Opinion
1 CA-CV 23-0434
06-04-2024
AMERICAN EXPRESS NATIONAL BANK, Plaintiff/Appellant, v. MARK EXPOSITO, Defendant/Appellee.
Zwicker & Associates, P.C., Tempe By Darren Tallman, Lambros Karandreas Counsel for Plaintiff/Appellant
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Maricopa County No. CV2019-009566 The Honorable Danielle J. Viola, Judge
Zwicker & Associates, P.C., Tempe By Darren Tallman, Lambros Karandreas Counsel for Plaintiff/Appellant
Judge Michael J. Brown delivered the decision of the Court, in which Presiding Judge Samuel A. Thumma and Judge Jennifer B. Campbell joined.
MEMORANDUM DECISION
BROWN, JUDGE
¶1 Plaintiff American Express National Bank appeals the superior court's denial of its renewed motion for judgment as a matter of law following a jury's verdict in favor of defendant Mark Exposito on American Express's breach of contract claims relating to four credit card accounts. We affirm the court's ruling on three accounts but reverse and remand for entry of judgment on the fourth.
BACKGROUND
¶2 In 2018, Exposito opened four different credit card accounts with American Express governed by cardmember agreements with virtually identical terms. The agreements included numerous terms, including a "Promise to pay", in which the cardmember agreed to "pay all charges, including charges [the cardmember] make[s]" as well as "charges that other people make." The agreements also stated that if a cardmember disputed a charge involving an American Express merchant, American Express "may credit the [cardmember's account] for all or part of the disputed charge." The agreements contained a "Billing Dispute Procedure" requiring cardmembers to notify American Express of billing errors in writing with an explanation on why the charge was incorrect. The procedure also required disputes to be submitted "[w]ithin 60 days after the error appeared on [the] statement."
¶3 Sometime in either 2016 or 2018, Exposito met Eslam Mohammed. Exposito had an extensive background in selling cars, and initially Mohammed provided Exposito with "transportation services" for businesses "in the Midwest" of the United States. Mohammed would also fly Exposito to Middle Eastern countries for other business activities, helping Exposito as an Arabic translator as well. Mohammed and Exposito eventually developed a business relationship in which Exposito would buy cars from Mohammed, and the cars would then be shipped to various destinations across the Middle East. Exposito used his American Express cards to pay for those transactions. However, at some point during 2019 the business relationship between the two deteriorated when Exposito received a notification from a shipper that his purchased vehicles had not arrived as scheduled.
¶4 After attempts to contact Mohammed failed to rectify the issue of the missing cars, Exposito contacted American Express to dispute the charges. According to Exposito, American Express had a practice of not charging for fraudulent transactions, and that such promises were one reason he used their cards. With this practice in mind, Exposito called American Express to dispute the charges and was told to use the online portal (rather than through the Billing Dispute Procedure outlined in the cardmember agreement). After he began checking on the disputed transactions, however, American Express locked him out of the online portal entirely and he was unable to continue to dispute the charges using that method. By September of 2019, American Express had canceled the four credit card accounts.
¶5 Two months later, American Express sued Exposito to recover the unpaid balance on the accounts, totaling approximately $928,000. Over a year later, Exposito's counsel sent a letter to American Express' counsel disputing numerous charges on three of the accounts, asserting "there [was] no evidence that Mr. Exposito ever received the cars" corresponding to the purchase charges. The total amount of the disputed charges was $1.179 million, though the letter did not specify which charges Exposito had already paid for, or which charges he was merely alleging that he did not owe. Neither Exposito nor his counsel disputed any charges on the fourth account ("the Expo Account"). Several charges on the Expo account occurred around the same timeframe, and in similar amounts, as the disputed charges in the other three accounts.
¶6 At trial, American Express presented testimony from their records custodian, who read portions of the cardmember agreement and billing statements for the accounts Exposito opened. The witness also read the Billing Dispute Procedure. In addition to his business with Mohammed, Exposito testified about his relationship with American Express, both as a cardmember and a merchant. Exposito described on several occasions how he had disputed charges with American Express without using the Billing Dispute Procedure listed in his cardmember agreement-instead disputing them online-and that American Express had investigated those charges. He produced a number of exhibits showing results of at least some investigation activity.
¶7 On cross-examination, Exposito discussed the accounts at issue. He expressly acknowledged he had not disputed any charges on the Expo Account, which had a remaining balance of $371,221.53. Despite that admission, Exposito denied that he owed that amount because he claimed that American Express owed him money, as the total charges he disputed were greater than what American Express was seeking to recover for the Expo Account.
¶8 After the close of the evidence, the court denied both parties' motions for judgment as a matter of law ("JMOL") under Arizona Rule of Civil Procedure 50 and submitted the matter to the jury. The jury found in Exposito's favor. American Express then renewed its JMOL motion, arguing that a reasonable jury could not conclude Exposito owed nothing on the Expo Account, which was a separate and distinct account on which Exposito disputed no charges, and that Exposito's disputes of charges on the other accounts failed to conform to the cardmember agreement's Billing Dispute Procedure. Exposito responded, asserting that under a theory of recoupment the total amount of the charges he disputed with American Express surpassed any amount he might owe in the Expo account, and that the jury's verdict was reasonable. The superior court denied the renewed JMOL motion, American Express timely appealed, and we have jurisdiction under A.R.S. § 12-2101(A).
DISCUSSION
¶9 American Express challenges the superior court's denial of its renewed JMOL motion, asserting the jury's verdict cannot stand because the trial evidence showed that Exposito did not follow the appropriate Billing Dispute Procedure to challenge the allegedly fraudulent transactions. American Express also argues there was no reasonable basis for the jury's verdict as to the Expo Account, because Exposito acknowledged he did not dispute any charges on that account.
¶10 We review the denial of a JMOL motion de novo. Glazer v. State, 237 Ariz. 160, 167, ¶ 29 (2015). We will affirm if any substantial evidence exists that would allow a reasonable person to also reach the jury's verdict, and we will view the evidence presented at trial in a light most favorable to sustaining the jury's verdict. Centerpoint Mech. Lien Claims, LLC v. Commonwealth Land Title Ins. Co., 255 Ariz. 261, 276, ¶ 70 (App. 2023).
¶11 We first note that Exposito has not filed an answering brief in this appeal. When debatable issues exist, we generally may treat the failure of a party to file an answering brief to constitute a confession of error. See Navarro v. State, 32 Ariz. 119, 120 (1927); Dowding v. Smithers, 82 Ariz. 261, 262 (1957). We decline to apply this doctrine to American Express's arguments about Exposito's failure to follow the Billing Dispute Procedure, because the issue raised is not debatable.
¶12 According to American Express, "extensive and irrefutable evidence" showed that Exposito failed to abide by the requirement that disputed charges be submitted in writing within 60 days of when they appear on the account. Instead, American Express argues, Exposito's first written communication disputing the charges came more than a year after the litigation began. Because there was "uncontested evidence of the contractually required dispute procedure," American Express contends the jury's verdict cannot stand.
¶13 Though the language of the Billing Dispute Procedure is clear, American Express fails to acknowledge the evidence Exposito presented that American Express did not consistently enforce such requirements. Exposito testified about several letters American Express sent him concerning its investigations of disputed transactions, and that these disputes began through the use of American Express's online portal. A party to a contract who accepts the other party's deficient performance as to one term of the contract may be found to have waived the right to claim breach on that term. See Am. Cont'l Life Ins. Co. v. Rainer Constr. Co., Inc., 125 Ariz. 53, 55 (1980); Trimble v. Am. Sav. Life Ins. Co., 152 Ariz. 548, 554 (App. 1986). The jury could infer on this evidence that American Express had waived the right to demand Exposito's strict compliance with the dispute process by repeatedly accepting disputes to charges through a different process. Moreover, Exposito testified that American Express had explicitly instructed him to dispute the charges online. For these reasons, the jury could reasonably conclude that American Express had waived any right to demand performance of the Billing Dispute Procedure, including the 60-day dispute requirement.
¶14 We cannot draw the same conclusion for the jury's implicit rejection of American Express's breach of contract claim on the Expo account. At trial, Exposito relied in part on theories of setoff and recoupment, asserting the amount American Express owes Exposito overall would cover any debt Exposito would owe American Express on the Expo Account. "[A] recoupment is a reduction by the defendant of part of the plaintiff's claim because of a right in the defendant arising out of the same transaction." Morris v. Achen Constr. Co., 155 Ariz. 507, 510 (App. 1986), reversed in part and vacated in part on other grounds, 155 Ariz. 512 (1987). The principle underpinning recoupment is to "allow[] entities owing each other money to apply their mutual debts against each other." Urias v. PCS Health Sys. Inc., 211 Ariz. 81, 85, ¶ 21 (App. 2005).
Though Exposito noted his defense at trial was setoff and recoupment, in responding to the renewed motion for JMOL he clarified that recoupment was the proper defense. Given that clarification, Exposito's only viable defense on this issue is recoupment.
¶15 Recoupment is an equitable defense, which can be used to reduce or eliminate a judgment. Morris, 155 Ariz. at 510. However, even assuming American Express's handling of the credit card charges at issue could constitute a debt, a recoupment defense is limited to the same transaction that gives rise to the claim which the defendant seeks to reduce or eliminate. See Aetna Fin. Co. v. Pasquali, 128 Ariz. 471, 473 (App. 1981) (declining to apply recoupment when the appellant's claim "did not arise out of mutual obligations or covenants of the loan transaction upon which appellee's suit was founded"); Nogales Serv. Ctr. v. Atlantic Richfield Co., 119 Ariz. 552, 554 (App. 1978) ("Recoupment is confined to the contract on which plaintiff sues, whereas setoffs generally include all mutual debts and liabilities."); Morris, 155 Ariz at 510.
¶16 Applying this law to the facts presented, American Express is correct that Exposito's admitted debts owed under the Expo Account could not be offset by his disputed debts for the other accounts. First, it does not appear that the Expo Account arises from the same transaction or contract as the other accounts at issue. Though American Express canceled this credit card account at the same time as the other accounts in this dispute and pled all four accounts together in its complaint, there is no indication the Expo Account had any connection to the fraud alleged by Exposito. This is particularly true given the liberal joinder of claims allowed by the Arizona Rules of Civil Procedure. See Ariz. R. Civ. P. 18(a) (allowing a party to join in one proceeding "as many claims as it has against an opposing party"). Moreover, the Expo Account was governed by a cardmember agreement separate from the other accounts.
¶17 Second, the record does not plainly confirm the extent of any debt American Express may have owed Exposito. Exposito relies on the fact that he challenged $1.179 million in charges on his accounts, which exceeds the damages American Express sought. But neither the letter nor Exposito's testimony specifically describe which of these charges he actually paid, and thus the record is unclear as to any amount American Express would "owe" Exposito as a mutual debt. The letter states "Exposito paid some before Mr. Moham[m]ed started this fraudulent use of the credit cards," but offers no further elaboration as to which charges were paid or the total of those amounts. (Emphasis added.)
¶18 Finally, Exposito testified that he had "already paid American Express $117,000 for cars [he] had authorized Mr. Mohammed to use [his] card for" but he offered no explanation for that figure. At a minimum, it is debatable whether (1) Exposito could rely on recoupment to avoid liability for the balance of the Expo account, and (2) the evidence presented would have supported the jury's decision to apply that defense to the entire balance. Accordingly, recognizing this is a debatable issue, we treat Exposito's failure to file an answering brief as a concession of error on this issue. See Stover v. Kesmar, 84 Ariz. 387, 388 (1958) (recognizing that because "debatable questions" were raised on appeal, and no valid excuse was shown for appellee's "failure to appear and file an answering brief to assist the court in an analysis of the various problems presented," the court "will assume such failure to file an answering brief is a confession . . . of reversible error"). Therefore, Exposito has conceded error in the denial of American Express's motion of JMOL as to the Expo Account, which had a remaining balance of $371,221.53.
CONCLUSION
¶19 We reverse the superior court's denial of American Express's motion for JMOL relating to the balance remaining on the Expo Account. We therefore remand for entry of judgment in favor of American Express on that claim for damages of $371,221.53 plus any appropriate interest and costs. We affirm the jury's verdict on the other accounts.