OSCAR S. GRAY v. AMERICAN EXPRESS COMPANY
UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
240 U.S. App. D.C. 10; 743 F.2d 10; 1984 U.S. App. LEXIS 19033
January 12, 1984, Argued  August 31, 1984, Decided

We are called upon to determine what rights, if any, appellant Oscar Gray has against American Express arising from circumstances under which it cancelled his American Express credit card. The District Court granted summary judgment to American Express; we vacate that judgment and remand for further proceedings.

I. BACKGROUND

Gray had been a cardholder since 1964. In 1981, following some complicated billings arising out of deferred travel charges incurred by Gray, disputes arose about the amount due American Express. After considerable correspondence, the pertinence and timeliness of which we will detail below, American Express decided to cancel Gray's card. No notification of this cancellation was communicated to Gray until the night of April 8, 1982, when he offered his American Express card to pay for a wedding anniversary dinner he and his wife already had consumed in a Washington restaurant. The restaurant informed Gray that American Express had refused to accept the charges for the meal and had instructed the restaurant to confiscate and destroy his card. Gray spoke to the American Express employee on the telephone at the restaurant who informed him, "Your account is cancelled as of now."

The cancellation prompted Gray to file a lengthy complaint in District Court, stating claims under both diversity and federal question jurisdiction. He alleged that the actions of American Express violated the contract between them, known as the "Cardmember Agreement," as well as the Fair Credit Billing Act (the "Act").

The surge in the use of credit cards, the "plastic money" of our society, has been so quick that the law has had difficulty keeping pace. It was not until 1974 that Congress passed the Act, first making a serious effort to regulate the relationship between a credit cardholder and the issuing company. We hold that the District Court was too swift to conclude that the Act offers no protection to Gray and further hold that long-standing principles of contract law afford Gray substantial rights. We thus vacate the District Court's judgment and remand.

II. DISCUSSION

A. The Statutory Claim

The Fair Credit Billing Act seeks to prescribe an orderly procedure for identifying and resolving disputes between a cardholder and a card issuer as to the amount due at any given time. The Supreme Court, in American Express Co. v. Koerner, 452 U.S. 233 (1981), succinctly described the mechanics of the Act as follows:
 
If the [cardholder] believes that the statement contains a billing error [as defined in 15 U.S.C. § 1666 (b)], he then may send the creditor a written notice setting forth that belief, indicating the amount of the error and the reasons supporting his belief that it is an error. If the creditor receives this notice within 60 days of transmitting the statement of account, [§ 1666(a)] imposes two separate obligations upon the creditor. Within 30 days, it must send a written acknowledgment that it has received the notice. And, within 90 days or two complete billing cycles, whichever is shorter, the creditor must investigate the matter and either make appropriate corrections in the [cardholder's] account or send a written explanation of its belief that the original statement sent to the [cardholder] was correct. The creditor must send its explanation before making any attempt to collect the disputed amount. A creditor that fails to comply with [§ 1666(a)] forfeits its right to collect the first $50 of the disputed amount including finance changes. [15 U.S.C. § 1666(e)]. In addition, [§ 1666(d)] provides that, pursuant to regulations of the Federal Reserve Board, a creditor operating an "open end consumer credit plan" may not restrict or close an account due to a [cardholder's] failure to pay a disputed amount until the creditor has sent the written explanation required by [§ 1666(a)] (footnote omitted).

Other obligations also attach. First, if "appropriate corrections" are made, the card issuer also must credit any finance charge on accounts erroneously billed. 15 U.S.C. § 1666(a)(B)(i). Second, the card issuer must notify the cardholder on subsequent statements of account that he need not pay the amount in dispute until the card issuer has complied with § 1666. 15 U.S.C. § 1666(c)(2). Third, the card issuer may not report, or threaten to report, adversely on the cardholder's credit before the card issuer has discharged its obligations under § 1666, 15 U.S.C. § 1666a(a), and, if the cardholder continues to dispute the bill in timely fashion, the card issuer may report the delinquency only if it also reports that the amount is in dispute and tells the cardholder to whom it has released this information. 15 U.S.C. § 1666a (b). The card issuer is further obliged to report any eventual resolution of the delinquency to the same third parties with whom it earlier had communicated. 15 U.S.C. § 1666a(c). Finally, a card issuer that fails to comply with any requirements of the Act is liable to the cardholder for actual damages, twice the amount of any finance charge, and costs of the action and attorney's fees. 15 U.S.C. § 1640 (a).

American Express is, of course, a creditor for purposes of the Act.

1. The Billing Error

The billing dispute in issue arose after Gray used his credit card to purchase airline tickets costing $9312. American Express agreed that Gray could pay for the tickets in 12 equal installments over 12 months. In January and February of 1981, Gray made substantial prepayments of $3500 and $1156 respectively. He so advised American Express by letter of February 8, 1981. There is no dispute about these payments, nor about Gray's handling of them. At this point the numbers become confusing because American Express, apparently in error, converted the deferred payment plan to a current charge on the March bill. American Express thereafter began to show Gray as delinquent, due at least in part to the dispute as to how and why the deferred billing had been converted to a current charge.

The District Court held that Gray failed to trigger the protection of the Act because he neglected to notify American Express in writing within 60 days after he first received an erroneous billing. Gray insists that his first letter to American Express on April 22, 1981, well within the 60 day period set forth in the statute, identified the dispute as it first appeared in the March, 1981 billing. According to Gray's complaint, the dispute continued to simmer for over a year because American Express never fulfilled its investigative and other obligations under the Act.

The District Court made no mention of the April 22, 1981 letter, deeming instead a September, 1981 letter as the first notification from Gray as to the existence of a dispute. We conclude that the District Court erred in overlooking the April letter.

Gray's April 22, 1981 letter complained specifically about the March bill and the miscrediting of the prepayments. Whatever the import and impact of other correspondence and actions of the parties, we hold that, through this earlier letter, Gray triggered the procedural protections of the Act. The letter enabled the card issuer to identify the name and account number, indicated that the cardholder believed that an error existed in a particular amount and set forth the cardholder's reasons why he believed an error had been made. 15 U.S.C. § 1666 (a). The later correspondence and activities may be treated as evidentiary in nature -- sufficient perhaps to show that American Express fulfilled all of its obligations under the Act, but not pertinent to the question of whether the Act was triggered in the first place.

2. Reporting and Collection Efforts

Gray alleged in count III that, notwithstanding his having given notice of dispute under § 1666 through his letters, American Express nevertheless turned over his account for collection to a bill collection agency. The District Judge dismissed this count by concluding that it failed to state a claim for relief. The District Court erred. We think that count III states an independent cause of action under § 1666a because Gray's April 22, 1981 correspondence brought the dispute within the Act's coverage. The question of American Express' compliance with the reporting and collection requirements of the Act also warrants consideration on remand.

3. The Act and the Cardmember Agreement

As we have indicated above, the District Court summarily resolved Gray's statutory claims by wrongly concluding that the Act did not apply. On appeal, American Express also urges that, even if the Act is otherwise pertinent, Gray was bound by the terms of the Cardmember Agreement which empowered American Express to cancel the credit card without notice and without cause. The contract between Gray and American Express provides:

We can revoke your right to use [the card] at any time. We can do this with or without cause and without giving you notice.

American Express concludes from this language that the cancellation was not of the kind prohibited by the Act, even though the Act regulates other aspects of the relationship between the cardholder and the card issuer.

Section 1666(d) of the Act states that, during the pendency of a disputed billing, the card issuer, until it fulfills its other obligations under § 1666(a)(B)(ii), shall not cause the cardholder's account to be restricted or closed because of the failure of the obligor to pay the amount in dispute. American Express seems to argue that, despite that provision, it can exercise its right to cancellation for cause unrelated to the disputed amount, or for no cause, thus bringing itself out from under the statute. At the very least, the argument is audacious. American Express would restrict the efficacy of the statute to those situations where the parties had not agreed to a "without cause, without notice" cancellation clause, or to those cases where the cardholder can prove that the sole reason for cancellation was the amount in dispute. We doubt that Congress painted with such a faint brush.

The effect of American Express's argument is to allow the equivalent of a "waiver" of coverage of the Act simply by allowing the parties to contract it away. Congress usually is not so tepid in its approach to consumer problems. See 118 Cong. Rec. 14,835 (1972) (remarks by Sen. Proxmire, principal proponent of the Act, concerning a technical amendment to a predecessor bill later carried over into the Act; its purpose was to prevent "possible evasion" by precluding the creditor from including a pre-dispute waiver provision in the card agreement); Koerner v. American Express Co., 444 F. Supp. 334 (E.D. La. 1977) (Koerner trial court's recitation of Act's legislative history reflecting congressional concern about card issuers' "high-handed tactics" in handling of consumer billing disputes).

Moreover, the consumer-oriented statutes that Congress has enacted in recent years belie the unrestrained reading that American Express gives to the Act in light of its contract. Waiver of statutory rights, particularly by a contract of adhesion, is hardly consistent with the legislature's purpose. The rationale of consumer protection legislation is to even out the inequalities that consumers normally bring to the bargain. To allow such protection to be waived by boiler plate language of the contract puts the legislative process to a foolish and unproductive task. A court ought not impute such nonsense to a Congress intent on correcting abuses in the market place.

Thus we hold that the Act's notice provision was met by Gray's April 22, 1981 letter and remand the case to the District Court for trial of Gray's statutory cause of action. American Express will be obliged to justify its conduct in this case as fully satisfying its obligations under the Act.
 
C. Discovery

Because the case is to be remanded for further proceedings, we think it appropriate to comment on the appellee's extraordinary use of interrogatories below. It appears to be of some significance to this case that Gray is a lawyer, because only a lawyer, tenacious even beyond the professional custom, would have been able to withstand the expenses and excesses of this litigation. Perhaps the presence of a lawyer-plaintiff caused American Express particular concern that occasioned their plethora of interrogatories; perhaps it was the shorter, but nonetheless substantial, set of interrogatories that plaintiff served on defendant. Whoever was the instigator and whatever the reason, the various sets of interrogatories and their answers are in the hundreds of pages. They run as far afield as inquiring the name of every law firm that plaintiff had been affiliated with since 1951 to asking all of the "professional credentials" that he had acquired in his lifetime; from psychiatrists consulted since 1978 to meals eaten at the fated restaurant since the suit was filed. The length, scope and detail of the interrogatories propounded by American Express suggest a strategy of attrition rather than a legitimate discovery of the facts needed to resolve a dispute over the account.

We cannot expect the District Judge to police the quantity or equality of interrogatories when discovery is abused in the way it appears to have been in this case. Gray did object to some of the interrogatories, as did American Express. But when the parties do not raise the question of general abuse of discovery, it is difficult for a trial judge, viewing the process segmentally, to realize how burdensome it has become. On remand, we think the trial court should take the quantity and relevance of the discovery into account in setting the case for trial and in determining what, if any, further discovery should be allowed, and in deciding whether sanctions for abusive litigation practices are appropriate.

The size of the record and the vigor with which the defenses have been pursued make it apparent that only a stubborn professional could seek to avail himself of the protection guaranteed by statute and the common law. The courts must exercise control so that access to justice is not foreclosed by such tactics at the preliminary stages of suit. Deep pockets and stubbornness ought not to be prerequisites to bringing a case like this one to issue.

III. CONCLUSION

The District Court's order of summary judgment and dismissal is hereby vacated. The case is remanded for further proceedings consistent with this opinion.