DISPOSITION:  [*1]  Defendant's motion for judgment on pleadings on counts I, II and III granted. Defendant's motion for summary judgment granted as to count IV but denied as to count V. Plaintiffs' motion for judgment on pleadings denied. Plaintiffs' motion for leave to file surreply to defendant's reply memorandum in support of defendant's motion for judgment on pleadings granted.

 

CASE SUMMARY:

 

 

PROCEDURAL POSTURE: Plaintiff credit card holders brought a five-count complaint against defendant bank, alleging violations of Virginia law, the Truth in Lending Act, and the Illinois consumer fraud statute. The parties cross-moved for judgment on the pleadings on Counts I, II, and III of the complaint, pursuant to Fed. R. Civ. P. 12(c). The bank also moved for summary judgment on Counts IV and V, pursuant to Fed. R. Civ. P. 56.

 

OVERVIEW: The credit card holders' complaint alleged that the bank unlawfully imposed "over the limit" and "past due" fees on their credit card accounts. The bank assessed a "past due" fee when a customer failed to make the minimum payment by the due date. Count I alleged that that practice violated Va. Code Ann. §  6.1-330.80. Count II alleged that the bank's imposition of flat rate late charges without regard to the amount actually due on the account also violated §  6.1-330.80. Count III alleged that the bank violated the Truth in Lending Act, 15 U.S.C.S. §  1602 et seq., by failing to apprise them of Virginia law and by violating its provisions. Count IV alleged consumer fraud in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/2, and Count V alleged that the bank imposed unlawful liquidated damages when it charged customers past due fees that bore no relation to the cost of collection or to the bank's actual damages. This court concluded that Va. Code Ann. §  6.1-330.80 did not apply to the bank, so it did not violate any Virginia statute. The facts were sufficient, however, to state a claim for unlawful liquidated damages.

 

OUTCOME: The bank's motion for judgment on the pleadings as to Counts I, II, and III was granted, and those counts dismissed with prejudice. The credit card holders' motion for judgment on the pleadings was denied. The bank's motion for summary judgment was granted as to Count IV, but denied as to Count V.

 

LexisNexis(R) Headnotes

 

 

Civil Procedure > Early Pretrial Judgments > Judgment on the Pleadings

[HN1] A Fed. R. Civ. P. 12(c) motion is designed to provide a means of disposing of cases when the material facts are not in dispute and a judgment on the merits can be achieved by focusing on the content of the pleadings.

 

Civil Procedure > Early Pretrial Judgments > Judgment on the Pleadings

[HN2] A motion for judgment on the pleadings may be made at any time after the pleadings are closed. The court will consider such a motion under the same standard as a motion to dismiss pursuant to Fed. R. Civ. P. 12(b). As a result, the motion should not be granted unless it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief. In evaluating the motion, the court will view the facts in the complaint in the light most favorable to the nonmoving party.

 

Civil Procedure > Early Pretrial Judgments > Judgment on the Pleadings

[HN3] In at least two situations, however, the court will consider a Fed. R. Civ. P. 12(c) motion under the same standard as a motion for summary judgment. First, as Rule 12 itself makes clear, when matters outside the pleadings are presented to and not excluded by the court, a 12(c) motion must be treated as one for summary judgment under Fed. R. Civ. P. 56. Second, if a 12(c) motion appears to be aimed at disposing of the case on the basis of the underlying substantive merits, the appropriate standard of review is that applicable to summary judgment, except that the court may consider only the contents of the pleadings. In either of these situations, the court will not grant a motion for judgment on the pleadings unless no genuine issues of material fact remain to be resolved and the defendant is entitled to judgment as a matter of law.

 

Governments > Legislation > Interpretation

[HN4] When interpreting a statute, a court must not be guided by a single sentence or member of a sentence, but look to the provision of the whole law, and to its object and policy.

 

Governments > Legislation > Interpretation

[HN5] When the legislature has spoken plainly it is not the function of courts to change or amend its enactments under the guise of construing them.

 

Civil Procedure > Summary Judgment > Summary Judgment Standard

[HN6] Summary judgment shall be rendered forthwith 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. In considering such a motion, the court construes the evidence and all inferences that reasonably can be drawn therefrom in the light most favorable to the nonmoving party. A dispute over material facts is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.

 

Civil Procedure > Summary Judgment > Summary Judgment Standard

[HN7] The court will enter summary judgment against a party who does not come forward with evidence that would reasonably permit the finder of fact to find in its favor on a material question.

 

Contracts Law > Remedies > Liquidated Damages

[HN8] Parties to a contract properly may agree in advance upon the amount to be paid for loss which may result from a breach of the contract. When the actual damages contemplated at the time of the agreement are uncertain and difficult to determine with exactness and when the amount fixed is not out of all proportion to the probable loss, the amount is deemed to have been intended as enforceable liquidated damages. But where the damage resulting from a breach of contract is susceptible of definite measurement or where the stipulated amount would be grossly in excess of actual damages, courts of law usually construe such a stipulation as an unenforceable penalty.

 

Civil Procedure > Pleading & Practice > Pleadings > Interpretation

[HN9] Under the liberal system of notice pleading envisioned by Fed. R. Civ. P. 8, complaints need not contain elaborate factual recitations. They are supposed to be succinct. Any need to plead facts that, if true, establish each element of a cause of action was abolished by the Rules of Civil Procedure in 1938, which to signify the radical change from code pleading also replaced cause of action with claim for relief. One pleads a claim for relief by briefly describing the events. At this stage the plaintiff receives the benefit of imagination, so long as the hypotheses are consistent with the complaint.

 

COUNSEL: For ALEXANDER ARARO, CARMEN PEREZ, LESLIE WELCH, plaintiffs: Jerome S. Lamet, Lisa M. Raimondi, Jerome S. Lamet & Associates, Chicago, IL.

 

For MICHELLE ORTON, plaintiff: Lisa M. Raimondi, Jerome S. Lamet & Associates, Chicago, IL.

 

For CAPITAL ONE BANK, defendant: Edward Sidney Weil, Schwartz, Cooper, Greenberg & Krauss, Chicago, IL.

 

For CAPITAL ONE BANK, defendant: James F McCabe, Annemarie C O'Shea, Morrison and Foerster, San Francisco, CA.

 

For CAPITAL ONE BANK, defendant: Patrick Thomas Stanton, Schwartz, Cooper, Greenberger & Krauss, Chtd., Chicago, IL.

 

JUDGES: John F. Grady, United States District Judge.

 

OPINIONBY: John F. Grady

 

OPINION:

MEMORANDUM OPINION

Plaintiffs have brought a five count complaint against defendant Capital One Bank, alleging violations of Virginia law, the Truth in Lending Act,  [*2]  and the Illinois consumer fraud statute. Before the court are the parties' cross motions for judgment on the pleadings on Counts I, II, and III of the complaint, pursuant to Federal Rule of Civil Procedure 12(c). Also before the court is defendant's motion for summary judgment on Counts IV and V, pursuant to Federal Rule of Civil Procedure 56. n1 For the reasons explained below, defendant's motion for judgment on the pleadings on Counts I, II, and III, is granted. Defendant's motion for summary judgment is granted as to Count IV but denied as to Count V.

 

n1 Plaintiffs have also filed a motion for class certification. They have identified three classes, designated as "A", "B", and "C", and not all the counts in the complaint apply to all classes. Additionally, class "C" has five subclasses. The class certification motion is not addressed in this opinion.

 

 

BACKGROUND n2

 

n2 This recitation of facts is taken from the allegations in Plaintiffs' Third Amended Class Action Complaint.

 

 [*3]

Capital One is a bank chartered by in the Commonwealth of Virginia. Plaintiffs are individuals who entered into credit card agreements with Capital One. Plaintiffs' complaint alleges that Capital One unlawfully imposed "over the limit" and "past due" fees on their credit card accounts. Under the Customer Agreements, plaintiffs received monthly statements specifying the amount of money they owed and the date on which a minimum payment was due. Capital One would assess a "past due" fee when a customer failed to make the minimum payment by 9:00 a.m. on the stated due date. Count I alleges that this practice violated Virginia Code §  6.1-330.80, which gives consumers a seven day grace period to make a timely payment before a lender may impose a late fee. See Va. Code Ann. §  6.1-330.80 (Michie 1993).

When payments arrived late, Capital One imposed flat rate charges in the amount of $ 15, $ 18, or $ 20, without regard to the amount actually due on the account. For example, plaintiff Perez incurred an $ 18 late fee in January of 1997, even though her minimum payment due was only $ 10. Count II alleges that this practice also violated Virginia Code §  6.1-330.80, which further provides [*4]  that late fees may not exceed 5% of the amount of the installment due.

In Count III, plaintiffs allege violations of the Truth in Lending Act ("TILA"). See 15 U.S.C. §  1602, et seq. They allege that defendant violated the TILA by failing to apprise the plaintiffs of Virginia law and by violating its provisions. For example, the defendant failed to disclose that its late fee was actually a finance charge. Defendant also failed accurately to disclose the time period in which credit could be repaid (7 days under Virginia law). Finally, by calculating the annual percentage rate ("APR") on an improperly disclosed finance charge, defendants understated the APR.

In Count IV, plaintiffs allege consumer fraud in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. 815 ILCS 505/2. The allegations primarily accuse defendant of violating Virginia law and failing to disclose (or conspicuously disclose) certain terms in the Customer Agreement. For example, defendant (1) used a contract with terms that violate Virginia law, (2) failed to disclose in a conspicuous manner that it would unilaterally modify the contracts, (3) failed to disclose the "past due" and [*5]  "over the limit" fees would be included in the amount used to compute the plaintiffs' monthly finance charge, (4) failed to disclose that the "past due" fees exceeded the cost of collection and were really an additional finance charge, (5) unilaterally modified the agreements by increasing the amount of the "past due" fees from $ 15 originally to $ 20, and (6) failed to disclose to some of its customers that making the minimum payment stated on their bills would not bring the account below the credit limit, and they would continue to incur "over the limit" fees.

The final count, Count V, alleges that Capital One imposed unlawful liquidated damages when it charged its customers "past due" fees that bore no relation to the cost of collection or to defendant's actual damages. In other words, they are intended as penalties.

 

DISCUSSION

 

I. Judgment on Pleadings on Counts I, II, and III

[HN1] A 12(c) motion "is designed to provide a means of disposing of cases when the material facts are not in dispute and a judgment on the merits can be achieved by focusing on the content of the pleadings." Wright & Miller, 5A Federal Practice and Procedure, §  1367 at 509-10 [*6]  (2d ed. 1990). [HN2] A motion for judgment on the pleadings may be made at any time after the pleadings are closed. The court will consider such a motion under the same standard as a motion to dismiss pursuant to Rule 12(b).  Flenner v. Sheahan, 107 F.3d 459, 461 (7th Cir. 1997); Frey v. Bank One, 91 F.3d 45, 46 (7th Cir. 1996), cert. denied, 519 U.S. 1113, 136 L. Ed. 2d 841, 117 S. Ct. 954 (1997); GATX Leasing Corp. v. National Union Fire Ins. Co., 64 F.3d 1112, 1114 (7th Cir. 1995). As a result, "the motion should not be granted unless it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief." Thomason v. Nachtrieb, 888 F.2d 1202, 1204 (7th Cir. 1989) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957)). In evaluating the motion, the court will view the facts in the complaint in the light most favorable to the nonmoving party.  Flenner, 107 F.3d at 461.

[HN3] In at least two situations, however, the court will consider a 12(c) motion under the same standard as a motion for summary judgment. First, as Rule 12 itself makes clear, when matters outside the pleadings are presented to and not excluded by the [*7]  court, a 12(c) motion must be treated as one for summary judgment under Rule 56. Fed. R. Civ. P. 12(c); Church v. General Motors Corp., 74 F.3d 795, 796 (7th Cir. 1996). Second, if a 12(c) motion appears to be aimed at "disposing of the case on the basis of the underlying substantive merits," the appropriate standard of review "is that applicable to summary judgment, except that the court may consider only the contents of the pleadings." Alexander, 994 F.2d 333 at 336; see also Republic Steel Corp. v. Pennsylvania Eng'g Corp., 785 F.2d 174, 177 n.2 (7th Cir. 1986) (noting that "like the summary judgment procedure, a motion under Rule 12(c) is directed towards a final judgment on the merits"). In either of these situations, the court will not grant a motion for judgment on the pleadings unless no genuine issues of material fact remain to be resolved and the defendant is entitled to judgment as a matter of law.  National Fidelity Life Ins. Co. v. Karaganis, 811 F.2d 357, 358 (7th Cir. 1987).

Here, only a question of law is presented as to Counts I, II, and III: which of two statutory provisions applies to plaintiffs' claims. See Wright & Miller, 5A Federal Practice  [*8]   and Procedure, §  1367 at 22-23 (suggesting that a 12(c) motion is useful in cases where "the sole question is the applicability or interpretation of a statutory provision"). The argument here is seemingly simple. Defendants argue that they are entitled to judgment on the pleadings because Virginia Code §  6.1-330.80 ("330.80"), which provides a grace period for making a payment and limits the late fee a lender can charge, does not apply to Capital One. Instead, Capital One argues that another section of the Virginia Code applies, §  6.1-330.63 ("330.63"), which allows banks to impose finance charges and other fees which a customer agrees by contract to pay. See Va. Code. Ann. §  6.1-330.63 (Michie Supp. 1997 ). Here, plaintiffs affirmatively state in their complaint that they executed customer agreements, and these agreements specified what fees would be charged. Defendant argues that because 330.63 applies, defendant is entitled to judgment on the pleadings. Plaintiffs, in turn, insist that 330.80 applies, so that they are entitled to judgment on the pleadings.

The question of which section of the Virginia Code applies to a bank that issues credit cards and imposes late fees [*9]  on its customers' accounts has not been addressed by any Virginia or federal court. In determining which course we will follow, our inquiry begins with the language of the statute.  Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 64 L. Ed. 2d 766, 100 S. Ct. 2051 (1980) (stating that "the starting point for interpreting a statute is the language of the statute itself"). In the absence of statutory definition, we will accord words and phrases their ordinary and natural meaning, and in so doing we will avoid interpretations that would render the statutory language meaningless, redundant, or superfluous.  Matter of Merchants Grain, Inc. By and Through Mahern, 93 F.3d 1347, 1353-54 (7th Cir. 1996), cert. denied, Mahern v. Adkins, 519 U.S. 1111, 136 L. Ed. 2d 837, 117 S. Ct. 948 (1997) (noting that this is a fundamental canon of statutory construction). We note, also, that statutory interpretation is a holistic endeavor that must account for a statute's full text, language, punctuation, structure, and subject matter.  Trustee of Chicago Truck Drivers, Helpers and Warehouse Workers Union (Indep.) Pension Fund, v. Leaseway Transp. Corp., 76 F.3d 824, 828 (7th Cir. 1996). [*10]  Finally, [HN4] when interpreting a statute, "a court must not be guided by a single sentence or member of a sentence, but look to the provision of the whole law, and to its object and policy." Grammatico v. United States, 109 F.3d 1198, 1204 (7th Cir. 1997).

The statutory provisions in dispute are both found in Chapter 7.3 of Title 6.1 of the Virginia Code. n3 The provision plaintiffs urge this court to apply, reads, in pertinent part, as follows:

 

§  6.1-330.80 Amount of late charge; when charge can be made.

 

A. Any lender or seller may impose a late charge for failure to make timely payment of any installment due on a debt . . . provided that such late charge does not exceed five percent of the amount of such installment payment and that the charge is specified in the contract between the lender or seller and the debtor. For the purposes of this section, "timely payment" is defined as one made by the date fixed for payment or within a period of seven calendar days after such due date.

 

The provision defendant says is applicable provides:

 

§  6.1-330.63 Charges by banks or savings institutions; revolving credit.

 

A. Notwithstanding any other provisions [*11]  of this chapter, any bank or savings institution may impose finance charges and other charges and fees at such rates and in such amounts and manner as may be agreed by the borrower under a contract for revolving credit or any plan which permits an obligor to avail himself of the credit so established.

 

 

n3 Title 6.1 of the Code of Virginia is entitled "Banking and Finance." Within that Title is Chapter 7.3, which deals with "Money and Interest."

 

The plaintiffs make several arguments in support of their theory that 330.80 applies. n4 The language of 330.80 broadly applies to "any lender" and "any installment due on a debt" and is therefore clearly applicable to the facts of this case. And 330.80 applies expressly to late charges and a 7 day grace period, whereas 330.63's only specific reference is to "finance charges" while referring generally to "other charges and fees." Since late charges are the issue in this case, plaintiffs argue that the provision specifically dealing with them should control. County  [*12]   of Fairfax v. Century Concrete Serv., Inc., 254 Va. 423, 492 S.E.2d 648, 650 (Va. 1997) (citing Virginia Nat'l Bank v. Harris, 220 Va. 336, 257 S.E.2d 867, 870 (Va. 1979) for the proposition that a specific statute prevails over a more general one). Second, the repayment of credit is the main issue in this case. Section 330.63 should not apply because it deals exclusively with the extension of credit, not the repayment of it. For example, it applies to "revolving loans," a term that only contemplates extension of credit. Third, "late charges" are not included within 330.63's phrase "other charges and fees," and therefore 330.63 does not govern. Under the canon of ejusdem generis, plaintiffs argue, this general phrase should be understood to relate to the specific term: "finance charges." Regulation Z of TILA, which is incorporated into 330.63 by reference, defines finance charges as interest, service fees, transaction fees, loan fees, and activity fees. The general phrase should be limited to this meaning. Moreover, the Virginia legislature presumably meant something different when it used the phrase "late charges" than when it used the phrase "other charges and fees."  [*13]  The latter phrase, therefore, must not include late charges. Fourth, this court should apply 330.80 in order to affect its purpose: to protect consumers from all excessive late fees imposed on any debt, including credit card debt. Finally, plaintiffs argue that refusing to impose this requirement on Capital One would create unfair competition in that some lenders -- notably credit unions -- would still be bound by 330.80. Banks like Capital One would enjoy large profits while some of their competitors would not. n5

 

n4 Plaintiffs' motion for leave to file surreply, which raises many of these arguments, is granted.

n5 Plaintiffs also argue that 14 other banks in Virginia currently comply with 330.80, a fact which indicates that these banks apparently believe they are bound by 330.80. However, plaintiffs do not explain why such a belief would be relevant to our inquiry. We are not aware of any canon of statutory interpretation that allows the court to consider an industry's interpretation of a statutory provision in determining whether the statute governs a particular case.

 

 [*14]

Defendant, on the other hand, contends that 330.63 clearly trumps 330.80. Section 330.63 is specifically intended to govern the extension of credit through credit cards; 330.80 is not. The term "revolving credit" is not defined by the statute, but it is clear from the language of 330.63 that it refers to credit card arrangements. For example, the second paragraph of 330.63(A) mentions "the extension of credit . . . to be effected by the use of a credit card," and later refers to this arrangement as "the revolving credit contract or plan." n6 The rest of the section addresses other issues related to credit card plans, such as specifying the disclosures that must be made with any credit card application or solicitation. See §  6.1-330.63(B). The terms of 330.63 provide that the bank may impose "other charges and fees" that the borrower agrees to pay. Defendant points out that because this language is very broad and does not contain any exceptions, it would unreasonable to read into it an exclusion for late fees. Therefore, concludes defendant, this provision more specifically addresses the issue in this case -- late charges on credit card debt -- than does 330.80. Most significant,  [*15]  however, is the fact that the opening language of 330.63 makes its terms applicable "notwithstanding any other provision of this chapter." Section 330.80 is within the same chapter as 330.63: Chapter 7.3. Therefore, 330.63 governs this case.

 

n6 The second paragraph of 330.63(A), states, in full:

 

In the event of the extension of credit by a bank or a savings institution hereunder to be effected by the use of a credit card for the purchase of merchandise or services, no finance charge shall be imposed on the cardholder or borrower on such extension of credit if payment in full of the unpaid balance owing for all extensions of credit under the revolving credit contract or plan is received at the place designated by the creditor prior to the next billing date (which shall be at least twenty-five days later than the prior billing date). (Emphasis added).

 

We agree with defendant that 330.63 applies, and plaintiffs' arguments to the contrary do not persuade us otherwise. First, plaintiffs are incorrect [*16]  in asserting that 330.63 is inapplicable because it only governs the extension and not the repayment of credit. The statute, on its face, addresses "finance charges and other charges and fees" payable by the borrower; it therefore, clearly contemplates repayment of credit. Moreover, contrary to the plaintiffs' contention, the phrase "revolving credit" encompasses extension of and repayment of credit:

 

Type of consumer credit arrangement which permits a buyer or a borrower to purchase goods or secure loans on a continuing basis so long as the outstanding balance of the account does not exceed a certain limit. Loans are repaid and new loans granted in a cycle. See also Charge account.

 

Black's Law Dictionary 1322 (6th Ed. 1990). n7

 

n7 Within the definition of "charge account" appears the term "revolving charge account," signifying "an arrangement between a seller and buyer pursuant to which: (1) the seller may permit the buyer to purchase goods or services on credit either from the seller or pursuant to a seller credit card." Black's Law Dictionary, (6th Ed. West) (emphasis added).

 

 [*17]

As for the applicability of 330.63 to the specific facts of this case, we note that the term "revolving credit" is commonly used to describe or refer to credit card arrangements. See In re Rembert, 141 F.3d 277, 1998 U.S. App. LEXIS 6896, 1998 WL 161706, at *5 (6th Cir. 1998); Clark v. Chicago Mun. Employees Credit Union, 119 F.3d 540, 541-42 (7th Cir. 1997); Bartholomew v. Northampton Nat'l Bank of Easton, Easton, Pa., 584 F.2d 1288, 1296 (3d Cir. 1978); In re Best Products Co., Inc., 210 B.R. 714, 715 (Bankr. E.D. Va. 1997). For example, in 1976 the Seventh Circuit found that Illinois' Revolving Credit Act specifically governed the rates chargeable by Illinois banks in connection with their credit card accounts.  Fisher v. First Nat'l Bank of Chicago, 538 F.2d 1284, 1289 (7th Cir. 1976). This, along with 330.63's specific mention of credit card debt as a "revolving credit" plan convinces us that 330.63 applies to the instant dispute over credit card charges. n8

 

n8 Plaintiffs themselves cite legislative history that bolsters the conclusion that 330.63's revolving credit language refers to credit card agreements: Senate Bill 1032 "amends provisions of Virginia law related to the terms and conditions associated with the use of credit cards and other revolving or open-end credit plans." Plaintiffs' Surreply to Defendant's Reply Memorandum in Support of Defendant's Motions for Judgment on the Pleadings and Summary Judgment ("Plaintiffs' Surreply"), Ex. A (a summary of Senate Bill 1032, "Charges by banks or savings institutions; revolving credit, open-end sales and loan plans").

 

 [*18]

Plaintiffs' argument that 330.63 does not apply because it refers only generally to "finance charges and other charges and fees," is also unpersuasive. Plaintiffs' ejusdem generis argument that "other fees and charges" should be read to include only different types of finances charges -- such as interest, service fees, transaction fees, loan fees, and activity fees -- is implausible. If the only charges and fees contemplated by the statute are those fees already included in the definition of finances charges, then the phrase "other charges and fees" would be rendered wholly superfluous; therefore, "other charges and fees" must mean something different from "finance charges." The breadth of the language suggests that it includes any "other charges and fees," including "late charges." As to plaintiffs' second argument, we agree that the legislature meant something different when it used the broad phrase "other charges and fees" in 330.63, and the specific phrase "late charges" in 330.80. However, we do not agree that simply because "other charges and fees" is different from "late charges," the more general phrase necessarily excludes "late charges." The language "other charges [*19]  and fees" is very broad, and in the absence of statutory exceptions or references to 330.80, it clearly contemplates all charges and fees (besides finance charges). It is far less reasonable to suppose, as plaintiffs insist, that the legislature meant to include all charges and fees except late charges.

Having determined that 330.63 is applicable to the facts of this case, we have no difficulty concluding that it governs to the exclusion of 330.80. The plain language of 330.63 states that its terms apply "notwithstanding any other provision of this chapter." With these words, the Virginia legislature clearly manifested an intent to treat charges imposed in revolving credit arrangements differently from charges imposed in other forms of credit extensions.

Plaintiffs' final argument is that this interpretation puts credit unions on a lesser footing than other lending institutions. For example, plaintiffs argue, credit unions are bound by 330.80's provisions by virtue of §  6.1-330.64. Va. Code. Ann. §  6.1-330.64 (Michie 1993). However, Article 7, the division under which 330.64 falls, is entitled "Exception to Contract Rate of Interest; Charges by Credit Unions." Section 330.64 only [*20]  addresses the finance charge a credit union may impose, not any other charges. n9 Plaintiffs themselves have argued that finance charges do not include late charges. We find nothing in 330.64 to suggest that credit unions are bound by the requirements of 330.80 and excluded from all the protections of 330.63.

 

 

n9 §  6.1-330.64. Credit Union Loans. -

A. A credit union may make loans to its members and to other credit unions. Notwithstanding any other statute or provision relating to interest or usury, any credit union may charge interest as agreed by the borrower provided such interest is not charged in advance. B.1. Any credit union contract for revolving credit or any plan which permits an obligor to avail himself of the credit so established may provide for computation of any finance charges by application of a rate, at the option of the credit union to:

a. The average daily balance for the period ending on the billing date;

b. The balance existing on the billing date of the month; or

c. Any other balance which does not result in the credit union charging or receiving any sum in excess of what would be charged or received under item a or b of this subdivision.

2. No finance charge shall be imposed unless the bill is mailed not later than eight days (excluding Saturdays, Sundays and holidays) after the billing date, except that such time limitation shall not apply in any case where the credit union has been prevented, delayed, or hindered in mailing or delivering the bill within such time period because of an act of God, war, civil disorder, natural disaster, strike, or other excusable or justifiable cause.

3. In the event of the extension of credit by a credit union hereunder to be effected by the use of a credit card for the purchase of merchandise or services, a finance charge shall be imposed upon the member or cardholder on such extensions of credit if payment in full of the unpaid balance owing for extensions of credit for merchandise or services is received at the place designed by the credit union prior to the next billing date, which shall be at least twenty-five days later than the prior billing date.

4. As used in this section, "average daily balance" means, for any billing period, that amount which is the sum of the actual amounts outstanding each day during the billing period divided by the number of days in the billing period.

 

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - [*21]

We are not unaware of the effect this decision may have on Virginia banks that issue credit cards, and more to the point, the effect it may have on their customers. But, as the Virginia Supreme Court has observed, [HN5] "when the legislature has spoken plainly it is not the function of courts to change or amend its enactments under the guise of construing them." Doss v. Jamco, Inc., 254 Va. 362, 492 S.E.2d 441, 445 (Va. 1997).

Counts I and II charge that Capital One violated Virginia law when it imposed late fees before a 7 day grace period had expired, and because those fees exceeded 5% of the amount due. Section 330.63 states that the parties may fix the terms under which charges and fees are imposed "in such . . . manner as may be agreed by the borrower." It also states that the lender must disclose "any grace period or free period during which the consumer may repay the full balance reflected on a billing statement . . . without the imposition of additional finance charges." The statute does not incorporate by general or specific reference the provision of 330.80 that requires a 7 day grace period; instead, it specifically makes its own terms applicable "notwithstanding any other [*22]  provision of this chapter." The plain language of the statute, therefore, indicates that the contract between the bank and the borrower governs "any grace period" the borrower is afforded, as well as any charges and fees. The question, therefore, is what the plaintiffs agreed to in the Customer Agreement. Plaintiffs attached "a typical Customer Agreement" to their complaint, which states at clause 12(c):

 

Late Payment Charge. A late payment charge of $ 18.00 (Effective 01/01/97 the late payment charge will be $ 20), will be imposed if we do not receive your Minimum Payment in time for it to be credited within 3 days after the due date shown on your Periodic Statement. (Effective 01/01/97 a late payment charge will be assessed if your payment is not received on the due date. There will be no grace period.)

 

Third Amended Class Action Complaint ("Complaint"), Ex. A (emphasis supplied). Plaintiffs admit they executed contracts with Capital One, and the Customer Agreement contained these terms. See Complaint, PP 16 - 19, 22. Therefore, no material facts are in dispute and we hold that defendant is entitled to judgment on the pleadings on Counts I and II.

The [*23]  viability of Count III, which charges defendant with failing to disclose the favorable Virginia statutory provisions and failing to comply with those provisions, depends on how this court rules concerning the applicability of Section 330.80. As plaintiffs explain,

 

Plaintiffs allege that due to Defendant's noncompliance with §  6.1-330.80, Defendant failed to disclose that its "late fee" was actually a finance charge and also failed to disclose the state mandated time period in which credit extended may be repaid, both in violation of 15 U.S.C. §  1637(a)(1) and Regulation Z §  226.6(a).

 

Plaintiffs' Memorandum in Opposition to Defendant's Motion for Judgment on the Pleadings as to Counts I, II and III and for Summary Judgment as to Counts IV and V, at 7. Aside from this claim, plaintiffs do not charge that defendant failed to make any other required TILA disclosures. Having concluded that 330.80 does not apply and that Capital One did not violate any Virginia statute, we grant the defendant's motion for judgment on the pleadings on Count III.

 

II. Defendants' Motion for Summary Judgment on Counts IV and V

[HN6] Summary judgment "shall be rendered forthwith if the [*24]  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). In considering such a motion, the court construes the evidence and all inferences that reasonably can be drawn therefrom in the light most favorable to the nonmoving party.  O'Connor v. DePaul University, 123 F.3d 665, 669 (7th Cir. 1997). "A dispute over material facts is genuine if 'the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Kennedy v. Children's Serv. Soc'y of Wis., 17 F.3d 980, 983 (7th Cir. 1994) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986)). [HN7] The court will enter summary judgment against a party who does not "come forward with evidence that would reasonably permit the finder of fact to find in [its] favor on a material question." McGrath v. Gillis, 44 F.3d 567, 569 (7th Cir. 1995). We will address Count IV and V in turn.

Count IV alleges various violations of Illinois' Consumer Fraud and [*25]  Deceptive Business Practices Act, 815 ILCS 505/2. Defendant argues that it is entitled to summary judgment on all of the plaintiffs' charges in Count IV because Virginia and federal law preempt plaintiffs' Illinois claims. n10 This is so because the very terms of the Customer Agreement specify that Virginia law will govern the contract. Moreover, plaintiffs' Illinois claims are preempted under Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 135 L. Ed. 2d 25, 116 S. Ct. 1730 (1996). Defendant also argues that even if Illinois law does apply, plaintiffs' claim fails because they have not articulated any "fraudulent or deceptive" conduct. We will only address the first argument because it persuades us to grant summary judgment in favor of defendant.

 

n10 Although the complaint and plaintiffs' brief refer specifically only to the Illinois consumer fraud statute, the plaintiffs' complaint also mentions that the consumer fraud statutes of 14 other states will be used if plaintiffs from those states are included in the class action.

 

 [*26]

Clause 23 of the "typical" Customer Agreement n11 attached to the plaintiffs' complaint states: "Applicable Law. This Agreement will be governed by Virginia and Federal law." Complaint, Ex. A. Plaintiffs do not dispute that they executed a contract containing these terms. Instead, they argue that notwithstanding this contractual provision, Illinois law should apply because Illinois has a greater interest in the litigation than does Virginia. The rule in Illinois is that "the parties' choice of law will be given effect unless it would violate fundamental Illinois public policy and Illinois has a materially greater interest in the litigation than the chosen state." Demitropoulos v. Bank One Milwaukee, N.A., 915 F. Supp. 1399, 1413 (N.D. Ill. 1996) (citing Maher & Associates, Inc. v. Quality Cabinets, 267 Ill. App. 3d 69, 640 N.E.2d 1000, 1006, 203 Ill. Dec. 850 (Ill. App. Ct. 1994), and International Surplus Lines Ins. Co. v. Pioneer Life Ins. Co. of Ill., 209 Ill. App. 3d 144, 568 N.E.2d 9, 14, 154 Ill. Dec. 9 (Ill. App. Ct. 1990)). "The public policy considerations must be strong and of a fundamental nature to justify overriding the chosen law of the parties." Id. [*27]  (quoting Potomac Leasing Co. v. Chuck's Pub, Inc., 156 Ill. App. 3d 755, 509 N.E.2d 751, 754, 109 Ill. Dec. 90 (Ill. App. Ct. 1987)). Examples of the types of cases in which Illinois courts have upheld choice of law provisions against public policy attacks include, for example, cases involving group insurance policies, marriage annulments, and usury laws.  Potomac Leasing, Co., 509 N.E.2d at 754 (citing cases). In contrast, Illinois courts have refused to enforce gambling contracts which are valid under the foreign law chosen by parties, because those contracts contravene Illinois public policy. Id.

 

n11 The parties have submitted several versions of Customer Agreements sent to the plaintiffs. They each bear substantially the same terms, but may vary in details that are irrelevant to the issues in this case.

 

According to the Illinois Supreme Court, the public policy of the State "must be sought in its constitution, legislative enactments and judicial decisions." Roanoke Agency, Inc. v. Edgar, 101 [*28]  Ill. 2d 315, 461 N.E.2d 1365, 1371, 78 Ill. Dec. 258 (Ill. 1984); see also Wright-Moore Corp. v. Ricoh Corp., 908 F.2d 128, 132 (7th Cir. 1990) (finding that choice of law provision violated Indiana public policy because an Indiana statute made it unlawful to opt out of Indiana'a franchise law). There is no argument here that the Illinois constitution or legislative enactments articulate a public policy against applying a foreign state's consumer fraud laws. Defendants cite two cases that have addressed the issue of whether the Illinois consumer fraud statute should be applied instead of the foreign statute designated in the parties' contract. In both cases, the courts refused to override the contractual choice of law provision in favor of the Illinois consumer fraud statute.  Demitropoulos, 915 F. Supp. at 1414; Potomac Leasing Co., 509 N.E.2d at 754. Plaintiffs cite no cases to the contrary. The only case they do cite, Promatek Med. Sys., Inc. v. Ergometrics, Inc., 1990 U.S. Dist. LEXIS 2068, No. 89 C 6913, 1990 WL 19491, at *5 (N.D. Ill. Feb. 15, 1990), states generally that there is a public interest in redressing injuries suffered by Illinois citizens. However, Promatek is completely inapposite.  [*29]  It did not deal with Illinois' consumer fraud statute, or the problem of what state's substantive law would apply. See id. (stating that "it is unclear whose substantive law will apply"). Instead, Promatek addressed, among other things, the defendant's motion for a change of venue. In its discussion of "the interest of justice" element, the court noted several factors tending to show that the interest of justice would not be served by a transfer. The last factor listed, in one sentence of the opinion, was the "public interest in allowing this court to redress injuries allegedly suffered by an Illinois corporation." Id.

Nevertheless, plaintiffs insist that Illinois law should apply. First, an out-of-state bank injured Illinois residents. Second, plaintiffs would have no redress if they were forced to bring an action under Virginia law because banks are specifically excluded under the Virginia Consumer Protection Act. See Va. Code. Ann. §  59. 1-199 (D) (Michie 1997). n12 Finally, plaintiffs cite Miner v. Gillette Co., 87 Ill. 2d 7, 428 N.E.2d 478, 56 Ill. Dec. 886 (Ill. 1981), for the proposition that a consumer fraud action should be brought under the laws of the [*30]  state in which the consumer was injured.

 

n12 States 59.1-199 states, that "[nothing in the chapter shall apply to ... (D) Banks, savings institutions, credit unions, small loan companies, public service corporations. . .."]

 

None of these arguments persuade us that we should disregard the parties' choice of law. As to the contention that Illinois law should apply because Illinois residents were injured, defendant accurately points out that not all of the plaintiffs are Illinois residents. n13 More to the point, however, plaintiffs cite no case to support the proposition that Illinois law should be applied solely because an Illinois citizen has been injured. To the contrary, Illinois law permits the parties' choice of law provision to govern even when an Illinois resident has been injured. See generally, Demitropoulos, 915 F. Supp. 1399. Furthermore, Virginia has a legitimate interest in regulating its financial institutions. We cannot conclude that Illinois' interest in protecting its citizens is materially [*31]  greater than Virginia's interest in such regulation.

 

n13 Plaintiff Amaro is a Colorado resident, and plaintiffs would like to certify a class of plaintiffs residing in fourteen other states. See Complaint, at PP 7, 37.

 

Next, plaintiffs contend that they would have no redress for the defendant's conduct if the Virginia Consumer Protection Act were applied. However, at least one Illinois court has enforced the parties' choice of law provisions even though the foreign consumer fraud statute left the Illinois resident without recourse.  Potomac Leasing Co., 509 N.E.2d at 753-54. Holding that this did not violate Illinois' public policy, the court stated that, "'[a] court should not refuse to apply the law of a foreign State, however unlike its own, unless it is contrary to pure morals and abstract justice, or unless the enforcement would be of evil example and harmful to its people.'" Id. at 754 (quoting Champagnie v. W.E. O'Neil Constr. Co., 77 Ill. App. 3d 136, 395 N.E.2d 990, 32 Ill. Dec. 609 [*32]  (Ill. App. Ct. 1979)); see also Demitropoulos, 915 F. Supp. at 1414 (quoting this language and stating that differences in the scope of Wisconsin's and Illinois' consumer fraud acts did not sufficiently implicate public policy concerns). Plaintiffs do not demonstrate how Virginia law is "contrary to pure morals," and consequently, we conclude that applying Virginia law would not violate a fundamental public policy of Illinois.

Finally, we are unpersuaded that Miner v. Gillette Co. instructs that consumer fraud actions must be brought in the state where the plaintiffs were injured. Miner discussed the propriety of certifying a class of resident and non-resident plaintiffs in a consumer fraud action.  Miner, 87 Ill. 2d 7, 428 N.E.2d 478, 56 Ill. Dec. 886. Addressing the issue of whether a question of fact or law predominated, the court implied that the laws of the 50 states would have to be applied. n14 428 N.E.2d at 483-84. The court did not suggest that the only proper place to bring a consumer fraud action is in the state where the plaintiffs were injured. Moreover, Miner did not deal with the situation before us today: whether Illinois law controls in the face of [*33]  contrary provision in a contract executed by the parties. n15

 

 

n14 The next question under the statute is whether this common question of fact predominates over the individual questions of law inherent in the application of the laws of the 50 states. . . . We believe that the issue of whether the common question of fact or the individual questions of law predominate in the present case is dependent upon plaintiffs' ability to establish that the differing laws of the States are subject to grouping in a manageable number of subclasses.

 

 Miner, 428 N.E.2d at 483-84.

n15 In the same vein, plaintiffs also cite Warren v. LeMay, 142 Ill. App. 3d 550, 491 N.E.2d 464, 471, 96 Ill. Dec. 418 (Ill. App. Ct. 1986), in their surreply for the proposition that the Illinois consumer fraud statute should be used to the utmost degree to eradicate all forms of deceptive and unfair business practices. Warren, however, did not address the situation where the parties had contracted to apply a different provision.

 

 [*34]

We conclude that Virginia law applies, and therefore we grant defendant's motion for summary judgment on plaintiffs' Illinois consumer fraud charges. Even if Count IV could be read to state a claim under Virginia consumer fraud law, defendant would be entitled to summary judgment under that section of the Virginia Consumer Protection Act that excludes banks. Va. Code. Ann. §  59.1-199(D).

Turning now to Count V, it alleges that defendant imposed unlawful liquidated damages when it charged plaintiffs $ 15, $ 18, and $ 20 in past due fees. The plaintiffs do not dispute that Virginia law applies.

 

The law is settled that [HN8] parties to a contract properly may agree in advance upon the amount to be paid for loss which may result from a breach of the contract. When the actual damages contemplated at the time of the agreement are uncertain and difficult to determine with exactness and when the amount fixed is not out of all proportion to the probable loss, the amount is deemed to have been intended as enforceable liquidated damages. But where the damage resulting from a breach of contract is susceptible of definite measurement (as when the breach consists of failure to pay a sum [*35]  of money) or where the stipulated amount would be grossly in excess of actual damages, courts of law usually construe such a stipulation as an unenforceable penalty.

 

 

 Taylor v. Sanders, 233 Va. 73, 353 S.E.2d 745, 746-47 (Va . 1987) (emphasis added); see also Brooks v. Bankson, 248 Va. 197, 445 S.E.2d 473, 479 (Va. 1994) (citing the standard articulated in Taylor); 301 Dahlgren Ltd. Partnership v. Board of Supervisors of King George County For and on Behalf of Dahlgren Sanitary Dist., 240 Va. 200, 396 S.E.2d 651, 653 (Va. 1990) (same).

Defendant moves for summary judgment because "the Complaint fails to allege that the damages caused by plaintiffs' failure to make timely payments can either be definitely measured in advance or are grossly in excess of actual damages." Motion for Judgment on the Pleadings as to Counts I, II, and III and Summary Judgment on Counts IV and V, at 14. For example, the fact that an $ 18 late fee was assessed to plaintiff Perez's account does not suggest that the fee was "grossly disproportionate" to Capital One's actual damages. Moreover, defendant argues in its reply brief, the plaintiffs have not alleged what Capital One's collection [*36]  costs or actual damages are, nor have they presented any evidence of these costs.

Initially, we note that defendant's motion focuses mainly on the sufficiency of the pleadings. Therefore, we will first analyze whether the allegations in the complaint are adequate. See 10A Charles Alan Wright, et al., Federal Practice and Procedure §  2722, at 46 (2d ed. 1983) (stating that if a motion for summary judgment is made solely on the basis of a pleading, it is equivalent to a 12(b) (6) or 12(c) motion and should be treated as such). [HN9] Under the liberal system of notice pleading envisioned by Federal Rule of Civil Procedure 8,

 

complaints need not contain elaborate factual recitations. They are supposed to be succinct. . . . Any need to plead facts that, if true, establish each element of a "cause of action" was abolished by the Rules of Civil Procedure in 1938, which to signify the radical change from code pleading also replaced "cause of action" with "claim for relief." One pleads a "claim for relief" by briefly describing the events. At this stage the plaintiff receives the benefit of imagination, so long as the hypotheses are consistent with the complaint.

 

 Sanjuan  [*37]   v. American Bd. of Psychiatry & Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994) (citations omitted). Here, plaintiffs allege that Capital One did not calculate the amount of the fee to be imposed by using a reasonable estimate of the cost to collect late accounts. Complaint, P 189, 190. They also allege that the amount of the fee did not represent "any reasonable endeavor . . . to estimate a fair, average compensation for any loss or damage that might be sustained by Capital One because of late payments by plaintiffs," and the fees "bore no reasonable relationship to actual loss incurred by Capital One for late payments." Complaint, P 191. Plaintiffs provide one example: Capital One imposed an $ 18 past due fee on plaintiff Perez's account when her Minimum Payment due was only $ 10. Complaint, P 192. Contrary to defendant's contention, this last fact does tend to suggest that the actual damage Capital One incurred by the late payment of $ 10 was far below the $ 18 charge applied to plaintiff Perez's account. See 301 Dahlgren Ltd. Partnership, 396 S.E.2d at 653 (concluding that a forfeiture provision refunding only 50% of a deposit was a penalty). Indeed, one wonders how Capital [*38]  One could have suffered losses beyond $ 10 if only $ 10 were due. We conclude that these facts are sufficient to state a claim for unlawful liquidated damages.

Defendant next argues in its reply that it is entitled to summary judgment because the plaintiffs failed to present evidence establishing Capital One's collection costs or actual damages. Before Capital One can shift the burden to the plaintiffs to show that a genuine issue of material fact exists, it must support its own claim that it is entitled to judgment as a matter of law. Defendant does not dispute the claim that it imposed $ 15, $ 18, and $ 20 charges when payments were late. It has presented no evidence that these charges are "not out of all proportion to the probable loss," nor has it presented any evidence of the actual damages it incurred as a result of the late payments. The Virginia Supreme Court dealt with a similar situation in 301 Dahlgren Ltd. Partnership, where it reviewed a trial court's decision to grant summary judgment to a defendant that presented no evidence at trial.  396 S.E.2d at 651. Reversing the trial court's grant of summary judgment and determining that the forfeiture provision at issue indeed [*39]  constituted an unenforceable penalty, the Virginia Supreme Court noted that the defendant never produced any evidence that it sustained any damages from the plaintiff's default in payment. Id. (stating also that the forfeiture provision facially appeared to be a penalty). The facts of this case are analogous, and we refuse to grant summary judgment in favor of the defendant.

Our conclusion that defendant is entitled to judgment on the pleadings on Counts I and II does not undermine our holding that plaintiffs may continue to pursue Count V. In 301 Dahlgren Partnership Ltd., the plaintiff applied for sewer and water connections in the Dalhgren Sanitary District ("District"). Id. at 652. It made a 25% deposit ($ 71,250), but later decided not to obtain the connections. Id. When it requested that the deposit be returned, the District returned only half of the deposit, citing a forfeiture provision in a local ordinance, that stated: "in the event of a forfeiture, the applicant shall be entitled to a refund of 50% of availability charges paid by such applicant. . . ." Id. at 652-53 (citing the ordinance passed by the Board of Supervisors of King George County). The [*40]  plaintiff sued to recover the fee it paid. The court assumed (without deciding) that the forfeiture provision was part of the contract, and concluded that the provision constituted an unenforceable penalty and entered judgment in plaintiff's favor for the amount in which it sued. Id. at 653.

Like the defendant in 301 Dahlgren Partnership Ltd., the defendant here is authorized by statute to make the charges it made. But whereas the plaintiffs here expressly agreed to the charges, there was no finding that the plaintiff in 301 Dahlgren Partnership Ltd. did so. However, that makes no difference because the Virginia Supreme Court reached its holding by hypothesizing the worst case scenario for the plaintiff: that they agreed to the forfeiture provision in the statute. For the Virginia Supreme Court, neither an agreement between the parties nor the statutory authority resolved the issue of whether the liquidated damages provision was unlawful. Here as well, the defendant is not entitled to summary judgment simply because of the agreement and statute.

 

CONCLUSION

The defendant's motion for judgment on the pleadings as to Counts I, II, and III is granted, and those [*41]  counts are dismissed with prejudice. Plaintiffs' motion for judgment on the pleadings is denied. Defendant's motion for summary judgment is granted as to Count IV but denied as to Count V.

DATED: May 19, 1998

ENTER:

John F. Grady, United States District Judge