Foreman v. Bank of Am., N.A.
| Decision Date | 13 August 2019 |
| Docket Number | Case No. 18-cv-01375-BLF |
| Citation | 401 F.Supp.3d 914 |
| Court | U.S. District Court — Northern District of California |
| Parties | James FOREMAN, et al., Plaintiffs, v. BANK OF AMERICA, N.A., Defendant. |
Bryan Scott Gowdy, Pro Hac Vice, Creed and Gowdy, PA, Jacksonville, FL, Jeffrey Douglas Kaliel, Sophia Goren Gold, Kaliel PLLC, Hassan Ali Zavareei, Tycko & Zavareei LLP, Washington, DC, for Plaintiffs.
Danielle Nicole Oakley, O'Melveny and Myers LLP, Newport Beach, CA, Matthew W. Close, O'Melveny & Myers LLP, Brittany Allison Rogers, OMelveny and Myers, Los Angeles, CA, for Defendant.
ORDER GRANTING WITHOUT LEAVE TO AMEND IN PART AND DENYING IN PART MOTION TO DISMISS THIRD AMENDED COMPLAINT
[Re: ECF 52]
This case involves a consumer's right to authorize his bank to transfer funds electronically to third parties through what is aptly named an "electronic fund transfer." Such transfers are governed by the Electronic Fund Transfer Act, 15. U.S.C. § 1693. If a consumer has authorized a financial institution to transfer funds on a recurring basis on his behalf, the EFTA contemplates that the consumer may also "stop payment" of those preauthorized transfers—that is, withdraw his authorization. Id. § 1693e. In practice, in order to stop payment, the consumer may be required by his financial institution to pay what is known as a "stop-payment fee." Plaintiffs James Foreman and Alvin Moody allege that Defendant Bank of America, N.A. ("BOA") charges such a fee. Plaintiffs contend that BOA's stop-payment fee violates the EFTA and California's Unfair Competition Law.
Before the Court is BOA's motion to dismiss the Third Amended Class Action Complaint ("TAC"). Mot., ECF 52. For the reasons that follow, the motion to dismiss the is GRANTED WITHOUT LEAVE TO AMEND IN PART AND DENIED IN PART.
Plaintiffs James Foreman and Alvin Moody each have a bank account with Defendant Bank of America, N.A. ("BOA"). Third Am. Compl. ("TAC") ¶ 34, ECF 51. Through its deposit agreement, BOA, like many financial institutions, allows its customers to authorize recurring electronic funds transfers ("EFTs") from their checking accounts to various third parties, to effectuate, for example, the payment of monthly bills. Id. ¶¶ 33–42. BOA also allows its customers to stop such payments subject to certain conditions.
In order to stop the payments, a BOA customer must first satisfy certain requirements imposed by BOA in its deposit agreement. First, and most relevant here, BOA requires the customer to pay a $30 "stop-payment fee" ("SPF"). Id. ¶¶ 3–4, 30. Every customer must pay this fee, regardless of his or her means. Id. ¶ 5. Second, it requires the customers to notify the third-party recipient of the EFT that the customer has withdrawn his or her authorization for the EFT. Id. ¶ 38. And third, it requires the customer to provide BOA with the exact details of the pre-authorized transfer, down to the penny, before BOA will stop the payment. Id. ¶ 39; see also id. ¶¶ 40–41.
Plaintiff James Foreman authorized BOA to transfer funds from his checking account to a third-party lender, whom he alleges was an illegal, predatory lender. Id. ¶¶ 43–52. When he learned that the predatory lending scheme was illegal in California, he considered stopping his EFT payment. Id. ¶ 48. But when he learned it would cost him $30 to stop his payment, he delayed in stopping the payment for several months and continued paying the illegal loans. Id. Eventually, after months of delay, in August 2017 he paid the $30 stop-payment fee. He had to pay the fee again to stop a second predatory loan in November 2017. Id. ¶ 50.
Plaintiff Alvin Moody is an indigent consumer whose monthly income comes mostly from Social Security benefits. Id. ¶¶ 53–54. In December 2017, he went to BOA and attempted to stop a recurring EFT to his insurance company in accordance with the terms and conditions of his BOA account. Id. ¶ 55. He also paid the $30 fee. Id. ¶ 56. BOA, however, failed to stop the EFT in December, and the EFT was effectuated on January 3, 2018. Id. ¶ 57. BOA then charged Moody a $35 overdraft fee because he had insufficient funds in his account for the transfer. Id. ¶ 58.
Plaintiffs allege that BOA's $30 stop-payment fee violates the Electronic Fund Transfer Act ("EFTA"), 15. U.S.C. § 1693, under three alternative theories: (1) SPFs per se violate the EFTA, id. ¶¶ 8, 72–80; (2) SPFs that exceed the bank's costs of processing stop-payment orders violate the EFTA, id. ¶¶ 10, 81–88; and (3) SPFs that "impede and hinder a consumer's exercise of the right to stop payment" violate the EFTA, id. ¶ 11, 89–98. Specifically, Plaintiffs claim that the fees violate 15 U.S.C. § 1693e(a), which discusses certain requirements relating to stopping payments. Id. ¶¶ 3, 8, 32, 36, 75, 84, 92. Likewise, they claim that BOA's deposit agreement violates 15 U.S.C. § 1693l , which states that "[n]o writing or other agreement between a consumer and any other person may contain any provision which constitutes a waiver of any right conferred or cause of action created by" the EFTA. Id. ¶¶ 37, 42, 76, 84, 94.
Based on these purported violations of the law, the TAC asserts seven causes of action.2 Both Plaintiffs assert three causes of action for violations of the EFTA ( 15 U.S.C. § 1693m ), with a cause of action for each alternative theory set out above. Id. ¶¶ 72–98. Plaintiff Foreman asserts three causes of action for violations of California's Unfair Competition Law ("UCL") ( Cal. Bus. & Prof. Code § 17204 ), with a cause of action for a violation of the EFTA for each alternative theory set out above. Id. ¶¶ 99–127. And finally, Plaintiff Moody asserts a cause of action for violation of the EFTA ( 15 U.S.C. § 1693h ), for BOA's failure to cancel his EFT upon request. Id. ¶¶ 128–38.
The first three causes of action for violations of the EFTA are brought on behalf of a putative class of "[a]ll holders of a [BOA] checking account who, within the applicable statute of limitations, paid one or more SPFs to stop a recurring EFT." Id. ¶ 60. The UCL claims are brought on behalf of a subclass of BOA accountholders in California who paid an SPF. Id.
The Court previously granted BOA's motion to dismiss the Second Amended Complaint ("SAC"). See ECF 50. The Court held that the SAC did not clearly delineate Plaintiff's theory (or theories) of liability under the EFTA and that Plaintiffs' allegations were internally inconsistent. See id. at 4–5. It also held that Plaintiffs had not alleged that they "personally were impeded, hindered, or delayed by the $30 SPF," such that they had not alleged a "causal link between BOA's impositions and Plaintiffs' abilities to exercise their rights to stop payments under the EFTA." Id. at 6. As to Plaintiff Moody's individual claim, the Court held that while Moody had "allege[d] facts that could state a claim under the EFTA," he had not actually asserted a related claim in the SAC. Id. at 6. The Court granted with leave to amend, and Plaintiffs filed their TAC, which more clearly delineates the three theories of liability recounted above.
"A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’ " Conservation Force v. Salazar , 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001) ). While a complaint need not contain detailed factual allegations, it "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 is facially plausible when it "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.
In deciding whether to grant leave to amend, the Court must consider the factors set forth by the Supreme Court in Foman v. Davis , 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962), and discussed at length by the Ninth Circuit in Eminence Capital, LLC v. Aspeon, Inc. , 316 F.3d 1048 (9th Cir. 2003). A district court ordinarily must grant leave to amend unless one or more of the Foman factors is present: (1) undue delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by amendment, (4) undue prejudice to the opposing party, or (5) futility of amendment. Eminence Capital , 316 F.3d at 1052. "[I]t is the consideration of prejudice to the opposing party that carries the greatest weight." Id. However, a strong showing with respect to one of the other factors may warrant denial of leave to amend. Id.
BOA moves to dismiss all of the claims in Plaintiffs' TAC. See generally Mot. BOA makes the following arguments for why various claims should be dismissed: (1) Plaintiffs do not have standing to bring the EFTA claims (except Moody's individual claim); (2) the EFTA does not prohibit stop payment fees under any of Plaintiffs' three theories; (3) Moody has not alleged an individual EFTA claim; and (4) the UCL claims are unsustainable either because they are preempted by the National Banking Act or because there is no predicate EFTA violation to sustain them.
The Court discusses each argument in turn, except the UCL claims, which it discusses alongside each of the related EFTA theories.
BOA argues that "Plaintiffs lack standing to challenge the stop-payment fee because they cannot allege that the fee impaired their ability to stop payment"—i.e. that the fee injured them.
Anyone seeking "to invoke the jurisdiction of the federal courts must satisfy the threshold requirement imposed by Article III of the Constitution by alleging an actual case or controversy." Los Angeles v. Lyons , 461 U.S. 95, 101, 103 S.Ct. 1660, 75...
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