
+District Judge, Presiding, 3:07-cv-05923-WHA
+Before: SIDNEY
+R. THOMAS,
+M.
+MARGARET MeKEOWN, and WILLIAM A.
+FLETCHER, Circuit Judges.
+OPINION
+McKEOWN, Circuit Judge:
+Bank fees, like taxes, are ubiquitous. And, like
+taxes, bank fees are unlikely to go away any time
+716 soon. The question we *716 consider here is the
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)
+extent to
+which overdraft fees imposed by a
+Casataxink are subject to state regulation.
+At issue is a bookkeeping device, known as "high-
+to-low" posting, which has the potential to
+multiply overdraft fees, turning a single overdraft
+into many such overdrafts.
+The revenue from
+overdraft fees is massive. Between 2005 and 2007,
+Wells Fargo Bank ("Wells Fargo") assessed over
+$1.4 billion in overdraft fees. Disturbed by the
+number of overdrafts caused by small, everyday
+debit-card purchases, Veronica Gutierrez and Erin
+Walker (collectively "Gutierrez") sued Wells
+Fargo under California state law for engaging in
+unfair business practices by imposing overdratt
+fees based on the high-to-low posting order and
+for engaging in fraudulent business practices by
+misleading clients as to the actual posting order
+used by the bank.
+The district court found that "the bank's dominant,
+indeed sole, motive" for choosing high-to-low
+posting "was to maximize the number of
+overdrafts and squeeze as much as possible out of
+what
+it
+called
+its
+'ODRI
+customers
+(overdraft/returned item)." The district court also
+found that Wells Fargo had "affirmatively
+reinforced the expectation that transactions were
+covered in the sequence [the purchases were]
+made while obfuscating its contrary practice of
+posting transactions in high-to-low order to
+maximize the number of overdrafts assessed on
+customers."
+The court issued a permanent
+injunction
+against "high-to-low" posting and
+ordered $203 million in restitution. On appeal,
+Wells Fargo seeks refuge from state law on the
+ground of federal preemption. It also challenges
+the district court's factual and legal findings. We
+conclude that federal law proempts state regulation
+of the posting order as well as any obligation to
+make specific, affirmative disclosures to bank
+customers. Federal law does not, however,
+preempt California consumer law with respect to
+fraudulent
+misleading
+representations
+conceming posting. As a consequence, we affirm
+in part, reverse in part, and remand for further
+proceedings.
+Background'
+1 This background is drawn from the district
+court's Findings of Fact and Conclusions of
+Law After Bench Trial.
+"Posting" is the procedure banks use to process
+debit items presented for
+payment against
+accounts. During the wee hours after midnight, the
+posting process takes all debit items presented for
+payment during the preceding business day and
+subtracts them from the account balance. These
+items are typically debit-card transactions and
+checks. If the account balance is sufticient to
+cover all items presented for payment, there will
+be no overdrafts, regardless of the bookkeeping
+method used. If, however, the account balance is
+insufficient to cover every debit item, then the
+account will be overdrawn. When an account is
+overdrawn, the posting sequence can have a
+dramatic effect on the number of overdrafts
+incurred by the account (even though the total sum
+overdrawn will be exactly the same). The number
+of overdrafts drives the amount of overdraft fees.
+Before April 2001, Wells Fargo used a low-to-
+high posting order. Under this system, the bank
+posted settiement items from lowest-to-highest
+dollar amount. Low-to-high posting paid as many
+items as the account balance could cover and thus
+minimized the number of overdrafts. Beginning in
+April of 2001, Wells Fargo did an about-face in
+California and began posting debit-card purchases
+717 in order of highest-to-lowest*717 dollar amount.
+This system had the immediate effect of
+maximizing the number of overdrafts. The
+customer's account was now depleted more
+rapidly than would be the case if the bank posted
+transactions in low-to-high order or, in some
+cases, chronological order.
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)
+As an illustration, consider a customer with $100
+CasteXtunt who uses his debit-card to buy ten
+small items totaling S99, followed by one large
+item for $100, all of which are presented to the
+bank for payment on the same day. Under
+chronological posting or low-to-high posting, only
+one overdraft would occur because the ten small
+items totaling $99 would post first, leaving $1 in
+the account. The $100 charge would then post,
+causing the sole overdraft. Using high-to-low
+sequencing, however, these purchases would lead
+to ten overdraft events because the largest item.
+$100, would be posted first— depleting the entire
+account balance-followed by the ten transactions
+totaling S99. Overdraft fees are based on the
+number of withdrawals that exceed the balance in
+the account, not on the amount of the overdraft.
+When high-to-low sequencing is used, the fees
+charged by the bank for the overdrafts can
+dramatically exceed the amount by which the
+account was actually overdrawn. For example,
+Gutierrez incurred $143 in overdraft fees as a
+consequence of a $49 overdraft, and Erin Walker
+incurred $506 in overdraft fees for exceeding her
+account balance by $120.
+Gutierrez claims that Wells Fargo made the switch
+to high-to-low processing in order to increase the
+amount of overdraft fees by maximizing the
+number of overdrafts. The bank amplified the
+cficct of its fee maximization plan, which it
+named "Balance Sheet Engineering," through
+several related practices that are not at issue here.
+California's Unfair Competition Law allows
+individual plaintifis to bring claims for unfair,
+unlawful, or fraudulent business practices. Cal.
+Bus. & Prof.Code § 17200.
+2 Although remedies under the Unfair Competition
+Law are limited to injunctive relief and restitution,
+the law's scope is "sweeping." Cel-Tech
+Comme'ns, Inc. v. Los Angeles Cellular Tel. Co.,
+20 Cal. 4th 163, 180, 83 Cal.Rptr. 2d 548, 973 P.2d
+527 (1999). Gutierrez sued on behalf of a class,
+alleging independent violations of both the law's
+"unfair" and "fraudulent" prongs. Gutierrez
+alleged that
+Wells Fargo's "resequencing"
+practices are unfair because they contradict the
+legislative policy expressed in California
+Commercial Code § 4303(b) 1992 Amendment
+cmt. 7, which provides that "items may be
+accepted, paid, certified, or charged to the
+indicated account of its customer in any order" so
+long as the bank "act[s] in good faith" and not "for
+the sole purpose of increasing the amount of
+returned chock fees charged to the customer."
+2 .Section 17200 of the California Business
+and Professions Code provides that "unfair
+competition shall mean and include any
+unlawful, unfair or fraudulent business act
+or practice. The Caltoma Supreme Lourt
+has held that the law's covcrage 1s
+sweepi, chcocoassing dhything that
+can properly be called a basiness practice
+and that at the same time is forbidden by
+law." Rubin k. Green, 4 Cal.4th 1187, 1200,
+17 Cal.Rptr.2d 828, 847 P.2d 1044 (1993).
+It govems "anti-competitive business
+practices as well as injuries to consumers,
+and has as a major purpose the preservation
+of fair business competition." Cel-Tech
+Commens, Inc. v. Los Angeles Cellular Tel.
+Co. 20 Cal.4th 163, 180, 83 Cal.Rptr.2d
+548, 973 P.2d 527 (1999) (citation and
+218 * Id. *718
+3 The district court held that proof of an
+uair ous ncos practice under $ 17200
+requires an unfair policy or practice
+tethered to a legislatively declared policy
+or the demonstration of an actual orl
+threatened impact on competition. As
+described above, Gutierrez "tethered" the
+claims to too legislative comment expressed
+in California Commercial Codo § 4303(b).
+The extent to which claims brought under
+the Unfair Competition Law must be
+tethered to a legislatively declared policy is
+a question of debato in California courts
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012) |
+casetextSB Bank Nevada, N.1. 691 F3d
+1152, 1169-70 (9th Cir.2012); Durell v.
+Sharp Healthcare, 183 Cal.App.4th 1350,
+1364-65, 108 Cal.Rptr.3d 682 (2010).
+The district court certified a class of "all Wells
+Fargo customers from November 15, 2004 to June
+30, 2008, who incurred overdraft fees on debit-
+card transactions as a result of the bank's practice
+of sequencing transactions from highest to
+lowest." After a two-week bench trial, the district
+court issued a comprehensive 90-page decision
+and found that Wells Fargo's "decision to post
+debit-card transactions in high-to-low order was
+made for the sole purpose of maximizing the
+number of overdrafts assessed on its customers."
+The court also concluded that Wells Fargo led
+customers "to expect that the actual posting order
+of their debit-card purchases would mirror the
+order in which they were transacted" while hiding
+its actual practice of posting transactions in high-
+to-low order so that the bank could "maximiz[e]
+the number of overdrafts assessed on customers."
+The district court rejected Wells Fargo's numerous
+defenses-federal preemption pursuant to various
+statutes and regulations, Gutierrez's lack of
+standing, and the impropriety of class certification
+-and held Wells Fargo's actions to be both unfair
+and fraudulent under the Unfair Competition Law.
+As a remedy, the court entered a permanent
+injunction requiring Wells Fargo to "cease its
+practice of posting in high-to-low order for all
+debit-card transactions" and "either reinstate a
+low-to-high posting method or use a chronological
+posting method (or some combination of the two
+methods) for debit-card transactions." It also
+imposed various related disclosure requirements.
+In addition to injunctive relief, the district court
+ordered Wells Fargo to pay $203 million in
+restitution. Both parties appealed. Wells Fargo's
+appeal focuses on its preemption argument and on
+the merits of Gutierrez's Unfair Competition Law
+claims. Gutierrez's cross-appeal is directed to the
+district court's denial of prejudgment interest and
+punitive damages.
+Analysis
+I. Arbitration
+As a threshold matter, we consider whether this
+dispute should be arbitrated. Although the contract
+between the parties contained a permissive
+arbitration clause, neither party requested
+arbitration, and consequently the district court did
+not consider the issue. On appeal, Wells Fargo
+seeks to compel arbitration and claims that its
+enforceable right to arbitration did not mature
+until the Supreme Court's 2011 decision in AT&T
+Mobility LLC v. Concepcion,
+- U.S.
+-, 131|
+S.Ct. 1740, 179 L.Ed.2d 742 (2011). Wells Fargo
+asks us to vacate the judgment and remand so that
+the district court can dismiss the case or stay it
+pending arbitration. Gutierrez argues that Wells
+Fargo has waived any claim to arbitration.
+After considering the terms of the arbitration
+agreement, the conduct of the parties, and the
+course of the litigation, along with the traditional
+benchmarks regarding waiver of arbitration and
+the purpose of the Federal Arbitration Act
+("FAA"), we conclude that the district court
+judgment should not be vacated on the basis of
+Concepcion. To do so at this stage would
+undermine the partics' agreement regarding
+719 arbitration, severely prejudice Gutierrez*719 and
+the certified class members, and result in a waste
+of judicial resources. This is an unusual, perhaps
+sul geners, case in which the specific
+circumstances counsel this result.
+In Concepcion, the Supreme Court held that the
+FAA prompted California's Discover Bank rule,
+id. at 1753, which rendered class-wide arbitration
+waivers unenforccable if it was "alleged that the
+party with the superior bargaining power has
+carried out a scheme to deliberately cheat large
+numbers of consumers out of individually small
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)
+sums of money," Discover Bank v Superior Court,
+casetexit 148, 162-63, 30 Cal.Rptr.3d 76, 113
+P.3d 1100 (2005).
+The central purpose of the FAA "is to ensure that
+"private agreements to arbitrate are enforced
+according to their terms.' " Stolt-Nielsen S.A. v.
+AnimalFeeds Int'l Corp.,
+- U.S. -
+—, 130 S.Ct.
+1758, 1773, 176 L.Ed.2d 605 (2010) (quoting Volt
+Info. Sci., Inc. v. Bd. of Trs. of Leland Stanford
+Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248,
+103 L.Ed.2d 488 (1989)). Section 2 of the FAA
+provides that an agreement to arbitrate "shall be
+valid, irrevocable, and enforceable, save upon
+such grounds as exist at law or in equity for the
+revocation of any contract. 9 U.S.C. $ 2.
+Although the FAA's savings clause "permits
+agreements to arbitrate to be invalidated by
+generally applicable contract defenses, such as
+fraud, duress, or unconscionability," it does not
+allow "defenses that apply only to arbitration or
+that derive their meaning from the fact that an
+agreement to arbitrate is at issue." Concepcion,
+131 S.Ct. at 1746 (citation and internal quotation
+marks omitted). In Concepcion, the Court struck
+down the Discover Bank rule because it was
+applied in a manner that disfavored arbitration and
+interfered with the enforcement of private
+arbitration agreements, thus standing "as an
+obstacle to the accomplishment and execution of
+the full purposes and objectives of Congress." Id.
+at 1753 (quotation marks and citation omittod).
+The effect of Concepcion, as intervening Supreme
+Court law, on a judgment on appeal after trial, is
+an issue of first impression. The mine run of cases
+claiming waiver of arbitration stem from situations
+where, before trial, a party belatedly asserts a clear
+right to arbitration. See, e.g., Cox v. Ocean View
+Hotel Corp., 533 F.3d 1114, 1123-26 (9th
+Cir. 2008) (declining to find that defendant's initial
+refusal to arbitrate employee's complaints
+constituted waiver of right to arbitrate subsequent
+legal action). But we have not found, nor have the
+parties cited, any cases involving waiver of a
+permissive arbitration right where the applicability
+of the right was not clear-cut, arbitration was
+never demanded, and the claim was first asserted
+on appeal following trial.
+Our analysis begins with the Customer Account
+Agreement ('CAA") between Wells Fargo and the
+class members, which provides:
+Either of us may submit a dispute to binding
+arbitration at any reasonable time notwithstanding
+that a lawsuit or other proceeding has been
+commenced. If either of us fails to submit to
+binding arbitration following a lawful demand, the
+one who fails to submit bears all costs and
+expenses incurred by the other compelling
+arbitration.
+The CAA further states that "[ejach of us agrees
+that any arbitration we have shall not be
+consolidated with any other arbitration and shall
+not be arbitrated on bchalf of others without the
+consent of each of us."
+4 We assume without deciding that the
+arbitration agreement is valid and that the
+dispute is within the scope of the
+arbitration agreement. Neither issue is on
+appeal.
+720 *720
+This arbitration clause stands in contrast to the
+mandatory arbitration provision found in many
+consumer contracts, such as the provision in
+Concepcion. To begin, it is a permissive clause in
+which either party may demand arbitration. The
+penalty for failing to consent to arbitration upon
+demand is bearing the costs involved in
+compelling arbitration. Four points stand out: 1)
+an arbitration demand is required; 2) the
+agreement contemplates that the partics may
+decide to remain within the judicial system to
+settle their disputes; 3) the agreement permits
+class arbitration on consent; and 4) any demand
+for arbitration must be made within a "reasonable
+time."
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)|
+The procedural posture of this case is reflective of
+casetexE intentions and expectations. Notably,
+Wells Fargo never made a demand for arbitration,
+raised it as a defense, or even mentioned it until
+after the Concepcion decision, at which point the
+trial was over and the district court had issued its
+judgment.
+Although
+the
+FAA
+allows
+for
+interlocutory appeals of orders denying motions to
+compel arbitration, seel U.S.C. § 16(a)(1)(B),
+unlike the defendant in Concepcion, Wells Fargo
+undertook no such tack. See131 S.Ct. at 1744-
+45;see also Franceschi v. Hosp. Gen. San Carlos,
+Inc., 420 F.3d 1, 4 (Ist Cir.2005) (arbitration right
+is forfcited where no interlocutory appeal was
+filed because "it would prejudice plaintiffs to have
+a full trial and then dctermine by a post-trial
+appeal that the whole matter should have been
+arbitrated and so [should] start again" (internal
+quotation marks omitted)).
+The timing of the
+arbitration
+demand is
+informative. The certiorari petition in Concepcion
+was filed on January 25, 2010, three months
+before the bench trial began in April 2010.
+Petition for Writ of Certiorari, Concepcion, 131
+S.Ct. 1740 (No. 09-893). On May 24, 2010, the
+Supreme Court accepted review. AT de T Mobility
+LLC v Concepcion,
+- U.S.
+-, 130 S.Ct.
+3322, 176 L.Ed.2d 1218 (2010). At that stage,
+final argument in the district court was more than
+a month away, no decision had been issued, and
+the parties were exchanging proposed findings.
+The arbitration
+however, squarely
+before the Supreme Court. The district court's
+decision was not issued until August 2010. Even
+in that interim period, Wells Fargo was silent as to
+arbitration and did not seck a stay pending the
+Supreme Court's decision in Concepcion. Instcad,
+Wells Fargo proceeded full steam ahead with this
+litigation in federal court. Only in April 2011,
+after an unfavorable result in the district court and
+the Supreme Court opinion did Wells Fargo seek
+to vacate the district court's judgment via a motion
+to compel arbitration filed with this court. The
+Appellate Commissioner
+motion
+without prejudice to renewing the arguments in
+the brief on cross-appeal. See Order, July 15,
+2011.
+Gutierrez argues that Wells Fargo "was driven by
+its preference to litigate this case in federal court
+in order to obtain favorable rulings from the
+district court on federal preemption and other
+issues." The record is devoid of Wells Fargo's
+motives for its chosen course of action, although
+Wells Fargo offered only argument, not evidence
+or declarations, as to the rationale for its litigation
+strategy. We make no judgment about Wells
+Fargo's motives.
+Against this background, we consider Gutierrez's
+argument that Wells Fargo waived any rights to
+arbitration given the belated nature of its request.
+For such a waiver to occur, there must be: "*(1)|
+knowledge of an existing right to compel
+721 arbitration; (2) acts inconsistent with that *721
+existing right; and (3) prejudice to the party
+opposing
+arbitration
+resulting
+from
+inconsistent acts." Fisher v. A.G. Becker Paribas
+Inc., 791 F.2d 691, 694 (9th Cir. 1986).
+Wells Fargo claims that any "existing right" arose
+only after Concepcion and thus it did not act
+inconsistently with that "existing right" because it
+would have been futile to seck arbitration carlier.
+See Fisher, 791 F.2d at 695. The futility of an
+In contemporancous consumer htigation, litigants
+did sucoeed in compelling arbitration despite the
+existence of the Discover Bank rule. See, e.g.,
+Dalie v. Pulte Home Corp., 636 F.Supp.2d 1025,
+1027 (E.D.Cal.2009) (recognizing that "under
+California law a class action waiver is only
+unenforceable in a narrow set of circumstances");
+McCabe v. Dell, Inc., No. CV 06-7811, 2007 WL
+1434972, at *3-4 (C.D.Cal. Apr. 12, 2007)
+(compelling arbitration after finding the arbitration
+clause
+enforceable
+unac.
+California
+law);
+Galbraith v. Resurgent Capital Servs., No. CIV S
+05-2133, 2006 WL 2990163, at *2 (E.D.Cal. Oct.
+19, 2006) (same). Especially because the CAA did
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)
+not prohibit class arbitration, a motion to compel
+casataxtwas not inevitably futile under the
+prescribed case-by-case analysis. See Douglas v
+U.S. Dist. Court for Cent. Dist. of Cal., 495 F.3d
+1062, 1068 (9th Cir.2007) (whether arbitration can
+be compelled "depends on the facts and
+circumstances developed during the course of
+litigation").
+Given the differing circumstances in our case and
+Fisher with respect to the first two prongs of
+Fisher, we focus on prejudice. We reject Wells
+Fargo's attempt to collapse all three Fisher prongs
+into one. Adopting this course would ignore the
+procedural posture of the case and also the court's
+approach in Fisher, which laid out the waiver
+analysis. Although Fisher held that the defendant
+there had not acted inconsistently with an existing
+right, it went on to discuss the prejudice that the
+Fishers would suffer if the court were to order
+arbitration. See791 F.2d at 698-99. We do the
+same.
+Ordering arbitration post-appeal would severely
+prejudice Gutierrez. The CAA requires the
+demand to be made at a "reasonable time." The
+series of dispositive motions, voluminous
+discovery, preparation for trial, two-week bench
+trial, post-trial briefing, and appellate proceedings
+amply demonstrate the resources both the parties
+and the courts have already expended, all of which
+would be undone if arbitration is now required.
+The prejudice to Gutierrez and the class stemming
+from Wells Fargo's invocation of arbitration five
+years into this litigation-time, expense, delay and
+uncertainty-is apparent. See Nat'l Found. for
+Cancer Research v. A.G. Edwards & Sons, Inc.,
+821 F.2d 772, 776 (D.C.Cir. 1987) (*To give
+[defendant] a second bite at the very questions
+presented to the court for disposition squarely
+confronts the policy that arbitration may not be
+used as a strategy to manipulate the legal
+process.").
+Independent of the Fisher analysis, arbitration at
+this juncture would frustrate the purposes of the
+FAA. "The overarching purpose of the FAA,
+evident in the text of $§ 2, 3, and 4, is to ensure
+the enforcement of arbitration agreements
+according to their terms so as to facilitate
+streamlined proceedings." Concepcion, 131 S.Ct.
+at 1748. Far from facilitating streamlined
+proceedings, sending this case to arbitration post-
+appeal would be wholly duplicative and lead to
+further delay and expense for both partics.
+Nor would arbitration at this late stage serve any
+contractual purpose. The CAA calls for all claims
+to be resolved through either litigation or
+722 arbitration, if timely *722 demanded by one of the
+parties. Because the CAA does not require
+arbitration, Gutierrez's prejudice is in no way self-
+inflicted. Ordering arbitration would undercut her
+contractual expectations, be inconsistent with the
+parties' agreement, and contradict their conduct
+throughout the litigation. See Concepcion, 131
+S.Ct. at 1752 ("Arbitration is a matter of contract,
+and the FAA requires courts to honor parties'
+expectations."). Because we reject Wells Fargo's
+belated effort to invoke arbitration, we proceed to
+the parties' remaining arguments.
+II. Federal Preemption
+We next consider whether the National Bank Act
+of 1864, 13 Stat. 99 (codified at 12 U.S.C. § 1 ct
+seq.), preempts application of California's Unfair
+Competition Law. Consistent with the principles
+of federalism, the United States has a "dual
+banking system." See, e.g., Atherton v. F.D.I.C.,
+519 U.S. 213, 221-23, 117 S.Ct. 666, 136 L.Ed.2d
+656 (1997). During the first century of the nation's
+existence, "state-chartered banks were the norm
+and federally chartered banks an exception." Id. at
+221, 117 S.Ct. 666. After the Civil War, Congress
+passed the National Bank Act to ensure that
+national and state banks could coexist on a basis
+of "competitive cquality." First Nat'! Bank of
+Logan, Utah v. Walker Bank & Trust Co., 385 U.S.
+252, 261, 87 S.Ct. 492, 17 L.Ed.2d 343 (1966).
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)
+The Act vests nationally chartered banks with
+casatext powers, such as the power to make
+contracts, to receive deposits, and to make loans,
+together with "all such incidental powers as shall
+be necessary to carry on the business of banking."
+12 U.S.C. § 24 (Third, Seventh). In addition to the
+National Bank Act, the activities of national banks
+are governed by related regulations promulgated
+by the Office of the Comptroller of the Currency
+(the "OCC"). See12 U.S.C. §§ 24, 93a, 371(a).
+In analyzing preemption, we ask whether the state
+law "prevent[s] or significantly interfere[s] with
+the national bank's exercise of its powers." Barnett
+Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25,
+33, 116 S.Ct. 1103, 134 L.Ed.2d 237 (1996).
+Althouch states
+"visitorial"
+oversight over national banks, state laws of
+general application continue to apply to national
+banks when "doing so does not prevent or
+significantly interfere with the national bank's
+exercise of its powers." Id. at 33, 116 S.Ct.
+1103;see also Watters v. Wachovia Bank, N.A., 550
+U.S. 1, 11, 127 S.Ct. 1559, 167 L.Ed.2d 389
+(2007) ("Federally chartered banks are subject to
+state laws of general application in their daily
+business to the extent such laws do not conflict
+with the letter or purposes of the NBA."). As the
+Supreme Court explained in Cuomo v. Clearing
+House Ass'n, LLC, 557 U.S. 519, 530, 129 S.Ct.
+2710, 174 L.Ed.2d 464 (2009), this balance of
+authority preserves "a regime of exclusive
+administrative oversight by the Comptroller while
+honoring in fact rather than merely in theory
+Congress's decision not to pre-empt substantive
+state law. This system echoes many other mixed
+state/federal regimes in which the Federal
+Government exercises general oversight while
+leaving state substantive law in place." Indeed,
+"[s)tates ... have always enforced their general
+laws against national banks." Id. at 534, 129 S.Ct.
+2710.
+Against the framework of extensive federal
+statutory and regulatory oversight of national
+banks, the question is whether Wells Fargo's
+implementation of high-to-low posting is subject
+to California's Unfair Competition Law, a
+consumer
+protection
+statute
+general
+applicability. Cal. Bus. & Prof.Code § 17200. We
+do not tackle the Unfair Competition Law
+723 generally*723 vis-a-vis federal banking regulation.
+Rather, reviewing de novo, we analyze each
+Unfair Competition
+Law
+claim separately,
+Martinez v. Wells Fargo Home Mortg., Inc., 598
+F.3d 549, 553 (9th Cir.2010), though as a practical
+matter, the remedy ordered by the district court
+boils down to a complete prohibition on the high-
+to-low-sequencing method.
+A. Unfair Business Practices and
+High-to-Low Posting
+The district court deemed Wells Fargo's high-to-
+low posting method an unfair practice in violation
+of the Unfair Competition Law because it was
+imposed in bad faith, in contravention of the
+policy reflected in California Commercial Code §
+4303(b).
+' In terms of remedy, the district court
+permanently enjoined Wells Fargo's use of high-
+to-low posting. The court ordered Wells Fargo to
+"either reinstate a low-to-high posting method or
+use a chronological posting method (or some
+combination of the two methods)." With respect to
+disclosures, the court required "all agreements,
+disclosures, websites, online banking statements,
+and promotional materials" to conform to the new
+posting system. Finally, the court ordered $203
+million in restitution because it found that Wells
+Fargo acted in bad faith when it decided to post
+debit-card transactions in high-to-low order. The
+appeal of this claim turns on whether state law can
+dictate Wells Fargo's choice of posting method.
+We hold that it cannot.
+§ The commentary to § 4303 explains that:
+Subsection (b) provides that a payor bank
+may accept or pay items in any order..
+The only restraint on the discretion given
+to the payor bank under subsection (b) 15
+that the bank act in good faith. For
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)|
+examplc, the bank could not properly
+casetextew an established
+practioe
+maximing the number of recamed cheeks
+for the so purpose of increasing the
+ordinarily pre-empt[s], contrary
+state
+law."
+Watters, 550 U.S. at 12, 127 S.Ct. 1559 (quotation
+marks omitted).
+Cal. Com.Code § 4303, 1992 Amendment
+am!
+Under the National Bank Act, key powers of
+national banks include the authority to receive
+deposits, as well as "all such incidental powers as
+shall be necessary to carry on the business of
+banking." 12 U.S.C. § 24 (Seventh). The deposit
+and withdrawal of funds "are services provided by
+banks since the days of their creation. Indeed, such
+activities define the business of banking."
+" Bank of Am. v. City and Cnty: of San Francisco,
+309 F.3d 551, 563 (9th Cir.2002). Both the
+"business of banking" and the power to "receiv[e)
+deposits" necessarily include the power to post
+transactions— i.e., tally deposits and withdrawals
+-to determine the balance in the customer's
+account. See12 U.S.C. § 24 (Seventh).
+6 The incidental powers reserved for national
+banks are "not limited to activities deemed
+essential to the exercise of enumerated
+powers but include activities closely
+related to banking and useful in carying
+out the business of banking." Bank of Aw.
+v. City and Cnty. of San Frascisco, 309
+F.3d 551, 562 (9th Cir.2002); see alsol2|
+C.F.R. § 7.4007(a) ('A national bank may
+roccive deposits and engage in any activity
+incidental to receiving deposits.").
+In addition to the broad power vested by statute,
+federal banking regulations adopted by the OCC
+724 specifically delegate *724 to banks the method of
+calculating fees. 12 C.F.R. § 7.4002(b). As the
+agency charged with administering the National
+Bank Act, the OCC has primary responsibility for
+the surveillance of the "business of banking"
+authorized by the National Bank Act. NationsBank
+of N.C., N.A. v. Variable Annuity Life Ins. Co., 513
+U.S. 251, 256, 115 S.Ct. 810, 130 L.Ed.2d 740
+(1995). The OCC is authorized to define the
+"incidental powers" of national banks beyond
+those specifically enumerated. See12 U.S.C. § 93a
+(authorizing the OCC "to prescribe rules and
+regulations to carry out the responsibilities of the
+office").
+The OCC has interpreted these incidental powers
+to include the power to set account terms and the
+power to charge customers non-interest charges
+and fees, such as the overdraft fees at issue here.
+12 C.F.R. § 7.4002(a).
+More specifically, the OCC has determined that
+"[t]he establishment of non-interest charges and
+fees, their amounts, and the method of calculating
+them are business decisions to be made by cach
+bank, in its discretion, according to sound banking
+judgment and safe and sound banking principles."
+12 C.F.R. § 7.4002(b)(2) (emphasis added).
+7 Section 7,4000(ai provides that a "national
+Danx may charge ld custonses nobelterest
+changes and foes, including deposit account
+service charges." 12 C.F.R. $ 7.4002(a).
+The ability to choose a method of posting
+transactions is not only a useful, but also a
+necessary, component of a posting process that is
+integrally related to the receipt of deposits.
+Designation of a posting method falls within the
+type of overarching federal banking regulatory
+power that is "not normally limited by, but rather
+OCC letters interpreting $ 7.4002 specifically
+consider high-to-low posting and associated
+overdraft fees to be a "pricing decision authorized
+by Federal law" within the power of a national
+bank. OCC Interpretive Letter No. 916, 2001 WL
+1285359, at *2 (May 22, 2001); see also OCC
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012) |
+Interpretive Letter No. 997, 2002 WL 32872368,
+casetex L15, 2002); OCC Interpretive Letter No.
+1082, 2007 WL 5393636, at *2 (May 17, 2007).
+The OCC has opined that "a bank's authorization
+to establish fees pursuant to 12 C.F.R. 7.4002(a)
+necessarily includes the authorization to decide
+how they are computed." OCC Interpretive Letter
+No. 916, 2001 WL 1285359, at *2 (May 22,
+2001). Accordingly, the OCC has determined that
+a national bank "may establish a given order of
+posting as a pricing decision pursuant to section
+24 (seventh) and section 7.4002." Id. In sum,
+Icecral law autorizes natona. Danks to establisa a
+posting order as part and parcel of setting fees,
+which is a pricing decision.
+The district court held that the bank's
+determination of posting order did not constitute a
+pricing decision because Wells Fargo did not
+follow the four factor decision making process for
+safe and sound banking principles mandated by
+the OCC. 12 C.F.R. § 7.4002(b).
+* The National Bank Act gives to the OCC the
+exclusive authority to exercise visitorial oversight
+over national banks, and it entrusts the OCC with
+the supervision of national banks' activities that
+are authorized by federal law. 12 U.S.C. § 484(a);
+12 C.F.R. § 7.4000; see also Cuomo, 557 U.S. at
+524, 129 S.Ct. 2710. Whether Wells Fargo's
+internal decision-making processes regarding
+posting orders complied with the "safe and sound
+banking principles" under § 7.4002(b)(2) is an
+725 inquiry that falls *725 squarely within the OCC's
+supervisory powers. The district court's findings
+with regard to Wells Fargo's compliance with the
+OCC regulation, then, are both "inapposite to the
+issue of preemption" and "fruitless." Martinez,
+598 F.3d at 556 n. 8 (citing Watters, 550 U.S. at
+13, 127 S.Ct. 1559). In Martinez, we addressed
+whether Wells Fargo had followed safe and sound
+banking principles in making a pricing decision
+and emphasized that the determination of the
+bank's compliance with these principles "is within
+the exclusive purview of the OCC." Id.
+8 Saction 7.4002 6) provides that
+charzes and feas in accomance with safel
+and sound banking principles it the bank
+employs
+decision-making proces
+through which it considers the following
+factors, among others: (i) The cost incurred
+Dy the banx in providing the service, (al)
+the competitive position of the bank in
+and marketing strategy; and (iv) The
+maintenance of the safety and soundness of
+12 C.F.R. § 3.4002(b).
+Wells Fargo's decision to rescquence the posting
+order falls within the OCC's definition of a pricing
+decision authorized by federal law. The district
+court is not free to disregard the OCCs
+determinations of what constitutes a legitimate
+pricing decision, nor can it apply state law in a
+way that interferes with this enumerated and
+incidental power of national banks.
+The restriction that the district court imposed on
+posting is akin to the fee restriction addressed in
+the Eleventh Circuit's recent preemption ruling.
+See Baptista v. JPMorgan Chase Bank, N.A., 640
+F.3d 1194, 1197 (11th Cir.2011). The court in
+Baptista held that a state statute that disallowed
+banks from charging non-customers for cashing a
+check was preempted because it significantly
+reduced the banks' latitude in deciding how to
+charge fees. Id. at 1197-98. The same logic
+applies here.
+We hold that a "good faith" limitation applied
+through California's Unfair Competition Law is
+preempted when applied in a manner that prevents
+or significantly interferes with a national bank's
+federally authorized power to choose a posting
+order. See Barnett, 517 U.S. at 37, 116 S.Ct. 1103
+(state statute could not bar small town national
+banks from selling insurance where federal statute
+10|
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)
+gave the banks such authority); Bank of Am., 309
+casetext 64 (federal regulations allowing banks
+to collect non-interest charges preempted a local
+law governing what ATM fecs a bank could
+charge). The federal court cannot mandate the
+order in which Wells Fargo posts its transactions.
+Therefore, we vacate the permanent injunction and
+the $203 million restitution award. The district
+court premised both of these remedies on only a
+violation of the "unfair" business practice prong of
+the Unfair Competition Law tethered to the "good
+faith" requirement of California Commercial Code
+§ 4303(b).
+B. Fraudulent Business Practices and
+Wells Fargo's Representations
+The district court found not only a violation of the
+"unfair" prong of the Unfair Competition Law
+with regard to the posting order, but also a
+violation of the "fraudulent" prong of the Unfair
+Competition Law with regard to Wells Fargo's
+representations about posting. The Unfair
+Competition Law authorizes injunctive relief and
+restitution as remedies against a person or entity
+engaging in unfair competition, including
+fraudulent business practices. Cal. Bus. &
+Prof.Code § 17203; see also Cel-Tech Comme'ns,
+Inc., 20 Cal.4th at 180, 83 Cal.Rptr.2d 548, 973
+P.2d 527 (each of the three Unfair Competition
+Law prongs constitutes a separate and independent
+cause of action). The district court faulted Wells
+Fargo both for its failure to disclose the effects of
+high-to-low posting and for its misleading
+statements. The district court concluded that Wells
+Fargo "did not tell customers that frequent use of a
+debit-card for small-valued purchases could result
+in an avalanche of overdraft fees for each of those
+purchases due to the high-to-low posting order."
+Instead, Wells Fargo
+"directed misleading
+propaganda at the class that likely led class
+726 members to *726 expect that the actual posting
+order of their debit-card purchases would mirror
+the order in which they were transacted."
+We have determined that the district court's
+injunction ordering a particular kind of posting
+and ordering $203 million in restitution under the
+"unfair" prong of California's Unfair Competition
+Law is preempted. The question arises whether we
+need to address preemption under the "fraudulent"
+prong as well. We conclude that we do because,
+on remand, the district court may determine that
+appropriate relief is available to the extent a claim
+for fraudulent misrepresentation is not preempted.
+The requirement to make particular disclosures
+falls squarely within the purview of federal
+banking regulation and is expressly preempted: "A
+national bank may exercise its deposit-taking
+powers without regard to state law limitations
+concerning," among other things, "disclosure
+requirements." 12 C.F.R. § 7.4007(b)(3). In
+Martinez, plaintiffs' claim that the bank "engaged
+in 'fraudulent' practices by failing to disclose
+actual costs of its underwriting and tax services"
+was expressly preempted by the OCC regulation
+preempting state disclosure requirements in real
+estate transactions. Martinez, 598 F.3d at 554,
+557;see also12 C.F.R. § 34.4(a)(9). Similarly, the
+Unfair Competition Law cannot impose liability
+simply based on the bank's failure to disclose its
+chosen posting method. See Rose v. Chase Bank
+USA, N.A., 513 F.3d 1032, 1038 (9th Cir.2008)
+(the National Bank Act preempts affirmative
+disclosure requirements of a California statute,
+insofar as those requirements apply to national
+banks); Parks v. MBNA Am. Bank, N.A., 54
+Cal.4th 376, 386-87, 142 Cal.Rptr.3d 837, 278
+P.3d 1193 (2012) (state law directed at credit card
+issuers, which prescribed specific disclosures on
+convenience chocks, was preempted). Imposing
+liability for the bank's failure to sufficiently
+disclose its posting method leads to the same
+result as mandating specific disclosures. Both
+remedies are tantamount to state regulation of
+disclosure requirements.
+We turn now to the different question of state law
+liability based on Wells Fargo's misicading
+statements about its posting method. Notably, the
+11
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012) |
+Unfair Competition Law itself does not impose
+casetext requirements but merely prohibits
+statements that are likely to mislead the public. As
+a non-discriminating
+state aw of venera.
+applicability that does not "conflict with federal
+law, frustrate the purposes of the National Bank
+Act, or impair the efficiency of national banks to
+discharge their duties," the Unfair Competition
+Law's prohibition on misleading statements under
+the fraudulent prong of the statute is not
+preempted by the National Bank Act. Bank of Am.,
+309 F.3d at 561.
+Wells Fargo's position-that § 7.4007(b)(2)
+dictates preemption is conclusively undercut by
+the OCC itself, which, far from concluding that
+the Unfair
+Competition Law is expressly
+preempted under its regulations, "has specifically
+cited [California's Unfair Competition Law] in an
+advisory letter cautioning banks that they may be
+subject to such laws that prohibit unfair or
+deceptive acts or practices." Martinez, 598 F.3d at
+555. The advisory letter warns that the
+"consequences of engaging in practices that may
+be unfair or deceptive under federal or state law
+can include litigation, enforcement actions,
+monctary judgments, and harm to the institution's
+reputation." OCC Advisory Letter, Guidance on
+Unfair or Deceptive Acts or Practices, 2002 WL
+521380, at *1 (Mar. 22, 2002). The OCC
+recognizes that state laws that withstand
+727 preemption "typically do not regulate the *727
+manner or content of the business of banking
+authorized for national banks, but rather establish
+the legal infrastructure that makes practicable the
+conduct of that business." Bank Activities and
+Operations, 69 Fed.Reg.1904, 1913 (Jan. 13,
+2004). By prohibiting fraudulent business
+practices, the Unfair Competition Law does
+exactly that—it establishes a legal infrastructure.
+Although Wells Fargo insists that a state law
+prohibiting misleading statements necessarily
+touches on "checking accounts," such an
+candisive
+interpretation—with
+limiting
+principle-"would swallow all laws." Aguayo v
+U.S. Bank, 653 F.3d 912, 925 (9th Cir.2011). We
+recently declined a bank's invitation to interpret
+the term "lending opcrations" expansively because
+"every action by the bank, due to the nature of its
+business, affects its ability to attract, manage, and
+disburse capital, and could be said to 'affect' its
+lending operations." Id. California's prohibition of
+misleading statements
+does
+not
+significantly
+interfere with the bank's ability to offer checking
+account services, choose a posting method, or
+calculate foes. Nor docs the Unfair Competition
+Law mandate the content of any nonmisleading
+and nontraudulent statements in the banking
+arcna. On the flip side, the National Bank Act and
+other OCC provisions do not aid Wells Fargo, as
+neither source regulates deceptive statements vis-
+a-vis the bank's chosen posting method. Where, as
+here, federal laws do not cover a bank's actions,
+states "are permitted to regulate the activitics of
+national banks where doing so does not prevent or
+significantly interfere with the national bank's or
+the national bank regulator's exercise of its
+powers." Watters, 550 U.S. at 12, 127 S.Ct.
+1559;see also Gibson v. World Sav. & Loan Ass'»,
+103 Cal.App.4th 1291, 1299, 128 Cal.Rptr.2d 19
+(2002) (the "state cannot dictate to the Bank how
+it can or cannot operate, but it can insist that,
+however the Bank chooses to operate, it do so free
+from fraud
+and
+other deceptive business
+practices*).
+Other than an argument regarding the cost of
+modifying its published materials, Wells Fargo
+does not articulate how abiding by the Unfair
+Competition Law's prohibition of misleading
+statements would prevent or significantly interfere
+with its ability to engage in the business of
+banking. Wells Fargo's inability to demonstrate a
+significant interference is unsurprising-the
+district court found that when it chose to, the bank
+could accurately explain the posting process to
+customers: "Wells Fargo provided its tellers and
+phone-bank employees with a clear script to
+respond to customers
+who
+protested after
+receiving multiple overdraft fees caused by high-
+12
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012) |
+to-low resequencing. These explanations were in
+capetextish." The limitation on fraudulent
+representations in California's Unfair Competition
+Law does not subject Wells Fargo's ability to
+receive acposts, to set account teams.
+implement a posting method, or to calculate fees
+to surveillance under a rival oversight regime, nor
+does it stand as an obstacle to the accomplishment
+of the National Bank Act's purposes. See Barnett,
+517 U.S. at 31, 116 S.Ct. 1103. In Martinez, we
+expressed the principle that controls here: "State
+laws of general application, which merely require
+all businesses incluany natonal danks, to rewaln
+from fraudulent, unfair, or illegal behavior, do not
+necessarily impair a bank's ability to exercise its …
+powers." 598 F.3d at 555. Accordingly, we hold
+that Gutierrez's claim for violation of the
+fraudulent prong of the Unfair Competition Law
+by making misleading misrepresentations with
+regard to its posting method is not preempted, and
+we affirm the district court's finding to this extent.
+Consistent with the foregoing, the district court
+728 may provide injunctive relief *728 and restitution
+against Wells Fargo. Although the court cannot
+issue an injunction requiring the bank to use a
+particular system of posting or requiring the bank
+to make specific disclosures, it can enjoin the bank
+from making fraudulent or
+misleading
+representations about its system of posting in the
+future. Restitution is available for past misleading
+representations. We make no judgment as to
+whether it is warranted here. On remand, the
+district court will be in a position to determine
+whether, subject to the limitations in this opinion,
+restitution is justified by the pleadings and the
+evidence in this case.
+III. Remaining Issues
+Finally, we consider Wells Fargo's challenge to
+standing, class certification, and the finding that
+Wells Fargo made misleading statements. Upon
+reviewing the trial record and the district court's
+extensive findings, we conclude that the district
+court did not err. See Lyon v. Gila River Indian
+Cmty:, 626 F.3d 1059, 1071 (9th Cir.2010) (the
+district court's conclusions of law are reviewed de
+novo and its findings of fact are reviewed for clear
+error).
+A. Standing
+To establish standing to seck class-wide relief for
+fraud-based Unfair Competition Law claims, the
+named plaintiff's must prove "actual reliance" on
+the misleading statements. Specifically, "a class
+representative
+proceeding on
+a claim of
+misrepresentation as the basis of his or her UCL
+action must demonstrate achiel reliance on the
+allegedly deceptive or misleading statements, in
+accordance with well-settled principles regarding
+the element of reliance in ordinary fraud actions."
+In re Tobacco Il Cases, 46 Cal.4th 298, 306, 93
+Cal.Rptr.3d 559, 207 P.3d 20 (2009).
+The district court found that Gutierrez and Walker
+read portions of the "Welcome Jacket," "which
+stated that '[clach purchase is automatically
+deducted from your primary checking account.'"
+The district court next found that Gutierrez and
+Walker each "relied upon the bank's misleading
+marketing materials that reinforced her natural
+assumption that debit-card transactions would post
+chronologically." The district court determined
+that both Gutierrez and Walker were misled by
+Wells Fargo's statements because the extent of the
+falsity of the statements was not known to either
+of them until they incurred hefty fees for having
+overdrawn their checking accounts. These findings
+are well supported by the evidence and are not
+clearly erroneous. Gutierrez and Walker therefore
+have standing. See Bates v. United Parcel Serv.,
+Inc., 511 F.3d 974, 985 (9th Cir.2007) (en banc)
+("In a class action, standing is satisfied if at least
+one named plaintiff' meets the requirements.").
+' Gutierrez's and Walker's harm was not all
+caused by their lack of oversight of their
+Owts
+account
+halanene
+misundesstanding that Wells Fargo's
+masleading statements sowed among
+customers about its posting scheme was a
+13
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)
+significant cause of the magnitude of the
+casete it experienced by Gutienez and Walker.
+B. Class Certification
+Next, class certification under Fed.R.Civ.P. 23(b)
+(3) requires that "questions of law or fact common
+to class members predominate over any questions
+affecting only individual members." With respect
+to marketing materials, the district court found
+that:
+A Wells Fargo marketing theme was that debit-
+card
+purchases
+"immediately"
+"automatically" deducted from an account. This
+likely led the class to believe: (1) that the funds
+would be deducted from their checking accounts
+729 in the order transacted, and (2) that the *729
+purchase would not be approved if they lacked
+sufficient available funds to cover the transaction.
+This language was present on Wells Fargo's
+website (TX 129), on Wells Fargo's Checking,
+Savings and More brochures from 2001 and 2005
+(TX 88, 89), and Wells Fargo's New Account
+Welcome Jacket from 2004 (TX 82).
+The pervasive nature of Wells Fargo's misleading
+marketing materials amply demonstrates that class
+members, like the named plaintiffs, were exposed
+to the materials and likely relied on them. See
+Tobacco II, 46 Cal.4th at 312, 93 Cal.Rptr.3d 559,
+207 P.3d 20 (to establish fraud under the Unfair
+Competition Law, plaintifis must show "that
+members of the public are likely to be deceived"').
+In addition, the district court found that Wells
+Fargo knew that "new accounts generate the bulk
+of OD [overdraft] revenue." Wells Fargo's
+speculation-that "some class members would
+have engaged in the same conduct irrespective of
+the alleged misrepresentation" does not meet its
+burden of demonstrating that individual reliance
+issues predominate. Unlike McLaughlin v. Am.
+Tobacco Co., 522 F.3d 215, 223 (2d Cir.2008)
+(partially abrogated on other grounds by Bridge v.
+Phoenix Bond & Indem. Co., 553 U.S. 639, 128
+S.Ct. 2131, 170 L.Ed.2d 1012 (2008)), where
+individual class members could have had different
+motives for choosing "light" cigarettes, we are
+hard pressed to agree that any class member would
+prefer to incur multiple overdraft fees.
+C. Misleading Statements
+Finally, the district court's finding that Wells Fargo
+made misleading statements is amply supported
+by the court's factual findings. Wells Fargo told
+customers that "[c)heck
+card
+and
+AlM
+transactions generally reduce the balance in your
+account immediatcly" and that "the money comes
+right out of your checking account the minute you
+use your debit-card." The bank also misleadingly
+admonished
+customers to "remember that
+whenever you use your debit-card, the money is
+immediately
+withdrawn from your checking
+account. If you don't have enough money in your
+account to cover the withdrawal, your purchase
+won't be approved." According to the district
+court,
+the "account activity" information provided to
+customers through online banking-a service
+made available to all Wells Fargo depositors-
+displayed "pending" debit-card transactions in
+chronological order (ie., the order in which the
+transactions were authorized by Wells Fargo).
+When it came time to post them during the
+settlement process, however, the same transactions
+were not posted in chronological order but were
+posted in high-to-low order.
+The findings go on:
+Misleading marketing materials promoted the
+same theme of chronological subtraction. A
+number of Wells Fargo marketing materials,
+including the Wells Fargo Welcome Jacket that
+was customarily provided to all customers who
+opened a consumer checking account, contained
+misleading representations regarding how debit-
+card transactions were processed. Specifically,
+these various materials— covered in detail in the
+findings of fact-communicated that debit-card
+POS purchases were deducted "immediately" or
+"automatically" from the user's checking
+14
+
+Gutierrez v. Wells Fargo Bank, NA 704 F.3d 712 (9th Cir. 2012)|
+account...
+Such representations would lead
+casetext consumers to believe that the
+transactions would be deducted from their
+checking accounts in the sequence transacted.
+Based on these findings, the district court
+concluded that "Wells Fargo affirmatively
+730 reinforced the expectation that transactions*730
+were covered in the sequence made while
+obfuscating its contrary practice of posting
+transactions in high-to-low order to maximize the
+number of overdrafts assessed on customers."
+Wells Fargo's altemate interpretation of the word
+"automatically" is insufficient to render the district
+court's findings clearly erroncous. Accordingly,
+the district court's holding that Wells Fargo
+violated the Unfair Competition Law by making
+misleading statements likely to deceive its
+customers is aftirmed.
+Conclusion
+Given the terms of the arbitration agreement and
+the parties' conduct throughout litigation, the
+Supreme Court's decision in Concepcion does not
+require that this dispute be arbitrated at this late
+stage— post-trial, post-judgment, and post-appeal.
+As to preemption, we hold that a national bank's
+decision to post payments to checking accounts in
+a particular order is a federally authorized pricing
+decision. The National Bank Act preempts the
+application of the unfair business practices prong
+of California's Unfair Competition Law to dictate
+a national bank's order of posting. See12 U.S.C. §
+24; 12 C.F.R. $ 7.4002. Similarly, both the
+imposition of affirmative disclosure requirements
+and liability based on failure to disclose are
+preempted by 12 U.S.C. § 24 and 12 C.F.R. §
+7.4007. The National Bank Act, however, docs not
+preempt Gutierrez's claim for affirmative
+misrepresentations under the "fraudulent" prong
+of the Unfair Competition Law.
+Although the injunctive relief ordered by the
+district court is based on both the unfair and
+fraudulent prongs of the Unfair Competition Law,
+the injunction is vacated because each of its terms
+dictates relief relating to the posting order, which
+is preempted. The restitution order, which is
+predicated on liability for Wells Fargo's choice of
+posting method and thus also preempted, is
+vacated as well. The district court's finding of
+liability for Wells Fargo's violations of the
+"fraudulent" prong of California's Unfair
+Competition Law is affirmed, and we remand for
+the district court to determine what relief, if any, is
+appropriate and consistent with this opinion.
+10 In lisht of the decision to vacate thel
+parties' arguments as to the amount of
+restitution awarded, prejudgment interest,
+and punitive damages.
+AFFIRMED in part, REVERSED in part, and
+REMANDED. Each party shall pay its own fees
+on appeal.
+15
+
+casetext
+Gutierrez v. Wells Fargo Bank, NA
+704 F.3d 712 (9th Cir. 2012)
\ No newline at end of file