Azur v. Chase Bank, USA, Nat. Ass'n

• Decision Date: 01 April 2010
• Docket Number: No. 09-1553.,09-1553.
• Citation: 601 F.3d 212
• Parties: Francis H. AZUR, Appellant v. CHASE BANK, USA, NATIONAL ASSOCIATION formerly known as Chase Manhattan Bank, USA, National Association formerly known as First USA Bank, N.A.
• Court: U.S. Court of Appeals — Third Circuit

601 F.3d 212

Francis H. AZUR, Appellant v. CHASE BANK, USA, NATIONAL ASSOCIATION formerly known as Chase Manhattan Bank, USA, National Association formerly known as First USA Bank, N.A.

No. 09-1553.

United States Court of Appeals, Third Circuit.

Argued January 27, 2010.

Filed April 1, 2010.

Dennis J. Buffone, Kurt A. Miller, Jerri A. Ryan (Argued), Ilene Tobias, Thorp, Reed & Armstrong, Pittsburgh, PA, for Appellant.

James C. Martin (Argued), Perry A. Napolitano, Reed Smith, Pittsburgh, PA, Joe N. Nguyen, Reed Smith, Philadelphia, PA, Felicia Y. Yu, Reed Smith, Los Angeles, CA, for Appellee.

Before: FUENTES and FISHER, Circuit Judges, and DIAMOND,^* District Judge.

OPINION OF THE COURT

FISHER, Circuit Judge.

Francis H. Azur filed suit against Chase Bank, USA, alleging violations of 15 U.S.C. §§ 1643 and 1666 of the Truth in Lending Act (TILA) and a common law negligence claim after Azur's personal assistant, Michele Vanek, misappropriated over $1 million from Azur through the fraudulent use of a Chase credit card over the course of seven years. The District Court granted Chase's motion for summary judgment, and Azur appealed. We are presented here with three discrete issues for our review. First, we must determine whether § 1643 of the TILA provides the cardholder with a right to reimbursement. Second, we must evaluate whether Azur's §§ 1643 and 1666 claims are precluded because Azur vested Vanek with apparent authority to use the Chase credit card. Third and finally, we must decide whether Azur's negligence claim is barred by Pennsylvania's "economic loss doctrine." For the reasons stated herein, we will affirm, on partly different grounds, the District Court's order granting Chase's motion for summary judgment.

I.

A.

ATM Corporation of America, Inc. (ATM) manages settlement services for large national lenders. Azur, the founder of ATM, served as its president and chief executive officer from 1993 until September 2007, when ATM was sold. In July 1997, ATM hired Vanek to be Azur's personal assistant. Vanek's responsibilities consisted of picking up Azur's personal bills, including his credit card bills, from a Post Office Box in Coraopolis, Pennsylvania;¹ opening the bills; preparing and presenting checks for Azur to sign; mailing the payments; and balancing Azur's checking and savings accounts at Dollar Bank. According to Azur, it was Vanek's job alone to review Azur's credit card and bank statements and contact the credit card company to discuss any odd charges. Azur also provided Vanek with access to his credit card number to enable her to make purchases at his request.

From around November 1999 to March 2006, Vanek withdrew without authorization cash advances of between $200 and $700, typically twice a day, from a Chase credit card account in Azur's name.² Azur was the sole cardholder and only authorized user on the account. Although Azur recalls opening a credit card account in or around 1987 with First USA, Chase's predecessor,³ Azur was unaware that he had a Chase credit card.

Each fraudulent transaction included a fee of approximately $2.00 and a finance charge that corresponded to the amount withdrawn, ranging from $4.00 for a $100 advance, to $21.06 for a $700 advance. The fraudulent charges were reflected on at least 65 monthly billing statements sent by Chase to Azur, and Vanek paid the bills by either writing checks or making on-line payments from Azur's Dollar Bank checking account. When writing checks, Vanek forged Azur's signature. Over the course of seven years, Vanek misappropriated over $1 million from Azur.

The transactions occasionally triggered Chase's fraud strategies.⁴ On April 16, 2004, Chase detected its first potentially fraudulent transaction, made outbound calls to the account's home telephone number, and left an automated message on the number's answering machine. Chase received no response. On April 23, 2004, one week later, Chase detected a second potential problem and left another automated message at the same telephone number. Three days later, Chase received a call from someone that was able to verify the account's security questions and validate the card activity. Although Chase's records indicate that the caller was female, Chase did not use voice recognition or gender identification as a means of security verification. Finally, on May 14, 2005, approximately one year later, Chase detected a third potentially fraudulent transaction and called the home telephone number. As before, five days later, a return caller once again verified the account activity. The account was paid in full without protest after each incident.⁵

On or about March 7, 2006, Azur discovered a suspicious letter requesting a transfer of funds from his checking account. After investigating, Azur and ATM discovered Vanek's fraudulent scheme and terminated her employment. On March 8, 2006, Azur notified Chase by telephone of the fraudulent use of the Chase account and closed the account. Thereafter, Azur sent Chase three pieces of correspondence relevant to this appeal: (1) a letter dated April 7, 2006; (2) an executed Affirmation of Unauthorized Use dated April 21, 2006; and (3) a letter dated May 17, 2006.

In the letter dated April 7, 2006, Azur notified Chase of the fraudulent use of the card, stated that he "is formally disputing that he is responsible for the payment of any unpaid charges and accompanying finance charges on the account" (App. at 48A), and requested statements, correspondence, and other documents regarding the account.

The Affirmation of Unauthorized Use, which Chase drafted and sent to Azur for execution, stated, "Any transaction(s) occurring on or after 10/09/2001 is/are also unauthorized." (Id. at 50A.) The Affirmation listed three credits, titled "unauthorized transactions," to Azur's account: (1) a "returned payment" in the amount of $10,000; (2) a "returned payment" in the amount of $20,000; and (3) a "fraudulent transaction" in the amount of $28,717.38. (Id.) Azur executed the document and returned it to Chase on April 21, 2006.

Finally, in the letter dated May 17, 2006, Azur once again notified Chase that he "continues to dispute any and all unpaid charges stemming from the Chase account, as well as all prior fraudulent transactions on that account, which have been the subject of prior communications between you and Mr. Azur and/or his representatives." (Id. at 52A.)

Because Azur closed the account on March 8, 2006, the account's final billing period ended on March 6, 2006. Chase has a "policy and practice" of mailing billing statements within two days of the close of each billing cycle.

B.

On February 22, 2007,⁶ Azur filed an amended complaint against Chase under §§ 1643 and 1666 of the TILA, 15 U.S.C. §§ 1601 et seq. (2006), and common law negligence.⁷ On April 8, 2008, Chase filed under seal a motion for summary judgment seeking dismissal of all three of Azur's claims.

On October 24, 2008, the Magistrate Judge issued a Report and Recommendation (R & R) suggesting that Azur's § 1643 claim proceed to trial but that Azur's other two claims be dismissed. Both parties filed objections, and Chase filed an additional motion for judgment on the pleadings for the § 1643 claim, arguing, based on this Court's decision in Sovereign Bank v. BJ's Wholesale Club, Inc., 533 F.3d 162 (3d Cir.2008), that § 1643 does not provide the cardholder with a right to reimbursement.

On January 7, 2009, the Magistrate Judge vacated his first R & R and issued a Supplemental R & R recommending that all three of Azur's claims be dismissed. The Magistrate Judge found that (1) Azur's § 1643 claim failed because Vanek had apparent authority to use Azur's credit card; (2) Azur's § 1666 claim failed because Azur did not send Chase a timely, written notice properly identifying the specific charges and amounts he was disputing; and (3) Azur's negligence claim was barred by Pennsylvania's economic loss doctrine. In light of this finding, the Magistrate Judge recommended that Chase's motion for judgment on the pleadings be dismissed as moot. On February 3, 2009, the United States District Court for the Western District of Pennsylvania adopted the Supplemental R & R, granted Chase's motion for summary judgment on all three counts, and dismissed Chase's motion for judgment on the pleadings as moot. Azur filed a timely notice of appeal.

II.

The District Court had jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1367, and we have jurisdiction pursuant to 28 U.S.C. § 1291. "We review an order granting summary judgment de novo, applying the same standard used by the District Court." Nicini v. Morra, 212 F.3d 798, 805 (3d Cir.2000) (en banc). "Summary judgment is proper where the pleadings, depositions, answers to interrogatories, admissions, and affidavits show there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Id. at 805-06 (citing Fed.R.Civ.P. 56(c)). "Once the moving party points to evidence demonstrating no issue of material fact exists, the non-moving party has the duty to set forth specific facts showing that a genuine issue of material fact exists and that a reasonable factfinder could rule in its favor." Ridgewood Bd. of Educ. v. N.E. ex rel. M.E., 172 F.3d 238, 252 (3d Cir.1999). We may affirm the District Court's order granting summary judgment on any grounds supported by the record. Nicini, 212 F.3d at 805. "To the extent that the District Court made conclusions of law, our review is de novo." In re Merck & Co., Inc. Sec., Derivative & Erisa Litig., 493 F.3d 393, 399 (3d Cir.2007) (italics omitted).

III.

Azur appeals the District Court's order granting Chase's motion for summary judgment. Azur argues that the District Court erred in dismissing (1) his § 1643 claim based on its conclusion that Vanek had apparent authority to make the credit card charges as a matter of law; (2) his § 1666 claim based on its determination...