Tenth Circuit Affirms Dismissal of Fair Credit Billing Act Complaint

The Tenth Circuit has affirmed the dismissal of a complaint against American Express Centurion Bank under the Fair Credit Billing Act (FCBA).  Plaintiff sought a refund of $379,153.72, but the Court held that, because he had paid his account in full, he had no "credit outstanding” and could not state a claim. Shook Partner Steven McCartan, Of Counsel Molly Carella and Associate Eric Hobbs represented American Express on appeal.

Between 2009 and 2012, Malik Hasan ordered more than $1 million in wine from Premier Cru, a retail and warehouse operation in Berkeley, California. He used credit cards issued by Chase Bank USA, N.A., and American Express Centurion Bank, and paid his balances in full. Later, Premier Cru failed to deliver a substantial portion of Hasan’s order before filing for Chapter 7 bankruptcy in January 2016. In bankruptcy, the trustee determined that none of the remaining wines in Premier Cru’s warehouse belonged to Hasan.

To recoup his losses, Hasan made a demand upon both Chase and American Express for reimbursement of the credit card charges pursuant to Section 170(a) of the Fair Credit Billing Act (FCBA), 15 U.S.C. § 1666i(a).  Both credit card companies denied the bulk of Hasan’s refund request; he then filed suit against both card issuers.

In the parallel cases (against Chase and American Express), the district court judges found that the language of sections 1666i(a) and (b) barred Hasan’s claims. Section (a) of the FCBA says credit card issuers are “subject to all claims (other than tort claims) and defenses arising out of any transaction in which the credit card is used as a method of payment or extension of credit … “[s]ubject to the limitation contained in subsection (b).” And subsection (b) limits the amount of a cardholder’s claims or defenses to “the amount of credit outstanding with respect to [the disputed] transaction at the time the cardholder first notifies the card issuer . . . of such claim or defense.”  In interpreting this provision, both courts found that the amount of “credit outstanding” is the amount that the cardholder has withheld from the card issuer.  Because Hasan had paid his bill in full, he had no “credit outstanding” and, therefore, no claim left against either bank.

Hasan appealed the decision to the Tenth Circuit, arguing that “credit outstanding” means the aggregate amount paid to the card issuer—as opposed to the amount withheld.  As the court put it, “[a]lthough Hasan doesn’t make it explicit, what’s ‘outstanding’ in this argument is the delivery of the wine.  So under Hasan’s reasoning, the ‘credit outstanding’ refers to the payments he made to Chase and AmEx for wine, which are outstanding because the wine hasn’t been delivered.” The court found that this theory “doesn’t work because the payments themselves aren’t outstanding; Hasan made his payments. It’s the delivery of the wine that hasn’t occurred.”

Similarly, Hasan sought to distinguish transactions in which the merchant delivers goods immediately from those in which the merchant delivers goods in the future.  But the court rejected this reasoning as well, saying, “[Section] 1666i doesn’t contain different rights for different types of transactions.”  In response to Hasan’s argument that this is inequitable—because it punishes cardholders who pay their bills in full—the court said that while this point “may be true,” it was equally true that “Hasan would have been in the same position had Congress not passed this statute.”  Before the enactment of the FCBA, the court said, his only remedy would have been to sue the merchant, not Chase or American Express. 

Hasan’s remedy, the court held, lies in Premier Cru’s bankruptcy proceedings; he has no claim against the card issuers under the FCBA.

The cases are: Hasan v. Am. Express Centurion Bank, No. 17-1072 (10th Cir., opinion published January 26, 2018), and Hasan v. Am. Express Centurion Bank, No. 16-2549 (D. Colo., complaint filed October 13, 2016).