Eckhardt v. State Farm Bank FSB

Filing 17

ORDER & OPINION entered by Judge Joe Billy McDade on 3/13/19. Defendant's Motion to Dismiss for Failure to State a Claim 13 is GRANTED IN PART and DENIED IN PART. Defendant's Motion is GRANTED as to Counts I and IV, which are DISMISSED WITHOUT PREJUDICE. To the extent Plaintiff is able to cure the deficiencies identified in Counts I and IV, Plaintiff may file a second amended complaint within twenty-one (21) days of this Order. Defendant's Motion is DENIED as to Counts II, III, V, and VI. SEE FULL WRITTEN ORDER. (FDS, ilcd)

E-FILED

Wednesday, 13 March, 2019 01:21:37 PM
Clerk, U.S. District Court, ILCD

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION
SETH ECKHARDT, Individually and On )
Behalf of All Others Similarly Situated, )
)
Plaintiff,
)
)
v.
)
)
)
STATE FARM BANK FSB,
)
Defendant.
)

Case No. 1:18-cv-01180

ORDER & OPINION
This matter is before the Court on Defendant State Farm Bank FSB’s Motion
to Dismiss for Failure to State a Claim (Doc. 13). The Motion has been fully briefed
and is ready for disposition. For the following reasons, Defendant’s motion (Doc. 13)
is GRANTED IN PART and DENIED IN PART.
BACKGROUND1
Plaintiff Seth Eckhardt has held a credit card issued by Defendant since 2017.
(Doc. 11 at 5). When he became a cardholder, he was given a copy of the standard
cardholder agreement, which stated in pertinent part: “Purchases. You may use your
Card to purchase or lease goods or services (‘Purchases’) from merchants who honor
Visa credit cards.” (Doc. 11 at 11 (citing Doc 11-1 at 4)). The agreement further stated:
“Quasi-cash transactions, described below, are deemed to be Cash Advances and not

Because the Court must accept all well-pleaded facts in the Complaint as true,
United States ex rel. Berkowitz v. Automation Aids, Inc., 896 F.3d 834, 839 (7th Cir.
2018), the facts necessary to resolve Defendant’s motion are drawn from the Amended
Complaint (Doc. 11) and from the docket.
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Purchases.” (Doc. 11 at 11 (citing Doc 11-1 at 4)). The agreement defined “quasi-cash
transactions” as:
[I]tems that are convertible to cash or similar cash-like transactions that
we may designate from time to time, including wire transfer money
orders, other money orders, travelers checks, or foreign currency or tax
payments (so-called “quasi-cash transactions”). However, your Card
may not be used to obtain, and we will not honor requests for, a Cash
Advance in the form of casino chips, bets or wagers, gaming transactions
(including Internet gambling), lottery tickets or the like. (Doc. 11 at 12
(citing Doc 11-1 at 4)).
Cash advances are treated less favorably than purchases. The annual percentage rate
charged for cash advances is substantially higher than that for purchases, and a
transaction fee is assessed for each cash advance while there is no corresponding fee
for purchases. (Doc. 11 at 5; see also Doc 11-1 at 1).
On multiple occasions prior to February 2018, Plaintiff purchased
cryptocurrency using his State Farm credit card. The cryptocurrency at issue herein
is created with cryptographic functions (essentially mathematical algorithms)
performed using a software called “Blockchain.” (Doc. 11 at 6–7). It is described as
“virtual money” but is not legal tender for public or private debts; neither its value
nor production are regulated by any government at this time. (Doc. 11 at 6). One can
obtain cryptocurrency by purchasing it from another; “mining” it, i.e., creating new
units of the cryptocurrency; or creating a new cryptocurrency altogether. (Doc. 11 at
6–9).
Prior to February 2018, Plaintiff’s transactions acquiring cryptocurrency were
treated as purchases within the meaning of the cardholder agreement and so listed
in his monthly credit card statements. (Doc. 11 at 15). On February 4, 2018, Plaintiff
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purchased cryptocurrency using his State Farm credit card, but that time, the
transaction was treated as a cash advance and so listed on his monthly statement.
(Doc. 11 at 15). Plaintiff was therefore charged a transaction fee, and the transaction
was subjected to the higher interest charges attributable to cash advances per the
agreement. (Doc. 11 at 15, Doc 11-1 at 1). Plaintiff attempted to negotiate with State
Farm to remedy the “surprise Cash Advance fees and interest charges” to no avail.
(Doc. 11 at 16).
LEGAL STANDARD
Defendant seeks dismissal pursuant to Federal Rule of Civil Procedure
12(b)(6), arguing Plaintiff failed to state a claim upon which relief may be granted.
(Doc. 13). To survive dismissal pursuant to Rule 12(b)(6), the complaint must contain
a short and plain statement of the plaintiff’s claim sufficient to plausibly demonstrate
entitlement to relief. Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555–57 (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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A
plaintiff is not required to anticipate defenses or plead extensive facts or legal
theories but must plead enough facts to present a story that holds together. Twombly,
550 U.S. at 570; Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010).
When faced with a motion to dismiss pursuant to Rule 12(b)(6), the Court
construes the complaint in the light most favorable to the plaintiff. United States ex
rel. Berkowitz v. Automation Aids, Inc., 896 F.3d 834, 839 (7th Cir. 2018). The Court

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also accepts all well-pleaded factual allegations as true and draws all reasonable
inferences from those facts in favor of the plaintiff. Id. Allegations that are, in reality,
legal conclusions are not taken as true and cannot survive a Rule 12(b)(6) challenge.
McReynolds v. Merrill Lynch & Co., Inc., 694 F.3d 873, 885 (7th Cir. 2012).
DISCUSSION
Congress enacted the Truth in Lending Act (TILA) to assure “a meaningful
disclosure of credit terms” so consumers “will be able to compare more readily the
various credit terms available . . . and avoid the uninformed use of credit.” TILA, 15
U.S.C. § 1601(a). The statute further sought “to protect the consumer against
inaccurate and unfair credit billing and credit card practices.” Id. To achieve these
goals, Congress delegated rule-making authority to the Board of Governors of the
Federal Reserve System (Board) and later to the Bureau of Consumer Financial
Protection (Bureau), which currently holds rule-making authority. TILA, 15 U.S.C. §
1604(a); see also Chase Bank USA, N.A. v. McCoy, 562 U.S. 195, 198 (2011) (noting
rule-making authority had once been vested with the Board). Pursuant to this
statutory authority, Regulation Z, 12 C.F.R. 1026 et seq., was promulgated “to
effectuate the purposes of [TILA], to prevent circumvention or evasion thereof, [and]
to facilitate compliance therewith[,]” TILA, 15 U.S.C. § 1604(a).
Plaintiff’s Amended Complaint (Doc. 11) alleges multiple violations of TILA
and Regulation Z as well as breach of the cardholder agreement. Specifically, Count
I alleges Defendant violated TILA, 15 U.S.C. § 1637(i)(2), and Regulation Z, 12 C.F.R.
§ 1026.9(c), by failing to provide Plaintiff and the putative class members advanced

4

notice of its intent to classify transactions acquiring cryptocurrency as cash advances
rather than purchases. (Doc. 11 at 20–22). Count II alleges Defendant violated TILA,
15 U.S.C. § 1632(a), and Regulation Z, 12 C.F.R. § 1026.5(a)(1)(i), by failing to abide
by the “clear and conspicuous” disclosure requirement. (Doc. 11 at 22–24). Count III
alleges Defendant breached the cardholder agreement by classifying transactions
acquiring cryptocurrency as cash advances. (Doc. 11 at 24–25). Count IV argues,
alternative to Counts I and III, if advanced notice was not required and transactions
acquiring cryptocurrency are, in fact, quasi-cash transactions, the prior monthly
statements labeling such transactions as purchases failed to “reflect the terms of the
legal obligations between the parties,” as required by TILA, 15 U.S.C. § 1637(b), and
Regulation Z, 12 C.F.R. § 1026.5(c). (Doc. 11 at 25–27). Count V argues, alternative
to Count III, Defendant breached the cardholder agreement by delegating to a third
party its right to designate transactions as cash advances. (Doc. 11 at 27–28). Finally,
Count VI seeks a declaration pursuant to the Declaratory Judgment Act, 28 U.S.C. §
2201, stating the terms of the cardholder agreement “do not permit State Farm to
impose Cash Advance fees or interest charges on Plaintiff and the Class for buying
virtual currencies from third-party credit card merchants.” (Doc. 11 at 28).
Defendant has moved to dismiss all six counts. (Doc. 13). Unfortunately, the
memoranda on the instant motion largely focus on the merits of Plaintiff’s claims as
opposed to the sufficiency of the Amended Complaint (Doc. 11). Specifically, many of
the arguments turn on the pivotal question of fact presented in this controversy:
whether cryptocurrency is cash-like. Questions of fact are inappropriate issues to

5

address in the context of a motion to dismiss pursuant to Rule 12(b)(6). See, e.g.,
Roberson ex rel. Roberson v. Novartis Pharm. Corp., No. 11 C 2035, 2011 WL 1740137,
at *1 (N.D. Ill. May 5, 2011). At this stage of the proceeding, the Court is bound to
accept Plaintiff’s factual allegations as true and must draw all reasonable inferences
therefrom in favor of Plaintiff. Automation Aids, Inc., 896 F.3d at 839.
The remaining arguments presented by the parties require the Court to engage
in statutory and regulatory interpretation. When interpreting a statute, the Court’s
primary focus is on the plain language enacted by Congress. “It is a cardinal principle
of statutory construction that a statute ought, upon the whole, to be so construed
that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or
insignificant.” Doe v. Chao, 540 U.S. 614, 630–31 (2004) (internal quotation marks
omitted). Secondary tools of statutory construction are employed only if the plain
language of the provision is ambiguous to the extent it is susceptible to more than
one reasonable interpretation. See United States v. Marcotte, 835 F.3d 652, 656 (7th
Cir. 2016) (“When a statute is unambiguous, our inquiry ‘starts and stops’ with the
text.” (quoting United States v. All Funds on Deposit with R.J. O’Brien & Assocs., 783
F.3d 607, 622 (7th Cir. 2015))). Similarly, “[c]ourts interpreting a regulation first look
to the regulation’s text, and look past it only when it is ambiguous or where a literal
interpretation would lead to an absurd result or thwart the purpose of the overall
statutory scheme.” Nat. Res. Def. Council v. Ill. Power Res. Generating, LLC, No. 1:13CV-1181, 2019 WL 208856, at *9 (C.D. Ill. Jan. 15, 2019) (internal quotation marks
omitted).

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I.

Count I – Alleged Violation of the Requirement to Disclose any
Significant Change to the Terms of the Cardholder Agreement
In Count I, Plaintiff alleges Defendant violated TILA and Regulation Z by

failing to provide adequate notice of a significant change in account terms when it
decided to begin treating transactions acquiring cryptocurrency as cash advances
rather than purchases. (Doc. 11 at 20–22; Doc. 14 at 15–19). Defendant argues no
change-in-terms notice was required because the account terms never changed. (Doc.
13 at 7–10).
Regulation Z requires written notice of “a significant change in account terms”
be given to “each consumer who may be affected” “at least 45 days prior to the
effective date of the change[.]” 12 C.F.R. § 1026.9(c)(2)(i)(A); see also TILA, 15 U.S.C.
§ 1637(i)(2) (“In the case of any credit card account under an open end consumer credit
plan, a creditor shall provide a written notice of any significant change, as determined
by rule of the Bureau, in the terms (including an increase in any fee or finance charge
. . .) of the cardholder agreement between the creditor and the obligor, not later than
45 days prior to the effective date of the change.”). Regulation Z defines “significant
change to an account term” as “a change to a term required to be disclosed under §
1026.6(b)(1) and (b)(2), an increase in the required minimum periodic payment, a
change to a term required to be disclosed under § 1026.6(b)(4), or the acquisition of a
security interest.” 12 C.F.R. § 1026.9(c)(2)(ii). Section 1026.6(b) sets forth the
requisite account-opening disclosures; among other things, the credit card issuer
must disclose the various rates, fees, and charges authorized by the cardholder

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agreement as well as the types of transactions to which each of the various rates, fees,
and charges apply. Regulation Z, 12 C.F.R. § 1026.6(b)(1), (2), (4).
There appears no dispute that the definitions of “cash advance” and “purchase”
are subject to Regulation Z’s account-opening disclosure requirements, meaning the
parties agree cardholders would be entitled to advance notice of any change to the
definitions of those terms. Additionally, Plaintiff does not appear to allege the
relevant provisions of the cardholder agreement were amended in the literal sense;
thus, it appears no relevant term of the cardholder agreement was expressly changed
or amended. The operative question is thus whether a change in application of the
unchanged cardholder agreement—specifically, a change in how one particular
transaction is classified within the enumerated types of transactions, which
ultimately determines the applicable interest rate and transaction fee—is a
significant change in account terms per Regulation Z.2 The Court is aware of no case
answering this question or a similar one,3 and the parties have not directed the
Court’s attention to any such case.

According to Plaintiff, the operative question “is whether Defendant changed the
‘types of transactions’ to which Defendant’s unchanged Purchase rates or unchanged
Cash Advance rates apply.” (Doc. 14 at 18–19 (emphasis in original)). To answer this
question, Plaintiff merely points to the change in treatment of transactions acquiring
cryptocurrency. However, as will be discussed, the types of transactions to which the
various rates and fees applied never changed. The only change Plaintiff alleges is how
Defendant classified transactions acquiring cryptocurrency among the existing types
of transactions set forth in the agreement. Plaintiff’s framing of the issue is thus
inaccurate.
3 The Court is aware of a virtually identical complaint filed in the Southern District
of New York; a motion to dismiss presenting this exact question is currently pending
before that court. Tucker v. Chase Bank USA N.A., 18-cv-3155, Doc. 39.
2

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To resolve the issue at bar, the Court must begin with the text of Regulation
Z. As stated, Regulation Z requires advance notice of a “significant change in account
terms,” which is a “change to a term required to be disclosed under § 1026.6(b)(1) and
(b)(2), an increase in the required minimum periodic payment, a change to a term
required to be disclosed under § 1026.6(b)(4), or the acquisition of a security interest.”
12 C.F.R. § 1026.9(c)(2)(i), (ii). This definition clearly and unambiguously
contemplates an actual change to a written term in the cardholder agreement—
specifically, a term that must be disclosed pursuant to Regulation Z, 12 C.F.R. §
1026.6(b).
However, Plaintiff has not alleged an actual change to any term of the
cardholder agreement. At all relevant times, the cardholder agreement identified and
defined three types of transactions (purchases, quasi-cash transactions/cash
advances, and balance transfers) and set forth the specific interest rate and
transaction fee associated with each type of transaction. (See Doc. 11-1 at 5). The only
change alleged is how Defendant classified transactions acquiring cryptocurrency
among those enumerated types of transactions; Defendant first classified them as
purchases and then as cash advances. This amounts to no more than a change in how
the definitions of “purchase” and “quasi-cash transaction” were interpreted and
applied to transactions acquiring cryptocurrency. But a change in how the terms of
the agreement are interpreted or applied cannot reasonably be equated to an actual
change to those terms. Plaintiff has thus failed to allege a significant change in

9

account terms, which is necessary to trigger the disclosure requirement set forth in
Regulation Z, 12 C.F.R. § 1026.9(c)(2)(i).
The Court is not persuaded by Plaintiff’s arguments otherwise. To start,
Plaintiff argues: “Regulation Z requires advance notice to cardholders where the
issuer changes ‘the type of transaction to which [an unchanged] rate applies, if
different rates apply to different types of transactions.’ ” (Doc. 14 at 18 (quoting
Regulation Z, 12 C.F.R. § 1026.6(b)(4)(i)(C)). Plaintiff seemingly equates the change
in how transactions acquiring cryptocurrency are classified to an actual change to the
contract terms enumerating and defining the broad categories, or types, of
transactions. Underlying is the flawed assumption that any change in how the terms
of the agreement are interpreted and applied constitutes an actual change to those
terms. In support, Plaintiff attempts to distinguish between “credit terms” and the
written “contractual terms” by arguing credit terms may be changed without
changing the contractual terms. (Doc. 14 at 18). But the Supreme Court has explicitly
rejected this analysis, Chase Bank USA, N.A. v. McCoy, 562 U.S. 195, 206 n.5 (2011),
which directly undermines Plaintiff’s position.
Plaintiff’s logical fallacy is illustrated by the very facts of this case. TILA and
Regulation Z require creditors to disclose, among other things, the applicable
schedule of interest rates and fees and identify the types of transactions to which
each rate and fee apply. Regulation Z, 12 C.F.R. § 1026.6(b); TILA, 15 U.S.C. § 1637.
The inconsistent classification of one particular transaction—here, first classifying
transactions acquiring cryptocurrency as purchases and then later as cash

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advances—does not change the broader types of transactions enumerated in the
agreement or alter the fees and rates applied to those types of transactions.
Defendant did not add transactions acquiring cryptocurrency as a separate type of
transaction to which cash advance rates and fees apply; Defendant instead
reclassified such transactions as quasi-cash transactions, an existing type of
transaction. Thus, Defendant did not change the “ ‘types of transactions’ to which
Defendant’s unchanged Purchase rates or unchanged Cash Advance rates apply,” as
Plaintiff argues.
Plaintiff’s reliance on 12 C.F.R. § 1026.5(e) does not alter the outcome. Section
1026.5(e) states § 1026.9(c) disclosures may be required when an event renders the
initial, account-opening disclosures inaccurate. Regulation Z, 12 C.F.R. § 1026.5(e).
No disclosure expressly stated transactions acquiring cryptocurrency are purchases
and not quasi-cash transactions, so Defendant’s decision in early 2018 to begin
classifying such transactions as cash advances as opposed to purchases did not render
the requisite disclosure of the types of transactions to which the various rates and
fees apply or the definitions thereof inaccurate per se.4
Similarly, the cases to which Plaintiff cites for his “reservation of right”
argument are unavailing because they are inapposite. (See Doc. 14 at 16). Those cases

This line of reasoning implicates Count II of Plaintiff’s Amended Complaint. As will
be discussed infra, Plaintiff has sufficiently alleged the definitions of “purchase” and
“quasi-cash transaction” are unclear to the extent an ordinary consumer would not
know in which category cryptocurrency falls. It is thus consistent for the Court to also
conclude the inconsistent classification of cryptocurrency did not render either
definition inaccurate per se.
4

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dealt with “specific changes,” which generally involve a change in terms explicitly
outlined in the cardholder agreement. See Swanson v. Bank of Am., N.A., 566 F. Supp.
2d 821, 825–26 (N.D. Ill. 2008), aff’d, 559 F.3d 653 (7th Cir. 2009) (examining whether
advanced notice was required when a cardholder’s interest rate increased following
an exceedance of the credit limit and the cardholder agreement explicitly allowed a
rate increase in such a situation); McCoy, 562 U.S. at 197 (examining the same issue);
Williams v. Wash. Mut. Bank, No. CIV. 07-2418, 2008 WL 115097, at *1 (E.D. Cal.
Jan. 11, 2008) (examining an interest rate increase imposed at the discretion of the
card issuer, as allowed by the cardholder agreement). Unlike here, each of these cases
saw a clear change in account terms: an altered interest rate. Again, no account or
cardholder agreement term was changed here.
Notably, this line of cases supports the Court’s reading of Regulation Z to
require advanced notice only when an actual change occurs. In fact, McCoy phrased
the issue as: “whether the [interest rate] increase actually changed a ‘term’ of the
Agreement that was required to be disclosed under [Regulation Z, 12 C.F.R. §
1026.6(b)].’ ” McCoy, 562 U.S. at 205. The Supreme Court went on to state: “If not,
[Regulation Z, 12 C.F.R. § 1026.9(c)(2)]’s subsequent notice requirement with respect
to a ‘change in terms’ does not apply.” Id. Thus, the Supreme Court has interpreted §
1026.9(c)(2) to require an actual change to a term of the cardholder agreement.
In sum, underpinning Plaintiff’s entire argument is the fundamentally flawed
assumption that a change in how the terms of the cardholder agreement are
interpreted and applied equates to an actual change to the terms of the agreement.

12

(See Doc. 14 at 15–19). To the contrary, a change in interpretation and application is
not an actual change to the terms being interpreted and applied. The change here—
Defendant’s decision to begin classifying transactions acquiring cryptocurrency as
cash advances—did not change any account term outlined in the cardholder
agreement. Consequently, Plaintiff was not entitled to advanced notice per
Regulation Z, 12 C.F.R. § 1026.9(c)(2).
Count I is therefore dismissed pursuant to Rule 12(b)(6). To the extent Plaintiff
is able to plead facts demonstrating an actual change in account terms, the Court will
allow Plaintiff an opportunity to replead Count I. See Runnion ex rel. Runnion v. Girl
Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510, 519 (7th Cir. 2015).
While Court need not address the parties’ respective arguments citing official
commentary on Regulation Z because 12 C.F.R. § 1026.9(c)(2) unambiguously
requires an actual change in account terms, the Court is concerned with Plaintiff’s
argument citing the official commentary. Specifically, Plaintiff argues:
TILA and Regulation Z thus required Defendant to notify Plaintiff that
Cash Advance rates would suddenly begin applying to crypto purchases.
See Supplement I, 12 C.F.R. § 1026.9(c)(2), comment 1. (explaining that
“notice must be given [even] if the [initial] contract allows the creditor
to [change a “significant account term”] at its discretion.”). (Doc. 14 at
16).
The comment actually states: “In contrast, notice must be given if the contract allows
the creditor to increase a rate or fee at its discretion.” Supplement I, 12 C.F.R. §
1026.9(c)(2), cmt. 1. When read in context, the statement refers to the types of specific
changes, interest rate increases, discussed in McCoy as opposed to the type of change
at issue here. While Plaintiff may certainly argue this statement supports his
13

position, Plaintiff’s alteration of the quote—the addition of bracketed words—
rendered the quote misleading. The Court notes Plaintiff uses this misleading tactic
multiple times in his memoranda.
Defendant has likewise made a misleading statement, specifically: “Further,
another section of Regulation Z, Section 1026.9(g), provides that banks are not
required to provide notice of rate increases ‘that are not due to a change in the
contractual terms of the consumer’s account.’ 12 C.F.R. § 1026.9(c)(2)(i)(A).” (Doc. 13
at 8). Section 1026.9(c)(2)(i)(A) actually states: “Increases in the rate applicable to a
consumer’s account due to delinquency, default or as a penalty described in
paragraph (g) of this section that are not due to a change in the contractual terms of
the consumer’s account must be disclosed pursuant to paragraph (g) of this section
instead of paragraph (c)(2) of this section.” Regulation Z, 12 C.F.R. § 1026.9(c)(2)(i)(A).
Contrary to Defendant’s assertion, neither § 1026.9(c)(2)(i)(A) nor subsection (g) state
no notice is required where there is no change in contract terms; subsection (g)
instead explains the notice requirements applicable when an interest rate is
increased due to delinquency, default or as a penalty and is irrelevant here.
The parties are reminded of their duty of candor to the Court. Misleading
statements are unacceptable and run afoul of Federal Rule of Civil Procedure 11(b).
Counsel for the parties are admonished to take care to ensure future filings comply
with Rule 11 and are free from misleading or inaccurate statements.

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II.

Count II – Alleged Violation of the Requirement that Disclosures be
Clear and Conspicuous
TILA and Regulation Z require the mandatory account-opening disclosures be

presented clearly and conspicuously. TILA, 15 U.S.C. § 1632(a); Regulation Z, 12
C.F.R. § 1026.5(a)(1)(i); see also Regulation Z, 12 C.F.R. § 1026.6(b)(4)(i)(C) (noting
the mandatory account-opening disclosures must indicate “[t]he type of transaction
to which [a] rate applies, if different rates apply to different types of transactions.”).
Clarity is examined “from the standpoint of the ordinary consumer.” Handy v. Anchor
Mortg. Corp., 464 F.3d 760, 764 (7th Cir. 2006); see also Smith v. Cash Store Mgmt.,
Inc., 195 F.3d 325, 327–28 (7th Cir. 1999) (“The sufficiency of TILA-mandated
disclosures is to be viewed from the standpoint of an ordinary consumer, not the
perspective of a Federal Reserve Board member, federal judge, or English professor.”
(internal quotation marks omitted)).
In Count II, Plaintiff alleges Defendant’s account-opening disclosures violated
this requirement because the definition of “quasi-cash transaction” was unclear and
ambiguous. (Doc. 11 at 23–24; Doc. 14 at 14–15). Defendant argues Count II should
be dismissed because cryptocurrency is cash-like and the disclosures were thus
sufficiently clear to allow an ordinary consumer to conclude transactions acquiring
cryptocurrency are cash advances. (Doc. 13 at 11–14). Defendant’s argument presents
an issue of fact: whether cryptocurrency is indeed cash-like. Issues of fact ought not
be resolved in the context of a Rule 12(b)(6) motion, as the facts alleged in the
complaint must be taken as true. See id.; Roberson, 2011 WL 1740137 at *1.

15

The Court’s focus is instead on the sufficiency of the Amended Complaint.
Here, the factual allegations in Plaintiff’s Amended Complaint, when taken as true,
plausibly indicate the initial disclosures were unclear—particularly, the portion of
the disclosures defining “purchase” and “quasi-cash transaction.” “Cash” is defined in
Random House Webster’s Unabridged Dictionary as: “money in the form of coins or
bank-notes, esp[ecially] that issued by a government.” Random House Webster’s
Unabridged Dictionary 322 (2d ed. 2001). Plaintiff has plausibly alleged facts
indicating cryptocurrency is unlike this definition of “cash” and is instead more akin
to a good, such as software. (See Doc. 11 at 6-9, 12-15). According to Plaintiff, an
ordinary consumer would therefore consider transactions acquiring cryptocurrency
purchases as opposed to cash advances, or, at the very least, would not know in which
category such transactions fall. (Doc. 11 at 24; Doc. 14 at 14–15). This, Plaintiff
claims, is exacerbated because cryptocurrency is dissimilar to the examples of quasicash set forth in the definition of “quasi-cash transaction.” (Doc. 11 at 12-14, 23–24).
That Defendant treated transactions acquiring cryptocurrency as purchases until
February 2018 also reasonably and plausibly indicates the definitions are unclear.
The Court finds Plaintiff has met the requirements of Rule 8(a) with respect to
Count II by alleging facts plausibly indicating the initial disclosures were unclear.
Dismissal pursuant to Rule 12(b)(6) is therefore inappropriate. See Smith, 195 F.3d
at 328.
III.

Counts III and V – Alleged Breach of Contract
“In Illinois, a breach of contract claim consists of: 1) the existence of a valid

and enforceable contract, 2) breach of the contract by the defendant, 3) performance
16

by the plaintiff, and 4) resulting injury to the plaintiff.” Northbrook Bank & Tr. Co.
v. Abbas, 2018 IL App (1st) 162972, ¶ 42, 102 N.E.3d at 861, 874. At this stage of the
proceeding, breach is the only element at issue, as Plaintiff has alleged the existence
of a valid and enforceable contract (the cardholder agreement), performance by
Plaintiff (authorized use of his credit card), and injury (money damages).
A.

Count III – Classification of Transactions Acquiring Cryptocurrency as
Cash Advances
In Count III, Plaintiff alleges Defendant breached the cardholder agreement

by classifying transactions acquiring cryptocurrency as cash advances rather than
purchases. (Doc. 11 at 24–25). Defendant argues Count III ought to be dismissed
pursuant to Rule 12(b)(6) because cryptocurrency is cash-like and therefore may
properly be classified as a quasi-cash transaction—thus, a cash advance—pursuant
to the cardholder agreement. However, as explained, whether cryptocurrency is cashlike is a question of fact. The Court is bound to accept as true Plaintiff’s factual
allegations supporting his argument cryptocurrency is not cash-like but rather is a
good (see Doc. 11 at 6-9, 12-15), meaning Plaintiff has sufficiently alleged breach.
Defendant’s motion to dismiss Count III must therefore be denied.
B.

Count V – Designation by a Third Party
In Count V, Plaintiff alleges, alternative to Count III, Defendant breached the

cardholder agreement as well as the implied covenant of good faith and fair dealing
by allowing a third party to designate transactions acquiring cryptocurrency as cash
advances. (Doc. 11 at 27). The basis for Defendant’s motion to dismiss this claim is
unclear; Defendant states the cardholder agreement would not be violated if
17

Defendant allowed a third party to designate certain transactions as cash advances,
but Defendant cites no contract provision or legal authority supporting this position
nor does Defendant even mention the implied covenant of good faith and fair dealing.
(See Doc. 13 at 16).
The United States judicial system is adversarial. Taylor v. Illinois, 484 U.S.
400, 408 (1988) (quoting United States v. Nixon, 418 U.S. 683, 709 (1974)). The Court
expects litigants to present cogent, fully-formed arguments adequately supported in
law and fact. Willis v. Lepine, 687 F.3d 826, 836 (7th Cir. 2012). (“Merely reciting the
[applicable legal] standard and then tossing the motion into the court’s lap is not
enough.”). Indeed, Local Rule 7.1(B)(1) requires litigants identify “the specific points
or propositions of law and supporting authorities upon which the moving party
relies.” Defendant’s argument wholly fails to meet these rudimentary standards. The
Court declines to step into the role of advocate to make Defendant’s argument for it
and therefore denies as waived Defendant’s motion to dismiss Count V. See Puffer v.
Allstate Ins. Co., 675 F.3d 709, 718 (7th Cir. 2012) (arguments that are
“underdeveloped, conclusory, or unsupported by law” are waived).
IV.

Count IV – Alleged Violation of the Requirement to Provide Accurate
Periodic Statements
Count IV alleges, alternative to Counts I and III, Defendant violated TILA and

Regulation Z by failing to provide Plaintiff and the putative class members with
accurate periodic account statements. Specifically, Plaintiff alleges the pre-February
2018 periodic statements listing transactions acquiring cryptocurrency as purchases,
as opposed to cash advances, were inaccurate and therefore noncompliant. (Doc. 11
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at 26). Defendant argues Count IV should be dismissed because (1) Plaintiff failed to
identify a violation of any specific disclosure requirement and (2) the inaccuracy—the
classification of transactions acquiring cryptocurrency as purchases rather than cash
advances—resulted in a windfall for Plaintiff rather than damages. (Doc. 13 at 15).
TILA requires credit card issuers to provide account statements following each
billing cycle. TILA, 15 U.S.C. § 1637(b). Both TILA and Regulation Z set forth a
number of items that must appear in the account statement, to the extent they are
applicable. Id.; Regulation Z, 12 C.F.R. § 1026.7(b). In essence, the requisite items
describe exactly what was applied to the cardholder’s account during the billing cycle
at issue, such as transactions, interest rates, fees, and credits. TILA, 15 U.S.C. §
1637(b); Regulation Z, 12 C.F.R. § 1026.7(b). Plaintiff has not alleged Defendant
violated either TILA, 15 U.S.C. § 1637(b), or Regulation Z, 12 C.F.R. § 1026.7(b), by
failing to accurately state any of the requisite items in any particular account
statement. Absent such an allegation, Plaintiff has failed to state claim for relief.
Plaintiff’s argument boils down to the following accusation: if transactions
acquiring cryptocurrency have always been quasi-cash transactions—therefore, cash
advances—then the account statements designating such transactions as purchases
were inaccurate. (See Doc. 11 at 26). But even assuming the statements at issue
inaccurately classified transactions acquiring cryptocurrency as purchases rather
than cash advances, the statements nevertheless accurately reflected how the
transactions were treated and what was actually applied to Plaintiff’s account in

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connection with those transactions, consistent with the purpose of TILA, 15 U.S.C. §
1637(b), and Regulation Z, 12 C.F.R. § 1026.7(b).
Contrary to Plaintiff’s belief, 12 C.F.R. § 1026.5(c) does not support his claim.
Section 1026.5(c) states: “Disclosures shall reflect the terms of the legal obligation
between the parties.” While this broad, general requirement does apply to periodic
account statements, the periodic statements at issue nevertheless accurately
reflected Plaintiff’s legal obligations to Defendant by stating the fees and interest
rates actually applied to his account in connection with his transactions acquiring
cryptocurrency. Thus, the periodic statements at issue do not run afoul of § 1026.5(c).
See also McIntyre v. Household Bank, No. 02 C 1537, 2004 WL 2958690, at *15 (N.D.
Ill. Dec. 21, 2004) (rejecting a similar argument and noting the canons of statutory
interpretation require the specific provisions in 12 C.F.R. § 1026.7(b) take precedence
over the general provision in 12 C.F.R. § 1026.5(c) and holding absent a specific
violation of § 1026.7(b), there is no violation of § 1026.5(c)).
For the for these reasons, Count IV is dismissed pursuant to Rule 12(b)(6).
Because the deficiency could be factual rather than legal, the Court will allow
Plaintiff an opportunity to replead Count IV. See Runnion, 786 F.3d at 519.
V.

Count VI – Request for Declaratory Judgment
Finally, Defendant argues Plaintiff’s claim for declaratory judgment (Doc. 11
at 28) should be dismissed because it is “based on the false premise that
cryptocurrency is not ‘cash-like[.]’ ” (Doc. 13 at 14). Again, whether cryptocurrency
is cash-like is a question of fact, and Plaintiff has plausibly alleged cryptocurrency
is not cash-like (Doc. 11 at 6-9, 12-15). Because the Court must accept this factual
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allegation as true at this stage of the proceeding, Defendant’s motion to dismiss
Count VI must be denied.
CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss for Failure to State
a Claim (Doc. 13) is GRANTED IN PART and DENIED IN PART. Defendant’s Motion
is GRANTED as to Counts I and IV, which are DISMISSED WITHOUT PREJUDICE.
To the extent Plaintiff is able to cure the deficiencies identified in Counts I and IV,
Plaintiff may file a second amended complaint within twenty-one (21) days of this
Order. Defendant’s Motion is DENIED as to Counts II, III, V, and VI.

SO ORDERED.
Entered this 12th day of March 2019.
/s Joe B. McDade
JOE BILLY McDADE
United States Senior District Judge

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