Johnson v. Bank of America NA

Filing 35

ORDER granting 30 Motion to Dismiss Amended Class Action Complaint, dismissing the amended class action complaint with prejudice and with it the plaintiff's individual and class requests for compensatory damages and injunctive relief. Signed by Honorable Joseph F Anderson, Jr on 04/15/2010.(bshr, )

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF SOUTH CAROLINA C O L U M B IA DIVISION C a rl Johnson, individually and on behalf ) o f all others similarly situated, ) ) P l a in tif f , ) ) vs. ) ) B a n k of America, N.A., ) ) D e f e n d a n t. ) ) C / A No.: 3:09-1600-JFA

ORDER

T h is matter comes before the court on defendant Bank of America's ("BofA") motion to dismiss [dkt. # 30] plaintiff Carl Johnson's ("Johnson") amended complaint [dkt. # 27]. T h e parties have fully briefed the motion and the court heard oral argument at a hearing held o n March 8, 2010, where the court took the motion under advisement. This order serves to a n n o u n c e the ruling of the court. I. F a c tu a l and Procedural Background B o f A provides its checking account holders certain online banking services pursuant to an online service agreement (the "Agreement") account holders execute prior to accessing B o f A 's online banking services. Pursuant to the Agreement, BofA offers online bill payment (" B ill Pay"). To effect payment, BofA uses a vendor, Fiserv, to issue either (1) an electronic tran s m is s io n , (2) a corporate check, or (3) a personal check. When Fiserv selects either a co rpo rate check or electronic transmission to deliver payment, BofA debits the customer's a c co u n t on the scheduled delivery day, or if that day is a weekend or holiday, the prior

b a n k in g day. For personal checks, BofA debits the customer's account when the payee p re se n ts the check for payment. By way of example, Johnson alleges that he requested BofA to make a series of payments to retail shops in the Columbia, South Carolina area that were n o t equipped to receive electronic transmissions. He asserts that his account was debited the d a y that the checks were slated for delivery and that the payees did not present the checks u n til between three days and ten days after delivery. Johnson alleges that the practice of debiting accounts upon delivery, and not p re se n tm e n t, deprives customers of the interest they would have otherwise earned during that p e r i o d . Johnson also alleges that delegating the discretion to select payment method, c o m b in e d with a financial motive to deprive customers of interest, constitutes breach of c o n tra c t. In his complaint Johnson asserts two claims for breach of contract pursuant to the U n if o rm Commercial Code ("UCC") as adopted in South Carolina, and a claim for breach o f the implied covenant of good faith and fair dealing implicit in all contracts. He seeks c o m p e n s a to ry and injunctive relief. II. D is c u ss io n A. S ta n d a rd of Review

U n d e r the Rule 8(a)(2), a pleading must contain a "short and plain statement of the c la im showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Recent Supreme C o u rt caselaw has interpreted this rule to require "sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, __U.S.__, 129 S.

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C t. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (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." I q b a l , 129 S. Ct at 1949. Recitals of the elements of a cause of action bolstered only by c o n c lu s o ry statements will fail to insulate a pleader from a motion to dismiss. Id. Pursuant to Iqbal and Twombly, this court must undertake a two-prong approach in d e t e rm in i n g the sufficiency of plaintiff's complaint. First, bearing in mind that a court must a c ce p t as true all factual allegations in the complaint, this court must segregate allegations th a t are factually supported and those which are mere legal conclusions and not entitled to a presumption of truth. Iqbal, 129 S. Ct. at 1950. Second, this court must determine whether th e remaining factual allegations in the complaint state a plausible claim for relief, based on " ju d ic ia l experience and common sense." Id. B. A p p lic a b ility of the UCC

Jo h n so n alleges that by delegating the choice of payment method used to fulfill his B ill Pay requests, BofA violates Articles 3 and 4 of the UCC. S.C. Code Ann. §§ 36-31 0 1 ­ 8 0 5 (2003 & Supp. 2009) ("Article 3"); S.C. Code Ann. §§ 36-4-101­504 (2003 & S u p p . 2009) ("Article 4"). As an initial proposition, contracts for services are generally g o v e rn e d by South Carolina common law, and neither the facts of the case, nor Johnson, s u g g e st that this is a case involving the sale of goods, which would implicate Article 2 of the U C C . See Palmetto Linen Serv., Inc. v. U.N.X., Inc., 205 F.3d 126 (4th Cir. 2000).

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1.

A r tic le 3

A rticle 3 does not to apply to the decision of choosing a means of making payment. A rtic le s 3 appears constrained in its application to the various issues arising out of the h a n d lin g of negotiable instruments themselves. Swindler v. Swindler, 584 S.E.2d 438, 440 (S .C . App. 2003) ("Article 3 applies to negotiable instruments."). Where a contract

c o n te m p la te s the issuance of a negotiable instrument, the contract is governed by common la w principles while the negotiable instrument is governed "according to its tenor without re g a rd to any breach of [another contract]." See, e.g., Burch v. Ashburn, 368 S.E.2d 82 (S.C. A p p . 1988). To the extent that Johnson argues that the Article 3's presentment rules apply t o the facts at hand, his argument misses the mark. Johnson nowhere alleges that BofA i m p r o p e r ly charged his account prior to presentment of a personal check drawn on his ac co u n t-- h e alleges that no personal checks were ever drawn on his account. Moreover, J o h n s o n lacks standing to allege presentment violations for corporate checks drawn on F is e rv 's account. At bottom, Johnson alleges violation of the Agreement, rather than im p r o p e r handling of negotiable instruments. 2. A r tic le 4

A rtic le 4 governs bank deposits and collections. S.C. Code Ann § 36-4-401 provides th a t a bank may charge a customer's account for any item that is otherwise properly payable. A n item is an instrument for the payment of money. S.C. Code Ann. § 36-4-104(g). Here, h o w e v e r, the dispute centers over the proper time to debit an account for an instrument drawn

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o n the account of another--Fiserv. Article 4 does not appear to apply to such a transaction, a n d Johnson has failed to put forth any argument beyond conclusory statements that it does. A c c o rd in g ly, all claims pursuant to Articles 3 and 4 of the UCC are hereby dismissed with p r e j u d i c e .1 C. J o h n s o n Alternatively Alleges Common Law Breach of the Implied Covenant o f Good Faith and Fair Dealing

J o h n s o n alleges that BofA breached the Agreement by violating the implied covenant o f good faith and fair dealing. To prove breach of contract, a plaintiff must prove the c o n tr a c t, its breach, and the damages caused by such breach. Fuller v. Eastern Fire & Cas. In s . Co., 124 S.E.2d 602, 610 (S.C. 1962). "When the language of a contract is plain and c a p ab le of legal construction, that language alone determines the instrument's force and e f f e c t." Ellis v. Taylor, 449 S.E.2d 487, 488 (S.C. 1994). "The Court's duty is to enforce th e contract made by the parties regardless of its wisdom or folly, apparent unreasonableness, o r the parties' failure to guard their rights carefully." Jordan v. Security Group, Inc., 428 S .E .2 d 705, 707 (S.C. 1993). Regardless of a contract's folly or wisdom, however, the p a rties must perform a contract pursuant to the implied covenant of good faith and fair d ea lin g . Adams v. G.J. Creel & Sons, Inc., 465 S.E.2d 84, 85 (S.C. 1995). However, "there

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If the court had found Articles 3 and 4 of the UCC applicable to the facts of the case, the result would not differ. UCC Article 3 defines "good faith" as "honesty in fact and the observance of reasonable commercial standards of fair dealing." S.C. Code Ann. § 36-3-103(6) (Supp. 2009). The court finds Johnson has failed to allege facts that plausibly indicate BofA's or Fiserv's lack of honesty in fact in performing the contract. The court also finds that Johnson has failed to adequately allege how BofA and Fiserv's performance fell outside the bounds of reasonable commercial standards or even suggested what reasonable commercial standards would be. 5

is no breach of an implied covenant of good faith where a party to a contract has done what p ro v is io n s of the contract expressly gave him the right to do." Id.; First Fed. Sav. & Loan A ss'n v. Dangerfield, 414 S.E.2d 590 (S.C. App. 1992). 1. G o o d Faith and Fair Dealing

Jo h n so n alleges that BofA's assignment of rights and delegation of duties to Fiserv e f f e c ts a breach of the implied duty of good faith and fair dealing implicit in every contract. S p e c if ica lly, Johnson argues that Fiserv improperly caused Johnson to incur losses when it p r e m a tu re ly debited his account. As an initial matter, the court notes that an assignee or d e le g a te stands in the shoes of the assignor or delegator. Moore v. Weinburg, 644 S.E.2d 7 4 0 (S.C. App. 2007). Accordingly, if the agreement allows or requires BofA to act or not a c t in a certain way, it also allows or requires Fiserv to conduct itself in the same manner. The Agreement provides Bank of America, incident to its Bill Pay services, the d isc re tio n to effect payment through one of three methods. The contract states: You authorize us to make payments in the manner we select from the f o l lo w in g methods: E lec tro n ic transmission. Most payments are made by electronic tra n sm is s io n . C o rp o ra te check. This is a check drawn on our account or the account o f our vendor. If a Payee on a corporate check fails to negotiate the c h e c k within 90 days, we will stop payment on the check and recredit yo u r account for the amount of the payment. P e rs o n a l check. This is a check drawn on your account based on your a u th o riz a tio n under this Agreement.

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(A m e n d . Compl. Ex. B at 5.) The Agreement further provides that: F o r payments made by electronic transmission or corporate check, the payment a m o u n t will be debited from, or charged to the account you designate on the s c h e d u le d delivery date. . . . For payments made by personal check, the a c c o u n t you designate will be debited when the check is presented to us for p a ym e n t . ( Id .) Johnson alleges that the Agreement governs the relationship between the parties. (A m e n d . Compl. ¶ 45.) He does not allege that the Agreement is somehow invalid or that s o m e other agreement defines the relationship of the parties. In his complaint, Johnson a lle g e s that BofA's vendor, Fiserv, issued a corporate check to satisfy Johnson's outstanding a c co u n ts at several Columbia, South Carolina establishments that have not elected to receive e le c tro n ic transmissions. (Amend. Compl. ¶¶ 63­92.) Johnson alleges that by issuing a c o rp o ra te check on Fiserv's account, and at Johnson's behest, BofA deprived Johnson of in te re s t he is entitled to. The plain language of the Agreement states that BofA has the discretion to choose b e tw e e n three methods of payment. The agreement also indicates that a corporate check may b e drawn on the account of its vendor and sets forth the relative dates on which a customer s h o u ld expect his account to be charged for payments he requests BofA fulfill on his behalf. T h e court finds that the complaint alleges that BofA, through its assignee or delagee Fiserv, " h a s done what provisions of the [Agreement] expressly gave [it] the right to do." Adams v . G.J. Creel and Sons, Inc., 465 S.E.2d 84. Further, Johnson fails to adequately allege how B o f A 's actions run afoul of reasonable commercial standards, or how BofA's conduct

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c o n tra v e n e s the plain language of the Agreement. 2. T h e Validity of the Assignment

J o h n s o n also alleges that BofA's assignment of the right to choose payment methods b re a c h e s the implied covenant of good faith and fair dealing because the assignment " m a te ria lly alters the contractual arrangement between [Johnson] and BofA." (Pl. Resp. 9.) In South Carolina, executory contracts, those that have not been fully performed, are a ss ig n a b le , A.E. Finley & Assoc., Inc. v. Hendrix, 247 S.E.2d 328, 330 (S.C. 1978), and " [ a ]n assignee stands in the shoes of its assignor." Moore v. Weinburg, 644 S.E.2d 740 (S.C. A p p . 2007). That is to day that the assignee has the same rights and privileges under the c o n tra c t as the assignor. Twelfth RMA Partners, L.P., v. Nat'l Safe Corp., 518 S.E.2d 44, 4 6 (S.C. App. 1999). However, rights arising out of a contract cannot be transferred if they a re coupled with liabilities or with contracts for personal services, or if they involve a relatio n sh ip of personal credit and confidence. Green v. Camlin, 92 S.E.2d 125 (S.C. 1956); C e n . Union Bank of S.C. v. N.Y. Underwriters' Ins. Co., 52 F.2d 823, 824­25 (4th Cir. 1931) (s ta tin g that most contract rights are assignable, and listing those that are not). Similarly, c o n tra c t duties are generally delegable, unless prohibited by statute, public policy, the terms o f the contract, or if they involve the personal qualities or skills of the obligor. 29 Richard A . Lord, Williston on Contracts, § 74:27 (4th ed. 2009); Restatement (Second) of Contracts § 318. To the extent that Johnson asserts that BofA's assignment and delegation to Fiserv w as improper, his argument lacks merit. As noted above, assignments and delegations are

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g e n e ra lly valid unless prohibited by law or the terms of the contract, or where the effect of h e assignment effects a change in the terms of the contract, as can the case in a contract for p e rs o n a l services. Johnson cites to no statute or case that suggests BofA's assignment and d e le g a tio n violates the law of South Carolina. Instead, Johnson argues in his response to B o f A 's motion to dismiss that the assignment and delegation changes the underlying basis o f the bargain between BofA and Johnson because, Johnson argues, Fiserv has an improper f in a n c ia l motive to maximize the period in which it can earn interest. However, argument o f the existence of an improper motive in a response to a motion to dismiss is a different a n im a l than an allegation in a complaint that Fiserv acts on this motive. Simply stating that a n American corporation is motivated by a desire to make money does little more than restate a bedrock principle of capitalism. Both BofA and Fiserv could reasonably be expected to make an attempt to turn a p ro f it in providing banking services. If BofA, rather than Fisev, executed the Bill Pay re q u e sts it would have exactly the same motivations as Fiserv: to minimize the risk incurring lo s s due to insufficient funds, to lower transactions cost, and to accrue interest from money in its possession. Johnson's argument to the contrary fails to show how his complaint s u f f ic ie n tly alleges that there is any difference between BofA and Fiserv in the execution the B ill Pay requests. (Pl. Resp. 4­6.) Such failure proves fatal to Johnson's argument at the m o tio n to dismiss stage. In sum, Johnson fails to adequately allege how the assignment and delegation

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m a te ria lly changes the benefit of the bargain under the contract or that Johnson has any in te re st in BofA, rather than Fiserv, performing the contract. Accordingly, the court finds th a t BofA's assignment and delegation to Fiserv valid, and that Fiserv stands in the shoes of B o f A with respect to the rights and duties created by the Agreement. Because the court finds th a t neither BofA nor Fiserv, as BofA's assignee, violated the terms of the contract or b re a c h e d the implied duty of good faith and fair dealing, the court grants BofA's motion to d i s m i s s .2 III. C o n c lu s io n B a se d on the foregoing, the court finds the UCC inapplicable to the facts as alleged in the complaint, and that the result would not differ if it did. The court also finds that the a m e n d e d complaint alleges that BofA, and its assignee and delegate Fiserv, performed as the A g re e m e n t allowed, and in such circumstances there can be no breach of the implied duty o f good faith and fair dealing. Johnson also fails to adequately allege that the assignment and d e leg a tio n to Fiserv was invalid. Accordingly, the court hereby grants BofA's motion to d is m is s [dkt. # 30] Johnson's amended complaint with prejudice and with it his individual a n d class requests for compensatory damages and injunctive relief.

The court notes that should the UCC apply to the facts of this case, the validity of the assignment would remain intact. As discussed above, Johnson has failed to adequately allege how the assignment and delegation to Fiserv would "materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of returning return performance." S.C. Code Ann. § 36-2-210(b) (2003). 10

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IT IS SO ORDERED.

A p ril 15, 2010 C o lu m b ia , South Carolina

J o s e p h F. Anderson, Jr. U n ite d States District Judge

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