Hayden v. Fifth Third Bank, Inc.
| Decision Date | 20 May 2013 |
| Docket Number | CIVIL ACTION NO. 3:12-CV-00824-H |
| Parties | LORI HAYDEN PLAINTIFF v. FIFTH THIRD BANK, INC. DEFENDANT |
| Court | U.S. District Court — Western District of Kentucky |
Plaintiff, Lori Hayden, has filed a class action complaint against her former employer, Defendant, Fifth Third Bank, Inc. ("Fifth Third").1 Plaintiff asserts two counts arising from the company's fee charge-back policy: 1) that Fifth Third's policy violated her rights, and the rights of those similarly situated, under the Truth in Lending Act, Title I of the Consumer Credit Protection Act, Pub. L. 90-321, 82 Stat. 146 ("TILA"), and its corresponding regulations at 12 C.F.R. §226.1, et seq. ("Regulation Z"); and 2) that Fifth Third breached its contract with Plaintiff, and those similarly situated, in implementing the policy.2
Fifth Third moves to dismiss the complaint in part for two reasons. First, it says that Plaintiff, and the putative class members, have no standing to assert the TILA claim. Second, it says that the contractual limitations period governing claims arising out of Plaintiff's employment withFifth Third bars claims against Fifth Third for events occurring more than six months before Plaintiff filed this suit. For the following reasons, the Court will sustain Fifth Third's motion in part and deny the motion in part.
According to Federal Rule of Civil Procedure 12(b)(6), courts will dismiss complaints "only if 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Garcia v. City of Oakwood, 99 F.3d 1138, *2 (6th Cir. 1996) (table opinion) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Therefore, to overcome a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court must view the allegations in a light most favorable to the nonmoving party, treating all well-pleaded facts as true, but the Court need not accept bare conclusions. See Tackett v. M& GPolymers, USA, LLC, 561 F.3d 478, 488 (6th Cir. 2009).
Rule 12 provides that if "matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment and disposed of as provided in Rule 56." FED. R. CIV. P. 12(d). Greenberg v. Life Ins. Co. of Va., 177 F.3d 507, 514 (6th Cir. 1999) (internal citations omitted). In Greenberg, the Sixth Circuit did not consider the plaintiffs' insurance policies "matters outside the pleadings", because they were referenced in the complaint and central to theplaintiff's claims relating to those policies. Id. Similarly, Fifth Third's employee incentive compensation plan (the "Plan") and Mortgage Loan Pricing Agreement and Prepayment of Settlement Costs Policy (the "Policy") are referenced in the complaint and central to Plaintiff's claims.3 The Court will consider these documents when determining whether the motion to dismiss should be granted.
The Court construes the facts in the light most favorable to Plaintiff. Fifth Third employed Plaintiff as a mortgage loan originator ("MLO"). MLOs solicit mortgage loan applications for loans that Fifth Third will finance. The loan solicitation process works as follows: Fifth Third first generates contact information for potential mortgage loan customers and provides that information to the MLOs. The MLOs then contact the potential customers and obtain their financial information to determine their eligibility for a mortgage loan financed by Fifth Third. The MLOs will discuss possible loan options with these potential customers. If and when the potential customer selects a product, the MLOs compile relevant loan documents and forward them to an underwriter or loan processor.
The Plan, a contract between the MLOs and Fifth Third, in large part defines the employment relationship at issue. The Plan includes the following fee charge-back policy:
ECF No. 14-2. In other words, where MLOs are unable to collect an application fee from a potential customer, Fifth Third would charge the MLOs that fee if Fifth Third denied or withdrew the loan. The pertinent fee for this case is the $350 loan application fee. Plaintiff emphasizes that the language in the Plan only obligates MLOs to collect application fees required for the product, and construes the provision to require only those application fees accruing lawfully.
Also relevant here, Fifth Third required MLOs to bind prospective borrowers to the Policy, which provided pricing options concerning the borrowers' loan application. One such option provided borrowers the choice of checking "yes" or "no" to the following provision:
I/we acknowledge that we are applying for a pre-approval and that a fee is due upon the borrower receipt of the initial Truth in Lending Disclosure (TIL). The fee will be non-refundable if I do not close on a loan with Fifth Third Mortgage Company. If I close on a loan then the fee will be credited towards my total costs due at closing. I further acknowledge that the rate and points cannot be locked until I/we provide Fifth Third Mortgage Company with an accepted purchase contract on a one to four family property.
ECF No. 14-1. Even if the borrower checked "no," Fifth Third's standard policy was to process the application regardless. If Fifth Third then denied the application or withdrew the loan, it would charge the MLOs the application fee.
Plaintiff argues that in such a scenario, the fees collected from the charge-back policy were unlawful for failing to comply with all the TILA requirements before charging an application fee. Plaintiff posits in her response that the TILA imposes upon Fifth Third a requirement that the borrower receive good faith estimate disclosures as to the amount and interest rate of the loan before charging an application fee, and Fifth Third circumvents this requirement by charging its MLOs for those fees before disclosing this information to consumers. In this manner, Plaintiff claims that Fifth Third violated the TILA's disclosure requirements. Plaintiff further contends that Fifth Thirdbreached the Plan by charging her application fees that were not required because they accrued unlawfully. Fifth Third requests that the Court dismiss the TILA claim in its entirety and the breach of contract claim to the extent that any of the breaches occurred more than six months before Plaintiff filed suit.4 The Court will address the two claims and corresponding arguments separately.
To bring a claim in federal court, the plaintiff must have both constitutional and prudential standing. To have constitutional standing, the plaintiff must have "suffered (1) an injury that is (2) 'fairly traceable to the defendant's allegedly unlawful conduct' and that is (3) 'likely to be redressed by the requested relief.'" Prime Media, Inc. v. City of Brentwood, 485 F.3d 343, 349 (6th Cir. 2007) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). Prudential standing, which "is a judicially created doctrine relied on as a tool of judicial self-governance," precludes litigation where: (1) "the asserted harm is a 'generalized grievance'"; (2) "the plaintiff [] purports to rest his claim to relief on the legal rights or interests of third parties"; and (3) "the plaintiff's complaint fall[s outside] the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." Id. (internal citations omitted). Although the specific argument is unclear, Fifth Third seems to contend that Plaintiff lacks prudential standing as to the TILA claim, because Plaintiff is not within the zone of interests that the TILA protects.5
Imposing disclosure requirements on certain creditors like Fifth Third, the TILA "was specifically designed to remedy problems that had developed from the rapidly expanding use of consumer credit in the 1960s." Purtle v. Eldridge Auto Sales, Inc., 91 F.3d 797, 799-800 (6th Cir. 1996). Congress included in the TILA "'private attorney general' enforcement provisions and statutory damage provisions which gives persons protected under the Act standing to sue for damages." Villareal v. Snow, 1996 WL 28254, *2 (N.D. Ill. Jan. 19, 1996).6
The private right of action provision in the TILA reads as follows, "Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part . . . with respect to any person is liable to such person . . . ." 15 U.S.C. § 1640(a). Plaintiff argues that this broad provision includes any person damaged by virtue of a TILA violation.
Section 1640(a) thus grants a private right of action to those protected under the TILA, and the only persons protected by the TILA's disclosure requirements are consumers. See, e.g., Regulation Z, 12 C.F.R. § 226.1(c)(1) (). The term "consumer" is defined in the TILA "with reference to a credit transaction." 15 U.S.C. § 1602(i). Plaintiff and those similarly situated are not consumers. They did not...
To continue reading
Request your trial