Sanchez v. American Express Travel Related Services Company

Citation: Not availableDocket: 1-06-0878 Rel

Court: Appellate Court of Illinois; March 29, 2007; Illinois; State Appellate Court

Original Court Document: View Document

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Edward Sanchez appeals a summary judgment granted to American Express Travel Related Services, Inc. in a case regarding alleged deceptive practices in currency exchange. Sanchez claims a genuine issue of material fact existed, disputing the court's decision. The background reveals that Sanchez visited an American Express location to exchange 1,050 Mexican pesos, with an exchange rate of 0.080936652 USD per peso displayed on an electronic board. He was informed of a $3 service fee, which he accepted, resulting in a total of $81.98 after the fee was deducted. Later, Sanchez filed a complaint alleging a "Money Skimming Scheme," asserting that American Express profited from an undisclosed difference between the exchange rate it received and the rate it charged customers, thereby violating the Illinois Consumer Fraud and Deceptive Business Practices Act. He contended that the receipt obscured this hidden fee. American Express responded with a motion to dismiss, arguing it was not legally obligated to disclose its currency purchase rates or profits from the spread, claiming Sanchez could not establish a fraud claim under the Act.

Defendant contended that plaintiff failed to adequately plead proximate cause or damages. In response, plaintiff referenced Covarrubias v. Bancomer, asserting that the defendant's failure to disclose profits exceeding the $3 service fee constituted a deceptive practice under the relevant Act. Plaintiff maintained that his pleadings regarding proximate cause and damages were sufficient. The circuit court denied defendant's motion to dismiss on May 13, 2005, but did not rule on plaintiff's subsequent motion for class certification. On November 14, 2005, defendant filed a motion for summary judgment, supported by affidavits from employees Linda Teter and Vicki Norton. 

Teter, the director of service delivery, explained that American Express allows individual travel service office (TSO) managers to set their own fees based on local competition, ensuring fees are competitive. She clarified that American Express does not disclose its net profit or the cost of currency to customers, stating the fee on receipts is not labeled as a "net fee." Teter described the process of buying foreign currencies in bulk at wholesale rates, emphasizing that individual transaction profits could not be anticipated. Norton, manager of personal travel and financial services, confirmed the details of a specific currency exchange transaction by the plaintiff on September 16, 2004, noting the $3 fee was clearly indicated on the receipt.

The fee charged by American Express for its Exchange Service is distinctly communicated as an additional charge separate from the retail exchange rate, with no intention to mislead customers into believing the company profits only $3 per transaction. During his deposition on November 3, 2005, the plaintiff stated he decided to sue after realizing the defendant profit from currency exchanges and claimed he was charged more than what was initially stated. He recalled seeking to exchange Mexican pesos for U.S. dollars on September 16, 2004, and admitted to not comparing rates with other exchange services before his transaction. Although he saw an exchange rate board, he could not recall specific rates or details of the transaction, yet confirmed the amount he received was accurate and met his expectations. The plaintiff acknowledged that his belief regarding overpayment was solely based on discussions with his attorney, and he had no evidence to support allegations of the defendant skimming funds. The deposition of Teter on January 27, 2006, revealed her expertise was limited to the defendant's foreign currency policies. She described the procedures for buy and sell transactions, noting that customers are informed of the applicable exchange rate and service fee but not the purchasing rate the defendant pays for the currency. Teter clarified that the FSRs do not disclose this information and emphasized that the company generates revenue primarily when reselling currency in sell transactions, not during buy transactions.

Revenue from currency exchange transactions is calculated at the teller (TSO) level rather than individually for each transaction. All currencies are grouped together, and a weighted cost average is used to determine the total revenue due to fluctuating exchange rates. Teter confirmed that transaction fees vary by location and market but become consistent for each office once updated in the express change system. Financial Service Representatives (FSRs) are trained to disclose transaction fees, and while they are aware that the defendant purchases currency at a lower wholesale rate, it is unclear if they inform customers of the exchange rate differences.

Foreign currency cash notes are ordered by each TSO from the defendant's money center in Las Vegas, which in turn receives notes from its England office. The Las Vegas center also buys back excess currency from TSOs for redistribution. The defendant profits by marking up the currency acquired from the money center before selling it to retail customers, with markup rates determined by local market managers based on competition. The retail rate at which the defendant buys and sells currency differs, and the goal is to profit from the spread between wholesale and retail rates.

Teter specified that "total fees" in a customer's transaction reflect the total paid for the listed transactions, confirming that the plaintiff paid a fee of $3 with no additional revenue generated from that transaction alone. However, the defendant could potentially earn additional revenue if it later sold the pesos acquired from the plaintiff at a higher rate. On March 21, 2006, the circuit court granted the defendant's motion for summary judgment after hearing arguments from both parties.

The circuit court granted summary judgment, stating that the plaintiff's inability to demonstrate that the $3 fee was the net fee or to identify any misrepresentation by American Express was critical. The court highlighted that after discovery, the plaintiff could not prove any facts that would allow for recovery or establish that a different outcome would result from transacting elsewhere. The order is subject to de novo review, affirming that summary judgment is appropriate when no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law. The plaintiff's claim was based on the Illinois Consumer Fraud and Deceptive Business Practices Act, requiring proof of a deceptive act or practice intended to deceive the plaintiff in a trade or commerce context. The court determined that the plaintiff failed to meet this burden, lacking evidence of misrepresentation or damages. The plaintiff's arguments relied on a precedent case, Covarrubias v. Bancomer, which involved similar issues regarding fees in a monetary transfer context but did not support the plaintiff's claims. Ultimately, the court affirmed that the plaintiff did not establish a violation of the Act, leading to the appeal.

The receipt in question indicated a "Current Interbank Exchg Rate: 0." The plaintiff alleged that the defendant violated the Act by underpaying for 971 pesos provided to the plaintiff's relative, claiming deceptive labeling of a "net sale fee" of $12 while profiting from the transaction. The circuit court dismissed the claim, ruling that the defendant had no duty to disclose its profit included in the 9.71 exchange rate. However, on appeal, the reviewing court reversed the dismissal, finding that the plaintiff had established a valid cause of action under the Act.

While there are factual similarities to the case of Bancomer, the reliance on its precedent is deemed unpersuasive. The Bancomer court's reasoning was significantly influenced by the cases of Martin v. Heinold Commodities, Inc. and Bernhauser v. Glen Ellyn Dodge, Inc., which are distinguished from the current case. In Martin, the defendant misled the plaintiff into believing a labeled commission was a fee paid to a third party, resulting in a violation of both the CFR and the Act. In Bernhauser, the defendants misrepresented extended-service contract fees as "pass through charges," leading to a similar reversal on appeal after the circuit courts dismissed the claims based on the Truth in Lending Act. The appeals in both cases established that the defendants' practices were not compliant with the Act, reinforcing the plaintiff's position in the current matter.

Defendants in the cases of Martin and Bernhauser inaccurately categorized fees on receipts as payments to third parties, with these fees being profits retained by the defendants. In contrast, the Bancomer case involved the defendant's failure to disclose that it obtained a more favorable exchange rate when purchasing Mexican pesos compared to the rate provided to the plaintiff when transferring $100. This raises doubts about whether the outcomes in Martin and Bernhauser support the Bancomer decision. 

Procedurally, Bancomer involved a reversal of a motion to dismiss, while the current case pertains to a summary judgment following a prior denial of dismissal, indicating a more comprehensive record was available to the circuit court. The evidence, including affidavits and depositions, reveals that the exchange rate displayed to the plaintiff was 0.080936652 USD per Mexican peso, and a $3 transaction fee was communicated and agreed upon. The receipt noted this fee as "fees," which the plaintiff did not contest. 

Furthermore, the defendant was found to have a better exchange rate for its currency purchases as opposed to rates available to individual customers, reflecting an intention to generate additional revenue. Unlike Bancomer, the current case did not misrepresent the transaction fee. The court highlighted that the defendant's profit motives should have been apparent to the plaintiff. The Seventh Circuit's ruling in In re Mexico Money Transfer Litigation underscored that no legal obligation exists for currency exchange firms to disclose their wholesale purchasing rates compared to retail selling rates, which complicates claims of fraud based on non-disclosure of such information.

The Seventh Circuit emphasized the nature of money as a commodity in an international market, illustrating that different pricing exists for bulk versus retail purchases of currency. It compared this to retail practices in other industries, noting that retailers are not obligated to disclose their wholesale costs. The court found the defendant's actions, which involved selling currency at a marked-up retail rate without disclosing the wholesale price, did not constitute a deceptive act. The plaintiff's claim was rejected, as labeling a service fee as "total fees" was not misleading. Additionally, the plaintiff failed to prove any damages, as he could not access the wholesale rate that the defendant received when selling the currency in large quantities. Consequently, the judgment of the circuit court was affirmed, with Judges Neville and Murphy concurring.