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James A. Mccoy, On Behalf v. Chase Manhattan

August 19, 2011

JAMES A. MCCOY, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY NO. 06-56278 SITUATED, D.C. NO.
v.
CHASE MANHATTAN BANK, USA, NATIONAL ASSOCIATION, PLAINTIFF-APPELLANT, DEFENDANT-APPELLEE.



On Remand from the United States Supreme Court

The opinion of the court was delivered by: Hawkins, Senior Circuit Judge:

FOR PUBLICATION

ORDER AND OPINION

Before: Richard D. Cudahy,*fn1 Harry Pregerson, and Michael Daly Hawkins, Circuit Judges.

Opinion by Judge Hawkins

ORDER

The Opinion and Dissent filed March 16, 2009, and appearing at 559 F.3d 963 (9th Cir. 2009), are withdrawn. They may not be cited as precedent by or to this court or any district court of the Ninth Circuit.

OPINION

James A. McCoy ("McCoy") brought this action on behalf of himself and others similarly situated against Chase Manhattan Bank, USA, N.A. ("Chase"), alleging Chase increased his interest rates retroactively to the beginning of his payment cycle after his account was closed to new transactions as a result of a late payment to Chase or another creditor. He claimed that the rate increase violated the notice requirements of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1615, because Chase failed to give notice of the increase until it had already taken effect. He also asserted violations of state law, claiming that the Delaware Banking Act did not authorize discretionary post-default rate increases, but only rates of interest that "vary in accordance with a schedule or formula."

5 Del. C. § 944.*fn2

In our prior decision, McCoy v. Chase Manhattan Bank, USA, 559 F.3d 963 (9th Cir. 2009), we reversed the dismissal of most of McCoy's federal and state claims. We concluded McCoy had stated a federal claim for violation of TILA and Regulation Z, 12 C.F.R. § 226, for Chase's failure to give notice of a discretionary interest rate increase due to consumer default. 559 F.3d at 967-69. We also concluded that McCoy had successfully stated several state law claims for violation of Delaware law because the decision to increase rates upon default was discretionary and not based on a "schedule or formula." Id. at 970-71 (reversing claims for declaratory relief, reformation, and damages for imposing an illegal penalty).

[1] Appellees sought Supreme Court review of our decision, and in Chase Bank USA, N.A. v. McCoy, 131 S. Ct. 871 (2011), the Court reversed our decision with respect to the federal claim and remanded for further proceedings.*fn3 We now withdraw our prior opinion, and, consistent with the Supreme Court's ruling, affirm the district court's dismissal of McCoy's first cause of action (violation of the TILA for failure to notify of rate increase), as well as his sixth cause of action (breach of contract for failure to notify him "of any change if required by applicable law").*fn4

[2] Although the Supreme Court decision did not specifically address our ruling on McCoy's state law claims, we cannot ignore the significant legal developments in this regard since the time we issued our prior opinion.*fn5 Two federal appellate courts have reached a contrary conclusion regarding the interpretation of Delaware Banking Act § 944. In Swanson v. Bank of America, 563 F.3d 634, 636 (7th Cir. 2009), the Seventh Circuit criticized our conclusion:

The ninth circuit asserted that ยง 944 does not authorize a bank to make discretionary changes in a borrower's rate of interest, because discretion differs from a "schedule or formula." Yet the statute does not say that only a "schedule or formula" may be used, nor does any decision of a Delaware court. The statute tells us that the bank's authority depends on its contracts. Section 944 permits a bank to make changes that are authorized by agreement with its customer. The changes that Bank of America made were ...


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