This action consobdates for centralized pretrial proceedings more than twenty putative class actions filed in this Court or transferred here by the Judicial Panel on Multidistrict Litigation. The underlying complaints challenge alleged foreign currency conversion policies by VISA and MasterCard, the two largest credit card networks, and their member banks, including Citigroup, Inc., Bank of America Corporation, Bank One Corporation, J.P. Morgan Chase & Company, Providian Financial Corp., and Household International, Inc. A Revised Consolidated Amended Class Action Complaint (“Complaint” or “Compl.”) asserts violations of the Sherman Act, 15 U.S.C. § 1
et seq.,
arising out of abeged price-fixing conspiracies by and
Background
On a motion to dismiss, the allegations in the Complaint are accepted as true.
There are various payment alternatives in the consumer payment card industry. One involves payment vehicles known as “general purpose cards.” They enable consumers to purchase goods or services from a merchant without directly accessing or reserving funds at the time of the purchase. (Compl.¶¶ 7, 81.) There are two primary types of general purpose cards: “credit cards” and “charge cards.” Holders of credit cards receive a line of credit from the credit card issuer (generally a bank), and are permitted to charge purchases to their credit cards. Then, they may elect to pay the entire amount due within a fixed period of time, or alternatively pay a portion of the amount and finance the remainder over time. (Compl.HH8, 81.) In contrast, holders of charge cards are required to pay the entire amount due within a set number of days after receiving a monthly billing statement. (Compl.¶¶ 9, 81.)
A general purpose card transaction includes several different parties: (1) the consumer cardholder; (2) the third-party merchant who accepts the card as payment for goods and/or services; (3) the network association or corporation that owns and operates the network processing the transactions; (4) the bank that issues the card to the consumer; and (5) the bank that contracts with the merchant to accept the card. (Compl.lHI 79, 82.) A typical transaction entails the following:
a merchant accepts a credit card from a customer for the provision of goods and services. The merchant then presents the card transaction data to an “acquirer,” typically a bank, for verification and processing. The acquirer presents the transaction data to the association which, in turn, contacts the issuer to check the cardholder’s credit line. The issuer then indicates to the association that it authorizes or denies the transaction. The association relays the message to the merchant’s acquirer, who then relays the message to the merchant. If the transaction is authorized, the merchant will submit a request for payment to the acquirer, which relays the request, via the association, to the issuer. The issuer pays the acquirer; [and finally] the acquirer pays the merchant and retains a percentage of the purchase price for its services which is shared with the issuer.
(Comply 88.)
A. VISA and MasterCard Associations
VISA and MasterCard are the two largest general purpose card networks in the world. (Compl.1186.) Those networks are owned by defendants VISA U.S.A., Inc. (“VISA U.S.A.”) and VISA International Service Association (“VISA International”) (collectively “VISA”), and defendant MasterCard International, Incorporated (“MasterCard”), respectively. VISA and MasterCard are joint ventures or membership associations owned and operated by their member banks. (CompLUK 35, 38, 90.) Their networks execute transactions that use one of their affiliated general
The memberships of the VISA and MasterCard associations are virtually identical reflecting a ninety-five percent (95%) overlap. (Compl.¶ 94.) All the defendants in this action, either directly or through a subsidiary or affiliate, are members of both VISA and MasterCard, and issue some type of general purpose card. (Compl.¶¶ 13, 92.) Defendant Citigroup, Inc. (“Citigroup”) issues Citibank VISA and MasterCard credit cards, AT & T Universal VISA and MasterCard credit cards, and Diners Club charge cards. (CompU 41.) Citigroup issues its Citibank cards through its wholly-owned subsidiary defendant Citibank (South Dakota) N.A. (“Citibank (South Dakota)”). (Compl.¶¶ 41-42.) The AT & T Universal credit cards are issued through Citigroup’s wholly-owned subsidiaries defendants Universal Financial Corp. and Universal Bank, N.A. Citigroup’s Diners Club charge cards are issued through its wholly-owned subsidiary Citibank (South Dakota), and Citibank (South Dakota)’s wholly-owned subsidiary defendant Citicorp Diners Club, Inc. (“Diners Club”). (Compl.¶¶ 41, 43-44, 47-48.)
Defendant Bank of America Corporation (“BOA Corp.”) issues its VISA and MasterCard credit cards through its wholly-owned subsidiary defendant Bank of America, N.A. (USA) (“BOA”). (Compl.¶¶ 49-50.) Defendant Bank One Corporation (“Bank One”) issues its VISA and MasterCard credit cards through its subsidiary defendant First USA Bank, N.A. (“First USA”). (Compl.¶¶ 54-55.) Defendant J.P. Morgan Chase & Co. (“J.P. Morgan Chase”) issues its VISA and MasterCard credit cards through its wholly-owned subsidiaries defendant Chase Manhattan Bank USA, N.A. and defendant The Chase Manhattan Bank. (Compl.¶¶ 59-60.) Defendant Providian Financial Corp. (“Providian”) issues its VISA and MasterCard credit cards through its wholly-owned subsidiaries defendant Providian National Bank and defendant Providian Bank. (Compl.¶¶ 64-65.) Defendant Household International, Inc. (“Household”) issues its VISA and MasterCard credit cards through its wholly-owned subsidiary defendant Household Finance Corporation. (Compl.¶¶ 66-68.) Defendant MBNA Corporation (“MBNA Corp.”) issues its VISA and MasterCard credit cards through its wholly-owned subsidiary defendant MBNA America Bank, N.A. (“MBNA”). (Compl.¶¶ 70-71.) Collectively these defendants and their subsidiaries and affiliates are referred to as the “Issuing Banks.” (Compl.¶¶ 13, 84.)
Both VISA and MasterCard are controlled by a select group of their member banks, which include the Issuing Banks. (CompU 91.) These banks established control by concurrent service on the board of directors and/or important committees of either or both associations. (CompU 91.) In fact, plaintiffs allege that nearly all of the largest card-issuing member banks have had or currently have a representative of their bank on the board of directors or an important policy-influencing committee of both VISA and MasterCard. (Compl.¶ 95.) For example, in 1996 seventeen of the twenty-seven banks on MasterCard’s Business Committee also had a representative on VISA’S Marketing Advisors Committee. Also, twelve of the twenty-one banks with a representative on VESA’s board of directors had a representative on MasterCard’s Business Commit
Further, the members of VISA and MasterCard are allocated voting and dissolution rights in relation to the total dollar volume of transactions that member transmits through the particular association. The top ten issuers of VISA and MasterCard cards account for a substantial majority of the total volume of credit card purchases. The Issuing Banks are seven of the top ten issuers of VISA and MasterCard credit cards. In the third quarter of 2001, the seven Issuing Banks accounted for $347 billion in receivables compared to $114 billion for the other forty-three issuers that make up the top fifty issuers of VISA and MasterCard cards. (Compl.¶ 93.)
In effect, plaintiffs allege, the Issuing Banks control both VISA and MasterCard. (Compl.lffl 74, 95.) As an illustration of this so-called “dual governance,” plaintiffs quote MasterCard’s Executive Vice President and General Counsel in a 1992 letter to the Department of Justice, as follows: “when one board acts with respect to a matter, the results of those actions are disseminated to the members which are members in both organizations. As a result, each of the associations is a fishbowl and officers and board members are aware of what the other is doing, much more so than in the normal corporate environment.” (Comply 97.)
B. The Currency Conversion Fees
VISA and MasterCard’s electronic networks and settlement systems serve as clearinghouses for general purpose card transactions in foreign' countries using cards issued by their member banks. (Compl.¶¶ 99.) This allows cardholders from the United States to purchase goods or services in foreign countries in that country’s currency. (Comply 99.) That amount is then converted to U.S. dollars by the respective network and billed to the United States cardholder in U.S. dollars. The.prevailing conversion rate for the applicable foreign currency is applied to the cardholders’ transactions. (Compl.¶¶ 79, 85.)
As part of the'conversion, cardholders are charged a currency conversion fee ranging from at least one percent (1%) to at most three percent three percent (3%) of the cost of the purchase. (Compl.¶¶ 1, 12, 102.) However, plaintiffs allege that this fee is charged whether or not currency is actually converted or exchanged. (Comply 12, 100.) More specifically, plaintiffs allege that the procedure VISA and MasterCard use to process all foreign currency transactions, sometimes referred to as “netting out,” often leads to the bulk of foreign currency transactions being conducted without an actual purchase of sale of any foreign currency. (Comply 100.) Plaintiffs offer the following example: “if 100 U.S. VISA cardholders in France charge U.S. $10,000 in French francs in goods on March 26, 2001, and 100 French VISA cardholders in the U.S. spend the equivalent of' U.S. $10,000 on the same day, defendant VISA does not actually convert any currency.” (Comply 100.) VISA and MasterCard automatically impose this currency conversion fee on the cardholder at the network level. (Comply 99.)
There are two tranches of currency conversion fees charged by VISA and MasterCard. The first, which plaintiffs label the “first tier” fee, is charged by VISA and MasterCard at an identical 1% of the pur
1. First Tier Fee
In the 1980’s VISA and MasterCard began to impose the first tier fee, and made it payable by the cardholders, not the member banks. (Compile 108, 104.) Plaintiffs contend that although the member banks generally compete against each other on many price terms, such as interest rates, annual fees, and services charged through VISA and MasterCard, they colluded to charge a floor price of 1% as a first tier currency conversion fee. (Comply 106.) Plaintiffs specifically allege that VISA, MasterCard, and their member banks horizontally fixed the amount of this first tier fee, both within and between the associations. (Compl.¶ 105.)
The first tier fee has been extremely profitable to VISA and MasterCard. (Comply 107.) Plaintiffs claim that there is no nexus between any purported transaction cost to the VISA or MasterCard networks, or the value of the transaction itself, and the imposition of the first tier fee. The first tier fee is far higher than the nominal transaction cost incurred by the associations. (Comply 108.)
The Complaint alleges that the common control of VISA and MasterCard by the largest member banks, and the common issuance of VISA and MasterCard branded cards by those same banks provides the inter-association communication necessary to fix and maintain the fee. (ComplA 109.) Indeed, plaintiffs assert that VISA communicated its intent to set the price of its currency conversion fee at 1% “in a manner calculated to reach MasterCard well in advance of implementation.” (Comply 110.) Specifically, plaintiffs allege that it was no more than four months prior to implementation of the 1% first tier fee that VISA first communicated its intentions to MasterCard. (Comply 110.) On learning of VISA’S plans, the Complaint alleges that MasterCard abandoned its plan to impose a currency conversion fee of twenty-five (25) basis points and instead imposed a 1% fee. (Comply 110.)
Plaintiffs contend that this first tier fee is neither necessary to the operation of the VISA and MasterCard networks, nor facilitates a service or product that would not otherwise exist. According to the Complaint, the fee does not enhance price competition for foreign currency transactions; rather it eliminates it. (Comply 111.) Moreover, the fee is not a cost-shifting device among VISA or MasterCard member banks. (Comply 113.) As such, plaintiffs allege that its anti-competitive effect outweighs any pro-competitive benefit. (Comply 112.)
Further, plaintiffs allege that the first tier fee is an artificial price floor that restrains trade because the member banks of VISA and MasterCard do not compete against each other within a network, and VISA and MasterCard themselves do not compete against each other. This results in an anti-competitive restraint of trade that harms consumers and sets an artificially high fixed first tier fee. (Comp.¶ 114.) Plaintiffs also contend that competition among the member banks is critical because each bank issues both VISA and MasterCard branded cards. This competition, however, is undermined by the defendants’ collusion to set a fixed price for their currency conversion fees.
2. Second Tier Fee
According to the Complaint, the second tier fee, which “is almost pure profit to the Issuing Banks,” is imposed on top of the first tier floor fixed by VISA, MasterCard, and their members. (Compl.¶¶ 117-18.) “Typically,” that second tier fee represents 2% of the foreign currency transaction. (Compl.¶ 102.) The Complaint asserts that often, the rate is more than 2% of the purchase price because it is calculated based on the total amount of the foreign currency transaction including the 1% first tier fee. (Compl.¶ 128.) According to plaintiffs, the Issuing Banks incur no expense in connection with the second tier fee because it is VISA and MasterCard at the network level that convert the foreign currency. (Compl.¶ 118.)
Plaintiffs allege that VISA and MasterCard aided and abetted their respective member banks’ collection of the second tier fees by adding that fee to a cardholders’ charge during the conversion process. Plaintiffs also contend that VISA and MasterCard modified their procedures to enable imposition of the second tier fee. (Comply 118.)
The Complaint asserts that absent collusion in the market, imposition of second tier fees would be against the economic self-interest of each Issuing Bank. (Comply 119.) Thus, plaintiffs contend that the Issuing Banks would lose some of their best customers to banks that did not impose the 2% second tier fee were it not for an agreement to act in concert and the attendant concealment of that fee. (Comply 119.)
Finally, the Complaint alleges a steady decline in costs occasioned by rapid technological innovations, as well as a decrease in fraud rates, since the imposition of these currency conversion fees. Nevertheless, fees for foreign exchange services have increased dramatically. According to plaintiffs, the reason for such an anomalous scenario is that, the fees were set collusively and free competition has been restrained. (Compl.11 120.)
3. Diners Club
Diners Club is another general purpose card electronic network and settlement system that processes Diners Club card transactions. (Comply 121.) Unlike VISA and MasterCard, it is not a joint venture or member association. The Diners Club network is owned and operated by defendant Citicorp Diners Club, Inc. (“Diners Club”), which issues the Diners Club charge card. (CompLUH 48, 121.) The Diners Club network permits U.S. cardholders to make purchases in foreign countries in that nation’s currency while being billed for those foreign transactions in U.S. dollars. (ComplV 121.)
Like VISA and MasterCard, Diners Club imposes a currency conversion fee on its cardholders’ foreign currency transactions. According to the Complaint, Diners Club formerly charged a 1% fee on foreign currency transactions, but then increased that fee to 2% “in fine with the recent proliferation” of second tier fees. (Comply 122.) Plaintiffs allege that Diners Club “imposed [this 2% fee] ... under the price-fixed ‘umbrella’ created by their participation in the conspiracy with the VISA and MasterCard Associations and other member banks.” (Compl.1l 122.)
Further, plaintiffs allege that Diners Club is an active and integral part of the conspiracy to impose currency conversion
C. Non-Disclosures of the Currency Conversion Fees
In substance, plaintiffs allege that VISA and MasterCard, together with their member banks, and Diners Club failed to disclose adequately the existence and amount of their currency conversion fees to their cardholders on the monthly billing statements or the solicitations and applications for the general purpose cards. (Compl.1ffl 125, 126.) According to the Complaint, the failure to disclose the currency conversion fees in solicitations is aggravated by the fact that the solicitations are the primary source of information to prospective cardholders about fees, finance charges, and card features. (Comply 126.) Moreover, some of defendants’ monthly statements report a foreign currency transaction without revealing a fee by simply listing the amount of the charge in the foreign currency and the corresponding amount in U.S. dollars. Still other statements identify a “rate” and fail to disclose the addition of currency conversion fees or the date of the conversion. (Comply 127.)
The Complaint also alleges that the monthly statements hindered a cardholder’s ability to corroborate the conversion rate utilized on a specific transaction. For example, neither the base exchange rate nor the date of the conversion were disclosed. Further, plaintiffs assert that the statements failed to itemize separately the actual base currency conversion rate, the first tier fees, or the second tier fees. (Comply 128.)
According to the Complaint, the only place currency conversion fees were even partially disclosed was in the cardmember agreement or the initial disclosure statement, which were sent to cardholders when they received their cards. (Comply 129.) The Complaint alleges that these “partial disclosures” obscured the fees and violated the disclosure requirements of the Truth in Lending Act (“TILA”). (CompLH 129.) Plaintiffs further allege that the defendants conspired through their memberships in the VISA and MasterCard associations to withhold disclosure of the currency conversion fees in solicitations and billing statements, and confusingly disclosed the fees in cardholder agreements. (Compl.li 130.)
Based on these allegations, plaintiffs bring five claims: (I) antitrust violations under Section One of the Sherman Act against all defendants; (II) antitrust violations under Section One of the Sherman Act against VISA and the Issuing Bank defendants; (III) antitrust violations under Section One of the Sherman Act against MasterCard and the Issuing Bank defendants; (IV) violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq., against all defendants; and (V) violations of South Dakota Consumer Protection Statutes against defendant Citibank (South Dakota).
Counts I through III assert two different theories of conspiracy. Count I alleges the first conspiracy theory — an “inter-association” conspiracy between and among Diners Club, VISA (together with its members), and MasterCard (together with its members), to fix currency conversion fees charged to cardholders of “no less than 1% of the transaction amount and frequently more.” (CompLIffl 150,154.)
Count IV alleges that defendants failed to properly disclose the currency conversion fees on purchases made in foreign currencies in violation of TILA disclosure requirements and the regulations promulgated thereunder in Federal Reserve Board Regulation Z, 12 C.F.R. § 226. (Compl.1ffl 170-71.) Plaintiffs allege that defendants VISA and MasterCard are liable for the TILA violations because they acted as agents of the Issuing Bank defendants within the meaning of TILA and Regulation Z. (Complin 172-73.) Finally, plaintiffs assert that VISA and MasterCard are liable for the TILA violations because they and their member banks conspired to violate TILA, and because VISA and MasterCard aided and abetted their member banks’ violations of TILA. (Cornpm 174,176.)
Defendants move to dismiss Counts I through IV for failure to state a claim on which relief may be granted. Defendants First USA, BOA, and MBNA, and their respective parent corporations join in the omnibus motion to dismiss and also move to stay the claims against them by their respective cardholders and refer those claims to arbitration. ' Lastly, defendants argue that the time to answer or otherwise move on the fifth cause of action is tolled by their motion to dismiss since all of the factual allegations in the Complaint are subject to the motion. Plaintiffs do not contest defendants’ tolling argument, and this Court adopts it.
For the following reasons, the motion to dismiss is denied in part and granted in part, and the motion to compel arbitration is granted.
Discussion
I. Motion to Compel Arbitration
Defendants First USA; Bank One; BOA; BOA Corp.; MBNA; and MBNA Corp. move to stay all claims against them by their respective cardholders and compel arbitration of those claims pursuant to their cardmember agreements.
Defendants First USA, BOA, and MBNA issue First USA, Bank of America, and MBNA credit cards, respectively. Defendants Bank One, BOA Corp., and MBNA Corp. are the parent companies of defendants First USA, BOA, and MBNA, respectively, and do not issue credit cards. (Decl. of Janet Z. Hernandez dated March II, 2002, ¶ 2; Decl. of Kimberly S. Gensler dated March 18, 2002, ¶ 3; Decl. of Deborah L. Fisher dated March 19, 2002, (“Fisher Decl.”) ¶2.) When First USA, BOA, and MBNA send credit cards to their cardholders, they forward a cardholder agreement setting forth the terms of the cardholders’ account. The cardholder agreement warns that any use of the credit card constitutes acceptance of the terms of the cardholder agreement. (Fisher Decl. ¶ 6; Decl. of Donna Barrett dated March 7, 2002, (“Barrett Decl.”) ¶¶ 4 — 5; Decl. of Suzan R. Uhlig dated March 18, 2002, (“Uhlig Decl.”) ¶ 9 (advising. that cardholder’s silence constitutes acceptance of the terms).)
Although plaintiffs do not specifically allege in their Complaint which plaintiffs are cardmembers of which defendant, the parties agree on the following: (1) plaintiff Caran Ruga is the only named plaintiff to
Plaintiffs acknowledge that none of the plaintiffs have an arbitration agreement with MBNA. (Pis.’ Opp. to Mot. to Compel. Arb. at 1.) Thus, without an MBNA card-member as a named plaintiff, there is no need to analyze whether any MBNA card-member’s claims belong in arbitration. Further, the fact that there are no named plaintiffs that are cardmembers of MBNA limits any possible TILA claims against MBNA to claims of secondary liability.
The First USA cardholder agreement sent to plaintiff Ruga provides that “[a]ny use of your Card or Account confirms your acceptance of the terms and conditions of this Agreement.” (Barrett Deck ¶ 5.) Plaintiff Ruga accepted the terms of the cardholder agreement by using her First USA credit card. (Barrett Decl. ¶ 5.)
Plaintiff Ruga’s cardholder agreement contains an arbitration clause that was typical of all First USA cardholder agreements, which states:
Arbitration: Any claim, dispute or controversy (“Claim”) by either you or us against the other, or against the employees, agents or assigns of the other, arising from or relating in any way to this Agreement or your Account, including Claims regarding the applicability of this arbitration clause or the validity of the entire Agreement, shall be resolved by binding arbitration by the National Arbitration Forum, under the Code of Procedure in effect at the time the Claim is filed.... Any arbitration hearing at which you appear will take place at a location within the federal judicial district that includes your billing address at the time the Claim is filed. This arbitration agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16. Judgement upon any arbitration award may be entered in any court having jurisdiction.
This arbitration agreement applies to all Claims now in' existence or that may arise in the future except for Claims by or against any unaffiliated third party to whom ownership of your Account may be assigned after default (unless that party elects to arbitrate). Nothing in this Agreement shall be construed to prevent any party’s use of (or advancement of any Claims, defenses, or offsets in) bankruptcy or repossession, replevin, judicial foreclosure or any prejudgment or provisional remedy relating to any collateral, security or property interests for contractual debts now or hereafter owed by either party to the other under this Agreement.
IN ABSENCE OF THIS ARBITRATION AGREEMENT, YOU AND WE MAY OTHERWISE HAVE HAD A RIGHT OR OPPORTUNITY TO LITIGATE CLAIMS THROUGH A COURT, AND/OR TO PARTICIPATE OR BE REPRESENTED IN LITIGATION FILED IN COURT BY OTHERS, BUT EXCEPT AS OTHERWISEPROVIDED ABOVE, ALL CLAIMS MUST NOW BE RESOLVED THROUGH ARBITRATION.
(Barrett Decl. Ex. 1.) Plaintiff Ruga’s cardholder agreement also contained a choice of law provision selecting Delaware law and federal law where applicable. (Barrett Decl. Ex. 1.)
Plaintiff Ross was a BOA cardholder prior to BOA’s inclusion of an arbitration clause in its cardholder agreement. In February 2000, plaintiff Ross received a document titled, “Important Notice Regarding Your Account” (“Important Notice”), with his monthly account statement. The Important Notice advised him of certain changes in the cardholder agreement governing his account, and included a copy of the amended agreement. (Uhlig Decl. ¶7.) The Important Notice also informed plaintiff Ross that these modifications to the agreement would become effective unless he wrote to BOA by March 25, 2000, and requested that his account be closed. Plaintiff Ross never took that initiative. (Uhlig Decl. ¶¶ 9-10.)
Among the changes to the BOA cardholder agreement was the addition of an arbitration clause. (Uhlig Decl. -¶ 8 & Ex. 2.) The Important Notice described the changes to the cardholder agreement and included the following: “Any claim, dispute or controversy with us, Bank of America Corporation or our affiliates, or certain other persons will be resolved by arbitration, as set forth in the Agreement. (Refer to Section 7.19.)” (Uhlig Decl. Ex. 2.) Section 7.19 of the amended cardholder agreement, as included in the Important Notice, provided:
7.19 Arbitration. Any dispute, -claim, or controversy (“Claim”) by or between you and us (including each other’s employees, agents or assigns) arising out of or relating to this Agreement, your Account, or the validity or scope of any provision of this Agreement, including the arbitration clause shall, upon election by either you or us, be resolved by binding arbitration.
Arbitration shall take place before a single arbitrator on an individual basis without resort to any form of class action. Arbitration may be selected at any time unless a judgement has been rendered or the other party would suffer substantial prejudice by the delay in demanding arbitration.
Arbitration, including selection of an arbitrator, shall be conducted in accordance with the rules for arbitration of financial services disputes of JAMS .... If JAMS is unable or unwilling to serve as the provider of arbitration, we may substitute another national arbitration organization with similar procedures. This arbitration section of this Agreement shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16. Judgment upon arbitration may be entered in any court having jurisdiction. Arbitration shall be conducted in the federal judicial district in which your billing address is located at the time the claim is filed. If we request arbitration, we will advance applicable JAMS fees and expenses. If the arbitrator rules in favor of one party against the other, the other party shall pay all reasonable attorneys’ fees and costs of the action on behalf of both parties (including any fees and expenses paid by one party on behalf of the other) unless the arbitrator or court decides such an award would cause a substantial injustice based on the facts and legal arguments set forth in the action.
YOU UNDERSTAND AND AGREE THAT IF EITHER YOU OR WE ELECT TO ARBITRATE A CLAIM, THIS ARBITRATION SECTION PRECLUDES YOU AND U.S. FROMHAVING A RIGHT OR OPPORTUNITY TO LITIGATE CLAIMS THROUGH COURT, OR TO PARTICIPATE OR BE REPRESENTED IN LITIGATION FILED IN COURT BY OTHERS. EXCEPT AS OTHERWISE PROVIDED ABOVE, ALL CLAIMS MUST BE RESOLVED THROUGH ARBITRATION IF YOU OR WE ELECT TO ARBITRATE.
(Uhlig Decl. Ex. 2.) Plaintiff Ross’s cardholder agreement also contained a choice of law provision selecting Arizona law and federal law where applicable. (Uhlig Decl. Ex. 2, § 7.18.)
When a contract contains a written arbitration clause and concerns a transaction involving commerce, the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1
et seq.
(2003), governs. 9 U.S.C. § 2. The FAA establishes a liberal policy in favor of arbitration as a means to reduce the costliness and delays of litigation.
See Campaniello Imports, Ltd. v. Saporiti Italia S.p.A.,
It is well settled that arbitration is contractual in nature, and “a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.”
AT & T Techs., Inc. v. Communications Workers of Am.,
Section Two of the FAA provides that written agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Section 3 of the FAA provides that the court must stay any suit or proceeding until arbitration has been completed if the action concerns “any issue referable to arbitration” under a written agreement for such arbitration. 9 U.S.C. § 3;
accord Dean Witter Reynolds, Inc. v. Byrd,
first, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the case are arbitrable, it must then decide whether to stay the balance of the proceedings pending arbitration.
Oldroyd,
There is no dispute about the existence of an arbitration clause in both plaintiffs Ruga and Ross!s cardholder agreements, and that both plaintiffs agreed to it.
2
However, there is a dispute as to who can compel arbitration. Defendants Bank One and BOA Corp. argue that plaintiffs Ruga and Ross’s claims against Bank One and BOA Corp. should be referred to arbitration, despite the fact that neither of them are signatories to the arbitration agreements. Since “whether an entity is a party to the arbitration agreement also is included within the broader issue of whether the parties agreed to arbitrate,” the Court will address the non-signatories issue first.
Smith/Enron Cogeneration Ltd. P’ship, Inc. v. Smith Cogeneration Int’l,
A. Non-Signatories
The First USA and BOA arbitration agreements are agreements between the cardholders and First USA and BOA, respectively. Plaintiffs however, allege claims against First USA and BOA, as well as Bank One and BOA Corp., the parent companies of First USA and BOA, respectively. Defendants argue that plaintiffs should be compelled to arbitrate the claims against the parent companies as well as those against First USA and BOA.
Although “arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit,”
Howsam,
A non-signatory may be. bound to an arbitration agreement under ordinary principles of contract and agency.
See Thomson-CSF, S:A. v. Am. Arbitration Ass’n,
Courts have bound non-signatories to arbitration agreements under an estoppel theory. Under one branch of this theory, when a non-signatory receives a direct benefit under the agreement containing the arbitration clause, it cannot avoid arbitration merely because it never signed the agreement. This branch of the estoppel theory is inapplicable here because it is the non-signatory who is trying to compel arbitration from a party.
See Fluor Daniel,
Under an alternative estoppel theory recognized by several circuits, courts have been willing to estop a signatory from avoiding arbitration with a non-signatory when the issues the non-signatory is seeking to arbitrate are intertwined with the contract.
See Choctaw Gen. Ltd. P’ship v. Am. Home Assurance Co.,
Whether the.claims are intertwined such that a signatory is estopped from avoiding arbitration with a non-signatory, the court must determine: (1) whether the signatory’s claims arise under the “subject matter” of the underlying agreement; and (2) whether there is a “close relationship” between the signatory and the non-signatory.
Chase Mortgage,
There are several principled grounds for finding estoppel in this action. First, the alleged wrongs by Bank One and BOA Corp. are “intimately founded in and intertwined with” the underlying agreement between First USA and BOA and their respective cardholders. Bank One and BOA Corp. are being sued for their respective subsidiaries’ TILA violations and conspiracy to fix the prices of currency, conversion fees. Both of these claims are derivative in nature in that the alleged
Plaintiffs insist that they are not suing the parent companies merely based on their subsidiaries’ actions, but that they also allege that the parent companies were active participants in the conspiracy. This contention, however, does not change the outcome of the analysis. Any participation by Bank One and BOA Corp. in the alleged conspiracy necessarily revolves around their respective subsidiaries’ issuance of credit cards. Those credit cards and their respective accounts are at the heart of the underlying contract containing the arbitration agreement. Therefore, this Court finds that even the allegations that seek to hold Bank One and BOA Corp. hable for their own conduct arise under the “subject matter” of the underlying agreement between plaintiffs and First USA and BOA.
Moreover, there is a close relationship between First USA and Bank One, and between BOA and BOA Corp. Bank One is the parent corporation of its wholly-owned subsidiary First USA, and BOA Corp. is the parent corporation of its wholly-owned subsidiary BOA. This more than satisfies the “close relationship” factor.
See Chase Mortgage,
Accordingly, this Court finds that, assuming the claims are otherwise arbitrable against First USA and BOA, it is appropriate to compel plaintiffs Ruga and Ross to also arbitrate their claims against Bank One and BOA Corp. under an estoppel theory.
B. Scope of Arbitration Agreement
As an initial matter, defendants argue that this Court should not reach the question of whether plaintiffs’ claims are within the scope of the arbitration clauses. Defendants contend that this issue of arbitra-bility is a question for the arbitrator in the first instance.
“Although the [Supreme] Court has also long recognized and enforced a ‘liberal federal policy favoring arbitration agreements,’ it has made clear that there is an exception to this policy: The question whether the parties have submitted a particular dispute to arbitration,
i.e.,
the
‘question of arbitrability,’
is ‘an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.’ ”
Howsam,
“When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally ... should apply ordinary state-law principles that govern the formation of contracts.”
First Options,
The First USA arbitration clause provides, in part,
Any claim, dispute or controversy (“Claim”) by either you or us against the other, or against the employees, agents or assigns of the other, arising from or relating in any way to this Agreement or your Account, including Claims regarding the applicability of this arbitration clause or the validity of the entire Agreement, shall be resolved by binding arbitration by the National Arbitration Forum, under the Code of Procedure in effect at the time the Claim is filed.
(Barrett Decl. Ex. 1 (emphasis added).)
The BOA arbitration clause provides, in part,
Any dispute, claim, or controversy (“Claim”) by or between you and us (including each other’s employees, agents or assigns) arising out of or relating to this Agreement, your Account, or the validity or scope of any provision of this Agreement, including the arbitration clause shall, upon election by either you or us, be resolved by binding arbitration.
(Uhlig Decl. Ex. 2, § 7.19 (emphasis added).)
Plaintiffs argue that the language emphasized above cannot be deemed “clear and unmistakable” evidence that either plaintiff Ruga or Ross agreed to have the arbitrator decide the question of arbitrability. This Court disagrees.
Both arbitration provisions specifically provide evidence that the plaintiffs “clearly and unmistakably” agreed to have the arbitrator decide the question of arbitra-bility. The First USA clause specifically states that “Claims regarding the applicability of this arbitration clause or the validity of the entire Agreement” shall be arbitrated.
4
The BOA clause specifically states that any claim relating to “the validity or scope of any provision of this Agreement, including the arbitration clause shall” be arbitrated. These provisions evidence the parties’ intent that the arbitrator, not the Court, is to determine arbitrability.
See Green Tree Fin. Corp. v. Bazzle,
No. 02-634, — U.S.-,
However, even if this Court were to determine that the language of the arbitration clauses did not “clearly and unmistakably” evidence an agreement to have the arbitrator decide the question of arbitrability, this Court would find that plaintiffs’ claims are within the scope of the arbitration clauses. As noted above, the arbitration clauses in the First USA and BOA cardholder agreements apply to any claim “arising from or relating in any way to ... [the] Account,” and “arising out of or relating to ... [the] Account,” respectively. Plaintiffs’ claims against First USA and BOA clearly relate to their accounts with their respective banks.- First, the claims allege that unlawful currency conversion fees were charged to plaintiffs’ accounts with First USA and BOA. Second, the alleged TILA violations were contained in documents and solicitations sent to plaintiffs regarding their credit card account or prospective credit card account with First USA and BOA. There is no question that these claims relate to plaintiffs’ accounts at First USA and BOA.
The arbitration clauses involved in this action are broad.
See, e.g., ACE Capital,
arbitration of even a collateral matter will be ordered if the claim alleged “implicates issues of contract construction or the parties’ rights and obligations under it.” Moreover, “[w]hen parties use expansive language in drafting an arbitration clause, presumably they intend all issues that ‘touch matters’ within the main agreement to be arbitrated, while the intended scope of a narrow arbitration clause is obviously more limited.”
ACE Capital,
This presumption of arbitrability can be overcome only if it may be said with “positive assurance” that the arbitration clause is not susceptible to the interpretation that it brings plaintiffs’ claims within its sweep.
Lewis Tree Serv.,
Here, this Court cannot say with positive assurance that the arbitration clauses at issue are not susceptible to an interpretation that plaintiffs Ruga and Ross’s claims “touch matters” within the cardholder agreements. Plaintiffs allege a conspiracy to fix currency conversion fee prices that are charged when they conduct a foreign currency transaction on their credit card. Thereafter, the alleged fixed price fees appear on plaintiffs’ monthly billing statements for their credit card accounts. Further, the terms of plaintiffs’ use of their credit card accounts are governed by the cardholder agreements that contain the arbitration clauses. Thus, when reading the arbitration agreements liberally, due to their broad language, the antitrust claims are related to the cardholder agreements and the plaintiffs’ credit card accounts such that the claims “touch matters” covered by the cardholder agreement. Moreover, in accord with the strong federal policy favoring arbitration, this Court resolves any doubt concerning arbitrability in favor of arbitration.
1. Claims Arising Prior to Contract
Plaintiffs argue that they cannot be forced to arbitrate claims that arose prior to the time that the parties entered into an arbitration agreement. Specifically, plaintiffs contend that the solicitations containing the TILA violations were sent to plaintiffs prior to plaintiffs’ receipt of any cardholder or arbitration agreement, and certainly prior to plaintiffs’ agreement to the terms of such a provision.
However, all of plaintiffs’ claims fall under the scope of the arbitration clauses at issue here. The First USA clause specifically states that the “arbitration agreement applies to all Claims now in existence or that may arise in the future.” Certainly plaintiff Ruga’s TILA violation claim was in existence at the time she agreed to the First USA cardholder agreement.
See Lloyd v. MBNA Am. Bank, N.A.,
No. 00 Civ. 109,
Accordingly, this Court finds that all of plaintiffs Ruga and Ross’s claims against First USA, Bank One, BOA, and BOA Corp. are within the scope of the arbitration agreement in the plaintiffs’ cardholder agreements.
C. Federal Statutory Claims
Defendants argue that both plaintiffs’ TILA and antitrust claims are arbitrable. Plaintiffs contend that horizontal price-fixing antitrust claims are not amenable to arbitration. For the following reasons, plaintiffs’ arguments are without merit.
Notwithstanding the vital public policy purposes served by federal statutes, the Supreme Court has repeatedly acknowledged that “[i]t is by now clear that statutory claims may be the subject of an arbitration agreement, enforceable pursuant to the FAA.”
Gilmer v. Interstate/Johnson Lane Corp.,
Although all statutory claims may not be' appropriate for arbitration, “[h]aving made the bargain to arbitrate, the party should be held to it unless Congress itself has evidenced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.” In this regard, we note that the burden is on [plaintiff] to show that Congress intended to preclude a waiver of a judicial forum for [his or her statutory] claims. If such an intention exists, it will be discoverable in the text of the [statute], its legislative history, or an “inherent conflict” between arbitration and the [statute’s] underlying purposes. Throughout such an inquiry, it should be kept in mind that “questions of arbitra-bility must be addressed with a healthy regard for the federal policy favoring arbitration.”
Gilmer,
Applying such an analysis, the Supreme Court has found that claims under the Sherman Act, ADEA, RICO, the Securities Exchange Act of 1934, and the Securities Act of 1933 are arbitrable.
See, e.g., Gilmer,
1. TILA Claims
Plaintiffs do not dispute the fact that TILA claims are arbitrable, nor could they. Numerous courts have found TILA claims to be arbitrable.
See, e.g., Randolph v. Green Tree Fin. Corp.,
2. Horizontal Price-Fixing Claims
In
Mitsubishi
the Supreme Court held that Sherman Act claims of antitrust conspiracy are arbitrable.
Further, the importance of the private damages remedy in antitrust actions does not compel the conclusion that those remedies are precluded in a private arbitration.
Mitsubishi,
the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed.... While the efficacy of the arbitral process requires that substantive review at the award-enforcement stage remain minimal, it would not require intrusive inquiry to ascertain that the'tribunal took cognizance of the antitrust claims and actually decided them.
Although
Mitsubishi
involved an arbitration in an international transaction, the Supreme Court has not limited
Mitsubishi
to international arbitrations. For instance, it has subsequently cited
Mitsubishi
without distinguishing between domestic and international arbitrations.
See, e.g., Green Tree Fin. Corp.-Alabama v. Randolph,
Further, courts in this district have held that
Mitsubishi
and its reasoning apply to domestic as well as international arbitra-tions.
See, e.g., Hough v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Plaintiffs contend that horizontal price-fixing antitrust claims, such as those alleged by plaintiffs, are not arbitrable. Plaintiffs rely mainly on
Coors Brewing Co. v. Molson Breweries,
In
Coors,
the Tenth Circuit did not hold that there was a blanket prohibition on the arbitration of horizontal price-fixing claims, but only that the arbitration agreement at issue in that ease “cover[ed] antitrust disputes ... provided that those disputes are within the scope of the agreement.”
In contrast, the arbitration clauses at issue here are quite broad in that they apply to any claim “arising from or relating in any way to ... your Account,” and “arising- out of or relating to ... your Account.” As previously discussed, after applying the strong policy in favor of arbitration, and resolving any doubts in favor of arbitrability, it is clear that plaintiffs’ antitrust claims “touch matters” covered by the cardholder agreements plaintiffs entered into. Plaintiffs allege a conspiracy to fix currency conversion fee prices that are charged when they conduct a foreign currency transactions with their credit cards, and the alleged fixed price fees appear on plaintiffs’ credit card accounts. The terms of plaintiffs’ use of those credit card accounts are governed by the cardholder agreements containing the arbitration clause. Thus, the antitrust claims are related to the cardholder agreements and the plaintiffs’ credit card accounts such that the claims “touch matters” covered by the cardholder agreement. 6
Further, this Court does not share the
Coors
concern over a result that compels arbitration. The Tenth Circuit noted that such an outcome would lead to the anomaly that
“every brewer in America
except Coors may bring an antitrust action against Molson.”
Coors,
D. Enforcement
Apart from the arbitrability of their claims, plaintiffs argue that the First USA and BOA arbitration clauses are unenforceable. Plaintiffs advance several arguments for unenforceability, but each is without merit.
Section Two of the FAA provides that arbitration agreements shall be enforced subject to all defenses to enforcement that apply to contracts generally. 9 U.S.C. § 2. To determine the merit of these contractual defenses, courts “should apply ordinary state-law principles that govern the formation of contracts.”
First Options,
Plaintiffs argue that the First USA and BOA arbitration clauses are unconscionable, and thus unenforceable. Specifically, they contend that the costs to bring an arbitration action discourage or prevent plaintiffs from vindicating their statutory rights.
7
“It may well be that the existence of large arbitration costs could preclude a litigant ... from effectively vindicating her federal statutory rights in the arbitral forum.”
Green Tree,
The Supreme Court did not determine “[h]ow detailed the showing of prohibitive expense must be before the party seeking arbitration must come forward with contrary evidence.”
Green Tree,
This Court agrees with District Judge Kaplan, in
Stewart v. Paul, Hastings, Janofsky & Walker, LLP,
As an initial matter, defendants have offered to pay all arbitration fees,
Even if defendants had not offered to pay the arbitration fee and waive any fee-shifting rights they may have, the costs required to bring an arbitration do not render the First USA and BOA arbitration agreements unconscionable.
The First USA arbitration agreement identifies the National Arbitration Forum (“NAF”) as its arbitration forum. (Barrett Decl. Ex. 1.) Under the current NAF Code, plaintiffs’ claims would be considered “Consumer Small Claims.” (Second Decl. of Joshua Wolson dated May 23, 2002, (“Wolson Deck II”), Ex. B (“NAF Code”), Rule 2(BB); Wolson Deck II Ex. A.) Such claims are subject to a different fee schedule than other claims submitted to NAF. (Wolson Deck II, NAF Code at 38.) Under the NAF Code, a plaintiff filing a “Consumer Small Claim” is subject to a filing fee ranging from $40 to $100, and a Participatory Hearing Fee ranging from $75 to $100. However, the respondent is required to pay the remaining hearing fees for the hearing, except for a $10 processing fee per so-called “Request.” 8 (Wolson Deck II, NAF Code at 39-40.) Moreover, the NAF Code provides for a waiver of the Small Claim filing fee, administrative fees, Request fees, or Hearing fees for indigent parties. (Wolson Deck II, NAF Code Rule 45(A).)
This fee schedule in the NAF Code has been upheld as adequate and fair by numerous courts.
See, e.g., Hale v. First USA Bank, N.A.,
No. 00 Civ. 5406(JGK),
The BOA arbitration agreement identifies Judicial Arbitration and Mediation Services, Inc. (“JAMS”) as the forum for
However, the BOA arbitration clause does contain a clause of some concern in consumer arbitrations, namely that “[i]f the arbitrator rules in favor of one party against the other, the other party shall pay all reasonable attorneys’ fees and costs of the action on behalf of both parties (including any fees and expenses paid by one party on behalf of the other) unless the arbitrator or court decides such an award would cause a substantial injustice based on the facts and legal arguments set forth in the action.” (Uhlig Decl. Ex. 2.) Notably, the agreement prohibits an award of fees and costs where either the arbitrator or court decided that “such an award would cause a substantial injustice.” Thus, plaintiff Ross has failed to demonstrate the likelihood of the application of such a fee shifting provision, and has only shown that he faces a risk that the fee-shifting provision in the BOA arbitration agreement would be applied.
See Musnick,
Moreover, even if an issue should arise during arbitration concerning fees imposed on plaintiffs, it can be addressed adequately by the Court at the arbitration award enforcement stage. Thus, plaintiffs are not left without recourse if they believe that they were not able to vindicate all their statutory rights in arbitration due to costs or fees imposed on them.
See Musnick,
Accordingly, this Court finds that plaintiffs have not demonstrated sufficiently an inability to pay the fees associated with the arbitrations called for under their cardholder agreements, nor the likelihood that they would incur large arbitration costs that would effectively preclude them from vindicating their federal statutory rights in arbitration. Thus, this Court will not invalidate the arbitration agreements as unconscionable. 10
Plaintiffs also argue that arbitration in this case would violate their Seventh Amendment right to a jury trial. Plaintiffs’ argument is without merit. A plaintiff is deemed- to have forgone the right to a jury trial under the Seventh Amendment as a result of entering into an agreement to arbitrate certain matters. As the Fourth Circuit held,
[T]he fact that the appellees waived their right to a jury trial does not require the court to evaluate the agreement to arbitrate under a more demanding standard. It is clear that a party may waive her right to adjudicate disputes in a judicial forum. Similarly, the right to a jury trial attaches in the context of judicial proceedings after it is determined that litigation should proceed before a court. Thus, the “loss of the right to a jury trial is a necessary and fairly obvious consequence • of an agreement to arbitrate.”
Sydnor v. Conseco Fin. Servicing Corp.,
Plaintiffs’ reliance on
National Equipment Rental, Ltd. v. Hendrix,
3. Procedural Limitations & Lack of Injunctive Relief
Finally, plaintiffs argue that their statutory right to injunctive relief under both
Plaintiffs’ arguments concerning discovery, subpoena powers, and their right to proceed against all co-conspirators in one forum have all been resolved in favor of arbitration and this Court will not revisit such unfounded arguments.
See, e.g., Chisolm v. Kidder Peabody Asset Mgmt., Inc.,
Plaintiffs further argue that arbitration in this action would not permit them to exercise certain statutory rights under the antitrust laws and TILA. Specifically, plaintiffs argue that the arbitration clauses effectively foreclose the statutory right of injunctive relief, which plaintiffs contend is provided to protect not only private plaintiffs, but competition and the public.
As discussed above, the Supreme Court has held that “by agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum.”
Mitsubishi,
Here, under the rules of NAF and JAMS, any relief available under the applicable substantive law, including injunctive relief, is available in arbitration as well. (JAMS Rule 22(d); Wolson Decl. II NAF Code Rule 20D.) Thus, injunctive relief will be available to plaintiffs Ruga and Ross against the defendants in the arbitration, as it was available to the plaintiff in Gilmer. Further, injunctive relief against the remaining co-conspirators will also be available to plaintiffs Ruga and Ross, since their claims against the other co-conspirators remain here. Therefore, plaintiffs have the ability to obtain injunctive relief against all defendants. 13
E. Stay
Section three of the FAA provides that a district court, upon determining that an action before it is subject to an enforceable arbitration provision, “shall ... stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement” 9 U.S.C. § 3. As this Court has found that all the claims by plaintiffs Ruga and Ross against defendants First USA, Bank One, BOA and BOA Corp. are subject to mandatory arbitration, the action by those plaintiffs against those defendants is stayed pending arbitration.
Accordingly, this Court grants defendants First USA and Bank One’s motion to stay plaintiff Ruga’s claims against them and compel plaintiff Ruga to bring those claims in arbitration in compliance with the agreement between the parties. Further, defendants BOA and BOA Corp.’s motion to' stay plaintiff Ross’s claims against them is granted and this Court compels plaintiff Ross to bring those claims in arbitration as well.
II. Motion to Dismiss
On a motion to dismiss, a court typically must accept the material facts alleged in the complaint as true and construe all reasonable inferences in a plaintiff’s favor.
Grandon v. Merrill Lynch & Co.,
“This generous approach to pleading applies in the antitrust context.”
Hamilton College,
The Second Circuit has held that “a short plain statement of a claim for relief which gives notice to the opposing party is all that is necessary in antitrust cases, as in other cases under the Federal Rules.”
George C. Frey Ready-Mixed Concrete, Inc. v. Pine Hill Concrete Mix Corp.,
A. Sherman Act Section One Claims
In Counts I through III plaintiffs allege three different conspiracies that violate Section One of the Sherman Act. In Count I, plaintiffs allege that VISA, in conjunction with its member banks, MasterCard, in conjunction with its member banks, and Diners Club conspired to fix a minimum currency conversion fee of 1%. In Count II, plaintiffs allege that VISA and its member banks conspired with each other to fix a minimum currency conversion fee of 1%, and facilitate the second tier fees. Count III is identical to Count II, except that it alleges MasterCard and its member banks were the co-conspirators.
1. Inter-Association Claim
Section One of the Sherman Act prohibits all combinations and conspiracies that unreasonably restrain trade among the states. 15 U.S.C. § 1. “To withstand a motion to dismiss, the plaintiff in a Sherman Act Conspiracy claim must allege (1) concerted action; (2) by two or more persons; (3) that unreasonably restrains interstate or foreign trade or commerce.”
In re Nasdaq Market-Makers Antitrust Litig.,
A district court must determine whether the complaint “contains either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory.”
Continental Orthopedic,
Defendants assert that Count I must be dismissed because plaintiffs failed to properly allege any concerted action. Outside of conclusory allegations that merely recite the language of the Sherman Act, defendants argue that plaintiffs have not alleged an express agreement among the defendants to fix currency conversion fees. Defendants also contend that an agreement among the defendants cannot be inferred reasonably from the limited facts plaintiffs allege. Specifically, defendants argue that: (1) MasterCard’s alleged response to VESA’s pre-implementation announcement of its currency conversion fee is insuffi-
With respect to MasterCard’s response to VESA’s announcement, defendants argue that plaintiffs have alleged nothing more than parallel conduct of two competitors. And with respect to the “dual governance,” i.e. the fact that the same banks allegedly control both VISA and MasterCard, defendants argue that-the Complaint merely alleges an opportunity to conspire or agree.
“The plaintiff must do more than allege the existence of a conspiracy — it must allege some facts in support of the claim.”
Floors-N-More, Inc. v. Freight Liquidators,
However, “[i]t is not necessary to find an express agreement in order to find a conspiracy. It is enough that a concert of action is contemplated and that the defendants conformed to this agreement.”
Ambook Enters, v. Time, Inc.,
Conscious parallelism in pricing is one such circumstance that can provide for an inference of an antitrust conspiracy.
Apex,
First, plaintiffs allege that, absent collusion and a common motive to conspire, the Issuing Bank defendants’ imposition of the second tier fee is against their economic self-interest because they would stand to lose some of their best customers. (Complff 119.) The Complaint also alleges that Diners Club’s imposition of its currency conversion fee is against its economic self-interest because it risks losing some of its customers as well. (Comply 124.)
Second, and more importantly, plaintiffs allege that the effective control that the member banks of VISA and MasterCard have over both the VISA and MasterCard associations facilitates the conspiracy. (Compl.1ffl 91-96, 109.) This “dual governance,” as it has been referred to, as well as the common issuance of VISA and MasterCard branded cards by the member banks, provides the vehicle for the inter-firm communication necessary to create, fix, and maintain the currency conversion fees. (Compl.1ff 91, 109.) In fact, plaintiffs quote a MasterCard official’s letter to the Justice Department stating that “when one board acts with respect to a matter, the results of those actions are disseminated to the members which are members in both organizations. As a result, each of the associations is a fishbowl and officers and board members are aware of what the other is doing, much more so than in the normal corporate environment.” (Comply 97.)
The dual governance and parallel pricing create sufficient circumstances for an inference of an antitrust conspiracy and overcome the minimum requirements of Rule 8 notice pleading.
See Todd,
The gravamen of defendants’ argument is that no reasonable inference of a conspiracy to fix currency conversion fees can be inferred from the limited facts that plaintiffs allege in Count I. Defendants essentially argue that the Court should adopt the inferences that they believe should be drawn and provide alternative, lawful explanations for their conduct. “While these contentions may supply the grounds for a motion for summary judgment, they are out of place in a motion to dismiss.”
Nasdaq,
Further, defendants’ argument that inferences of conspiracy should not be drawn from the facts alleged in the Complaint because those inferences are economically implausible is misplaced at this stage.
Whether plaintiffs can prove any antitrust violations based on the facts alleged in the Complaint is of no consequence. “The alleged facts, viewed as a whole, provide [a] sufficient basis from which all the elements in plaintiffs’ Section 1 ... claim[] can be inferred and constitutes adequate notice to the defendants. The discovery process will provide ‘whatever additional sharpening of the issues is necessary.’ ”
Three Crown Ltd. P’ship v. Caxton Corp.,
a. Diners Club
The Citigroup defendants filed a separate brief to argue that Count I should be dismissed as to defendant Diners Club. They argue that plaintiffs have failed to allege that Diners Club was part of any conspiracy, and thus the claim against it should be dismissed.
As noted above, an allegation of an express agreement among the co-conspirators is not necessary. The complaint need only allege a factual circumstance to infer an antitrust conspiracy.
Ambook,
Here, plaintiffs have alleged that Diners Club, like the VISA and MasterCard defendants and their respective member banks, imposed a minimum currency conversion fee of 1%, and now impose a fee of at least 2%. (Compl.¶¶ 122-23.) Further, plaintiffs allege that the imposition of this fee by Diners Club is against its individual economic self-interest absent collusion with the VISA and MasterCard defendants and their respective member banks. (Compl.¶ 24.) Plaintiffs also allege that Citigroup’s indirect ownership of Diners Club and Citibank, another Citigroup subsidiary, facilitated the conspiracy between Diners Club and VISA and MasterCard. (Compl.¶ 123.) Again, when the Court reads the Complaint liberally and as a whole, as it must, these allegations suffice to survive a motion to dismiss. The allegations in the Complaint sufficiently plead facts to create circumstances giving rise to an inference of an antitrust conspiracy.
See Nasdaq,
2. Intra-Association Claims
Counts II and III allege so-called “intra-association” antitrust conspiracies between VISA and its member banks, and MasterCard and its member banks, respectively. As they did with Count I, defendants argue that Counts II and III must be dismissed because plaintiffs failed to properly allege any concerted action among the respective associations and their member banks. Specifically, defendants argue that the first tier fee set by VISA and MasterCard cannot be the basis for an antitrust conspiracy because VISA and MasterCard must be treated as autonomous entities acting unilaterally in their self-interest. Defendants also argue that the second tier fee cannot be the basis for an intra-association conspiracy since plaintiffs only allege that VISA and MasterCard “facilitate and encourage” the “collection” of that fee, and have aided and abetted that process. Those allegations,
Defendants maintain that VISA and MasterCard’s conduct with respect to the first tier fee is not a proper predicate for an intra-association conspiracy. They contend that the respective associations should be treated as single entities, like their competitors American Express and Diners Club. Defendants principally rely on
AD/SAT,
Notably, in United States v. Visa U.S.A, Inc., District Judge Jones held,
antitrust law’s concern with the free working of the competitive process applies with equal force to joint ventures. Although a joint venture may involve aspects of agreement among competitors to enable a joint venture to function, agreements among those competitors unrelated to the efficiency of the joint venture and in particular limiting competition in areas where the competitors should compete, are subject to scrutiny under the antitrust laws.
Defendants also argue that plaintiffs’ allegations regarding the second tier fee are vague. However, antitrust claims are not subject to a heightened pleading requirement, and therefore defendants’ argument misses the mark. The allegations must merely provide a short plain statement of a claim for relief which gives notice to the opposing party.
See In re Magnetic Audiotape Antitrust Litig.,
No. 99 Civ. 1580(LMM),
Further, in Counts II and III, plaintiffs allege that each respective association and its member banks agreed to fix a currency conversion fee of no less than 1% of the transaction amount, and they conspired to facilitate and encourage the imposition and collection of the second tier fee. (Compl.1HÍ 164-65.) VISA and MasterCard’s role in this conspiracy was to aid and abet the process of collecting the fees by adding the second tier fee onto the transaction amount at the network level during the conversion. (Comply 118.)
As previously noted, a complaint may infer an antitrust conspiracy where “a concert of action is contemplated and that the defendants conformed to this agreement.”
Ambook,
Here, plaintiffs allege that defendants acted in a similar manner in that they imposed a minimum currency conversion fee and they “generally” also assessed the second tier fee, “typically” at the level of 2%. (Comply 102.) Further, plaintiffs have alleged that the imposition of the second tier fee by the Issuing Banks would, in a competitive market without an agreement to fix prices, be against the economic self-interest of the issuing banks and would expose the banks to losing some of their best customers. (CompU 119.) Also, plaintiffs allege that, the associations themselves, and their member banks’ control of the associations facilitate the intra-association conspiracies by providing the basis for interfirm communications and information exchange. (Comply 91.)
These allegations, when read liberally and in light of the entire Complaint, are sufficient to draw an inference of an antitrust conspiracy. Thus, this Court cannot conclude as a matter of law that such an inference would be unreasonable. As the Complaint, taken as a whole, sufficiently pleads a Section One claim and provides satisfactory notice to the defendants, the motion to dismiss must be denied.
See Three Crown,
a. VISA
VISA filed a separate brief arguing on its own behalf that Count II should be dismissed because VISA acted as a single entity. VISA makes substantially the same arguments advanced by the other defendants regarding the single entity theory. Similarly, VISA neglects plaintiffs’ express allegations regarding the necessity and use of the currency conversion fee. Thus, as the Complaint alleges that the fee does not enable a joint venture to function, and is unrelated to the efficiency of the association, an antitrust action can stand.
See United States v. Visa,
VISA also argues that the Complaint does not properly allege harm to competition. However, VISA’S central point in its argument is that the current VISA foreign currency conversion practice or system “would not be possible without the network-level rules which govern” the member banks, and foreign exchange rates set at the network level are a “practical necessity within the VISA system.” (VISA’S Mot. to Dismiss at 8, 10.) Thus, VISA argues that plaintiffs cannot allege harm to competition because rates at the network level, such as the currency conversion fee, are a necessity, and foreign currency conversion would not be practical or possible otherwise. This argument is in stark contrast with the allegations in the Complaint that the fee is not necessary and does not provide an otherwise unavailable product. (Comply 112.) Therefore, the argument is better suited for a summary judgment motion, not a motion to dismiss. 14
Accordingly, defendants’ motion to dismiss Counts I through III is denied.
B. Truth in Lending Act Claim
Count IV of the Complaint alleges claims against all defendants for violations
Defendants contend that all claims in count IV should be dismissed because plaintiffs do not allege specific details about their card accounts and charges. Defendants also argue that those claims should be dismissed as to VISA and MasterCard, as well as the non-card issuing bank defendants, as none of them are “creditors” under TILA. Lastly, defendants argue that plaintiffs’ claims for actual damages under TILA must be dismissed because plaintiffs have not properly alleged detrimental reliance on the alleged inadequate disclosures.
1. Elements of TILA Claim
Initially, defendants argue that plaintiffs’ allegations regarding the TILA violations are vague; specifically defendants claim that plaintiffs fail to allege which plaintiffs are actual cardholders, which foreign purchases are at issue, and whether the card was used primarily for consumer purposes. Defendants’ arguments are misplaced on a motion to dismiss as claims for a violation of TILA are not subject to a heightened pleading standard, and thus the specificity that defendants argue is lacking is not required.
See generally Swierkiewicz v. Sorema N.A.,
2. Creditor under TILA
As a threshold issue, this. Court must determine whether each defendant is a creditor as defined in TILA because that statute only regulates creditors. 15 U.S.C. § 1640(a) (making “any creditor who fails to comply” with the disclosure requirements hable);
accord Mayfield v. Gen. Elec. Capital Corp.,
No. 97 Civ. 2786(DAB),
a person who both (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of the indebtedness, by agreement.
a. VISA and MasterCard
Defendants argue that the Complaint is devoid of any allegation that VISA or MasterCard is a creditor under TILA or Regulation Z. Plaintiffs argue that the Complaint sufficiently alleges that VISA and MasterCard are “creditors” because it alleges that VISA and MasterCard are agents of the Issuing Bank defendants within the meaning of TILA. (Compl.lHl 35-40, 172.) As agents of the Issuing Bank defendants, plaintiffs argue, VISA and MasterCard fall under the definition of “card issuer” in § 1602(n), and thus are creditors under the last two sentences of § 1602(f).
The Official Staff Interpretations of the Federal Reserve Board are “dispositive in construing TILA or Regulation Z unless it is shown that the opinion is demonstrably irrational.”
Mayfield,
An agent of a card issuer is considered a card issuer. Because agency relationships are traditionally defined by contract and by state or other applicable law, this regulation does not define agent. Merely providing services relating to the production of credit cards or data processing for others, however, does not make one the agent of the card issuer. In contrast, a financial institution may become the agent of the card issuer if an agreement between the institution and the card issuer provides that the cardholder may use a line of credit with the financial institution to pay obligations incurred by use of credit card.
Official Staff Interpretations, 12 C.F.R. § 226, Supp. I, ¶ 2(a)(7) (2003).
Defendants argue that plaintiffs have not sufficiently pled an agency relationship between VISA and MasterCard, and their respective member banks. They contend that plaintiffs have not alleged any facts that support a conclusion of agency, and any facts that plaintiffs do allege clearly indicate that VISA and MasterCard are not their member banks’ agents under the Official Staff Interpretations. Plaintiffs allege that their allegations satisfy the Rule 8(a) notice pleading standard with respect to the agency issue. Whether the plaintiffs have sufficiently pled an agency relationship between VISA and MasterCard and their respective member banks is irrelevant to this Court’s analysis at this stage. Even assuming that plaintiffs have properly alleged the agency relationship, their claims that seek to hold VISA and MasterCard liable as creditors under TILA still must fail.
The Federal Reserve Board has ruled that a card issuer can only be considered a creditor, assuming it has not otherwise satisfied the definition of creditor, where that card issuer extends' credit.
15
b. Non-Card Issuing Bank Defendants
Defendants also argue that like VISA and MasterCard, the non-card issuing bank companies of the actual card-issuing bank defendants, such as the bank holding parent companies, are not alleged to be creditors under TILA. 16 Defendants note that there are no allegations that any of these companies themselves, as opposed to through a subsidiary, extend credit or issue payment cards. Plaintiffs argue that the bank holding parent companies can be held liable under TILA for their subsidiaries’ faulty disclosures because they exercised such dominion over their subsidiaries that the two are fairly treated as one, which is effectively a veil-piercing argument.
Initially, the Complaint contains no allegations that could hold Citibank (Nevada) N.A. and Household. Credit Card Service, Inc. liable as creditors under TILA, either directly or derivatively. Thus, this Court finds that the Complaint fails to state a claim as to Count IV against Citibank (Nevada) N.A. and Household Credit Card Service, Inc., and dismisses that claim against them with prejudice. ;
With respect to the bank holding parent companies, determining the proper pleading standard for a veil-piercing claim has been labeled a “knotty question” by some courts in this district.
See, e.g., United Feature Syndicate, Inc. v. Miller Features Syndicate, Inc.,
The only allegations in the entire Complaint that support plaintiffs’ veil-piercing theory are the allegations, which appear consistently in each section addressing each bank holding company, that the bank holding company “exercised such dominion and control over its subsidiaries ... that it is hable according to the law for the acts of such subsidiaries under the facts alleged in this Complaint,” and that the card-issuing defendants were wholly owned subsidiaries of their respective bank holding companies. (CompLIHI 41-72.) These purely conclusory allegations cannot suffice to state a claim based on veil-piercing or alter-ego liability, even under the liberal notice pleading standard.
See Old Republic Ins.,
Plaintiffs’ reliance on cases noting that veil-piercing is a very fact-specific analysis, conducted only after a full examination of the parties and their relationships, is misplaced. The plaintiffs in those cases alleged sufficient facts to support their allegations of veil-piercing.
See, e.g., Federal Trade Comm’n v. Citigroup, Inc.,
c. Citigroup and Diners Club
The Citibank defendants separately argue that there are no allegations that defendants Citigroup and Diners Club are creditors under TILA. Citigroup, the bank holding company, argues that there are no allegations that it issued credit cards or extended credit to anyone. Defendants argue that plaintiffs’ allegation that Citigroup issues credit cards through its subsidiaries does not satisfy the requirements of TILA. Lastly, defendants argue that Diners Club is not a creditor under TILA since it is not the entity that issues Diners Club cards or extends credit to Diners Club cardholders. 18
While plaintiffs argue that Citigroup exercised such dominion and control over its card-issuing subsidiaries that it should be held liable for those subsidiaries’ TILA violations, the Complaint contains the barest of, allegations of dominion and control. (Comply 46.) For the same reasons that this Court found plaintiffs’ allegations against the other bank holding companies insufficient as to TILA claims based on a veil-piercing theory, the allegations against Citigroup are also insufficient.
As for Diners Club, defendants attach an “exemplar cardmember agreement” to their brief and argue that the agreement evidences that Citibank (South Dakota) is the true issuer of Diners Club charge cards. and the actual entity that extends credit to the cardholder. Defendants argue that the agreement can be considered because the plaintiffs incorporated it into their Complaint by reference and it is integral to the Complaint.
See Chambers v. Time Warner, Inc.,
Indeed, “[o]rdinarily our consideration is limited to the face of the complaint and documents attached to the complaint are incorporated by reference, but here we may consult [the exemplar] Agreement ... because [it][is] integral to [plaintiffs’] claims and [plaintiffs] had notice of that information.”
Schnall v. Marine Midland Bank,
Accordingly, Count IV must be dismissed with prejudice as to VISA, MasterCard, Citibank (Nevada) N.A., and Household Credit Card Service, Inc. Count IV is dismissed without prejudice and with leave to replead against defendants Citigroup, Inc., Bank of America Corporation, Bank One Corporation, J.P. Morgan Chase & Co., Providian Financial Corp., Household International, Inc., and MBNA Corporation. Finally, defendants’ motion to dismiss Count IV as to the card-issuing defendants is denied.
3. Actual Damages
Defendants contend that plaintiffs’ claim for actual damages under TILA for disclosure violations must be dismissed since plaintiffs have not alleged detrimental reb-anee. Plaintiffs counter that detrimental reliance is not an element of an actual damages claim under TILA, and even if it is, they have pled such reliance.
A private right of action under TILA exists for civil liability against any creditor who fails to comply with any requirement imposed under TILA. 15 U.S.C. § 1640(a) (2003). A plaintiff may pursue “any actual damages sustained by [him] as a result of the failure” to make the required disclosures, and/or so-called statutory damages, which are capped at $500,000. 15 U.S.C. § 1640(a)(1)-(2). It is well-established that a plaintiff must show detrimental reliance to establish actual damages for a TILA violation.
See Demry v. Citibank (South Dakota), N.A,
No. 01 Civ. 9959(HB),
The statute’s language, as well as its legislative history, supports such a finding. Section 1640(a)(1) specifically states that a plaintiff may recover actual damages sustained “as a result” of a TILA violation. 15 U.S.C. § 1640(a)(1). Notably, § 1640(a)(2), which provides for statutory damages, contains no such limiting or causal connection language.
See
15 U.S.C. § 1640(a)(2);
see also Perrone,
Without a causation requirement, actual damages would overlay the statutory damages for no apparent reason. Conceptually, however, statutory and actual damages perform different functions: statutory damages are reserved for cases in which the damages caused by a violation are small or difficult to ascertain. Actual damages may be recovered where they are probably caused by the violation.
Further, the legislative history of the 1995 amendments to TILA states, “Congress provided for statutory damages because actual damages in most cases would be nonexistent or extremely difficult to prove. To recover actual damages, consumers must show that they suffered a loss because they relied on an inaccurate or incomplete disclosure.” H.R.Rep. No. 193, 104th Cong., 1st Sess. (1995);
accord Turner
a. Presumption of Reliance
Plaintiffs maintain that if detrimental reliance is required for a claim for actual damages under TILA, such reliance should be presumed from the allegations in the Complaint in this “failure to disclose” case. Plaintiffs contend that where the TILA violation is a material omission, there should be a presumption of rebanee as there is in the securities fraud arena.
19
See Affiliated Ute Citizens v. United States,
The Fifth Circuit in
Perrone,
addressing this exact issue, noted that the plaintiffs in that case “attempt[ed] to analogize TILA to Rule 10b-5 by stating the mandate that lessors disclose certain costs associated with obtaining credit ... makes the existence of such costs 'material’ facts.”
Perrone,
Plaintiffs stress that the remedial nature of TILA as a consumer protection statute favors a more hberal interpretation of the type of rebanee needed for actual damages. This Court disagrees and finds
As the Fifth Circuit held in
Perrone,
violations of TILA are dissimilar from violations of Rule 10b-5 in the securities fraud context concerning reliance. The TILA reliance requirement stems from the express language in the statute as opposed to common law fraud in Rule 10b-5 cases.
20
See
15 U.S.C. § 1640(a)(1) (plaintiff may recover “any actual damages sustained by [her] as a result of the failure” to make the required disclosures);
Basic, Inc. v. Levinson,
Further, any presumption of rebanee for actual damages claims would obbterate the differences between actual damages claims and statutory damages claims, a result that Congress could not have intended. In TILA, Congress created a measure to protect consumers from deception in a growing field. As part of that measure, Congress provided for two different types of damages, actual and statutory.
See
15 U.S.C. § 1640(a)(l)-(2). “Under this regime, statutory damages provide at least a partial remedy for
all
material TILA violations; however, actual damages ensure that consumers' who have suffered actual harm due to a lender’s faulty disclosures can be fully compensated, even if the total amount of their harm exceeds the statutory ceiling on TILA damages.”
Turner,
Plaintiffs complain that without a presumption of reliance on omission cases, actual damages claims would be too difficult to prove. However, that is precisely the statutory scheme that Congress created. “This difficulty seems to have been the impetus for establishing a scheme of statutory damages, and it seems bkely that if actual damages could be computed by a simple formula, no statutory damage provision would have been necessary.”
McCoy,
Accordingly, plaintiffs cannot rely on a presumption of rebanee and therefore must prove detrimental rebanee. As plaintiffs have not alleged detrimental reb-anee, their claims for actual damages under TILA are dismissed without prejudice and with leave to renew.
4. TILA Conspiracy and Aiding or Abetting
Lastly, defendants argue that plaintiffs’ TILA claims against the non-card issuing defendants should be dismissed because there can be no babibty for conspiracy to violate TILA, nor any babibty for aiding and abetting a violation of TILA. Plaintiffs argue that this Court should interpret TILA broadly due to its remedial nature and find that there are private causes of action for conspiracy to violate TILA, and aiding and abetting TILA violations. To do otherwise, plaintiffs contend, would allow circumvention of TILA by “ingenious malefactors.”
TILA provides that “any creditor who fails to comply with any requirement imposed under this part ... with respect to any person is liable to such person.” 15 U.S.C. § 1640(a). As this Court noted previously, plaintiffs have not properly alleged that the non-card issuing defendants are creditors under TILA or that they are bable for their subsidiary’s TILA violations. There is no express private right of action anywhere in the statutory scheme for conspiracy to violate TILA or aiding and abetting TILA violations. TILA creates a duty to disclose certain information only on behalf of “creditors” as that term is defined in TILA. See 15 U.S.C. § 1631(a)-(b) (2003). Creditors, in turn, are bable for violations of that duty only to the individuals or entities to whom they owe that duty. See 15 U.S.C. § 1640(a). TILA does not extend that duty or the benefits of that duty to anyone else. Nor does TILA make creditors bable to anyone for any violations of the disclosure requirements. Thus, based on the plain language of the statute there is no claim for conspiracy or aiding and abetting under TILA.
The only decision addressing this issue has also found that the language in TILA does not provide for secondary babibty.
See Weiner v. Bank of King of Prussia,
The Second Circuit’s opinion in
Dins-more
expanded the
Central Bank
holding to prohibit claims for conspiracy to violate the securities laws.
[c]ritically, as in the case of aiding and abetting, there is no mention of conspiracy in the text of § 10(b). Just as Congress clearly knew how to impose aiding and abetting liability when it chose to do so, thereby suggesting that its absence from § 10(b) should not be disregarded, the existence of statutes expressly providing for conspiracy liability ... warrants the same conclusion.
Dinsmore,
This Court finds the reasoning in
Central Bank, Dinsmore,
and
Weiner
22
persuasive. Since TILA’s statutory text does not provide for conspiracy or aiding and abetting claims, and the legislative history supports that conclusion, claims for con
Plaintiffs’ reliance on
Wiwa v. Royal Dutch Petroleum Co.,
No. 96 Civ. 8386(KMW),
[n]either Central Bank nor Dinsmore holds that a statute must explicitly allow for secondary liability in order for a court to hold aiders and abetters or co-conspirators liable. Rather, Central Bank and Dinsmore support the proposition that the scope of liability under a statute should be determined based on a reading of the text of the specific statute.
Wiwa,
Accordingly, defendants motion to dismiss Count TV is granted in part. and denied in part, as follows: (1) Count TV in its entirety is dismissed with prejudice as to defendants VISA, MasterCard, Citibank (Nevada), and Household Credit Card Service; (2) Count IV in its entirety is dismissed without prejudice and with leave to replead as to defendants Citigroup, Inc., Bank of America Corporation, Bank One Corporation, J.P. Morgan Chase & Co., Providian Financial Corp., Household International, Inc., and MBNA Corporation; (3) the claims in Count IV for actual damages are dismissed without prejudice and with leave to replead; (4) Count IV is dismissed with prejudice as to plaintiffs’ claims of conspiracy and/or aiding and abetting; and (5) the motion to dismiss Count TV as to all other parties is denied.
Conclusion
Accordingly, defendants’ motion to dismiss the Complaint is denied in part and granted in part. Specifically, defendants motion to dismiss Counts I through III is denied. Their motion to dismiss Count TV is denied in part and granted in part, as follows: (1) Count TV in its entirety is dismissed with prejudice as to defendants VISA, MasterCard, Citibank (Nevada) N.A., and Household Credit Card Service, Inc.; (2) Count IV in its entirety is dismissed without prejudice and with leave to replead as to defendants Citigroup, Inc., Bank of America Corporation, Bank One Corporation, J.P. Morgan Chase & Co., Providian Financial Corp., Household International, Inc., and MBNA Corporation; (3) the claims in Count IV for actual damages are dismissed without prejudice and
Further, defendants First USA Bank, N.A. and Bank One Corporation motion to compel arbitration of plaintiff Ruga’s claims is granted. Also, defendants Bank of America, N.A. (USA) and Bank of America Corporation’s motion to compel arbitration with respect to plaintiff Ross’s claims is granted.
To the extent permitted by this Memorandum and Order, plaintiff shall serve and file a further amended complaint no later than August 15, 2003.
SO ORDERED.
Notes
. The records of BOA indicate that a Nancy Ross is also a responsible party for the only credit card account that plaintiff Ross is responsible for at BOA. However, since Nancy Ross is not a named plaintiff to this action, this Court will treat plaintiff Ross's account as if it were held in his’ name alone. (Uhlig Deck ¶¶ 4-6.)
. Plaintiffs' reliance on
Specht v. Netscape Communications Corp.,
. Although plaintiffs have alleged that First USA and Bank One on the one hand, and BOA and BOA Corp. on the other, are agents of each other, and that the parents are the alter egos of the subsidiaries, the factual basis for such a finding is lacking. More importantly, defendants do not rely on these allegations in their argument for arbitration.
. Plaintiffs’ argument that the question of ar-bitrability is a “legal issue” and not a "Claim” as that word is used in the First USA arbitration clause is without merit. The term "Claim” is defined in the arbitration clause to include "[a]ny claim, dispute or controversy.” (Barrett Decl. Ex. 1.) Clearly, the question of whether the arbitrator or the Court should determine arbitrability can, and should, be deemed a claim, dispute or controversy.
. Plaintiffs’ argument also ignores the fact that other courts have found claims alleging horizontal price-fixing claims to be subject to arbitration.
See, e.g., Acquaire,
. Plaintiffs’ reliance on
AlliedSignal, Inc. v. B.F. Goodrich Co.,
. Plaintiffs’ suggestion that the arbitration clauses at issue here are unconscionable because they appear in "pre-printed forms” and are allegedly in “fine print," are without merit. The use of pre-printed forms dpes not convert an otherwise valid contract into an unconscionable contract.
See Bischoff v. DirecTV, Inc.,
. The Requests listed in the NAF Code include, inter alia, requests for amendment, subpoena, discovery order, and continuance. (Wolson Deck II, NAF Code at 40.)
. Plaintiffs' argument that the NAF Code unreasonably subjects them to a "loser pays” cost-shifting provision is. unavailing. The applicable NAF Code only permits an award of fees ánd costs in favor of a party as permitted by law. (Wolson Deck II, NAF Code Rule 37(C).) Thus, plaintiffs are in no worse a position under the NAF Code then they would be in federal court.
. Plaintiffs' remaining arguments that the First USA and BOA arbitration clauses are
. Plaintiffs further argue that compelling arbitration in this case would require the Court to "splinter” proof in a manner that contravenes the Seventh Amendment. Plaintiffs cite no case authority for their position and this Court has found none. An issue of splintering proof in violation of the Seventh Amendment does not arise in this case because the claims litigated in federal court will be between different parties than the claims litigated in the arbitration.
. Notably, plaintiffs cite no authority for their proposition that arbitration should be denied where plaintiffs cannot effectively and efficiently proceed against all defendants in a single proceeding. Nor does this Court find any support for such a contention.
. The cases that plaintiffs cite for support are inapposite. Specifically,
Broughton v. Cigna Healthplans of Cal.,
. Moreover, VISA correctly notes that a principal and its agent may be incapable of conspiring under Section One.
See, e.g., Fuchs Sugars & Syrups, Inc. v. Amstar Corp.,
. Counsel for the plaintiffs' invitation to ignore the pertinent section of Regulation Z in favor of the broader -statutory language is declined. Congress delegated the task of car
. The non-card issuing defendants are as follows: defendants Citigroup, Inc.; Bank of America Corporation; Bank One Corporation; J.P. Morgan Chase & Co.; Providian Financial Corp.; Household International, Inc.; MBNA Corporation; Citibank (Nevada) N.A.; and Household Credit Card Service, Inc. (Compl.lHI 41, 45,. 49, 52, 56, 61, 66, 68, 70.) Defendants Citibank (Nevada) N.A. and Household Credit Card Service, Inc. are alleged to merely process certain general purpose card transactions. (Compl.lfll 45, 68.) The remaining non-card issuing bank defendants are bank holding parent companies of the card-issuing defendants.
. Notably, the parties have not argued what substantive law should apply to the veil-piercing analysis.
. The Citigroup defendants also argue that plaintiffs have failed to allege that defendant Universal Financial Corp. ("UFC”) is a creditor under TILA because it only issued cards to businesses, not consumers, during the relevant time period, and thus is outside the scope of TILA. As accurate a picture as that may be of UFC's practices during the relevant time period, it is evidence outside the Complaint and this Court will not consider it. Thus, plaintiffs’ allegations that UFC issued cards to one or more plaintiffs suffice to allege that UFC was a creditor under TILA on a motion to dismiss.
. Of course, plaintiffs also allege improper disclosure violations of TILA, as well as omission violations of TILA. (Comply 170(b).) Plaintiffs do not argue that a presumption of reliance should be applied for the improper disclosure claim. Thus, allegations of actual detrimental reliance are necessary for claims of actual damages under TILA for improper disclosure claims.
. It is noteworthy that Plaintiffs argue for a fraud-based presumption of reliance on this issue, but elsewhere insist that TILA based claims are not subject to the same heightened pleading standard as fraud claims.
. Although the
Weiner
court did not address a claim for aiding and abetting a TILA claim,
. Plaintiffs' attempt to distinguish
Weiner
based on the fact that the opinion was written thirty years ago, and based on an alleged significantly different factual scenario. Plaintiffs' arguments are unavailing. Plaintiffs do not articulate why this Court should disregard
Weiner
based simply on its age. Plaintiffs do not argue that the language of TILA has changed significantly in the last thirty years, or that the state of the law has changed. Further, the
Weiner
court did not rely on the facts before it to find that a claim for conspiracy did not exist. Rather, it based its ruling on the fact that conspiracy was not included within the terms of the statute itself.
See Weiner,
. It is also noteworthy that TILA was amended in 1982 to eliminate “arrangers” of credit from the definition of creditor under TILA. Pub.L. No. 97-320, 96 Stat. 1469, § 702 (1982); Pub.L. No. 96-221, 94 Stat. 132, § 602 (1980). This amendment further evidences Congress's intent to prohibit liability for aiding or abetting a TILA violation.
. Further, plaintiffs’ argument that a claim for conspiracy and aiding and abetting should be found to be implied in TILA if the Court reads the statute liberally in accord with its remedial nature, is unpersuasive. As the Supreme Court stated in
Central Bank,
"[plolicy considerations cannot override our interpretation of the text and structure of the Act.”