Opinion
Civil Action No. 01-646, Section "K"(2)
July 22, 2002
ORDER AND REASONS
Before this Court is defendant, American Express's, Motion for Summary Judgment (rec. doc. 18). The Court has considered the motions and relevant law and finds that defendant's motion should be GRANTED.
Factual Background
In 1986 Michael Shwartz ("Shwartz") opened a credit card account with American Express Travel Related Services Company Inc. "AETRS" in 1986 and established three accounts. including: (1) an Optima Card Account, (2) a Platinum Card Account and (3) an AETRS Corporate Card Account. According to the terms of the Platinum Card account, AETRS was authorized to revoke a card member's privileges at any time. Specifically, the Platinum Card Agreement stated that AETRS could revoke credit card privileges of a card member "whether or not the [card member] has breached the agreement and without giving [the cardmember] notice. Similary, the Optima Card Agreement entered into between Shwartz and AETRS stated that:
Agreement between Platinum Card Member and AETRS; Motion for Summary Judgment, Exhibit A.
[W]e may suspend or cancel your Optima Card privileges at our sole option subject to applicable law, at any time with or without cause and without giving you notice. Any such action on our part will not cancel your obligation to pay us the outstanding balance. Finance Charges and other charges due on your card account . . . You agree to pay all such obligations despite any suspension or cancellation of your Card Account.
Agreement between Optima Card Member and AETRS; Motion for Summary Judgment, Exhibit C.
In February 2001, AETRS became concerned with the excessively high balances on Shwartz's Platinum Card account and demanded that he produce various personal financial information with respect to items purchased on that account. Plaintiff objected to providing such information but assured the AETRS representative that all payments would continue to be made timely and reminded him that in his fourteen years as a customer with American Express, he had never missed or been late with a payment. Plaintiff also suggested that AETRS contact his banker to verify that he had a line of credit sufficient to cover the outstanding charges. AETRS did not accept plaintiff's offer and advised Shwartz that: (1) it could not insure itself that he could afford to pay the outstanding charges and (2) his accounts would be "cut off." AETRS also demanded payment of chances not yet billed.
Motion for Summary Judgment, p. 4.
Opposition to Motion for Summary Judgment, p. 2-3.
Opposition to Motion for Summary Judgment, p. 3.
Opposition to Motion for Summary Judgment. p. 3.
Thereafter, plaintiff filed a complaint with this Court alleging that AETRS had unlawfully terminated his credit card privileges. Plaintiff sought damages for embarrassment, humiliation, severe anxiety, and emotional distress which required treatment with a mental health professional following the termination of his accounts.
AETRS subsequently filed a counter claim denying petitioner's allegations and demanding that Shwartz pay the outstanding balance on his Optima and Platinum Card Accounts — an amount totaling $68,879.53. AETRS also requested the following relief: (1) damages equaling the amount which Shwartz has been "unjustly enriched" and (2) the cost of the proceedings and AETRS's attorneys fees and costs to be borne by Shwartz.
Motion for Summary Judgment
Through the instant motion for summary judgment, AETRS claims that there are no genuine issues of fact as to plaintiff's claims or its counterclaim. Specifically, the motion reasons that: (1) AETRS did not breach any contract it had with Shwartz when it cancelled his Optima and Platinum card accounts because the terms of both contracts entitled AETRS to revoke the privileges of the card member (Shwartz) for any reason and with or without notice and (2) even though it did not need cause to terminate plaintiff's accounts, AETRS believed it had reason to cancel them after it (a) investigated plaintiff's underlying creditworthiness and (b) was unable to obtain information from Shwartz which would support the level of spending on the Platinum Card Account.
Further, the Motion claims that there is no genuine issue of fact as to AETRS's counterclaim seeking payment of the outstanding amounts owed on the Platinum and Optima accounts and attorneys fees because: (1) the contracts governing both accounts provide that the card member is responsible for paying all amounts charged to them — despite the cancellation of the accounts and (2) Shwartz has not disputed the validity of any of the charges made on either account.
The Court notes that, while AETRS did not specify in either its Counterclaim or Motion for Summary Judgment, the Optima and Platinum agreements include attorneys fees provisions. Specifically, the Platinum Card Agreement provides. "[y]ou agree to pay all court costs plus attoreny's fees of 15% of the unpaid balance if we must refer your account to an attorney who is not our employee. . . . Similarly, the Optima Card Agreement provides, "[u]pon your default and subject to any limitations or requirements of applicable law, you agree to pay all our reasonable costs, including reasonable attorneys fees, incurred by us in collecting the balance due . . . whether or not suit is brought against you. . . ."
Motion for Summary Judgment, Exhibit A, p. 2.
Motion for Summary Judgment, Exhibit C.
In response, and citing no case law., plaintiff argues that summary judgment should be denied because, although the Platinum and Optima Card agreements provide that American Express can revoke Shwartz's credit card privileges at any time, with or without cause, those provisions are inconsistent with the equitable provisions of La. C.C. art. 2054 — as equity would require that Shwartz be given reasonable notice of the termination of his accounts. La. C.C. art. 2054 provides:
When the parties made no provision for a particular situation, it must be assumed that they intended to bind themselves not only to the express provisions of the contract. but also to whatever law. equity or usage regards as implied in a contract of that kind or necessary for the contract to achieve its purpose.
Thus, Shwartz contends that the provisions of the Platinum and Optima Card agreements, which give AETRS the latitude to revoke a card members privileges at any time, whether or not the card member has breached the agreement and without notice, are inconsistent with the equitable principles of Art. 2054. For example, Shwartz argues that AETRS was in "bad faith" to terminate the account of an individual who had never missed a payment without making a reasonable inquiry into that individual's financial status. Further, plaintiff posits that AETRS's "failure to comply with the implied obligation of good faith as required by the laws of equity constitutes a breach of contract for which AETRS should be liable."
Opposition to Motion for Summary Judgment, p. 5.
Finally, as to ATERS's counterclaim, plaintiff argues that summary judgment should not be granted because: (1) AETRS's became a "bad faith obligee" when it unilaterally terminated Shwartz's credit accounts without prior notice and knowing that he had never missed a payment and (2) La. C.C. art. 2003 does not permit a "bad faith obligee" to recover any damages when its own bad faith has caused the obligor's failure to perform and requires an obligee's damages to be proportionately reduced when the obligee's negligence contributed to the obligor's failure to perform.
Analysis Standard for Motion for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "An issue is material if its resolution could affect the outcome of the action." Daniels v. City of Arlington, Texas, 246 F.3d 500, 502 (5th Cir. 2001).
The moving party bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact. Stults v. Conoco, 76 F.3d 651, 656 (5th Cir. 1996) citation omitted). When the moving party has carried its burden under Rule 56(c), its opponent must do more that show there is some possible doubt as to the material facts. Rather, the nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986); Beck v. Texas State Board of Dental Examiners, 204 F.3d 629, 633 (5th Cir. 2000).
In reviewing the motion, the Court considers the record as a whole, disrecarding evidence that the jury is "not required to believe." Thomas v. Great Atlantic and Pacific Tea Company, Inc., 233 F.3d 326, 329 (5th Cir. 2000). Thus, where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial." Matsushita at 588. Finally, the Court notes that substantive law determines materiality of facts and only "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Resolution of Motion Before the Court
In the case at bar, the Court concludes that AETRS's motion for summary judgment should be granted because the record, taken as a whole, could not lead a rational trier of fact to find for the nonmoving party. First, it is unrefuted that (1) both the Platinum and Optima cards specifically permitted AETRS to revoke Shwartz's accounts for any reason (or no reason) and with or without notice and (2) Shwartz presently owes $68,879.53 on those accounts. Also, plaintiff's reliance on La.C.C. arts. 2054 and 2003, in an attempt to raise a "genuine issue of material fact's is misplaced as: (1) art. 2054 only applies "when the parties made no provision for a particular situation" and in this case the parties specifically agreed on AETRS's authority to terminate Shwartz's accounts and (2) art. 2003 requires a finding that an obligee has acted negligently or in bad faith and this Court can not find that AETRS became a "bad faith obligee" merely by enforcing the terms of its credit card agreements.
The Court notes that according to Local Rule 56.2(E), "Each copy of the papers opposing a motion for summary judgment shall include a separate, short and concise statement of the material facts as to which there exists a genuine material issue to be tried. All material facts set forth in the statement required to be served by the moving party will be deemed admitted, for purposes of the motion, unless controverted as required by this rule." Because plaintiff did not comply with the requirements of Local Rule 56.2E, this Court deems defendant's Statement of Uncontested Material Facts as admitted.
Further, the Court notes that its decision to enforce cancellation provisions of the AETRS Credit Card agreements, is consistent with federal law. In Samuel's v. Old Kent Bank, 1997 WL 458434 (N.D. Ill. 1997), for example, Old Kent Bank ("Old Kent") issued MasterCard and Visa credit cards which included "termination" clauses similar to the ones at issue in the case at bar. Specifically, the Card Agreements permitted Old Kent to "add, change, or discontinue any or all cardholder services at any time and for any reason. . . ."., When Old Kent exercised its discretion to cancel one of the programs offered to its cardholders, plaintiff brought suit alleging, inter alia, that Old Kent had breached the contracts made with its card holders and violated the covenant of good faith and fair dealing.
Samuels, at 6.
The program at issue in Old Kent, the CardMiles Program, also provided a similar termination clause: "The CardMiles Program and benefits are offered at the sole discretion of Old Kent. Old Kent reserves the right to cancel, change, or temporarily suspend the CardMiles program at any time without notice. This court result in the cancellation of any outstanding certificates."
However, the court determined that there had been no breach of contract in the "traditional sense" because the contracts clearly permitted Old Kent to cancel a cardholder's card or any of the programs it offered at any time. Further, the court held that when the express terms of a contract govern the disputed issue, courts should not imply a covenant of good faith and fair dealing to override or replace express contractual terms. The Court reasoned that:
Samuels, at 6.
Samuels, at 7. Also citing, Hubbard Chevrolet v. General Motors Co., 873 F.2d 873, 876 (5th Cir. 1989) (applying Michigan law to determine that the implied covenant of good faith and fair dealing would not be applied to override or contradict express contractual terms) and Bushwick-Decatur Motors v. Ford Motor Co., 116 F.2d 675, 677 (2d Cir. 1940) (upholding an at-will termination provision of a contract and explaining that "with a power of termination at will here so unmistakably clear, we certainly cannot assert that a limitation of good faith was anything that the parties had in mind. Such a limitation can be read into the agreement only as an overriding requirement of public policy. This seems an extreme step for judges to take.").
Since a termination without cause will almost always be charaterizable as "bad faith" termination, focus of the terminating party's state of mind will always result in the invalidation of unrestricted termination clauses. (internal citation omitted).
We of course recognize that cancellation of the program worked, at least collectively, a significant forfeiture on Old Kent cardholders . . . The fact remains, however, that the unrestricted termination provisions contained within the contract gave Old Kent the express authority to accomplish this forfeiture. These clear and unambiguous contractual provisions alone warrant dismissal of this claim. The only alternative would be judicial rewriting of the contact. Absent fraud or other aggravating circumstances, such judicial interference with freedom of contract is unacceptable and better left to the political branches. . . .
Samuels, at 8.
The reasoning employed in Samuels is equally persuasive in the case at bar. The cancellation language of the Platinum and Optima agreements expressly allowed AETRS to cancel Shwartz's accounts for any reason. Thus, this Court will not rewrite either of the contracts to impose an obligation of good faith and fair dealing that was not agreed to by the parties.
Finally, the Court notes that AETR'S claim that it was at liberty to cancel Shwartz's credit accounts without notice is without merit. In Gray v. American Express Co., 743 F.2d 10, U.S.App. D.C. 10 (1984), the court held that the provision an American Express credit card agreement permitting American Express to revoke a cardholders use of a card at any without notice was unenforceable. The court explained that such a provision would permit American Express to retroactively cancel irreversible transactions that the card holder had already completed after the cancellation but before the cardholder learned his card has been cancelled.
Nevertheless, the case at bar is distinguishable from Gray because: (1) plaintiff received verbal notice, through an AETRS representative, that his accounts would be "cut off" before they were cancelled and (2) there has been no allegation or proof that plaintiff incurred any obligations on either of his AETRS accounts after his card was cancelled but before he received verbal notice of the cancellation of his accounts.
Accordingly,
IT IS ORDERED THAT defendant's Motion for Summary Judgment is GRANTED and plaintiffs complaint shall be DISMISSED WITH PREJUDICE.
IT IS FURTHER ORDERED that the matter of attorney's fees is referred to the magistrate for a report and recommendation pursuant to Rule 54(d)(1)(D).