Veronica Gutierrez v. Wells Fargo Bank, N.A. , 704 F.3d 712 ( 2012 )


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  •                   FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    VERONICA GUTIERREZ; ERIN WALKER;            No. 10-16959
    WILLIAM SMITH , individually and on
    behalf of all others similarly situated,       D.C. No.
    Plaintiffs-Appellees,   3:07-cv-05923-
    WHA
    v.
    WELLS FARGO BANK, NA,
    Defendant-Appellant.
    VERONICA GUTIERREZ; ERIN WALKER;            No. 10-17468
    WILLIAM SMITH , individually and on
    behalf of all others similarly situated,       D.C. No.
    Plaintiffs-Appellees,   3:07-cv-05923-
    WHA
    v.
    WELLS FARGO BANK, NA,
    Defendant-Appellant.
    2               GUTIERREZ V . WELLS FARGO
    VERONICA GUTIERREZ; ERIN WALKER,              No. 10-17689
    Plaintiffs-Appellants,
    D.C. No.
    and                        3:07-cv-05923-
    WHA
    WILLIAM SMITH , individually and on
    behalf of all others similarly situated,
    Plaintiff,     OPINION
    v.
    WELLS FARGO BANK, NA,
    Defendant-Appellee.
    Appeal from the United States District Court
    for the Northern District of California
    William Alsup, District Judge, Presiding
    Argued and Submitted
    May 15, 2012—San Francisco, California
    Filed December 26, 2012
    Before: Sidney R. Thomas, M. Margaret McKeown,
    and William A. Fletcher, Circuit Judges.
    Opinion by Judge McKeown
    GUTIERREZ V . WELLS FARGO                           3
    SUMMARY*
    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
    *
    This summary constitutes no part of the opinion of the court. It has
    been prepared by court staff for the convenience of the reader.
    4               GUTIERREZ V . WELLS FARGO
    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.
    COUNSEL
    Jordan Elias, Richard M. Heimann, Roger N. Heller, Michael
    W. Sobol (argued), and Alison M. Stocking, Lieff Cabraser
    Heimann & Bernstein, LLP, San Francisco, California; Jae K.
    Kim and Richard D. McCune, McCune & Wright, LLP,
    Redlands, California, for Plaintiffs-Appellees.
    Robert A. Long, Jr. (argued), Mark William Mosier, Keith A.
    Noreika, and Stuart C. Stock, Covington & Burling LLP,
    Washington, D.C.; David M. Jolley and Sonya D. Winner,
    Covington & Burling, LLP, San Francisco, California; Emily
    Johnson Henn, Covington & Burling LLP, Redwood Shores,
    California for Defendant-Appellant.
    Julia B. Strickland, Lisa M. Simonetti, and David W. Moon,
    Stroock & Stroock & Lavan LLP, Los Angeles, California,
    for Amici Curiae American Bankers Association and
    California Bankers Association.
    GUTIERREZ V . WELLS FARGO                    5
    Nina F. Simon, Washington, D.C., for Amici Curiae Center
    for Responsible Lending, Consumer Federation of America,
    California Reinvestment Coalition, and Law Foundation of
    Silicon Valley.
    OPINION
    McKEOWN, Circuit Judge:
    Bank fees, like taxes, are ubiquitous. And, like taxes,
    bank fees are unlikely to go away any time soon. The
    question we consider here is the extent to which overdraft
    fees imposed by a national bank are subject to state
    regulation.
    At issue is a bookkeeping device, known as “high-to-low”
    posting, which has the potential to multiply overdraft fees,
    turning a single overdraft into many such overdrafts. The
    revenue from overdraft fees is massive. Between 2005 and
    2007, Wells Fargo Bank (“Wells Fargo”) assessed over $1.4
    billion in overdraft fees. Disturbed by the number of
    overdrafts caused by small, everyday debit-card purchases,
    Veronica Gutierrez and Erin Walker (collectively
    “Gutierrez”) sued Wells Fargo under California state law for
    engaging in unfair business practices by imposing overdraft
    fees based on the high-to-low posting order and for engaging
    in fraudulent business practices by misleading clients as to
    the actual posting order used by the bank.
    The district court found that “the bank’s dominant, indeed
    sole, motive” for choosing high-to-low posting “was to
    maximize the number of overdrafts and squeeze as much as
    6                  GUTIERREZ V . WELLS FARGO
    possible out of what it called its ‘ODRI customers’
    (overdraft/returned item).” The district court also found that
    Wells Fargo had “affirmatively reinforced the expectation
    that transactions were covered in the sequence [the purchases
    were] made while obfuscating its contrary practice of posting
    transactions in high-to-low order to maximize the number of
    overdrafts assessed on customers.” The court issued a
    permanent injunction against “high-to-low” posting and
    ordered $203 million in restitution. On appeal, Wells Fargo
    seeks refuge from state law on the ground of federal
    preemption. It also challenges the district court’s factual and
    legal findings. We conclude that federal law preempts state
    regulation of the posting order as well as any obligation to
    make specific, affirmative disclosures to bank customers.
    Federal law does not, however, preempt California consumer
    law with respect to fraudulent or misleading representations
    concerning posting. As a consequence, we affirm in part,
    reverse in part, and remand for further proceedings.
    BACKGROUND 1
    “Posting” is the procedure banks use to process debit
    items presented for payment against accounts. During the
    wee hours after midnight, the posting process takes all debit
    items presented for payment during the preceding business
    day and subtracts them from the account balance. These
    items are typically debit-card transactions and checks. If the
    account balance is sufficient to cover all items presented for
    payment, there will be no overdrafts, regardless of the
    bookkeeping method used. If, however, the account balance
    is insufficient to cover every debit item, then the account will
    1
    This background is drawn from the district court’s Findings of Fact and
    Conclusions of Law After Bench Trial.
    GUTIERREZ V . WELLS FARGO                   7
    be overdrawn. When an account is overdrawn, the posting
    sequence can have a dramatic effect on the number of
    overdrafts incurred by the account (even though the total sum
    overdrawn will be exactly the same). The number of
    overdrafts drives the amount of overdraft fees.
    Before April 2001, Wells Fargo used a low-to-high
    posting order. Under this system, the bank posted settlement
    items from lowest-to-highest dollar amount. Low-to-high
    posting paid as many items as the account balance could
    cover and thus minimized the number of overdrafts.
    Beginning in April of 2001, Wells Fargo did an about-face in
    California and began posting debit-card purchases in order of
    highest-to-lowest dollar amount. This system had the
    immediate effect of maximizing the number of overdrafts.
    The customer’s account was now depleted more rapidly than
    would be the case if the bank posted transactions in low-to-
    high order or, in some cases, chronological order.
    As an illustration, consider a customer with $100 in his
    account who uses his debit-card to buy ten small items
    totaling $99, followed by one large item for $100, all of
    which are presented to the bank for payment on the same day.
    Under chronological posting or low-to-high posting, only one
    overdraft would occur because the ten small items totaling
    $99 would post first, leaving $1 in the account. The $100
    charge would then post, causing the sole overdraft. Using
    high-to-low sequencing, however, these purchases would lead
    to ten overdraft events because the largest item, $100, would
    be posted first—depleting the entire account
    balance—followed by the ten transactions totaling $99.
    Overdraft fees are based on the number of withdrawals that
    exceed the balance in the account, not on the amount of the
    overdraft. When high-to-low sequencing is used, the fees
    8                  GUTIERREZ V . WELLS FARGO
    charged by the bank for the overdrafts can dramatically
    exceed the amount by which the account was actually
    overdrawn. For example, Gutierrez incurred $143 in
    overdraft fees as a consequence of a $49 overdraft, and Erin
    Walker incurred $506 in overdraft fees for exceeding her
    account balance by $120.
    Gutierrez claims that Wells Fargo made the switch to
    high-to-low processing in order to increase the amount of
    overdraft fees by maximizing the number of overdrafts. The
    bank amplified the effect of its fee maximization plan, which
    it named “Balance Sheet Engineering,” through several
    related practices that are not at issue here.
    California’s Unfair Competition Law allows individual
    plaintiffs to bring claims for unfair, unlawful, or fraudulent
    business practices. 
    Cal. Bus. & Prof. Code § 17200.2
    Although remedies under the Unfair Competition Law are
    limited to injunctive relief and restitution, the law’s scope is
    “sweeping.” Cel-Tech Commc’ns, Inc. v. Los Angeles
    Cellular Tel. Co., 
    20 Cal. 4th 163
    , 180 (1999). Gutierrez
    sued on behalf of a class, alleging independent violations of
    both the law’s “unfair” and “fraudulent” prongs. Gutierrez
    2
    Section 17200 of the California Business and Professions Code
    provides that “unfair competition shall mean and include any unlawful,
    unfair or fraudulent business act or practice.” The California Supreme
    Court has held that the law’s coverage is sweeping, encompassing
    “anything that can properly be called a business practice and that at the
    same time is forbidden by law.” Rubin v. Green, 
    4 Cal. 4th 1187
    , 1200
    (1993). It governs “anti-competitive business practices as well as injuries
    to consumers, and has as a major purpose the preservation of fair business
    competition.” Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co.,
    
    20 Cal. 4th 163
    , 180 (1999) (citation and internal quotation marks
    omitted).
    GUTIERREZ V . WELLS FARGO                             9
    alleged that Wells Fargo’s “resequencing” practices are unfair
    because they contradict the legislative policy expressed in
    California Commercial Code § 4303(b) 1992 Amendment
    cmt. 7, which provides that “items may be accepted, paid,
    certified, or charged to the indicated account of its customer
    in any order” so long as the bank “act[s] in good faith” and
    not “for the sole purpose of increasing the amount of returned
    check fees charged to the customer.”3 Id.
    The district court certified a class of “all Wells Fargo
    customers from November 15, 2004 to June 30, 2008, who
    incurred overdraft fees on debit-card transactions as a result
    of the bank’s practice of sequencing transactions from highest
    to lowest.” After a two-week bench trial, the district court
    issued a comprehensive 90–page decision and found that
    Wells Fargo’s “decision to post debit-card transactions in
    high-to-low order was made for the sole purpose of
    maximizing the number of overdrafts assessed on its
    customers.” The court also concluded that Wells Fargo led
    customers “to expect that the actual posting order of their
    debit-card purchases would mirror the order in which they
    were transacted” while hiding its actual practice of posting
    transactions in high-to-low order so that the bank could
    3
    The district court held that proof of an unfair business practice under
    § 17200 requires an unfair policy or practice tethered to a legislatively
    declared policy or the demonstration of an actual or threatened impact on
    competition. As described above, Gutierrez “tethered” the claim to the
    legislative comment expressed in California Commercial Code § 4303(b).
    The extent to which claims brought under the Unfair Competition Law
    must be tethered to a legislatively declared policy is a question of debate
    in California courts that need not be addressed here. See Davis v. HSBC
    Bank Nevada, N.A., 
    691 F.3d 1152
    , 1169–70 (9th Cir. 2012); Durell v.
    Sharp Healthcare, 
    183 Cal. App. 4th 1350
    , 1364–65 (2010).
    10              GUTIERREZ V . WELLS FARGO
    “maximiz[e] the number of overdrafts assessed on
    customers.”
    The district court rejected Wells Fargo’s numerous
    defenses—federal preemption pursuant to various statutes and
    regulations, Gutierrez’s lack of standing, and the impropriety
    of class certification—and held Wells Fargo’s actions to be
    both unfair and fraudulent under the Unfair Competition Law.
    As a remedy, the court entered a permanent injunction
    requiring Wells Fargo to “cease its practice of posting in
    high-to-low order for all debit-card transactions” and “either
    reinstate a low-to-high posting method or use a chronological
    posting method (or some combination of the two methods)
    for debit-card transactions.” It also imposed various related
    disclosure requirements. In addition to injunctive relief, the
    district court ordered Wells Fargo to pay $203 million in
    restitution. Both parties appealed. Wells Fargo’s appeal
    focuses on its preemption argument and on the merits of
    Gutierrez’s Unfair Competition Law claims. Gutierrez’s
    cross-appeal is directed to the district court’s denial of
    prejudgment interest and punitive damages.
    ANALYSIS
    I. ARBITRATION
    As a threshold matter, we consider whether this dispute
    should be arbitrated. Although the contract between the
    parties contained a permissive arbitration clause, neither party
    requested arbitration, and consequently the district court did
    not consider the issue. On appeal, Wells Fargo seeks to
    compel arbitration and claims that its enforceable right to
    arbitration did not mature until the Supreme Court’s 2011
    decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct.
    GUTIERREZ V . WELLS FARGO                   11
    1740 (2011). Wells Fargo asks us to vacate the judgment and
    remand so that the district court can dismiss the case or stay
    it pending arbitration. Gutierrez argues that Wells Fargo has
    waived any claim to arbitration.
    After considering the terms of the arbitration agreement,
    the conduct of the parties, and the course of the litigation,
    along with the traditional benchmarks regarding waiver of
    arbitration and the purpose of the Federal Arbitration Act
    (“FAA”), we conclude that the district court judgment should
    not be vacated on the basis of Concepcion. To do so at this
    stage would undermine the parties’ agreement regarding
    arbitration, severely prejudice Gutierrez and the certified
    class members, and result in a waste of judicial resources.
    This is an unusual, perhaps sui generis, case in which the
    specific circumstances counsel this result.
    In Concepcion, the Supreme Court held that the FAA
    preempted California’s Discover Bank rule, 
    id. at 1753
    ,
    which rendered class-wide arbitration waivers unenforceable
    if it was “alleged that the party with the superior bargaining
    power has carried out a scheme to deliberately cheat large
    numbers of consumers out of individually small sums of
    money,” Discover Bank v. Superior Court, 
    36 Cal. 4th 148
    ,
    162–63 (2005).
    The central purpose of the FAA “is to ensure that ‘private
    agreements to arbitrate are enforced according to their
    terms.’” Stolt–Nielsen S.A. v. AnimalFeeds Int’l Corp.,
    
    130 S. Ct. 1758
    , 1773 (2010) (quoting Volt Info. Sci., Inc. v.
    Bd. of Trs. of Leland Stanford Junior Univ., 
    489 U.S. 468
    ,
    479 (1989)). Section 2 of the FAA provides that an
    agreement to arbitrate “shall be valid, irrevocable, and
    enforceable, save upon such grounds as exist at law or in
    12              GUTIERREZ V . WELLS FARGO
    equity for the revocation of any contract.” 
    9 U.S.C. § 2
    .
    Although the FAA’s savings clause “permits agreements to
    arbitrate to be invalidated by generally applicable contract
    defenses, such as fraud, duress, or unconscionability,” it does
    not allow “defenses that apply only to arbitration or that
    derive their meaning from the fact that an agreement to
    arbitrate is at issue.” Concepcion, 
    131 S. Ct. at 1746
     (citation
    and internal quotation marks omitted). In Concepcion, the
    Court struck down the Discover Bank rule because it was
    applied in a manner that disfavored arbitration and interfered
    with the enforcement of private arbitration agreements, thus
    standing “as an obstacle to the accomplishment and execution
    of the full purposes and objectives of Congress.” 
    Id. at 1753
    (quotation marks and citation omitted).
    The effect of Concepcion, as intervening Supreme Court
    law, on a judgment on appeal after trial, is an issue of first
    impression. The mine run of cases claiming waiver of
    arbitration stem from situations where, before trial, a party
    belatedly asserts a clear right to arbitration. See, e.g., Cox v.
    Ocean View Hotel Corp., 
    533 F.3d 1114
    , 1123–26 (9th Cir.
    2008) (declining to find that defendant’s initial refusal to
    arbitrate employee’s complaints constituted waiver of right to
    arbitrate subsequent legal action). But we have not found,
    nor have the parties cited, any cases involving waiver of a
    permissive arbitration right where the applicability of the
    right was not clear-cut, arbitration was never demanded, and
    the claim was first asserted on appeal following trial.
    Our analysis begins with the Customer Account
    Agreement (“CAA”) between Wells Fargo and the class
    members, which provides:
    GUTIERREZ V . WELLS FARGO                          13
    Either of us may submit a dispute to binding
    arbitration at any reasonable time
    notwithstanding that a lawsuit or other
    proceeding has been commenced. If either of
    us fails to submit to binding arbitration
    following a lawful demand, the one who fails
    to submit bears all costs and expenses
    incurred by the other compelling arbitration.
    The CAA further states that “[e]ach of us agrees that any
    arbitration we have shall not be consolidated with any other
    arbitration and shall not be arbitrated on behalf of others
    without the consent of each of us.”4
    This arbitration clause stands in contrast to the mandatory
    arbitration provision found in many consumer contracts, such
    as the provision in Concepcion. To begin, it is a permissive
    clause in which either party may demand arbitration. The
    penalty for failing to consent to arbitration upon demand is
    bearing the costs involved in compelling arbitration. Four
    points stand out: 1) an arbitration demand is required; 2) the
    agreement contemplates that the parties may decide to remain
    within the judicial system to settle their disputes; 3) the
    agreement permits class arbitration on consent; and 4) any
    demand for arbitration must be made within a “reasonable
    time.”
    The procedural posture of this case is reflective of the
    parties’ intentions and expectations. Notably, Wells Fargo
    never made a demand for arbitration, raised it as a defense, or
    4
    W e assume without deciding that the arbitration agreement is valid and
    that the dispute is within the scope of the arbitration agreement. Neither
    issue is on appeal.
    14              GUTIERREZ V . WELLS FARGO
    even mentioned it until after the Concepcion decision, at
    which point the trial was over and the district court had issued
    its judgment. Although the FAA allows for interlocutory
    appeals of orders denying motions to compel arbitration, see
    
    9 U.S.C. § 16
    (a)(1)(B), unlike the defendant in Concepcion,
    Wells Fargo undertook no such tack. See 
    131 S. Ct. at
    1744–45; see also Franceschi v. Hosp. Gen. San Carlos, Inc.,
    
    420 F.3d 1
    , 4 (1st Cir. 2005) (arbitration right is forfeited
    where no interlocutory appeal was filed because “it would
    prejudice plaintiffs to have a full trial and then determine by
    a post-trial appeal that the whole matter should have been
    arbitrated and so [should] start again” (internal quotation
    marks omitted)).
    The timing of the arbitration demand is informative. The
    certiorari petition in Concepcion was filed on January 25,
    2010, three months before the bench trial began in April
    2010. Petition for Writ of Certiorari, Concepcion, 
    131 S. Ct. 1740
     (No. 09-893). On May 24, 2010, the Supreme Court
    accepted review. AT&T Mobility LLC v. Concepcion, 
    130 S. Ct. 3322
     (2010). At that stage, final argument in the district
    court was more than a month away, no decision had been
    issued, and the parties were exchanging proposed findings.
    The arbitration issue was, however, squarely before the
    Supreme Court. The district court’s decision was not issued
    until August 2010. Even in that interim period, Wells Fargo
    was silent as to arbitration and did not seek a stay pending the
    Supreme Court’s decision in Concepcion. Instead, Wells
    Fargo proceeded full steam ahead with this litigation in
    federal court. Only in April 2011, after an unfavorable result
    in the district court and the Supreme Court opinion did Wells
    Fargo seek to vacate the district court’s judgment via a
    motion to compel arbitration filed with this court. The
    Appellate Commissioner denied the motion without prejudice
    GUTIERREZ V . WELLS FARGO                     15
    to renewing the arguments in the brief on cross-appeal. See
    Order, July 15, 2011.
    Gutierrez argues that Wells Fargo “was driven by its
    preference to litigate this case in federal court in order to
    obtain favorable rulings from the district court on federal
    preemption and other issues.” The record is devoid of Wells
    Fargo’s motives for its chosen course of action, although
    Wells Fargo offered only argument, not evidence or
    declarations, as to the rationale for its litigation strategy. We
    make no judgment about Wells Fargo’s motives.
    Against this background, we consider Gutierrez’s
    argument that Wells Fargo waived any rights to arbitration
    given the belated nature of its request. For such a waiver to
    occur, there must be: “(1) knowledge of an existing right to
    compel arbitration; (2) acts inconsistent with that existing
    right; and (3) prejudice to the party opposing arbitration
    resulting from such inconsistent acts.” Fisher v. A.G. Becker
    Paribas Inc., 
    791 F.2d 691
    , 694 (9th Cir. 1986).
    Wells Fargo claims that any “existing right” arose only
    after Concepcion and thus it did not act inconsistently with
    that “existing right” because it would have been futile to seek
    arbitration earlier. See Fisher, 
    791 F.2d at 695
    . The futility
    of an arbitration demand, however, is not clear cut here. In
    contemporaneous consumer litigation, litigants did succeed
    in compelling arbitration despite the existence of the
    Discover Bank rule. See, e.g., Dalie v. Pulte Home Corp.,
    
    636 F. Supp. 2d 1025
    , 1027 (E.D. Cal. 2009) (recognizing
    that “under California law a class action waiver is only
    unenforceable in a narrow set of circumstances”); McCabe v.
    Dell, Inc., No. CV 06-7811, 
    2007 WL 1434972
    , at *3–4
    (C.D. Cal. Apr. 12, 2007) (compelling arbitration after
    16              GUTIERREZ V . WELLS FARGO
    finding the arbitration clause enforceable under California
    law); Galbraith v. Resurgent Capital Servs., No. CV 05-2133,
    
    2006 WL 2990163
    , at *2 (E.D. Cal. Oct. 19, 2006) (same).
    Especially because the CAA did not prohibit class arbitration,
    a motion to compel arbitration was not inevitably futile under
    the prescribed case-by-case analysis. See Douglas v. U.S.
    Dist. Court for Cent. Dist. of Cal., 
    495 F.3d 1062
    , 1068 (9th
    Cir. 2007) (whether arbitration can be compelled “depends on
    the facts and circumstances developed during the course of
    litigation”).
    Given the differing circumstances in our case and Fisher
    with respect to the first two prongs of Fisher, we focus on
    prejudice. We reject Wells Fargo’s attempt to collapse all
    three Fisher prongs into one. Adopting this course would
    ignore the procedural posture of the case and also the court’s
    approach in Fisher, which laid out the waiver analysis.
    Although Fisher held that the defendant there had not acted
    inconsistently with an existing right, it went on to discuss the
    prejudice that the Fishers would suffer if the court were to
    order arbitration. See 
    791 F.2d at
    698–99. We do the same.
    Ordering arbitration post-appeal would severely prejudice
    Gutierrez. The CAA requires the demand to be made at a
    “reasonable time.” The series of dispositive motions,
    voluminous discovery, preparation for trial, two-week bench
    trial, post-trial briefing, and appellate proceedings amply
    demonstrate the resources both the parties and the courts have
    already expended, all of which would be undone if arbitration
    is now required. The prejudice to Gutierrez and the class
    stemming from Wells Fargo’s invocation of arbitration five
    years into this litigation—time, expense, delay and
    uncertainty—is apparent. See Nat’l Found. for Cancer
    Research v. A.G. Edwards & Sons, Inc., 
    821 F.2d 772
    , 776
    GUTIERREZ V . WELLS FARGO                   17
    (D.C. Cir. 1987) (“To give [defendant] a second bite at the
    very questions presented to the court for disposition squarely
    confronts the policy that arbitration may not be used as a
    strategy to manipulate the legal process.”).
    Independent of the Fisher analysis, arbitration at this
    juncture would frustrate the purposes of the FAA. “The
    overarching purpose of the FAA, evident in the text of §§ 2,
    3, and 4, is to ensure the enforcement of arbitration
    agreements according to their terms so as to facilitate
    streamlined proceedings.” Concepcion, 
    131 S. Ct. at 1748
    .
    Far from facilitating streamlined proceedings, sending this
    case to arbitration post-appeal would be wholly duplicative
    and lead to further delay and expense for both parties.
    Nor would arbitration at this late stage serve any
    contractual purpose. The CAA calls for all claims to be
    resolved through either litigation or arbitration, if timely
    demanded by one of the parties. Because the CAA does not
    require arbitration, Gutierrez’s prejudice is in no way self-
    inflicted. Ordering arbitration would undercut her contractual
    expectations, be inconsistent with the parties’ agreement, and
    contradict their conduct throughout the litigation. See
    Concepcion, 
    131 S. Ct. at 1752
     (“Arbitration is a matter of
    contract, and the FAA requires courts to honor parties’
    expectations.”). Because we reject Wells Fargo’s belated
    effort to invoke arbitration, we proceed to the parties’
    remaining arguments.
    II. FEDERAL PREEMPTION
    We next consider whether the National Bank Act of 1864,
    
    13 Stat. 99
     (codified at 
    12 U.S.C. § 1
     et seq.), preempts
    application of California’s Unfair Competition Law.
    18              GUTIERREZ V . WELLS FARGO
    Consistent with the principles of federalism, the United States
    has a “dual banking system.” See, e.g., Atherton v. F.D.I.C.,
    
    519 U.S. 213
    , 221–23 (1997). During the first century of the
    nation’s existence, “state-chartered banks were the norm and
    federally chartered banks an exception.” 
    Id. at 221
    . After the
    Civil War, Congress passed the National Bank Act to ensure
    that national and state banks could coexist on a basis of
    “competitive equality.” First Nat’l Bank of Logan, Utah v.
    Walker Bank & Trust Co., 
    385 U.S. 252
    , 261 (1966). The
    Act vests nationally chartered banks with enumerated powers,
    such as the power to make contracts, to receive deposits, and
    to make loans, together with “all such incidental powers as
    shall be necessary to carry on the business of banking.”
    
    12 U.S.C. § 24
     (Third, Seventh). In addition to the National
    Bank Act, the activities of national banks are governed by
    related regulations promulgated by the Office of the
    Comptroller of the Currency (the “OCC”). See 
    12 U.S.C. §§ 24
    , 93a, 371(a).
    In analyzing preemption, we ask whether the state law
    “prevent[s] or significantly interfere[s] with the national
    bank’s exercise of its powers.” Barnett Bank of Marion
    Cnty., N.A. v. Nelson, 
    517 U.S. 25
    , 33 (1996). Although
    states cannot exercise “visitorial” oversight over national
    banks, state laws of general application continue to apply to
    national banks when “doing so does not prevent or
    significantly interfere with the national bank’s exercise of its
    powers.” 
    Id. at 33
    ; see also Watters v. Wachovia Bank, N.A.,
    
    550 U.S. 1
    , 11 (2007) (“Federally chartered banks are subject
    to state laws of general application in their daily business to
    the extent such laws do not conflict with the letter or purposes
    of the NBA.”). As the Supreme Court explained in Cuomo v.
    Clearinghouse Ass’n, LLC, 
    557 U.S. 519
    , 530 (2009), this
    balance of authority preserves “a regime of exclusive
    GUTIERREZ V . WELLS FARGO                   19
    administrative oversight by the Comptroller while honoring
    in fact rather than merely in theory Congress’s decision not
    to pre-empt substantive state law. This system echoes many
    other mixed state/federal regimes in which the Federal
    Government exercises general oversight while leaving state
    substantive law in place.” Indeed, “[s]tates . . . have always
    enforced their general laws against national banks.” 
    Id. at 534
    .
    Against the framework of extensive federal statutory and
    regulatory oversight of national banks, the question is
    whether Wells Fargo’s implementation of high-to-low
    posting is subject to California’s Unfair Competition Law, a
    consumer protection statute of general applicability. 
    Cal. Bus. & Prof. Code § 17200
    . We do not tackle the Unfair
    Competition Law generally vis-a-vis federal banking
    regulation. Rather, reviewing de novo, we analyze each
    Unfair Competition Law claim separately, Martinez v. Wells
    Fargo Home Mortg., Inc., 
    598 F.3d 549
    , 553 (9th Cir. 2010),
    though as a practical matter, the remedy ordered by the
    district court boils down to a complete prohibition on the
    high-to-low-sequencing method.
    A. UNFAIR BUSINESS PRACTICES AND HIGH -TO -LOW
    POSTING
    The district court deemed Wells Fargo’s high-to-low
    posting method an unfair practice in violation of the Unfair
    Competition Law because it was imposed in bad faith, in
    contravention of the policy reflected in California
    20                  GUTIERREZ V . WELLS FARGO
    Commercial Code § 4303(b).5 In terms of remedy, the
    district court permanently enjoined Wells Fargo’s use of
    high-to-low posting. The court ordered Wells Fargo to
    “either reinstate a low-to-high posting method or use a
    chronological posting method (or some combination of the
    two methods).” With respect to disclosures, the court
    required “all agreements, disclosures, websites, online
    banking statements, and promotional materials” to conform
    to the new posting system. Finally, the court ordered $203
    million in restitution because it found that Wells Fargo acted
    in bad faith when it decided to post debit-card transactions in
    high-to-low order. The appeal of this claim turns on whether
    state law can dictate Wells Fargo’s choice of posting method.
    We hold that it cannot.
    Under the National Bank Act, key powers of national
    banks include the authority to receive deposits, as well as “all
    such incidental powers as shall be necessary to carry on the
    business of banking.” 
    12 U.S.C. § 24
     (Seventh). The deposit
    and withdrawal of funds “are services provided by banks
    since the days of their creation. Indeed, such activities define
    5
    The commentary to § 4303 explains that:
    Subsection (b) provides that a payor bank may accept
    or pay items in any order. . . . The only restraint on the
    discretion given to the payor bank under subsection (b)
    is that the bank act in good faith. For example, the
    bank could not properly follow an established practice
    of maximizing the number of returned checks for the
    sole purpose of increasing the amount of returned check
    fees charged to the customer.
    
    Cal. Com. Code § 4303
    , 1992 Amendment cmt. 7.
    GUTIERREZ V . WELLS FARGO                            21
    the business of banking.”6 Bank of Am. v. City and Cnty. of
    San Francisco, 
    309 F.3d 551
    , 563 (9th Cir. 2002). Both the
    “business of banking” and the power to “receiv[e] deposits”
    necessarily include the power to post transactions—i.e., tally
    deposits and withdrawals—to determine the balance in the
    customer’s account. See 
    12 U.S.C. § 24
     (Seventh).
    The ability to choose a method of posting transactions is
    not only a useful, but also a necessary, component of a
    posting process that is integrally related to the receipt of
    deposits. Designation of a posting method falls within the
    type of overarching federal banking regulatory power that is
    “not normally limited by, but rather ordinarily pre-empt[s],
    contrary state law.” Watters, 
    550 U.S. at 12
     (quotation marks
    omitted).
    In addition to the broad power vested by statute, federal
    banking regulations adopted by the OCC specifically delegate
    to banks the method of calculating fees. 
    12 C.F.R. § 7.4002
    (b). As the agency charged with administering the
    National Bank Act, the OCC has primary responsibility for
    the surveillance of the “business of banking” authorized by
    the National Bank Act. NationsBank of N.C., N.A. v.
    Variable Annuity Life Ins. Co., 
    513 U.S. 251
    , 256 (1995).
    The OCC is authorized to define the “incidental powers” of
    national banks beyond those specifically enumerated. See
    6
    The incidental powers reserved for national banks are “not limited to
    activities deemed essential to the exercise of enumerated powers but
    include activities closely related to banking and useful in carrying out the
    business of banking.” Bank of Am. v. City and Cnty. of San Francisco,
    
    309 F.3d 551
    , 562 (9th Cir. 2002); see also 
    12 C.F.R. § 7.4007
    (a) (“A
    national bank may receive deposits and engage in any activity incidental
    to receiving deposits.”).
    22                 GUTIERREZ V . WELLS FARGO
    12 U.S.C. § 93a (authorizing the OCC “to prescribe rules and
    regulations to carry out the responsibilities of the office”).
    The OCC has interpreted these incidental powers to
    include the power to set account terms and the power to
    charge customers non-interest charges and fees, such as the
    overdraft fees at issue here. 
    12 C.F.R. § 7.4002
    (a).7 More
    specifically, the OCC has determined that “[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) (emphasis added).
    OCC letters interpreting § 7.4002 specifically consider
    high-to-low posting and associated overdraft fees to be a
    “pricing decision authorized by Federal law” within the
    power of a national bank. OCC Interpretive Letter No. 916,
    
    2001 WL 1285359
    , at *2 (May 22, 2001); see also OCC
    Interpretive Letter No. 997, 
    2002 WL 32872368
    , at *3 (Apr.
    15, 2002); OCC Interpretive Letter No. 1082, 
    2007 WL 5393636
    , at *2 (May 17, 2007). The OCC has opined that “a
    bank’s authorization to establish fees pursuant to 12 C.F.R.
    7.4002(a) necessarily includes the authorization to decide
    how they are computed.” OCC Interpretive Letter No. 916,
    
    2001 WL 1285359
    , at *2 (May 22, 2001). Accordingly, the
    OCC has determined that a national bank “may establish a
    given order of posting as a pricing decision pursuant to
    section 24 (seventh) and section 7.4002.” 
    Id.
     In sum, federal
    7
    Section 7.4002(a) provides that a “national bank may charge its
    customers non-interest charges and fees, including deposit account service
    charges.” 
    12 C.F.R. § 7.4002
    (a).
    GUTIERREZ V . WELLS FARGO                        23
    law authorizes national banks to establish a posting order as
    part and parcel of setting fees, which is a pricing decision.
    The district court held that the bank’s determination of
    posting order did not constitute a pricing decision because
    Wells Fargo did not follow the four factor decision making
    process for safe and sound banking principles mandated by
    the OCC. 
    12 C.F.R. § 7.4002
    (b).8 The National Bank Act
    gives to the OCC the exclusive authority to exercise visitorial
    oversight over national banks, and it entrusts the OCC with
    the supervision of national banks’ activities that are
    authorized by federal law. 
    12 U.S.C. § 484
    (a); 
    12 C.F.R. § 7.4000
    ; see also Cuomo, 
    557 U.S. at 524
    . Whether Wells
    Fargo’s internal decision-making processes regarding posting
    orders complied with the “safe and sound banking principles”
    under § 7.4002(b)(2) is an inquiry that falls squarely within
    the OCC’s supervisory powers. The district court’s findings
    with regard to Wells Fargo’s compliance with the OCC
    regulation, then, are both “inapposite to the issue of
    preemption” and “fruitless.” Martinez, 
    598 F.3d at
    556 n.8
    8
    Section 7.4002(b) provides that:
    [a] national bank establishes non-interest charges and
    fees in accordance with safe and sound banking
    principles if the bank employs a decision-making
    process through which it considers the following
    factors, among others: (i) The cost incurred by the bank
    in providing the service; (ii) The deterrence of misuse
    by customers of banking services; (iii) The
    enhancement of the competitive position of the bank in
    accordance with the bank’s business plan and
    marketing strategy; and (iv) The maintenance of the
    safety and soundness of the institution.
    
    12 C.F.R. § 7.4002
    (b).
    24              GUTIERREZ V . WELLS FARGO
    (citing Watters, 
    550 U.S. at 13
    ). In Martinez, we addressed
    whether Wells Fargo had followed safe and sound banking
    principles in making a pricing decision and emphasized that
    the determination of the bank’s compliance with these
    principles “is within the exclusive purview of the OCC.” 
    Id.
    Wells Fargo’s decision to resequence the posting order
    falls within the OCC’s definition of a pricing decision
    authorized by federal law. The district court is not free to
    disregard the OCC’s determinations of what constitutes a
    legitimate pricing decision, nor can it apply state law in a way
    that interferes with this enumerated and incidental power of
    national banks.
    The restriction that the district court imposed on posting
    is akin to the fee restriction addressed in the Eleventh
    Circuit’s recent preemption ruling. See Baptista v. JPMorgan
    Chase Bank, N.A., 
    640 F.3d 1194
    , 1197 (11th Cir. 2011). The
    court in Baptista held that a state statute that disallowed
    banks from charging non-customers for cashing a check was
    preempted because it significantly reduced the banks’ latitude
    in deciding how to charge fees. 
    Id.
     at 1197–98. The same
    logic applies here.
    We hold that a “good faith” limitation applied through
    California’s Unfair Competition Law is preempted when
    applied in a manner that prevents or significantly interferes
    with a national bank’s federally authorized power to choose
    a posting order. See Barnett, 
    517 U.S. at 37
     (state statute
    could not bar small town national banks from selling
    insurance where federal statute gave the banks such
    authority); Bank of Am., 
    309 F.3d at
    561–64 (federal
    regulations allowing banks to collect non-interest charges
    preempted a local law governing what ATM fees a bank
    GUTIERREZ V . WELLS FARGO                   25
    could charge). The federal court cannot mandate the order in
    which Wells Fargo posts its transactions. Therefore, we
    vacate the permanent injunction and the $203 million
    restitution award. The district court premised both of these
    remedies on only a violation of the “unfair” business practice
    prong of the Unfair Competition Law tethered to the “good
    faith” requirement of       California Commercial Code
    § 4303(b).
    B. FRAUDULENT BUSINESS PRACTICES             AND   WELLS
    FARGO ’S REPRESENTATIONS
    The district court found not only a violation of the
    “unfair” prong of the Unfair Competition Law with regard to
    the posting order, but also a violation of the “fraudulent”
    prong of the Unfair Competition Law with regard to Wells
    Fargo’s representations about posting.             The Unfair
    Competition Law authorizes injunctive relief and restitution
    as remedies against a person or entity engaging in unfair
    competition, including fraudulent business practices. 
    Cal. Bus. & Prof. Code § 17203
    ; see also Cel-Tech Commc’ns,
    Inc., 
    20 Cal. 4th at 180
     (each of the three Unfair Competition
    Law prongs constitutes a separate and independent cause of
    action). The district court faulted Wells Fargo both for its
    failure to disclose the effects of high-to-low posting and for
    its misleading statements. The district court concluded that
    Wells Fargo “did not tell customers that frequent use of a
    debit-card for small-valued purchases could result in an
    avalanche of overdraft fees for each of those purchases due to
    the high-to-low posting order.” Instead, Wells Fargo
    “directed misleading propaganda at the class that likely led
    class members to expect that the actual posting order of their
    debit-card purchases would mirror the order in which they
    were transacted.”
    26              GUTIERREZ V . WELLS FARGO
    We have determined that the district court’s injunction
    ordering a particular kind of posting and ordering $203
    million in restitution under the “unfair” prong of California’s
    Unfair Competition Law is preempted. The question arises
    whether we need to address preemption under the
    “fraudulent” prong as well. We conclude that we do because,
    on remand, the district court may determine that appropriate
    relief is available to the extent a claim for fraudulent
    misrepresentation is not preempted.
    The requirement to make particular disclosures falls
    squarely within the purview of federal banking regulation and
    is expressly preempted: “A national bank may exercise its
    deposit-taking powers without regard to state law limitations
    concerning,” among other things, “disclosure requirements.”
    
    12 C.F.R. § 7.4007
    (b)(3). In Martinez, plaintiffs’ claim that
    the bank “engaged in ‘fraudulent’ practices by failing to
    disclose actual costs of its underwriting and tax services” was
    expressly preempted by the OCC regulation preempting state
    disclosure requirements in real estate transactions. Martinez,
    
    598 F.3d at 554, 557
    ; see also 
    12 C.F.R. § 34.4
    (a)(9).
    Similarly, the Unfair Competition Law cannot impose
    liability simply based on the bank’s failure to disclose its
    chosen posting method. See Rose v. Chase Bank USA, N.A.,
    
    513 F.3d 1032
    , 1038 (9th Cir. 2008) (the National Bank Act
    preempts affirmative disclosure requirements of a California
    statute, insofar as those requirements apply to national
    banks); Parks v. MBNA Am. Bank, N.A., 
    54 Cal. 4th 376
    ,
    386–87 (2012) (state law directed at credit card issuers, which
    prescribed specific disclosures on convenience checks, was
    preempted). Imposing liability for the bank’s failure to
    sufficiently disclose its posting method leads to the same
    result as mandating specific disclosures. Both remedies are
    tantamount to state regulation of disclosure requirements.
    GUTIERREZ V . WELLS FARGO                    27
    We turn now to the different question of state law liability
    based on Wells Fargo’s misleading statements about its
    posting method. Notably, the Unfair Competition Law itself
    does not impose disclosure requirements but merely prohibits
    statements that are likely to mislead the public. As a non-
    discriminating state law of general applicability that does not
    “conflict with federal law, frustrate the purposes of the
    National Bank Act, or impair the efficiency of national banks
    to discharge their duties,” the Unfair Competition Law’s
    prohibition on misleading statements under the fraudulent
    prong of the statute is not preempted by the National Bank
    Act. Bank of Am., 
    309 F.3d at 561
    .
    Wells Fargo’s position—that § 7.4007(b)(2) dictates
    preemption—is conclusively undercut by the OCC itself,
    which, far from concluding that the Unfair Competition Law
    is expressly preempted under its regulations, “has specifically
    cited [California’s Unfair Competition Law] in an advisory
    letter cautioning banks that they may be subject to such laws
    that prohibit unfair or deceptive acts or practices.” Martinez,
    
    598 F.3d at 555
    . The advisory letter warns that the
    “consequences of engaging in practices that may be unfair or
    deceptive under federal or state law can include litigation,
    enforcement actions, monetary judgments, and harm to the
    institution’s reputation.” OCC Advisory Letter, Guidance on
    Unfair or Deceptive Acts or Practices, 
    2002 WL 521380
    , at
    *1 (Mar. 22, 2002). The OCC recognizes that state laws that
    withstand preemption “typically do not regulate the manner
    or content of the business of banking authorized for national
    banks, but rather establish the legal infrastructure that makes
    practicable the conduct of that business.” Bank Activities and
    Operations, 
    69 Fed. Reg. 1904
    , 1913 (Jan. 13, 2004). By
    prohibiting fraudulent business practices, the Unfair
    28              GUTIERREZ V . WELLS FARGO
    Competition Law does exactly that—it establishes a legal
    infrastructure.
    Although Wells Fargo insists that a state law prohibiting
    misleading statements necessarily touches on “checking
    accounts,” such an expansive interpretation—with no limiting
    principle—“would swallow all laws.” Aguayo v. U.S. Bank,
    
    653 F.3d 912
    , 925 (9th Cir. 2011). We recently declined a
    bank’s invitation to interpret the term “lending operations”
    expansively because “every action by the bank, due to the
    nature of its business, affects its ability to attract, manage,
    and disburse capital, and could be said to ‘affect’ its lending
    operations.” 
    Id.
     California’s prohibition of misleading
    statements does not significantly interfere with the bank’s
    ability to offer checking account services, choose a posting
    method, or calculate fees. Nor does the Unfair Competition
    Law mandate the content of any nonmisleading and
    nonfraudulent statements in the banking arena. On the flip
    side, the National Bank Act and other OCC provisions do not
    aid Wells Fargo, as neither source regulates deceptive
    statements vis-a-vis the bank’s chosen posting method.
    Where, as here, federal laws do not cover a bank’s actions,
    states “are permitted to regulate the activities of national
    banks where doing so does not prevent or significantly
    interfere with the national bank’s or the national bank
    regulator’s exercise of its powers.” Watters, 
    550 U.S. at 12
    ;
    see also Gibson v. World Sav. & Loan Ass’n, 
    103 Cal. App. 4th 1291
    , 1299 (2002) (the “state cannot dictate to the Bank
    how it can or cannot operate, but it can insist that, however
    the Bank chooses to operate, it do so free from fraud and
    other deceptive business practices”).
    Other than an argument regarding the cost of modifying
    its published materials, Wells Fargo does not articulate how
    GUTIERREZ V . WELLS FARGO                   29
    abiding by the Unfair Competition Law’s prohibition of
    misleading statements would prevent or significantly interfere
    with its ability to engage in the business of banking. Wells
    Fargo’s inability to demonstrate a significant interference is
    unsurprising—the district court found that when it chose to,
    the bank could accurately explain the posting process to
    customers: “Wells Fargo provided its tellers and phone-bank
    employees with a clear script to respond to customers who
    protested after receiving multiple overdraft fees caused by
    high-to-low resequencing. These explanations were in plain
    English.” The limitation on fraudulent representations in
    California’s Unfair Competition Law does not subject Wells
    Fargo’s ability to receive deposits, to set account terms, to
    implement a posting method, or to calculate fees to
    surveillance under a rival oversight regime, nor does it stand
    as an obstacle to the accomplishment of the National Bank
    Act’s purposes. See Barnett, 
    517 U.S. at 31
    . In Martinez, we
    expressed the principle that controls here: “State laws of
    general application, which merely require all businesses
    (including national banks) to refrain from fraudulent, unfair,
    or illegal behavior, do not necessarily impair a bank’s ability
    to exercise its . . . powers.” 
    598 F.3d at 555
    . Accordingly,
    we hold that Gutierrez’s claim for violation of the fraudulent
    prong of the Unfair Competition Law by making misleading
    misrepresentations with regard to its posting method is not
    preempted, and we affirm the district court’s finding to this
    extent. Consistent with the foregoing, the district court may
    provide injunctive relief and restitution against Wells Fargo.
    Although the court cannot issue an injunction requiring the
    bank to use a particular system of posting or requiring the
    bank to make specific disclosures, it can enjoin the bank from
    making fraudulent or misleading representations about its
    system of posting in the future. Restitution is available for
    past misleading representations. We make no judgment as to
    30             GUTIERREZ V . WELLS FARGO
    whether it is warranted here. On remand, the district court
    will be in a position to determine whether, subject to the
    limitations in this opinion, restitution is justified by the
    pleadings and the evidence in this case.
    III.     REMAINING ISSUES
    Finally, we consider Wells Fargo’s challenge to standing,
    class certification, and the finding that Wells Fargo made
    misleading statements. Upon reviewing the trial record and
    the district court’s extensive findings, we conclude that the
    district court did not err. See Lyon v. Gila River Indian
    Cmty., 
    626 F.3d 1059
    , 1071 (9th Cir. 2010) (the district
    court’s conclusions of law are reviewed de novo and its
    findings of fact are reviewed for clear error).
    A. STANDING
    To establish standing to seek class-wide relief for fraud-
    based Unfair Competition Law claims, the named plaintiffs
    must prove “actual reliance” on the misleading statements.
    Specifically, “a class representative proceeding on a claim of
    misrepresentation as the basis of his or her UCL action must
    demonstrate actual reliance on the allegedly deceptive or
    misleading statements, in accordance with well-settled
    principles regarding the element of reliance in ordinary fraud
    actions.” In re Tobacco II Cases, 
    46 Cal. 4th 298
    , 306
    (2009).
    The district court found that Gutierrez and Walker read
    portions of the “Welcome Jacket,” “which stated that ‘[e]ach
    purchase is automatically deducted from your primary
    checking account.’” The district court next found that
    Gutierrez and Walker each “relied upon the bank’s
    GUTIERREZ V . WELLS FARGO                           31
    misleading marketing materials that reinforced her natural
    assumption that debit-card transactions would post
    chronologically.” The district court determined that both
    Gutierrez and Walker were misled by Wells Fargo’s
    statements because the extent of the falsity of the statements
    was not known to either of them until they incurred hefty fees
    for having overdrawn their checking accounts. These
    findings are well supported by the evidence and are not
    clearly erroneous. Gutierrez and Walker therefore have
    standing. See Bates v. United Parcel Serv., Inc., 
    511 F.3d 974
    , 985 (9th Cir. 2007) (en banc) (“In a class action,
    standing is satisfied if at least one named plaintiff meets the
    requirements.”).9
    B. CLASS CERTIFICATION
    Next, class certification under Fed. R. Civ. P. 23(b)(3)
    requires that “questions of law or fact common to class
    members predominate over any questions affecting only
    individual members.” With respect to marketing materials,
    the district court found that:
    A Wells Fargo marketing theme was that
    debit-card purchases were “immediately” or
    “automatically” deducted from an account.
    This likely led the class to believe: (1) that
    the funds would be deducted from their
    checking accounts in the order transacted, and
    9
    Gutierrez’s and W alker’s harm was not all caused by their lack of
    oversight of their own account balances. The misunderstanding that W ells
    Fargo’s misleading statements sowed among customers about its posting
    scheme was a significant cause of the magnitude of the harm experienced
    by Gutierrez and W alker.
    32              GUTIERREZ V . WELLS FARGO
    (2) that the purchase would not be approved if
    they lacked sufficient available funds to cover
    the transaction. This language was present on
    Wells Fargo’s website (TX 129), on Wells
    Fargo’s Checking, Savings and More
    brochures from 2001 and 2005 (TX 88, 89),
    and Wells Fargo’s New Account Welcome
    Jacket from 2004 (TX 82).
    The pervasive nature of Wells Fargo’s misleading marketing
    materials amply demonstrates that class members, like the
    named plaintiffs, were exposed to the materials and likely
    relied on them. See 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”). In addition, the district court found that Wells
    Fargo knew that “new accounts generate the bulk of OD
    [overdraft] revenue.” Wells Fargo’s speculation—that “some
    class members would have engaged in the same conduct
    irrespective of the alleged misrepresentation”—does not meet
    its burden of demonstrating that individual reliance issues
    predominate. Unlike McLaughlin v. Am. Tobacco Co.,
    
    522 F.3d 215
    , 223 (2d Cir. 2008) (partially abrogated on
    other grounds by Bridge v. Phoenix Bond & Indem. Co.,
    
    553 U.S. 639
     (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.
    C. MISLEADING STATEMENTS
    Finally, the district court’s finding that Wells Fargo made
    misleading statements is amply supported by the court’s
    factual findings. Wells Fargo told customers that “[c]heck
    GUTIERREZ V . WELLS FARGO                33
    card and ATM transactions generally reduce the balance in
    your account immediately” and that “the money comes right
    out of your checking account the minute you use your debit-
    card.” The bank also misleadingly admonished customers to
    “[r]emember that whenever you use your debit-card, the
    money is immediately withdrawn from your checking
    account. If you don’t have enough money in your account to
    cover the withdrawal, your purchase won’t be approved.”
    According to the district court,
    the “account activity” information provided to
    customers through online banking — a service
    made available to all Wells Fargo depositors
    — displayed “pending” debit-card
    transactions in chronological order (i.e., the
    order in which the transactions were
    authorized by Wells Fargo). When it came
    time to post them during the settlement
    process, however, the same transactions were
    not posted in chronological order but were
    posted in high-to-low order.
    The findings go on:
    Misleading marketing materials promoted the
    same theme of chronological subtraction. A
    number of Wells Fargo marketing materials,
    including the Wells Fargo Welcome Jacket
    that was customarily provided to all
    customers who opened a consumer checking
    account, contained misleading representations
    regarding how debit-card transactions were
    processed.     Specifically, these various
    materials — covered in detail in the findings
    34             GUTIERREZ V . WELLS FARGO
    of fact — communicated that debit-card POS
    purchases were deducted “immediately” or
    “automatically” from the user’s checking
    account. . . . Such representations would lead
    reasonable consumers to believe that the
    transactions would be deducted from their
    checking accounts in the sequence transacted.
    Based on these findings, the district court concluded that
    “Wells Fargo affirmatively reinforced the expectation that
    transactions were covered in the sequence made while
    obfuscating its contrary practice of posting transactions in
    high-to-low order to maximize the number of overdrafts
    assessed on customers.”           Wells Fargo’s alternate
    interpretation of the word “automatically” is insufficient to
    render the district court’s findings clearly erroneous.
    Accordingly, the district court’s holding that Wells Fargo
    violated the Unfair Competition Law by making misleading
    statements likely to deceive its customers is affirmed.
    CONCLUSION
    Given the terms of the arbitration agreement and the
    parties’ conduct throughout litigation, the Supreme Court’s
    decision in Concepcion does not require that this dispute be
    arbitrated at this late stage—post-trial, post-judgment, and
    post-appeal. As to preemption, we hold that a national bank’s
    decision to post payments to checking accounts in a particular
    order is a federally authorized pricing decision. 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. See 
    12 U.S.C. § 24
    ; 
    12 C.F.R. § 7.4002
    . Similarly, both the imposition of
    affirmative disclosure requirements and liability based on
    GUTIERREZ V . WELLS FARGO                          35
    failure to disclose are preempted by 
    12 U.S.C. § 24
     and 
    12 C.F.R. § 7.4007
    . The National Bank Act, however, does not
    preempt Gutierrez’s claim for affirmative misrepresentations
    under the “fraudulent” prong of the Unfair Competition Law.
    Although the injunctive relief ordered by the district court
    is based on both the unfair and fraudulent prongs of the
    Unfair Competition Law, the injunction is vacated because
    each of its terms dictates relief relating to the posting order,
    which is preempted. The restitution order, which is
    predicated on liability for Wells Fargo’s choice of posting
    method and thus also preempted, is vacated as well. The
    district court’s finding of liability for Wells Fargo’s
    violations of the “fraudulent” prong of California’s Unfair
    Competition Law is affirmed, and we remand for the district
    court to determine what relief, if any, is appropriate and
    consistent with this opinion.10
    AFFIRMED in part, REVERSED in part, and
    REMANDED. Each party shall pay its own fees on appeal.
    10
    In light of the decision to vacate the restitution award, we do not
    reach the parties’ arguments as to the amount of restitution awarded,
    prejudgment interest, and punitive damages.
    

Document Info

Docket Number: 10-16959, 10-17468, 10-17689

Citation Numbers: 704 F.3d 712, 2012 WL 6684748

Judges: Thomas, McKeown, Fletcher

Filed Date: 12/26/2012

Precedential Status: Precedential

Modified Date: 11/5/2024

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