FOREIGN CURRENCY
Wright v. Capital One Bank N.A.
Date: March 4, 2024
Issue: Whether Capital One violated its cardholder agreements by overcharging credit and debit card customers on transactions made in foreign currencies.
Case Summary: A Virginia federal district court dismissed a lawsuit alleging Capital One overcharged credit and debit card customers on transactions made in foreign currencies.
Emily Wright and three other named plaintiffs have credit, debit, and prepaid cards with Capital One. According to plaintiffs, Capital One was required to apply foreign exchange (FX) rates for foreign transactions that were either wholesale FX market rates or government-mandated rates. However, plaintiffs claimed Capital One allowed Visa and Mastercard (the processors) to act as its agents by selecting the FX rates to be changed. Further, plaintiffs asserted the processors promulgated rules requiring Capital One to apply FX rates to cardholders’ foreign transactions. Rather than applying FX rates to plaintiffs’ foreign transactions that reflect the terms of the Processors’ rule, plaintiffs claimed Capital One charged “fictional” rates. Plaintiffs contended the cardholder agreements only authorized Capital One to charge rates that existed in the wholesale market on the applicable date, and Capital One violated the cardholder agreements and the processors’ rules by charging off-market rates.
In their complaint, plaintiffs asserted several claims against Capital One including breach of contract; unjust enrichment; breach of implied covenant of good faith and fair dealing; and violations of state consumer protection laws in Massachusetts, North Carolina, Washington and New Jersey. Capital One moved the court to dismiss, arguing it made no promises to plaintiffs about FX rates and is not responsible for the alleged wrongs about which they complain. According to Capital One, plaintiffs’ own allegations and the agreements they cite show the processors calculate and apply FX rates. Capital One emphasized it does not participate in that process nor adjust the rates the processors set or charge.
Judge Patricia Tolliver Giles of the Eastern District of Virginia granted Capital One’s motion to dismiss. At the outset, the court concluded plaintiffs possessed Article III standing. Next, the court concluded plaintiffs failed to state a breach of contract claim. The court explained that under Virginia law, to prove a breach of contract occurred a party must show the existence of an executed and enforceable agreement that the defendant failed to perform. A party must also prove that the breach caused damages and that those damages are recoverable. The court interpreted the cardholder agreements’ terms according to their plain meaning and determined the language does not identify Capital One’s specific promise concerning the rates that will ultimately be charged to their cardholders. Moreover, the language failed to identify the specific procedures or rules that the processors will use to set rates. For these reasons, the court concluded plaintiffs cannot identify the existence of Capital One’s duty and cannot plausibly allege a breach of contract. What is more, plaintiffs did not plausibly allege Capital One owed a contractual duty to charge either wholesale market rates or government-mandated rates, or that Capital One ultimately retained control over the processors’ imposed rates.
The court also determined plaintiffs failed to state a claim for unjust enrichment. As explained by the court, it must dismiss a claim for unjust enrichment when the parties have an express written contract. Neither party disputed the agreements’ validity or enforceability. As a result, an express contract existed and, in turn, plaintiffs cannot raise an unjust enrichment claim.
Further, the court determined plaintiffs failed to state a breach of good faith and fair dealing claim. Plaintiffs alleged Capital One’s cardholder agreements created the objectively justified expectation the rates applied for foreign currency exchange would bear some resemblance to rates actually paid by Capital One. Additionally, plaintiffs alleged Capital One breached its duties of good faith and fair dealing in the performance and execution of its contracts. However, the court explained under Virginia law, such a claim must be brought as part of a claim for breach of contract” rather than independently. The court emphasized if plaintiffs cannot plausibly identify the duty Capital One owed them, they cannot allege the bank exercised that duty in bad faith.
Finally, the court concluded Plaintiffs failed to state a claim that Capital One violated state consumer protection laws. The court explained under the state statutes cited by plaintiffs, alleging a breach of contract claim alone is not enough to state a successful claim of an unfair or deceptive trade practice. Plaintiffs claimed Capital One made false representations about its FX rate procedures at contract formation which would qualify as breaking a promise it never intended to perform. However, the court determined that citing the cardholder’s agreements’ contractual language is not sufficient to prove Capital One’s intent. The court emphasized it is not bound to accept such conclusory statements as true.
Bottom Line: There has been no indication of whether plaintiffs plan to appeal the district court’s decision.
Documents: Opinion
