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STATE OF INDIANA ) IN THE ALLEN SUPERIOR COURT
) SS
COUNTY OF ALLEN ) CAUSE NO. 02D09-2112-PL-521
WILLIAMS WOODS, KATERINA ) ORDER
BOBAY, and DAVID BOBAY, )
individually and on behalf of )
all others similarly situated, )
)
Plaintiffs, )
)
vs. )
)
THREE RIVERS FEDERAL, )
CREDIT UNION, )
)
Defendant. )
The Court having taken under advisement the Defendant, Three Rivers Federal Credit
Union’s Motion to Dismiss Plaintiffs’ Amended Class Action Complaint Pursuant to
Rules 12(B)(6) and 9(B) of the Indiana Rules of Trial Procedure, and having considered
the legal memoranda and the arguments of counsel, now issues its decision.
Background
Defendant, Three Rivers Federal Credit Union (“Three Rivers”) is a federal credit union
that provides banking services to consumers, including the Plaintiffs, William Woods,
Katerina Bobay and David Bobay (collectively referred to as (“Plaintiffs”). Plaintiffs are
Indiana residents who have had a checking bank account with Three Rivers. The
Plaintiffs were assessed various fees by Three River.
On October 4, 2021, Plaintiff, Woods, filed a Complaint in the Wayne Superior Court.
On November 17, 2021, the Plaintiffs filed an Amended Complaint.1 The Amended
Complaint is framed in six (6) “Claims for Relief”:
Claim 1 - Breach of Contract (Multiple Fees) as to Plaintiffs
Claim 2 - Breach of Contract (APSN Transactions) as to the Bobays
Claim 3 - Breach of Contract (Overdraft Transfer) as to the Bobays
Claim 4 - Breach of Contract (Phantom Transactions) as to the Bobays
Claim 5 – Unjust Enrichment
Claim 6 - Violation of the Indiana Deceptive Consumer Sales Act.
On November 30, 2021, the case was venued to the Allen County Superior Court.
1
Plaintiffs’ Complaint and the Amended Complaint requests that the Court certify a class of individuals who are
account holders of Three Rivers who have been similarly charged with the various fees which the three Plaintiffs are
challenging. The fact that the Plaintiffs are seeking to have this dispute treated as a class action has no direct bearing
on the merits of Three Rivers’ Motion to Dismiss.
On January 18, 2022, pursuant to Trial Rule 12(B)(6) and Trial Rule 9(B), Three Rivers
filed a Motion to Dismiss.
On March 3, 2022, the Plaintiffs filed a response.
On March 30, 2022, Three Rivers filed a Motion to Strike All Trial Court Orders
Submitted in Opposition to Motion to Dismiss.
On March 31, 2022, the Plaintiffs filed a response to the Motion to Strike.
On July 19, 2022, a hearing was conducted on the Motion to Strike and the Court issued
a ruling. Hearing was also conducted on the Motion to Dismiss, which the Court took
under advisement.
Discussion
The Plaintiffs’ have filed an Amended Complaint that is framed as six (6) “Claims for
Relief”:
Claim 1 - Breach of Contract (Multiple Fees) as to Plaintiffs
Claim 2 - Breach of Contract (APSN Transactions) as to the Bobays
Claim 3 - Breach of Contract (Overdraft Transfer) as to the Bobays
Claim 4 - Breach of Contract (Phantom Transactions) as to the Bobays
Claim 5 – Unjust Enrichment
Claim 6 - Violation of the Indiana Deceptive Consumer Sales Act.
Paragraph 1 of the Amended Complaint provides a summation of the forty-one (41) page
complaint. According to paragraph 1, the Plaintiffs request injunctive relief and damages
from Three Rivers based upon four (4) practices of Three Rivers identified by the
Plaintiffs as (1) assessing multiple fees on an item; (2) overdraft fees assessed on
transactions that did not actually overdraw the account; (3) fees assessed on
transactions when the accountholder never made a request for a withdrawal request
and the account balance was never reduced; and (4) assessment of unnecessary and
futile overdraft protection fees.
Three Rivers has filed the Motion to Dismiss contending that Claims 1 through 4 of the
Amended Complaint fail to state a claim for which relief may be granted. Three Rivers
argues that these four claims
A T.R. 12(B)(6) Motion to Dismiss addresses the legal sufficiency of the claim and does
not require determinations of fact. Elliot v. Rush Memorial Hosp., 928 N.E.2d 634, 639
(Ind. Ct. App. 2010). When reviewing a motion to dismiss, the Court should review the
pleadings in the light most favorable to the non-moving party, with every reasonable
inference drawn in the non-moving party’s favor. Caesars Riverboat Casino, LLC v.
Kephart, 934 N.E.2d 1120, 1122 (Ind. 2010). A complaint may not be dismissed for
failure to state a claim upon which relief can be granted unless it is clear on the face of
the complaint that the complaining party is not entitled to relief. City of New Haven v.
Reichhart, 748 N.E.2d 374, 377 (Ind. 2001). A motion to dismiss is proper only when it
is apparent that the complaint states a set of facts and circumstances, which if true,
would not support the relief requested. Time Warner Entm’t Co. v. Whiteman, 741 N.E.2d
1265, 1270 (Ind. Ct. App. 2001).
Three Rivers first argues that dismissal of is proper because federal regulations preempt
the allegations in the Plaintiffs’ Amended Complaint. Specifically, Three Rivers argues
that type of fees that federal credit unions may charge, how the fees are charged and
the manner in which these fees may be charged are all governed by the National Credit
Union Administration (“NCUA”), the Federal Credit Union Act (FCUA”), and the Truth in
Savings Act (“TISA”). Thus, Three Rivers argues that the Plaintiffs are preempted from
filing a claim under state law against a federal credit union for failure to disclose certain
fee practices or for perceived unfair fee practices.
Plaintiffs disagree, and argue that their lawsuit does not seek to use state law to decide
what fees and disclosures regarding fees set by Three Rivers. Rather, Plaintiffs argue
that the lawsuit is challenging Three Rivers’ misinterpretation of the parties’ contract
and that the Plaintiffs are merely seeking to enforce the contract as written.
Federal preemption analysis begins with a presumption against preemption. See
KS&E Sports v. Runnels, 72 N.E.3d 892, 904 (Ind. 2017). In fact, the law is categorically
clear that although “the Supremacy Clause gives Congress the power to preempt state
law . . .” the Court does “not easily find preemption,” and will only find preemption “if it
is the clear and manifest purpose of Congress." Kennedy Tank & Mfg. Co. v. Emmert
Indus. Corp., 67 N.E.3d 1025, 1028 (Ind. 2017) (internal notations and citations
omitted). Further, the burden of establishing federal preemption is placed upon Three
Rivers, the party seeking to preempt state law claims alleged in Claims 1 through 4 in
the Amended Complaint. See KS&E Sports, 72 N.E.3d at 905.
In support of their argument, Three Rivers cites several out of circuit federal cases for
the proposition that FCUA and TISA are designed to prevent lawsuits that use state
consumer law to dictate what fees a federal credit union may charge, the manner in
which the fees are charged and what disclosures must be given to consumers. However,
Three Rivers failed to cite any Indiana case law to support their position for federal
preemption.
Plaintiffs cite to and heavily rely on Old Nat’l Bank v. Kelly, 31 N.E.3d 522 (Ind. Ct. App.
2015). There, the Court of Appeals examined the issue of federal preemption in relation
to a class action lawsuit regarding overdraft fees and state law claims of breach of
contract, the duty of good faith and fair dealing, and unjust enrichment, similarly to the
case at bar. Here, like in Old Nat’l Bank, it is crucial to note that “[e]fforts to hold banks
liable for practices that purportedly violate state law are void if they conflict with federal
law, frustrate the purposes of the National Bank Act, or impair the efficiency of national
banks to discharge their duties." Old Nat'l Bank v. Kelly, 31 N.E.3d 522, 529 (Ind. Ct.
App. 2015) (citing Bank of Am. v. City & Cnty. of San Francisco, 09 F.3d 551, 561 (9th
Cir. 2002). However, the proper inquiry for testing the legal sufficiency of the claims
asserted in the Complaint is “whether the state law claims, as alleged, more than
incidentally affect the exercise of the banks' deposit taking power." Old Nat'l Bank v.
Kelly, 31 N.E.3d at 529.
As a federal credit union, Three Rivers has the “[a]uthority to impose charges and fees.
A national bank may charge its customers non-interest charges and fees, including
deposit account service charges.” 12 C.F.R. §7.40029(a). Also, “[t]he establishment of
non-interest charges and fees, their amounts, and the method of calculating them are
business decisions to be made by each bank, in its discretion, according to sound
banking judgment and safe and sound banking principles.” 12 C.F.R. § 7.4002(b)(2).
Therefore, any allegations made in the Complaint regarding the ability of Three Rivers
to charge fees, including the overdraft fees, are preempted by federal regulations as part
of Three Rivers’ deposit taking power.
However, just as in Old Nat’l Bank, Plaintiffs are not disputing the fact that Three Rivers
has the ability to assesses overdraft fees or challenging the amount of the fee being
assessed. Rather, the Plaintiffs are alleging in Claims 1 through 4 that Three Rivers is
breaching the parties’ contract and/or violating a duty of good faith and fair dealing.
Paragraph 172 of the Amended Complaint, under Claim 1, clearly alleges that Three
Rivers breached the express terms of its agreements with Plaintiffs. Identical allegations
were made in Claims 2, 3, and 4. In Paragraph 188 under Claim 2, Plaintiffs allege that
Three Rivers abused its discretion by charging fees on APSN transactions when
transactions did not overdraw checking accounts, consequently breaching both the
parties’ contract and Three Rivers duty of good faith and fair dealing, Paragraph 200
under Claim 3 alleges that Three Rivers abused its discretion under the parties’ contract
when Three Rivers charged fees on unnecessary and futile overdraft transfers.
Paragraph 212 of Claim 4 alleges that Three Rivers abused its discretion and violated
its duty of good faith and fair dealing when it charged fees on phantom transactions.
“C.F.R. § 7.4002 authorizes a bank to charge overdraft fees, but does not authorize
banks to ignore state contract or tort law.” Old Nat'l Bank, 31 N.E.3d at 533. “Where an
attack has been made not upon the right to charge overdraft fees but upon an allegedly
manipulation of the overdraft program to maximize fees, it has been held that the
allegations ‘do no more than incidentally affect the banks’ exercise of their deposit taking
power and are therefore not preempted.’ (Citation omitted)” Id. at 531.
As mentioned above, Plaintiffs repeatedly allege in the Amended Complaint that Three
Rivers breached the terms of the parties’ contract due to Three Rivers manipulation of
the overdraft fees that it is entitled to assess.
Accordingly, as to Three Rivers’ contention that Claims 1, 2, 3 and 4 of the Amended
Complaint fail to state a claim for which relief may be granted because federal law
preempts those claims, the Court finds that Three Rivers has not convinced the Court
that the Plaintiffs are not entitled to relief.
Three Rivers also contends that the Plaintiff’s allegations in Claims 1 through 4 fail to
state a claim for which relief may be granted because (1) the express terms of the parties’
contract permits Three Rivers to assess the fees that are the subject of Claims 1 through
4; and, (2) that the provisions in the parties’ contract allowing for the assessment of
overdraft fees are clear and unambiguous and therefore Three Rivers’ practices, being
in complete compliance with the provisions of the contract, cannot be the grounds for a
breach of contract claim. The Court is of the opinion that these contentions are better
developed in a motion for summary judgment after the parties have been able to engage
in discovery and to develop the support for their arguments.
As to Three Rivers contention that Claim 5 (unjust enrichment) and Claim 6 (violation
of the Deceptive Consumer Sales Act) fail to state claims for which relief may be granted,
the Court, having determined that Three Rivers’ Motion to Dismiss should be denied as
to the Plaintiffs’ Claims 1 through 4 on the issue of preemption, prefers to proceed
forward in this case and to address the issues raised in Three Rivers’ Motion to Dismiss
after the parties have engaged in discovery and can file a motion for summary judgment.
WHEREFORE, the Court denies the Defendant, Three Rivers Federal Credit Union’s
Motion to Dismiss Plaintiffs’ Amended Class Action Complaint Pursuant to Rules
12(B)(6) and 9(B) of the Indiana Rules of Trial Procedure.
DATED:_August 23, 2022
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STATE OF INDIANA ) IN THE ALLEN SUPERIOR COURT ) SS COUNTY OF ALLEN ) CAUSE NO. 02D09-2112-PL-521 WILLIAMS WOODS, KATERINA ) ORDER BOBAY, and DAVID BOBAY, ) individually and on behalf of ) all others similarly situated, ) ) Plaintiffs, ) ) vs. ) ) THREE RIVERS FEDERAL, ) CREDIT UNION, ) ) Defendant. ) The Court having taken under advisement the Defendant, Three Rivers Federal Credit Union’s Motion to Dismiss Plaintiffs’ Amended Class Action Complaint Pursuant to Rules 12(B)(6) and 9(B) of the Indiana Rules of Trial Procedure, and having considered the legal memoranda and the arguments of counsel, now issues its decision. Background Defendant, Three Rivers Federal Credit Union (“Three Rivers”) is a federal credit union that provides banking services to consumers, including the Plaintiffs, William Woods, Katerina Bobay and David Bobay (collectively referred to as (“Plaintiffs”). Plaintiffs are Indiana residents who have had a checking bank account with Three Rivers. The Plaintiffs were assessed various fees by Three River. On October 4, 2021, Plaintiff, Woods, filed a Complaint in the Wayne Superior Court. On November 17, 2021, the Plaintiffs filed an Amended Complaint.1 The Amended Complaint is framed in six (6) “Claims for Relief”: Claim 1 - Breach of Contract (Multiple Fees) as to Plaintiffs Claim 2 - Breach of Contract (APSN Transactions) as to the Bobays Claim 3 - Breach of Contract (Overdraft Transfer) as to the Bobays Claim 4 - Breach of Contract (Phantom Transactions) as to the Bobays Claim 5 – Unjust Enrichment Claim 6 - Violation of the Indiana Deceptive Consumer Sales Act. On November 30, 2021, the case was venued to the Allen County Superior Court. 1 Plaintiffs’ Complaint and the Amended Complaint requests that the Court certify a class of individuals who are account holders of Three Rivers who have been similarly charged with the various fees which the three Plaintiffs are challenging. The fact that the Plaintiffs are seeking to have this dispute treated as a class action has no direct bearing on the merits of Three Rivers’ Motion to Dismiss. On January 18, 2022, pursuant to Trial Rule 12(B)(6) and Trial Rule 9(B), Three Rivers filed a Motion to Dismiss. On March 3, 2022, the Plaintiffs filed a response. On March 30, 2022, Three Rivers filed a Motion to Strike All Trial Court Orders Submitted in Opposition to Motion to Dismiss. On March 31, 2022, the Plaintiffs filed a response to the Motion to Strike. On July 19, 2022, a hearing was conducted on the Motion to Strike and the Court issued a ruling. Hearing was also conducted on the Motion to Dismiss, which the Court took under advisement. Discussion The Plaintiffs’ have filed an Amended Complaint that is framed as six (6) “Claims for Relief”: Claim 1 - Breach of Contract (Multiple Fees) as to Plaintiffs Claim 2 - Breach of Contract (APSN Transactions) as to the Bobays Claim 3 - Breach of Contract (Overdraft Transfer) as to the Bobays Claim 4 - Breach of Contract (Phantom Transactions) as to the Bobays Claim 5 – Unjust Enrichment Claim 6 - Violation of the Indiana Deceptive Consumer Sales Act. Paragraph 1 of the Amended Complaint provides a summation of the forty-one (41) page complaint. According to paragraph 1, the Plaintiffs request injunctive relief and damages from Three Rivers based upon four (4) practices of Three Rivers identified by the Plaintiffs as (1) assessing multiple fees on an item; (2) overdraft fees assessed on transactions that did not actually overdraw the account; (3) fees assessed on transactions when the accountholder never made a request for a withdrawal request and the account balance was never reduced; and (4) assessment of unnecessary and futile overdraft protection fees. Three Rivers has filed the Motion to Dismiss contending that Claims 1 through 4 of the Amended Complaint fail to state a claim for which relief may be granted. Three Rivers argues that these four claims A T.R. 12(B)(6) Motion to Dismiss addresses the legal sufficiency of the claim and does not require determinations of fact. Elliot v. Rush Memorial Hosp., 928 N.E.2d 634, 639 (Ind. Ct. App. 2010). When reviewing a motion to dismiss, the Court should review the pleadings in the light most favorable to the non-moving party, with every reasonable inference drawn in the non-moving party’s favor. Caesars Riverboat Casino, LLC v. Kephart, 934 N.E.2d 1120, 1122 (Ind. 2010). A complaint may not be dismissed for failure to state a claim upon which relief can be granted unless it is clear on the face of the complaint that the complaining party is not entitled to relief. City of New Haven v. Reichhart, 748 N.E.2d 374, 377 (Ind. 2001). A motion to dismiss is proper only when it is apparent that the complaint states a set of facts and circumstances, which if true, would not support the relief requested. Time Warner Entm’t Co. v. Whiteman, 741 N.E.2d 1265, 1270 (Ind. Ct. App. 2001). Three Rivers first argues that dismissal of is proper because federal regulations preempt the allegations in the Plaintiffs’ Amended Complaint. Specifically, Three Rivers argues that type of fees that federal credit unions may charge, how the fees are charged and the manner in which these fees may be charged are all governed by the National Credit Union Administration (“NCUA”), the Federal Credit Union Act (FCUA”), and the Truth in Savings Act (“TISA”). Thus, Three Rivers argues that the Plaintiffs are preempted from filing a claim under state law against a federal credit union for failure to disclose certain fee practices or for perceived unfair fee practices. Plaintiffs disagree, and argue that their lawsuit does not seek to use state law to decide what fees and disclosures regarding fees set by Three Rivers. Rather, Plaintiffs argue that the lawsuit is challenging Three Rivers’ misinterpretation of the parties’ contract and that the Plaintiffs are merely seeking to enforce the contract as written. Federal preemption analysis begins with a presumption against preemption. See KS&E Sports v. Runnels, 72 N.E.3d 892, 904 (Ind. 2017). In fact, the law is categorically clear that although “the Supremacy Clause gives Congress the power to preempt state law . . .” the Court does “not easily find preemption,” and will only find preemption “if it is the clear and manifest purpose of Congress." Kennedy Tank & Mfg. Co. v. Emmert Indus. Corp., 67 N.E.3d 1025, 1028 (Ind. 2017) (internal notations and citations omitted). Further, the burden of establishing federal preemption is placed upon Three Rivers, the party seeking to preempt state law claims alleged in Claims 1 through 4 in the Amended Complaint. See KS&E Sports, 72 N.E.3d at 905. In support of their argument, Three Rivers cites several out of circuit federal cases for the proposition that FCUA and TISA are designed to prevent lawsuits that use state consumer law to dictate what fees a federal credit union may charge, the manner in which the fees are charged and what disclosures must be given to consumers. However, Three Rivers failed to cite any Indiana case law to support their position for federal preemption. Plaintiffs cite to and heavily rely on Old Nat’l Bank v. Kelly, 31 N.E.3d 522 (Ind. Ct. App. 2015). There, the Court of Appeals examined the issue of federal preemption in relation to a class action lawsuit regarding overdraft fees and state law claims of breach of contract, the duty of good faith and fair dealing, and unjust enrichment, similarly to the case at bar. Here, like in Old Nat’l Bank, it is crucial to note that “[e]fforts to hold banks liable for practices that purportedly violate state law are void if they conflict with federal law, frustrate the purposes of the National Bank Act, or impair the efficiency of national banks to discharge their duties." Old Nat'l Bank v. Kelly, 31 N.E.3d 522, 529 (Ind. Ct. App. 2015) (citing Bank of Am. v. City & Cnty. of San Francisco, 09 F.3d 551, 561 (9th Cir. 2002). However, the proper inquiry for testing the legal sufficiency of the claims asserted in the Complaint is “whether the state law claims, as alleged, more than incidentally affect the exercise of the banks' deposit taking power." Old Nat'l Bank v. Kelly, 31 N.E.3d at 529. As a federal credit union, Three Rivers has the “[a]uthority to impose charges and fees. A national bank may charge its customers non-interest charges and fees, including deposit account service charges.” 12 C.F.R. §7.40029(a). Also, “[t]he establishment of non-interest charges and fees, their amounts, and the method of calculating them are business decisions to be made by each bank, in its discretion, according to sound banking judgment and safe and sound banking principles.” 12 C.F.R. § 7.4002(b)(2). Therefore, any allegations made in the Complaint regarding the ability of Three Rivers to charge fees, including the overdraft fees, are preempted by federal regulations as part of Three Rivers’ deposit taking power. However, just as in Old Nat’l Bank, Plaintiffs are not disputing the fact that Three Rivers has the ability to assesses overdraft fees or challenging the amount of the fee being assessed. Rather, the Plaintiffs are alleging in Claims 1 through 4 that Three Rivers is breaching the parties’ contract and/or violating a duty of good faith and fair dealing. Paragraph 172 of the Amended Complaint, under Claim 1, clearly alleges that Three Rivers breached the express terms of its agreements with Plaintiffs. Identical allegations were made in Claims 2, 3, and 4. In Paragraph 188 under Claim 2, Plaintiffs allege that Three Rivers abused its discretion by charging fees on APSN transactions when transactions did not overdraw checking accounts, consequently breaching both the parties’ contract and Three Rivers duty of good faith and fair dealing, Paragraph 200 under Claim 3 alleges that Three Rivers abused its discretion under the parties’ contract when Three Rivers charged fees on unnecessary and futile overdraft transfers. Paragraph 212 of Claim 4 alleges that Three Rivers abused its discretion and violated its duty of good faith and fair dealing when it charged fees on phantom transactions. “C.F.R. § 7.4002 authorizes a bank to charge overdraft fees, but does not authorize banks to ignore state contract or tort law.” Old Nat'l Bank, 31 N.E.3d at 533. “Where an attack has been made not upon the right to charge overdraft fees but upon an allegedly manipulation of the overdraft program to maximize fees, it has been held that the allegations ‘do no more than incidentally affect the banks’ exercise of their deposit taking power and are therefore not preempted.’ (Citation omitted)” Id. at 531. As mentioned above, Plaintiffs repeatedly allege in the Amended Complaint that Three Rivers breached the terms of the parties’ contract due to Three Rivers manipulation of the overdraft fees that it is entitled to assess. Accordingly, as to Three Rivers’ contention that Claims 1, 2, 3 and 4 of the Amended Complaint fail to state a claim for which relief may be granted because federal law preempts those claims, the Court finds that Three Rivers has not convinced the Court that the Plaintiffs are not entitled to relief. Three Rivers also contends that the Plaintiff’s allegations in Claims 1 through 4 fail to state a claim for which relief may be granted because (1) the express terms of the parties’ contract permits Three Rivers to assess the fees that are the subject of Claims 1 through 4; and, (2) that the provisions in the parties’ contract allowing for the assessment of overdraft fees are clear and unambiguous and therefore Three Rivers’ practices, being in complete compliance with the provisions of the contract, cannot be the grounds for a breach of contract claim. The Court is of the opinion that these contentions are better developed in a motion for summary judgment after the parties have been able to engage in discovery and to develop the support for their arguments. As to Three Rivers contention that Claim 5 (unjust enrichment) and Claim 6 (violation of the Deceptive Consumer Sales Act) fail to state claims for which relief may be granted, the Court, having determined that Three Rivers’ Motion to Dismiss should be denied as to the Plaintiffs’ Claims 1 through 4 on the issue of preemption, prefers to proceed forward in this case and to address the issues raised in Three Rivers’ Motion to Dismiss after the parties have engaged in discovery and can file a motion for summary judgment. WHEREFORE, the Court denies the Defendant, Three Rivers Federal Credit Union’s Motion to Dismiss Plaintiffs’ Amended Class Action Complaint Pursuant to Rules 12(B)(6) and 9(B) of the Indiana Rules of Trial Procedure. DATED:_August 23, 2022