Salls v. Digital Federal Credit Union
Filing
31
District Judge Timothy S. Hillman: MEMORANDUM AND ORDER entered granting in part and denying in part 12 Motion to Dismiss for Failure to State a Claim. (Castles, Martin)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
_______________________________________
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BRANDI SALLS, individually, and on
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CIVIL ACTION
behalf of all others similarly situated
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NO. 18-11262-TSH
Plaintiff,
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v.
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DIGITAL FEDERAL CREDIT UNION and )
DOES 1 through 100,
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Defendants.
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______________________________________ )
MEMORANDUM AND ORDER ON DEFENDANT’S MOTION TO DISMISS
(Docket No. 12)
November 8, 2018
HILLMAN, D.J.
Brandi Salls (“Plaintiff”) brings a putative class action challenging the practice of Digital
Federal Credit Union and DOES 1 through 100 (“Defendant”) to charge overdraft fees when
members accounts have sufficient funds to cover the transactions. She brings claims for breach of
contract (Counts I and II), breach of the implied duty of good faith and fair dealing (Count III),
unjust enrichment (Count IV), money had and received (Count V), and violation of Regulation E,
12 C.F.R. § 1005.17, of the Electronic Fund Transfers Act (“EFTA”), 15 U.S.C. §§ 1693 et seq.
(Count VI). Defendant moves to dismiss all claims pursuant to Fed. R. Civ. P. 12(b)(6) for failure
to state a claim upon which relief can be granted. (Docket No. 12). For the reasons stated below,
Defendants motion is granted in part and denied in part.
Background
The following facts are taken from Plaintiff’s complaint (Docket No. 1) and assumed to be
true for the purposes of this motion. The court also may consider “matters fairly incorporated
within [the complaint] and matters susceptible to judicial notice.” In re Colonial Mortgage
Bankers Corp., 324 F.3d 12, 15 (1st Cir. 2003). Accordingly, the Court will also consider models
of the two agreements that Plaintiff entered into with Defendant. (Docket Nos. 23-1; 23-2). 1
Plaintiff is a member of and entered into two written contracts with Defendant. The first
agreement (“Account Agreement”) states, in relevant part:
•
•
All accounts are subject to your Schedule of Fees and Service Charges. You
shall debit such charges against any account I own except my IRA. If there
are insufficient funds available, the charges are payable on demand and, for
checking accounts, will be treated as an overdraft. Docket No. 23-1 at 7
(emphasis in original).
You may at your discretion, but are not obligated to nor shall you be liable
for refusal to, pay funds from this account: When such payment would draw
the available balance in the account below the minimum balance for the
account as established from time to time by you (overdraft—See the
Schedule of Fees and Service Charges). This may include overdraft fees
created by checks, debit card, ACH, and other electric means as applicable.
Id. at 17 (emphasis in original).
The second agreement (“Opt In Agreement”) describes Defendant’s overdraft policies as required
by Regulation E of EFTA. 12 C.F.R. § 1005.17. The Opt In Agreement provides: “An overdraft
occurs when you do not have enough money in your account to cover a transaction, but we pay it
anyway.” (Docket No. 24-2 at 4).
1
Plaintiff has quoted and referenced both agreements in her complain. She has also requested that this
Court take judicial notice of the them and Defendant has not objected to their authenticity. Therefore, I
will consider both documents at this stage. See Beddall v. State St. Bank & Tr. Co., 137 F.3d 12, 17 (1st
Cir. 1998) (“When, as now, a complaint’s factual allegations are expressly linked to—and admittedly
dependent upon—a document (the authenticity of which is not challenged), that document effectively
merges into the pleadings and the trail court can review it in deciding a motion to dismiss under Rule
12(b)(6).”).
2
Plaintiff’s claims in this case arise from overdraft fees based on the “available balance” as
opposed to the “ledger” or “actual balance.” The “available balance” of an account is calculated
by deducting pending debits and deposit holds. Therefore, the “available balance” can be much
lower than the “actual balance” in an account.
Plaintiff alleges that on December 18, 2014, December 19, 2014, and on information and
belief at least one time within twelve months of filing her complaint, she was charged an overdraft
fee when her “actual balance” was enough to cover the transaction. Because her “available
balance” was insufficient, however, she was charged an overdraft fee.
Standard of Review
A defendant may move to dismiss, based solely on the complaint, for the plaintiff's “failure
to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). To survive a Rule
12(b)(6) motion to dismiss, a complaint must allege “a plausible entitlement to relief.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 559, 127 S.Ct. 1955 (2007). Although detailed factual allegations
are not necessary to survive a motion to dismiss, the standard “requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555,
127 S.Ct. 1955. “The relevant inquiry focuses on the reasonableness of the inference of liability
that the plaintiff is asking the court to draw from the facts alleged in the complaint.” OcasioHernandez v. Fortuno-Burset, 640 F.3d 1, 13 (1st Cir. 2011).
In evaluating a motion to dismiss, the court must accept all factual allegations in the
complaint as true and draw all reasonable inferences in the plaintiff’s favor. Langadinos v.
American Airlines, Inc., 199 F.3d 68, 68 (1st Cir. 2000). It is a “context-specific task” to determine
“whether a complaint states a plausible claim for relief,” one that “requires the reviewing court to
draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679, 129
3
S.Ct. 1937 (2009) (internal citations omitted). “[W]here the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has
not ‘show[n]’—that the pleader is entitled to relief.” Id. (quoting Fed. R. Civ. P. 8(a)(2)). On the
other hand, a court may not disregard properly pled factual allegations, “even if it strikes a savvy
judge that actual proof of those facts is improbable.” Twombly, 550 U.S. at 556, 127 S.Ct. 1955.
Discussion
1.
Breach of Contract
“It is well-settled under Massachusetts law that the interpretation of a contract is generally
a question of law.” Baybank Middlesex v. 1200 Beacon Properties, Inc., 760 F. Supp. 957, 963 (D.
Mass. 1991) (citations omitted). If a contract is unambiguous, it must be enforced according to its
plain terms. Freelander v. G. & K. Realty Corp., 357 Mass. 512, 516, 258 N.E.2d 786 (1970). If
it is ambiguous, however, its interpretation is a question of fact for the jury. Gillentine v. McKeand,
426 F.2d 717, 721 (1st Cir. 1970); Trafton v. Custeau, 338 Mass. 305, 307-08, 155 N.E.2d 159
(1959). “The determination of whether the terms of a contract are ambiguous is a question of law.”
Baybank, 760 F. Supp. at 963. Terms will be found ambiguous only when they “are inconsistent
on their face or where the phraseology can support reasonable difference of opinion as to the
meaning of the words employed.” Fashion House, Inc. v. K Mart Corp., 892 F.2d 1076, 1083 (1st
Cir. 1989).
When an agreement between the parties is contained in more than one document, the
separate documents “must be read together to effectuate the intentions of the parties.” Chase
Commercial Corp. v. Owen, 32 Mass. App. Ct. 248, 250 (1992) (citations omitted); see also Singh,
977 F.2d at 21 (“Under Massachusetts law, when several writings evidence a single contract or
comprise constituent parts of a single transaction, they will be read together.”) (citations omitted);
4
Consolo v. Bank of America, 2017 WL 1739171, at *3 n.3 (D. Mass. May 2, 2017) (“documents
must be read together when they are close in temporal space and are closely interrelated.”)
(quotation marks and citation omitted).
Here “[a]lthough the Agreements are separate, they are arguably linked with respect to an
account holder’s overdraft protection.” Walbridge v. Northeast Credit Union, 299 F. Supp. 3d 338,
344 (D.N.H. 2018); see also Smith v. Bank of Hawaii, 2017 WL 3597522, at *5-6, (D. Haw. Apr.
13, 2017) (similarly construing an overdraft agreement and account agreement together as part of
the same transaction). But see Advia, 227 F. Supp. 3d 848, 856 (W.D. Mich. 2016) (finding that
“the Op-in Agreement is a separate contract.”). Because “Plaintiff[] ha[s] not laid out any facts
supporting the inference” that the agreements should not be construed together even though they
are arguably linked with respect to overdraft protection, I will consider the overdraft agreement in
the context of the Account Agreement for the purposes of this motion. Harrington v. Tetraphase
Pharm. Inc., 2017 WL 1946305, at *4 (D. Mass. May 9, 2017). 2
Members opt in to Defendant’s overdraft service by checking a box on their checking and
savings account application. (Docket No. 24-2 at 3). The Opt In Agreement is accompanied by an
overdraft disclosure form. (Docket No. 24-2 at 4). The disclosure provides, in relevant part: “An
overdraft occurs when you do not have enough money in your account to cover the transaction,
but we pay it anyway.” Id. (emphasis added). The overdraft disclosure does not provide any
information clarifying that “enough money” is to be construed as “available balance” and therefore
2
Massachusetts law requires documents to be “read together when they are close in temporal space.” See
Consolo, 2017 WL 1739171, at *3 n.3. Here, however, the documents Plaintiff submitted to the Court are
not dated, and Plaintiff does not provide the date of the Opt-In Agreement in her complaint. Thus, the
factual issue remains as to whether the agreements were entered in a sufficiently close temporal space as to
require being read together. See Walbridge, 299 F. Supp. 3d at 344 n. 3 (construing the Opt-In and Account
Agreements together for the purposes of the motion to dismiss despite the remaining “factual question as
to when the agreements were signed and in what sequence.”).
5
I find that a reasonable person could construe “enough money” to mean “ledger balance.” See
Walbridge, 299 F. Supp. 3d at 343 (“Standing alone, the Opt In Agreement does not sufficiently
define or explain the term ‘enough money’ to put account holders on notice that ‘enough money’
means available balance.”). Cf. Chambers v. NASA Fed. Credit Union, 222 F. Supp. 3d 1, 10
(D.D.C. 2016) (finding an opt in agreement unambiguously referring to “available balance” where
it “specifically invoke[ed] the phrase ‘available balance’” and provided examples to demonstrate
what not “enough money in your account to cover a transaction” meant).
Defendant argues, however, that reading the Opt In Agreement in conjunction with the
Account Agreement provides context that lends support to its arguments. The Account Agreement
does indeed include references to available funds and overdrafts. Most relevant here:
•
•
All accounts are subject to your Schedule of Fees and Service Charges. You
shall debit such charges against any account I own except my IRA. If there
are insufficient funds available, the charges are payable on demand and, for
checking accounts, will be treated as an overdraft. Docket No. 23-1 at 7
(emphasis in original).
You may at your discretion, but are not obligated to nor shall you be liable
for refusal to, pay funds from this account: When such payment would draw
the available balance in the account below the minimum balance for the
account as established from time to time by you (overdraft—See the
Schedule of Fees and Service Charges). This may include overdraft fees
created by checks, debit card, ACH, and other electric means as applicable.
Id. at 17 (emphasis in original).
Defendant argues that these passages clearly demonstrate that the overdraft service utilizes
members’ “available balance.” Defendant next contends that “‘[a]vailable balance’ is a wellknown banking term that has long been understood to mean the money in an account minus holds
placed on funds to account for uncollected deposits and for pending debit transactions.” (Docket
No. 13 at 9). Finally, Defendant argues that The Funds Availability Policy in the Account
Agreement provides explicit guidance for members of various scenarios in which funds will not
be immediately “available.” Id. at 16-17.
6
For two reasons Defendant’s argument fails. First, Defendant did not properly define
“available balance” and its meaning is therefore ambiguous. Plaintiff contends that her account
balance was artificially low not only because there was a hold placed on deposits into her account
but also because Defendant subtracted pending transactions from the ledger balance. Indeed, this
is how Defendant calculates “available balance.” Nowhere, however, does the Funds Availability
Policy mention this second scenario or clarify how it might affect a member’s balance. Instead,
the Funds Availability Policy only explains how there may be a delay on funds coming into a
member’s account. Despite not sufficiently defining the term, Defendant argues that “available
balance” nonetheless a well-known term that reasonable members would understand. I find,
however, that the meaning of the term as used in the Account Agreement is ambiguous. Indeed,
several courts, have found similar contractual arraignments ambiguous when they used the term
“available balance.” See, e.g., Ramirez v. Baxter Credit Union, 2017 WL 1064991, at *5 (N.D.
Cal. Mar. 21, 2017) (“Plaintiff reasonably asserts that the agreement fails to define ‘available
balance,’ or otherwise clearly indicate to a customer that her ‘available balance’ is somehow
different from her ledger balance.”); Walbridge, 299 F. Supp. 3d at 346 (“The terms Northeast
used, in the absence of clear definitions or explanations, could reasonably be understood to mean
the actual balance, as other courts have found.”).
Second, even if it was clear that Defendant subtracted pending transactions to calculate
“available balance,” neither of the Account Agreement sections pertaining to over-drafting nor the
Opt In Agreement refer members to the Funds Availability Policy to find explanations of how their
balance is calculated for purposes of overdrafts. Likewise, the Funds Availability policy makes
no reference of how it might be related to overdrafts. Thus, it is not at all clear that Defendant
would use the “available balance” when determining if an account was overdrawn even if that term
7
were defined adequately. See Smith, 2017 WL 3597522, at *6 (“Although the Account Agreement
has sporadic references to ‘available’ funds or balances, there is no statement, clearly understood
by a reasonable customer, that BOH would use the available balance method when determining if
an account was overdrawn.”); Walbridge, 299 F. Supp. 3d at 346 (“the agreements here are long,
twenty-four pages in total, and Northeast relies on scattered references to available funds while
using other terms that it does not define.”).
Therefore, I find that Plaintiff has plausibly argued that the contracts, even when construed
together, are ambiguous as to whether they use the “available balance” method to determine
whether an account has been overdrafted. This ambiguity presents a factual dispute not appropriate
for resolution on this motion.
Accordingly, Plaintiff’s breach of contract claim survives
Defendant’s motion to dismiss.
2. Breach of the Implied Covenant of Good Faith and Fair Dealing
Under Massachusetts law, a plaintiff states a claim for breach of the covenant of good faith
and fair dealing “when one party violates the reasonable expectations of the other.” Robert and
Ardis James Foundation v. Meyers, 474 Mass. 181, 188 (2016). For the reasons stated above, I
find that a reasonable person could have construed the contracts to mean that Defendant would use
the ledger balance method when calculating overdrafting fees. Thus, Plaintiff plausibly states a
claim that her reasonable expectations were violated, and that Defendant therefore breached the
implied covenant.
3. Unjust Enrichment and Money Had and Received
Defendant argues that because a contractual relationship exists, there can be no claims for
unjust enrichment and money had and received. Defendant is correct that “Massachusetts law
does not allow litigants to override an express contract by arguing unjust enrichment.” Platten v.
8
HG Bermuda Exempted Ltd., 437 F.3d 118, 130 (1st Cir. 2006); see also Zarum v. Brass Mill
Materials Corp., 334 Mass. 81, 134 N.E.2d 141, 143 (1956) (“The law will not imply a contract
where there is an existing express contract covering the same subject matter.”); Metropolitan Life
Ins. Co. v. Cotter, 464 Mass. 623, 641 (2013) (“Ordinarily, a claim of unjust enrichment will not
lie where there is a valid contract that defines the obligations of the parties.”) (quotation marks and
citations omitted).
While Defendant is correct that damages for breach of contract and the equitable claims
are mutually exclusive, the First Circuit in Lass v. Bank of America, N.A. noted that “it is accepted
practice to pursue both theories at the pleading stage.” 695 F.3d 129 (1st Cir. 2012); see also Viera
v. First American Title Ins. Co., 668 F. Supp. 2d 282, 295 (D. Mass. 2009) (Plaintiff may “plead
alternative and even inconsistent legal theories, such as breach of contract and unjust enrichment,
even if Plaintiffs only can recover under one of these theories.”). In Lass, the First Circuit
permitted equitable claims to survive a motion to dismiss when the contract at issue did “not
explicitly address” some of the claims made by the plaintiff in that case. Lass, 695 F.3d 129, 140;
see also Metropolitan Life, 464 Mass. at 641 (holding that a plaintiff is only entitled to pursue
equitable claims “in circumstances where one party to a contract demands performance from the
other that is not due under the terms of the contract.”). Therefore, the court held that “the district
court will be in a better position once the record is more developed to determine whether the unjust
enrichment claim should survive.” Lass, 695 F.3d at 141.
Here, Plaintiff asserts that she entered into binding contracts with Defendant and uses the
same theories to support both her breach of contract and equitable claims. Thus, unlike the
situation in Lass, the contractual arrangement between the parties here does explicitly cover the
dispute. Plaintiff does not allege that Defendant was enriched because it received a benefit outside
9
the scope of the contracts between the parties. Rather, Plaintiff alleges that the benefit was
conferred upon Defendant because it breached the contract. As such, Plaintiffs equitable claims
must fail. See Walbridge, 299 F. Supp. 3d at 347 (holding that “[a]lthough incompatible claims
might be allowed to proceed at the pleading stage in some cases,” because the plaintiff “brings
claims for breach based on the same theory that he asserts in support of his equitable claims . . . it
is appropriate to dismiss the claims.”).
4.
EFTA
a. Violation of Regulation E
Plaintiff alleges Defendant violated Regulation E of EFTA, 12 C.F.R. § 1005.1 et seq.,
because it did not accurately describe its overdrafting practices in the Opt-In Agreement.
Regulation E provides, in relevant part:
[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 one-time debit card transactions; and
(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.
C.F.R. § 1005.17(b). Further, the mandated disclosure must “be clear and readily understandable.”
12 C.F.R. § 1005.4(a)(1).
10
Defendant’s Opt In Agreement states that “[a]n overdraft occurs when you do not have
enough money in your account to cover a transaction.” (Docket No. 24-2 at 4). Plaintiff argues
that this description does not accurately describe Defendant’s practice. (Docket No. 25 at 16).
Defendant contends that when read in conjunction with the Agreement, the Opt-In Agreement
sufficiently and accurately describes Defendant’s policies. For the reasons stated above in the
context of the breach of contract claim, the language Defendant uses is ambiguous. Therefore, I
do not find that “enough money” accurately describes Defendant’s policy of using the “available
balance” method such that a member could meaningfully provide affirmative consent.
b. Defenses
i. Safe Harbor
Defendant alternatively argues that it is protected from liability under the EFTA safe harbor
provision. Financial institutions are protected from liability under EFTA 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).
Defendant relies on Tims v. LGE Community Credit Union, 2017 WL 5133230 (N.D. Ga.
Nov. 6, 2017). The court in that case found that the safe harbor provision applied because “‘enough
money’ could mean either balance calculation method.” Id. at *6. Therefore, the court held that
“LGE cannot be said to have explicitly misled the Plaintiff or inaccurately described its overdraft
program. The only thing LGE can be said to be guilty of is a lack of precision.” Id.
Other courts, however, have been critical of the Tims holding. See, e.g., Walbridge, 299 F.
Supp. 3d at 349 (“The reasoning in Tims is strained at best and, therefore, not persuasive.”).
Indeed, most courts have interpreted the safe provision as precluding liability for violations arising
from the form notice takes but not from misleading or inaccurate content it includes. Walbridge,
11
299 F. Supp. 3d at 349; Gunter v. United Federal Credit Union, 2017 WL 4274196, at *4 (D. Nev.
Sept. 25, 2017); Pinkston-Polling v. Advia Credit Union, 2017 WL 5153218, at *2 (W.D. Mich.
Apr. 20, 2017); Smith, 2017 WL 3597522, at *8; Walters v. Target Corp., 2017 WL 3721433, at
*5 (S.D. Cal. Feb. 14, 2017); Ramirez v. Baxter Credit Union, 2017 WL 118859, at *7 (N.D. Cal.
Jan. 12, 2017); Berenson v. Nat’l Fin. Servs., LLC, 403 F. Supp. 2d 133, 151 (D. Mass 2006). I
agree that the reasoning in Tims is unpersuasive and hold that the safe harbor does not protect
Defendant from liability in this case.
ii. Statute of Limitations
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).
According to Plaintiff, she was wrongly charged overdraft fees on December 18, 2014, December
19, 2014, and upon information and belief at least one other time within twelve months of filing
her complaint on June 15, 2018.
1. Claims from June 15, 2017 to Present
Defendant contends that Plaintiff’s claim accrued “as soon as the first fee [was] charged.”
(Docket No. 13 at 16). None of the Circuit Courts have directly addressed this issue. In Wike v.
Vertrue, Inc., 566 F.3d 590, 591-92 (6th Cir. 2009), a cardholder verbally preauthorized monthly
charges to a debit card. The Sixth Circuit concluded that “the one-year limitations period began
when the first recurring transfer took place.” Id. at 593. All the transfers at issue in that case,
however, were made within the one-year period. As a result, the court did not determine whether,
had the first transfer been made outside that period, all claims based on later transfers would have
been barred.
12
Some district courts have interpreted Wike to stand for the proposition that a pre-authorized
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 *3 (N.D. Ill. Nov. 27, 2013) (concluding the first transfer “also triggers
the limitations period for all ensuring transfers.”); Harvey v. Google Inc., 2015 WL 9268125, at
*4 (N.D. Cal Dec. 21, 2015) (same). But see Diviacchi v. Affinion Grp., Inc., 2015 WL 3631605,
at *10 (D. Mass. March 11, 2015) (holding that each transfer “constitutes a new and independent
violation” this is actionable if it falls within the one-year limitation period regardless of whether
earlier transfers fell outside the window). Defendant relies heavily on the Wike progeny to argue
that the clock on Plaintiff’s claim began to run on December 18, 2014.
This case, however, is factually distinguishable from Wike and its progeny. In Smith v.
Bank of Hawaii, the court “conclude[d] that Wike cannot logically be extended to the facts of this
case, which involves allegedly unauthorized overdraft fees.” 2018 WL 1662107, at *5 (D. Haw.
Apr. 5, 2018) (emphasis in original). In the court’s view:
The difference between preauthorizing a series of transfers and opting in to an
overdraft services 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.
Id.; see also Pingston-Polling v. Advia Credit Union, 2018 WL 3758088, at *3 (W.D. Mich. Aug.
8, 2018) (“This Court agrees with the reasoning in Smith . . . [that] overdraft fees constitute discrete
harms that do not constitute a single transaction providing for recurring transfers.”).
Indeed, Regulation E seems to contemplate that this distinction is a meaningful one. On
the one hand, Regulation E requires preauthorized transfers to be in writing but only focuses on
the authorization itself. 12 C.F.R. § 1005.10(b). On the other hand, with regard to overdraft
services, the statute not only focuses on the requirements for opt-in provisions, but also prohibits
13
“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” without making the appropriate
disclosures. 12 C.F.R. § 1005.17(c)(2). “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.” Smith, 2018 WL 1662107, at *5. I find the Smith court’s
reasoning persuasive and therefore Defendant’s reliance on Wike and its progeny is misplaced
given the facts of this case.
Plaintiff alleges that on information and belief, “at least one such instance has occurred
within twelve months of filing this complaint.” Compl. ¶ 38. Therefore, Plaintiff’s EFTA claims,
insofar as they occurred within one year of filing her complaint are not time barred.
2. Claims before June 15, 2017
With regard to Plaintiff’s claims under EFTA that occurred outside of the one-year
window, Plaintiff contends that the discovery rule applies. While, “it is unclear whether the oneyear statute of limitations of the EFTA incorporates a discovery rule,” the First Circuit has not
addressed the issue. Dorsey v. Enterprise Leasing, 78 F. Supp. 3d 353, 357 (D.D.C. 2015).
Plaintiff contends that it is likely that the First Circuit would find that the statute does incorporate
the rule. See Skwira v. United States, 344 F.3d 64, 75 (1st Cir. 2003) (“lower federal courts
‘generally apply a discovery rule when a statute is silent on the issue.’”) (quoting Rotella v. Wood,
528 U.S. 549, 555, 120 S.Ct. 1075 (2000)). Thus, I will assume that the discovery rule is available
to Plaintiff here.
The “discovery rule allows a claim to accrue when the litigant first knows or with due
diligence should know facts that will form the basis for an action.” Randall v. Laconia, N.H., 679
14
F.3d 1, 7 (1st Cir. 2012) (internal quotation marks omitted). Whether a litigant should have known
is evaluated against the objective standard of what a “reasonable person similarly situated to the
plaintiff would have known.” McIntyre v. United States, 367 F.3d 38, 59 (1st Cir. 2004) (emphasis
omitted). In order to apply, “the factual basis for the cause of action must have been inherently
unknowable that is, not capable of detection through the exercise of reasonable diligence at the
time of injury.” Sanchez v. United States, 740 F.3d 47, 52 (1st Cir. 2014) (internal quotation marks
omitted).
Plaintiff argues that this Court should not resolve whether the discovery rule applies on
this motion as it involves a fact-intensive inquiry. See Abdallah v. Bain Capital LLC, 880 F. Supp.
2d 190, 198 (D. Mass. 2012) (“Although determining whether the discovery rule, fraudulent
concealment, or equitable tolling should apply in a case is a question of fact to be determined by
the finder of fact, the court can grant a motion to dismiss if no set of facts would entitle the plaintiff
to relief.”); In re Tyco Intern., Ltd., 2004 WL 2348315, at *18 (D.N.H. Oct. 14, 2004) (“the
discovery rule generally will not be resolvable on a motion to dismiss, unless it is plain from the
complaint itself that the plaintiffs’ claims are time-barred.”).
While application of the discovery rule is often fact-intensive, here I find that the discovery
rule does not apply as a matter of law. “In the context of EFTA claims . . . the discovery rule [will
often] not apply because a plaintiff could reasonably discover an injury by reviewing his bank
statement or online account which would show that a fee or fees had been improperly assessed.”
Walbridge v. Northeast Credit Union, 299 F. Supp. 3d 338, 351 (D.N.H. 2018); see also Harvey,
2015 WL 9268125, at *4 (“If Harvey had exercised due diligence, she should have discovered the
injury either by looking at her Google account or even more simply, looking at her bank
statements.”).
15
Plaintiff claims that she could not have discovered the facts which form the basis of her
claim because Defendant concealed its practice of using the “available balance” method from its
customers. Plaintiff’s argument is unpersuasive. Plaintiff alleges in her complaint that she was
charged an overdraft fee when her account had a positive “ledger balance.” Therefore, had
Plaintiff checked her bank statements, she “should have known when [she] was charged [her] first
overdraft on a positive ledger balance that [Defendant] was not using the ledger balance method
to assess overdraft fees.” Domann v. Summit Credit Union, 2018 WL 4374076, at *10 (W.D. Wis.
Sept. 13, 2018). Accordingly, Plaintiff’s claim was not inherently unknowable. Indeed, had she
used reasonable diligence, she could have easily discovered the factual foundation of her claim.
She is therefore not entitled to rely on the discovery rule for her EFTA claims that occurred more
than one year before she filed her complaint.
Conclusion
For the reasons stated above, Defendants motion (Docket No. 12) is granted in part and
denied in part. Claims IV and V are dismissed. Claims I, II, and III survive Defendant’s motion
to dismiss. Finally, Claim VI survives Defendant’s motion only for claims that occurred on or
after June 15, 2017.
SO ORDERED
/s/ Timothy S. Hillman
TIMOTHY S. HILLMAN
DISTRICT JUDGE
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