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Jaffe v. Capital One Bank

March 1, 2010

PHILLIP JAFFE AND OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
CAPITAL ONE BANK, CAPITAL ONE SERVICES, INC. AND CAPITAL ONE, F.S.B., WASHINGTON MUTUAL BANK D/B/A JPMORGAN CHASE BANK, N.A., D/B/A CHASE BANK, N.A. (CHASE BANK), CHASE BANK, USA, N.A., D/B/A CHASE MASTERCARD (CHASE CARD), AND AMERICAN EXPRESS, DEFENDANTS.



The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.

OPINION AND ORDER

ECF CASE

Pro se Plaintiff Phillip Jaffe's Complaint asserts violations of federal and state laws arising from defendant credit card companies' alleged late posting of payments and resulting fees and penalties. The Complaint names Capital One Bank, Capital One Services, Inc. and Capital One, F.S.B. (collectively, "Capital One"), Washington Mutual Bank, Chase Bank, USA, N.A., and American Express. Capital One has moved to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6). Chase has moved to dismiss under Fed. R. Civ. P. 12(b)(6). American Express has moved to dismiss under Fed. R. Civ. P. 12(b)(6) or, in the alternative, to strike the class allegations under Fed. R. Civ. P. 23(d)(1)(D). The Federal Deposit Insurance Company, in its capacity as Receiver for Washington Mutual, has moved to substitute itself for Washington Mutual and to dismiss without prejudice pursuant to 12 U.S.C. § 1821(d)(13)(D). For the reasons set forth below, Defendants' motions to dismiss will be GRANTED.

BACKGROUND

Jaffe alleges that he opened credit card accounts with Capital One, Chase, and American Express "at different points in time."*fn1 (Compl. ¶ 8) "At some point," Jaffe observed that his credit card payments were not posted until several days after they were received by the Defendants. (Compl. ¶ 9) Jaffe cites only one example of late posting, however, alleging that he made an electronic payment to Capital One on February 24, 2007, to satisfy a credit card bill due on February 25, 2007, and that Capital One imposed a late fee on his account on February 26, 2007. (Compl. ¶ 10) Jaffe alleges that Defendants' alleged practice of posting payments late caused him to incur late fees and higher credit card fees and damaged his credit history. (Compl. ¶ 13)

Jaffe brings this suit on his own behalf and on behalf of others similarly situated, including "[a]ll persons who have made payments . . . [to] Capital One Bank, Washington Mutual Bank and American Express" and "[a]ll persons who were victimized by adhesion contracts in that they had to go along with increases in interest rates or lose their cards."*fn2

(Compl. ¶¶ 18(a), 18(b)) Jaffe alleges that "there are in excess of 500 members of the proposed class" and claims that the fraud on the proposed class resulted in "Hundreds of Millions, if not, Hundreds of Billions for the card companies." (Compl. ¶¶ 11, 18(c)) He also alleges that Capital One, Washington Mutual and American Express acted intentionally or with "extreme negligence" in failing to credit the accounts of credit card holders who made timely payments. (Compl. ¶¶ 18(e)(b), 18(e)(c), 18(e)(d)) Jaffe also claims that these three defendants charged higher interest rates to members of the proposed class and defamed them by lowering their credit scores. (Compl. ¶¶ 18(e)(o), 18(e)(p), 18(e)(q))

The Complaint alleges causes of action for fraud (Counts 1-9), conversion (Count 10), unjust enrichment (Count 11), and for violations of the Fair Credit Billing Act, 15 U.S.C. § 1601 (Count 12).*fn3

DISCUSSION

Although Jaffe is proceeding pro se, he is an attorney. (Compl. ¶ 18(e)(v). A lawyer proceeding pro se is not entitled to the special consideration that courts customarily grant to pro se parties. Harbulak v. County of Suffolk, 654 F.2d 194, 198 (2d Cir. 1981); Chira v. Columbia Univ., 289 F. Supp. 2d 477, 482 (S.D.N.Y. 2003). Accordingly, the sufficiency of his pleadings will be judged according to the same standards applicable to represented parties. See Harbulak, 654 F.2d at 198; Chira, 289 F. Supp. 2d at 482.

I. THE FDIC RECEIVER WILL BE SUBSTITUTED FOR DEFENDANT WASHINGTON MUTUAL AND THE ACTION AGAINST THE FDIC RECEIVER WILL BE DISMISSED WITHOUT PREJUDICE PURSUANT TO 12 U.S.C. § 1821(d)(13)(D)

Federal Rule of Civil Procedure 25(c) permits the substitution of a party in an action where there has been a transfer of interest. On September 25, 2008, the Office of Thrift Supervision declared Washington Mutual insolvent and appointed the FDIC as Receiver pursuant to 12 U.S.C. § 1821(c)(2)(A)(ii). See Christensen Decl. Ex. A. When the FDIC is appointed as a receiver, it "steps into the shoes" of the failed financial institution. O'Melveny & Myers v. FDIC, 512 U.S. 79, 86 (1994); see also 12 U.S.C. §§ 1821(d)(2)(A)(i), 1821(d)(2)(B)(i). In the case of Washington Mutual, the FDIC effected a transfer of Washington Mutual's operations through a Purchase and Assumption Agreement with J.P. Morgan Chase, N.A., entered into on September 25, 2008.*fn4 (Christensen Decl. Ex. B) Under the terms of the Purchase and Assumption Agreement, the FDIC Receiver retained liability for "borrower claims." (Christensen Decl. Ex. B at 9)

The Complaint asserts claims of holders of credit cards issued by Washington Mutual, among other financial institutions. (Compl. ¶¶ 8, 18(a)) These are "borrower claims" for which the FDIC Receiver retains liability under the Purchase and Assumption Agreement. See Christensen Decl. Ex. B at 9. Because the FDIC Receiver has retained liability for the claims alleged in the Complaint, there has been a transfer of interest such that the FDIC Receiver is the appropriate Defendant. See Fed. R. Civ. P. 25(c); Citytrust v. 1st & 90th Assoc. Co., No. 91 Civ. 5932 (KMW), 1992 WL 6178, at *1 (S.D.N.Y. Jan. 6, 1992) (allowing the substitution of a party where Plaintiff's interest in the action had been transferred to the FDIC Receiver). Jaffe does not object to the FDIC Receiver taking the place of Washington Mutual in this action, see Pltf. Br. 1 n. 1, and the Court will order this substitution.

The Federal Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") sets forth an administrative process for asserting and resolving claims against the assets of failed financial institutions. See 12 U.S.C. § 1821(d)(3) -- (13). FIRREA also dictates that no court has jurisdiction over such claims absent exhaustion of the administrative process outlined in the statute. 12 U.S.C. § 1821(d)(13); see also Intercontinental Travel Mktg. v. FDIC, 45 F.3d 1278, 1282 (9th Cir. 1994); IndyMac Bank, F.S.B. v. MacPherson, No. 09-CV-768 (ADS), 2009 WL 4289945, at *2-3 (E.D.N.Y. Dec. 1, 2009).

After the administrative claims process set forth in FIRREA is exhausted, the statute provides that claimants may bring a court action, but only "in the district or territorial court of the United States for the district within which the depository institution's principal place of business is located or the United States District Court for the District of Columbia (and such court shall have jurisdiction to hear such claim)."*fn5 12 U.S.C. § 1821(d)(6)(A).

Jaffe filed an administrative claim on August 10, 2009. (FDIC Supp. Br. 1) The FDIC disallowed that claim on August 20, 2009, because "[t]he claims presented [were] not proven to the satisfaction of the Receiver pursuant to 12 U.S.C. §1821(d)(5)(D)." (Christensen Decl. Ex. 1) The FDIC notified Jaffe that he had 60 days to file a lawsuit asserting his claims in either the United States District Court for the District of Columbia or for the Western District of Washington, where Washington Mutual's principal place of business is located. See id.

Under FIRREA, this Court is not one of the courts permitted to hear Jafffe's claims against the FDIC Receiver and does not have subject matter jurisdiction over those claims. See Augienello v. FDIC, 310 F. Supp. 2d 582, 589-90 (S.D.N.Y. 2004). Jaffe argues, however, that this Court has jurisdiction over his claims because FIRREA's provisions do not apply to affirmative defenses. (Pltf. Oct. 1 Br. 1-3) Jaffe's argument misses the point. Subject matter jurisdiction is not an affirmative defense. "Once challenged, the burden of establishing jurisdiction rests with the party asserting that it exists." Augienello, 310 F. Supp.2d at 587. Moreover, under Fed. R. Civ. P. 12(h)(3), "[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action."

Jaffe also seeks to distinguish the cases cited by the FDIC Receiver for the proposition that a claimant against a failed institution's assets must first exhaust his administrative remedies before seeking a judicial determination as to his claims. (Pltf. Oct. 1 Br. 1) He points out that the FDIC's cases "involve situations in which the FDIC has taken over the liabilities of those banks that have become insolvent and the claims that the FDIC addresses are only the claims of those injured by the insolvency of the defunct banks." Id. Although some of the cases cited by the FDIC arise in this context, at least one arises from pre-insolvency conduct. See Intercontinental Travel Marketing, 45 F.3d at 1281 (noting that the claims at issue involved a breach of the terms of a Merchant Bankcard Agreement that occurred prior to the appointment of the FDIC Receiver). Moreover, Jaffe does not explain why claims arising out of an institution's insolvency would be subject to different statutory provisions than claims unrelated to the financial duress of a defendant institution. Neither the statute nor case law draws such a distinction.

Given FIRREA's clear jurisdictional provisions, Jaffe's claims against the FDIC Receiver will be dismissed without prejudice for lack of subject matter jurisdiction.

II. THE COMPLAINT FAILS TO STATE A CLAIM

"To 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, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S.Ct. at 1949.

"In considering a motion to dismiss . . . the court is to accept as true all facts alleged in the complaint," Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007) (citing Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83, 87 (2d Cir. 2002)), and must "draw all reasonable inferences in favor of the plaintiff." Id. (citing Fernandez v. Chertoff, 471 F.3d 45, 51 (2d Cir. 2006)).

"When determining the sufficiency of plaintiffs' claim for Rule 12(b)(6) purposes, consideration is limited to the factual allegations in plaintiffs' . . . complaint, . . . to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs' possession or of which plaintiffs had ...


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