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Salls v. Digital Federal Credit Union

United States District Court, D. Massachusetts

November 8, 2018

BRANDI SALLS, individually, and on behalf of all others similarly situated Plaintiff,
v.
DIGITAL FEDERAL CREDIT UNION and DOES 1 through 100, Defendants.

          MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS (Docket No. 12)

          TIMOTHY S. HILLMAN, DISTRICT JUDGE

         Brandi Salls (“Plaintiff”) brings a putative class action challenging the practice of Digital Federal Credit Union and DOES 1 through 100 (“Defendant”) to charge overdraft fees when members accounts have sufficient funds to cover the transactions. She brings claims for breach of contract (Counts I and II), breach of the implied duty of good faith and fair dealing (Count III), unjust enrichment (Count IV), money had and received (Count V), and violation of Regulation E, 12 C.F.R. § 1005.17, of the Electronic Fund Transfers Act (“EFTA”), 15 U.S.C. §§ 1693 et seq. (Count VI). Defendant moves to dismiss all claims pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. (Docket No. 12). For the reasons stated below, Defendants motion is granted in part and denied in part.

         Background

         The following facts are taken from Plaintiff's complaint (Docket No. 1) and assumed to be true for the purposes of this motion. The court also may consider “matters fairly incorporated within [the complaint] and matters susceptible to judicial notice.” In re Colonial Mortgage Bankers Corp., 324 F.3d 12, 15 (1st Cir. 2003). Accordingly, the Court will also consider models of the two agreements that Plaintiff entered into with Defendant. (Docket Nos. 23-1; 23-2).[1]

         Plaintiff is a member of and entered into two written contracts with Defendant. The first agreement (“Account Agreement”) states, in relevant part:

• All accounts are subject to your Schedule of Fees and Service Charges. You shall debit such charges against any account I own except my IRA. If there are insufficient funds available, the charges are payable on demand and, for checking accounts, will be treated as an overdraft. Docket No. 23-1 at 7 (emphasis in original).
• You may at your discretion, but are not obligated to nor shall you be liable for refusal to, pay funds from this account: When such payment would draw the available balance in the account below the minimum balance for the account as established from time to time by you (overdraft-See the Schedule of Fees and Service Charges). This may include overdraft fees created by checks, debit card, ACH, and other electric means as applicable. Id. at 17 (emphasis in original).

         The second agreement (“Opt In Agreement”) describes Defendant's overdraft policies as required by Regulation E of EFTA. 12 C.F.R. § 1005.17. The Opt In Agreement provides: “An overdraft occurs when you do not have enough money in your account to cover a transaction, but we pay it anyway.” (Docket No. 24-2 at 4).

         Plaintiff's claims in this case arise from overdraft fees based on the “available balance” as opposed to the “ledger” or “actual balance.” The “available balance” of an account is calculated by deducting pending debits and deposit holds. Therefore, the “available balance” can be much lower than the “actual balance” in an account.

         Plaintiff alleges that on December 18, 2014, December 19, 2014, and on information and belief at least one time within twelve months of filing her complaint, she was charged an overdraft fee when her “actual balance” was enough to cover the transaction. Because her “available balance” was insufficient, however, she was charged an overdraft fee.

         Standard of Review

         A defendant may move to dismiss, based solely on the complaint, for the plaintiff's “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). To survive a Rule 12(b)(6) motion to dismiss, a complaint must allege “a plausible entitlement to relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559, 127 S.Ct. 1955 (2007). Although detailed factual allegations are not necessary to survive a motion to dismiss, the standard “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555, 127 S.Ct. 1955. “The relevant inquiry focuses on the reasonableness of the inference of liability that the plaintiff is asking the court to draw from the facts alleged in the complaint.” Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 13 (1st Cir. 2011).

         In evaluating a motion to dismiss, the court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Langadinos v. American Airlines, Inc., 199 F.3d 68, 68 (1st Cir. 2000). It is a “context-specific task” to determine “whether a complaint states a plausible claim for relief, ” one that “requires the reviewing court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937 (2009) (internal citations omitted). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]'-that the pleader is entitled to relief.” Id. (quoting Fed.R.Civ.P. 8(a)(2)). On the other hand, a court may not disregard properly pled factual allegations, “even if it strikes a savvy judge that actual proof of those facts is improbable.” Twombly, 550 U.S. at 556, 127 S.Ct. 1955.

         Discussion

         1.Breach of Contract

         “It is well-settled under Massachusetts law that the interpretation of a contract is generally a question of law.” Baybank Middlesex v. 1200 Beacon Properties, Inc., 760 F.Supp. 957, 963 (D. Mass. 1991) (citations omitted). If a contract is unambiguous, it must be enforced according to its plain terms. Freelander v. G. & K. Realty Corp., 357 Mass. 512, 516, 258 N.E.2d 786 (1970). If it is ambiguous, however, its interpretation is a question of fact for the jury. Gillentine v. McKeand, 426 F.2d 717, 721 (1st Cir. 1970); Trafton v. Custeau, 338 Mass. 305, 307-08, 155 N.E.2d 159 (1959). “The determination of whether the terms of a contract are ambiguous is a question of law.” Baybank, 760 F.Supp. at 963. Terms will be found ambiguous only when they “are inconsistent on their face or where the phraseology can support reasonable difference of opinion as to the meaning of the words employed.” Fashion House, Inc. v. K Mart Corp., 892 F.2d 1076, 1083 (1st Cir. 1989).

         When an agreement between the parties is contained in more than one document, the separate documents “must be read together to effectuate the intentions of the parties.” Chase Commercial Corp. v. Owen, 32 Mass.App.Ct. 248, 250 (1992) (citations omitted); see also Singh, 977 F.2d at 21 (“Under Massachusetts law, when several writings evidence a single contract or comprise constituent parts of a single transaction, they will be read together.”) (citations omitted); Consolo v. Bank of America, 2017 WL 1739171, at *3 n.3 (D. Mass. May 2, 2017) (“documents must be read together when they are close in temporal space and are closely interrelated.”) (quotation marks and citation omitted).

         Here “[a]lthough the Agreements are separate, they are arguably linked with respect to an account holder's overdraft protection.” Walbridge v. Northeast Credit Union, 299 F.Supp.3d 338, 344 (D.N.H. 2018); see also Smith v. Bank of Hawaii, 2017 WL 3597522, at *5-6, (D. Haw. Apr. 13, 2017) (similarly construing an overdraft agreement and account agreement together as part of the same transaction). But see Advia, 227 F.Supp.3d 848, 856 (W.D. Mich. 2016) (finding that “the Op-in Agreement is a separate contract.”). Because “Plaintiff[] ha[s] not laid out any facts supporting the inference” that the agreements should not be construed together even though they are arguably linked with respect to overdraft protection, I will consider the overdraft agreement in the context of the Account Agreement for the purposes of this motion. Harrington v. Tetraphase Pharm. Inc., 2017 WL 1946305, at *4 (D. Mass. May 9, 2017).[2]

         Members opt in to Defendant's overdraft service by checking a box on their checking and savings account application. (Docket No. 24-2 at 3). The Opt In Agreement is accompanied by an overdraft disclosure form. (Docket No. 24-2 at 4). The disclosure provides, in relevant part: “An overdraft occurs when you do not have enough money in your account to cover the transaction, but we pay it anyway.” Id. (emphasis added). The overdraft disclosure does not provide any information clarifying that “enough money” is to be construed as “available balance” and therefore I find that a reasonable person could construe “enough money” to mean “ledger balance.” See Walbridge, 299 F.Supp.3d at 343 (“Standing alone, the Opt In Agreement does not sufficiently define or explain the term ‘enough money' to put account holders on notice that ‘enough money' means available balance.”). Cf. Chambers v. NASA Fed. Credit Union, 222 F.Supp.3d 1, 10 (D.D.C. 2016) (finding an opt in agreement unambiguously referring to “available balance” where it “specifically invoke[ed] the phrase ‘available balance'” and provided examples to demonstrate what not “enough money in your account to cover a transaction” meant).

         Defendant argues, however, that reading the Opt In Agreement in conjunction with the Account Agreement provides context that lends support to its arguments. The Account Agreement does indeed include references to available funds and overdrafts. Most relevant here:

• All accounts are subject to your Schedule of Fees and Service Charges. You shall debit such charges against any account I own except my IRA. If there are insufficient funds available, the charges are payable on demand and, for checking accounts, will be ...

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