RAY v. ATLANTIC UNION BANK (2025)

MEMORANDUM ORDER

This matter comes before the Court on a motion to dismiss for failure to state a claim filed by the defendant, Atlantic Union Bank (“the Bank”). (ECF No. 9.) The plaintiff, Brian Ray, brings two claims against the Bank individually and on behalf of all others similarly situated. First, Ray alleges that the Bank violated the Electronic Funds Transfer Act (“EFTA”) by failing to comply with 12 C.F.R. § 1005.1, et seq. (“Regulation E”). Ray also brings an unjust enrichment claim under Virginia law. In its motion to dismiss, the Bank argues that Ray fails to plead a violation of Regulation E. It also argues that Ray cannot bring an unjust enrichment claim against it because a contract exists between the parties. Further, the Bank asserts that the Court should dismiss the class action allegations because the contract between Ray and the Bank includes a class waiver that prevents Ray from representing a class in litigation against the Bank.

Because Ray's complaint states a claim for a Regulation E violation, the Court will deny the Bank's motion to dismiss the EFTA claim. But an express contract exists between the parties, preventing Ray's unjust enrichment claim. Accordingly, the Court will grant the motion to dismiss the unjust enrichment claim. Lastly, the Court will deny the motion to dismiss the class allegations without prejudice, with leave to re-raise that argument at the appropriate time.

I. BACKGROUND 1

Ray, a customer of the Bank, alleges that the Bank violated the EFTA by failing to comply with Regulation E. Regulation E requires that banks “[p]rovide[ ] a reasonable opportunity for the consumer to affirmatively consent, or opt in, to [the bank's overdraft] service” before charging overdraft fees for ATM and one-time debit card transactions. 12 C.F.R. § 1005.17(b)(1)(ii) (2023). To accomplish this, Regulation E mandates that banks use an opt-in form that “[p]rovide[s] the consumer with a notice in writing, or if the consumer agrees, electronically, segregated from all other information, describing the institution's overdraft service.” Id. § 1005.17(b)(1)(i) (emphasis added). This separate opt-in form must be “substantially similar” to Model Form A-9, promulgated with Regulation E by the Consumer Financial Protection Bureau (“CFPB”). Id. § 1005.17(d). In “clear and readily understandable” language, the form must include a “brief description of the financial institution's overdraft service and the types of transactions for which a fee or charge for paying an overdraft may be imposed.” Id. §§ 205.4(a)(1), 1005.17(d)(1).

To comply with Regulation E, the Bank uses a form entitled “What You Need to Know About Overdrafts and Overdraft Fees” (“the Opt-in Form”). (ECF No. 10-1.) The Opt-in Form explains to customers that an overdraft “occurs when [the customer] does not have enough money in [their] account to cover a transaction” but the Bank “pay[s] it anyway.” (Id.) It goes on to say that the Bank will always pay overdrafts for automatic bill payments and check transactions, but that customers must specifically authorize the Bank to pay overdrafts for debit card purchases and ATM transactions. (Id.) The Opt-in Form warns that the Bank “pays overdrafts at [its] discretion” and does not guarantee that it will always pay an overdraft. (Id.) If the Bank does pay an overdraft, however, it charges the customer “up to $38” per overdraft transaction and “limits the total number of combined [overdraft] fees to 6 per business day.” (Id.) The bottom of the Opt-in Form contains a fillable space in which the customer checks a box to either authorize or not authorize the Bank to pay overdraft fees for debit card and ATM transactions. (Id.) If the customer authorizes the overdraft protection, the customer must indicate which accounts he wants to be included in the overdraft protection. (Id.) The customer must then sign the form. (Id.)

Based on the documents integral to the Complaint, Ray, a customer of the Bank, appears to have ² used the Opt-in Form to authorize the Bank to pay overdrafts for his debit card and ATM transactions. Ray then received a Reg-E Confirmation Notice (“the Confirmation Notice”), dated August 2021, which “confirms that [the customer has] asked [the Bank] to authorize and pay overdrafts on ATM and everyday debit card transactions” for the specified account. (ECF No. 1-1.) The Confirmation Notice also includes substantially similar information regarding the Bank's overdraft policies as described above and contained in the Opt-in Form.

In 2024, Ray incurred at least four separate $38 overdraft fees after attempting to use ATMs and his debit card. He now brings suit, arguing that the Bank's Opt-in Form ³ does not comply with Regulation E's requirements under the EFTA because it (1) failed to describe “when or how [the Bank] determines overdrafts on [a customer]’s one-time debit card and ATM transactions;” (2) failed to “obtain its customers’ affirmative consent as required by Regulation E;” and (3) impermissibly relied on other documents to describe the overdraft process. (ECF No. 1 ¶¶ 4–5, 98, 99.) In the alternative, Ray argues that the Bank was unjustly enriched by collecting the overdraft fees.

II. DISCUSSION 4

A. Regulation E Violation

Ray's Complaint plausibly asserts a violation of Regulation E insofar as the Bank's Opt-in Form fails to state “when or how [the Bank] determines overdrafts on [a customer]’s one-time debit card and ATM transactions.”⁵ (ECF No. 1 ¶ 98.) To satisfy Regulation E, a bank's opt-in form must include a “brief description of the financial institution's overdraft service and the types of transactions for which a fee or charge for paying an overdraft may be imposed.” 12 C.F.R. § 1005.17(d)(1). Ray claims that the Bank's Opt-in Form fails to meet this standard because it does not alert the customer to (1) whether the Bank uses the actual balance ⁶ or the available balance ⁷ to calculate overdrafts, and (2) whether the Bank calculates overdrafts at the time of the transaction or at a later settlement with the merchant. To support this argument, Ray highlights the Opt-in Form's phrasing that declares “an overdraft occurs when [the customer] do[es] not have enough money in [their] account to cover a transaction.” (ECF No. 10-1 (emphasis added).) Indeed, the Opt-in Form does not further describe if the Bank calculates whether the customer has “enough money” based on the actual or available balance, or whether the customer must have “enough money” at the time of the transaction itself or at the later settlement with the merchant.⁸ (Id.)

By alleging that the Bank's Opt-in Form does not describe the bank's actual overdraft practice, Ray's Complaint plausibly pleads a violation of Regulation E.⁹ Under Ray's argument, the Bank's Opt-in Form is, at best, ambiguous. See Pinkston-Poling, 227 F. Supp. 3d, 856–67 (denying a Rule 12(b)(6) motion to dismiss when the plaintiff plausibly alleged the language within the defendant bank's disclosures was “at least ambiguous”). Accepting these allegations as true, the Court can “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Ray's Regulation E claim, therefore, stands.

B. Unjust Enrichment Claim

Ray also argues, in the alternative, that he paid overdraft fees to the Bank, which it kept even though it knew that it was not entitled to such fees. The Bank argues that the Court must dismiss Ray's equitable unjust enrichment claim because a contract exists regarding the overdraft fees.

“Under Virginia law, unjust enrichment is an implied contract action based on principles of equity ․ As a result, a condition precedent to the assertion of such a claim is that no express contract exists between the parties.” Colonna's Shipyard, Inc. v. Coastal Cement Corp., No. 2:22cv395, 2023 WL 3321734, at *3 (E.D. Va. May 9, 2023) (internal citations omitted). Thus, a plaintiff cannot raise an unjust enrichment claim where an express contract governs the alleged wrongdoing.¹⁰ A plaintiff may, however, initially plead both a breach of contract claim and an unjust enrichment claim in the alternative, see Harrell v. Colonial Holdings, Inc., 923 F. Supp. 2d 813, 827 (E.D. Va. 2013), but may only do so “in the absence of an enforceable contract,” Colonna's Shipyard, 2023 WL 3321734, at *3.

Ray admits the existence of a contract between the parties and does not allege that the contract between the parties is invalid or unenforceable. Further, Ray does not allege a breach of contract claim ¹¹ in his Complaint, which would allow him to plead an unjust enrichment claim in the alternative. Thus, because an express contract exists between the parties, no one disputes the enforceability of that contract, and Ray did not plead a breach of contract claim, the Court will dismiss the unjust enrichment claim.

C. Class Action Waiver

The Bank lastly argues that Ray may not bring the class action allegations because he agreed to a class action waiver in his contract with the Bank. The Bank's argument is premature because Ray has not yet moved for class certification. The Court, therefore, will deny this argument without prejudice. The Bank may re-raise the class action waiver issue at the appropriate time.

III. CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART the motion to dismiss. (ECF No. 9.) Because Ray plausibly pleaded a violation of the EFTA based on the Opt-in Form's ambiguity about when and how the Bank calculates overdraft fees, the Court DENIES the motion to dismiss that claim. Additionally, because Ray has not yet moved for class certification, the Court DENIES WITHOUT PREJUDICE the Bank's class action waiver argument. But, because an express contract exists between the parties, the Court GRANTS the motion to dismiss as to Ray's unjust enrichment claim WITH PREJUDICE.

It is so ORDERED.

FOOTNOTES

2.   Ray's Complaint includes very few factual allegations about whether and when he received the Opt-in Form, what he knew about the Bank's overdraft practices, or the transactions that led to the overdrafts at issue. Ray also does not allege whether he initially authorized the Bank to pay overdraft fees on his account. Because the Reg-E Confirmation Notice that Ray attached to his Complaint confirms that he opted-in to overdraft protections, however, the Court will assume that Ray opted-in to the overdraft protection for the purposes of his motion.

3.   Ray alleges in his Complaint that the Bank's “opt-in disclosure document must be substantially similar to Regulation E Model Form A-9,” but that the Bank's form fails to comply. (ECF No. 1 ¶ 2.) The “disclosure document” that Ray refers to, however, is the Confirmation Notice that Ray attaches to his Complaint, (ECF No. 1-1), rather than the Opt-in Form that the Bank attaches to its memorandum in support, (ECF No. 10-1). Because the Confirmation Notice merely parrots the language of the Opt-in Form while confirming that the customer did opt-in to the overdraft protections, the Court also considers whether Ray has plausibly alleged that the Opt-in Form itself violates Regulation E.

5.   Ray, however, does not plausibly plead that the Bank failed to “obtain its customers’ affirmative consent as required by Regulation E” or that the Opt-in Form impermissibly relies on other documents to describe the overdraft process. (ECF No. 1 ¶¶ 5, 99.) The Opt-in Form clearly includes a fillable space and signature line where the customer can indicate whether or not they want to opt-in to the overdraft protections. (See ECF No. 10-1.) The Opt-in Form additionally does not refer the customer to or cite other documents to explain the overdraft process. (See id.); Goines v. Valley Cmty. Servs. Bd, 822 F.3d 159, 166 (4th Cir. 2016) (wherever the factual allegations in the complaint conflict with the exhibits, the exhibit prevails).

6.   The actual balance means the amount of money listed in account before considering pending transactions.

7.   The available balance in an account is the amount of money that a customer has considering any pending transactions.

8.   The Bank argues that it calculates overdrafts based on the customer's actual balance rather than the available balance as Ray alludes, and that the “enough money” language in its Opt-in Form accurately reflects this method. But whether the Bank uses the actual or available account balance to determine overdrafts is a question of fact that the Court may not resolve at the motion to dismiss stage. See Republican Party of N.C., 980 F.2d at 952 (“A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts.”) Regardless of which type of balance the Bank uses to calculate overdrafts, a plain reading of the Opt-in Form shows that the Bank does not clearly inform the customer of its overdraft process. Thus, Ray plausibly pleaded an EFTA violation.

9.   See, e.g., Walker v. People's United Bank, 305 F. Supp. 3d 365, 376 (D. Conn. 2018); Walbridge v. N.E. Credit Union, 299 F. Supp. 3d 338, 348 (D.N.H. 2018); Pinkston-Poling, Pinkston-Poling, 227 F. Supp. 3d 848, 856–67 (W.D. Mich. 2016); Gunter v. United Fed. Credit Union, Case No. 3:15cv483, 2017 WL 4274196 at *3 (D. Nev. Sept. 25, 2017).

10.   See, e.g., id.; JTH Tax, LLC v. Shahabuddin, 477 F. Supp. 3d 477, 482 (E.D. Va. 2020); McPike v. Zero-Gravity Holdings, Inc., 280 F. Supp. 3d 800, 809–10 (E.D. Va. 2017); Khair v. Countrywide Home Loans, Inc., No., 2010 WL 2486430, at *4 (E.D. Va. June 14, 2010); Weiler v. Arrowpoint Corp., No. 1:10cv157, 2010 WL 1946317, at *9 (E.D. Va. May 11, 2010).

11.   In the background and factual allegations section of his Complaint, Ray mentions that the Bank breached its duty of good faith and fair dealing. But Ray never formally asserts a breach of contract claim against the Bank in his statement of claims. Because Ray does not expressly raise a claim for breach of good faith and fair dealing, the Court will not read such a claim into his Complaint.

John A. Gibney, Jr., Senior United States District Judge