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Azose v. Washington Mutual Bank

December 3, 2008


The opinion of the court was delivered by: Hurley, Senior District Judge


Plaintiffs Solomon Azose and Natalie Azose, individually and on behalf of all persons similarly situated, ("Plaintiffs"), filed the present class action against Defendants Washington Mutual Bank ("Washington Mutual"), J.P. Morgan Chase & Co. and Chase Manhattan Banking Corporation ("Chase"),*fn1 (collectively "Defendants"), alleging, inter alia, violations of the Electronic Fund Transfer Act ("EFTA"), 15 U.S.C. §§ 1693 et seq., and its implementing regulations, 12 C.F.R. § 205 et seq. Defendants have each moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). For the reasons stated below, Defendants' motions are granted, and Plaintiffs are given thirty days to amend their pleading.


I. The Complaint

The following facts are taken from the Complaint and are presumed true for purposes of this motion.

Plaintiffs were banking customers of Washington Mutual with checking and savings accounts at the bank ("Washington Mutual accounts"). (Compl. ¶¶ 2, 7; Ex. A.) On three separate occasions in June 2007 and July 2007, Plaintiffs used an automated teller machine ("ATM") at a Chase location in Lawrence, New York to conduct balance inquiries on their Washington Mutual accounts. (Id. ¶¶ 3-6; 10, 12, 14.) Washington Mutual charged an "ATM Balance Inquiry Fee" to Plaintiffs for each transaction. (Id. ¶¶ 9-14; Ex. A.) At the time Plaintiffs conducted each of the balance inquiries, the Chase ATM did not provide notice that Washington Mutual would impose a fee for the transaction. (Id. ¶¶ 15-17.) In addition, on each of these occasions, the Chase ATM did not disclose the amount of the fee Washington Mutual would charge Plaintiffs nor did the Chase ATM advise Plaintiffs that they could elect to discontinue the transaction based upon any fees. (Id. ¶¶ 18-26.)

Plaintiffs do not allege that they have a checking, savings or other consumer asset account at Chase, nor do they allege that Chase charged them a fee for any of the transactions.

II. Procedural Background

Plaintiffs commenced this action in New York State Supreme Court, Queens County, on October 31, 2007 alleging principally that Defendants violated the EFTA and 12 C.F.R. § 205.16 of Regulation E, 12 C.F.R. §§ 205.1-205.18 ("Regulation E") by their failure to comport with the Act's notice and fee requirements. Defendant Washington Mutual removed this matter to this Court on November 30, 2007 pursuant to 28 U.S.C. § 1441(b).

III. Claims Asserted in the Complaint

The Complaint asserts five causes of action: (1) breach of contract; (2) common law fraud; (3) violation of New York General Business Law §§ 349 and 350; (4) unjust enrichment; and (5) violation of the EFTA and 12 C.F.R. § 205.16 of Regulation E. (Compl. ¶¶ 45-75.) Plaintiffs withdraw the first four causes of action against Defendants. (Pls.' Opp'n Mem. at 2.) Accordingly, these claims are hereby dismissed.

Count 5, the remaining cause of action, alleges principally that Defendants assessed fees against Plaintiffs for conducting balance inquiry transactions at the Chase ATMs, and "the ATM[s] by which Plaintiffs checked their banking balances did not provide notice that a fee would be charged for such balance inquiries or of the amount of such fees" in violation of 12 C.F.R. § 205.16 of Regulation E of the EFTA. (Pls.' Opp'n Mem. at 1-2.) Defendants now move by the instant motions to dismiss the Complaint pursuant to Rule 12(b)(6) for failure to state a claim on which relief can be granted under the EFTA.


I. Motion to Dismiss: Legal Standards

A complaint is subject to dismissal under Rule 12(b)(6) where it "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The test is whether the plaintiff is entitled to offer evidence to support his claim, not whether he is ultimately likely to prevail. Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998). A court must liberally construe the claims and "accept[] all factual allegations in the complaint and draw[] all reasonable inferences in the plaintiff's favor." ATSI Commcn's, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).

Rule 8(a) provides that a pleading shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court recently addressed the pleading standard applicable in evaluating a motion to dismiss under Rule 12(b)(6). In Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007), the Court disavowed the well-known statement in Conley v. Gibson, 355 U.S. 41 (1957) that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. at 45-46. Instead, to survive a motion to dismiss under Twombly, a plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." 127 S.Ct. at 1974.

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).

Id. at 1964-65 (citations and internal quotation marks omitted).

The Second Circuit has stated that Twombly does not require a universally heightened standard of fact pleading, but "instead requir[es] a flexible 'plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007). In other words, Twombly "'require[s] enough facts to 'nudge [plaintiffs'] claims across the line from conceivable to plausible.'" In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007) (quoting Twombly, 127 S.Ct. at 1974). Although Twombly did not make clear whether the plausibility standard applies beyond the antitrust context, the Second Circuit has "declined to read Twombly's flexible 'plausibility standard' as relating only to antitrust cases." ATSI Commn's, Inc., 493 F.3d at 98 n.2.

In deciding a motion to dismiss pursuant to Rule 12(b)(6), a court must look to the allegations on the face of the complaint, but may also consider "[d]ocuments that are attached to the complaint or incorporated in it by reference." Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007); Gillingham v. GEICO Direct, 2008 WL 189671, at *2 (E.D.N.Y. Jan. 18, 2008) (noting that a court considering a motion to dismiss "must limit itself to the facts stated in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint") (internal quotation marks omitted).

II. Statutory and Regulatory Background

The EFTA was enacted as part of the comprehensive Consumer Credit Protection Act, Pub. L. No. 95-630 § 2001, 92 Stat. 3641 (1978) (codified as amended at 15 U.S.C. § 1601 et seq.). Its purpose was to protect consumers by providing a "basic framework establishing the rights, liabilities, and responsibilities of participants in electronic transfer systems." 15 U.S.C. § 1693(b); see Flores v. Diamond Bank, 2008 WL 4861511, at *1 (N.D. Ill. Nov. 7, 2008); Voeks v. Pilot Travel Ctrs., 560 F. Supp. 2d 718, 720 (E.D. Wis. 2008); see also Household Finance Realty Corp. v. Dunlap, 834 N.Y.S.2d 438, 442 (N.Y. Sup. Ct. 2007). Pursuant to the EFTA, an operator of an ATM is required to provide notice of the fees charged to consumers. Id. Specifically, 15 U.S.C. § 1693b(d) states in pertinent part:

(3) Fee disclosures at automated teller machines

(A) In General

The regulations prescribed under paragraph (1) shall require any automated teller machine operator who imposes a fee on any consumer for providing host transfer services to such consumer to provide notice in accordance with subparagraph (B) to the consumer (at the time the service is provided) of--

(i) the fact that a fee is imposed by such operator for providing the service; and

(ii) the amount of any ...

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