Carol Tims v. LGE Community Credit Union , 935 F.3d 1228 ( 2019 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-14968
________________________
D.C. Docket No. 1:15-cv-04279-TWT
CAROL TIMS,
Individually, and on behalf of all others similarly situated,
Plaintiff – Appellant,
versus
LGE COMMUNITY CREDIT UNION,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(August 27, 2019)
Before MARTIN, JILL PRYOR and JULIE CARNES, Circuit Judges.
JILL PRYOR, Circuit Judge:
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According to Carol Tims, when she opened an account at LGE Community
Credit Union, LGE promised to use one account balance calculation method in
assessing overdraft fees against her account, but then used a different one, which
resulted in more fees. Tims alleged that LGE agreed to impose overdraft fees only
when her ledger balance—the amount of money in her account without considering
pending debits—was insufficient to cover a transaction. She alleged that LGE
broke that promise by assessing overdraft fees when, based on her ledger balance,
there was enough money in her account to cover the transaction in question, but
based on her available balance—the money in her account after considering
pending debits and deposits—there was not.
Tims sued LGE in district court for breach of contract, breach of the implied
covenant of good faith and fair dealing, and violation of the Electronic Fund
Transfer Act (EFTA), 15 U.S.C. §§ 1693-1693r. The district court dismissed her
claims under Federal Rule of Civil Procedure 12(b)(6) after determining that the
two parties’ agreements unambiguously permitted LGE to assess overdraft fees
using the available balance calculation method.
We disagree with the district court’s interpretation of the contracts. Because
we conclude that the agreements are ambiguous as to whether LGE could rely on
an account’s available balance, rather than its ledger balance, to assess overdraft
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fees, we reverse the district court’s dismissal of the case and remand for further
proceedings consistent with our opinion.
I. BACKGROUND
A. Congressional Regulation of Overdraft Fees After the Advent of Online
Banking
“Overdraft” is a banking term describing a deficit in a bank account caused
by drawing more money than the account holds. Before the development of
electronic fund transfer (EFT) systems, banks generally provided overdraft
coverage for check transactions only. See Electronic Fund Transfers, 74 Fed. Reg.
59,033, 59,033 (Nov. 17, 2009). When a bank customer overdrew her account by
writing a check in an amount that exceeded the amount of funds in the account, her
financial institution applied its discretion in deciding whether to honor the
customer’s draft, in effect extending a small line of credit to its customer and
imposing a small fee for the convenience. Id.
Online banking transformed how financial institutions handled overdrafts
and overdraft fees. New EFT systems provided customers with more ways to
make payments from their accounts, including automatic teller machine (ATM)
withdrawals, debit card transactions, online purchases, and transfers to other
accounts. Id. Most financial institutions chose to extend their overdraft coverage
to all EFT transactions. Some further decided to cover automatically all overdrafts
their customers might generate from their EFTs. Id. These changes had the
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benefit to financial institutions of “reduc[ing] cost[s]” from manually reviewing
individual transactions and furthering “consistent treatment of consumers.” Id. at
59,033-34. But they came at a significant and sometimes unexpected cost to
consumers: financial institutions generally assessed a flat fee each time an
overdraft occurred, sometimes charging additional fees—for each day an account
remained overdrawn, for example, or incrementally higher fees as the number of
overdrafts increased. Id. at 59,033.
Congress enacted EFTA with the aim of outlining the rights, responsibilities,
and obligations of individuals and institutions using EFT systems. Id. In EFTA’s
implementing regulations (Regulation E, 12 C.F.R. pt. 1005), Congress set out to
“assist consumers in understanding how overdraft services provided by their
institutions operate and to ensure that consumers have the opportunity to limit the
overdraft costs associated with ATM and one-time debit card transactions where
such services do not meet their needs.” Id. at 59,035. Doing away with the
practice of automatic enrollment of consumers in overdraft coverage, Regulation E
required financial institutions to secure consumers’ “affirmative consent” to
overdraft services through an opt-in notice. Id. at 59,036. The opt-in notice was to
be “segregated from all other information[] describing the institution’s overdraft
service,” 12 C.F.R. § 1005.17(b)(1)(i), and be “substantially similar” to a model
form (Model Form A-9) provided by the Federal Reserve, id. § 1005.17(d).
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“But the opt-in requirement and model form have not dispelled all the
controversy and confusion surrounding overdraft fees.” Chambers v. NASA Fed.
Credit Union, 222 F. Supp. 3d 1, 6 (D.D.C. 2016). Model Form A-9 does not
address which account balance calculation method a financial institution should
use to determine whether a transaction results in an overdraft. See 12 C.F.R. pt.
1005, app. A. Without any such provision in the model form, “some financial
institutions have failed to disclose the balance calculation method that they use to
determine whether a transaction results in an overdraft.” Chambers, 222 F. Supp.
3d at 6.
In determining whether a customer has made a withdrawal or incurred a
debit that exceeds the balance in her account—an overdraft—financial institutions
typically use one of two methods of calculating the balance in a customer’s
account: the “ledger” balance method or the “available” balance method. The
ledger balance method considers only settled transactions; the available balance
method considers both settled transactions and authorized but not yet settled
transactions, as well as deposits placed on hold that have not yet cleared.
Consumer Fin. Prot. Bureau, Supervisory Highlights 8 (Winter 2015), available at
https://files.consumerfinance.gov/f/201503_cfpb_supervisory-highlights-winter-
2015.pdf (last visited May 24, 2019). These two competing methods of calculating
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a consumer’s balance and charging overdraft fees based on that balance lie at the
heart of this case.
B. Factual Background
LGE allegedly charged Tims overdraft fees of $30.00 each on two
occasions. Tims’s complaint alleged that at the time LGE assessed the overdraft
fees, her ledger balance was sufficient to cover each transaction. She alleged that
LGE agreed to use the ledger balance calculation method in assessing overdraft
fees, and so LGE’s use of the available balance calculation method breached her
agreements with LGE.
LGE argues that its agreements with Tims unambiguously provided that
LGE would use the available balance calculation method in imposing overdraft
fees. LGE thus asserts that it did not breach its agreements by imposing fees based
on Tims’s available balance.
There were two agreements between Tims and LGE: the “Opt-In
Agreement” and the “Account Agreement.” LGE asked consumers to sign the
Opt-In Agreement to obtain their consent to LGE’s overdraft policies. The Opt-In
Agreement said little about which balance calculation method LGE employs,
stating only that “[a]n overdraft occurs when you do not have enough money in
your account to cover a transaction, but we pay it anyway.” Doc. 29 at 44. 1
1
All citations in the form “Doc. #” refer to numbered entries on the district court docket.
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LGE adopted the Opt-In Agreement to comply with Regulation E, 12 C.F.R.
§ 1005.17. Again, Regulation E requires financial institutions to secure a
consumer’s “affirmative consent” before charging overdraft fees and stipulates that
consent can be secured through use of an opt-in form “substantially similar” to
Model Form A-9. Id. § 1005.17(b)(1)(iii), (d). LGE’s Opt-In Agreement is nearly
an exact copy of Model Form A-9. Compare id. pt. 1005, app. A, with Doc. 29 at
44.
The second agreement between Tims and LGE, the Account Agreement,
contained a “Payment Order” provision explaining that in processing items drawn
on a consumer’s account, LGE’s “policy is to pay [the items] as we receive them.”
Doc. 29 at 31. The Account Agreement went on to say, “[i]f an item is presented
without sufficient funds in your account to pay it” or “if funds are not available to
pay all of the items” presented for payment, LGE “may, at [its] discretion, pay” the
item or items, creating an overdraft for which LGE will charge a fee. Id. at 32.
A separate provision in the Account Agreement, the “Funds Availability
Disclosure,” addressed the conditions under which funds were available for
consumers’ use. Id. at 37. In this provision, LGE explained that its general policy
was “to make funds from your deposits available to you on the same business day
that [LGE] receive[s] your deposit,” but certain deposits would not be “available”
to consumers until the second business day at the earliest. Id.
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C. Procedural History
Tims brought this case as a consumer class action, asserting three claims
against LGE that are the subject of this appeal. 2 First, Tims alleged that LGE
breached its Opt-In and Account Agreements by assessing overdraft fees using the
available balance calculation method. Second, she alleged that LGE violated the
implied covenant of good faith and fair dealing implicit in every contract under
Georgia law. 3 Third, she alleged that LGE’s practices failed to accurately describe
its overdraft service as required by Regulation E, thus violating EFTA.
LGE filed a Rule 12(b)(6) motion to dismiss all claims, which the district
court granted. Using Georgia’s canons of contract construction, the district court
determined that the agreements unambiguously permitted LGE to assess overdraft
fees using the available balance calculation method. The court concluded that
LGE had neither breached the parties’ contract nor the covenant of good faith and
fair dealing and that no EFTA violation had occurred. Tims timely appealed.
2
Tims also asserted claims against LGE for unjust enrichment and money had and
received. On appeal, she does not argue that the district court erred in dismissing these claims,
so we do not address their merits. See Access Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1330
(11th Cir. 2004) (stating that a legal claim or argument that has not been briefed on appeal is
“deemed abandoned and its merits will not be addressed”).
3
The Account Agreement provided that Georgia law governs the contract. Because the
parties agree that Georgia law applies here, we assume that it does. See Bahamas Sales Assoc.,
LLC v. Byers, 701 F.3d 1335, 1342 (11th Cir. 2012) (“If the parties litigate the case under the
assumption that a certain law applies, we will assume that law applies.”).
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II. STANDARD OF REVIEW
We review de novo a district court’s grant of a motion to dismiss for failure
to state a claim under Federal Rule of Civil Procedure 12(b)(6). See Glover v.
Liggett Grp., Inc., 459 F.3d 1304, 1308 (11th Cir. 2006). We accept factual
allegations in the complaint as true and construe them in the light most favorable to
the plaintiff. See Hill v. White, 321 F.3d 1334, 1335 (11th Cir. 2003). To
withstand a motion to dismiss under Rule 12(b)(6), a complaint must include
“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009).
We review de novo the issue of whether a contract is ambiguous. See Frulla
v. CRA Holdings, Inc., 543 F.3d 1247, 1252 (11th Cir. 2008). Questions of
contract interpretation are pure questions of law, also reviewed de novo. Gibbs v.
Air Canada, 810 F.2d 1529, 1532 (11th Cir. 1987).
III. DISCUSSION
Tims challenges the district court’s dismissal of her claims against LGE for
(1) breach of contract; (2) breach of the implied covenant of good faith and fair
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dealing; and (3) violation of Regulation E of EFTA. We consider these claims in
turn.
A. Tims Stated a Claim for Breach of Contract.
To state a claim for breach of contract under Georgia law, Tims had to
plausibly allege that LGE owed her a contractual obligation, then breached it,
causing her damages. Norton v. Budget Rent a Car Sys., Inc., 705 S.E.2d 305, 306
(Ga. Ct. App. 2010). Tims alleged that LGE promised to calculate her account
balance—and assess overdraft fees in light of that balance—by considering only
the ledger balance, then breached that promise by considering the available balance
instead. We must interpret the two agreements between Tims and LGE to decide
whether LGE had a contractual obligation to use the available balance calculation
method or the ledger balance calculation method for unsettled withdrawals 4 in
imposing overdraft fees.
Under Georgia law, courts interpret contracts in three steps: first, the court
determines whether the contract language is clear and unambiguous. If the
language is clear, the court applies its plain meaning; if it is unclear, the court
4
The parties appear to agree that, as to deposits, the Funds Availability Disclosure
permits LGE to place holds on some types of deposits pending clearance of the deposit (ledger
balance method), but that as to other types of deposits, LGE has agreed that the deposit will be
made immediately available to the customer (available balance method). The dispute here
concerns how debit transactions are to be treated under the Opt-In Agreement and the Account
Agreement, with Tims arguing that the relevant documents indicate that the ledger method will
be used and LGE arguing that the terms of the agreements provide for use of the available
balance method.
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proceeds to step two. At step two, the court attempts to resolve the ambiguity
using Georgia’s canons of contract construction. If the ambiguity cannot be
resolved using the canons, then the court proceeds to step three, where the parties’
intent becomes a question of fact for the jury. City of Baldwin v. Woodward &
Curran, Inc., 743 S.E.2d 381, 389 (Ga. 2013).
“The cardinal rule of construction is to ascertain the intention of the parties.”
Maiz v. Virani, 253 F.3d 641, 659 (11th Cir. 2001) (alteration adopted) (internal
quotation marks omitted). A contract is ambiguous when it “leave[s] the intent of
the parties in question—i.e., that intent is uncertain, unclear, or is open to various
interpretations.” Capital Color Printing, Inc. v. Ahern, 661 S.E.2d 578, 583 (Ga.
Ct. App. 2008) (internal quotation marks omitted). A contract is unambiguous
when, after examining the contract as a whole and affording its words their plain
meaning, “the contract is capable of only one reasonable interpretation.” Id.
(internal quotation marks omitted).
1. The Plain Language of the Opt-In and Account Agreements Is
Ambiguous as to Which Account Balance Calculation Method LGE
Uses to Assess Overdraft Fees.
Both parties argue that the Opt-In and Account Agreements are
unambiguous, but they disagree about which account balance calculation method
the agreements unambiguously promised to use. Each party contends that the
agreements’ plain language clearly supports its own interpretation of LGE’s
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balance calculation method. After careful review, we disagree with both parties
that the agreements are unambiguous.
We turn to the language of the Opt-In and Account Agreements and begin
with the Opt-In Agreement. 5 In relevant part, the Opt-In Agreement explained that
“[a]n overdraft occurs when you do not have enough money in your account to
cover a transaction, but we pay it anyway.” Doc. 29 at 44. Each party contends
that this language plainly supports its own interpretation of LGE’s balance
calculation method. Tims argues that the phrase “enough money in your account”
unambiguously referred to the ledger balance because the term “account” is
presented without limitation or modification, such as a reference to “available”
funds. LGE argues that “enough” unambiguously referred to the available balance.
LGE consults the dictionary definition of the word “enough”—“occurring in such
quantity, quality, or scope as to satisfy fully the demands, wants, or needs of a
situation or of a proposed use or end” 6—then points out that “enough” is
synonymous with “available.” Because “enough” and “available” are synonyms,
5
Under Georgia law, “‘where multiple documents are executed at the same time in the
course of a single transaction, they should be construed together.’” Curry v. State, 711 S.E.2d
314, 317 (Ga. Ct. App. 2011) (quoting Martinez v. DaVita, Inc., 598 S.E.2d 334, 337 (Ga. Ct.
App. 2004)). Neither party disputes that Tims entered into the Opt-In and Account Agreements
at the same time when she opened an account with LGE.
6
Enough, Webster’s Third New International Dictionary 755 (2002). In Georgia,
“[w]hen interpreting a contract, the language must be afforded its literal meaning and plain
ordinary words given their usual significance,” and “[d]ictionaries may supply the plain and
ordinary meaning of a word.” Grange Mut. Cas. Co. v. Woodard, 861 F.3d 1224, 1231 (11th
Cir. 2017) (internal quotation marks omitted).
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LGE argues, a consumer would understand merely by reading the word “enough”
that LGE would take only a consumer’s available funds into account in calculating
the account’s balance.
We find neither argument persuasive. The Opt-In Agreement sheds no light
on what “enough money in [an] account” means in the context of determining
when an overdraft has occurred. Id. Both parties’ arguments raise the question of
how LGE determines what “enough money” is—is it enough money to cover only
settled transactions or to cover authorized but not yet settled transactions as well?
The Opt-In Agreement is thus ambiguous concerning the account balance
calculation method LGE’s overdraft service uses for unsettled debit transactions.
The plain language of the Account Agreement is no more helpful. In
describing LGE’s overdraft service, the Account Agreement’s Payment Order
section stated that an overdraft occurs “[i]f an item is presented without sufficient
funds in your account to pay it” or “if funds are not available to pay all of the
items.” Id. at 32. The conditions under which deposits would be available for
consumers’ use were set forth in a separate section, the Funds Availability
Disclosure. The Funds Availability Disclosure explained that LGE’s “policy is to
make funds from [the consumer’s] deposits available to [the consumer] on the
same business day” that LGE receives the deposit. Id. at 37. It stipulated that
consumers can immediately “withdraw funds” for most deposits, including cash,
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wire transfers, and money order deposits; however, consumers must wait to
“withdraw funds” under certain limited circumstances, including deposits of
checks exceeding $5,000 and deposits into repeatedly and recently overdrawn
consumer accounts. Id. The Funds Availability Disclosure made no mention of
debit transactions specifically, referring only to “withdrawals” generally. Id.
Each party contends the language of this agreement, too, clearly requires the
use of its favored account balance calculation method in charging overdraft fees.
Tims argues that the phrase “sufficient funds,” by itself, plainly refers to the ledger
balance. She also argues that even though the Funds Availability Disclosure said
some deposited funds will be considered unavailable to consumers for a period of
time, it did not say whether or how the funds’ unavailability relates to the financial
institution’s account balance calculation method for overdraft purposes. Finally,
Tims points out that even though the Funds Availability Disclosure explained that
certain deposits could not immediately be withdrawn by consumers, it said nothing
about whether pending debits affected consumers’ ability to withdraw funds.
In an argument similar to the one it makes about the Opt-In Agreement,
LGE asserts that “sufficient” is synonymous with “available,” 7 and so a consumer
7
“Sufficient” is defined as “[a]dequate; of such quality, number, force, or value as is
necessary for a given purpose.” Sufficient, Black’s Law Dictionary 1661 (10th ed. 2014).
“Available” is defined as “capable of use for the accomplishment of a purpose: immediately
utilizable.” Available, Webster’s Third New International Dictionary 150 (2002).
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reading the word “available” and then the term “sufficient” in adjacent sentences
would understand the Account Agreement as clearly referring to the available
balance calculation method. LGE also notes that the Funds Availability Disclosure
stipulated that consumers could use funds only when they were “available,” a word
also used in the Payment Order subsection of the Account Agreement describing
when an overdraft occurs. See Doc. 29 at 32 (stating that an overdraft occurs “if
funds are not available to pay all of the items”).
Neither argument persuades us. We cannot say the Account Agreement
unambiguously articulated the account balance calculation method LGE uses for
unsettled debit transactions. Nothing in the Account Agreement explained how
LGE determines whether funds are “sufficient.” Nor did the mere presence of the
word “available” in the Account Agreement, in two separate subsections, clearly
communicate that LGE would calculate a consumer’s account balance for the
purpose of assessing overdraft fees based on unsettled transactions. LGE
“apparently assumes that the [consumer] will read the word ‘available’ in [two
separate] sections spanning the [12]-page Account Agreement” and conclude that
the financial institution uses the available balance calculation method in its
overdraft service just because the agreement uses the term “available.” Smith v.
Bank of Hawaii, No. 16-00513 JMS-RLP, 2017 WL 3597522, at *7 (D. Haw. Apr.
13, 2017). LGE assumes too much. As Tims points out, although the Account
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Agreement explained that certain deposits would not immediately be available to
consumers, it did not explain that a pending debit would render funds unavailable
to consumers.
In the absence of anything in the Account Agreement addressing the account
balance calculation method LGE used in its overdraft service for unsettled
transactions and given the ambiguity of the terms “sufficient funds” and
“available,” the Account Agreement failed to clearly indicate which balance
calculation method LGE was using to determine when an unsettled debit
transaction would result in an assessment of overdraft fees. Other courts,
confronting similar terms across subsections of similar account agreements, have
agreed. See, e.g., Pinkston-Poling v. Advia Credit Union, 227 F. Supp. 3d 848,
854-56, 856 n.4 (W.D. Mich. 2016) (deciding that the terms “enough money” and
“sufficient funds” did not clearly indicate that an available balance method would
be used in imposing overdraft fees); see also Walbridge v. Ne. Credit Union, 299
F. Supp. 3d 338, 343-46 (D.N.H. 2018) (determining that the terms “enough
money,” “insufficient funds,” and “nonsufficient funds” did not clearly indicate
that an available balance method would be used in charging overdraft fees).
Neither the Opt-In Agreement nor the Account Agreement clearly
articulated which balance calculation method LGE was using to determine when
unsettled transactions would trigger an overdraft. The contracts are ambiguous.
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2. The Agreements Remain Ambiguous After Considering Georgia’s
Canons of Contract Construction.
Having determined that the language of the Opt-In and Account Agreements
is susceptible to two different constructions, we turn to the second step of contract
interpretation under Georgia law and attempt to resolve the ambiguity using
Georgia’s canons of construction.8 Applying these canons, the district court
8
Tims also asks us to construe the agreements as contracts of adhesion. In Georgia,
contracts of adhesion are “standardized contract[s] offered on a ‘take it or leave it’ basis and
under such conditions that a consumer cannot obtain the desired product or service except by
acquiescing in the form contract,” and are “construed strictly against the drafter.” Walton Elec.
Membership Corp. v. Snyder, 487 S.E.2d 613, 617 n.6 (Ga. Ct. App. 1997). Because she failed
to clearly present this argument before the district court, we will not assess its merits here. See
In re Pan Am. World Airways, Inc., Maternity Leave Practices & Flight Attendant Weight
Program Litig., 905 F.2d 1457, 1462 (11th Cir. 1990). Tims contends that she presented the
argument to the district court because her complaint stated that LGE drafted the agreements,
which were adhesive in nature. Tims does not argue, but we note, that she subsequently
mentioned the Georgia canon of construction regarding contracts of adhesion once, in a footnote
in her opposition to LGE’s motion to dismiss, without advancing any argument that her
agreement with LGE was a contract of adhesion. Tims’s description of the agreements and her
brief reference without argument in a footnote was insufficient to preserve the argument for
appeal. See U.S. Sec. & Exchange Comm’n v. Big Apple Consulting USA, Inc., 783 F.3d 786,
812 (11th Cir. 2015) (explaining that a litigant’s “fleeting footnote explaining” an argument to
the district court “in one sentence . . . is insufficient to properly assert a claim on appeal”).
In addition, Tims argues that we should apply the doctrine of contra proferentem, a canon
of contract construction “that counsels in favor of construing ambiguities in contract language
against the drafter.” Allen v. Thomas, 161 F.3d 667, 671 (11th Cir. 1998). Tims likewise failed
to preserve this argument for appellate review. She mentioned the doctrine of contra
proferentem only once, in the aforementioned footnote, without advancing any argument that it
applied. See Doc. 31 at 15 n.3 (noting only that “ambiguities in a contract will be construed
against the drafter” (alterations adopted) (internal quotation marks omitted)). Tims’s fleeting
reference in a footnote to the doctrine of contra proferentem was insufficient to preserve her
argument for appeal, and we thus do not address it. See Big Apple Consulting USA, Inc., 783
F.3d at 812.
Our conclusion that Tims failed to preserve these arguments for purposes of our review
of the motion to dismiss does not foreclose her from raising these arguments in the district court
at the summary judgment stage.
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determined that any ambiguity in the contracts could be resolved. The district
court concluded that the use of the word “available” in the Account Agreement
plainly referred to the available balance method for two reasons: first, based on the
close proximity of the words “available” and “sufficient” in the Payment Order
subsection, and second, because “available” must be interpreted consistently
throughout the Account Agreement, which uses the word in different subsections.
We find neither reason compelling.
First, the proximity of the word “available” to the word “sufficient” in the
Payment Order subsection of the Account Agreement does not clearly
communicate that LGE would use an available balance calculation method when
considering unsettled transactions in its overdraft service. As discussed above, the
Account Agreement’s Payment Order provision stated that LGE would assess
overdraft fees if there were not “sufficient funds in your account to pay [an item]”
and just after noting that its “payment policy . . . may reduce the amount of
overdraft . . . fees you have to pay if funds are not available to pay all of the
items.” Doc. 29 at 32 (emphasis added). The district court concluded that the
proximity of “sufficient” to “available” meant the words are somehow linked. See
Doc. 67 at 11 (“By including the term ‘available’ in such close proximity to the
term ‘sufficient,’ the parties indicate that they view both terms to be related.”). No
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Georgia canon of contract construction supports this conclusion, however.9 There
is no rule that words in close proximity should be construed as related to one
another without considering word order and context. And even if we agreed that
the terms were related to one another, the related terms still did not unambiguously
specify that LGE would apply the available balance calculation method to
unsettled transactions in assessing overdrafts. A consumer could reasonably
understand the phrase “available . . . sufficient funds” to refer to her ledger
balance: that available funds are those in her account and sufficient to cover her
draft. Thus, even read together, the terms “available” and “sufficient” fail to
clearly communicate how unsettled transactions are treated in the balance
calculation method LGE employs in its overdraft services. So the contract remains
capable of two reasonable constructions.
Second, we disagree that the Account Agreement was necessarily referring
to an available balance calculation method for unsettled debit transactions based on
the use of the word “available” in a Funds Availability Disclosure provision that
9
The most comparable Georgia canon of contract construction is the last antecedent
canon, which provides that “[r]eferential and qualifying words and phrases, where no contrary
intention appears, refer solely to the last antecedent.” Deal v. Coleman, 751 S.E.2d 337, 342
(Ga. 2013) (internal quotation marks omitted); see also Key v. Ga. Dep’t of Admin. Servs., 798
S.E.2d 37, 41 (Ga. Ct. App. 2017) (canon applicable in contract as well as statutory
construction). But the last antecedent rule does not apply here because “sufficient funds” is not a
limiting clause or phrase and “available” is not a noun. See Barnhart v. Thomas, 540 U.S. 20, 26
(2003) (explaining that the doctrine applies to “limiting clause[s] or phrase[s]” that are “read as
modifying only the noun or phrase that [they] immediately follow[]”).
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addresses a completely different matter: the availability of deposited funds. The
Funds Availability Disclosure provision used variations of the word “available”
more than 20 times—in nearly every sentence. But “available” was never used in
conjunction with the word “balance.” And “available” was never defined to
exclude unsettled debit transactions for overdraft purposes. At best, this section
equated “available” with “able to be withdrawn.” See, e.g., Doc. 29 at 37 (“This
disclosure describes your ability to withdraw funds at LGE . . . . Our policy is to
make funds from your deposits available to you on the same business day we
receive your deposit.”). LGE’s explanation in the Funds Availability Disclosure
provision for when deposited funds became “available” to consumers for
withdrawal simply did not address how LGE would treat unsettled debits when it
calculated a consumer’s balance for overdraft fee purposes.
LGE’s argument that the agreements clearly promised to use the available
balance calculation method does not convince us, either. LGE asserts that the
repeated use of the word “available” unambiguously communicated that overdraft
fees would be assessed using the available balance method. To support its
interpretation of the word “available,” LGE cites to Chambers. 222 F. Supp. 3d at
1. The dispute in Chambers, as in this case, concerned whether a credit union’s
Opt-In and Account Agreements obligated the credit union to use the ledger or the
available balance method in its overdraft service. Id. at 10. The court dismissed
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Chambers’s breach of contract claims after concluding that the Opt-In Agreement
unambiguously stated that the credit union would use the available balance
calculation method. Id.
Several significant details distinguish Chambers from this case, however.
Importantly, in Chambers, the Opt-In Agreement used the phrase “available
balance.” Id. In addition, the Account Agreement in Chambers contained a
subsection addressing “Available Balances to Make Transactions,” which linked
the concept of available balance to the mechanics of when and how the bank would
assess overdrafts. Id. at 10-11. Finally, the Opt-In Agreement in Chambers
provided examples illustrating when an account would not have “enough money”
and thus be subject to an overdraft. Id. at 10.
None of those factors is present in this case. The agreements here did not
use the phrase “available balance”; the Account Agreement nowhere explained the
mechanics of how and when LGE would assess overdrafts, nor linked the concept
of an “available balance” to those mechanics; and the Opt-In Agreement provided
no examples illustrating when a consumer would not have “enough money” to
cover a transaction and thereby trigger an overdraft. Because of these three
distinctions, we cannot say the Opt-In and Account Agreements in this case clearly
demonstrated the parties’ intent that LGE would use the available balance
calculation method when assessing overdraft fees. See Walbridge, 299 F. Supp. 3d
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at 345-46 (concluding based on the same three factors that the financial institution
did not clearly communicate an intent to use the available balance in charging
overdraft fees).
Neither the Opt-In Agreement nor the Account Agreement read separately,
nor the two agreements read together, clearly articulated LGE’s balance calculation
method for charging overdraft fees. Applying the Georgia canons of construction
does nothing to clarify the contracts’ ambiguity. Because the language remains
ambiguous after considering both the plain language of the contracts and the
Georgia canons of construction before us,10 the parties’ intent will become a
question for the jury should neither party be granted summary judgment. The
district court therefore erred in dismissing Tims’s claim for breach of contract.
B. Tims Stated a Claim Against LGE for Breach of the Covenant of Good
Faith and Fair Dealing.
Tims next argues that the district court erred in dismissing her claim that
LGE breached the implied covenant of good faith and fair dealing under Georgia
law. We agree.
Under Georgia law, “[e]very contract imposes upon each party a duty of
good faith and fair dealing in its performance and enforcement.” Brack v.
10
In note 8, supra, we noted that the doctrine of contra proferentem had not been
preserved for purposes of our review but Tims could advance it during the summary judgment
stage of litigation.
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Brownlee, 273 S.E.2d 390, 392 (Ga. 1980) (internal quotation marks omitted).
That implied promise “becomes a part of the provisions of the contract, but the
covenant cannot be breached apart from the contract provisions [that] it modifies
and therefore cannot provide an independent basis for liability.” Myung Sung
Presbyterian Church v. N. Am. Assoc. of Slavic Churches & Ministries, 662 S.E.2d
745, 748 (Ga. Ct. App. 2008). A plaintiff “must set forth facts showing a breach of
an actual term of an agreement” to state a claim for breach of the implied duty of
good faith and fair dealing. Am. Casual Dining, L.P. v. Moe’s Sw. Grill, L.L.C.,
426 F. Supp. 2d 1356, 1370 (N.D. Ga. 2006).
Given our conclusion on the breach of contract claim, Tims’s allegations
sufficiently “set forth facts showing a breach of an actual term of [the] agreement.”
Id. Tims alleged that LGE had a contractual obligation to use the ledger balance
calculation method and breached that promise; therefore, Tims’s claim for breach
of the implied covenant of good faith and fair dealing has been properly pled. The
district court erred in dismissing this claim.
C. Tims Stated a Claim Against LGE for Violating EFTA.
Tims alleges, and we think it plausible, that LGE violated EFTA Regulation
E. Under EFTA, Congress charged the Federal Reserve Board—and, later, the
Consumer Financial Protection Bureau (CFPB)—with promulgating regulations to
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carry out EFTA’s purposes. 15 U.S.C. § 1693b(a)(1); see also id. § 1693a(4).11
One of EFTA’s central features is a requirement that financial institutions disclose
“[t]he terms and conditions of electronic fund transfers involving a consumers
account . . . in accordance with the regulations of the” CFPB. Id. § 1693c(a).
Regulation E is part of the CFPB’s implementation of this requirement.
Regulation E requires financial institutions to give consumers a “notice . . .
describing the institution’s overdraft service.” 12 C.F.R. § 1005.17(b)(1)(i). The
notice must be “substantially similar to Model Form A-9” and describe the
“financial institution’s overdraft service” in a “clear and readily understandable”
way. Id. § 1005.17(d)(1), 1005.4(a)(1). See also 15 U.S.C. § 1693c (requiring
financial institutions to make disclosures “in accordance with the regulations of
the” CFPB “in readily understandable language”). Before financial institutions
may charge overdraft fees, they must give consumers “a reasonable opportunity . . .
to affirmatively consent, or opt in, to the service.” 12 C.F.R. § 1005.17(b)(1)(ii).
Congress created a private right of action for consumers against financial
institutions that fail to provide proper notice describing their overdraft service. See
15 U.S.C. § 1693m. Congress further directed the CFPB to draft boilerplate
language to help financial institutions “compl[y] with the disclosure requirements”
11
Congress reassigned responsibility for enforcing EFTA from the Federal Reserve
Board to the CFPB in 2010. See Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010, Pub. L. No. 111-203, Title X, § 1084, 124 Stat. 1376, 2081–83.
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for overdraft services. 15 U.S.C. § 1693(b). Model Form A-9, the template for
LGE’s Opt-In Agreement, was issued pursuant to this directive.
As we have explained, the Opt-In Agreement LGE gave Tims is ambiguous
because it could describe either the available or the ledger balance calculation
method for unsettled debits. As a result, it is plausible that the notice does not
describe the overdraft service in a “clear and readily understandable” way. 12
C.F.R. § 1005.4(a)(1). It is also plausible that Tims had no reasonable opportunity
to affirmatively consent to LGE’s overdraft services. Id. § 1005.17(b)(1)(ii).
Affirmative consent requires “plain and clear consent . . . before certain acts or
events, such as changes in policies that could impair an individual’s rights or
interests.” Affirmative-Consent Requirement, Black’s Law Dictionary (11th ed.
2019). A notice that does not adequately convey the circumstances in which a
financial institution will charge overdraft fees may not provide a consumer all the
information she needs to give plain and clear consent. Here, Tims plausibly did
not have a reasonable opportunity to affirmatively consent because the notice gave
her no way to know whether LGE would use the available balance or the ledger
balance method to charge her overdraft fees.
But that is not the end of the matter. Congress provided a safe harbor from
EFTA liability for “any failure to make disclosure in proper form if a financial
institution utilized an appropriate model clause issued by the” CFPB. 15 U.S.C.
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§ 1693m(d)(2).12 The CFPB interprets the safe harbor to preclude liability “for
failure to make disclosures in proper form” provided the institution “uses [the
model form’s] clauses accurately to reflect its services.” 12 C.F.R. pt. 1005, app.
A (Supp. I).
In its notice defining the term “overdraft,” LGE copied verbatim the
definition of that term provided in Model Form A-9: “[a]n overdraft occurs when
you do not have enough money in your account to cover a transaction, but we pay
it anyway.” LGE seeks refuge in the safe harbor because, it argues, it used an
appropriate model form to describe its overdraft service. We disagree that LGE is
protected from liability by the safe harbor.
LGE emphasizes that its form is accurate, and that may be so. After all, we
have concluded it could correctly refer to either the ledger balance or the available
balance method. But that does not conclude the inquiry.
The relevant question is whether the claim Tims asserts is one for LGE’s
“failure to make disclosure in proper form.” The answer must be no. The statute’s
text, which is where all statutory interpretation must begin, makes that much plain.
See BedRoc Ltd., LLC v. United States, 541 U.S. 176, 183 (2004). “Form” has
12
The safe-harbor provision also shields financial institutions from liability for “any act
done or omitted in good faith in conformity with any rule, regulation, or interpretation thereof.”
15 U.S.C. § 1693m(d)(1). LGE does not argue this provision precludes liability here, and we
express no view on the matter.
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many meanings, but it is best read here to refer to “[p]rocedure as determined or
governed by custom or regulation,” as distinct from content or substance.
Webster’s New College Dictionary 448 (3d ed. 2008); see also Form, Black’s Law
Dictionary (11th ed. 2019) (defining “form” as “[t]he outer shape, structure or
configuration of something, as distinguished from its substance or matter” or an
“[e]stablished . . . procedure”); Form, Oxford English Dictionary (2d ed. 1989)
(defining “in due or proper form” to mean “according to the rules or prescribed
methods”). Thus, making disclosure in proper form means making the disclosure
according to proper procedures. The safe-harbor provision insulates financial
institutions from EFTA claims based on the means by which the institution has
communicated its overdraft policy. But it does not shield them for claims based on
their failure to make adequate disclosures. A financial institution thus strays
beyond the safe harbor when communications within its overdraft disclosure
inadequately inform the consumer of the overdraft policy that the institution
actually follows. See Berenson v. Nat’l Fin. Servs., LLC, 403 F. Supp. 2d 133, 151
(D. Mass. 2005) (holding the safe harbor “insulates an institution only from a
challenge as to the form—not the adequacy—of the disclosure”).
Regulation E sets out procedures for how financial institutions must present
their disclosures. To comply with the regulation, financial institutions must make
the disclosure “in writing, or if the consumer agrees, electronically” and must
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further “segregate[]” the notice “from all other information.” 12 C.F.R.
§ 1005.17(b)(1)(i). The format of the notice required by § 1005.17(b)(1)(i) must
be “substantially similar to Model Form A-9.” Id. § 1005.17(d). Financial
institutions must also “[p]rovide[] the consumer with confirmation of the
consumer’s consent in writing, or if the consumer agrees, electronically.” Id.
§ 1005.17(b)(1)(iv). These provisions set out the “proper form” for presenting a
disclosure.
Tims does not allege LGE failed to do any of that. Instead, she challenges
the substance of the Opt-In Agreement, which she says failed to give her enough
information to give affirmative consent to LGE’s overdraft service. As its text
makes clear, the safe-harbor provision LGE invokes does not preclude liability
when, as in this case, the content of the Regulation E disclosure is at issue.
Because Tims challenges only LGE’s failure to make an adequate disclosure, and
not its failure to make the disclosure “in proper form,” LGE cannot seek refuge
under the safe harbor provision. This is so whether or not the form accurately
describes the overdraft service. In this, our ruling is consistent with the great
weight of district court authority to have considered the matter. See Salls v. Dig.
Fed. Credit Union, 349 F. Supp. 3d 81, 91 (D. Mass 2018) (collecting cases).
Tims’s complaint challenged the substance of LGE’s Opt-In Agreement.
Because the safe harbor does not protect financial institutions from challenges to
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the substance of Opt-In Agreements, Tims’s EFTA claim survives a motion to
dismiss, and the district court erred in granting the motion.
IV. CONCLUSION
For the foregoing reasons, we reverse the district court’s order granting
LGE’s motion to dismiss and remand for further proceedings consistent with this
opinion.
REVERSED AND REMANDED.
29