Court Opinion

ID: 4273329
Source: CourtListenerOpinion
Date Created: 2018-05-08 17:00:18.327506+00
Date Added: 2024-06-11T14:33:30.218721
License: Public Domain

NOT PRECEDENTIAL

                         UNITED STATES COURT OF APPEALS
                              FOR THE THIRD CIRCUIT
                                   ____________

                                        No. 16-3523
                                       ____________

                          MZL CAPITAL HOLDINGS, INC,
                On behalf of themselves and all others similarly situated;
                                  THOMAS RAIC,
                                                 Appellants

                                             v.

                  TD BANK, N.A.; UNIDENTIFIED ENTITIES (A-Z)

                       On Appeal from the United States District Court
                                for the District of New Jersey
                          (D. C. Civil Action No. 1-14-cv-05772)
                         District Judge: Honorable Renee M. Bumb

                         Submitted under Third Circuit LAR 34.1(a)
                                    on March 24, 2017

           Before: SMITH, Chief Judge, JORDAN and ROTH, Circuit Judges

                                (Opinion filed: May 8, 2018)

                                     ________________

                                         OPINION *

ROTH, Circuit Judge:

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
       Plaintiffs MZL Capital Holdings, Inc. (MZL) and Thomas Raic appeal the District

Court’s dismissal of their Second Amended Class Action Complaint. Since plaintiffs’

allegations are inadequate, we will affirm.

                                              I.

       MZL, a New York corporation, and Raic, a resident of New York State, are both

checking account customers of TD Bank. Plaintiffs utilized TD Bank to send and receive

wired currency from foreign countries. Each plaintiff entered into a service contract with

TD Bank which stated that currency would be converted using an “applicable exchange

rate.” 1 TD Bank’s “applicable exchange rate” is calculated using a number of variables,

including but not limited to the Interbank Market rate, the size of the proposed

transaction, and the prevailing Customer Market rate. Although TD Bank does not define

“applicable exchange rate” within any of its contracts, it provides customers its

applicable exchange rate for a particular date either by telephone or e-mail.

       MZL had a commercial checking account with TD Bank. Around January 29,

2014, MZL received a wire transfer from London in the amount of £70,000.00. TD Bank

exchanged this currency at a rate of 1.3355 dollars on the pound, despite a higher

exchange rate posted by the Wall Street Journal. 2 After MZL inquired about the

1
  JA 143. MZL entered into a “Business Deposit Account Agreement” with TD Bank
that stated that currency would be calculated by “using our applicable exchange rate that
is in effect on the date when we credit the funds to your Account and not when the
deposit is made.” Id. Although a different contract, Raic’s agreement with TD Bank also
referred to an “applicable rate.” JA 158.
2
  The Wall Street Journal posted an exchange rate of 1.3664 dollars on the pound for
January 29, 2014. JA 156. The Wall Street Journal’s posted exchange rates are common
benchmarks in the financial services industry.
                                              2
exchange rate, TD Bank sent MZL a letter indicating that it set its rates based on criteria

that “did not represent the actual cost of converting the currency given the risk it assumed

in the timing of the [exchange].” 3 Nonetheless, TD Bank provided MZL with a $250.00

credit, an amount that was less than what TD Bank would have owed MZL had it applied

the exchange rate posted by the Wall Street Journal.

       Raic had a personal TD Value Checking account with TD Bank. Around July 29,

2014, Raic received a wire transfer from Croatia in the amount of €61,323.41. TD Bank

exchanged this currency at a rate of 1.3048, notwithstanding higher exchange rates posted

by the Wall Street Journal 4 and OANDA Corporation. 5 Around August 10, 2015, Raic

received a wire transfer from Croatia in the amount of €22,500.00. Once again, TD Bank

exchanged this currency at a lower rate than those posted by reputable foreign exchange

reporters. After each transaction, Raic called TD Bank to determine the applicable

exchange rate used during each wire transfer. TD Bank allegedly replied that the

applicable exchange rate included the market rate and a fee that applied to the

transaction.

       On September 16, 2014, plaintiffs filed a putative class action lawsuit against TD

Bank, alleging that TD Bank’s applicable exchange rate defrauded its customers in

violation of the New Jersey Consumer Fraud Act (NJCFA). Plaintiffs subsequently

3
  JA 156.
4
  The Wall Street Journal posted an exchange rate of 1.3409 dollars on the euro for July
29, 2014. JA 158.
5
  OANDA posted an exchange rate of 1.33908 dollars on the euro for July 29, 2014. JA
158. OANDA is another reputable source of market exchange rates used by the financial
services industry.
                                             3
amended their complaint on December 4, 2015, to add claims for breach of contract,

breach of the implied covenant of good faith and fair dealing, and violation of various

other states’ consumer protection laws. On December 23, 2015, TD Bank moved to

dismiss all causes of action.

       On September 6, 2016, the District Court dismissed with prejudice the Second

Amended Complaint. Plaintiffs appealed.

                                            II. 6

       Plaintiffs appeal only the dismissal of their claims for violations of the NJCFA,

breach of contract, and breach of the implied covenant of good faith and fair dealing.

Each claim is addressed below.

                                   A. NJCFA CLAIM

       To state a claim under the NJCFA, a plaintiff must allege (1) unlawful conduct by

a defendant, (2) an “ascertainable” loss, and (3) a causal relationship between the

defendant’s unlawful conduct and the plaintiff’s loss. 7 Such claims sound in fraud, and

thus must be pled with particularity as required by Rule 9(b) of the Federal Rules of Civil

Procedure. 8 When pleadings of fraudulent conduct are based on the plaintiff’s

6
  The District Court had jurisdiction over this matter pursuant to 28 U.S.C. § 1331. We
have jurisdiction of this appeal pursuant to 28 U.S.C. § 1291. We exercise plenary
review over a dismissal pursuant to Rule 12(b)(6) and make all inferences in favor of the
nonmoving party. Mandel v. M & Q Packaging Corp., 706 F.3d 157, 163 (3d Cir. 2013)
(citation omitted).
7
  Zaman v. Felton, 98 A.3d 503, 516 (N.J. 2014) (internal quotation marks and citation
omitted).
8
  See, e.g., Frederico v. Home Depot, 507 F.3d 188, 202-03 (3d Cir. 2007) (applying the
heightened pleading standards of Rule 9(b) to claims under the NJCFA); F.D.I.C. v.
Bathgate, 27 F.3d 850, 876 (3d Cir. 1994) (same).
                                             4
information and belief, the plaintiff “must also describe the sources of information with

particularity, providing the who, what, when, where and how of the sources, as well as

the who, what, when, where and how of the information those sources convey.” 9

       Applying these standards, the District Court found that the plaintiffs did not

adequately plead that TD Bank’s conduct was unlawful. The court pointed out that there

was nothing in the agreement that required TD Bank to use a specific exchange rate and

that the applicable exchange rate was used in each instance. We agree. Even assuming,

without deciding, that the facts in plaintiffs’ complaint are pled with the particularity

required, plaintiffs allege only that TD Bank charged a “flat embedded transaction fee

equivalent to a certain number of basis points,” rather than charging the rate quoted by

the more established foreign exchange reporters.

       While the omission of material information may constitute unlawful conduct as

defined in the NJCFA, 10 the New Jersey Supreme Court has clarified that “when the

alleged consumer fraud consists of an omission, . . . intent is an essential element of the

fraud.” 11 None of the plaintiffs’ allegations establish such intent with particularity as

required by Rule 9(b). Without any particularized factual allegations suggesting that TD

Bank intended to deceive consumers, we conclude that TD Bank’s alleged conduct does

9
  Institutional Investors Grp. v. Avaya, Inc., 564 F.3d 242, 253 (3d Cir. 2009).
10
   The NJCFA defines “unlawful practice” as “[t]he act, use or employment by any
person of any unconscionable commercial practice, deception, fraud, false pretense, false
promise, misrepresentation, or the knowing, concealment, suppression, or omission of
any material fact with intent that others rely upon such concealment, suppression or
omission, in connection with the sale or advertisement of any merchandise.” N.J. Stat.
Ann. 56:8-2. The NJCFA further defines “merchandise” to include “services or anything
offered, directly or indirectly to the public for sale.” N.J. Stat. Ann. 56:8-1(c).
11
   Cox v. Sears Roebuck & Co., 647 A.2d 454, 462 (N.J. 1994).
                                              5
not “stand outside the norm of reasonable business practices” or “victimize the average

consumer” in any way. 12

       Accordingly, we will affirm the dismissal of plaintiffs’ NJCFA claim.

                             B. BREACH OF CONTRACT

       Under New Jersey law, a proper breach of contract claim includes four elements:

(1) the parties entered into a valid contract, (2) the plaintiff honored his own obligations

under the contract, (3) the defendant failed to perform his obligations under the contract,

and (4) the plaintiff sustained damages as a result. 13 Finding that nothing in the contract

required TD Bank to use a particular exchange rate or disclose its methodology for

calculating the “applicable exchange rate,” the District Court determined that TD Bank’s

conduct did not breach any contractual obligation.

       On appeal, plaintiffs assert that the mere fact that the customer agreement did not

disclose the alleged existence of an embedded fee constitutes a violation of the depository

agreements signed by TD Bank. Even ignoring the problems with these allegations

discussed above, plaintiffs have still failed to identify any provision of the contracts

between the parties which required TD Bank to disclose the existence of such a fee.

Absent any such contractual obligation, a breach of contract claim cannot lie. 14 Thus, we

will affirm dismissal of plaintiffs’ breach of contract claim.

12
   New Jersey Citizen Action v. Schering-Plough Corp., 842 A.2d 174, 177 (N.J. Super.
Ct. 2003) (internal quotation marks and citation omitted).
13
   Frederico, 507 F.3d at 203 (citation omitted).
14
   Cf. Edwards v. Prudential Property & Casualty Co., 814 A.2d 1115, 1120 (N.J. Super.
Ct. 2003) (finding that the lack of a contractual obligation defeats a breach of contract
claim).
                                              6
                      C. IMPLIED CONVENANT OF GOOD FAITH

       Under New Jersey law, claims for a breach of the implied covenant of good faith

and fair dealing require a plaintiff to provide “evidence sufficient to support a conclusion

that the party alleged to have acted in bad faith has engaged in some conduct that denied

the benefit of the bargain originally intended by the parties.” 15 No claim for a breach of

the covenant of good faith and fair dealing may lie, however, unless the underlying

conduct is distinct from that alleged in a corresponding breach of contract claim. 16

       Plaintiffs claim a breach of the implied covenant of good faith and fair dealing

because TD Bank allegedly charged an embedded transaction fee that was not listed in

the contract. In this way, TD Bank misled customers by using the phrase “applicable

exchange rate” to make a profit. The District Court rejected this argument, finding that

the plaintiffs’ claim was based on the same conduct as the breach of contract claim.

Further, the District Court determined that the plaintiffs had not shown that TD Bank

acted in bad faith.

       Plaintiffs renew these arguments on appeal. We agree that the plaintiffs’ claim for

breach of the implied covenant of good faith and fair dealing is identical to its claim for

breach of contract; the issue of the embedded fee serves as the sole factual basis for both

15
   Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 864 A.2d 387,
396 (N.J. 2005) (internal quotation marks and citation omitted); see also Vasaturo Bros.
v. Alimenta Trading-USA, LLC, No. 09-2049, 2011 WL 3022440, at *5 (D.N.J. July 22,
2011) (noting that bad motive is a requirement for a claim for breach of the implied
covenant of good faith and fair dealing).
16
   See Wade v. Kessler Inst., 798 A.2d 1251, 1262 (N.J. 2002) (finding that, where same
conduct underlies both claims, “there can be no separate breach of an implied covenant of
good faith and fair dealing”).
                                              7
claims. Thus, we will affirm the dismissal of plaintiffs’ breach of the implied covenant

of good faith and fair dealing claim as duplicative of the breach of contract claim.

                                            III.

       In light of the foregoing, we will affirm the judgment of the District Court

                                             8