United States District Court, D. Hawaii
RODNEY SMITH, individually and on behalf of all others similarly situated, Plaintiff,
BANK OF HAWAII, Defendant.
ORDER DENYING DEFENDANT'S SECOND MOTION FOR
SUMMARY JUDGMENT, ECF NO. 116
A. OTAKE UNITED STATES DISTRICT JUDGE.
putative class action, Plaintiff Rodney Smith
(“Smith”) challenges the adequacy of disclosures
regarding the method used by Defendant Bank of Hawaii
(“BOH”) to impose overdraft fees. Smith contends
that BOH charged him overdraft fees in a manner inconsistent
with what was described in agreements he signed, by using an
available-balance method rather than a ledger-balance method
to assess the sufficiency of customer account funds to cover
a transaction. BOH moves for summary judgment on five causes
of action or, in the alternative, partial summary judgment as
to actual damages on the Electronic Fund Transfers Act
(“EFTA”) claim. ECF No. 116. For the reasons set
forth below, the Court DENIES the Motion.
several prior orders describe the factual background of this
case, the Court will not recount every detail here. See
Smith v. Bank of Haw., 2017 WL 3597522 (D. Haw. Apr. 13,
2017) (“Smith I”) (denying BOH's
Motion to Dismiss); Smith v. Bank of Haw., 2018 WL
1662107 (D. Haw. Apr. 5, 2018) (“Smith
II”) (granting in part and denying in part
BOH's first Motion for Summary Judgment).
alleges that BOH's use of the available-balance method
rather than the ledger-balance method is “inconsistent
with how BOH expressly describes the circumstances under
which overdraft fees are assessed in” its contractual
overdraft program documents. FAC ¶ 28-29, ECF No. 1-1. A
ledger-balance method uses only settled transactions to
determine overdraft fees. Smith II, 2018 WL 1662107,
at *1 (citing Consumer Financial Protection Bureau
(“CFPB”) Supervisory Highlights, Winter 2015
§ 2.3, ECF No. 81-15). The available-balance method
includes: (1) settled transactions; (2) transactions that are
authorized but not yet settled; and (3) holds on deposits
that have yet to clear. Id. Accordingly,
“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. (quoting CFPB
Supervisory Highlights, Winter 2015 § 2.3, ECF No.
contractual overdraft program documents include: (1) the
Consumer Deposit Account Agreement and Disclosure Statement
and Bankoh Consumer Electronic Financial Services Agreement
(“Account Agreement”); (2) the Fee Schedule for
Personal Checking and Savings Accounts (“Fee
Schedule”); and (3) “What You Need to Know about
Overdrafts and Overdraft Fees” (“Opt-In
Agreement”) (collectively, the
“Agreements”). See Smith I, 2017 WL 3597522,
at *2 (describing in detail the terms of the Agreements). In
the Motion, BOH argues that the Court should also consider
the change-in-terms notice sent to BOH customers in January
2015 (“January 2015 CIT Notice”) as an additional
contract document in BOH's overdraft program. ECF No.
116-1 at 29. The January 2015 CIT Notice provided, in
If you do not have sufficient available funds on deposit to
cover the amount of a check or transaction (e.g., an
in-person withdrawal, automatic payment, ATM withdrawal,
BankCard or Check Card purchase, or other electronic
transfer), we may return the check or reject the transaction
without payment. We may elect, however, in our sole
discretion to create an overdraft by paying the check or
permitting the transaction. Either way, there may be a
service fee for each item or transaction as stated in our Fee
Schedule. You will be charged no more than three Overdraft
and/or Returned Item fees per account on any one day. No.
Overdraft or Returned Item fee will be imposed on any day
that your end of day available balance is or would have been
overdrawn by less than $5.
ECF No. 117-12 at 2.
Motion, BOH argues that there was a course of dealing between
Smith and BOH prior to when Smith received the January 2015
CIT Notice, and that the course of dealing resolved any
ambiguities concerning which balance method BOH used.
See ECF No. 116-1 at 32. The following facts inform
the course of dealing argument:
opened his first BOH checking account on July 1,
2010. See BOH's Concise Statement
of Facts (“CSF”) ¶ 3, ECF No. 117; Ex. 1, ECF
No. 117-5. BOH employees were trained to explain BOH's
overdraft program to customers when they opened a new
account, including providing a description of the
“available balance.” Maryellen Ing Decl.
(“Ing Decl.”) ¶¶ 2-4, ECF No. 117-3.
Smith testified that BOH did not provide this explanation to
him when he opened his account. Rodney Smith Deposition
(“Smith Dep.”) at 104:4-106:12, ECF No.
gave Smith a copy of the Frequently Asked Questions
(“FAQ”) document when he opened his account and
mailed him another copy of that document a few weeks later.
CSF ¶¶ 32-33; Ex. 3, ECF No. 117-7; Matt Emerson
Decl. (“Emerson Decl.”) ¶ 6, ECF No. 117-2.
The FAQ document provided, in relevant part: “You may
also be assessed overdraft charges or non-sufficient funds
(returned item) charges for checks, automatic bill payments,
and other transactions which exceed the available balance in
your account.” ECF No. 117-1 at 2.
2010, the BOH website had an “Understanding
Overdrafts” page. CSF ¶ 29; Ex. 15, ECF No.
117-19. It appears that the customer would have to click the
“Personal” tab, then “Checking, ”
then “Understanding Overdrafts” to reach that
page. Id. Then, the customer would click on the
“FAQs” tab on that page, and find the question,
“How is my available balance determined?” there,
“available balance” was defined, in relevant
Your current balance is your balance at the start of the day,
plus or minus the day's transactions. Your available
balance is your current balance minus holds. Holds include
deposits with a hold on the amount and Visa debit card holds
for purchases you've signed for or made online. (Please
note that for point-of-sales transactions, some merchants
obtain authorizations for only a partial amount [for example,
gas stations] or a greater amount [for example restaurants]
of the purchase. Therefore, until the actual amount of the
transaction is debited from your account, you must factor in
the difference.) You can spend up to the amount of your
available balance without incurring a fee for insufficient
Ex. 15, ECF No. 117-19 at 5 (bracket in original). Smith
testified that he did not remember seeing this information on
the website. Smith Dep. at 142:11-144:8.
also has a mobile app, which displays the
“current” and “available” balances.
CSF ¶ 24. Smith testified that he used the app to check
his account balance, but that he did not pay attention to or,
ultimately, understand that there were two different
balances. Smith Dep. at 86:25-87:5, 144:13-16.
received an electronic account statement each month. CSF
¶ 13; Ex. 9, ECF No. 117-13. Amidst other information,
the account statement listed overdraft fees and the dates
they were charged. Ex. 9, ECF No. 117-13. The daily balances
were listed near the end of each account statement. Ex. 9,
ECF No. 117-13. Putting that information together, some of
the account statements revealed (with some deduction) a
positive “daily balance” (the ledger balance) on
days when overdraft fees were imposed. CSF ¶¶
14-15; see, e.g., ECF No. 117-13 at 6-7, 11-13. Each
time Smith incurred an overdraft fee, he received a mailed
notice from BOH. CSF ¶ 21; Ex. 10, ECF No. 117-14. Smith
testified that it was only when he received the overdraft fee
notices that he would review the monthly account statements.
Smith Dep. at 42:4-8, 131:5-10, 150:2-22.
or six occasions, Smith called BOH because he thought (1) his
balance amount as displayed in the mobile app was incorrect
or (2) BOH had improperly charged him an overdraft fee.
Id. at 70:11-16, 90:8-15. Smith testified that he
did not learn about BOH's balance method from these phone
calls, although he admitted that a BOH employee had once
mentioned holds to him. Id. at 70:11-25.
filed his Complaint and First Amended Complaint
(“FAC”) in the First Circuit Court of the State
of Hawai'i on September 9 and 13, 2016, respectively. ECF
No. 1-1 at 1, 35. BOH removed the action to federal court on
September 19, 2016. ECF No. 1. Smith brings six causes of
action: (1) violation of Hawaii Revised Statutes
(“HRS”) Chapter 480 for unfair or deceptive acts
or practices (“UDAP”); (2) breach of contract;
(3) breach of the covenant of faith and fair dealing; (4)
unjust enrichment; (5) money had and received; and (6)
violation of EFTA for noncompliance with Regulation E. ECF
filed a Motion to Dismiss the FAC on November 2, 2016, ECF
No. 16, which Chief District Judge J. Michael Seabright
denied on April 13, 2017. Smith I, 2017 WL 3597522,
at *4, 10. In that motion, BOH argued that the Agreements
were not ambiguous because they clearly conveyed that BOH
used the available-balance method. See Id. at *5.
Smith I construed the Agreements together, and found
that the relevant terms in the Agreements were ambiguous.
also argued that “Plaintiff's EFTA claim should be
dismissed because: (1) BOH complied with EFTA; (2) BOH's
use of the model form precludes liability; (3) imposing
liability would violate due process; and (4) the claim is
outside of the statute of limitations.” Id. at
*7. Chief Judge Seabright rejected all of BOH's
arguments. Id. Having determined that the terms in
the Agreements were ambiguous, Chief Judge Seabright further
concluded it was unclear whether BOH complied with EFTA.
also argued that the UDAP claim should be dismissed because
the Agreements explicitly stated that BOH uses the available
balance to determine overdraft fees. Id. at *9.
However, Chief Judge Seabright concluded that
“[b]ecause the relevant terms of the Agreements are
ambiguous, it is unclear whether BOH's conduct
constituted a deceptive act or practice.” Id.
Further, Chief Judge Seabright found that Smith had
adequately alleged a deceptive act or practice. Id.
December 11, 2017, BOH filed its first Motion for Summary
Judgment, arguing that Smith's claims were time-barred
under both EFTA and the contractual limitations provision of
the Account Agreement. ECF No. 71. On April 8, 2018, Chief
Judge Seabright granted the Motion for Summary Judgment based
on the state law contractual limitation period, but only as
to overdraft fees charged before September 9, 2015. Smith
II, 2018 WL 1662107, at *9.
August 5, 2018, BOH filed the instant motion, its Second
Motion for Summary Judgment. ECF No. 116. Smith filed his
Opposition on October 1, 2018, ECF No. 125, and BOH filed its
Reply on October 5, 2018, ECF No. 127. A hearing was held on
November 26, 2018. On November 29, 2018, Smith filed a
supplemental brief addressing two cases cited by defense
counsel for the first time at the hearing. ECF No. 140. On
December 3, 2018, BOH filed a reply to Smith's
supplemental brief. ECF No. 144.
STANDARD OF REVIEW
judgment is proper where 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(a). Federal Rule of Civil
Procedure 56(a) mandates summary judgment “against a
party who fails to make a 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.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); see also Broussard v. Univ. of Cal. at
Berkeley, 192 F.3d 1252, 1258 (9th Cir. 1999).
party seeking summary judgment bears the initial burden of
informing the court of the basis for its motion and of
identifying those portions of the pleadings and discovery
responses that demonstrate the absence of a genuine issue of
material fact.” Soremekun v. Thrifty Payless,
Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing
Celotex, 477 U.S. at 323). “When the moving
party has carried its burden under Rule 56[(a)], its opponent
must do more than simply show that there is some metaphysical
doubt as to the material facts [and] come forward with
specific facts showing that there is a genuine issue for
trial.” Matsushita Elec. Indus. Co. v. Zenith
Radio, 475 U.S. 574, 586-87 (1986) (citation and
internal quotation signals omitted); see also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)
(stating that a party cannot “rest upon the mere
allegations or denials of his pleading” in opposing
issue is ‘genuine' only if there is a sufficient
evidentiary basis on which a reasonable fact finder could
find for the nonmoving party, and a dispute is
‘material' only if it could affect the outcome of
the suit under the governing law.” In re
Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing
Anderson, 477 U.S. at 248). 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., 475 U.S. at 587;
see also Posey v. Lake Pend Oreille Sch. Dist. No.
84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating that
“the evidence of [the nonmovant] is to be believed, and
all justifiable inferences are to be drawn in his
favor” (citations omitted)).
seeks summary judgment on Smith's UDAP, breach of
contract, unjust enrichment, money had and received, and EFTA
claims and, in the alternative, partial summary judgment as
to actual damages on the EFTA claim. Having drawn all
reasonable inferences in favor of Smith, the Court finds that
the contract between BOH and Smith was ambiguous, and that
there are genuine issues of material fact regarding the