Gutierrez v. Wells Fargo Bank

Wells Fargo Bank (Wells Fargo) (defendant) processed debit card charges nightly and imposed fees for each transaction that resulted in an overdraft. If a customer made multiple charges that resulted in overdrafts on his account, he was charged multiple fees. Prior to April 2001, Wells Fargo used a low-to-high posting order to process debit-card charges, meaning it posted each customer’s daily transactions from lowest to highest dollar amount. In April 2001, Wells Fargo began using a high-to-low posting order, posting transactions from highest to lowest dollar amount. This change maximized the number of overdrafts, as the largest charges were deducted from a customer’s account first, meaning that large charges that caused an overdraft were followed by smaller charges that resulted in additional overdraft fees. A class of Wells Fargo customers who had incurred overdraft fees because of the posting-order change (collectively, the plaintiff class) (plaintiffs) filed a lawsuit against Wells Fargo in federal district court, alleging that Wells Fargo violated California’s Unfair Competition Law by adopting the high-to-low posting order to maximize overdraft fees. The plaintiff class also argued that Wells Fargo led its customers to believe that their debit card transactions would be posted in the order that they were made, hiding its actual high-to-low posting order. The district court held that Wells Fargo’s actions were unfair and misleading under California law. The district court issued a permanent injunction prohibiting Wells Fargo from using a high-to-low posting order and requiring Wells Fargo to either use a low-to-high or chronological posting order. Wells Fargo appealed, arguing that the National Bank Act of 1864—which created the Office of the Comptroller of the Currency (OCC), a federal agency tasked with overseeing national banks—preempted the plaintiff class’s state-law claims.