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Acosta v. Target Corp.

United States Court of Appeals, Seventh Circuit

March 19, 2014

RICHARD ACOSTA and JENIFER ROMAN, Plaintiffs-Appellants,
TARGET CORPORATION, et al., Defendants-Appellees

Argued January 10, 2014.

Page 854

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 05 C 7068 -- Joan B. Gottschall, Judge.

For RICHARD ACOSTA, on behalf of himself all others similarly situated, Jenifer Roman, Plaintiffs - Appellants: David J. Piell, Buffalo Grove, IL.

For Target Corporation, Target National Bank, Target Receivables Corporation, now known as: TARGET RECEIVABLES LLC, Defendants - Appellees: Brian Melendez, Dykema Gossett Pllc, Minneapolis, MN.

Before FLAUM and EASTERBROOK, Circuit Judges, and GRIESBACH, District Judge.[*]


Page 855

Flaum, Circuit Judge.

From 2000 to 2007, Target Corporation sent unsolicited general-purpose credit cards to millions of existing holders of its limited-use charge cards accepted only at Target. As part of this " upgrade" campaign, Target deactivated the holder's old card. Richard Acosta and Jenifer Roman brought a putative class action claiming that this campaign violated the federal Truth in Lending Act and state law. The district court granted summary judgment for Target and we affirm.

I. Background

A. The Autosub Program

Target Guest Cards are store credit cards, which permit guests to make purchases only at Target. Target began its Guest Card program in 1994 and has continued it ever since. In 2000, Target introduced Target Visa Cards, which are all-purpose credit cards that can be used anywhere, although they feature special benefits for Target customers. The Guest Card and the Visa were provided on different terms: Target used different underwriting criteria for each, they were governed by separate credit card agreements, and the Visa typically had a higher credit limit and lower APR than the Guest Card.

This controversy arises from Target's campaign to " upgrade" customer Guest Cards to Visas, which began in 2000 and lasted until 2007. From 2000 through mid-2006, Target called this program " Auto-Substitution," and from late 2006 through 2007 it was known as " Auto-Product Change." (For simplicity, we'll refer to the programs collectively as " Autosub." ) During this time, Target sent unsolicited Visas to more than ten million current and former Guest Card hold ers. The cards were attached to a " card carrier" [1] and accompanied by a credit card agreement and marketing materials designed to entice the recipient to activate the new card.

When Target mailed the Autosubbed Visas, it typically deactivated the Guest Cards shortly afterward.[2] If a customer activated her new Target Visa, two things generally happened: the Visa's terms, set forth in the cardholder agreement, became effective, and the accountholder's Guest Card balance was transferred to the Visa. If the customer did not activate the Visa, Target closed her account entirely.

The materials sent with the Visas did not suggest that keeping the Guest Card was an option. Various fliers and brochures informed customers, " We've replaced your Target Card with a Target Visa" and " Your old Target Card will be closing soon, so cut up your old Target Card, activate your new Target Visa and start using it today!" Although the possibility was not highlighted for them, customers could in fact opt out of the Visa upgrade if they wished. A Guest Card accountholder could call Target to reject the Visa but ask to keep the Guest Card. Alternatively, if a holder attempted to use the Guest Card after the Visa had been mailed, she would be informed that the Guest Card account had been closed but that she had the choice to reopen it. Finally,

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Target telemarketers called over a million people who were mailed a Visa card but did not activate it immediately. During those calls, telemarketers advised customers that the Guest Card was about to expire, but they could keep it if they desired.

The credit limits on the Autosubbed Visas were always rounded to a number between $1,000 and $10,000, and the credit agreement gave Target the right to change the credit limit at its discretion. In contrast, new customers had to open a Target Visa through a standard application, and cards opened in this way could have credit limits as low as $500. Further, the method used for calculating the credit limit in the Autosub mailings was different than the method used after the Autosubbed Visa was activated. The Autosub materials did not indicate that the credit limits were subject to change, and customers often had their credit limits reduced after activation. For example, in the 2005 rollout, most customers initially had a credit limit of $1,000, but many with credit scores under 649 had their limits reduced.

Finally, both the Guest Card and Visa agreements gave Target substantial leeway to modify or cancel accounts. From 1994 through 2006, the Guest Card agreements provided:

OUR RIGHTS--We may limit or cancel 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 any changes in accordance with the law.

The Visa agreements in effect from 2000 through 2007 put it slightly differently:

CHANGES TO THIS AGREEMENT. We have the right to change this Agreement (including the right to add additional terms) and to apply ...

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