A bank being sued by customers over how it orders transactions – allegedly to maximize profits from overdraft fees – is entitled to summary judgment on most of the state claims alleged by customers in a class-action lawsuit, the Indiana Court of Appeals ruled Thursday.
In Old National Bank v. Steven Kelly, Jon A. Cook, and Rebecca F. Cook, individually and on behalf of others similarly situated, 82A01-1406-CT-234, customers of Old National Bank sued over the bank’s bookkeeping device known as “high-to-low” posting, the delayed debiting of transactions, and the bank’s alleged utilization of a so-called “shadow” line of credit. Customers allege that transactions would not be posted in the order they occurred and often were grouped together in order to allow the bank to charge more overdraft fees. The customers also alleged that they were automatically enrolled in the overdraft program.
The five counts brought against the bank are breach of contract and breach of the covenant of good faith and fair dealing; civil conversion; unjust enrichment, unconscionable overdraft policies and practices; and a violation of the Indiana Crime Victim Relief Act.
The bank moved for summary judgment in June 2013. It did not directly dispute its use of the procedures that maximized overdraft fees, but rather claimed entitlement to judgment as a matter of law due to preemption by federal banking law and the non-viability of state claims. The trial court denied the bank’s motion, leading to this interlocutory appeal.
The COA rejected the preemption argument offered by Old National.
“The bank has not shown an irreconcilable conflict or that the state laws do more than incidentally affect the bank’s deposit-taking power. The Bank is not entitled to a declaration of preemption in these summary judgment proceedings,” Judge L. Mark Bailey wrote.
Taking a look at the viability of the state claims, the judges ruled in favor of the bank except on the breach of contract and breach of good faith and fair dealing claim.
“[I]n order to show that Depositors’ breach of contract claim could not survive, the Bank would be obliged to show that its contract is not ambiguous and is not inconsistent in its terms or in relation to extrinsic evidence. We cannot, by examination of the contract and with reference to undisputed facts, conclude that the Deposit Agreement unambiguously and consistently provides for the sums actually charged by the Bank. Summary judgment is inappropriate where, as here, a factfinder could infer from the designated materials that the Bank breached its duty of good faith and fair dealing,” Bailey wrote.
The COA remanded the class action for further proceedings consistent with the opinion.