RAMIREZ v. BANK OF AMERICA (2022)

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

Defendant Bank of America North America (“BANA”) filed the pending motion to dismiss. In this putative class action, plaintiffs Anthony Ramirez and Masako Williams bring claims for breach of the covenant of good faith and fair dealing (the “breach of covenant claims”), unjust enrichment, and violation of the California Unfair Competition Law (“UCL,” Cal. Bus. & Prof. Code § 17200 et seq.) and the Texas Deceptive Trade Practices Consumer Protection Act (“DTPA,” Tex. Bus. & Com. Code Ann. § 17.41 et seq.).¹

Having considered the parties' written and oral arguments, and the admissible evidence submitted, and for the reasons set forth herein, the motion is Granted.

I. BACKGROUND

Plaintiffs allege the following:

Plaintiffs are customers of BANA who use BANA's banking services. (Dkt. No. 1, “Complaint,” “Comp.”) BANA assesses fees when a customer has insufficient funds for a transaction.² (Id. at ¶ 23.) The Court will refer to these as the “Account Fees.”

During the COVID-19 pandemic, many BANA customers, including plaintiffs, faced financial difficulties that resulted in them not having sufficient funds in their bank accounts. When they attempted to overdraw from their accounts, BANA assessed Account Fees. (Id. at ¶¶ 1-2.) Imposition of these fees exacerbated plaintiffs' financial struggles. (Id. at ¶ 3.)

In response to this situation, and pressure from the public, media, and government, BANA “promised that it would refund punitive fees that hurt its most vulnerable customers, including overdraft and insufficient funds fees.” (Id. at ¶ 7.) BANA made the following representations:

• BANA told customers that they could “request refunds including overdraft fees, non-sufficient funds fees ․ and monthly maintenance fees.” (Id. at ¶ 9.)

• On March 19, 2020, BANA announced on its website that it is “offering assistance to clients through its Client Assistance Program ․ Working on a case-by-case basis, ․ Bank of America's additional assistance for clients impacted by the coronavirus includes: Consumer and Small Business deposit accounts: clients can request refunds including overdraft fees, nonsufficient funds fees, ․ and monthly maintenance fees.” (Id. at ¶ 43.)

• On March 12, 2020, BANA reported to Forbes that it “offer[ed] assistance to qualifying consumer and small business clients facing hardships, including forbearance with certain fees.” (Id. at ¶ 45.)

• On March 24, 2020, its head of consumer, small business, and wealth management client care told CNBC: “Our teams are ready to help clients and small businesses, and we are especially focused on the needs of those experiencing hardship due to the current situation․ If you have been negatively impacted by coronavirus and need additional assistance related to your account please visit our website or you can give us a call.” (Id. at ¶ 45.)

• On March 24, “it claimed through U.S. News & World Report it would “skip” OD fees for customers who “call and request it.” (Id. at ¶ 45.)

Plaintiffs allege that these representations constituted a promise that BANA “would refund [Account Fees] that it had issued during the pandemic.” (Id. at ¶ 46.)

Plaintiffs also allege that BANA had discretion regarding fees. Transactions involving deposit accounts at BANA are governed by the Deposit Agreement and the Online Banking and Transfers Service Agreement (together the “Account Agreements”), which were drafted by BANA. (Id. at ¶ 48.) The Account Agreements state that BANA “may” deduct fees, overdrafts, or other money owed under the agreements from the customer's account, that BANA “may” do so without prior notice to the customer, and “may” overdraw the customer's account. (Id. at ¶¶ 49-51.)

Plaintiffs understood these terms to mean that BANA had discretion over whether to charge, refund, or waive Account Fees, and that BANA would exercise this discretion fairly. (Id. at ¶ 52.) They further understood that BANA would not exercise its discretion “solely to the detriment of its most vulnerable customers, especially during the COVID-19 pandemic.” (Id.)

Contrary to plaintiffs' expectations based on BANA's public representations, BANA did not “set up a system that would allow customer service representatives” to refund fees. (Id. at ¶ 47.) Rather, it maintained its pre-COVID policy of allowing only a very limited number of fee refunds, and refused to consider additional refunds based on a customer's circumstances. (Id. at ¶ 14.)

In 2020, BANA made $1.1 billion from overdraft fees alone, and in the first nine months of 2021, made $823 million solely from overdraft fees. (Id. at ¶ 17.)

Allegation of Plaintiff Ramirez

Plaintiff Ramirez is a BANA customer. Prior to the pandemic, he incurred few, if any, Account Fees. (Id. at ¶ 54.) During the pandemic, he was not able to get as many hours working as a truck driver, causing him financial difficulties. (Id.) In August 2021, he overdrew his account. (Id.) Over the next two months, BANA assessed a combined total of $245 in Account Fees. (Id. at ¶ 55.)

In 2020 and 2021, Ramirez saw reports that large banks, including BANA, were promising relief from Account Fees to customers suffering from financial hardship. (Id. at ¶ 56.) This influenced the way he used his checking account and prompted him to seek relief from these fees. (Id.)

Each month when he got his account statements, Ramirez called BANA to request relief from the [Account] [F]ees assessed by BANA. (Id.) He spoke to three different customer service representatives. (Id.) He told each representative to whom he spoke that he had overdrawn his account because of financial hardships caused by the COVID-19 pandemic. (Id.) Each BANA representative denied his request “on the spot” without any further investigation or consideration of his circumstances. (Id. at ¶ 57.) Each told him that he did not qualify for any relief program. (Id.) The only reason any of these BANA employees gave him for denying relief was that he was ineligible for any fee refunds while his account was still overdrawn. (Id.) This made no sense to Ramirez because a customer with an overdrawn account is a customer in greatest need of help. (Id.) The statements by each of these BANA representatives led Ramirez to believe that BANA had no process or program for considering or granting relief for its financial customers' hardships during the pandemic, “despite the explicit promises BANA had made.” (Id. at ¶ 58.)

Had Ramirez known that BANA did not intend to keep its “promises” to use its discretion to grant customers relief from Account Fees during the pandemic, he would have taken additional steps to ensure that he did not overdraw his account and incur these fees, such as seek help from family members or obtain a small loan to increase his balance. (Id.) Some of these alternative measures might have been expensive, but they still would have cost less than BANA's punitive fees. (Id.) But “because of BANA's promises to help,” he did not believe these less costly steps were necessary. (Id.)

Allegations of Plaintiff Williams

Plaintiff Williams is 85 years old and unable to work. (Id. at ¶ 60.) She was financially dependent upon family prior to the pandemic. When the pandemic hit, her family became less financially stable and were less able to care for her. (Id. at ¶ 61.) Williams did not have sufficient funds in her count to cover costs. As a result, BANA charged her fees nearly every month during the pandemic. (Id. at ¶¶ 62-63.)

Williams saw “BANA's statements in the first half of 2020 that it would provide relief to consumers suffering from financial hardship during the pandemic on her local nightly news.” (Id. at ¶ 64.) This prompted her to both keep depositing her money with BANA and seek relief from the fees BANA charged to her account. (Id.)

Through her son, Williams called BANA several times to attempt to have Account Fees refunded. Her son explained to BANA that their family was facing financial strain and hardship due to COVID-19, but BANA consistently refused to refund the fees. (Id. at ¶ 65.)

Had Williams known that BANA would not refund her fees, she would have moved to another bank that did not have such fees or that would have provided her with relief from such fees. (Id. at ¶ 69.)

II. LEGAL STANDARD

A defendant may move to dismiss a complaint for failing to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 12(b)(6) motion, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when a plaintiff pleads “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In reviewing the plausibility of a complaint, courts “accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).

Federal Rule of Civil Procedure 9(b) heightens these pleading requirements for all claims that “sound in fraud” or are “grounded in fraud.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) (citation omitted); Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”). The Ninth Circuit has interpreted Rule 9(b) to require that allegations of fraud are “specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.” Neubronner v. Milken, 6 F.3d 666, 671 (9th Cir. 1993) (internal quotation marks omitted).

III. DISCUSSION

A. National Bank Act Preemption

The parties agree that the National Bank Act would only preempt claims asserting that it was “per se improper for the Bank to charge [Account Fees] during the pandemic, even if a customer requested a refund.” (Dkt. No. 26 at 3; Dkt. No. 28 at 22.) The Court finds that none of plaintiffs' claims do so. Plaintiffs' do not contest BANA's right to assess fees, they contest the way in which defendant assessed and refused to refund fees, alleging through their various claims that BANA did so in ways that were misleading or in breach of contract. Accordingly, defendant's preemption argument does not apply to any of plaintiffs' claims.

In summary, the National Bank Act vests nationally chartered banks with enumerated powers, such as the power to make contracts, to receive deposits, and to make loans, together with “all such incidental powers as shall be necessary to carry on the business of banking.” 12 U.S.C. § 24. The activities of national banks are governed by related regulations promulgated by the Office of the Comptroller of the Currency (the “OCC”). See 12 U.S.C. §§ 24, 93a, 371(a). The NBA only preempts state law that “prevent[s] or significantly interfere[s] with the national bank's exercise of its powers.” Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25, 33, 116 S.Ct. 1103, 134 L.Ed.2d 237 (1996).

Relevant here, NBA regulations specifically delegate to banks determination of the method of calculating fees. 12 C.F.R. § 7.4002(b); Gutierrez v. Wells Fargo Bank, NA, 704 F.3d 712, 724 (9th Cir. 2012) (“The OCC has interpreted these incidental powers to include the power to set account terms and the power to charge customers non-interest charges and fees, such as the overdraft fees”) (citing 12 C.F.R. § 7.4002(a)). However, this regulation does not preempt state law claims alleging that this power is exercised in an unlawful manner, such as in a way that breaches a contract, or its misleading. Gutierrez, 704 F.3d at 726 (UCL claim based on misrepresentations regarding fees not preempted by NBA).

None of plaintiffs' claims challenge BANA's right to assess fees or otherwise conflict with federal law. Rather, plaintiffs challenge how BANA communicated with them regarding the fees and assessed the fees. Such claims are not preempted.

B. Breach of the Covenant of Good Faith and Fair Dealing Claims – Count 1

Plaintiffs allege that BANA violated the covenant of good faith and fair dealings implicit in the Account Agreements that it entered with plaintiffs because it “failed to exercise the discretion it retained for itself” in the Account Agreements when it “assess[ed] BANA Account Fees on customers suffering from financial hardship during the pandemic,” though it had “promised” to consider financial hardship caused by the pandemic. (Comp. at ¶ 87.) Defendant argues that plaintiffs' claims fail because they would impose an obligation on BANA not supported by the express terms of the contract. (Dkt. No. 26 at 13.)

The Court will assess Ramirez' claim under California law and Williams' claim under Texas law.

1. Plaintiff Ramirez's Breach of Covenant Claim Under California Law

The covenant of good faith and fair dealing is breached where one party “unfairly frustrat[ed] the other party's right to receive the benefits of the agreement actually made.” Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1369, 108 Cal.Rptr.3d 682 (2010) (emphasis and citation omitted). “In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party's rights to the benefits of the contract.” Love v. Fire Ins. Exch., 221 Cal. App. 3d 1136, 1153, 271 Cal.Rptr. 246 (1990). “If there exists a contractual relationship between the parties, ․ the implied covenant is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated in the contract.” Racine, 11 Cal. App. 4th at 1034, 14 Cal.Rptr.2d 335.

When a contract confers discretionary power to one party affecting the rights of the other, the party with the discretionary power must exercise it in good faith and in accordance with fair dealing. Kelly v. Skytel Commc'ns, Inc., 32 F. App'x 283, 285 (9th Cir. 2002). This means that the discretion may not be exercised “arbitrarily or in disregard of the purposes of the contract and the interests of the other party.” Racine & Laramie, Ltd., Inc. v. Cal. Dep't of Parks Recreation, 11 Cal. App. 4th 1026, 14 Cal.Rptr.2d 335 (Cal. Ct. App. 1992).

The question here is whether BANA denied plaintiff the benefits of the Account Agreements by not exercising its discretion in alignment with its alleged public promises. BANA's alleged promise to consider whether customers have been impacted financially by the pandemic is not a part of the Account Agreements and cannot be used to create additional contractual obligations on BANA under the Agreements. The covenant only effectuates “the parties' legitimate expectations based upon the terms of the contract.” Kelly, 32 F. App'x at 285. BANA's alleged promises stemming from an unprecedented global pandemic cannot be viewed as stemming from the terms of the Account Agreements. Accordingly, this claim is Dismissed With Prejudice.

2. Williams' Breach of Covenant Claim Under Texas Law

Defendant moves to dismiss Williams' breach of covenant claim because under Texas law there is no implied covenant of good faith and fair dealing in consumer banking contracts. (Dkt. No. 26 at 13.) Plaintiff argues that the relationship between plaintiff and defendant is the kind of “special relationship” that Texas courts have recognized create a covenant of good faith and fair dealing. (Dkt. No 28 at 12.) This Court “must defer to state courts' interpretations of state law, unless these interpretations are untenable or amount to a subterfuge to avoid federal review of a constitutional violation.” Clark v. Estelle, 15 F.3d 1083 (9th Cir. 1994) (internal quotation marks and citation omitted).

Texas law does not recognize an implied duty of good faith and fair dealing in every contract or business transaction. Cockrell v. Republic Mortg. Ins. Co., 817 S.W.2d 106, 116 (Tex. App. 1991). However, a “duty of good faith and fair dealing may arise as a result of a special relationship between the parties governed or created by a contract.” Arnold v. Nat'l Cnty. Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex. 1987), holding modified by Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826 (Tex. 1990). Special relationships have been recognized where there is a fiduciary relationship and an imbalance in bargaining power. Prime Prod., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 638 (Tex. App. 2002). However, these factors are not dispositive. Baxter v. PNC Bank, N.A., No. A-12-CA-462-SS, 2012 WL 12877952, at *2 (W.D. Tex. Sept. 6, 2012) (“[b]ut even if such parties do not stand on completely equal footing, Texas courts have limited the implication of a duty of good faith to a few specific relationships”); Hux v. S. Methodist Univ., 819 F.3d 776, 783 (5th Cir. 2016) (“given the Texas courts' decades-long refusal to extend the special-relationship doctrine ․ we are confident that the Texas Supreme Court would hold that there is no duty of good faith and fair dealing in the student-university relationship.”).

Texas courts have found that there is not a special relationship between a depositor and a bank. In Plaza Nat. Bank v. Walker, 767 S.W.2d 276, 278 (Tex. App. 1989), writ denied (June 14, 1989), the Texas Court of Appeals found a bank had a duty of good faith to a depositor and overruled dismissal of the depositor's breach of contract claim. Multiple courts have found this decision implicitly overruled by subsequent Texas Supreme Court rulings. In Eller v. NationsBank of Texas, N.A., 975 S.W.2d 803 (Tex. App. 1998), the plaintiff had leased a deposit box at the bank. She alleged that items went missing from the box while it was in the bank's care. The court found no special relationship between plaintiff and the bank. Id. at 809. It explained that after Plaza the Texas Supreme Court had “recognized that the mere relationship of debtor and creditor is not sufficiently special to impose a duty of good faith upon its parties” and that “[s]ince relationship between a bank and its depositor is one of debtor and creditor, Plaza has been implicitly overruled.” Id. at 809; see also Falcon Int'l Bank v. Cantu, No. 13-13-00577-CV, 2015 WL 1743396, at *12 (Tex. App. Apr. 16, 2015) (recognizing implicit overruling of Plaza).

The Court appropriately defers to Texas courts on this issue. Given that under Texas law there is no covenant of good faith and fair dealings in contracts between a depositor and bank, Williams' claim is Dismissed With Prejudice.

C. Plaintiffs' Unjust Enrichment, UCL, and DTPA Claims: Counts 2-4

All of plaintiffs' remaining claims depend upon plaintiffs' allegation that defendant's representations, as described in the complaint, constituted a promise “that it would refund punitive fees that hurt its most vulnerable customers, including overdraft and insufficient funds fees.”³ (Id. at ¶ 7.) Defendant argues that these claims should be dismissed because BANA's representations cannot reasonably be interpreted as a “promise” to refund fees. As stated in Section II., supra, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955.

Even if the Court considers all the representations alleged by plaintiffs, some of which were not made directly by BANA, plaintiffs have not plausibly alleged that BANA's representations constituted a “promise” to refund fees. Telling customers that they can request refunds cannot reasonably be taken as a promise to fulfil all such requests. General statements that BANA will “help” but which make no mention of fees or refunds cannot reasonably be converted into a specific and binding promise to refund fees upon request. Of all the representations alleged by plaintiff, only one approximates a promise, the alleged statement by BANA “through” U.S. World News that the bank would “skip” fees for those who request it. Comp. at ¶ 45. However, plaintiffs misrepresent the article, which states that BANA told the publication that it “may refund overdraft, nonsufficient funds and monthly maintenance fees if a customer requests it.”⁴ (Emphasis supplied.) In short, plaintiffs have not provided facts to support their legal theory that BANA's representations were understood by consumers as a promise to refund fees upon request.

The Court clarifies that it is not stating that the facts alleged cannot support unjust enrichment ⁵ , UCL ⁶ , or DTPA claims. The Court's finds that it is implausible that consumers understood the alleged representations to be a promise to refund all fees, not that it is implausible that consumers could have been misled by BANA's alleged representations. The Court's order also should not be read to hold that plaintiffs could not bring these claims based on allegations that BANA led them to believe a program was created to address fee refunds in light of the pandemic, but did not do so. To the extent plaintiffs base their claims on that conduct they must plead more clearly.

Accordingly, the Court Dismisses plaintiffs' remaining claims With Leave to Amend.

D. Claims on Behalf of a Nationwide Class

If plaintiffs choose to file an amended complaint and include a nationwide class, they must identify the state law applicable to any common law claims made on behalf of a nationwide class. Tromble v. W. Digital Corp., No. 4:20-CV-08102-YGR, 2021 WL 2165796, at *2 (N.D. Cal. May 27, 2021).

IV. CONCLUSION

For the reasons set forth above, Count 1 is Dismissed With Prejudice and Counts 2, 3 and 4 are Dismissed With Leave to Amend.

Plaintiff shall file an amended complaint within 21 days and defendant shall respond 14 days thereafter. Failure to file an amended complaint by the deadline will result in a sua sponte dismissal of the action.⁷

IT IS SO ORDERED.

FOOTNOTES

1.   Plaintiffs seek to represent a nationwide class of BANA consumer checking account holders in the United States who, after March 12, 2020, were charged overdraft fees or insufficient funds fees by BANA after BANA promised to consider waiving such fees due to the pandemic, attempted to seek a refund, and did not receive a refund for such fees. In the alternative, they seek to represent two classes meeting the same criteria but made up of California account holders and Texas account holders respectively. (Dkt. No. 1 at ¶ 71.)

2.   BANA applies either (1) a $35 insufficient funds (“NSF”) fee when there are insufficient funds to pay a transaction and it rejects the charge; or (2) a $35 overdraft (“OD”) fee when there are insufficient funds to pay a requested transaction and it accepts the charge. (Id. at ¶ 23.)

3.   Plaintiffs allege BANA was unjustly enriched by inducing customers to use its services by promising to refund Account Fees and then not refunding those fees. Their UCL and DTPA claims allege that BANA mislead consumers by misrepresenting to consumers that it would refund fees.

4.   Ellen Chang, These Banks are Waiving Overdraft Fees Because of the Coronavirus, US NEWS (Mar. 24, 2020), available at https://money.usnews.com/banking/articles/these-banks-are-waiving-overdraft-fees-because-of-the-coronavirus (hereinafter, Chang, These Banks are Waiving Overdraft Fees).

5.   The Court rejects defendant's argument that plaintiffs' unjust enrichment claims are barred because they have alleged the existence of an express contractual agreement related to the assessment of account fees. Plaintiffs plead this claim in the alternative to their contract claims, Comp. ¶ 92, which is allowed under both California and Texas law. In re Facebook, Inc., Consumer Priv. User Profile Litig., 402 F. Supp. 3d 767, 803 (N.D. Cal. 2019); Anderson Remodeling & Constr., LLC v. Smith, No. 08-19-00292-CV, 2021 WL 302749, at *6 (Tex. App. Jan. 29, 2021).

6.   The Court advises plaintiffs that if they seek to amend their UCL claim they must adequately allege reliance. As pled, this requirement is not met as plaintiffs have not alleged that Ramirez heard or was aware of any of BANA's representations. Stewart v. Electrolux Home Products, Inc., E.D.Cal.2018, 304 F.Supp.3d 894, 910 (“To sufficiently plead reliance for a UCL claim, the plaintiff must establish that the defendant's misrepresentation or concealment was an immediate cause of the injury-causing conduct.”) (emphasis supplied).

7.   The parties are advised that the District is currently in a judicial emergency resulting from increased case volumes, COVID-19 backlogs, limited resources, and judicial vacancies. The District's weighted caseload by district judge is the highest in the Ninth Circuit. In light of the foregoing, and to the extent possible, parties and their counsel are highly encouraged to resolve issues without formal motion practice and to consider consenting to the jurisdiction of the District's qualified Magistrate Judges.

Yvonne Gonzalez Rogers, United States District Judge