Garrett v. Call Fed. Credit Union

1

ASHLEY GARRETT, on behalf of herself and all others similarly situated, Plaintiff, v. CALL FEDERAL CREDIT UNION, Defendant.

Civil Action No. 3:23-cv-678-HEH

United States District Court, E.D. Virginia, Richmond Division

August 23, 2024

MEMORANDUM OPINION (DENYING DEFENDANT'S MOTION TO DISMISS)

Henry E. Hudson, Senior United States District Judge.

THIS MATTER is before the Court on Call Federal Credit Union's (“Defendant”) Motion to Dismiss (the “Motion,” ECF No. 11), filed on December 14 2023. Plaintiff Ashley Garrett (“Plaintiff') filed her Complaint (ECF No. 1) on October 18, 2023, alleging breaches of contract and violations of the Electronic Fund Transfer Act (the “EFTA,” 15 U.S.C. § 1693 etseq., implemented at 12 C.F.R. § 1005). (Compl. ¶¶ 140-87.) Defendant now moves to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (Mot. at 1.) The parties have filed memoranda supporting their respective positions, and the Court heard oral argument on March 6, 2024. At the hearing, the Court denied Defendant's Motion for the reasons articulated below. (Minute Entry at 1, ECF No. 38.)

I. BACKGROUND

Defendant is a federal credit union headquartered in Richmond, Virginia, that provides banking services to consumers. (Compl. ¶ 5.) Plaintiff lives in Fredericksburg, Virginia, and maintains a checking account with Defendant. (Id. ¶ 4.) The parties agree that Plaintiff and Defendant entered into a Membership and Account Agreement (the “Agreement”) which governs this case. (See id. ¶¶ 2, 22, 44, 95, 141, 154, 167; Mem. in Supp. at 5, ECF No. 12.) However, the parties disagree as to which version of the Agreement controls. (Resp. in Opp'n at 5, ECF No. 24.) Plaintiff relies on the version of the Agreement attached to its Complaint (the “2013 Agreement,” ECF No. 1-1), while Defendant relies on the version attached to its Motion (the “2019 Agreement,”^[1] ECF No. 12-1), asserting that Plaintiffs version is outdated. Plaintiff disputes the authenticity of the 2019 Agreement. (Resp. in Opp'n at 5.)

The 2013 Agreement states:

If, on any day, the available funds in your share or deposit account are not sufficient to pay the full amount of a check, draft, transaction, or other item, plus any applicable fee, that is posted to your account, we may return the item or pay it.

(Compl. ¶ 24 (quoting 2013 Agreement ¶ 14(a)).)

Plaintiff challenges Defendant's alleged practice of charging overdraft fees on “Authorize Positive, Settle Negative Transactions,” or “APSN Transactions.” (Id. ¶ 27.) According to Plaintiff, when a customer makes a debit card transaction, Defendant immediately reduces the customer's account balance by the transaction amount, setting aside the necessary funds and adjusting the displayed “available balance” to reflect the deduction. (Id. ¶ 28.) The funds held back by Defendant are unavailable for the customer's use, having already been designated for paying for a specific transaction. (Id. ¶ 31.) Yet even though the customer's account initially had sufficient funds to cover the transaction because Defendant already held back the funds for payment, Defendant still charges an overdraft fee when, days later, the transaction settles into a negative account balance. (Id. ¶¶ 29-30.)

Even when a transaction with held-back funds does not overdraft the consumer's account, Defendant allegedly nonetheless assesses an overdraft fee on that same transaction when-during a subsequent, unrelated transaction-the account is overdrawn. (Id. ¶¶ 33, 35.) This fee is assessed in addition to the separate overdraft fee assessed on the subsequent, unrelated transaction. (Id.) In essence, when another transaction overdrafts the account, the bank assesses overdraft fees on that transaction and the previous transaction-despite that money having already been set aside.

Defendant charged Plaintiff $30 in overdraft fees for transactions on four (4) different days in 2023-even though Plaintiffs account balance had sufficient funds to cover the transactions. (Id. ¶¶ 25-26.) Plaintiff characterizes this practice as deceptive, misleading, and without any justification, other than to maximize Defendant's overdraft fee revenue. (Id. ¶¶ 35-36.) Defendant, however, contests Plaintiffs characterization of this process. Defendant claims that when a customer initially conducts a debit card transaction, the funds are not “set aside” as Plaintiff alleges. (Mem. in Supp. at 7-9.) And rather than a deceptive APSN scheme, Plaintiff was simply charged a fee each time the vender's bank requested money based on her debit card purchase. While this may indeed be the case, the Court must take Plaintiffs allegations as true at this stage.

Plaintiff also alleges that Defendant charges multiple fees for a single rejected item, in violation of the Agreement. (Id. ¶¶ 95-110.) Plaintiff states that Defendant rejects payment of an item, charging Plaintiff a $30 “return fee,” and then-without Plaintiffs knowledge or understanding-reprocesses payment for the same item three [(3)] more times, resulting in three [(3)] additional $30 “return fees.” (Id. ¶¶ 111-18.) Plaintiff contends that Defendant is aware that it assesses multiple fees on a single item because items which are rejected and submitted for repayment are labeled “RETRY PYMT” in Defendant's back-office records. (Id. ¶ 119.) Plaintiff also asserts that this practice is inconsistent with its contract and its representations and promises to consumers.

Finally, Plaintiff alleges that Defendant misrepresents its overdraft practices in its Opt-In Form (ECF No. 1-2), in violation of 12 C.F.R. § 1005 (“Regulation E”), specifically the opt-in rule contained in § 1005.17. (Compl. ¶¶ 179-84.) Plaintiff argues that the Opt-in Form fails to satisfy § 1005.17 because it does not adequately describe Defendant's overdraft practices. (Id. ¶ 184.) As a result of Defendant's inadequate Opt-in Form, Defendant failed to obtain Plaintiff's affirmative consent to overdraft fees, which is necessary to assess overdraft fees under Regulation E. (Id. ¶ 185.)

II. LEGAL STANDARD

A Rule 12(b)(6) motion “does not resolve contests surrounding facts, the merits of a claim, or the applicability of defenses.” Tobey v. Jones, 706 F.3d 379, 387 (4th Cir. 2013) (quoting Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992)). “A complaint need only ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.'” Ray v. Roane, 948 F.3d 222, 226 (4th Cir. 2020) (quoting Tobey, 706 F.3d at 387) (alteration in original). However, a “complaint must provide ‘sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Turner v. Thomas, 930 F.3d 640, 644 (4th Cir. 2019) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “Allegations have facial plausibility ‘when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Tobey, 706 F.3d at 386 (quoting Iqbal, 556 U.S. at 678).

A court “need not accept legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments.” Turner, 930 F.3d at 644 (quoting Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012)). In considering such a motion, a plaintiff's well-pleaded allegations are taken as true, and the complaint is viewed in the light most favorable to the plaintiff. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir. 2009). Legal conclusions enjoy no such deference. Iqbal, 556 U.S. at 678.

For a Rule 12(b)(6) motion, courts may consider documents that are either “explicitly incorporated into the complaint by reference” or “those attached to the complaint as exhibits.” Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 166 (4th Cir. 2016) (internal citations omitted). A court may consider a document not attached to the complaint, when “the document [is] integral to the complaint and there is no dispute about the document's authenticity.” Id. (citations omitted). “[I]n the event of conflict between the bare allegations of the complaint and any exhibit attached ..., the exhibit prevails.” Id. (quoting Fayetteville Invs. v. Com. Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991)) (alteration in original).

III. ANALYSIS

Plaintiff asserts the following claims against Defendant: Count One (1) - Breach of Contract, including Breach of the Duty of Good Faith and Fair Dealing, on behalf of Plaintiff and the Account Balance Class; Count Two (2) - Breach of Contract, including Breach of the Duty of Good Faith and Fair Dealing, on behalf of Plaintiff and the APSN Class; Count Three (3) - Breach of Contract, including Breach of the Duty of Good Faith and Fair Dealing, on behalf of Plaintiff and the Multiple Fee Class; and Count Four (4) -Violation of EFTA (Regulation E) on behalf of Plaintiff and the Classes. (Compl. ¶¶ 140-87.) Defendant moves to dismiss the Complaint in its entirety. (Mot. at 1.)

The principal dispute here revolves around a Membership and Account Agreement. Plaintiff contends the Court should assess the 2013 Agreement. The 2013 Agreement contains reasonably ambiguous language regarding how Defendant assesses fees for each “item.” Defendant, however, counters that the Court should consider the more recent 2019 Agreement. The 2019 Agreement is clear how Defendant assesses fees for each “item.” Because the parties do not agree about which contract controls, the Court cannot dismiss Plaintiffs Complaint on its face. See Martin Marietta Corp. v. Int'l Telecomms. Satellite Org, 991 F.2d 94, 97 (4th Cir. 1992) (finding that a court is unable to resolve contractual ambiguities at the motion to dismiss stage).

Defendant...