Bank’s Liability for Deceptive Gift Cards and Unlawful Fees

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

PLAINTIFF’S BRIEF IN OPPOSITION TO

PRELIMINARY STATEMENT

Defendants’ Motion to Dismiss Plaintiff’s Amended Complaint should be denied in its entirety for the simple reason that the Amended Complaint sets forth facts and allegations that more than adequately support each of Plaintiffs claims for violations of the New Jersey Consumer Fraud Act (“NJCFA”), the New Jersey Truth In Consumer Contract, Warranty and Notice Act (“TCCWNA”) and for unjust enrichment.  Defendants even acknowledged in their motion that the statements found on the packaging of the Gift Card at issue were deceptive and misleading. Indeed, Defendants specifically admit that they overcharged Plaintiff on two occasions for administrative fees well in excess of the amount of the fee represented on the packaging.

Having effectively admitted to making deceptive and misleading statements, Defendants have now resorted to inappropriate objections regarding the jurisdiction of this Court and unsupported character attacks on Plaintiff. To be certain, Defendants have not raised any legitimate jurisdictional questions pursuant to Rule 12(b)(1).  On the contrary,  Defendants’ current objections to the Amended Complaint are the very same flawed objections that Defendant made in connection with their initial motion to dismiss, which notably were raised pursuant to Rule 12(b)(6).^[1]  Defendants erroneous assertion that these identical arguments are now jurisdictional issues amounts to nothing more than a veiled attempt to override the facts of Plaintiff’s well-pled Complaint and inappropriately seek dismissal of Plaintiff’s claims on the merits without permitting Plaintiff to conduct discovery.

Furthermore, in analyzing Defendants arguments under a Rule 12(b)(6) standard, each and every one of Defendants reasons for seeking dismissal are meritless. Defendants have ignored binding United States Supreme Court case law in  that squarely defeats any possibility that Plaintiff’s claims may be preempted. Defendant have overlooked a sea of precedent that unambiguously supports the conclusion that the law of New Jersey should apply to this lawsuit.  Defendant have even tried to concocted a bizarre accounting scheme in a desperate attempt to dispute Plaintiff’s damages in this matter.

When Defendants’ motion is stripped to its core, and a plain text reading is applied to the Amended Complaint’s actual allegations, it becomes clear that Defendants’  arguments are poorly reasoned and devoid of substance thus offering no basis to sustain Defendants’ motion.

PLAINTIFF’S RESPONSE TO DEFENDANTS’ FACTUAL ALLEGATIONS

A.                Gifts Cards Are A Useless Product To The Majority of Consumers.

Now conveniently stationed at the checkout counter of virtually every retail store in America, Gift Cards (or “stored value” cards  as termed by the industry) of all kinds gloss the checkout aisle like ornaments on a Christmas tree ready to be grabbed by an unsuspecting consumer ready to make an impulse purchase for that forgotten birthday or special occasion.  A cursory inspection of the Gift Cards packaging touts the convenience of Gift Cards and the wide array of locations where Gift Cards can be used.  Indeed, the Gift Card at issue in this case is coined as the “All-Access Gift Card” and solicits in boldface lettering that the card is “accepted anywhere VISA debit cards are accepted.”  See Amend. Compl., at Ex. A.  Gift Card issuers, such as Inter National Bank (“INB”), and servicers, such as Netspend Corporation (“Netspend”), however, are obviously not producing Gift Cards simply to make life more convenient for consumers. On the contrary, Defendants are producing these cards to make handsome profits.  Unfortunately, Defendants make these profits by fleecing the consumer.

The reason Gift Cards have become so heavily marketed to consumers is not surprising when one considers how Gift Cards really work. Gift Cards such as the one at issue in this lawsuit do not provide any increased convenience or purchasing power than a debit card (or check card), a regular check, or cash.  Gift Cards, however, are replete with schemes for Defendants to earn interest on the consumer’s funds during periods of inactivity and then whittle away the principal by charging outlandish fees.

1.         The “Purchase Fee”

Using Plaintiff as a comparator, had Plaintiff’s mother simply chosen to write a check to Plaintiff for $50.00 she would have saved $4.95 from the initial “purchase fee” charged.  See id.  The $4.95 charged, now pure profit to Defendants, equates to an almost 10% immediate interest charge assessed against the consumer.  By contrast, Plaintiff’s bank would have processed a $50.00 check or cash deposit for free.

2.         Earning Interest On The Consumer’s Money

The $50.00 spent on the Gift Card now goes to Defendants’ bank account instead of Plaintiff’s bank account.  Defendants then collect interest on the funds until Plaintiff uses the Gift Card to make a purchase.  Defendants thus incur a benefit from Plaintiff’s delay in using the Gift Card.  By contrast, had Plaintiff received a $50.00 check (or cash) from his mother, he could have deposited the money in his own bank account to earn interest before he spends the funds.

3.         The “Administrative Fee”

Defendants further fleece the consumer by charging an “administrative fee” in order to wipe out the funds on the Gift Card. See id.   Even if Defendants charged Plaintiff a $2.95 fee as represented on the packaging, which they did not do, said fee would equate to a greater than 70% annual interest rate on the initial principal of $50.00.  By contrast, Plaintiff would not have been charged any fee if he deposited the $50.00 in his bank account and did not use it for six months or even many years.^[2]

4.         The Replacement Fee And The Balance Inquiry Fee

Defendants then tack on fees for losing the card or making a telephone call to check the balance.  Defendants would have charged Plaintiff $9.95 if he lost the card and wanted a new card issued or alternatively have a check issued to him.  See Def. Ex. 3, Terms and Conditions.  Defendants also charged Plaintiff $0.50 for simply calling a phone number to check the balance.  See id.  By contrast, Plaintiff would be not be charged anything to a have new card issued if he lost his debit card, nor would he be charged if he called his bank’s automated customer service line to check the balance on his bank account.

5.         Fraud Protection

Plaintiff’s debit card can also be used everywhere that the Gift Card can be used and provides greater fraud protection. For example, Plaintiff’s debit card is protected by a PIN number, whereas the Gift Card has no PIN at all. Plaintiff can also report fraudulent activity on his debit card and be reimbursed.  By contrast, Defendants confirm in the fine print that “[i]f you lose the Gift Card someone would be able to use all the remaining value.”  Moreover, Defendants require the consumer to provide his card number before offering the consumer any recourse at all for fraudulent activity or reissuing a lost card.  Since many consumers presumably do not write down or remember a sixteen digit Gift Card number, the end result is that the consumer losses all the funds to the thief.^[3]

B.                 Defendants Admit That The Packaging On The Gift Card Contains Misrepresentations.

Although the above described regime certainly causes one to question the legitimacy of Gift Card sales to most consumers,^[4]Plaintiff’s claims here are specifically related to three dishonest statements Defendants included on the packaging of the Gift Card at issue to mislead consumers.

1.        “The monthly administrative fee of $2.95 will be waived for the first 6 months from date of purchase.”

Defendants admit that it overcharged Plaintiff by accessing him a $4.95 monthly fee instead of the $2.95 fee represented on the packaging on April 30, 2008.  See Def. Br., at 7.  What is even more disturbing is that Defendants continued to overcharge Plaintiff by assessing him the same $4.95 fee on May 31, 2008 even though Plaintiff contacted Defendants on May 12, 2008 and notified them of the overcharge.  See id.  Since Defendants did not refund any portion of the fee assessed in May 2008, Plaintiff was thus overcharged $2.00 in connection with the monthly fee assessment for May 2008.

2.         “The funds on this card do not expire” and “Card good through 11.09”

Defendants confirm in the Gift Card’s fine print that “fees will be deducted . . . until the value of the card reaches $0.”  See Def. Ex. 3.  Therefore, even if Defendants properly charged Plaintiff a $2.95 fee, which they did not do, simple arithmetic shows that the card will expire 23 months from the date of purchase even if Plaintiff made no purchases at all.  Accordingly, Defendants pitch that the funds do not expire is simply not true; the Gift Card would have become worthless by August 2009.

C.                Everything Related To This Lawsuit Occurred In New Jersey.

Virtually all relevant events in connection with Plaintiff’s claims occurred in New Jersey.  Plaintiff is a current resident of Marlton, New Jersey and possessed the Gift Card at issue along with its packaging in Marlton, New Jersey.  See Amend. Compl. & Def Br., at 2.  Every transaction made on the Gift Card, as confirmed by Defendants also occurred in New Jersey:

See Def Br., at 4-7.   The only direct interaction Plaintiff had with Defendants was via a call center in the Philippines.  See id.

LEGAL STANDARD

A.                A Well Pleaded Complaint Need Only Allege Claims That Are Not “Speculative” To Defeat A Motion To Dismiss Pursuant To Rule 12(b)(6).

Universally recognized as a notice pleading standard, Rule 8(a)(2) of the Federal Rules of Civil Procedure calls for a plaintiff filing a complaint in the federal courts to simply provide “a short and plain statement of the claim showing that the pleader is entitled to relief.”  See Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 555 (2007) (“A complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.”) See also Swierkiewicz v. Sorema N. A., 534 U.S. 506, 513 (2002) (calling Rule 8 a “simplified notice pleading standard.”)

When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).^[6]   “[T]he threshold level to be met by a plaintiff to withstand a motion to dismiss is very low.”  Smith v. Weeks, 2002 WL 31750203, at *5 (E.D. Pa. Dec. 9, 2002)

The Third Circuit after Twombly has consistently held that in considering a motion to dismiss pursuant to Rule 12(b)(6) the Court shall:

‘accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff’ and ‘determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.’

Umland v. PLANCO Financial Services, Inc., 542 F.3d 59, 64 (3d Cir. 2008) (quoting Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006) and Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n. 7 (3d Cir. 2002)).  See also Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (finding Pinker “remains an acceptable statement of the standard” and “finding [Twombly] confusing”). “Rule 12(b)(6) does not countenance … dismissals based on a judge’s disbelief of a complaint’s factual allegations.”  Twombly, 550 U.S. at 556 (quoting Neitzke v. Williams, 490 U.S. 319, 327 (1989)). “A well-pleaded complaint may proceed even if it appears ‘that a recovery is very remote and unlikely.’” Id. (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

To the extent Twombly or more recently Ashcroft v. Iqbal, 129 S. Ct. 937 (2009), impacts the standard of review of a Rule 12(b)(6) motion, these opinions merely clarify  that a complaint must “raise a right to relief above the speculative level.”  Twombly, 550 U.S. at 555.  The Third Circuit in Phillips noted that Twombly “‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence’ of the necessary element.” 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).

B.                 Defendants’ Supposed “Standing” Arguments Pursuant to Rule 12(b)(1) Are Not Jurisdictional Questions.

Jurisdiction of this Court over this matter is unquestionably conferred via the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2) (“CAFA”), in that there is diversity of citizenship between the Plaintiff and members of the proposed Class and Defendants, and the aggregate amount in controversy is in excess of five million dollars ($5,000,000.00).  See Amend. Compl.  Accordingly, this Court possesses full authority to oversee this lawsuit and rule upon questions of law that arise in the litigation.

Defendants now argue for the first time that the claims in Plaintiff’s Amended Complaint should be dismissed pursuant to Rule 12(b)(1) because Plaintiff purportedly lacks “standing” to sue.  Defendants’ classification of these objections is this manner is clearly erroneous.  In each instance, Defendants have contorted their arguments into supposed jurisdictional questions which in reality are just legal questions of statutory interpretation addressed on motion pursuant to Rule 12(b)(6) and/or inherently material questions of fact classically determined by a jury.  See Def Br., Sec. V.

By way of example, the question of whether Plaintiff is a “consumer” under either New Jersey or Texas law does not relate to the issue of standing, but rather a statutory interpretation of the law which this Court has full authority to decide.  Moreover, material questions of fact as to whether Plaintiff has suffered an “ascertainable loss” likewise do not amount to questions of Article III standing.  Defendants’ assertion that a preemption analysis would fall under the banner of standing is equally flawed.

The common thread among the above examples is that the Court has unquestioned power to make rulings on these issues. Standing by comparison historically is an analysis that the Court engages in to limit lawsuits filed by individuals based solely on ideologies, or when lawsuit are filed by individuals looking to protect the rights of others.  See, i.e., U.S. v. Richardson,  418 U.S. 166 (1974) (dismissing case for lack of standing where taxpayer was asking court to compel  government to give him information on precisely how the Central Intelligence Agency spends its funds).

Defendants are thus misusing subject matter jurisdiction to inappropriately create a new uncontested set of “facts” to be accepted in lieu of Plaintiff’s factual averments as set forth in his Amended Complaint. Defendants’ attempt to override the facts of a well-pled complaint and then move to dismiss Plaintiff’s claims on the merits in this manner without any discovery should be rejected out of hand.

Furthermore, Rule 12(b)(1) certainly was not meant to serve as a loophole to avoid the limitations of Rule 12(g) which is precisely what Defendants are doing here. Defendants noticeably failed to include in their initial motion to dismiss any argument that Texas law should apply or that Plaintiff’s claim should be dismissed pursuant to Texas law.  Accordingly, Plaintiffs claim in this regard is untimely pursuant to Rule 12(g) and should be denied summarily as well.

LEGAL ARGUMENT

 I.                  PLAINTIFF HAS STATED A VALID CLAIM AGAINST DEFENDANTS FOR VIOLATIONS OF THE NEW JERSEY CONSUMER FRAUD ACT.

A.                Plaintiff Has Sufficiently Plead That He Suffered An Ascertainable Loss Caused By Defendants’ Violation Of The NJCFA.

Defendants’ assertion that Plaintiff’s Amended Complaint is somehow deficient with respect to the pleading of ascertainable loss is belied by the language in Plaintiff’s Amended Complaint.  Plaintiff’s Amended Complaint clearly states:

Plaintiff and those similarly situated have suffered an ascertainable loss, including, but not limited to, being charged and/or paying the $4.95 monthly fee instead a $2.95 monthly fee after the first six month following the Gift Card’s purchase.

See Amend. Compl., at ¶ 22. This paragraph unambiguously claims that Plaintiff was overcharged by Defendants in connection with the fees assessed on his Gift Card while specifically referencing his “ascertainable loss.”  Although Plaintiff is not required to “to plead the amount of damages with mathematical precision,” this elementary calculation of loss should not have been hard for Defendants: Plaintiff was overcharged $2.00 for the fees assessed in the May 2008.  Astech-Marmon, Inc. v. Lenoci, 349 F. Supp. 2d 265, 271 (D. Conn. 2004) (citing Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1171 (9th Cir. 2002)).

Defendants’ additional demand for a detailed accounting of every transaction made on the Gift Card in the pleadings is entirely unwarranted.^[7]  As an initial matter, each and every transaction made on the Gift Card is not relevant to the merits of Plaintiff’s NJCFA claim.  For example, the fact that Plaintiff made a $3.75 purchase as Regal Cinema in Burlington, New Jersey in December 2008 does not have any direct relevance to basis for which Plaintiff claims relief.  Additionally, pleadings “[do] not require ‘detailed factual allegations.’”  Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Therefore, the omission of this information is really of no instance to the adequacy of the pleading.

Notwithstanding the above, the greatest flaw with Defendants argument is that Defendants obviously already know the transaction history related to the Gift Card. Indeed, Defendants even set forth the transaction history in excruciating detail in their Statement of Facts despite the questionable relevance of this information to Defendants’ motion.  See Def Br., at 2-7.  The pleadings stage is not an opportunity to force Plaintiff to complete a trivial task of re-pleading irrelevant facts that Defendants already know to delay progress in this case. Defendants’ motion to dismiss in this regard is thus devoid of any substance and should be denied.^[8]

B.                 Plaintiff In Fact Suffered An Ascertainable Loss.

Defendants’ backup theory relating to the “ascertainable loss” requirement under the NJCFA, that Plaintiff did not in fact suffer a loss, is equally unavailing.  Since Defendants admit they overcharged charged Plaintiff in both April 2008 and May 2008, Defendants concoct a bizarre accounting scheme to suggest that Plaintiff was somehow “enriched” because he was refunded the overcharged fee in April 2008.

Contrary to Defendants’ assertions, Plaintiff does not allege anywhere in his Amended Complaint that he is seeking reimbursement for the overcharged fees that were refunded to him for the month of April 2008. ^[9]  Moreover, Defendants’ acts of overcharging Plaintiff in April 2008 and May 2008 are two separate distinguishable transactions.  Defendants’ inference that, by refunding Plaintiff in connection with the overcharge in April, Defendants were somehow justified in overcharging him again in May simply defies credibility.  The simple fact that Defendants refunded Plaintiff the $4.95 administrative fee assessed on April 30, 2009 (as a “one time” controversy because Defendants indisputably overcharged him) does not mean that Plaintiff did not suffer a discrete ascertainable loss when Defendants overcharged him again in May 2008.  The most notable distinction between these two transactions is that Defendants consciously overcharged Plaintiff in May 2008 despite the fact that Plaintiff even contacted Defendants earlier in the month to advise Defendants that he was being overcharged.

Nonetheless, even if Defendants’ scheme is given some credence though it deserves none, the only observation to make at this juncture is that there is a material factual disagreement between the parties as to whether Plaintiff suffered an ascertainable loss. This disagreement can only be resolved by the jury.  See Szczubelek v. Cendant Mortgage Corp., 215 F.R.D. 107, 126 (D.N.J. 2003) (“whether Plaintiff suffered an actual “ascertainable loss” are clearly questions of fact for a jury to answer.”).  See also 49 Prospect Street Tenants Ass’n v. Sheva Gardens, Inc., 547 A.2d 1134, 1140 (N.J. Super. 1988).  Accordingly, Defendants’ motion to dismiss on this alternative theory should similarly be denied.

C.                Plaintiff’s Claim Pursuant To NJCFA Is Enforceable Against INB Regardless Of Its National Bank Status.

The United States Supreme Court recently ruled on the extent to which the National Banking Act (“NBA”) prevents states from enforcing it own laws against national banks.  In siding with the States, Justice Scalia wrote that “[i]f a state statute of general applicability is not substantively pre-empted, then ‘the power of enforcement must rest with the [State] and not with’ the National Government.”  See Cuomo v. Clearing House Ass’n, L.L.C., 129 S. Ct. 2710, 2717 (2009) (quoting  First Nat. Bank in St. Louis v. Missouri, 263 U.S. 640, 660 (1924)).  In reaching this conclusion, the Supreme Court made clear that the NBA and the authority it delegates to the Office of Comptroller of the Currency (“OCC”) does not divest states of its law enforcement powers.  See id. at 2717.

Although the Supreme Court was specifically addressing a state attorney general’s ability to bring an enforcement action against a national bank, the premise of the ruling applies equally to those consumers filing civil suits pursuant to state law as private attorneys general.  See Lemelledo v. Beneficial Management Corp. of America, 696 A.2d 546, 553 (N.J. 1997) (“the CFA, in allowing for private suits in addition to actions instituted by the Attorney General, contemplates that consumers will act as “private attorneys general.”). Accordingly, Defendants are not entitled to blanket protection from liability under the NJCFA simply because INB is a national bank.

There is also no conflict between the federal regulatory regime promulgated by the OCC and Plaintiff’s claims under the NJCFA that would warrant preemption.  Quite the contrary, the OCC similarly condemns the precise conduct for which Plaintiff has filed suit:

[W]ith respect to gift cards that are bank products, the OCC would expect to see the following disclosures . . . The amount or the existence of any monthly maintenance, dormancy, usage, or similar fees.

*    *     *

National bank gift card issuers should take appropriate steps to avoid engaging in marketing or promotional practices that could mislead a reasonable consumer about the terms, conditions, or limitations of the bank gift card product they are offering.  For example, issuers should not advertise a gift card as having “no expiration date” if monthly service or maintenance fees, dormancy fees, or similar charges can consume the card balance and thereby have the same practical effect as an expiration date.  Similarly, if such fees may consume the card balance before the stated expiration date for the card arrives, disclosures relating to that expiration date (other than the disclosure on the front of the card) should explain that possibility.

Williams, OCC Bulletin 2006-34, at 2-3 (emphasis added).

Defendants citation to SPGGC, LLC v. Ayotte, 488 F.3d 525 (1st Cir. 2007), and SPGGC, LLC v. Blumenthal, 408 F. Supp. 2d 87 (D. Conn. 2006), in support of their argument are inapposite.  In both of these cases, the States Attorneys General of New Hamsphire and Connecticut were attempting to enforce specific state consumer protection statutes that prohibit issuing Gift Cards with expiration dates or with applicable fees against national banks.  See Ayotte, 488 F.3d at 533; Blumenthal, 408 F. Supp. 2d at 91.  The Courts in these cases found that these types of provisions might conflict with OCC regulations which permitted national banks to assess fees and set expiration dates on gift cards.^[10]

Plaintiff, however, is not claiming that Defendants cannot issue Gift Cards with fees or expiration dates.  Plaintiff is only claiming that the disclosures regarding fees and expiration of the Gift Card at issue here mislead consumers.  To be certain, Plaintiff claims and the OCC’s guidance are in complete agreement that Defendants’ conduct in this case is misleading and deceptive as confirmed the OCC bulletin quoted above.  Defendants’ motion to dismiss on preemption grounds should also be denied.

D.                New Jersey Law Should Be Applied To Decide The Merits Of Plaintiff’s Consumer Fraud Claim.

To the extent this Court does not deny Defendants’ motion on this issue pursuant to Rule 12(g), Defendants argument that a potential conflict of law exists between the consumer fraud statutes of New Jersey and Texas^[11] is nonetheless mooted by the fact that virtually everything related to this lawsuit is connected to New Jersey.^[12]  The New Jersey Supreme Court in setting forth the choice of law standard for actions in tort held:

[W]e now apply the Second Restatement’s most significant relationship standard in tort cases. Under that standard, the law of the state of the injury is applicable unless another state has a more significant relationship to the parties and issues.

P.V. v. Camp Jaycee, 962 A.2d 453, 460 (N.J. 2008).  In a consumer fraud case, “the injury is decidedly where the consumer is located, rather than where the seller maintains its headquarters.”  In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1017 (7th Cir. 2002).  See alsoClark v. Experian Information Solutions Inc., 2005 WL 1027125, *3 (N.D. Ill. 2005).  The Restatement itself offers an explanation for this conclusion:

This is so for the reason among others that persons who cause injury in a state should not ordinarily escape liabilities imposed by the local law of that state on account of the injury. . . When a person in state X writes a letter about the plaintiff which is received by a person in state Y, the local law of Y, the state where the publication occurred, will govern most issues involving the tort.

Restatement (Second) of Conflict of Law § 145, cmt. e (1969).  Since Plaintiff resides in New Jersey and was harmed there, Defendants as such cannot dispute that New Jersey law presumptively applies. See Elias v. Ungar’s Food Products, Inc., 252 F.R.D. 233, 247 (D.N.J. 2008) (conducting conflict of law analysis of consumer fraud claim based on tort theory pursuant to Section 145).

Defendants’ analysis is markedly incomplete since they have failed to discuss or even consider a standard tort based conflict of law analysis under Section 145 in their briefing. Defendants have obviously avoided considering such an analysis since New Jersey law indisputably would apply.  Nonetheless, even applying a fraud theory to the analysis under Section 148 of the Restatement, which holds that “when the plaintiff’s action in reliance took place in the state where the false representations were made and received, the local law of this state determines the rights and liabilities of the parties,” New Jersey once again would meet this criteria.  Restatement (Second) of Conflict of Law § 148(1) (1969).  See Agostino v. Quest Diagnostics Inc., 256 F.R.D. 437, 462 (D.N.J. 2009) (applying law of plaintiffs’ home state pursuant to Section 148(1) in connection with false and deceptive letters received from defendant debt collectors). See also Siegel v. Shell Oil Co., 256 F.R.D. 580, 585 (N.D. Ill. 2008) (applying law of plaintiffs’ home state pursuant to Section 148(1) in connection with gasoline price fixing scheme).

Although Defendants cite In Re Mercedes Benz Tele Aid Contract Litigation, 257 F.D.R. 46 (D.N.J. 2007), to support their contention that the presumptive rule set forth in Section 148(1) should not apply, conducting a factors analysis under Section 148(2) does not improve Defendants’ argument.  New Jersey possesses contacts or interests under every applicable factor^[13] identified:

See Pl. Resp. to Def. Statement of Facts, supra.

The solitary factor providing Texas with any interest in this lawsuit at all is that INB and Netspend have business offices in Texas.^[14]  Courts have roundly criticized and refused to apply the law of the state where a defendant is headquartered in this manner.See, i.e., In re Bridgestone/Firestone, Inc., 288 F.3d at 1018 (“choice-of-law rule selects the 50 states and multiple territories where the buyers live, and not the place of the sellers’ headquarters, for these suits.”);  Inacom Corp. v. Sears, Roebuck and Co.,  254 F.3d 683, 688 (8th Cir. 2001) (“[The defendant] maintains its business headquarters in Chicago, Illinois, but most of the conduct comprising and resulting from the fraudulent concealment tort occurred in Omaha, Nebraska [where the plaintiff] Inacom received [the defendants] representations . . . [and] relied upon [the defendant’s] representations.”);  Berry v. Budget Rent A Car Systems, Inc., 497 F. Supp. 2d 1361, 1365 (S.D. Fla. 2007) (“A consideration of the Sections 145 and 148 contacts persuades this Court that it should apply the law of the state in which each Plaintiff rented a vehicle, rather than the law of  . . . the state in which [the defendant] is headquartered.”); Pratt v. Panasonic Consumer Electronics Co., 2006 WL 1933660, *13 (N.J. Super. 2006) (applying law of plaintiff’s home state instead of state where defendant was headquartered).

Indeed, even the Texas courts reject Defendants’ approach.  One Texas appellate court summarized that “Section 148 so clearly points to the consumer’s location rather than the manufacturer’s that one writer calls it ‘one of the most easily applied tests in theRestatement.’” See Tracker Marine, L.P. v. Ogle, 108 S.W.3d 349, 357 (Tex. App. 2003) (quoting  Ryan, Comment, Uncertifiable?: The Current Status of Nationwide State Law Class Actions, 54 Baylor L. Rev.. 467, 499 (2002)).  See also Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 698 (Tex. 2002) (“Texas . . . does not apply the law of the state where a defendant is headquartered to every claim for economic damages that can be alleged against the defendant.”).

Relying solely on In Re Mercedes Benz Tele Aid Contract Litigation^[15] again for support, Defendants beg this Court to ignore the fact that the factors analysis under Section 148(2) overwhelmingly favors New Jersey, and conduct yet another analysis under Section 6 which provides only generic guidelines for conducting a conflict analysis. See Restatement (Second) of Conflict of Law § 6 (1969).  Unfortunately for Defendants, even this analysis favors New Jersey’s interests.

New Jersey’s interest in protecting consumers is evidenced by its comprehensive consumer fraud law. In fact, “[t]he available legislative history demonstrates that the NJCFA was intended to be one of the strongest consumer protection laws in the nation.”  . . . [T]he NJCFA generally provides a higher level of protection for consumer-plaintiffs through measures that make it easier for consumer-plaintiffs to recover in lawsuits against businesses engaging in fraudulent practices, and thus members of the proposed class residing in other states will generally be afforded no less protection under the NJCFA than their home state, and, in fact, may receive greater protection. As a result, the application of NJCFA does not trample upon other states’ interest in protecting their consumers from fraud.

Elias, 252 F.R.D. at 247 (finding New Jersey to have most significant interest in enforcing its consumer protection laws for the benefit of consumers).

Judge Irenas perhaps best summarized why Defendants’ argument should be put to rest in his conflict of laws analysis of the consumer fraud statutes of Pennsylvania and New Jersey:

It is unrealistic, however, to suggest that the Pennsylvania legislature intended to protect the perpetrators of consumer fraud by holding out the possibility that damage awards might be lower than in New Jersey. Both New Jersey and Pennsylvania wished to protect consumers and their statutes are in harmony in achieving that end. Their differences do not represent competing or conflicting resolutions of a particular policy issue. Rather they both reflect a legislative determination to attack the same evil. Because plaintiff has chosen to invoke the remedies of the New Jersey law . . . and nothing in the law is in conflict with or repugnant to Pennsylvania law, this court will apply such law in the resolution of this case.

Boyes v. Greenwich Boat Works, Inc., 27 F. Supp. 2d 543, 548 (D.N.J. 1998).  The same rationale applies here in an analysis between Texas law and New Jersey law.  Defendants’ suggestion that Texas’ consumer protection law was somehow intended to protect businesses is a fallacy.  Even Texas courts confirm the same.  See, i.e., Tracker Marine, 108 S.W.3d at 356 (“Consumer protection statutes are intended to protect consumers; one would expect the state where those consumers reside would have the most significant interest.”).^[16]  See also Pope v. Rollins Protective Services Co.,  703 F.2d 197, 201-202 (5th Cir. 1983) (“One of the primary reasons for the enactment of the DTPA was to provide consumers with a remedy for deceptive trade practices without the burdens of proof and numerous defenses encountered in a common law fraud or breach of warranty action.”).

For these reasons, New Jersey law should be applied to Plaintiff’s consumer fraud claims, and Defendants’ motion to dismiss in this regard should accordingly be denied.

II.                  PLAINTIFF HAS STATED A VALID CLAIM AGAINST DEFENDANTS FOR VIOLATIONS OF THE NEW JERSEY TRUTH IN CONSUMER CONTRACT, WARRANTY AND NOTICE ACT.

Plaintiff has also brought a statutory claim under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:12-14 et seq. (“TCCWNA” or “Act”).  Defendants move to dismiss Plaintiff’s TCCWNA claim because (1) Plaintiff is not a consumer and (2) Plaintiff did not plead a violation of a clearly established consumer right or responsibility of a seller.  See Def. Br., at 31, 38.  Defendants’ arguments fail.

The TCCWNA prohibits sellers and creditors, among other businesses, from “offering or entering into certain consumer contracts or giving or displaying certain written consumer warranties, notices or signs which are in violation of the rights of consumers . . . .”  N.J.S.A. 56:12-14 (emphasis added).  Specifically, the TCCWNA provides that:

No seller, lessor, creditor, lender or bailee shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract or give or display any written consumer warranty, notice or sign after the effective date of this act which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee as established by State or Federal law at the time the offer is made or the consumer contract is signed or the warranty, notice or sign is given or displayed.

N.J.S.A. 56:12-15.  As a consumer protection statue under Title 56 (which enumerates New Jersey’s consumer protection laws), the TCCWNA should be broadly construed in favor of consumers.  See Bosland, 964 A.2d at 748 (N.J. 2009) (summarizing history of “constant expansion” of consumer protections ) (quoting Thiedemann v. Mercedez-Benz, U.S.A., L.L.C., 872 A.2d 783 (N.J. 2005)).

Although the TCCWNA clearly protects “consumers,” by its own terms it also protects “prospective consumers.”  N.J.S.A. 56:12-15.  The term consumer is defined as “any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes.”  Id.  The term “prospective” is not defined.  Notably, however, the Act does not require the “consumer” or “prospective consumer” to have purchased anything directly from the defendant seller or creditor, or to have any privity with the defendant.  Nor could it logically require a purchase or other direct transaction, since the Act was clearly drafted in a way as to not only regulate contracts, but also “signs,” “notices” and warranties that are on “display” or that are “given” rather than sold.   Of course, signs, notices and other displays cannot normally be sold or purchased.

The TCCWNA further does not require the plaintiff to show damages, as it plainly provides that: “Any person who violates the provisions of this act shall be liable to the aggrieved consumer for a civil penalty of not less than $100.00 or for actual damages, or both at the election of the consumer, together with reasonable attorney’s fees and court costs.”   N.J.S.A. 56:12-17.  As one court put it, the Act “can be violated if a contract or notice simply contains a provision prohibited by state or federal law, and it provides a remedy even if the plaintiff has not suffered any actual damages.”  Barrows v. Chase Manhattan Mortg. Corp., 465 F. Supp. 2d 347, 362 (D.N.J. 2006);accord, McGarvey v. Penske Automotive Group, Inc., 2009 WL 1874070 (D.N.J. June 29, 2009).

The TCCWNA may be violated if the writing “includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee as established by State or Federal law . . . .”  N.J.S.A. 56:12-15 (emphasis added).  The New Jersey Superior Court has held that a violation of the Consumer Fraud Act (“NJCFA”) can constitute a violation of a “clearly established legal right of the consumer” under the TCCWNA.  See Bosland v. Warnock Dodge, Inc., 933 A.2d 942, 949 (N.J. Super. 2007), affirmed 964 A.2d 741 (N.J. 2009) (in class action, finding that false written representation concerning automobile registration fee which can violate NJCFA can also be basis for TCCWNA claim).

The fact that the underlying “violation” of an “established right of the consumer or responsibility of the seller . . . creditor . . .” may be a basis for a separate cause of action does not nullify the TCCWNA.  The Act expressly provides that:  “The rights, remedies and prohibitions accorded by the provisions of this act are hereby declared to be in addition to and cumulative of any other right, remedy or prohibition accorded by common law, Federal law or statutes of this State, and nothing contained herein shall be construed to deny, abrogate or impair any such common law or statutory right, remedy or prohibition.”  N.J.S.A. 56:12-18.

With these broad provisions and remedial purposes in mind, it is evident in this case that Plaintiff properly pled a claim under the TCCWNA.

A.                Plaintiff’s Amended Complaint Shows That He Is A Consumer Or Prospective Consumer. 

Defendants first argue that Plaintiff is not a “consumer” under the TCCWNA.  See Def. Br. at 32, 38.   This argument fails for several reasons.

First, Plaintiff has pled that he is a consumer insofar as he is an “individual” who “buys” “property or service which is primarily for personal, family or household purposes.”  N.J.S.A. 56:12-15 (emphasis added).  There is no doubt that Plaintiff used the Gift Card for personal and household purchases, such a books and movies.  The fact that he did not buy the Gift Card directly from Defendants is of no moment, since the TCCWNA does not require that the consumer must have actually been the purchaser of a consumer product or service from the defendant.

Indeed, the TCCWNA covers “consumers” who are aggrieved by a “notice” or “sign,” without any prerequisite of a purchase, and prohibits the “giving or displaying” of notices or signs that violate clearly established rights or responsibilities.  There is no doubt that the language at issue here — about the administrative fee of the Gift Card and whether the value would ever expire — was “displayed” on the Gift Card and Gift Card’s packaging or “given” to Plaintiff.  Such language can be a “notice,” “sign” or “warranty” on display to a consumer.  See generally Neveroski v. Blair, 358 A.2d 473, 479 (N.J. Super. App. Div. 1976) (“We do not consider that privity is a condition precedent to recovery under [the related NJCFA].  Section 19 clearly grants a remedy to ‘any person who suffers any ascertainable loss * * * as a result of the use’ of any practice declared unlawful. There is no provision that the claimant thereunder must have a direct contractual relationship with the seller of the product or service”) (abrogated on other grounds that actually make statute broader).

Second, in this case, Defendants’ own gift card packaging provides that “these terms and conditions apply to purchaser and to any subsequent holder of the card by gift or otherwise.”  (See Amend. Compl. ¶ 47).  Therefore, even if assuming, arguendo, that Plaintiff has to be the purchaser of the gift card, Defendants’ own product provides that Plaintiff (as a subsequent holder) can stand in the shoes of the purchaser.  Surely, Defendants cannot have it both ways on this score.  If Plaintiff has to be bound by the terms and conditions (including the various fees charged for the gift card) even though he was not the direct purchaser, then Defendants have to be bound by the Plaintiff’s claims asserting the rights of the purchaser.

Finally, the TCCWNA clearly applies to “prospective consumers” as well as “consumers.”  N.J.S.A. 56:12-15.  Although not defined by the TCCWNA, the common definition of “prospective” is “effective or operative in the future . . . anticipated or expected; likely to come about.”  Black’s Law Dictionary 7th ed. at 1238.  Certainly Plaintiff can be a future or prospective buyer of the gift card. Indeed, as both the beneficiary and the actual user of the gift card at issue in this case, it is difficult to imagine how Plaintiff cannot, at a minimum, receive the protection of the TCCWNA as a “prospective consumer.”

There can be no doubt here that Plaintiff received the Gift Card and the written misrepresentations that came with it and its package.   Nor is there any doubt that Plaintiff lost certain value from the Gift Card that was eaten away by Defendants’ misleading fees.

B.                 Plaintiff Has Clearly Pled That Defendants Have Violated A Clearly Established Legal Right Of The Consumer Or Responsibility Of The Seller.   

Defendants also argue that Plaintiff’s TCCWNA claim must be dismissed because he purportedly “fails to allege a provision that violates a clearly established legal right of the consumer or responsibility of the seller.”  See Def. Br. at 32, 38.   To the exclusion of other claims or theories of liability, Defendants focus upon only a fragment of Plaintiff’s TCCWNA claim and repeatedly cite to a disclaimer in the packaging of the gift card that provides that a $2.95 monthly fee will be charged after the first six months “except where (or unless) prohibited by law.”  Id.  Plaintiff’s Amended Complaint plainly sets forth a TCCWNA claim, the disclaimer oft-cited by Defendants notwithstanding.

First, the Amended Complaint makes clear what offending notice, sign or warranty Defendants put in writing.  The Amended Complaint specifically pleads:

• The Gift Card package contains the following provisions and representations: (a)“Card good through 11.09”; (b)      “The funds on this card do not expire.”; (c)“The monthly administrative fee of $2.95 will be waived for the first 6 months from date of purchase.” Amend. Compl., at ¶16.

• Defendants’ policy and/or practice is to charge a monthly fee of $4.95 (not $2.95) against the unused value of the Gift Cards after 6 consecutive months. Id. at ¶17.

• Defendants charged such a $4.95 monthly fee, which they described as a “maintenance” fee, to Plaintiff’s account on or about April 30, 2008 and again May 31, 2008.  Id. at ¶17.

This type of language on any product can constitute a warranty.^[17]  Minimally, the offending written language can be a “sign”^[18] or “notice,” ^[19] as those terms are ordinarily understood.     

Plaintiff’s Amended Complaint also plainly sets forth what clearly established rights or responsibilities these written misrepresentations violate including: The N.J. Consumer Fraud Act (Amend. Compl., at ¶¶ 38-44); The common law of unjust enrichment (Amend. Compl., at ¶¶ 53-55); and  The Federal Trade Commission Act, 15 U.S.C. § 45(a)(1). (Amend. Compl., at ¶¶ 52).

Thus, Plaintiff has pled in detail both the provisions of the writing that are offensive and the clearly established state and federal law that they offend.  Nothing more is required at the pleadings stage of the case.  See Bosland, 933 A.2d at 949 (N.J. Super. 2007), affirmed 964 A.2d 741 (N.J. 2009) (“plaintiff alleged sufficient facts that, if proven, would establish a violation of the TCCWNA”) (emphasis added).   Plaintiff must now be given the opportunity to take discovery and prove his underlying claims, which will also establish his claim under the TCCWNA.

As in Bosland, supra, the written misrepresentations that form the basis for the NJCFA claim also form the basis of Plaintiff’s TCCWNA claim.  Although the Bosland case involved a “regulatory violation” under the NJCFA, there can be no doubt that the New Jersey Supreme Court has clearly established for well over a decade that “affirmative acts or misrepresentations” — along with “knowing omissions” and “regulatory violations”  – can be the basis for NJCFA claims.  See Cox v. Sears, Roebuck & Co., 647 A.2d 454, 461-462 (N.J. 1994); accord, Real v. Radir Wheels, Inc., 2009 WL 961206, *4 (N.J. April 8, 2009) (“scope of the CFA’s proscriptions is both wide and deep”).  This is a well pled case of affirmative misrepresentations under a clearly established New Jersey consumer protection law, the NJCFA.

The same analysis is true for Plaintiff’s unjust enrichment claim, discussed infra.  See VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554, 641 A.2d 519 (1994) (unjust enrichment clearly established common law claim in New Jersey); see also N.J.S.A. 56:12-18 (“The rights, remedies and prohibitions accorded by the provisions of this act are hereby declared to be  . . . cumulative of any other right, remedy or prohibition accorded by common law, Federal law or statutes of this State”).

Plaintiff also had a basis to plead, and has in fact pled, that Defendants’ written misrepresentations violate clearly established federal law, namely the Federal Trade Commission Act, 15 U.S.C. § 45(a)(1).  The OCC has provided guidance that in “connection with the gift card[s], the bank would be subject to the prohibition against unfair or deceptive acts or practices in the Federal Trade Commission Act, 15 USC 45(a)(1), and to all other requirements applicable to bank products.”  See OCC Bulletin 2006-34, n. 4.  As quoted in Section I.C of this brief, supra, Defendant have clearly violated the OCC guidelines by labeling and marketing their gift card as one that never expires and also by misrepresenting a $2.95 monthly fee when the actual monthly fee was $4.95 Defendants violated consumer rights and their responsibilities under clearly established federal law, as set forth above.  Indeed, the OCC provisions could not be more on point.

In sum, Plaintiff’s Amended Complaint sets forth a proper TCCWNA claim and Defendants’ motion to dismiss should be denied.

III.               PLAINTIFF HAS STATED A VALID CLAIM AGAINST DEFENDANTS FOR UNJUST ENRICHMENT.

To state a claim for unjust enrichment, a plaintiff must demonstrate “both that defendant received a benefit and that retention of that benefit without payment would be unjust.”  VRG Corp. v. GKN Realty Corp., 641 A.2d 519, 526 (N.J. 1994).  In a brief “throwaway” argument, Defendants claim that Plaintiff is required to plead his unjust enrichment claim with reference to the standards of Rule 9(b) – stating the circumstances with particularity – and that he has not done so.  See Def. Br., at 35, 39.  To the contrary, a brief perusal of the Amended Complaint easily demonstrates that Plaintiff has met this standard.

The Amended Complaint states specifically that Defendants’ policy and/or practice is to charge a monthly fee in excess of what they represent will be charged (Amend. Compl., at ¶¶ 16-17, 19-21, 25); that they charged such excessive fees to the Plaintiff on at least two separate occasions, in April and in May, 2008 (Id. at ¶ 18); that Plaintiff and members of the class were charged and/or paid the excessive amounts (Id. at ¶¶ 22-24); and, that Defendants have been unjustly enriched by their collection of the unlawful amounts (Id. at ¶¶ 53-55).  Even under the heightened standard of Rule 9(b), Plaintiff’s allegations throughout the Amended Complaint clearly demonstrate the “who, what, when, where, and how” of the alleged wrongdoing.  See In re Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir. 1999) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)).  Defendants’ motion to dismiss the unjust enrichment claim should be denied.

CONCLUSION

            For the foregoing reasons, Plaintiff respectfully requests that this Court deny Defendants’ Motion to Dismiss Plaintiff’s Amended Complaint in its entirety.

Respectfully Submitted,

FRANCIS & MAILMAN, P.C.

BY:     /s/ James A. Francis                                                                            JAMES A. FRANCIS

JOHN SOUMILAS

GREGORY GORSKI

Land Title Building, 19^th Floor

100 South Broad Street

Philadelphia, PA 19110

(215) 735-8600

DONOVAN SEARLES, LLC

DAVID A. SEARLES

1845 Walnut Street, Suite 1100

Philadelphia, PA 19103

(215) 732-6067

Dated:  July 23, 2009                                      Attorneys for Plaintiff and the Class

^{[1] Defendants provide no explanation for this peculiar circumstance in their brief.↩}

^{[2] Defendants are also motivated to clear out Plaintiff’s funds with fees so as to avoid having to declare the funds as unclaimed property to the State should Plaintiff fail to use the Gift Card for a long period of time (many years). Defendants as a result are able to keep the funds for themselves as pure profit as opposed to turning over a large portion of the unused funds to the State.↩}