Williams v. Visa, Inc.

Background

James Williams alleged that Visa’s rules prohibit merchants from adding surcharges to purchases made with Visa debit cards. He alleged that Visa did not enforce that rule effectively, that merchants in South Carolina repeatedly charged him such surcharges, and that Visa profited because its debit-card assessment fee was calculated as a percentage of the transaction amount. Williams asserted four claims: breach of a third-party-beneficiary contract, unjust enrichment, violation of California’s Unfair Competition Law, and declaratory and injunctive relief. The case was brought on behalf of Williams and a proposed class.

Visa moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. The court had jurisdiction under 28 U.S.C. § 1332(d). It agreed to consider Visa’s rules because Williams’s complaint necessarily relied on them and treated those rules as incorporated into the complaint.

Court’s analysis

Third-party-beneficiary contract claim. A third-party beneficiary is a person who was not a contracting party but may enforce a contract made expressly for that person’s benefit. The Visa Rules expressly stated that they did not create rights or claims for third parties. The court said that disclaimer was strong evidence that Visa and the acquiring banks did not intend to create obligations to consumers. Williams relied primarily on Visa’s merchant-surcharge question-and-answer document, but the court found that it merely summarized merchant requirements and did not show that consumers were intended beneficiaries. The court also found that Williams did not identify a Visa Rules provision requiring Visa to enforce the no-surcharge rule. The court dismissed this claim and granted leave to amend because it was not obvious that amendment would be futile.

Unjust-enrichment claim. The court explained that, whether treated as unjust enrichment or a restitution claim, Williams had to allege that Visa received a benefit and that retaining it was unjust. The court rejected Visa’s argument that the claim necessarily failed because the contract claim failed, and it also rejected the argument that the Visa Rules foreclosed a quasi-contract claim because Williams was not a party to those rules. But the court agreed that Williams had not alleged wrongful conduct. It found that Visa’s retention of part of the debit surcharge could be wrongful only if Visa had a duty not to permit the charges, and Williams did not identify the source of such a duty. The court granted Visa’s motion to dismiss this claim.

California Unfair Competition Law claim. The court addressed three alleged deficiencies. First, Williams was a South Carolina citizen who alleged that South Carolina merchants charged him the surcharges. The court found that his general allegation that Visa was based in California did not plausibly show that the relevant decision was made in California, so he had not adequately alleged standing under California’s law. The court dismissed this claim with leave to amend on that ground.

Second, the court held that Williams had not alleged a legally recognized economic injury. It relied on decisions holding that a person generally does not suffer a qualifying injury from nonenforcement of a policy when the person has no legal entitlement to enforcement of that policy. The court dismissed the claim for lack of cognizable injury and granted leave to amend because Williams might be able to adequately plead a contract breach.

Third, the court found that Visa’s alleged conduct was not adequately pleaded as unfair. Williams proceeded under the unfairness part of the statute. The court found his allegations that Visa acted unethically were conclusory, and it concluded that he had not identified a legislative policy to which Visa’s conduct was sufficiently connected. The court therefore found that Williams had not adequately alleged unfair practices.

Declaratory and injunctive relief

The court dismissed Williams’s request for declaratory and injunctive relief because he agreed that those remedies depended on the viability of his other claims, and the court had dismissed the contract and Unfair Competition Law claims.

Disposition

The court granted Visa’s motion to dismiss. It granted Williams leave to amend solely to cure the deficiencies identified in the order, and directed that any amended complaint be filed within 28 days. The opinion does not state that the dismissals were with or without prejudice.