decided as amended december 29 1975.: September 25, 1975.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 72-968)
Kalodner, Van Dusen and Rosenn, Circuit Judges. Van Dusen, Circuit Judge, dissenting in part.
This appeal presents novel issues of great importance to credit cardholders and the banking industry in Pennsylvania. Plaintiffs challenge the method by which three national banks computed the service charge on their customers' Master Charge and BankAmericard revolving charge accounts prior to the institution of this class action. At issue are the maximum lawful rate of service charge and the "previous balance" method of determining the balance on which the service charge is imposed.
Plaintiff Haas instituted suit on November 13, 1972, against Pittsburgh National Bank, Mellon Bank, and Equibank. She sought statutory damages under the National Bank Act in an amount double the interest received by defendants from their cardholders during the preceding two years. 12 U.S.C. §§ 85-86 (1970). The complaint alleged that defendants charged interest at a rate in excess of that permitted by Pennsylvania law which the National Bank Act makes applicable to national banks. See id. § 85 (1970).
On August 6, 1973, the United States District Court for the Western District of Pennsylvania entered an order defining the class as "[all] holders of . . . credit cards issued by defendants, Pittsburgh National Bank, Mellon Bank, N.A. and Equibank, N.A., who, during the period since November 13, 1970, were charged by such defendants a finance charge in connection with the purchase of goods or services." Subsequently, on January 21, 1974, the district court determined that Haas could not represent cardholders at Equibank since she only held cards issued by the other two defendants. The district court therefore directed that, within thirty days, a nominal plaintiff be added who held a card issued by Equibank. The complaint accordingly was amended on February 19, 1974, to add plaintiff Mitchell.
Before this court's recent opinion in Acker v. Provident National Bank*fn1 was filed, the district court granted the defendants' motion for summary judgment. The district court held:
(1) Bank-operated credit card plans involving the purchase of goods and services are governed by the Pennsylvania Goods and Services Installment Sales Act (Sales Act) which specifies that a service charge of one and one-quarter percent per month may be made. 69 P.S. § 1101 et seq. (Supp. 1975-1976). Such plans are not regulated under the Pennsylvania Banking Code of 1965 which limits interest to one percent per month. 7 P.S. § 309 (1967).
(2) The Sales Act permits the "previous balance" method to be used in computing the balance upon which a service charge is imposed.
(3) Unpaid service charges may be included in the balance subject to subsequent service charges, thus permitting the compounding of interest.
Summary judgment was granted in favor of Equibank on the previous balance method issue on the ground that the amendment adding plaintiff Mitchell did not relate back to the filing of the original complaint. Thus, since Equibank ceased this practice more than two years before the date of the order directing that an additional plaintiff be joined, the district court held that the action against Equibank was barred by the statute of limitations.
Plaintiffs appeal from the judgment entered in the district court. They do not contest the district court's holding that banks may charge one and one-quarter percent interest on purchases governed by the Sales Act. We reverse, however, as to other issues.
A person desiring to establish a Master Charge or BankAmericard revolving charge account completes a credit application form containing the terms of the account agreement. This application then is reviewed by the bank to which it is submitted. If the application is approved, a Master Charge or BankAmericard card is issued. Under the account agreements in use at the defendant banks, the cardholder may present this card to purchase merchandise from merchants who have agreed to honor the credit card.*fn2 The merchant imprints a sales draft describing the merchandise with the cardholder's number and gives the cardholder a copy. The merchant then submits the sales draft to the bank which issued the credit card, and the bank in turn pays the merchant the face amount of the sales draft, less an agreed discount. The cardholder's purchase is posted to his revolving charge account.
The balance in the cardholder's account is computed on the basis of monthly billing cycles. On the last day of the billing cycle, the "billing date," the bank's computer reviews all transactions posted to the cardholder's account during the billing cycle. The computer then calculates the service charge, if any, and prints out a monthly statement which is mailed to the cardholder. This statement shows, inter alia, the balance owing at the beginning of the billing cycle, all purchases and payments made during the billing cycle, the service charge, and the balance owing at the end of the cycle.
II. Service Charge on Commercial Transactions
Plaintiffs contended in the district court that a bank operating a credit card plan may not charge more than one percent interest per month on the balance outstanding in a cardholder's account. This contention was based on plaintiffs' assertion that the interest rate on balances derived on all credit card transactions is governed by section 309 of the Banking Code of 1965. 7 P.S. § 309 (1967). After the district court had granted summary judgment in favor of defendant banks, however, this court ruled that, with respect to transactions covered by the Sales Act, banks as well as merchants may impose a monthly service charge of one and one-quarter percent. Acker v. Provident National Bank, supra, 512 F.2d at 739.
In light of this intervening decision, plaintiffs have modified their contention on appeal. Plaintiffs recognize that, under Acker, a bank may charge the one and one-quarter percent rate on "consumer" transactions regulated by the Sales Act. Consumer transactions comprise purchases of goods "for use primarily for personal, family, or household purposes" and purchases of services "for other than a commercial or business use." 69 P.S. § 1201(1), (2) (Supp. 1975-1976); see Butera v. Atlantic Richfield Co., 63 Pa. D. & C. 2d 232, 234 (Pa. Ct. Common Pleas 1973). However, although plaintiffs agree that Acker requires rejection of their argument with respect to consumer transactions, they still contend that interest rates on "commercial" transactions, i.e., purchases of goods and services for business purposes, are regulated by the Banking Code.
Defendants have objected on appeal that nominal plaintiffs Haas and Mitchell lack standing to challenge the interest rate charged on commercial transactions since the record does not demonstrate the nature of their purchases. Defendants contend that all transactions by nominal plaintiffs were consumer transactions and that the nature of these transactions is not a genuine issue of fact in dispute. See Fed. R. Civ. P. 56. As we shall explain shortly, we agree that all transactions by nominal plaintiff Haas involving Mellon Bank were consumer transactions. We nonetheless believe summary judgment in favor of Mellon Bank was inappropriate since the district court has not yet determined, in the exercise of its discretion, whether Haas may represent a class of Mellon Bank cardholders who were charged interest on commercial transactions. With respect to Pittsburgh National Bank and Equibank, we reverse the summary judgments entered because we are unable to find any basis in the record for a determination that nominal plaintiffs Haas and Mitchell were not charged interest on commercial transactions.
A. Haas as Class Representative for Mellon Bank Cardholders Paying Interest on Commercial Transactions
During the two-year period under consideration, the balance of Haas, the only nominal plaintiff holding a Mellon Bank Master Charge card, was attributable to only one transaction. On August 3, 1970, Haas purchased a hearing aid for $300. We are persuaded that, as a matter of law, this was a consumer transaction since, under the Sales Act, a hearing aid is an item "brought for use primarily for personal . . . purposes." 69 P.S. § 1201(1) (Supp. 1975-1976). Because Haas did not engage in any commercial transactions, she does not have standing against Mellon Bank on this issue.
Even though Haas herself does not have standing to challenge the service charge rate imposed on commercial transactions by Mellon Bank, summary judgment is inappropriate if Haas may represent a class of plaintiffs who do have standing. Rule 23(a) of the Federal Rules of Civil Procedure specifies four prerequisites to the maintenance of a class action. In determining the propriety of permitting Haas to represent cardholders who have been charged interest by Mellon Bank on commercial transactions, the third and fourth prerequisites are most in point:
Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if . . . (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
In La Mar v. H & B Novelty & Loan Co., the Ninth Circuit held that a nominal plaintiff with a claim against one defendant could not represent class plaintiffs with claims against another defendant. 489 F.2d 461 (9th Cir. 1973). The court determined that, as a matter of law, the nominal plaintiff was not "typical" since
typicality is lacking when the representative plaintiff's cause of action is against a defendant unrelated to the defendants against whom the cause of ...