Briggs v. United States

564 F. Supp. 2d 1087, 2008 U.S. Dist. LEXIS 28135, 2008 WL 941963
CourtDistrict Court, N.D. California
DecidedApril 7, 2008
DocketC 07-05760 WHA
StatusPublished

This text of 564 F. Supp. 2d 1087 (Briggs v. United States) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Briggs v. United States, 564 F. Supp. 2d 1087, 2008 U.S. Dist. LEXIS 28135, 2008 WL 941963 (N.D. Cal. 2008).

Opinion

ORDER GRANTING IN PART AND DENYING IN PART AND DEFENDANTS’ MOTION FOR JUDGMENT ON THE PLEADINGS OR FOR PARTIAL DISMISSAL

WILLIAM ALSUP, District Judge.

INTRODUCTION

In this proposed class action, plaintiff Julius Briggs, on the behalf of soldiers and veterans who use credit cards issued by the Army and Air Force Exchange Service (“AAFES”), has sued defendants the United States of America and AAFES for allegedly unlawful debt-collection practices. Count One alleges improper debt-collection and Count Two alleges improper finance charges. Defendants move for judgment on the pleadings, or, in the alternative, for partial dismissal on the grounds that: (i) there is a lack of subject-matter jurisdiction; (ii) jurisdiction is also lacking as to Count Two because no case or controversy exists; (iii) any recovery plaintiff might be able to obtain would be subject to immediate and equal setoff by the United States; and (iv) there is improper venue for all counts. For the reasons stated below, the motion for judgment on the pleadings or for partial dismissal is Granted in Part and Denied in Part.

STATEMENT

This order must take the well-pled allegations in the complaint as true. The AAFES issued credit cards to military personnel to purchase uniforms and other merchandise from post-exchange stores in U.S. military bases. For purposes of this action, the terms of usage were governed by the 1993 AAFES Credit Program Account Agreement. The credit-card plan under the agreement offered two types of purchases: the Uniform Clothing Deferred Payment Plan (“UC”) for uniforms and the Deferred Payment Plan (“DPP”) for other goods. Card users had the option to pay their balances in full or to pay a minimum monthly payment as shown on their account statements. UC balances were not subject to a finance charge while DPP balances were subject to a periodic finance charge. If card users failed to make monthly payments on time, the agreement allowed AAFES to impose “an administrative fee to cover the cost of processing and handling a delinquent claim,” and “a penalty charge at 6 percent annually for failure to pay any part of this amount more than 90 days past due” (First Amd. Compl. Exh. A).

The federal agency referred delinquent debts to the Department of the Treasury, which administered the Treasury Offset Program (“TOP”). TOP collected delinquent debts owed to federal agencies and states pursuant to 26 U.S.C. 6402(d) (collection of debts owed to federal agencies) and 31 U.S.C. 3720A (reduction of tax refund by the amount of debt). When card users failed to repay their credit-card debt, TOP offset the delinquent debt against funds the government owed the debtor, if any, for benefits and tax refunds. The *1089 agreement, signed by Plaintiff Julius Briggs, explicitly authorized this referral: “Your debt may be submitted for deduction from any Federal Income Tax refund to which you may be entitled under provisions of the Deficit Reduction Act, 26 U.S.C. 6402(d) and 31 U.S.C. 3720A” (First Amd. Compl. Exh. A). Following the referral to TOP, AAFES continued to accrue interest, penalty and administrative charges on a delinquent account.

Plaintiff Briggs is an army veteran. On November 12,1993, he began using a credit card issued by AAFES. He stopped using the card on December 16, 1993. By that point, he had incurred charges of $348.19 for UC purchases and $1508.89 for DPP purchases. His monthly credit-card statement required him to make a minimum payment of $31 by December 13, 1993. Plaintiff Briggs did not make the minimum payment and made no further payments on the account thereafter.

He received a credit-card statement with a closing date of December 18, 1993, which stated, “Notice: Administrative fees and penalties will be assessed on delinquent accounts as authorized by 31 U.S.C. 3717 [the Debt Collection Act].” In a box labeled, “Overdue Notice,” the statement further stated, “Payment of $31.00 from previous statements has not been received. If the amount is not received by 04 Jan. 94, overdue notification will be sent to your unit commander/work supervisor. If payment is not received by 18 Jan. 94, your account (*) will be delinquent and payroll deductions will begin for the account balance. Charge privileges are suspended pending receipt of the overdue amount” (First Amd. Compl. Exh. B).

AAFES continued to send Plaintiff Briggs billing statements between January 1994 and June 1997. AAFES, however, did not take any other action to collect the outstanding balance. In June 1997, AAFES referred the account to the Department of the Treasury. It is unclear from the pleadings whether AAFES sent further notice to Plaintiff Briggs regarding the referral (besides what was stated in the original agreement). TOP did not start offsetting payments until 2003. TOP withheld the following federal payments: $411.84 on April 18, 2003; $818.00 on January 30, 2004; $646.65 on February 18, 2005; $397.00 on February 17, 2006; and $511.30 on May 4, 2007 (First Amd. Compl. Exh. C). Even after these payments, AAFES asserted that Plaintiff Briggs still owed more than $4000.

Plaintiff Briggs corresponded with AAFES about the allegedly improper debt collection prior to filing suit. Attached to the complaint was a letter dated May 24, 2007, from AAFES’ general counsel. It appears that Plaintiff Briggs only discussed Count One, the improper debt-collection issue, at that time. The letter stated, in relevant part (First Amd. Compl. Exh. D):

I am responding to your letter dated May 14, 2007, concerning your client, Julius Briggs, and the debt he owes to the Army and Air Force Exchange Service (AAFES), a non-appropriated fund instrumentality of the United States. Your letter states that Mr. Briggs’ debt has been delinquent since December 1993 or January 1994 and that offsets of Mr. Briggs’ tax returns occurred outside the 10 year limitation for collection of federal debts. For the reasons stated below, AAFES disagrees.

Plaintiff Briggs commenced this action in November 2007. A first amended complaint was filed in January 2008. He makes two claims: Count One alleges that AAFES unlawfully referred debt that had been outstanding for more than ten years for administrative offset in violation of the Debt Collection Act, 31 U.S.C. 3716(e)(1); *1090 and Count Two alleges that AAFES imposed finance charges on debt arising out of UC purchases, without any authority for doing so and in violation of a contractual provision prohibiting such charges. Plaintiff Briggs seeks to sue on behalf of a class of persons subject to TOP collections for debts outstanding for more than ten years (for Count One) and persons subject to TOP collections whose UC debt was improperly charged interest (for the Count Two).

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Bluebook (online)
564 F. Supp. 2d 1087, 2008 U.S. Dist. LEXIS 28135, 2008 WL 941963, Counsel Stack Legal Research, https://law.counselstack.com/opinion/briggs-v-united-states-cand-2008.