## Facts

- Wells Fargo Bank, N.A. assessed overdraft fees on debit-card transactions using a “posting order” to determine the sequence in which daily debits were deducted from customer checking accounts.
- Before April 2001, Wells Fargo generally used a low-to-high posting order; in April 2001 it switched to a high-to-low posting order for debit-card transactions.
- High-to-low posting deducted larger transactions first, which could convert a single overdraft into multiple overdrafts and increase overdraft-fee assessments.
- The district court found Wells Fargo adopted high-to-low posting primarily to increase overdraft fees and revenue from overdraft/returned-item customers.
- Plaintiffs alleged Wells Fargo’s communications led customers to expect chronological or purchase-sequence posting; the district court found the bank reinforced that expectation while obscuring its high-to-low practice.
- From 2005 to 2007, Wells Fargo assessed more than $1.4 billion in overdraft fees.
- A certified class sued under California’s Unfair Competition Law (UCL), and after a bench trial the district court found the practice “unfair” and “fraudulent,” enjoined high-to-low posting, and ordered $203 million in restitution.
- Wells Fargo appealed, asserting National Bank Act (NBA) and OCC-regulation preemption, among other challenges, and later sought to compel arbitration after AT&T Mobility LLC v. Concepcion.

## Issues

1. Whether the NBA preempts applying the UCL “unfair” prong to a national bank’s choice of debit-transaction posting order that affects overdraft-fee revenue.
2. Whether the NBA preempts state-law theories that impose affirmative disclosure requirements or liability for failure to disclose details about posting order.
3. Whether the NBA preempts UCL “fraudulent” prong claims based on affirmative misrepresentations about posting order.
4. Whether Concepcion required vacating the judgment and compelling arbitration based on the deposit agreement.

## Decision

- The Ninth Circuit affirmed in part, reversed in part, and remanded.
- The court declined to vacate the judgment under Concepcion and denied Wells Fargo’s post-judgment request to compel arbitration.
- The court held that transaction posting order, as used to determine overdraft fees, is a federally authorized “pricing” decision and that the NBA preempts UCL “unfair” prong liability to the extent it regulates or dictates posting order.
- The court held the NBA preempts state-law theories imposing affirmative disclosure requirements and theories premised on failure to disclose the posting order.
- The court held the NBA does not preempt generally applicable state-law claims based on affirmative misrepresentations under the UCL’s “fraudulent” prong.
- The court vacated relief to the extent it rested on preempted theories (including the injunction barring high-to-low posting and restitution tied to the “unfair” prong) and remanded to determine what relief, if any, was supported solely by the surviving misrepresentation theory.

## Legal Principles

- Under the NBA and OCC regulations, state law is preempted when it significantly interferes with a national bank’s exercise of federally authorized banking powers, including fee-setting and related pricing mechanisms.
- A state consumer-protection statute cannot be used to prescribe or prohibit a national bank’s transaction posting order when the claim effectively regulates a pricing decision that determines overdraft fees.
- State law cannot impose affirmative disclosure mandates on national banks, nor impose liability based solely on a failure to disclose, where such requirements would conflict with federal banking authority and disclosure schemes.
- Generally applicable state laws that prohibit deception remain enforceable against national banks; claims based on affirmative misrepresentations are not preempted merely because they relate to a federally authorized banking practice.
- Post-judgment requests to compel arbitration may be denied where raised after trial and judgment and are not compelled by subsequent changes in arbitration law.

## Conclusion

The Ninth Circuit held that federal banking law preempted California UCL theories that would regulate Wells Fargo’s posting order or impose disclosure duties, but allowed UCL claims based on affirmative misrepresentations about posting order; it vacated remedies premised on preempted theories and remanded for relief limited to the surviving deception findings.


Gutierrez v. Wells Fargo Bank, N.A., 704 F.3d 712 (9th Cir. 2012)