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Federal Court Dismisses Certain State Law Claims in Multidistrict Litigation Case Alleging ATM Overdraft Fee Fraud

A federal judge denied most of a motion to dismiss brought by multiple banks in a consolidated case alleging overdraft fee fraud. In re Checking Account Overdraft Litigation, 694 F.Supp.2d 1302 (S.D. Fla. 2010). The Judicial Panel on Multidistrict Litigation (JPML) consolidated multiple claims into a single matter in the Southern District of Florida in order to deal efficiently with common pretrial matters. The plaintiffs asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing (“GFFD covenant”), and many individual causes asserted common law breach of contract claims and state law consumer protection claims. The defendants filed an omnibus motion to dismiss, which the trial court granted in part and denied in larger part. The court dismissed claims under certain state consumer statutes, as well as claims based on the laws of states in which no plaintiffs lived.

The central issue of the litigation was the ordering of ATM transactions from highest to lowest, regardless of the order in which the account holder performed the transaction. This allegedly reduced the account holder’s total account balance more quickly, garnering more overdraft fees for the defendants. At the time the court rendered its order on the omnibus motion to dismiss, the litigation consisted of fifteen separate complaints, each brought against an individual bank. All of the fifteen complaints pending at the time of the court’s order involved breach of GFFD covenant claims. Five complaints were filed in California as putative class actions on behalf of California customers. Eight complaints were filed outside California, putatively on behalf of nationwide classes excluding California. One complaint was filed by a California resident and sought to represent a nationwide class. The final complaint was filed by a Washington resident on behalf of a class of Washington customers. According to the JPML, the consolidated litigation has involved one hundred separate complaints since 2009, with forty-four still involved as of March 5, 2013.


The court refused to dismiss most of the plaintiffs’ claims. It first ruled that federal banking law did not preempt the state law and common law claims. It also retained most of the common law claims, including the GFFD covenant, unconscionability, unjust enrichment, and conversion. It dismissed claims based on the GFFD covenant under Texas law without prejudice, finding that the covenant in Texas law “only exists in exceptional circumstances.” Id. at 1317.

Regarding state statutory claims, the court considered whether the plaintiffs had standing to sue under specific states’ statutes, and whether they had properly followed the statutes’ pleading requirements. It reviewed statutes from various states that require evidence of deceptive practices, unfair acts, or unconscionable acts; statutes that only apply to transactions of goods or services; and statutes that require notice or demand before filing suit. It dismissed all claims brought under the laws of states where none of the named plaintiffs resided, with prejudice to refiling. It dismissed claims based on the state statutes of Massachusetts and New Mexico without prejudice. It dismissed claims based on other state statutes with prejudice: California, Oregon, Montana, Ohio, and Wisconsin. It allowed all other state law claims to proceed to the next stage of litigation.

Victims of bank fee fraud can turn for help to the consumer rights attorneys at DiTomasso♦Lubin, who will fight for their rights under state and federal consumer protection law. We represent clients throughout the greater Chicago area, particularly Cook and DuPage Counties, and our practice extends beyond Illinois to wronged consumers in Indiana, Wisconsin and Iowa. To schedule a confidential consultation with one of our attorneys, please contact us online, at (630) 333-0000, or at (877) 990-4990.

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