## Facts

- First USA Bank (First USA) issued the Hylands a Gold Visa credit card.
- While vacationing in Greece, the Hylands used the card to purchase an expensive oriental rug from Aris Evangelinos, a Greek shop owner.
- Evangelinos expressly warranted that the rug was an authentic antique made from pure silk and cotton.
- After returning to the United States, the Hylands obtained an evaluation indicating the rug did not match Evangelinos’s express warranties.
- The Hylands notified First USA of the problem and sought relief regarding the credit-card charge.
- Despite knowing the transaction occurred in Greece, First USA allegedly promised multiple times to help resolve the dispute.
- First USA instructed the Hylands to return the rug to the merchant and to provide proof of the return.
- The Hylands shipped the rug back to Greece, where Greek Customs assessed a $1,240 tax/duty on the shipment.
- The Hylands refused to pay the duty and informed First USA they would not pay and would hold First USA responsible for any resulting loss.
- Greek Customs seized the rug.
- First USA ultimately denied liability for the loss, relying on the geographic limitation in TILA § 170(a)(3) and Regulation Z, which restrict issuer liability to certain domestic transactions.
- The Hylands sued First USA, alleging First USA could be liable for the merchant’s breach of express warranty under TILA § 170 and Regulation Z and that First USA waived the geographic-limit defense through its conduct.
- First USA moved to dismiss for failure to state a claim under Rule 12(b)(6).

## Issues

1. Whether a credit-card issuer’s geographic-limitation defense under TILA § 170(a)(3) (15 U.S.C. § 1666i(a)(3)) and Regulation Z can be waived.
2. Whether the Hylands pleaded enough facts to support a reasonable inference that First USA, while aware the transaction occurred in Greece, voluntarily and intentionally relinquished its right to assert the geographic limitation, making dismissal under Rule 12(b)(6) improper.

## Decision

- The court denied First USA’s Rule 12(b)(6) motion to dismiss.
- The court held the complaint sufficiently alleged waiver of First USA’s right to rely on TILA § 170(a)(3)’s geographic limitation at the pleading stage.
- The court emphasized that whether waiver occurred generally depends on facts and could not be resolved on a motion to dismiss based on the allegations presented.

## Legal Principles

- Under TILA § 170 and Regulation Z, a card issuer may be subject to a cardholder’s non-tort claims and defenses arising out of a credit-card transaction, including claims tied to a merchant’s breach of warranty, subject to statutory limits.
- TILA § 170(a)(3) limits issuer exposure by requiring, among other things, that the transaction occur in the same state as the cardholder’s mailing address or within 100 miles of that address.
- Waiver is the voluntary and intentional relinquishment or abandonment of a known right.
- A party’s knowledge of the right at issue, coupled with conduct suggesting an intent not to rely on that right, can support a waiver theory.
- On a Rule 12(b)(6) motion, the court accepts well-pleaded allegations as true and draws reasonable inferences in the plaintiff’s favor; if the alleged facts could support waiver, dismissal is not warranted.

## Conclusion

The court allowed the Hylands’ TILA/Regulation Z theory to proceed because they plausibly alleged that First USA, while aware the rug purchase occurred in Greece (outside TILA § 170(a)(3)’s ordinary geographic scope), repeatedly promised assistance and directed the return process in a manner that could support a finding that First USA waived its geographic-limit defense; the ruling did not decide ultimate liability, only that the waiver claim was adequately pleaded.


Hyland v. First USA Bank, 1995 WL 595861 (1995)