Tucker v. Chase Bank USA, N.A.

• Citation: 399 F.Supp.3d 105
• Decision Date: 01 August 2019
• Docket Number: 18 Civ. 3155 (KPF)
• Parties: Brady TUCKER, Ryan Hilton, and Stanton Smith, on behalf of themselves and others similarly situated, Plaintiffs, v. CHASE BANK USA, N.A., Defendant.
• Court: U.S. District Court — Southern District of New York

399 F.Supp.3d 105

Brady TUCKER, Ryan Hilton, and Stanton Smith, on behalf of themselves and others similarly situated, Plaintiffs,

v.CHASE BANK USA, N.A., Defendant.

18 Civ. 3155 (KPF)

United States District Court, S.D. New York.

Signed August 1, 2019

David J. Harris, Jr., Finkelstein & Krinsk LLP, San Diego, CA, for Plaintiffs.

Alan Schoenfeld, Noah Adam Levine, Stephanie Simon, Wilmer Cutler Pickering Hale & Dorr LLP, New York, NY, for Defendant.

OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:

Plaintiffs Brady Tucker, Ryan Hilton, and Stanton Smith used Chase Bank credit cards to buy various "cryptocurrencies." From 2017 until early 2018, Defendant Chase Bank USA, N.A. ("Chase") classified Plaintiffs' acquisitions of cryptocurrency as "purchases" for purposes of each Plaintiff’s operative credit card agreement; this classification subjected the transactions to certain interest rates. However, from January 23 to February 2, 2018, Chase classified Plaintiffs' cryptocurrency acquisitions as "cash advances," which were subjected to substantially higher interest rates and transaction fees under the relevant agreements.

Plaintiffs filed this suit, on behalf of themselves and others similarly situated, alleging breach of contract and violations of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 - 1667f, and its implementing regulation, Regulation Z, 12 C.F.R. Part 1026. Specifically, Plaintiffs claim that Chase breached their credit card agreements by treating acquisitions of cryptocurrency as cash advances. In addition, Plaintiffs claim that Chase violated TILA and Regulation Z by (i) failing to make clear and conspicuous disclosures about the types of transactions for which it imposed different rates, in violation of 15 U.S.C. § 1632(a) and its implementing regulations; (ii) failing to provide advance notice of significant changes in account terms, in violation of 15 U.S.C. § 1637(i)(2) and its implementing regulations; and, in the alternative, (iii) failing to provide accurate disclosures in its periodic account statements in violation of 15 U.S.C. § 1637(b) and 12 C.F.R. § 1026.5(c). Plaintiffs also seek declaratory relief.

Chase moves to dismiss Plaintiffs' breach of contract claim and their three TILA and Regulation Z claims under Federal Rule of Civil Procedure 12(b)(6). For the reasons that follow, the Court denies the motion as to Plaintiffs' breach of contract and clear and conspicuous disclosure claims, and grants the motion as to Plaintiffs' advance notice and accurate periodic account statements claims.

BACKGROUND¹

A. Factual Background

1. Cryptocurrency Generally

"Cryptocurrency" is a term of art that refers to units of computer code, created by private computer programmers, that may be used as forms of currency by some private individuals. (Am. Compl. ¶ 45). The creation of cryptocurrency is not subject to control or oversight by any governmental agency; according to Plaintiffs, "anyone can create their own cryptocurrency at any time, so long as they are sufficiently skilled at programming computers." (Id. at ¶¶ 22, 26). Cryptocurrencies are not legal tender, do not represent a claim on legal tender, are not accepted as currency by the government, and are not accepted as payment by the "overwhelming majority of private business and individuals." (Id. at ¶¶ 20-21). Although certain types of cryptocurrency may be used as currency, cryptocurrencies are "fundamentally private-sector technologies, computer codes, and software applications." (Id. at ¶¶ 29, 31). Cryptocurrency can be obtained by purchasing it from a creator of same, creating new units of the cryptocurrency, or creating a new type of cryptocurrency altogether. (See id. at ¶¶ 22, 24).

2. Chase Credit Card Agreements

Chase is one of the largest issuers of credit cards in America, offering a variety of credit cards to consumers nationwide.

(Am. Compl. ¶¶ 1, 35). To receive a Chase credit card, consumers must enter into a credit card agreement with Chase, the terms of which are contained in what the relevant statute and regulations refer to as an "account-opening disclosure" (the "Contract"). (Id. at ¶ 35). The terms of the Contracts differ in some respects depending upon the type of credit card at issue, but each sets forth applicable interest rates and fees that apply to different types of credit card transactions. (Id. at ¶ 36). The Contracts specify a variable annual percentage rate ("APR") for purchases, and a substantially higher APR for cash advances.

The terms of the Contracts are identical in three key respects relevant to this litigation. First , the Contracts define "purchases" as credit card transactions to "buy goods and services." (Am. Compl. ¶ 88, Ex. A). Second , with regard to cash advances, the Contracts note:

You may obtain cash from automatic teller machines, at banks or by using cash advance checks [issued by Chase]. Unless we [Chase] say otherwise, balance transfer checks or promotional checks made payable to cash or yourself will be treated as cash advances. We treat certain other transactions as cash advances. See the Cash-like Transactions section under [the] Important Definitions [section] above.

(Id. at ¶ 38). Third , the Contracts contain identical definitions of "cash-like transactions":

The following transactions will be treated as cash advances: purchasing travelers checks, foreign currency, money orders, wire transfers or similar cash-like transactions ; purchasing lottery tickets, casino gaming chips, race track wagers or similar betting transactions; and making a payment using a third party service.

(Id. at ¶ 39 (emphasis supplied in Amended Complaint)).

3. Plaintiffs' Use of Chase Credit Cards to Buy Cryptocurrency

Plaintiffs are Chase credit card holders and, as such, have entered into Contracts with Chase. (Am. Compl. ¶¶ 13-15). Beginning in 2016, Plaintiffs began using their Chase credit cards to buy cryptocurrency. (Id. at ¶¶ 6-7). From in or about 2016 until January 22, 2018, Chase classified each of these acquisitions of cryptocurrency as a purchase within the meaning of the Contracts. (Id. at ¶ 7). Chase assessed no transaction fees and applied the lower interest charges specified for purchase transactions. (Id. ). During this time, Plaintiffs received periodic account statements from Chase in which their cryptocurrency transactions were listed as "purchases." (Id. at ¶¶ 47, 50, 53).

From January 23, 2018, to February 2, 2018, Plaintiffs continued to use the same Chase credit cards to purchase additional cryptocurrency. (Am. Compl. ¶¶ 47, 50, 53). Chase classified these transactions, however, as cash advances, which incur higher interest rates and fees than purchases. (Id. at ¶¶ 7, 51). Plaintiffs did not receive advance notice that cryptocurrency acquisitions would be treated as cash advances beginning in or about January 23, 2018. (Id. at ¶ 8).

Plaintiffs claim that, had they known that these transactions would be classified as cash advances rather than purchases, they would not have used their Chase credit cards to acquire cryptocurrency, in order to avoid the cash advance fees and interest charges. (Am. Compl. ¶¶ 49, 52, 55). Plaintiffs Smith and Tucker called Chase to dispute the classification and subsequent charges.² Chase "conceded and refunded the [c]ash [a]dvance fees" to Smith but refused to remove the cash advance interest charge for either plaintiff. (Id. at ¶¶ 48, 54).

B. Procedural History

Plaintiffs filed their initial complaint in this action on April 10, 2018. (Dkt. #1). Chase filed a motion to dismiss on July 27, 2018. (Dkt. #23). Plaintiffs then filed the Amended Complaint on August 17, 2018. (Dkt. #30). Chase filed a motion to dismiss the Amended Complaint on November 2, 2018. (Dkt. #39). Plaintiffs filed their opposition on November 30, 2018 (Dkt. #42), and the motion was fully submitted when Chase filed its reply on December 14, 2018 (Dkt. #43).

DISCUSSION

A. Applicable Law

1. Motion to Dismiss under Fed. R. Civ. P. 12(b)(6)

When considering a motion to dismiss under Rule 12(b)(6), a court should "draw all reasonable inferences in [the plaintiff’s] favor, assume all well pleaded factual allegations to be true, and determine whether they plausibly give rise to an entitlement to relief." Faber v. Metro. Life Ins. Co. , 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks omitted) (quoting Selevan v. N.Y. Thruway Auth. , 584 F.3d 82, 88 (2d Cir. 2009) ). Thus, "[t]o 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) ).

"While Twombly does not require heightened fact pleading of specifics, it does require enough facts to ‘nudge [a plaintiff’s] claims across the line from conceivable to plausible.’ " In re Elevator Antitrust Litig. , 502 F.3d 47, 50 (2d Cir. 2007) (per curiam) (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). "Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.’ " Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ). Moreover, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.

2. TILA and Regulation Z

Congress enacted TILA in order to promote the "informed use of credit" by consumers. 15 U.S.C. § 1601(a) ; see also Anderson Bros. Ford v. Valencia , 452 U.S. 205, 219-20, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981). In so doing, Congress sought to assure "a meaningful disclosure of credit terms so that the consumer will be able to...