Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-02013/USCOURTS-caed-2_06-cv-02013-3/pdf.json

Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 28:1441 Petition for Removal

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28 This matter was determined to be suitable for decision without *

oral argument. L.R. 78-230(h).

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

MARY JANE AUGUSTINE, an individual,)

on behalf of herself and all )

others similarly situated, )

) 2:06-cv-2013-GEB-EFB

Plaintiff, )

)

v. ) ORDER*

)

FIA CARD SERVICES, N.A. and DOES 1 )

through 10, inclusive, )

)

Defendants. )

)

Defendant FIA Card Services, N.A. (“Defendant”) moves for

the dismissal of this action. Plaintiff opposes this motion. 

Plaintiff alleges claims under the Consumer Legal Remedies Act

(“CLRA”) and the Unfair Competition Law (“UCL”) against Defendant on

behalf of herself and all other California consumers who have had

credit card accounts with Defendant. (First Am. Compl. ¶ 2.) 

Plaintiff’s claims are based on Defendant’s practice of increasing

interest rates retroactively and without sufficient warning which she

alleges violates California law. (Id. ¶¶ 13, 20.) 

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DISCUSSION

I. Standard

Dismissal is appropriate under Rule 12(b)(6) if Plaintiff

failed to (1) present a cognizable legal theory, or (2) plead

sufficient facts to support a cognizable legal theory. Robertson v.

Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984). 

When considering a motion to dismiss, all material allegations in the

Complaint must be accepted as true and construed in the light most

favorable to Plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974);

Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996).

In addition, Plaintiff is given the benefit of every reasonable

inference that can be drawn from the allegations in the Complaint. 

Retail Clerks Int’l Ass’n v. Shermahorn, 373 U.S. 746, 753 n.6 (1963). 

Accordingly, a motion to dismiss must be denied “unless it appears

beyond doubt that [Plaintiff] can prove no set of facts in support of

[his or her] claim which would entitle [him or her] to relief.” 

Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

II. CLRA

Defendant argues both of Plaintiff’s state law claims are

expressly preempted by the National Banking Act and the Office of the

Comptroller of the Currency regulations. (Def.’s Mot. for Summ. J.

(“Def.’s Mot.) at 8:2-4.) Plaintiff concedes broad federal

preemption, but asserts her claims are not expressly preempted because

they are not based on the amount of interest rates charged, but on

“Defendant’s deceptive practices which fail to provide adequate notice

of interest rate increase.” (Pl.’s Opp’n at 2:27-28.) Defendant

counters that “Plaintiff’s Complaint does not present any properly

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pleaded claims of ‘deception’ or ‘misrepresentation.’” (Def.’s Reply

at 3:25-26.)

Plaintiff alleges Defendant’s practice of retroactively

increasing the interest rates charged to cardholders constitutes an

unfair and deceptive practice under the CLRA which proscribes

“[r]epresenting that goods or services have . . .

characteristics, . . . which they do not have . . . [and] . . .

[i]nserting an unconscionable provision in the contract.” Cal. Civil

Code §§ 1770(a)(5), (19). Plaintiff concedes Defendant’s practice of

retroactively increasing interest rates is disclosed in the

contractual agreement. (First Am. Compl. ¶ 14.) Therefore, “[r]ather

than practicing concealment or making false promises, [Defendant],

from the beginning of the contractual relationship, notifies

cardmembers of the actions it may take in the event of a default.” 

Evans v. Chase Manhattan Bank USA, N.A., 2006 WL 213740, *5 (N.D. Cal.

Jan. 27, 2006). Plaintiff has not plead facts to support a claim of

misrepresentation under the CLRA. In addition, “[t]he practice of

retroactively increasing the interest rate is not unconscionable. Id.

at *3. Therefore, Plaintiff has not “alleged facts sufficient to

state a claim for unfair or deceptive acts” under the CRLA. Id. at

*6.

Moreover, California law provides that the CRLA does not

apply to credit card transactions. See Berry v. American Exp.

Publishing, Inc., 147 Cal. App. 4th 224, 233 (2007) (“We conclude

neither the express text of CLRA nor its legislative history supports

the notion that credit transactions separate and apart from any sale

or lease of goods or services are covered under the [CLRA].”). 

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Defendant’s motion to dismiss Plaintiff’s claims under the CLRA is

granted.

III. UCL 

 Defendant also argues Plaintiff’s claims under the UCL are

preempted. (Def.’s Mot. at 8:2-4.) Plaintiff responds that there is

no federal preemption for UCL claims. (Pl.’s Opp’n at 12:23.) 

Plaintiff’s UCL claims are based on Defendant’s practice of

retroactively increasing the interest rate charged to cardholders and

the failure to disclose and explain the process to cardholders. 

(First Am. Compl. ¶ 20.) 

“Preemption can occur in one of three ways: express

preemption by statute, occupation of the field, or conflict between

state and federal regulation.” U.S. v. 4,432 Mastercases of

Cigarettes, More Or Less, 448 F.3d 1168, 1189 (9th Cir. 2006). The

“general presumption . . . [is that] a federal statute or regulation

does not preempt a state’s historic police powers unless preemption is

a clear and manifest purpose of the United States Congress.” Smith v.

Wells Fargo Bank, N.A., 135 Cal. App. 4th 1463, 1475 (2005). 

“However, the presumption is not triggered when the State regulates in

an area where there has been a history of significant federal

presence.” Bank of Am. v. City & County of S.F., 309 F.3d 551, 558

(9th Cir. 2002). “[T]here has been a history of significant federal

presence in national banking, [therefore,] the presumption against

preemption of state law is inapplicable.” Id. at 559.

A. Retroactive Increase Under the UCL

Plaintiff’s first allegation under the UCL is that

Defendant’s practice of retroactively increasing the interest rate is

unfair and deceptive. (First Am. Compl. ¶ 20.) Defendant argues

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Plaintiff’s claim is expressly preempted because federal regulations

allow Defendant to extend loans “without regard to state laws

concerning . . . terms of credit . . . [and] rates of interest on

loans.” 12 C.F.R. § 7.4008(d)(2)(iv), (x). Defendant further argues

that by “challenging conduct provided for in [Defendant’s] Cardholder

Agreement, Plaintiff directly attacks [Defendant’s] terms of credit.” 

(Def.’s Mot. at 11:10-11.) Plaintiff does not respond to this

argument. 

Federal regulations do not preempt all UCL causes of action. 

See Office of the Comptroller of the Currency, Advisory Letter 2002-03

at 3, n.2 (March 22, 2002) (“OCC Letter”) (“A number of state laws

prohibit unfair or deceptive acts or practices, and such laws may be

applicable to insured depository institutions. See e.g., Cal. Bus. &

Prof. Code §§ 17200 et seq.; 17500 et seq.”); Smith, 135 Cal. App. 4th

at 1481 (holding that a cause of action under the UCL is not preempted

by federal law if based on the violation of a federal regulation). 

Those claims that are not preempted “involve acts or practices that

are unscrupulous, unconscionable, or contrary to public policy.” OCC

Letter at 1. 

Defendant’s practice of retroactively increasing the

interest rate charged to cardholders is not unconscionable. Evans,

2006 WL 213740, at *3. Plaintiff has not alleged facts sufficient to

show her claim is not preempted since it seeks to change Defendant’s

terms of credit provided in Defendant’s Cardholder Agreement. 12

C.F.R. § 7.4008(d)(2)(iv). Therefore, Defendant’s motion to dismiss

Plaintiff’s claim that the practice of retroactively increasing

interest rates violates the UCL is granted.

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B. Failure to Disclose Under the UCL 

Plaintiff further alleges Defendant violated the UCL when it

failed to disclose the evaluation process used for retroactive rate

increases. (First Am. Compl. ¶ 20.) Defendant argues that federal

law regulates what disclosures must be made and therefore, Plaintiff’s

claim is preempted. (Def.’s Mot. at 12:19-27.) 

The UCL restricts “any unlawful, unfair, or fraudulent

business act or practice and unfair, deceptive, untrue, or misleading

advertising.” Cal. Bus. & Prof. Code § 17200. The UCL “borrows

violations from [state and federal] laws by making them independently

actionable as unfair competitive practices.” Korea Supply Co. v.

Lockheed Martin Corp., 29 Cal. 4th 1134, 1143 (2003). However,

“[w]hen specific legislation provides a ‘safe harbor,’ [Plaintiff] may

not use the general unfair competition law to assault that harbor.” 

Schnall v. Hertz Corp., 78 Cal. App. 4th 1144, 1154 (2000). 

Federal law provides that banks may extend loans “without

regard to state law limitations concerning . . . [d]isclosure and

advertising, including laws requiring specific statements,

information, or other content to be included in credit application

forms, credit solicitations, billing statements, credit contracts, or

other credit-related documents.” 12 C.F.R. § 7.4008(d)(2)(viii).

Plaintiff does not allege that Defendant fails to make the 

required disclosures under federal law. Plaintiff’s claim that

Defendant was required to make different disclosures because of state

law is expressly preempted by 12 C.F.R. § 7.4008(d)(2)(viii). 

Therefore, Defendant’s motion to dismiss on Plaintiff’s claim that

Defendant’s failure to disclose violates the UCL is granted. 

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CONCLUSION

Defendant’s motion to dismiss Plaintiff’s claims under the

CLRA and the UCL is granted. Therefore, this action is dismissed.

IT IS SO ORDERED.

Dated: April 20, 2007

 

GARLAND E. BURRELL, JR.

United States District Judge

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