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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 ...

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