JOHN R. TUNHEIM, District Judge.
Plaintiff Anthony Brown brought this putative class action against defendants Wells Fargo & Company and Wells Fargo Bank, N.A. (collectively "Wells Fargo") alleging that Wells Fargo violated the Electronic Funds Transfer Act, 15 U.S.C. §§ 1693a et seq. ("EFTA"). Brown alleges that Wells Fargo failed to provide "prominent and conspicuous" notice that a consumer would be charged a fee by its automated teller machines (ATMs), as required by the EFTA. Brown, on behalf of the class, seeks actual damages, statutory damages, and attorneys' fees. Brown also seeks to recover under a theory of unjust enrichment. The case is before the Court on Brown's motion for class certification, Wells Fargo's motion for Rule 11 sanctions, and both parties' cross-motions for summary judgment.
The Court will grant in part each party's motion for summary judgment. Because Brown has not demonstrated that Wells Fargo & Company is an ATM operator, the Court will grant Wells Fargo & Company's motion for summary judgment on Brown's claim that Wells Fargo & Company violated the EFTA. In contrast, the Court finds as a matter of law that Wells Fargo Bank, N.A. ("Wells Fargo Bank") failed to provide "prominent and conspicuous [fee] notice" on its ATMs, and it will therefore grant summary judgment to Brown on his claim that Wells Fargo Bank violated the EFTA. Because a valid contract controlled Brown's use of the ATM, the Court will grant Wells Fargo's motion for summary judgment with respect to Brown's unjust enrichment claim. The Court finds that Brown has not defined a certifiable class that meets the requirements of Rule 23, and it will deny Brown's motion for class certification. Finally, because Brown has alleged colorable claims, the Court will deny Wells Fargo's motion for Rule 11 sanctions.
In May 2011, Brown used a Wells Fargo ATM in a gas station on East Seventh Street in St. Paul ("Seventh Street ATM"). (Am. Compl. ¶ 6, Aug. 15, 2011, Docket No. 9.) Brown does not have an account with Wells Fargo and so he incurred a $3.00 transaction fee when he withdrew money. (Id.) Brown does not contest that he knew before completing the transaction that Wells Fargo would charge him a fee; he received on-screen notice of the fee and the amount. (See generally Am. Compl.; Decl. of Timothy Ward ¶ 8, Jan. 13, 2012, Docket No. 24.)
The EFTA requires that all ATM operators post in a "prominent and conspicuous location" a notice that a fee is imposed on non-customers using the machine. 15 U.S.C. § 1693b(3)(B)(i). The act also requires that the ATM provide notice "on the screen . . . after the transaction is initiated and before the consumer is irrevocably committed to completing the transaction." Id. § 1693b(3)(B)(ii). The EFTA provides for two types of damages: actual damages and statutory damages. Id. § 1693m.
When Brown filed the original complaint in this case, he alleged that Wells Fargo & Company did not comply with the EFTA because there was
A fee notice was on both the Seventh Street ATM and the Government Center ATM when Brown used them. (Ward Decl. ¶ 2.) Both ATMs were a "freestanding" model with a hood around the screen and the keypad. (Id. ¶ 3.) The notice was located within the hood, on the user's right-hand side. (Id.) The parties dispute whether the notice was "prominent and conspicuous."
(Id., Ex. B.)
(Id., Ex. C.)
(Curtis P. Zaun Aff., Ex. 8, Feb. 3, 2012, Docket No. 39.)
(Ward Decl., Ex. D.)
By November 2011, Wells Fargo had replaced all of the hooded ATMs with an ATM that accepts deposits without an envelope — and that new ATM model has the fee notice sticker next to its keypad. (Id. ¶¶ 5-7 & Ex. F.) Wells Fargo replaced the Seventh Street ATM on September 13, 2011 and the Government Center ATM on October 14, 2011. ([Second] Decl. of Timothy Ward ¶ 2, Mar. 30, 2012, Docket No. 50.)
Wells Fargo asserts that Wells Fargo Bank operates the Seventh Street ATM, the Government Center ATM, and all other ATMs referenced in the Complaint. (Ward Decl. ¶ 2; Swan Decl. ¶ 2.) Wells Fargo further asserts that Wells Fargo & Company "does not engage in any banking business and is not an [ATM] operator." (Swan Decl. ¶ 2; see also Zaun Aff., Ex. 1, Wells Fargo & Company's Answers to Interrog. at 2.) Wells Fargo Bank is the principal operating subsidiary of Wells Fargo & Company. (Id.)
Wells Fargo moves for summary judgment on Brown's EFTA claim on two separate grounds. First, Wells Fargo & Company moves for summary judgment on Brown's EFTA claim because it argues that it is not an ATM "operator" within the meaning of the statute. Second, Wells Fargo Bank moves for summary judgment on Brown's EFTA claim because it argues the on-machine notice was "prominent and conspicuous" as a matter of law. Brown moves for summary judgment on his EFTA claim because he contends that the on-machine notice was
Summary judgment is appropriate where there are no genuine issues of material fact and the moving party demonstrates that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the suit, and a dispute is genuine if the evidence is such that it could lead a reasonable jury to return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A court considering a motion for summary judgment must view the facts in the light most favorable to the non-moving party and give that party the benefit of all reasonable inferences that can be drawn from those facts. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Wells Fargo & Company argues it cannot be liable under the EFTA claim because it is not an ATM "operator" within the meaning of the statute. The EFTA imposes notice requirements on "any automated teller machine operator who imposes a fee on any consumer" for providing ATM services. 15 U.S.C. § 1693b(d)(3)(A). The EFTA defines the term "automated teller machine operator" as "any person who— (I) operates an automated teller machine at which consumers initiate electronic fund transfers; and (II) is not the financial institution that holds the account of such consumer from which the transfer is made." 15 U.S.C. § 1693b(d)(3)(D)(i). Both defendants maintain that Wells Fargo Bank is the ATM operator
Brown appears to be arguing that the Court should disregard the corporate entity and find that Wells Fargo & Company is an ATM operator because it controls Wells Fargo Bank and its activities. There is a presumption, however, that a parent corporation is a separate entity, and the plaintiff must demonstrate "substantial reasons" to overcome this presumption. See H.J., Inc. v. Int'l Tel. & Tel. Corp., 867 F.2d 1531, 1549 (8
Because Wells Fargo Bank imposed a fee on users like Brown for the use of its ATM, the EFTA requires it to post a notice stating that it may impose a fee "in a prominent and conspicuous location on or at the automated teller machine at which the electronic fund transfer is initiated by the consumer." 15 U.S.C. § 1693b(d)(3)(B)(i). The parties contest whether the notice is prominent and conspicuous.
The EFTA does not define what constitutes a "prominent and conspicuous location." Because the EFTA is a consumer protection statute, enacted as an amendment to the Consumer Credit Protection Act (CCPA), Wike v. Vertrue, Inc., 566 F.3d 590, 592 (6
The "clear and conspicuous standard" was undefined under TILA and FCRA, but, in analyzing these statutes, courts borrowed a definition from the Uniform Commercial Code which defines a term as conspicuous when it is "so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it." See, e.g., Barrer v. Chase Bank USA, NA, 566 F.3d 883, 892 (9
Relevant factors to the conspicuousness of a warning include the location of the disclaimer, the type size used, whether the notice is set off in some way (e.g. font style spacing, or the use of capital letters), and the location of the warning.
Using a theory of unjust enrichment, Brown seeks to recover the fees Wells Fargo received from Brown and "all others similarly situated" during transactions at non-EFTA-compliant ATMs. The Court will grant Wells Fargo's motion for summary judgment with respect to the unjust enrichment claim because Brown does not dispute that the on-screen fee notice was adequate.
In Minnesota, a claim for "[u]njust enrichment requires a showing that one party benefitted from another party through the use of illegal or unlawful means." Sandberg v. City of Belgrade, 2012 WL 5759, at *4 (Minn. Ct. App. Jan. 3, 2012). If both parties fully perform under a valid contract governing the rights and obligations of the parties, neither party can benefit illegally or unlawfully, and any unjust enrichment claim fails. See Midwest Sport Marketing, Inc. v. Hillerich & Bradsby of Canada, Ltd., 552 N.W.2d 254, 268 (Minn. Ct. App. 1996). This Court joins other courts that have found the ATM user's explicit agreement to continue the transaction and accept a fee after an on-screen notice is sufficient to form a contract.
The Court rejects Brown's contention that it would be "absurd" to find a valid contract was formed when the EFTA was not being complied with. (Pl.'s Mem. in Opp. at 30.) The purpose of the EFTA is to insure that transactions "are conducted in such a way as to protect the rights of individual consumers," and the consumer's rights are still protected if they accept the on-screen warning — this contract formation does not frustrate the purposes of the EFTA. See Voeks v. Wal-Mart Stores, Inc. No. 07-C-0030, 2007 WL 2358645, at *6-7 (E.D. Wis. Aug. 17, 2007) ("[T]he mere fact that a provision of the contract may be in violation of a federal statute does not necessarily render the contract illegal or unenforceable."). Even if the contract was unenforceable, recovery under the doctrine of unjust enrichment would be improper because both Brown and Wells Fargo Bank fully performed under the contract.
Wells Fargo & Company can only be liable for unjust enrichment because of its relationship with Wells Fargo Bank. Because an unjust enrichment claim against Wells Fargo Bank is improper, a claim against Wells Fargo & Company is also improper.
In sum, the Court will grant Wells Fargo & Company's motion for summary judgment, resulting in its dismissal from this case. The Court will grant in part Wells Fargo Bank's motion for summary judgment, resulting in the dismissal of Brown's unjust enrichment claim. Finally, the Court will grant in part Brown's motion for summary judgment because Wells Fargo Bank violated the EFTA by failing to provide a "prominent and conspicuous" fee notice on the ATM's used by Brown. The Court will next address whether Brown should be permitted to form a class to pursue his EFTA claim.
(Pl.'s Motion for Class Certification at 2, Docket No. 30.) Because the Court will grant Wells Fargo's summary judgment motion regarding Brown's unjust enrichment claim, it will only address the proposed EFTA class.
"In order to obtain class certification, a plaintiff has the burden of showing that the class should be certified and that the requirements of [Federal Rule of Civil Procedure] 23 are met." Coleman v. Watt, 40 F.3d 255, 258 (8
"Prior to the consideration of the explicit requirements set forth under Rule 23(a), the Court must find that two implicit requirements have been met. First, the Court must find the existence of a precisely defined class. ... Second, the Court must find that the class representatives are members of the proposed class." Irvin E. Schermer Trust v. Sun Equities Corp., 116 F.R.D. 332, 335 (D. Minn. 1987). Once the implicit requirements are satisfied, Rule 23 "establishes a two-step analysis to determine whether class certification is appropriate. First, plaintiffs must satisfy the four prerequisites of Federal Rule Civil Procedure 23(a). Second, the action must satisfy at least one of three subdivisions of Federal Rule Civil Procedure 23(b)." In re Retek Inc. Sec. Litig., 236 F.R.D. 431, 434 (D. Minn. 2006). The Court will address each requirement in turn.
Prior to considering the explicit requirements of Rule 23, the Court will first address its implicit requirements. "Plaintiffs must establish that the class, as proposed, is objectively ascertainable and a precise definition of the class must be given." Gardner v. Equifax Info. Servs., LLC, No. 06-3102, 2007 WL 2261688, at *3 (D. Minn. Aug. 6, 2007) (citing Roman v. ESB, Inc., 550 F.2d 1343, 1348 (4
Even Brown initially admitted that actual notice to class members "could be somewhat difficult." (Pl.'s Mem. in Supp. of Class Certification at 21, Docket No. 31.) Brown suggests that Wells Fargo could identify the financial institutions of the cardholders who used the ATMs and were charged fees, and that these financial institutions could be contacted and "either asked to provide the names and contact information of their cardholders or asked to mail the notices directly to their customers themselves." (Id. at 5.)
While Wells Fargo could identify the cardholders who used the Seventh Street ATM and Government Center ATM, Brown does not explain how Wells Fargo should identify the cardholders who used ATMs of the "same design" with "the ATM fee warning in the same location."
Notifying the putative class members by publication is also unrealistic. Brown seeks to certify a class consisting of, "customers who used a Wells Fargo ATM
The Court finds that Brown has failed to precisely define a class (because he has not described a way to clearly identify and contact the class) or to demonstrate that he is a representative member of that class (see Part II.C.2, infra). The Court will, therefore, deny class certification.
Even if Brown had precisely defined the class, he would also fail to meet the explicit requirements of Rule 23.
In re St. Jude Medical, Inc., 425 F.3d 1116, 1119 (8
The parties do not dispute that the class is so numerous that joinder of all members is impracticable, see Fed. R. Civ. P. 23(a)(1), or that sufficient common issues of fact or law exist to satisfy the Rule 23(a)(2) requirement.
A district court must evaluate carefully the legitimacy of the named plaintiff's plea that he is a proper class representative under Rule 23(a). In re Milk Prods. Antitrust Litigation, 195 F.3d 430, 436 (8
Brown is not a typical or adequate class representative because Brown does not limit his prospective class to only those ATM users eligible for statutory damages. (Am. Compl. ¶ 41 ("[A]ll putative Class Members are entitled to actual damages [and] statutory damages[.]").) A majority of courts have held that the EFTA requires detrimental reliance in order to recover actual damages. Johnson v. U.S. Bank N.A., No. 10-4880, 2011 WL 6275963, at *4-5 (D. Minn. Dec. 15, 2011) (noting conflicting cases from the Eastern District of Wisconsin).
The Court finds the reasoning of these courts persuasive and agrees that, under the plain language of the EFTA's actual damage provision, a plaintiff must prove detrimental reliance. The provision provides, "[A]ny person who fails to comply with any provision of this subchapter with respect to any consumer . . . is liable to the consumer in an amount equal to the sum of — (1) any actual damage sustained by such consumer
Brown has not pled and cannot plead detrimental reliance — because of the onscreen notice, he knew he would be charged — and, therefore, he cannot assert an actual damages claim. Therefore, the Court concludes that Brown is not a typical or adequate class representative for persons asserting claims for actual damages.
Even if Brown was able to establish the putative class meets the requirement under Rule 23(a), certification would fail under Rule 23(b). Brown argues that the class could be certified under either Rule 23(b)(1) or (b)(3). The Court addresses each subsection in turn.
A class may be maintained under Federal Rule of Civil Procedure 23(b)(1) if:
"To proceed under Rule 23(b)(1)(A) the court must find that individual lawsuits would create the possibility of establishing `incompatible standards of conduct'" for Wells Fargo. Reynolds v. Nat'l Football League, 584 F.2d 280, 283 (8
A class may be maintained under Federal Rule of Civil Procedure 23(b)(3) if "the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." As outlined above, common questions of law and fact do not predominate. Because the proposed class includes a claim for actual damages — and those claims require detrimental reliance — each putative class member would have to individually prove detrimental reliance and individual issues would overwhelm the common ones. See In re Hartford Sales Practices Litigation, 192 F.R.D. 592, 605 (D. Minn. 1999) ("[T]he Court finds that it would be virtually impossible — and certainly impracticable — to resolve on a class-wide basis questions of individual reliance on the part of class members."). Because Brown has not demonstrated that common question of fact predominate class certification based on Rule 23(b)(2) is also unavailable. The Court will deny Brown's motion for class certification because he fails to meet the requirements of either Rule 23(a) or (b).
Wells Fargo asserts that Brown's failure to assert claims warranted by existing law is cause for Rule 11 sanctions. The Court will deny Wells Fargo's motion.
Federal Rule of Civil Procedure 11(b)(3) empowers federal courts to sanction parties who submit pleadings with factual contentions lacking evidentiary support, or contentions which will not "likely have evidentiary support after a reasonable opportunity for further investigation or discovery. ..." Sanctions may also be warranted where pleadings contain legal contentions not warranted by existing law. Id. at 11(b)(2). However, "[t]he imposition of sanctions is a serious matter and should be approached with circumspection." O'Connell v. Champion Intern. Corp., 812 F.2d 393, 395 (8
As discussed above, Brown asserted colorable claims. Wells Fargo argues that Brown's lawsuit "appears to have been brought for the improper purpose of trying to extract a significant class action settlement and attorneys' fees." (Def.'s Mem. in Supp. of Sanctions at 10, Docket No. 43.) An attempt to enforce a statute passed by Congress and a motion for class certification have neither an "improper purpose" and are not "attempt[s] to extort" (see id. at 11). Consequently, the Court will deny Wells Fargo's motion for Rule 11 sanctions.
Based on the foregoing, and all the files, records, and proceedings herein,
1. Wells Fargo & Company and Wells Fargo Bank, N.A.'s Motion for Summary Judgment [Docket No. 20] is
2. Anthony Brown's Cross Motion for Summary Judgment [Docket No. 36] is
3. Anthony Brown's Motion for Class Certification and Appointment of Class Counsel Under Fed. R. Civ. P. 23 [Docket No. 30] is
4. Wells Fargo & Company and Wells Fargo Bank, N.A.'s Joint Motion for Rule 11 Sanctions [Docket No. 41] is