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Lossia v. Flagstar Bancorp, Inc.

United States District Court, E.D. Michigan, Southern Division

March 29, 2017

JAMES LOSSIA, JR. and ALEXANDRA PLAPCIANU, individually and on behalf of others similarly situated, Plaintiffs,
v.
FLAGSTAR BANCORP, INC., a/k/a FLAGSTAR BANK, Defendant.

          ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT [DOC. 62]

          GEORGE CARAM STEEH UNITED STATES DISTRICT JUDGE

         This matter comes before the court on defendant Flagstar Bancorp, Inc.'s (“Flagstar”) motion for summary judgment of plaintiffs James Lossia and Alexandra Plapcianu's third amended complaint. The court heard oral argument on Flagstar's motion on March 27, 2017. For the reasons set forth below, Flagstar's motion for summary judgment is GRANTED.

         FACTUAL BACKGROUND

         Flagstar is a federally chartered bank incorporated in the State of Michigan. The plaintiffs opened a joint checking account on December 6, 2014 and signed Flagstar's signature card acknowledging that they received and agreed to the written terms of their account on January 15, 2015. Flagstar's Terms and Conditions and Disclosure Guide (“Agreement”) governs plaintiffs' relationship with Flagstar. The Agreement contains the following provision:

Payment Order of Items
. . . .
Our policy is to process wire transfers, online banking transfers, in branch transactions, ATM transactions, debit card transactions, ACH transactions, bill pay transactions and items we are required to pay such as returned deposit items, first - as they occur on their effective date for the business day on which they are processed. We process checks and similar items second - in the order in which they are received for the business day on which they are processed. . . . .

         ACH transactions are electronic, automated clearinghouse transactions. Flagstar explained that it receives ACH transactions in batch format from the Federal Reserve and then processes the ACH transactions in the order set by the Federal Reserve. (Barlow dep. at 134-36). The Federal Reserve, in turn, receives the ACH transaction files from the merchants with whom the transactions were initiated. Flagstar does not re-sequence the ACH transactions it receives from the Federal Reserve. Flagstar began its current practice of processing ACH transactions in this way in 2012. (Barlow dep. at 151-52).

         Prior to 2012, Flagstar's policy was to reorder checks and ACH transactions from largest to smallest. (Barlow dep. at 12). Defendant cites to Flagstar's Operating Statements to show that in 2012 Flagstar experienced a significant decline in income from deposit fees and charges. In September, 2014, Flagstar undertook a new project which implemented a “Posting Modification” relating to overdrafts. According to a confidential document produced in discovery, Flagstar implemented “OD & Bounce Re-launch” in the first quarter of 2015 and saw an increase in income from deposit fees and charges. It is against this backdrop that plaintiffs' bring their lawsuit for violations of the Deposit Agreement.

         Between February 25 and February 28, 2015, plaintiff Lossia initiated ten ACH transactions. On March 2, 2015, at 6:20 a.m., Lossia checked his transaction history online with Flagstar and observed that the ten transactions were listed as “pending” in a different order than the order in which he initiated them. Lossia knew he did not have enough money in the account to cover the transactions. He checked his online transaction history again at 11:58 a.m. and noticed that the ten previously “pending” transactions had now posted and were in a different order than earlier in the day. In addition, Flagstar had assessed seven overdraft fees. The same day, Lossia called Flagstar and in a 28 minute call complained that his transactions were processed in a different order than the order in which he initiated them and that he was charged more than the maximum number of five permitted insufficient fund (“NSF”) fees per day. During this call, Lossia told the Flagstar representative that he intended to charge the Google Wallet transaction to his credit card, but mistakenly charged it to his Flagstar account. (Def. Ex. F, phone call transcript and Ex. G, audio file) Two days later, the same transactions appeared online in yet a different order and still showed the seven NSF fees. When plaintiffs received their end of cycle bank statement, the transactions were shown in still a different order and an eighth overdraft fee was charged on March 2, 2015 on a physical check. The statement shows that Flagstar reversed three of the eight disputed NSF fees on March 3, 2015.

         Plaintiffs' March 2, 2015 bank statements show the order in which Flagstar processed the ten ACH transactions at issue:

□ $2, 825 to GOOGLE GOOGLE.COM/CH - WALLET/TOP
□ $500 to AMEX EPayment ER AM - ACH PMT
□ $200 to CHASE - EPAY
□ $450 to USAA.COM PAYMNT ACH ...

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