Edwards v. Wells Fargo And Co.

• Decision Date: 19 May 2010
• Docket Number: No. 06-16892.,06-16892.
• Citation: 606 F.3d 555
• Parties: Paul D.S. EDWARDS, Plaintiff-Appellant,v.WELLS FARGO AND COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

606 F.3d 555

Paul D.S. EDWARDS, Plaintiff-Appellant,v.WELLS FARGO AND COMPANY, Defendant-Appellee.

No. 06-16892.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 15, 2008.

Filed May 19, 2010.

Paul D.S. Edwards, pro se, Las Vegas, NV.

Jay Earl Smith, Smith Larsen & Wixom, Las Vegas, NV, for defendant-appellee Wells Fargo Bank.

Appeal from the United States District Court for the District of Nevada, Edward C. Reed, District Judge, Presiding. D.C. No. CV-05-01253-ECR.

Before: ANDREW J. KLEINFELD and N. RANDY SMITH, Circuit Judges, and RICHARD MILLS,^* District Judge.

KLEINFELD, Circuit Judge:

We address what seems like a simple question, but because of the language of the applicable regulatory framework, it turns out not to be simple: does a credit card issuer have to resolve disputes about purchases with the consumer who used the card to buy the goods, or just with the person who obtained the card and authorized issuance of another card to the consumer? The answer is, the latter.

FACTS

The district court decided this case on a motion to dismiss for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). Both parties presented affidavits and other material outside of the pleadings, in support of and in opposition to, the motion. The district court did not exclude any of these materials, and took them into account in his decision, so “the motion must be treated as one for summary judgment under Rule 56.” ¹ Accordingly, we take the facts as established by the evidence to the extent that they are undisputed, and in favor of the respondent, Edwards, to the extent material facts are genuinely in dispute,² and treat this as an appeal from summary judgment.

Wells Fargo Bank issued a Visa credit card to Hamid Maghamfar. Saeid Maghamfar was added to the account about five years later. Both Maghamfar brothers signed a form by which they agreed to be “equally responsible for the repayment of current and future charges on the account and will have equal access to all account services and features.”

For reasons not disclosed in the record, Hamid Maghamfar subsequently arranged with Wells Fargo and Paul Edwards to have an additional credit card issued on the Maghamfar account to Edwards, the plaintiff and appellant. They made the arrangement on the phone, with Maghamfar and Edwards making the call together and talking to some unknown Wells Fargo Visa representative. Their arranging for someone other than the person paying the bills to the bank to get a credit card is like the common scenario where parents get a credit card for a child in college.

Edwards submitted a sworn affidavit saying that the Wells Fargo representative required him to provide identifying information including his social security number, and told him on the phone that he would be personally liable, as well as the Maghamfars, for any purchases he made on the card. Wells Fargo, however, submitted an affidavit swearing that they would not hold Edwards personally responsible. There is no form in the record signed by Edwards like the one that the Maghamfars signed promising the bank to be responsible for charges.

Edwards had numerous disputes with merchants with whom he used the Visa card. They range from a $36.28 charge at Kinko's that Edwards claims he never incurred, to $794.95 for a grey suit that Edwards says was defective and not properly altered. Edwards wrote to Wells Fargo, and for a while, thinking that he was a lawyer representing the Maghamfars, Wells Fargo resolved the disputes with him. (Edwards never claimed to be the Maghamfars' lawyer, but cited and quoted the Fair Credit Billing Act and Regulation Z in detail, so Wells Fargo assumed he was.) Eventually Wells Fargo realized that Edwards was writing on his own behalf, not on behalf of the Maghamfars, and quit responding to him about his billing disputes. The bank wrote to the Maghamfars instead, and charged their account when they did not respond.

Edwards sued Wells Fargo for actual, statutory, and punitive damages under the Fair Credit Billing Act, a subpart of the Truth in Lending Act, ³ and under the Nevada Unfair Consumer Practices Act.⁴ The basis for these claims are the seven billing disputes, all well under $1,000, that Wells Fargo did not resolve with Edwards and with respect to which Wells Fargo did not respond to Edwards' correspondence. On appeal, Edwards makes no argument regarding his Nevada state law claims, so we do not address those claims.

ANALYSIS

Summary judgment is proper if the pleadings and other evidence before the court “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.” ⁵ We review the grant of summary judgment de novo, viewing the evidence and drawing all reasonable inferences in the light most favorable to the non-moving party. ⁶

Edwards argues that as a consumer, cardholder, and user of a credit card issued on the Maghamfar account, he was entitled to the dispute resolution procedures that federal law requires a credit card issuer to follow.⁷ He correctly points out that under the Truth in Lending Act ⁸ and regulations implementing it,⁹ a credit card issuer owes an obligation to respond to, investigate and resolve disputes regarding purchases. The question in this case is to whom that obligation is owed.

The statute says that the creditors' billing dispute duties run to the “obligor” on the account.¹⁰ Neither the statute nor the regulations define “obligor,” so we use the ordinary legal understanding in this context, one who is obligated to pay a debt.¹¹ And here we run into the first potential difficulty, that Wells Fargo told Edwards on the telephone that he was an obligor, but told the district court in a sworn affidavit that he was not. After this dispute had crystallized and before Edwards filed suit, Wells Fargo put in writing its current position that Edwards is not obligated to pay Wells Fargo for charges on the credit card.

In spite of stating that the Wells Fargo representative told him he would be personally liable on the card, Edwards does not claim to be an obligor on the account. Instead, he argues that because he was the “cardholder” and “consumer,” Wells Fargo owed him the obligation regardless of whether he was the obligor. Wells Fargo argues that although Edwards was an “authorized user” he was not the “account holder” or “obligor,” so he lacked “standing” to pursue the claim. The bank uses the word “standing” to mean, not its usual Article III meaning, but merely that the statute and regulations establish no duty running to him. Because Edwards argues that he is entitled to the billing dispute procedures because he is a “cardholder,” “consumer” and “user” of the card, and not because he is also an “obligor” under the statute, we assume for purposes of decision that Wells Fargo does not owe any duty to Edwards as an “obligor” under the statute.

We need to detour into vocabulary to make the arguments comprehensible. A “cardholder” under the statute means a “person to whom a credit card is issued or a person who has agreed with the card issuer to pay obligations arising from the issuance of a credit card to another person.” ¹² Edwards is a “cardholder” under the first of these alternative definitions regardless of whether the telephone call in which he was told he would have to pay would also make him a “cardholder” under the second. Wells Fargo issued a Visa credit card to him in his name to be used for consumer credit purposes. Whatever duty Wells Fargo owed to a cardholder, it owed to Edwards.

The statutory language discussing the credit card issuers' duties means that the duties were not owed to Edwards, just to the Maghamfars because they, and not he, were the obligors. The statute says that if the creditor receives timely written notice from “the obligor” of a claimed billing error, the creditor must send timely written acknowledgment to the “obligor” within strict time limits.¹³ If we could stop there, this would be an easy case. Edwards does not argue that he is an “obligor” and is entitled to the procedures owed to obligors. We cannot stop there, though, because the implementing regulations create a dense fog around the straightforward statutory language.

The statute expressly delegates authority to the Federal Reserve Board to issue implementing regulations.¹⁴ The Federal Reserve Board has done so in a lengthy document called “Regulation Z,” accompanied by extensive official, published staff interpretation. The matter is so complexified by regulation Z that it took a Supreme Court opinion just to say (in the context of company credit cards issued to individual employees) what a consumer is ¹⁵ even though the word consumer is defined by the regulation, ¹⁶ or perhaps because the word is defined by the regulation.

Edwards argues that regardless of whether he is an obligor, the statute requires the bank to deal with him on his billing disputes because it has a duty to deal with “consumers.” The policy of the Act, he correctly argues, as declared in the statute, is to protect “consumers” regarding extension of credit.¹⁷ The bank argues that there was no extension of credit, but that is incorrect, since Edwards got the disputed suit and the other goods giving rise to billing errors before they were paid for. What matters for our purposes is that, assuming that Edwards is not an obligor on the card because he does not claim to be one, the extension of credit was to the Maghamfars, not Edwards. Wells Fargo never “offered” or “extended” credit to Edwards personally. Rather, the Maghamfars let Edwards incur debts on their behalf. In “adding” Edwards, Wells Fargo simply made it possible for him to use credit it extended to the Maghamfars.

Edwards claims to be a “cardholder” to whom an obligation is owed, and the Bank claims that he is not. Plainly, he physically held a card, but that is not the end of the issue. Regulation Z...