Cobb v. PayLease LLC
2014 U.S. Dist. LEXIS 99114
D. Minnesota2014Background
- Cobb applied for an apartment and authorized a $37.95 one-time ACH debit by phone to Common Properties on May 14, 2013.
- The ACH was returned for insufficient funds on May 16; Cobb’s bank charged him a $35 NSF fee.
- On May 29 PayLease (servicing agent for Common Properties) initiated a $25 ACH “returned fee” from Cobb’s account; the $25 was recredited on June 4.
- Cobb alleges he never received notice or authorization for any electronic collection of a returned-item fee and sues PayLease under the Electronic Fund Transfer Act (EFTA), and for conversion and unjust enrichment, with class allegations.
- PayLease moved to dismiss, arguing (inter alia) no completed electronic fund transfer, repayment moots EFTA liability, telephone authorization exempts the charge, and PayLease provided notice to Common Properties.
- The district court denied the motion to dismiss, finding Cobb plausibly alleged a completed EFT, that repayment does not automatically defeat an EFTA claim, the telephone exemption did not apply, and conversion/unjust enrichment claims could proceed (limited damages likely for short retention).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of EFTA (was an EFT completed?) | Cobb: PayLease initiated and withdrew $25 from his account on May 29 — a completed EFT. | PayLease: Only an assessment occurred; no completed transfer/payee receipt, so EFTA does not apply. | Court: Bank statement + complaint plausibly allege a completed EFT; deny dismissal on this ground. |
| Effect of recrediting funds before suit | Cobb: Return of funds does not eliminate statutory or other EFTA remedies (statutory damages and §1693m(e) safe harbor). | PayLease: Since Cobb was recredited, no EFTA liability should remain. | Court: Recrediting alone does not bar EFTA suit; statutory damages and safe-harbor structure support allowing the claim to proceed. |
| Telephone authorization / EFTA exemption | Cobb: He authorized only the $37.95 debit; he never authorized the $25 returned-item charge. | PayLease: Cobb authorized the transaction by phone to Common Properties; telephone-initiated EFTs are exempt. | Court: Exemption applies only to calls with a financial institution’s officer; Common Properties is not a financial institution and the $25 was not authorized by phone; deny dismissal. |
| Conversion & unjust enrichment despite return of funds | Cobb: PayLease retained and benefited from the $25 for six days; Cobb seeks interest/time-value as damages. | PayLease: Because the $25 was returned and (it contends) never received, conversion/unjust enrichment fail. | Court: Claims plausibly plead retention/benefit during the six-day period; survives motion to dismiss (damages likely limited to interest/time-value). |
Key Cases Cited
- Gomez v. Wells Fargo Bank, N.A., 676 F.3d 655 (8th Cir.) (12(b)(6) plausibility standard explained)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state a plausible claim)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility and pleading standards)
- Carcieri v. Salazar, 555 U.S. 379 (2009) (apply statutory text where plain)
- Raine v. Reed, 14 F.3d 280 (5th Cir.) (EFTA recrediting discussion in FDIC/deposit-insurance context)
- Cody v. Hillard, 304 F.3d 767 (8th Cir.) (avoid reading one statutory provision to render another superfluous)
- Bisbey v. D.C. Nat’l Bank, 793 F.2d 315 (D.C. Cir.) (civil liability attaches for failures to comply with EFTA)
- Tennille v. W. Union Co., 751 F.Supp.2d 1168 (D. Colo.) (denying dismissal where defendant retained and benefited from plaintiffs’ funds and interest)