Churlik v. Gate City Bank
U.S. District Court, District of Minnesota
Churlik v. Gate City Bank
Trial Court Opinion
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Tracilee Churlik, Case No. 23-cv-0637 (WMW/LIB)
individually and on behalf
of all others similarly situated,
Plaintiff,
ORDER
v.
Gate City Bank,
Defendant.
Before the Court is Defendant Gate City Bank’s (“Gate City”) motion to dismiss.
(Dkt. 25.) For the reasons addressed below, the Court grants the motion.
BACKGROUND
Plaintiff Tracilee Churlik holds a checking account with Defendant Gate City Bank.
The checking account is governed by the “Account Agreement” comprised of the Terms
and Conditions, Schedule of Fees and Opt-In Agreement (collectively, “Account
Agreement”).
Churlik’s complaint challenges two types of non-sufficient funds (“NSF”) fees
imposed by Gate City pursuant to the Account Agreement. The first are NSF fees on debit
card transactions that were authorized against sufficient funds but subsequently settled
against insufficient funds on seven occasions after Churlik spent the funds that were needed
to pay those transactions before they were presented for payment (“APSN Transactions”).
The second is an NSF fee on a $0.28 withdrawal verification by PayPal made against
insufficient funds (“verification debit”). Churlik seeks to represent two classes: Minnesota
customers that are charged fees on APSN Transactions and Minnesota customers that are
charged fees on verification debits.
Churlik filed a complaint asserting claims alleging (1) breach of contract, including
breach of the implied covenant of good faith and fair dealing, (2) unjust enrichment and
(3) violations of the Minnesota Consumer Fraud Act. Gate City moved to dismiss for
failure to state a claim on which relief can be granted. Fed. R. Civ. P. 12(b)(6).
ANALYSIS
I. Legal Standards
To survive a motion to dismiss under Rule 12(b)(6), Fed. R. Civ. P., “a complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678(2009) (quoting Bell Atl. Corp. v. Twombly,550 U.S. 544, 570
(2007)). While the Court must accept factual allegations as true, the Court need not accept legal conclusions. Christopher v. Ramsey Cnty.,621 F. Supp. 3d 972
, 977 (D. Minn. 2022).
Under Minnesota law, the elements of a breach of contract claim are “(1) formation
of a contract, (2) performance by plaintiff of any conditions precedent to his right to
demand performance by the defendant, and (3) breach of the contract by defendant.” Lyon
Fin. Servs., Inc. v. Illinois Paper & Copier Co., 848 N.W.2d 539, 543(Minn. 2014) (quoting Park Nicollet Clinic v. Hamann,808 N.W.2d 828, 833
(Minn. 2011)).
II. Breach of Contract
Under contract interpretation principles, words should not be interpreted in isolation
and effect should be given to each contract term. See Halla Nursery, Inc. v. City of
Chanhassen, 781 N.W.2d 880, 884(Minn. 2010). Courts interpret ambiguous account agreement terms regarding when fees are assessed as promising that fees will be assessed at the time of authorization. See, e.g., Lloyd v. Navy Fed. Credit Union,2018 WL 1757609
at *8 (S.D. Cal. Apr. 12, 2018).
The Account Agreement contains language referring to the bank “paying” fees and
distinguishing between authorization of a transaction and later payment at settlement. The
Account Agreement does not contain any promise to assess fees based on the account
balance at authorization or to sequester held funds to pay specific transactions. The
Account Agreement’s repeated use of “pay” and “payment” in reference to when fees are
assessed, along with the additional clarifying language distinguishing holds from payment,
support Gate City’s legal argument that the bank is permitted to charge NSF fees when it
pays APSN transactions that overdraw an account.
The Court concludes that the Account Agreement permits Gate City to charge NSF
fees when it pays APSN transactions that settle against insufficient funds, even if those
transactions were previously authorized against sufficient funds. Therefore, Gate City did
not breach the express terms of the Account Agreement by charging NSF fees on APSN
transactions.
III. Breach of Implied Covenant of Good Faith and Fair Dealing
Under Minnesota law, every contract includes an implied covenant of good faith
and fair dealing requiring that one party not “unjustifiably hinder” the other party’s
performance. In re Hennepin Cnty. 1986 Recycling Bond Litigation, 540 N.W.2d 494, 502(Minn. 1995). “A party acts in bad faith if it refuses ‘to fulfill some duty or contractual obligation based on an ulterior motive.’” Kivel v. WealthSpring Mortg. Corp.,398 F.Supp.2d 1049, 1057
(D. Minn. 2005). Merely seeking to maximize profits is insufficient to show bad faith. BP Prod. N. Am., Inc. v Twin Cities Stores,534 F.Supp.2d 959, 967
(D.
Minn. 2007).
As discussed above, the unambiguous Account Agreement expressly permitted Gate
City to charge the NSF fees at issue for transactions that overdrew the account. By
charging overdraft fees clearly allowed under the contractual terms, Gate City did not
“unjustifiably hinder” Churlik’s rights or contractual performance as prohibited. In re
Hennepin Cnty., 540 N.W.2d at 502.
Additionally, Churlik failed to plausibly allege in her complaint that Gate City had
any improper ulterior motive beyond maximizing profit when assessing the NSF fees. As
established in Kivel, to demonstrate bad faith, Churlik needed to allege sufficient facts
suggesting that Gate City refused to fulfill its contractual obligations based on an ulterior
motive outside of ordinary business revenue interests. 398 F. Supp. 2d at 1057. Mere allegations that Gate City aimed to maximize its fees fail to clear this bar. BP Prod.,534 F.Supp.2d at 967
. Because the Account Agreement allowed the NSF fees, and Churlik did
not adequately allege any ulterior motive beyond profit, Gate City did not breach the
implied covenant of good faith and fair dealing. Accordingly, Churlik fails to state a claim
under this theory, and her breach of implied covenant claim is dismissed.
IV. Unjust Enrichment
Under Minnesota law, an unjust enrichment claim fails when an enforceable, written
contract governs the issue because the contract precludes requiring payment on a quasi-
contract theory. Gisairo v. Lenovo (United States) Inc., 516 F.Supp.3d 880, 893 (D. Minn. 2021). While Rule 8(d), Fed. R. Civ. P., generally allows parties to plead unjust enrichment as an alternative theory even where a contract claim is valid, parties cannot maintain or recover on an unjust enrichment claim if the governing contract is enforceable. See Cummins Law Office, P.A. v. Norman Graphic Printing Co.,826 F.Supp.2d 1127, 1132
(D.
Minn. 2011).
Here, both Gate City and Churlik agree that the Account Agreement contract
governs the NSF fees at issue. Churlik did not allege any facts suggesting that the Account
Agreement is unenforceable or invalid such that a quasi-contract claim could be
permissible. Churlik’s breach of contract claim also does not contain any deficiencies.
Therefore, under the rules articulated in Gisairo and Cummins, the valid written Account
Agreement precludes Churlik from maintaining an unjust enrichment claim as an
alternative pleading.
V. Violation of Minnesota Consumer Fraud Act
To bring a claim under the Minnesota Consumer Fraud Act (“MCFA”), private
plaintiffs must demonstrate that their cause of action benefits the public, rather than just a
discrete group of consumers. See Ly v. Nystrom, 615 N.W.2d 302, 314 (Minn. 2000). And
the alleged misrepresentation must be made in connection with the sale of merchandise.
Minn. Stat. § 325F.69, subd. 1.
Churlik alleges harm only to herself and other Gate City customers who incurred
certain overdraft fees. As the court found in Thorkelson regarding a discrete class of
consumers, Churlik’s allegations do not demonstrate the public benefit that is required for
a private MCFA claim. Thorkelson v. Publ’g House of Evangelical Lutheran Church in
Am., 764 F.Supp.2d 1119, 1131 (D. Minn. 2011). Additionally, overdraft fees themselves
are not categorized or listed in the statute as sales of merchandise or goods governed by
the law’s provisions. Minn. Stat. § 325F.69, subd. 1. Crucially, Churlik does not plausibly
allege that Gate City made any specific misrepresentation regarding overdraft fees or
account terms at the time of opening her account, which is when an actionable sale occurred.
Similar to Thorkelson, where the court dismissed ERISA claims after finding the retirement
plan qualified as a church plan exempt from ERISA, Churlik cannot assert claims that
depend on provisions of consumer protection statutes that apply to the account agreement
with Gate City.
Because Churlik fails to adequately plead facts showing that her claim benefits the
public broadly rather than a discrete group, or that Gate City made an actionable
misrepresentation related to the sale of her account, Churlik’s pleadings cannot sustain a
MCFA claim.
VI. Conclusion
Based on the foregoing analysis, the Court concludes that dismissal of the
complaint, pursuant to Rule 12(b)(6), is warranted. The plain language of the Account
Agreement unambiguously permitted Gate City to charge NSF fees when it paid APSN
debit card transactions that settled against insufficient funds, even though the transactions
were previously authorized on sufficient funds. Multiple provisions in the Agreement refer
to fee assessment occurring when Gate City “pays” transactions. The Agreement
distinguishes authorization from later payment and contains no promise to assess fees
based on the balance when the authorization occurs or to sequester held funds.
Although Churlik contends that the Account Agreement is ambiguous as to the NSF
fees, when the Account Agreement is considered in its entirety, the Court finds no
ambiguity as to the plain meaning of the Account Agreement’s terms. Because the contract
claim fails, Churlik’s claims for breach of implied covenant of good faith and fair dealing,
unjust enrichment and violations of the MCFA also fail.
ORDER
Based on the foregoing analysis and all the files, records and proceedings herein, IT
IS HEREBY ORDERED that Defendant Gate City Bank’s motion to dismiss, (Dkt. 25),
is GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: February 6, 2024 s/ Wilhelmina M. Wright
Wilhelmina M. Wright
United States District Judge Trial Court Opinion
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Tracilee Churlik, Case No. 23-cv-0637 (WMW/LIB)
individually and on behalf
of all others similarly situated,
Plaintiff,
ORDER
v.
Gate City Bank,
Defendant.
Before the Court is Defendant Gate City Bank’s (“Gate City”) motion to dismiss.
(Dkt. 25.) For the reasons addressed below, the Court grants the motion.
BACKGROUND
Plaintiff Tracilee Churlik holds a checking account with Defendant Gate City Bank.
The checking account is governed by the “Account Agreement” comprised of the Terms
and Conditions, Schedule of Fees and Opt-In Agreement (collectively, “Account
Agreement”).
Churlik’s complaint challenges two types of non-sufficient funds (“NSF”) fees
imposed by Gate City pursuant to the Account Agreement. The first are NSF fees on debit
card transactions that were authorized against sufficient funds but subsequently settled
against insufficient funds on seven occasions after Churlik spent the funds that were needed
to pay those transactions before they were presented for payment (“APSN Transactions”).
The second is an NSF fee on a $0.28 withdrawal verification by PayPal made against
insufficient funds (“verification debit”). Churlik seeks to represent two classes: Minnesota
customers that are charged fees on APSN Transactions and Minnesota customers that are
charged fees on verification debits.
Churlik filed a complaint asserting claims alleging (1) breach of contract, including
breach of the implied covenant of good faith and fair dealing, (2) unjust enrichment and
(3) violations of the Minnesota Consumer Fraud Act. Gate City moved to dismiss for
failure to state a claim on which relief can be granted. Fed. R. Civ. P. 12(b)(6).
ANALYSIS
I. Legal Standards
To survive a motion to dismiss under Rule 12(b)(6), Fed. R. Civ. P., “a complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678(2009) (quoting Bell Atl. Corp. v. Twombly,550 U.S. 544, 570
(2007)). While the Court must accept factual allegations as true, the Court need not accept legal conclusions. Christopher v. Ramsey Cnty.,621 F. Supp. 3d 972
, 977 (D. Minn. 2022).
Under Minnesota law, the elements of a breach of contract claim are “(1) formation
of a contract, (2) performance by plaintiff of any conditions precedent to his right to
demand performance by the defendant, and (3) breach of the contract by defendant.” Lyon
Fin. Servs., Inc. v. Illinois Paper & Copier Co., 848 N.W.2d 539, 543(Minn. 2014) (quoting Park Nicollet Clinic v. Hamann,808 N.W.2d 828, 833
(Minn. 2011)).
II. Breach of Contract
Under contract interpretation principles, words should not be interpreted in isolation
and effect should be given to each contract term. See Halla Nursery, Inc. v. City of
Chanhassen, 781 N.W.2d 880, 884(Minn. 2010). Courts interpret ambiguous account agreement terms regarding when fees are assessed as promising that fees will be assessed at the time of authorization. See, e.g., Lloyd v. Navy Fed. Credit Union,2018 WL 1757609
at *8 (S.D. Cal. Apr. 12, 2018).
The Account Agreement contains language referring to the bank “paying” fees and
distinguishing between authorization of a transaction and later payment at settlement. The
Account Agreement does not contain any promise to assess fees based on the account
balance at authorization or to sequester held funds to pay specific transactions. The
Account Agreement’s repeated use of “pay” and “payment” in reference to when fees are
assessed, along with the additional clarifying language distinguishing holds from payment,
support Gate City’s legal argument that the bank is permitted to charge NSF fees when it
pays APSN transactions that overdraw an account.
The Court concludes that the Account Agreement permits Gate City to charge NSF
fees when it pays APSN transactions that settle against insufficient funds, even if those
transactions were previously authorized against sufficient funds. Therefore, Gate City did
not breach the express terms of the Account Agreement by charging NSF fees on APSN
transactions.
III. Breach of Implied Covenant of Good Faith and Fair Dealing
Under Minnesota law, every contract includes an implied covenant of good faith
and fair dealing requiring that one party not “unjustifiably hinder” the other party’s
performance. In re Hennepin Cnty. 1986 Recycling Bond Litigation, 540 N.W.2d 494, 502(Minn. 1995). “A party acts in bad faith if it refuses ‘to fulfill some duty or contractual obligation based on an ulterior motive.’” Kivel v. WealthSpring Mortg. Corp.,398 F.Supp.2d 1049, 1057
(D. Minn. 2005). Merely seeking to maximize profits is insufficient to show bad faith. BP Prod. N. Am., Inc. v Twin Cities Stores,534 F.Supp.2d 959, 967
(D.
Minn. 2007).
As discussed above, the unambiguous Account Agreement expressly permitted Gate
City to charge the NSF fees at issue for transactions that overdrew the account. By
charging overdraft fees clearly allowed under the contractual terms, Gate City did not
“unjustifiably hinder” Churlik’s rights or contractual performance as prohibited. In re
Hennepin Cnty., 540 N.W.2d at 502.
Additionally, Churlik failed to plausibly allege in her complaint that Gate City had
any improper ulterior motive beyond maximizing profit when assessing the NSF fees. As
established in Kivel, to demonstrate bad faith, Churlik needed to allege sufficient facts
suggesting that Gate City refused to fulfill its contractual obligations based on an ulterior
motive outside of ordinary business revenue interests. 398 F. Supp. 2d at 1057. Mere allegations that Gate City aimed to maximize its fees fail to clear this bar. BP Prod.,534 F.Supp.2d at 967
. Because the Account Agreement allowed the NSF fees, and Churlik did
not adequately allege any ulterior motive beyond profit, Gate City did not breach the
implied covenant of good faith and fair dealing. Accordingly, Churlik fails to state a claim
under this theory, and her breach of implied covenant claim is dismissed.
IV. Unjust Enrichment
Under Minnesota law, an unjust enrichment claim fails when an enforceable, written
contract governs the issue because the contract precludes requiring payment on a quasi-
contract theory. Gisairo v. Lenovo (United States) Inc., 516 F.Supp.3d 880, 893 (D. Minn. 2021). While Rule 8(d), Fed. R. Civ. P., generally allows parties to plead unjust enrichment as an alternative theory even where a contract claim is valid, parties cannot maintain or recover on an unjust enrichment claim if the governing contract is enforceable. See Cummins Law Office, P.A. v. Norman Graphic Printing Co.,826 F.Supp.2d 1127, 1132
(D.
Minn. 2011).
Here, both Gate City and Churlik agree that the Account Agreement contract
governs the NSF fees at issue. Churlik did not allege any facts suggesting that the Account
Agreement is unenforceable or invalid such that a quasi-contract claim could be
permissible. Churlik’s breach of contract claim also does not contain any deficiencies.
Therefore, under the rules articulated in Gisairo and Cummins, the valid written Account
Agreement precludes Churlik from maintaining an unjust enrichment claim as an
alternative pleading.
V. Violation of Minnesota Consumer Fraud Act
To bring a claim under the Minnesota Consumer Fraud Act (“MCFA”), private
plaintiffs must demonstrate that their cause of action benefits the public, rather than just a
discrete group of consumers. See Ly v. Nystrom, 615 N.W.2d 302, 314 (Minn. 2000). And
the alleged misrepresentation must be made in connection with the sale of merchandise.
Minn. Stat. § 325F.69, subd. 1.
Churlik alleges harm only to herself and other Gate City customers who incurred
certain overdraft fees. As the court found in Thorkelson regarding a discrete class of
consumers, Churlik’s allegations do not demonstrate the public benefit that is required for
a private MCFA claim. Thorkelson v. Publ’g House of Evangelical Lutheran Church in
Am., 764 F.Supp.2d 1119, 1131 (D. Minn. 2011). Additionally, overdraft fees themselves
are not categorized or listed in the statute as sales of merchandise or goods governed by
the law’s provisions. Minn. Stat. § 325F.69, subd. 1. Crucially, Churlik does not plausibly
allege that Gate City made any specific misrepresentation regarding overdraft fees or
account terms at the time of opening her account, which is when an actionable sale occurred.
Similar to Thorkelson, where the court dismissed ERISA claims after finding the retirement
plan qualified as a church plan exempt from ERISA, Churlik cannot assert claims that
depend on provisions of consumer protection statutes that apply to the account agreement
with Gate City.
Because Churlik fails to adequately plead facts showing that her claim benefits the
public broadly rather than a discrete group, or that Gate City made an actionable
misrepresentation related to the sale of her account, Churlik’s pleadings cannot sustain a
MCFA claim.
VI. Conclusion
Based on the foregoing analysis, the Court concludes that dismissal of the
complaint, pursuant to Rule 12(b)(6), is warranted. The plain language of the Account
Agreement unambiguously permitted Gate City to charge NSF fees when it paid APSN
debit card transactions that settled against insufficient funds, even though the transactions
were previously authorized on sufficient funds. Multiple provisions in the Agreement refer
to fee assessment occurring when Gate City “pays” transactions. The Agreement
distinguishes authorization from later payment and contains no promise to assess fees
based on the balance when the authorization occurs or to sequester held funds.
Although Churlik contends that the Account Agreement is ambiguous as to the NSF
fees, when the Account Agreement is considered in its entirety, the Court finds no
ambiguity as to the plain meaning of the Account Agreement’s terms. Because the contract
claim fails, Churlik’s claims for breach of implied covenant of good faith and fair dealing,
unjust enrichment and violations of the MCFA also fail.
ORDER
Based on the foregoing analysis and all the files, records and proceedings herein, IT
IS HEREBY ORDERED that Defendant Gate City Bank’s motion to dismiss, (Dkt. 25),
is GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: February 6, 2024 s/ Wilhelmina M. Wright
Wilhelmina M. Wright
United States District Judge Reference
- Status
- Unknown