SAN DIEGO – The U.S. District Court for the Southern District of California granted a bank's motion to compel arbitration in a suit against it over two types of fees.
U.S. District Judge Cathy Ann Bencivengo ruled on the case Jan. 25.
“There is no disagreement here that the terms of the arbitration agreement encompass this dispute and that it requires bilateral arbitration of (Reyna) McGovern’s individual claims, while precluding her from representing a class or seeking public injunctive relief,” Bencivengo wrote.
McGovern sued U.S. Bank N.A. (USB) on behalf of herself and all others similarly situated over allegations of breach of contract and violation of California's unfair competition law. The suit stems from how USB assesses two different kinds of fees: the OON (out-of-network) and the OD (overdraft). The OON Fee is related to using an out-of-network ATM to check an account balance and take out money. The OD Fee is associated with an overdraft fee for transactions made with a debit card when there isn’t enough money in the account.
McGovern filed the lawsuit and said these fees weren’t allowed based on the account agreement she and others had with the bank. USB then filed a motion to compel arbitration, stating that the account agreement calls for all matters to be settled with an arbitrator, not in a courtroom.
Bencivengo agreed with USB.
While McGovern said the McGill v. Citibank rule, from a California Supreme Court case, did apply in this case, Bencivengo said it was preempted by the Federal Arbitration Act (FAA).
The FAA allows arbitration agreements to only be invalidated by certain defenses like fraud, not by defenses that surround the actual issue of whether or not to arbitrate, such as in this case. The court also noted that McGill rule shouldn’t serve as the basis to cancel out a contract, or an attempt to make it invalid.