Azur v. Chase Bank, USA, National Ass'n

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 09-1553

FRANCIS H. AZUR,
Appellant

v.

CHASE BANK, USA, NATIONAL ASSOCIATION
formerly known as CHASE MANHATTAN BANK, USA,
NATIONAL ASSOCIATION formerly known as
FIRST USA BANK, N.A.

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 2-06-cv-01088)
District Judge: Honorable Donetta W. Ambrose

Argued January 27, 2010
Before: FUENTES and FISHER, Circuit Judges,
and DIAMOND,* District Judge.

*
Honorable Paul S. Diamond, United States District
Judge for the Eastern District of Pennsylvania, sitting by
 (Filed: April 1, 2010)

Dennis J. Buffone
Kurt A. Miller
Jerri A. Ryan (Argued)
Ilene Tobias
Thorp, Reed & Armstrong
301 Grant Street
One Oxford Centre, 14th Floor
Pittsburgh, PA 15219
Counsel for Appellant

James C. Martin (Argued)
Perry A. Napolitano
Reed Smith
225 Fifth Avenue
Pittsburgh, PA 15222

Joe N. Nguyen
Reed Smith
1650 Market Street
2500 One Liberty Place
Philadelphia, PA 19103-7301

Felicia Y. Yu
Reed Smith
355 South Grand Avenue, Suite 2900
Los Angeles, CA 90071

designation.

2
 Counsel for Appellee

OPINION OF THE COURT

FISHER, Circuit Judge.

Francis H. Azur filed suit against Chase Bank, USA,
alleging violations of 15 U.S.C. §§ 1643 and 1666 of the Truth
in Lending Act (TILA) and a common law negligence claim
after Azur’s personal assistant, Michele Vanek, misappropriated
over $1 million from Azur through the fraudulent use of a Chase
credit card over the course of seven years. The District Court
granted Chase’s motion for summary judgment, and Azur
appealed. We are presented here with three discrete issues for
our review. First, we must determine whether § 1643 of the
TILA provides the cardholder with a right to reimbursement.
Second, we must evaluate whether Azur’s §§ 1643 and 1666
claims are precluded because Azur vested Vanek with apparent
authority to use the Chase credit card. Third and finally, we
must decide whether Azur’s negligence claim is barred by
Pennsylvania’s “economic loss doctrine.” For the reasons stated
herein, we will affirm, on partly different grounds, the District
Court’s order granting Chase’s motion for summary judgment.

I.

A.

3
 ATM Corporation of America, Inc. (ATM) manages
settlement services for large national lenders. Azur, the founder
of ATM, served as its president and chief executive officer from
1993 until September 2007, when ATM was sold. In July 1997,
ATM hired Vanek to be Azur’s personal assistant. Vanek’s
responsibilities consisted of picking up Azur’s personal bills,
including his credit card bills, from a Post Office Box in
Coraopolis, Pennsylvania;1 opening the bills; preparing and
presenting checks for Azur to sign; mailing the payments; and
balancing Azur’s checking and savings accounts at Dollar Bank.
According to Azur, it was Vanek’s job alone to review Azur’s
credit card and bank statements and contact the credit card
company to discuss any odd charges. Azur also provided Vanek
with access to his credit card number to enable her to make
purchases at his request.

From around November 1999 to March 2006, Vanek
withdrew without authorization cash advances of between $200
and $700, typically twice a day, from a Chase credit card
account in Azur’s name.2 Azur was the sole cardholder and only
authorized user on the account. Although Azur recalls opening

1
Azur had never been to the P.O. Box and did not have a
key to it.
2
When the misappropriation began in 1999, the account
was at First USA Bank, National Association (First USA),
Chase’s predecessor. In April 2003, First USA became Bank
One, Delaware, National Association (Bank One); in February
2006, Bank One merged with Chase.

4
a credit card account in or around 1987 with First USA, Chase’s
predecessor,3 Azur was unaware that he had a Chase credit card.

Each fraudulent transaction included a fee of
approximately $2.00 and a finance charge that corresponded to
the amount withdrawn, ranging from $4.00 for a $100 advance,
to $21.06 for a $700 advance. The fraudulent charges were
reflected on at least 65 monthly billing statements sent by Chase
to Azur, and Vanek paid the bills by either writing checks or
making on-line payments from Azur’s Dollar Bank checking
account. When writing checks, Vanek forged Azur’s signature.
Over the course of seven years, Vanek misappropriated over $1
million from Azur.

The transactions occasionally triggered Chase’s fraud
strategies.4 On April 16, 2004, Chase detected its first
potentially fraudulent transaction, made outbound calls to the

3
Chase has possession of a letter dated July 20, 1999, and
signed by Azur that authorizes First USA to “discuss and/or
release information with my assistant Michelle Vanek.” (App.
at 1443A.)
4
Chase employed a computerized fraud detection system
known as FALCON, which Chase claimed was the best fraud
detection tool in the industry. In addition to FALCON, Chase
reviewed authorizations in real time and employed other
authorization controls, including placing limitations on the
number of ATM transactions completed in a day and on the
dollar amounts of withdrawals.

5
account’s home telephone number, and left an automated
message on the number’s answering machine. Chase received
no response. On April 23, 2004, one week later, Chase detected
a second potential problem and left another automated message
at the same telephone number. Three days later, Chase received
a call from someone that was able to verify the account’s
security questions and validate the card activity. Although
Chase’s records indicate that the caller was female, Chase did
not use voice recognition or gender identification as a means of
security verification. Finally, on May 14, 2005, approximately
one year later, Chase detected a third potentially fraudulent
transaction and called the home telephone number. As before,
five days later, a return caller once again verified the account
activity. The account was paid in full without protest after each
incident.5

On or about March 7, 2006, Azur discovered a suspicious
letter requesting a transfer of funds from his checking account.
After investigating, Azur and ATM discovered Vanek’s
fraudulent scheme and terminated her employment. On
March 8, 2006, Azur notified Chase by telephone of the
fraudulent use of the Chase account and closed the account.
Thereafter, Azur sent Chase three pieces of correspondence
relevant to this appeal: (1) a letter dated April 7, 2006; (2) an
executed Affirmation of Unauthorized Use dated April 21,
2006; and (3) a letter dated May 17, 2006.

5
Chase’s records indicate that the calls were not made
from the telephone number listed on the account.

6
 In the letter dated April 7, 2006, Azur notified Chase of
the fraudulent use of the card, stated that he “is formally
disputing that he is responsible for the payment of any unpaid
charges and accompanying finance charges on [the] account”
(App. at 48A), and requested statements, correspondence, and
other documents regarding the account.

The Affirmation of Unauthorized Use, which Chase
drafted and sent to Azur for execution, stated, “Any
transaction(s) occurring on or after 10/09/2001 is/are also
unauthorized.” (Id. at 50A.) The Affirmation listed three
credits, titled “unauthorized transactions,” to Azur’s account:
(1) a “returned payment” in the amount of $10,000; (2) a
“returned payment” in the amount of $20,000; and (3) a
“fraudulent transaction” in the amount of $28,717.38. (Id.)
Azur executed the document and returned it to Chase on
April 21, 2006.

Finally, in the letter dated May 17, 2006, Azur once again
notified Chase that he “continues to dispute any and all unpaid
charges stemming from the [Chase account], as well as all prior
fraudulent transactions on that account, which have been the
subject of prior communications between you and Mr. Azur
and/or his representatives.” (Id. at 52A.)

Because Azur closed the account on March 8, 2006, the
account’s final billing period ended on March 6, 2006. Chase
has a “policy and practice” of mailing billing statements within
two days of the close of each billing cycle.

B.

7
 On February 22, 2007,6 Azur filed an amended complaint
against Chase under §§ 1643 and 1666 of the TILA, 15 U.S.C.
§§ 1601 et seq. (2006), and common law negligence.7 On
April 8, 2008, Chase filed under seal a motion for summary
judgment seeking dismissal of all three of Azur’s claims.

On October 24, 2008, the Magistrate Judge issued a
Report and Recommendation (R&R) suggesting that Azur’s
§ 1643 claim proceed to trial but that Azur’s other two claims be
dismissed. Both parties filed objections, and Chase filed an
additional motion for judgment on the pleadings for the § 1643
claim, arguing, based on this Court’s decision in Sovereign Bank
v. BJ’s Wholesale Club, Inc., 533 F.3d 162 (3d Cir. 2008), that

6
Azur filed his original complaint on August 16, 2006.
7
Azur’s requested relief included (a) “[d]amages in the
amount of all payments collected by Chase for money
misappropriated and [fraudulent] purchases;” (b) “[a]n
injunction restraining Chase from collecting or attempting to
collect, from Mr. Azur, amounts representing money
misappropriated and [fraudulent] purchases;” (c) “[a]n order
requiring Chase to request the removal of the adverse credit
reports that Chase made to credit reporting agencies concerning
Mr. Azur’s credit status, and restraining Chase from submitting
any further adverse credit reports concerning Mr. Azur;” and
(d) “[c]ompensatory and punitive damages for Chase’s unlawful
submission of adverse credit reports concerning Mr. Azur’s
credit status.” (App. at 80A-83A.)

8
§ 1643 does not provide the cardholder with a right to
reimbursement.

On January 7, 2009, the Magistrate Judge vacated his
first R&R and issued a Supplemental R&R recommending that
all three of Azur’s claims be dismissed. The Magistrate Judge
found that (1) Azur’s § 1643 claim failed because Vanek had
apparent authority to use Azur’s credit card; (2) Azur’s § 1666
claim failed because Azur did not send Chase a timely, written
notice properly identifying the specific charges and amounts he
was disputing; and (3) Azur’s negligence claim was barred by
Pennsylvania’s economic loss doctrine. In light of this finding,
the Magistrate Judge recommended that Chase’s motion for
judgment on the pleadings be dismissed as moot. On
February 3, 2009, the United States District Court for the
Western District of Pennsylvania adopted the Supplemental
R&R, granted Chase’s motion for summary judgment on all
three counts, and dismissed Chase’s motion for judgment on the
pleadings as moot. Azur filed a timely notice of appeal.

II.

The District Court had jurisdiction pursuant to 28 U.S.C.
§§ 1331 and 1367, and we have jurisdiction pursuant to 28
U.S.C. § 1291. “We review an order granting summary
judgment de novo, applying the same standard used by the
District Court.” Nicini v. Morra, 212 F.3d 798, 805 (3d Cir.
2000) (en banc). “Summary judgment is proper where the
pleadings, depositions, answers to interrogatories, admissions,
and affidavits show there is no genuine issue of material fact
and that the moving party is entitled to judgment as a matter of

9
law.” Id. at 805-06 (citing Fed. R. Civ. P. 56(c)). “Once the
moving party points to evidence demonstrating no issue of
material fact exists, the non-moving party has the duty to set
forth specific facts showing that a genuine issue of material fact
exists and that a reasonable factfinder could rule in its favor.”
Ridgewood Bd. of Educ. v. N.E. ex rel. M.E., 172 F.3d 238, 252
(3d Cir. 1999). We may affirm the District Court’s order
granting summary judgment on any grounds supported by the
record. Nicini, 212 F.3d at 805. “To the extent that the District
Court made conclusions of law, our review is de novo.” In re
Merck & Co., Inc. Sec., Derivative & ERISA Litig., 493 F.3d
393, 399 (3d Cir. 2007) (italics omitted).

III.

Azur appeals the District Court’s order granting Chase’s
motion for summary judgment. Azur argues that the District
Court erred in dismissing (1) his § 1643 claim based on its
conclusion that Vanek had apparent authority to make the credit
card charges as a matter of law; (2) his § 1666 claim based on its
determination that Azur failed to meet the section’s notice
requirement; and (3) his negligence claim as barred by
Pennsylvania’s economic loss doctrine. Chase, in contrast, asks
that we affirm the District Court’s order. In addition, Chase
contends that Azur does not have a right to reimbursement under
§ 1643 and that Vanek’s apparent authority also precludes
Azur’s § 1666 claim.8 We will begin by addressing, as an initial

8
Chase also argues that Azur’s contributory negligence
bars his negligence claim. Chase, however, likely waived this

10
matter, whether § 1643 provides Azur with a right to
reimbursement. Then, we will turn to Vanek’s alleged apparent
authority and Azur’s negligence claim, respectively.9

A. Right to Reimbursement

Chase argues that Azur cannot recover the money already
paid to Chase under § 1643 of the TILA. We agree. Section
1643 does not provide the cardholder with a right to
reimbursement. This is clear from the statute’s language: “A
cardholder shall be liable for the unauthorized use of a credit
card only if . . . .” 15 U.S.C. § 1643(a). “Liable” means
“[r]esponsible or answerable in law” or “legally obligated.”
Black’s Law Dictionary 998 (9th ed. 2009). See also Webster’s
Third New Int’l Dictionary 1302 (1993) (defining “liable” as
“bound or obliged according to law or equity”). Accordingly,

defense by failing to raise it in front of the Magistrate Judge or
District Court. See In re Ins. Brokerage Antitrust Litig., 579
F.3d 241, 262 (3d Cir. 2009) (“For an issue to be preserved for
appeal, a party must unequivocally put its position before the
trial court at a point and in a manner that permits the court to
consider its merits.” (quotations and citations omitted)).
Regardless, because we hold that Azur’s negligence claim is
barred by Pennsylvania’s economic loss doctrine, see Section C,
infra, we do not need to reach this issue.
9
Because we find that Vanek’s apparent authority
precludes both Azur’s § 1643 and § 1666 claims, we decline to
reach the issue of notice.

11
the statute’s plain meaning places a ceiling on a cardholder’s
obligations under the law and thus limits a card issuer’s ability
to sue a cardholder to recover fraudulent purchases. The
language of § 1643 does not, however, enlarge a card issuer’s
liability or give the cardholder a right to reimbursement.

We already reached this conclusion in Sovereign Bank,
533 F.3d 162. Sovereign Bank concerned, among other things,
an indemnification action by Sovereign Bank, a card “Issuer,”
against Fifth Third Bank, an “Acquirer,” and BJ’s Wholesale
Club, Inc., a “Merchant,” based on Sovereign Bank’s assertion
that it had a duty under § 1643 to reimburse a cardholder’s
account for all fraudulent charges in excess of $50. Id. at 164,
174. We disagreed:

“TILA § 1643 does not impose any obligation on
issuers of credit cards to pay the costs associated
with unauthorized or fraudulent use of credit
cards. It simply limits the liability of cardholders,
under certain circumstances, to a maximum of
$50 for unauthorized charges. Indeed, § 1643
does not address, nor is it even concerned with,
the liability of an Issuer or any party other than
the cardholder for unauthorized charges on a
credit card. Section 1643 imposes liability only
upon the cardholder.”

Id. at 175. Faced here with the same issue in a new context, we
arrive at the same outcome: § 1643 of the TILA does not

12
provide the cardholder with a right to reimbursement.10
Accordingly, to the extent that Azur requests reimbursement
under § 1643 for money already paid to Chase, his claim fails.

10
Although other federal courts of appeals have assumed
that a right to reimbursement exists, they have done so without
analysis. See Minskoff v. Am. Exp. Travel Related Servs. Co.,
Inc., 98 F.3d 703, 707, 710 (2d Cir. 1996) (holding that the
“appropriate resolution” on remand of a cardholder’s § 1643
reimbursement claim is that “[the card issuer] is liable for [the
user’s] fraudulent purchases . . . from the time the credit card
was issued until [the cardholder] received the first statement
from [the card issuer] containing [the user’s] fraudulent charges
plus a reasonable time to examine that statement.”); DBI
Architects, P.C. v. Am. Express Travel-Related Servs. Co., Inc.,
388 F.3d 886, 888, 894 (D.C. Cir. 2004) (remanding a
cardholder’s § 1643 reimbursement claim to determine at what
point the cardholder created apparent authority in the fraudulent
user). See also Asher v. Chase Bank USA, N.A., 310 F. App’x
912, 919 (7th Cir. 2009) (stating, for statute of limitations
purposes, that “a violation [of § 1643] occurs when the card
issuer notifies the cardholder that despite the cardholder’s claim
of fraud, the card issuer will not reimburse the cardholder for the
disputed amount” in a nonprecedential opinion, which we cite
solely due to Azur’s reliance on the case at oral argument and in
a subsequent Rule 28(j) letter) and Carrier v. Citibank (S.D.),
N.A., 383 F. Supp. 2d 334, 338, 341 (D. Conn. 2005) (assuming
a right to reimbursement under a card issuer’s policy of “$0
liability for unauthorized use” but holding that the fraudulent
user had apparent authority).

13
 B. Apparent Authority

Vanek’s alleged apparent authority is a more difficult
issue. Relying on three cases, Minskoff v. American Express
Travel Related Services. Co., Inc., 98 F.3d 703 (2d Cir. 1996),
DBI Architects, P.C. v. American Express Travel-Related
Services. Co., Inc., 388 F.3d 886 (D.C. Cir. 2004), and Carrier
v. Citibank (S.D.), N.A., 383 F. Supp. 2d 334 (D. Conn. 2005),
the Magistrate Judge recommended that Azur’s § 1643 claim be
dismissed because Azur vested Vanek with apparent authority
to make charges to the Chase account as a matter of law:

“[T]he plaintiff vested Michele Vanek with
apparent authority to use the account, as the
repeated payment of billed charges led Chase to
reasonably believe the charges were authorized.
Furthermore, the plaintiff’s failure to review his
account statements and his lax supervision of
Vanek, in whom he delegated authority to review
his statements, prepare checks on the account, and
discuss routine questions with the card issuer,
constituted a negligent omission that created
apparent authority in Vanek to incur the charges.”

(App. at 17A.) The District Court agreed and dismissed Azur’s
§ 1643 claim. On appeal, Azur argues that whether he clothed
Vanek with apparent authority is an issue of fact to be decided
by a jury.

The application of both §§ 1643 and 1666 of the TILA
depend, in part, on whether the fraudulent user had apparent

14
authority to use the credit card. As stated above, § 1643
provides that “[a] cardholder shall be liable for the unauthorized
use of a credit card” in certain circumstances. 15 U.S.C.
§ 1643(a). The term “unauthorized use” is defined as the “use
of a credit card by a person other than the cardholder who does
not have actual, implied, or apparent authority for such use and
from which the cardholder receives no benefit.” 15 U.S.C.
§ 1602(o). Relatedly, § 1666(a) sets forth the procedures a
creditor must follow to resolve alleged billing errors. 15 U.S.C.
§ 1666(a). Like the phrase “unauthorized use,” the phrase
“billing error” includes “[a] reflection on or with a periodic
statement of an extension of credit that is not made to the
consumer or to a person who has actual, implied, or apparent
authority to use the consumer’s credit card or open-end credit
plan.” 12 C.F.R. § 226.13(a)(1).

To determine whether apparent authority exists, we turn
to applicable state agency law. See 12 C.F.R. Pt. 226, Supp. I
(“Whether such [apparent] authority exists must be determined
under state or other applicable law.”); Minskoff, 98 F.3d at 708
(“‘Congress apparently contemplated, and courts have accepted,
primary reliance on background principles of agency law in
determining the liability of cardholders for charges incurred by
third-party card bearers.’” (quoting Towers World Airways v.
PHH Aviation Sys., 933 F.2d 174, 176-77 (2d Cir. 1991))). In
this case, the parties do not refute the application of
Pennsylvania law. Citing the Restatement (Second) of Agency,
the Pennsylvania Supreme Court has explained as follows:

“Apparent authority is power to bind a principal
which the principal has not actually granted but

15
 which he leads persons with whom his agent deals
to believe that he has granted. Persons with
whom the agent deals can reasonably believe that
the agent has power to bind his principal if, for
instance, the principal knowingly permits the
agent to exercise such power or if the principal
holds the agent out as possessing such power.”

Revere Press, Inc. v. Blumberg, 246 A.2d 407, 410 (Pa. 1968).
Similarly, we have stated that under Pennsylvania law “[t]he test
for determining whether an agent possesses apparent authority
is whether a man of ordinary prudence, diligence and discretion
would have a right to believe and would actually believe that the
agent possessed the authority he purported to exercise.” In re
Mushroom Transp. Co., Inc., 382 F.3d 325, 345 (3d Cir. 2004)
(quotations and citations omitted).11

11
Pennsylvania agency law is comparable to general
agency law principles. Restatement (Second) of Agency § 8
provides that “[a]pparent authority is the power to affect the
legal relations of another person by transactions with third
persons, professedly as agent for the other, arising from and in
accordance with the other’s manifestations to such third
persons,” and § 27 explains that the “apparent authority to do an
act is created as to a third person by written or spoken words or
any other conduct of the principal which, reasonably interpreted,
causes the third person to believe that the principal consents to
have the act done on his behalf by the person purporting to act
for him.” Restatement (Second) of Agency §§ 8 and 27 (1958).
Agency Third, adopted in 2005 and published in 2006, is

16
 Although the articulation of the proper agency law
standard is fairly easy, the application of that standard is
difficult. Two decisions of the Second and D.C. Circuits,
respectively, are instructive. In both cases, the Second and D.C.
Circuits held that a cardholder’s negligent omissions clothed the
fraudulent card user with apparent authority under facts similar
to those present in the instant case.

The Second Circuit in Minskoff was the first court of
appeals to address this issue. Minskoff served as the president
and chief executive officer of a real estate firm. 98 F.3d at 706.
In 1988, the firm opened an American Express corporate credit
card account and issued one card in Minskoff’s name. Id. In
1992, Minskoff’s assistant, whom the firm had recently hired,
applied for and obtained an additional card to the account in her
own name without Minskoff’s or the firm’s knowledge. Id.
From April 1992 to March 1993, the assistant charged a total of
$28,213.88 on the corporate card. Id. During this period,
American Express sent twelve monthly billing statements to the
firm’s address; each statement listed both Minskoff and the
assistant as cardholders and separately itemized their charges.
Id. At the same time, American Express was paid in full by a
total of twelve forged checks drawn on bank accounts

similar: “apparent authority” is “the power held by an agent or
other actor to affect a principal’s legal relations with third
parties when a third party reasonably believes the actor has
authority to act on behalf of the principal and that belief is
traceable to the principal’s manifestations.” Restatement
(Third) of Agency § 2.03 (2006).

17
maintained by either Minskoff or the firm at Manufacturers
Hanover Trust (MHT), which also periodically mailed
statements to the firm showing that the payments had been
made. Id. at 706-07, 710. The assistant used the same system
to misappropriate another $300,000 after applying for a
platinum account. Id. at 707, 710. After discovering the fraud,
Minskoff filed suit against American Express under the TILA.
Id. at 707.

In determining whether or not the assistant had apparent
authority to use the credit card, the Second Circuit began by
differentiating between the acquisition and use of a credit card
obtained through fraud or theft: “[W]hile we accept the
proposition that the acquisition of a credit card through fraud or
theft cannot be said to occur under the apparent authority of the
cardholder, [that] should not . . . preclude a finding of apparent
authority for the subsequent use of a credit card so obtained.”
Id. at 709. Then, noting that “[n]othing in the TILA suggests
that Congress intended to sanction intentional or negligent
conduct by the cardholder that furthers the fraud or theft of an
unauthorized card user,” the court held that “the negligent acts
or omissions of a cardholder may create apparent authority to
use the card in a person who obtained the card through theft or
fraud.” Id. Applying that reasoning to the facts before it, the
Second Circuit found that Minskoff’s and the firm’s failure to
examine any of the credit card or bank statements created, as a
matter of law, “apparent authority for [the assistant’s]
continuing use of the cards, especially because it enabled [the
assistant] to pay all of the American Express statements with
forged checks, thereby fortifying American Express’ continuing

18
impression that nothing was amiss with the Corporate and
Platinum Accounts.” Id. at 710.12

In DBI Architects, the D.C. Circuit took a narrower
approach. DBI was a corporation with an AMEX 13 credit card
account. 388 F.3d at 888. In 2001, DBI appointed a new
account manager of its D.C. and Virginia offices. Soon
thereafter, the new manager requested that AMEX add her as a
cardholder on DBI’s corporate account without DBI’s
knowledge, although AMEX sent DBI an account statement
reflecting the change. Id. From August 2001 to May 2002, the
manager charged a total of $134,810.40 to the credit card. Id.
As in Minskoff, AMEX sent DBI ten monthly billing statements
– each listing the manager as a cardholder and itemizing her
charges – and the manager paid AMEX with thirteen DBI
checks. Id. Most of the checks were signed or stamped in the
name of DBI’s president; none were signed in the manager’s
own name. Id. Like Minskoff, DBI eventually filed suit against
AMEX under the TILA. Id. at 888.

12
The Second Circuit relied in part on a New York law
obligating consumers to exercise reasonable care and
promptness in examining bank statements for errors. Minskoff,
98 F.3d at 709. According to the court, the law derived from
common law obligations. Id.
13
“AMEX” is the abbreviation used by the DBI Architects
court to refer to American Express Travel-Related Services
Company. 388 F.3d at 887.

19
 Acquainted with the Second Circuit’s decision in
Minskoff, the D.C. Circuit decided its case on narrower grounds.
Rather than fault the cardholder for merely failing to inspect
monthly credit card statements, the court focused on the
cardholder’s continuous payment of the fraudulent charges
without complaint:

“DBI is correct that its failure to inspect its
monthly billing statements did not clothe [the
manager] with apparent authority to use its
corporate AMEX account. [However,] AMEX is
correct that DBI clothed [the manager] with
apparent authority to use its corporate AMEX
account by repeatedly paying without protest all
of [the manager’s] charges on the account after
receiving notice of them from AMEX.”

Id. at 891. The court later explained its reasoning as follows:

“By identifying apparent authority as a limit on
the cardholder’s protection under § 1643,
Congress recognized that a cardholder has certain
obligations to prevent fraudulent use of its card.
DBI’s troubles stemmed from its failure to
separate the approval and payment functions
within its cash disbursement process. [The
manager] had actual authority both to receive the
billing statements and to issue DBI checks for
payment to AMEX. While DBI did not
voluntarily relinquish its corporate card to [the
manager], it did mislead AMEX into reasonably

20
 believing that [the manager] had authority to use
the corporate card by paying her charges on the
corporate account after receiving AMEX’s
monthly statements identifying her as a
cardholder and itemizing her charges.”

Id. at 893. Although the court acknowledged that payment
might not always create apparent authority, it held that such
authority existed as a matter of law in that case:

“[T]his is not a case involving an occasional
transgression buried in a welter of financial detail.
[] Nor is this a case involving payment without
notice, as might occur when a cardholder
authorizes its bank to pay its credit card bills
automatically each month. Where, as here, the
cardholder repeatedly paid thousands of dollars in
fraudulent charges for almost a year after monthly
billing statements identifying the fraudulent user
and itemizing the fraudulent charges were sent to
its corporate address, no reasonable juror could
disagree that at some point the cardholder led the
card issuer reasonably to believe that the
fraudulent user had authority to use its card.”

Id. at 893-94 (quotations and citation omitted). Ultimately, the
court remanded the case to determine at what point the
manager’s apparent authority began. Id. at 894.

We agree with the D.C. Circuit’s more nuanced analysis.
“Apparent authority is power to bind a principal which the

21
principal has not actually granted but which he leads persons
with whom his agent deals to believe that he has granted.”
Revere Press, 246 A.2d at 410. A cardholder may, in certain
circumstances, vest a fraudulent user with the apparent authority
to use a credit card by enabling the continuous payment of the
credit card charges over a period of time. As the D.C. Circuit
reasoned, by identifying apparent authority as a limitation on the
cardholder’s protections under § 1643, Congress recognized that
the cardholder is oftentimes in the best position to identify fraud
committed by its employees.

Here, Azur’s negligent omissions led Chase to reasonably
believe that the fraudulent charges were authorized. Although
Azur may not have been aware that Vanek was using the Chase
credit card, or even that the Chase credit card account existed,
Azur knew that he had a Dollar Bank checking account, and he
did not review his Dollar Bank statements or exercise any other
oversight over Vanek, his employee. Instead, Azur did exactly
what the D.C. Circuit in DBI Architects cautioned against: he
“fail[ed] to separate the approval and payment functions within
[his] cash disbursement process.” 388 F.3d at 893. Had Azur
occasionally reviewed his statements, Azur would have likely
noticed that checks had been written to Chase. Because Chase
reasonably believed that a prudent business person would
oversee his employees in such a manner, Chase reasonably
relied on the continuous payment of the fraudulent charges.

Many of Azur’s counter-arguments are beside the point.
Azur asserts that Minskoff and DBI Architects are
distinguishable because the fraudulent users in those cases were
cardholders on the accounts. This distinction is irrelevant:

22
Chase’s belief that the fraudulent charges were authorized did
not depend on whether the fraudulent charges were made by a
second cardholder; Chase’s belief was contingent upon the
continuous payment of the fraudulent charges – regardless of
which card they were on – without objection. Azur also focuses
on Chase’s failure to identify the fraud.14 The issue, however,
is whether Azur led Chase to believe that Vanek had authority
to make the charges, not whether Chase’s fraud-detecting tools
were effective. Moreover, Vanek’s ability to answer the account
security questions over the telephone and the fact that Chase’s
fraud-detecting tools identified relatively few problems
reinforce the conclusion that Chase was reasonable in believing,
and did in fact believe, that the charges were authorized. In
short, none of the arguments Azur has advanced persuade us to
disturb the District Court’s apparent authority determination.

Accordingly, we hold that Azur vested Vanek with
apparent authority to use the Chase credit card, thus barring his
§§ 1643 and 1666 claims.

14
First, Azur argues that Chase could not have reasonably
believed that the charges were authorized because (1) Vanek’s
telephone calls were made from telephone numbers that did not
match the number listed on the account, and (2) Vanek was
female, when the account indicated that the only cardholder was
male. Second, Azur contends that Chase’s fraud-detecting tools,
including FALCON, were ineffective because only three out of
hundreds of fraudulent transactions triggered a response.

23
 C. Economic Loss Doctrine

Lastly, the District Court adopted the Magistrate Judge’s
recommendation and held that Pennsylvania’s economic loss
doctrine bars Azur’s common law negligence claim against
Chase. On appeal, Azur contends that the Pennsylvania
Supreme Court case Bilt-Rite Contractors, Inc. v. The
Architectural Studio, 866 A.2d 270 (Pa. 2005), created an
exception to the doctrine that applies to Azur because Azur does
not have a contractual remedy. In response, Chase argues that
the Bilt-Rite exception is narrow and does not cover Azur’s
claim.

Pennsylvania’s economic loss doctrine “‘provides that no
cause of action exists for negligence that results solely in
economic damages unaccompanied by physical or property
damage.’” Sovereign Bank, 533 F.3d at 175 (quoting Adams v.
Copper Beach Townhome Cmtys., L.P., 816 A.2d 301, 305 (Pa.
Super. 2003)). The doctrine “‘is concerned with two main
factors: foreseeability and limitation of liability.’” Id. (quoting
Adams, 816 A.2d at 307). The first Pennsylvania appellate court
to discuss the doctrine explained,

“To allow a cause of action for negligent cause of
purely economic loss would be to open the door
to every person in the economic chain of the
negligent person or business to bring a cause of
action. Such an outstanding burden is clearly
inappropriate and a danger to our economic
system.”

24
Aikens v. Baltimore & Ohio R.R. Co., 501 A.2d 277, 279 (Pa.
Super. 1985). The Pennsylvania Supreme Court has recognized
the doctrine’s existence. See Excavation Techs., Inc. v.
Columbia Gas Co. of Pa., 985 A.2d 840, 841-43 (Pa. 2009).

The Pennsylvania Supreme Court crafted a narrow
exception to the doctrine in Bilt-Rite, where a building
contractor filed a negligent misrepresentation claim against an
architect after its reliance on the architect’s allegedly incorrect
plans in its winning bid resulted in economic loss. 866 A.2d at
272. Adopting Section 552 of the Restatement (Second), which
“sets forth the parameters of a duty owed when one supplies
information to others, for one’s own pecuniary gain, where one
intends or knows that the information will be used by others in
the course of their own business activities,” id. at 285-86, the
court refused to apply the economic loss doctrine to claims of
negligent misrepresentation under Section 552: “to apply the
economic loss doctrine in the context of a Section 552 claim
would be nonsensical: it would allow a party to pursue an action
only to hold that, once the elements of the cause of action are
shown, the party is unable to recover for its losses,” id. at 288.

The Pennsylvania Supreme Court emphasized the narrow
scope of the Bilt-Rite exception in Excavation Techs., where an
excavator filed a negligent misrepresentation claim against a
utility company pursuant to § 552 after the excavator sustained
economic damages because the utility company erred in marking
the locations of some of the gas lines. 985 A.2d at 841, 844. In
applying the economic loss doctrine, the court distinguished the
case from Bilt-Rite on the grounds that, unlike architects, “[a]
facility owner [] does not engage in supplying information to

25
others for pecuniary gain. . . . [Therefore], § 552(1) and (2) do
not apply here.” Id. at 843 (quotations and citations omitted).
The court also declined to expand the exception: “[P]ublic
policy weighs against imposing liability here. Permitting
recovery would shift the burden from excavators, who are in the
best position to employ prudent techniques on job sites to
prevent facility breaches.” Id. at 844.

We agree with Chase that the Pennsylvania Supreme
Court would likely hold that the economic loss doctrine bars
Azur’s negligence claim: Azur’s economic damages are
unaccompanied by physical or property damage and, because
Chase is not in the business of providing Azur with information
for pecuniary gain, this is not the § 552 negligent
misrepresentation case contemplated by Bilt-Rite. Rather, like
Excavation, we find that Pennsylvania public policy weighs
against imposing liability because cardholders, and not card
issuers, are in the best position to prevent employees with access
to security information from committing fraud.

Azur’s main argument against the imposition of the
economic loss doctrine focuses on Azur’s assertion that he does
not have a contractual remedy. However, we already rejected an
identical argument in Sovereign Bank, where we applied the
doctrine in a case concerning a card issuer’s negligence claim
against other financial institutions with which it had no
contractual relationship. We explained,

“Bilt-Rite did not hold that the economic loss
doctrine may not apply where the plaintiff has no
available contract remedy. . . . [T]he Bilt-Rite

26
 Court simply carved-out an exception to allow a
commercial plaintiff to seek recourse from an
‘expert supplier of information’ with whom the
plaintiff has no contractual relationship, in very
narrow circumstances not relevant here. [] The
Pennsylvania Supreme Court emphasized that its
holding was limited to those ‘businesses’ which
provide services and/or information that they
know will be relied upon by third parties in their
business endeavors.”

Sovereign Bank, 533 F.3d at 180 (citing Bilt-Rite, 866 A.2d at
286). Therefore, Azur’s contention that the Bilt-Rite exception
encompasses all cases in which the plaintiff has no contractual
remedy is without support.

IV.

For the foregoing reasons, we will affirm, on partly
different grounds, the order of the District Court.15 As an initial
matter, we hold that § 1643 of the TILA does not provide the
cardholder with a right to reimbursement. With regards to the
specifics of the instant case, we find that Azur vested Vanek
with apparent authority to use the Chase card and thus that
Azur’s §§ 1643 and 1666 claims cannot stand. Finally, we hold
that Pennsylvania’s economic loss doctrine bars Azur’s common
law negligence claim.

15
We decline to reach the issue of notice under § 1666.
See note 9, supra.

27