Opinion ID: 1235030
Heading Depth: 3
Heading Rank: 2

Heading: Sovereign's Equitable Indemnification Claims Against Fifth Third and BJ's.

Text: As noted, BJ's and Fifth Third separately moved to dismiss these equitable indemnification claims pursuant to Rule 12(b)(6), and the district court granted both motions. 395 F.Supp.2d 183 (M.D.Pa.2005). Sovereign contends that was error. [7] Indemnification is a fault shifting mechanism. Sirianni v. Nugent Bros., Inc., 509 Pa. 564, 506 A.2d 868, 871, (1986). The right of indemnity rests upon a difference between the primary and the secondary liability of two persons each of which is made responsible by the law to an injured party. It is a right which enures to a person who, without active fault on his own part, has been compelled, by reason of some legal obligation, to pay damages occasioned by the negligence of another, and for which he himself is only secondarily liable. The difference between primary liability and secondary liability ... depends on a difference in the character or kind of the wrongs which cause the injury and in the nature of the legal obligation owed by each of the wrongdoers to the injured person. ... [S]econdary as distinguished from primary liability rests upon a fault that is imputed or constructive only, being based on some legal relation between the parties, or arising from some positive rule of common or statutory law or because of a failure to discover or correct a defect or remedy a dangerous condition caused by the act of the one primarily responsible. Builders Supply Co. v. McCabe, 366 Pa. 322, 77 A.2d 368, 370, 371 (1951) (emphasis omitted). Sovereign claims a right to indemnification because BJ's and Fifth Third are primarily liable (presumably to Sovereign's cardholders) based on their negligently allowing the retention of the Cardholder Information. Sovereign believes that it is only secondarily liable because of the operation of the Truth in Lending Act (TILA), 15 U.S.C. § 1643(a), (d), which creates a ceiling of $50 for cardholder liability for unauthorized charges. Sovereign claims that its status of secondary liability arises because, when a credit card purchase is made, the cardholder's account is charged, or debited, within days for that purchase and it becomes the cardholder's obligation to pay the charges incurred; this is true even if the purchase is fraudulent. However, once a cardholder becomes aware of fraudulent activity on his/her account and notifies the card Issuer, that Issuer is obligated to reverse the charges, or credit the cardholder, for the amount of those fraudulent charges less $50, under the TILA. Thus, although § 1643 on its face only limits a cardholder's liability, it creates a concomitant duty in the Issuer to reimburse the cardholder's account for all fraudulent charges in excess of the $50 ceiling. Sovereign submits that its cardholders had already been charged the full amount of the fraudulent charges before the fraud was discovered. Thus, in order to keep cardholders' liability below the $50 limitation, Sovereign was obligated to reimburse the cardholder accounts for the amount of the fraudulent charges less $50. According to Sovereign, this is the precise situation the doctrine of equitable indemnification was designed to address. We disagree. Sovereign can point to no authority to support its attempt to forge an equitable indemnification claim from the provisions of the TILA, and we have found none. The TILA is a consumer protection statute. Fairley v. Turan-Foley Imports, Inc., 65 F.3d 475, 479 (5th Cir.1995). TILA § 1643 does not impose any obligation on issuers of credit cards to pay the costs associated with unauthorized or fraudulent use of credit cards. It simply limits the liability of cardholders, under certain circumstances, to a maximum of $50 for unauthorized charges. Indeed, § 1643 does not address, nor is it even concerned with, the liability of an Issuer or any party other than the cardholder for unauthorized charges on a credit card. Section 1643 imposes liability only upon the cardholder. Since TILA § 1643 does not obligate Sovereign to reimburse its cardholders' accounts, the district court correctly dismissed the equitable indemnification claims against Fifth Third and BJ's.