Darla Legg and Jason T. Legg, on Behalf of Themselves and All Persons Similarly Situated v. West Bank, 2016 Iowa Sup. LEXIS 3

Background

Plaintiffs Darla and Jason Legg sued West Bank as a putative consumer class challenging one-time non-sufficient-funds (NSF) fees the bank charged after paying debit card/ATM/ACH transactions that created overdrafts.
West Bank authorizes debit transactions in real time but posts them in end-of-day batches; it changed posting order from low-to-high (older practice) to high-to-low in July 2006, then back to low-to-high in Oct. 2010.
The change to high-to-low sequencing led to multiple NSF fees for single-day small debits that would have generated fewer fees if posted low-to-high; the Leggs were charged such fees in 2009–2010.
The amended petition pleaded usury claims under the Iowa Consumer Credit Code (ICCC) (alleging NSF fees were finance charges exceeding statutory caps) and sequencing claims (unjust enrichment and breach of good-faith duties related to sequencing change).
The district court denied West Bank’s summary-judgment motions on the usury and sequencing claims; West Bank sought interlocutory appeal. Iowa Supreme Court considered whether overdraft payments are an "extension of credit," whether NSF fees are finance charges, whether unjust enrichment claim survives an express contract, and whether an express good-faith contractual claim remains.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether payment of overdrafts on bank-card transactions is an "extension of credit" under the ICCC	Legg: bank advanced funds and thus extended credit, so NSF fees are finance charges subject to ICCC caps	West Bank: overdraft advances are due and payable on next sufficient deposit; customers have no right to defer, so no extension of credit	Held: Not an extension of credit under ICCC; summary judgment should have been granted to bank on usury claims
Whether NSF fees are finance charges under the ICCC (consequence of first issue)	Legg: NSF fees are finance charges and exceeded statutory rate	West Bank: even if fees exist, not within ICCC because no credit extension	Held: Court did not reach substance because it resolved there was no credit extension; usury claims dismissed
Whether sequencing change (low-to-high → high-to-low) supports unjust enrichment	Legg: bank intentionally reapportioned fees to enrich itself at customers' expense	West Bank: express account agreement and fee disclosures govern; sequencing is covered by express contract so unjust enrichment barred	Held: Express contract covered sequencing/fees; unjust enrichment claim cannot proceed; summary judgment for bank was proper
Whether bank breached duty of good faith by changing sequencing without adequate notice	Legg: Agreement imposes obligation to "exercise good faith and ordinary care"; changing sequencing without notice violated that duty	West Bank: discretionary contractual change permitted; UCC's good-faith provision does not create independent cause of action beyond contract terms	Held: Plaintiffs may proceed on an express-contract-based good-faith claim (bank's summary judgment denied as to this claim); implied-good-faith claim barred by express contract

Key Cases Cited

Griffen Pipe Prods. Co. v. Bd. of Review, 789 N.W.2d 769 (Iowa 2010) (summary-judgment standard and appellate review)
Anderson v. Nextel Partners, Inc., 745 N.W.2d 464 (Iowa 2008) (defining "extension of credit" under ICCC and analyzing contractual right to defer payment)
State ex rel. Miller v. Nat’l Farmers Org., 278 N.W.2d 905 (Iowa 1979) (no credit where agreement made sums due and payable immediately)
Muchmore Equip., Inc. v. Grover, 315 N.W.2d 92 (Iowa 1982) (contract requiring prompt payment precludes extension of credit)
Clinton Nat’l Bank v. Saucier, 580 N.W.2d 717 (Iowa 1998) (common-law treatment of overdraft payments as loans—distinguished from ICCC analysis)
In re Checking Account Overdraft Litig., 694 F. Supp. 2d 1302 (S.D. Fla. 2010) (discretion to sequence postings must be exercised in good faith; used as persuasive authority)
Chariton Feed & Grain v. Harder, 369 N.W.2d 777 (Iowa 1985) (express contract supersedes implied contract)
Sherwin-Williams Co. v. Iowa Dep’t of Revenue, 789 N.W.2d 417 (Iowa 2010) (legislative definitions control over common-law meanings)
Sandbulte v. Farm Bureau Mut. Ins. Co., 343 N.W.2d 457 (Iowa 1984) (statute-of-limitations analysis for contract-based good-faith claims)