Chambers v. HSBC Bank USA, N.A.
- Edgardo Ramos
- 1:19-cv-10436-ER
- U.S. District Court · Southern District of New York
- 11
In Chambers v. HSBC, Judge Ramos granted in part and denied in part HSBC’s motion to dismiss claims about repeated insufficient-funds fees.
Patrice Chambers, the proposed similarly situated plaintiffs she sought to represent, and HSBC Bank USA, N.A. The breach-of-contract claim remained pending, while three other claims were dismissed.
What happened
In Chambers v. HSBC Bank USA, N.A., Patrice Chambers alleged that HSBC improperly charged multiple insufficient-funds fees when payments were resubmitted. She brought contract, good-faith, unjust-enrichment, and New York consumer-protection claims on behalf of herself and similarly situated people.
The court found that the account agreements could reasonably be read either to allow a fee for each resubmitted payment or to treat repeated submissions as part of the same payment. The court therefore allowed the breach-of-contract claim to proceed, but dismissed the good-faith, consumer-protection, and unjust-enrichment claims as duplicative or unavailable under the existing contract.
Judge Ramos granted in part and denied in part HSBC’s motion to dismiss and directed the parties to appear for a later telephone conference.
The detailed version
- Chambers v. HSBC Bank USA, N.A. · No. 1:19-cv-10436-ER
- Edgardo Ramos
- Dec. 10, 2020
Background
Patrice Chambers sued HSBC Bank USA, N.A. over insufficient-funds fees charged when two attempted electronic payments were presented more than once. Chambers alleged that she authorized a payment to Santander Bank and a payment to Geico. Each payment was initially returned for insufficient funds, and Chambers conceded that the first fee for each transaction was proper. When each payment was presented again and returned, HSBC charged another fee. Chambers alleged that the second fees were improper.
Chambers asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and violation of New York General Business Law § 349. HSBC moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint adequately states a claim, to dismiss the complaint in its entirety and with prejudice.
Breach-of-contract claim
The account documents stated that HSBC could charge a $35 insufficient-funds fee for each withdrawal, check, electronic funds transfer, or other “item” that overdraws the account. The documents defined “item” to include ACH transactions and other instruments or instructions for paying, transferring, or withdrawing funds.
The parties disputed whether a payment resubmitted by a merchant was a new “item” or part of the original payment. HSBC argued that each presentation was a separate item and authorized a separate fee. Chambers argued that the term could refer to the payment she originally authorized, rather than each later collection attempt.
The court found both interpretations reasonable. It concluded that the agreements were ambiguous about what qualifies as an “item,” and that this ambiguity could not be resolved against Chambers at the motion-to-dismiss stage. The court therefore held that Chambers sufficiently alleged a breach-of-contract claim and denied HSBC’s motion as to that claim. The court emphasized that Chambers’s interpretation might not ultimately prevail, but was reasonable enough to allow the claim to proceed.
Other claims
The court dismissed the implied-covenant claim because it relied on the same alleged conduct as the contract claim and was therefore duplicative.
The court also dismissed the claim under New York General Business Law § 349. It found that Chambers had not alleged a materially misleading consumer-oriented act separate from the alleged failure to follow the account agreements. The court did not decide HSBC’s argument that the National Bank Act preempted that claim.
The court dismissed the unjust-enrichment claim because the parties had a valid contract, and Chambers did not question the contract’s validity or enforceability. The dispute concerned only the meaning of “item” within that contract.
Disposition
The court’s conclusion states that HSBC’s motion to dismiss was granted in part and denied in part. The breach-of-contract claim remained, while the implied-covenant, General Business Law § 349, and unjust-enrichment claims were dismissed. The court directed the parties to appear for a telephone conference on January 20, 2021, and directed the clerk to terminate the motion.
Read the full 11-page opinion on CourtListener, the free public archive maintained by the Free Law Project.