MEMORANDUM DECISION AND ORDER I. INTRODUCTION Plaintiff Malinda Fairchild-Cathey, on behalf of herself and a class of others similarly situated, commenced this action against Americu Credit Union (“Defendant”) on October 27, 2021, alleging breach of contract and breach of the implied covenant of good faith and fair dealing. Dkt. No. 1. Defendant later filed a motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. No. 9. Thereafter, Plaintiff filed an amended complaint, Dkt. No. 12 (“Amended Complaint”), which mooted Defendant’s motion to dismiss. Dkt. No. 14. In the Amended Complaint, Plaintiff named two additional plaintiffs: Richard Mumford and Aaron Forjone. Am. Compl. at 1. Plaintiffs now assert the following causes of action against Defendant: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) violation of New York General Business Law (“GBL”) §349. Id. at 30-33. Presently before the Court is Defendant’s motion to dismiss the Amended Complaint for failure to state a claim upon which relief can be granted. Dkt. No. 21 (“Motion”). Plaintiffs oppose the motion. Dkt. No. 25 (“Plaintiffs’ Response”). Defendant has submitted a reply to Plaintiffs’ Response. Dkt. No. 26 (“Defendant’s Reply”). For the reasons that follow, Defendant’s motion to dismiss is granted in part, and denied in part. II. BACKGROUND The following facts, which the Court assumes to be true at this stage, are taken from the Amended Complaint. A. Factual History Plaintiffs hold or formerly held checking accounts with Defendant. Am. Compl. 51. Defendant is a credit union which provides banking services to its members. Id. 9. According to Plaintiffs, the two documents attached to their Amended Complaint govern Plaintiffs’ relationship with Defendant. Am. Compl. 72. The documents include a “Schedule of Fees and Charges,” Dkt. No. 12, Ex. A (“Fee Schedule”), along with a “Membership and Account Agreement,” Dkt. No. 12, Ex. B (“Membership Agreement”) (collectively, “Account Documents”). When Defendant’s members — such as Plaintiffs — attempt a transaction but lack sufficient funds to complete the transaction, the Account Documents permit Defendant to charge the accountholder a $28 insufficient fund (“NSF”) fee. Am. Compl. 12. The Fee Schedule provides that Defendant may assess a $28 fee per “each” item returned for insufficient/uncollected funds. Id. 21 (quoting Fee Schedule at 2). Furthermore, the Membership Agreement’s “overdrafts” section provides in relevant part: If, on any day, the available funds in your share or deposit account are not sufficient to pay the full amount of a check, draft, item, transaction or other items posted to your account plus any applicable fee (“overdraft”), we may pay or return the overdraft. The Credit Union’s determination of an insufficient account balance may be made at any time between presentation and the Credit Union’s midnight deadline with only one review of the account required. We do not have to notify you if your account does not have sufficient funds to pay an overdraft. Your account may be subject to a charge for each overdraft regardless of whether we pay or return the overdraft. Am. Compl. 51 (quoting Membership Agreement at 4). 1. NSF Fees Plaintiffs allege that Defendant assesses multiple NSF fees on a single transaction in violation of the Account Documents. Am. Compl.
16, 18. Plaintiffs concede that the Account Documents permit Defendant to charge a single $28 NSF fee when a transaction is returned for insufficient funds or paid despite insufficient funds. Id. 12. However, they allege that Defendant breaches the Account Documents by charging more than one $28 NSF fee on the same transaction because reasonable consumers would understand that the same transaction may incur only a single NSF fee. Id. 13. The alleged breach occurs when a transaction is repeatedly processed by a merchant, and an NSF fee is assessed for each processing request, despite Plaintiffs never sending a request to re-process the payments. Id. 18. The dispute between the two parties hinges on the meaning of “item” in the Account Documents. Plaintiffs allege that the Account Documents guarantee that a single NSF Fee will be assessed for “each item.” Pls.’ Resp. at 1. Specifically, Plaintiffs assert that an “item” is the same “item” even when reprocessed a second or third time after an initial return for insufficient funds because “item” refers to an accountholder’s instruction for payment, id., “especially when — as here — Plaintiff Fairchild-Cathey took no action to resubmit the transaction.” Am. Compl. 23. Defendant ascribes a different meaning to “item.” Defendant reads the Account Documents collectively as authorizing it to assess an NSF fee “on any day,” and for “each overdraft,” i.e., any day a transaction is presented for payment and the account lacks sufficient funds. Mot. at 2-3. 2. Overdraft Fees on APPSN Transactions Plaintiffs also allege that Defendant unlawfully charges overdraft fees on transactions referred to as Authorize Positive Purportedly Settle Negative (“APPSN”) transactions. Id. 54. This sort of transaction allegedly occurs when a customer makes a purchase and the customer’s account balance is reduced from the initial transaction without an overdraft. However, settlement of a subsequent unrelated transaction that lowers the customer’s available balance will result in an overdraft on the initial transaction, irrespective of the initial positive balance of the first transaction. Id. 60. According to Plaintiffs, in these APPSN transactions, there are always positive funds available in the account to cover the transaction, but subsequent transactions result in a negative balance. Id. 74, 76. Consequently, Defendant allegedly assesses overdraft fees on APPSN transactions that have sufficient funds to cover a transaction. Id. 80. To carry out this practice, Plaintiffs allege that Defendant “actually authorizes transactions on positive funds, [then] claims to set those funds aside on hold, but then fails to use those same funds to settle those same transactions.” Id. 77. Plaintiffs further state that because APPSN transactions are debited from the account immediately, and such withdrawals take place upon initiation, they cannot be re-debited later. Id. 82. However, Defendant manages to re-debit the account anyway, which leads Plaintiffs to believe that “something more is going on.” Id. 86. The “more” according to Plaintiffs is an alleged surreptitious batching process. Id. According to Plaintiffs, “at the moment a debit card transaction is getting ready to settle, [Defendant] does something new and unexpected, during the middle of the night, during its nightly batch posing process.” Id. Specifically, Plaintiffs allege that Defendant “releases the hold placed on the funds for the transaction for a split second, putting money back into the account, then re-debits the same transaction a second time.” Id. 86. This secret step, Plaintiffs allege, permits Defendant to charge overdraft fees on transactions that should have never caused an overdraft because they were authorized with sufficient funds. Id. 87. 3. ATM Out of Network Fees Claim Plaintiffs’ final set of breach of contract claims relate to Defendant’s policy of out-of-network-ATM (“OON”) fees. Plaintiffs allege that Defendant’s Account Documents misrepresent to its members the nature of Defendant’s assessment of these fees. Id. 120. Plaintiffs specifically allege that Defendant’s Account Documents mislead its members into believing that a balance inquiry is not a separate, individual transaction; rather, members are led to believe that a balance inquiry is part of a single transaction, such as a deposit or withdrawal. Id. However, when a member uses an out-of-network ATM, they are charged two OON fees per cash withdrawal preceded by a surprise balance inquiry fee, which results in three discrete fees that are not provided for in the Account Documents. Id.
