Roberts v. Capital One, N.A.
17-1762
| 2d Cir. | Dec 1, 2017Background
- Plaintiff Tawanna Roberts maintained a Capital One checking account with a linked debit card and alleged Capital One’s overdraft practices breached the parties’ written agreements (Deposit Agreement and EFT Agreement).
- Roberts sued for breach of contract, breach of the covenant of good faith and fair dealing, conversion, unjust enrichment, and violation of N.Y. Gen. Bus. Law § 349; the district court dismissed all claims under Rule 12(b)(6).
- Central legal dispute: whether an “Overdraft” under the agreements occurs when Capital One authorizes a transaction (the time of the merchant authorization) or when Capital One actually pays/settles the transaction with the merchant.
- Roberts contended the phrase “elect to pay” in the Deposit Agreement means overdrafts are triggered at authorization; Capital One argued the agreements mean overdrafts occur at settlement when the bank pays merchants.
- The Second Circuit found the contract language ambiguous about timing (authorization vs. settlement) and held dismissal of the breach-of-contract claim was improper; it affirmed dismissal of certain common-law claims and vacated dismissal of the NY GBL § 349 claim for remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the agreements define when an Overdraft occurs (authorization vs. settlement) | “Overdraft” refers to Capital One’s election to pay at the time of authorization | “Overdraft” refers to the bank’s payment/settlement event when it pays merchants | Ambiguous: reasonable interpretations support both; contract ambiguity precludes dismissal and requires factfinding |
| Whether Roberts forfeited the “elect to pay” argument by raising it on appeal | The district court relied on the same language; appellate consideration is appropriate | Roberts’ argument differs from district-court briefing, so it should be forfeited | Court exercised discretion to consider the issue because it presents pure legal question and district court relied on the clause |
| Whether ambiguity in the defined term “Overdraft” infects other related provisions | Ambiguity in the definition makes related provisions ambiguous too | Other provisions clarify timing (settlement) | The ambiguity carries through other provisions that use the defined term, preventing dismissal |
| Whether dismissal of other claims should be reversed along with contract claim | Reinstatement of the contract claim would affect other claims | District court correctly dismissed common-law claims; § 349 requires remand to consider federal preemption | Affirmed dismissal of covenant/good faith, conversion, unjust enrichment; vacated dismissal of § 349 for remand (per defendant’s concession) |
Key Cases Cited
- JA Apparel Corp. v. Abboud, 568 F.3d 390 (2d Cir. 2009) (ambiguous contract interpretation is for factfinder)
- Universal Am. Corp. v. Nat’l Union Fire Ins. Co., 37 N.E.3d 78 (N.Y. 2015) (contract language subject to more than one reasonable interpretation is ambiguous)
- Bank of N.Y. Mellon Trust Co., N.A. v. Morgan Stanley Mortg. Capital, Inc., 821 F.3d 297 (2d Cir. 2016) (courts may not rewrite contracts by adding or excising terms)
- Columbus Park Corp. v. Dep’t of Hous. Pres. & Dev., 598 N.E.2d 702 (N.Y. 1992) (construction that renders a provision meaningless is disfavored)
- Cheng v. Modansky Leasing Co., Inc., 539 N.E.2d 570 (N.Y. 1989) (ambiguous terms are construed against the drafter)
- Greene v. United States, 13 F.3d 577 (2d Cir. 1994) (appellate courts generally do not consider issues raised first on appeal, but discretion exists)
- United States v. Brunner, 726 F.3d 299 (2d Cir. 2013) (appellate discretion to hear new issues is appropriate when question is legal and requires no extra factfinding)
- Niagara Mohawk Power Corp. v. Hudson River-Black River Regulating Dist., 673 F.3d 84 (2d Cir. 2012) (arguments insufficiently developed or raised only in a footnote are deemed waived)