v. Mastercard Int'l, Inc.
| Decision Date | 06 October 2014 |
| Docket Number | CIVIL ACTION FILE NO. 1:14-CV-614-TWT |
| Court | U.S. District Court — Northern District of Georgia |
| Parties | C.Y.M. CHI and V.L. CHI, on behalf of themselves and all others similarly situated, et al., Plaintiffs, v. MASTERCARD INTERNATIONAL, INC., Defendant. |
This is a civil RICO action. It is before the Court on the Defendant's Motion to Dismiss for Failure to State a Claim [Doc. 16] and the Plaintiffs' Motion to Exclude the Declaration of Gary R. Carney [Doc. 27]. For the reasons stated below, the Defendant's Motion to Dismiss is GRANTED. The Plaintiffs' Motion to Exclude is DENIED.
On a motion to dismiss, the Court takes as true the facts alleged by the plaintiff. The Plaintiffs, C.Y.M. Chi and V.L. Chi, allege, on behalf of themselves and others similarly situated, as follows: Vertrue, through its subsidiary Adaptive Marketing,operates "consumer savings clubs" or "membership clubs" that charge monthly fees.1 Most consumers are enrolled in these programs accidentally when making other purchases through online merchants.2 Vertrue creates the impression that the membership clubs are part of the transactions with the online merchants.3 When a consumer joins one of the membership clubs, the online merchant uses the "data pass" method to send credit card information from the merchant to Vertrue without the customer's permission.4 Vertrue then charges the consumer's credit card monthly until the consumer opts out of the program.5
With respect to MasterCard, the Plaintiffs allege that MasterCard processes the fraudulent transactions initiated by Vertrue.6 MasterCard receives fees from Vertrueand the online merchants for processing the transactions.7 The Plaintiffs allege that MasterCard continued processing the transactions, despite knowing their true nature.8
The Chis allege that they were enrolled in one of Vertrue's membership clubs when they provided their MasterCard information to enroll in another online service.9 The membership club, SavingsAce, charged the Chis $666.55 from April 2011 to August 2013.10 The Chis obtained a refund of the charges, but have not been refunded for interest.11 The Chis also allege that the class of plaintiffs who are similarly situated suffered damages in excess of five million dollars.12
The Plaintiffs initially filed their Complaint on February 28, 2014, against Vertrue, Inc., Adaptive Marketing, LLC, Velo Holdings, Inc., MyLife.com, Inc., Oak Investment Partners XII, L.P., and MasterCard International, Inc.13 On March 27, 2014, the Plaintiffs voluntarily dismissed the Defendants MyLife.com and OakInvestment Partners XII.14 On April 4, 2014, the Plaintiffs filed the First Amended Complaint at issue here.15 MasterCard then filed this Motion to Dismiss for Failure to State a Claim on May 5, 2014.16 The following day, the Plaintiffs voluntarily dismissed all remaining defendants, with the exception of MasterCard.17 Then, on May 22, 2014, the Plaintiffs filed a Motion for Leave to File Second Amended Complaint,18 which this Court denied as futile on July 11, 2014.19
A complaint should be dismissed under Rule 12(b)(6) only where it appears that the facts alleged fail to state a "plausible" claim for relief.20 A complaint may survive a motion to dismiss for failure to state a claim, however, even if it is "improbable" that a plaintiff would be able to prove those facts; even if the possibility of recovery isextremely "remote and unlikely."21 In ruling on a motion to dismiss, the court must accept the facts pleaded in the complaint as true and construe them in the light most favorable to the plaintiff.22 Generally, notice pleading is all that is required for a valid complaint.23 Under notice pleading, the plaintiff need only give the defendant fair notice of the plaintiff's claim and the grounds upon which it rests.24
The Defendant filed the Declaration of Gary R. Carney [Doc. 25-1] to oppose the Plaintiffs' Motion for Leave to File a Second Amended Complaint [Doc. 23]. The Plaintiffs now object to the declaration, arguing that it includes evidence of settlement negotiations in violation of Federal Rule of Evidence 408.25 Rule 408 bars the use ofcompromise offers and statements made during compromise negotiations when used "to prove or disprove the validity or amount of a disputed claim."26 Such evidence may, however, be used for any other purpose.27
Here, the Defendant offered the Carney Declaration to argue that the Plaintiffs should not be granted leave to amend their Complaint a second time.28 The Court has already denied the motion for leave to amend. The motion to exclude is therefore moot as it applies to the motion for leave to amend. On a motion to dismiss, the Court considers the Complaint and documents attached to it. Because there is no need to consider the Carney Declaration with regard to the motion to dismiss and the Defendant offered the declaration for a purpose other than disputing the validity of the claim, the motion to exclude is denied.
The Defendant moves to dismiss the Plaintiffs' RICO Claims. As an initial matter, the Plaintiffs have indicated that they do not intend to pursue the RICO claimsfurther.29 Because this Court denied the Plaintiffs' motion for leave to file a second amended complaint, however, the RICO claims are still before this Court. In the Eleventh Circuit, to establish a civil RICO claim, plaintiffs must prove conduct of an enterprise through a pattern of racketeering activity.30 This Court finds that the Plaintiffs' RICO claims should be dismissed.
First, the Plaintiffs failed to plead sufficient facts to show a RICO enterprise. To show a RICO enterprise, plaintiffs must plead facts to show "a group of persons associat[ing], formally or informally, with the purpose of conducting illegal activity."31 To be a part of the enterprise, the defendant must have "some part in directing the enterprise's affairs."32 "[O]ne is not liable under [RICO] unless one has participated in the operation or management of the enterprise itself."33 Simply providing financial services or processing credit card transactions is not enough toestablish "operation or management" of an enterprise.34 Courts have specifically held that where credit card companies are carrying out their business of processing transactions, they are not participating in a RICO enterprise.35
Here, the Plaintiffs allege that MasterCard processed the fraudulent membership charges initiated by Vertrue.36 They do not allege any agreement between MasterCard and Vertrue. Nor do they allege any facts that suggest MasterCard did anything other than act as a credit card company in the normal course of business. The court in Trilegiant held, in a nearly identical situation, that where credit card companies were merely processing "savings club" charges, the plaintiffs did not allege sufficient facts for a RICO enterprise.37 Similarly, here, MasterCard was merely processing the charges. The Plaintiffs have not alleged sufficient facts to show a RICO enterprise.
Second, the Plaintiffs failed to plead sufficient facts showing a pattern of racketeering activity. The Plaintiffs must show at least two related predicate acts.38 Predicate acts based on fraud must be pleaded with increased specificity under Federal Rule of Civil Procedure 9(b).39 Here, the Plaintiffs allege the predicate acts of mail fraud, wire fraud, and bank fraud.40
Mail and wire fraud have identical elements, both requiring proof of intentional participation in a scheme to defraud another of money or property and using the mail or wires in furtherance of that scheme.41 The Plaintiffs failed to plead both predicate offenses with the required specificity. Rule 9(b) requires that plaintiffs demonstrate (1) the precise statements or misrepresentations made, (2) when, where, and by whom the statement was made, (3) how the statement misled the plaintiffs, and (4) what the defendants gained from the misrepresentation.42 Where there are no affirmativemisrepresentations and no duty to disclose, RICO claims must be dismissed.43 Here, the Plaintiffs make no allegations of specific statements from MasterCard that misled them, much less when any statements occurred or who made them. Instead, the Plaintiffs make general allegations about electronic, mail, and telephone conversations.44 From these facts, it is impossible for the Court to conclude that MasterCard was doing anything other than operating as a legitimate financial institution, which is not actionable under RICO.45 Similarly, the Plaintiffs cannot and do not allege facts to support bank fraud as a predicate act. Bank fraud requires harm to a financial institution.46 Here, the Plaintiffs are individuals, not banks. They therefore cannot allege facts to support a claim for bank fraud as a predicate act.
Third, the Plaintiffs' RICO conspiracy claims must be dismissed. Where an underlying RICO claim fails, and the plaintiff does not allege additional facts tosupport a RICO conspiracy claim, the conspiracy claim must also fail.47 Count II of the Plaintiffs' First Amended Complaint alleges a RICO conspiracy.48 It does not, however, add any additional facts. Instead it concludes that there was an agreement and references "numerous overt acts as alleged above."49 Because the RICO conspiracy claim does not allege any additional facts, it must be dismissed as well.
Fourth, the Plaintiffs' RICO aiding and abetting claims must be dismissed. This Court declines to address whether RICO aiding and abetting liability exists in the Eleventh Circuit after the Supreme Court's holding in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A.50 because whether or not such liability exists, the Plaintiffs have failed to plead sufficient facts to state a claim. The Eleventh Circuit has found that simply stating that defendants "aided and...
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