Opinion
No. 01 Civ. 9959 (HB)
January 23, 2003
OPINION ORDER
Plaintiffs, Gad Demry and Tamara D. Haviv, on behalf of themselves and others similarly situated, claim that the credit card charges and disclosures made by defendant Citibank (South Dakota), N.A. ("Citibank") violate the Truth in Lending Act ("TILA") ( 15 U.S.C. § 1601 et seq.) and South Dakota's consumer protection statute (S.D. Codified Law § 37-24-6), and breaches the contract with them and other cardholders. Plaintiffs move for partial summary judgment and defendant cross-moves for summary judgment to dismiss plaintiffs' complaint in its entirety. For the foregoing reasons, plaintiffs' motion is DENIED and defendant's cross-motion is GRANTED.
I. BACKGROUND
Plaintiffs are card holders of credit card accounts issued by defendant Citibank. During the relevant time period, Haviv (but not Demry) obtained a cash advance, and Demry (but not Haviv) transferred balances from other credit cards onto his Citibank card. See Previn Decl. Exhs. 1-2; Haviv Depo. at 52. After Demry made the balance transfer and Haviv took the cash advance, plaintiffs contend defendant failed to adjust the corresponding interest rates in accordance with plaintiffs' understanding of the terms of the credit card agreement with defendant, thus violating the TILA.
TILA, which is implemented by the Federal Reserve Boards' Regulation Z, 12 C.F.R. Part 226, requires consumer credit lenders to make certain disclosures about the terms and costs of the offered credit. 12 C.F.R. § 226.1 (2001). More specifically, Regulation Z requires lenders to provide an initial disclosure in regard to applicable interest rate terms before the lender may extend credit to a prospective credit card holder, and then provide advance notice if the rate terms change.See 12 C.F.R. § 226.5 (b)(1); 226.5(e), 226.6 226.9(c). If the initial terms provide a rate that may vary, the lender must disclose that fact at the outset. 12 C.F.R. § 226.7 (d) n. 15. Plaintiffs assert two different bases for defendant's alleged violation of TILA. First, plaintiffs contend that defendant represented that all rates would be under a variable rate plan, but did not in fact bill all rates under such plan. Second, plaintiffs contend that for the items billed under a variable rate plan, defendant had failed to adjust rates downward in a timely fashion. Based on defendant's alleged misconduct, plaintiffs further assert that defendant breached the credit card agreement with plaintiffs and violated South Dakota's Deceptive Trade Practices and Consumer Protections statute.
II. STANDARDS OF REVIEW
Evidence in support of a motion for summary judgment must be reviewed in the light most favorable to the non-movant. FRCP 56(c), Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). If, when "[v]iewing the evidence produced in the light most favorable to the nomovant . . . a rational trier could not find for the nonmovant, then there is no genuine issue of material fact and entry of summary judgment is appropriate." Binder v. Long Island Lighting Co., 933 F.2d 187, 191 (2d Cir. 1991). While the burden to demonstrate that no genuine issue of material fact rests solely with the moving party, FDIC v. Giammetti, 34 F.3d 51, 54 (2d Cir. 1994), once the moving party has provided sufficient evidence to support a motion for summary judgment, the opposing party "must set forth specific facts showing that there is a genuine issue for trial" and cannot rest on "mere allegations or denial." Rule 56(e); see Rexnord Holding, Inc. v. Biderman, 21 F.3d 522, 525-36 (2d Cir. 1994). "If the evidence [non-movant] is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted). An "opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
III. DISCUSSION
a. Periodic Statements
1. TILA Claims
Under Regulation Z, "[i]f a variable-rate plan is involved, the creditor shall disclose the fact that periodic rate(s) may vary." 12 C.F.R. § 226.7 (d) n. 15. Plaintiffs do not dispute that defendant, in fact, disclosed to them, in summary, that their "Periodic Rates and APRs may vary" ("the backer disclosure") on the back of their periodic statements. See, e.g., Previn Exh. 2 at 10 (emphasis added). Rather, plaintiffs contend, following the issuance of the 2000 card agreement, that the U.S. prime rate dropped by several percentage points, and that Citibank violated TILA by failing to decrease the interest rate on their cash advances and balance transfers by a corresponding amount, contrary to their understanding based on the backer disclosure.
Plaintiffs contend that the backer disclosure, taken together with 12 C.F.R. § 226.7 (d) n. 15, indicate that "all periodic rates on the front of the [monthly] statement were under [the same] variable-rate plan." Plaintiffs' Opp. Mem. at 3-4. In other words, "all rates detailed on the front [of the credit card statement] would fluctuate with the [U.S. prime rate]." Id. at 4 (emphasis added). Plaintiffs emphasize that this inference should be drawn from defendant's use of the plural form of "rate" in the backer disclosure, and "[d]efendant' s lack of any specific or exclusionary language in the backer disclosure" that might inform the credit card holder that the interest rate on cash advances does not vary unless the card holder first defaults. Plaintiffs argue that defendant's rate summary, even if true, "provid[es] `too much information' to the cardholder," Plaintiffs' Opp. Mem. at 7, and that such information allegedly interferes with assuring "meaningful disclosure of credit terms" to the customer. Id., see 15 U.S.C. § 1601 (a). In effect, plaintiffs appear to seek a meaningless construction of the word "may" in the backer disclosure, and urge that the disclosure means simply that "periodic rates and APRs . . . vary." I find no evidence to support plaintiffs' strained construction.
12 C.F.R. § 226.7 (d) n. 15 states: "If a variable rate plan is involved, the creditor shall disclose the fact that the periodic rate(s) may vary."
Citibank's general disclosure about interest rates, although not as specific as sought by plaintiffs, see Plaintiffs' Opp. Mem. at 4 (suggesting defendant should have made "the more specific disclosure `your periodic rate and APR on Standard Purchases may vary'" (emphasis in original)), is accurate and consistent with TILA's requirement that credit card lenders disclose the fact that the variable periodic rate may vary. 12 C.F.R. § 226.7 (d) n. 15. I find nothing in the TILA, which prohibits defendant from warning consumers in their monthly statements that their initially fixed interest rates on certain charges may also vary, in light of the 2000 card agreement disclosure that the consumers' rates would escalate if they default. Plaintiffs cite no evidence that defendant gave any disclosure that could lead a reasonable juror to believe that the interest rate on cash advances or balance transfers does or should vary with the prime rate. Indeed, other than the disclosure on the back of each monthly statement, plaintiffs do not argue that any of defendant's other disclosures are defective, misleading, or at least incomplete in any way. See, e.g., Plaintiffs' Mem. at 6. I find nothing in the monthly billing statement (or 2000 card agreement for that matter) that discloses or suggests that the interest rate on cash advances or the promotional rate on balance transfers changed from fixed to variable based on the U.S. prime rate. See Bridge Decl. Exh. 3 (providing that the fixed promotional rate supersedes calculated variable rate based on the prime rate); Bridge Decl. Exh. 2 (providing fixed interest rate on cash advances); Previn Decl. Exh. 2 at 16. In view of the lack of evidence presented to support plaintiffs' tortured interpretation, I find plaintiffs' proffered belief to be nothing more than wishful thinking.
Finally, I find plaintiffs' bare-bones contention that defendant's failed to clearly and conspicuously disclose the legal obligations of the parties, as required by 12 C.F.R. § 226.5 (a)(1) and 226.5(c), without merit. Defendant's initial disclosure indicates to each respective plaintiff who obtained a cash advance or balance transfer that the interest rate on cash advances is fixed, Bridge Decl. Exh. 2 at 185, and that the promotional rate does not, unlike the interest rate on purchases, vary with the prime rate, Bridge Decl. Exh. 1 at 167; Bridge Decl. Exh. 3 at 175. In addition, I find no reason to "nullify" defendant's disclosures about plaintiffs' accounts, as suggested by plaintiffs, simply because they are posted on the back of the billing statement. Plaintiffs suggest that defendant "did not inform customers that there was language pertinent to the agreement on the [back] side of the page," Plaintiffs' Opp. Mem. at 10, and thus the terms disclosed on the reverse side of the statement violates the "clear and conspicuous" disclosure requirement of § 226.5. Id. I disagree. If payment is necessary because of an existing balance, each statement clearly instructs the card holder to refer to the reverse side of the statement for payment instructions. Previn Decl. Exhs. 1-2. Near the top of the reverse side of the statement, it clearly and conspicuously states that it contains "Information About Your Account," including information about the applicable finance charges. Id Accordingly, I find plaintiffs' reasoning untenable and that defendant's language, i.e., "periodic rates and APRs may vary," is fair. Plaintiffs' motion for summary judgment on defendant's compliance with TILA is denied, and defendant's cross-motion is granted.
b. Timing of Calculated Applicable Interest Rate
Plaintiffs argue defendant further violated TILA because it failed to adjust downward in a timely manner certain rates that it had disclosed to be variable. More specifically, plaintiffs contend that defendant departed from the purportedly "ambiguous" terms of the 2000 card agreement, which sets forth that any change to the variable periodic rate will take effect "on the first day of the billing period directly following the month in which [defendant] calculate[s] the rate." Bridge Decl. Exh. 3. The rate is calculated by "adding the margin applicable to [each card holder's] account to the Prime Rate published in The Wall Street Journal on the last business day of each month." Id. Plaintiffs assert that the calculated rate should "immediately apply to the account in the billing month containing the determination date," Plaintiffs Opp. Mem. at 8 (emphasis added), not "on the first day of the billing period directly following the month in which we calculate the rate," as disclosed in the 2000 card agreement. Bridge Decl. Exh. 3. Contrary to plaintiffs' belief, the fact that defendant offers no convincing reason to delay the rate reduction is irrelevant. Defendant clearly and conspicuously disclosed to plaintiffs the manner in which their variable rate would be calculated, see id., and plaintiffs had the option, which it failed to exercise, to decline the terms of the card agreement by closing their account.
As an example of the delay by defendant, plaintiffs note that during Demry's February 2001 billing cycle, which ran from January 26 to Febuary 23, Demry's should have received the benefit of the prime rate published on January 25, 2001, the last billing date of the January 2001 billing cycle. Plaintiffs' argument, however, is flatly contradicted by the 2000 card agreement, which states in clear terms that the applicable interest rate is based "on the last business day of each month" and takes effect "on the first day of the billing period directly following the month in which [defendant] calculate[s] the rate." Bridge Decl. Exh. 3. In the given example, the last business day fell on January 31, 2001 with the prime rate at 9.00%. Accordingly, based on the formula provided by defendant, the 9.00% prime rate should be applied to Demry's billing cycle beginning February 24, 2001 ( e.g., the March 2001 billing cycle). Based on a 7.4% margin, my calculation of the applicable rate coincides with defendant's calculation. I find nothing ambiguous, either in substance or form, about defendant's disclosure regarding the methodology to calculate the applicable variable interest rate. To arrive at their calculated interest rate, plaintiffs urge that the word "month" must be read to mean "billing period." Plaintiffs' interpretation borders on the absurd. I find nothing in any of defendant's disclosures that suggest that consumers should depart from the well understood meaning of the word "month" and equate it with the term "billing period." Paine Webber Inc. v. Bybyk, 81 F.3d 1193, 1199 (2d Cir. 1996) ("In interpreting a contract, `[w]ords and phrases are given their plain meaning. Rather than rewrite an unambiguous agreement, a court should enforce the plain meaning of that agreement.'" (quoting American Express Bank Ltd v. Uniroyal, Inc., 562 N.Y.S.2d 613, 614 (1st Dep't 1990)). Accordingly, plaintiffs' motion for summary judgment on their TILA claim in regard to the timing of the calculated interest rate is denied, and defendant's cross-motion is granted.
c. TILA Damages
Having determined that defendant did not violate TILA under any of the grounds asserted by plaintiffs, I find that statutory damages under TILA are unavailable to plaintiffs. See 15 U.S.C. § 1640 (a)(2)(A). For the same reason, I find plaintiffs cannot recover actual damages under TILA. 15 U.S.C. § 1640 (a)(1). Even if defendant's disclosures were improper under TILA, it is well established that plaintiffs are not entitled to recover actual damages if they have not shown any detrimental reliance on the allegedly improper TILA disclosures. Schuster v. Citibank (South Dakota), N.A., 2002 WL 31654984, at *3 (S.D.N.Y. Nov. 20, 2002); see also Gold Country Lenders v. Smith, 289 F.3d 1155, 1157 (9th Cir. 2002); Turner v. Beneficial Corp., 242 F.3d 1023, 1026-28 (11th Cir. 2001) (en banc); Peters v. Jim Lupient Oldsmobile Co., 220 F.3d 915, 916-17 (8th Cir. 2000); Stout v. J.D. Byrider, 228 F.3d 709, 718 (6th Cir. 2000); Perrone v. General Motors Acceptances Corp., 232 F.3d 433, 436-40 (5th Cir. 2000). Here, plaintiffs admit that they have no recollection of the card agreement or that they simply assumed what the applicable rate on purchases, cash advances, etc. would be without reference to the initial disclosure provided in the card agreement. Demry Depo. at 164-165; Haviv Depo. at 117. Despite the admitted lack of reliance by plaintiffs on defendant's disclosures, plaintiffs argue, against the expressed intent of Congress, numerous circuit court opinions, and the Schuster opinion decided last year in this District, that detrimental reliance is not necessary in order to find actual damage. The legislative history behind amendments to TILA indicates that Congress intended that "[t]o recover actual damages, consumers must show that they suffered a loss because they relied on an inaccurate or incomplete disclosure." H.R. Rep. No. 104-193, at 99 (1995) (quoted in Turner v. Beneficial Corp., 242 F.3d 1023, 1028 (11th Cir. 2002)). I find no reason to depart from the detrimental reliance standard expressed by Congress and earlier adopted by this Court and other circuit courts. Plaintiffs' motion for damages is denied and Citibank's cross-motion is granted.
2. Breach of Contract
As discussed above, plaintiffs provide no evidence from which a reasonable juror could conclude that defendant Citibank breached any agreement with plaintiffs about (1) how interest rates would vary, or (2) when the variable interest rate should change. Plaintiffs have shown no genuine issue of material fact in connection with Citibank's alleged breach. Thus, plaintiffs' motion for summary judgment on their breach of contract claim is denied and defendant's cross-motion to dismiss this claim is granted. Schuster, 2002 WL 31654984, at *4.
3. South Dakota Consumer Protection Statutes
Lastly, plaintiffs contend that defendant violated South Dakota's Deceptive Trade Practices and Consumer Protections ("DTPCP") statute. S.D. Codified Laws "SDCL" Ch. 37-24. Section 37-24-6 under SDCL makes it unlawful for any person to "[k]nowingly and intentionally act, use, or em ploy any deceptive act or practice, fraud, false pretense, false promises, or misrepresentation to conceal, suppress or omit any material fact in connection with the sale or advertisement of any merchandise, regardless of whether any person has in fact been mislead, deceived, or damaged thereby." SDCL § 37-24-6. According to plaintiffs, defendant Citibank violated § 37-24-6 after it misrepresented to its customers that the periodic rates in connection with balance transfers and cash advances vary with the prime rate, when in fact those rates are fixed. See SDCL § 37-24-1 (broadly defining "merchandise" to include services); State of South Dakota v. Western Capital Corp., 290 N.W.2d 467 (N.D. 1980) ("services" under DTPCP includes extension of credit). Notwithstanding plaintiffs' disregard of defendant's initial disclosures and attempts at creative lexicography, I find Citibank did not make any misrepresentations, as alleged by plaintiff, in violation of SDCL § 37-24-6. Accordingly, on this claim too, plaintiffs' motion for summary judgment must be denied, and defendant's cross-motion granted.
IV. CONCLUSION
Plaintiffs' selective reading of defendant's disclosures and use of their unsubstantiated and novel construction of the words "may" and "month" fail to expose a material fact issue on any of their claims. Accordingly, I grant defendant's motion to dismiss plaintiffs' complaint and instruct the clerk of the court to close this case as well as any open motions.
SO ORDERED.