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Zevon v. Department Stores National Bank

United States District Court, Second Circuit

November 4, 2013

MARCY ZEVON, individually and on behalf of all others similarly situated, Plaintiff,
v.
DEPARTMENT STORES NATIONAL BANK, Defendant.

OPINION AND ORDER

PAUL A. CROTTY, District Judge.

Plaintiff Marcy Zevon ("Plaintiff"), a holder of a Macys credit card issued by Defendant Department Stores National Bank ("DSNB"), claims that DSNB violated the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq., and TILA's implementing regulation ("Regulation Z"), 12 C.F.R. pt. 1026, et seq., by failing to include the full text of Regulation Z's model billing rights notice in monthly statements sent to Macys credit card holders. Plaintiff seeks to represent all persons who were sent, on or after October 18, 2011, a statement with a billing rights notice containing substantially the same text as the billing rights notice sent to Plaintiff. On March 15, 2013, DSNB moved to dismiss Plaintiff's Complaint or, in the alternative, to strike Plaintiff's request for $1, 000, 000 in statutory damages.

For the reasons set forth below, DSNB's motion to dismiss is DENIED and its motion to strike is GRANTED.

BACKGROUND

I. Statutory and Regulatory Background

TILA promotes consumers' "informed use of credit" by requiring that creditors provide "meaningful disclosure of credit terms." See 15 U.S.C. § 1601(a); Chase Bank USA, N.A. v. McCoy, 131 S.Ct. 871, 874 (2011). TILA authorizes the Consumer Financial Protection Bureau ("CFPB") to issue regulations to achieve TILA's purpose of promoting meaningful disclosure. See 15 U.S.C. § 1604(a). CFPB has the authority to promulgate regulations that "may contain such additional requirements, classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for all or any class of transactions, as in the judgment of the Burea are necessary or proper." Id. The regulation promulgated to enforce TILA is known as Regulation Z. See 12 C.F.R. § 226.1.

One way TILA furthers its purpose is by requiring that creditors provide billing rights notices to customers. Under 15 U.S.C. § 1637(a)(7), creditors must provide an annual billing rights notice "in a form prescribed by regulations of the Bureau." These notices must be "substantially similar" to Regulation Z's Model Form G-3(A) and are known as "long-form notices." See 12 C.F.R. § 1026.6(b)(5)(iii). As an alternative to annual notices, Regulation Z allows creditors to distribute a shortened billing rights notice on a monthly basis. See 12 C.F.R. § 1026.9(a)(2). Known as "short-form notices, " these statements must be "substantially similar" to Regulation Z's Model Form G-4(A). See id. Although either type of notice can satisfy TILA's requirements, only long-form notices are explicitly discussed in TILA's statutory provisions. See generally 15 U.S.C. § 1637(a)(7).

TILA provides consumers with a cause of action for statutory damages for certain specifically enumerated statutory provisions. See 15 U.S.C. 1640(a). Section 1637 is one of the enumerated provisions and, as a result, consumers may generally obtain statutory damages for a creditor's failure to provide an adequate long-form notice. See id. On July 22, 2010, Congress recently increased the limit for class action statutory damages from $500, 000 to $1, 000, 000. See Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 1416(a), 124 Stat. 1376, 2153 (2010).

II. Factual Background

The following factual allegations, which are assumed to be true for the purposes of the motion to dismiss, are drawn from Plaintiff's Complaint. Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 708 (2d Cir. 2011). Plaintiff is the holder of a Macys Card store credit card account issued by DSNB. Compl. ¶ 11. On or about October 19, 2011, DSNB sent Plaintiff a monthly statement and included a short-form billing rights notice. Compl. ¶¶ 12, 33; see id., Ex. A. The model short-form notice provided in Regulation Z includes two sections: (1) "What To Do If You Think You Find A Mistake On Your Statement" and (2) "Your Rights If You Are Dissatisfied With Your Credit Card Purchases." 12 C.F.R. § 1026, Appendix G, Model Form G-4(A). The "short-form" notice Plaintiff received, however, omitted this advisory notice. Compl. ¶ 35; see id., Ex. A.

On October 18, 2012, Plaintiff brought this action individually and on behalf of all others similarly situated. The proposed class would include "all persons who, according to the Bank's records, were furnished, on or after October 18, 2011, a periodic statement with a billing rights notice containing substantially the same text as that in the billing rights notice" sent to Plaintiff. Compl. ¶ 15.[1] Plaintiff does not claim any injury from this omission, but seeks injunctive relief and $1, 000, 000 in statutory damages, together with costs and reasonable attorney's fees, pursuant to Section 1640(a). See Compl. ¶¶ 4, 39. On March 15, 2013, DSNB moved to dismiss the Complaint for failure to state a claim and, in the alternative, to strike Plaintiff's request for $1, 000, 000 in damages. DSNB argues that Plaintiff is not entitled to statutory damages for violations of 12 C.F.R. § 1026.9(a)(2) because it is not listed in Section 1640(a) and, even if Plaintiff is entitled to statutory damages, she is limited to a maximum of $500, 000.

DISCUSSION

I. Legal Standard

Federal Rule of Civil Procedure 12(b)(6) requires Plaintiff to "provide the grounds upon which his claim rests through factual allegations sufficient to raise a right to relief above the speculative level.'" ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Plaintiff must allege "enough facts to state a claim to relief that is plausible on its face.'" Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010) (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Court accepts as true all well-pleaded factual allegations and draws all inferences in Plaintiff's favor. See Allaire Corp. v. Okumus, 433 F.3d 248, 249-50 (2d Cir. 2006). In evaluating a motion to dismiss, the Court "may ...


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