Dicicco v. Citizens Fin. Grp., Inc.
| Decision Date | 10 September 2015 |
| Docket Number | CIVIL ACTION NO. 15-267 |
| Court | U.S. District Court — Eastern District of Pennsylvania |
| Parties | MICHAEL A. DICICCO, STACEY A DICICCO, JOSEPH S. MAGUIRE and RITA M. MAGUIRE, individually and on behalf of all others similarly aggrieved v. CITIZENS FINANCIAL GROUP, INC., et al. |
Plaintiffs filed this putative class action against Citizens Financial Group, Inc. and Citizens Bank of Pennsylvania, Inc. (collectively, "Citizens"), alleging that Citizens overbilled borrowers on Home Equity Lines of Credit ("HELOC") loan agreements by requiring higher monthly payments during the first part of the loan repayment period than the loan contracts permitted. The Second Amended Complaint (the "Complaint") asserts claims for breach of contract, violation of the Truth in Lending Act (the "TILA"), 15 U.S.C. § 1601 et seq., and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa. Stat. Ann. § 201-1 et seq. Citizens has moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. We held argument on the Motion on July 29, 2015. For the following reasons, we grant the Motion in part, and deny it in part.
The Complaint alleges that Citizens provides consumers with HELOC loans that are secured by residential real estate. (Second Am. Compl. ("Compl.") ¶¶ 9, 11.) Named Plaintiffs Michael and Stacey DiCicco, and Joseph and Rita Maguire, all entered into HELOC loan agreements with Citizens. (Id. ¶ 9.) Each HELOC loan agreement (the "Agreement") beginswith a "Draw Period" during which time borrowers may "draw up to the maximum loan amount and pay interest only on the outstanding principal balance." (Id. ¶ 10.) When the Draw Period concludes, the "Repayment Period" begins, during which borrowers may no longer borrow, and the outstanding balance on the loan is converted to a fifteen-year term loan. (Id.) During the Repayment Period, borrowers are required to make "Minimum Payments" each month. (Id. ¶ 18.)
The DiCiccos' Agreement, which is attached as Exhibit C to the Complaint,1 contains the following provision that describes the calculation of Minimum Payments during the Repayment Period:
(Compl. Ex. C § 3.c.) In addition, the TILA required Citizens to make separate disclosures to borrowers regarding how their Minimum Payments were to be determined during the Repayment Period, but the Complaint alleges that Plaintiffs received no such disclosures. (Compl. ¶ 61.)
The Complaint further alleges that Citizens calculates borrowers' Minimum Payments in a way that is contrary to the terms of the Agreements and results in mandatory Minimum Paymentsthat are higher than required during the first half of the Repayment Period. (Id. ¶¶ 20-21.) According to the Complaint, because the Agreement calls for an "amortized" payment schedule, it should result in "a level monthly payment with varying amounts of the payment going to principal and interest" as long as the applicable interest rate is unchanged (the "Equal Payment Method"). (Id. ¶ 19 (emphases in original).) Instead, Citizens allegedly uses an "add-on-interest" method (the "Add-on-interest Method"), which charges equal payments of principal plus "any interest accrued during the billing cycle" for each month of the Repayment Period and results in higher mandatory Minimum Payments during the first half of the Repayment Period. (Id. ¶¶ 15, 21.)
By way of example, the DiCiccos and Citizens entered into an Agreement in 2003. (Id. ¶ 12 n.1.) The Agreement was "reset" in June 2006 and permitted the DiCiccos to draw up to $158,000.00 during a seven-year Draw Period.2 (Id.) On February 6, 2013, Citizens sent the DiCiccos an "End-of-Draw Notice," which advised them that, "in accordance with the terms of [their] original line of credit agreement[,] [their] ability to write checks [against] the . . . account [would] cease on June 9, 2013." (Id. ¶ 15.) The Notice further advised the DiCiccos that "[t]he terms of [their] Agreement require[d] that [their] existing principal balance of $157,372 [would] be payable over the next 180 months in equal principal payments of $874.29 plus any interest accrued during the billing cycle." (Id.)
Following this Notice and during the first year of the Repayment Period, Citizens charged the DiCiccos between $1,359.00 and $1,375.00 as Minimum Payments in each monthly bill, using the Add-on-interest Method. The Complaint alleges that the DiCiccos should have been charged $1,144.34 per month based on Citizens' own online mortgagepayment calculator, which uses the Equal Payment Method.3 According to the Complaint, use of the Add-on-interest Method has resulted in the DiCiccos being billed $3,122.76 more than what their Agreement allegedly required during the first year of repayment. (Compl. ¶ 31.) Notably, however, the DiCiccos did not make any payments to Citizens during the Repayment Period and, in late 2014, Citizens sent them a Notice of Default, asserting that they owed a total of $20,322.81 in unpaid monthly charges and late fees.
The Complaint alleges that the Maguires entered into an Agreement in April 2004, which permitted them to borrow up to $475,000.00 during a ten-year Draw Period. (Compl. ¶ 13.) According to the Complaint, before the end of the Maguires' Draw Period, Citizens sent them an End-of-Draw Notice that was substantially identical to the Notice sent to the DiCiccos. (Id. ¶ 16.) The Complaint further alleges that the Maguires should have been charged $3,049.23 as a minimum monthly payment (under the Equal Payment Method), but instead were charged $3,592.91 (under the Add-on-interest Method) for the month ending January 16, 2015. (Id. ¶¶ 13, 33-35.)
The Complaint alleges that the DiCiccos' and the Maguires' Minimum Payment calculations exemplify an improper billing practice that Citizens has allegedly applied to all HELOC loans that originated since 2003, and which have recently transitioned into the Repayment Period. (Id. ¶ 41.)
The DiCiccos commenced this action by filing a "Class Action Complaint" against Citizens on January 21, 2015. On March 2, 2015, they filed an Amended Complaint, whichadded the Maguires as named Plaintiffs. After seeking and obtaining leave of court, on April 17, 2015, Plaintiffs filed a Second Amended Complaint, which amended the class and subclass definitions.
The Second Amended Complaint contains four Counts. Count I asserts a breach of contract claim, alleging that Citizens calculated the HELOC Minimum Payment in a way that the Agreements do not authorize, and seeks declaratory and injunctive relief. Count II asserts a second breach of contract claim on the same basis, but instead seeks restitution as the remedy. Count III asserts a TILA claim based on Citizens' alleged (1) failure to disclose how Plaintiffs' Minimum Payments would be determined during the Repayment Period, and (2) unilateral change to the method by which it would calculate the Minimum Payment. See 15 U.S.C. § 1637a(a)(8)(c) (); 12 C.F.R. § 226.5b(f)(3) (). Count IV asserts a UTPCPL claim based on Citizens' allegedly "unfair or deceptive practices" in connection with the HELOC loans. See 73 Pa. Stat. Ann. § 201-2 (). Citizens has moved to dismiss the entire Complaint for failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6).
When considering a motion to dismiss pursuant to Rule 12(b)(6), we "consider only the complaint, exhibits attached to the complaint, [and] matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents." Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993)). We take the factual allegations of the complaint as true and draw all reasonable inferences in favor of the plaintiff. DelRio-Mocci v.Connolly Props., Inc., 672 F.3d 241, 245 (3d Cir. 2012) (citing Warren Gen. Hosp. v. Amgen, Inc., 643 F.3d 77, 84 (3d Cir. 2011)). Legal conclusions, however, receive no deference, as the court is "'not bound to accept as true a legal conclusion couched as a factual allegation.'" Wood v. Moss, 134 S. Ct. 2056, 2065 n.5 (2014) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
A plaintiff's pleading obligation is to set forth "a short and plain statement of the claim," Fed. R. Civ. P. 8(a)(2), which gives the defendant "'fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). The complaint must contain "'sufficient factual matter to show that the claim is facially plausible,' thus enabling 'the court to draw the reasonable inference that the defendant is liable for [the] misconduct alleged.'" Warren Gen. Hosp., 643 F.3d at 84 (quoting Fowler v. UPMC Shadyside, 578 F.3d 203,...
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