Lapa v. JPMorgan Chase Bank, N.A.

Background

David Lapa sued his credit-card issuer, JP Morgan Chase Bank, N.A., for breach of contract and breach of the implied covenant of good faith and fair dealing. He sought monetary damages of no less than $200,000.

Lapa alleged that Chase closed his credit-card account on May 14, 2021, without advance notice. He alleged that he was not in default and had never been in default on his obligations to Chase. His position was based on language in the Card Member Agreement stating, “If your account is in default, we may close it without notice.” He argued that this language meant Chase had to provide notice when closing an account that was not in default.

Chase removed the case from New York state court to the federal court. After an earlier dismissal without prejudice because Lapa had not provided the agreement’s terms, Lapa filed a Second Amended Complaint and separately submitted the Card Member Agreement. Chase then moved to dismiss the amended pleading under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when the complaint does not state a legally sufficient claim.

The Court’s Analysis

The court first addressed the implied-covenant claim. Under New York law, a separate claim for breach of the implied covenant of good faith and fair dealing generally cannot proceed when it is based on the same facts as a breach-of-contract claim. The court found that Lapa’s implied-covenant claim relied on precisely the same facts as his contract claim and granted the motion to dismiss that claim.

The court then interpreted the Card Member Agreement. It focused on the agreement’s provision stating that Chase “may close or suspend your account” and that accounts may be closed based on the customer’s actions or inactions “but our business needs.” The court also noted that the agreement did not state that Chase had to provide advance notice before closing an account or that closure was permitted without notice only when the account was in default.

The court concluded that the agreement’s only reasonable interpretation was that Chase could close Lapa’s account for its own business needs without advance notice, regardless of whether Lapa was in default. It therefore dismissed the breach-of-contract claim as implausible on its face.

Disposition

Judge Nelson S. Roman granted Chase’s motion to dismiss Lapa’s Second Amended Complaint. The court dismissed Lapa’s claims for breach of contract and breach of the implied covenant of good faith and fair dealing with prejudice, explaining that Lapa had already received two opportunities to amend and that another opportunity would be futile. The court directed the Clerk of Court to terminate the motion and close the action.