United States District Court, N.D. California
ORDER ON DEFENDANT'S MOTION TO DISMISS FIRST
AMENDED COMPLAINT AND MOTION TO STRIKE CLASS ALLEGATIONS RE:
DKT. NOS. 48, 49
ILLSTON United States District Judge
the Court are defendant's motions to dismiss
plaintiff's first amended complaint and to strike
plaintiff's class allegations, or in the alternative, to
deny class certification. Dkt. Nos. 48, 49. Pursuant to Civil
Local Rule 7-1(b), the Court determines that this matter is
appropriate for resolution without oral argument and VACATES
the hearing set for March 24, 2017. For the reasons set forth
below, the Court DENIES defendant's motion to dismiss and
GRANTS IN PART and DENIES IN PART defendant's motion to
strike class allegations.
Sondra Ramirez (“Ramirez”) filed this class
action lawsuit on July 5, 2016, seeking damages and
injunctive relief against defendant Baxter Credit Union
(“BCU”) in connection with BCU's overdraft
charge policy. Compl. (Dkt. No. 1). On January 12, 2017, the
Court granted BCU's motion to dismiss plaintiff's
complaint, in part, with leave to amend. Dkt. No. 40. Ramirez
filed an amended complaint against BCU, alleging the same six
causes of action: (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 Transfer Act
(“EFTA”); and (6) violation of California's
Unfair Competition Law (“UCL”). First Am. Compl.
(“FAC”) (Dkt. No. 46) ¶¶ 55-96.
the class period, Ramirez was a BCU member. FAC ¶ 5.
When Ramirez opened her BCU checking account, she
affirmatively opted in to BCU's overdraft protection,
which BCU refers to as its “Courtesy Payment
service.” See Id. ¶¶ 23, 37;
id. Ex. 1, Membership Enrollment Form (Dkt. No.
46-1), at 1-2. Ramirez's Membership Enrollment Form
included a federally mandated, separate opt-in provision with
the heading “What You Need to Know About Overdraft
Fees.” FAC, Ex. 1 at 2.
opt-in states that “[a]n overdraft occurs when
you do not have enough money in your account to cover a
transaction, but [BCU] pay[s] it anyway.” Id.
(emphasis in original). It further describes the credit
union's Courtesy Payment service, explaining that BCU
automatically authorizes and pays overdrafts for certain
transactions, including checks and automatic bill payments.
Id. The opt-in notes that BCU “does
not authorize and pay overdrafts for” ATM
transactions and one-time debit card transactions, unless the
applicant opts in immediately below. Id. (emphasis
in original). The opt-in describes the amount of fees BCU
charges for overdrafts ($29 per overdraft), but does not
describe how the credit union calculates a member's
balance for purposes of determining whether she has
overdrafted her account. See Id. Ramirez alleges
that the overdraft opt-in does not accurately describe
BCU's actual overdraft service. FAC ¶¶ 22-23,
she opened her account, Ramirez and her joint applicant opted
in to the Courtesy Payment service for ATM and one-time debit
card transactions by checking the box beside “I
do want [BCU] to authorize and pay
overdrafts on my ATM and one-time (individual, not recurring)
Debit Card transactions.” Id. (emphasis in
original). The two signed the Membership Enrollment Form just
below the opt-in provision. Id. In the signature
block, the form states that “[b]y signing below you
acknowledge that you have received and agreed to the terms
and conditions contained on both sides of this form and in
the Deposit Account Agreement, which includes . . . Fee
disclosures . . . .” Id.
Deposit Account Agreement, attached as Exhibit 2 to
plaintiff's first amended complaint, is a 33-page
document containing detailed disclosures regarding the rights
and responsibilities of Ramirez and BCU with respect to
Ramirez's account. See FAC, Ex. 2 (Dkt. No.
46-2). Ramirez alleges that the Deposit Account Agreement
also fails to accurately describe BCU's overdraft
service. Id. ¶¶ 24-25, 27. While BCU's
Courtesy Payment service is not identified in the account
agreement table of contents, it is described in some detail
under the section entitled “Your Checking
Account.” See FAC, Ex. 2, Table of Contents;
id. at 11. In brief, the Courtesy Payment service
disclosure first explains eligibility criteria for the
service, and then describes how the service functions.
See Id. The agreement provides, in relevant part:
Courtesy Payment may be granted that will allow you to
overdraw the available funds in your Account. We pay
overdrafts at our discretion, which means we do not guarantee
that we will always authorize and pay any type of
transaction. Our Courtesy Payment service will attempt to
pay, when possible, checks, [Automated Clearing House
transfers], and recurring Debit Card purchases presented
against insufficient available funds in your account. . . .
Our current service charge is $29 for each overdraft. A
Courtesy Payment service charge will not be charged for any
transaction that brings the available balance in your account
negative by $5 or less. A Courtesy Payment service charge per
each occurrence that results in the available balance in your
account becoming negative by more than $5 will be charged to
your account as stated in the Product Feature,
Truth-In-Savings and Service Charge and Fee disclosures.
There is no limit to the number of service charges that can
be charged for overdrawing the available balance in your
account. . . .
Id. The agreement contains “Funds Availability
Disclosures” that describe when deposited funds become
“available.” See Id. at 22-23. The
agreement also describes that, when a customer uses her Visa
Debit Card to make purchases, funds to cover those purchases
“will be deducted from [the] checking account. If the
balance in [the] account is not sufficient to pay the
transaction amount, [BCU] may treat the transaction as an
overdraft request pursuant to [the] Courtesy Payment program
. . . .” Id. at 23. The last page of the
Deposit Account Agreement is the “Service Charge and
Fee Schedule, ” which lists the $29 “Courtesy
Payment service charge (each transaction that results in the
available balance in the account being negative by more than
$5).” Id. at 33. The agreement also contains
nearly a full page of definitions. Id. at 1-2.
Nowhere, however, does the Deposit Account Agreement define
“available balance” or describe how it is
alleges that on January 16, 2016, she had a positive balance
of $347.86 in her checking account. FAC ¶ 37. When
Ramirez bought something for $60.97 with her debit card, BCU
assessed an overdraft fee against her account. Id.
Plaintiff alleges that this is but one example of an ongoing
course of conduct. See Id. ¶¶ 37, 40.
dispute, and others like it, hinge on how a financial
institution calculates account balances when determining
whether an overdraft has occurred, and whether the
institution adequately informs accountholders of these
overdraft practices. A checking account has two balances: a
“ledger” balance (or “actual”
balance), which represents the official account balance at
any given time, and an “available” balance, which
represents the funds immediately available to the
accountholder. See Id. ¶ 26. Sometimes these
two balances are the same, but often they are not. For
instance, when an accountholder deposits a check, banks
generally make only a portion of that check available
immediately, with the remainder held for a certain time
period while the funds clear. See Id. The
account's ledger balance might reflect the full amount of
the deposit right away, but the available balance would
include only a portion of that check deposit until the check
clears. Or, as another example, when an accountholder uses
his or her debit card to make a purchase in a store or
online, the merchant might place a “credit hold”
on those funds, with the actual debit against the account
occurring one or two days later when the transaction settles.
See Id. The account's ledger balance does not
reflect such a transaction until it settles, but the
available balance reflects the transaction immediately.
alleges that, based on the opt-in language in her Membership
Enrollment Form and the disclosures in the Deposit Account
Agreement, BCU promised to use a member's ledger balance
to determine when an overdraft occurs, when in actuality, the
credit union uses a member's available balance.
Id. ¶¶ 25-27. As a result, an
accountholder may inadvertently overdraft his or her account,
and do so repeatedly, by relying on the ledger balance.
Ramirez alleges that by misleading its members in this
manner, BCU has violated the EFTA provisions governing
overdrafts and breached the terms of the opt-in form and the
Deposit Account Agreement (together, the “Customer
brings this case on behalf of two separate classes, the
“Positive Balance Class” and the
“Regulation E Class.” See FAC
¶¶ 42-43. The “Positive Balance Class”
is defined as “[a]ll United States residents who have
or have had accounts with BCU who incurred overdraft fees
when the ledger balance in the checking account was
sufficient to cover the transactions in the four years
preceding the filing of this Complaint.” Id.
¶ 43. The “Regulation E Class” is defined as
“[a]ll United States residents who have or have had
accounts with BCU who incurred overdraft fee(s) for ATM or
non-recurring debit card transactions since August 15,