Georgion v. Bank of Am. Corp

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NANCY GEORGION; SUSAN PURDY; THAN SILVERLIGHT; CHRISTINA SMITH; and DONNA WILLIAMS on behalf of themselves and all others similarly situated, Plaintiffs, v. BANK OF AMERICA CORPORATION, Defendant.

No. 3:22-cv-00618-RJC-WCM

United States District Court, W.D. North Carolina, Charlotte Division

August 29, 2023

MEMORANDUM AND RECOMMENDATION

W CARLETON METCALF, UNITED STATES MAGISTRATE JUDGE

This matter is before the Court on a Motion to Dismiss (Doc. 11) filed by Defendant Bank of America Corporation (“BAC”). The Motion has been referred to the undersigned pursuant to 28 U.S.C. § 636 for the entry of a recommendation.

I. Relevant Procedural Background

On November 11, 2022, Plaintiffs Nancy Georgion (“Georgion”), Susan Purdy (“Purdy”), Than Silverlight (“Silverlight”), Christina Smith (“Smith”), and Donna Williams (“Williams”) filed this action on behalf of themselves and all others similarly situated.

On January 10, 2023, BAC filed the Motion to Dismiss. Doc. 11. Plaintiffs have responded, and BAC has replied. Docs. 26, 27.

II. Plaintiffs' Allegations

Plaintiffs' claims arise out of Bank of America's alleged use of Zelle, an electronic payment system developed by the major banks to compete with consumer payment systems such as PayPal, Venmo, and CashApp.^[1] Doc. 1 at ¶ 1.

A. Early Warning Services and Zelle

Plaintiffs allege that Early Warning Services, LLC (“Early Warning”) is a privately held financial services company owned by Bank of America and other banks. Doc. 1 at ¶ 28. Early Warning's principal asset is Zelle. Id.

Zelle is a “peer to peer” payment service that allows “Network Banks” to “handle transfers without paying” third party fees. Id. at ¶ 36. Zelle marketed itself as being “‘faster' and ‘safer' than its competition.because it is ‘backed by the banks.'” Id. at ¶ 37; see also Id. at ¶¶ 38-40 (alleging advertisements and public interviews in which Zelle was touted as safe, secure, and backed by the banks).

Although Zelle was created to compete with other peer to peer payment services, it differs from those services “in several important respects.” Id. at ¶ 43.

First, “the transfer goes immediately from bank account to bank account - there is no entity holding onto the money while the transaction is verified or before it's collected by the recipient.... Instead, the money transfers immediately from a BOA customer's bank account to the recipient's bank account.” Id. at ¶ 43. Because Zelle transfers occur in “real-time,” Plaintiffs characterize the transfers as “immediate and unrecoverable.” Id. at ¶ 51.

Second, Zelle is “automatically integrated” into customer's bank accounts (including those customers who are not aware of the Zelle feature in their online accounts), is “always on,” and cannot be removed or disabled by the customer. Id. at ¶¶ 44, 45, 48.

Despite BAC's awareness that its customers are losing “tens of millions of dollars every year specifically due to unauthorized transactions via Zelle,” BAC “makes repeated promises on its website, app, and elsewhere that Zelle is a ‘fast, safe and easy way to send and receive money,' and that its online banking offers a ‘secure, convenient experience.'” Id. at ¶¶ 5 (emphasis in Complaint), 62; see also ¶ 63 (quoting BAC's “digital webpage”); ¶¶ 67-69 (alleging that BAC knows Zelle is not secure based on consumer complaints and numerous news reports). Further, Plaintiffs allege that BAC's marketing does not “warn potential [Bank of America] customers of the risks of being scammed by persons impersonating their banks due to Zelle.” Id. at ¶ 70.

Additionally, “Bank of America prominently displays that it guarantees customers security on the online and mobile bank website.” Id. at ¶ 75 (“You can confidently use Online or Mobile Banking - we guarantee that you will not be liable for fraudulent transactions when reported promptly....”) (emphasis in Complaint); ¶ 76 (“you are not liable for unauthorized transfers or bill payments made via Online or Mobile Banking is reported promptly”); (emphasis in Complaint) ¶ 77 (“You're never liable for unauthorized purchases or transactions - as long as they're reported promptly”).

Bank of America's Online Banking Service Agreement (the “Online Service Agreement”) “also repeatedly promises users that, if they timely report fraud, that they will not be liable at all for fraudulent transfers, without limitation.” Id. at ¶ 79 (quoting the Online Service Agreement, Section 7(B) (“..You will have no liability for unauthorized transactions if you notify us withn 60 days....”) (emphasis in Complaint).

Plaintiffs allege that the Online Service Agreement requires BAC to conduct a reasonable investigation when a customer reports an error, to provisionally credit the customer's account during that investigation, and to provide the customer with the documents BAC used during that investigation. Id. at ¶ 80 (quoting Section 7(A) of the Online Service Agreement).

Finally, Plaintiffs contend that BAC “falsely tells customers that it will protect users by verifying the identity of the person receiving money through Zelle.” Id. at ¶ 83.

Plaintiffs allege that, despite these assurances, BAC has a policy of denying claims arising from Zelle transactions and that BAC refunded “less than 45% of the overall dollar value of claims made” during the period between January 2021 and September 2022. Id. at ¶¶ 85, 86, 87.

B. Plaintiffs and Their Claims

In overview, Plaintiffs, who are Bank of America account holders, allege that they were victims of fraud perpetrated by third parties who used Zelle to instantly and permanently transfer money out of Plaintiffs' Bank of America accounts (the “Transfers”), and that Bank of America's response to Plaintiffs' reports of this fraud were inadequate and contrary to Bank of America's previous representations. Id. at ¶¶ 12-26.

Plaintiffs assert a claim based on violations of the Electronic Funds Transfer Act, 15 U.S.C. § 1693, et seq. (“EFTA”) and the EFTA's associated regulations, as well as claims for breach of the Online Service Agreement, breach of the implied covenant of good faith and fair dealing, and, to the extent applicable to each Plaintiff, violations of state specific consumer protection laws.^[2]

III. Legal Standard

When considering a motion made pursuant to Rule 12(b)(6), the court, accepting the allegations in the complaint as true and construing them in the light most favorable to the plaintiff, determines “whether the complaint on its face states plausible claims upon which relief can be granted.” Francis v. Giacomelli, 588 F.3d 186, 189, 192 (4th Cir. 2009); accord Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 253 (4th Cir. 2009).

The court, however, is not required to accept “legal conclusions, elements of a cause of action, and bare assertions devoid of further factual enhancement.” Consumeraffairs.com, 591 F.3d at 255; see Giacomelli, 588 F.3d at 192. That is, while “detailed factual allegations” are not required, the complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); accord Consumeraffairs.com, 591 F.3d at 255. “A claim has 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); accord Consumeraffairs.com, 591 F.3d at 255. In short, the well-pled factual allegations must move a plaintiff's claim from conceivable to plausible. Twombly, 550 U.S. at 570; Consumeraffairs.com, 591 F.3d at 256.

IV. Materials Considered

BAC has attached the following documents to its Motion to Dismiss: Exhibit 1 (Doc. 11-3): described as a screenshot of a webpage cited in Plaintiffs' Complaint at Doc. 1 at ¶ 77, n. 30.

Exhibit 2 (Doc. 11-4): described as a screenshot of a webpage cited in Plaintiffs' Complaint at ¶77, n. 28.

Exhibit 3 (Doc. 11-5): the Online Service Agreement, effective February 18, 2022, and which BAC asserts was operative at the time of the Transfers challenged by Georgion, Silverlight, Smith, and Williams.^[3]

Exhibit 4 (Doc. 11-6): described as a screenshot of a Bank of America webpage entitled “How to Avoid Scams.”

Exhibit 5 (Doc. 11-7): described as a screenshot of a Bank of America webpage providing an overview of the online security center.

Exhibit 6 (Doc. 11-8): described as a screenshot of a Bank of America webpage describing Zelle.

BAC contends that these exhibits are sufficiently referred to in Plaintiffs' Complaint such that they may be considered in conjunction with the Motion to Dismiss. BAC further contends that various warnings included in these exhibits describe the circumstances of fraud alleged by each named Plaintiff, such that Plaintiffs should have been aware of the potential scams about which they now complain.

Plaintiffs object to the Court's consideration of the exhibits, other than the Online Service Agreement. In particular, Plaintiffs assert that the screenshots of the webpages submitted by BAC are not authenticated, are not referenced in the Complaint, and post-date the fraudulent transactions supporting Plaintiffs' claims.

For purposes of this Memorandum, the undersigned has considered the Online Service Agreement. The undersigned has also considered language from Bank of America webpages, but only to the extent it is quoted in the Complaint. See Witthohn v. Fed. Ins. Co., 164 Fed.Appx. 395, 396 (4th Cir. 2006); Philips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009); cf Presnell v. Snap-On Securecorp, Inc., 583 F.Supp.3d 702, 707 n. 2 (M.D. N.C. 2022) (considering website where both parties “cited to the website and presented their...