Hauk v. Jp Morgan Chase Bank Usa

• Decision Date: 23 January 2009
• Docket Number: No. 06-56846.,06-56846.
• Citation: 552 F.3d 1114
• Parties: Timothy HAUK, on behalf of himself and all others similarly situated, Plaintiff-Appellant, v. JP MORGAN CHASE BANK USA, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

552 F.3d 1114

Timothy HAUK, on behalf of himself and all others similarly situated, Plaintiff-Appellant, v. JP MORGAN CHASE BANK USA, Defendant-Appellee.

No. 06-56846.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 22, 2008.

Filed January 23, 2009.

Michael D. Braun, Braun Law Group, P.C., Los Angeles, CA; Matthew J. Zevin, Stanley, Mandel & Iola, L.L.P., San Diego, CA, for the plaintiff-appellant.

Shirley M. Hufstedler, Robert S. Stern, and Nancy R. Thomas, Morrison & Foerster L.L.P., Los Angeles, CA; Angela L. Padilla and Geoffrey Graber, Morrison & Foerster L.L.P., San Francisco, CA, for the defendant-appellee.

Appeal from the United States District Court for the Central District of California; Stephen V. Wilson, District Judge, Presiding. D.C. No. CV-05-00625-SVW.

Before: CONSUELO M. CALLAHAN and SANDRA S. IKUTA, Circuit Judges, and WILLIAM B. SHUBB,^* Senior District Judge.

SHUBB, Senior District Judge:

Appellant Timothy Hauk appeals the district court's grant of summary judgment in favor of Appellee Chase Bank USA, N.A.¹ on his claims for violations of the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601-1667f; California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code §§ 17200-17210; and California's False Advertising Law (FAL), id. §§ 17500-17509. We affirm the district court's grant of summary judgment on Hauk's TILA claim but reverse and remand the district court's grant of summary judgment on his UCL and FAL claims.

I. Factual and Procedural Background

In June 2003, Hauk opened a Chase credit card account and received a Cardmember Agreement ("CMA"). After Hauk had maintained his Chase account for about sixteen months, Chase sent him a balance transfer offer (BTO) in October 2004. The BTO offered Hauk a promotional fixed annual percentage rate (APR) of 4.99% for any balances he transferred to his Chase account. It also incorporated the terms of the CMA and indicated that Chase could impose an increased rate ("Non-Preferred APR") in lieu of the promotional rate if Hauk made a late payment to Chase or any of his other creditors. During a telephone conversation with a Chase representative on or about October 11, 2004, Hauk transferred a $10,200 balance with another creditor to his Chase account, thereby accepting the BTO.

On Hauk's October statement, Chase indicated the promotional APR of 4.99% for transferred balances. When Hauk received his November statement, however, he learned that Chase had applied a Non-Preferred APR of 28.74% to his account, resulting in a $241.60 finance charge. In response to the increased rate, Hauk contacted Chase and was informed that he was no longer eligible to receive the promotional 4.99% APR.

According to Chase, Hauk lost eligibility for the 4.99% APR because of a late payment he had made to another creditor about three months before he accepted the BTO. Specifically, in July 2004, Hauk had made his final mortgage payment to Home Coming Funding (HCF) one day after the thirty-day grace period, and HCF reported that Hauk's account was "30-days delinquent" to Experian, Inc., a credit report agency.

To evaluate Hauk's eligibility for promotional and Preferred rates, Chase performed monthly account reviews and relied on information it received from Experian. Prior to sending Hauk the October BTO, Chase had accessed his Experian credit report in August and September 2004. If Chase had discovered Hauk's late payment to HCF during either of those credit reviews and elected to impose a Non-Preferred APR because of that late payment, Chase's computer system would have automatically cancelled any pending offers, including the BTO. Chase, however, did not cancel the BTO before Hauk accepted it, and Hauk's account does not reflect Chase's knowledge of his late payment to HCF until the end of October.

Based on this information, Chase contends that it did not discover Hauk's late payment to HCF until after Hauk accepted the BTO. Hauk, on the other hand, alleges that Chase discovered his late payment to HCF in August or September but waited to apply a Non-Preferred APR until after he accepted the BTO. Hauk also argues that, irrespective of when Chase learned about Hauk's late payment to HCF, the CMA and BTO did not disclose that Chase could impose a Non-Preferred APR based on a late payment he made before accepting the BTO.

Hauk filed his class action Complaint in state court on March 25, 2005. In his First Amended Complaint filed less than three months later, Hauk alleged claims for violations of 1) TILA; 2) UCL; 3) FAL; 4) California's Consumers Legal Remedies Act (CLRA), Cal. Civ.Code §§ 1750-1784; and 5) the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681-1681x. Asserting jurisdiction under 28 U.S.C. § 1331, Chase removed the matter to the United States District Court for the Central District of California on July 11, 2005.

Chase moved for summary judgment on the grounds that Hauk's state law claims were preempted and that Chase's disclosures defeated Hauk's TILA and state law claims. After providing for limited discovery, the district court granted Chase's motion for summary judgment on Hauk's TILA claim. With respect to Hauk's UCL, FAL, and CLRA claims, the district court found that the state law claims were not preempted and deferred addressing the merits until the parties conducted discovery on the question of when Chase first learned of Hauk's late payment to HCF. After additional discovery and supplemental briefing, the district court granted Chase's motion for summary judgment on Hauk's state law claims, explaining that Chase's disclosures defeated the claims and that Hauk could not prove Chase had knowledge of his late payment before he accepted the BTO. Hauk has withdrawn his FCRA claim and does not appeal the district court's grant of summary judgment on his CLRA claim. Hauk therefore appeals only the district court's grant of summary judgment in favor of Chase on his TILA, UCL, and FAL claims.

II. Discussion

We review a district court's grant of summary judgment de novo, thereby applying the same standard as a district court. Laws v. Sony Music Entm't, Inc., 448 F.3d 1134, 1137 (9th Cir.2006). Summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). When determining whether a genuine issue of material fact remains for trial, we must view the evidence and all inferences therefrom in the light most favorable to the non-moving party and may not weigh the evidence or make credibility determinations. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). We also review a district court's interpretation of state law de novo. Laws, 448 F.3d at 1137.

A. Hauk's TILA Claim

Congress enacted TILA "to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices." 15 U.S.C. § 1601. To effectuate TILA's purpose, a court must construe "the Act's provisions liberally in favor of the consumer" and require absolute compliance by creditors. In re Ferrell, 539 F.3d 1186, 1189 (9th Cir.2008); see also Jackson v. Grant, 890 F.2d 118, 120 (9th Cir.1989) ("Even technical or minor violations of the TILA impose liability on the creditor.").

TILA entrusts the Federal Reserve Board with implementation of the Act, and the agency has imposed "even more precise" disclosure requirements via Regulation Z. Virachack v. Univ. Ford, 410 F.3d 579, 581 (9th Cir.2005); see also Household Credit Servs., Inc. v. Pfennig, 541 U.S. 232, 238, 124 S.Ct. 1741, 158 L.Ed.2d 450 (2004) ("Congress has expressly delegated to the Board the authority to prescribe regulations containing `such classifications, differentiations, or other provisions' as, in the judgment of the Board, `are necessary or proper to effectuate the purposes of [TILA], to prevent circumvention or evasion thereof, or to facilitate compliance therewith.'" (quoting 15 U.S.C. § 1604(a))) (alteration in original). Courts must defer to the decisions of the Federal Reserve Board and cannot apply "[t]he concept of `meaningful disclosure' that animates TILA ... in the abstract." Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 568, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980); see also Anderson Bros. Ford v. Valencia, 452 U.S. 205, 219, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981) ("[A]bsent some obvious repugnance to the statute, ... [Regulation Z] should be accepted by the courts, as should the Board's interpretation of its own regulation.").

Hauk's account with Chase provided him with the use of open-ended credit, rendering the disclosures in Subpart B of Regulation Z controlling. See 12 C.F.R. § 226.2(a)(20).² Because the BTO constituted a "credit device," subdivision 226.9(b)(2) mandated the applicable disclosures in subsection 226.6(a). See Official Staff Comm., 12 C.F.R. § 226, Supp. I, § 226.9(b) cmt. 1. Specifically, subsection 226.6(a) required that the BTO disclose the applicable APR and any increased penalty rate that may apply "upon the occurrence of one or more specific events, such as a late payment." Id. § 226.6(a)(2) cmt. 11.

Regulation Z also required that Chase's disclosures "reflect the terms of the legal obligation between the parties." 12 C.F.R. § 226.5(c). Pursuant to subsection 226.5(c), a disclosure would have violated TILA if it inaccurately described the creditor's or cardholder's rights or obligations as they existed at the time the disclosure was made. DeMando v. Morris, 206 F.3d 1300, 1303 (9th Cir.2000); see also Official Staff Comm., 12 C.F.R. § 226, Supp. I, § 226.5(c) cmt. 1 ("The disclosures should reflect the credit...