Maletto v. Capital One Finance Corp.

          MEMORANDUM OPINION

          SUSAN PARADISE BAXTER, UNITED STATES DISTRICT JUDGE

         In this civil action, Plaintiffs Arthur J. Maletto and M&M Contractors, Inc. ("Plaintiffs") have sued Capital One Finance Corp. and Capital One Bank (USA), N.A. (collectively, "Capital One" or "Defendants") for alleged violations of the Truth in Lending and Fair Credit Billing Act, 15 U.S.C. §§1601, et seq. and related theories under Pennsylvania common law. The claims arise from losses that M&M Contractors, Inc. ("M&M") sustained after an employee opened a credit account in the company's name and surreptitiously misappropriated $446, 550.60.

         Pending before the Court is the Defendants' motion to dismiss the Plaintiffs' operative pleading. For the reasons that follow, Defendants' motion will be granted in part and denied in part.

         I. BACKGROUND

         Plaintiff M&M is a closely held Pennsylvania corporation whose principal place of business is located in Elk County. First Amended Compl. ("FAC"), ¶3. M&M's corporate officers include Plaintiff Arthur J. Maletto, Jeffrey Maletto, and James Maletto. Id. ¶15.

         At some point in time not specified in the pleading, Arthur Maletto, acting as President oil M&M, opened a corporate credit card account with Capital One. FAC ¶12. The address of record for the corporate credit account was M&M's business address in Johnsonburg, Pennsylvania. Id. ¶13. Arthur Maletto authorized Capital One to issue three cards on the M&M credit account - one in the name of each corporate officer. Id. ¶14.

         On July 30, 2007, M&M hired Melissa Bittler ("Bittler") to work as an administrator in M&M's business office. FAC ¶16. Bittler's duties involved, among other things, receiving statements for M&M's corporate credit account with Capital One, reconciling charges on the account with M&M's corporate records, and processing payments on the account. Id. ¶17. By virtue of her duties as M&M's office administrator, Bittler gained access to the company's financial information, as well as the officers' personal information. Id. ¶18.

         In or around 2012, Bittler surreptitiously opened a second Capital One credit account (the "Second Credit Account") in M&M's name, falsely identifying herself as one of the company's officers and authorized users. FAC ¶¶19-22. Bittler then directed Capital One to issue credit cards in the names of each of the three corporate officers as well as herself. Id. ¶22. In the credit application form, Bittler identified her own personal residence as the address of record for the business. Id. ¶23. Based on Bittler's fraudulent application, Capital One issued credit cards in the name of Arthur Maletto, Jeffrey Maletto, James Maletto, and Bittler. Id. ¶24. The credit cards, opening documentation, credit agreement forms, and all subsequent statements were mailed to Bittler's personal address, without the knowledge or consent of M&M's corporate officers. Id. ¶¶24-25.

         Between 2012 and May of 2017, Bittler used the Second Credit Account to make unauthorized cash withdrawals from ATM machines as well as unauthorized purchases of personal, family, or household goods. FAC ¶¶26-27. No. similar cash advances were ever made on M&M's original credit account, nor were any cash advances made by the corporate officers on the Second Credit Account. Id. ¶28. Moreover, the charges made to the Second Credit Account by Bittler were of a wholly different nature, and far exceeded in number and amount, the charges that were made by M&M's officers on either account. Id. ¶29-30.^[1] All told, Bittler misappropriated some $446, 550.60 from M&M through her unauthorized use of the Second Credit Account. Id. ¶33. Bittler accomplished this by stealing M&M's checks, forging the signatures of its corporate officers, and using the checks to pay off the Second Credit Account. ¶¶31-32.

         On or about May 2, 2017, M&M's corporate officers discovered the misappropriation of corporate funds. FAC ¶34. On or around May 3, 2017, Capital One mailed M&M copies of the billing statements it had issued to Bittler relative to the Second Credit Account. Id. ¶61. Plaintiffs maintain that "M&M did not receive the statements and/or did not have a reasonable opportunity to evaluate and investigate the statements until on or after May 6, 2017." Id. ¶62.

         On May 15, 2017, Plaintiffs registered a verbal dispute as to the alleged fraudulent charges on the Second Credit Account. See FAC Ex. A, ECF No. 11-1. Plaintiffs' attorney followed up with a letter to Capital One on June 6, 2017, which stated the following:

On May 15, 2017, my clients and I spoke with Jordan M. in the Capital One Fraud Department about disputed/fraudulent charges made to the above account. Jordan M. was told during the discussion that nearly every charge made on the account since its inception was by an unauthorized card user. After review of all of the account statements, it appears that there were approximately $296, 416.5 8 in fraudulent charges.^[2]

The purpose of this letter is to memorialize the May 15 discussion and to formally make a claim for a refund and/or chargeback of the unauthorized charges, together with all interest payments and fees related thereto. In addition, my clients are hereby disputing their obligation to pay the outstanding balance on the account. If there are forms that need to be filled out for Capital One to process the refund/chargeback request or the dispute related to the account's outstanding balance, please send them to me as soon as possible. I will also ask that you provide me with instructions on how the at-issue charges should be specifically identified.

Jordan M. was not able to provide copies of any paper or electronic applications that were made when the account was opened or any subsequent applications for issuance of additional cards. Please consider this letter as a request for production of all applications (written or electronic) related to this account. If any of the applications were made electronically, I will ask that you provide the IP address from which the application was submitted. In addition, please provide all card holder agreements that apply to this account.

FAC Ex. A, ECF No. 11-1.

         Capital One did not respond to the foregoing correspondence until June 25, 2018, more than one year later. FAC ¶36. When it did respond, Capital One did not provide the information that M&M's counsel had requested. Id.

         According to Plaintiffs, Bittler's activities relating to the application, use, and payment of the Second Credit Account should have been suspicious to Capital One and should have led Capital One to investigate Bittler's application. FAC ¶¶39, 42. Had Capital One done so, Plaintiffs aver, Capital One would have discovered that the application was fraudulent. Id. Plaintiffs also fault Capital One for not monitoring the activity on the Second Credit Account after it was opened. Id. ¶41. Plaintiffs posit that proper monitoring would have led Capital One to discover that Bittler was using the account to make fraudulent charges and misappropriating M&M's funds to pay off the account. Id.

         To date, Capital One has not refunded, or charged back, the amounts that M&M paid to cover Bittler's fraudulent charges, nor has it written off the charges made by Bittler that remain unpaid. FAC ¶¶44-45. Based on "information and belief," Plaintiffs allege that Capital One has submitted adverse reports about the Plaintiffs' credit ratings to various credit reporting agencies, or may soon do so. Id. ¶¶49, 76.

         As a result of these alleged events, Plaintiffs commenced this lawsuit on October 10, 2018. ECF No. 1. Plaintiffs' operative pleading, the First Amended Complaint, sets forth eight separate causes of action. ECF No. 11. Counts I through IV assert claims under the Truth in Lending Act ("TILA") and Fair Credit Billing Act, 15 U.S.C. §§ 1637, 1643, and §1666. Counts V through VI set forth claims under Pennsylvania law for alleged negligence, conversion, unjust enrichment, and breach of contract.

         Defendants filed the pending motion to dismiss, and accompanying brief, on February 6, 2019. ECF Nos. 19 and 20. Therein, they argue that Plaintiffs' various federal and state claims are time-barred or otherwise fail to state a cognizable basis for relief. Plaintiffs filed their brief in opposition to the motion on February 25, 2019, ECF No. 23, and Defendants filed their reply on March 8, 2019. ECF No. 26. As a result of these filings, the motion is ripe for adjudication.

         II. STANDARD OF REVIEW

         Rule 12(b)(6) of the Federal Rules of Civil Procedure recognizes a defense based upon the plaintiffs failure to state a claim upon which relief can be granted. "When considering a Rule 12(b)(6) motion, we accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Wayne Land & Mineral Grp. LLC v. Delaware River Basin Comm% 894 F.3d 509, 526-27 (3d Cir. 2018) (internal quotation marks and citations omitted). In order to survive dismissal, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl Corp, v. Twombly, 550 U.S. 544, 570 (2007)). Plausibility means "more than a sheer possibility that a defendant has acted unlawfully." Id. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556).

         III. ...