A federal appeals panel has determined a lower court improperly ended a class action accusing Bank of America of overcharging customers who used other institutions’ automated teller machines.
Brittany Covell and Kristin Schertzer sued Bank of America, alleging the bank violated its customer contracts by charging two $2.50 fees for balance inquiries on out-of-network ATMs. U.S. District Judge Jeffrey Miller granted summary judgement in favor of the bank.
Covell alone challenged that ruling before the U.S. Ninth Circuit Court of Appeals. Judge Ronald Gould wrote the panel’s opinion, filed July 29; Judges Salvador Mendoza and Ronald Gilman concurred. Gilman, a U.S. Sixth Circuit Court of Appeals judge, sat on the Ninth Circuit panel by designation.
According to court records, when a customer uses a Bank of America debit card in another company’s ATM, the screen asks if the customer wants to view an account balance. Agreeing to that prompt triggers the $2.50 fee. On the screen displaying the balance is a prompt for printing the balance and continuing the transaction. If the customer taps “continue” instead of “cancel” — the only two options — Bank of America charges another $2.50 before showing possible transaction options like “withdrawal” and “transfer.”
Covell’s lawsuit acknowledges Bank of America’s right to charge the initial fee under its contract with customers, but alleged the second fee is wrong because she didn’t initiate a second inquiry when opting to print and continue. She initially named as defendants three ATM operator: Cardtronics, FCTI and Cash Depot. Those companies reached a settlement before a judge ruled on their motions to dismiss.
The surviving complaint would create a class of all Bank of America checking account holders assessed two inquiry fees for single transactions at ATMs in 7-Eleven stores.
Gould explained Covell and the bank differ on the definition of “balance inquiry” as incorporated in customer account documents and said Judge Miller misunderstood Covell’s proposed definition “as requiring BOA to divine a customer’s subjective intent each time the customer presses a button on an ATM. The district court misunderstood (Covell’s) interpretation to include a requirement that balance inquiries be performed ‘knowingly’ or ‘intentionally’ - terms BOA repeats on appeal to undermine (Covell’s) arguments. But these terms do not appear anywhere in (Covell’s) briefs.”
The panel said Covell’s position “is based on objective manifestations of consent commonly required in electronic transactions” such as agreeing to service terms on a website, whereas Bank of America said the fee is proper whenever an ATM sends it an electronic message, regardless of what a customer selected.
In reversing summary judgement, the appeals judges determined state law guidelines for deciphering contractual terms all support Covell’s argument. Gould said Bank of America’s reading of the term “is more akin to a technical definition understood by those in the industry familiar with how ATMs work” and noted its expert report on “the process was broken down into no fewer than nine steps, complete with a diagram.”
The panel further explained Bank of America’s position doesn’t square with other contractual language or fit in when reviewing customer documents in their entirety. For example, Bank of America also charges $2.50 for withdrawals and transfers, which “are unquestionably customer-initiated transactions,” while a brochure states customers authorize the bank to “act on the instructions you give us through ATMs” and not based on information the ATMs independently send to the bank.
Bank of America also convinced Judge Miller it has no control over third-party ATM operators, and specifically on-screen prompts. But the panel rejected that argument, finding it has no bearing on a legal interpretation of user contracts — documents that don’t reference the bank’s relationship with ATM providers.
“BOA’s control over the ATM operators is not relevant to the parties’ contract dispute,” Gould wrote. “This case does not concern the actions of a third party — it concerns BOA’s actions, because it was BOA that charged (Covell) the challenged second out-of-network fee. Extrinsic evidence of BOA’s control over the ATM operators is irrelevant.”
The panel further noted the contract language allows Bank of America to decline a balance inquiry fee in certain situations, like suspected fraud, which demonstrates the bank’s ability to objectively evaluate customer behavior.
Although it revived Covell’s breach of contract claim, the panel rejected her claim for breaching the covenant of good faith and fair dealing, which it called “indistinguishable” from her primary allegations and said it is “rendered duplicative and unnecessary” following the earlier conclusions, as Bank of America had an express duty to limit its fees to transactions its customers clearly initiated.
Finally, the panel agreed with Judge Miller in rejecting Bank of America’s contention it is entitled to summary judgment on grounds the plaintiffs failed to follow contractual pre-dispute procedures. Gould explained those processes only apply to fraud or unauthorized transactions, not fee disputes. In remanding the complaint, the panel asked Judge Miller to reconsider class certification.
Covell is represented by Lynch Carpenter, of Pasadena and Del Mar; and KalielGold, of Washington, D.C.
Bank of America is represented by Winston & Strawn, of Los Angeles.
Bank of America declined to comment on the litigation.