Federal Judiciary

Credit card holders’ rights

By Akin Gump Supreme Court Practice Group

The Supreme Court, taking on a case affecting the rights of credit card customers, agreed on Monday to settle banks’ duty to give advance notice before raising the interest rate they will charge when a card user defaults on a payment.   The Court granted review despite the advice of the federal government that the case should be returned to lower courts to consider the Federal Reserve’s views.  The government suggested the case had little continuing importance, but bank card-issuers disagreed.  The case will be heard and decided in the Term starting Oct. 4.

A series of lawsuits, aimed at perhaps half of the entire credit card industry, followed a Ninth Circuit Court ruling that a customer had to be notified in advance if a card-issuer was going to raise a rate due to delinquency or default — even though the contract with the issuer already had indicated that such a change would follow. Chase Bank USA, a card issuer, took the case on to the Supreme Court, saying it was already clear that the Federal Reserve did not require any such notice.    (In 2009, the Fed, later backed by a new law from Congress, imposed a 45-day advance notice for implementing a default rate increase, but that only applies to increases that would go into effect after last August, and not the ones at issue in Chase Bank USA v. McCoy, et al., 09-329.   (Chase Bank is now a part of J.P. Morgan Chase & Co.)

Last January, the Court asked the U.S. Solicitor General to provide the government’s views on the case.  Last month, Acting U.S. Solicitor General Neal K. Katyal suggested that the Court return the case to the Ninth Circuit, to consider a friend-of-court brief that the Fed had filed in the First Circuit Court last October.  In response to that suggestion, lawyers for the California cardholders who had sued Chase Bank argued that taking that step would be unprecedented — that is, the Court has never before sent a case back to a lower court to reconsider in the wake of an amicus brief filed in another case in a different court.   That response relied upon a series of sharply critical comments that Justice Antonin Scalia has been making , protesting the increasing practice in the Court of granting review of a case and simultaneously wiping out the lower court ruling and returning the case for a new look.  Scalia has caustically suggested that the Court is making up a variety of reasons for evading its duty to decide cases on the merits.

It is unclear whether the Court’s decision to grant review, rather than sending the case back to the Ninth Circuit, had come because of Scalia’s views about the so-called GVR process.  The Court may have simply decided that enough existing lawsuits, predating the Fed’s new Regulation Z policy on advance notice, were now on file that the lower courts needed an answer to what if any notice was required prior to the revised policy.

The Chase Bank case was one of three cases newly granted for review next Term.  The Court also agreed to decide whether one state agency may constitutionally sue another part of the same state government, in order to enforce individual rights that are protected by a federal law.  The case is Virginia Office for Protection and Advocacy v. Reinhard, et al. (09-529).  That, too, was a case in which the Court had sought advice from the Solicitor General’s office; the SG recommended that the Court hear and decide the case, and then to rule that such lawsuits are not infringements on state sovereignty.

In addition, the Court agreed to decide, in a California murder case, whether a state must have clear-cut deadlines for a prison inmate’s filing of challenges to his conviction, if delay in pursuing such a plea is going to be used to scuttle a later attempt to get legal relief in a federal habeas case.  Federal habeas cases are to be dismissed if the state inmate had failed to satisfy a procedural requirement when his case previously was pending in state courts.  The new case is Walker v. Martin (09-996).

The Court’s next opportunity to issue orders granting or denying review of new cases is expected next Monday.

Full post as published by SCOTUSBLOG on June 21, 2010 (boomark / email).