Powell-Perry v. Branch Banking & Trust Co. (In re Checking Account Overdraft Litig.), MDL No. 2036.Case No. 09–MD–02036–JLK.

• Decision Date: 01 September 2011
• Docket Number: MDL No. 2036.Case No. 09–MD–02036–JLK.
• Citation: 813 F.Supp.2d 1365
• Parties: In re CHECKING ACCOUNT OVERDRAFT LITIGATION.This Document Relates To:Powell–Perry et al. v. Branch Banking & Trust Company S.D. Fla. Case No. 10–cv–20820–JLK M.D. N.C. Case No. 09–cv–00619Barras v. Branch Banking & Trust Company S.D. Fla. Case No. 10–cv–20813–JLK M.D. N.C. Case No. 09–00678Given v. M & T Bank Corporation S.D. Fla. Case No. 10–cv–20478–JLK Md. Case No. 09–cv–02207Hough et al. v. Regions Financial Corporation et al. S.D. Fla. Case No. 10–cv–20476–JLK N.D. Ga. Case No. 09–02545Buffington, et al. v. SunTrust Banks, Inc. S.D. Fla. Case No. 09–cv–23632–JLK N.D. Ga. Case No. 09–01558
• Court: U.S. District Court — Southern District of Florida

813 F.Supp.2d 1365

In re CHECKING ACCOUNT OVERDRAFT LITIGATION.This Document Relates To:Powell–Perry et al.

v.Branch Banking & Trust Company S.D. Fla. Case No. 10–cv–20820–JLK M.D. N.C. Case No. 09–cv–00619Barras

v.Branch Banking & Trust Company S.D. Fla. Case No. 10–cv–20813–JLK M.D. N.C. Case No. 09–00678Given

v.M & T Bank Corporation S.D. Fla. Case No. 10–cv–20478–JLK Md. Case No. 09–cv–02207Hough et al.

v.Regions Financial Corporation et al. S.D. Fla. Case No. 10–cv–20476–JLK N.D. Ga. Case No. 09–02545Buffington, et al.

v.SunTrust Banks, Inc. S.D. Fla. Case No. 09–cv–23632–JLK N.D. Ga. Case No. 09–01558

MDL No. 2036.Case No. 09–MD–02036–JLK.

United States District Court, S.D. Florida,Miami Division.

Sept. 1, 2011.

Aaron S. Podhurst, Robert C. Josefsberg, Steven C. Marks, Peter Prieto, Stephen F. Rosenthal, John Gravante III, Podhurst Orseck, P.A., Miami, FL, for Plaintiffs.

Beth A. Alexander, Lieff Cabraser Heimann & Bernstein LLP, Nashville, TN, Charles M. Delbaum, Stuart T. Rossman, Boston, MA, John S. Hughes, Wallace & Graham PA, Salisbury, NC, Michael W. Sobol, Roger Norton Heller, Lieff Cabraser Heimann & Bernstein, San Francisco, CA, for Plaintiffs.

Nancy H. Baughan, William J. Holley, II, Parker Hudson Rainer & Dobbs, Marquis II, Atlanta, GA, for Defendants.Anthony C. Depastina, Civil Justice Inc., Baltimore, MD, David M. Given, Nicholas A. Carlin, Phillips & Erlewine & Given LLP, San Francisco, CA, Scott C. Borison, Legg Law Firm LLC, Frederick, MD, for Given.Charles D. Marshall, Green Welling, PC, San Francisco, CA, Gary Walker Jackson, Jackson & McGee, LLP, Charlotte, NC, for Barras.Edward Adam Webb, G. Franklin Lemond, Jr., Webb Law Group LLC, Atlanta, GA, for Hough et al.

ORDER DENYING RENEWED MOTIONS TO COMPEL ARBITRATION

JAMES LAWRENCE KING, District Judge.

THIS CAUSE comes before the Court upon Defendants' Renewed Motions to Compel Arbitration.¹ The Court is fully briefed in the matter and proceeds having had the benefit of oral argument. (DE # 1840).

I. Introduction

This is a class-action suit brought on behalf of accountholders at a variety of banks who claim the Defendant banks unlawfully charged them excessive overdraft fees.² This Court denied earlier-filed Motions to Compel Arbitration by the Defendant Banks in the Omnibus Order Denying Motions to Compel Arbitration of May 10, 2010, 734 F.Supp.2d 1279 (S.D.Fla.2010) (DE # 447). The Banks appealed. Upon remand by the Eleventh Circuit Court of Appeals for consideration in light of the recent United States Supreme Court opinion in AT & T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), the Parties filed Renewed Motions to Compel Arbitration.

II. Background

Plaintiffs in the five above-styled cases held checking accounts at four banks: Branch Banking & Trust Company (“BB & T”), M & T Bank Corporation (“M & T”), Regions Financial Corporation (“Regions”), and SunTrust Banks, Inc. (“Suntrust”). All five Plaintiffs' accounts are governed by deposit agreements with their respective banks (“Agreements” or “Bank Services Agreement” or “BSA”). All five of the Agreements contain arbitration provisions purporting to require arbitration of any claims related to Plaintiffs' accounts at the election of either Plaintiffs or the respective Banks.

Although the Federal Arbitration Act 9 U.S.C. § 1, et seq. (“FAA”) generally requires enforcement of arbitration agreements, the FAA's “Savings Clause” permits courts to refuse to uphold an arbitration agreement “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Relying on the Savings Clause, the Court's May 10, 2010 Order held the five arbitration agreements at issue were unconscionable under applicable state law,³ and thus not enforceable.⁴ At the time, the inclusion of a class-action waiver in an arbitration agreement was a significant factor weighing in favor of finding the agreements unconscionable, and thus unenforceable, under the law of all four states at issue. See, e.g., Tillman v. Commer. Credit Loans, Inc., 362 N.C. 93, 655 S.E.2d 362, 373 (2008) (finding class-action waiver worked with other factors to render arbitration agreement unconscionable because it “contributes to the financial inaccessibility of the arbitral forum”); Herron v. Century BMW, 387 S.C. 525, 536, 693 S.E.2d 394 (2010) (affirming denial of motion to compel arbitration because class action waiver in arbitration agreement was unconscionable); Walther v. Sovereign Bank, 386 Md. 412, 872 A.2d 735, 749–53 (2005) (explaining prohibition on class actions in arbitration clause not enough alone to invalidate agreement to arbitrate) (emphasis added); Dale v. Comcast Corp., 498 F.3d 1216, 1224 (11th Cir.2007) (holding arbitration agreement unenforceable because the class action waiver therein was unconscionable under Georgia law). As a result, although the Court engaged in an extensive case-by-case analysis of each Agreement, the Court relied on the class-action waiver factor in the earlier decision denying arbitration. (DE # 447 at pp. 6–9, 12, 14–15, 16–20). Now, in light of Concepcion and the mandate of the Eleventh Circuit, the Court reconsiders its ruling on unconscionability, without consideration of the class-action waivers in the Agreements.

III. DiscussionA. Concepcion

The United States Supreme Court's recent decision in AT & T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) held a state law that “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” in enacting the FAA is preempted by the FAA. 131 S.Ct. at 1753. More specifically, the Court struck down a California common law rule requiring a finding of unconscionability in arbitration agreements containing class action waivers,

when the [class-action] waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.

Id. at 1746. In finding the so-called “ Discover Bank rule” ⁵ preempted by the FAA, the Court explicitly rejected the argument that “class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system,” finding instead that, “States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.” Id. at 1753.

Notably, the Supreme Court acknowledged that the terms of the specific arbitration agreement in Concepcion was extremely consumer-friendly, and that under that agreement, “aggrieved customers who filed claims would be essentially guaranteed to be made whole.” Id. In Concepcion, AT & T customers challenged AT & T's practice of charging them sales tax on cellular phones that were advertised as free. Id. at 1745. The arbitration agreement the plaintiffs signed with AT & T required that: (1) AT & T pay all costs for nonfrivolous claims; (2) the arbitration take place in the county in which the customer was billed; (3) for claims of $10,000 or less, the customer may choose whether the arbitration proceeds in person, by telephone, or based only on submissions; and (4) the arbitrator may award any form of individual relief. Id. at 1744. The Agreement also “denies AT & T the ability to seek reimbursement of attorneys' fees, and, in the event that a customer receives an arbitration award greater than AT & T's last settlement offer, requires AT & T to pay a $7,500 minimum recovery and twice the amount of the claimant's Attorneys' fees.” Id. Accordingly, the Court found the claim in Concepcion “was most unlikely to go unresolved” if forced into arbitration. Id. at 1753.

B. The Eleventh Circuit's Interpretation of Concepcion

In Cruz v. Cingular Wireless, LLC, 648 F.3d 1205 (11th Cir.2011), for the first time since Concepcion, the Eleventh Circuit passed on the validity of a class action waiver in a consumer contract's arbitration agreement. The Cruz plaintiffs were customers of AT & T Mobility, LLC.⁶ They filed a class action lawsuit under the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), Fla. Stat. § 501.201, et seq., challenging AT & T's practice of charging them a $2.99 monthly fee for an optional “Roadside Assistance Plan” that they never ordered. Id. at 1207–09. Notably, before initiating cellular phone service, the Cruz plaintiffs signed the very same arbitration agreement, containing the same class action waiver, upheld by the Supreme Court in Concepcion. Id. at 1207–10.

After AT & T moved to compel arbitration, the Cruz plaintiffs argued the arbitration provision was unenforceable because the class action waiver therein “hindered the remedial purposes of FDUTPA by effectively immunizing AT & T from liability for unlawful business practices, in violation of public policy” under Florida law. Id. The Cruz plaintiffs raised a similar argument to that raised by the Concepcion plaintiffs: “The vast majority of these numerous, small-value claims against AT & T will go unprosecuted unless they may be brought as a class.” Id. at 1212. More specifically, they argued that (1) attorneys would refuse to represent AT & T customers for these claims,⁷ and (2) absent class procedures, the vast majority of AT & T customers “would never know their rights have been violated.” Id. The Eleventh Circuit squarely rejected these arguments:

However, the Concepcion Court specifically rejected this public policy argument.... Thus, in light of Concepcion, state rules mandating the availability of class arbitration based on generalizable characteristics of consumer protection claims ... are preempted by the FAA, even if they may be “desirable.” Therefore, to the extent that Florida law would be sympathetic to the Plaintiffs'...