Joseph Walbridge brings a putative class action to challenge the practices of Northeast Credit Union to charge overdraft fees when customers' accounts held funds to cover the transactions. He alleges claims for breach of contract, breach of the implied duty of good faith and fair dealing, unjust enrichment, money had and received, and violation of Regulation E,
Standard of Review
In considering a motion to dismiss, the court accepts all well-pleaded facts as true, disregarding legal conclusions, and resolves
Background
Walbridge had a checking account and a debit card with Northeast Credit Union that was originated by the Share Account Agreement ("Account Agreement"). Walbridge also completed the Opt In Form for overdraft transactions ("Opt In Agreement"). His claims in this case arise from overdraft fees charged by Northeast based on the "available balance" in his account rather than the balance shown on the account, called the "ledger balance" or "actual balance."
The difference between the available balance and the actual balance results from the way Northeast credits deposits made to an account and reduces the balance by debits that are pending but not yet paid. As a result, the available balance can be less, and even considerably less, than the actual balance, depending on the delay in crediting deposits and the anticipatory deductions of pending debits. Northeast then assesses an overdraft fee when the available balance is insufficient to cover a transaction, even though the actual balance shows enough money to cover the transaction.
Walbridge alleges that on March 15, 2016, he had an actual balance in his Northeast checking account of $111.09. He made a debit card payment of $32.43, which left a balance of $78.66. Northeast, however, determined that he had insufficient funds and charged an overdraft fee of $32.00. Northeast then assessed additional overdraft fees of $32.00 on March 29 and March 30, 2016. Walbridge believes that subsequent improper overdraft fees were charged but provides no allegations in support.
Walbridge alleges that Northeast breached the Account and Opt In Agreements and the implied duty of good faith and fair dealing by charging him overdraft fees when the actual balance showed there was money in his account to cover the transactions. He also brings equitable claims for unjust enrichment and money had and received. In addition, Walbridge alleges that Northeast violated Regulation E of EFTA by failing to disclose its overdraft policy.
Discussion
Northeast moves to dismiss Walbridge's breach of contract claims and EFTA claim on the grounds that it did not promise to use the actual balance for its overdraft service and instead properly explained its overdraft policy based on the available balance. Northeast moves to dismiss the EFTA claim on the merits and asserts that the claim is barred by the statute of limitations and the "safe harbor" provision. Northeast moves to dismiss the equitable claims because valid contracts control the issues raised. Walbridge objects to the motion to dismiss.
A. Breach of Contract
Walbridge contends that Northeast breached the Opt In Agreement by assessing
Under New Hampshire law, "[a] breach of contract occurs when there is a failure without legal excuse to perform any promise which forms the whole or part of a contract." Audette v. Cummings,
"The language of a contract is ambiguous if the parties to the contract could reasonably disagree as to the meaning of that language." Found. for Seacoast Health v. Hosp. Corp. of Am.,
1. Opt In Agreement
The Opt In Agreement is a one-page form through which a Northeast customer chooses to have certain overdrafts paid by Northeast and to incur a fee for that service.
Walbridge argues that the plain meaning of the promise in the Opt In Agreement is that an overdraft would occur only when there was not enough money in the account, as shown by the actual balance, to cover the transaction. Northeast argues that the Opt In Agreement is part of the Account Agreement and must be read in conjunction with that Agreement. Based on reading the Agreements together, Northeast contends that the plain meaning of "enough money" is the available balance.
Standing alone, the Opt In Agreement does not sufficiently define or explain the term "enough money" to put account holders on notice that "enough money" means the available balance. Cf. Chambers v. NASA Fed. Credit Union,
On the other hand, there would be no need for overdraft protection, provided in the Opt In Agreement, in the absence of an account at Northeast that is established through an Account Agreement. The Account Agreement refers to the Opt In Agreement as the source for certain overdraft protections.
2. Account Agreement
The Account Agreement includes several sections pertaining to available funds and overdrafts. Section 3.7 explains that Northeast can refuse to allow a withdrawal "if the amount requested is not yet available for withdrawal." Doc. 8-4 at 3. Section 3.10, titled "Nonsufficient Funds," states: "If you write a check for more money than you have in your account, you will be deemed to be overdrawn and [Northeast] may refuse to honor the check and return it as unpaid for reason of nonsufficient funds (NSF)." Id. at 4. Neither section defines "available for withdrawal" or "more money than you have in your account."
More specific to overdrafts, section 3.35, titled "Paying of Overdrafts," states that "at its sole discretion, [Northeast] may honor items presented for payment or authorization against your account even if there are insufficient funds in your account."Id. at 6. The provision explains what items may and may not be honored and that a fee will be charged when payments are made. The remainder of the provision provides the process of notification, consequences for failure to correct a "negative balance," and the procedures for collecting amounts owed. The term "insufficient funds" is not defined.
Appended to the Account Agreement is another document titled "Northeast Credit Union Combined Disclosure Agreement." One of the six parts of the Disclosure Agreement is titled "Truth-in-Savings Disclosure for Personal Savings & Transaction Accounts," which includes a provision titled "Funds Availability Policy for Personal and Business Accounts." Doc. 8-4, at 10.
The Funds Availability Policy explains when deposits become available for use and that not all deposited funds are available for withdrawal or to pay checks as soon as they are deposited. There does not appear to be any reference in that provision to the overdraft payment section of the Account Agreement or to the overdraft protection offered in the Opt In Agreement. Neither the Account Agreement nor the Opt In Agreement refers customers to the Disclosure Agreement to find definitions or explanations of what balance is used for purposes of overdraft protection.
Northeast contends that the cited parts of the Account Agreement and the Disclosure Agreement make it clear that the terms "insufficient funds" and "enough money" mean available funds and that the Funds Availability Policy in the Disclosure Agreement explains that deposits are not
Other courts have considered similar breach of contract claims arising from financial institutions' practices of charging overdraft fees based on available balances and have come to differing conclusions. Northeast relies on Tims v. LGE Community Credit Union,
In Chambers, the parties disputed whether the language in the Opt In Agreement promised to use the actual balance or the available balance for assessing an overdraft.
Walbridge relies on a series of cases in which courts have found that the language used in similar Opt In Agreements and Account Agreements is ambiguous as to what constitutes enough money in the account or sufficient funds for purposes of assessing overdraft fees. In Smith, the court concluded that the terms used in the Opt In Agreement and Account Agreement to describe the balance used for the overdraft policy were ambiguous and could have referred to either the actual balance or the available balance.
In this case, Northeast did not use the term "available balance" as the defendants did in Smith, Ramirez, and Wodja and instead referred to "enough money," "insufficient funds," and "nonsufficient funds." To the extent the availability of funds is explained in the Disclosure Agreement, that section was not linked to the Opt In Agreement or to the parts of the Account Agreement that discussed overdrafts. In addition, as the court noted in Smith, the agreements here are long, twenty-four pages in total, and Northeast relies on scattered references to available funds while using other terms that it does not define. The terms Northeast used, in the absence of clear definitions or explanations, could reasonably be understood to mean the actual balance, as other courts have found.
Northeast has not shown that the only reasonable meaning of "enough money," "insufficient funds," and "nonsufficient funds" is the available balance. The Account Agreement and the Opt In Agreement could be reasonably understood to promise that overdraft fees would be charged only if a customer overdrew the actual balance in the account. Therefore, Walbridge states claims for breach of the Opt In and the Account Agreements.
B. Breach of the Implied Duty of Good Faith and Fair Dealing
Northeast moves to dismiss the implied duty claim on the ground that it is premised on erroneous interpretations of the Opt In Agreement and the Account Agreement. Based on its own interpretations of the Agreements, Northeast asserts
C. Unjust Enrichment and Money Had and Received
Northeast moves to dismiss the equitable claims for unjust enrichment and money had and received on the ground that those claims cannot succeed when a contract controls the issue raised in the claims. In response, Walbridge contends that he can plead causes of action in the alternative. He also argues that his claim for money had and received is not affected by the Agreements because he was not contractually required to pay the overdraft fees.
"Unjust enrichment is an equitable remedy that is available when an individual receives a benefit which would be unconscionable for him to retain." Axenics, Inc. v. Turner Constr. Co.,
While a plaintiff cannot recover under both breach of contract and the equitable actions for unjust enrichment or money had and received, the existence of a contractual relationship does not necessarily require dismissal of an equitable claim at the pleading stage. See Lass v. Bank of Am., N.A.,
Walbridge does not dispute the validity of the Agreements and brings claims for breach based on the same theory that he asserts in support of his equitable claims. As such, Walbridge does not allege that the fees charged by Northeast are outside the scope of the Agreements. Although incompatible claims might be allowed to proceed at the pleading stage in some cases, here Walbridge could not recover on his equitable claims, which arise out of the Agreements, and therefore, it is appropriate to dismiss the claims.
D. EFTA, Regulation E
Walbridge alleges that Northeast violated Regulation E of EFTA,
Regulation E implements EFTA and requires financial institutions to provide notice and obtain the consent of their account holders before charging overdraft fees for certain transactions. § 1005.17(b). The notice must "be substantially similar to Model Form A-9 set forth in Appendix A of this part, include all applicable items in this paragraph, and may not contain any information not specified in or otherwise permitted by this paragraph." § 1005.17(d). Paragraph d requires "[a] brief description of the financial institution's overdraft service and the types of transactions for which a fee or charge for paying an overdraft may be imposed, including ATM and one-time debit card transactions." § 1005.17(d)(1).
1. Violation
Walbridge alleges that Northeast violated Regulation E by failing to include an accurate description of its overdraft service in the Opt In Agreement as required by § 1005.17(d)(1), which resulted in a failure to provide notice before charging a fee for an overdraft. Northeast contends that it did not violate Regulation E because the phrase "not enough money" used in the Opt In Agreement to describe when an overdraft would occur is an accurate description of its overdraft service. Northeast also asserts that it did not violate Regulation E because it used the model form without any alteration.
To the extent Northeast moves to dismiss the Regulation E claim on the ground that it used Model Form A-9, that argument merely frames the question of whether Northeast used the overdraft method that is described in its Opt In Agreement. In other words, does "enough money" as used in Model Form A-9 and the Opt In Agreement mean the available balance, as Northeast argues, or the actual balance, as Walbridge argues. As is discussed above in the context of the breach of contract claim, the phrase could mean either and is therefore ambiguous. See Smith,
Northeast suggests that it could not describe its overdraft policy differently because that is not allowed under Regulation E. Other courts have concluded that financial institutions are required by Regulation E to accurately describe their overdraft services and that additional explanation is allowed, if necessary, because an Opt In Agreement need only be substantially similar to Form A-9. Gunter v. United Federal Credit Union,
Northeast contends that it is protected from liability for any violation of Regulation E by EFTA's safe harbor provision and by EFTA's statute of limitations. Walbridge contends that neither applies.
a. Safe Harbor
Financial institutions are protected from liability under EFTA, 15 U.S.C. § 1693m, for "any failure to make disclosure in proper form if a financial institution utilized an appropriate model clause issued by the Bureau or the Board." § 1693m(d)(2). With only one cited exception, the safe harbor provision has been interpreted to protect institutions from liability for violations arising from the form of notice provided but not from inaccurate or misleading content of the notice. See Gunter,
As is explained in detail in the cited cases, the safe harbor provided by § 1693m(d)(2) does not apply to Walbridge's claim that Northeast violated EFTA by inaccurately describing its overdraft service. The reasoning in Tims is strained at best and, therefore, not persuasive. The safe harbor does not apply to Walbridge's claim in this case.
b. Statute of Limitations
EFTA claims must be brought "within one year from the date of the occurrence of the violation." § 1693m(g). Walbridge does not allege facts to show when he signed the Opt In Agreement, which he contends violates EFTA. He does allege, however, that he was charged overdraft fees, based on the Opt In Agreement, on three occasions in March of 2016. Because Walbridge filed his complaint on September 20, 2017, it appears that his claim is time barred. Walbridge argues, however, that the limitations period begins anew with each overdraft charge and that the discovery rule applies which raises a factual issue that cannot be resolved in the context of a motion to dismiss.
i. Independently Actionable Violations
Walbridge contends that a new cause of action for a violation of Regulation E occurred each time Northeast charged him an overdraft fee.
All but one of the courts that have considered the EFTA statute of limitations have concluded that the limitation period is triggered when a financial institution makes a first unauthorized transfer or a fee assessment is paid. See Wheeler v. Native Commerce Studios, LLC,
Walbridge relies on Diviacchi v. Affinion Gr., Inc.,
Therefore, the first assessment of an overdraft fee in Walbridge's account, which occurred in March of 2016, triggered the one-year limitations period. The complaint was not filed until September of 2017, more than a year later. As a result, the claim was filed outside the limitations period.
ii. Discovery Rule
Walbridge contends that his EFTA claim cannot be dismissed as untimely without an opportunity for him to develop facts to show that he did not discover the violation until less than a year before he filed suit.
For purposes of federal claims generally, the "discovery rule allows a claim to accrue when the litigant first knows or with due diligence should know facts that will form the basis for an action." Randall v. Laconia, N.H.,
"The district court may grant a motion to dismiss based on a defendant's affirmative defense of a statute of limitations when the pleader's allegations leave no doubt that an asserted claim is time-barred." DeGrandis v. Children's Hosp. Boston,
Conclusion
For the foregoing reasons, the defendant's motion to dismiss (document no. 8) is granted as to Claim 4 (unjust enrichment and restitution), Claim 5 (money had and received), and Claim 6 (violation of EFTA). The motion is otherwise denied.
SO ORDERED.
Notes
See Smith v. Bank of Hawaii,
In 2010, Regulation E of the EFTA was amended to require financial institutions to obtain consent from customers before enrolling them in overdraft services that would incur fees. In re TD Bank, --- F.Supp.3d at ----,
The copies of the documents provided here are not signed or dated, which leaves a factual question as to when the agreements were signed and in what sequence. Cf. Tims v. LGE Community Credit Union,
Neither party explains what caused the difference between the actual balance and the available balance in Walbridge's account.
Northeast does not cite a provision in this Account Agreement for "Payment Order of Your Transactions."
The bank in Smith used the term "available" to describe account balances, but the court found that it did not adequately define "available." Smith,
Northeast contends that the term "enough money" is sufficient and means available balance because Regulation E defines an "overdraft service" to mean " 'a service under which a financial institution assesses a fee or charge on a consumer's account held by the institution for paying a transaction (including a check or other item) when the consumer has insufficient or unavailable funds in the account.' " Doc. no. 8-1 at 12 (quoting "Regulation E Final Rule, 74 F.R. 59033-01 (Nov. 17, 2009) ). Northeast does not show that the Final Rule definition of overdraft service is included in either Agreement, or that the definition in the Rule clarifies Northeast's promise in the Opt In Agreement. To the extent Northeast also relies on results of testing done by a consulting company for the Federal Reserve Board to create a model opt in form, that process does not show that the terms used in the Opt In Agreement and Account Agreement were clear and unambiguous.
Northeast does not explain why it cites to Part 205 rather than Part 1005 or point out any substantive difference between § 205.17 and § 1005.17, which are both referred to as Regulation E and appear to be substantially the same or identical. See Tims,
To the extent Walbridge also relies on a theory of continuing violation, that theory does not apply here. The continuing violation doctrine applies in narrow circumstances, usually in discrimination cases, to allow recovery for actions taken outside the limitations period when repeated conduct is necessary to cause an injury. Quality Cleaning Prods. R.C., Inc. v. SCA Tissue N. Am., LLC,
Although Walbridge also mentions equitable tolling in passing, he provides no developed argument to support that theory. "[E]quitable tolling is a rare remedy to be applied in unusual circumstances, not a cure-all for an entirely common state of affairs." Neves v. Holder,