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Villasenor v. American Signature

July 9, 2007

JOSE VILLASENOR, ON BEHALF OF HIMSELF AND THE CLASSES DEFINED HEREIN, PLAINTIFF,
v.
AMERICAN SIGNATURE, INC. D/B/A VALUE CITY FURNITURE; WORLD FINANCIAL NETWORK NATIONAL BANK; AND ALLIANCE DATA SYSTEMS CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Jose Villasenor ("Villasenor" or "Plaintiff") has filed a five-count Amended Complaint against American Signature, Inc. d/b/a Value City Furniture ("VCF"), World Financial Network National Bank (the "Bank") and Alliance Data Systems Corporation ("ADS," and together with the Bank and VCF, "Defendants"). Each of Villasenor's claims relates to an allegedly deceptive and misleading sales promotion called the "Real Deal." Villasenor alleges that Defendants affirmatively misrepresented that they were offering interest-free financing on furniture purchases until 2011 and then surreptitiously switched consumers to financing arrangements involving the payment of interest. Before the Court are (1) the joint Motion to Dismiss filed by the Bank and ADS; and (2) VCF's separate Motion to Dismiss. For the reasons set forth in this Memorandum Opinion and Order, Defendants' Motions to Dismiss are granted in part and denied in part.

Plaintiff's Factual Allegations

In the fall of 2006, Villasenor visited a VCF store located at 8310 S. Cicero Avenue in Burbank, Illinois after he observed a sign in the window of that store advertising "no interest til 2011." (Am. Cplt. ¶ 16.) The sign advertised a program that VCF called the "Real Deal," which program was widely promoted by VCF and was designed and implemented jointly by Defendants. Similar signs were placed conspicuously in all other VCF stores.

On September 27, 2006, Villasenor purchased a dinette set, a loveseat, two tables, a bedroom set, and a TV cart at a VCF store. Villasenor opened a private label VCF credit card account and charged his purchase to that account. Both ADS and the Bank assist VCF in providing such private label credit cards to VCF customers, which cards are branded with VCF's name and logo and can be used only at VCF stores or affiliated stores. VCF acts as the agent of the Bank with respect to the private label credit card program; it invites consumers to apply for credit and takes applications for the cards on behalf of the Bank. VCF also delivers required disclosures related to the cards on behalf of the Bank and, in doing so, acts upon the Bank's instructions. For its part, ADS provides VCF with certain services related to the cards, including account acquisition and activation, receivables funding, card authorization, card issuance, statement generation, remittance processing, customer service functions, and marketing services.

The credit card agreement for Villasenor's VCF credit card account provides that, "[i]f a promotional Credit Plan is offered at the time you open your credit card account, this Agreement will include information about the terms for the [promotional] Plan (which may include . . . the ANNUAL PERCENTAGE RATE . . .) by use of an insert, attachment, or other written information provided as part of or with this Agreement." Id. at ¶ 24 and Exh. D thereto. The credit card agreement further provides that the "Agreement is governed by Ohio and applicable federal law."

VCF provided Villasenor with an "insert, attachment, or other written information" regarding the Real Deal promotion in the form of a glossy red, white and black booklet (the "Booklet"). Id. at ¶ 25 and Exh. E thereto. The Booklet provides, in pertinent part, that:

No interest charges apply on promotional credit plan purchases if the balance is paid in full before the promotional period ends (20, 30, 40, 50, or 60 months from the date of purchase, depending upon the plan you enrolled in). If the promotional credit-plan is not paid in full before the promotional period ends, the remaining balance plus interest will be included in your regular revolving balance and regular credit terms apply.

Id. at ¶ 29 and Exh. E thereto. Upon completing his furniture purchase, VCF provided Villasenor with a cash register receipt indicating that the terms of his purchase were "50 month plan / no intere[st]." However, the cash register receipt also provides a "supplemental disclosure" for the Real Deal promotion that states:

The Real Deal offers customers a choice of paying for merchandise in one of several ways: (1) cash/check/bank charge/3 or 5 month payment plan ("Cash Plan"); (2) twenty month payment plane ("20 Month plan"); (3) thirty month payment plan ("30 Month Plan"); (4) forty month payment plan ("40 Month Plan"); (5) fifty month payment plan ("50 Month Plan"); and (6) sixty month payment plan ("60 Month Plan")

Customers who select the 50 Month Plan will pay a price that is $704.64 greater than the price paid by customers who select the Cash Plan. This difference is a FINANCE CHARGE. The ANNUAL PERCENTAGE RATE of the FINANCE CHARGE is 10.540% Id. at ¶ 30 and Exh. F thereto.

Villasenor alleges on information and belief that the Bank and/or ADS are paid a percentage of all sales charged on a VCF credit card. The Bank and ADS refer to these percentages as a "merchant discount." VCF passes onto consumers some or all of the burden of paying the "merchant discount" to the Bank and ADS by charging more for goods in VCF credit card transactions than it does for the same goods in cash transactions.

Discussion

I. ...


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