Hanjy v. Arvest Bank, Case No. 4:14–cv–00006–KGB.

• Decision Date: 31 March 2015
• Docket Number: Case No. 4:14–cv–00006–KGB.
• Citation: 94 F.Supp.3d 1012
• Parties: James HANJY and J & J Virtual Communications, LLC, on behalf of themselves and all others similarly situated, Plaintiffs v. ARVEST BANK, Defendant.
• Court: U.S. District Court — Eastern District of Arkansas

94 F.Supp.3d 1012

James HANJY and J & J Virtual Communications, LLC, on behalf of themselves and all others similarly situated, Plaintiffs
v.
ARVEST BANK, Defendant.

Case No. 4:14–cv–00006–KGB.

United States District Court, E.D. Arkansas, Western Division.

Signed March 31, 2015.

94 F.Supp.3d 1016

E. Adam Webb, Webb, Klase & Lemond, LLC, Atlanta, GA, Frank L. Watson, III, Watson Burns, PLLC, Memphis, TN, for Plaintiffs.

John C. Calhoun, Jr., James M. McHaney, Jr., Hilburn, Calhoon, Harper, Pruniski & Calhoun, Ltd., North Little Rock, AR, for Defendant.

OPINION AND ORDER

KRISTINE G. BAKER, District Judge.

Plaintiffs James Hanjy and J & J Virtual Communications, LLC (“J & J”) bring this action on behalf of themselves and all others similarly situated against defendant Arvest Bank (“Arvest”). Plaintiffs assert claims for breach of contract and breach of

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the covenant of good faith and fair dealing, unconscionable contract, and unjust enrichment based on Arvest's assessment and collection of overdraft fees for debit-card transactions (Dkt. No. 12).¹ Before the Court is Arvest's motion to dismiss plaintiffs' first amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (Dkt. No. 15). Plaintiffs have responded (Dkt. No. 20), and Arvest has replied (Dkt. No. 24).

Before plaintiffs filed their response, Arvest filed an amended and supplemental brief in support of its motion to dismiss (Dkt. No. 19). Plaintiffs move to strike Arvest's supplemental brief (Dkt. No. 21), Arvest has responded to the motion to strike (Dkt. No. 23), and plaintiffs have replied (Dkt. No. 25). Plaintiffs subsequently filed a response to Arvest's supplemental brief (Dkt. No. 26), and Arvest replied (Dkt. No. 27). Plaintiffs also move to strike portions of this second reply (Dkt. No. 28), and Arvest has responded to the motion to strike (Dkt. No. 30).

In addition, plaintiffs filed two notices of subsequent authority (Dkt. Nos. 31, 33), and Arvest has responded to both (Dkt. Nos. 32, 34).

For the reasons that follow, the Court denies Arvest's motion to dismiss (Dkt. No. 15) and plaintiffs' motions to strike (Dkt. Nos. 21, 28).

I. Background

Mr. Hanjy and J & J are former checking account customers of Arvest. Mr. Hanjy is a citizen of Missouri, and J & J is a Missouri limited liability company. Arvest is an Arkansas-chartered bank that operates branches in Arkansas, Kansas, Missouri, and Oklahoma (Dkt. No. 12, ¶ 15). Plaintiffs propose to represent under Rule 23 of the Federal Rules of Civil Procedure a class defined as:

All Arvest customers in the United States who, within the applicable statute of limitations preceding the filing of this action to the date of class certification, incurred an overdraft fee as a result of Arvest's practices of assessing an overdraft fee on a debit card transaction at a time when the customer agreement did not provide for such a fee, assessing an overdraft fee even when a debit card transaction should not have been authorized, re-sequencing debit card transactions from highest to lowest dollar amount, or assessing overdraft fees even when a customer had sufficient funds in their account to cover all merchant requests for payment.

(Dkt. No. 12, ¶ 17).

According to plaintiffs' complaint, the terms of Arvest's checking accounts and its contracts with account holders are contained in a standardized deposit agreement and a document labeled “Electronic Funds Transfer Agreement and Disclosure” (“EFT agreement”) (Dkt. No. 12, ¶¶ 33, 36). Plaintiffs have attached examples of deposit agreements and the EFT agreement as exhibits to their first amended complaint (Dkt. Nos. 12–1 to 12–4). Plaintiffs allege that, per the terms of the deposit agreement and the EFT agreement, Arvest's contracts with its checking account holders did not authorize Arvest to assess overdraft fees against debit card transactions, as opposed to credit card transactions. Plaintiffs further claim that the terms of the deposit agreement and EFT agreement suggest that debit card

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transactions would not be authorized if there were not adequate funds in the account. Plaintiffs allege that, contrary to these contractual terms, Arvest intentionally authorized debit card transactions even when the transaction was not covered by the customer's account balance in order to assess overdraft fees.

Plaintiffs further allege that Arvest engaged in manipulative practices to reorder debit card transactions from highest amount to lowest amount, in order to result in multiple transactions that incurred overdraft fees when those transactions, if processed in chronological order, would have resulted in only one overdraft and one overdraft fee. Plaintiffs allege that Arvest instituted this high-to-low posting for the sole purpose of maximizing overdraft transactions and, therefore, maximizing the amount of overdraft fees it charged to its customers. In addition to high-to-low posting, plaintiffs contend that Arvest held transactions for multiple days and batched transactions together.

Plaintiffs also claim that Arvest failed to provide to its customers accurate balance information. Specifically, plaintiffs allege that Arvest provided inaccurate balance information through its electronic network and on its website by virtue of its manipulation and reordering of transactions. As a result, plaintiffs allege that they and other customers generally did not have accurate balance information at the time they executed transactions and that the effect of this confusion was to encourage the customer to incur more overdraft charges.

Plaintiffs further allege that Arvest failed to provide notice of its overdraft practices. The deposit agreement provides that a checking account is “subject to charges, interest rates, and minimum balance requirements established from time to time” by Arvest and that Arvest may change such charges, interest rates, balance requirements, “or any other account terms, at any time, after such notice, if any, as is required by law, or if there is no specific requirement of law, then after reasonable notice.” (Dkt. No. 12–3, at 2). Plaintiffs allege that Arvest never informed them of its intention to change the applicable contract terms to authorize the approval of debit card transactions when there were inadequate funds in the account or to assess overdraft fees on debit card transactions. Plaintiffs also allege that Arvest's contract does not disclose Arvest's allegedly improper debit reordering and overdraft assessment. In addition, plaintiffs allege that Arvest failed to notify customers of overdrafts or to advise customers of their right to opt out of Arvest's overdraft scheme until it became subject in 2010 to opt-out requirements imposed by regulations promulgated under the Electronic Funds Transfer Act (“EFTA”), 15 U.S.C. § 1693. See 12 C.F.R. § 205.17.

For their first claim for relief, plaintiffs allege that Arvest breached the terms of its contracts with account holders by intentionally authorizing debit card transactions that would result in overdraft fees. Plaintiffs further allege that, through its overdraft practices and manipulation of debit-posting, Arvest breached the implied covenant of good faith and fair dealing.

Second, plaintiffs assert that Arvest's contracts with customers are unconscionable based on allegations that: Arvest failed to disclose the right to opt out of the overdraft scheme; Arvest did not obtain customers' affirmative consent prior to processing a transaction that would overdraw a customer's account and result in an overdraft fee; Arvest did not alert its customers that a debit card transaction would result in an overdraft fee and did not provide the customer the opportunity to cancel the transaction before assessing

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fees; Arvest's contract with its customers is a contract of adhesion because it consists of standardized forms, Arvest has superior bargaining power, and the customers have no opportunity to negotiate; and the contract documents provided to Arvest's customers are deceptive, unfair, and misleading “in that, to any extent they give the Bank the right to impose the various overdraft policies described herein, they do so in a way that [is] grossly unfair, because the Bank's actual practices are never disclosed or permitted.” (Dkt. No. 12, ¶ 90).

Lastly, plaintiffs assert unjust enrichment as an alternative theory for relief, alleging that it is inequitable for Arvest to retain the allegedly improperly assessed overdraft fees. Arvest moves to dismiss plaintiffs' first amended complaint in its entirety pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

II. Motions To Strike

Arvest's amended and supplemental brief in support of its motion to dismiss raises an argument that was not asserted in Arvest's original motion to dismiss or brief in support—Arvest's assertion that the National Banking Act (“NBA”), 12 U.S.C. § 21 et seq., and Office of the Comptroller of the Currency (“OCC”) regulations preempt...