State v. Capital One Bank (Usa) N.A.

980 F.Supp.2d 1346

State of NEW MEXICO ex rel. Gary KING, Attorney General, Plaintiff,

v.CAPITAL ONE BANK (USA) N.A. and Capital One Services, LLC, Defendants.

Case No. 13cv00513 WJ/RHS.

United States District Court, D. New Mexico.

Nov. 4, 2013.

Turner W. Branch, Branch Law Firm, Albuquerque, NM, Allen Carney, Randall K. Pulliam, Carney Bates & Pulliam, PLLC, Little Rock, AR, Kenneth Grunfeld, Richard Golomb, Golomb & Honik, Philadelphia, PA, Scott Fuqua, N.M. Attorney General's Office, Santa Fe, NM, for Plaintiff.

Stephen S. Hamilton, Montgomery & Andrews, P.A., Gary R. Kilpatric, Montgomery & Andrews, Santa Fe, NM, Donald C. Trigg, Montgomery & Andrews P.A., Albuquerque, NM, for Defendants.

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS CONSUMER RELIEF CLAIMS PURSUANT TO PRIOR CLASS ACTION SETTLEMENT

WILLIAM P. JOHNSON, District Judge.

THIS MATTER comes before the Court upon Defendants' Motion to Dismiss Consumer Relief Claims Pursuant to Prior Class Action Settlement filed August 8, 2013 (Doc. No. 22). Having considered the parties' briefs and the applicable law, the Court finds that Defendants' motion is well-taken and, therefore, is GRANTED.

Background

This is an enforcement action brought by the State of New Mexico through Attorney General Gary King ( hereinafter referred to as “Plaintiff”) in regards to allegations of unfair marketing practices. This suit is one of nine (9) parallel proceedings that Plaintiff has brought against major credit card companies. The instant suit, as with the other suits, centers around the sale of “payment protection plans” which is a term used to describe services that cancel or suspend a credit card holder's obligation in certain circumstances. Also at issue here are Defendants' plans which purport to monitor a consumer's credit report and notify the consumer of any major changes in their credit report. Plaintiff alleges Defendants' actions in selling and administering these payment protection plans violate the New Mexico Unfair Practices Act (“NMUPA”) NMSA (1978) § 57–12–1 et seq. and a federal disclosure regulation under the Dodd–Frank Act known as Regulation Z, 12 C.F.R. § 1026.5.

Spinelli Case

Defendants claim that the class action lawsuit Spinelli v. Capital One Bank (USA) N.A., No. 8:08–cv–132–T33EAJ (M.D.Fla) (“ Spinelli ”) which involved a settlement of claims brought by consumers regarding Defendants' payment protection plans bars Plaintiff's claims for restitution on behalf of individual consumers ¹. The Spinelli complaint accused Defendants of using unfair and deceptive practices to market its payment protection plans, enrolling customers in payment protection plans without their informed consent, and enrolling customers even when they were ineligible for certain payment protection benefits. The Spinelli plaintiffs asked the court to award money damages and restitution under various state consumer protection laws, including the NMUPA. This relief was sought on behalf of consumers across the country that had enrolled in Defendants' payment protection plans. In 2010, Defendants agreed to settle the case after extended settlement negotiations. Under the resulting settlement, each Spinelli class member was eligible to receive a payment between $15 and $63, with the exact amount depending on factors such as whether the class member had ever received payment protection benefits. In exchange, class members and “all those who claim through them or who assert claims on their behalf (including the government in its capacity as parens patriae )” were “deemed to have completely released and forever discharged” Defendants from each of the “Released Claims.” (Doc. No. 22–2),Spinelli Final Approval Order, attached as Exhibit B to Defendants' Motion, at 12.4. Class members were also “forever barred and enjoined from commencing, instituting or maintaining any Released Claims” against the “Released Parties” in the settlement court “or any other forum.” Id. at 11. The “Released Claims” include all claims “arising out of or in any way, directly or indirectly, relating to any act, omission, event, incident, matter, dispute, or injury regarding Payment Protection, including, without limitation, the development, sale, pricing, marketing, claims handling, or administration of Payment Protection.” Id., at 13. The settlement class included all Capital One cardholders—including those living in New Mexico—“who enrolled in and were charged for Payment Protection on or after January 1, 2005 through July 31, 2010.” Id.

As required by the settlement agreement, Defendants provided individual notice of the settlement to more than eight million individuals who had enrolled in a Capital One payment protection plan. The Spinelli Court determined that the notice provided by Capital One fully satisfied the requirements of Fed.R.Civ.P. 23. Although there were several parties who appealed the final settlement order, all of those appeals have been dismissed. Therefore, the settlement of the Spinelli action is now final.

Defendants assert that Plaintiff's request for “refund of monies paid by New Mexico consumers for these payment protection products” sought under the NMUPA Act and Regulation Z is barred under the theory of res judicata ². Defendants' motion does not attack the sufficiency of Plaintiff's other requests for relief, including Plaintiff's request for civil penalties.

Discussion

I. Legal Standard

Fed.R.Civ.P. 12(b)(6) allows a defense for “failure to state a claim upon which relief can be granted.” In asserting a claim, the claimant must plead “only enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim challenged by a 12(b)(6) motion to dismiss does not require detailed factual allegations, but must set forth “more than labels and conclusions, and a formulaic recitation of the element of a cause of action will not do”. Id. at 555, 127 S.Ct. 1955 “The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the [claimant's] complaint alone is legally sufficient to state a claim for which relief may be granted.” Sutton v. Utah State Sch. for the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir.1999). A 12(b)(6) motion should not be granted “unless it appears beyond doubt that the [claimant] can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see Ash Creek Mining Co. v. Lujan, 969 F.2d 868, 870 (10th Cir.1992). All well-pleaded factual allegations in the complaint are accepted as true, seeAsh Creek Mining Co., 969 F.2d at 870, and viewed in the light most favorable to the nonmoving party, see Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974).

“Within the res judicata framework, this court applies federal law to determine the effect of a previous federal judgment, even if that judgment was issuedin a case based on diversity jurisdiction.” Hartsel Springs Ranch of Colorado, Inc. v. Bluegreen Corp., 296 F.3d 982, 986 (10th Cir.2002). “Under the doctrine of res judicata, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” Clark v. Haas Grp., Inc., 953 F.2d 1235, 1238 (10th Cir.1992) “The fundamental policies underlying the doctrine of res judicata [ ] are finality, judicial economy, preventing repetitive litigation and forum-shopping, and ‘the interest in bringing litigation to an end.’ ” Plotner v. AT & T Corp., 224 F.3d 1161, 1168 (10th Cir.2000) (citation omitted). “Res judicata requires the satisfaction of four elements: (1) the prior suit must have ended with a judgment on the merits; (2) the parties must be identical or in privity; (3) the suit must be based on the same cause of action; and (4) the plaintiff must have had a full and fair opportunity to litigate the claim in the prior suit.” Nwosun v. Gen. Mills Restaurants, Inc., 124 F.3d 1255, 1257 (10th Cir.1997).

II. Plaintiff's Claims not Barred by Res Judicata

Defendants argue that the Spinelli case bars Plaintiff from asserting its consumer relief claims because the consumers Plaintiff is acting on behalf of in this matter were parties to the settlement agreement reached in the Spinelli case. Before turning to an analysis of the elements of res judicata, the Court will first address the general arguments made by parties.

Plaintiff repeatedly argues that the Attorney General has the unique authority and duty to enforce certain statutory schemes in order to protect the citizens of New Mexico. It argues that the Attorney General represents the interests of the State as a whole as opposed to the interests of any one consumer. The Attorney General certainly has special powers and duties. However, Plaintiff's argument misapprehends what is truly at issue in the present Motion, whether Plaintiff's claims for consumer restitution are barred by res judicata. The Motion does not request that Plaintiff be barred from seeking any other remedy, including potential civil penalties. Courts have repeatedly recognized a distinction for res judicata purposes between an instance where a state agency is seeking to vindicate public interests and when the state agency is seeking restitution on behalf of consumers. Rex, Inc. v. Manufactured Hous. Comm. of State of N.M., Manufactured Hous. Div., 1995–NMSC–023, 119 N.M. 500, 508, 892 P.2d 947, 955 (holding state agency was barred from seeking restitution on behalf of consumer who had already litigated her claims against Defendant); FTC v. AMREP Corp., 705 F.Supp. 119, 124 (S.D.N.Y.1988) (noting that the Federal Trade Commission's suit was barred to the extent that it sought redress for purchasers who had already settled their private claims); EEOC v....