Lamoureux v. Trustco Bank

592 F.Supp.3d 14

Robert N. LAMOUREUX, et al., individually and on behalf of others similarly situated, Plaintiffs,

v.TRUSTCO BANK, et al., Defendants.

1:21-CV-0336 (GTS/CFH)

United States District Court, N.D. New York.

Signed March 16, 2022

J. PATRICK LANNON, ESQ., JOHN C. CHERUNDOLO, ESQ., CHERUNDOLO LAW FIRM, PLLC, Counsel for Plaintiff, AXA Tower One, 15th Floor, 100 Madison Street, Syracuse, NY 13202.

JEFFREY D. KALIEL, ESQ., SOPHIA GOREN GOLD, ESQ., KALIEL GOLD, PLLC, Co-Counsel for Plaintiff, 1100 15^th Street NW, 4^th Floor, Washington, DC 20005.

KEVIN P. RODDY, ESQ., WILENTZ GOLDMAN & SPITZER PA, Co-Counsel for Plaintiff, 90 Woodbridge Center Drive, Suite 900, Woodbridge, NJ 07095.

JEFFREY BILS, ESQ., TARAS KICK, ESQ., THE KICK LAW FIRM, Co-Counsel for Plaintiff, 815 Moraga Drive, Los Angeles, CA 90049.

CRYSTAL R. PECK, ESQ., JOHN W. BAILEY, ESQ., RYAN P. BAILEY, ESQ., BAILEY, JOHNSON & PECK, P.C., Counsel for Defendant Trustco Bank, 5 Pine West Plaza, Suite 507, Albany, NY 12205.

DECISION and ORDER

GLENN T. SUDDABY, Chief United States District Judge

Currently before the Court, in this putative class action filed by Robert N. Lamoureux ("Plaintiff") against Defendant Trustco Bank ("Bank") and Does 1 through 100 (collectively, "Defendants"), is the Bank's motion to dismiss Plaintiff's Complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). (Dkt. No. 17.) For the reasons set forth below, the Court grants in part and denies in part the Bank's motion.

I. RELEVANT BACKGROUND

A. Plaintiff's Complaint

Generally, in his Complaint filed on March 24, 2021, Plaintiff alleges that the Bank violated the contractual agreements governing his accounts, as well as statutory law, when engaging in the following four practices: (1) failing to comply with Regulation E's Opt-In Rule by not fulfilling certain Regulation E prerequisites in its Overdraft Protection contract document (Dkt. No. 1, at ¶¶ 12-14); (2) assessing overdraft fees ("OD fees") on "Authorized Positive, Purportedly Settle Negative Transactions" ("APPSN Transactions") (id. at ¶¶ 15-59); (3) assessing multiple $36 insufficient fund fees ("NSF fees") on electronic transactions or checks when they are reprocessed after being returned for insufficient funds (id. at ¶¶ 55-68); and (4) in late August 2020 to September 2020, mishandling the operation of the Bank's software system meant to be utilized by its bank customers for electronic transactions, which caused customers to incur multiple NSF fees and/or OD fees (id. at ¶¶ 103, 114).

Based on these factual allegations, Plaintiff asserts the following six claims: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) unjust enrichment/restitution; (4) money had and received; (5) violation of the Electronic Fund Transfers Act ("EFTA") (Regulation E); and (6) violation of New York General Business Law ("GBL") § 349. (Dkt. No. 1.)

B. Summary of Parties’ Briefing on the Bank's Motion

1. The Bank's Memorandum of Law

Generally, in support of its motion to dismiss, the Bank sets forth five arguments. (Dkt. No. 17-8.)

First, the Bank argues that the Complaint does not sufficiently state a claim for breach of contract. (Id. at 3-19.) More specifically, the Bank argues that Plaintiff does not sufficiently allege that a breach of contract occurred based on the APPSN or ATM/one-time debit card transactions for three reasons: (1) Plaintiff's Complaint does not allege that he did not receive a Regulation E Opt-In contract or that Trustco breached the terms of the Regulation E Opt-in contract, and, even if the Complaint did so, the claim must fail because Plaintiff never alleges that he entered into a Regulation E Opt-In contract (id. at 5-6);¹ (2) Plaintiff's checking account statements and overdraft fee notices confirm that the Bank did not charge OD fees on APPSN or ATM/one-time debit card transactions (id. at 6-9); and (3) even if the Bank assessed the OD fees, the Bank's account documents unambiguously state that it will assess OD fees depending on whether sufficient funds exist in the account when a transaction is settled or posted, thereby authorizing the challenged conduct (id. at 10-13). The Bank further argues that Plaintiff does not sufficiently allege that the Bank breached the contract by allegedly charging NSF fees on re-presented payment for two reasons: (1) Plaintiff's Complaint does not allege that the Bank charged Plaintiff NSF fees on any re-presented payment (id. at 9-10); and (2) the relevant account documents unambiguously allow the Bank to charge multiple NSF fees on the same re-presented payment, and therefore Plaintiff's allegations cannot constitute a breach of contract (id. at 13-19).

Second, the Bank argues that Plaintiff fails to state a claim for breach of the implied covenant of good faith and fair dealing, because he does not allege facts independent of or separate from the breach-of-contract claim. (Id. at 19-20.) More specifically, the Bank argues that, because Plaintiff does not plausibly suggest that the Bank complied with the literal terms of the Account Disclosure Notice but plausibly suggests that the Bank acted in a way to undermine the purpose of the contract so as to deprive Plaintiff of a right under the agreement, he cannot state a separate cause of action for breach of the implied covenant of good faith and fair dealing. (Id. at 20.)

Third, the Bank argues that Plaintiff fails to state a claim for unjust enrichment, restitution, and money had and received, because these claims are merely duplicative of his breach-of-contract claim. (Id. at 20-21.)

Fourth, the Bank argues that Plaintiff fails to state a claim for violation of the EFTA (Regulation E), because he never alleges that he opted into a Regulation E Opt-In contract. (Id. at 21.) The Bank also argues that the Regulation E claim is time barred, because it is subject to a one-year statute of limitations, which runs from the date of the occurrence of the first violation. (Id. )

Fifth, the Bank argues that Plaintiff fails to state a claim for violation of New York GBL § 349 for two reasons: (1) Plaintiff does not allege an act or practice that was misleading in a material respect separate and apart from allegations that the Bank breached the contractual agreements (id. at 22-23); and (2) Plaintiff does not allege that he saw, read, or relied upon misrepresentations made by the Bank because he does not allege to have read any of the relevant account documents and his Complaint does not include factual allegations regarding what Plaintiff relied upon in forming that misrepresentation (id. at 23).

2. Plaintiff's Opposition Memorandum of Law

Generally, in opposition to the Bank's motion to dismiss, Plaintiff sets forth ten arguments. (Dkt. No. 22.)

First, Plaintiff argues that the overdraft promises in the account documents support Plaintiff's allegations regarding OD fees assessed on APPSN transactions. (Id. at 7-15.) More specifically, Plaintiff argues that, at the moment that the Bank authorizes a debit card transaction, it places a "debit hold" on the account (i.e., it reduces the account's available balance, places a hold on funds in the amount of the transaction, and therefore makes those funds off-limits for other transactions). (Id. at 4-6.) Plaintiff argues that a sentence-by-sentence analysis of the "Available Balance" section of the Account Disclosure Notice confirms that it bars OD fees on the APPSN transactions, because the provision states that (1) the "available balance" is the balance used to determine overdrafts," (2) the funds are immediately placed on "hold" and removed from the available balance for debit card transactions, (3) the "hold" endures for three days and expires at the end of three days only if a transaction has not yet settled, and (4) before the end of the three-day window, the "hold" remains in place "from the time of the authorization to the time the match authorization transaction is paid from [the] account." (Id. at 8-9.)² Plaintiff argues that the only possible conclusion from this language is that for debit card transactions that do settle before three days—like those Plaintiff identifies in his Complaint—the holds have not expired and stand ready to be applied to the debit card transaction for which they were initially held. (Id. at 9.) Plaintiff also argues that the account documents bar OD fees on APPSN transactions because the Bank repeatedly promises that it determines overdrafts when it decides to "authorize and pay" debit card transactions, which is a promise to accountholders that "authorization" is coterminous with "payment" and is the key moment when the Bank determines overdraft fees on debit cards, rather than that moment being at the time of settlement. (Id. at 9-12.)

Second, Plaintiff argues that the Schedule of Service Charges (or "Fee Schedule"), which the Account Disclosure Notice identifies as the document listing all fees, bars multiple NSF fees on the same re-presented payment. (Id. at 12-15.) Plaintiff argues that the Account Disclosure Notice likewise permits only one fee on the same "item." (Id. at 13.) Plaintiff argues that an "item" is the same "item" no matter how many times it is submitted or returned, which is the only meaning consistent with the Nacha Rules, the New York Uniform Commercial Code, and standard industry usage. (Id. at 13-15.) Plaintiff argues that the Bank promised him that it would assess a single fee when he sought to make a single ACH payment or wrote a single check, even if the merchant attempted to collect those funds multiple times. (Id. at 13.) Plaintiff argues that, at best, the Account Disclosure Notice is ambiguous and therefore the Court must deny the motion. (Id. at 15.)

Third, Plaintiff argues that more than forty courts across the country have rejected the Bank's position on NSF fees. (Id. at 15-17.) Plaintiff argues that, in the past eighteen months, fourteen federal courts, including six in the...