By Thomas G. Wolfe, J.D.
Reviewing the respective one-year limitation period contained in an underlying checking account agreement as well as set forth in the federal Electronic Fund Transfers Act (EFTA), the federal district court in Hawaii reached a split decision in connection with Bank of Hawaii’s request for summary judgment concerning a bank customer’s claims that the bank violated the EFTA and Hawaii law by imposing unauthorized overdraft fees on his checking account. Distinguishing between claims based on preauthorized recurring transfers and claims based on unauthorized overdraft fees, which arguably fell outside the scope of the agreement between the bank and its customer, the court determined that the customer could advance his EFTA claim on the bank’s overdraft fees occurring within one year of filing his complaint. Overdraft fees charged outside the one-year limit were barred. Similarly, in connection with the state-law claims, the court denied summary judgment on overdraft fees charged after a September 2015 cutoff date, but granted summary judgment in favor of the bank on overdraft fees charged before that cutoff date.
According to the court’s April 5, 2018, opinion in Smith v. Bank of Hawaii, the Bank of Hawaii (BOH) described its checking account offerings as providing three different types of balances: a ledger balance, a current balance, and an available balance. Referencing a Consumer Financial Protection Bureau Supervisory Highlights issue, the court noted that a transaction that would not have resulted in an overdraft fee under a ledger-balance method still could result in an overdraft fee under an available-balance method.
The bank customer opened multiple BOH checking accounts between July 2010 and December 2014. Previously, in rejecting BOH’s motion to dismiss the customer’s lawsuit, the court determined that the bank’s underlying checking account agreement and opt-in form, construed together, were “ambiguous as to BOH’s choice of balance method.” Accordingly, the court refused to recognize that BOH adequately disclosed that it was using an “available-balance method” to determine overdrafts on the customer’s applicable checking account.
EFTA limitation period. BOH argued that, as a matter of law, the customer’s EFTA claim was barred in its entirety under EFTA’s one-year statute of limitations because a claim accrues “when the first unauthorized transfer occurs.” In contrast, the customer argued that “each wrongly imposed overdraft charge constitutes a separate violation, involving its own statutory period.” Noting that no federal appellate court has squarely resolved the issue in the context of preauthorized recurring transfers, the trial court determined that the case before it presented a different set of factual circumstances—one involving “allegedly unauthorized overdraft fees.”
The court stressed that EFTA’s implementing regulation, Regulation E, accounted for these differing factual circumstances. The bank customer maintained that BOH did not disclose its use of an available-balance method for determining overdrafts and corresponding fees and that he thought he was opting in to an overdraft service that used a ledger-balance instead. In the court’s view, given the nature of the customer’s claim that the fees were outside the scope of the underlying agreement, “it makes sense in the overdraft context to view each fee separately—as an allegedly unauthorized charge—whereas it might not make sense to view preauthorized recurring transfers separately.”
Consequently, using this framework, the court decided that BOH was not entitled to summary judgment concerning overdraft fees the bank charged within one year of the customer’s complaint. However, claims based on overdraft fees imposed by the bank outside that one-year limit were barred.
Contractual limitation period. Next, in connection with the customer’s state-law claims against BOH for breach of the implied covenant of good faith and fair dealing, unjust enrichment, and the violation of other Hawaii laws, the court focused on the one-year limitation period contained in the agreement governing the checking account. The court ultimately determined that the one-year limitation period in the contract was not unreasonable or unconscionable under the circumstances.
Generally, the court agreed with BOH that the customer had the tools, including his own bank statements, to discover the facts supporting his state claims “within approximately a month of each challenged fee.” Moreover, the customer contacted BOH five or six times about the overdraft fees. Against this backdrop, the court determined that at least one overdraft fee was charged within one year of the filing of the original complaint. As a result, the court denied the bank’s request for summary judgment as to any overdraft fees charged on or after Sept. 9, 2015, but granted summary judgment in favor of BOH as to any fees charged before that date.
No waiver of jury trial. Also, in reviewing the applicable checking account agreement and related documentation, despite the inclusion of a “jury trial waiver” provision in the middle of a 36-page agreement, the court concluded that the bank customer had not knowingly and voluntarily waived his right to a jury trial.
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