Judge Trims Claims in HSBC Overdraft Fee MDL

A New York federal judge has dismissed state law claims from multidistrict litigation related to HSBC Bank USA NA’s overdraft fee policy, finding that plaintiffs cannot bring claims under state laws that do not apply to them. However, claims for violations of the Unfair Competition Law, False Advertising law and breach of the implied covenant of good faith and fair dealing were allowed to stand.

The HSBC overdraft class action lawsuits alleged the bank reordered its customers’ transactions from highest to lowest instead of processing them in chronological order. By processing the customers’ largest transactions first, the plaintiffs allege the bank was able to maximize the number of overdraft fees it could charge. They also claim that HSBC fails to clearly disclose this posting order to its customers, does not advise them of their ability to opt out of the overdraft program and fails to timely post deposited funds to customers’ accounts. The three class action lawsuits were consolidated into multidistrict litigation (MDL) on June 5, 2013.

The plaintiffs sought to represent a nationwide class as well as 13 state subclasses of HSBC customers who were allegedly charged improper overdraft fees. In November 2013, HSBC filed a motion to dismiss the overdraft fee MDL, alleging that the plaintiffs failed to state a claim in states outside of New York and California because they did not allege any contacts in the state.

On Wednesday, U.S. District Judge Arthur D. Spatt trimmed several state law claims and claims for conversion, breach of contract and unjust enrichment from the HSBC overdraft fee MDL.

“In this case, the Court finds that the Plaintiffs may only assert a state claim if a named plaintiff resides in, does business in, or has some other connection to that state,” Judge Spatt wrote in his March 5 decision. He explained that to hold otherwise could allow plaintiffs to pursue lengthy and expensive legal action over alleged state law violations, even if nobody actually suffered an injury under those laws.

Judge Spatt dismissed the breach of contract claims from the HSBC overdraft fee MDL, agreeing with HSBC that the plaintiffs failed to allege a breach of an actual contract term. He also ruled that the plaintiffs couldn’t pursue unjust enrichment claims or violations of the California Consumers Legal Remedies Act. The judge found that the statute of limitations had tolled on the plaintiffs’ conversion claims, and dismissed those claims as well.

HSBC also argued that the plaintiffs’ claims were preempted by the National Bank Act, which has permitted national banks to post checks in order from the highest to lowest amount. However, Judge Spatt did not agree that the plaintiffs’ Unfair Competition Law claims were preempted by the federal law and allowed the UCL claims to stand.

The plaintiffs are represented by Jonathan W. Cuneo of Cuneo Gilbert & Laduca LLP; Nancy L. Fineman and Aron K. Liang of Cotchett Pitre & McCarthy LLP; Seth D. Rigrodsky and Timothy J. MacFall of Rigrodsky & Long PA; and Brian S. Cohen and Clifford J. Bond of Cohen Law Group PC.

The HSBC Overdraft Fee Class Action Lawsuit MDL is In re: HSBC Bank USA NA, Debit Card Overdraft Fee Litigation, Case No. 2:13-md-02451, in the U.S. District Court for the Eastern District of New York.

Join a Free Bank Overdraft Class Action Lawsuit Investigation

If you have incurred overdraft fees in the last three years from any of the following banks, you may be eligible to participate in a class action lawsuit to recover some or all of your overdraft fees:

• Ally Financial Inc.
• Bank of Hawaii
• Bank of the West
• Capital One Financial Corp.
• Commerce Bank
• Fifth Third Bancorp
• HSBC North America Holdings Inc.
• BOKF NA (includes Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas, and Colorado State Bank and Trust).

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