American Express Class Action Defense Case—Berry v. American Express: As Matter Of First Impression California Court Holds Issuance Of Credit Card Falls Outside Scope Of Consumer Legal Remedies Act (CLRA)

Mar 5, 2007 | By: Michael J. Hassen

Act of Extending Credit “Separate and Apart from any Sale or Lease of Goods or Services” Falls Outside the Scope of California’s Consumer Legal Remedies Act (CLRA) California Court Holds

Plaintiff filed a putative class action against various American Express entities seeking injunctive relief under California’s Consumer Legal Remedies Act (CLRA) in connection with arbitration clause contained in his American Express cardholder agreement. Berry v. American Express Publishing, Inc., 147 Cal.App.4th 224, 54 Cal.Rptr.3d 91, 92 (Cal.App. 2007). Defense attorneys demurred to the complaint, arguing that issuing a credit card does not fall within the scope of the CLRA. The trial court agreed with the defense arguments and sustained the demurrer to the class action complaint without leave to amend. The appellate court affirmed, concluding that “the extension of credit, such as issuing a credit card, separate and apart from the sale or lease of any specific goods or services, does not fall within the scope of the act.” Id.

After plaintiff began receiving an Amex publication called “Travel + Leisure” and noticed a $43 charge on his credit card statement for the magazine, he telephoned American Express Centurion Bank and American Express Publishing, the subscription was canceled, and the charge was reversed. Berry, at 93. Plaintiff then filed a putative class action against various American Express entities alleging that defendants charged customers for magazines that they never ordered. Id. Ultimately, the class action complaint was amended to contain but a single cause of action for declaratory relief “which alleged the arbitration clause and class action waiver in the cardholder agreement violated CLRA.” Id. Thus, the complaint sought solely to prohibit enforcement of the arbitration clause in the cardholder agreement. Defense attorneys demurred and the trial court sustained the demurrer without leave to amend, dismissing the class action complaint with prejudice. Id.

In support of its demurrer, American Express argued that the CLRA “does not apply because the issuance of a credit card to [plaintiff] was not ‘a transaction intended to result or which results in the sale or lease of goods or services to [a] consumer.’” Berry, at 93. The California Court of Appeal agreed. The appellate court first observed that this case presented an issue of first impression, id., at 94. Turning to the language of the CLRA, the appellate court held that a credit card is not a “good” within the meaning of the statute, id. The court then discussed the legislative history of the CLRA, and concluded that the issuance of a line of credit is not a “service” under the statute, id., at 94-97. As the appellate court summarized, “We conclude neither the express text of CLRA nor its legislative history supports the notion that credit transactions separate and apart from any sale or lease of goods or services are covered under the act.” Id., at 97. Accordingly, the court affirmed the trial court order dismissing the class action complaint.

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