The meaning of the word "item" was the definitive factor in the Business Court’s decision last week in Gay v. People’s Bank, 2015 NCBC 59.
The case was an attempted class action involving claims against the Bank for allegedly improperly imposing overdraft fees on checking accounts. The overdraft fees arose due to the Bank’s "high to low posting" of ATM charges.
The Bank did not deduct debit card charges from their accounts in the chronological order in which they were incurred, but instead re-ordered them from the largest debit charge to the smallest. This practice, according to the Plaintiff, had the effect of more quickly reducing the funds in his account and thereby "running up" the overdraft charges collected by the Bank. He sought to represent a class of the Bank’s customers who had incurred overdraft charges.
The Bank’s position was that its high to low ordering was plainly disclosed in its account agreements. That seemed pretty clear. One document said:
Payment Order of Items – The law permits us to pay items (such as checks or drafts) drawn on your account in any order. To assist you in handling your account with us, we are providing you with the following information regarding how we process the items that you write. When processing items drawn on your account, our policy is to pay them according to the dollar amount. We pay the largest items first. The order in which items are paid is important if there is not enough money in your account to pay all of the items that are presented. Our payment policy will cause your largest, and perhaps more important, items to be paid first . . . , but may increase the overdraft or NSF fees you have to pay if funds are not available to pay all of your items.
Op. ¶23 (quoting the Bank’s Terms and Conditions).
The specificity of that language makes one wonder how the Plaintiff class ever got past a Motion for Judgment on the Pleadings. But it did exactly that, in an unpublished Order from former Business Court Judge Murphy in April 2014.
What preclusive effect did that Order have on Judge Bledsoe’s ruling? None. But hold it, if it does not have that effect, doesn’t that mean that one Superior Court Judge can overrule another? And we all know that is not allowed. Judge Bledsoe wrote:
North Carolina law is clear . . . that ‘denial of a previous motion for judgment on the pleadings made under [Rule 12(c)] does not preclude the trial court from granting a subsequent motion for summary judgment.’
Op. ¶20 (quoting Rhue v. Pace, 165 N.C. App. 423, 426, 598 S.E.2d 662, 664-65 (2004)).
Plaintiff tried to stir up ambiguity on whether the disclosure regarding the ordering of "items" included debit card transactions, given its specific reference to checks and draft and its lack of mention of debits.. But Judge Bledsoe said that "[t]he law is clear . . . that the Court will not read an ambiguity into a contract where none exists." Op. ¶26. Moreover, it is settled that "parties can differ as to the interpretation of language without its being ambiguous." Op. Par. 26 (quoting Walton v. City of Raleigh, 342 N.C. 879, 881-82, 467 S.E.2d 410, 412 (1996).
He concluded that the phrase "such as checks or drafts" following the word "items" was "an unambiguous phrase of inclusion and not an exhaustive list of the specific ‘items’ embraced by the Bank’s policy." Op. ¶27. He actually went even further, ruling that the term "’item,’ as used here, plainly contemplates any debit to an account — whether by check, draft, ACH payment, wire, online, mobile device, voice response, debit transaction or other withdrawal." Op. ¶28. That construction of the word, he said, was consistent with the "plain, ordinary and popular use of the word ‘item.’" as used in Webster’s Dictionary Op. ¶28.
If you are worried about how your own bank handles overdraft fees for the use of your ATM card, you don’t have to be. Or, if you are thinking you’d like to sue banks over overdraft charges, it’s probably too late. The Office of the Comptroller of the Currency put Regulation E in place in 2010. Regulation E governs how banks must deal with overdraft charges from ATM cards.