By Tim Carpenter, Kansas Reflector
TOPEKA — The attorney for a prominent Kansas financial institution urged the Kansas Supreme Court to derail a class-action lawsuit challenging imposition of obscure bank fees and limiting to 30 days the timeframe for customers to contest transaction penalties.
A Shawnee County District Court judge granted a motion from Capitol Federal Savings Bank for dismissal of the lawsuit in October 2024. Plaintiffs Jennifer Harding and Samantha Ramirez pivoted to the Kansas Court of Appeals. The three-judge appellate panel reversed the district court after concluding “erroneous” reasoning was relied upon to dismiss breach of contract claims against Capitol Federal.
Capitol Federal, a Topeka company serving Kansas and Missouri customers and listing assets of $10 billion, filed an appeal with the state Supreme Court.
In oral argument Monday, justices and attorneys focused on whether plaintiffs should have been allowed by District Judge Merlin Wheeler to proceed to a jury trial.
The justices considered ambiguities in Capitol Federal’s fine-print document outlining the meaning of “improper charges,” which the Court of Appeals said wasn’t written in a manner to be “inherently clear.” Supreme Court justices weighed consequences of a customer overdrawing a bank account as well as obligations of customers when contesting fees imposed on account holders.
Supreme Court justices considered the appropriateness of Capitol Federal’s requirement that its customers raise concerns about potentially improper charges within 30 days of Capitol Federal sending an account statement or forever lose the right to contest the issue.
“That provision only serves a purpose of limiting Capitol Federal’s liability, right?” said Justice Dan Biles, who has served on the Supreme Court since 2009.
Justice Caleb Stegall, who was appointed in 2014 by Gov. Sam Brownback, also brought up Capitol Federal’s 30-day window for customers to object to fees or charges.
“Where do we draw the line?” Stegall said. “What if the contract just said, ‘You’re banned from bringing any claim against (Capitol Federal), period?’ Why is it that the courthouse doors are just slammed shut?”
In September 2022, Harding’s lawyers filed the lawsuit against Capitol Federal to challenge the fee assessed her for a purchase that was authorized when she still had a positive balance in her checking account. Harding said it was a violation of the customer agreement for the bank to charge her a $32 overdraft fee on that transaction, because it was settled when the account no longer had sufficient funds to cover the purchase.
Ramirez joined Harding’s suit in October 2022 after alleging Capitol Federal broke the account agreement by charging her a fee each time AT&T attempted to collect on a $164.87 bill. She asserted nothing in the customer agreement gave Capitol Federal authority to assess the $32 overdraft fee three separate times on a single debit card item.
Kersten Holzhueter, who represented Capitol Federal, told the Supreme Court that the district court’s dismissal of the class-action lawsuit was proper. The fees at the core of the suit were permitted by the customer contract, she said.
In response to Stegall, she said a complete prohibition on lawsuits by account holders against Capitol Federal wouldn’t likely be allowed in Kansas. She said the 30-day limit in terms of challenging fee assessments was reasonable.
“They key issue to discuss here today, and reinforce in Kansas, is that not all petitions present questions that warrant discovery or trial,” Holzhueter said. “Having a bank account comes with obligations on the bank, but it also has responsibility for the account holder. This includes an obligation to notify Capitol Federal of certain disputes.”
David Seeley, an attorney representing the plaintiffs, said his clients’ objections to Capitol Federal’s business practices should be allowed to move forward in district court.
“Plaintiff needs to have the opportunity to pursue these claims and shouldn’t be required to terminate them at the outset,” he said.
Seeley said monthly statements issued by Capitol Federal to account holders didn’t take into consideration complex circumstances in which an account could have been overdrawn.
“You know that if you are an expert on banking or banking law, and understand that this is a problem that is nationwide,” Seeley said.
He echoed the Court of Appeals, which declared in its opinion that “contrary to the district court’s ruling otherwise, nothing in the plain language of the notice provision clearly and unambiguously proves that the disputed bank fees are a type of charge that a consumer must report to Capitol Federal under the account agreement.”
Seeley said the 30-day notice provision imposed by Capitol Federal shouldn’t apply to impermissible fees the company charged its customers. He said the time restraint was fundamentally unfair.
“The court needs to be mindful that you are locking the doors to the courthouse if you uphold a provision like this,” Seeley said.
