McCollam v. Sunflower Bank, N.A.
| Citation | 598 F.Supp.3d 1104 |
| Decision Date | 15 April 2022 |
| Docket Number | Civil Action No. 21-cv-1484-WJM-SKC |
| Parties | Karen MCCOLLAM, on behalf of herself and all others similarly situated, Plaintiff, v. SUNFLOWER BANK, N.A., Defendant. |
| Court | U.S. District Court — District of Colorado |
Sophia G. Gold, KalielGold PLLC, Berkeley, CA, Jeffrey Douglas Kaliel, Kaliel Gold PLLC, Washington, DC, for Plaintiff.
Andrew J. Demko, Mayer Brown LLP, Ashley Taylor Brines, Katten Muchin Rosenman LLP, Los Angeles, CA, David Cameron Walker, Douglas Wayne Brown, Brown Dunning Walker Fein PC, Denver, CO, for Defendant.
William J. Martinez, United States District Judge Plaintiff Karen McCollam brings this putative class action against Defendant Sunflower Bank, N.A. ("Sunflower"), alleging claims of breach of contract and breach of the implied covenant of good faith and fair dealing. (ECF No. 26 at 14–16.) This matter is before the Court on Sunflower's Motion to Dismiss ("Motion") pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 29.) For the reasons explained below, the Motion is granted.
The following factual summary is drawn from McCollam's Amended Class Action Complaint ("Complaint"). (ECF No. 26.) The Court assumes the allegations contained in the Complaint are true for the purpose of deciding the Motion. See Ridge at Red Hawk, L.L.C. v. Schneider , 493 F.3d 1174, 1177 (10th Cir. 2007).
McCollam has a checking account with Sunflower. (¶ 32.)1 Customers with checking accounts are issued debit cards that allow them to have electronic access to their checking accounts for purchases, payments, withdrawals, and other electronic debit transactions. (¶ 11.) Among the documents that govern the parties’ relationship is a document entitled Your Deposit Account ("Account Agreement") (ECF No. 26-1) and a document entitled What You Need to Know About Account Overdrafts and Overdraft Fees ("Opt-in Form") (ECF No. 26-2) (jointly, the "Contract Documents"). (¶ 33.)2
McCollam brings this putative class action challenging Sunflower's practice of charging overdraft fees on a subset of debit card transactions that she refers to as "Authorize Positive, Purportedly Settle Negative Transactions" ("APPSN Transactions"). (¶ 13.)
Defining an APPSN Transaction requires familiarity with the basic structure of a debit card transaction. A debit card transaction occurs in two stages. (¶ 26.) First, when a merchant swipes a customer's debit card, the credit card terminal connects to Sunflower, who verifies the customer's account and determines whether to authorize the transaction. (¶ 27.) If Sunflower authorizes the transaction, it may put a hold on the account. (¶ 39.) The hold does not affect the account's actual balance, but the account's "available balance" is reduced by the amount of the hold. (¶ 14; ECF No. 26-1 at 7.)
Second, when the merchant presents the transaction for payment, which can occur up to three days after the transaction was authorized, the hold is released. (¶ 29.) Then funds are withdrawn from the account—i.e. , subtracted from the account's actual balance—and paid to the merchant. (Id. ; ECF No. 26-1 at 7.)
An APPSN Transaction is a debit card transaction that is authorized when an account has sufficient funds to cover the transaction but paid when the account does not have sufficient funds to cover the transaction. (¶ 16.) For instance, a customer may have an "available balance" of $100 on Monday when a merchant swipes her card and requests a temporary hold of $80. If Sunflower authorizes the transaction, an $80 hold would be put on the account, bringing the "available balance" to $20. On Tuesday, Sunflower may choose to honor a $100 check written by the customer and presented for payment. (See ECF No. 26-1 at 7 ().) At this point the account would have an "available balance" of negative $80. Then, on Wednesday, if the merchant presents the $80 transaction for payment, Sunflower will release the hold, bringing the "available balance" to $0, and pay merchant, bringing the "available balance" and actual balance to negative $80. Thus, at the time this transaction is settled and paid, the account would not have sufficient funds to cover the $80 transaction. McCollam refers to this type of transaction as an APPSN Transaction. (¶ 16.)
McCollam alleges that on October 5, 2017, and November 6, 2017, Sunflower breached its contract with her by assessing overdraft fees for APPSN Transactions. (¶ 56.) On September 10, 2021, McCollam filed her Complaint alleging breach of contract and breach of the implied covenant of good faith and fair dealing against Sunflower. (¶¶ 69–77.)
On September 24, 2021, Sunflower filed the instant Motion requesting that McCollam's claims be dismissed for failure to state a claim upon which relief may be granted. (ECF No. 29.) McCollam filed a response to the Motion (ECF No. 33), to which Sunflowers replied (ECF No. 35). McCollam also filed two notices of supplemental authorities. (ECF Nos. 37 and 40.)
Under Rule 12(b)(6), a party may move to dismiss a claim in a complaint for "failure to state a claim upon which relief can be granted." "The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted." Dubbs v. Head Start, Inc. , 336 F.3d 1194, 1201 (10th Cir. 2003) (internal quotation marks omitted).
The Rule 12(b)(6) standard requires the Court to "assume the truth of the plaintiff's well-pleaded factual allegations and view them in the light most favorable to the plaintiff." Ridge at Red Hawk , 493 F.3d at 1177. Thus, in ruling on a Motion to Dismiss under Rule 12(b)(6), the dispositive inquiry is "whether the complaint contains ‘enough facts to state a claim to relief that is plausible on its face.’ " Id. (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); see also Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
Granting a motion to dismiss "is a harsh remedy which must be cautiously studied, not only to effectuate the spirit of the liberal rules of pleading but also to protect the interests of justice." Dias v. City & Cnty. of Denver , 567 F.3d 1169, 1178 (10th Cir. 2009) (internal quotation marks omitted). "Thus, ‘a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.’ " Id. (quoting Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). However, "[t]he burden is on the plaintiff to frame a ‘complaint with enough factual matter (taken as true) to suggest’ that he or she is entitled to relief." Robbins v. Oklahoma , 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). "[C]omplaints that are no more than ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action,’ ... ‘will not do.’ " Id. (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).
It has long been the law in Colorado that a party attempting to recover on a claim for breach of contract must prove the following elements: (1) the existence of a contract; (2) performance by the plaintiff or some justification for nonperformance; (3) failure to perform the contract by the defendant; and (4) resulting damages to the plaintiff. W. Distrib. Co. v. Diodosio , 841 P.2d 1053, 1058 (Colo. 1992) (en banc).
If the underlying contract is unambiguous and the plaintiff fails to state a claim based on the language of the contract, a motion to dismiss should be granted. Titan Indem. Co. v. Travelers Prop. Cas. Co. of Am. , 181 P.3d 303, 307 (Colo. App. 2007) (en banc). On the other hand, dismissal is inappropriate when the claim "may have merit if ambiguities are resolved in favor of the claimant." Dorman v. Petrol Aspen, Inc. , 914 P.2d 909, 915 (Colo. 1996) (en banc).
A contract is ambiguous when it "is reasonably and fairly susceptible of more than one meaning." Arenberg v. Cent. United Life Ins. Co. , 18 F. Supp. 2d 1167, 1179 (D. Colo. 1998). "In determining whether a provision in a contract is ambiguous, the instrument's language must be examined and construed in harmony with the plain and generally accepted meaning of the words used, and reference must be made to all the agreement's provisions." Fibreglas Fabricators, Inc. v. Kylberg , 799 P.2d 371, 374 (Colo. 1990) (en banc).
McCollam alleges that Sunflower breached its contract with her by charging her overdraft fees for APPSN Transactions on October 5, 2017, and November 6, 2017. (¶¶ 69–77.) She alleges breach of contract based on two theories: (1) the Contract Documents require Sunflower to make overdraft determinations when it authorizes APPSN transactions, but Sunflower made its overdraft determinations when it paid the transactions at issue here (ECF No. 33 at 10–16); and (2) after Sunflower authorized her APPSN Transactions, the holds put on her account made it impossible for those transactions to overdraw her account (id. at 8–10).
Sunflower argues that McCollam fails to state a claim for breach of contract because the Contract Documents expressly permit Sunflower to charge overdraft fees for APPSN Transactions. (ECF No. 29 at 5–6; ECF No. 35 at 5.)
First, McCollam argues that the Contract Documents require that overdraft fees be assessed at the time Sunflower authorizes an APPSN Transaction. (ECF No. 33 at 10–16.) Sunflower argues that the Contract Documents unambiguously permit it to assess overdraft fees at the time of payment. (ECF No. 35 at 6–9.) The Court agrees with Sunflower.
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