Florida District Court Allows Litigation Alleging Excessive Overdraft Fees on Debit Card Purchases to Proceed; National Bank Act Does Not Preempt State Law Claims

On March 11, the U.S. District Court, Southern District of Florida refused to dismiss several consolidated lawsuits against Bank of America, Citibank, JPMorgan Chase, Union Bank, U.S. Bank, Wachovia, Wells Fargo, SunTrust, and Huntington National Bank (the defendant banks) alleging that the defendant banks charged “excessive” overdraft fees on debit card purchases. In re Checking Account Overdraft Litigation, No. 09-MD-02036, 2010 WL 841305 (S.D. Fla. Mar. 11, 2010). The court held that the plaintiffs, who are current or former checking account customers of the defendant banks and who seek to recover for themselves and all other similarly-situated customers allegedly-excessive overdraft fees for charges made to their accounts on debit card transactions, pleaded plausible facts supporting claims for breach of contract, breach of a covenant of good faith and fair dealing, unconscionability, conversion, unjust enrichment, and violation of the consumer protection statutes of various states, and therefore stated claims that survived the defendant banks’ motion to dismiss. The court held that the plaintiffs “set forth a number of … policies and practices,” that would entitle plaintiffs to relief, including manipulating customer accounts by reordering debit transactions on a single day, or over multiple days, from largest to smallest amount, regardless of the actual chronological sequence, thus resulting in more overdrafts than if the transactions were processed chronologically. Importantly, the court rejected the defendant banks’ preemption argument barring state regulation of the activities of national banks under the National Bank Act (NBA). In holding that the claims were not preempted, the court noted that the state law claims only "incidentally affect the exercise of national banks’ deposit taking powers," noting first that Office of the Comptroller of the Currency’s regulations and interpretive letters do not explicitly preempt the state law claims because they do not explicitly (i) authorize banks "to ignore general contract or tort law," or (ii) authorize debit card postings in a high to low order to increase fees. The court further noted that field preemption does not apply to such claims and that state laws of general application, such as those alleged to have been violated in this case, "do not vitiate the purposes of the NBA," and, thus, are not preempted. The multidistrict litigation consolidated 15 legal actions against the defendant banks, and, collectively, the complaints involve individual plaintiffs from 14 states asserting claims under the laws of 21 states.