The U.S. Court of Appeals for the Third Circuit has affirmed the dismissal of a class action against a federal savings bank in which the bank's policy of generally processing consumer debit transactions in order of descending dollar amount was alleged to have resulted in excessive overdraft fees.


In its decision in Hassler v. Sovereign Bank, issued on March 15, 2010, the Third Circuit agreed that the district court had properly dismissed the plaintiff's claims that the bank's policy violated New Jersey's Consumer Fraud Act (CFA), breached the bank's contractual duty of good faith and fair dealing, and unjustly enriched the bank. (To read the Ballard Spahr alert on the district court decision, click here. The published decision can be found at 644 F.Supp.2d 509 (D.N.J. 2009).)

Ballard Spahr lawyer Darryl J. May handled this litigation on behalf of Sovereign Bank, one of numerous banks hit with class actions that have been filed around the country involving similar challenges to overdraft policies and procedures. Ballard Spahr lawyers are currently defending several such class actions. 

The Third Circuit found that any claim that the bank's actions were unfair under the CFA was precluded by the bank's clear explanation in its deposit agreement of its right to permit or refuse overdrafts and of its general practice of posting customer payment transactions daily in descending order, as well as by its disclosure that such processing order might impact the imposition of overdraft fees. Because the bank's actions were consistent with the clear terms of the deposit agreement and the account-holder's legitimate expectations concerning handling of the account, the plaintiff's claims for breach of contract and unjust enrichment also failed, the court held.

The Third Circuit opinion is non-precedential, suggesting that the court found the case to involve the application of well-settled legal principles to a clear set of facts. The opinion should have persuasive value for other courts.

Fifteen similar class action complaints involving nine national bank defendants have been centralized in a multidistrict proceeding before Judge James L. King in the U.S. District Court for the Southern District of Florida, and the centralization of more actions is expected.

In an opinion issued before the Third Circuit decision in Hassler, Judge King denied the banks' omnibus motion to dismiss, ruling that the plaintiffs' claims under the laws of various states were not preempted by the National Bank Act. In contrast to the Third Circuit and district court Hassler decisions, which thoroughly reviewed and focused on New Jersey law in finding no claims to be stated, Judge King found that the plaintiffs had adequately stated claims under the laws of various states. However, it is notable that in his opinion, Judge King distinguished the district court's Hassler decision by mistakenly characterizing it as one involving the processing of checks rather than electronic debits.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its skill in defending banks and other consumer financial services providers in class actions filed in state and federal courts throughout the country. For more information, please contact group Chair, Alan S. Kaplinsky, 215.864.8544 or



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