IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 16-cv-02549-RBJ
MALIK M. HASAN, M.D.
Plaintiff,
v.
AMERICAN EXPRESS CENTURION BANK,
Defendant.
PLAINTIFF’S RESPONSE BRIEF TO “DEFENDANT AMERICAN EXPRESS
CENTURION BANK’S MOTION FOR LEAVE TO NOTIFY COURT REGARDING A
PERTINENT DISTRICT OF COLORADO OPINION”
Pursuant to the leave granted by the Court at the Scheduling Conference
conducted in chambers on January 27, 2016 -- as recorded in the Amended Courtroom Minutes
[Dkt 33] -- Plaintiff, Malik M. Hasan, M.D. (“Dr. Hasan”), through his undersigned counsel,
G.W. MERRICK & ASSOCIATES, LLC, respectfully submits Response Brief to “Defendant
American Express Centurion Bank’s Motion for Leave to Notify Court Regarding a Pertinent
District of Colorado Opinion” (“Defendant’s Motion for Leave”).
1. Defendant’s Motion for Leave brings to the Court’s attention an October
12, 2016 “Order of Dismissal” entered by Hon. Richard Matsch in Hasan v. Chase Bank, USA,
N.A., Case No. 16-cv-01991-RPM (the “Chase Dismissal Order”). In the Chase Dismissal
Order, Judge Matsch dismissed a claim brought under Section 170 of the Fair Credit Billing Act
(“FCBA”), 15 U.S.C. §1666i.
2. In declaring that the credit card issuer in that case had no exposure, the
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Chase Dismissal Order points to Section 170(b) of the FBCA. Judge Matsch observed that
under that statutory subsection a card issuer’s exposure to a cardholder may not exceed “the
amount of credit outstanding with respect to such transaction.” Noting that the cardholder had
paid all the card charges prior to making demand for reimbursement, Judge Matsch concluded
that there was no “credit outstanding with respect to such transaction” within the meaning of
Section 170(b). Chase Dismissal Order at pp. 3-4.
3. Dr. Hasan urges, however, that “the amount of credit outstanding with
respect to such transaction” -- the pivotal language found in Section 170(b) of the FCBA --
means the aggregate payments by the cardholder to the card issuer on account of the subject
purchase transaction(s) until the purchased goods/services are delivered by the merchant.
Because: (i) this case is materially distinguishable from that in which the Chase Dismissal Order
entered, and (ii) there are compelling reasons for concluding that the Chase Dismissal Order
should not have entered, this Court should decline to dismiss the captioned case.
4. In choosing between these differing statutory constructions, it should be
underscored that Judge Matsch’s construction diverges from: (i) the text of the statute, (ii) the
periodic statements sent by AMEX to its cardholders, and (iii) the core purpose of the FCBA.
A. The Text of Section 170(b) Clarifies the Meaning
. A statutory provision
that may be ambiguous in isolation is often clarified because “the same terminology is used
elsewhere [in the statute] that makes its meaning clear.” United Sav. Ass'n of Tex. v. Timbers of
Inwood Forest Assocs., 484 U.S. 365, 371 (1988). It is a “basic canon of statutory construction
that identical terms within an Act bear the same meaning.” Reno v. Koray, 515 U.S. 50, 55
(1995). Clarification of the meaning of “credit outstanding” in Section 170(b) is contained later
in the very same statutory subsection. Section 170(b) goes on to provide:
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For the purpose of determining the amount of credit outstanding in the
preceding sentence, payments and credits
to the cardholder’s account are
deemed to have been applied, in the order indicated, to the payment of: (1)
late charges in the order of their entry to the account; (2) finance charges
in order of their entry to the account; and (3) debits to the account other
than those set forth above, in the order in which each debit entry to the
account was made.
Thus, it is apparent from the text that Section 170(b) uses the term “credit” to correspond to
“payment” or a payment substitute.1
With respect to credit card purchases for future delivery of goods -- such as Dr.
Hasan’s purchase of wine for future delivery -- the “outstanding credit” consists of the aggregate
amount of payments that Dr. Hasan made to the credit card issuer in respect of his purchases for
future delivery by the merchant. The outstanding credit with respect to any particular transaction
or set of transactions is finally eliminated only when the merchant delivers the goods/services to
the consumer/cardholder.
See Citibank v. Mincks, 135 S.W. 3d 545, 552-53, 555 (Mo.
App. 2004)(proposed statutory construction conflicting with the statutory language and at odds
with the broad remedial purpose of Section 170 of the FCBA is to be rejected).
Unfortunately, appropriate textual analysis of the meaning of the phrase “credit
outstanding,” as found in Section 170(b) of the FCBA, is absent from the Chase Dismissal Order.
B. The AMEX Cardholder Agreement and Billing Statement Report the “Credit
Outstanding.” Moreover, like other card issuers, AMEX publishes to its cardholders a
Cardmember Agreement. The AMEX Cardholder Agreement advises that “in most cases we
apply a credit to the same balance as a related charge. We may apply payments and credits
within balances … in any order we choose.” See Exhibit A
1 If the meaning of “credit” in Section 170(b) is equivalent to accumulated cardholder debt with
respect to a transaction, the prescribed application of “credit” to satisfy the three types of obligations identified in
Section 170(b) becomes unintelligible.
to Dr. Hasan’s December 9, 2016
RESPONSE IN OPPOSITION TO “DEFENDANT AMERICAN EXPRESS CENTURION
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BANK’S MOTION TO DISMISS AND MEMORANDUM IN SUPPORT THEREOF (the
“Hasan Dismissal Response”) at p. 2 of 6 (“How we apply payments and credits”).
In addition, AMEX transmits monthly statements to its cardholders. The monthly
statements differentiate and specifically list “new charges” (purchases) during the month, as well
as “payments/credits” made during the month by the cardholder. For example, the AMEX
statement summaries for the April and May of 2012 statements provide:
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See Exhibit B
Because these important materials (the AMEX Cardmember Agreement and the
monthly AMEX account statements) were not before Judge Matsch when he authored the Chase
Dismissal Order they were not considered by him. Of course, these matters provide a critical
distinction between this case and the one in which the Chase Dismissal Order entered.
to the Hasan Dismissal Response. In each case, these AMEX documents
expressly differentiate between “charges” and “payments/credits.” It is evident that the term
“credit” is used by AMEX to reflect payments by AMEX cardholders toward “charges” on their
respective account statements.
C. Judge Matsch’s Section 170(b) Interpretation Conflicts with Expert
Accounting Opinion. The Court may consider the opinion of accounting professionals with
respect to how the different interpretations of phrases in Section 170(b) may operate in a
complex or unfamiliar environment. Indianapolis Life Ins. Co. v. United States, 940 F. Supp.
1370, 1377 (S.D. Ind. 1996). Professional accountants illuminate that the term “credit
outstanding” consists of the aggregate amount of payments that Dr. Hasan made to the card
issuer in respect of his purchases for future delivery. The credit outstanding is eliminated, on a
final basis, only when the merchant delivers the goods/services to the consumer.2 See Exhibit C
In the Chase Dismissal Order, Judge Matsch did not weigh or consider the critical
professional accounting input in connection with the Chase Dismissal Order. Judge Matsch’s
failure to consider valuable accounting input with respect to the key phrase in Section 170(b)
to the Hasan Dismissal Response.
2 Each purchase transaction by the card holder generates a “charge” which is separately listed on the
monthly statement in chronological order. For completeness, the monthly statement may also list “charges” for
interest (if the prior statement balance was not fully paid) and/or late fees (if the cardholder did not pay the card
issuer by the statement due date). When the cardholder pays all or any portion of a monthly statement, the card
issuer will post a “credit” to the cardholder’s account. If the monthly statement is fully paid the aggregate charges
and credits will cancel out. However, in the case of purchases of goods for future delivery which are not later
delivered by the merchant as agreed, the card issuer must reinstate the cardholder’s credit balance on all transactions
where the merchant failed to deliver the goods as agreed.
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also differentiates the case in which the Chase Dismissal Order entered from this one.
D. Dr. Hasan’s Better Interpretation of Section 170(b) is Consistent with the
Statutory Purpose
(1) Transactions where the merchant promptly delivers goods/services to the
cardholder at the time of purchase. In this first type of transaction, the card issuer promptly pays
the merchant (extending a loan to the merchant) and creates a debit in the cardholder’s credit
card account. When the cardholder pays the card issuer for the purchase, a credit is issued to
offset this debit charge.
. Even if one were not yet convinced, in scrutinizing Judge Matsch’s
construction of Section 170(b) it is important to bear in mind that credit card transactions involve
two fundamental types:
(2) Transactions where the merchant is to deliver goods and services to the
cardholder at a future time. In this second type of transaction (which is the type of transaction
involved in this case), the merchant is paid by the card issuer and the card issuer is paid by the
cardholder -- for goods/services that are to be later delivered. The payment by the cardholder to
the card issuer creates a credit in the cardholder’s account which will be eliminated only when
the goods/services are delivered to the cardholder at a point in the future.
In both types of transactions there is an “amount of credit outstanding with respect to such
transaction.”
In essence, the Chase Dismissal Order opines that “the amount of credit
outstanding with respect to such transaction” is limited to the first category of credit card
transactions. But a review of the statute demonstrates that such a limitation is not contained in
the text of Section 170(b). See Fla. Dep't of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33,
53 (2008); Ali v. Fed. Bureau of Prisons, 552 U.S. 214, 228 (2008)(federal courts are not free to
rewrite statutes -- and limit the reach of Congressional legislation -- to achieve an outcome that
the court deems more desirable).
Moreover, the interpretation of Section 170(b) adopted by Judge Matsch in the
Chase Dismissal Order diverges from the statutory purpose. Under Judge Matsch’s construction
cardholders engaged in transactions contemplating future delivery of goods/services by the
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merchant are stripped of all Section 170 statutory protection. This construction produces an
irrational discrimination between different classes of cardholders and a perverse outcome giving
rise to an Equal Protection issue.3
Finally, it must be underscored that Dr. Hasan’s better construction of Section
170(b) limits the card issuer’s exposure in the second type of credit card transaction to the same
extent that it is limited in the first type of credit card transaction. Dr. Hasan’s superior
interpretation of Section 170(b)(which is more consistent with the statutory purpose of broadly
protecting consumers) limits the exposure of the credit card issuer in both types of transactions to
“the amount of credit outstanding” regardless of which party (the cardholder or the merchant) is
the beneficiary of the “credit.”
See e.g, Legal Servs. Corp. v. Velazquez, 531 U.S. 533, 545
(2001)(when there are two reasonable constructions for a statute, yet one raises a constitutional
question, the Court should prefer the interpretation which avoids the constitutional issue);
accord, Gomez v. United States, 490 U.S. 858, 864 (1989). In contradistinction, Dr. Hasan’s
better reading of Section 170(b) protects cardholders regardless of whether the merchant is to
deliver the goods/services immediately or at a future time. Of course, as part of the federal truth
in lending legislation, the Fair Credit Billing Act is remedial and is to be broadly interpreted so
as to protect consumers. See Johnson v. Riddle, 305 F.3d 1107, 1117 (10th Cir. 2002)(and cases
cited); Begala v. PNC Bank, 163 F.3d 948, 950 (6th Cir. 1998).
WHEREFORE, Dr. Hasan underscores that the litigation in which the Chase
Dismissal Order entered is materially distinguishable from this case. Moreover, Dr. Hasan
respectfully urges that regardless -- and for the reasons set forth herein -- this Court should
decline to follow the reasoning set forth in the Chase Dismissal Order.
3 Under Judge Matsch’s interpretation of Section 170(b), responsible cardholders who pay their card
balances in full each month (which payments are due within 14 days in the case of AMEX statements) are stripped
of Section 170 protection each month when the balance is paid, while those who misuse credit and consistently carry
large credit card balances maximize their statutory protection.
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Dated: February 10, 2017. /s/ Glenn W. Merrick
Glenn W. Merrick
__________
G.W. MERRICK & ASSOCIATES, LLC
6300 S. Syracuse Way, Suite 220
Centennial, Colorado 80111
Tel. (303) 831-9400
Fax (303) 771-5803
E-mail: gwm@gwmerrick.com
ATTORNEYS FOR PLAINTIFF, MALIK
M. HASAN, M.D.
The undersigned certifies that on the 10th day of February, 2017, the foregoing
PLAINTIFF’S RESPONSE BRIEF TO “DEFENDANT AMERICAN EXPRESS CENTURION
BANK’S MOTION FOR LEAVE TO NOTIFY COURT REGARDING A PERTINENT
DISTRICT OF COLORADO OPINION” was served upon counsel for Defendant by e-mail and
by placing the same in the custody of the U.S. Postal Service, postage prepaid, addressed as
follows:
CERTIFICATE OF SERVICE
Eric J. Hobbs, Esq.
Shook Hardy & Bacon
1660 17th Street, Suite 450
Denver, Colorado 80202-1254
ehobbs@shb.com
Steven M. McCartan, Esq.
Shook Hardy & Bacon
2555 Grand Boulevard
Kansas City, Missouri 64108-2613
smccartan@shb.com
_/s/ Liana Steele ______________
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