Demando v. Morris, 98-16001

• Decision Date: 21 March 2000
• Docket Number: No. 98-16001,98-16001
• Parties: (9th Cir. 2000) SUSAN M. DEMANDO, on behalf of herself and all others similarly situated, Plaintiff-Appellant, v. NIGEL W. MORRIS, an individual; CAPITAL ONE FINANCIAL OPINION CORPORATION, a Delaware banking corporation; CAPITAL ONE BANK, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1300

206 F.3d 1300 (9th Cir. 2000)

SUSAN M. DEMANDO, on behalf of herself and all others similarly situated, Plaintiff-Appellant, v. NIGEL W. MORRIS, an individual; CAPITAL ONE FINANCIAL OPINION CORPORATION, a Delaware banking corporation; CAPITAL ONE BANK, Defendants-Appellees.

No. 98-16001

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted November 1, 1999

Filed March 21, 2000

COUNSEL: Robert S. Green and Gordon M. Fauth, Jr., Girard & Green, San Francisco, California, for the plaintiff-appellant.

James F. McCabe, Morrison & Foerster, San Francisco, California, for the defendants-appellees.

Appeal from the United States District Court for the Northern District of California; James Larson, Magistrate Judge, Presiding. D.C. No. CV-97-03391-JL

Before: Alfred T. Goodwin, Mary M. Schroeder, and Arthur L. Alarcon, Circuit Judges. Opinion by Judge Schroeder

OPINION

SCHROEDER, Circuit Judge:

Susan DeMando appeals the district court's grant of summary judgment in favor of defendant Capital One Bank. DeMando, who holds a credit card issued by Capital One, alleges that the bank's course of dealing violated the Truth in Lending Act ("TILA"), 15 U.S.C. SS 1601-1693, and constituted breach of contract, unfair competition, fraud, and misrepresentation under California law. We affirm the dismissal of the state law claims but hold that she has stated a claim against Capital One under TILA for issuing a disclosure that failed to reflect the terms of the underlying credit agreement.

In June 1995, DeMando received a solicitation letter bearing the signature of Capital One's president. The letter bore a heading in large block letters that read "Receive a 10.9% Lifetime APR!" and went on to describe an offer by Capital One: "Simply transfer $250 or more to your Capital One card and receive a low fixed APR of 10.9%--for life!" (Emphasis in original). The letter also stated: "You will keep this low fixed rate as long as your account remains in good standing. Not only will you save hundreds in interest, but you will never have to shop for another credit card again! This is not an introductory rate. It will not expire to a higher rate--ever! Knowing that can make your finances more manageable." Finally, the letter noted, "P.S. Don't miss this opportunity to receive this low fixed APR! Please refer to the Important Information on back."

Printed on the reverse side of the letter was a "Notice of Change in Terms." The Notice informed DeMando that "[b]y requesting a balance transfer of at least $250, you agree to a change in your Capital One Customer Agreement . . . . The monthly periodic rate and corresponding ANNUAL PERCENTAGE RATES used to calculate the FINANCE CHARGE is explained below. All other terms and conditions for your Account remain in full force and effect. " (Emphasis in original.) The Notice included a table that stated that the applicable annual percentage rate ("APR") would be 10.9%, but did not expressly provide that this APR was to be a fixed or "lifetime" rate.

DeMando requested a balance transfer, and began receiving the 10.9% APR. In August 1997, Capital One mailed DeMando a Notice of Change in Terms informing her that her APR would be increased to 14.99%, effective as of the October 1997 billing cycle. Capital One currently claims that this Notice was a mistake, and that when it sent out notices of increased APRs it first attempted to segregate all computer "cells" containing customers with fixed APRs. According to Capital One, it sought "diligently to exclude from the August 1997 interest rate change those accounts on which it agreed that the APR would not be changed if the customer's account remained in good standing."

DeMando protested the attempted increase immediately. She contends that she called Capital One's customer service hotline and was told that the 1997 Notice was not a mistake but rather was sent in accordance with DeMando's Customer Agreement, which the customer service representative asserted gave Capital One the right to change the applicable APR at any time. On September 15, DeMando filed a complaint alleging violations of TILA and the California Consumer Legal Remedies Act and seeking relief for breach of contract, unfair competition, fraud, and negligent misrepresentation.

On September 16, Capital One wrote to DeMando to inform her that it was voluntarily rescinding the change. It said that while the "Customer Agreement . . . explains that we may change the terms of your account at any time," Capital One agreed "[i]n the interest of customer goodwill" not to increase her APR in October 1997: "Your annual percentage rate for purchases will remain a 10.9% fixed rate." Accordingly, DeMando's APR was never in fact increased from 10.9% and remains at 10.9% today.

After rescinding the attempted change in rate, Capital One filed a motion to dismiss or, in the alternative, for summary judgment. DeMando cross-moved for summary judgment on her unfair competition and breach of contract claims, and moved for class certification. The parties consented to the disposition of the proceedings before a magistrate judge. By order dated April 24, 1998, Magistrate Judge James Larson granted summary judgment in favor of Capital One on every count and dismissed DeMando's motion for class...