U.S. District Judge James Lawrence King in Miami said customers with debit cards attached to checking accounts aren’t compelled to use arbitration rather than class-action lawsuits, as the banks argued. A U.S. Supreme Court decision in April on arbitration agreements for AT&T Inc. wireless customers must be applied case by case, the judge said.
Arbitration agreements for SunTrust, M&T, Regions Financial Corp. (RF) and Branch Banking & Trust Co. are “unconscionable” and can’t be enforced, King said in an opinion made public today. He said the Supreme Court ruling in AT&T Mobility LLC v. Concepcion didn’t require arbitration in every case.
“Concepcion only said that you don’t knock out arbitration automatically,” Aaron Podhurst, the lead plaintiffs’ lawyer, said in an interview. “Concepcion said it’s a fact issue, so Judge King applied the facts. We have Judge King finding that in four different states, the arbitration agreements are unconscionable.”
The litigation before King involves customers at more than 30 banks that were sued over their overdraft-fee policies. The customers said the banks reorder debit-card transactions in their computers to maximize overdraft fees. They say such fees are processed from highest dollar amount to lowest, rather than in chronological order of purchases.
Mike McCoy, a spokesman for Atlanta-based SunTrust, declined to comment about the ruling. An attorney for Buffalo, New York-based M&T, James Dunbar, declined to comment.
“The court’s order represents a tremendous victory for consumers in litigation of national significance and at a time when the ability of consumers to stop corporate misconduct has been placed in question by the Concepcion decision,” plaintiffs’ attorney Michael Sobol of Lieff Cabraser Hiemann & Bernstein LLP said in a statement.
The plaintiffs’ lawyers argued that forcing customers into arbitration would effectively bar millions of them from pursuing claims individually because they aren’t worth the effort. Bank of America Corp. (BAC), the biggest U.S. bank, in February agreed to pay $410 million without admitting liability to settle overdraft litigation.
King previously ruled that none of the banks could force customers into arbitration. A federal appeals court told the judge to reconsider in light of the Concepcion decision.
The case is In Re Checking Account Overdraft Litigation, 09-cv-02036, U.S. District Court, Southern District of Florida (Miami).
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