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Update I On June 4, 2012, a federal district court issued a decision finding that a plaintiff lacked constitutional standing to bring a claim for alleged violations of the fee-notice requirement under the Electronic Fund Transfer Act (EFTA). In Charvat v. First National Bank of Wahoo (link here), the United States District Court for the District of Nebraska held that the plaintiff lacked standing because he did not allege an injury in fact. ”¹ The court also stayed all proceedings in the case pending the U.S. Supreme Court’s decision in First American Financial Corp. v. Edwards, discussed below.

Update II On June 28, 2012, the United States Supreme Court issued its decision in First American Financial Corp. v. Edwards. Although expected to be an important decision in the development of standing jurisprudence, First American was largely a nonevent. The Supreme Court dismissed the case, stating without any explanation that “[t]he writ of certiorari [had been] improvidently granted” (link here). The upshot: for now, lower courts will be left to decide standing challenges—including those made in litigation under (EFTA)—without additional guidance from the Supreme Court. In addition, the Ninth Circuit’s decision holding that a plaintiff had constitutional standing to bring a claim under the Real Estate Settlement Procedures Act (RESPA) remains intact.

Update III On August 2, 2013, the Eighth Circuit reversed the lower court’s ruling in Charvat. According to the Eighth Circuit's decision:  

[W]e conclude Charvat . . . had standing to pursue his [EFTA] claims against Appellees based on the informational injury that he allegedly sustained. The district court concluded that because Charvat failed to allege some injury beyond the failure to receive an “on machine” notice, he had not suffered a cognizable injury in fact. We disagree. Decisions by this Court and the Supreme Court indicate that an informational injury alone is sufficient to confer standing, even without an additional economic or other injury." ²

Since this advisory was originally posted, other courts have also rejected standing arguments made by defendants in EFTA litigation.³ The lower court's decision in Charvat remains an outlier.

February 23, 2012
Advisory

Introduction In this installment of our advisory, we discuss the strategy of moving to dismiss a fee-notice litigation on the grounds that a plaintiff lacks constitutional standing to bring suit under EFTA. After explaining the standing doctrine, we argue that a plaintiff who has prior notice of an ATM fee cannot establish an injury in fact or causation. Next, we analyze two contrary cases decided under EFTA and propose a response to them based on controlling precedents. Finally, we look at First American Financial Corp. v. Edwards, a case pending before the United States Supreme Court, and recommend that defendants consider moving in the alternative for a stay of litigation.

Standing Doctrine Under Article III of the Constitution, federal courts can hear only disputes that raise an actual case or controversy between the parties. The purpose of this requirement is to restrict judicial power “to the traditional role of Anglo-American courts, which is to redress or prevent actual or imminently threatened injury to persons caused by private or official violation of law."⁴ To have standing, a plaintiff must demonstrate (1) that he or she suffered a concrete, particularized “injury in fact”; (2) that the defendant’s action caused the claimed injury; and (3) that the claimed injury would likely be “redressed by a favorable decision."⁵ Where any one of these elements is missing, a federal court lacks subject-matter jurisdiction and the case must be dismissed.⁶

No Injury in Fact There is an argument that a plaintiff claiming that a defendant failed to post physical signage of an ATM fee—even though the fee was electronically disclosed on the ATM screen—cannot make the injury-in-fact showing. Because the on-screen notice made the plaintiff aware of the fee, he or she was not misled or otherwise harmed by the absence of physical signage. Thus, in those circumstances, the plaintiff suffered no concrete, particularized injury in fact.

This argument is supported by cases decided outside of the EFTA context. For example, in Cargill, Inc. v. United States, the plaintiffs claimed that, by failing to give notice that an agency had been reestablished, the defendant violated regulations promulgated under the Federal Advisory Committee Act.⁷ According to the Fifth Circuit, while there may have been “technical violations of the [regulatory] notice rules,” the plaintiffs had actual notice of the agency’s continued operation because the plaintiffs had been meeting with the agency and its personnel.⁸ In light of that actual notice, the Fifth Circuit held that the plaintiffs suffered no injury in fact and “therefore lack[ed] standing to assert the claim at hand.⁹

Another example is Central Arizona Irrigation & Drainage District v. Lujan.¹⁰ which arose out of the Secretary of the Interior’s proposal to amend a water-supply contract to allow recharge of entitlements to groundwater.¹¹ The plaintiffs brought suit in the United States District Court for the District of Arizona claiming that the notice of the proposed amendment violated the Reclamation Reform Act because the notice did not identify the recharge provisions.¹² According to the court, however, the plaintiffs had “discussed [the recharge] provisions with the Department of the Interior on numerous occasions” and “had complete, actual knowledge about [those] provisions.”¹³

The parallels to fee-notice litigation are plain. For the same reason that there was no injury in fact in Cargill and Central Arizona, no injury in fact should be found where a fee-notice plaintiff had actual knowledge of an ATM fee. Where there was on-screen notice, any missing physical signage caused no “invasion of a legally protected interest that is both concrete and particularized[,] and actual or imminent, not conjectural or hypothetical."¹⁴

No Causation Beyond requiring proof of injury in fact, standing demands a causal connection between the claimed injury and the defendant’s actions.¹⁵ Where a plaintiff inflicts his or her own injury, the causal chain is thrown into question. As a leading treatise explains, “[t]olerance for self-inflicted injury is not boundless. At some point, standing may be denied because the injury seems solely—or almost solely—attributable to the plaintiff.”¹⁶ In the ordinary fee-notice case, the core “injury” was self-inflicted. Many plaintiffs hunt for non-conforming ATM signage for the sole purpose of commencing litigation. Moreover, using a modern ATM, a consumer must affirmatively agree to pay an ATM fee by pushing a button or on-screen prompt before the transaction can be completed. That type of voluntary conduct undercuts a plaintiff’s claim to have standing. 

Contrary EFTA Caselaw Defendants should be aware of two contrary cases decided under EFTA. The plaintiffs in In re: Regions Bank ATM Fee Notice Litigation¹⁷ and Kinder v. Dearborn Federal Savings Bank¹⁸ alleged that the defendants violated EFTA by failing to provide physical notice of ATM fees. In both cases, the defendants moved to dismiss, arguing plaintiffs lacked standing because the plaintiffs received on-screen notice of the fees. The district courts rejected that argument, holding that the missing physical signage was an EFTA violation, which itself serves as an Article III injury. In a passage followed by Kinder, the Regions court explained:

That Congress included two forms of damages—actual and statutory—is clear evidence that Congress intended to create a statutory right and a mechanism to redress violations [of EFTA]. Regardless of whether Plaintiffs were aware of the ATM fee, they were entitled to notice of the fee in the form prescribed by Congress . . . . Congress created a statutory right to a particular form of notice, and Plaintiffs allege that Defendant did not provide it. That is a concrete, particular injury.¹⁹ 

But the district courts nowhere recognized (much less analyzed) the following United States Supreme Court precedents establishing that a statutory violation—untethered to any harm caused by the challenged action—cannot create standing:

• Summers v. Earth Island Institute: “[T]he requirement of injury in fact is a hard floor of Article III jurisdiction that cannot be removed by statute."²⁰

• Raines v. Byrd: “Congress cannot erase Article III’s standing requirements by statutorily granting the right to sue to a plaintiff who would not otherwise have standing.”²¹

• Valley Forge Christian College v. Americans United for Separation of Church & State, Inc.: “Neither the Administrative Procedure Act, nor any other congressional enactment, can lower the threshold requirements of standing under Art. III."²²

Thus, despite the holding in Regions and Kinder, an EFTA claim made in a harm-free vacuum should fall below the “hard floor of Article III jurisdiction.”²³

First American In First American Financial Corp. v. Edwards²⁴ the Supreme Court of the United States is poised to issue a decision that that will likely crystallize whether cases like Regions and Kinder can survive scrutiny. The plaintiff commenced First American alleging that the defendants engaged in a kickback scheme when they sold her title insurance, thereby violating RESPA.²⁵ The defendants moved to dismiss, arguing that the plaintiff lacked Article III standing because she alleged no insurance overcharge or any other injury in fact. The lower court denied the motion²⁶ and the Ninth Circuit affirmed.²⁷ Traveling the same path as the Regions and Kinder courts, the Ninth Circuit reasoned that “[t]he injury required by Article III can exist solely by virtue of statutes creating legal rights, the invasion of which creates standing.²⁸ The court then held: “Because [RESPA] does not limit liability to instances in which a plaintiff is overcharged, we hold that Plaintiff has established an injury sufficient to satisfy Article III."²⁹

The defendants appealed to the United States Supreme Court.³⁰ Briefing was completed on November 10, 2011 (briefs available here), and oral argument was held on November 28, 2011 (transcript available here). No decision has yet been issued.

However First American is decided, the case is likely to impact litigation under EFTA. Like the typical fee-notice plaintiff, the plaintiff in First American claims that a statutory violation alone is sufficient to establish Article III jurisdiction. That reasoning came under fire during oral argument. As Chief Justice Roberts remarked:

You said violation of a statute is injury in fact. I would have thought that would be called injury in law. And when we say . . . that what is required is injury in fact, I understand that to be in contradistinction to injury in law. And when you tell me all that you’ve got . . . is violation of the statute, that doesn’t sound like injury in fact.³¹

Fee-notice defendants will have reason to cheer if the Ninth Circuit is reversed because it misconstrued Article III’s injury-in-fact requirement. But in any event, all EFTA litigants will want to pay attention to what the Court ultimately decides. The case can be tracked here or here.

Stay of Litigation In light of First American, a fee-notice defendant may want to couple its motion to dismiss with an alternative request for a stay of the litigation. This was the approach taken by the defendant in Mabary v. Hometown Bank, N.A..,³² a fee-notice case commenced as a putative class action in the United States District Court for the Southern District of Texas. After the court certified a class,³³ the defendant moved to dismiss the case for lack of Article III jurisdiction or, alternatively, to stay the case pending the outcome of First American.³⁴ The court issued orders (without a written decision) decertifying the class and staying the case.³⁵

Conclusion The key for defendants is to persuade courts that, absent actual injury, a technical EFTA violation cannot establish standing. The precedents cited above, including Summers and Cargill, should aid a defendant who makes that argument. Whether First American will provide defendants with additional ammunition is something we will soon learn (in all likelihood, within the next few months).


*        *        *

¹ Charvat v. First Nat. Bank of Wahoo, 8:12CV97, 2012 WL 2016184 (D. Neb. June 4, 2012).

² No. 12-2790, 2013 WL 3958300, at *3 (8th Cir. Aug. 2, 2013). 

³ Alicea v. Citizens Bank of Pennsylvania, No. 12-1750, 2013 WL 1891348 (W.D. Pa. May 6, 2013); Frey v. eGlobal ATM, No. 3:11-CV-2598-L, 2013 WL 1091237 (N.D. Tex. Mar. 15, 2013); Bell v. First Bank Richmond, No. 1:12-CV-00965, 2013 WL 123615 (S.D. Ind. Jan. 7, 2013); Mabary v. Hometown Bank, N.A., 888 F. Supp. 2d 857 (S.D. Tex. 2012); Johnson v. Rustad & Associates, Inc., No. 2-CV-0926, 2012 WL 5994933 (D. Minn. Nov. 30, 2012); and Zabienski v. ONB Bank & Trust, No. 12–CV–0130, 2012 WL 3583020 (N.D. Okla. Aug. 20, 2012).

⁴ Summers v. Earth Island Inst., 555 U.S. 488, 492 (2009).

⁵ Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (internal quotations omitted). 

⁶ See, e.g., id.; Ford v. NYLCare Health Plans of Gulf Coast, Inc., 301 F.3d 329, 332 (5th Cir. 2002). 

⁷ 173 F.3d 323, 332 (5th Cir. 1999).

⁸ Id.

⁹ Id.

¹⁰ 764 F. Supp. 582 (D. Ariz. 1991).

¹¹ Id. at 585.

¹² Id. at 595.

¹³ Id.

¹⁴ Cargill, 173 F.3d at 329 (internal quotations omitted) (citing Lujan, 504 U.S. at 560).

¹⁵ Lujan, 504 U.S. at 560-61.

¹⁶ 13A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3531.5 (3d ed. 1997) (collecting cases).

¹⁷ No. 2:11–MD–2202, 2011 WL 4036691 (S.D. Miss. Sept. 12, 2011).

¹⁸ No. 10-12570, 2011 WL 6371184 (E.D. Mich. Dec. 20, 2011).

¹⁹ Regions, 2011 WL 6371184, *4 (emphasis in original).

²⁰ 555 U.S. at 497.

²¹ 521 U.S. 811, 820 n.3 (1997).

²² 454 U.S. 464, 487 n.24 (1982).

²³ Summers, 555 U.S. at 497.

²⁴ No. 10-708, (U.S.) (cert. granted in part by 131 S. Ct. 3022).

²⁵ Edwards v. First Am. Corp., 517 F. Supp. 2d 1199, 1201 (C.D. Cal. 2007).

²⁶ Id. at 1204.

²⁷ 610 F.3d 514, 518 (9th Cir. 2010).

²⁸ Id. at 517 (internal quotations and citations omitted).

²⁹ Id.

³⁰ 131 S. Ct. 3022.

³¹ Tr. of Oral Argument at 32-33, First Am., No. 10-708 (U.S.).

³² No. 4:10-CV-3936 (S.D. Tex. filed Oct. 19, 2010).

³³ 2011 WL 5864325 (S.D. Tex. Nov. 22, 2011).

³⁴ No. 4:10-CV-3936 (S.D. Tex.) (ECF No. 43).

³⁵ No. 4:10-CV-3936 (S.D. Tex.), Minute Entry dated Dec. 5, 2011, and Order dated Dec. 21, 2011 (ECF No. 52).

This advisory was prepared by Eric P. Magnuson, a member of the Business Litigation and Banking and Financial Services practice groups at Nutter McClennen & Fish LLP. For more information, please contact Eric at 617.439.2324 (or emagnuson@nutter.com) or your Nutter attorney at 617.439.2000.

This advisory is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.