Thompson v. Municipal Credit Union

Background

Elsa Thompson sued Municipal Credit Union as a proposed class representative. She maintained a FasTrack Checking Account and alleged that Municipal Credit violated the account contract by charging multiple insufficient-funds fees when a single payment was presented more than once. Thompson alleged that she authorized a $204.86 PayPal payment in February 2017, that the payment was rejected for insufficient funds, and that Municipal Credit charged a fee. When PayPal presented the same payment again about a week later and it was again rejected, Municipal Credit charged a second fee. She alleged other similar charges between February and July 2017.

The contract consisted of an Account Agreement and a Fee Schedule. The FasTrack Checking section said that a $32 service charge would be assessed each time an authorized automated clearinghouse debit request or bill payment, or a check drawn by the customer, was presented and returned unpaid. Elsewhere, under “Other Fees and Charges,” the Fee Schedule described an insufficient-funds fee as $32 “per item.” Thompson argued that these provisions, read together, limited Municipal Credit to one fee for each payment authorization or check. Municipal Credit argued that the “per item” language did not apply to FasTrack accounts and that the FasTrack provision allowed a fee each time a payment was presented and returned unpaid.

Thompson also alleged that the practice disproportionately burdened racial and ethnic minorities, older people, and younger people, but the opinion states that her action was for breach of contract. In her opposition, she said she was no longer pursuing a claim for breach of the duty of good faith and fair dealing, so the court considered only the breach-of-contract claim.

Legal standard

Municipal Credit moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not plead enough facts to state a legally plausible claim. The court accepted well-pleaded factual allegations as true but was not required to accept a contract interpretation that the agreement’s text plainly contradicted.

Under New York law, a breach-of-contract claim requires an agreement, the plaintiff’s adequate performance, the defendant’s breach, and damages. The court also applied rules requiring it to read the contract as a whole, give terms their ordinary meaning, avoid making provisions redundant, and give a specific provision priority over a conflicting general provision.

Court’s analysis

The court held that the “Other Fees and Charges” provision did not apply to FasTrack Checking Accounts because the FasTrack section already specifically described the insufficient-funds fee for that account type. The court reasoned that applying the separate “per item” language to FasTrack accounts would make the FasTrack provision unnecessary and would give insufficient effect to the word “other.” The FasTrack provision was specific, while the “Other Fees and Charges” provision was general.

The court further held that the FasTrack provision was unambiguous. Its wording made the presentation and return of an authorized debit request, bill payment, or check unpaid the event that triggered a fee, and it stated that the fee applied “each time” that event occurred. The court concluded that Municipal Credit could charge a new fee each time the payment was presented and returned unpaid, even if it was the same payment that had previously been rejected. The court therefore ruled that the second fee on Thompson’s PayPal transaction was authorized by the contract.

The court did not decide the meaning of the “per item” language in the “Other Fees and Charges” section because it determined that provision did not apply to FasTrack accounts. It also considered supplemental authority submitted by Thompson and denied Municipal Credit’s motion to strike that authority, finding that it did not add new arguments or prejudice Municipal Credit and did not affect the result.

Disposition

The court granted Municipal Credit’s motion to dismiss. It dismissed Thompson’s complaint with prejudice because the unambiguous contract language made amendment futile. The court directed the Clerk to close the motion to dismiss, the motion to strike, and the case.