Judge orders arbitration in excessive overdraft cases against Wells Fargo and KeyBank

Posted on: October 1st, 2013 by Steve Larson
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FeeA Florida federal judge overseeing multidistrict litigation regarding checking account overdraft fees on Tuesday deemed the arbitration provisions signed by KeyBank NA and Wells Fargo & Co. customers enforceable.  One day after hearing the parties arguments regarding the arbitration clause, U.S. District Judge James Lawrence King dismissed putative class suits by KeyBank customer David Johnson and Wells Fargo customer Alicia Kennedy because both signed contracts that include provisions requiring that the parties resolve any disputes in arbitration.

“Based on the arguments presented, as well as a review of the record, the court concludes that the delegation clause is enforceable,” Judge King said in the two orders.

The two suits are part of a collection of lawsuits against a slew of banks accusing them of collecting millions in unfair overdraft fees after changing the order of customers’ debit card transactions in order to maximize such fees.

Judge King had initially ruled in June 2010 that KeyBank’s arbitration provision was substantively unconscionable because of the class action waiver, which the judge said effectively shields the bank from liability, and because of the one-sided nature of the agreement, according to court documents.

But just a few days later, the U.S. Supreme Court enforced an arbitration provision in Rent-A-Center West Inc. v. Jackson. In August 2012, the Eleventh Circuit vacated Judge King’s 2010 decision and remanded for consideration in light of Rent-A-Center and two 2011 U.S. Supreme Court cases, AT&T Mobility LLC v. Concepcion and Cruz v. Cingular Wireless LLC, which upheld class action waivers in consumer contracts.

Kennedy filed her suit against Wells Fargo in March 2011 in California. The case was transferred to the MDL in Florida one month later and has been stayed since then, according to court documents.

A number of banks have settled out of the MDL, most recently Marshall & Isley Bank, which earlier this month was granted final approval for a $4 million deal.

TD Bank agreed to pay $62 million, while Bank of America, JPMorgan Chase Bank, and PNC Bank NA settled out of the MDL for $410 million, $110 million and $90 million, respectively.

RBS Citizens agreed in April 2012 to pay $137.5 million to resolve its alleged role in the scheme. And Great Western Bank settled its case in August 2012 by agreeing to pay $2.2 million..

The individual cases are Johnson v. KeyBank NA, case number 1:10-cv-21176, and Kennedy v. Wells Fargo Bank NA et al., case number 1:11-cv-21313, both in the U.S. District Court for the Southern District of Florida.

The MDL is In re: Checking Account Overdraft Litigation, case number 1:09-md-02036, in the U.S. District Court for the Southern District of Florida.