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Ninth Circuit:
‘Balance Inquiry’ Refers to Customer-Initiated Transaction
Opinion Says Ordinary Meaning of Bank of America’s Contract Provision Allowing Fees for Queries on Third-Party ATMs Does Not Include Requests by Cash Machine Without Patron’s Consent
By Kimber Cooley
Staff Writer
The Ninth U.S. Circuit Court of Appeals has held that a bank’s contract provision allowing for its charging of fees for any balance inquiries made at third-party ATMs only contemplates customer-initiated queries and does not permit additional payments for electronic requests made by the cash machine to the financial institution without the patron’s knowledge or consent.
The dispute over the interpretation of “balance inquiry” came about in a proposed class action filed by three Bank of America (“BOA”) customers in February 2019. The complaint alleges that the institution improperly charges two fees—each in the amount of $2.50—for a single balance inquiry at certain non-BOA ATMs and asserts causes of action for breach of contract and the covenant of good faith and fair dealing.
The third-party ATMs pass along to BOA a customer’s express request for a balance inquiry—a practice not challenged by plaintiffs—but also send a second report of a query to the bank if the user elects to print the results and continue with the transaction.
District Court Judge Jeffrey Miller of the Southern District of California on April 4, 2022 declined to certify the class and granted summary judgment in favor of the defendant as to all counts, finding that the plaintiffs consented to the second fee by using the third-party ATM. One of the plaintiffs—Brittany Covell—appealed.
Circuit Judge Ronald M. Gould authored the opinion, filed Monday, reversing the judgment in favor of Bank of America on the breach of contract claim and vacating the denial of class certification. Gould wrote:
“We conclude that the ordinary and popular meaning of ‘balance inquiry’ requires an objectively clear customer request for balance information from the ATM. Only then would it be reasonable for a bank to charge its customers a balance inquiry fee.”
Circuit Judge Salvador Mendoza Jr. and Senior Sixth U.S. Circuit Judge Ronald Gilman, sitting by designation, joined in the opinion.
Bank Agreement
Covell’s agreement with Bank of America (“BOA”) includes the following provision:
“When you use an ATM that is not prominently branded with the Bank of America name and logo, you may be charged a fee by the ATM operator or any network used and you may be charged a fee for a balance inquiry even if you do not complete a fund transfer. We may also charge you fees.”
A fee schedule provides for a “Non-Bank of America ATM Fee” of “$2.50” per withdrawal, transfer, and balance inquiry at third-party ATMs.
Covell moved to certify the class of “[a]ll Bank of America, N.A., checking account holders in the United States who since May 1, 2018 were assessed two (2) out-of-network fees for a single balance inquiry undertaken at FCTI, Inc.’s ATM machines located in 7 Eleven stores.”
Competing Definitions
Gould noted that the bank agreement does not define “balance inquiry” and the parties offer competing definitions for the term. He explained:
“Plaintiff’s interpretation allows a customer to be charged for a ‘balance inquiry’ under the contract only if it is objectively clear that the customer requested balance information from the ATM—for example, by selecting ‘Yes’ in response to a prompt reading ‘Would you like to view your Account Balance?’ Plaintiff thus characterizes a ‘balance inquiry’ as a customer-initiated transaction in which the customer inquires about her balance.
“In sharp contrast, BOA’s interpretation, adopted by the district court, allows BOA to charge a customer for a ‘balance inquiry’ anytime that an ATM sends an electronic message to BOA requesting balance information, regardless of what the customer pressed on the ATM screen. BOA and the district court thus conceive of a ‘balance inquiry’ as an ATM-initiated transaction that occurs whether or not a customer makes any inquiry at all.”
In analyzing the proposed definitions, the jurist pointed out that, under California law, terms must be understood in their ordinary and popular sense. He reasoned that the definition adopted by Miller was a “technical definition” and wrote:
“The district court’s interpretation of ‘balance inquiry,’ characterized to include an inquiry made by the ATM computer, does not represent the ‘ordinary and popular’ meaning of the term….[A]dopting this interpretation, the district court assumed that a layperson would be well-versed in the electronic transmittals that occur between the ATM and BOA. In the district court’s view, a layperson reading BOA’s contract would understand that ‘balance inquiry’ could not refer to anything other than these electronic transmittals. We conclude that these assumptions are unreasonable and do not plausibly represent a layperson’s understanding of ‘balance inquiry.’ ”
He continued:
“In contrast, Plaintiff’s interpretation—that a ‘balance inquiry’ occurs when a customer objectively makes a request for balance information—aligns with the ordinary and popular meaning of the term….A reasonable consumer would understand—without need for an expert report—that by responding ‘Yes’ to the prompt ‘Would you like to view your Account Balance?’, she is inquiring about her balance information. A customer reading the Account Documents would naturally associate the term ‘balance inquiry’ with this familiar ATM transaction.”
Whole Contract
Gould looked to the entirety of the agreement and noted that courts prefer a contractual interpretation that gives effect to all provisions over one that renders part of the document superfluous or inexplicable.
Miller extrapolated consent to the double fees from the contractual provision providing that “[w]hen you use an ATM that is not prominently branded with the Bank of America name and logo…you may be charged a fee for a balance inquiry even if you do not complete a fund transfer.”
Disagreeing, Gould opined:
“The district court ignored the phrase ‘We…may also charge you fees’ at the end of the Deposit Agreement provision. This phrase is critical. A statement that ‘[BOA] may also charge you fees’ indicates that the preceding ‘When you use’ language does not refer to BOA fees. If the ‘When you use’ language referred to fees that BOA may charge, then the words ‘[BOA] may also charge you fees’ would be superfluous or inexplicable.”
He added:
“A more natural reading of the provision giving effect to all its parts is that the first (“When you use”) sentence refers to fees charged by ATM operators, and the second sentence refers to BOA fees that are detailed in a separate provision.”
The jurist concluded that Miller’s interpretation of the contract produces absurd results, remarking:
“The district court’s reasoning suggests that a customer ‘implicitly…consent[s]’ to fees associated with an ATM transaction by ‘using’ the ATM, even if the customer cannot reasonably know that his actions are generating fees….Under this interpretation, a customer’s use of an ATM gives a blank check to BOA for any fees BOA decides to charge.”
Gould was unpersuaded by BOA’s assertion that it should not be held responsible for fees generated by customer responses on ATMs over which it has no control. He said that “BOA’s control or lack of control over the ATM Operators does not relieve BOA of its contractual duty to charge only those fees permitted by the Account Documents.”
Class Certification
Miller denied the motion for class certification because he concluded that individual considerations—such as the subjective intent of each class plaintiff, variations in the ATM prompts, and differences in state laws applicable to different members of the proposed class—predominated over common questions.
Addressing this concern, Gould said:
“Our interpretation of ‘balance inquiry’ ameliorates the ‘subjective intent’ concern. Our interpretation of the term does not require probing the subjective intent of individual ATM customers. For this reason, we vacate the district court’s denial of class certification. It is unclear how our holding might affect the other two concerns identified by the district court. We remand for the district court to reconsider class certification.”
Gould reasoned that the plaintiff’s assertion that the bank breached the covenant of good faith and fair dealing by abusing the discretion provided by the phrase “[w]e may also charge you fees” was duplicative of the breach of contract claim and affirmed the grant of summary judgment as to that cause of action.
The case is Schertzer v. Bank of America, 23-55104.
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