Fisher v. First Nat. Bank of Omaha, 75-1976

Citation548 F.2d 255
Decision Date28 January 1977
Docket NumberNo. 75-1976,75-1976
Parties, 1977-1 Trade Cases 61,266 Fred FISHER, on Behalf of Himself and on Behalf of All Other Persons Similarly Situated, Appellant, v. FIRST NATIONAL BANK OF OMAHA, Omaha, Nebraska, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Everett Meeker (argued), Washington, Iowa, Lex Hawkins and Glenn L. Norris, Des Moines, Iowa, and Patrick L. Cooney, Omaha, Neb., on brief, for appellant.

William E. Morrow, Jr. (argued), and Donald J. Buresh, Omaha, Neb., on brief, for appellee.

Before GIBSON, Chief Judge, and LAY and HENLEY, Circuit Judges.

HENLEY, Circuit Judge.

Plaintiff challenges in this appeal the method by which defendant First National Bank of Omaha computed the service charge on its customers' BankAmericard revolving charge accounts. Plaintiff brings this appeal from the district court's 1 grant of summary judgment denying injunctive relief and damages on his claims of usury in violation of the National Bank Act, 12 U.S.C. §§ 21 et seq. and price-fixing in violation of the Sherman Anti-trust Act, 15 U.S.C. § 1 et seq. Plaintiff also appeals from denial of his motion for a class determination under Fed.R.Civ.P. 23.

I

Defendant First National Bank of Omaha is a national banking association with its principal place of business in Omaha, Nebraska. As a Class A member of National BankAmericard Incorporated, defendant is licensed to operate the BankAmericard franchise credit card system in Nebraska and Iowa. The sole named plaintiff, Fred Fisher, is a resident of the State of Iowa. Fisher received an unsolicited BankAmericard from defendant sometime in February, 1969 when cards were mailed to preferred customers selected from lists supplied by correspondent banks. 2 He used his card from time to time to make credit purchases from member merchants in Iowa and, on one occasion, his wife obtained a $250.00 cash advance from the Coralville Bank & Trust Company in Coralville, Iowa. At all times material to this case, the interest defendant charged on cash advance and sales drafts was computed at a rate of 1 1/2% per month (18% per annum) on the previous month's unpaid balance up to $499.99, and 1% per month (12% per annum) on previous balances of $500.00 or more. There is also a fixed service fee on cash advances of $1.00 for each $50.00 of cash advanced. No interest is charged, however, if the previous month's balance is paid in full within twenty-five days of the billing date.

Plaintiff commenced this litigation by filing two class actions in the Southern District of Iowa. In one complaint he alleged violations of the federal Truth In Lending Act, 15 U.S.C. §§ 1601 et seq., and in the other he alleged usury in violation of the National Bank Act, 12 U.S.C. §§ 85 and 86. In each case the defendant moved to dismiss the complaints on account of improper venue. 3 The district court in Iowa found that venue was improperly laid in that district and transferred the cases to the District of Nebraska as authorized by 28 U.S.C. § 1406(a). Fisher v. First Nat'l Bank of Omaha, 338 F.Supp. 525 (S.D.Iowa 1972). 4 After the transfer the complaints were amended and the cases were consolidated. Count I of the amended complaint alleged Truth In Lending violations; Count II alleged usury; Count III set out alleged antitrust violations; and Counts IV and V undertook to allege civil rights violations. Plaintiff moved for a determination that the actions be maintained as a class action; that motion was denied by the district court on the ground that the case failed to satisfy the requirements of Rule 23(b)(3). The district court certified the case as a proper one for an interlocutory appeal under 28 U.S.C. § 1292(b), but the necessary permission for such an appeal was denied by this court on January 15, 1974.

Upon cross-motions for summary judgment, the district court granted summary judgment in favor of plaintiffs on the Truth In Lending violations asserted in Count I and awarded attorney's fees and costs, but granted summary judgment for defendant on the remaining four counts. In an unreported memorandum opinion filed June 24, 1975, the district court held that the interest rate which defendant may legally charge on credit card loans is governed by the usury laws of the state where the extension of credit occurs; that in this case credit was extended at Omaha, Nebraska where the drafts are received and charged to the cardholder's account; and that the interest charged by defendant on its BankAmericard plan was not usurious in Nebraska. The court also found that plaintiff's remaining claims (antitrust and civil rights) were without merit.

On this appeal plaintiff does not complain of the action of the district court in dismissing the civil rights counts of the amended complaint. He does complain of the ruling of the district court on the usury and antitrust claims and of the action of the district court in refusing to permit the case to be prosecuted as a class action.

The defendant has not cross-appealed from the ruling of the district court on plaintiff's Truth In Lending claim.

II

In this section of this opinion and in the succeeding one we will deal with the usury issue.

The rate of interest that a national bank may charge is ultimately a question of federal law, and the matter is governed by 12 U.S.C. § 85 which in pertinent part is as follows:

Any association (national bank) may take, receive, reserve, and charge on any loan or discount made, or upon any notes, bill of exchange, or other evidences of debt, interest at the rate allowed by the laws of State, Territory, or District where the bank is located . . . and no more, except that where by the laws of any State a different rate is limited for banks organized under State laws, the rate so limited shall be allowed for associations organized or existing in any such State under this chapter.

Neither side questions the proposition that the relevant law in this case is that of Nebraska as far as credit card transactions that originated in Nebraska are concerned. The question is whether under the National Bank Act we are required to apply the law of Nebraska or the law of Iowa to transactions which were initiated in Iowa but consummated in Nebraska.

The district court found in effect that when a holder of a BankAmericard uses his card in Iowa to make a retail purchase or to obtain a cash advance, he creates a three party draft which operates functionally as though he had drawn a check on the defendant bank in Omaha, Nebraska. And the district court then stated:

A customer using this "lender credit card" . . . communicates or indicates his intention to establish the credit card arrangement with BankAmericard when the lender, through banking channels, receives in the State of Nebraska the draft of the customer.

This determination hereby renders the plaintiff's allegation that the defendant is engaged in making usurious loans in Iowa moot. The interest rate-finance charge extracted by BankAmericard from its customers is clearly a lawful rate within the State of Nebraska. Neb.Rev.Stat. Section 45-137 (1943).

Although the transactions with which we are concerned were and are interstate in nature, we do not necessarily quarrel with the view of the district court that the credit arrangements involved are consummated in Nebraska, and that credit to the cardholders is extended in that state, and that Nebraska law should be applied on that basis. See Schumacher v. Lawrence, 108 F.2d 576 (6th Cir. 1940), and Haas v. Pittsburgh Nat'l Bank, 60 F.R.D. 604, 608, n. 3 (W.D.Pa.1973). We are persuaded, however, that it really makes no difference whether the transactions are characterized as being Nebraska transactions or whether they are characterized as Iowa transactions.

In the very recent case of Fisher v. First Nat'l Bank of Chicago, 538 F.2d 1284 (7th Cir. 1976), it was held that under the provisions of § 85, if a national bank in one state makes a loan in another state in which it is doing business, and if there is a differential between the maximum rate allowable in one state and the maximum rate allowable in the other state with respect to the same class of debt, the bank may charge the higher of the two rates.

We find ourselves in agreement with that holding. And when it is applied to this case, it is clear that the bank is entitled to charge on these transactions the highest permissible Nebraska rate for the same class of loan regardless of whether the loan is made in Nebraska or Iowa since the maximum rate allowable in Iowa is no higher than the maximum rate allowable in Nebraska. If Iowa permitted a higher rate, which it does not, the bank would be entitled to charge the higher rate.

III

Plaintiff's account with BankAmericard ran from April, 1969 through March, 1971. The case was decided by the district court on June 26, 1975. During that over-all period of time Nebraska recognized a number of categories of loans and differentiated between them as far as permissible rates of interest were concerned.

The maximum rate of interest allowed for ordinary loans was 9% per annum simple interest, a rate that was raised to 11% per annum effective August 24, 1975. Laws 1975, LB 349, § 2, R.S.Neb. § 45-103.03 (1976 Cum.Supp.).

Nebraska also allowed licensed lenders to make personal installment loans up to $3,000.00, and to charge the following interest rates: 30% per annum on loans with respect to which the unpaid balance was less than $300.00; 24% on loans having unpaid balances of between $300.00 and $500.00; 18% on loans having unpaid balances of between $500.00 and $1,000.00; and 12% on loans having unpaid balances in excess of $1,000.00. R.S.Neb. §§ 45-114 et seq., particularly § 45-137.

Additional recognized categories of credit transactions other than bank loans were revolving charge agreements, R.S.Neb. §§ 45-201 et seq., and installment sales contracts, ...

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