Exarhos v. JPMorgan Chase Bank, N.A.
| Decision Date | 20 July 2021 |
| Docket Number | 20 C 7754 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | BOBBY EXARHOS & TARA EXARHOS, Plaintiffs, v. JPMORGAN CHASE BANK, N.A., Defendant. |
Plaintiffs Bobby and Tara Exarhos, residents of Chicago, Illinois, filed suit against Defendant JPMorgan Chase Bank, N.A. (“Chase”) alleging violations of the Electronic Fund Transfer Act (“EFTA”), 15 U.S.C. § 1693 et seq., for failure to properly handle their complaints regarding unauthorized transfers on two of their Chase checking accounts. Chase now moves to dismiss the case for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court denies Chase's motion because: (1) the Court cannot conclude at this stage that the Exarhoses' are liable for the unauthorized transfers on their joint checking account ending in 5372 (“First Chase Account”) and (2) the Exarhoses adequately alleged that they provided notice of the single unauthorized transfer on their account ending in 8718 (“Second Chase Account”).
BACKGROUND[1]
The Exarhoses are Chase and Amazon account holders who were victims of the July 2019 Capital One and Amazon data breach. Over a period of nine months, from October 2, 2019 through July 22, 2020, fourteen debit transfers totaling more than $500 and named “Amazon.com Servi Internet” or “Amazon Marketpla Internet” appeared on the First Chase Account. The Exarhoses did not authorize or benefit from any of the transfers. Doc. 1 at 2. Eight of the fourteen transfers occurred in June and July 2020. The Exarhoses did not recognize that these transfers did not relate to their own Amazon purchases until July 2020. On July 24, 2020, Bobby reported the transfers to Chase through the bank's Dispute Transaction Form. That same day, the Exarhoses received a letter from Chase indicating that it would provide temporary credit for one of the disputed transfers, dated October 2, 2019 in the amount of $1.79.[2] Around July 27 the Exarhoses closed the First Chase Account and opened the Second Chase Account. Just over one week later, on August 5 an unauthorized $1.36 charge named “Amazon Marketpla Internet” appeared on the Second Chase Account. Id. at 4.
On August 14, the Exarhoses received a letter from Chase stating that it would not credit certain reported transfers because the Exarhoses are “responsible for any transactions that occur[red] more than 60 days after [Chase] sen[t] the first statement on which unauthorized transactions appear[ed]” on October 16, 2019. Doc. 1-1 at 2. In response, on August 24, the Exarhoses, through counsel, sent Chase a letter disputing the transfers on the First Chase Account, with the exception of the October 2, 2019 charge and noting that the Exarhoses believe they are victims of the July 2019 Capital One and Amazon data breach. The letter demanded that Chase provide a written explanation of its findings and all information on which it relied and attached an exhibit which listed all of the disputed transfers.
The Exarhoses' counsel also sent a second dispute letter to Chase that day reporting the unauthorized transfer on the Second Chase Account. The letter mistakenly indicated that the transfer amount was $211.99, instead of the actual transfer amount of $1.36. However, an exhibit attached to the letter included and circled the correct amount.[3] The letter also noted that the Exarhoses were victims of the July 2019 Capital One and Amazon data breach, referenced the connection between the disputed transfers on their two Chase accounts and demanded that Chase take necessary measures to protect their accounts. Chase did not respond to either letter and did not issue the Exarhoses any provisional credits. On October 5, the Exarhoses' counsel sent a follow-up letter to Chase regarding the disputed transfers. Chase did not respond to this letter and did not issue any provisional credits.
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed.R.Civ.P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Kubiak v. City of Chicago, 810 F.3d 476, 480-81 (7th Cir. 2016). To survive a Rule 12(b)(6) motion, the complaint must assert a facially plausible claim and provide fair notice to the defendant of the claim's basis. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Adams v. City of Indianapolis, 742 F.3d 720, 728-29 (7th Cir. 2014). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
The EFTA provides “a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems.” 15 U.S.C. § 1693(b). The “primary objective” of the EFTA “is the provision of individual consumer rights.” Id. Accordingly, the EFTA contains error resolution procedures and consumer protections for unauthorized electronic fund transfers. See 15 U.S.C. §§ 1693f, 1693g. Specifically, the EFTA requires a financial institution that receives sufficient timely notice from a consumer of an error to: “[1] investigate the alleged error, [2] determine whether an error has occurred, and [3] report or mail the results of such investigation and determination to the consumer within ten business days.” 15 U.S.C. § 1693f(a). The EFTA “obligates consumers to report transfer errors to financial institutions 60 days after having been transmitted the written documentation containing the error.” Camacho v. JPMorgan Chase Bank, No. 14-cv-04048, 2015 WL 5262022, at *2 (N.D. Cal. Sept. 9, 2015) (citing 15 U.S.C. § 1693f(a)). For the purposes of the EFTA, an unauthorized transfer is an error. 15 U.S.C. § 1693f(f)(1). EFTA Regulation E (“Regulation E”) also requires consumers to “report an unauthorized electronic fund transfer that appears on a periodic statement within 60 days of the financial institution's transmittal of the statement to avoid liability for subsequent transfers.” 12 C.F.R. § 205.6(b)(3).
However, the EFTA places the burden of proof on the financial institution to show that the consumer is liable for unauthorized transfers, 15 U.S.C. § 1693g(b), and specifically limits a consumer's liability for unauthorized transfers to the lesser of $50 or the amount of the transfers that occur “prior to the time the financial institution is notified of . . . an unauthorized electronic fund transfer, ” id. § 1693g(a). The EFTA further states that “reimbursement need not be made to the consumer for losses the financial institution establishes would not have occurred but for the failure of the consumer to report [the unauthorized transfers] within sixty days of transmittal of the statement.” Id. § 1693g(a). Therefore, the EFTA clearly holds consumers liable for transfers that the financial institution establishes would not have occurred if the consumer had timely notified it of the transfer but limits that liability regardless of whether the consumer timely reports the transfers. In other words, the EFTA may still provide recovery for consumers who fail to timely report unauthorized transfers. See, e.g., Perry v. OCNAC #1 Fed. C.U., 423 F.Supp.3d 67, 78 (D.N.J. 2019) (); Cifaldo v. BNY Melon Inv. Serv. Tr. Co., No. 17-cv-00842, 2017 WL 6513342, at *4 (D. Nev. Dec. 19, 2017) (). Similarly, Regulation E states that if a consumer fails to provide timely notification of unauthorized transfers, “the consumer's liability shall not exceed the amount of the unauthorized transfers that occur after the close of the 60 days and before notice to the institution, and that the institution establishes would not have occurred had the consumer notified the institution within the 60-day period.” 12 C.F.R. § 205.6(b)(3).
Chase argues that because the Exarhoses failed to timely notify it of the unauthorized transfers on the First Chase Account, the EFTA time-bars their claims and precludes them from recovery. See, e.g., Camacho, 2015 WL 5262022, at *4 ( ). The Exarhoses do not dispute that they failed to timely report a number of the unauthorized transfers but argue that Chase bears the burden of establishing that the unauthorized transfers would not have occurred if the Exarhoses had timely notified Chase and that whether Chase can meet that burden is a factual determination not appropriate at this stage. Rallis v. First Gulf Bank, N.A., No. 08cv102, 2008 WL 4724745, at *4 (N.D. Fla. Oct. 24, 2008) (...
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