Abel v. Keybank Usa, N.A., 03 CV 524.

• Decision Date: 04 March 2004
• Docket Number: No. 03 CV 524.,03 CV 524.
• Parties: Shannon M. ABEL, individually, and on behalf of those similarly situated, et al., Plaintiffs, v. KEYBANK USA, N.A., et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

313 F.Supp.2d 720

Shannon M. ABEL, individually, and on behalf of those similarly situated, et al., Plaintiffs, v. KEYBANK USA, N.A., et al., Defendants.

No. 03 CV 524.

United States District Court, N.D. Ohio, Eastern Division.

March 4, 2004.

Christopher C. Casper, James, Hoyer, Newcomer & Smiljanich, J. Daniel Clark, Scott Charlton, Clark, Charlton & Martino, Tampa, FL, Edgar C. Gentle, III, Mary Frances Fallaw, Gentle, Pickens, Eliason & Turner, Birmingham, AL, Ronald L. Burdge, Burdge Law Office, Dayton, OH, for Plaintiffs.

Brian J. Lamb, Jennifer Mingus Mountcastle, Thompson Hine, Cleveland, OH, C. Lee Reeves, Christopher A. Bottcher, Sirote & Permutt, Birmingham, AL, Courtney Worcester, Nixon Peabody, Manchester, NH, W. Scott O'Connell, Nixon Peabody, Boston, MA, for Defendants.

Memorandum of Opinion and Order

GAUGHAN, District Judge.

INTRODUCTION

This matter is before the Court upon Defendants' Partial Motion to Dismiss Plaintiffs' Second Amended and Consolidated Complaint (Doc. 45). This case arises out of loan documents issued by defendant Key Bank in connection with plaintiffs' student loans. For the reasons that follow, defendants' Motion is GRANTED.

FACTS

Plaintiffs, Shannon M. Abel, Bradley S. Phillips and Laura L. Murphy¹, bring this class action lawsuit against defendants, KeyBank USA, N.A. (hereafter "Key"), JP Morgan Chase Bank (hereafter "JP Morgan") and Bank One National Banking Association (hereafter "Bank One") asserting wrongdoing in connection with the issuance of plaintiffs' student loans.

For purposes of ruling on defendants' Motion, the facts asserted in the Second Amended and Consolidated Class Action Complaint and Demand for Jury Trial ("Amended Complaint") are presumed true.

Plaintiffs are former students of Solid Computer Decisions (hereafter "SCD"). (Compl.¶ 6). Plaintiffs each entered into a student enrollment contract with SCD that contained certain financial terms and disclosures related to student loans. The enrollment contract is a standardized, preprinted form contract. (Compl.¶ 12b). Thereafter, SCD, on behalf of Key, presented a promissory note issued by Key. (Compl.¶ 12c). SCD employees received training and instructions from Key with regard to the issuance of the promissory notes. (Compl.¶ 12c). During the transaction, SCD received credit applications and presented Key documents to students. (Compl.¶ 12e).

Ultimately, plaintiffs' student loans were closed and Key disbursed the funds to SCD as payment for plaintiffs' tuition. (Compl.¶¶ 16, 22, 28). Prior to plaintiffs' completion of the training program, SCD closed for business. Key, however, refused to refund or release plaintiffs from their repayment obligations.

The first amended complaint contained five claims. Count one asserted a claim for violation of the Truth in Lending Act, 15 U.S.C. § 1601, et seq. (hereafter "TILA") and Regulation Z, 12 C.F.R. Pt. 226. Count two asserted a claim for derivative liability under the Ohio Consumer Sales Practices Act. Count three claimed violation of Ohio's Retail Installment Sales Act, O.R.C. § 1317, et seq. (hereafter "RISA"). Counts four and five asserted claims for unjust enrichment and civil conspiracy, respectively. Defendants filed a motion to dismiss the complaint. In a Memorandum of Opinion and Order dated September 24, 2003, this Court dismissed counts two, four and five, as well as a portion of count one. The court denied defendants' motion to the extent count one is based on Key's alleged failure to properly disclose the annual percentage rate of the loans at issue. In addition, the Court denied defendants' motion with respect to count three, the alleged violation of Ohio's RISA. The Court, however, ordered plaintiffs to file a more definite statement as to this claim. In response, defendants filed the Amended Complaint. The Amended Complaint asserts two claims for relief. Count one is a claim for violation of TILA. Count two asserts a claim for violation of RISA.

Defendants move to dismiss count two on the grounds that the National Bank Act preempts RISA. Plaintiffs oppose defendants' motion.

STANDARD

When considering a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the allegations of the complaint must be taken as true and construed liberally in favor of the plaintiff. Lawrence v. Chancery Court of Tenn., 188 F.3d 687, 691 (6th Cir.1999). The complaint is not to be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). See also Hammond v. Baldwin, 866 F.2d 172, 175 (6th Cir.1989). Notice pleading requires only that the defendant be given "fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley, 355 U.S. at 47, 78 S.Ct. 99. However, the complaint must set forth "more than the bare assertion of legal conclusions." Allard v. Weitzman (In Re DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir.1993).

"In practice, a...complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988) (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101 (7th Cir.1984)). Legal conclusions and unwarranted factual inferences are not accepted as true, nor are mere conclusions afforded liberal Rule 12(b)(6) review. Fingers v. Jackson-Madison County General Hospital District, 101 F.3d 702, 1996 WL 678233 (6th Cir.1996), unpublished. Dismissal is proper if the complaint lacks an allegation regarding a required element necessary to obtain relief. Craighead v. E.F. Hutton & Co., 899 F.2d 485, 489-490 (6th Cir.1990).

DISCUSSION

Defendants argue that the National Bank Act, 12 U.S.C. § 24 (Seventh), preempts RISA and, accordingly, that claim must be dismissed. Plaintiffs claim that RISA is a consumer protection statute that is not preempted by the National Bank Act.

1. Preemption Standards

Preemption may occur in three ways. "It is well established that within Constitutional limits Congress may preempt state authority by so stating in express terms." Pacific Gas and Elec. Co. v. State Energy Res. Conservation & Dev. Comm'n, 461 U.S. 190, 203, 103 S.Ct. 1713, 75 L.Ed.2d 752 (1983)(citing Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977)). Absent express preemptive language, "courts must consider whether the federal statute's `structure and purpose,' or nonspecific statutory language, nonetheless reveal a clear, but implicit, pre-emptive intent." Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 31, 116 S.Ct. 1103, 134 L.Ed.2d 237 (1996)(citing Jones, 430 U.S. at 525, 97 S.Ct. 1305). This type of preemption is commonly referred to as "field preemption" and occurs when regulation by the federal government in a particular area is "so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it." American Bankers Ass'n v. Lockyer, 239 F.Supp.2d 1000, 1008 (E.D.Cal.2002)(quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947)). The third form of preemption is "conflict preemption." Conflict preemption exists where the federal law is in "irreconcilable conflict" with state law. Barnett Bank, 517 U.S. at 31, 116 S.Ct. 1103.

A conflict will be found `where compliance with both federal and state regulations is a physical impossibility...,' Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963), or where the state `law stands as an obstacle to the accomplishment and execution of the full purpose and objectives of Congress.' Hines v. Davidowitz, 312 U.S. 52, 61 S.Ct. 399, 85 L.Ed. 581 (1941).

Ray v. Atlantic Richfield Co., 435 U.S. 151, 98 S.Ct. 988, 55 L.Ed.2d 179 (1978).

It is well established that, in addition to actions taken by Congress, federal regulations enacted by federal agencies may preempt state law. Fidelity Federal Savings and Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982) ("Federal regulations have no less pre-emptive effect than federal statutes."). "Where Congress has directed an administrator to exercise his discretion, his judgments are subject to judicial review only to determine whether he has exceeded his statutory authority or acted arbitrarily." Id. at 153-54, 102 S.Ct. 3014 (citing United States v. Shimer, 367 U.S. 374, 381-82, 81 S.Ct. 1554, 6 L.Ed.2d 908 (1961)). In such a case, "the court's inquiry is similarly limited,"

If [h]is choice represents a reasonable accommodation of conflicting policies that were committed to the agency's care by statute, we should not disturb it unless it appears from the statute or its legislative history that the accommodation is not one that Congress would have sanctioned.

Fidelity Federal, 458 U.S. at 154, 102 S.Ct. 3014 (quoting Shimer, 367 U.S. at 383, 81 S.Ct. 1554).

2. Analysis

In this case, plaintiffs assert a claim pursuant to RISA Sections 1317.032(A) and (C). Section 1317.032(A) provides (A) A buyer who is entitled to assert in an action in connection with a consumer transaction any of the following defenses against the seller of goods or services that are obtained pursuant to a purchase money loan installment note or retail installment contract may also assert the defense against the holder, assignee, or transferee of the [note or contract], whether or not any notice of potential claims and defenses is included in the note or contract:

(1) That the subject of the consumer transaction was not furnished or delivered by the seller in accordance with the agreed upon terms of the transaction;

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(4) That the subject of the consumer transaction did not conform to any express or implied warranty made by the...