United States District Court, S.D. New York
June 6, 2005.
BERND BILDSTEIN, on Behalf of Himself and Others Similarly Situated, Plaintiff,
MASTERCARD INTERNATIONAL INCORPORATED, Defendant.
The opinion of the court was delivered by: WILLIAM PAULEY, District Judge
MEMORANDUM AND ORDER
This putative class action concerns certain foreign currency
conversion practices by MasterCard International Incorporated
("MasterCard" or "Defendant"). In his Second Amended Complaint
(the "Complaint"), Bernd Bildstein ("Bildstein" or "Plaintiff")
alleges that MasterCard unlawfully charges cardholders an
undisclosed Foreign Currency Transaction Fee ("FCTF").*fn1
Plaintiff asserts claims for deceptive business practices under
New York General Business Law ("GBL") Section 349 and unjust
enrichment under New York law.
Presently before this Court is MasterCard's motion to dismiss
the Complaint pursuant to Rule 12(b)(6) for failure to state a
claim. For the reasons set forth below, MasterCard's motion to
dismiss is denied. BACKGROUND
MasterCard is a global credit card network that promotes "its
Master[C]ard brand credit card for use in the United States and
all over the world." (Second Amended Complaint ("SAC") ¶ 6.)
Plaintiff alleges that MasterCard indirectly charges its
cardholders a service fee of approximately one percent, the FCTF,
for transactions in foreign currencies. (SAC ¶ 7.) The FCTF is
part of the currency conversion rate charged to cardholders and
is not disclosed by MasterCard in promotional material or monthly
billing statements. (SAC ¶ 9.) As a result, cardholders who use
their MasterCard brand credit card for foreign transactions are
charged "more than the currency conversion rate applicable to
that particular country and currency involved in the transaction"
and therefore, "unknowingly paid millions of dollars for the
FCTF." (SAC ¶¶ 9, 16.)
Bildstein has been a MasterCard debit cardholder since
September 1997. (SAC ¶ 1.) Beginning in 2000 and continuing
through the filing of the Complaint, Bildstein used his
MasterCard debit card in Mexico for certain transactions in
Mexican Pesos. (SAC ¶ 12.) Bildstein contends that MasterCard
assessed the FCTF in addition to the exchange rate on these
charges and concealed the fee as part of the conversion rate.
(SAC ¶ 12.) Had MasterCard disclosed the embedded fee, Bildstein
argues that he would have sought other methods to exchange his
currency for no fee or, a fee lower than the FCTF. (SAC ¶ 13.)
Bildstein filed his Second Amended Complaint on August 25, 2004
following this Court's earlier decision dismissing Plaintiff's
Amended Complaint and granting leave to replead. The Complaint
asserts two claims against MasterCard: (1) deceptive business
practices under GBL Section 349; and (2) unjust enrichment.
Defendant moves to dismiss the entire Complaint. DISCUSSION
I. Motion to Dismiss Standard
In determining whether dismissal is appropriate under Rule
12(b)(6), the court must "accept as true the material facts
alleged in the complaint and draw all reasonable inferences in
[plaintiff's] favor." Freedom Holdings Inc. v. Spitzer,
357 F.3d 205, 216 (2d Cir. 2004); accord Velez v. Levy,
401 F.3d 75, 80 (2d Cir. 2005). Further, "[a] complaint cannot be
dismissed for failure to state a claim `unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of
his claim which would entitle him to relief.'" Freedom Holdings
Inc, 357 F.3d at 216 (quoting Conley v. Gibson, 355 U.S. 41,
45-46 (1957)); accord Dabit v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 395 F.3d 25, 31 (2d Cir. 2005). As such, "`the
office of a motion to dismiss is merely to assess the legal
feasibility of the complaint, not to assay the weight of the
evidence which might be offered in support thereof.'" Eternity
Global Master Fund Ltd. v. Morgan Guar. Trust Co. of New York,
375 F.3d 168, 176 (2d Cir. 2004) (quoting Geisler v.
Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980)); accord Velez,
401 F.3d at 80. On a motion to dismiss, the inquiry "is not
whether a plaintiff will ultimately prevail but whether the
claimant is entitled to offer evidence to support the claims."
Eternity Global Master Fund Ltd., 375 F.3d at 177 (quoting
York v. Ass'n of the Bar, 286 F.3d 122, 125 (2d Cir. 2002).
II. N.Y. General Business Law § 349
As fully set forth in this Court's prior decision, GBL Section
349 provides a private right of action for consumer fraud. See
Bildstein, 329 F. Supp. 2d at 413; Twentieth Century Fox Film
Corp. v. Marvel Enters., Inc., 155 F. Supp. 2d 1, 25 (S.D.N.Y.
2001) (citation omitted). Under Section 349, Bildstein must establish that: "(1)
the defendant's deceptive acts were directed at consumers, (2)
the acts are misleading in a material way, and (3) the plaintiff
has been injured as a result." Maurizio v. Goldsmith,
230 F.3d 518, 521-22 (2d Cir. 2000); accord Lava Trading Inc. v.
Hartford Fire Ins. Co., No. 03 Civ. 7037 (PKC), 2004 WL 555723,
at *3 (S.D.N.Y. Mar. 19, 2004); Blue Cross & Blue Shield of N.J.
v. Philip Morris USA Inc., 3 N.Y.3d 200, 205-06 (2004); Solomon
v. Bell Atl. Corp., 9 A.D.3d 49, 51, 777 N.Y.S.2d 50, 54 (1st
Dep't 2004). With respect to the injury requirement, a plaintiff
must demonstrate "`actual' injury to recover under the statute,
though not necessarily pecuniary harm." Stutman v. Chem. Bank,
95 N.Y.2d 24, 29, (2000) (citation omitted).
MasterCard argues that Bildstein's Section 349 claim should be
dismissed for Plaintiff's failure to plead facts establishing
consumer-oriented conduct, actionable deception or actual injury.
Accepting the facts pled in the Complaint as true and drawing all
inferences in favor of Bildstein, this Court concludes that
Plaintiff now states a Section 349 claim.
A. Consumer-Oriented Conduct
Section 349 broadly protects consumers from deceptive business
practices conducted in New York. See N.Y. Gen. Bus. Law § 349
(McKinney 2004); Pelman ex rel. Pelman v. McDonald's Corp.,
396 F.3d 508, 511 (2d Cir. 2005) ("§ 349 extends well beyond
common-law fraud to cover a broad range of deceptive practices");
Blue Cross & Blue Shield, 3 N.Y.3d at 205 ("the scope of the
statute is intentionally broad, applying to virtually all
economic activity") (internal quotation marks and citations
omitted). Under this statute, consumer-oriented conduct requires
the allegation of "facts sufficient to show that the challenged
conduct has `a broader impact on consumers at large,' i.e., it `potentially
affects similarly situated consumers' in New York." The Jordan
(Bermuda) Inv. Co. v. Hunter Green Invs. Ltd., No. 00 Civ. 9214
(RWS), 2003 WL 1751780, at 15 (S.D.N.Y. Apr. 1, 2003) (quoting
S.F.K.F.C., Inc. v. Bell Atl. Tricon Leasing Corp.,
84 F.3d 629, 636 (2d Cir. 1996)); accord New York v. Feldman,
210 F. Supp. 2d 294, 301 (S.D.N.Y. 2002) (consumer-oriented "has been
Bildstein has satisfied that pleading requirement. The
Complaint contains allegations that "Master[C]ard has spent
millions of dollars promoting its Master[C]ard brand credit card
for use in the United States and all over the world.
Master[C]ard's promotion efforts include substantial efforts
directed to the New York consumer." (SAC ¶ 6.) Plaintiff also
alleges that "Master[C]ard began applying the FCTF to all
transactions in which the transaction currency differs from the
billing currency" and that MasterCard did not separately disclose
"the FCTF in the promotional material directed to the New York
consumer or in the billing statement sent to its credit card
holders." (SAC ¶¶ 8, 9.) Finally, Bildstein asserts that he
"brings this action on behalf of himself and all other persons
who . . . were subjected to hidden transaction charges which were
buried in the `conversion rate' and not disclosed to them" and
consequently, "unknowingly paid millions of dollars for the
FCTF." (SAC ¶¶ 14, 16.) Such allegations that MasterCard
orchestrated a deceptive practice directed at Bildstein and
others similarly situated amply demonstrate "a broader impact on
consumers at large." S.F.K.F.C., Inc., 84 F.3d at 636.
Defendant's reliance on Kraus v. Visa International Service
Association, No. 602168/2001, slip op. at 11 (N.Y. Sup. Ct. Apr.
9, 2002) is misplaced. (Defendant's Memorandum in Support of
Motion to Dismiss ("Def. Mem.") at 11-12; Declaration of Theodore
Allegaert Ex. A.) In Kraus, plaintiff alleged that Visa
International Service Association ("Visa") charged a foreign exchange rate fee in excess of the amount set
forth in his cardholder agreement with the issuing bank. Kraus,
No. 602168/2001, slip op. at 1. The New York State Supreme Court
dismissed plaintiff's Section 349 claim based on documentary
evidence pursuant to New York C.P.L.R. 3211. Given the absence of
consumer-directed conduct, the state court concluded that the
issuing bank determined the disputed fee, not Visa. Kraus, No.
602168/2001, slip op. at 6.
In contrast, MasterCard's motion is not based on documentary
evidence. Rather, it is a Rule 12(b)(6) motion to dismiss where
the facts alleged in the complaint must be accepted as true and
all reasonable inferences drawn in favor of Bildstein. Grandon,
147 F.3d at 188. Bildstein alleges that MasterCard determined the
FCTF "should be at least one percent, and that it would be
assessed as part of the currency conversion rate to all
cardholders." (SAC ¶ 7.) Further, unlike Kraus, Bildstein
alleges that MasterCard encouraged him to use the card for
foreign currency transactions. These allegations, together with
the allegations discussed above, sufficiently plead
Defendant's assertion that Bildstein must show direct contact
with MasterCard to establish consumer-oriented conduct is
unavailing. (Def. Mem. at 10.) Privity is not required to state a
Section 349 claim. See In re Tertiary Butyl Ether Prods. Liab.
Litig., 175 F. Supp. 2d 593, 630-31 (S.D.N.Y. 2001) ("Indeed,
there is no requirement of privity, and the victims of indirect
injuries are permitted to sue under [Section 349].") (internal
quotation marks and citation omitted). Accordingly, the Complaint
amply pleads consumer-oriented conduct. B. Actionable Deception
MasterCard also moves to dismiss the Section 349 claim based on
Plaintiff's allegations of deception. (Def. Mem. at 7.) Under
Section 349, "`[d]eceptive acts' are defined objectively, as acts
`likely to mislead a reasonable consumer acting reasonably under
the circumstances.'" Boule v. Hutton, 328 F.3d 84, 94 (2d Cir.
2003) (quoting Maurizio, 230 F.3d at 521). Moreover, it is well
established that omissions may provide the basis for such claims.
See Oswego Laborers' Local 214 Pension Fund v. Marine Midland
Bank, N.A., 85 N.Y.2d 20, 26 (1995) ("objective definition of
deceptive acts and practices" includes "misrepresentations or
omissions"); see also Stutman, 95 N.Y.2d at 29; Solomon,
9 A.D.3d at 52. Deceptive practices, however, "need not reach the
level of common-law fraud to be actionable under [S]ection 349."
Boule, 328 F.3d at 94 (quoting Stutman, 95 N.Y.2d at 29).
Bildstein has sufficiently pled deception by omission.
Omission-based claims under Section 349 are appropriate "where
the business alone possesses material information that is
relevant to the consumer and fails to provide this information."
Oswego, 85 N.Y.2d at 26. The Complaint alleges that MasterCard
went "to great efforts to conceal the FCTF" by embedding it in
the currency conversion rate and failing to disclose its
existence. (SAC ¶ 9.) Bildstein further alleges that "no other
fee is similarly [e]mbedded" and that "Master[C]ard was fully
aware that disclosing the FCTF as a separate fee would cause the
consumer not to use the Master[C]ard credit card." (SAC ¶ 11.)
The Complaint therefore, alleges that MasterCard withheld
material information from cardholders and effectively pleads
C. Actual Injury
This Court addressed the actual injury requirement of a Section
349 claim at length in its prior decision. See Bildstein,
329 F. Supp. 2d at 415-16. To survive a motion to dismiss, plaintiff
must plead injury separate and distinct from the alleged
deception. See Small v. Lorillard Tobacco Co., 94 N.Y.2d 43,
56 (1999) (plaintiff may not assert "deception as both act and
injury"); Donahue v. Ferolito, Vultaggio & Sons, 13 A.D.3d 77,
78 (1st Dep't 2004); Sokoloff v. Town Sports Int'l, Inc.,
6 A.D.3d 185, 186, 778 N.Y.S.2d 9, 10 (1st Dep't 2004). Previously,
this Court dismissed Plaintiff's Amended Complaint as "bereft of
any allegation that MasterCard failed to deliver the service
Bildstein paid for . . . or that MasterCard charged an inflated
FCTF" and further provided that "[s]uch allegations would have
been sufficient to state a claim under Section 349." Bildstein,
329 F. Supp. 2d at 16. Despite Defendant's argument to the
contrary, the Complaint does not suffer such fatal pleading
Bildstein alleges that his actual injury is the amount the FCTF
exceeded the prevailing exchange rate at the time of his
transactions in Pesos. (SAC ¶ 13.) He specifically asserts that
MasterCard's failure to disclose the FCTF deprived him the
opportunity to "pay for the purchases in American currency and pay only the foreign
exchange rate;" convert "American currency into [P]esos before
arriving in Mexico, and pay only the exchange rate;" and research
"other credit cards to ascertain if they had an embedded FCTF in
their exchange rate and a lower rate than Master[C]ard, or,
possibly have found a credit card that did not charge a FCTF at
all." (SAC ¶ 13.) These allegations adequately plead harm beyond
the claimed deception. Based on the above, Plaintiff has
sufficiently stated a claim under Section 349.
III. Unjust Enrichment
Defendant also moves to dismiss Plaintiff's unjust enrichment
claim. In New York, unjust enrichment requires "proof that (1)
defendant was enriched, (2) at plaintiff's expense, and (3)
equity and good conscience militate against permitting defendant
to retain what plaintiff is seeking to recover." Briarpatch Ltd.
v. Phoenix Pictures, Inc., 373 F.3d 296, 306 (2d Cir. 2004);
accord Golden Pac. Bancorp v. FDIC, 375 F.3d 196, 203 n. 8
(2d Cir. 2004). The Complaint alleges that MasterCard collected
the FCTF, which exceeded the prevailing exchange rate, from
unknowing cardholders pursuant to a manipulative practice of
nondisclosure. (SAC at ¶¶ 7, 9, 11, 13.) Construing all
reasonable inferences in favor of Plaintiff, the Complaint states
a claim for unjust enrichment.
Nevertheless, Defendant argues that Plaintiff cannot state a
claim for unjust enrichment where a contract governs the subject
matter at issue. (Def. Mem. at 13-14.) MasterCard contends that
Plaintiff entered an agreement with his card issuing bank thereby
barring his unjust enrichment claim. Although MasterCard
correctly observes that an enforceable contract generally
precludes recovery in quasi contract, that rule does not apply
here. See Bazak Int'l v. Tarrant Apparel Group, 347 F. Supp. 2d 1,
4 (S.D.N.Y. 2004) (contract precludes unjust enrichment claim
based on same subject matter); Shady Records, Inc. v. Source
Enters., Inc., 351 F. Supp. 2d 74, 78 (S.D.N.Y. 2004).
Bildstein's agreement with his card issuing bank cannot
preclude Plaintiff's unjust enrichment claim against MasterCard,
a non-party to that agreement. See EUA Cogenex Corp. v. N.
Rockland Centr. School Dist., 124 F. Supp. 2d 861, 873 (S.D.N.Y.
2000) (unjust enrichment "applies in the absence of an express
agreement"); Hochman v. LaRea, 14 A.D.3d 653, 789 N.Y.S.2d 300,
302 (2d Dep't 2005) ("where . . . there is a bona fide dispute as
to the existence of a contract, or where the contract does not
cover the dispute in issue, a plaintiff may proceed upon a theory
of quasi-contract"); Zuccarini v. Ziff-Davis Media, Inc.,
306 A.D.2d 404, 405, 762 N.Y.S.2d 621 (2d Dep't 2003). Accordingly,
Bildstein states a claim for unjust enrichment.
MasterCard further argues that the unjust enrichment claim
should be dismissed for Plaintiff's failure to plead a
relationship between the parties. Whether New York law imposes a
nexus requirement to state a claim for unjust enrichment is
unsettled. Compare Reading Int'l, Inc. v. Oaktree Capital
Mgmt., 317 F. Supp. 2d 301, 333-34 (S.D.N.Y. 2003) (claims for
unjust enrichment "clearly contemplate that a defendant and
plaintiff must have had some type of direct dealings or an
actual, substantive relationship") (quoting In re Motel 6 Sec.
Litig., Nos. 93 Civ. 2183, 2866 (JFK), 1997 WL 154011, at *7
(S.D.N.Y. Apr. 2, 1997)), with Dreick Finanz AG v. Sun, No.
89 Civ. 4347 (MBM), 1989 WL 96626, at *4 (S.D.N.Y. Aug. 14, 1989)
(stating that unjust enrichment does not require "plaintiff and
defendants to have had direct dealings with one another"); see
also Cox v. Microsoft Corp., 8. A.D.3d 39, 40-41, 778 N.Y.S.2d 147 (1st Dep't 2004) (direct dealing not required to
state a claim for unjust enrichment). This Court need not decide
whether a nexus must be shown as the Complaint sufficiently
pleads a relationship between Bildstein and MasterCard to state a
claim. Bildstein alleges that he held a MasterCard debit card
since 1997 and during that time, MasterCard collected the FCTF
from him. (SAC ¶¶ 1, 12, 13.) These allegations, to the extent
required, along with the allegations discussed above adequately
state a claim for unjust enrichment under New York law.
For the reasons set forth above, MasterCard's motion to dismiss
the Second Amended Complaint is denied.