State v. Capital One Bank (Usa) N.A.

Decision Date29 October 2013
Docket NumberCase No. 13cv00513 WJ/RHS.
Citation980 F.Supp.2d 1314
PartiesState of NEW MEXICO ex rel. Gary King, Attorney General, Plaintiff, v. CAPITAL ONE BANK (USA) N.A. and Capital One Services, LLC, Defendants.
CourtU.S. District Court — District of New Mexico


Limited on Preemption Grounds

West's NMSA § 57–12–3Turner W. Branch, Branch Law Firm, Albuquerque, NM, Allen Carney, Randall K. Pulliam, Carney Bates & Pulliam, PLLC, Little Rock, AR, Kenneth Grunfeld, Richard Golomb, Golomb & Honik, Philadelphia, PA, Scott Fuqua, N.M. Attorney General's Office, Santa Fe, NM, for Plaintiff.

Stephen S. Hamilton, Gary R. Kilpatric, Montgomery & Andrews, P.A., Santa Fe, NM, Donald C. Trigg, Montgomery & Andrews PA, Albuquerque, NM, for Defendants.


WILLIAM P. JOHNSON, District Judge.

THIS MATTER comes before the Court upon Defendants' Motion to Dismiss for Failure to State a Claim for Relief filed August 8, 2013 (Doc. No. 23). Having considered the parties' briefs and the applicable law, the Court finds that Defendants' motion is partially well-taken and, therefore, is GRANTED in part and DENIED in part.


This is an enforcement action brought by the State of New Mexico through Attorney General Gary King ( hereinafter referred to as Plaintiff) in regards to allegations of unfair trade practices. This suit is one of nine (9) parallel proceedings that Plaintiff has brought against major credit card companies. The instant suit, as with the other suits, centers around the sale of “payment protection plans” which is a term used to describe services that cancel or suspend a credit card holder's obligation in certain circumstances. Also at issue are Defendants' plans which purport to monitor a consumer's credit report and notify the consumer of any major changes in his or her credit report. Plaintiff alleges that Defendants' actions in selling and administering these payment protection plans violate the New Mexico Unfair Practices Act (“NMUPA”) NMSA (1978) § 57–12–1 et seq. and a federal disclosure regulation under the Dodd–Frank Act known as Regulation Z, 12 C.F.R. § 1026.5. Defendants claim that Plaintiff has failed to sufficiently plead its claims and move for dismissal under Fed.R.Civ.P. 12(b)(6). Additionally, Defendants argue that Plaintiff's NMUPA claims are preempted by federal law.

I. Legal Standard

Fed.R.Civ.P. 12(b)(6) allows a defense for “failure to state a claim upon which relief can be granted.” In asserting a claim, the claimant must plead “only enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim challenged by a 12(b)(6) motion to dismiss does not require detailed factual allegations, but must set forth “more than labels and conclusions, and a formulaic recitation of the element of a cause of action will not do.” Id. at 555, 127 S.Ct. 1955 “The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the [claimant's] complaint alone is legally sufficient to state a claim for which relief may be granted.” Sutton v. Utah State Sch. for the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir.1999). A 12(b)(6) motion should not be granted “unless it appears beyond doubt that the [claimant] can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see Ash Creek Mining Co. v. Lujan, 969 F.2d 868, 870 (10th Cir.1992). All well-pleaded factual allegations in the complaint are accepted as true, see Ash Creek Mining Co., 969 F.2d at 870, and viewed in the light most favorable to the nonmoving party, see Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974).

Fed.R.Civ.P. 9(b) provides: “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other conditionsof mind of a person may be averred generally.” The requirements of Rule 9(b) must be read in conjunction with the principles of Rule 8, which calls for pleadings to be “simple, concise, and direct, ... and to be construed as to do substantial justice.” Fed.R.Civ.P. 8(e), (f); see also Schwartz v. Celestial Seasonings, Inc., 124 F.3d 1246, 1252 (10th Cir.1997). The purpose of Rule 9(b) is “to afford defendant fair notice of plaintiff's claims and the factual ground upon which [they] are based ...” Farlow v. Peat, Marwick, Mitchell & Co., 956 F.2d 982, 987 (10th Cir.1992) (citation omitted). Simply stated, a complaint must “set forth the time, place and contents of the false representation, the identity of the party making the false statements and the consequences thereof.” Lawrence Nat'l Bank v. Edmonds (In re Edmonds), 924 F.2d 176, 180 (10th Cir.1991).

Defendants argue that the Plaintiff's Complaint should be held to the heightened standard for fraud allegations set forth in Fed.R.Civ.P. 9(b) while Plaintiff argues Rule 9(b) does not apply to claims under the NMUPA. Although Defendants cite a number of cases holding that claims under consumer protection laws generally are held to the heightened pleading standard, courts in this district have held that Rule 9(b) does not apply to claims under the NMUPA. See Woodard v. Fid. Nat. Title Ins. Co., CIV 06–1170 RB/WDS, 2007 WL 5173415 (D.N.M. Dec. 4, 2007) (The Tenth Circuit does not impose the Fed.R.Civ.P. 9(b) heightened pleading requirement upon unfair trade practices claims, and New Mexico courts do not require plaintiffs to plead such claims with particularity); Skyline Potato Co., Inc. v. Tan–O–On Mktg., Inc., 879 F.Supp.2d 1228, 1270–71 (D.N.M.2012) (same). Further, Defendants' argument that the cases in this district only address negligent misrepresentations is inapposite because “knowingly” is an element of a NMUPA claim. See Skyline Potato Co., 879 F.Supp.2d at 1270–71 (“Unlike a common-law fraud claim, which has an element that the defendant act with intent to deceive and to induce reliance on the misrepresentation, a UPA violation requires only that the defendant act knowingly.”) (internal quotation omitted). Accordingly, this Court will not review Plaintiff's Complaint under the heightened Fed.R.Civ.P. 9(b) standard, but rather will review it under the ordinary standard for motions to dismiss.

II. Plaintiff's Complaint Sets Forth Sufficient Facts to Survive a Motion to Dismiss

The NMUPA prohibits [u]nfair or deceptive trade practices and unconscionable trade practices.” NMSA (1978) § 57–12–3. In order to state a claim under the NMUPA, the plaintiff must show:

First, ... the party charged made an ‘oral or written statement, visual description or other representation that was either false or misleading.’ Second, the false or misleading representation must have been ‘knowingly made in connection with the sale, lease, rental or loan of goods or services in the extension of credit or ... collection of debts.’ Third, the conduct complained of must have occurred in the regular course of the representer's trade or commerce. Fourth, the representation must have been of the type that ‘may, tends to or does, deceive or mislead any person.’

Stevenson v. Louis Dreyfus Corp., 1991–NMSC–051, 112 N.M. 97, 100, 811 P.2d 1308, 1311. “The ‘knowingly made’ requirement is met if a party was actually aware that the statement was false or misleading when made, or in the exercise of reasonable diligence should have been aware that the statement was false or misleading.” Id.

In the instant case, Plaintiff has alleged Defendants knowingly made false or misleading statements regarding their payment protection plans involving the extension of credit in violation of the NMUPA. See (Doc. No. 11), Amended Complaint, ¶ 9. Defendants are in the business of extending credit to consumers, so these practices occurred in the regular course of Defendants' trade. Further, Plaintiff alleges that Defendants' statements to their consumers were the kind that “may, tend to, or does, deceive or mislead any person.” Stevenson, 112 N.M. at 100, 811 P.2d at 1311. Thus, Plaintiff has alleged each element of a NMUPA claim.

Plaintiff's allegations are more than a bare bones recitation of the elements of a NMUPA claim. Plaintiff sets forth in detail the specific products and practices it alleges were a violation of the NMUPA. See (Doc. No. 11) ¶¶ 19–21 (describing products at issue); ¶¶ 24–36 (describing unfair marketing practices); ¶¶ 37–43 (describing Defendants' unfair handling of the refund process for consumers who have been “slammed”); ¶¶ 52–53 (noting that Defendants target and enroll consumers who either do not qualify for the payment protection plans or will derive minimal benefit from these plans); ¶¶ 62–64 (noting that Defendants do not provide a list of exclusions from the payment protection plans until after the consumers are enrolled). Defendants argue their Motion should be granted simply because the Complaint in the instant case is similar to the complaints filed in the parallel cases. However, the instant Complaint sets forth facts specific to Defendants in this matter, so the fact that Plaintiff has similar claims against other defendants is not dispositive. Although Plaintiff has not identified specific consumers who were affected by Defendants' allegedly unfair practices, Plaintiff has sufficiently identified the practices it claims were unfair and identifies specific groups of consumers who were targeted by Defendants and were harmed by Defendants' practices.

Plaintiff also brings a claim for violation of Regulation Z, 12 C.F.R. § 1026.5, which sets forth general disclosure requirements for creditors including requirements for disclosures involving payment protection plans. In its...

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