Court: District Court, N.D. Illinois; July 7, 2014; Federal District Court
The Court addressed motions for judgment on the pleadings and motions for summary judgment filed by Defendants EIntelligence, Inc. and MetaBank, ultimately denying the motions for judgment on the pleadings but granting summary judgment in favor of the Defendants. The motion to certify the class was deemed moot.
The case involves an alleged violation of the Electronic Funds Transfer Act (EFTA). EIntelligence, an Independent Sales Organization based in Illinois, entered into a Merchant Processing Services Agreement with 7700 Kedzie Gas Corporation in February 2012, granting EIntelligence exclusive management rights over an ATM. EIntelligence was responsible for servicing the ATM and managing maintenance requests from Kedzie Gas, which determined the surcharge fees for ATM users. Surcharge fees were processed through EIntelligence and credited to its bank account, from which monthly payments were made to Kedzie Gas after deducting maintenance fees.
EIntelligence had a Retail Services and EFT Processing Agreement with First Data Retail Services as a processor and required a sponsoring bank for transaction processing. MetaBank, having entered a Merchant Participation Agreement with Kedzie Gas, served as the sponsoring bank for the ATM and retained the right to audit EIntelligence’s operations to ensure compliance with contractual and network standards.
MetaBank required notification of any new laws regarding ATMs, while EIntelligence was responsible for legal compliance. On February 20, 2012, EIntelligence sold and enrolled an ATM at Kedzie Gas, which was connected to the processor FDRS and subsequently linked to customer bank accounts. A fee notice sticker on the ATM indicated a $2.50 withdrawal fee, stating that the terminal was operated by MetaBank and serviced by EIntelligence. Singer utilized this ATM on March 3, 2012, and alleges that although she saw an on-screen fee notice, there was no prominently posted fee notice sticker, contrary to EFTA regulations. The receipt indicated that EIntelligence received the surcharge. Defendants provided time-stamped photographs from multiple dates showing the fee sticker was present at the ATM, which Singer contends is inadmissible evidence.
EIntelligence's policy included monitoring and replacing defaced fee disclosures, requiring timestamped photographs of fee stickers and ATM inspections. Between September 26 and October 24, 2012, Singer made two additional withdrawals and later filed a class action lawsuit against Kedzie Gas for alleged EFTA violations, claiming inadequate fee notice. On October 16, 2013, she dismissed a related suit against Illinois State Petroleum Corporation. Procedurally, Singer filed a second amended class action complaint on November 14, 2012, after which MetaBank and EIntelligence moved for judgment on the pleadings and for summary judgment in 2014. The legal standards for judgment on the pleadings dictate that the court must view all well-pleaded facts in the light most favorable to the plaintiff.
A Rule 12(c) motion should be granted only if it is clear that the plaintiff cannot prove any facts supporting a claim for relief. The complaint must present a narrative of the claim without adhering to a specific recovery theory, and plaintiffs can enhance their complaints with factual details via affidavits or briefs. If these additions substantiate a claim, the complaint is upheld. Summary judgment is warranted when evidence shows no genuine dispute of material fact, allowing the movant to claim judgment as a matter of law. The movant must initially prove the absence of genuine issues, after which the burden shifts to the nonmovant to demonstrate with specific evidence that a triable issue remains. Mere allegations or conclusory statements are insufficient; concrete documentary evidence is required. A genuine issue exists if reasonable jurors could favor the nonmovant. Courts must interpret facts and draw reasonable inferences in favor of the nonmovant during summary judgment considerations.
Regarding the Congressional amendment to the Electronic Fund Transfer Act (EFTA), before the amendment, the EFTA required both on-screen and posted fee notices at ATMs. The December 20, 2012 amendment altered this requirement, allowing the notice to appear only on the ATM screen or on paper issued after the transaction is initiated. The amendment does not explicitly state it is retroactive, leading defendants to argue for its application in the current case while the plaintiff contends it should not apply retroactively, citing a presumption against retroactivity in the absence of clear statutory language. The Seventh Circuit has not definitively ruled on this matter, though it acknowledged the amendment's effect on notice requirements in a related case. Most courts, including those in various district cases, have leaned toward finding the amendment non-retroactive, as supported by existing case law.
In Gawarecki v. ATM Network, Inc., the court determined that the Electronic Funds Transfer Act (EFTA) does not indicate congressional intent for a new notice provision to apply retroactively to cases arising before its enactment. Citing Brown v. Wells Fargo Co., the court found that the plaintiff had a vested right to receive specific notice regarding ATM transaction fees. Conversely, in Mabary v. Hometown Bank, the court ruled that no such vested right existed and declined to enforce a presumption against statutory retroactivity. The court followed established precedent affirming that statutory retroactivity is disfavored when congressional intent is unclear, concluding that the pre-amendment EFTA notice requirements were applicable in this case. Consequently, the defendants' motions for judgment on the pleadings were denied.
Regarding motions for summary judgment by ATM operators, both defendants argued they were not "automated teller machine operators" under the EFTA, claiming Kedzie Gas operated the ATM. Liability under the EFTA could be established if either MetaBank or EIntelligence was found to operate the ATM and charged fees for electronic fund transfers. The EFTA defines an "automated teller machine operator" broadly, including any person operating an ATM that initiates electronic fund transfers, excluding the financial institution holding the consumer's account. At the time of the transaction, the EFTA mandated the ATM operator to prominently display fee notices to consumers before they committed to the transaction.
MetaBank contended it was not liable under the EFTA, asserting that the term "operator" lacks a clear definition and arguing for a strict interpretation that implies control over the ATM's operations. It referenced case law regarding definitions of "operator" in other legal contexts to support its argument.
Singer references a fee sticker indicating that MetaBank operates the ATM and may charge a $2.50 withdrawal fee. MetaBank contends that it is labeled as the "operator" solely to comply with regulatory requirements and asserts that it did not impose any fees at the outset. Singer argues that MetaBank played a crucial role in imposing surcharges and directly benefited from them. The Court determines there is no genuine issue of material fact regarding MetaBank's status as an ATM operator, concluding that MetaBank does not own or manage the ATM at Kedzie Gas and pointing to similar case law where courts defined "operator" in line with ownership and transaction management. MetaBank's primary role was as a sponsor bank for EIntelligence, which managed the ATM operations and compliance with the EFTA, as reflected in their contractual agreement.
EIntelligence claims it is not the ATM operator, identifying Kedzie Gas as the true owner and stating it did not impose surcharge fees, which were determined by Kedzie Gas. Singer disputes this, asserting that EIntelligence has control over the transactions. The Court acknowledges a genuine issue of material fact exists regarding EIntelligence's role as an operator of the ATM at Kedzie Gas.
EIntelligence demonstrated operational control over the ATM at Kedzie Gas, aligning with the definition of an "operator" despite Kedzie Gas's ownership. The Processing Agreement grants EIntelligence exclusive management rights, while relevant statutes and case law do not necessitate physical possession of keys or cash to establish operational status. Evidence suggests EIntelligence enforced surcharge fees, as funds from transactions were routed directly to its account, with receipts indicating fees were paid to EIntelligence. This scenario raises a genuine dispute regarding EIntelligence's operator status under the Electronic Fund Transfer Act (EFTA).
EIntelligence asserts a bona fide error defense under 15 U.S.C. § 1693m(c) to shield itself from liability, arguing that any violations were unintentional and resulted from a bona fide error. The defense requires proof that the defendant maintained adequate procedures to prevent errors and that any violation was not intentional. EIntelligence presents affidavits and evidence, including photographs, to support its claim. However, Singer contests the sufficiency of this evidence, arguing that EIntelligence's two-page EFTA compliance policy was inadequate and that actual employees did not oversee compliance—only independent contractors. Despite EIntelligence servicing the ATM for eight months prior to a transaction on October 15, 2012, a photograph taken on September 24, 2012, showed the fee notice sticker was visible, indicating some adherence to policy.
Three photographs from 2012 show a fee sticker prominently displayed on an ATM, countering Singer's claim that they are inadmissible as evidence. Singer's assertion does not adequately refute EIntelligence's undisputed facts. The Court finds that EIntelligence's two-page EFTA policy demonstrates reasonable efforts to avoid missing notices, similar to a precedent where a one-page policy sufficed under the bona fide error defense. No evidence suggests EIntelligence intentionally removed the sticker or acted in bad faith; rather, it had procedures in place to monitor the ATM, evidenced by the photographs.
Singer's claim that EIntelligence employees never visited the ATM does not affect the validity of its procedures, as independent contractors can be employed for compliance. The bona fide error defense requires merely the maintenance of procedures, which EIntelligence adequately demonstrated. The Court concludes that any failure to display the fee sticker at Kedzie Gas was unintentional.
While the Court determined that MetaBank was not an operator, it acknowledges that the bona fide error defense would also apply to MetaBank due to its contractual relationship with EIntelligence. The contract specifies that EIntelligence is responsible for complying with applicable laws, including the EFTA, and there is no evidence of intentional non-compliance. Consequently, EIntelligence's policy would aid MetaBank in proving its defense if needed. The Court denies Defendants' motions for judgment on the pleadings and grants summary judgment in favor of Defendants, rendering the motion to certify the class moot.
