Gordon Rees Scully Mansukhani Charleston Partner Eric Evans and Associates Delaney Tyson and Maeve Cavanaugh secured a significant victory for a large South Carolina federal credit union and the credit union industry as a whole, reducing a putative multi-million dollar class action to an individual claim and ending the plaintiff’s three-year effort to pursue classwide relief.
GRSM’s client, a large South Carolina federal credit union, was sued by a member asserting claims of breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment based on the credit union’s overdraft fee practices. After three years of motion practice and discovery, the plaintiff moved for class certification, seeking to certify a class of all members charged an overdraft fee during the relevant period “on a transaction that did not overdraw the account.” The plaintiff alleged that the proposed class encompassed more than 14,000 member accounts and more than $5 million in damages.
GRSM filed a forceful opposition on behalf of the credit union, arguing that the plaintiff failed to satisfy multiple requirements of South Carolina Rule of Civil Procedure 23(a). The adequacy requirement became the central issue. The credit union emphasized the plaintiff’s lack of knowledge about the basic theories and facts alleged in the pleadings, arguing that her role had become “so minimal that [she] virtually … abdicated to [her] attorneys the conduct of the case” and that she was not prepared to “vigorously pursue the case” on behalf of absent putative class members. The credit union urged the court to adopt persuasive authority from other jurisdictions holding that a proposed class representative who yields control of the litigation to counsel is inadequate. In response, the plaintiff argued that her deposition attendance and general awareness of the case satisfied South Carolina’s minimum adequacy requirement. The court disagreed, holding that the plaintiff failed to establish her adequacy as the proposed class representative and denying class certification on that basis.
The court also denied certification because the plaintiff failed to make the required showing of typicality. The credit union identified divergent legal and factual theories advanced by the plaintiff at her deposition, by the plaintiff’s counsel during an earlier motion hearing, and by the plaintiff’s expert in an affidavit submitted in support of class certification. The credit union argued that these conflicting theories showed that the plaintiff could not establish claims typical of the proposed 14,000-member class. The credit union also emphasized that the plaintiff’s theory depended on individualized evidence that would not apply to absent class members and, in key respects, had been spoliated. Although the plaintiff’s counsel attempted at the certification hearing to reframe the case around a new unified theory of liability, the court again sided with the credit union and held that the plaintiff failed to establish typicality under Rule 23(a).
The decision halted the plaintiff’s counsel’s attempt to convert a small number of overdraft transactions into a multi-million dollar class action. It also provides useful persuasive authority for credit unions facing overdraft fee class claims and adds to the developing body of South Carolina class certification defenses in financial services litigation.