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Smith v. Bank of Hawaii

United States District Court, D. Hawaii

April 5, 2018

RODNEY SMITH, individually and on behalf of all others similarly situated, Plaintiff,
BANK OF HAWAII, Defendant.


          J. Michael Seabright Chief United States District Judge


         In this putative class action, Plaintiff Rodney Smith (“Smith”) challenges Defendant Bank of Hawaii's (“BOH”) imposition of overdraft fees - specifically its use of an “available-balance method” rather than a “ledger-balance method” for assessing the sufficiency of funds in customer accounts to cover transactions. Smith contends that BOH's practice violates its Agreements with members, including the implied covenant of good faith and fair dealing. And he asserts claims based on “unjust enrichment, ” “Money Had and Received, ” and violations of the Electronic Fund Transfers Act (“EFTA”) and Hawaii Revised Statutes (“HRS”) Chapter 480.

         Currently before the court are BOH's Motion for Summary Judgment (the “Summary Judgment Motion”) and Motion to Strike the Demand for Jury Trial (the “Motion to Strike”). ECF Nos. 71, 72. For the following reasons, the Summary Judgment Motion is GRANTED in part and DENIED in part; the Motion to Strike is DENIED.


         A. Factual Background

         A “ledger-balance method” for determining when an account is overdrawn takes into account “only settled transactions, ” whereas an “available-balance method” includes also debits to an account that are authorized but not yet settled and reflects holds on deposits that have not yet cleared. Consumer Financial Protection Bureau (“CFPB”) Supervisory Highlights, Winter 2015 § 2.3, ECF No. 81-15. Thus, “transactions that would not have resulted in an overdraft (or overdraft fee) under a ledger-balance method [may] result in an overdraft (and an overdraft fee) under an available-balance method.” Id.

         BOH describes its checking accounts as having “three different balances”:

The first is the “ledger” balance. Ledger balance is the account balance at the end of the banking day and the beginning of the next banking day. It reflects the full amount of all deposits made into the account throughout the day (without regard for whether a portion of a check deposit is on hold), less payment transactions that have actually posted to the account during that day. The second balance is referred to as “current” balance. It is the ledger balance plus deposits and minus payment transactions as they post throughout the day. The “available balance” is the amount the customer has available to spend. It is generally described as the current balance, less “holds.” Holds are that portion of a deposit on hold until a deposited check clears. Holds also refer to VISA debit card payment transactions that have been authorized by BOH but have not yet been presented for payment by the merchant who sold goods or services to BOH's customer.

Matt Emerson Decl. ¶ 3, ECF No. 70-2. BOH customer account statements do not show a current or ledger balance. Rather, “credits” and “debits” are listed chronologically in separate sections, and additional sections record “daily balances” and “overdraft/returned item fees.” See, e.g. Statements of Account, ECF Nos. 70-8 through 70-10.

         Smith has opened multiple BOH checking accounts, the first in July 2010, and his current account in December 2014.[1] Emerson Decl. ¶¶ 4-5. Although Smith does not recall reading them at the time, Rodney Smith Decl. ¶ 4, ECF No. 81-1, BOH has submitted executed signature cards from 2011 and 2014, wherein he agreed “to all of the terms and conditions” in the Consumer Deposit Account Agreement and Disclosure Statement and Bankoh Consumer Electronic Financial Services Agreement and Disclosure Statement (the “Agreement”), ECF Nos. 70-6 and 70-7. Consumer Signature Cards (“Signature Cards”), ECF Nos. 70-4, 70-5.

         That Agreement includes the following provisions, which appear on page 17 of the 36-page document, and are mentioned on page 3 of the table of contents:

Jury Trial Waiver. You and we each waive our respective rights to a trial before a jury in connection with any disputes related to your account or account services. This includes any claim by us or by you, claims brought by you as a class representative on behalf of others, and claims by a class representative on your behalf as a class member (so-called “class action” suits).
. . . .
Limitation on Time to Sue. An action or proceeding by you to enforce an obligation, duty or right arising under this agreement or by law with respect to your account or any account service must be commenced within one year after the cause of action accrues.

         Agreement at 17.[2] The Jury Trial Waiver appears again later in the Agreement, and it is also referred to in the 2014 Consumer Signature Card. ECF Nos. 70-5, 70-6 at 32, 70-7 at 33.

         B. Procedural Background

         Smith filed his original Complaint and Demand for Jury Trial in state court on September 9, 2016, and a First Amended Complaint (“FAC”) on September 13, 2016. ECF No. 1-1, at 1 & 35. On September 19, 2016, BOH filed a Notice of Removal. ECF No. 1.

         On November 2, 2016, BOH filed a Motion to Dismiss the FAC, arguing that its Agreement and Opt-in form for its overdraft program unambiguously disclose that it uses the available-balance method to determine overdrafts. Def.'s Mem. at 18-25, ECF No. 16-4. This court disagreed and denied the Motion, finding that “[e]ven construed together, the Agreements' terms are ambiguous as to BOH's choice of balance method.” Smith v. Bank of Haw., 2017 WL 3597522, at *5 (D. Haw. Apr. 13, 2017) (describing in detail the terms of the relevant documents).

         BOH also argued in the Motion to Dismiss that Smith's EFTA claim should be dismissed based on the EFTA's one-year statute of limitations. Def.'s Mem. at 37-40, ECF No. 16-4. It contended that the statutory period for the claim began to run at the time of the first overdraft charge, and it asked the court to take judicial notice of Smith's April 2015 bank statement showing an overdraft fee. Id. at 38; Req. Judicial Notice, ECF No. 17. The court declined to take judicial notice of the statement, however, and “[a]s a result, ” found that there was “nothing to indicate, even assuming the statute of limitations for all overdraft fees begins with the first overdraft fee, ” that Smith's first overdraft fee was charged more than a year before this suit was filed. Smith, 2017 WL 3597522, at *8. The court found, therefore, that “on the present record, the claims are timely.” Id. (emphasis omitted).

         BOH now asks the court to determine as a matter of law what it assumed merely for argument's sake on the Motion to Dismiss, that “[a]n EFTA claim accrues when the first unauthorized transfer occurs.” Def.'s Mem. Supp. Mot. Summ. J. at 2-3, ECF No. 71-1. It contends, therefore, that Smith's EFTA claim is “barred in its entirety” by the EFTA's limitation period. Id. at 2. It also contends that Smith's remaining claims are governed by the contractual limitation period in the Agreement. Id. at 2-3. It therefore requests judgment on all of Smith's claims to the extent they accrued more than one year before this action was filed. Id.

         BOH filed the Summary Judgment Motion on December 11, 2017. ECF No. 71. Smith filed his Opposition on February 1, 2018. ECF No. 79. BOH replied on February 8, 2018. ECF No. 88.

         BOH filed the Motion to Strike (based on the contractual Jury Trial Waiver) on December 11, 2017. ECF No. 72. Smith filed an Opposition on January 30, 2018. ECF No. 74. And BOH filed its Reply on February 6, 2018. ECF No. 85.

         Oral argument was held on February 20, 2018.


         Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The burden initially lies with the moving party to show that there is no genuine issue of material fact. T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). Nevertheless, “summary judgment is mandated if the non-moving party ‘fails to make a showing sufficient to establish the existence of an element essential to that party's case.'” Broussard v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). An issue of fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is material if the resolution of the factual dispute affects the outcome of the claim or defense under substantive law governing the case. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir. 2001). When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986).

         “One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses[.]” Celotex, 477 U.S. at 323-24. “There is no genuine issue of fact if the party opposing the motion ‘fails to make an adequate showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'” Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989) (quoting Celotex, 477 U.S. at 322). Moreover, there is no genuine issue of material fact if, taking the record as a whole, a rational trier of fact could not find in favor of the non-moving party. Matsushita Elec. Indus. Co., 475 U.S. at 586; Taylor, 880 F.2d at 1045.


         A. Summary Judgment Motion

         1. Electronic Fund Transfers Act

         Congress enacted the EFTA as part of the comprehensive Consumer Credit Protection Act (the “CCPA”), Pub. L. No. 95-630 § 2001, 92 Stat. 3641 (1978), “to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems.” 15 U.S.C. § 1693(b). “In enacting the [CCPA] . . . Congress intended for courts to broadly construe its provisions in accordance with its remedial purpose.” Stout v. FreeScore, LLC, 743 F.3d 680, 684 (9th Cir. 2014); see also Clemmer v. Key Bank Nat'l Ass'n, 539 F.3d 350, 353 (6th Cir. 2008) (describing the CCPA as a “remedial statute accorded ‘a broad, liberal construction in favor of the consumer.'” (quoting Begala v. PNC Bank, Ohio, Nat'l Ass'n, 163 F.3d 948, 950 (6th Cir. 1998))).

         Rules contained in “Regulation E” implementing EFTA, see 12 C.F.R. § 1005.1 et seq, require that for accounts opened on or after July 1, 2010, a financial institution must “obtain the consumer's affirmative consent before the institution assesses any fee or charge on the consumer's account for paying an ATM or one-time debit card transaction pursuant to the institution's overdraft service.” 12 C.F.R. § 1005.17(c). Subject to enumerated exceptions not applicable here, “the term ‘overdraft service' means a service under which a financial institution assesses a fee or charge on a consumer's account held by the institution for paying a transaction (including a check or other item) ...

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