Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_16-cv-00420/USCOURTS-azd-2_16-cv-00420-0/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1693 Electronic Fund Transfer Act

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Leshae Ali,

Plaintiff,

v. 

USAA Federal Savings Bank,

Defendant.

No. CV-16-00420-PHX-JAT

ORDER 

 Pending before the Court is Plaintiff Leshae Ali’s (“Plaintiff”) Motion to Dismiss 

Defendant USAA Federal Savings Bank’s (“Defendant”) Counterclaim. (Doc. 18). 

Defendant filed an Opposition to the Motion to Dismiss, (Doc. 22), and Plaintiff filed a 

Reply in Support of Plaintiff’s Motion to Dismiss, (Doc. 23). The Court now rules on the 

motion. 

I. BACKGROUND1

This action concerns Plaintiff’s savings account opened with Defendant prior to 

December 2015. (Doc. 1 at 3; Doc. 15 at 2). On December 11, 2015, Plaintiff noticed a 

substantial deficit in her account and suspected that she was a victim of fraud. (Doc. 1 at 

3). On the same day, Plaintiff called Defendant to report the suspected fraud and dispute 

the deficit in her account. (Id.) 

 

1

 The Court recounts the factual background of this case as alleged by Plaintiff in 

her Complaint and Defendant in its Counterclaim. See (Docs. 1, 15).

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 With no response from Defendant, Plaintiff called Defendant again on January 14, 

2016. (Doc. 1 at 3; Doc. 15 at 3). Plaintiff alleges that Defendant’s representative advised 

her that the requisite steps were not taken to process the claim during the December 11th 

conversation. (Doc. 1 at 3). Plaintiff then asked Defendant’s representative to investigate 

the deficit and provide an explanation. (Doc. 1 at 4). On January 28, 2016, Plaintiff 

received a notice dated January 21, 2016 stating that the investigation was complete, 

there were no fraudulent transactions, and Plaintiff could call to request copies of 

documents and information used to make the determination. (Id.) 

 On February 1, 2016, Plaintiff called Defendant to request the documents and 

information referenced in the letter. (Id.) Plaintiff alleges that Defendant’s representative 

told Plaintiff that she was not likely entitled to receive any documentation and would 

follow up within forty-eight hours if she was in fact entitled to the information. (Doc. 1 at 

4; Doc. 15 at 4). Plaintiff called Defendant two days later and Defendant’s representative 

informed her that she was not entitled to receive any documentation. (Doc. 1 at 4). 

 In making this determination, Defendant alleges that “Plaintiff authorized a third 

party to deposit sums into, withdraw sums from, and/or otherwise access the Accounts by 

providing her account information and login credentials” to that third party. (Doc. 15 at 

7). As a result, Defendant argues it owed Plaintiff no duty of disclosure under the 

Electronic Funds Transfer Act (“EFTA”). (Id.) Defendant further alleges that because the 

allegedly fraudulent withdrawals were authorized, Plaintiff’s unpaid, overdrawn accounts 

constitute a breach of the Consumer Agreement signed by both parties upon initiation of 

the savings account. (Doc. 15 at 7–8). 

 Plaintiff filed her Complaint to recover damages under EFTA on February 15, 

2016. (Doc. 1). Then, on April 6, 2016, Defendant filed an Amended Answer to 

Complaint and Counterclaim (“Counterclaim”) alleging an Arizona state law breach of 

contract claim. (Doc. 15). In its Counterclaim, Defendant asserts supplemental 

jurisdiction arising out of the federal question jurisdiction asserted in the Complaint. (Id.) 

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On April 27, 2016, Plaintiff moved to dismiss the Counterclaim for lack of subject-matter 

jurisdiction. (Doc. 18). 

II. LEGAL STANDARDS 

A. Subject-Matter Jurisdiction 

 Federal Rule of Civil Procedure (“Rule”) 12(b)(1) allows a party to move to 

dismiss a claim based on “lack of subject-matter jurisdiction.” Fed. R. Civ. P. 12(b)(1). A 

Rule 12(b)(1) subject-matter jurisdiction challenge may be raised at any time by the 

parties or the Court. Fed. R. Civ. P. 12(h)(3).

The Court is “free to hear evidence regarding jurisdiction and to rule on that issue 

prior to trial, resolving factual disputes where necessary. In such circumstances, no 

presumptive truthfulness attaches to [a claimant’s] allegations, and the existence of 

disputed material facts will not preclude the trial court from evaluating for itself the 

merits of jurisdictional claims.” Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 

1987) (internal quotations and citations omitted). However, if the jurisdictional issue is 

dependent on the resolution of factual issues relating to the merits of the case, the Court 

applies the Rule 12(b)(6) standard to the Rule 12(b)(1) motion, and assumes that all of 

the allegations in the claim are true. Id. “Dismissal is then appropriate where it appears 

beyond doubt that the [claimant] can prove no set of facts in support of his claim which 

would entitle him to relief.” Id. (quoting Conley v. Gibson, 355 U.S. 41, 45–46 (1957) 

(internal quotations omitted)). 

B. Supplemental Jurisdiction over Counterclaims 

The Court has supplemental jurisdiction over a counterclaim if the counterclaim is 

so related to the complaint “that they form part of the same case or controversy.” 

28 U.S.C. § 1367(a) (2012). Under Rule 13, a party must state compulsory counterclaims 

and may state permissive counterclaims in the party’s initial pleading. Fed. R. Civ. P. 

13(a)–(b). A compulsory counterclaim is a claim against the other party at the time of 

service that “arises out of the transaction or occurrence that is the subject matter of the 

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opposing party’s claim,” Fed. R. Civ. P. 13(a), while a permissive counterclaim is any 

counterclaim that is not compulsory. Fed. R. Civ. P. 13(b). 

Although the Ninth Circuit has not expressly ruled on the applicability of the 

compulsory and permissive counterclaim framework to § 1367 supplemental jurisdiction 

claims, it has acknowledged a district court’s supplemental jurisdiction over compulsory 

counterclaims. See, e.g., Gibson v. Chrysler Corp., 261 F.3d 927, 938 (9th Cir. 2001). 

Defendant asks the Court to expand the scope of supplemental jurisdiction past the 

existing scope of Rule 13 compulsory counterclaims and allow supplemental jurisdiction 

over some permissive counterclaims. See (Doc. 22 at 6–8); see also Randall v. Nelson & 

Kennard, No. CV-09-387-PHX-LOA, at *4 (D. Ariz. Aug. 26, 2009) (quoting Campos v. 

W. Dental Srvs., Inc., 404 F. Supp. 2d 1164, 1168 (N.D. Cal. 2005)) (“[T]he standard for 

supplemental jurisdiction is broader than the standard for a counterclaim to be 

compulsory.”); Avery v. First Resolution Mgmt. Corp., No 06-1812 HA, 2007 WL 

1560653, at *7–8 (D. Or. May 25, 2007), aff’d, 568 F.3d 1018 (9th Cir. 2009) 

(acknowledging that the supplemental jurisdiction “same case or controversy” test is 

broader than the compulsory counterclaim “same transaction or occurrence” test). But see 

Hart v. Clayton-Parker & Assocs., Inc., 869 F. Supp. 774, 776 (D. Ariz. 1994) (equating 

the supplemental jurisdiction inquiry to the compulsory counterclaim inquiry). 

Accordingly, the Court recognizes the widened scope of § 1367 and adopts Defendant’s 

argument that the Court can have supplemental jurisdiction over some permissive 

counterclaims. 

 Courts in the Ninth Circuit can determine whether the “claims arise out of the 

same transaction or occurrence” when “the essential facts of the various claims are so 

logically connected that considerations of judicial economy and fairness dictate that all of 

the issues be resolved in one lawsuit.” Pochiro v. Prudential Ins. Co. of Am., 827 F.2d 

1246, 1249 (9th Cir. 1987) (internal quotations omitted).

To determine whether two claims are “logically connected,” courts should 

consider if “the facts necessary to prove the two claims substantially overlap,” and 

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whether the “collateral estoppel effect of [] the first action would preclude the [claimant] 

from denying the truth of [the opposing party’s] statements.” Id. at 1251; see also Union 

Paving Co. v. Downer Corp., 276 F.2d 468, 470 (9th Cir. 1960) (parties that fail to plead 

a claim that arises out of the same transaction or occurrence as the opponent’s claim will 

be “held to have waived [the counterclaim] and [are] precluded by res judicata from ever 

suing upon them again”). The Court can determine if the facts substantially overlap by 

comparing the facts alleged in the Complaint with the facts alleged in the Counterclaim. 

See Easter Seals, Inc. v. Life, Inc., No. CV-09-1506-PHX-JAT, 2010 WL 892189, at *1–

2 (D. Ariz. Mar. 10, 2010). 

III. ANALYSIS 

 Plaintiff has moved to dismiss the Counterclaim for lack of subject-matter 

jurisdiction. The Complaint and Counterclaim both allege that Plaintiff is an account 

holder at Defendant’s bank. (Doc. 1 at 3; Doc. 15 at 7). In addition, both parties allege 

that Plaintiff’s account reflected a substantial deficit. (Doc. 1 at 3; Doc. 15 at 7–8). 

However, the cause of this deficit is in dispute. Plaintiff alleges that she is a victim of 

fraud. (Doc. 1 at 3). Plaintiff argues that her subsequent report of this fraud to Defendant 

triggered error resolution procedures under § 1693f(f)(6) and (7) of EFTA, regardless of 

whether Defendant found a legitimate error. (Id.; Doc. 32 at 3). Plaintiff further alleges 

that “Defendant did not comply with its duties after Plaintiff provided notice of her 

‘belief’ that there was an ‘error’ regarding her account and after she requested 

documentation regarding Defendant’s decision that there was no error.” (Doc. 23 at 4).

 Conversely, Defendant alleges that Plaintiff authorized a third party to make the 

electronic transfers. (Doc. 15 at 7–8). Defendant further alleges that because the 

transaction was authorized, the transaction falls outside the scope of an “error”2 and 

 

2

 To the extent that Defendant argues that the transaction falls outside the scope of 

“error,” Defendant argues that “being defrauded by a third party and convinced to make 

transactions on the accounts, or giving the third party access to her accounts to conduct 

transactions, is not the same as an unauthorized electronic fund transfer, which is the 

subject of EFTA.” (Doc. 22 at 5). The Court understands this argument to concern 

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Defendant is exempt from fulfilling its error resolution procedures under § 1693f(d). 

(Doc. 22 at 5). As a result, Defendant alleges that Plaintiff breached the Consumer 

Agreement by failing to pay for the negative balance. (Id.) 

Under EFTA, a “financial institution” has a duty to investigate consumer-alleged 

“errors” in consumer accounts and notify the consumer of the results of such 

investigation. 15 U.S.C. § 1693f(a) (2012). EFTA defines seven instances of “error” that 

give rise to the error resolution procedures, including “a consumer’s request for 

additional information concerning an electronic fund transfer or any documentation 

required by this subchapter,” and “any other error described in regulations of the 

Bureau.”3

Id. § 1693f(f)(6)–(7).

A financial institution’s duty under EFTA is triggered when a consumer: (1) 

notifies the bank of the account number and holder; (2) “indicates the consumer’s belief

that the documentation . . . contains an error and the amount of such error;” and (3) “sets 

forth the reasons for the consumer’s belief.” Id. § 1693f(a). Should a financial institution 

determine there was no error, “it shall deliver or mail to the consumer an explanation of 

its findings within 3 business days after the conclusion of its investigation.” Id.

§ 1693f(d). In addition, if the consumer requests additional information, the financial 

institution must “promptly deliver or mail to the consumer reproductions of all 

documents which the financial intuition relied on to conclude that such error did not 

occur.” Id.

 

“unauthorized transactions” as described by § 1693f(f)(1). 

3

“Error” also includes “an unauthorized electronic fund transfer.” 15 U.S.C. 

§ 1693f(f)(1) (2012). An “unauthorized electronic fund transfer” is defined as “an 

electronic fund transfer from a consumer’s account initiated by a person other than the 

consumer without actual authority to initiate such transfer and from which the consumer 

receives no benefit.” Id. § 1693a(12). The term does not include a transfer authorized by 

the account holder; a transfer “initiated with fraudulent intent by the consumer or any 

person acting in concert with the consumer”; or transfers that are considered “errors 

committed by a financial institution.” Id. However, because Plaintiff’s cause of action is 

limited to § 1693f(f)(6) and (7), (see Doc. 32 at 3), the Court will not address a cause of 

action under § 1693f(f)(1). 

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 Plaintiff alleges she reported an error as defined by § 1693f(f)(6) and (7) when she 

requested additional information and documentation. (Doc. 32 at 3). As a result, the 

determination of whether the transactions were authorized by Plaintiff (as alleged in the 

Counterclaim) has no bearing on whether Defendant committed a procedural error under 

EFTA. Rather, Defendant’s error can potentially exist under § 1693f(f)(6) and (7) simply 

because Plaintiff requested additional information and documentation and allegedly did 

not receive that documentation. Thus, the claims are distinct and do not rely on one 

another’s outcome.

Moreover, the state contract Counterclaim would unnecessarily congest the EFTA 

claim at issue. Namely, Plaintiff’s EFTA claim would involve very limited discovery and 

focus primarily on the communication between Plaintiff and Defendant, whereas the 

Counterclaim would involve significantly more discovery on separate issues including 

third party fraud and Plaintiff’s account management. The facts that do overlap between 

the claims are limited to the parties involved and the existence of Plaintiff’s account with 

Defendant. Further, because the sphere of discovery in each claim is distinct, should 

Defendant pursue its Counterclaim in state court, the findings made by that court would 

not risk judicial inconsistency. Thus, the respective discovery of the claims would not 

substantially overlap and there is little risk of collateral estoppel. The claims are not 

logically connected and accordingly are not part of the same transaction or occurrence. 

As a result, the claim is not compulsory.

 Recognizing the widened scope of § 1367, a permissive Counterclaim could 

possibly have supplemental jurisdiction if the Counterclaim was still part of the same 

case or controversy as the Complaint. Under this widened scope, the Court can extend 

“supplemental jurisdiction beyond compulsory claims to encompass permissive claims 

that are so related to claims in the action within such original jurisdiction.” Avery, No 06-

1812 HA, 2007 WL 1560653, at *7–8 (D. Or. May 25, 2007), aff’d, 568 F.3d 1018 (9th 

Cir. 2009) (quoting Campos, 404 F. Supp. 2d at 1169) (internal quotations omitted). 

However, here, the claims are too disparate to be considered so related that they form part 

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of the same case or controversy. Plaintiff’s claim is limited to Defendant’s procedural 

error reporting duties under EFTA, while Defendant’s claim focuses on whether Plaintiff 

breached her contract through an allegedly authorized third-party transaction. As 

explained above, the factual findings and related discovery are unlikely to overlap despite 

originating out of the same consumer account. Thus, the Court lacks supplemental 

jurisdiction because the Counterclaim is not compulsory and is not part of the same case 

or controversy as the Complaint.4

IV. CONCLUSION

 Because the Court has found that the permissive Counterclaim does not arise out 

of the same case or controversy as the Complaint, supplemental jurisdiction does not 

exist.

5

Accordingly, 

/ 

/ 

/ 

/ 

/ 

/ 

/ 

/ 

 

4

 To the extent that the parties argue the Court should or should not exercise 

supplemental jurisdiction under 28 U.S.C. § 1367(c), (Doc. 18 at 10–12; Doc. 22 at 9–

10), these arguments are no longer relevant. Because the Counterclaim is permissive and 

does not arise out of the same case or controversy as the Complaint, supplemental 

jurisdiction does not exist under § 1367(a) and the discretionary inquiry under § 1367(c) 

is not applicable.

5

 In response to oral arguments held on September 14, 2016, the Court ordered 

Plaintiff to provide a more definite statement regarding her cause of action under 

15 U.S.C. § 1693f(f). See (Doc. 31). In response, Plaintiff limited her pleading to a cause 

of action under 15 U.S.C. § 1693f(f)(6) and (7). (Doc. 32 at 3). If Plaintiff ever amends 

her pleadings to include a cause of action under 15 U.S.C. § 1693f(f)(1), Defendant will 

be permitted to plead its Counterclaim again (subject to any motion to dismiss Plaintiff 

might file). 

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 IT IS HEREBY ORDERED that the Plaintiff’s Motion to Dismiss the 

Counterclaim, (Doc. 18), is GRANTED; the Counterclaim (only) is dismissed, without 

prejudice, for lack of subject-matter jurisdiction.6

Dated this 28th day of September, 2016.

 

6

 Because the Complaint will proceed, the Clerk of the Court shall not enter 

judgment at this time. 

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