diff --git "a/langchain_pipeline.py" "b/langchain_pipeline.py" --- "a/langchain_pipeline.py" +++ "b/langchain_pipeline.py" @@ -39,6619 +39,7 @@ def pipeline(file, model_name, balance_type, apsn_transactions, max_fees_per_day """ law context: - 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 + United State Dealt a 26 a are Vini liability for Wells Fargo's violations of the "fraudulent" prong of California's Unfair Competition Law is affirmed, and we remand for