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Murr v. Capital One Bank (USA), N.A.

United States District Court, E.D. Virginia, Alexandria Division

June 27, 2014


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For Margaret Murr, on behalf of herself and all others similarly situated, Plaintiff: Daniel M Cohen, LEAD ATTORNEY, Cuneo Gilbert & LaDuca LLP (Alex), Alexandria, VA.

For Capital One Bank (USA), N.A., Defendant: Mary Catherine Zinsner, Syed Mohsin Reza, Troutman Sanders LLP (Tysons Corner), Tysons Corner, VA.

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Leonie M. Brinkema, United States District Judge.

Before the Court is defendant's Motion for Summary Judgment. For the reasons that follow, the motion will be granted in part and denied in part.


Since 2009, plaintiff Margaret Murr (" plaintiff" or " Murr" ) has maintained a credit card account with defendant Capital One Bank (USA), N.A. (" defendant" or " Capital One" ). During her first three years as a cardholder, until October 2012, plaintiff used her credit card for purely transactional purposes. That is, plaintiff

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paid off purchases made on her card in full every month without accruing interest charges pursuant to the terms of her Credit Card Agreement (" CCA" ), which entitles her to a 25-day grace period in which she can avoid paying interest on her purchases, provided that she pays off the balance from the previous billing period in full by the due date.

In October 2012, plaintiff received a promotional offer (" the Offer" ) from defendant promising " 0% APR for 12 months" on balance transfers from other accounts and purchases made using an " Access Check," three of which were attached to the Offer and bore plaintiff's name and address.[1] Compl. ¶ ¶ 18-20. The Access Checks allowed plaintiff to borrow up to a certain amount of money -- limited only by the total credit limit on her account -- at no interest for one year in exchange for a 2% up-front fee on the amount borrowed. Id. Generally speaking, defendant conceived of the Offer as a way to increase its relative market share of consumer debt. See Pl.'s Mem. in Supp. of Mot. for Class Certification (" Pl.'s Mem." ), Ex. 5, at 1 (" The objective of the Balance Build programs is to profitably grow assets and garner a larger share of wallet with our revolving customers." ). Defendant thus targeted the segment of its cardholders " already carrying credit card debt or [those] who will have to incur that debt for a new purchase." Def.'s Mem. in Supp. of Its Mot. for Summ. J. (" Def.'s Mem." ), Ex. I. As a cardholder who did not routinely carry a balance, plaintiff was not a member of the targeted segment.

On October 11, 2012, plaintiff directed her husband to write an Access Check for $4,358.80 to pay off their county property taxes. That amount appeared on her next bill as a " special transfer balance," alongside her " purchase balance." See Compl. ¶ 47. Her bill also reflected the one-time 2% transaction fee, which totaled $87.18. Id. Plaintiff thereafter sent defendant a payment equal to the transaction fee plus the full amount of all the purchases she had charged during the previous billing period. Id. Much to plaintiff's surprise, her next bill showed that the payment she had made left a small unpaid purchase balance, for which she was charged $11.31 in accumulated interest.

The source of plaintiff's surprise and confusion was two-fold. First, plaintiff did not understand the Offer's effect on her interest-free grace period. Because plaintiff did not pay off the Access Check balance in full after the first month, defendant deemed her to be carrying a balance and therefore eliminated her grace period for new purchases. In other words, by carrying a balance at the end of the billing period due to her use of the Access Check, plaintiff incurred interest at the standard rate (13.9% APR) on new purchases from the day they were made, even though defendant did not charge interest on the Access Check balance. Defendant claims that this loss of the 25-day grace period was dictated by the terms of the CCA, which states in relevant part:

Interest Charges and Fees.

We will charge Interest Charges and Fees to your Account as disclosed to you in your Statements and other Truth in Lending Disclosures. In general, Interest Charges begin to accrue from the day a transaction occurs. However, we will not charge you interest on any new balances posted to the purchase Segment of

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your Account provided you have paid your previous balance in full by the due date.

Def.'s Mem., Ex. B, at 6 (emphasis in original). Defendant further claims that the only way plaintiff could have restored her grace period under the CCA was to pay off everything -- the amount of the Access Check and all purchases plus accumulated interest and fees.

Plaintiff was not alone in finding the Offer and its consequences to be confusing. Documents uncovered in discovery reveal that defendant was aware of a steady stream of complaints from consumers who lost their grace periods after accepting the Offer despite paying off their purchase balances in full. Moreover, just one month after plaintiff received the Offer in the mail, defendant reached a settlement agreement with the Vermont Attorney General to more clearly disclose " how accepting a Vermont Access Check Offer will affect the interest paid on future purchases made" by cardholders, like plaintiff, who do not routinely carry a balance. Pl.'s Mem., Ex. 33.

The second source of confusion was the manner in which defendant allocated plaintiff's payments among her balances. Her October 2012 bill, for instance, showed a minimum required payment of $48.00, or 1% of the total balance on her account (plus interest and fees). Although plaintiff made a payment of $450.24, which covered the entire amount of purchases charged plus the 2% transaction fee, the first $48.00 of that payment was applied to her Access Check balance -- rather than her purchase balance -- meaning $48.00 of plaintiff's purchase balance remained unpaid. As a consequence, interest accrued on the remaining purchase balance even though those purchases had been made before plaintiff lost her grace period.

Defendant claims that this allocation method is spelled out in the CCA, which states:

How We Apply Your Payments.

We apply your minimum payments to lower Annual Percentage Rate balances before higher ones. We apply any portion of your payment, in excess of your minimum payment, to higher Annual Percentage Rate balances before lower ones.

Def.'s Mem., Ex. B, at 6 (emphasis in original). Plaintiff continued to use her credit card to make purchases throughout November 2012. At the close of the next billing period, she again attempted to pay off the entire amount of her purchase balance plus $11.31 in accrued interest charges (but none of the Access Check balance). Compl. ¶ 48. Her payment again fell short of achieving that goal because defendant allocated the minimum payment to the Access Check balance. Finding this to be unfair, plaintiff stopped using her credit card to make purchases and similarly stopped making any substantial attempts to pay off her balance. Id. ¶ ¶ 49-51.

As a result of defendant's practices, although plaintiff did not incur any interest charges on her Access Check balance, she did incur unexpected interest charges on new purchases in the amount of $26.16 due to her loss of a grace period and the manner in which defendant allocated her payments. In July 2013, after plaintiff had refused to make payments for several months, defendant charged off her account. In August 2013, plaintiff paid $4,368.50 of the $4,535.89 that she owed, and defendant elected not to pursue the remainder.

On August 30, 2013, plaintiff initiated

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this class action.[2] The Complaint makes myriad allegations based on what plaintiff describes as defendant's bait-and-switch tactics. In particular, plaintiff alleges that defendant eliminated her grace period on new purchases, wrongly and without notice, when she accepted the Offer. See Compl. ¶ ¶ 3, 28. Plaintiff further alleges that defendant " manufactured" a shortfall in her payments by diverting a certain amount of them to her Access Check balance, thereby causing a portion of her purchases to go unpaid and accrue unexpected interest charges. Id. ¶ 3. Finally, plaintiff alleges that none of these consequences were made apparent to her at the time she accepted the Offer by writing an Access Check. Nor was it clear that the only way to avoid incurring interest charges would be to pay the entire balance of the Access Check right away or refrain from making any new purchases until doing so.

As a result, the Complaint alleges that plaintiff has suffered injury in the form of " improperly incurred interest charges," late fees, and loss of the interest-free grace period associated with her credit card. Id. ¶ 57. Plaintiff has also " been the subject of derogatory credit reports and suffered negative credit consequences, and has been harassed by debt collectors." Id. ¶ 56. She has made claims against defendant for common law fraud and constructive fraud (Counts I and II); breach of contract and the implied covenant of good faith and fair dealing (Counts III and IV); violating the Truth in Lending Act (" TILA" ), 15 U.S.C. § 1601 et seq. (Count V); violating the Fair Credit Billing Act (" FCBA" ), 15 U.S.C. § 1666 (Count VI); violating the Arizona Consumer Fraud Act (" ACFA" ), Ariz. Rev. Stat. Ann. § 44-1521 et seq. (Count VII); and for declaratory relief (Count VIII).

On October 18, 2013, defendant moved to dismiss the entire Complaint for failure to state a claim upon which relief can be granted. On November 15, 2013, the Court granted defendant's motion as to plaintiff's claim that defendant breached the implied covenant of good faith and fair dealing (Count IV), but denied the rest of defendant's motion.


Defendant has moved for summary judgment on all remaining counts. Plaintiff has responded to the motion and the parties have argued their positions during a hearing before the Court.

A. Standard of Review

Summary judgment is appropriate where the record demonstrates " that there is no genuine dispute as to any material fact and the [moving party] is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Accordingly, the question on summary judgment is " whether a reasonable jury could find in favor of the non-moving party, taking all inferences to be drawn from the underlying facts in the light most favorable to the non-movant[.]" In re Apex Express, 190 F.3d 624, 633 (4th Cir. 1999). To survive a summary judgment motion, " [t]he disputed facts must be material to an issue necessary for the proper resolution of the case, and the quality and quantity of the evidence offered to create a question of fact must be adequate to support a jury verdict." Thompson Everett, Inc. v. Nat'l Cable Adver., L.P., 57 F.3d 1317, 1323 (4th Cir. 1995) (citation omitted). That means the non-moving party may not rest upon a " mere scintilla" of evidence, but must instead offer

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specific facts supporting its position. See Celotex, 477 U.S. at 324; accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In other words, once the moving party demonstrates that it is entitled to judgment as a matter of law, the burden shifts to the non-moving party to identify facts showing that there is a genuine issue for trial. See Pulliam Inv. Co. v. Cameo Prop., 810 F.2d 1282, 1286 (4th Cir. 1987).

B. Common Law Fraud (Counts I and II)

Plaintiff asserts two fraud claims under Virginia common law, both of which rely on the same underlying facts. Count I alleges that defendant fraudulently induced plaintiff to accept the Offer by misrepresenting its terms and concealing material information relating to its costs. Compl. ¶ ¶ 72-76. Count II alleges that those same misrepresentations and efforts to conceal constitute constructive fraud. Id. ¶ ¶ 82-86. Defendant argues that it is entitled to summary judgment on both counts because plaintiff's claims are preempted by federal law and, even if they are not preempted, " fail on their own terms" because ...

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