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Financial Services Law Insights and Observations

District court allows some claims to proceed in ATM-fee action

Courts Class Action Fees State Issues ATM

Courts

On September 28, the U.S. District Court for the Southern District of California allowed fraud claims under California’s Unfair Competition Law (UCL) and breach of contract claims to proceed against a national bank and several independent ATM operators (collectively, “defendants”) in a putative class action alleging that the defendants (i) charged unwarranted fees for using out-of-network (OON) ATMs for balance inquiries; (ii) made deceptive and misleading representations on screens and on signs regarding those fees; and (iii) assessed fees in violation of governing account documents. As previously covered by InfoBytes, the class action alleged 13 claims against the defendants for violations of, among other things, the UCL, and claims for conversion, negligence, and breach of contract. In March, the court dismissed all 13 claims but allowed the plaintiffs leave to amend a number of them. After the plaintiffs filed their amended complaint, the defendants subsequently submitted four new motions to dismiss.

The court denied dismissal of the UCL claims against all ATM operators, concluding that the plaintiffs sufficiently alleged claims under the fraud prong. Specifically, the court noted that the plaintiffs provided details with enough particularity, such as the date and location and examples of the specific screen prompts, which established that the ATM operators “employed a misleading series of screen prompts at the ATM machines to trick Plaintiffs, and other accountholders, into engaging in OON balance inquiries.” However, the court dismissed all the unjust enrichment claims and one plaintiff’s breach of contract claim against the national bank, concluding, among other things, that the dispute between the plaintiffs and national bank is covered by a “valid and enforceable written agreement,” which precludes the assertion of unjust enrichment. Moreover, the court allowed two plaintiffs’ breach of contract claims to proceed against the national bank, determining that “[b]oth parties have set forth reasonable, opposing interpretations of the [account agreement],” and the plaintiffs’ definition of “balance inquiry” under the agreement is at least plausible. Thus, the court denied dismissal as to those claims. 

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