Gutierrez v. Wells Fargo Bank: Ninth Circuit Rules on Preemption and Class Certification In Action Alleging that Bank Charged Improper Overdraft Fees

In Gutierrez v. Wells Fargo Bank, NA, 704 F.3d 712 (9th Cir. Dec. 26, 2012), the plaintiffs alleged that Wells Fargo violated the Unfair Competition Law (UCL) by imposing overdraft fees based on the high-to-low posting order and by misleading clients as to the actual posting order used. The district court enjoined Wells from using the high-to-low method and ordered it to pay over $200 million in restitution. Wells appealed, and the Ninth Circuit affirmed in part and reversed in part, holding:

Wells waived the right to demand arbitration by failing to make the demand in the district court, and only doing so on appeal, and ordering the case into arbitrate would frustrate, rather than advance, the Federal Arbitration Act (FAA) goal of expeditious litigation. Slip op. at 10-17.

The National Bank Act of 1864, 12 U.S.C. § 1 et seq., preempts application of the UCL's "unfair" prong to control a bank's method of posting transactions. Slip op. at 17-25. 

The National Bank Act does not preempt application of the UCL's "fraudulent" prong to control a bank's use of allegedly fraudulent communications with customers regarding the method of posting transactions or the impact of use of that method.  Slip op. at 25-30. 

The district court did not err in finding that the plaintiffs had standing to pursue the UCL claims because each had read and relied upon the bank's statements regarding its posting methods.  Slip op. at 30-31.  

The district court did not err in certifying the class because "class members, like the named plaintiffs, were exposed to the materials and likely relied on them." Citing Tobacco II, 46 Cal. 4th at 312 (to establish fraud under the Unfair Competition Law, plaintiffs must show 'that members of the public are likely to be deceived').  Slip op. at 31-32. 

In a line that reminds me of Jimmy Fallon's Capitol One commercials, the court said: "Unlike McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 223 (2d Cir. 2008) ... where individual class members could have had different motives for choosing 'light' cigarettes, we are hard pressed to agree that any class member would prefer to incur multiple overdraft fees." Slip op. at 32.  

Finally, the Court held that the district court did not err in holding that "Wells Fargo violated the Unfair Competition Law by making misleading statements likely to deceive its customers."  Slip op. at 32-34.  

The opinion is available here.