Jeffries v. Wells Fargo Bank, N.A.

• Decision Date: 19 October 2011
• Docket Number: Case No. 10-cv-5889
• Parties: RHODA JEFFRIES, Plaintiff, v. WELLS FARGO BANK, NA., et al. Defendants.
• Court: U.S. District Court — Northern District of Illinois

RHODA JEFFRIES, Plaintiff, v. WELLS FARGO BANK, NA., et al. Defendants.

Case No. 10-cv-5889

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

Dated: October 19, 2011

MEMORANDUM OPINION AND ORDER

This matter is before the Court on two motions to dismiss Plaintiff Rhoda Jeffries' second amended complaint [27 and 30], filed by Defendants Wells Fargo Bank and TCN Recovery, Inc., and Plaintiff's motion to file surreply¹ [41]. For the reasons set forth below, the Court grants in part Defendants' motions to dismiss [27 and 30] and dismisses Plaintiff's federal claims. The remainder of this case is remanded to state court. The Court grants in part and denies in part Plaintiff's motion to file a surreply [41].

I. Background²

Plaintiff Rhoda Jeffries and North Texas Auto Leasing entered into a Motor Vehicle Retail Installment Sales Contract dated September 15, 2006, for the purchase of a 2004 LexusGX470.³ Shortly thereafter, in September 2006, the contract was assigned by North Texas Auto Leasing to Wells Fargo Auto Finance, Inc.. The contract creates a security interest in the vehicle. The certificate of title for the vehicle shows that Wells Fargo Auto Finance, Inc. is the first-lien holder with a security interest in the Vehicle.⁴

Jeffries began making monthly payments of $713.98 to Wells Fargo in October 2006. Jeffries alleges that Wells Fargo hired Defendant TCN Recovery, Inc. to repossess the car on May 12, 2010. On May 13, 2010, Wells Fargo sent Jeffries a notice of redemption. Jeffries mailed a completed Affidavit of Defense to Wells Fargo on May 26, 2010. Jeffries' Affidavit of Defense states that "No contract exist [sic]. The alleged agreement does not exist. The lien is flawed. No balance is due. There is a billing error. Violations may exist pursuant but not limited to the FDCPA and TILA * * *." Jeffries alleges that Wells Fargo sold the vehicle on June 10, 2010.

On August 17, 2010, Jeffries filed an amended complaint in the Circuit Court of Cook County, Illinois. On September 16, 2010, Defendant Wells Fargo removed the case to this Court on the basis of federal question jurisdiction. After the case was removed, Jeffries filed a second amended complaint, asserting the following claims against Wells Fargo and TCN Recovery: (1)

Declaratory Relief; (2) Contractual Breach of Implied Covenant of Good Faith and Fair Dealing;(3) Violation of TILA; (4) Violation of the Consumer Fraud and Deceptive Business Practices Act; (5) Conversion; (6) Violation of the Fair Debt Collection Practices Act; and (7) Unconscionability. Jeffries' second amended complaint includes allegations that Wells Fargo uses "various layers of companies" for "plausible deniability" so that it may "move things around 'off balance sheet'" in order to create "the potential for abuse [that] is practically infinite." Jeffries also asserts that she had no payment obligations under the auto-loan because Wells Fargo "bifurcated" the loan agreement from the vehicle's certificate of title and securitized the loan by selling it to investors." Both Defendants have moved to dismiss all claims asserted in Jeffries' second amended complaint.

II. Legal Standard

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint, not the merits of the case. See Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). To survive a Rule 12(b)(6) motion to dismiss, the complaint first must comply with Rule 8(a) by providing "a short and plain statement of the claim showing that the pleader is entitled to relief" (Fed. R. Civ. P. 8(a)(2)), such that the defendant is given "fair notice of what the * * * claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the "speculative level," assuming that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 550 U.S. at 563.The Court accepts as true all of the well-pleaded facts alleged by the plaintiff and all reasonable inferences that can be drawn therefrom. See Barnes v. Briley, 420 F.3d 673, 677 (7th Cir. 2005). While a pro se litigant's pleadings are held to a lesser standard, the pro se litigant must comply with the court's rules and procedures. See Antonelli v. Sheahan, 81 F.3d 1422, 1427 (7th Cir. 1996); Jones v. Phipps, 39 F.3d 158, 163 (7th Cir. 1994).

III. Analysis

A. Motion for Leave to File Surreply and for Disqualification of Counsel

Plaintiff Jeffries filed a document entitled "Plaintiff Combined Surreply in Opposition to Defendants' Motion to Dismiss and Motion to Strike All Testimony and Pleadings of Plaintiffs Attorneys and Motion for Disqualification of All Attorneys and Affirmative Defenses to Wells Fargo Claim." Both Defendants have responded to Jeffries' motion.

The decision whether to grant a motion for leave to file a surreply is within the district court's discretion. See Johnny Blastoff, Inc. v. Los Angeles Rams, 188 F.3d 427, 439 (7th Cir. 1999). In some instances, allowing the filing of a surreply "vouchsafes the aggrieved party's right to be heard and provides the court with the information necessary to make an informed decision." In re Sulfuric Acid Antitrust Litig., 231 F.R.D. 320, 329 (N.D. Ill. 2005); see also

Franek v. Walmart Stores, Inc., 2009 WL 674269, *19 n.14 (N.D. Ill. Mar. 13, 2009) (recognizing that a surreply might be appropriate "when a moving party 'sandbags' an adversary by raising new arguments in a reply brief"). However, denial of a motion to file a surreply is appropriate when the movant has had the opportunity to thoroughly brief the issues. See Destiny Health, Inc. v. Connecticut General Life Ins. Co., 741 F. Supp. 2d 901, 911 (N.D. Ill. 2010). Moreover, there simply is no need for a surreply when "[e]ach brief in the sequence on themotion fairly responded to the arguments in the brief that preceded it." See Franek, 2009 WL 674269 at *19 n.14.

Here, Defendants' reply briefs were limited to the content of Jeffries' response brief, and Jeffries' proposed surreply fails to identify or respond to any supposedly new arguments raised in Defendants' replies. However, because Plaintiff is pro se, the Court liberally construes her filings and has considered her surreply in ruling on Defendants' motions to dismiss.

Additionally, Jeffries' surreply cites Illinois Rules of Professional Conduct and this Court's local rules to suggest that "[a]ttorneys for plaintiff [sic] should be disqualified due to the fact that the lawyer's testimony is likely to be prejudicial to the lawyer's client; attorneys in this case are debt collectors and have a benefit in the outcome of the case." Surreply Mot. at 8. Disqualification of counsel "is a drastic measure which courts should hesitate to impose except when absolutely necessary." Freeman v. Chicago Musical Instrument Co., 689 F.2d 715, 721-22 (7th Cir.1982) (noting that motions to disqualify should be "viewed with extreme caution for they can be misused as techniques of harassment"). A party bears a "heavy burden" to disqualify an adversary's chosen counsel. See id. In determining whether to disqualify counsel, a court "must balance the clients' interest in retaining the counsel of their choice against this court's interest in upholding the ethical standards set forth in its local rules." Doe. v. The Catholic Archdiocese of Chicago, 2010 WL 2293460, *2 (N.D. Ill. June 8, 2010) (citing Hutchinson v. Spanierman, 190 F.3d 815, 828 (7th Cir. 1999)). Moreover, the "prohibition on attorneys acting as witnesses applies only to trial and evidentiary proceedings." Id. at *3. Local Rule 83.53.7(c) states that it should not be construed to prevent an attorney-witness "from handling other phases of the litigation." L.R. 83.53.7(c). "That leaves the lawyer free to conduct discovery, draftmotions, and otherwise participate in the pretrial stage." Doe, 2010 WL 2293460 at *3 (citing Mercury Vapor Processing Technologies, Inc. v. Village of Riverdale, 545 F. Supp. 2d 783, 789 (N.D. Ill. 2008)).

Here, Jeffries' motion falls far short of carrying the "heavy burden" required to disqualify Wells Fargo's chosen counsel. She fails to identify any basis for concluding that any party's attorney reasonably may be expected to testify in this matter—much less in a way that is prejudicial to the attorney's client. And even if there was reason to believe that one of the attorneys in this case may testify, the attorney-witness rule would not warrant counsel's disqualification during the pretrial stage of the litigation. To the extent Jeffries' motion seeks the disqualification of defense counsel, it is denied.

B. Truth In Lending Act Claim

In Count III, Jeffries alleges that Defendants violated the Truth In Lending Act, 15 U.S.C. 1601 et seq. ("TILA"), by "failing to provide Plaintiffs [sic] with accurate material disclosures required under TILA and not taking into account the intent of the State Legislature in approving this statute * * *." (SAC ¶ 94). Defendants contend that Count III should be dismissed because (i) the second amended complaint fails to assert allegations that could result in assignee-liability under TILA, and (ii) TILA rescission is not available for loans secured by automobiles.

Where a finance company voluntarily takes assignment of a retail installment contract from a creditor, the finance company is treated as an "assignee"—not a "creditor"—as defined by TILA. See 15 U.S.C. § 1602(f); 12 C.F.R. Pt. 226, Supp. I at 300; Walker v. Wallace Auto Sales, Inc., 155 F.3d 927, 931 (7th Cir. 1998) (finance company...