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Azur v. Chase Bank

April 1, 2010

FRANCIS H. AZUR, APPELLANT
v.
CHASE BANK, USA, NATIONAL ASSOCIATION FORMERLY KNOWN AS CHASE MANHATTAN BANK, USA, NATIONAL ASSOCIATION FORMERLY KNOWN AS FIRST USA BANK, N.A.



On Appeal from the United States District Court for the Western District of Pennsylvania, (D.C. No. 2-06-cv-01088), District Judge: Honorable Donetta W. Ambrose.

The opinion of the court was delivered by: Fisher, Circuit Judge.

PRECEDENTIAL

Argued January 27, 2010

Before: FUENTES and FISHER, Circuit Judges, and DIAMOND,*fn1 District Judge.

OPINION OF THE COURT

Francis H. Azur filed suit against Chase Bank, USA, alleging violations of 15 U.S.C. §§ 1643 and 1666 of the Truth in Lending Act (TILA) and a common law negligence claim after Azur's personal assistant, Michele Vanek, misappropriated over $1 million from Azur through the fraudulent use of a Chase credit card over the course of seven years. The District Court granted Chase's motion for summary judgment, and Azur appealed. We are presented here with three discrete issues for our review. First, we must determine whether § 1643 of the TILA provides the cardholder with a right to reimbursement. Second, we must evaluate whether Azur's §§ 1643 and 1666 claims are precluded because Azur vested Vanek with apparent authority to use the Chase credit card. Third and finally, we must decide whether Azur's negligence claim is barred by Pennsylvania's "economic loss doctrine." For the reasons stated herein, we will affirm, on partly different grounds, the District Court's order granting Chase's motion for summary judgment.

I.

A.

ATM Corporation of America, Inc. (ATM) manages settlement services for large national lenders. Azur, the founder of ATM, served as its president and chief executive officer from 1993 until September 2007, when ATM was sold. In July 1997, ATM hired Vanek to be Azur's personal assistant. Vanek's responsibilities consisted of picking up Azur's personal bills, including his credit card bills, from a Post Office Box in Coraopolis, Pennsylvania;*fn2 opening the bills; preparing and presenting checks for Azur to sign; mailing the payments; and balancing Azur's checking and savings accounts at Dollar Bank. According to Azur, it was Vanek's job alone to review Azur's credit card and bank statements and contact the credit card company to discuss any odd charges. Azur also provided Vanek with access to his credit card number to enable her to make purchases at his request.

From around November 1999 to March 2006, Vanek withdrew without authorization cash advances of between $200 and $700, typically twice a day, from a Chase credit card account in Azur's name.*fn3 Azur was the sole cardholder and only authorized user on the account. Although Azur recalls opening a credit card account in or around 1987 with First USA, Chase's predecessor,*fn4 Azur was unaware that he had a Chase credit card.

Each fraudulent transaction included a fee of approximately $2.00 and a finance charge that corresponded to the amount withdrawn, ranging from $4.00 for a $100 advance, to $21.06 for a $700 advance. The fraudulent charges were reflected on at least 65 monthly billing statements sent by Chase to Azur, and Vanek paid the bills by either writing checks or making on-line payments from Azur's Dollar Bank checking account. When writing checks, Vanek forged Azur's signature. Over the course of seven years, Vanek misappropriated over $1 million from Azur.

The transactions occasionally triggered Chase's fraud strategies.*fn5 On April 16, 2004, Chase detected its first potentially fraudulent transaction, made outbound calls to the account's home telephone number, and left an automated message on the number's answering machine. Chase received no response. On April 23, 2004, one week later, Chase detected a second potential problem and left another automated message at the same telephone number. Three days later, Chase received a call from someone that was able to verify the account's security questions and validate the card activity. Although Chase's records indicate that the caller was female, Chase did not use voice recognition or gender identification as a means of security verification. Finally, on May 14, 2005, approximately one year later, Chase detected a third potentially fraudulent transaction and called the home telephone number. As before, five days later, a return caller once again verified the account activity. The account was paid in full without protest after each incident.*fn6

On or about March 7, 2006, Azur discovered a suspicious letter requesting a transfer of funds from his checking account. After investigating, Azur and ATM discovered Vanek's fraudulent scheme and terminated her employment. On March 8, 2006, Azur notified Chase by telephone of the fraudulent use of the Chase account and closed the account. Thereafter, Azur sent Chase three pieces of correspondence relevant to this appeal: (1) a letter dated April 7, 2006; (2) an executed Affirmation of Unauthorized Use dated April 21, 2006; and (3) a letter dated May 17, 2006.

In the letter dated April 7, 2006, Azur notified Chase of the fraudulent use of the card, stated that he "is formally disputing that he is responsible for the payment of any unpaid charges and accompanying finance charges on [the] account" (App. at 48A), and requested statements, correspondence, and other documents regarding the account.

The Affirmation of Unauthorized Use, which Chase drafted and sent to Azur for execution, stated, "Any transaction(s) occurring on or after 10/09/2001 is/are also unauthorized." (Id. at 50A.) The Affirmation listed three credits, titled "unauthorized transactions," to Azur's account:

(1) a "returned payment" in the amount of $10,000; (2) a "returned payment" in the amount of $20,000; and (3) a "fraudulent transaction" in the amount of $28,717.38. (Id.) Azur executed the document and returned it to Chase on April 21, 2006.

Finally, in the letter dated May 17, 2006, Azur once again notified Chase that he "continues to dispute any and all unpaid charges stemming from the [Chase account], as well as all prior fraudulent transactions on that account, which have been the subject of prior communications between you and Mr. Azur and/or his representatives." (Id. at 52A.)

Because Azur closed the account on March 8, 2006, the account's final billing period ended on March 6, 2006. Chase has a "policy and practice" of mailing billing statements within two days of the close of each billing cycle.

B.

On February 22, 2007,*fn7 Azur filed an amended complaint against Chase under §§ 1643 and 1666 of the TILA, 15 U.S.C. §§ 1601 et seq. (2006), and common law negligence.*fn8 On April 8, 2008, Chase filed under seal a motion for ...


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