Lussoro v. Ocean Fin. Fed. Credit Union

456 F.Supp.3d 474

Audrey LUSSORO, on behalf of herself and all others similarly situated, Plaintiff,

v.OCEAN FINANCIAL FEDERAL CREDIT UNION, Defendant.

18-CV-7400 (PKC) (ST)

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

Signed April 22, 2020

Jason T. Brown, Patrick Sidney Almonrode, Brown, LLC, Jersey City, NJ, Jeffrey D. Kaliel, Sophia Goren Gold, Kaliel PLLC, Washington, DC, Adam A. Edwards, Pro Hac Vice, Arthur Stock, Pro Hac Vice, Gregory F. Coleman, Pro Hac Vice, Mark E. Silvey, Pro Hac Vice, Rachel Soffin, Pro Hac Vice, Greg Coleman Law PC, Knoxville, TN, for Plaintiff.

Wystan M. Ackerman, Kevin Daly, Pro Hac Vice, Robinson & Cole LLP, Hartford, CT, for Defendant.

MEMORANDUM & ORDER

PAMELA K. CHEN, United States District Judge:

Plaintiff Audrey Lussoro¹ brings this action against Defendant Ocean Financial Federal Credit Union alleging breach of contract and breach of the implied covenant of good faith and fair dealing claims, as well as violations of New York General Business Law § 349 (" § 349") and the Electronic Fund Transfers Act ("EFTA"), 15 U.S.C. §§ 1693 et seq. , and its implementing regulations, known as Regulation E, 15 C.F.R. §§ 1005 et seq.² Before the Court is Defendant's motion to dismiss Plaintiff's amended complaint in its entirety. For the reasons stated herein, Defendant's motion is granted in part and denied in part.

BACKGROUND

I. Relevant Facts³

Defendant is one of the largest credit unions in New York, with approximately $600 million in assets. (Am. Compl., Dkt. 28, ¶ 11.) Plaintiff has a checking account with Defendant. (Id. ¶ 12.) Customers with checking accounts, like Plaintiff, are issued debit cards that allow them to have electronic access to their checking accounts for purchases, withdrawals, and other electronic debit transactions. (Id. ¶ 13.) Plaintiff's checking account is governed by Defendant's standard account agreement ("the Contract"). (Id. ¶ 14; see also Am. Compl. Exhibit ("Ex.") A, Dkt. 28-1.) Pursuant to the Contract, Defendant charges a fee of $28 when a debit card transaction overdraws a customer's checking account. (Am. Compl., Dkt. 28, ¶ 14.)

A debit card transaction occurs in two stages. (Id. ¶ 28.) First, Defendant must authorize a purchase made by a debit card at the point of sale, i.e. , when a merchant "swipes" a customer's card. (Id. ) At that point, Defendant determines whether the customer's account is valid and whether there are sufficient funds in the account to cover the transaction amount. (Id. ) Also at that time, Defendant sequesters the funds necessary to cover these transactions via a "debit hold." (Id. ¶¶ 19–20.) However, these charges are not settled at the same time they are authorized; rather, "[s]ometime thereafter, the funds are actually transferred from the customer's account to the merchant's account," thereby settling the transaction. (Id. ¶ 31.)

Plaintiff alleges that Defendant frequently imposes overdraft fees on debit card transactions that had sufficient funds to cover the transaction at authorization. (Id. ¶¶ 16, 18.) Defendant allegedly imposes these fees because, even though there may be sufficient funds in an account at authorization, "sometime thereafter," at the time of settlement, intervening transactions have reduced the amount of funds available in the account so that there are no longer sufficient funds to cover the settling transaction. (See id. ¶¶ 16, 18, 31.) Defendant charges this overdraft fee even though it previously sequestered the funds necessary, via a debit hold, to cover such charges. (Id. ¶ 22; see also id. ¶ 40 (alleging that Defendant "actually authorizes transactions on positive funds, sets those funds aside on hold, then fails to use those same funds to ‘post’ those same transactions").) For example, on July 19, 2018, Plaintiff used her debit card in two transactions, one in the amount of $2.77 and the other in the amount of $3.11. (Id. ¶ 63; see also Defendant's Supplemental Brief ("Def.’s Supp. Br.") Ex. A,⁴ Dkt. 36-1, at ECF⁵ 2–3.) At that time, Plaintiff had sufficient funds in her account to cover these transactions, which were authorized accordingly by Defendant. (Id. ¶¶ 17–18, 63–64.) On July 20, 2018, Defendant, pursuant to its policy of posting different types of charges in a specific order (see Am. Compl. Ex. A, Dkt. 28-1, at 4), posted a $197 charge that significantly decreased the amount of money available in Plaintiff's account (Def.’s Supp. Br. Ex. A, Dkt. 36-1, at ECF 2). Therefore, later on July 20, 2018, when the charges from July 19, that had been previously authorized, were settled, there was not enough money in Plaintiff's account to cover these charges and she was assessed two $28 overdraft fees. (Am. Compl., Dkt. 28, ¶¶ 4, 63–64; Def.’s Supp. Br. Ex. A, Dkt. 36-1, at ECF 2.) Plaintiff refers to these types of transactions as "Authorize Positive, Purportedly Settle Negative Transactions" or "APPSN Transactions." (Am. Compl., Dkt. 28, ¶ 15.) Plaintiff challenges Defendant's practice of charging overdraft fees on APPSN transactions, alleging that they are in violation of the Contract and misleading to the average consumer. (Id. ¶¶ 23, 25–27.)

II. Procedural History

Plaintiff filed her original complaint on December 27, 2018. (Dkt. 1.) The Honorable Joseph F. Bianco granted Defendant permission to move to dismiss Plaintiff's complaint. (See Feb. 21, 2019 Minute Entry.)⁶ After Defendant served its motion to dismiss, Plaintiff filed an amended complaint. (Dkt. 28.) Defendant renewed its request to file a motion to dismiss as to Plaintiff's amended complaint (Dkt. 29), which the Court granted (Apr. 23, 2019 Docket Order). Defendant's motion to dismiss was fully briefed on June 14, 2019. (Dkts. 34–38.) The Court held oral argument on July 9, 2019. (July 9, 2019 Minute Entry.) At oral argument, the Court allowed the parties to file supplemental briefs. (Id. ; see also Dkts. 41–42.) The parties have since also filed supplemental letters with additional relevant authority. (See Dkts. 43–47.)

LEGAL STANDARD

To survive a motion to dismiss pursuant to Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "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." Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). "The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (internal citation omitted).

Determining whether a complaint states a plausible claim for relief is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679, 129 S.Ct. 1937 (internal citation omitted); see also Rothstein v. UBS AG , 708 F.3d 82, 94 (2d Cir. 2013). In addressing the sufficiency of a complaint, courts are required to accept the well-pleaded factual allegations contained within the complaint as true, see Bldg. Indus. Elec. Contractors Ass'n v. City of New York , 678 F.3d 184, 187 (2d Cir. 2012), but "need not credit conclusory statements unsupported by assertions of facts or legal conclusions and characterizations presented as factual allegations," In re Livent, Inc. Noteholders Sec. Litig. , 151 F. Supp. 2d 371, 404 (S.D.N.Y. 2001) (citing Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ). Additionally, a court "need not feel constrained to accept as truth conflicting pleadings that make no sense, or that would render a claim incoherent, or that are contradicted either by statements in the complaint itself or by documents upon which its pleadings rely, or by facts of which the court may take judicial notice." Id. at 405–06 (citing Hirsch v. Arthur Andersen & Co. , 72 F.3d 1085, 1095 (2d Cir. 1995) ). At the pleadings stage, a court must limit its inquiry to the facts alleged in the complaint, the documents attached to the complaint or incorporated therein by reference, and "documents that, while not explicitly incorporated into the complaint, are ‘integral’ to [the] plaintiff's claims and were relied upon in drafting the complaint." Id. at 404 (citing Cortec Indus., Inc. v. Sum Holding L.P. , 949 F.2d 42, 44 (2d Cir. 1991) ).

DISCUSSION

Plaintiff brings four claims against Defendant: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) violation of New York General Business Law § 349 ; and (4) violation of EFTA's Regulation E. (Am. Compl., Dkt. 28, at 17–21.) The Court addresses each claim in turn.

I. Plaintiff's Breach of Contract Claim

Plaintiff alleges that Defendant breached the Contract by charging overdraft fees for Plaintiff's July 19, 2018 transactions, even though Plaintiff had sufficient funds to cover those transactions at the time they were authorized. (Plaintiff's Memorandum in Opposition ("Pl.’s Opp. Br."), Dkt. 38, at 4–10.) Defendant argues that Plaintiff's claim fails for two reasons: (1) Plaintiff has waived her claim by failing to report the overdraft charges to Defendant within 60 days, as required by the Contract, and (2) the Contract clearly allows Defendant to charge overdraft fees when an account has insufficient funds to cover a transaction at the time of settlement. (Def.’s Supp. Br., Dkt. 36, at 2–4.)

A. Waiver

Defendant first argues that Plaintiff has waived her breach of contract claim because she failed to report the overdraft fees as an error, as required by the Contract. (Def.’s Supp. Br., Dkt. 36, at 2; see also Am. Compl. Ex. A, Dkt. 28-1, at 3–4 ("In addition to your duty to review your statements for unauthorized signatures, alterations and forgeries, you...