Wolfington v. Reconstructive Orthopaedic Assocs. II PC

• Decision Date: 20 August 2019
• Docket Number: Nos. 17-3500 & 18-1182,s. 17-3500 & 18-1182
• Citation: 935 F.3d 187
• Parties: Andrew WOLFINGTON, individually and on behalf of all others similarly situated, Appellant v. RECONSTRUCTIVE ORTHOPAEDIC ASSOCIATES II PC, a/k/a the Rothman Institute; Rothman Institute; Does 1 through 10, inclusive
• Court: U.S. Court of Appeals — Third Circuit

935 F.3d 187

Andrew WOLFINGTON, individually and on behalf of all others similarly situated, Appellant

v.RECONSTRUCTIVE ORTHOPAEDIC ASSOCIATES II PC, a/k/a the Rothman Institute; Rothman Institute; Does 1 through 10, inclusive

Nos. 17-3500 & 18-1182

United States Court of Appeals, Third Circuit.

Argued: October 23, 2018

Opinion filed: August 20, 2019

Peter H. LeVan, Jr. [ARGUED], LeVan Law Group, 130 North 18th Street, One Logan Square, 27th Floor, Philadelphia, PA 19103, Counsel for Appellant

Laura D. Ruccolo [ARGUED], Capehart Scatchard, 8000 Midlantic Drive, Laurel Corporate Center, Suite 300S, P.O. Box 5016, Mount Laurel, NJ 08054, Counsel for Appellee

Before: KRAUSE, COWEN, and FUENTES, Circuit Judges

OPINION OF THE COURT

FUENTES, Circuit Judge

This is an appeal from the District Court’s entry of judgment on the pleadings against appellant-plaintiff Andrew Wolfington on his claim under the Truth in Lending Act¹ ("the Act"). Wolfington’s claim under the Act stems from reconstructive knee surgery he received from defendant-appellee Reconstructive Orthopaedic Associates II PC, also known as the Rothman Institute ("Rothman"). Wolfington alleged that Rothman failed to provide disclosures required by the Act when it permitted him to pay his deductible in monthly installments following surgery. The District Court entered judgment on Wolfington’s claim because it determined he had failed to allege that credit had been extended to him in a "written agreement," as required by the Act’s implementing regulation, Regulation Z.² After entering judgment, the District Court also sua sponte imposed sanctions on Wolfington’s counsel. Because we agree that Wolfington failed to adequately allege the existence of a written agreement, but conclude that counsel’s investigation and conduct were not unreasonable, we affirm in part and reverse in part.

I. Background

Because the District Court granted judgment on the pleadings,³ we accept the well-pled allegations in Wolfington’s Complaint as true. Those allegations may be summarized as follows:

A. Wolfington’s Surgery

Wolfington agreed on January 12, 2016 to have surgery provided by Rothman, scheduled for January 21, 2016. As part of the January 12 agreement, Wolfington signed a document titled "Financial Policy."⁴ The Policy provided that Wolfington agreed to pay any outstanding deductible not covered by his insurance before his surgery took place. The day before Wolfington’s surgery, however, Wolfington’s father informed Rothman that Wolfington was unable to pay his deductible, then around $2,000. Rothman orally agreed to accept a $200 "initial payment" by Wolfington and to permit him to pay the remaining deductible in monthly installments of $100 (the "January 20 Agreement").⁵ Wolfington received two emails on January 20, one confirming the $200 payment and the other confirming the establishment of the payment plan and listing the credit card to which payments would be charged. The Complaint quotes both emails in full. Wolfington had surgery as scheduled, but subsequently failed to make any further payments on his outstanding deductible.

B. Proceedings in the District Court

Wolfington filed a putative class action in the District Court, alleging that Rothman had extended him credit in the January 20 Agreement, subject to the Truth in Lending Act, but failed to provide disclosures required by the Act. The Complaint set forth two claims, including one for violation of the Act. His second claim, for violation of the Electronic Funds Transfer Act, was later withdrawn. Rothman filed an Answer with counterclaims for breach of contract and a Motion for Judgment on the Pleadings, which included a copy of the Financial Policy, along with other documents.

Prior to issuing its decision on Rothman’s Motion, the District Court conducted a six-minute telephone conference with the parties on the record on December 14, 2016.⁶ During that telephone conference, the District Court addressed two factual issues with the parties. First, the District Court confirmed that Wolfington had made no payments pursuant to the January 20 Agreement. Second, the District Court asked if there was "anything in writing confirming this arrangement?"⁷ Wolfington’s counsel replied, "[T]he only information that we have is the confirmation receipts with respect to an online bill payment plan ... that indicated the $100 a month payments."⁸ Defense counsel then stated, "That’s correct.... There’s no signed agreement by the plaintiff to make the payments."⁹

Eight days after the telephone conference, the District Court granted Rothman’s Motion. In granting the Motion, the District Court first determined that it could properly rely on the Financial Policy, reasoning that the allegations in the Complaint referenced and relied on it. The District Court also relied on counsel’s statement at oral argument, stating, "[U]nder the concession of Plaintiff’s counsel ... there is no longer any dispute as to any material fact, establishing that there was no finance charge and no ‘written agreement’ between the parties."¹⁰ Based on that evidence, the District Court concluded that Wolfington failed to allege the existence of a written agreement for the extension of credit.

In its memorandum, the District Court framed its decision as a judgment on the pleadings under Rule 12(c). The District Court analyzed Wolfington’s claims only under the standard for Rule 12(c) and provided no substantive analysis of the standard for summary judgment under Rule 56. Pursuant to Rule 12(c), the District Court declined to consider "certain documents" Rothman attached to its Motion in order to avoid "converting the instant Motion into one for summary judgment."¹¹ After determining it would grant judgment on the pleadings, however, the District Court stated, "Alternatively, Defendant’s motion will be converted into one for summary judgment, pursuant to Rule 12(d), which will also be granted."¹² Wolfington moved for reconsideration under Rule 59(e), which the District Court denied.

In granting Rothman’s Motion, the District Court also sua sponte initiated sanctions proceedings under Rule 11 against Wolfington’s counsel. Prior to imposing sanctions, the District Court accepted declarations from Wolfington’s counsel, conducted a hearing, and received supplemental briefing. The District Court concluded that sanctions in the form of attorneys’ fees were appropriate, reasoning that counsel could have reasonably discovered both the lack of a written agreement and Wolfington’s failure to make any payments on the deductible before filing the Complaint. Ultimately, the District Court imposed sanctions under Rule 11 of $38,447.91. The sanctions were imposed solely for Wolfington’s claim under the Truth in Lending Act, and not for the withdrawn claim under the Electronic Funds Transfer Act, although the District Court stated it retained the authority to impose sanctions on the withdrawn claim.

II. Discussion¹³

On appeal, Wolfington challenges the District Court’s entry of judgment on the pleadings under Rule 12(c) and imposition of sanctions under Rule 11. For the reasons below, we conclude that Wolfington has failed to adequately allege a violation of the Truth in Lending Act, but that his counsel’s investigation and conduct were not unreasonable. We therefore affirm the entry of judgment on the pleadings and reverse the imposition of sanctions.

A. Truth in Lending Act

First, Wolfington challenges the District Court’s entry of judgment on the pleadings on his claim under the Truth in Lending Act. In particular, Wolfington contends that (1) the District Court erred under Rule 12(c) by considering material outside the pleadings—namely, counsel’s purported concession that there was no written agreement—and, (2) he has adequately alleged (a) the extension of credit, (b) the consummation of a credit transaction, and (c) a written agreement. Although we conclude the District Court erred in considering material outside the pleadings, we affirm the entry of judgment on the pleadings because Wolfington has failed to allege the existence of a written agreement, as required by Regulation Z.

1. Applicable Law

(a) Judgment on the Pleadings

A motion for judgment on the pleadings under Rule 12(c) "is analyzed under the same standards that apply to a Rule 12(b)(6) motion."¹⁴ Consequently, the court must "view the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the nonmoving party," and may not grant the motion "unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law."¹⁵ Thus, in deciding a motion for judgment on the pleadings, a court may only consider "the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant’s claims are based upon these documents."¹⁶

If the court considers matters outside pleadings other than documents "integral to or explicitly relied upon in the complaint,"¹⁷ the "motion must be treated as one for summary judgment under Rule 56."¹⁸ Conversion of a motion under Rule 12 to one for summary judgment requires that "the procedures of Rule 56 govern."¹⁹ Those procedures include providing the parties at least ten days’ notice and the opportunity to submit evidence of record to support or oppose summary judgment.²⁰ Review on appeal is de novo .²¹

(b) Truth in Lending Act

Wolfington brings his sole remaining claim under the Truth in Lending Act²² and its implementing regulation promulgated by the Federal Reserve Board, Regulation Z.²³ The Act and Regulation Z require a "creditor" extending credit to make certain disclosures²⁴ before the "consummation" of the credit transaction.²⁵

To be subject to the Act’s disclosure requirements, a lender must qualify as a "creditor" both in general and in the particular challenged transaction.²⁶ Under Regulation Z, a...