Court: Court of Appeals for the D.C. Circuit; January 10, 2018; Federal Appellate Court
Plaintiff Valerie McMullen sought a refund for unused personal training sessions after her trainer left the gym. Instead, she received unexpected charges from Chase and Synchrony banks for sessions she claims she did not incur. After attempts to resolve the issues failed, McMullen filed a lawsuit against both banks and several associated individuals and companies. The court partially granted the banks' motion to dismiss but allowed claims of fraud, conspiracy to defraud, and violations of D.C. consumer protection law to proceed. In the current proceedings, McMullen and Chase filed cross-motions for summary judgment on the remaining claims. The court found no genuine issue of material fact and granted Chase's motion.
The factual background includes the establishment of the ChaseHealthAdvance program in 2008, which provided a revolving line of credit for medical expenses and required providers to submit invoices promptly. On November 10, 2008, Chase entered into a provider agreement with Bullen Wellness, associated with Karim Steward and Wayne Bullen, who owned a gym and a chiropractic practice, respectively. Although Bullen Wellness's application included Dr. Bullen's credentials, Chase had no official connection to the gym. McMullen began attending sessions at One World Fitness in September 2010, purchasing 54 sessions for $5,040 and applying for a ChaseHealthAdvance account, which was approved with a $12,000 credit limit.
In October 2010, the plaintiff received a $5,040 charge from Bullen Wellness on her Chase billing statement and made payments without issue. After exhausting 54 training sessions by December 2010, she purchased an additional 150 sessions charged to her personal credit card. In September 2011, she expressed her intent to renew her gym membership contingent on her preferred trainer's employment, a conversation disputed by the defendant Steward but not by Chase. The next day, the trainer was terminated, prompting the plaintiff to cancel her membership and request a refund for the prepaid remaining three months. Instead of a refund, she found a new $1,000 charge from Bullen Wellness on her Chase bill in November 2011, which she disputed as unauthorized. Despite receiving a dispute form from Chase, she did not return it and continued to make payments, ultimately paying off the $1,000 balance by June 2012.
On September 12, 2014, the plaintiff filed suit in the Superior Court for the District of Columbia against several defendants including Steward, Bullen, One World Fitness, Bullen Wellness, Washington Chiropractic, Synchrony, and Chase, alleging violations of the D.C. Consumer Protection Procedures Act, civil conspiracy, fraud, conversion, breach of contract, breach of good faith and fair dealing, vicarious liability, and seeking punitive damages. She later amended her complaint to include class-action claims on behalf of other One World Fitness customers who received financing from the banks. Chase successfully removed the case to federal court under the Class Action Fairness Act. On September 23, 2015, Chase moved to dismiss several claims, with Synchrony joining the motion. The plaintiff opposed the motion and sought leave to amend her complaint again. The court granted her leave to amend but also dismissed her punitive damages claim on February 16, 2016.
The Court has accepted the proposed Second Amended Complaint as the operative document, finding that the Plaintiff adequately alleged violations of the Consumer Protection Procedures Act (CPPA) (Count I) and fraud and conspiracy to commit fraud (Count III) against the banks. Following extensive discovery, Chase submitted a Motion for Summary Judgment, to which the Plaintiff responded with a cross-motion. The Court is now evaluating both motions.
In addressing cross-motions for summary judgment, each motion is assessed independently to determine if either party is entitled to judgment as a matter of law. Key legal standards dictate that summary judgment is granted only when material facts are undisputed. A "material" fact impacts the case's outcome, while a "genuine" dispute exists if reasonable evidence could lead a jury to favor the non-moving party. Assertions of fact must be supported by specific evidence from the record.
The Court must accept the non-movant's evidence as true and draw all reasonable inferences in their favor, without weighing evidence or making credibility decisions. To oppose a summary judgment effectively, the non-movant must provide more than mere allegations or denials; concrete evidence is required to establish a genuine issue for trial. If the evidence is merely "colorable" or lacks significant probative value, summary judgment may be awarded.
In the Plaintiff's case, the accusation of fraud centers on a $1,000 charge from Bullen Wellness noted on her October 2011 billing statement, which also forms the basis for her CPPA violation claim against Chase. The Court will analyze each count accordingly.
To establish fraud, a plaintiff must demonstrate, with clear and convincing evidence, that the defendant made a false representation concerning a material fact, knew it was false, intended to deceive, and that the plaintiff relied on that representation. In cases involving commercial contracts negotiated at arm's length, the plaintiff must also show that their reliance was reasonable. The elements of fraud include both affirmative misstatements and willful omissions when there is a duty to disclose. Mere silence does not constitute fraud unless there is a duty to speak.
In this case, the plaintiff, McMullen, alleges that Chase falsely represented that she had authorized a $1,000 charge from Bullen Wellness. However, both parties agree that the billing statement sent by Chase accurately reflected the charge but did not state that McMullen authorized it. McMullen admitted in her deposition that the statement did not indicate authorization. Chase's billing statement served merely to inform McMullen of charges and provided her with the opportunity to dispute any errors, as required by law. Consequently, while the statement acknowledged the charge, it did not falsely represent that McMullen was obligated to pay it, nor did it indicate that her authorization was given.
Chase is accused by the Plaintiff of falsely representing a relationship with One World Fitness through marketing materials, specifically a welcome letter suggesting that One World was a Chase Health Advance provider, which was not the case. The letter included both Chase and One World logos and offered a free chiropractic screening, creating an implication of partnership. However, it was One World that suggested this relationship, as Chase did not authorize the use of its logo and had no contractual agreement with the gym. Chase provided a template for welcome letters to ensure proper disclosures, but did not approve the specific letter in question.
Additionally, the Plaintiff claims that Chase's handling of her account involved willful omissions, including the unauthorized issuance of a line of credit, lack of signed documentation for the credit, an unauthorized credit check, and the assertion that One World Fitness was not an approved provider for financing. However, these allegations are not found in the Second Amended Complaint, where only affirmative misrepresentations were alleged against Chase. The Plaintiff's attempt to introduce omissions as a basis for fraud through her Cross-Motion constitutes a significant alteration of her claims, which is not permissible at the summary judgment stage.
Chase could potentially be granted summary judgment on the omission claims alone due to these procedural issues. Even if the claims were properly alleged, the evidence does not support the assertion that Chase opened a second line of credit in the Plaintiff’s name or authorized such action, undermining the foundation of her claims. The document cited by Plaintiff, indicating credit approval, was not directed to her and does not substantiate her allegations against Chase.
The plaintiff contests the validity of a credit approval notification from Chase, asserting she never authorized a line of credit on the specified date, and Chase has not produced any signed documentation to the contrary. The court previously acknowledged the plausibility of her claims but noted that discovery did not reveal any disputable facts warranting a trial. Chase's representative clarified that the notification did not pertain to a new credit application but was related to a routine credit check for an existing account over 90 days old. In September 2010, the plaintiff had authorized an application for a ChaseHealthAdvance account, which was approved with a $12,000 limit. By September 2011, a $1,000 charge was made on this account, which she acknowledged as authorized. The credit approval notification sent to Bullen Wellness was determined to be a standard response to this charge, not an indication of a new line of credit. Under the Fair Credit Reporting Act, creditors are permitted to request credit reports for current accountholders without their consent, which was the case here. Consequently, the court found that there was no unauthorized line of credit from Chase, and thus no basis for claims of willful omission or failure to disclose information during a call with the plaintiff.
Chase's policies require providers to retain a signed receipt, which the bank can request if it receives a written billing dispute. McMullen did not submit her dispute in writing, so Chase's obligation to disclose a receipt was not triggered. A creditor's duty to investigate billing disputes arises only upon receiving written notice from the consumer. McMullen's claim that Chase committed fraud by failing to disclose a credit check before approving a transaction is unfounded, as there is no duty to disclose unless specific conditions are met, which McMullen did not demonstrate. Federal law permits lenders to obtain credit reports without consumer authorization during credit transactions. McMullen's claims about One World Fitness not being an approved provider and the inappropriateness of financing gym services through ChaseHealthAdvance failed because Chase had no obligation to disclose its business relationships or the permissible use of its accounts. There was no evidence of misstatements or omissions by Chase, supporting the bank's entitlement to summary judgment. Finally, McMullen's assertion that Chase falsely claimed she was legally obligated to pay $1,000 is flawed, as such statements pertain to legal rather than factual matters, which do not support fraud claims.
Misrepresentation of law generally does not support a fraud claim. Even if Chase mistakenly believed that McMullen owed $1,000, this constitutes a legal opinion rather than an actionable misrepresentation of fact. Under D.C. law, fraud does not require actual knowledge of the falsehood; rather, it can be established through reckless disregard for the truth. McMullen claims Chase acted recklessly by demanding payment without investigation, but Chase had no obligation to investigate since McMullen failed to submit her dispute in writing as required.
Additionally, there is no evidence that Chase intended to deceive McMullen. Intent can be inferred from reckless disregard combined with the severity of the misrepresentation. McMullen's claims of fraudulent intent rely on allegations that Chase ignored its credentialing protocols, complaints from customers, and required written disputes. However, Chase verified Bullen Wellness's credentials through a valid medical license and conducted annual re-verifications. The assertion that Chase ignored customer complaints is unsupported; the sampled customers who requested refunds did not claim unauthorized charges. McMullen herself acknowledged that she did not believe Chase intended to harm her.
Defendant had no notice of any alleged fraud by Bullen Wellness, and no reasonable jury could conclude that it intended to deceive McMullen. McMullen cannot cite Chase's dispute policies as evidence of fraudulent intent, as these policies require written disputes per federal law (15 U.S.C. 1666(a)). Such requirements are standard for credit-account issuers to maintain an accurate record of disputes. McMullen agreed to these terms when opening her account in 2010 and saw them on each billing statement; therefore, they were not coercive as she claims. Chase is entitled to summary judgment on the fraud count because McMullen's reliance on the billing statement was unreasonable. The complaint alleges she relied on Chase's representation to make a $1,000 payment, yet she recognized the charge as erroneous and contacted Chase to dispute it. Chase reiterated the need for a written dispute, which was also stated on her billing statement. Despite knowing the dispute process, McMullen did not submit a written dispute and paid the charge, which was unreasonable since the statement indicated she would not have to pay while her dispute was investigated. Additionally, the conspiracy claim, which relies on the underlying fraud claim, is also insufficient because the fraud claim has been deemed inadequate. Thus, the conspiracy claim fails as well.
Count I alleges that Chase violated eight provisions of the D.C. Consumer Protection Procedures Act (CPPA). Unlike common-law fraud, proving intent is not necessary under the CPPA; a plaintiff must only demonstrate a statutory violation. The CPPA ensures consumers receive truthful information about goods and services in D.C. and is intended to be broadly construed from a reasonable consumer's perspective.
1. **Violation of Section 28-3904(b)**: This section prohibits merchants from falsely claiming sponsorship or affiliations. McMullen argues Chase misrepresented its relationship with One World Fitness based on a welcome letter from Steward received at gym enrollment. However, Chase had no knowledge of or approval for the letter, and McMullen's attempts to connect it to Chase are undermined by the timeline of events. The letter was issued in 2010, while complaints regarding unauthorized charges arose in 2011. McMullen cannot hold Chase accountable for not investigating issues that arose after the letter was issued.
2. **Allegations Related to the October 2011 Billing Statement**: McMullen claims that the billing statement implied Chase’s endorsement of personal training services, despite an internal mandate prohibiting such financing. However, the record does not support the existence of any such mandate, and Chase's testimony contradicts her claims. The court finds no genuine dispute over whether Chase made false representations regarding its affiliation or approval of the services in question.
3. **Grouped Allegations under Section 28-3904**: The court addresses various misrepresentation claims associated with the October 2011 billing statement, which include misleading as to material facts, falsely representing transaction rights, using ambiguity to mislead, and falsely claiming services or repairs were made. The specifics of these allegations suggest a pattern of purported misrepresentation by Chase, though they lack substantiation in the record.
McMullen alleges Chase misrepresented information related to a billing statement from October 2011, claiming she did not authorize a $1,000 charge for "Bullen Wellness Washington DC" and asserting that she had not received goods or services on that date. She contends that Chase's representations misled her regarding the charges and the initiation of a fraud investigation. The court clarifies that billing statements merely detail charges submitted to a lender and do not imply authorization or receipt of services. The court previously noted that consumers might assume listed charges represent authorized debts, but this was in the context of a Motion to Dismiss. With discovery completed, the court finds that the billing statement provided clear procedures for disputing charges, which would not mislead a reasonable consumer. Consequently, Chase is granted summary judgment on McMullen's claims under sections 28-3904(e) and (e-1), as she failed to demonstrate any misrepresentation. Additionally, her claims regarding Chase's omissions concerning the unauthorized line of credit, including a lack of signed applications or documentation, were also deemed insufficient, leading to summary judgment on subsection (f). The court concludes that a billing statement does not represent that goods or services have been received.
A credit check was performed, but One World Fitness was not approved as a provider, while Bullen Wellness was approved for chiropractic services. Personal-training services under the ChaseHealthAdvance program were also not approved. Under D.C. Code 28-3904(f), unlike common-law fraud, a duty to disclose is not required for a plaintiff to prove a violation. However, McMullen's claims regarding omissions either pertain to factually incorrect allegations or lack the potential to mislead a reasonable consumer. The first three omissions relate to a supposed unauthorized second line of credit, which does not support a CPPA violation since it never existed; charges incurred were solely from an account McMullen acknowledged opening. While Chase has not provided documentation for a $1,000 charge, the absence of this does not mislead, as there are established procedures for disputing charges that McMullen failed to utilize. Chase checked McMullen's credit before the charge, which it is legally allowed to do, but she did not clarify how this was misleading. The final omissions regarding the relationship between Chase and One World Fitness are unfounded, as Bullen Wellness was the actual service provider. Additionally, Chase’s lack of disclosure about Bullen Wellness being approved for chiropractic services was neither material nor misleading. Regarding D.C. Code 28-3904(q), McMullen alleges Chase failed to provide a signed receipt for the $1,000 charge. Although Chase argues the non-existence of the second line of credit absolves them, the issue remains regarding the unsigned receipt for the charge, as Chase policy mandates retention of such documents by providers for four years, but no receipt has been found.
Chase requires providers to provide a receipt if there is a dispute over a charge; failure to do so mandates an immediate refund according to their policy. Chase claims it did not request a receipt from Bullen Wellness because the Plaintiff did not submit her dispute in writing. However, the court interprets Chase’s failure to produce the receipt as potentially violating the Consumer Protection Procedures Act (CPPA). Despite this, the court finds that the Plaintiff's interpretation of the CPPA is federally preempted by the National Bank Act (NBA). Under the Supremacy Clause, federal law can preempt state law either expressly or impliedly, particularly through conflict preemption, which occurs when state law obstructs the federal objectives. The court affirms that Congress intended for the NBA to override state laws that impose undue burdens on national banks, as illustrated in prior cases like Barnett Bank and Franklin National Bank. The NBA allows national banks to operate without being hindered by state regulations that conflict with federal banking powers, reinforcing that state consumer finance laws are preempted if they significantly interfere with a national bank's operations.
Under 12 U.S.C. 25b(b)(1)(B) and as established in Barnett Bank, the defendant contends that requiring signed authorization for each charge would significantly hinder its federally authorized lending powers. Consumers often engage in purchases electronically or via phone without signed verification, implying that Chase's policies do not conflict with the CPPA. Federal regulations allow banks to make receipts available at the start of transactions rather than requiring them for each charge. Imposing a requirement for Chase to provide customer receipts would be excessively burdensome and could disrupt capital flow. The National Bank Act (NBA) protects banking activities that support the bank's established operations. Therefore, the interpretation proposed by the plaintiff would interfere with national banks' powers and is preempted by the NBA. Consequently, Chase is entitled to summary judgment on the plaintiff's claim under 28-3904(q), and the court grants Chase's motion while denying the plaintiff's cross-motion. An order reflecting this decision will be issued.
