DRESS v. CAPITAL ONE BANK USA (2021)

United States Court of Appeals, Fourth Circuit.2021-06-02No. No. 19-1926

Summary · law.co

Holding. The court affirmed the district court's dismissal of the complaint for failure to state a plausible claim for relief, finding that the credit card agreements' terms were unambiguous and clearly authorized Capital One to charge interest on new purchases made while an account balance remained outstanding.

Credit card holders sued Capital One Bank, claiming the bank breached its contract by charging interest on new purchases despite allegedly promising not to do so if the balance was paid in full by the deadline. The lower court dismissed the case for failing to state a valid legal claim, and the credit card holders appealed. The appellate court reviewed the credit card agreements and determined that the contract language was clear and unambiguous: while Capital One generally charges interest from the transaction date, it makes an exception only when the cardholder has paid the entire account balance in full by the due date. Because each plaintiff had an outstanding balance when making new purchases, Capital One was contractually authorized to charge interest on those purchases, making the plaintiffs' breach of contract claim implausible.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether credit card agreements were ambiguous regarding when interest accrues on new purchases
Whether Capital One breached its contract by charging interest despite an alleged no-interest promise
Application of Virginia contract law to interpret unambiguous written agreements

Procedural posture

The plaintiffs appealed the district court's dismissal of their breach of contract and breach of covenant of good faith and fair dealing claims for failure to state a claim upon which relief could be granted.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

Susan Dress,

Amy Edwards, and Stephanie Barnett (Plaintiffs) sued Capital One Bank (Capital One), alleging, inter alia, breach of contract and breach of the covenant of good faith and fair dealing. Plaintiffs claimed that Capital One promised its credit card holders that they would not be charged interest on new purchases if they paid for those purchases in full by the payment deadline, and that Capital One breached that promise. The district court dismissed their action for failure to state a claim, and Plaintiffs appeal. Finding no error, we affirm.

We review de novo a district courts dismissal of an action for failure to state a claim. Trejo v. Ryman Hosp. Props., Inc., 795 F.3d 442, 445-46 (4th Cir. 2015). “When ruling on a motion to dismiss, courts must accept as true all of the factual allegations contained in the complaint and draw all reasonable inferences in favor of the plaintiff.” Hall v. DIRECTV, LLC, 846 F.3d 757, 765 (4th Cir. 2017). To survive a motion to dismiss, a complaint must “state[ ] a plausible,” not merely conceivable, “claim for relief,” Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

Specifically, here Plaintiffs must state a plausible claim for relief under Virginia contract law. The district court, as a “federal court exercising diversity jurisdiction,” had to apply the substantive law of the forum state. Volvo Const. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 599–600 (4th Cir. 2004). Virginia law honors contractual choice-of-law provisions. See Settlement Funding, LLC v. Von Neumann-Lillie, 274 Va. 76, 645 S.E.2d 436, 438 (2007). Accordingly, because the parties’ contracts stated that Virginia law governed their agreements, Virginia contract law governs Plaintiffs’ claims.

Under Virginia law, where the terms of a contract are clear and unambiguous, the contract is construed according to its plain meaning and a reviewing court must enforce the contract as written by the parties. See Va. Elec. & Power Co. v. N. Va. Regl Park Auth., 270 Va. 309, 618 S.E.2d 323, 326-27 (2005); see also TM Delmarva Power, LLC v. NCP of Va., LLC, 263 Va. 116, 557 S.E.2d 199, 200 (2002) (“Contracts are construed as written, without adding terms that were not included by the parties.”). “A contract is not ambiguous merely because the parties disagree as to the meaning of the terms used.” TM Delmarva Power, 557 S.E.2d at 200. Rather, a contract is ambiguous only “when the contracts language is of doubtful import, is susceptible of being understood in more than one way or of having more than one meaning, or refers to two or more things at the same time.” Pocahontas Mining Ltd. Liab. Co. v. CNX Gas Co., 276 Va. 346, 666 S.E.2d 527, 531 (2008).

The district court dismissed Plaintiffs’ suit because it found that the contracts between the parties clearly authorized Capital One to impose the interest charges Plaintiffs challenged. On appeal, Plaintiffs argue that the contracts are ambiguous and thus that their claim that Capital One breached the contracts’ terms is plausible. However, we have reviewed the documents governing the parties’ agreements and find that the contracts’ terms are unambiguous. Specifically, the contracts inform cardholders that, in general, interest charges begin to accrue from the day a transaction occurs. The contracts then “plainly declare[ ]” the one, limited exception to the general rule of interest accrual: namely, that Capital One will not charge interest on new purchases only if the cardholder has timely paid her account balance in full. W. F. Magann Corp. v. Virginia-Carolina Elec. Works, Inc., 203 Va. 259, 123 S.E.2d 377, 381 (1962) (noting courts must construe contracts based on the parties’ intentions as expressed by the words used therein).

Here, because each of the Plaintiffs carried an outstanding account balance when they made new purchases, Capital One acted within its contractual authority when it charged interest on those new purchases. Plaintiffs’ claims for breach of contract and breach of the covenant of good faith and fair dealing are therefore implausible. See Doctors Co. v. Womens Healthcare Assocs., Inc., 285 Va. 566, 740 S.E.2d 523, 527 (2013) (stating that, to prevail on a breach of contract claim, a plaintiff must show “a legally enforceable obligation between the defendant and plaintiff, breached by defendant, which proximately caused damages to the plaintiff”); see also Wards Equip., Inc. v. New Holland N. Am., Inc., 254 Va. 379, 493 S.E.2d 516, 520 (1997) (noting that, in Virginia, the implied covenant of good faith and fair dealing “cannot be the vehicle for rewriting an unambiguous contract in order to create duties that do not otherwise exist”).

Accordingly, we affirm the district courts order. We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before this court and argument would not aid the decisional process.

AFFIRMED

FOOTNOTES

FOOTNOTE

. The district court dismissed Dress’ claims for lack of standing and Plaintiffs have not challenged that dismissal on appeal.

PER CURIAM:

Affirmed by unpublished per curiam opinion.

Unpublished opinions are not binding precedent in this circuit.