Fifth Circuit Affirms Certification of Electronic Funds Transfer Act Class

Carlton Fields

In a case similar to its late-2014 decision in Mabary v. Home Town Bank, N.A., 771 F.3d 820 (5th Cir. 2014), the Fifth Circuit recently affirmed certification of a class of consumers who were charged a fee for using an automated teller machine (“ATM “) that allegedly lacked a fee notice on its exterior, in violation of the Electronic Funds Transfer Act (“EFTA”), 15 U.S.C. § 1693b(d)(3) (2011).  See Frey v. First Nat. Bank Southwest, No. 13–10375, — F. App’x —, 2015 WL 728066 (5th Cir. Feb. 20, 2015).  The EFTA protects consumer accounts established primarily for personal, family, or household purposes.  During the relevant time period, it required ATM operators to notify consumers when a fee would be imposed by posting such notice in a prominent and conspicuous location on or at the ATM and on the ATM’s screen, or on a paper notice issued from the machine, after the transaction was initiated and before the consumer was irrevocably committed to completing the transaction.  No fee could be imposed unless the required notice was given.

In Frey, First National Bank operated an ATM in Plano, Texas that charged non-account holders a fee for use.  The Plaintiff made a withdrawal from that ATM and was charged $3.50.  Although the ATM had an on-screen notice advising him of the transaction fee, the Plaintiff alleged the ATM did not have the required exterior notice of the fee.  Pursuant to Rule 23(b)(3), the district court certified a class of consumers who were charged withdrawal fees from that ATM between November 9, 2010 and April 26, 2012, the date the bank posted a compliant notice on the ATM.

The Fifth Circuit affirmed, rejecting the bank’s arguments on appeal that the class was not ascertainable and that common issues did not predominate.  The bank argued that because the EFTA applied only to consumers whose accounts were established primarily for personal, family, or household purposes, the court would have to conduct fact-intensive, individualized inquiries into the nature of every class member’s account, rendering the class unascertainable, but the court disagreed.  The court reasoned that the class definition was clear and definite, and included an estimated 1,500 individuals charged a fee from a specific ATM between two specified dates, who could be identified from account numbers associated with the ATM transactions.  The court characterized as “largely administrative,” any inquiries of the bank or class members to establish whether the account involved was a personal or business account.  The court was careful to distinguish prior cases involving multiple defendants and bank locations on the ground that the Frey class was relatively small, easily identifiable, and included a discrete number of individuals charged a recorded fee after using one specified ATM between two specified dates.

The bank further argued common issues did not predominate, again because each class member would have to prove his or her account was primarily for personal rather than business use, but also because each class member would have to prove the exterior notice was absent when he or she used the ATM, but the court again disagreed.  The court explained that the primary questions with regard to the bank’s liability were whether and when the bank failed to provide the exterior notice in violation of the EFTA during the class period; if so, the appropriate amount of statutory damages; and whether the bank could avail itself of either of two available statutory defenses to liability.  The answers to those questions would affect all class members’ claims.

With regard to the nature of the account use, the court reasoned that the fact that some inquiry into the nature of each account would have to be made did not render that issue predominant over the multiple common issues bearing on the bank’s liability.  With regard to proving the absence of the exterior notice, the court agreed with the district court’s finding that:

[A]ssuming sufficient evidence such that a reasonable juror could conclude that fee notice was absent for any particular period of time, any class member without affirmative proof that the notice was not there on any particular day is entitled to some inference that the notice was absent. Thus, the period in which the sign was absent is a common issue of fact, and whether the notice was absent on any particular day is not an individualized inquiry defeating predominance.

The court noted that the ultimate proof regarding the dates the notice was absent would need to be resolved by the trier of fact and may or may not ultimately entitle all class members to relief, but the proof required was still common to the class.  The putative class members all used the same ATM during a specified time period, and were allegedly charged a fee without the required exterior notice being posted.  A common course of conduct provided a class-wide basis for deciding common issues of fact and law, including whether and when the required notice was absent.

Frey v. First Nat. Bank Southwest, No. 13–10375, — F. App’x —, 2015 WL 728066 (5th Cir. Feb. 20, 2015).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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