NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
____________
No. 19-2865 ____________
JENNIFER GORDON; VALERIE TANTLINGER; JENNIFER UNDERWOOD, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, Appellants
v.
KOHL’S DEPARTMENT STORES, INC.; CAPITAL ONE, NATIONAL ASSOCIATION
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2-15-cv-00730) District Judge: Honorable Wendy Beetlestone ____________
Submitted under Third Circuit L.A.R 34.1(a) May 28, 2020
Before: AMBRO, HARDIMAN, and RESTREPO, Circuit Judges.
(Filed: June 9, 2020) ____________
OPINION* ___________
HARDIMAN, Circuit Judge.
Plaintiffs are customers of Kohl’s Department Stores, Inc. They applied for a
Kohl’s private-label credit card and in the process bought a debt-cancellation product
called Kohl’s Account Ease (KAE). They sued Kohl’s and Capital One, National
Association, asserting claims for breach of the implied covenant of good faith and fair
dealing and unjust enrichment. The District Court granted Kohl’s and Capital One
summary judgment. We will affirm.
I
Kohl’s is a nationwide department store chain based in Wisconsin. For over fifty
years, Kohl’s has offered private-label credit cards (Kohl’s cards), which customers can
use to shop at Kohl’s. In 2006, Kohl’s and Chase Bank USA, N.A. agreed that Chase
would issue Kohl’s cards and own the customer accounts, and Kohl’s would service the
accounts. Chase disclosed this arrangement to customers in a Cardmember Agreement
the customers received when they applied for a Kohl’s card. The Agreement provided:
* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent.
2 “We may add or delete a term or change any term of this Agreement . . . by furnishing
you notice of the change in the manner required by applicable law.” App. 282.
In 2011, Capital One bought the Kohl’s card accounts from Chase and became the
issuer. Capital One gave new customers an updated Cardmember Agreement, but
preexisting customers received the updated Agreement only if they requested it.
From 2006 to 2017, most customers who applied for a Kohl’s card did so on point-
of-sale pin pads. The pin pads prompted them to buy KAE by stating: “I elect to purchase
optional [KAE] costing $1.60 per $100 of my ending monthly balance. I received KAE
benefit summary/disclosure.” App. 142. The benefit summary explained KAE would
cancel the balance on the customer’s account up to $10,000 when a covered person
experienced a qualifying involuntary unemployment, disability, hospitalization, or loss of
life. If a customer bought KAE and the issuing bank approved her application for a
Kohl’s card, Kohl’s forwarded the customer’s information to Assurant, KAE’s third-party
plan administrator. Assurant then sent the customer a KAE Amendment to the
Cardmember Agreement, which described KAE’s terms and conditions in full. One term
provided that Chase or Capital One could “change the terms of this Amendment at any
time, but adverse changes will not take effect until after [they] have provided [the
customer] with written notice and a reasonable opportunity to cancel.” App. 213.
In 2011, Capital One grew concerned that because customers rarely received KAE
benefits, KAE could attract regulatory scrutiny. So Capital One and Kohl’s implemented
3 changes to make KAE benefits easier for customers to receive. They first instructed
Assurant not to enforce certain terms in the KAE Amendments. For example, Assurant
did not require customers to: submit a form verifying their claim; comply with a 180-day
deadline for claims based on unemployment, disability or hospitalization; or register for
state unemployment benefits. Capital One and Kohl’s also gave refunds to customers
who complained they did not authorize KAE. Capital One and Kohl’s did not notify
customers about these changes.
Plaintiffs are three customers who applied for Kohl’s cards and bought KAE in the
process. They sued Kohl’s and Capital One on behalf of themselves and a putative class,
asserting claims for breach of the implied covenant of good faith and fair dealing and
unjust enrichment. As the District Court noted, the theories supporting Plaintiffs’ claims
initially were “difficult to pin down.” Gordon v. Kohl’s Dep’t Stores, Inc., 172 F. Supp.
3d 840, 853 (E.D. Pa. 2016). But by the time Kohl’s and Capital One moved to dismiss
the second amended complaint, Plaintiffs alleged “two distinct theories of recovery.” Id.
Under the first theory (the “No Value” theory), Plaintiffs claimed KAE had “little or no
value,” and they did not enroll in it voluntarily. Id. They claimed Kohl’s and Chase
“unilateral[ly] enroll[ed]” them, which either violated the covenant of good faith as “an
improper exercise of [Kohl’s and Chase’s] right to impose new terms,” or was “an
instance of unjust enrichment that [fell] completely outside the terms of the Agreements.”
Id. Under the second theory (the “No Authorization” theory), Plaintiffs claimed “any
4 legal authorization” they gave Kohl’s and Chase to enroll them in KAE “was not
assigned to Capital One.” Id. Thus, “[Kohl’s and Capital One’s] continued billing of
Plaintiffs for KAE . . . was either a breach of the implied covenant of good faith and fair
dealing arising from [Kohl’s and Capital One’s] improper exercise of the right to impose
new terms, or were acts that fell completely outside the Capital One Cardmember
Agreement and by which Defendants were unjustly enriched.” Id.
Discovery showed that Plaintiffs enrolled in KAE voluntarily, so the No Value
theory was “no longer viable.” Gordon, 2017 WL 3390269, at *9 n.8 & n.9. But in their
memorandum of law in opposition to summary judgment, Plaintiffs raised a new
argument, without citation to legal authority, that Capital One and Kohl’s breached the
implied covenant of good faith and fair dealing by failing to notify customers of what
Plaintiffs called “material changes to the terms of KAE.” App. 660, 677. At oral
argument on the motion for summary judgment, Plaintiffs said this theory supported
“both” their implied-covenant and unjust-enrichment claims. Dkt. No. 2:15-cv-00730,
Doc. 181, pg. 48. But they later clarified it was a mere “component” of their No
Authorization theory. Plaintiffs explained that even if they authorized Chase to enroll
them in KAE, the material changes Kohl’s and Capital One made vitiated the
authorization. Id.
After oral argument, the District Court correctly understood Plaintiffs as having
“clarified that their claims rest[ed] entirely on” the No Authorization theory. Gordon,
5 2017 WL 3390269, at *9 n.8. In a thorough and well-reasoned opinion, the Court rejected
that theory and granted Kohl’s and Capital One summary judgment. The Court first
explained that Plaintiffs’ KAE authorization was assigned to Capital One. See id. at *10.
Next, it held Plaintiffs could not show Kohl’s or Capital One “failed to honor the terms of
KAE in good faith.” Id. Even though Plaintiffs “presented evidence that they could have
obtained a better deal or refund if they had complained about KAE,” they still “received
exactly what is described in their KAE contracts.” Id. Nor could Plaintiffs show Kohl’s or
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
____________
No. 19-2865 ____________
JENNIFER GORDON; VALERIE TANTLINGER; JENNIFER UNDERWOOD, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, Appellants
v.
KOHL’S DEPARTMENT STORES, INC.; CAPITAL ONE, NATIONAL ASSOCIATION
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2-15-cv-00730) District Judge: Honorable Wendy Beetlestone ____________
Submitted under Third Circuit L.A.R 34.1(a) May 28, 2020
Before: AMBRO, HARDIMAN, and RESTREPO, Circuit Judges.
(Filed: June 9, 2020) ____________
OPINION* ___________
HARDIMAN, Circuit Judge.
Plaintiffs are customers of Kohl’s Department Stores, Inc. They applied for a
Kohl’s private-label credit card and in the process bought a debt-cancellation product
called Kohl’s Account Ease (KAE). They sued Kohl’s and Capital One, National
Association, asserting claims for breach of the implied covenant of good faith and fair
dealing and unjust enrichment. The District Court granted Kohl’s and Capital One
summary judgment. We will affirm.
I
Kohl’s is a nationwide department store chain based in Wisconsin. For over fifty
years, Kohl’s has offered private-label credit cards (Kohl’s cards), which customers can
use to shop at Kohl’s. In 2006, Kohl’s and Chase Bank USA, N.A. agreed that Chase
would issue Kohl’s cards and own the customer accounts, and Kohl’s would service the
accounts. Chase disclosed this arrangement to customers in a Cardmember Agreement
the customers received when they applied for a Kohl’s card. The Agreement provided:
* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent.
2 “We may add or delete a term or change any term of this Agreement . . . by furnishing
you notice of the change in the manner required by applicable law.” App. 282.
In 2011, Capital One bought the Kohl’s card accounts from Chase and became the
issuer. Capital One gave new customers an updated Cardmember Agreement, but
preexisting customers received the updated Agreement only if they requested it.
From 2006 to 2017, most customers who applied for a Kohl’s card did so on point-
of-sale pin pads. The pin pads prompted them to buy KAE by stating: “I elect to purchase
optional [KAE] costing $1.60 per $100 of my ending monthly balance. I received KAE
benefit summary/disclosure.” App. 142. The benefit summary explained KAE would
cancel the balance on the customer’s account up to $10,000 when a covered person
experienced a qualifying involuntary unemployment, disability, hospitalization, or loss of
life. If a customer bought KAE and the issuing bank approved her application for a
Kohl’s card, Kohl’s forwarded the customer’s information to Assurant, KAE’s third-party
plan administrator. Assurant then sent the customer a KAE Amendment to the
Cardmember Agreement, which described KAE’s terms and conditions in full. One term
provided that Chase or Capital One could “change the terms of this Amendment at any
time, but adverse changes will not take effect until after [they] have provided [the
customer] with written notice and a reasonable opportunity to cancel.” App. 213.
In 2011, Capital One grew concerned that because customers rarely received KAE
benefits, KAE could attract regulatory scrutiny. So Capital One and Kohl’s implemented
3 changes to make KAE benefits easier for customers to receive. They first instructed
Assurant not to enforce certain terms in the KAE Amendments. For example, Assurant
did not require customers to: submit a form verifying their claim; comply with a 180-day
deadline for claims based on unemployment, disability or hospitalization; or register for
state unemployment benefits. Capital One and Kohl’s also gave refunds to customers
who complained they did not authorize KAE. Capital One and Kohl’s did not notify
customers about these changes.
Plaintiffs are three customers who applied for Kohl’s cards and bought KAE in the
process. They sued Kohl’s and Capital One on behalf of themselves and a putative class,
asserting claims for breach of the implied covenant of good faith and fair dealing and
unjust enrichment. As the District Court noted, the theories supporting Plaintiffs’ claims
initially were “difficult to pin down.” Gordon v. Kohl’s Dep’t Stores, Inc., 172 F. Supp.
3d 840, 853 (E.D. Pa. 2016). But by the time Kohl’s and Capital One moved to dismiss
the second amended complaint, Plaintiffs alleged “two distinct theories of recovery.” Id.
Under the first theory (the “No Value” theory), Plaintiffs claimed KAE had “little or no
value,” and they did not enroll in it voluntarily. Id. They claimed Kohl’s and Chase
“unilateral[ly] enroll[ed]” them, which either violated the covenant of good faith as “an
improper exercise of [Kohl’s and Chase’s] right to impose new terms,” or was “an
instance of unjust enrichment that [fell] completely outside the terms of the Agreements.”
Id. Under the second theory (the “No Authorization” theory), Plaintiffs claimed “any
4 legal authorization” they gave Kohl’s and Chase to enroll them in KAE “was not
assigned to Capital One.” Id. Thus, “[Kohl’s and Capital One’s] continued billing of
Plaintiffs for KAE . . . was either a breach of the implied covenant of good faith and fair
dealing arising from [Kohl’s and Capital One’s] improper exercise of the right to impose
new terms, or were acts that fell completely outside the Capital One Cardmember
Agreement and by which Defendants were unjustly enriched.” Id.
Discovery showed that Plaintiffs enrolled in KAE voluntarily, so the No Value
theory was “no longer viable.” Gordon, 2017 WL 3390269, at *9 n.8 & n.9. But in their
memorandum of law in opposition to summary judgment, Plaintiffs raised a new
argument, without citation to legal authority, that Capital One and Kohl’s breached the
implied covenant of good faith and fair dealing by failing to notify customers of what
Plaintiffs called “material changes to the terms of KAE.” App. 660, 677. At oral
argument on the motion for summary judgment, Plaintiffs said this theory supported
“both” their implied-covenant and unjust-enrichment claims. Dkt. No. 2:15-cv-00730,
Doc. 181, pg. 48. But they later clarified it was a mere “component” of their No
Authorization theory. Plaintiffs explained that even if they authorized Chase to enroll
them in KAE, the material changes Kohl’s and Capital One made vitiated the
authorization. Id.
After oral argument, the District Court correctly understood Plaintiffs as having
“clarified that their claims rest[ed] entirely on” the No Authorization theory. Gordon,
5 2017 WL 3390269, at *9 n.8. In a thorough and well-reasoned opinion, the Court rejected
that theory and granted Kohl’s and Capital One summary judgment. The Court first
explained that Plaintiffs’ KAE authorization was assigned to Capital One. See id. at *10.
Next, it held Plaintiffs could not show Kohl’s or Capital One “failed to honor the terms of
KAE in good faith.” Id. Even though Plaintiffs “presented evidence that they could have
obtained a better deal or refund if they had complained about KAE,” they still “received
exactly what is described in their KAE contracts.” Id. Nor could Plaintiffs show Kohl’s or
Capital One were unjustly enriched, because their collection of KAE fees was “legally
justified.” Id. at *12.
Plaintiffs timely appealed the summary judgment as to Kohl’s.
II1
We review the District Court’s summary judgment de novo. State Auto Prop. &
Cas. Ins. Co. v. Pro Design, P.C., 566 F.3d 86, 89 (3d Cir. 2009).
As in the District Court, Plaintiffs’ theories on appeal have changed. They say
nothing about the two theories they argued in the District Court. Instead, they argue their
third theory, and they blame the District Court for “fundamental[ly] misinterpret[ing]”
their claims. Opening Br. 1–5. Yet as we noted already, Plaintiffs did not plead this
theory, they presented it for the first time in their memorandum of law in opposition to
1 The District Court had jurisdiction under 28 U.S.C. § 1332, and we have jurisdiction under 28 U.S.C. § 1291.
6 summary judgment, and they described it as only a “component” of their second theory at
oral argument. So we will not reverse the District Court on this ground. See Caisson
Corp. v. Ingersoll-Rand Co., 622 F.2d 672, 680 (3d Cir. 1980) (“[A] trial court should not
be reversed on grounds that were never urged . . . in the court below.”).
Plaintiffs’ third theory is unpersuasive in any event. Plaintiffs argue Kohl’s
breached the implied covenant when it failed to notify customers that it stopped enforcing
certain KAE terms and implemented a new refund policy. Specifically, they argue “there
was an undeniable gap in the KAE Amendments about providing notice to customers
regarding changes to those agreements,” and Kohl’s acted “arbitrarily and unreasonably”
by notifying only “persons who called to complain . . . or [to seek] the benefits of the
product.” Opening Br. 31–33 (citation omitted). We reject Plaintiffs’ premise that Kohl’s
“change[d]” the KAE Amendments. Id. As the District Court correctly noted, Kohl’s
stopped enforcing its rights under the KAE Amendments; it did not change the
Amendments’ terms. See Gordon, 2017 WL 3390269, at *4 (“Despite these systematic
changes in the approval process for KAE claims, the formal terms of KAE were never
modified.”). Regardless, Kohl’s had no duty to notify customers about the changes
Plaintiffs contend it made. The KAE Amendments provide that adverse changes will not
take effect until after the issuing bank provides customers with written notice. To
supplement this explicit notice requirement with an implicit one requiring Kohl’s to
7 notify customers about changes beneficial to them would “rewrite the contract.” Nemec v.
Shrader, 991 A.2d 1120, 1126 (Del. 2010).
Plaintiffs also argue that if Kohl’s is not a party to the KAE Amendments, “Kohl’s
would still be liable to [them] and other KAE enrollees for unjust enrichment” because of
its “limited notice of material changes to KAE’s principal terms and conditions.”
Opening Br. 41, 43. Again, we disagree that Kohl’s changed the KAE terms. And
Plaintiffs do not deny that the KAE Amendments are valid contracts that govern their
payment of KAE fees to Capital One. So they cannot recover those fees from Kohl’s in
quasi-contract. See Wood v. Coastal States Gas Corp., 401 A.2d 932, 942 (Del. 1979)
(“[T]he contract is the measure of [Plaintiffs’] right, [and] there can be no recovery under
an unjust enrichment theory independent of it.”).
* * *
For the reasons stated, we will affirm the District Court’s summary judgment.