Schmidt v. JPMorgan Chase Bank, NA et al

REPLY in Support of 28 MOTION for Summary Judgment , 31 AMENDED 29 , 28 MOTION MOTION for Summary Judgment

S.D. Tex.September 12, 2018

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION JIMMY D. SCHMIDT and JIMMY DOUGLAS SCHMIDT, M.D., P.A., § § Plaintiffs § § v. § CIVIL ACTION NO. 4:17-cv-00532 § JURY JPMORGAN CHASE BANK, NA, § JPMORGAN CHASE & CO., AND § CHASE BANK CARD SERVICES, § Defendants. § DEFENDANTS’ REPLY IN SUPPORT OF AMENDED MOTION FOR SUMMARY JUDGMENT Defendants JPMorgan Chase Bank, NA, JPMorgan Chase & Co., and Chase Bank Card Services1 (collectively, “Chase” or “Defendants”) file this Reply Brief in Support of their Amended Motion for Summary Judgment. I. INTRODUCTION Pending before the Court is Defendants’ Motion for Summary Judgment [Doc. # 28] and Amended Motion for Summary Judgment (“Defendants’ Motion”)[Doc. # 31].2 In their Response, Plaintiffs fail to address the relevant legal standards at play and mischaracterize the evidence applicable to those standards. Plaintiffs also completely ignore the dispositive evidence that they failed to timely report the allegedly unauthorized transactions from the deposit account, as they were 1. Once again, Defendants note that Chase Card Services is not the proper Chase entity as it relates to the opening of the Chase credit cards – Chase Bank USA, N.A. is the proper party. Chase has been requesting that Plaintiffs replace Chase BankCard Services, Inc. with Chase Bank USA, N.A. throughout the entire litigation. See, for example, Chase’s Original Answer [Doc. #2] at ⁋4 n. 2 (noting that “Chase Bank USA, N.A., not Chase Bank Card Services, Inc., is the proper defendant with respect to the credit card accounts alleged to be at issue in this lawsuit”). To say that this is a recent “corporate shell game” is disingenuous and improper. 2. The Amended Motion for Summary Judgment contains minimal edits to reflect limited changes in the attached Amended Declaration of Stephanie Nicholls (“Nicholls Decl.”). The remaining Exhibits to Defendants’ Motion for Summary Judgment remain intact and should be considered along with the Amended Motion and Amended Declaration. As it turns out, Plaintiffs did not even address the amendments in their Response to Defendants’ Amended Motion for Summary Judgment (“Plaintiffs’ Response”)[Doc. 32]. Case 4:17-cv-00532 Document 34 Filed in TXSD on 09/12/18 Page 1 of 7 2 obligated to do under the UCC as a condition precedent to being reimbursed. Thus, they fail to raise an issue of material fact on any of their claims, and the Court should grant summary judgment and dismiss Plaintiffs’ claims. II. PLAINTIFFS’ ATTEMPT TO STRIKE NICHOLLS’ DECLARATION FAILS Plaintiffs’ attempt to strike the Amended Declaration of Stephanie Nicholls is unsupported. Ms. Nicholls’ Declaration is based upon “[her] personal knowledge, information that [she] learned through [her] review of the business records at Chase Bank USA, N.A. (‘Chase USA’), or information based on the same that was provided to [her] by other employees of Chase USA with knowledge thereof.” Amended Motion, Exhibit A, at ⁋ 1. She testified as a Rule 30(b)(6) witness, and as such, she may rely upon these things. See Brazos River Authority v. GE Ionics, Inc., 469 F. 3d 416, 433 (5th Cir. 2006). The Court should deny Plaintiffs’ request to strike her Amended Declaration. III. PLAINTIFFS FAIL TO RAISE AN ISSUE OF FACT WITH RESPECT TO THEIR BREACH OF FIDUCIARY DUTY CLAIM Plaintiffs fail to consider the sworn basis for their breach of fiduciary claim. In both answers to interrogatories and the First Amended Complaint, Plaintiffs stated that the basis of this claim is that “as a result of Defendants’ knowledge that Rhodes worked for Plaintiffs, Defendants justified opening these accounts in Plaintiffs’ name.” See Defendants’ Motion, at 10 (citing response to Interrogatory); see also Plaintiffs’ First Amended Complaint [Doc. # 19] at ⁋ 16. Thus, when Plaintiffs discuss events occurring after the opening of the Southwest Airlines Card, they confuse the issue and misstate their sworn claim.3 Plaintiffs appear to argue that two issues of fact exist with respect to this claim. First, they argue that Rhodes breached her fiduciary duty to Plaintiffs. See Plaintiffs’ Response, at ⁋⁋ 29-30. Second, they contend that Chase knew that Ms. Rhodes was Plaintiffs’ employee. Id. at ⁋⁋ 30-32. 3. In their Response, Plaintiff argue solely about the opening of the Southwest Airlines Card and provide no argument with respect to the Chase Ink Card. Case 4:17-cv-00532 Document 34 Filed in TXSD on 09/12/18 Page 2 of 7 3 That is not enough, however. In order to survive summary judgment, there must be a material issue of fact as to whether Chase knew Rhodes’ actions were a breach of her fiduciary duty. No such issue of fact exists, as Dr. Schmidt himself admitted that he has no evidence that Chase knew of Ms. Rhodes’ unlawful activity. See Defendants’ Motion at 11. (citing Schmidt Depo. at 64:12-23). This admission alone justifies dismissal of this claim. In addition, Meadows v. Hartford (cited by Plaintiffs), counsels that Plaintiffs’ breach of fiduciary claim requires a showing that Defendants “knowingly participate[d] in the breach of duty of a fiduciary . . . .” 492 F.3d 634, 639 (5th Cir. 2007)(emphasis added). As noted, there is no evidence that Defendants knowingly participated in Ms. Rhodes’ unauthorized and unlawful actions. See Defendants’ Motion, at 11. The Court should grant summary judgment on this claim. IV. PLAINTIFFS FAIL TO RAISE AN ISSUE OF FACT WITH RESPECT TO THEIR NEGLIGENCE CLAIM Plaintiffs offer no evidence of the applicable standard of care. Plaintiffs explicitly allege that Defendants “had a duty to use reasonable skill and care in the performance of their duties as financial institutions” and that Defendants’ conduct fell “below the standard of care required of similar financial institutions.” Defendants’ Motion, at 12 (citing Plaintiffs’ First Amended Complaint, at ⁋ 17)(emphasis added). However, despite correctly stating the legal standard, Plaintiffs offered no expert testimony on this issue or any evidence of the industry standard of care. Plaintiffs concede this last point, and in fact, there is no discussion of any industry standard of care in Plaintiffs’ Response. Plaintiffs now argue that they do not need to offer expert testimony, as a layman would “understand the process of acquiring a credit card . . .” using a customer’s name, date of birth, and social security number. This is not, however, the relevant issue. The pertinent issue is whether the facts presented by Plaintiffs show that Defendants’ authentication of Plaintiffs’ identity fell below “the standard of care required of financial institutions.” As conceded by Plaintiffs in their Response regarding Chase’s computer processes, the authentication of an electronic applicant’s Case 4:17-cv-00532 Document 34 Filed in TXSD on 09/12/18 Page 3 of 7 4 identity clearly involves the very “use of specialized equipment and techniques unfamiliar to the ordinary person” (computer authentication) that requires expert testimony. See FFE Transp. Services, Inc. v. Fulgham, 154 S.W.3d 84, 91 (Tex. 2004). At the very least, Plaintiffs’ negligence claim requires some evidence of the industry standard of care; not just unsupported allegations that Chase’s process fails to meet it.4 There is no evidence, for example, that Chase’s use of the mother’s maiden name with the Southwest Airlines Card, or the failure to consider the applicant’s mother’s maiden name with the Chase Ink Card, fall below relevant industry standards, because there is no evidence as to what the standard is. A jury cannot determine an industry standard of care without any evidence, but that is exactly what Plaintiffs are asking the Court to approve. Chase’s purported failure to talk to Dr. Schmidt likewise cannot establish negligence. Here, Plaintiffs are arguing that accepting on-line applications for credit cards without talking to the applicant is negligent. They want the fact finder to agree without the aid of any expert testimony, or any supporting evidence, about the applicable industry standard. This is particularly troublesome given the ubiquitous practice of electronic credit card applications. There is no evidence in the record showing that accepting an on-line application without talking to the applicant violates any industry standard of care.5 This lack of evidence is fatal to Plaintiffs’ negligence claim. V. PLAINTIFFS ARE NOT ENTITLED TO DECLARATORY JUDGMENT Plaintiffs argue that, if Defendants are right in their Motion, “then Plaintiffs are left without a remedy, unless they can proceed on their declaratory judgment claim.” Plaintiffs’ Response, at ⁋⁋ 41-42. This is a veiled admission that that their request for declaratory relief is a redundant second 4. The way Chase handles card applications may very well be the industry standard. It is Plaintiffs’ burden, however, to establish the standard, and they have failed to do so. 5. The same is true with respect to the other alleged failures of Chase. See Plaintiffs’ Motion, at ⁋ 36. None of the alleged instances of Defendants’ purported negligence are supported with any evidence of the applicable standard of care or any showing that they fell below any standard of care. Case 4:17-cv-00532 Document 34 Filed in TXSD on 09/12/18 Page 4 of 7 5 bite at the apple. If they do not win with their substantive claim, Plaintiffs want to reassert this same claim as a request for declaratory judgment. This use of a declaratory judgement action is improper and should be denied. Plaintiffs further concede that they have not plead causes of action under the Truth in Lending Act or the Texas UCC, the most analogous causes of action given Plaintiffs’ stated reasons for declaratory judgment. They also fail to address Chase’s contention that they are not entitled to any relief for the allegedly improper payments to the cards from the deposit account- which encompasses the entirety of their claim for compensatory damages. Without any new causes of action, Plaintiffs’ request is a mere restatement of its negligence claim. In other words, it is redundant and unnecessary.6 The Court should dismiss Plaintiffs’ declaratory judgment action. VI. THERE IS NO EVIDENCE OF MALICE There is no evidence that Chase acted with malice, a high standard. See TEX. CIV. PRAC. & REM. CODE § 41.001(7)(defining malice as “specific intent by the defendant to cause substantial injury or harm to the claimant”). Plaintiffs make the extraordinary claim that Chase does not care about its long-standing customers and values only excessive finance charges through unscrupulous credit practices. There is absolutely no evidence, however, to establish any of this, and there is no connection between the factual record and these conclusions. Further, as noted in Defendants’ Motion, there is a fundamental conflict between Plaintiffs’ sworn rationale for malice and Dr. Schmidt’s testimony. See Defendants’ Motion at 15. Plaintiffs do not address their sworn interrogatory response or Dr. Schmidt’s testimony in their Response. For this reason, the Court should dismiss Plaintiffs’ request for exemplary damages. 6. Mattly v. Speigel, Inc., 19 S.W.3d 890 (Tex.App.—Houston [1st Dist.] 2000, no pet.) does not help Plaintiffs’ request for declaratory relief. In that case, Plaintiff alleged a negligence claim like the one alleged here. It is unclear how this case offers any support for a request for declaratory relief. Case 4:17-cv-00532 Document 34 Filed in TXSD on 09/12/18 Page 5 of 7 6 VII. CONCLUSION The Court should grant Defendants’ Motion and dismiss all of Plaintiffs’ claims against Defendants. Dated: September 12, 2018 Respectfully Submitted, GREENBERG TRAURIG, LLP By: /s/ Paul J. Brown Paul J. Brown State Bar No.: 24006913 S.D. Tex. No: 26366 1000 Louisiana Street, Suite 1700 Houston, Texas 77002 Phone: 713.374.3554 Fax: 713.754.7554 brownpa@gtlaw.com ATTORNEY IN CHARGE FOR DEFENDANTS JPMORGAN CHASE BANK, NA, JPMORGAN CHASE & CO., AND CHASE BANK CARD SERVICES OF COUNSEL: Aimee Housinger State Bar No.: 24083203 S.D. No. 1717243 1000 Louisiana Street, Suite 1700 Houston, Texas 77002 housingera@gtlaw.com Case 4:17-cv-00532 Document 34 Filed in TXSD on 09/12/18 Page 6 of 7 7 CERTIFICATE OF SERVICE I hereby certify that all counsel of record have been served with a copy of the foregoing via the Court’s ECF filing system on September 12, 2018. By: /s/ Paul J. Brown Paul J. Brown Case 4:17-cv-00532 Document 34 Filed in TXSD on 09/12/18 Page 7 of 7