Court Partly Denies State Farm’s Motion To Dismiss In Case Involving Cryptocurrency Issues


Court Partly Denies State Farm’s Motion To Dismiss In Case Involving Cryptocurrency Issues

There have been a number of lawsuits in which cryptocurrency has been an issue. One of the most recent was Eckhart v. State Farm Bank. In Eckhart, the plaintiff filed a complaint and alleged that he had an account at the bank and a bank-issued card. The agreement for the card permitted him to purchase goods and services using the card. Basically, Plaintiff had rights traditional to a cardholder.

However, when it came to “quasi-transactions,” Plaintiff alleged that they were not treated as purchases under the agreement. Rather, the agreement categorized them as “cash advances.” Such advances had higher interest rates and additional fees. Transactions considered to be “quasi transactions” include wire transfers, money orders, travel checks, and foreign currency or tax payments. The agreement, however, did not designate cryptocurrency as a mode of payment. Nor did it attach conditions to the use of cryptocurrency.

The plaintiff still used his bank-issued card to purchase cryptocurrencies more than once. According to the complaint, the bank designated the transactions as the purchase of goods until February 2018. That month, the bank treated the transaction as a cash advance. As a result, he received additional fees and higher interest rates. After failed negotiations with the bank to address the charges, he filed a complaint against the bank. The complaint alleged that the bank violated the Truth in Lending Act by not providing plaintiff with advance notice on the reclassification of cryptocurrency purchases, the bank failed to provide clear and conspicuous disclosures, and the bank breached the cardholder agreement. The complaint also alleged that that plaintiff should have received a declaration from the bank that the agreement should not have imposed such fees and interest. The bank then moved to dismiss the complaint.

In addressing the bank’s motion to dismiss, the court found that the TILA claim did not require the bank to provide plaintiff with advance notice because the bank changed its interpretation of crypto – it did not alter the terms of the agreement. Thus, the court dismissed this claim. As to the claim of clear and conspicuous disclosures, the court did not dismiss this count, finding that a factual dispute existed and plaintiff had a viable claim. As to breach of contract and declaratory judgment, the court did not dismiss these claims. The court held that the plaintiff alleged viable claims sufficient to overcome a motion to dismiss.

All in all, three of the claims are going forward, which means that the parties are going to engage in discovery. The court will ultimately make a final ruling on the case – which will likely be months from now.

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