SEIBEL, District Judge.
Before the Court is Defendants' Motion to Dismiss, (Doc. 22), Plaintiffs First Amended Class Action Complaint (the "Complaint" or "Compl."), (Doc. 15), under Federal Rules of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, 12(b)(2) for lack of personal jurisdiction over Defendant IH Financial Licenses, Inc., and 12(b)(6) for failure to state a
I assume the facts, but not the conclusions, in the Complaint to be true for purposes of Defendants' Motion.
Defendants The Bancorp Bank, Interactive Communications International, Inc., ITC Financial Licenses, Inc., and IH Financial Licenses, Inc., advertise, promote, market, distribute, service, warrant, and sell prepaid, stored-value Vanilla Visa and Vanilla MasterCard gift cards (collectively, the "gift cards") throughout the United States. (Compl. ¶¶ 1-2.) In exchange for paying an activation fee, consumers can purchase the gift cards for a pre-set value at major chain retailers, such as CVS and 7 Eleven, and when the gift cards are used, the pre-set value decreases in the amount equal to each transaction. (Id. ¶¶ 2, 16.) The gift cards are "non-reloadable," meaning that cardholders cannot add value or merge the values of two or more gift cards after purchase. (Id. ¶¶ 39, 42.)
The packaging for both the Visa and MasterCard gift cards is virtually identical, with each gift card coming in a sealed package that states on the front that the card is either a Visa or MasterCard gift card, bearing the "Vanilla®" logo, and denoting that the card is valued at "$20-$500 + S4.95 Purchase Charge." (Id. ¶¶ 19-20; id. Ex. A, at 1.) In smaller font on the back of the packaging, it states, among other things, "
The outer packaging and Cardholder Agreement state that the gift cards may be used to make purchases from merchants that accept Visa or MasterCard debit cards. (Id. ¶¶ 22, 34; id. Ex. A, at 2; id. Ex. B, at 1; id. Ex. C, at 1.) But "[s]ome merchants do not allow cardholders to conduct split transactions where [a cardholder] would use the Prepaid Giftcard as partial payment for goods and services and then pay the remainder of the balance with another form of legal tender." (Id. Ex. B, at 2; id. Ex. C, at 2.) This restriction prevents cardholders from completely depleting the gift cards at some merchant locations when their gift card balances are lower than the cost of the goods or services they seek to purchase. (Id. ¶ 36.) At merchant locations that allow split transactions, cardholders must inform the cashier that they would like to complete a split transaction and in what amount before the gift card is swiped, or the gift card is likely to be declined. (Id. ¶ 37; id. Ex. B, at 2; id. Ex. C, at 2). The "Revocation/Cancellation" section of the Cardholder Agreement states,
(Id. Ex. B, at 5; id. Ex. C, at 5.) The outer packaging explains that "[c]ard funds never expire." (Id. ¶ 22; id. Ex. A, at 2.)
In or about January 2011, Plaintiff purchased a Vanilla Visa gift card for $25 plus $4.95 activation fee. (Id. ¶ 45.) Thereafter, Plaintiff used her gift card to engage in transactions with merchants, each for less than the balance remaining on the gift card. (Id.) In or about February 2011, Plaintiff attempted to engage in a transaction for more than the remaining balance on her gift card, but the merchant would not complete a split transaction and the gift card was declined. (Id. ¶ 46.) In the same month, Plaintiff attempted to complete a second split transaction at a Walmart store, but the debit card terminal stated, "Card issuer denied the charge," and the Wal-mart clerk explained that Wal-mart store has problems with Vanilla Visa and MasterCard gift cards "all the time." (Id. ¶ 47.)
Plaintiff brings this lawsuit as a class action on behalf of herself and "[a]ll persons who purchased or hold a Vanilla Visa or Vanilla MasterCard Gift Card in New York State for personal use or as a gift, and not for resale." (Id. ¶ 49.) She brings claims for (1) violation of the New York General Business Law Section 349 ("Section 349"), (2) breach of the implied covenant of good faith and fair dealing, (3) unjust enrichment, and (4) conversion. (Id. ¶¶ 56-73.) She alleges that this Court has subject matter jurisdiction over the action pursuant to the Class Fairness Act of 2005 ("CAFA"), 28 U.S.C. § 1332(d). (Id. ¶ 14.)
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (alteration, citations, and internal quotation marks omitted). While Federal Rule of Civil Procedure 8 "marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era,... it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Iqbal, 556 U.S. at 678-79, 129 S.Ct. 1937.
In considering whether a complaint states a claim upon which relief can be granted, the court may "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth," and then determine whether the remaining well-pleaded factual allegations, accepted as true, "plausibly give rise to an entitlement to relief." Id. at 679, 129 S.Ct. 1937. Deciding whether
Defendants argue that the Complaint should be dismissed for failure to state a claim for cognizable damages. (Ds' Mem. 9-11; Ds' Reply Mem. 3-7.)
To state a claim under Section 349, "a plaintiff must allege: (1) the [defendant's] act or practice was consumer-oriented; (2) the act or practice was misleading in a material respect; and (3) the plaintiff was injured as a result." Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir.2009); accord Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 25, 623 N.Y.S.2d 529, 647 N.E.2d 741 (1995). Although the statute does not require an assertion of justifiable reliance or the defendant's intent to deceive or mislead, a plaintiff must allege that the defendant's consumer-oriented deceptive acts or practices "resulted in actual injury to [the] plaintiff." Blue Cross & Blue Shield of N.J., Inc. v. Philip Morris USA Inc., 3 N.Y.3d 200, 205-06, 785 N.Y.S.2d 399, 818 N.E.2d 1140 (2004); see Oswego, 85 N.Y.2d at 26, 623 N.Y.S.2d 529, 647 N.E.2d 741. New York courts have rejected the notion that a defendant's deception alone — in other words, allegations of pecuniary loss arising solely from the purchase of the defendant's product — may suffice to plead "actual injury" for a Section 349 claim. See Small v. Lorillard Tobacco Co., 94 N.Y.2d 43, 55-56, 698 N.Y.S.2d 615, 720 N.E.2d 892 (1999) (finding argument that deception is both act and injury fails under Section 349); Baron v. Pfizer, Inc., 42 A.D.3d 627, 840 N.Y.S.2d 445, 448 (3d Dep't 2007) (rejecting argument that consumer who bought product he would not have purchased absent seller's deceptive commercial practices suffered injury within meaning of Section 349); Donahue v. Ferolito, Vultaggio &
Here, Plaintiff has not alleged that she has suffered an injury within the meaning of Section 349. Plaintiff alleges that she and other similarly situated consumers "are left with balances on their Gift Cards which are too small for use in many transactions" because some merchants will not allow consumers to engage in split transactions, and they have "no options or recourse to reclaim the unused, prepaid balances on the Gift Cards," (Compl. ¶¶ 3, 4, 42), but these contentions are belied by Plaintiffs Complaint and motion papers, as well as the documents that I may consider on a motion to dismiss.
First, Plaintiff concedes that some merchants allow cardholders to engage in split transactions and that a cardholder must merely tell the merchant before the gift card is swiped that he or she intends to engage in a split transaction. (Id. ¶¶ 37, 46-47; id. Ex. B, at 2 ("Some merchants do not allow cardholders to conduct split transactions where [the cardholder] would use the Prepaid Giftcard as partial payment for goods and services and then pay the remainder of the balance with another form of legal tender. If [the cardholder] wish[es] to conduct a split transaction and it is permitted by the merchant, [the cardholder] must tell the merchant to charge only the exact amount of funds available on the Prepaid Giftcard to the Prepaid Giftcard. [The cardholder] must then arrange to pay the difference using another payment method.") (emphasis added); id. Ex. C, at 2 (same); P's Mem. 8 (noting two occasions where Plaintiff could not engage in split transaction, but not claiming that split transactions are never allowed).) Therefore, that Plaintiff cannot complete a split transaction with every merchant that accepts Visa debit cards does not mean that she has suffered actual injury within the meaning of Section 349, especially when the Cardholder Agreement discloses this very fact. See, e.g., Serrano v. Cablevision Sys. Corp., 863 F.Supp.2d 157, 167-68 (E.D.N.Y.2012) (dismissing Section 349 claim where defendant's alleged deceptive practice — discretionary restriction of bandwidth or suspension of internet service — fully disclosed in Terms of Service and Acceptable Use Policy); Shovak v. Long Island Commercial Bank, 50 A.D.3d 1118, 858 N.Y.S.2d 660, 662-63 (2d Dep't 2008) (affirming dismissal of Section 349 claim where fee associated with mortgage fully disclosed to plaintiff in written agreement); Broder v. MBNA Corp., 281 A.D.2d 369, 722 N.Y.S.2d 524, 526 (1st Dep't 2001) ("[T]here can be no [Section 349] claim
Second, even if no merchant would ever allow Plaintiff to cash in the small value left on her gift card in a split transaction,
Plaintiff argues that her claim is not based on the loss of the remaining value on the cards, but rather "on Defendants' false and misleading statements to Plaintiff and the members of the class that the Gift Cards can be utilized and are accepted in the same manner and fashion as Visa and MasterCard debit cards." (P's Mem. 2.) There are two fundamental flaws with this argument. First, Plaintiff nowhere alleges that a holder of a Visa or MasterCard debit card can make split purchases at any retailer. Plaintiff states that gift card holders, "[u]nlike Visa and MasterCard Debit cardholders]," are required to arrange for a split transaction with a retailer when the purchase price exceeds the card balance, (Compl. ¶ 38.) But the quoted portion of the allegation is entirely conclusory. Nowhere does the Complaint state what happens to a debit card holder whose desired purchase costs more than his or her available balance. For all one can tell from the Complaint, when a Visa or MasterCard debit card holder's balance is below the amount of the desired purchase, he or she is in the same boat as a gift card holder whose card likewise does not cover the full purchase — that is, that some retailers will allow a split transaction and others will not.
Second — putting aside the flaw described in the previous paragraph — if Plaintiffs damage is, as she argues, (P's Mem. 2), that she thought she could use the gift card just like a Visa debit card but cannot, her injury is identical to the deception. Therefore, Plaintiffs argument that she has sustained cognizable damages boils down to the very argument that the New York Court of Appeals has expressly rejected — that is, "that consumers who buy a product that they would not have purchased, absent a manufacturer's deceptive commercial practices, have suffered an injury under General Business Law § 349." Small, 94 N.Y.2d at 56, 698 N.Y.S.2d 615, 720 N.E.2d 892. Because Plaintiff has failed to allege, for example, that the cost of the gift card "was inflated as a result of [Defendants'] deception" or that Plaintiff attempted, without success, to recoup the balance of the funds on her gift card, Plaintiffs claim "sets forth deception as both act and injury" and, thus, "contains no manifestation of either pecuniary or `actual' harm," Small, 94 N.Y.2d at 56, 698 N.Y.S.2d 615, 720 N.E.2d 892; compare Lonner v. Simon Prop. Grp., Inc., 57 A.D.3d 100, 866 N.Y.S.2d 239, 247 (2d Dep't 2008) (finding plaintiff stated claim that he was injured by defendant's deceptive conduct under Section 349 in case concerning pre-paid, stored-value gift cards subject to $2.50 monthly "dormancy fee" that was only disclosed to customers in "impermissibly small" font size in customer agreement), with Donahue, 786 N.Y.S.2d at 154 (dismissing plaintiffs' Section 349 claim where they "impermissibly set up the deception as both act and injury" by alleging that defendants' deceptive labels on bottled soft drinks, which promised that consumption of product would
Plaintiffs unjust enrichment claims are also dismissed for failure to allege an actual injury. A cognizable unjust enrichment claim requires a showing "1) that the defendant benefitted; 2) at the plaintiffs expense; and 3) that `equity and good conscience' require restitution." Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir.2000); accord Clifford R. Gray, Inc. v. LeChase Constr. Servs., LLC, 31 A.D.3d 983, 819 N.Y.S.2d 182, 187 (3d Dep't 2006). "The `essence' of such a claim `is that one party has received money or a benefit at the expense of another.'" Kaye, 202 F.3d at 616 (quoting City of Syracuse v. R.A.C. Holding, Inc., 258 A.D.2d 905, 685 N.Y.S.2d 381, 382 (4th Dep't 1999)); accord Levin v. Kitsis, 82 A.D.3d 1051, 920 N.Y.S.2d 131, 134 (2d Dep't 2011). For the reasons already stated — because Plaintiff is not precluded from ever using her gift card in a split transaction or from recouping the de minimis value remaining on her gift card — she has not plausibly alleged that Defendants have benefitted at her expense, and her unjust enrichment claims are dismissed.
To state a claim for conversion under New York law, a plaintiff must allege "(1) legal ownership or an immediate superior right of possession to a specific identifiable thing and (2) that the defendant exercised an unauthorized dominion over the thing in question, to the alteration of its condition or to the exclusion of the plaintiffs rights." Ancile Inv. Co. v. Archer Daniels Midland Co., 784 F.Supp.2d 296, 312 (S.D.N.Y.2011) (internal quotation marks omitted); accord Colavito v. N.Y. Organ Donor Network, 8 N.Y.3d 43, 49-50, 827 N.Y.S.2d 96, 860 N.E.2d 713 (2006) ("A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession."). For the reasons already stated, Plaintiff has failed to plausibly plead facts that show that Defendants "unlawfully and wrongfully seized possession of monies rightfully belonging to Plaintiff and the other members of the Class through unlawful acts and conduct," (Compl. ¶ 72), and Plaintiffs conversion claims are therefore dismissed.
"Implicit in all contracts is a covenant of good faith and fair dealing in the course of contract performance.... This embraces a pledge that neither party shall do anything which will have the effect
Leave to amend a complaint should be "freely give[n] ... when justice so requires." Fed.R.Civ.P. 15(a)(2). It is within the sound discretion of the district court to grant or deny leave to amend. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir.2007). Leave to amend, "though liberally granted, may properly be denied for: `undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.'" Ruotolo v. City of N.Y., 514 F.3d 184, 191 (2d Cir.2008) (quoting Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962)). Amendment is futile when the claim as amended "cannot withstand a motion to dismiss pursuant to Rule 12(b)(6)," and "[i]n deciding whether an amendment is futile, the court uses the same standard as those governing the adequacy of a filed pleading." MacEntee v. IBM, 783 F.Supp.2d 434, 446 (S.D.N.Y.2011) (internal quotation marks omitted). Here, Plaintiff has not pleaded cognizable damages to sustain any of her claims. Thus, the problem with her claims "is substantive[,] ... better pleading will not cure it," and "[r]epleading would thus be futile." Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir.2000). Further, Plaintiff has not requested leave to file a Second Amended Complaint or otherwise suggested that she is in possession of facts that could cure the deficiencies. Accordingly, I decline to grant Plaintiff leave to amend sua sponte. See, e.g., Gallop v. Cheney, 642 F.3d 364, 369 (2d Cir.2011) (no error in failing to grant leave to amend where it was not sought); Walton v. Morgan Stanley & Co., 623 F.2d 796, 799 n. 7 (2d Cir.1980) ("[A]ppellants never sought leave to amend their complaint either in the district court or as an alternative form of relief in this court after [appellee] raised the issue of the sufficiency of appellants' complaint. Accordingly, we see no reason to grant such leave sua sponte.").
For the foregoing reasons, Defendants' Motion to Dismiss Plaintiffs Complaint for