Gordon v. Kohl's Dep't Stores, Inc.

• Decision Date: 28 March 2016
• Docket Number: CIVIL ACTION NO. 15-730
• Parties: Jennifer Gordon, Valerie Tantlinger and Jennifer Underwood, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. Kohl's Department Stores, Inc. and Capital One, National Association, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

172 F.Supp.3d 840

Jennifer Gordon, Valerie Tantlinger and Jennifer Underwood, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs,

v.Kohl's Department Stores, Inc. and Capital One, National Association, Defendants.

CIVIL ACTION NO. 15-730

United States District Court, E.D. Pennsylvania.

Signed March 28, 2016

Angela Edwards, Law Office of Angela Edwards, East Longmeadow, MA, Charles J. Kocher, Patrick Howard, Saltz Mongeluzzi Barrett & Bendesky PC, Philadelphia, PA, Lee S. Shalov, Wade C. Wilkinson, McLaughlin & Stern LLP, New York, NY, for Plaintiffs.

Joseph J. Schuster, Sarah Schindler-Williams, Ballard Spahr LLP, Philadelphia, PA, for Defendants.

OPINION

WENDY BEETLESTONE, JUDGE.

In this putative class action, Plaintiffs Jennifer Gordon, Valerie Tantlinger, and Jennifer Underwood allege that Defendants Kohl's Department Stores, Inc. (“Kohl's”) and Capital One, National Association (“Capital One”) improperly charged them for two “enhancement products” related to their Kohl's-branded credit card accounts. Plaintiffs claim that they were enrolled in the programs without authorization and that the programs had little or no value. Based on these factual allegations, Plaintiffs' Second Amended Complaint (“SAC”) asserts claims for unjust enrichment and a breach of the implied covenant of good faith and fair dealing. Defendants have filed a motion to dismiss Plaintiffs' claims in their entirety. For the reasons described herein, Defendants' motion shall be granted, in part, and denied, in part.

I. BACKGROUND¹

A. Kohl's-Branded Credit Cards

The Kohl's-branded credit cards (“Cards”) at issue in this case are a joint venture between Capital One and Kohl's. Capital One is one of the 10 largest banks in the United States, based on deposits, with approximately $204 billion in deposits and $300 billion in total assets. SAC ¶ 25. Kohl's is a Wisconsin-based department store chain, with over one thousand stores throughout the United States, as well as multiple websites on which customers may shop for merchandise. SAC ¶ 24. Pursuant to a Private Label Credit Card Program Agreement (the “Private Label Agreement”) Kohl's markets the Cards (which Cards bear the mark of the Kohl's store brand) to their customers and services the Cards on behalf of Capital One. It is, however, Capital One which issues the Cards and with which customers enter into a cardmember agreement (the “Capital One Cardmember Agreement”). SAC ¶ 25, Ex. 2.

Prior to 2011, the Cards were issued by Chase Bank, N.A. (“Chase”), and customers were thereby parties to a cardmember agreement with Chase (the “Chase Cardmember Agreement”). SAC ¶ 1; Defs.' Mot. Exs. A, B, C. The Chase Cardmember Agreement provides that Chase “may assign your Account, any amounts you owe us, or any of our rights and obligations under this Agreement to a third party.” Defs.' Mot. Ex. A ¶ 23. Capital One acquired the Card program from Chase, effective April 1, 2011. SAC ¶¶ 1, 26, Ex. 1. At the time, the program served more than 20 million customers, with an outstanding balance of approximately $3.7 billion. Id. The Kohl's-branded credit card portfolio was the only Chase asset acquired by Capital One in this transaction. SAC ¶ 27.

Upon the transfer of the Card accounts (“Accounts”) to Capital One, all cardholders were sent the Capital One Cardmember Agreement. SAC ¶ 30. The Capital One Cardmember Agreement states: “This agreement (‘Agreement’) governs your Kohl's credit card Account (‘Account’) with us. Please keep this Agreement for your records. You agree with us that the following terms apply to your Account.” SAC Ex. 2 at 2. The Capital One Cardmember Agreement defines “us” to refer to “Capital One, N.A., the creditor and issuer of the Account and any other person to whom this Agreement and/or the Account may be assigned.” Id. at 2:1.

B. KAE and PrivacyGuard

Plaintiffs' claims arise from charges imposed on their Accounts for two ancillary “enhancement products” which are not mentioned by name in the Capital One Cardmember Agreement: Kohl's Account Ease (“KAE”) and PrivacyGuard. SAC ¶ 3. Under the Private Label Agreement, the profits from fees for ancillary products such as KAE and PrivacyGuard are shared by Capital One and Kohl's. SAC ¶ 28.

1. KAE

KAE is a product that “purports to cancel a consumer's account balance, up to a certain dollar amount, in the event of a qualifying event due to involuntary employment, disability, hospitalization or death.” SAC ¶ 36. The fee for KAE is $1.60 per each $100 of a customer's ending monthly balance. Id .

The in-store applications for Chase-issued Cards included a KAE Benefit Summary/Disclosure, which provides, in part:

Kohl's Account Ease (KAE) is an optional amendment to your Cardmember Agreement under which we may cancel the balance on your Account up to a maximum of $10,000. The Plan works when you, your Spouse or Domestic Partner, an Authorized User of your Account, or a Higher Wage Earner in your Household experience a qualifying event.

Defs.' Mot. Exs. A, B, C. However, the Capital One Cardmember Agreement that Plaintiffs claim they received when their Accounts were transferred to Capital One does not contain the KAE Benefit Summary/Disclosure. SAC Ex. 2.

The full terms of KAE are set forth in the Kohl's Account Ease Plan Amendments to Cardmember Agreements (the “KAE Amendments”) issued by each bank. Defs. Mot. Ex. E; Pls.' Opp. Ex. 4. Both the Chase and Capital One KAE Amendments provide that “[a]ll provisions of your [Cardmember] Agreement remain in full force and effect. In the event of a conflict between your Agreement and this Amendment, the terms of this Amendment will govern.” Defs.' Mot. Ex. E ¶ 15; Pls.' Opp. Ex. 4 ¶ 15. The provision defining the parties to the KAE Amendments does not include assignees, and assignment is not mentioned anywhere in either KAE Amendment. Defs.' Mot. Ex. E ¶ 1.1(k); Pls.' Opp. Ex. 4 ¶ 1.1(k).

Both the Chase and Capital One KAE Amendments grant the banks the authority to change the terms of KAE at any time, although “adverse changes will not take effect until [the bank] ha[s] provided you with written notice and a reasonable opportunity to cancel your agreement without penalty before the changes go into effect.” Defs.' Mot. Ex. E ¶ 10; Pls.' Opp. Ex. 4 ¶ 10. A significant difference between the Chase and Capital One KAE Amendments it that the Chase KAE Amendment provides that it shall be governed by Delaware law, while the Capital One KAE Amendment contains a Virginia governing law provision. Defs.' Mot. Ex. E ¶ 16; Pls.' Opp. Ex. 4 ¶ 16.

2. PrivacyGuard

PrivacyGuard is a product which purports to provide customers with credit monitoring and credit report retrieval services in exchange for a monthly fee of $14.99. SAC ¶ 5, 44. PrivacyGuard is not mentioned in either the Chase or Capital One Cardmember Agreement, or in any of the in-store Card applications currently before the Court. Defs.' Mot. Exs. A, B, C. However, Schedule 6.3(c) to the Private Label Agreement, which describes “Bank Enhancement Products” to be offered by Capital One, provides that, in addition to KAE, the “[b]ank will offer Cardholders an identify [sic] theft protection service called 'PrivacyGuard.”' Pls.' Opp. Ex. 2.

C. Plaintiffs' Kohl's-Branded Credit Card Accounts

1. Gordon (KAE Claims Only)

Plaintiff Jennifer Gordon (“Gordon”), a resident of Pennsylvania, opened her Account at a Pennsylvania Kohl's department store in 2010. SAC ¶ 11. Kohl's records records reflect that Gordon was enrolled in KAE on September 27, 2010, and that she was subsequently sent a copy of the Chase KAE Amendment. Defs.' Mot. Ex. E. After Capital One took over the Accounts in April 2011, Gordon received a new Capital One-issued Card and a copy of the Capital One Cardmember Agreement. SAC ¶ 11. The Capital One Cardmember Agreement received by Gordon did not reference KAE or expressly incorporate by reference any prior agreements to which Gordon was a party. SAC ¶ 12. Gordon asserts that she did not authorize Capital One or Kohl's to charge her for KAE at any point after April 1, 2011. Id .

In October 2013, Gordon discovered KAE charges on her Account statement. SAC ¶ 13. Upon further investigation, Gordon realized that she had been charged over $400 in KAE fees between April 19, 2011 and the filing of the SAC in this case. SAC ¶ 13. Gordon's Account remained opened as of the end of 2014, and KAE fees continued to appear on her monthly statements at that time. Defs.' Mot. Ex. G.

2. Tantlinger (KAE Claims Only)

Plaintiff Valerie Tantlinger (“Tantlinger”), a resident of Pennsylvania, opened her Account in 2007. SAC ¶ 14. Kohl's records reflect that Tantlinger was enrolled in KAE on March 3, 2007, and she was subsequently sent a copy of the Chase KAE Amendment. Defs.' Mot. Ex. E. Between November 2008 and May 2012, Tantlinger did not use her Card, and her Account became inactive. Id. On May 11, 2012, Tantlinger unsuccessfully attempted to use her inactive Card at a Kohl's store. SAC ¶ 15. A Kohl's representative at the store requested Tantlinger's personal information, which she provided. Id. Tantlinger subsequently received a new Capital One-issued Card accompanied by a Capital One Cardmember Agreement in the mail. Id. The Capital One Cardmember Agreement received by Tantlinger did not reference KAE or expressly incorporate by reference any prior agreements to which Tantlinger was a party, and Tantlinger asserts that she did not authorize Defendants to charge her for KAE at any point after the issuance of the Capital One Cardmember Agreement. SAC ¶ 16.

In June 2013, Tantlinger discovered charges to her Account for KAE. SAC ¶ 17. Upon investigation, Tantlinger realized that she had been charged over $200 for KAE between May 11, 2012 and June 11, 2013. SAC ¶ 17. Tantlinger's Account statements indicate that she was not charged for KAE at any point after June 2013. Defs.' Mot. Ex. H.

3. Underwood (KAE and PrivacyGuard Claims)

Plaintiff Jennifer Underwood (“Underwood”),...