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IN THE CIRCUIT COURT FOR BALTIMORE CITY, MARYLAND

DALE WELLS,
8717 Ridge Road,
Ellicott City, Maryland 21043,

SHARON GOLDENBERG, Civil No. C-99-000202
1760 Park Road, N.W.,
Washington, D.C. 20010,

JOHN DOVEL,
217 West Cameron Street
Falls Church, VA 22046

on behalf of cardholders
and former cardholders similarly situated,

vs.

CHEVY CHASE BANK, F.S.B.,
A Federal Savings Bank.
7926 Jones Branch Road,
McLean, Virginia 22101,

FIRST USA BANK, N.A.
A National Bank.
201 North Walnut Street,
Wilmington, DE 19801,

Defendants.
__________________________________

 

FIRST AMENDED CLASS ACTION COMPLAINT AND JURY DEMAND

Named Plaintiffs, Dale Wells, Sharon Goldenberg and John Dovel, through their attorneys, Trial Lawyers for Public Justice, P.C., John T. Ward, Ward, Kershaw and Minton, P.A. make this their complaint against defendants Chevy Chase Bank, F.S.B. and First USA Bank, N.A.

 

THE PARTIES
1. Named Plaintiff Dale Wells is an individual who resides at 8717 Ridge Road, Ellicott City, Maryland 21043.
2. Named Plaintiff Sharon Goldenberg is an individual who resides at 1760 Park Road, N.W., Washington, D.C. 20010.
3. Named Plaintiff John Dovel is an individual who resides at 217 West Cameron Street, Falls Church, Virginia, 22046.
4. Defendant Chevy Chase Bank, F.S.B. (Chevy Chase) is a federally regulated savings association with its home office, as that term is defined by Office of Thrift Supervision regulations, 12 C.F.R. § 545.91, currently located at 7926 Jones Branch Road, McLean, Virginia, 22101. Prior to January 16, 1996, Chevy Chases home office was located at 8401 Connecticut Avenue, Chevy Chase, Maryland, 20815. Chevy Chase continues to maintain offices at 8401 Connecticut Avenue, Chevy Chase, Maryland. Its Credit Card Division is located in Frederick, Maryland.
5. Defendant First USA Bank, N.A. (First USA) is a federally regulated national bank with its home office located at 201 North Walnut Street, Wilmington, Delaware, 19801. On information and belief, First USA purchased Chevy Chases credit card portfolio on or about September 30, 1998.


FACTS APPLICABLE TO ALL COUNTS
6. Chevy Chase issued credit cards to named plaintiffs and other class member cardholders (hereafter plaintiffs or cardholders) throughout the United States prior to January 1996. After plaintiffs signed up for a credit card, Chevy Chase sent them Cardholder Rules and Regulations and Notice of Billing Rights (hereafter Maryland Cardholder Rules) (Ex. A).
7. The Maryland Cardholder Rules provided that cardholders were entitled to use their Chevy Chase credit card to make purchases or obtain cash advances, subject to the terms and conditions set forth in the Maryland Cardholder Rules.
8. The Maryland Cardholder Rules provided that no finance charge for purchases or cash advances would be imposed for a billing period if payment for the entire New Balance shown on the bill was received by Chevy Chase on or before the payment due date. If the cardholder paid less than the entire New Balance, Chevy Chase would impose a finance charge on the remaining balance.
9. Under the Maryland Cardholder Rules the finance charge was calculated by multiplying the Average Daily Balance by a monthly periodic rate. The monthly periodic rate was determined by dividing the annual percentage rate (hereafter APR) by 12.
10. The APR, under Maryland Cardholder Rules, was one of two figures: (1) a percentage no greater than 24%, or (2) a set percentage plus the Prime rate, neither of which could exceed 24%.
11. In the Maryland Cardholder Rules Chevy Chase agreed that [y]our annual percentage rate will never exceed 24%. (emphasis added). This promise was applicable to the APR charged on both balances for purchases and cash advances.
12. The Maryland Cardholder Rules contained the following provision: Governing Law - This Agreement is made in Maryland. It is governed by Subtitle 9 of Title 12 of the Commercial Law Article of the Maryland Annotated Code and applicable federal laws.
13. Subtitle 9 of Title 12 of the Commercial Law Article of the Maryland Annotated Code (hereafter Subtitle 9") prohibits a lending institution from applying a new, increased APR to pre-existing balances unless the cardholder agreement authorized that retroactive application of the new APRs to the pre-existing balances.
14. The Maryland Cardholder Rules authorized the application of new, higher APRs to pre-existing balances only as a penalty for cardholders who: (1) exceeded their credit limit for two consecutive months; (2) missed two consecutive monthly payments; or (3) discontinued a checking, savings, or Money Fund account with the bank.
15. Pursuant to its Maryland Cardholder Rules, Chevy Chase periodically changed the APR applicable to cardholder accounts. When Chevy Chase changed the APR, the new rate applied only to balances accrued from the date of the change, and the previously existing rate still applied to balances accrued prior to the date of the change.
16. The Maryland Cardholder Rules authorized Chevy Chase to charge cardholders an annual fee of $40.
17. The Maryland Cardholder Rules authorized Chevy Chase to charge a late charge fee of $15 or 5% of the cardholders minimum payment, whichever was greater, if the cardholder failed to make at least their minimum payment on or before the fifth day following the closing date or the tenth day following the payment due date, whichever was earlier.
18. The Maryland Cardholder Rules contained a contractual commitment that Chevy Chase would comply with Subtitle 9 when amending the Maryland Cardholder Rules. This provision read as follows: Amendments – We may amend the terms of this Agreement in accordance with applicable law at any time. Also, we may at any time add new credit services, discontinue any credit services, or replace your card with another card. The governing law provision in the Maryland Cardholder Rules defined the applicable law as Subtitle 9 of Title 12 of the Commercial Law Article of the Maryland Annotated Code and applicable federal laws.
19. By contracting to comply with Subtitle 9, Chevy Chase agreed that, prior to amending the Maryland Cardholder Rules, it would notify cardholders in compliance with the federal Truth in Lending Act and the regulations promulgated thereunder. These regulations ("Regulation Z") required Chevy Chase to notify cardholders of amendments to the cardholder agreements at least 15 days before the effective date of the change. 12 C.F.R. § 226.9(c)(1). Regulation Z also required Chevy Chase to disclose to cardholders, at least 30 days (or one billing cycle) before charging them a fee for renewing their credit card, the terms and conditions that would apply if the card were renewed. 12 C.F.R. § 226.9(e).
20. By contracting to comply with Subtitle 9, Chevy Chase agreed that, if it amended the Maryland Cardholder Rules to increase the interest or finance charges, to change the method of calculation of the finance charge, or to change other charges applied to the account, it would:
A. At least 25 days prior to the effective date of the amendment, mail notice to cardholders, in an envelope that, on its face, contained a statement that an important notice of an increase in rates or fees of the account is enclosed;
B. Provide in the envelope a clear and conspicuous notice describing the amendment and comparing the original terms of the agreement with the new, amended terms;
C. Provide with the notice a statement that the cardholder would receive a second notice with her next periodic billing statement;
D. Provide with the notice a statement that if the bank did not receive the cardholders written notice of refusal within 25 days of the mailing of the second notice, that the amendment would become effective on the first date of the billing cycle in which the amendment became effective;
E. Provide with the notice an enumeration of the cardholders rights upon the cardholders timely refusal of the amendments (which include the cardholders right to continued use of the account pursuant to the original unamended terms for either the duration of time for which an annual fee was paid, or, if no annual fee was required by the agreement, or the time remaining on the annual fee payment was less than three months, for a period not less than three months; and, at the expiration of these periods, that the cardholder could then pay any outstanding unpaid indebtedness under the terms of the unamended agreement);
F. Provide with the notice the address to which the cardholder could send the notice of refusal; and
G. Send a second notice with the cardholders next periodic statement containing the same information as the first notice.
21. On or about January 16, 1996, Chevy Chase moved its home office, as defined by 12 C.F.R. 545.91, from Chevy Chase, Maryland, to McLean, Virginia. After Chevy Chase moved its home office to McLean, Virginia, it included the following new notice in its January and February 1996 billing statements sent to plaintiffs and other cardholders whose credit card accounts were issued under the Maryland Cardholder Rules:
CHEVY CHASE BANK HAS MOVED ITS HOME OFFICE TO VIRGINIA. EFFECTIVE IMMEDIATELY, THE TERMS AND CONDITIONS OF YOUR CREDIT CARD ACCOUNT WILL BE SUBJECT TO VIRGINIA LAW AND APPLICABLE FEDERAL LAW. BEGINNING WITH YOUR NEXT BILLING STATEMENT, YOUR ACCOUNT WILL BE GOVERNED BY THE ENCLOSED RULES AND REGULATIONS. AMENDED TERMS ARE SHOWN IN ITALICS.

This notice was the only notice cardholders received of these changes in the terms and conditions of their Maryland Cardholder Rules. The referenced Cardholder Rules and Regulations are attached hereto as Exhibit B (hereafter Virginia Cardholder Rules).
22. The Virginia Cardholder Rules specified that, instead of using the monthly periodic rate to calculate finance charges, Chevy Chase would multiply the average daily purchase balance by a daily periodic rate. The daily periodic rate was specified as 1/365th of the APR.
23. The Virginia Cardholder Rules further provided that the late fee would be $20 and would be applied to the cardholders account balance if the cardholder failed to make at least his minimum monthly payment on or before the payment due date.
24. The Virginia Cardholder Rules further provided that cardholders would be charged an overlimit fee of $20 each time the cardholders outstanding balance exceeded his credit limit.
25. Shortly thereafter, Chevy Chase began raising cardholders APRs, and applying these new, higher APRs to purchase and cash advance balances. Many of the APRs that Chevy Chase applied to cardholders balances exceeded 24%. In all cases, Chevy Chase used the daily periodic rate times the average daily purchase balance to calculate cardholders finance charges.
26. Chevy Chase began charging its cardholders $20 late fees and $20 overlimit fees.
27. Effective September 30, 1998, all of Chevy Chases credit card accounts were transferred to First USA.
28. First USA continued to charge cardholders as set forth in Paragraphs 21-25.

FACTS APPLICABLE TO NAMED PLAINTIFFS
29. Named Plaintiff Dale Wells first obtained his Chevy Chase Visa card on or about 1985. He used his Visa in accordance with the terms and conditions set forth in the Maryland Cardholder Rules.
30. The only notice Wells received of Chevy Chases unilateral change in the Maryland Cardholder Rules was the following language printed on his January 1996 billing statement:
CHEVY CHASE BANK HAS MOVED ITS HOME OFFICE TO VIRGINIA. EFFECTIVE IMMEDIATELY, THE TERMS AND CONDITIONS OF YOUR CREDIT CARD ACCOUNT WILL BE SUBJECT TO VIRGINIA LAW AND APPLICABLE FEDERAL LAW. BEGINNING WITH YOUR NEXT BILLING STATEMENT, YOUR ACCOUNT WILL BE GOVERNED BY THE ENCLOSED RULES AND REGULATIONS. AMENDED TERMS ARE SHOWN IN ITALICS.

31. Subsequently, Chevy Chase began calculating Wells finance charge by multiplying the daily periodic rate by the average daily purchase balance.
32. Subsequently, Chevy Chase raised Wells APR in excess of 24% and applied that new, higher APR to pre-existing balances.
33. Wells incurred late fees and overlimit fees of $20 or more after January 16, 1996.
34. Wells current (as of January 15, 1999) APR is 26.74%.
35. Named Plaintiff Sharon Goldenberg first obtained her Chevy Chase MasterCard on or about 1995. She used her MasterCard in accordance with the terms and conditions set forth in the Maryland Cardholder Rules.
36. The only notice Goldenberg received of Chevy Chases unilateral change in the Maryland Cardholder Rules was the following language printed on her February 1996 billing statement:
CHEVY CHASE BANK HAS MOVED ITS HOME OFFICE TO VIRGINIA. EFFECTIVE IMMEDIATELY, THE TERMS AND CONDITIONS OF YOUR CREDIT CARD ACCOUNT WILL BE SUBJECT TO VIRGINIA LAW AND APPLICABLE FEDERAL LAW. BEGINNING WITH YOUR NEXT BILLING STATEMENT, YOUR ACCOUNT WILL BE GOVERNED BY THE ENCLOSED RULES AND REGULATIONS. AMENDED TERMS ARE SHOWN IN ITALICS.

37. Subsequently, Chevy Chase began calculating Goldenbergs finance charge by multiplying the daily periodic rate by the average daily purchase balance.
38. Subsequently, Chevy Chase raised Goldenbergs APR in excess of 24% and applied that new, higher APR to pre-existing balances.
39. Goldenberg incurred overlimit fees of $20 or more after January 16, 1996.
40. Goldenbergs current (as of January 15, 1999) APR is 26.74%.
41. Named Plaintiff John Dovel first obtained his Chevy Chase MasterCard on or about 1994. He used his MasterCard in accordance with the terms and conditions set forth in the Maryland Cardholder Rules.
42. The only notice Dovel received of Chevy Chases unilateral change in the Maryland Cardholder Rules was the following language printed on his January or February 1996 billing statement:

CHEVY CHASE BANK HAS MOVED ITS HOME OFFICE TO VIRGINIA. EFFECTIVE IMMEDIATELY, THE TERMS AND CONDITIONS OF YOUR CREDIT CARD ACCOUNT WILL BE SUBJECT TO VIRGINIA LAW AND APPLICABLE FEDERAL LAW. BEGINNING WITH YOUR NEXT BILLING STATEMENT, YOUR ACCOUNT WILL BE GOVERNED BY THE ENCLOSED RULES AND REGULATIONS. AMENDED TERMS ARE SHOWN IN ITALICS.

43. Subsequently, Chevy Chase began calculating Dovels finance charge by multiplying the daily periodic rate by the average daily purchase balance.
44. Subsequently, Chevy Chase raised Dovels APR in excess of 24% and applied that new, higher APR to pre-existing balances.
45. Dovel incurred late fees of $20 or more after January 16, 1996.
46. Dovels APR on cash advances, prior to paying off his account on or about April 1998, was 24.8%.
47. None of the named plaintiffs have claims in excess of $75,000 against Chevy Chase.

CLASS ACTION ALLEGATIONS
48. Named Plaintiffs bring this action on behalf of themselves and on behalf of a class of cardholders and former cardholders similarly situated pursuant to Md. Rule 2-231. The Class is defined as follows:
All cardholders who had a Chevy Chase-issued Visa or MasterCard credit card prior to January 16, 1996 in which Chevy Chase agreed that the governing law would be Subtitle 9 of Title 12 of the Commercial Law Article of the Maryland Annotated Code and thereafter incurred any finance charges, late fees, or overlimit fees.

49. Members of the Class are so numerous and geographically disbursed that joinder of all of them is impractical.
50. The size of the class is at this time unknown. Upon information and belief, Chevy Chase has approximately 3.1 million credit cardholders throughout the United States.
51. There are numerous questions of law and fact common to the Class, including, but not limited to:
A. Did Chevy Chase contract with cardholders prior to January 16, 1996 that it would never raise their APR above 24%?
B. Did Chevy Chase breach its Maryland contract with cardholders that it would never increase their APRs above 24%?
C. Did Chevy Chase contract with cardholders prior to January 16, 1996 that it would not apply new, higher APRs to pre-existing balances?
D. Did Chevy Chase breach its Maryland contract that it would not apply new, higher APRs to pre-existing balances?
E. Did Chevy Chase contract with cardholders prior to January 16, 1996 that it would amend the Cardholder Rules in accordance with Subtitle 9 and applicable federal law?
F. Did Chevy Chase breach its Maryland contract to amend the Cardholder Rules in accordance with Subtitle 9?
G. Did Chevy Chase breach its Maryland contract y amending it to change the method for calculating cardholders finance charges without proper notice?
H. Did Chevy Chase breach its Maryland contract by amending it to increase late fees without proper notice?
I. Did Chevy Chase breach its contract by amending it to add overlimit fees without proper notice?
J. Did Chevy Chase engage in unfair and deceptive trade practices?
52. Named Plaintiffs are members of the Class and their claims are typical of other class members claims in that, like all class members, each named plaintiff had a Chevy Chase credit card issued prior to January 16, 1996, that was subject to the Maryland Cardholder Rules (Ex. A).
53. Named Plaintiffs are adequate representatives of the Class interests in that they will vigorously pursue this action on behalf of the entire Class, have no conflicts with the Class, have interests completely coincident with the Class interests, and have retained counsel experienced in class actions and credit card litigation to represent them.
54. Questions of law and fact common to the Class, including the legal and factual issues relating to the agreements governing the credit card accounts and liability, predominate over any questions affecting only individual cardholders. This class action is superior to other available methods for the fair and efficient adjudication of this controversy. Here the Class is readily definable, and can be easily identified by examination of defendants records; prosecution of this case as a class action will eliminate the possibility of repetitious litigation or will provide redress for claims which otherwise may be too small to support the expense of individual, complex litigation; and there are no unusual problems which would make this case difficult to manage as a class action.

COUNT I
BREACH OF CONTRACT

(Interest Charges Over 24%)

55. The allegations of paragraphs 1 through 54 are incorporated.
56. The Maryland Cardholder Rules constituted a contract pursuant to which cardholders agreed to pay a finance charge on their month to month account balances in consideration for Chevy Chases promise that the APR would never exceed 24%.
57. After January 16, 1996, in breach of its Maryland contracts, Chevy Chase raised cardholders APR rates above 24%. First USA continued to charge those rates after cardholders accounts were transferred to First USA.
58. As a result of defendants breach of contract, cardholders incurred damages in the form of additional finance charges that they would not have incurred had defendants not breached the contract.

WHEREFORE, named plaintiffs seek judgment against the defendants, on behalf of themselves and the Class, consisting of their actual damages as a result of defendants breaches of its contracts, plus interest, and such further relief as this Court deems appropriate.

 

COUNT II
BREACH OF CONTRACT

(Higher Interest on Past Balances)

59. The allegations of paragraphs 1 through 54 are incorporated.
60. The Maryland Cardholder Rules constituted a contract pursuant to which cardholders agreed to pay a finance charge on their credit card account balances and Chevy Chase agreed that it would not apply new APRs to pre-existing balances.
61. Under Subtitle 9, with which Chevy Chase contractually agreed to comply, Chevy Chase could not charge new APRs on pre-existing balances unless the contract authorized it.
62. After January 16, 1996, in breach of its contract, Chevy Chase increased cardholders APRs and applied those increased APRs to cardholders pre-existing balances, although Subtitle 9 prohibited application of the new APRs to cardholders pre-existing balances. First USA continued to apply these increased APRs to cardholders pre-existing balances after cardholders accounts were transferred to First USA.
WHEREFORE, named plaintiffs seek judgment against the defendants, on behalf of themselves and the Class, consisting of their actual damages as a result of defendants breach of contract, plus interest, and such further relief as this Court deems appropriate.

 

COUNT III
BREACH OF CONTRACT

(Failure to Provide Notice of Cardholder Rules Amendments)

63. The allegations of paragraphs 1 through 54 are incorporated.
64. The Maryland Cardholder Rules constituted a contract pursuant to which cardholders agreed to pay a finance charge on their credit card account balances and Chevy Chase agreed that if it amended its Maryland Cardholder Agreement, it would do so in compliance with Subtitle 9.
65. When Chevy Chase amended its Maryland Cardholder Rules on or after January 16, 1996, it failed to provide the contractually required notice under Subtitle 9, in breach of its Maryland cardholder agreements.
66. As a result of Chevy Chases breach, cardholders were deprived of their contractual rights and benefits and suffered damages in the form of additional finance charges and fees they would not have incurred had defendants not breached the contract. First USA continued to charge these finance charges and fees after the cardholder accounts were transferred to First USA.
WHEREFORE, named plaintiffs seek judgment against defendants, on behalf of themselves and the Class, consisting of their actual damages as a result of their breach of contract, plus interest, and such further relief as this Court deems appropriate.

COUNT IV
BREACH OF CONTRACT
(Change In Method of Calculation of
Finance Charge Without Proper Notice)

67. The allegations of paragraphs 1 through 54 are incorporated.
68. The Maryland Cardholder Rules constituted a contract pursuant to which cardholders agreed to pay a finance charge on their credit card account balances and Chevy Chase agreed that if it amended its Cardholder Agreement, it would do so in compliance with Subtitle 9.
69. When Chevy Chase amended its Maryland Cardholder Rules on or about January 16, 1996, it failed to provide the contractually required notice under Subtitle 9, that it was changing the method of calculating finance charges by using a daily periodic rate rather than a monthly periodic rate.
70. As a result of Chevy Chases breach, cardholders were deprived of their contractual rights and benefits and suffered damages in the form of additional finance charges they would not have incurred had Chevy Chase not breached the contract. First USA continued to charge these finance charges after the cardholder accounts were transferred to First USA.
WHEREFORE, named plaintiffs seek judgment against defendants, on behalf of themselves and the Class, consisting of damages as a result of defendants breach of contract, plus interest, and such further relief as this Court deems appropriate.

COUNT V
BREACH OF CONTRACT

(Increase in Late Fees and Overlimit Fees Without Proper Notice)

71. The allegations of the paragraphs 1 through 54 are incorporated.
72. The Maryland Cardholder Rules constituted a contract pursuant to which cardholders agreed to pay a finance charge on credit card account balances and Chevy Chase agreed that if it amended its Maryland Cardholder Agreement, it would do so in compliance with Subtitle 9.
73. When Chevy Chase amended the Maryland Cardholder Rules on or about January 16, 1996, it failed to provide the contractually required notice under Subtitle 9, that it was increasing the late fees from $15 to $20, in breach of its Maryland Cardholder Rules.
74. When Chevy Chase amended its Maryland Cardholder Rules on or about January 16, 1996, it failed to provide the contractually required notice under Subtitle 9, that it was adding overlimit fees of $20, in breach of the Maryland Cardholder Rules.
75. As a result of Chevy Chases breach, cardholders were deprived of their contractual rights and benefits and suffered damages in the form of additional late fees and overlimit fees they would not have incurred had defendants not breached the contract. First USA continued to charge these fees after the cardholder accounts were transferred to First USA.
WHEREFORE, named plaintiffs seek judgment against defendants, on behalf of themselves and the Class, consisting of damages as a result of defendants breach of contract, plus interest, and such further relief as this Court deems appropriate.

COUNT VI
UNFAIR AND DECEPTIVE TRADE PRACTICES

76. The allegations of paragraphs 1 through 54 are incorporated.
77. In violation of Md. Code Ann., Commercial Law Art., §§ 13-301(d) and 13-303(3), Chevy Chase failed to state that cardholders had the right to refuse its amendments to the Maryland Cardholder Rules.
78. This fact was material and Chevy Chases failure to state it deceived or tended to deceive cardholders.
79. As a result of Chevy Chases failure to state this material fact, cardholders incurred damages in the amount of the higher finance charges and fees.
WHEREFORE, named plaintiffs seek judgment against Chevy Chase on behalf of themselves and the Class, consisting of their actual damages as a result of defendants unfair and deceptive practices, interest, reasonable attorneys fees and costs, and such further relief as this Court deems appropriate.

JURY DEMAND
Plaintiffs Wells, Goldenberg and Dovel demand trial by jury on all counts.

 

Respectfully submitted,

_________________________
John T. Ward
Ward, Kershaw & Minton
113 West Monument Street
Baltimore, MD 21201

__________________________
F. Paul Bland, Jr.
Sarah Posner
Victoria S. Nugent
Trial Lawyers for Public Justice, P.C.
1717 Massachusetts Avenue, N.W.
Suite 800
Washington, D.C. 20036
(202) 797-8600
(202) 232-7203 (Facsimile)

Of Counsel:

__________________________________
Michael P. Malakoff
Malakoff, Doyle & Finberg, P.C.
The Frick Building, Suite 203
Pittsburgh, PA 15219
(412) 281-8400
(412) 281-3262 (Facsimile)

Attorneys for Named Plaintiffs Dale Wells,
Sharon Goldenberg and John Dovel
and the Class Plaintiffs

Dated: February __, 1999