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Christopher Hughes and Carla Cressman, Individually and On v. Td Bank

April 19, 2012

CHRISTOPHER HUGHES AND CARLA CRESSMAN, INDIVIDUALLY AND ON HONORABLE JOSEPH E. IRENAS BEHALF OF OTHERS SIMILARLY SITUATED,
PLAINTIFFS,
v.
TD BANK, N.A., DEFENDANT.



The opinion of the court was delivered by: Irenas , Senior District Judge:

OPINION

Plaintiffs' claims arise from Defendant's allegedly unlawful banking practices. Presently before the Court is Defendant's Motion to Dismiss for failure to state a claim. (Dkt. No. 4)

I.

Plaintiffs Christopher Hughes and Carla Cressman opened checking accounts with Defendant TD Bank. To make purchases and withdraw funds from the accounts, Defendant issued Plaintiffs a debit card. (Compl. ¶ 37) In connection with the accounts, TD Bank automatically registered customers for its overdraft protection program. ( Id. at ¶ 78) In other words, TD Bank did not obtain Plaintiffs' affirmative consent or opt-in to the program. ( Id. at ¶ 82)

The overdraft protection program allowed customers to withdraw funds in excess of their daily account balance - up to a certain internally designated limit - but were charged a fee for each transaction in the red. Due to nearly instantaneous debit transaction authorizations, TD Bank could have denied transactions that would overdraw accounts instead of permitting the transactions and charging a fee. ( Id. at ¶¶ 99-101)

The specific terms of TD Bank's checking accounts and overdraft protection programs are provided in the Personal Deposit Account Agreement ("PDAA"). ( See Cert. Leming, Ex. B at 13-14) Relevant here, the 2009 PDAA specifically reserves the right to "establish different processing orders for checks and other items." ( Id. at 13) "[S]ome processing orders may result in more insufficient funds items [sic] and more fees than others. We may choose our processing orders in our sole discretion and without notice to you, regardless of whether additional fees may result." ( Id. at 14) Once an account has a negative balance, each transaction, no matter how small, accrues a thirty-five dollar fee up to five total fees per day. ( See Compl. ¶ 49) Posting the checks from largest to smallest within any given business day, regardless of the order in which they arrived at the bank, exhausts account funds more quickly and is alleged to result in more overdraft fees. ( Id. at ¶ 52) Moreover, the overdraft fee is often disproportionately larger than the size of the offending transaction. This is especially so considering reordering the day's transactions from high to low has the effect of assigning overdraft fees to the smallest of the day's transactions.
The 2011 PDAA also reserves the right to reorder transactions, but only within certain categories of items. First, "deposits that have become available to you that Business Day are added to your available Account balance." (Cert. Leming, Ex. A at 12) Next, pending debit card transactions are deducted from the account. *fn1 ( See id. ) However, TD Bank does not deduct the amount of pending debit card authorizations from the "available Account balance for certain merchants that frequently request authorization for amounts in excess of the likely transaction amount (hereinafter "Undocumented Merchants")." ( Id. ) In other words, a purchase may post several days after the date of the transaction despite TD Bank having received a request for an authorization.

We then post items to your Account by category, in the following order:

i) Outgoing wire transfers, deposit return chargebacks, and debit adjustments to your Account balance;

ii) Overdraft fees, other returned item fees, and deposit return fees;

iii) All other Account fees (except as described in (iv) below), and all other items including checks, ATM transactions, and debit card transactions; and

iv) Fees assessed at the end of the statement cycle including, for example but not limited to, monthly maintenance fees and non-TD Bank ATM fees.

Within categories i, ii, and iii, we post items in order from largest to smallest. ( Id. ) TD Bank does "not process transactions in the order in which they occur. The order in which items are processed may affect the total amount of overdraft fees incurred." ( Id.)

In one bizarre example, Plaintiffs allege that TD Bank charged Cressman two overdraft fees on May 13, 2011 yet the account displayed a positive balance. Plaintiffs assert that "TD Bank deducted pending transactions on subsequent days without reflecting those transactions on Ms. Cressman's statement." (Compl. ¶¶ 86-88) Neither the parties nor the PDAA adequately explains how overdraft fees could accrue with a positive balance.

On December 14, 2011, Plaintiffs filed the Complaint. On February 27, 2012, Defendant filed the present Motion to partially dismiss for failure to state a claim. This case is currently subject to a Conditional Transfer Order ("CTO") entered by the MDL Panel on March 16, 2012. *fn2 Defendant timely opposed the CTO. "If any party files a notice of opposition with the Clerk of the Panel within this 7-day period, the stay will be continued until further order of the Panel." Conditional Transfer Order, In re Checking Account Overdraft Litigation , MDL No. 2036, Dkt. No. 654, (Mar. 16, 2012). At this juncture, therefore, this Court retains jurisdiction to decide this Motion.

II.

Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint "for failure to state a claim upon which relief can be granted." In order to survive a motion to dismiss, a complaint must allege facts that raise a right to relief above the speculative level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007); see also Fed. R. Civ. P. 8(a)(2).

While a court must accept as true all allegations in the plaintiff's complaint, and view them in the light most favorable to the plaintiff, Phillips v. County of Allegheny , 515 F.3d 224, 231 (3d Cir. 2008), a court is not required to accept sweeping legal conclusions cast in the form of factual allegations, unwarranted inferences, or unsupported conclusions. Morse v. Lower Merion Sch. Dist. , 132 F.3d 902, 906 (3d Cir. 1997). The complaint must state sufficient facts to show that the legal allegations are not simply possible, but plausible. Phillips , 515 F.3d at 234. "A claim has facial plausibility when the plaintiff pleads factual content that ...


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