                                                                                                                           Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


2-15-2002

Cappalli v. Nordstrom FSB
Precedential or Non-Precedential:

Docket 1-2436




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Recommended Citation
"Cappalli v. Nordstrom FSB" (2002). 2002 Decisions. Paper 130.
http://digitalcommons.law.villanova.edu/thirdcircuit_2002/130


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                                               NOT PRECEDENTIAL

                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT
                           __________

                          No. 01-2436
                           __________

                 PAULA E. CAPPALLI, IN HER OWN
             NAME AND AS REPRESENTATIVE OF A CLASS,
                                               Appellant

                                v.

                         *NORDSTROM FSB

         *(Amended in accordance with Clerk's Order dated 6/27/01)
                           __________

        ON APPEAL FROM THE UNITED STATES DISTRICT COURT
            FOR THE EASTERN DISTRICT OF PENNSYLVANIA
                   D.C. Civil No. 00-cv-04454
     District Judge: The Honorable Thomas N. O'Neill, Jr.
                           __________

           Submitted Under Third Circuit LAR 34.1(a)
                       February 12, 2002
                           __________

       Before: MANSMANN, McKEE, and BARRY, Circuit Judges

              (Opinion Filed: February 15, 2002)
                          ____________

                       MEMORANDUM OPINION
                          ____________



BARRY, Circuit Judge
     Paula Cappalli brought a putative class action suit against a
national credit bank
currently known as Nordstrom fsb (the "Bank"). Cappalli alleged that the
fee she was
charged after making a late payment on her Nordstrom credit card account
violated the
Home Owner's Loan Act ("HOLA"), 12 U.S.C.   1463(g). The Bank filed a
motion to
dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
The District
Court granted the Bank's motion, finding that Cappalli failed to state a
claim upon which
relief could be granted. We agree and will affirm. We have jurisdiction
pursuant to 28
U.S.C.   1291.
     To receive her Nordstrom credit card, Cappalli signed a cardholder
agreement,
thereby entering into a written agreement with the Bank. In relevant
part, the cardholder
agreement stated:
                3.   Promise to Pay. I agree to pay . . . for all
purchases and cash
           advances, including applicable Finance Charges and other charges
or
           fees incurred by me . . .

                 4.   Monthly Payments.       Each month, I agree to pay at least
the Total
             Minimum Payment shown on my monthly billing statement no later
             than the Payment Due date shown on the monthly billing
statement.

                            *    *        *

                    6. (d)    The Monthly Periodic Rate of Finance Charge
on my account is
               1.75% (corresponding ANNUAL PERCENTAGE RATE 21%).

                            *    *        *

               11. Late Payment Fee. If the "Current Due" shown on my
monthly billing
          statement . . . is not paid within 10 days after the scheduled
Payment Due
          shown on my monthly billing statement, [the Bank] may charge me
and I
          agree to pay a Late Payment of $20.

                            *    *        *

               15. Governing Law. I understand that this Agreement is
governed by
          and construed in accordance with the laws of the United States.
To
          the extent state law applies to this Agreement, this Agreement
will
          be governed by the laws of the state of Arizona.

App. at 20-22.
     In April 2000, Cappalli received a billing statement from the Bank
that showed an
unpaid balance of $101.72 and indicated that a payment was due on May 13,
2000.
Cappalli's husband mailed a check to the Bank for $101.72 on May 29, 2000
sixteen
days after the due date. In June 2000, Cappalli received a statement
showing a balance of
$22.88. The new balance consisted of a $20 late payment fee and $2.88 in
periodic
finance charges that had accrued on the unpaid balance in May. On appeal,
Cappalli
argues that the $22.88 the Bank billed her represented an interest charge
of 391% in
violation of her cardholder agreement and HOLA.
     Section 1463(g) of HOLA provides, in relevant part, that "a
[national] savings
association may charge interest on any extension of credit . . . at the
rate allowed by the
laws of the State in which such savings association is located . . . ."
18 U.S.C.
1463(g)(1). Under the regulatory scheme of HOLA, late payment fees are
considered
"interest." 12 C.F.R.    560.110(a); see also Smiley v. Citibank (South
Dakota), N.A., 517
U.S. 735, 740 (1996). Thus, we must determine whether the late payment
charged by the
Bank resulted in interest charges that exceeded the limits imposed by the
laws of the state
of Arizona.
     The general usury statute in Arizona provides that, "Interest on any
loan,
indebtedness, judgement or other obligation shall be at the rate of ten
percent per annum
unless a different rate is contracted for in writing, in which event any
rate of interest may
be agreed to." Ariz. Rev. Stat.    44-1201(A) (emphasis added). In this
case, Cappalli
and the Bank entered into a credit agreement that established a 21% Annual
Percentage
Rate ("APR") and a $20 late payment fee. Cappalli argues that Section 44-
1201(A)
requires parties to establish a single rate of interest because the
statute states that parties
may contract for "a" different rate. Because both the APR and late fee
payments are
considered "interest" under 12 C.F.R.   560.110(a), Cappalli argues that
having two
different "rates" of interest violates the alleged requirement of a single
rate.
     As the District Court noted, however, "there is nothing in either
Smiley or
560.110(a) that requires that the [APR] assessed on outstanding balances
be treated as a
ceiling that controls all . . . terms of the cardholder agreement that
might fall under the
definition of 'interest.'" Dist. Ct. Op. at 6. In other words, parties
are free to contract for
a different APR rate and a different late payment fee. Even if the Bank
had wanted to
combine the charges into a single figure, the Truth in Lending Act
("TILA") and its
supporting regulations prohibit parties from including late fees within
the APR. 15
U.S.C.     1601 et. seq.; Regulation Z, 12 C.F.R.   226.14(b), 226.6.
Thus, not only was
the separation of the APR and late payment fee permissible, it was
required by law.
     In the alternative, Cappalli argues that two other Arizona statutes
prohibited the
amount of the late fee. Sections 44-1205(B) and 44-6002(F) of the Arizona
Revised
Statutes place limits on how much banks may charge for late payments.
Section 44-
1205(B) applies to "revolving credit accounts," while Section 44-6002(F)
applies to
"retail charge accounts." Cappalli asserts that the account she held with
the Bank
qualifies under both statutes. Whether Sections 44-1205(B) or 44-6002(F)
apply here,
however, is irrelevant under the most favored lender doctrine.
     The most favored lender doctrine states that "A [national] savings
association
located in a state may charge interest at the maximum rate permitted to
any state-
chartered or licensed lending institution by the law of that state." 12
C.F.R.   560.110(b)
(emphasis added); see also Tiffany v. National Bank of Missouri, 85 U.S.
409, 413
(1873). Section 44-1201(A) is the general usury statute in Arizona. See,
e.g., Aros v.
Beneficial Arizona, Inc., 977 P.2d 784, 786 (Ariz. 1999); Morrison v.
Shanwick Int'l
Corp., 804 P.2d 768, 775 (Ariz. App. 1990). Thus, the Bank was permitted
to charge
Cappalli both the APR and late payment fee because, as discussed above,
Section 44-
1201(A) permitted the Bank to charge "any rate of interest" to which the
parties agreed.
     For the foregoing reasons, we will affirm the dismissal of Cappalli's
suit.

TO THE CLERK OF THE COURT:
     Kindly file the foregoing Memorandum Opinion.


                                   /s/ Maryanne Trump Barry
                                   Circuit Judge
