Old National Bank v. Steven Kelly, Jon A. Cook, and Rebecca F. Cook, individually and on behalf of others similarly situated
2015 Ind. App. LEXIS 365
| Ind. Ct. App. | 2015Background
- Plaintiffs (class of Indiana checking account holders) sued Old National Bank for overdraft fees charged on debit-card transactions, alleging the bank batched, delayed, and re-ordered (high-to-low) postings and used a “shadow” overdraft practice that maximized $35 fees.
- Deposit Account Agreement reserved the bank’s discretion to post items "in any order" and to assess NSF/overdraft fees; customers were automatically enrolled in overdraft coverage until the bank changed the practice in 2010.
- Plaintiffs asserted claims for breach of contract and implied covenant of good faith and fair dealing, conversion (and related Indiana Crime Victim Relief Act damages), unjust enrichment, and unconscionability.
- Bank moved for summary judgment arguing federal preemption under the National Bank Act/OCC regulations and, alternatively, that it negated essential elements of the state-law claims. The trial court denied the motion; interlocutory appeal followed.
- The Court of Appeals held federal law did not preempt the plaintiffs’ contract/good-faith claim as a matter of law, but affirmed summary judgment for the bank on conversion, unjust enrichment, and standalone unconscionability damages claims; remanded remaining breach/good-faith claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal law preempts Plaintiffs' state-law claims | Gutierrez-type posting/disclosure challenges not preempted when allegations attack misrepresentations and bad-faith manipulation rather than the mere choice of posting method | National Bank Act and OCC regs preempt state regulation of posting order and disclosure obligations regarding deposit-taking powers | Preemption denied as a matter of law for Plaintiffs' broader allegations; bank did not show irreconcilable conflict or that state law more than incidentally affected deposit-taking power |
| Breach of contract / implied covenant of good faith and fair dealing | Bank abused contractual discretion (delayed batching and high-to-low posting combined with misleading disclosures) violating implied covenant | Contract language permitted posting at bank's discretion and describing posting/overdraft procedures; bank performed per contract | Claim for breach of implied covenant survives summary judgment — contract ambiguity and extrinsic evidence could support bad-faith performance finding |
| Conversion / criminal conversion (and treble damages under Crime Victim Relief Act) | Withdrew/retained identifiable funds without consent and with intent; amounted to conversion/theft | Deposits are general (bank becomes creditor); failure to pay debts does not constitute criminal conversion | Summary judgment for bank: conversion (civil and criminal) negated as matter of law |
| Unjust enrichment and standalone unconscionability damages | Fees excessive/unconscionable; equitable relief appropriate | Express contract governs parties; unjust enrichment unavailable where valid contract exists; no independent damages claim for unconscionability | Summary judgment for bank: unjust enrichment and monetary claim for unconscionability are barred |
Key Cases Cited
- Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25 (1996) (three preemption frameworks and conflict-preemption standard)
- Watters v. Wachovia Bank, N.A., 550 U.S. 1 (2007) (scope of national bank powers and federal oversight)
- Gutierrez v. Wells Fargo Bank, N.A., 704 F.3d 712 (9th Cir. 2012) (OCC/regulatory deference; posting-order preemption but nonpreemption of deceptive-disclosure claims)
- In re HSBC Bank U.S.A., N.A., Debit Card Overdraft Fee Litig., 1 F. Supp. 3d 34 (E.D.N.Y. 2014) (analysis of OCC authority and preemption in overdraft-fee litigation)
- In re Checking Account Overdraft Litig., 694 F. Supp. 2d 1302 (S.D. Fla. 2010) (allegations of fee-maximizing manipulation held to only incidentally affect deposit-taking)
- Bank of Am. v. City & Cnty. of San Francisco, 309 F.3d 551 (9th Cir. 2002) (state-law claims void if they conflict with federal banking law or frustrate National Bank Act purposes)
- First Fed. Sav. Bank of Ind. v. Key Mkts., Inc., 559 N.E.2d 600 (Ind. 1990) (when courts may imply duty of good faith to resolve contractual ambiguity)