Hawaii Federal Court Finds That Preemption Applies to State-Law UDAP Claims Based on Alleged TILA Violations

On October 28, the U.S. District Court for the District of Hawaii held that a plaintiff’s state-law Unfair and Deceptive Acts and Practices (UDAP) claims, which were based on violations of the Truth in Lending Act’s (TILA’s) disclosure requirements, are preempted by federal law. Kauinui v. Citibank (South Dakota), N.A., Civ. No. 09-000258, 2009 WL 3530373 (D. Haw. Oct. 28, 2009). In this case, the plaintiff, a credit-card account holder, filed suit against her credit card company, a national bank, alleging that the bank violated TILA’s disclosure requirements regarding the Annual Percentage Rate (APR) and/or the finance charge, and that the TILA violations constituted unfair and deceptive acts or practices under Hawaii’s UDAP statutes. The defendant bank moved to dismiss the claims and to strike portions of the plaintiff’s complaint. The court declined to grant dismissal on the TILA claims, finding that it is “plausible that the bank had violated the disclosure requirements of TILA,” despite the plaintiff’s failure to attach all pages of her credit card statement to the complaint. However, the court granted dismissal of the state UDAP claims. The court noted that federal preemption “does not apply to claims based on violations of generally applicable duties owed by all businesses, such as fraud and breach of contract.” In this case, the court found that a violation of TILA’s disclosure requirement was not a violation of a general law, but a specific allegation and was therefore preempted when applied to the national bank. The court also granted the defendant bank’s motion to strike the plaintiff’s request for statutory damages under TILA because statutory damages are not available for the type of disclosure violation alleged.