Smith v. Wells Fargo Bank, N.A.
Decision Date | 29 December 2005 |
Docket Number | No. D045487.,D045487. |
Court | California Court of Appeals Court of Appeals |
Parties | Sean M. SMITH et al., Plaintiffs and Appellants, v. WELLS FARGO BANK, N.A. et al., Defendants and Respondents. |
Finkelstein & Associates, Howard D. Finkelstein, Mark L. Knutson and C. Michael Plavi, II, San Diego, CA, for Plaintiffs and Appellants.
Pillsbury Winthrop Shaw Pittman, Daniel G. Lamb, Jr. and Brian D. Martin, San Diego, CA, for Defendants and Respondents.
Plaintiff Sean M. Smith, individually and on behalf of a class similarly situated, appeals a judgment following an order granting the motions for summary adjudication and a no-merit determination filed by defendants Wells Fargo Bank, N.A. and Wells Fargo & Company (together Bank) in his action alleging causes of action for unfair business practices (Bus. & Prof. Code, § 17200 et seq.) (UCL),1 false and misleading advertising (§§ 17200 et seq., 17500 et seq.), and violation of the Consumer Legal Remedies Act (Civ.Code, § 1750 et seq.) (CLRA). On appeal, Smith contends: (1) the trial court erred by concluding federal regulations preempt his state causes of action; (2) because violations of federal regulations and breaches of contract may constitute predicate acts for his causes of action and there are triable issues of material fact regarding those predicate acts, the trial court erred by granting Bank's motions for summary adjudication and a no-merit determination; and (3) the trial court abused its discretion by excluding part of his expert witness's declaration.
Bank customers can make merchant or point-of-sale (POS) transactions with their checking accounts using paper checks, automated teller machine cards (ATM Cards), or ATM and check cards (Check Cards). In August 1997, Smith opened a personal checking account with Bank and received a Check Card related to that account. At that time, Smith received Bank's consumer disclosure statement, which stated:
Before May 2002, it was Bank's practice to deny a POS transaction using either an ATM Card or a Check Card if, at that time, there were insufficient funds in the customer's account to cover the transaction.2 In contrast, if the customer used a paper check for which there were insufficient funds to cover the POS transaction, Bank would take one of three actions: (1) pay the paper check under any existing overdraft protection agreement with customer; (2) pay the paper check and create an overdraft on the customer's account (and charge the customer an overdraft fee); or (3) return the paper check unpaid for insufficient funds (and charge the customer a fee for the returned check).
In late 2001, as part of Bank's "balance sheet engineering" program to increase revenues, Bank decided to extend its "shadow line" overdraft feature for paper checks to also cover all Check Card POS transactions, thereby potentially increasing Bank's annual revenues between $120 million and $145 million based on additional overdraft fees charged to customers' accounts.
On March 19, 2002, Smith's monthly account statement from Bank included the following notice (Notice):
In May Bank implemented the change in its practice described in the Notice.
In December Smith filed the instant complaint. The complaint alleged that Bank's account holder agreement and other materials The complaint's first cause of action for false and misleading advertising alleged that:
The complaint's second cause of action for violation of the UCL alleged that:
The complaint's third cause of action for violation of the CLRA was based on the factual allegations previously described in the complaint.
The trial court granted Smith's motion for class certification of his action against Bank, defining the class as "`All persons and entities who, while a California resident, have been charged an overdraft fee as a result of using a [Bank] Check Card issued by [Bank]....'"
In June 2004 Bank filed motions for summary adjudication of Smith's UCL and false and misleading advertising claims and for a no-merit determination on Smith's CLRA claim. Bank argued: (1) Smith's claims regarding the inadequacy of its disclosure of its May 2002 policy change were preempted by the National Banking Act (NBA) (12 U.S.C. § 24) and regulations issued by the Office of the Comptroller of the Currency (OCC); (2) Bank's disclosure was adequate as a matter of law; and (3) Smith's false and misleading advertising claim has no merit as a matter of law. In support of its motions, Bank submitted a separate statement of undisputed facts.
Smith opposed Bank's motions, arguing his claims were not preempted by the NBA or OCC regulations. He further argued there were triable issues of material fact whether Bank's account agreements and materials were misleading and deceptive because they did not adequately disclose the existence and terms of its Check Card involuntary overdraft policy and its resultant charges and fees, including its May 2002 policy change. In support of his opposition, Smith submitted a separate statement of undisputed and disputed facts. That separate statement asserted that: "The [N]otice does not explain the policy change in a clear and conspicuous manner and does not make any reference to [Bank's] Check Card and does not identify when the policy change takes effect ... Nor does the [N]otice explain under what circumstances [Bank] will approve or deny a POS transaction when there are insufficient funds in the account." (Italics added.)
In reply to Smith's opposition, Bank, for the first time, cited certain OCC regulations that require disclosures regarding account terms and conditions and require notice of...
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