The member merchant presents the sales slip, or slips, to Provident or PNB. The amount shown on the sales slip, less a percentage set by agreement between Provident or PNB and the merchant, is paid to the merchant, or credited to his account. When the cardholder disputes the sale quality or delivery of merchandise covered by the sales slip, Provident or PNB may collect from or charge back the sale to the member merchant.
The Master Charge and BankAmericard plans are operated on the basis of billing cycles. The last day of the billing cycle is referred to as the "billing date", which is the same date of each month for each individual cardholder. The day immediately following the billing date is the first day of the next billing cycle. There are 12 billing cycles per calendar year. Provident's Master Charge billing system and PNB's BankAmericard billing system are processed by computer. Although transactions such as payments, credits and new charges to accounts are processed as the slips are received by Provident or PNB respectively, actual computations in the accounts, including calculation of charges, are made only once each billing cycle on the billing date.
On the billing date all transactions posted to an account during that billing cycle [e.g., purchases, payments and credits] are reviewed by the computer; the charge, if any, is calculated and imposed, and a summary of the resulting information is printed by computer on a statement [the "monthly statement"]. The monthly statement is mailed to the cardholder within a day or two after the billing date.
On the first billing date subsequent to the receipt of sales slips by Provident or PNB, the amounts and dates of new purchases are recorded on the monthly statement and the total of the new purchases is included on the statement as a part of the amount shown under the heading "New Balance". The remainder of the amount shown under the heading "New Balance" consists of previously outstanding balances less applicable payments and credits.
No charges are imposed on purchases when they first appear on the periodic statement as new charges. If the cardholder pays the entire outstanding balance of his account before his next billing date [a period of about 25 days] he will incur no charges on those new purchases. This feature is known as the "free ride" period. Some Master Charge and BankAmericard cardholders pay their entire outstanding balances each month and never incur any charges.
If the cardholder fails to pay the entire outstanding balance, a charge will be imposed on those purchases, but it will be computed only from the billing date on which the purchases first appeared on the monthly statement, and not from the date of the actual purchase.
Plaintiff Dabrow has been a Master Charge cardholder since June 1970 and he used his Master Charge Credit Card only for the purchases of goods and services. Dabrow and Acker have been BankAmericard cardholders since November 5, 1966 and March 11, 1970, respectively, and both have used their BankAmericard credit cards only for purchases of merchandise.
In their first count, the plaintiffs claim that the defendants' charge in excess of one percent per thirty days against their revolving credit accounts are usurious under the National Bank Act and the Pennsylvania Banking Code of 1965 in charging interest at a rate exceeding 12% per annum. The defendants contend that the Goods and Services Installment Sales Act, which permits a finance charge of 15% per annum, is the applicable statute.
In count two of the Complaint, the plaintiffs allege that both Provident and PNB, in determining the outstanding balance on which the finance charge is imposed, failed to deduct or otherwise take into account payments and credits that occurred subsequent to the previous billing date. This method of calculation is known as the "previous balance method." The plaintiffs allege that since under this method the balance may represent a sum of money which may have been substantially paid the day after the carrying charge was imposed, the previous balance method of calculating interest violates the National Bank Act and the Goods and Services Installment Sales Act.
Plaintiffs have conceded that their allegation that the defendants employed the previous balance method of calculating finance charges was contrary to fact and they do not oppose the dismissal of count two.
Therefore, the defendants' motions for summary judgment on count two are granted.
In count three of the Complaint, the plaintiffs claim that it is unlawful to charge one and one quarter (1.25) per cent on their revolving credit accounts' outstanding balances every thirty days instead of every calendar month because the effect is to charge an annual percentage rate in excess of 1.25% per month allowed by the National Bank Act and the Goods and Services Installment Sales Act. Plaintiffs do not oppose the dismissal of count three as well as count two.
Therefore, the defendants' motions for summary judgment on count three are granted.
In count four, defendants are alleged to have violated the provisions of the National Bank Act and the Pennsylvania Goods and Services Installment Sales Act by charging interest on interest, i.e., by compounding interest, in computing the finance charge imposed on their revolving credit accounts.
In count five of the Complaint, plaintiffs allege that the defendants are understating the true annual interest rate on "Master Charge" and "BankAmericard" charge accounts by disclosing an annual percentage interest rate based on a three hundred and sixty (360) day year instead of a calendar year in violation of the Truth-In-Lending-Act. It has been stipulated by the parties that Provident and PNB never used a 365/360 day method of accounting
and the plaintiffs do not oppose the dismissal of count five.
Therefore, the defendants' motions for summary judgment on count five are granted.
In the sixth and final count, the plaintiff, Kenneth C. Dabrow, claims that defendant Provident charged a monthly service charge in each 31 day month from November 28, 1970 to October 1971 in excess of 1.25% in violation of the National Bank Act and the Pennsylvania Goods and Services Installment Sales Act.
Thus, of the six counts listed in the plaintiffs' amended complaint, three (counts 2, 3 and 5) are no longer asserted by the plaintiffs. Counts one, four and six are still to be decided.
The case is here on the following motions submitted by the parties: (1) the defendant Provident's motion to dismiss pursuant to Rule 12 of the Fed. R. Civ. P. on the ground that the Court lacks subject matter jurisdiction, (2) the defendant Provident's motion to dismiss the entire complaint pursuant to Rule 11 of the Fed. R. Civ. P. on the ground that it was filed without good ground to support it, (3) the defendant Provident's motion to dismiss counts 1, 4 and 6 under Rule 12 of the Fed. R. Civ. P. on the ground that as to these counts, the complaint fails to state a claim upon which relief can be granted, (4) the motions of the plaintiffs and both defendants for summary judgment pursuant to Rule 56 of the Fed. R. Civ. P., (5) plaintiffs' motion for class determination.
The Court will presently discuss the defendant Provident's motion to dismiss on the ground that the plaintiffs and both defendants for summary judgment. As will presently be seen, this obviates the discussion of the other motions listed, i.e., renders them moot.
The third sentence of Fed. R. Civ. P. 56(c) provides for the immediate rendition of a judgment in the event that the matters considered by the Court on the motion for summary judgment disclose "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."
It appears to the Court that there exists no genuine issue as to any material fact in the matter now pending and that the motions for summary judgment may be decided.
Plaintiffs allege that this Court has jurisdiction over counts 1 through 4 and count 6 of their Complaint on the basis of 28 U.S.C. § 1337. That section provides, inter alia, that: "The district courts shall have original jurisdiction of any civil action or proceeding arising under any Act of Congress regulating commerce . . . ." The plaintiffs also allege that this Court has jurisdiction under 28 U.S.C. § 1355, which provides that: "The district courts shall have original jurisdiction, exclusive of the courts of the States, of any action or proceeding for the recovery or enforcement of any fine, penalty, or forfeiture, pecuniary or otherwise, incurred under any Act of Congress."
The defendant Provident asserts that the jurisdiction of this Court may not be founded on either § 1355 or § 1337. Provident asserts that jurisdiction over actions against national banks alleging violations of state usury laws may be based only on 28 U.S.C. § 1348. Section 1348 states that:
"The district courts shall have original jurisdiction of any civil action commenced by the United States, or by direction of any officer thereof, against any national banking association, any civil action to wind up the affairs of any such association, and any action by a banking association established in the district for which the court is held, under chapter 2 of Title 12, to enjoin the Comptroller of the Currency, or any receiver acting under his direction, as provided by such chapter.
All national banking associations shall, for the purposes of all other actions by or against them, be deemed citizens of the States in which they are respectively located. June 25, 1948, c. 646, 62 Stat. 933."
The issues raised by the defendant Provident concerning this Court's jurisdiction have been recently considered by three Circuit Courts, and a District Court in this Circuit, and in each case jurisdiction was found to exist under § 1337.
Cupo v. Community National Bank & Trust Company of New York, 438 F.2d 108 (2d Cir. 1971), was an action to invalidate the election of directors of a national bank. The plaintiff alleged that he was wrongfully denied election to a one-year term as director in violation of § 61 of the National Banking Act which guarantees the right of cumulative voting by shareholders of national banks. The Cupo court held that the National Banking Act is an act regulating commerce within the meaning of § 1337, relying on Murphy v. Colonial Federal Savings and Loan Association, 388 F.2d 609 (2d Cir. 1967) for its holding.
The Cupo case is followed by Partain v. First National Bank of Montgomery, 467 F.2d 167 (5th Cir. 1972) which involved a fact situation similar to the one in the present case. In Partain, three plaintiffs sued the First National Bank of Montgomery, under § 86 of the National Bank Act, for themselves and all other holders of BankAmericards issued by the defendant bank. The plaintiffs alleged that through the use of the credit cards the bank charged the plaintiffs and their class usurious interest -- greater than that permitted by the Alabama Small Loan Act (Code of Ala., Tit. 5, § 290).
The Partain court stated that in Imm v. Union Railroad Company, 289 F.2d 858 (3d Cir. 1951) it was pointed out that there is an increasing recognition of the breadth of 28 U.S.C. § 1337. Professor Charles Bunn, Jurisdiction and Practice of the Courts of the United States 71-72 (1949), was quoted with approval as follows: " 'Acts regulating commerce ' are coming rapidly to mean all acts whose constitutional basis is the commerce clause." Imm held specifically that the Federal Employers' Liability Act is an Act "regulating commerce" and that therefore the District Courts have jurisdiction of suits arising thereunder regardless of amount in controversy.
The court in Partain found that jurisdiction did exist under 28 U.S.C. § 1337, and cited both Cupo and Murphy, supra, for that proposition.
Burns v. American National Bank & Trust Co. and Fisher v. First National Bank of Chicago, 479 F.2d 26 (8th Cir. 1973) involved actions to recover usury penalties against national banks for plaintiffs and other members of their class under §§ 85 and 86 of the National Bank Act. In a combined en banc hearing, the Eighth Circuit joined both the Second and Fifth Circuits in holding that the National Bank Act is an "act regulating commerce" within the meaning of § 1337 providing for federal jurisdiction. The Eighth Circuit Court cited both the Cupo and Partain decisions for its position.
A recent case in this Circuit, Haas v. Pittsburgh National Bank et al., 60 F.R.D. 604 (D.C. Aug. 6, 1973) Civil Action No. 72-2343 involved an almost identical fact situation as the present case. The Haas case was a class action brought against defendant banks to recover damages for alleged violations of § 85 and § 86 of the National Bank Act, the Pennsylvania Goods and Services Installment Sales Act, the Pennsylvania Banking Code of 1965, and the Truth-In-Lending Act, in connection with the issuance of BankAmericard and Master Charge card.
The defendants in Haas, contesting the jurisdiction of the district court, delved into a lengthy discussion of the history of legislation concerning national banks in this country, concentrating on the legislative history in the nineteenth century. The defendant Provident in the present case likewise discusses at length the history of legislation concerning national banks, with much of its discussion dealing with the nineteenth century. The Haas court rejected the defendants' argument that the Court lacked jurisdiction after considering the recent cases on the subject. The Court stated:
"Thus, in light of the Burns, Cupo and Partain decisions and the reasoning of the commentators, whatever may have been the state of the law during the time of John Marshall, today the National Bank Act is an act regulating commerce within the meaning of 28 U.S.C. § 1337 and thus § 1337 is sufficient to confer jurisdiction upon this Court."