Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

Green v. Charter One Bank


February 25, 2009


The opinion of the court was delivered by: Judge Joan B. Gottschall


Before the court is a motion by defendant Charter One Bank, N.A. ("Charter One") to dismiss the amended class action complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, the motion is granted in part and denied in part.


Plaintiff Robert Green ("Green") received a Charter One gift card, with a face value of $30.00, as a holiday gift in late 2004. He promptly signed the back of the card, which stated that "[b]y using the card, the holder agrees to all terms under which it was issued and any amendments thereto." Am. Class Action Compl. ¶ 6. Green first tried to use the card eleven months later, on or around December 20, 2005. He made a purchase for $13.17. Later that day, he tried to make a second purchase for $15.00, but was told that the card contained insufficient funds. The next day, Green called the toll-free number on the back of the gift card to check his balance. He learned that it was $4.33, despite the fact that he had spent only $13.17 of the $30.00 original balance. He discovered that Charter One had deducted $12.50 from the balance to pay five months' worth of inactivity fees. The card expired at the end of December 2005 with the remaining $4.33 unspent.


Green filed suit in the Circuit Court of Cook County, Illinois. Charter One removed the case to federal court on March 21, 2008 on the basis of the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d) ("CAFA").*fn2 Green brings four state law claims against Charter One: (1) breach of fiduciary duty; (2) constructive trust; (3) unjust enrichment; and (4) breach of various state consumer fraud and deceptive trade practices acts.

Charter One argues that: (1) the claims are preempted by the National Bank Act, 12 U.S.C. § 1 et seq. (the "NBA"); (2) the complaint fails to state a claim because the parties had a contract that allows for the collection of inactivity fees; (3) the fiduciary duty claim fails under the economic loss doctrine and because there is no fiduciary relationship between the parties; (4) the constructive trust claim fails because it is a remedy, not a cause of action; (5) the unjust enrichment claim fails in light of the contract between the parties and because Green is not entitled to bring such a claim; and (6) the consumer protection statutory violation claim is inadequately pled under Federal Rule of Civil Procedure 9(b).

A. Legal Standard

Rule 12(b)(6) permits a defendant to assert by motion that the plaintiff's claim for relief fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). The court must accept as true the allegations of the complaint and draw all reasonable inferences in favor of the plaintiff. INEOS Polymers, Inc. v. BASF Catalysts, 553 F.3d 491, 497 (7th Cir. 2009). To survive a Rule 12(b)(6) motion, the complaint "need only provide a 'short and plain statement of the claim showing that the pleader is entitled to relief' that is also sufficient to provide the defendant with 'fair notice' of the claim and its basis." Windy City Metal Fabricators & Supply, Inc. v. CIT Technical Fin. Servs., Inc., 536 F.3d 663, 667 (7th Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, ___, 127 S.Ct. 1955, 1964 (2007) and Fed. R. Civ. P. 8(a)(2)). The plaintiff need not plead particularized facts, but the factual allegations in the complaint must be sufficient to suggest a plausible, not merely speculative, right to relief. Twombly, 550 U.S. at ___, 127 1973-74 & n.14; Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir. 2008).

B. Arguments

Charter One's most expansive argument in favor of dismissal is that the NBA preempts any state law suit that is based on inactivity fees deducted from balances on gift cards. It is undisputed that Charter One, which has merged into RBS Citizens, N.A., is a national bank. Therefore, its business activities are controlled by the NBA and associated regulations promulgated by the Office of the Comptroller of the Currency ("OCC"). Watters v. Wachovia Bank, N.A., 550 U.S. 1, ___, 127 S.Ct. 1559, 1564 (2007). The NBA vests banks with "all such incidental powers as shall be necessary to carry on the business of banking." 12 U.S.C. § 24 (Seventh). The OCC regulations specifically authorize national banks to offer "electronic stored value systems," that is gift cards. 12 C.F.R. § 7.5002(a)(3). They also provide that "[a] national bank may charge its customers non-interest charges and fees . . . ." Id. § 7.4002(a). Both regulations contain statements noting that the OCC applies preemption principles in determining whether state law applies to limit the rights of national banks in regard to these issues. Id. 7.4002(d); id. 7.5002(c).

The NBA "shields national banking from unduly burdensome and duplicative state regulation." Watters, 550 U.S. at ___, 127 S.Ct. at 1567 (internal citations omitted). Thus, national banks "are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or the general purpose of the NBA." Id. Where the state laws would "impair the exercise of authority, enumerated or incidental under the NBA" they are preempted. Id.; see U.S. Const. art. VI, cl. 2 (providing that "the Laws of the United States . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding"). Thus, the issue is whether the NBA and its regulations preempt Green's claims pursuant to the principles of conflict preemption.

Charter One asserts that the claims are preempted because they all revolve around its collection of inactivity fees on gift cards, which is permitted by the NBA. It relies on cases that hold that certain state consumer protection statutes that attempt to limit the ability of national banks to impose fees conflict with, and therefore are preempted by, the NBA. In Rose v. Chase Bank, N.A., 513 F.3d 1032 (9th Cir. 2008), the court held that the NBA preempts claims brought under California's Unfair Competition Law for failure to provide disclosures and unfair business practices in relation to charges and fees imposed on the use of convenience checks. Id. at 1038. In SPGGC, LLC v. Ayotte, 488 F.3d 525 (1st Cir. 2007), the court concluded that New Hampshire's Consumer Protection Act, which regulated the terms and conditions of gift cards, conflicted with the CPA because it significantly interfered with the national bank's authority to issue gift cards with expiration dates and administrative fees. Id. at 533. The reasoning of these cases, along with the statutory and regulatory scheme at issue, seems to compel a conclusion that any claim involving collection of inactivity fees on gift cards is preempted. However, Green contends Charter One's conduct as to the details of its operation of the gift card program is not regulated by the OCC and that any claims regarding specific disclosures and the amount of fees are not, therefore, subject to preemption.

A similar argument to the one Green raises was rejected in Ayotte. See 488 F.3d at 533 (noting that the state attorney general argued that preemption did not apply because neither the NBA nor OCC regulations specifically require gift cards to have expiration dates or administrative fees). The Ayotte court reasoned that "[t]he Supreme Court has directly answered this argument by holding that conflict preemption is implicated in situations beyond those where a federal law requires something that a state law prohibits." Id. (citing Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 35 (1996)). Green cites an OCC Bulletin regarding disclosures on gift cards in support of his argument, but its import is unclear given that it was issued in August 2006, long after Green used his gift card. He does not explain how, when a regulation authorizes a national bank to charge fees to its customers, it does not preempt state claims relating to the authorized fees and he does not attempt to distinguish authority that holds to the contrary. See SPGGC, LLC v. Blumenthal, 505 F.3d 183, 189 (2d Cir. 2007) (noting that the "OCC regulations appear to permit, or at least not to prohibit, the attachment of . . . dormancy or inactivity fees to [gift] cards."). Thus, the court rejects as unpersuasive Green's argument that claims regarding the specifics of a national bank's operation of its gift card program are not vulnerable to preemption.

Green next states that he "does not take issue with the fees and charges and forfeitures that [Charter One] may charge so long as there is complete and adequate disclosures in order that the parties to the transaction have had a meeting of the minds rather than to have been the victims of a scam." Pl.'s Resp. in Opp'n to Def.'s Mot. to Dismiss at 6. Green's theory of the case seems to be that: (1) the disclosures on the gift card were insufficient to place him on notice of the terms of the contract he was entering into when he used the card; and (2) Charter One had no contractual authority to deduct inactivity fees from the balance of the gift card before Green used the gift card and entered into a contractual relationship with the bank.*fn3 Thus, the argument is intertwined with the issue of whether a contract that provides for inactivity fees governs the terms of the parties' relationship, as Charter One contends.*fn4

Charter One argues that when Green used the gift card,*fn5 he agreed to pay all the fees charged by Charter One, including the monthly $2.50 inactivity fee. However, this argument is not dispositive at such an early stage in the case where Green advances a contrary theory of the case and evidence is needed to clarify when the contract was formed and when fees were deducted. Thus, the issue can be framed as whether the NBA preempts a claim grounded on allegations that suggest that a national bank is deducting fees from a gift card before a contractual relationship has been formed that authorizes such deductions. Green does not develop, and Charter One does not reply to, this implicit issue, but given its dispositive nature, the court considers it.

A plain reading of the relevant OCC regulation discloses that it authorizes fees to customers. 12 C.F.R. § 7.4002(a). The OCC has clarified that "[a]s used in section 7.4002(a), 'customer' simply means any party that obtains a product or service from the bank." Comptroller of the Currency, Interpretive Letter No. 934 at 2 n.5 (Aug. 20, 2001), available at Drawing all reasonable inferences in favor of Green, he "obtained a product or service from the bank" only upon use of the gift card and, therefore, he became a "customer" in December 2005 after inactivity fees had been deducted from the balance of the gift card. With these allegations, namely where fees were charged to a non-customer without contractual authorization, it is not obvious that Green's claims are in irreconcilable conflict with, and therefore preempted by, the NBA or associated regulations or that "compliance with the state [law] would frustrate the purposes of the federal scheme." See Pac. Capital Bank, N.A. v. Connecticut, 542 F.3d 341, 351 (2d Cir. 2008) (discussing whether a state statute limiting the fees that national banks could charge on refund anticipation loans was in conflict with the NBA). Consequently, the court does not find the claims preempted at this early stage in the litigation. The court therefore turns to Charter One's remaining arguments for dismissal of the individual claims for: (1) breach of fiduciary duty; (2) constructive trust; (3) unjust enrichment; and (4) violations of state consumer protection statutes.

Charter One argues that Count I, breach of fiduciary duty, should be dismissed as barred by the economic loss doctrine and because no fiduciary relationship exists, and Count II should be dismissed because "constructive trust" is a remedy, not a cause of action. In response, Green asserts that a fiduciary relationship was created between the purchaser of the gift card and Charter One when the purchaser gave the bank money to hold in trust for the benefit of Green. In support, Green cites Mitchell v. Simms, 398 N.E.2d 211, 215 (Ill. App. Ct. 1979), a thirty-year old case dealing with an action by an executor of a decedent's estate against the conservator of the estate of the decedent's brother and against jointly-owned corporations to impose a trust, and Anderson v. Lybeck, 154 N.E.2d 259, 262 (Ill. 1958), a fifty-year old case providing a black-letter legal definition of a constructive trust. Neither case provides sufficient support for Green's argument or rebuts Charter One's argument that the balance on the card was a general liability of the bank and that, therefore, a creditor-debtor relationship, not a fiduciary one, was established.*fn6

See Pommier v. Peoples Bank Marycrest, 967 F.2d 1115, 1119 (7th Cir. 1992) (observing that "a debtor-creditor relationship is not a fiduciary relationship as a matter of law"). Certain facts could establish that a fiduciary relationship existed between Green and Charter One. See id. (requiring a plaintiff to "show that he placed trust and confidence in [the bank that loaned him money] and that [the bank] gained influence and superiority over him" to demonstrate a fiduciary relationship). However, Green does not sufficiently allege facts that raise his fiduciary duty claim above the speculative level.*fn7 Moreover, it is hard to see how the constructive trust claim can survive without a predicate claim for breach of fiduciary duty. Consequently, Counts I and II are dismissed. The court does not reach Charter One's arguments regarding the economic loss doctrine or whether constructive trust is a viable separate cause of action.

Next, Charter One offers two arguments in support of dismissal of Green's unjust enrichment claim. Green offers little useful argument in response. Nevertheless, both bases for dismissal of the claim advanced by Charter One are so obviously without merit that the claim survives dismissal. First, Charter One argues that a claim for unjust enrichment fails where the parties entered into an express contract. This is a correct statement of the law, but the argument cannot succeed at such an early stage where Green's theory of the case is that no contract was formed at the point the inactivity fees were withheld. Second, Charter One argues that Green is not the proper party to assert the claim. It cites to Dawson v. Blockbuster, Inc., No. 86451, 2006 WL 1061769 (Ohio Ct. App. Mar. 16, 2006), which holds that a gift card recipient could not state a claim for unjust enrichment because under Ohio law, "the party asserting the claim [must] demonstrate that 'the claimant conferred a benefit upon the recipient.'" Id. at *5. Charter One's reliance on Ohio law, the governing law according to the cardholder agreement, is misplaced when the claim is quasi-contractual, and cannot, by its very nature, be governed by the terms of the agreement. Moreover, the law of Illinois explicitly recognizes that an unjust enrichment claim may be brought where "the plaintiff is seeking recovery of a benefit that was transferred to the defendant by a third party." See HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 545 N.E.2d 672, 679 (Ill. 1989) (noting that retention of the benefit is unjust where "the plaintiff for some reason had a better claim to the benefit than the defendant"). Thus, Charter One's motion to dismiss Count III is denied.*fn8

Finally, Charter One argues that the consumer protection statutory claims must fail because the allegations do not meet the heightened pleading standards for such claims. See Fed. R. Civ. P. 9(b) (requiring a party to "state with particularity the circumstances constituting fraud or mistake"). Green does not offer any argument in response. "[W]hen presented with a motion to dismiss, the non-moving party must proffer some legal basis to support his cause of action. The federal courts will not invent legal arguments for litigants." Stransky v. Cummins Engine Co., 51 F.3d 1329, 1335 (7th Cir. 1994). Green's failure to respond permits an inference of acquiescence and "acquiescence operates as a waiver." See Wojtas v. Capital Guardian Trust, Co., 477 F.3d 924, 926 (7th Cir. 2007) (upholding a district court's dismissal of claims in light of the plaintiff's failure to respond to statute of limitations arguments in a motion to dismiss)). Thus, Count IV is dismissed.


For the reasons stated above, the defendant's motion to dismiss the amended class action complaint is granted in part (as to Counts I, II, and IV) and denied in part (as to Count III only). If the plaintiff wishes to amend, he may do so within 14 days. If no amendment is filed, the defendant shall answer Count III within 28 days of this order; if an amendment is filed, the defendant shall answer or otherwise plead 30 days after the filing of the amended pleading.

JOAN B. GOTTSCHALL United States District Judge

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.