Farrell v. Bank of America, N.A.
3:16-cv-00492
S.D. Cal.Apr 11, 2017Background
- Plaintiff Joanne Farrell is a Bank of America (BoA) customer who wrote checks that overdrew her account; BoA honored the checks and charged a $35 initial overdraft fee each time.
- Under BoA’s Deposit Agreement, if the negative balance was not cured within five days BoA imposed an additional $35 “Extended Charge.”
- Farrell sued as a putative class, alleging the Extended Charges exceed the interest rate permitted by the National Banking Act (NBA), 12 U.S.C. §§ 85, 86.
- BoA moved to dismiss, arguing the Extended Charges are service charges (authorized by 12 C.F.R. § 7.4002), not “interest”; the district court denied the motion.
- BoA sought certification under 28 U.S.C. § 1292(b) of the controlling legal question (whether Extended Charges are “interest”) and requested a stay pending interlocutory appeal.
- The court granted certification and stayed the litigation pending the Ninth Circuit’s decision (or its decision not to hear the appeal), directing six‑month joint status reports.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether BoA’s Extended Charges qualify as “interest” under the NBA | Extended Charges are interest because they function as charges for the bank’s extension of funds/credit | Extended Charges are deposit account service charges authorized by regulation and not ‘‘interest’’ under the NBA | The question is controlling and there are substantial grounds for difference of opinion; §1292(b) certification granted |
| Whether resolution of that question will materially advance the litigation | If Extended Charges are interest, plaintiff’s NBA claim survives | If they are service charges, plaintiff’s claims must be dismissed with prejudice | Court found resolution would materially advance termination of the case and thus meets §1292(b) |
| Whether there is substantial ground for difference of opinion | Farrell: no, factual development needed and issue clear | BoA: yes, unsettled law with contrary district court decisions | Court concluded reasonable jurists could disagree (noted multiple district decisions holding Extended Charges are not interest) |
| Whether further discovery is required before certification | Farrell: needs discovery on factual predicates | BoA: no, legal question of whether overdraft coverage is an extension of credit is decidable on the pleadings | Court held no further factual development necessary; §1292(b) certification appropriate |
Key Cases Cited
- Couch v. Telescope Inc., 611 F.3d 629 (9th Cir. 2010) (standards for §1292(b) interlocutory certification)
- Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681 (9th Cir. 2011) (reasonable jurists might disagree standard for §1292(b))
- In re TD Bank, N.A., 150 F. Supp. 3d 593 (D.S.C. 2015) (district court holding similar overdraft/extended charges are not “interest”)