McMullen v. Synchrony Bank

• Decision Date: 19 February 2016
• Docket Number: Civil Action No. 14-1983 (JEB)
• Citation: 164 F.Supp.3d 77
• Parties: Valerie McMullen, Plaintiff, v. Synchrony Bank, et al., Defendants.
• Court: U.S. District Court — District of Columbia

164 F.Supp.3d 77

Valerie McMullen, Plaintiff,

v.Synchrony Bank, et al., Defendants.

Civil Action No. 14-1983 (JEB)

United States District Court, District of Columbia.

Signed February 19, 2016

Brendan James Klaproth, Klaproth Law PLLC, Christopher J. Regan, Patrick Michael Regan, Salvatore J. Zambri, Regan Zambri & Long, PLLC, Washington, DC, for Plaintiff.

Amelia J. Schmidt, Gregory Thomas Jaeger, Stroock & Stroock & Lavan, Andrew J. Soukup, Eric C. Bosset, Robert D. Wick, Covington & Burling, LLP, Patrick C. Horrell, Rosenau & Rosenau, Washington, DC, Brendan S. Everman, Stroock & Stroock & Lavan LLP, Miami, FL, Julia B. Strickland, Marcos D. Sasso, Stroock & Stroock & Lavan LLP, Los Angeles, CA, Sidney S. Friedman, William H. Thrush, Jr., Weinstock, Friedman & Friedman, P.A., Baltimore, MD, for Defendants.

MEMORANDUM OPINION

JAMES E. BOASBERG

, United States District Judge

While a gym membership typically improves one's physical well-being at a slight cost to one's fiscal health, the case at hand concerns a fitness endeavor that had a far greater impact on the wallet than the waistline. This suit alleges that fitness companies and two banks conspired to defraud gym member Valerie McMullen by opening unauthorized lines of credit in her name and processing unauthorized charges against that credit. She thus brought this suit against seven named Defendants and various unidentified corporations and individuals, asserting seven counts that include violations of District of Columbia common law and the D.C. Consumer Protection Procedures Act.

In this Opinion, the Court adjudicates the Bank Defendants' Motion to Compel Arbitration, their Motion to Dismiss the three counts asserted against them, and Plaintiff's Motion for Leave to Amend her Complaint. Finding no basis to compel arbitration and no ground to deny leave to amend, the Court will permit the suit to proceed with the proposed amended complaint. And, concluding that the claims therein are largely not, unlike some gym memberships, an exercise in futility, the Court will deny the majority of the Motion to Dismiss.

I. Background

The facts in this section are taken from the proposed Second Amended Complaint, which Plaintiff attaches to her Motion for Leave to Amend. Because the Court ultimately decides to grant that Motion, see infra Section III.B, it treats this as the operative pleading throughout this Opinion.

Although many of the facts of this case are subject to dispute, all parties seem to agree that the beginning of Plaintiff's relationship with Defendants was fairly prosaic. In September 2010, she signed up for 50 personal-training sessions with One World Fitness, a D.C. gym, at a cost of $5,040. See Second Amended Complaint (SAC), ¶ 15. One World represented that Plaintiff “could receive a refund at any time ... upon request.” Id. Three months later, she renewed her membership with One World, purchasing 150 training sessions at a cost of $8,050. Id. , ¶ 16. She charged the first 50 sessions through Chase Health Advance credit card and paid for the additional 150 sessions with a credit card unrelated to this case. Id. , ¶¶ 15-16. In September 2011, Plaintiff canceled her membership and requested a refund of $2,210. Id. , ¶ 17. One World informed her that she would receive this money within 90 days. Id.

In fact, according to McMullen, rather than canceling her membership and providing her the refund, Karim Stewart and Wayne Bullen, the primary owners of One World, obtained lines of credit with J.P. Morgan Chase and Synchrony Bank on her behalf, without her assent or knowledge. Id. , ¶ 18. These credit lines together permitted charges of up to $8,500, which Stewart and Bullen used in full, without authorization from McMullen and for services never provided. Id. These unauthorized actions—opening credit lines and making charges—lie at the heart of Plaintiff's lawsuit. The Court will not dwell on the allegations specific to Stewart, Bullen, and their corporate alter egos—all of whom are named Defendants in this suit—but will instead focus on the facts pertaining to Chase and Synchrony, jointly referred to as the “Bank Defendants,” since they have together filed the Motion to Dismiss at issue here. (Although Synchrony was previously known as GE Capital Retail Bank, see ECF No. 15 (Corporate Disclosure Statement), the Court will use its current name for ease of reference.)

In October 2011, after having canceled her One World membership, McMullen received a “CareCredit” credit card from Synchrony. SAC, ¶ 20. The credit card was accompanied by a financial statement indicating that a credit limit of $7,500 had been issued to her, and that the entire $7,500 had been billed and paid to “Bullen Wellness Washington DC” on September 21, 2011. Id. (Bullen Wellness is a chiropractor business in the District, also owned by Stewart and Bullen. Id. ¶ 11.) Shortly thereafter, McMullen called Synchrony to dispute the line of credit and the charges, but she was told “that the charge was authorized and payment due.” Id. , ¶ 22. Synchrony nevertheless agreed to send her a form to dispute the charge—a form that Plaintiff says she never received. Id.

That same month, McMullen received a financial statement from Chase Health Advance, indicating that “Bullen Wellness Washington DC” had charged $1,000, also on September 21, 2011, against a separate line of credit opened in her name. Id. , ¶ 21. McMullen then telephoned Chase, which also failed to “process the dispute as requested by Ms. McMullen, or make any attempts to confirm the validity” of the charge. Id. , ¶ 23.

In July 2012 and in March 2013, Plaintiff again called Synchrony to dispute the unauthorized line of credit and charges, and during the latter call she requested that the Bank “furnish a signed application requesting the line of credit, a promissory note, and a receipt or purchase authorization” for the $7,500 charge. Id. , ¶¶ 24-25. On January 14, 2014, Plaintiff called Synchrony a fourth time, once more requesting “a promissory note, application, contract, or any other documentary evidence in relation to the unauthorized line of credit and charge.” Id. , ¶ 26. This time, Synchrony assured her that it would mail her such documents within seven business days. Id. But all McMullen received was a letter thanking her for her “recent inquiry regarding [her] CARECREDIT/GECRB account,” indicating that Synchrony would “make every effort to resolve [her] inquiry in a timely manner,” and promising to “send ... a written response with the actions take [sic ] on [her] account” after completing review thereof. Id. McMullen alleges that she never received any further response from Synchrony nor any “documentary proof of her alleged indebtedness” to it. Id.

While McMullen sought to dispute the unauthorized credit line and charges by telephone, she also sought the aid of the Attorney General for the District of Columbia, but such assistance proved unable to resolve the matter. Id. , ¶¶ 19, 27. McMullen states that Synchrony had been notified “on multiple occasions” by the Attorney General that Stewart and Bullen's charges were fraudulent, but “failed to take any corrective action, or at a minimum investigate the fraudulent conduct.” Id. , ¶ 27. Instead, Synchrony charged McMullen interest on the unauthorized $7,500 charge, in the amount of $4,700. Id. , ¶ 28. Eventually, “[w]ith the threat of a damaged credit score hanging over her head, Ms. McMullen proceeded to attempt to pay the debts, all the while continuing to dispute the charges.” Id. , ¶ 29. By April 2014, she had paid Chase the full $1,000 billed by Bullen Wellness, as well as more than $5,000 of the unauthorized charges billed to the Synchrony account in her name. Id. , ¶¶ 30-31. All the same, Synchrony “wrote off the false debt and reported the Unauthorized Charges ... as a ‘Charge Off’[,] thereby adversely impacting McMullen's credit.” Id. , ¶ 31. Plaintiff believes such “inaccurate reporting to the credit agencies has further caused [her] substantial damages.” Id.

On September 12, 2014, Plaintiff filed suit in the Superior Court for the District of Columbia. See ECF 1 (Notice of Removal) at 1. She named Stewart and Bullen, their fitness companies (One World Fitness, Bullen Wellness, and Washington Chiropractic), Synchrony, Chase, and a handful of unnamed individuals and corporate entities as Defendants. See id. , Attach.

1 (Complaint), ¶¶ 1, 6-14. The Complaint raised a bevy of claims against these Defendants—viz. , violations of the CPPA, civil conspiracy, common-law fraud, conversion, breach of contract, breach of good faith and fair dealing, vicarious liability, and punitive damages. See id. , ¶¶ 36-83. McMullen later amended her Complaint to include class-action claims, seeking relief on behalf of a putative class of “all One World Fitness customers who received financing from the Bank Defendants.” Notice of Removal at 2. Defendant Chase then removed the suit to federal court pursuant to the diversity-removal provisions of the Class Action Fairness Act. Id. at 4-8. Plaintiff thereafter sought remand to state court, see ECF No. 12, but Judge John Bates, to whom the case was previously assigned, denied her motion, even after permitting additional jurisdictional discovery. See ECF Nos. 26, 52, 55.

With the matter of removal settled, Chase moved to dismiss the claims asserted against it—specifically, violations of the CPPA, fraud and conspiracy under D.C. common law, and punitive damages. See ECF No. 57 (MTD). Defendant Synchrony, meanwhile, filed a Motion to Compel Arbitration, see ECF No. 61 (MTC), and also joined Chase's Motion to Dismiss. See ECF No. 63 (Notice of Joinder). The case was reassigned to this Court on October 22, 2015, see ECF No. 64, and, after briefing was completed on Defendants' Motions, Plaintiff sought leave to amend her complaint a second time. See ECF No. 70 (MTA). The three Motions are now ripe for adjudication.

II. Legal Standard

A. Motion to Compel...