RICHARD ACOSTA and JENIFER ROMAN, on behalf of themselves and others similarly situated, Plaintiffs,
TARGET CORPORATION, et al., Defendants.
MEMORANDUM OPINION AND ORDER
JOAN B. GOTTSCHALL, District Judge.
Target's slogan is "Expect more. Pay less." This suit is about something unexpected: Target's "Autosub" program, under which Target sent unsolicited Target Visa cards to holders of Target Guest Cards (Target's proprietary credit card). Two recipients of unsolicited Target Visa cards, plaintiffs Richard Acosta and Jenifer Roman, filed suit against Target Corporation, and two of its affiliated entities, Target Receivables LLC (formerly known as Target Receivables Corporation) and Target National Bank (collectively, "Target"). They assert the Autosub program violates provisions in the Truth in Lending Act ("TILA") governing the issuance of unsolicited credit cards, 15 U.S.C. § 1642, and requiring card issuers to provide certain disclosures about new accounts, 15 U.S.C. § 1637. The plaintiffs also assert state law claims of fraudulent inducement, breach of contract, tortious interference with business relationship, and implied trust. Finally, they seek a declaration that Target violated TILA and the credit card agreements associated with their Target Guest Cards.
The plaintiffs' motion to strike a declaration submitted by Target in support of its motion for summary judgment, the parties' cross motions for summary judgment, and the plaintiffs' motion for class certification are before the court. For the following reasons, the motion to strike is denied as moot, Target's motion for summary judgment is granted, the plaintiffs' motion for summary judgment is denied, and the plaintiffs' motion for class certification is denied.
A. Target Credit Cards
Starting in 1994, Target began to issue "private label" credit cards, known as Target Guest Cards. Target Guest Card account holders could use their Target Guest Cards to make purchases from Target-owned entities and entities with whom Target had made special arrangements. In 2000, Target began to issue Visa cards bearing its logo. The Target Visa card is a general use credit card that can be used to obtain cash advances and to make purchases anywhere Visa credit cards are accepted.
From 2000 through 2007, Target sought to have holders of Target Guest Cards "upgrade" to Target Visa cards. Dfs.' Mot. Summ J. Ex. M at 3, Dkt. 225. To effectuate this plan, Target sent unsolicited Target Visa cards to over ten million past and current Target Guest Card account holders, along with marketing materials designed to entice recipients to activate their Target Visa cards and increase their card use. From 2000 through the Spring of 2006, this program was known as "Auto-Substitution" or "Autosub." From the Fall of 2006 through 2007, it was referred to as "Auto-Product Change."
B. The Plaintiffs
On June 1, 1999, Acosta applied for a Guest Card at a Target store in Cicero, Illinois. Acosta used his Guest Card from 1999 to 2005. In October of 2005, Target mailed Acosta his regular monthly statement plus a separate envelope containing a card carrier (an unsolicited Target Visa card attached to an insert with large font, color graphics, and basic credit card information) and a tri-fold brochure. The first page of the tri-fold brochure contained a summary of terms. The remaining five pages contained details about the Target Visa card (hereinafter "the tri-fold, " the "terms, " and the "credit card agreement"). Acosta activated his Target Visa card in November of 2005.
Roman also applied for and obtained a Target Guest Card. In September of 2004, she had a balance of $412.91 on her Target Guest Card. That month, Roman received and activated a Target Visa card. The Visa card had a higher credit limit and a lower minimum payment than the Target Guest Card, as well as a lower interest rate. Roman did not pay her Target Visa card account in full every month. She thus incurred higher late fees and a higher interest rate than she would have under the terms of her Target Guest Card.
C. Guest Cards and Target Visa Cards
1. Activating the Target Visa Card
When a holder of a Target Guest Card activated a Target Visa card, three things happened: the Target Visa card's terms became effective, the account holder's balance was transferred from the Target Guest Card to the Target Visa card, and the Target Guest Card generally was deactivated. After Acosta and Roman activated their Target Visa cards, they did not attempt to use or reactivate their Target Guest Cards. Both understood that by activating their Target Visa cards, they would lose access to their Target Guest Cards.
Despite the policy of closing Target Guest Cards when cardholders activated their Target Visa cards, approximately 12, 000 Target Guest Card accounts remained open even though the cardholders also activated Target Visa cards. The record does not explain how or why this occurred, nothing indicates that Acosta or Roman could have continued to use their Target Guest Cards, and the parties do not offer any evidence as to whether the 12, 000 cardholders had separate accounts for their Target Guest Card and Target Visa card or had a Target Guest Card and a Target Visa card that were associated with a single account.
2. Opting out of the Target Visa Card
Target allowed cardholders to opt out of the "upgrade" to the Target Visa card and keep their Target Guest Cards in three ways. First, if an individual called Target, rejected the Target Visa card, and asked to keep her Target Guest Card, the call center employee could prevent the Target Guest Card account from being deactivated. Second, if an individual attempted to make a purchase at Target using her Target Guest Card after Target had mailed the Target Visa card, regardless of whether it had been activated, the cashier would call the Guest Contact Center, and a Guest Contact Center employee would notify the individual that her Target Guest Card account had been closed and offer to close the Target Visa account and re-open the Target Guest Card account. Finally, Target had telemarketers call over one million individuals who had not yet activated their Target Visa cards as a part of a program it called "Autoclose Activation Campaign." Pls.' Mot. Summ. J. Ex. AD. The telephone call script Target produced in discovery encourages the recipient to activate the Target Visa card, advises her that her Target Guest Card is set to expire, and reveals that a request to keep the Target Guest Card would be granted.
The materials Target sent to Acosta and Roman and other recipients of Target Visa cards did not suggest that recipients could reject the Target Visa cards and keep their Target Guest Cards. For example, documents sent with Target Visa cards included language such as: "We've replaced your Target Card with a Target Visa.... Your old Target Card account will be closing soon, so cut up your old Target Card, activate your new Target Visa and start using it today!" and "Cut up your current Target Guest Card. It's no longer valid and should be destroyed." Dfs.' Mot. Summ. J. Ex. M, W at 2 (emphasis in original). The terms included the statement, "If you do not accept the terms of the Target Visa Card, do not activate the Card. Your Target Guest Card will be closed to further use and you must pay off any outstanding balance[.]" Pls.' Mot. Summ. J. Ex. W at 2.
3. Information Provided About the Target Visa Card
The terms of the Target Guest Card and the Target Visa card differed. For example, Target used different underwriting criteria for issuing the two credit cards, the credit card agreements are not identical, and only the Target Visa card has an expiration date. In addition, Target's marketing materials stated that the Target Visa card had a higher credit limit and lower APR than the Target Guest Card.
a. Format of the Disclosures
TILA requires solicitations sent to consumers to open new credit card accounts to contain certain information ( e.g., the annual percentage rate ("APR") and fees) in a "tabular format." 15 U.S.C. § 1367(c). Target's 2001 and 2002 Autosub packages contained the required disclosures in a table. The Autosub and Auto-Product Change packages from 2004-2007 did not contain tables.
b. APR & Finance Charges
Acosta (and others who received Target Visa cards in 2005) received a card carrier that understated the then-applicable APR by.25% and was.25% less than the APR shown on the credit card agreement. Acosta's card carrier listed his account number and his $9, 500 credit limit, as well as an APR of 20.24%. Meanwhile, both the terms and the credit card agreement (each contained in the tri-fold) stated: "The ANNUAL PERCENTAGE RATE (APR) FOR PURCHASES is determined by adding a margin of 13.99% to the Prime Rate. For the billing period beginning in September 2005, your APR for purchases would be 20.49%." Dfs.' Mot Summ. J. Ex. N, at 1, 2. The terms summary stated, "[w]hen you activate your Target Visa Card, your APRs may be different (and may be higher than) the rate disclosed in this Credit Card Agreement because of changes in the Prime Rate after August 31, 2005." Id. at 1. Target blames this discrepancy on a change in the prime interest rate that occurred in September of 2005. The parties disagree as to when the card carrier and trifold were printed.
Acosta and Roman also assert that the terms accompanying the Autosubbed Target Visa cards created the misleading impression that they described all of the differences between the Target Guest Card and the Target Visa card. The terms describe various finance charges as well as the regular and penalty APRs and how they are calculated. The headings of the terms provide as follows:
THIS BROCURE CONTAINS IMPORTANT INFORMATION REGARDING CHANGES TO YOUR TARGET CREDIT CARD ACCOUNT.
SUMMARY OF CERTAIN TERMS CHANGES
KEY DIFFERENCES BETWEEN TARGET VISA CARD AND TARGET CARD
THERE ARE DIFFERENCES BETWEEN THE TERMS OF YOUR NEW TARGET VISA CARD AND YOUR PREVIOUS TARGET CARD, AS SUMMARIZED BELOW.
Dfs.' Mot. Summ. J. Ex. N & O (emphasis in original).
At various times between 2000 and 2007, Target Visa cards had higher fees and penalties than those associated with similarly situated Target Guest Cards. Target Guest Card accounts were subject to the penalty APR if a card holder missed two consecutive payments, while Target Visa accounts were subject to the penalty APR if a client missed two payments in a twelve month period. Both Acosta and Roman made at least one late Target Guest Card payment.
c. Credit Limit
The Target Visa card agreement contained the following provision: "CREDIT LIMIT.... You agree that we may change a Credit Limit at any time for any reason not prohibited by law, including, but not limited to, changes in your credit capacity, your pattern of payments to us, or your purchasing behavior...." Dfs' Mot. Summ. J. Ex. N at 2 (emphasis in original). The credit limit listed on the card carrier was always rounded to a number to between $1, 000 and $10, 000. This meant Autosubbed Target Visa cards had a minimum credit limit of $1, 000. In contrast, Target Visa cards opened through an application had starting credit limits as low as $500.
The parties dispute how the credit limit disclosed on the card carrier was calculated. It is clear, however, that the method of calculating the credit limit disclosed on the card carrier differed from the method used after a Target Guest Card holder accepted a Target Visa card. In addition, the credit limit for Target Visa cards could decline. For the 2005 Autosub rollout, most individuals who activated a Target Visa card started with a credit limit of $1, 000. By March of 2007, individuals in this group who had credit scores below 649 had their credit limits reduced by an average of $18-76. The Autosub communications did not disclose that an individual might not continue to qualify for the credit limit listed on the card carrier.
Target intended to prevent Autosubbed accounts from being subject to credit limit changes for the first six months after conversion based upon the application of "existing account underwriting" criteria for Target Visa cards. Pls.' SOF, Dkt. 213 at 99. However, Target surveyed approximately half-million Target Visa card accounts from the 2005 rollout. One tenth of one percent of account holders experienced a change in their credit limit within one month after accepting Target Visa cards. A significant majority of that group had their credit limit reduced rather than increased.
D. Target's Ability to Change the Terms of the Agreement
The parties agree there was an enforceable agreement between Target and holders of Guest Cards. From 1994 through 2006, Target Guest Card agreements provided, in pertinent part, that:
OUR RIGHTS - We may limit or cancel your Account.... We may call by telephone regarding your Account.
OTHER CHANGES TO THIS AGREEMENT - We have the right to change this Agreement and apply those changes to the existing balance. We will make ...