King v. Carolina First Bank
26 F. Supp. 3d 510
D.S.C.2014Background
- Plaintiffs (former Carolina First / Mercantile / South Financial customers) challenge TD Bank’s practice of posting debit-card transactions highest-to-lowest, alleging it increased overdraft fees and violated contracts and Regulation E.
- Carolina First and South Financial were acquired by TD Bank on September 30, 2010; plaintiffs allege the practices continued post-acquisition and that affirmative EFTA consent was not obtained.
- Plaintiffs assert state-law claims for breach of contract, unconscionability, conversion, and unjust enrichment, plus a federal EFTA/Regulation E claim.
- TD Bank moved to dismiss, arguing (1) state-law claims are preempted by the National Bank Act and OCC regulations, and (2) the account agreements permit the posting order so plaintiffs fail to state claims.
- The court denied dismissal on preemption grounds (finding plaintiffs’ claims only incidentally affect deposit-taking powers) and allowed most state-law claims to proceed, but dismissed unconscionability (as an affirmative recovery) under South Carolina law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Preemption (NBA/OCC) | State-law claims do not limit TD’s federally authorized posting discretion; claims seek recovery for past wrongful conduct and contract breaches, not to regulate posting method. | Posting order is an incidental banking power preempted by the NBA and OCC regulations; state claims improperly interfere with national-bank powers. | Denied dismissal on preemption; court finds plaintiffs’ claims only incidentally affect deposit-taking and preemption not established at motion stage. |
| Breach of contract / Implied covenant | Account agreements and implied covenant were breached by undisclosed overdraft practices and fees charged when funds were available. | Account agreements explicitly permit high-to-low posting; covenant cannot override express contract terms. | Plaintiffs adequately pleaded breach and implied covenant claims to survive Rule 12(b)(6). |
| Unconscionability | Plaintiffs seek declaratory relief and challenge oppressive practices; MDL precedent permits such claims. | South Carolina treats unconscionability as a defense (shield), not a basis for affirmative monetary recovery. | Dismissed: unconscionability claim not available as an affirmative remedy under South Carolina law. |
| Conversion / Unjust enrichment | Plaintiffs allege wrongful exercise of ownership (conversion) and alternatively seek restitution (unjust enrichment). | Economic-loss rule and existence of an express contract bar tort/equitable recovery. | Conversion and unjust enrichment survive dismissal at this stage (pleadings may proceed; unjust enrichment allowed as alternative theory). |
Key Cases Cited
- Gutierrez v. Wells Fargo Bank, N.A., 704 F.3d 712 (9th Cir. 2012) (held OCC/ NBA preempted challenge to high-to-low posting as a pricing/fee decision but not fraudulent-misrepresentation claims)
- In re Checking Account Overdraft Litigation, 694 F. Supp. 2d 1302 (S.D. Fla. 2010) (MDL court declined to find preemption and allowed contract/tort claims to proceed)
- Watters v. Wachovia Bank, N.A., 550 U.S. 1 (2007) (states may regulate national banks unless regulation prevents or significantly interferes with bank powers)
- Barnett Bank of Marion County v. Nelson, 517 U.S. 25 (1996) (state law preempted when it conflicts with exercise of federal bank powers)
- Baptista v. JPMorgan Chase Bank, N.A., 640 F.3d 1194 (11th Cir. 2011) (cited in related preemption analysis)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard for facial plausibility)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard requiring factual plausibility)
- Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989) (Supremacy Clause preemption principles)