King v. Carolina First Bank & the S. Fin. Grp., Inc., C/A No. 8:13–2264–TMC.

CourtUnited States District Courts. 4th Circuit. United States District Court of South Carolina
Writing for the CourtTIMOTHY M. CAIN
Citation26 F.Supp.3d 510
PartiesJames KING and Jan Kasmir, on behalf of themselves and all others similarly situated, Plaintiffs, v. CAROLINA FIRST BANK and The South Financial Group, Inc., a/k/a TD Bank, NA, Defendants.
Decision Date06 June 2014
Docket NumberC/A No. 8:13–2264–TMC.

26 F.Supp.3d 510

James KING and Jan Kasmir, on behalf of themselves and all others similarly situated, Plaintiffs,
CAROLINA FIRST BANK and The South Financial Group, Inc., a/k/a TD Bank, NA, Defendants.

C/A No. 8:13–2264–TMC.

United States District Court, D. South Carolina, Greenville Division.

Signed June 6, 2014

Motion granted in part and denied in part.

[26 F.Supp.3d 512]

Edward Adam Webb, Webb Law Group, Michael Louis Goldberg, Fried Rogers Goldberg, Atlanta, GA, for Plaintiffs.

Reid Thomas Sherard, Nelson Mullins Riley and Scarborough, Greenville, SC, Tara Cloer Sullivan, Thomas William McGee, III, Nelson Mullins Riley and Scarborough, Columbia, SC, Donald R. Frederico, Pierce Atwood, Boston, MA, Joshua D. Dunlap, Lucus A. Ritchie, Pierce Atwood, Portland, ME, for Defendants.

TIMOTHY M. CAIN, District Judge.

In this putative class action, Plaintiffs challenge the manner in which Defendants Carolina First Bank (“Carolina First”) and The South Financial Group, Incorporated (“South Financial”), now doing business as TD Bank, N.A. (collectively “TD Bank”), posted debit transactions. (ECF No. 22–Am. Compl.). 1 Plaintiffs allege four state law claims: 1) breach of contract; 2) unconscionability; 3) conversion; and 4) unjust enrichment, and a federal claim under the Regulation E of the Electronic Transfer Act (“EFTA”), 12 C.F.R. § 205.17 (“Regulation E”). This matter is before the court on TD Bank's Motion to Dismiss. (ECF No. 25). Plaintiffs filed a response opposing the motion (ECF No. 29), and Defendants filed a Reply (ECF No. 30). Plaintiffs also filed a Supplemental Memorandum to provide the court with additional authority. (ECF No. 39). A hearing was held on this motion on May 22, 2014, and the court took the matter under advisement.

I. Background/Procedural History

The primary basis of Plaintiffs' state law claims are allegations that they were

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harmed by the manner in which TD Bank posted debit card transactions to their accounts. TD Bank posted credits and then debits, with the debits with the highest dollar amount being posted first. Plaintiffs contend that by posting the debits with the highest dollar amounts first, TD Bank increased their overdraft fees.

Plaintiffs were customers of Carolina First, which was owned by South Financial and acquired by TD Bank on September 30, 2010. (Am. Compl. ¶¶ 1–2). South Financial also operated Mercantile Bank (“Mercantile”), and all three, Carolina First, Mercantile, and South Financial, had substantially identical practices during the relevant time periods. (Am. Compl. ¶ 2).

A class action was brought against TD Bank regarding its overdraft practices in a multidistrict litigation (“MDL”), and TD Bank settled for $62 million for class members for the period of December 1, 2003, through August 15, 2010. In re Checking Acct. Overdraft Litigation, 626 F.Supp.2d 1333 (U.S.Jud.Pan.Multi.Lit.2009). (Am. Compl. ¶ 3). Carolina First was not part of TD Bank during this period. (Am. Compl. ¶ 4). Moreover, Plaintiffs allege that the practices continued even after Carolina First became part of TD Bank until at least June 2011 and, further Defendants did not obtain the affirmative consent required by the EFTA under Regulation E beginning in August 2010. (Am. Compl. ¶ 6). Thus, Plaintiffs seek to represent “all former customers of Carolina First, Mercantile, and South Financial that were improperly assessed overdraft fees and also a class of TD Bank customers who have been improperly assessed overdraft fees since the end of the class period covered by the TD settlement in In re Checking Acct. Overdraft Litigation.” (Am. Compl. at ¶ 8).

Pursuant to Fed.R.Civ. P. 12(b)(6), TD Bank filed this motion to dismiss Plaintiffs' state law claims on the grounds that they are preempted by the National Bank Act (“NBA”), 12 U.S.C. § 21 et seq., because the posting of debits to customers' accounts falls within TD Bank's federally-authorized power to conduct the business of banking, and the Office of the Comptroller of the Currency's (“OCC”) regulations preempt the state common law claims alleged here. Even if not preempted, TD Bank contends that Plaintiffs have failed to state a claim under state law.2

II. Applicable Law

When considering a 12(b)(6) motion to dismiss, the court must accept as true the facts alleged in the complaint and view them in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir.1999). “To survive a motion to dismiss, 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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ( quoting [ Bell Atlantic 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. Although “a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations,” a pleading that merely offers “labels and conclusions,” or “a formulaic

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recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Likewise, “a complaint [will not] suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancements.’ ” Iqbal, 129 S.Ct. at 1949 ( quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955).

In analyzing a motion under Rule 12(b)(6), the Court also considers Fed.R.Civ.P. 8(a)(2), which requires a pleading to contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” To satisfy the minimal requirements of Rule 8(a)(2), a complaint must contain facts sufficient to “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955. These cases make clear that Rule 8 “requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief.” Id. at 556 n. 3, 127 S.Ct. 1955 (quoting Fed.R.Civ.P. 8(a)(2)). This showing must consist of at least “enough facts to state a claim to relief that is plausible on its face.” Id. at 570, 127 S.Ct. 1955.3

III. Discussion

Under the Supremacy Clause, state laws that conflict with federal law are without effect. Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 168, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989).4 Federal law may preempt state law in three ways: (1) by express language in a federal statute; (2) by implication from the “depth and breadth of a congressional scheme that occupies the legislative field”; or (3) by implication because of a conflict with a federal statute. Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 121 S.Ct. 2404, 150 L.Ed.2d 532 (2001). Conflict has been found when compliance with both laws is a “physical impossibility;” or when the state law stands “as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 31, 116 S.Ct. 1103, 134 L.Ed.2d 237 (1996).

“Federally chartered banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or the general purposes of the NBA.” Watters v. Wachovia Bank, N.A., 550 U.S. 1, 11, 127 S.Ct. 1559, 167 L.Ed.2d 389 (2007) (citations omitted). State laws of general application continue to apply to national banks when “doing so does not prevent or significantly interfere with the national bank's exercise of its powers.” Id. at 33, 127 S.Ct. 1559.

The NBA authorizes national banks to perform “all such incidental powers as shall be necessary to carry on the business of banking.” 12 U.S.C. § 24 (2013). Congress delegated to the OCC the authority to define national banks' incidental powers by promulgating rules and regulations that possess the same preemptive effect as the

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NBA itself. See 12 U.S.C. 93a. “The OCC applies preemption principles derived from the United Stated Constitution, as interpreted through judicial precedent, when determining whether State laws apply that purport to limit or prohibit charges and fees described in this section.” 12 C.F.R. § 7.4002(d). In general, state laws on contract or torts “are not inconsistent with the deposit-taking powers of national banks and apply to national banks to the extent consistent with the decision of the Supreme Court in Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance Commissioner, et al., 517 U.S. 25, 116 S.Ct. 1103, 134 L.Ed.2d 237 (1996).” 12 C.F.R. § 7.4007.

TD Bank argues the state law claims asserted here are preempted because those claims conflict with the NBA by “significantly impair[ing] a bank's exercise of an enumerated or incidental power.” (Defs.' Mem. Supp. Mot. to Dismiss, ECF No. 25–1 at 15). TD Bank contends that the NBA grants national banks all incidental powers to carry on the “business of banking” and receive deposits, 12 U.S.C. § 24, and state law claims are preempted to the extent that they conflict with the NBA. TD Bank further contends that the power to carry on the business of banking and to receive deposits includes the power to post debits, which includes the power to establish a posting order of debits, Id. at 15, and national banks have the authority under OCC regulations to choose a posting order as part of its power to “charge its customers non-interest charges and fees.” Id. at 16 (citing 12 C.F.R. § 7.4002(b)(2), as the OCC has interpreted in OCC Interp. Letter No. 1082, 2007 WL 3341502, at *2 (May 17, 2007) and OCC Interp. Letter No. 933, 2002 WL 31955273, at *4 (August 17, 2001)).

Plaintiffs contend that their claims are not preempted by federal law. Plaintiffs contend that Defendants erroneously assert that Plaintiffs seek to use state law to limit TD Bank's discretion under federal law to chose its...

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