Hassler v. Sovereign Bank

Citation: 374 F. App'x 341Docket: No. 09-2982

Court: Court of Appeals for the Third Circuit; March 15, 2010; Federal Appellate Court

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Cortney Hassler initiated a class action against Sovereign Bank, alleging that overdraft fees on his checking account violated the New Jersey Consumer Fraud Act and common law. The District Court dismissed the case, a decision that will be upheld. Hassler's complaint details two specific instances of overdraft fees incurred due to Sovereign's practice of rearranging transaction posting. On August 28, 2008, Hassler had a balance of $112.35, made a $39.58 payment, followed by a $140.00 debit. If posted in the order of occurrence, only one overdraft would have occurred; however, by posting the transactions in reverse order, Sovereign assessed two overdraft fees of $33.00 each. A similar incident occurred three days later, with transactions again posted in reverse order. The Account Agreement outlines that Sovereign reserves the right to post withdrawals in any order, which may differ from the order transactions were made. It specifies that fees may apply for withdrawals exceeding available funds, and the bank is not liable for honoring such transactions. The agreement also details the use of the Visa CheckCard for purchases, stating that amounts are automatically deducted from the checking account.

Hassler contends that Sovereign's reordering of debits and withdrawals from his and other class members' accounts infringes on the New Jersey Consumer Fraud Act (NJCFA), breaches the covenant of good faith and fair dealing in their contracts, and leads to unjust enrichment. The District Court granted Sovereign's motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), with jurisdiction established under the Class Action Fairness Act and this Court's jurisdiction under 28 U.S.C. § 1291, applying New Jersey law.

The standard of review for the motion to dismiss is plenary, meaning that all well-pleaded allegations in the complaint are accepted as true, and the court considers the complaint and any authentic documents related to the claims. Hassler's claim under the NJCFA requires him to demonstrate unlawful conduct by Sovereign, an ascertainable loss, and a causal connection between the two. Unlawful conduct encompasses various deceptive practices, including misrepresentation and the concealment of material facts.

New Jersey law defines an unconscionable business practice as one that lacks good faith and fair dealing. For a practice to qualify as consumer fraud, it must be misleading and deviate from reasonable business norms, typically a question for a jury. However, if the claim is based on written statements, the court can determine whether the practice is unfair. In this case, the Account Agreement clearly outlined Sovereign's actions, indicating no jury question exists, only a legal question regarding compliance with the NJCFA given the explained terms. The Account Agreement explicitly allowed Sovereign to reorder charges, which undermines Hassler's claim, leading to its proper dismissal.

Withdrawals from an account may not be processed in the same order they were made, as Sovereign typically posts payment transactions in descending order based on amount. For example, a $900 mortgage payment would be processed before a $100 grocery purchase. Sovereign cautioned that the posting order could impact overdraft fees. The Account Agreement allows Sovereign discretion in processing charges, indicating that exceeding the account balance does not guarantee denial of the charge. Hassler's reliance on the presumed chronological posting of transactions is undermined by the explicit terms of the Account Agreement.

Hassler's breach of contract claim, based on the duty of good faith and fair dealing under New Jersey law, also fails. This claim requires evidence of bad faith conduct that undermines the intended benefits of the contract. Hassler did not allege any ill motives by Sovereign; his claims revolve around the reordering of charges leading to overdraft fees, which he deemed unfair. The exercise of discretion by Sovereign in managing charges is permissible as long as it aligns with the contract's provisions, which it does in this case.

Hassler's unjust enrichment claim, which asserts that Sovereign unjustly benefited at his expense, also fails. This claim necessitates proving that Sovereign was enriched beyond its contractual rights. Since Sovereign's actions were within the scope of the Account Agreement, its collection of overdraft fees did not constitute unjust enrichment. Consequently, the District Court's judgment affirming the dismissal of Hassler's claims is upheld, and Sovereign's argument regarding preemption is rendered unnecessary to address.