Hess v. Citibank

• Decision Date: 14 August 2006
• Docket Number: No. 05-3791.,05-3791.
• Citation: 459 F.3d 837
• Parties: Michael HESS, personal representative of the Estate of George E. Hess, Plaintiff/Appellant, George E. Hess, Plaintiff, v. CITIBANK, (SOUTH DAKOTA), N.A., Defendant/Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

459 F.3d 837

Michael HESS, personal representative of the Estate of George E. Hess, Plaintiff/Appellant, George E. Hess, Plaintiff, v. CITIBANK, (SOUTH DAKOTA), N.A., Defendant/Appellee.

No. 05-3791.

United States Court of Appeals, Eighth Circuit.

Submitted: June 14, 2006.

Filed: August 14, 2006.

COPYRIGHT MATERIAL OMITTED

Charles J. Schimmel, argued, Overland Park, KS (W. Greg Wright, on the brief), for appellant.

Thomas C. Walsh, argued, St. Louis, MO (Louis F. Bonacorsi and Ketrina G. Bakewell, on the brief), for appellee.

Before MURPHY, MELLOY, and COLLOTON, Circuit Judges.

COLLOTON, Circuit Judge.

Michael Hess, personal representative of his father's estate, appeals the district court's¹ grant of summary judgment dismissing the estate's claims under state law and the Truth in Lending Act, 15 U.S.C. §§ 1601-1667f ("TILA"). We affirm.

I.

Michael Hess's father, George Hess, was the holder of a Citibank Visa credit card when he died on August 29, 1998. At the time of his death, his account balance was $889.58. On November 6, 1998, the probate court of Jackson County, Missouri, appointed Michael Hess the personal representative of his father's estate. On February 24, 1999, Citibank filed a claim for $889.58 in the probate estate and attached a copy of George Hess's credit card statement dated September 10, 1998, reflecting this account balance.

Michael Hess, on behalf of the estate, sent Citibank a check for $974.96 in December 2000, apparently relying on the last statement received by his father prior to his death, which listed this higher amount as the balance due. This older statement, dated August 11, 1998, did not reflect either a payment of $100 that posted on August 27 or finance charges added to the account by Citibank, which resulted in the balance of $889.58 on the September 1998 statement. Citibank's internal statements from November 1998 through November 2000, which were never mailed to George or Michael Hess, list an account balance of $968.22. The estate's payment posted on December 11, 2000, and Citibank's internal statements dated December 11, 2000, and January 10, 2001, both list a credit of $6.74.

On June 9, 2004, Michael Hess filed suit in the district court, claiming Citibank owed his father's estate a refund of $85.38, which represented the difference between Citibank's claim in probate and the estate's payment, or, at a minimum, $6.74, the credit balance reflected on Citibank's internal statements after the payment. He alleged that Citibank had failed to refund the credit and had instead "swept" the credit into its own general account, then had "covered up" the allegedly unlawful transaction by failing to provide periodic statements, in violation of the TILA and Regulation Z, 12 C.F.R. §§ 226.1-226.36. He also alleged violations of state law, including conversion, breach of contract, breach of the covenant of good faith, fraud, money had and received, and unjust enrichment. Hess purported to sue on behalf of a nationwide class of consumers whose accounts allegedly had been swept by Citibank after 60 days of inactivity.

In response, Citibank moved for summary judgment, arguing that Hess could not prove one essential element necessary to every count in the complaint—i.e., that Citibank had misappropriated an account balance properly due to George Hess's estate—and thus could not seek relief on behalf of himself or any member of the purported class. Citibank claimed that it was entitled to interest that had accrued during the two years between the date in February 1999, when it filed its claim in the probate court, and Michael's payment in December 2000. Citibank contended that, whether the amount of interest was calculated according to the terms of the cardmember agreement attached by Hess to his complaint or under Missouri's statutory interest rate, the balance on the account as of December 2000 exceeded the $974.96 payment, so Citibank did not owe any money to George Hess's estate.

The district court stayed discovery pending resolution of the motion for summary judgment, and then granted Citibank's motion. The court calculated the amount of interest that would have accrued on the account through December 2000 employing three different potential methodologies. Using the annual percentage rate of 18.90% listed on the statement dated September 10, 1998, the court calculated the total interest that would have accrued under both variable and fixed rates, and then, as a third alternative, calculated the total interest accrued using the statutory rate of 9% per annum, as provided by Missouri Revised Statutes § 408.020. The court reasoned that under any method of computing interest, the balance on George Hess's account in December 2000 would have been greater than $974.96. The court observed that the cardmember agreement submitted by Hess states that finances charges continue to accrue until payment-in-full is credited to the account, and concluded that once Citibank was notified of George Hess's death, the TILA and Regulation Z do not require Citibank to continue to send monthly statements to his estate. The court concluded that Citibank had demonstrated that it was entitled to interest, and that the total account balance was more than the payment, so "there was no overpayment and no credit balance owing to George Hess' account." The court therefore held that Hess could not "prove an essential element of each of his seven claims." (App. at 439-440).

II.

On appeal, Hess argues that Citibank violated the TILA because it did not send a billing statement to the estate disclosing "how and when it supposedly charged the interest eliminating the positive credit balance" in George Hess's account. (Appellant's Br. at 33 n. 9). Under section 127(b) of the TILA:

[t]he creditor of any account under an open end consumer credit plan shall transmit to the obligor, for each billing cycle at the end of which there is an outstanding balance in that account or with respect to which a finance charge is imposed, a statement setting forth each of the following items to the extent applicable: ... (4)[t]he amount of any finance charge added to the account during the period.

15 U.S.C. § 1637(b). Hess argues that upon George Hess's death, his estate became the "obligor" entitled to periodic statements, because it "was obligated to pay the debt and was treated as an obligor by Citibank when it submitted a claim against the estate in the Hess probate." (Appellant's Br. at 32). Hess also claims that Citibank's failure to send account statements to the estate violated the disclosure requirements of Regulation Z. Citibank responds that it was not required to send statements to George Hess's estate for three independent reasons, one of which is that the Hess estate was not an "obligor" within the meaning of 15 U.S.C. § 1637(b).

Congress has delegated to the Board of Governors of the Federal Reserve System the authority to prescribe regulations that may contain "such classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for any class of transactions, as in the judgment of the Board are necessary or proper to effectuate the purposes of [the TILA], to prevent circumvention or evasion thereof, or to facilitate compliance therewith." 15 U.S.C. § 1604(a). Congress has specifically designated the Board as the primary source for interpretation and application of the TILA, see Household Credit Servs., Inc. v. Pfennig, 541 U.S. 232, 238, 124 S.Ct. 1741, 158 L.Ed.2d 450 (2004), empowering it to formulate interstitial policy and to create rules for administering the statute.

In reviewing the agency's construction of the statute, if Congress has "directly spoken to the precise question at issue," then we must "give effect to the unambiguously expressed intent." Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984); see also First Nat'l Bank of Council Bluffs v. Office of the Comptroller of the Currency, 956 F.2d 1456, 1462-63 (8th Cir.1992) (finding the statutory phrase "immediate preceding examination" in section 108(e)(3)(i) of the TILA to be unambiguous). Otherwise, where Congress has "explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation." Chevron, U.S.A., Inc., 467 U.S. at 843-44, 104 S.Ct. 2778. Absent a clear expression of congressional intent, legislative regulations are given controlling weight unless they are "arbitrary, capricious, or manifestly contrary to the statute." Id. at 844, 104 S.Ct. 2778. Deference to the views of the Board is "especially appropriate" in the process of interpreting the TILA, given the agency's "pivotal role in setting the statutory machinery in motion," broad administrative lawmaking power delegated by Congress, and unique position to navigate the complexities of the statute striking the appropriate balance between "competing considerations of complete disclosure and the need to avoid informational overload." Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565-569, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980) (internal quotations omitted).

The TILA does not define the term "obligor" used in section 127(b). As we shall explain below, there is a substantial argument that the text and structure of the TILA unambiguously excludes an estate from the scope of "obligor," but at best for Hess, the term is ambiguous. The Board enacted Regulation Z to implement the TILA, see 12 C.F.R. § 226.1(a), and it is entitled to deference in applying ambiguous terms. Sections 226.5-226.16 of Regulation Z include the regulatory provisions that govern open-end credit plans, see Schnall v. Marine Midland Bank, 225 F.3d 263, 266-69 (2d Cir.2000), and it is evident that the Board intended 12 C.F.R. § 226.7 to define the scope of a creditor's obligations to disclose periodic...