United States District Court, S.D. New York
December 2, 2004.
IN RE CURRENCY CONVERSION FEE ANTITRUST LITIGATION. GILBERT SCHRANK, individually and on behalf of all others similarly situated, Plaintiff,
CITIBANK (SOUTH DAKOTA), N.A., Defendant.
The opinion of the court was delivered by: WILLIAM PAULEY, District Judge
MEMORANDUM AND ORDER
This putative class action stems from plaintiff Gilbert
Schrank's ("Plaintiff" or "Schrank") allegations that defendant
Citibank (South Dakota), N.A. ("Citibank") unlawfully imposed a
foreign currency conversion fee ("conversion fee") on its
cardholders.*fn1 In particular, Schrank alleges that the
conversion fees charged for foreign transactions on his Citibank
credit card violate certain New York state consumer laws and the
common laws of other states.
Presently before this Court is Plaintiff's motion to certify
two classes. For the reasons set forth below, Plaintiff's motion
is granted in part and denied in part.
Schrank used his Citibank credit card for purchases in foreign
countries. (Verified Complaint, dated Nov. 10, 2003 ("Compl.") ¶¶
2, 4.) Citibank assessed a conversion fee on each of Schrank's
foreign currency transactions, equaling three percent of the
foreign purchase's U.S. dollar amount. (Compl. ¶ 9.) There are
two tranches of currency conversion fees charged by Citibank. The
first is a one percent fee, charged and retained by either Visa
or MasterCard. The second tier, typically two percent on top of
the one percent fee, is charged and retained by Citibank. (Compl.
Schrank alleges that Citibank does not disclose the conversion
fee in its literature or monthly statements. (Compl. ¶ 12.)
Instead, Citibank conceals the conversion fee by adding it to its
"secret computations of foreign currency conversion rates."
(Compl. ¶ 9.) Schrank contends that the conversion fee bears no
relation to Citibank's actual costs in converting its customers'
foreign charges into U.S. dollars. (Compl. ¶ 16.) He alleges that
Citibank performs currency conversion automatically through a computer program that imposes a "de minimus cost."
(Compl. ¶ 16.)
Plaintiff alleges six causes of action: (1) violation of New
York Personal Property Law ("NYPPL"), Article 10, § 413(3) (a);
(2) unfair and deceptive practices in violation of New York
General Business Law § 349 ("Section 349"); (3) common law fraud;
(4) unconscionable charges under the common law and UCC § 2-202;
(5) violation of the obligation of good faith pursuant to common
law and UCC § 1-203; and (6) unjust enrichment. (Compl. ¶¶
27-38.) Purporting to bring this suit on behalf of himself and
others who were charged conversion fees, Schrank seeks
certification of two classes pursuant to Rule 23 of the Federal
Rules of Civil Procedure:*fn2
Class I: All residents of the State of New York who
were issued, or will be issued, Visa and/or
MasterCard credit cards by defendant, subject to the
statutory provisions set forth in the First and
Second causes of action.
Class II: All persons and entities throughout the
United States, with respect to the common law claims set forth in the Third through Sixth causes of
(Compl. ¶ 21; Plaintiff's Memorandum in Support of Class
Certification ("Pl. Mem.") at 14.)
Citibank opposes this motion, arguing, inter alia, that
Schrank is not typical of the putative class members and that
individual issues would overwhelm any purported common ones.
(Citibank's Memorandum in Opposition of Class Certification
("Def. Mem.") at 1.) In addition, Citibank argues that if a class
is certified, cardholders with arbitration agreements should be
excluded. (Def. Mem. at 21-22.)
I. Class Certification Standards
Rule 23 of the Federal Rules of Civil Procedure governs class
certification. Parker v. Time Warner Entm't Co., L.P.,
331 F.3d 13, 18 (2d Cir. 2003); Benner v. Becton Dickinson & Co.,
214 F.R.D. 157, 162 (S.D.N.Y. 2003). A district court must conduct a
"rigorous analysis" to ascertain whether the Rule 23 requirements
have been satisfied. See Gen. Tel. Co. v. Falcon,
457 U.S. 147, 161 (1982); accord Caridad v. Metro-North Commuter R.R.,
191 F.3d 283, 291 (2d Cir. 1999). While Rule 23 must be liberally
interpreted and not given a strict construction, Marisol A. v.
Giuliani, 126 F.3d 372, 377 (2d Cir. 1997), the party seeking
class certification bears the burden of establishing the requisites of Rule 23, see Amchem Prods., Inc. v. Windsor,
521 U.S. 591, 614 (1997); Caridad, 191 F.3d at 291.
There are two prerequisites for class actions. First, the party
seeking class certification must prove that the proposed class
meets the four requirements of Rule 23(a): (1) the class is so
numerous that joinder of all members is impracticable; (2) there
are questions of law or fact common to the class; (3) the claims
or defenses of the representative parties are typical of the
claims or defenses of the class; and (4) the representative
parties will fairly and adequately protect the interests of the
class. Fed.R.Civ.P. 23(a); In re Visa Check/MasterMoney
Antitrust Litig., 280 F.3d 124, 132-33 (2d Cir. 2001). Second,
the party seeking class certification must show that the proposed
class action falls within one of the types of class actions
maintainable under Rule 23 (b) because: (1) prosecution of
separate actions by individual parties would create a risk of
either inconsistent adjudications or would be dispositive of the
interest of those members not parties to the adjudication; (2)
defendants have acted or refused to act on grounds generally
applicable to the class; or (3) questions of law or fact common
to members of the class predominate, and a class action is
superior to other available methods for adjudication.
Fed.R.Civ.P. 23(b); Visa, 280 F.3d at 133.
When considering a motion for class certification, a court should consider the allegations in the complaint as true.
Shelter Realty Corp. v. Allied Maint. Corp., 574 F.2d 656, 661
n. 15 (2d Cir. 1978). A court may also consider material outside
the pleadings in determining the appropriateness of class
certification. Kaczmarek v. Int'l Bus. Mach. Corp.,
186 F.R.D. 307, 311 (S.D.N.Y. 1999) (citing Sirota v. Solitron Devices,
Inc., 673 F.2d 566, 571 (2d Cir. 1982)). Nonetheless, resolution
of a class certification motion should not become "a preliminary
inquiry into the merits" of the case. Eisen v. Carlisle &
Jacquelin, 417 U.S. 156, 177 (1974); see Visa,
280 F.3d at 133. "In determining the propriety of a class action, the
question is not whether the plaintiff or plaintiffs have stated a
cause of action or will prevail on the merits, but rather whether
the requirements of Rule 23 are met." Eisen, 417 U.S. at 178
(internal quotation marks omitted).
II. Rule 23(a) Requirements
Plaintiff must show that the proposed class "is so numerous
that joinder of all members is impracticable." Fed.R.Civ.P.
23(a)(1). "Impracticable" simply means difficult or inconvenient,
not impossible. See Robidoux v. Celani, 987 F.2d 931, 935 (2d
Cir. 1993); Reynolds v. Giuliani, 118 F. Supp. 2d 352, 388
(S.D.N.Y. 2000). Further, Plaintiff does not need to provide a precise number for the class size. See Robidoux,
987 F.2d at 935; In re Laser Arms Corp. Sec. Litig.,
794 F. Supp. 475, 494 (S.D.N.Y. 1989) ("Since the numerosity requirement
speaks in terms of impracticability rather than impossibility,
plaintiffs need not enumerate the precise number of potential
plaintiffs in the class when reasonable estimates will
Here, Plaintiff contends that the proposed classes "consist?
of hundreds of thousands of holders of Visa and MasterCard credit
cards issued by [Citibank]." (Compl. ¶ 22.) These allegations
satisfy the numerosity requirement. Cons. Rail Corp. v. Town of
Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995) ("[N]umerosity is
presumed at a level of 40 members.").
B. Commonality and Typicality
The requirement of typicality overlaps with that of
commonality. Marisol, 126 F.3d at 376 ("The commonality and
typicality requirements tend to merge into one another, so that
similar considerations animate analysis of Rules 23(a) (2) and
(3)."). However, Citibank does not challenge Plaintiff's
application for class action certification based on lack of
"The crux of [the typicality] requirement? is to ensure that
`maintenance of a class action is economical and [that] the named plaintiff's claim and the class claims are so
interrelated that the interests of the class members will be
fairly and adequately protected in their absence.'" Marisol,
126 F.3d at 376 (quoting Falcon, 457 U.S. at 157 n. 13);
accord Hirschfeld v. Stone, 193 F.R.D. 175, 182-83 (S.D.N.Y.
2000); Reynolds, 118 F. Supp. 2d at 388.
Specifically, the "typicality requirement is satisfied when
each class member's claim arises from the same course of events
and each class member makes similar legal arguments to prove the
defendant's liability . . . irrespective of minor variations in
the fact patterns underlying the individual claims." Robidoux,
987 F.2d at 936-37; accord Robinson v. Metro-North Commuter
R.R., 267 F.3d 147, 155 (2d Cir. 2001). The factual background
of the named plaintiff's claim need not be identical to that of
the putative class members as long as "the disputed issue of law
or fact occup[ies] essentially the same degree of centrality to
the named plaintiff's claim as to that of other members of the
proposed class." Caridad, 191 F.3d at 293 (citation omitted).
"In assessing the typicality of the plaintiff's claims, the
court must pay special attention to unique defenses that are not
shared by the class representatives and members of the class."
Spann v. AOL Time Warner, Inc., 219 F.R.D. 307, 316 (S.D.N.Y.
2003). Although "the mere existence of individualized factual questions with respect to the class representative's
claims will not bar class certification, class certification is
inappropriate where a putative class representative is subject to
unique defenses which threaten to become the focus of the
litigation." Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp.,
222 F.3d 52, 59 (2d Cir. 2000) (citation omitted); see also
Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 903 F.2d 176, 180 (2d Cir. 1990); Langner v.
Brown, No. 95 Civ. 1981 (LBS), 1996 WL 709757, at *3 (S.D.N.Y.
Dec. 10, 1996) (class certification may be denied if the named
plaintiffs are vulnerable to unique defenses that "attack the
heart of the plaintiff's case"). This rule applies to defenses
that negate the plaintiff's case-in-chief and to affirmative
defenses for which defendant bears the burden of proof. See
Spann, 219 F.R.D. at 317-18; Leroy v. Paytel III Mgmt.
Assocs., Inc., No. 91 Civ. 1933 (JFK), 1992 WL 367090, at *2-3
(S.D.N.Y. Nov. 24, 1992) (finding no typicality where a statute
of limitations defense applied to plaintiff's claims but might
not have applied to the claims of the other putative class
Citibank argues that Schrank's claims are not typical of other
putative class members. (Def. Mem. at 4-5.) However, Section 413
of the New York Personal Property Law restricts assessment of
fees not delineated in the statute, irrespective of the
plaintiff's conduct or circumstances. N.Y. Pers. Prop. Law § 413(5). Therefore, Schrank is typical of all New York class
members who were assessed the conversion fee purportedly in
violation of New York Personal Property Law § 413(5).
In contrast, Schrank fails to show typicality with respect to
his other claims. Schrank concedes that the conversion fee
assessed on his foreign purchases was "small and not of any
enormous economic consequences." Consequently, he did nothing
about it. (Declaration of Benjamin R. Nagin, dated Feb. 18, 2004
("Nagin Decl.") Ex. 7: Shrank Deposition Transcript at 87-88.)
Schrank's continued use of his credit card after learning of the
conversion fees opens a possible defense that he was not deceived
by the purported misrepresentation or nondisclosure. See Gary
Plastic Packaging, 903 F.2d at 179-80 (holding that the
plaintiff was an inappropriate class representative since its
claim was subject to several unique defenses including its
continued purchases of certificates of deposit despite having
notice of defendant's alleged fraud). Citibank intends to raise
this defense. (Def. Mem. at 9-10.) Such a defense makes Schrank
atypical of class members who paid the conversion fee
unknowingly. See Baffa, 222 F.3d at 59-60 (finding the
plaintiff atypical because she had more information than the
other putative class members, and she continued to make stock
purchases after obtaining notice of the alleged fraud); Gary
Plastic, 903 F.2d at 179-80; Kovaleff v. Piano, 142 F.R.D. 406, 408 (S.D.N.Y. 1992) (finding the plaintiff atypical where he
continued making investments after learning of the alleged
fraud). Thus, this Court finds that Schrank satisfies the
typicality requirement with respect to his NYPPL claim, but not
with respect to his other claims.
Adequate representation requires that class counsel be
qualified, experienced and generally able to conduct the
litigation, and that the named plaintiff's interests be congruent
with those of absentee class members. See Amchem Prods.,
521 U.S. at 625-26; Falcon, 457 U.S. at 157-58; Marisol A.,
126 F.3d at 378.
Citibank argues that Schrank fails the adequacy requirement
because he is a "close personal friend of his attorney," and they
socialize together. (Citibank Mem. at 5-6.) Citibank speculates
that Schrank's close relationship with class counsel would make
it difficult for him to "exercise independent judgment on behalf
of his absent class members." (Citibank Mem. at 6-7.) This
hypothetical conflict of interest is too diaphanous to bar
certification at this stage. In re Visa, 280 F.3d at 145
(holding that speculative conflict should be disregarded at the
class certification stage). There is no dispute that Plaintiff's
counsel is qualified and experienced. Further, the Complaint asserts that "Plaintiff will fairly and
adequately protect the interests of the Class." (Compl. ¶ 25;
Reply Mem. at 12-15.) In light of Citibank's hypothetical
conflict of interest, Schrank's pleadings sufficiently establish
that the representative parties will fairly and adequately
protect the interests of the class. See In re Sumitomo Copper
Litig., 194 F.R.D. 480, 483 (S.D.N.Y. 2000).
Thus, this Court finds that Schrank's proposed class of New
York state residents satisfies Rule 23(a) with respect to the
NYPPL claim, but not with respect to the Section 349, common law
fraud, unconscionability, violation of good faith obligation and
unjust enrichment claims.
III. Rule 23(b)(3) Requirements
Plaintiff seek certification pursuant to Rule 23(b)(3), which
states that a class action is appropriate when
the court finds that the questions of law or fact
common to the members of the class predominate over
any questions affecting only individual members, and
that a class action is superior to other available
methods for the fair and efficient adjudication of
Fed.R.Civ.P. 23(b)(3). A district court is required to take a
close look at a putative class under Rule 23(b)(3). Amchem,
521 U.S. at 615-16. In assessing whether to certify the class, a
court should consider: (A) the interest of members of the class in
individually controlling the prosecution or defense
of separate actions; (B) the extent and nature of any
litigation concerning the controversy already
commenced by or against members of the class; (C) the
desirability or undesirability of concentrating the
litigation of the claims in the particular forum; (D)
the difficulties likely to be encountered in the
management of a class action.
"The Rule 23(b)(3) predominance inquiry tests whether proposed
classes are sufficiently cohesive to warrant adjudication by
representation." Amchem, 521 U.S. at 623. "In order to meet the
predominance requirement of Rule 23(b)(3), a plaintiff must
establish that `the issues in the class action that are subject
to generalized proof, and thus applicable to the class as a
whole, . . . predominate over those issues that are subject only
to individualized proof.'" Visa, 280 F.3d at 136 (quoting
Rutstein v. Avis Rent-A-Car Sys., Inc., 211 F.3d 1228, 1233
(11th Cir. 2000)). This requirement is more demanding than the
commonality requirement under Rule 23(a); thus, a court must deny
certification where individual issues of fact abound. Moore v.
PaineWebber, Inc., 306 F.3d 1247, 1252 (2d Cir. 2002); In re
Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig.,
209 F.R.D. 323, 349 (S.D.N.Y. 2002). Of course, to find predominance, a Court must consider the elements of each cause of
action, and determine whether those elements can be satisfied by
common, class-wide proof. In re Linerboard Antitrust Litig.,
305 F.3d 145, 156 (3d Cir. 2002) ("Clearly, if proof of the
essential elements of the cause of action require individual
treatment, then there cannot be a predominance of questions of
law and fact common to the members of the class.") (internal
quotation marks omitted); In re WorldCom, Inc. Sec. Litig.,
219 F.R.D. 267, 287 (S.D.N.Y. 2003); Fisher v. Plessey Co. Ltd.,
103 F.R.D. 150, 155 (S.D.N.Y. 1984). Plaintiff bears the burden
of establishing predominance. Selby v. Principal Mut. Life Ins.
Co., 197 F.R.D. 48, 54 (S.D.N.Y. 2000).
Except for his recitation of statutory text for the NYPPL claim
(Compl. ¶¶ 4-15), Schrank's pleadings are deficient concerning
how Citibank's conversion fee is unlawful. Further, Plaintiff's
Complaint and motion papers do not convince this Court that
common proof regarding the elements of the asserted claims would
predominate. This alone requires denial of Plaintiff's motion for
class certification with respect to his non-NYPPL claims. See
Retired Chi. Police Ass'n v. City of Chicago, 7 F.3d 584, 596
(7th Cir. 1993) ("All of the? elements [of Rule 23] are
prerequisites to certification; failure to meet any one of them
precludes certification as a class."); see also Daniels v. City
of New York, 198 F.R.D. 409, 413 (S.D.N.Y. 2001) ("[P]laintiff bears the burden of establishing that the class
meets the Rule 23 requirements."); Selby, 197 F.R.D. at 54;
Pecere v. Empire Blue Cross & Blue Shield, 194 F.R.D. 66, 69-70
(E.D.N.Y. 2000). Nevertheless, this Court analyzes each of
Plaintiff's claims regarding predominance.
1. Claims Based on New York Consumer Protection Laws
a. New York Personal Property Law
Section 413 of the NYPPL governs charges imposed by credit card
issuing companies. In pertinent part, the NYPPL provides that
"[n]o fee, expense, delinquency, collection or other charge
whatsoever shall be taken, received, reserved or contracted for
by the seller under or holder of a retail instalment [sic] credit
agreement except as provided in this section." N.Y. Pers. Prop.
Law § 413(5)(a). Section 413(5)(b) lists seven types of charges
that a credit card issuing company may impose: (1) an annual
membership fee, (2) a late payment fee, (3) an overlimit charge,
(4) a returned payment charge, (5) a charge for replacement of a
lost or stolen credit card, (6) a charge for additional credit
cards, and (7) a charge for copies of sales slips, monthly
statements or other documents not required by federal or state
law governing billing error disputes. N.Y. Pers. Prop. Law §
413(5)(b). Plaintiff contends that charges not catalogued in the
NYPPL are unlawful. If Plaintiff attempts to establish an NYPPL violation, questions of
Citibank's alleged liability would predominate. Citibank
acknowledges that class certification is appropriate for
Schrank's NYPPL claim. (Transcript of Oral Argument, dated May 7,
2004 ("Tr.") at 106.)
b. Section 349
Plaintiff alleges that Citibank's conversion fee violated
Section 349 of the New York General Business Law. (Compl. ¶¶
29-30.) Section 349 "declares unlawful deceptive acts or
practices in the conduct of any business, trade or commerce or in
the furnishing of any service." Riordan v. Nationwide Mut. Fire
Ins. Co., 977 F.2d 47, 51 (2d Cir. 1992) (brackets and internal
quotation marks omitted). "A plaintiff under section 349 must
prove three elements: first, that the challenged act or practice
was consumer-oriented; second, that it was misleading in a
material way; and third, that the plaintiff suffered injury as a
result of the deceptive act." Stutman v. Chem. Bank,
95 N.Y.2d 24, 29 (2000) (citations omitted); accord Maurizio v.
Goldsmith, 230 F.3d 518, 521-22 (2d Cir. 2000). The causation
element is essential: "The plaintiff . . . must show that the
defendant's `material deceptive act' caused the injury."
Stutman, 95 N.Y.2d at 29; see also Petitt v. Celebrity
Cruises, Inc., 153 F. Supp. 2d 240, 266 (S.D.N.Y. 2001). "In
addition, a plaintiff must prove `actual' injury to recover under the statute, though not
necessarily pecuniary harm." Stutman, 95 N.Y.2d at 29. However,
assessment of specific causation often dissolves into a "myriad
of individualized causation inquiries." In re Rezulin Prods.
Liab. Litig., 210 F.R.D. 61, 66 (S.D.N.Y. 2002).
To prevail on their Section 349 claim, each plaintiff must
prove that Citibank caused his injury. Petitt,
153 F. Supp. 2d at 266. The cardholder agreement expressly provides for
assessment of conversion fees. (Declaration of Susan Bridge,
dated Feb. 18, 2004 ("Bridge Decl.") Ex. 1: Cardmember
Agreement.) To prove causation, each plaintiff must show that
Citibank's disclosure of the conversion fees was inadequate, thus
deceiving the cardholder into using his Citibank card for foreign
purchases when other more economical options were available.
See Perlman v. McDonald's Corp., No. 02 Civ. 7821 (RWS), 2003
WL 22052778, at *10-11 (S.D.N.Y. Sept. 3, 2003) (noting that
plaintiff must show a connection between the allegedly deceptive
practice and her injuries). Such a showing entails individual
inquiries, including an examination of each cardholder's
understanding and whether it was justified. See Moore v.
PaineWebber, Inc., 306 F.3d 1247, 1255-56 (2d Cir. 2002) (class
certification of fraud claims not appropriate where
misrepresentations cannot be demonstrated using generalized proof
rather than individualized proof). While some common questions concerning Citibank's assessment of
conversion fees exist, individual questions about causation would
overwhelm them. Accordingly, Plaintiff's Section 349 claim is not
appropriate for class certification.
2. Claims Based on Common Law
Schrank asserts four claims based on common law and the Uniform
Commercial Code. Citibank contends that Schrank's claims of
fraud-by-omission, unconscionability, breach of the covenant of
good faith and unjust enrichment require this court to apply the
laws of all fifty states, thus, defeating predominance. (Def.
Mem. at 17-19.)
The New York choice of law rules require application of the
substantive law of the state with the most significant interest
in the lawsuit. Lee v. Bankers Trust Co., 166 F.3d 540, 545 (2d
Cir. 1999). With respect to tort claims, this is usually the
state where the tort took place. Lee, 166 F.3d at 545 (conduct
regulating rules usually requires application of law of place of
tort); see also Spence v. Glock, Ges.m.b.H., 227 F.3d 308,
312-13 (5th Cir. 2000); Krock v. Lipsay, 97 F.3d 640, 645-46
(2d Cir. 1996); In re Ford Motor Co. Ignition Switch Prods.
Liab. Litig., 174 F.R.D. 332, 348 (D.N.J. 1997) ("Each
plaintiff's home state has an interest in protecting its
consumers from in-state injuries caused by foreign corporations
and in delineating the scope of recovery for its citizens under its own laws."). The
putative class members reside in all fifty states and the
District of Columbia. The torts arose in all fifty states and the
District of Columbia where the individual cardholders were
solicited as cardholders, signed their cardholder agreements and
received their monthly statements. Therefore, the laws of all
fifty states and the District of Columbia must be applied to
ensure proper adjudication of all class member claims. See
Lewis Tree Service, Inc. v. Lucent Techs. Inc., No. 99 Civ.
8556 (JGK), 2002 WL 31619022, at *10 (S.D.N.Y. Nov. 20, 2002).
Indeed, the choice-of-law analysis reflects due process concerns
and may not be altered in a nationwide class action simply
because of logistical difficulties. See Phillips Petroleum Co.
v. Shutts, 472 U.S. 797, 821-22 (1985). Thus, the laws of all
fifty states would need to be applied to enforce the due process
rights of plaintiffs in this nation-wide action.
"[V]ariations in state law may swamp any common issues and
defeat predominance." Castano, 84 F.3d at 741; In re Agent
Orange Prod. Liab. Litig. MDL No. 381, 818 F.2d 145, 165 (2d
Cir. 1987) (noting the possibility of "widespread disagreement"
where a federal court applies the common laws of different
states); In re Rezulin Prods. Liab. Litig., 210 F.R.D. 61,
67-68 (S.D.N.Y. 2002) (noting that claims of consumer fraud would
require a court to apply "the laws of all fifty states to
determine the need for proving such matters as intent, reliance, causation and injury
before even addressing the form and extent of any relief that
might be appropriate"). In such circumstances, courts routinely
deny class certification because plaintiffs' claims would require
application of the substantive law of multiple states. See
e.g., Lewis Tree, 2002 WL 31619022, at *10 (denying class
certification where plaintiff's claims of common law fraud would
require application of the "substantive law of over fifty
states"); Lilly v. Ford Motor Co., No. 00 C 7372, 2002 WL
507126, at *2 (N.D. Ill. Apr. 03, 2002) (denying class
certification where plaintiff's claims of unjust enrichment would
require application of the substantive law of many states).
Rather than challenge Citibank's argument, Schrank dismisses it
with the cursory observation: "Differences in state law
principles are generally of a relative [sic] minor nature."
(Plaintiff's Reply Memorandum in Support of Class Certification
("Reply Mem.") at 9-10.) Schrank provides no additional support
for that sweeping statement. At oral argument, Schrank's counsel
conceded that the common law claims would require consideration
of the laws of other states. (Tr. at 109-10.)
The state by state variations in Schrank's non-New York law
claims overwhelm any common issues, and require denial of class
certification. See Castano, 84 F.3d at 741 (noting that
plaintiffs have the burden of establishing that variations do not "swamp any common issues"); Daniels, 198 F.R.D. at 413; In re
Ford Motor Co. Ignition Switch Prods., 174 F.R.D. 332, 349
(D.N.J. 1997) ("In a motion for class certification, plaintiffs
bear the burden of providing an extensive analysis of state law
variations to determine whether there are `insuperable obstacles'
to class certification." (quotations omitted)); cf. In re
Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d 283,
315 (3d Cir. 1998) (finding class certification appropriate where
plaintiffs compiled "a series of charts setting forth
comprehensive analyses of the various states' laws potentially
applicable to their common law claims").
Because individual questions concerning the substantive laws of
other states would overwhelm any potential common issues,
Schrank's common law claims are inappropriate for class
IV. Arbitration Clauses
Citibank contends that almost 98.5 percent of its cardholders
have signed a binding arbitration agreement, precluding them from
being members of any class in this action. (Def. Mem. at 22 n.
9.) It is undisputed that Citibank added the arbitration clause to its shareholder agreement one year before
the filing of this action.*fn4 (Bridge Decl. ¶¶ 8-9
(attesting that arbitration clauses were added to cardholder
agreements in September-October 2001).)
As this Court has previously ruled, arbitration agreements
signed by cardholders before commencement of the relevant
litigation are fully enforceable. Currency Conversion,
265 F. Supp. 2d at 403; In re Currency Conversion Fee Antitrust
Litig., No. MDL 1409, M 21-95, 2004 WL 2327938, at *13-14
(S.D.N.Y. Oct. 15, 2004); see also Moses H. Cone Mem'l Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (noting the
"liberal federal policy favoring arbitration agreements," so that
"any doubts concerning the scope of arbitrable issues should be
resolved in favor of arbitration"). Further, those arbitration
agreements may be enforced by Citibank as well as an entity
bearing a "close relationship" with it, such as Citibank's parent
or subsidiary corporations. Currency Conversion,
265 F. Supp. 2d at 403.
Accordingly, this Court holds that arbitration clauses
engrafted on cardholder agreements prior to this litigation are
enforceable, and those cardholders who agreed to arbitrate their
claims against Citibank are excluded from the class. CONCLUSION
For the foregoing reasons, Plaintiff's motion to certify Class
I comprising New York state residents is granted in part, and
Plaintiffs' motion to certify Class II comprising a nationwide
class of Citibank cardholders is denied. This Court certifies the
New York class as follows:
All New York state residents issued Citibank Visa or
MasterCard credit cards who did not agree to
arbitrate their claims and were assessed a foreign
currency conversion fee in violation of the New York
Personal Property Law.