Schwartz v. HSBC Bank United States, N.A.

BRUCE SCHWARTZ, individually and on behalf of all others similarly situated, Plaintiff, v. HSBC BANK USA, N.A., Defendant.

14 Civ. 9525 (KPF)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

January 9, 2017

OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:

Plaintiff Bruce Schwartz sued Defendant HSBC Bank USA, N.A., for alleged violations of the Truth in Lending Act ("TILA" or the "Act"), 15 U.S.C. §§ 1601-1677f, and its implementing regulations. In a previous opinion, the Court held that Plaintiff had sufficiently stated a claim for violation of TILA disclosure requirements concerning penalty annual percentage rates (or "APRs"). See Schwartz v. HSBC Bank USA, N.A., 160 F. Supp. 3d 666, 681-82 (S.D.N.Y. 2016) ("Schwartz I"). Following the Supreme Court's decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), Plaintiff filed a Second Amended Complaint (the "SAC"), which Defendant now moves to dismiss for lack of standing pursuant to Federal Rule of Civil Procedure 12(b)(1). Because the SAC fails plausibly to plead a concrete and particularized injury, Defendant's motion is granted.

BACKGROUND¹

A. Factual Background

The Court assumes familiarity with its prior Opinion, see Schwartz I, 160 F. Supp. 3d at 669-71, and only briefly recites the facts relevant to the instant motion.

Plaintiff maintains an open-end consumer credit card account with Defendant. (SAC ¶¶ 8, 10-11). Defendant's billing statements to Plaintiff from January 2014 through May 2014 failed properly to disclose (i) that failure to make a timely monthly minimum payment could subject Plaintiff's account balance to a penalty APR; and (ii) what the amount of that penalty APR would be. (Id. at ¶¶ 20-21, 44-45). Specifically, Plaintiff alleges that these billing statements "neither disclosed that [Plaintiff] was already subject to a penalty [of] 27.24% or any other penalty APR, nor made any disclosure under the 'Late Payment Warning' advisory that a failure to make the minimum payment due by the due date could subject [Plaintiff] to the imposition of a penalty APR of 27.24%." (Id. at ¶ 44). Plaintiff alleges that these omissions violated mandatory disclosure provisions under TILA's statutory and regulatory scheme. (Id. at ¶ 45). Schwartz I held, inter alia, that such allegations"sufficiently stated a claim for violation of TILA's APR disclosure requirements." 160 F. Supp. 3d at 681-82.²

B. Procedural Background

Plaintiff filed the Complaint on December 1, 2014, and a First Amended Complaint (the "FAC") on March 27, 2015. (Dkt. #2, 12). In Schwartz I, issued February 9, 2016, the Court partially converted Defendant's motion to dismiss into one for summary judgment, and awarded Defendant summary judgment as to Plaintiff's claims for breach of contract and for improperly imposing a late fee and interest charge in violation of TILA. See 160 F. Supp. 3d at 676-79, 683-84. The Court denied, however, Defendant's motion to dismiss Plaintiff's claim for failing properly to disclose penalty APRs in violation of TILA.³ See id. at 681-82. Following a February 23, 2016 conference, the Court stayed this action pending the Supreme Court's anticipated decision in Spokeo, which was issued on May 16, 2016, and revised on May 24, 2016. Thereafter, the Court held a conference on June 9, 2016, and set a schedule for the filing of the SAC and of Defendant's instant motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1). (Dkt. #45, 49).

Plaintiff filed the SAC on June 30, 2016 (Dkt. #48); Defendant its motion to dismiss and supporting brief on July 18, 2016 (Dkt. #51-52); Plaintiff his opposition brief and declaration on August 17, 2016 (Dkt. #53-54); and Defendant its reply brief on August 31, 2016 (Dkt. #55). After briefing was completed, the Second Circuit decided Strubel v. Comenity Bank, 842 F.3d 181 (2d Cir. 2016). This Court subsequently granted the parties leave to submit supplemental letter briefs concerning the effect, if any, of Strubel on the pending motion, which briefs the parties filed on December 16, 2016. (Dkt. #59-60).⁴

DISCUSSION

A. Applicable Law

1. Motions to Dismiss Under Federal Rule of Civil Procedure 12(b)(1)

"[A] district court may properly dismiss a case for lack of subject matter jurisdiction under Rule 12(b)(1) if it lacks the statutory or constitutional power to adjudicate it." Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005) (internal quotation marks omitted); accord Sokolowski v. Metro. Transp. Auth., 723 F.3d 187, 190 (2d Cir. 2013). A "plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000).

In resolving a Rule 12(b)(1) motion to dismiss, "[t]he court must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of [the] plaintiff, but jurisdiction must be shown affirmatively, and that showing [may] not [be] made by drawing from the pleadings inferences favorable to the party asserting it." Morrison v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (internal citation and quotation marks omitted). Where subject matter jurisdiction is contested, a district court may consider evidence outside the pleadings, such as affidavits and exhibits. See Zappia Middle East Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000); accord Tandon v. Captain's Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014). And where, as here, "the Rule 12(b)(1) motion is facial, i.e., based solely on the allegations of the complaint or the complaint and exhibits attached to it (collectively the "Pleading") ... [t]he task of the district court is to determine whether the Pleading 'allege[s] facts that affirmatively and plausibly suggest that [the plaintiff] has standing to sue.'" Carter v. HealthPort Techs., LLC, 822 F.3d 47, 56 (2d Cir. 2016) (quoting Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011)).

2. Truth in Lending Act and Regulation Z

Congress enacted TILA to "'protect consumers against inaccurate and unfair credit billing and credit card practices' and promote 'the informed use of credit' by 'assuring a meaningful disclosure' of credit terms." Strubel, 842 F.3d at 186 (quoting Vincent v. The Money Store, 736 F.3d 88, 105 (2d Cir. 2013)); see also 15 U.S.C. § 1601(a). The Act "promotes this goal largely by 'imposingmandatory disclosure requirements on those who extend credit to consumers in the American market.'" Id. (quoting Mourning v. Family Publ'ns Serv., Inc., 411 U.S. 356, 363 (1973)). TILA affords consumers a cause of action for, inter alia, statutory damages against a creditor who fails to comply with certain disclosure requirements. See 15 U.S.C. § 1640(a)(2) (providing for an individual consumer in most such cases to be awarded statutory damages between $500 and $5,000, and for a possible class award of up to $1,000,000); see also id. § 1637(b)(12) (setting forth disclosure requirements related to late payment deadlines and penalties).

As relevant here, the Act requires the creditor of an open-end consumer credit card account "[to] transmit to the obligor [i.e., the credit card holder], for each billing cycle at the end of which there is an outstanding balance in that account or with respect to which a finance charge is imposed, a statement setting forth" applicable disclosures. 15 U.S.C. § 1637(b). The TILA disclosure provision concerning interest rate hikes for late payments provides:

If 1 or more late payments under an open end consumer credit plan may result in an increase in the annual percentage rate applicable to the account, the statement required under subsection (b) with respect to the account shall include conspicuous notice of such fact, together with the applicable penalty annual percentage rate, in close proximity to the disclosure required under subparagraph (A) of the date on which payment is due under the terms of the account.

Id. § 1637(b)(12)(B).

TILA's implementing regulations, known as Regulation Z, clarify that a creditor must disclose "on each periodic statement" "[t]he amount of any latepayment fee and any increased periodic rate(s) (expressed as an annual percentage rate(s)) that may be imposed on the account as a result of a late payment." 12 C.F.R. § 1026.7(b)(11)(i)(B).⁵ Regulation Z also requires that the payment due date be "disclosed on the front of the first page of the periodic statement," and that "[t]he amount of the late payment fee and the annual percentage rate(s) ... be stated in close proximity to the due date." Id. § 1026.7(b)(13).

In the SAC, Plaintiff alleges that Defendant's billing statements from January 2014 through May 2014 failed properly to disclose certain notices required under 15 U.S.C. § 1637(b)(12)(B) and 12 C.F.R. § 1026.7(b)(11), (b)(13). As noted, Schwartz I upheld substantially these allegations. See 160 F. Supp. 3d at 681-82.

3. Standing

To satisfy the "irreducible constitutional minimum" of Article III standing, a plaintiff bears the burden of establishing (i) "injury in fact," (ii) a "causal connection" between that injury and the complained-of conduct, and (iii) a likelihood "that the injury will be redressed by a favorable decision." Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992) (internal quotation marks omitted); accord Spokeo, 136 S. Ct. at 1547. Here, Defendant argues that Plaintiff fails adequately to plead the first element — that he suffered an injuryin fact. (Def. Br. 14-20). To demonstrate injury in fact, a plaintiff must show he suffered (i) "an invasion of a legally protected interest," (ii) "that is concrete and particularized," and (iii) "actual or imminent, not conjectural or hypothetical." Spokeo, 136 S. Ct. at 1547 (quoting Lujan, 504 U.S. at 560) (internal quotation marks omitted).

Plaintiff has pled the invasion of a legally protected interest under TILA that is...