I earlier wrote about a number of banks being sued for reordering debit card transactions from high to low in order to increase overdraft fees. Those suits were all transferred by the multi-district panel to a district court in Florida.
In their latest attempts to ditch the multi-district litigation pending in Florida, the banks once again argued that the National Banking Act (“NBA”) barred the plaintiffs’ state law claims, pointing to a recent Eleventh Circuit decision holding that the NBA preempted an action based on a state consumer protection law aimed at limiting a bank’s ability to charge fees for certain services.
Judge King found on July 13, however, that the MDL plaintiffs’ contracts and tort state law claims were not barred, because they were not synonymous with those in the Eleventh Circuit case and because “the NBA rests upon a foundation of state contract law that it does not — it cannot — preempt.”
The banks were asking the judge to reconsider his March 2010 omnibus order denying dismissal bids in which they had argued that the activities of national banks in conducting the “business of banking” were subject only to federal regulation.
While Judge King noted in last year’s order that preemption of state law was generally presumed in the regulation of national banks, he also found that the contract and tort state law claims at issue were not preempted because they do not affect the national banks’ deposit-taking powers.
In their follow-up motions, the banks focused their arguments on the Eleventh Circuit’s May 11 decision in Baptista v. JPMorgan Chase Bank NA, which they said mandated that the MDL plaintiffs’ claims be considered preempted by the NBA.
Judge King shot down that argument in Wednesday’s order, finding that the MDL, unlike the Baptista case, does not take aim at a bank’s authority to charge fees.
None of the MDL plaintiffs have alleged that the banks were unable to charge fees to their customers, a claim that would not hold up given the Office of the Comptroller of the Currency’s interpretation of the NBA, which allows banks to charge fees and have latitude in deciding how to charge them, the judge held.
Instead, the MDL plaintiffs only seek recovery for the way in which the banks allegedly manipulated their debit and checking charges, not the way in which the fees were computed, the judge wrote.
“A desire to limit a bank’s authority to charge a fee is not synonymous with a desire to hold a bank liable for the bad-faith manner in which an account is reorganized to justify a larger number of overdraft charges,” Judge King wrote.
Judge King also reiterated his previous finding that the plaintiffs’ claims were based on contract principles that had only an “incidental impact” on the banks’ deposit-taking powers, and that the purpose of those claims were “harmonized with the stated intent” of the NBA. He denied the defendants’ bid for an interlocutory appeal.
In February, Bank of America NA agreed to pay $410 million to settle the case against it pending in Florida.