Preira v. Bancorp Bank

• Decision Date: 17 August 2012
• Docket Number: No. 11–CV–1547 (CS).,11–CV–1547 (CS).
• Parties: Stephanie Rose PREIRA, on behalf of herself and all others similarly situated, Plaintiff, v. The BANCORP BANK, Interactive Communications International, Inc., ITC Financial Licenses, Inc., and IH Financial Licenses, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

885 F.Supp.2d 672

Stephanie Rose PREIRA, on behalf of herself and all others similarly situated, Plaintiff,

v.The BANCORP BANK, Interactive Communications International, Inc., ITC Financial Licenses, Inc., and IH Financial Licenses, Inc., Defendants.

No. 11–CV–1547 (CS).

United States District Court,

S.D. New York.

Aug. 17, 2012.

David J. Meiselman, James R. Denlea, Jeffrey I. Carton, Robert J. Berg, Meiselman, Denlea, Packman, Carton & Eberz P.C., White Plains, NY, for Plaintiff.

Casey D. Laffey, Othiamba Lovelace, Felicia Yu, Reed Smith LLP, New York, NY, for Defendants.

MEMORANDUM AND ORDER

SEIBEL, District Judge.

Before the Court is Defendants' Motion to Dismiss, (Doc. 22), Plaintiff's First Amended Class Action Complaint (the “Complaint” or “Compl.”), (Doc. 15), under Federal Rules of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, 12(b)(2) for lack of personal jurisdiction over Defendant IH Financial Licenses, Inc., and 12(b)(6) for failure to state a claim. For the following reasons, Defendants' Motion is GRANTED.

I. BACKGROUND

I assume the facts, but not the conclusions, in the Complaint to be true for purposes of Defendants' Motion.

Defendants The Bancorp Bank, Interactive Communications International, Inc., ITC Financial Licenses, Inc., and IH Financial Licenses, Inc., advertise, promote, market, distribute, service, warrant, and sell prepaid, stored-value Vanilla Visa and Vanilla MasterCard gift cards (collectively, the “gift cards”) throughout the United States. (Compl. ¶¶ 1–2.) In exchange for paying an activation fee, consumers can purchase the gift cards for a pre-set value at major chain retailers, such as CVS and 7 Eleven, and when the gift cards are used, the pre-set value decreases in the amount equal to each transaction. ( Id. ¶¶ 2, 16.) The gift cards are “non-reloadable,” meaning that cardholders cannot add value or merge the values of two or more gift cards after purchase. ( Id. ¶¶ 39, 42.)

The packaging for both the Visa and MasterCard gift cards is virtually identical, with each gift card coming in a sealed package that states on the front that the card is either a Visa or MasterCard gift card, bearing the “Vanilla®” logo, and denoting that the card is valued at “$20–$500 + S4.95 Purchase Charge.” ( Id. ¶¶ 19–20; id. Ex. A, at 1.) In smaller font on the back of the packaging, it states, among other things, “TERMS AND CONDITIONS APPLY. See enclosed Cardholder Agreement for details. IMPORTANT—Be sure to provide gift card recipient the enclosed Cardholder Agreement. For Card information, the Cardholder Agreement, or to request a replacement Card, call 1–800–571–1376 or visit www. vanillavisa. com [or www. vanilla mastercard. com]. Expired Card will be replaced upon request. Card funds never expire.” ( Id. ¶ 22 (emphasis in original); id. Ex. A, at 2.) At the point of sale, the Cardholder Agreement contained inside the packaging is inaccessible to the customer, but the customer may view the Cardholder Agreement on the relevant company's website or by calling the 800 number before purchase. ( Id. ¶¶ 26, 28.) Further, cardholders have access to the Cardholder Agreement inside the packaging after the card has been activated, but before engaging in their first transaction. ( Id. ¶¶ 28, 30–31.)

The outer packaging and Cardholder Agreement state that the gift cards may be used to make purchases from merchants that accept Visa or MasterCard debit cards. ( Id. ¶¶ 22, 34; id. Ex. A, at 2; id. Ex. B, at 1; id. Ex. C, at 1.) But “[s]ome merchants do not allow cardholders to conduct split transactions where [a cardholder] would use the Prepaid Giftcard as partial payment for goods and services and then pay the remainder of the balance with another form of legal tender.” ( Id. Ex. B, at 2; id. Ex. C, at 2.) This restriction prevents cardholders from completely depleting the gift cards at some merchant locations when their gift card balances are lower than the cost of the goods or services they seek to purchase. ( Id. ¶ 36.) At merchant locations that allow split transactions, cardholders must inform the cashier that they would like to complete a split transaction and in what amount before the gift card is swiped, or the gift card is likely to be declined. ( Id. ¶ 37; id. Ex. B, at 2; id. Ex. C, at 2). The “Revocation/Cancellation” section of the Cardholder Agreement states,

You may cancel this Cardholder Agreement by returning the Prepaid Giftcard to us. Your termination of this Cardholder Agreement will not affect any of our rights or your obligations arising under this Cardholder Agreement prior to termination. Any remaining balance will be sent to you by check as long as you return the Prepaid Giftcard to Vanilla Visa [or Vanilla MasterCard] Gift Card Customer Service, PO Box 826, Fortson, GA 31808, and provide your name and address.

( Id. Ex. B, at 5; id. Ex. C, at 5.) The outer packaging explains that “[c]ard funds never expire.” ( Id. ¶ 22; id. Ex. A, at 2.)

In or about January 2011, Plaintiff purchased a Vanilla Visa gift card for $25 plus $4.95 activation fee. ( Id. ¶ 45.) Thereafter, Plaintiff used her gift card to engage in transactions with merchants, each for less than the balance remaining on the gift card. ( Id.) In or about February 2011, Plaintiff attempted to engage in a transaction for more than the remaining balance on her gift card, but the merchant would not complete a split transaction and the gift card was declined. ( Id. ¶ 46.) In the same month, Plaintiff attempted to complete a second split transaction at a Wal-mart store, but the debit card terminal stated, “Card issuer denied the charge,” and the Wal-mart clerk explained that Wal-mart store has problems with Vanilla Visa and MasterCard gift cards “all the time.” ( Id. ¶ 47.) ¹

Plaintiff brings this lawsuit as a class action on behalf of herself and “[a]ll persons who purchased or hold a Vanilla Visa or Vanilla MasterCard Gift Card in New York State for personal use or as a gift, and not for resale.” ( Id. ¶ 49.) She brings claims for (1) violation of the New York General Business Law Section 349 (“Section 349”), (2) breach of the implied covenant of good faith and fair dealing, (3) unjust enrichment, and (4) conversion. ( Id. ¶¶ 56–73.) She alleges that this Court has subject matter jurisdiction over the action pursuant to the Class Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d). ( Id. ¶ 14.)

II. DISCUSSIONA. Standard of Review

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (alteration, citations, and internal quotation marks omitted). While Federal Rule of Civil Procedure 8 “marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, ... it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Iqbal, 556 U.S. at 678–79, 129 S.Ct. 1937.

In considering whether a complaint states a claim upon which relief can be granted, the court may “begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth,” and then determine whether the remaining well-pleaded factual allegations, accepted as true, “plausibly give rise to an entitlement to relief.” Id. at 679, 129 S.Ct. 1937. Deciding whethera complaint states a plausible claim for relief is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’ ” Id. (second alteration in original) (quoting Fed.R.Civ.P. 8(a)(2)).

B. Failure to State a Claim for Damages

Defendants argue that the Complaint should be dismissed for failure to state a claim for cognizable damages. (Ds' Mem. 9–11; Ds' Reply Mem. 3–7.) ² They argue that neither Plaintiff nor members of the putative class have suffered any injury because (1) balances on the gift cards do not expire; (2) some (although not all) merchants allow cardholders to exhaust the gift card balances by way of split transactions, thus enabling cardholders to use the full value of their gift cards in some stores; and (3) a customer can return a gift card at anytime for a full refund of the remaining balance. (Ds' Mem. 9–10; Ds' Reply Mem. 3–7.) Plaintiff argues that “[t]he unexhausted balance and the non-refundable activation fee” that consumers pay “per card for a card that does not work as advertised are cognizable damages,” (P's Mem. 8),³ and “that consumers may be able to seek a refund of any remaining unusable balances on their Gift Cards (at further expense to themselves by mailing the Gift Cards back to Defendants) does not sanitize Defendants' deceptive acts and practices,” ( id. at 9).

i. New York General Business Law Section 349

To state a claim under Section 349, “a plaintiff must allege: (1) the [defendant's] act or practice was consumer-oriented; (2) the act or practice was misleading in a material respect; and (3) the plaintiff was injured as a result.” Spagnola v. Chubb Corp., 574...