Veronica Gutierrez v. Wells Fargo Bank, N.A.

Veronica Gutierrez and Erin Walker sued Wells Fargo under California state law for engaging in unfair business practices by imposing overdraft fees based on a high-to-low posting order and for engaging in fraudulent business practices by misleading clients as to the actual posting order used by the bank. The U.S. District Court for the Northern District of California held that the bank's actions were both "unfair" and "fraudulent" under California's Unfair Competition Law. That court in 2010 ordered the bank to cease its practice of charging overdraft fees based on its posting in high-to-low order for all debit-card transactions, and ordered a $203 million restitution to affected consumers in the state of California. The bank appealed to the U. S. Court of Appeals for the Ninth Circuit. The Court of Appeals, in a decision filed on 12/26/2012, reversed in part and affirmed in part the lower court's ruling. It found that as a national bank, Wells Fargo was protecting in its pricing decision by the preemption provision of the National Bank Act, and that the application of the unfair business practices provision of California's Unfair Competition Law to dictate a national bank's order of posting is similarly preempted. Also struck down under the preemption provision were the imposition under California law of affirmative disclosure requirements and imposition of liability based on failure to disclose. The lower court's injunction requiring the bank to cease the use of a high-to-low posting order and to make restitution relating to prior use of such a posting order were vacated by the Court of Appeals.

The court however, held that the National Bank Act does not preempt a provision of California's Unfair Competition Law against affirmative misrepresentations. The Court of Appeals affirmed the district court's finding that Wells Fargo had violated that provision. It ordered that the lower court may both provide injunctive relief to prohibit future misreprsentations and order restitution for past misleading representations. The case was returned to the district court for any further action.