Gutierrez, et al v. Wells Fargo Bank, N.A., No. 10-16959 (9th Cir. 2012)
Annotate this CasePlaintiffs sued Wells Fargo under California state law for engaging in unfair business practices by imposing overdraft fees based on a high-to-low posting order and for engaging in fraudulent practices by misleading clients as to the actual posting order used by the bank. The district court entered judgment in favor of plaintiffs and Wells Fargo subsequently appealed, raising issues of federal preemption. The court concluded that federal law preempted state regulation of the posting order as well as any obligation to make specific, affirmative, disclosures to bank customers. The court held, however, that Federal law did not preempt California consumer law with respect to fraudulent or misleading representations concerning posting. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings.
Court Description: Banking Law. The panel affirmed in part and reversed in part the district court’s issuance of a permanent injunction requiring Wells Fargo Bank to cease its practice of charging overdraft fees based on its posting in high-to-low order for all debit-card transactions, and $203 million restitution order to a certified class of bank customers. The district court held that the bank’s actions were both “unfair” and “fraudulent” under California’s Unfair Competition Law. As a threshold matter, the panel held that given the circumstances of this case, the district court’s judgment should not be vacated on the basis of the Supreme Court’s intervening decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), and denied the bank’s post-judgment, post-appeal request that this dispute be arbitrated under a permissive arbitration clause contained in a contract between the parties. The panel also held that the Bank’s decision to post payments to checking accounts in a particular order is a federally authorized pricing decision. The panel further held that the National Bank Act preempts the application of the unfair business practices prong of California’s Unfair Competition Law to dictate a national bank’s order of posting. The panel also held that both the imposition of affirmative disclosure requirements and liability based on failure to disclose are preempted. The panel held that the National Bank Act does not preempt the claim for affirmative misrepresentations under the fraudulent prong of the Unfair Competition Law. The panel vacated the injunction because each of its terms dictated relief relating to the posting order, which was preempted. The panel also vacated the restitution order.
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