Smith v. Bank of Hawaii et al

Filing 95

ORDER (1) GRANTING IN PART AND DENYING IN PART DEFENDANT BANK OF HAWAII'S MOTION FOR SUMMARY JUDGMENT (ECF NO. 71 ) AND (2) DENYING BANK OF HAWAII'S MOTION TO STRIKE DEMAND FOR JURY TRIAL (ECF NO. 72 ). E xcerpt of conclusion: "Judgment is GRANTED in favor of BOH on all counts based on overdraft fees charged before September 9, 2016, but summary judgment is DENIED as to all counts based on overdraft fees charged on o r after that date." Signed by CHIEF JUDGE J. MICHAEL SEABRIGHT on 3/7/2018. (afc) WRITTEN ORDER follows hearing held 2/28/2018. Minutes of hearing: ECF 94 . CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). All participants are registered to receive electronic notifications. /FONT>

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
RODNEY SMITH, individually and on
behalf of all others similarly situated,
Plaintiff,
vs.
BANK OF HAWAII,
Defendant.

Civ. No. 16-00513 JMS-RLP
ORDER (1) GRANTING IN PART
AND DENYING IN PART
DEFENDANT BANK OF
HAWAII’S MOTION FOR
SUMMARY JUDGMENT (ECF
NO. 71) AND (2) DENYING BANK
OF HAWAII’S MOTION TO
STRIKE DEMAND FOR JURY
TRIAL (ECF NO. 72)

ORDER (1) GRANTING IN PART AND DENYING IN PART DEFENDANT
BANK OF HAWAII’S MOTION FOR SUMMARY JUDGMENT (ECF NO.
71) AND (2) DENYING BANK OF HAWAII’S MOTION TO STRIKE
DEMAND FOR JURY TRIAL (ECF NO. 72)
I. INTRODUCTION
In this putative class action, Plaintiff Rodney Smith (“Smith”)
challenges Defendant Bank of Hawaii’s (“BOH”) imposition of overdraft fees —
specifically its use of an “available-balance method” rather than a “ledger-balance
method” for assessing the sufficiency of funds in customer accounts to cover
transactions. Smith contends that BOH’s practice violates its Agreements with
members, including the implied covenant of good faith and fair dealing. And he
asserts claims based on “unjust enrichment,” “Money Had and Received,” and

violations of the Electronic Fund Transfers Act (“EFTA”) and Hawaii Revised
Statutes (“HRS”) Chapter 480.
Currently before the court are BOH’s Motion for Summary Judgment
(the “Summary Judgment Motion”) and Motion to Strike the Demand for Jury
Trial (the “Motion to Strike”). ECF Nos. 71, 72. For the following reasons, the
Summary Judgment Motion is GRANTED in part and DENIED in part; the
Motion to Strike is DENIED.
II. BACKGROUND
A.

Factual Background
A “ledger-balance method” for determining when an account is

overdrawn takes into account “only settled transactions,” whereas an “availablebalance method” includes also debits to an account that are authorized but not yet
settled and reflects holds on deposits that have not yet cleared. Consumer
Financial Protection Bureau (“CFPB”) Supervisory Highlights, Winter 2015
§ 2.3, ECF No. 81-15. Thus, “transactions that would not have resulted in an
overdraft (or overdraft fee) under a ledger-balance method [may] result in an
overdraft (and an overdraft fee) under an available-balance method.” Id.
///
///

2

BOH describes its checking accounts as having “three different
balances”:
The first is the “ledger” balance. Ledger balance is the account
balance at the end of the banking day and the beginning of the
next banking day. It reflects the full amount of all deposits
made into the account throughout the day (without regard for
whether a portion of a check deposit is on hold), less payment
transactions that have actually posted to the account during that
day. The second balance is referred to as “current” balance. It
is the ledger balance plus deposits and minus payment
transactions as they post throughout the day. The “available
balance” is the amount the customer has available to spend. It
is generally described as the current balance, less “holds.”
Holds are that portion of a deposit on hold until a deposited
check clears. Holds also refer to VISA debit card payment
transactions that have been authorized by BOH but have not yet
been presented for payment by the merchant who sold goods or
services to BOH’s customer.
Matt Emerson Decl. ¶ 3, ECF No. 70-2. BOH customer account statements do not
show a current or ledger balance. Rather, “credits” and “debits” are listed
chronologically in separate sections, and additional sections record “daily
balances” and “overdraft/returned item fees.” See, e.g. Statements of Account,
ECF Nos. 70-8 through 70-10.
Smith has opened multiple BOH checking accounts, the first in July 2010,
and his current account in December 2014.1 Emerson Decl. ¶¶ 4-5. Although

1

According to BOH, Smith closed his first account on January 3, 2011 and opened a new
checking account on that same day. Emerson Decl. ¶ 4. Smith states that he remembers going
(continued . . .)
3

Smith does not recall reading them at the time, Rodney Smith Decl. ¶ 4, ECF No.
81-1, BOH has submitted executed signature cards from 2011 and 2014, wherein
he agreed “to all of the terms and conditions” in the Consumer Deposit Account
Agreement and Disclosure Statement and Bankoh Consumer Electronic Financial
Services Agreement and Disclosure Statement (the “Agreement”), ECF Nos. 706 and 70-7. Consumer Signature Cards (“Signature Cards”), ECF Nos. 70-4, 705.
That Agreement includes the following provisions, which appear on
page 17 of the 36-page document, and are mentioned on page 3 of the table of
contents:
Jury Trial Waiver. You and we each waive our respective
rights to a trial before a jury in connection with any
disputes related to your account or account services. This
includes any claim by us or by you, claims brought by you
as a class representative on behalf of others, and claims by a
class representative on your behalf as a class member (socalled “class action” suits).
....

(. . . continued)
“to one branch to notify them that there was an issue with my social security number, but since
the employee I spoke to was not able to help me, I went to another branch to get it fixed. I did
not realize that they had closed one account and opened another.” Smith Decl. ¶ 3, ECF No. 811.

4

Limitation on Time to Sue. An action or proceeding by you to
enforce an obligation, duty or right arising under this agreement
or by law with respect to your account or any account service
must be commenced within one year after the cause of action
accrues.
Agreement at 17.2 The Jury Trial Waiver appears again later in the Agreement,
and it is also referred to in the 2014 Consumer Signature Card. ECF Nos. 70-5,
70-6 at 32, 70-7 at 33.
B.

Procedural Background
Smith filed his original Complaint and Demand for Jury Trial in state

court on September 9, 2016, and a First Amended Complaint (“FAC”) on
September 13, 2016. ECF No. 1-1, at 1 & 35. On September 19, 2016, BOH filed
a Notice of Removal. ECF No. 1.
On November 2, 2016, BOH filed a Motion to Dismiss the FAC,
arguing that its Agreement and Opt-in form for its overdraft program
unambiguously disclose that it uses the available-balance method to determine
overdrafts. Def.’s Mem. at 18-25, ECF No. 16-4. This court disagreed and denied
the Motion, finding that “[e]ven construed together, the Agreements’ terms are
ambiguous as to BOH’s choice of balance method.” Smith v. Bank of Haw., 2017

2

Of course, these terms appear in a much smaller font size in the Agreement.

5

WL 3597522, at *5 (D. Haw. Apr. 13, 2017) (describing in detail the terms of the
relevant documents).
BOH also argued in the Motion to Dismiss that Smith’s EFTA claim
should be dismissed based on the EFTA’s one-year statute of limitations. Def.’s
Mem. at 37-40, ECF No. 16-4. It contended that the statutory period for the claim
began to run at the time of the first overdraft charge, and it asked the court to take
judicial notice of Smith’s April 2015 bank statement showing an overdraft fee. Id.
at 38; Req. Judicial Notice, ECF No. 17. The court declined to take judicial notice
of the statement, however, and “[a]s a result,” found that there was “nothing to
indicate, even assuming the statute of limitations for all overdraft fees begins with
the first overdraft fee,” that Smith’s first overdraft fee was charged more than a
year before this suit was filed. Smith, 2017 WL 3597522, at *8. The court found,
therefore, that “on the present record, the claims are timely.” Id. (emphasis
omitted).
BOH now asks the court to determine as a matter of law what it
assumed merely for argument’s sake on the Motion to Dismiss, that “[a]n EFTA
claim accrues when the first unauthorized transfer occurs.” Def.’s Mem. Supp.
Mot. Summ. J. at 2-3, ECF No. 71-1. It contends, therefore, that Smith’s EFTA
claim is “barred in its entirety” by the EFTA’s limitation period. Id. at 2. It also

6

contends that Smith’s remaining claims are governed by the contractual limitation
period in the Agreement. Id. at 2-3. It therefore requests judgment on all of
Smith’s claims to the extent they accrued more than one year before this action
was filed. Id.
BOH filed the Summary Judgment Motion on December 11, 2017.
ECF No. 71. Smith filed his Opposition on February 1, 2018. ECF No. 79. BOH
replied on February 8, 2018. ECF No. 88.
BOH filed the Motion to Strike (based on the contractual Jury Trial
Waiver) on December 11, 2017. ECF No. 72. Smith filed an Opposition on
January 30, 2018. ECF No. 74. And BOH filed its Reply on February 6, 2018.
ECF No. 85.
Oral argument was held on February 20, 2018.
III. SUMMARY JUDGMENT STANDARD
Summary judgment is proper when there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. Fed.
R. Civ. P. 56(c). The burden initially lies with the moving party to show that there
is no genuine issue of material fact. T.W. Elec. Serv., Inc. v. Pac. Elec.
Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987). Nevertheless, “summary
judgment is mandated if the non-moving party ‘fails to make a showing sufficient

7

to establish the existence of an element essential to that party’s case.’” Broussard
v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999) (quoting Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986)). An issue of fact is genuine “if the
evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is
material if the resolution of the factual dispute affects the outcome of the claim or
defense under substantive law governing the case. See Arpin v. Santa Clara Valley
Transp. Agency, 261 F.3d 912, 919 (9th Cir. 2001). When considering the
evidence on a motion for summary judgment, the court must draw all reasonable
inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith
Radio, 475 U.S. 574, 587 (1986).
“One of the principal purposes of the summary judgment rule is to
isolate and dispose of factually unsupported claims or defenses[.]” Celotex, 477
U.S. at 323-24. “There is no genuine issue of fact if the party opposing the motion
‘fails to make an adequate showing sufficient to establish the existence of an
element essential to that party’s case, and on which that party will bear the burden
of proof at trial.’” Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989) (quoting
Celotex, 477 U.S. at 322). Moreover, there is no genuine issue of material fact if,
taking the record as a whole, a rational trier of fact could not find in favor of the

8

non-moving party. Matsushita Elec. Indus. Co., 475 U.S. at 586; Taylor, 880 F.2d
at 1045.
IV. DISCUSSION
A.

Summary Judgment Motion
1.

Electronic Fund Transfers Act
Congress enacted the EFTA as part of the comprehensive Consumer

Credit Protection Act (the “CCPA”), Pub. L. No. 95-630 § 2001, 92 Stat. 3641
(1978), “to provide a basic framework establishing the rights, liabilities, and
responsibilities of participants in electronic fund and remittance transfer systems.”
15 U.S.C. § 1693(b). “In enacting the [CCPA] . . . Congress intended for courts to
broadly construe its provisions in accordance with its remedial purpose.” Stout v.
FreeScore, LLC, 743 F.3d 680, 684 (9th Cir. 2014); see also Clemmer v. Key Bank
Nat’l Ass’n, 539 F.3d 350, 353 (6th Cir. 2008) (describing the CCPA as a
“remedial statute accorded ‘a broad, liberal construction in favor of the
consumer.’” (quoting Begala v. PNC Bank, Ohio, Nat’l Ass’n, 163 F.3d 948, 950
(6th Cir. 1998))).
Rules contained in “Regulation E” implementing EFTA, see 12
C.F.R. § 1005.1 et seq, require that for accounts opened on or after July 1, 2010, a
financial institution must “obtain the consumer’s affirmative consent before the

9

institution assesses any fee or charge on the consumer’s account for paying an
ATM or one-time debit card transaction pursuant to the institution’s overdraft
service.” 12 C.F.R. § 1005.17(c). Subject to enumerated exceptions not applicable
here, “the term ‘overdraft service’ means a service under which a financial
institution assesses a fee or charge on a consumer’s account held by the institution
for paying a transaction (including a check or other item) when the consumer has
insufficient or unavailable funds in the account.” 12 C.F.R. § 1005.17(a). And
financial institutions may not charge fees without meeting certain disclosure
requirements:
[A] financial institution . . . shall not assess a fee or
charge on a consumer’s account for paying an ATM or
one-time debit card transaction pursuant to the
institution’s overdraft service, unless the institution:
(i) Provides the consumer with a notice in writing,
or if the consumer agrees, electronically,
segregated from all other information, describing
the institution’s overdraft service;
(ii) Provides a reasonable opportunity for the
consumer to affirmatively consent, or opt in, to the
service for ATM and one-time debit card
transactions;
(iii) Obtains the consumer’s affirmative consent, or
opt-in, to the institution’s payment of ATM or onetime debit card transactions; and

10

(iv) Provides the consumer with confirmation of
the consumer’s consent in writing, or if the
consumer agrees electronically, which includes a
statement informing the consumer of the right to
revoke such consent.
12 C.F.R. § 1005.17(b). Moreover, disclosure must “be clear and readily
understandable.” 12 C.F.R. § 1005.4(a)(1). The FAC alleges that “[t]he
description of BOH’s overdraft service in its opt-in agreement does not describe its
actual overdraft service as required by Reg[ulation] E.” FAC ¶ 85.
Individual and class actions for damages for failure to comply with
the EFTA may be brought “within one year from the date of the occurrence of the
violation.” 15 U.S.C. § 1693m(g). BOH contends that this period begins to run
“as soon as the first fee is charged after an alleged failure to obtain proper
authorization.” Def.’s Mem. at 26, ECF No. 71-1. And it contends that because
Smith incurred his first overdraft fee more than a year before he filed suit, his
EFTA claim is completely barred. Id. at 28-29. Smith counters that each wrongly
imposed overdraft charge constitutes a separate violation, “involving its own
statutory period.” Opp’n at 36, ECF No. 79.
No circuit court has resolved this question. BOH relies on a Sixth
Circuit case involving monthly charges to a debit card that were preauthorized by
the cardholder verbally, but not in writing as the EFTA requires. Wike v. Vertrue,

11

Inc., 566 F.3d 590, 591-92 (6th Cir. 2009); see 15 U.S.C. § 1693e(a) (requiring
preauthorized transfers be “in writing” ); accord 12 C.F.R. § 1005.10(b). There,
the question was whether the statute of limitations was “triggered” when the
transfers were arranged (thirteen months before suit was filed), or five weeks later,
when the transfers began. Id. at 592-93. Finding that the plaintiff was not injured
until a transfer was made, the court concluded that “the one-year limitations period
began when the first recurring transfer took place.” Id. at 593. Because all of the
transfers had been made within the one-year period, however, the court was not
called upon to determine whether, had the first transfer been made outside that
window, all claims based on later transfers would have been barred.
But some district courts have applied Wike to conclude that a preauthorized transfer made outside of the one-year window bars all later claims.
See, e.g. Repay v. Bank of Am., N.A., 2013 WL 6224641, at *4 (N.D. Ill. Nov. 27,
2013); accord Harvey v. Google Inc., 2015 WL 9268125, at *4 (N.D. Cal. Dec 21,
2015); Pelletier v. Pac. WebWorks, Inc., 2012 WL 43281, at *6 (E.D. Cal. Jan. 9,
2012). In reaching the opposite result, Diviacchi v. Affinion Grp., Inc., 2015 WL
3631605 (D. Mass. Mar. 11, 2015), found that Repay “overstate[d] the reach of the
Wike decision.” Id. at *8. And it found (also in the context of a preauthorized
recurring transfer) that each transfer “constitutes a new and independent violation”

12

that is actionable if it falls within the limitation period regardless of whether earlier
transfers stemming from the same deficient authorization fell outside that window.
Id. at *10.
This court need not determine which view is correct in the context of
preauthorized recurring transfers. But it concludes that Wike cannot logically be
extended to the facts of this case, which involves allegedly unauthorized overdraft
fees.3 The difference between preauthorizing a series of transfers and opting in to
an overdraft service is both significant and meaningful. In the first instance, a
consumer gives express permission for a series of recurring transfers from his or
her account. But in the second instance a consumer merely opts in to a service,
perhaps with no intention of ever using it, and he or she does not agree to any
specific fee or charge, let alone a series of them.
And Regulation E reflects these differing factual circumstances. It
requires a preauthorized transfer to be in writing, focusing on the authorization
itself. 12 C.F.R. § 1005.10(b). But with regard to the overdraft services, it focuses
not only on the requirements for a consumer’s opt-in, but it also expressly prohibits
“any fee or charge on the consumer’s account for paying an ATM or one-time

3

This court disagrees with the single district court that has done so. See Whittington v.
Mobiloil Fed. Credit Union, 2017 WL 6988193, at *12-13 (E.D. Tex. Sept. 14, 2017) (applying
Wike without analyzing its differing factual circumstances).
13

debit card transaction pursuant to the institution’s overdraft service” unless proper
disclosure is made. 12 C.F.R. § 1005.17(c)(2); accord 12 C.F.R. § 1005.17(b)(1)
(providing “a financial institution holding a consumer’s account shall not assess a
fee or charge on a consumer’s account for paying an ATM or one-time debit card
transaction pursuant to the institution’s overdraft service unless” it complies with
its disclosure obligations) (emphasis added). Thus, the violation for purposes of
determining the limitation period for a preauthorized transfer may properly be
characterized as an omission. But when a bank assesses overdraft fees or charges,
it violates the express language of Regulation E every time it imposes a fee or
charge.
Repay acknowledges that the type of transaction matters and that
treating “some types of EFTA claims” as discrete injuries “may make sense.”
2013 WL 6224641, at *4. The court there envisioned a case in which a defendant
“initiated a . . . transfer not authorized by the parties’ original agreement,” and as
such a case, and it cited O’Brien v. Landers, 2011 WL 221865 (N.D. Ill. Jan. 24,
2011), as an example. Id.
The plaintiff in O’Brien signed a gym membership agreement in
which the gym “reserve[d] the absolute right to increase [member] dues,” and he
signed an electronic fund transfer authorization stating “I authorize my bank to

14

make my payments by the method indicated below and post it to my account.”
O’Brien, 2011 WL 221865, at *1. Besides debiting the monthly dues, however,
the gym twice initiated transfers for one-time fees, the second of which the
plaintiff challenged in the suit. Id. In finding plaintiff had stated a claim under the
EFTA, the court noted that the charge “was not covered by the plain terms of the
original contract,” and therefore was “outside the scope of plaintiff’s
preauthorization.” Id. at *2.
Although O’Brien did not raise a statute-of-limitation issue, this case
is closer to O’Brien than to Wike, and it is precisely the type of case Repay
imagined would make sense to treat differently — a case in which the defendant
allegedly initiated an electronic transfer (or in this case charged a fee) to which the
defendant had not agreed, see Repay, 2013 WL 6224641, at *4. Here, like in
O’Brien, Smith contends that the fees charged were outside the scope of his
Agreement: he contends that BOH did not disclose its use of an “available-balance
method” for determining overdrafts, and therefore, he thought he was opting in to
an overdraft service that used a ledger-balance method instead. Thus, it makes
sense in the overdraft context to view each fee separately — as an allegedly
unauthorized charge — whereas it might not make sense to view preauthorized
recurring transfers separately.

15

Accordingly, because Smith has asserted an improper overdraft fee
was charged within one year of the day he filed his Complaint, BOH is not entitled
to summary judgment on Smith’s EFTA claim. Claims based on overdraft fees
imposed outside the one-year limit, however, are barred.4
2.

State Law Contractual Limitation Period
BOH next contends that the Agreement’s one-year contractual

limitation period “encompasses each of the claims alleged in Plaintiff’s FAC,”
including the state-law claims, and that it “bars recovery of overdraft fees incurred
before September 9, 2015.” Def.’s Mem. at 12 (emphasis omitted). Smith argues
that the limitation period is unconscionable, and therefore unenforceable. Opp’n at
19.
“Under Hawaii law, unconscionability is recognized as a general
contract defense.” Narayan v. Ritz-Carlton Dev. Co., 140 Haw. 343, 350, 400 P.3d
544, 551 (2017). “Recent Hawaii decisions have defined unconscionability” as
“‘encompass[ing] two principles: one-sidedness and unfair surprise,’” which are
“also characterized as procedural and substantive unconscionability.” Id. (quoting
Balogh v. Balogh, 134 Haw. 29, 41, 332 P.3d 631, 643 (2014)). To be found

4

As explained below, even if the discovery rule applies to the EFTA as Smith contends,
it would not extend the one-year statute of limitation in this case.

16

unconscionable, a contract generally must be both procedurally and substantively
unreasonable, but not necessarily to the same degree, and “there may be
‘exceptional cases where a provision of the contract is so outrageous as to warrant
holding it unenforceable on the ground of substantive unconscionability alone.’”
Balogh, 134 Haw. at 41, 332 P.3d at 643 (quoting Gillman v. Chase Manhattan
Bank, N.A., 534 N.E. 2d 824, 828-29 (N.Y. 1988)). “Essentially a sliding scale is
invoked which disregards the regularity of the procedural process of the contract
formation . . . in proportion to the greater harshness of unreasonableness of the
substantive terms themselves.” 15 Samuel Williston, A Treatise on the Law of
Contracts § 1763A (3d ed. 1972). And the party challenging a contract provision
bears the burden of proving that the provision is unconscionable. Picardy v. Sky
River Mgmt., LLC, 2013 WL 656808, at *3 (Haw. Ct. App. Feb. 22, 2013) (mem.).
“Procedural unconscionability, or unfair surprise, focuses on the
process by which the allegedly offensive terms found their way into the
agreement.” Narayan, 140 Haw. at 351, 400 P.3d at 552 (internal quotation marks
and citation omitted). It “requires an examination of the contract formation
process and the alleged lack of meaningful choice,” including “whether deceptive
or high-pressured tactics were employed, the use of fine print in the contract, the
experience and education of the party claiming unconscionability, and whether

17

there was disparity in bargaining power.” Id. (quoting Gillman, 534 N.E. 2d at
828). “Procedural unconscionability often takes the form of adhesion contracts”
because, “[a]lthough adhesion contracts are not unconscionable per se, they are
defined by a lack of meaningful choice and, thus, often satisfy the procedural
element of unconscionability.” Id.
“Substantive unconscionability focuses on the one-sidedness of the
agreement” and “‘entails an analysis of the substance of the bargain to determine
whether the terms [are] unreasonably favorable to the party against whom
unconscionability is urged.’” Id. at 352, 400 P.3d at 553 (quoting Gillman 534
N.E. 2d. at 829) (emphasis added). Generally, however, “in the absence of a
controlling statute to the contrary, a provision in a contract may validly limit,
between the parties, the time for bringing an action on such a contract to a period
less than that prescribed in the general statute of limitations, provided that the
shorter period itself shall be a reasonable period.” Order of United Commercial
Travelers of Am. v. Wolfe, 331 U.S. 586, 608 (1947); see also Soltani v. W. & S.
Life Ins. Co., 258 F.3d 1038, 1043-44 (9th Cir. 2001) (collecting cases).
The Agreement here, at least to some degree, meets the procedural
element of unconscionability. There is certainly a disparity in the parties’
bargaining power, and the limitation provision is listed at page 17 of a 36-page

18

document. Nonetheless, the provision is written in relatively plain English, and it
is listed in the Agreement’s table of contents.
But even considering the procedural unconscionability, the court finds
that the time limit imposed is not substantively unconscionable — that is, it is not
unreasonable under the circumstances. Although a one-year period is significantly
shorter than the applicable statutes of limitation, the contractual period is not so
short as to effectively abrogate a plaintiff’s right to sue. This is especially true
where the Agreement’s limitation period is not tied to the event giving rise to the
action but begins to run “one year after the cause of action accrues.” Agreement at
17, ECF No. 70-7. The Hawaii Supreme Court has long defined the word “accrue”
in statutes of limitation to mean the point at which “the plaintiff knew or should
have known” of a cause of action. See Yoshizaki v. Hilo Hosp., 50 Haw. 150, 154,
433 P.2d 220, 223 (1967); Agustin v. Dan Ostrow Const. Co., 64 Haw. 80, 83, 636
P.2d 1348, 1351 (1981). Construing the Agreement’s one-year limitation period as
incorporating Hawaii’s discovery rule, the provision is not substantively
unconscionable.
The Agreement’s provision limiting actions to within one year from
the date a claim accrues is thus applicable to Smith’s state-law claims.

19

3.

Application of the Discovery Rule 5
BOH has asked this court to determine that Smith’s “claims based on

overdraft fees occurring earlier than September 9, 2015 are time-barred.” Def.’s
Mem. at 29. Smith contends that, even if the court were to find the Agreement’s
limitation period valid, “the discovery rule and equitable tolling apply to all of
Plaintiff’s state and federal law claims throughout the class periods.”6 Opp’n at
37.
Under Hawaii’s discovery rule, a limitation period does not begin to
run until a plaintiff knows or has reason to know the basis of an action. Aana v.
Pioneer Hi-Bred Int’l, Inc., 965 F. Supp. 2d 1157, 1179-80 (D. Haw. 2013) (citing
5

As an initial matter, the court rejects BOH’s argument that the discovery rule does not
apply to the Agreement’s limitation period. Def.’s Mem. at 18. As explained above, the
Agreement’s period is tied to the date an action “accrues.” And in Hawaii, this means the
discovery rule applies. See Hays v. City and Cty. of Honolulu, 81 Haw. 391, 393, 917 P.2d 718,
720 (1996) (noting that “in Yoshizaki . . . this court adopted what has become known as the
‘discovery rule.’”). Indeed, it is the incorporation of that rule that allows this court to say with
relative ease that the provision here is not unconscionable.
6

Counsel identifies the following classes and periods:
The Positive Balance Class:
All persons who have or have had accounts with BOH who incurred
overdraft fees for transactions when the ledger balance in the checking
account was sufficient to cover the transactions in the six years preceding
the filing of this Complaint.
The Regulation E Class:
All persons who have or have had accounts with BOH who incurred
overdraft fee(s) for ATM or nonrecurring debit card transactions since
August 15, 2010.

Opp’n at 6.

20

Hays, 81 Haw. at 393, 917 P.2d at 720). Generally, that requires knowledge of the
injury or harm, as well as its cause, but not the legal theory upon which recovery
might be sought. Id. And a plaintiff who has reason to make an inquiry is charged
with the requisite knowledge if a reasonable inquiry would reveal the underlying
facts:
As the discovery rule has developed, the salient point giving
rise to its application is the inability of the injured, despite the
exercise of reasonable diligence, to know that he is injured and
by what cause. We have clarified that in this context,
reasonable diligence is not an absolute standard, but is what is
expected from a party who has been given reason to inform
himself of the fact upon which his right to recovery is premised.
As we have stated: “‘[T]here are [very] few facts which
diligence cannot discover, but there must be some reason to
awaken inquiry and direct diligence in the channel in which it
would be successful. This is what is meant by reasonable
diligence.’” Put another way, “[t]he question in any given case
is not, what did the plaintiff know of the injury done him?
[B]ut, what might he have known, by the use of the means of
information within his reach, with the vigilance the law requires
of him?”
Vidinha v. Miyaki, 112 Haw. 336, 341, 145 P.3d 879, 884 (Ct. App. 2006) (quoting
Fine v. Checcio, 870 A.2d 850, 858 (2005) (citations omitted)); accord Assoc. of
Apartment Owners of Newtown Meadows v. Venture 15, Inc., 115 Haw. 232, 278,
167 P.3d 225, 271 (2007).
Thus, “the ultimate question” is whether the plaintiff’s claims could
have been discovered by the exercise of “reasonable diligence.” Sheppard v.
21

Monsanto Co., 2016 WL 3629074, at *5 (D. Haw. June 29, 2016) (quoting
Newtown Meadows, 115 Haw. at 280, 167 P.3d at 273); Aana, 965 F. Supp. 2d at
1179; Hays, 81 Haw. at 391, 917 P.2d at 720. Although diligence is often a
question of fact, summary judgment may be granted if “reasonable minds can draw
only one conclusion from the evidence.” Jacoby v. Kaiser Foundation Hosp., 1
Haw. App. 519, 527, 622 P.2d 613, 618 (1981).
Here, there is no dispute that Smith questioned the validity of many, if
not all, of the overdraft fees he now claims were illegally charged, and he admits
having called BOH about overdraft fees “five or six times.” Smith Dep. at 70,
ECF No. 70-17. He argues that he was unable to discover the basis for the charges
— i.e. that BOH was using an available-balance method to calculate the balance in
his account — and that further inquiry would have proved “futile.” Opp’n at 42.
But he did not need to discover the actual method BOH was using to determine his
balance. Rather, he needed only to have discovered that — by using the method he
thought he had agreed to — he had had enough money to cover debits for which he
was charged an overdraft fee. And this he unquestionably could have done by
looking at his statements. Indeed, he admitted this ability during his deposition
with the following exchange:

22

Q
How did you know you were assessed an
overdraft fee?
A
I get a email saying that a overdraft fee has
been charged, so when I look at it, that’s when I went
into the account and looked at the statement, and I
basically said that I had the money in there.
Q
Okay.
A
That prompted me to file a complaint.
Q
Okay. So you got a notice that you had been
assessed an overdraft fee; correct?
A
Yes.
...
Q
And then after you got that notice, you went
and looked at your statements; right?
A
Yes.
Q
And when you reviewed the statements, you
concluded that you had enough money in your account at
that time and, therefore, the fee was improper in your
mind; right?
A
Yes.
Smith Dep. at 150-51. As an example, Smith’s April 2015 Statement shows two
overdraft fees charged for debits made on April 14, yet it shows a positive “daily
balance” for that date. ECF No. 70-10 at 6-7. In other words, he was clearly
charged an overdraft fee at a time when he had a positive ledger balance.
Moreover, BOH’s ATMs, its ATM receipts, and its on-line and mobile banking
apps show both “available” and “current” balances for customer accounts. ECF
Nos. 70-9 through 70-13. Given all of this information, Smith certainly had the
tools to discover the facts supporting his claims within approximately a month of
each challenged fee.
23

The record shows that at least one overdraft fee was charged (despite
a positive ledger balance) within one year of the filing of the original complaint.
Statement of Account September 22, 2016, ECF No. 81-12. Therefore, BOH is not
entitled to summary judgment on the FAC in its entirety, and the court DENIES
summary judgment as to any overdraft fees charged on or after September 9, 2016.
But summary judgment is GRANTED in favor of BOH as to any fees charged
before that date.7
///
///

7

Although Smith’s argument is not entirely clear, he may also seek damages outside the
limitation period under the “continuing violation” doctrine. In analyzing whether this doctrine
applies, “[t]he key is whether the conduct complained of constitutes a continuing pattern and
course of conduct as opposed to unrelated discrete acts.” Au v. Republic State Mortg. Co., 2013
WL 1339738, at *13 (D. Haw. Mar. 29, 2013) (quoting Joseph v. J.J. MacIntyre Cos., 281 F.
Supp. 2d 1156, 1161 (N.D. Cal. 2003)). Applying this test, the court concludes that the overdraft
fees represent discrete acts and not a continuing pattern. Each overdraft charge is a new event,
triggered by the specific balance in Smith’s BOH account. As Smith himself has conceded, each
overdraft fee “requires an independent assessment” that an overdraft has occurred and a fee
should be charged; fees “are not automatic, and are not part of a single transaction or decision
making event.” Opp’n at 34-35, ECF No. 79.
Finally, Smith also makes passing reference to equitable tolling, without offering any
analysis. Regardless, he has not presented evidence supporting a question of fact as to equitable
tolling. “In order to toll a statute of limitations for a complaint filed after its expiration, a
plaintiff must demonstrate (1) that he . . . has been pursuing his right diligently, and (2) that some
extraordinary circumstance stood in his way. Extraordinary circumstances are circumstances
that are beyond the control of the complainant and make it impossible to file a complaint within
the statute of limitations.” Office of Hawaiian Affairs v. State, 110 Haw. 338, 360, 133 P.3d 767,
789 (2006) (internal quotations and citations omitted). For the reasons stated above, Smith has
met neither prong.

24

B.

Motion to Strike Demand for Jury Trial
“The Seventh Amendment guarantees the right to a jury trial ‘[i]n

Suits at common law[.]’” Palmer v. Valdez, 560 F.3d 965, 968 (9th Cir. 2009)
(quoting U.S. Const. amend. VII). “Like other constitutional rights, the right to a
jury trial in civil suits can be waived.” Id. (citations omitted). But courts “‘indulge
every reasonable presumption against waiver’ of the jury trial right.” Lutz v.
Glendale Union High Sch., 403 F.3d 1061, 1064 (9th Cir. 2005) (quoting Aetna
Ins. Co. v. Kennedy ex rel. Bogash, 301 U.S. 389, 393 (1937)).
Under federal law, pre-dispute contractual waivers of a jury trial right
are permitted “as long as the parties waived their rights knowingly and
voluntarily.” In re Cty. of Orange, 784 F.3d 520, 526 (9th Cir. 2015) (citing Nat’l
Equip. Rental, Ltd. v. Hendrix, 565 F.2d 255, 258 (2d Cir. 1977)); see also Palmer,
560 F.3d at 968 (“A valid waiver in a civil trial ‘must be made knowingly and
voluntarily based on the facts of the case.’”) (citing Tracinda Corp. v.
DaimlerChrysler AG, 502 F.3d 212, 222 (3d Cir. 2007) (other citation omitted));
K.M.C. Co. v. Irving Tr. Co., 757 F.2d 752, 756 (6th Cir. 1985) (“Those cases in
which the validity of a contractual waiver of jury trial has been in issue have
///
///

25

overwhelmingly applied the knowing and voluntary standard.”) (citations
omitted). 8
In determining whether a contractual jury waiver was “knowing and
voluntary,” courts apply the following types of factors:
(1) whether there was a gross disparity in bargaining power
between the parties; (2) the business or professional experience
of the party opposing the waiver; (3) whether the opposing
party had an opportunity to negotiate contract terms; and
(4) whether the clause containing the waiver was
inconspicuous.
Parris v. Wyndham Vacation Resorts, Inc., 2013 WL 1296231, at *1 (D. Haw.
Mar. 28, 2013) (quoting Phoenix Leasing Inc. v. Sure Broadcasting, Inc., 843 F.
Supp. 1379, 1384 (D. Nev. 1994)). Federal courts across the country consistently
use these types of factors “to determine whether a waiver was knowing, voluntary,
and intelligent.” Breham v. Asset Acceptance, LLC, 2010 WL 1735147, at *1 (D.
Ariz. Apr. 28, 2010). See, e.g., Nat’l Equip. Rental, 565 F.2d at 258 (considering

8

If a federal court is sitting in diversity, state law principles of waiver can apply if they
are “more protective than federal law of the jury trial right.” In re Cty. of Orange, 784 F.3d at
524 (holding that “Erie [R. Co. v. Tompkins, 304 U.S. 64 (1938)]’s federalism principle requires
federal courts sitting in diversity to import, as the federal rule, state law governing jury trial
waivers where . . . state law is even more protective than federal law of the jury trial right”).
Plaintiff appears to rely on this distinction in pointing out that Hawaii law may be “more
protective than federal law” regarding the right to a jury trial. Opp’n at 7, ECF No. 74. But
Plaintiff cites no authority indicating that the rule would apply to supplemental claims where, as
here, the action is otherwise brought under 28 U.S.C. § 1331. In any event, the court does not
rely on Hawaii principles in denying Defendant’s Motion to Strike.

26

conspicuousness, negotiability, and gross inequality in bargaining power); Miller v.
Sun Capital Partners, Inc., 2016 WL 4941989, at *5 (D. Del. Sept. 15, 2016) (“A
contractual waiver is knowing and voluntary when the facts of the case show that
‘(1) there was no gross disparity in bargaining power between the parties; (2) the
parties are sophisticated business entities; (3) the parties had an opportunity to
negotiate the contract terms; and (4) the waiver provision was conspicuous.’”)
(quoting First Union Nat’l Bank v. United States, 164 F. Supp. 2d 660, 663 (E.D.
Pa. 2001)).
Circuits are split, however, as to who has the burden of proof to
establish whether a jury waiver was knowing and voluntary. See, e.g., Parris,
2013 WL 1296231, at *1 (“The Ninth Circuit has not addressed [the burden] issue,
and there is a split among circuits regarding which party has the burden of proof.”)
(citing cases and placing burden on the party seeking enforcement of the waiver).
But district courts in the Ninth Circuit appear to “have uniformly placed the burden
on the party seeking to enforce the waiver[.]” Century 21 Real Estate LLC v. All
Prof’l Realty, Inc., 2012 WL 2682761, at *3 (E.D. Cal. July 6, 2012) (citation
omitted). The court is likewise convinced — given the constitutional nature of the
right at stake — that BOH has the burden here. See Leasing Serv. Corp. v. Crane,
804 F.2d 828, 833 (4th Cir. 1986) (agreeing “with those courts that have held that

27

the party seeking enforcement of the waiver must prove that consent was both
voluntary and informed.”) (citing Nat’l Equip. Rental, 565 F.2d at 258).
Applying these principles, Plaintiff did not “knowingly and
voluntarily” waive his Seventh Amendment right. The record is clear —
regardless of which side has the burden — that the waiver or references to it were
non-negotiable terms in standard forms (both in the Agreements and in one of the
Consumer Signature Cards). See Smith Decl. ¶ 13, ECF No. 74-1. As BOH
necessarily concedes (in arguing that Plaintiff could “negotiate” by taking his
business elsewhere), the standard jury-waiver term was a take-it-or-leave-it
proposition. Def.’s Mem. at 8-9, ECF No. 72-1. In this situation, a “gross
disparity in bargaining power” exists between BOH and its individual customers.
Plaintiff was not, for example, a business entity negotiating terms of a specific loan
agreement,9 or a prospective employee with the ability to negotiate terms of an
employment agreement.10

9

See, e.g., Phoenix Leasing, 843 F. Supp. at 1384-85 (upholding a waiver provision in a
negotiated loan between a commercial lender and a sophisticated business borrower).
10

See, e.g., Parris, 2013 WL 1296231, at *2 (enforcing waiver in employment contract
with experienced broker, recruited by the employer, with no gross disparity in bargaining
power).

28

Also weighing — but only slightly — in favor of Plaintiff is the
relative inconspicuousness of the provision. BOH stresses that the specific waiver
in the Agreements was in bold print. Agreement at 17, ECF Nos. 70-6, 70-7. And
it was written in plain English.11 But in another respect it was mixed with other
boilerplate in a 36-page, single-spaced, non-negotiated form. Although that fact,
standing alone, certainly does not render the term unenforceable — terms in the
“fine print” of a consumer contract are not invalid just because the consumer does
not read them — the term’s conspicuousness is a factor that must be considered
(along with others) in determining whether Plaintiff “knowingly and voluntarily”
waived his constitutional right to a jury trial. It is the fundamental nature of that
right that gives pause. See, e.g., Nat’l Equip. Rental, 565 F.2d at 258 (rejecting a
jury waiver that was “set deeply and inconspicuously in the contract,” reasoning
that “this printed form provision buried in a multitude of words is too weak an
imitation of a genuine agreement to be treated as a waiver of so important a

11

In this regard, the court gives little weight to Plaintiff’s overblown statement that
“[d]ue to the size of the type face and the length of the Deposit Agreements, I am unable to
identify the jury waiver provision unless it was specifically pointed out to me.” Smith Decl. ¶ 9,
ECF No. 74-1. During oral argument, counsel for Plaintiff conceded that Smith knows how to
read. If he had read the document, he obviously would have identified it. The court, however,
accepts Plaintiff’s statement as an indication that the waiver provision is inconspicuous because
it is part of the fine print on page 17 of a 36-page single-spaced document, and that he didn’t
understand its meaning.

29

constitutional safeguard[.]”) (quoting Nat’l Equip Rental, Ltd. v. Szukhent, 375
U.S. 311, 332-33 (1964) (Black, J., dissenting)); Dreiling v. Peugeot Motors of
Am., Inc., 539 F. Supp. 402, 403 (D. Colo. 1982) (“A constitutional guarantee so
fundamental as the right to jury trial cannot be waived unknowingly by mere
insertion of a waiver provision on the twentieth page of a twenty-two page
standardized form contract.”).
In short, considering all the relevant factors applied in caselaw, the
court concludes that Plaintiff did not knowingly and voluntarily waive his Seventh
Amendment right to a jury trial. BOH’s Motion to Strike Jury Demand is
DENIED.
///
///
///
///
///
///
///
///
///

30

V. CONCLUSION
For the foregoing reasons, BOH’s Motion for Summary Judgment is
GRANTED in part and DENIED in part. Judgment is GRANTED in favor of
BOH on all counts based on overdraft fees charged before September 9, 2016, but
summary judgment is DENIED as to all counts based on overdraft fees charged on
or after that date.
BOH’s Motion to Strike Demand for Jury Trial is DENIED.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, March 7, 2018.

/s/ J. Michael Seabright
J. Michael Seabright
Chief United States District Judge

Smith v. Bank of Haw., Civ. No. 16-00513 JMS-RLP, Order (1) Granting in Part and Denying in
Part Defendant Bank of Hawaii’s Motion for Summary Judgment (ECF No. 71) and (2) Denying
Bank of Hawaii’s Motion to Strike Demand for Jury Trial (ECF No. 72)

31