Megitt v. Indymac Bank, F.S.B.

• Decision Date: 31 March 2008
• Docket Number: C.A. No. 07-30108-MAP.
• Citation: 547 F.Supp.2d 56
• Parties: Kristi L. MEGITT and Todd Pelletier, Plaintiffs v. INDYMAC BANK, F.S.B., Defendant.
• Court: U.S. District Court — District of Massachusetts

547 F.Supp.2d 56

Kristi L. MEGITT and Todd Pelletier, Plaintiffs v. INDYMAC BANK, F.S.B., Defendant.

C.A. No. 07-30108-MAP.

United States District Court, D. Massachusetts.

March 31, 2008.

Jennifer K. Cannon, Bulkley, Richardson & Gelinas, LLP, Springfield, MA, Naomi A. Carry, Donn A. Randall, Bulkley Richardson & Gelinas LLP, Boston, MA, J. Kevin Snyder, Dykema Gossett, LLP, Los Angeles, CA, Renee Zipprich, Dykema Gossett PLLC, Chicago, IL, for Defendant.

Daniel A. Edelman, Edelman, Combs & Latturner, Chicago, IL, Christopher M. Lefebyre, Pawtucket, RI, for Plaintiffs.

MEMORANDUM AND ORDER RE: REPORT AND RECOMMENDTION WITH REGARD TO DEFEDANT'S MOTION TO DISMISS (Dkt. Nos. 8 & 19)

PONSOR, District Judge.

This action challenges the legal sufficiency of the Notice of Right to Cancel that Defendant provided to Plaintiffs in connection with their home loan transactions. The basis of Plaintiffs' claims is that Defendant failed to properly notify them when their three-day cancellation period expired, by leaving blank the specific date by which the notice of cancellation had to be sent, in violation of the Truth in Lending Act, 15 U.S.C. § 1601(a).

Defendant filed a Motion to Dismiss, which was referred to Chief Magistrate Judge Kenneth P. Neiman for report and recommendation.

On March 28, 2008, Judge Neiman issued his Report and Recommendation, to the effect that Defendant's motion should be allowed, citing as authority the First Circuit's decision in Palmer v. Champion Mart., 465 F.3d 24 (1st Cir.2006), and Carye v. Long Beach Morg. Co., 470 F.Supp.2d 3 (D.Mass.2007). The conclusion of the Report and Recommendation admonished the parties at n. 4 that objections to the Report and Recommendation had to be filed within ten days.

Because the court has had an opportunity to review the papers in this case as well as Judge Neiman's Report and Recommendation and sees no reason for delay, the court, upon de novo review, will adopt the Report and Recommendation and will allow Defendant's Motion to Dismiss without waiting for the ten-day objection period to expire. Plaintiffs' rights are saved fully as if objections had been filed, and Plaintiffs may move for reconsideration and to vacate the judgment, if they desire.

The import of the First Circuit's Palmer decision with regard to the purely technical omission in the document embodying the notice makes the ruling here compelling and inevitable. Judge Young's Carye decision sensibly applies Palmer to precisely the facts underlying this case. There being no just reason for delay, the court has proceeded to rule.

For the foregoing reasons, Judge Neiman's Report and Recommendation dated March 28, 2008 (Dkt. No. 19) is hereby ADOPTED and Defendant's Motion to Dismiss (Dkt. No. 8) is ALLOWED. The clerk is ordered to enter a judgment of dismissal. This case may now be closed.

It is So Ordered.

REPORT AND RECOMMENDATION WITH REGARD TO DEFEDANT'S MOTION TO DISMISS (Document No. 8)

March 28, 2008

NEIMAN, United States Chief Magistrate Judge.

This putative class action involves the legal sufficiency of the Notice of Right to Cancel ("Notice") that IndyMac Bank, F.S.B. ("Defendant") provided individually to Kristi Megitt ("Megitt") and Todd Pelletier ("Pelletier") (together "Plaintiffs") in connection with their respective home loan transactions. The basis of Plaintiffs' claims is that Defendant failed to properly notify them when their respective three-day cancellation periods expired. Defendant has moved to dismiss Plaintiffs' claims pursuant to Fed.R.Civ.P. 12(b)(6) and the motion has been referred to this court for a report and recommendation. See 28 U.S.C. § 636(b)(1)(B). For the reasons that follow, the court will recommend that Defendant's motion to dismiss be allowed.

I. BACKGROUND

The following allegations come from Plaintiffs' amended complaint and the documents annexed thereto. See Palmer v. Champion Morig., 465 F.3d 24, 28 (1st Cir.2006) (citing cases). The court has accepted all well-pleaded facts as true and has given Plaintiffs, the parties who pursue the contested claims, the benefit of all reasonable inferences. See id. (citations omitted).

On January 26, 2006, Pelletier obtained a loan from Defendant, secured by his residence, for debt consolidation purposes. (Id. ¶ 7.) Megitt and her husband secured a similar loan on June 16, 2006. (Id. ¶ 5.) At their respective closings, Plaintiffs each received three copies of the Notice which disclosed the manner and method by which they were entitled to cancel their mortgage loan transactions. (Id. ¶ 12, Exs. 1, 2.)

Each Notice tracked the model form for such disclosures. In relevant part, Megitt's Notice, like the model form, informed her as follows:

You have a legal right under federal law to cancel this transaction, without cost, within three (3) business days from whichever of the following events occurs last:

(1) the date of the transaction, which is: June 16, 2006: or

(2) the date you received your Truth in Lending disclosures; or

(3) the date you received this notice of your right to cancel.¹

Each Notice further provided: "If you cancel by mail or telegram, you must send notice no later than midnight of, ______, (or midnight of the third business day following the latest of the three events listed above)." No date was inserted in the blank space on either Notice.

Plaintiffs allege that, because Defendant failed to insert a specific date for cancellation, Defendant's Notices violated the federal Truth in Lending Act, 15 U.S.C. § 1601, et seq. ("TILA"), the implementing Federal Reserve Board Regulation Z, 12 C.F.R. § 226.1, et seq. ("Regulation Z"), and TILA's state counterpart, the Massachusetts Consumer Cost Disclosure Act ("MCCDA"), Mass. Gen. L. ch. MOD, §§ 1-34. (Id. ¶¶ 6, 20, 24.) The complaint contains three counts. Count I is Megitt's claim for rescission and attorney's fees. Count II is Pelletier's claim for rescission and attorney's fees. And Count III is a putative class action claim for statutory damages.

In due course, Defendant filed a motion to dismiss, Plaintiffs filed an opposition, and Defendant filed a reply brief. On December 13, 2007, the court heard oral argument and Defendant thereafter, with the court's permission, filed a supplemental memorandum of law responding to several rulings that Plaintiff addressed for the first time at oral argument. Having now reviewed the relevant pleadings, the court is poised to offer its recommendation.

II. DISCUSSION

Defendant makes two arguments. Relying primarily on the First Circuit's recent decision in Palmer v. Champion Mortg., Defendant asserts first that the "technical" omissions of which Plaintiffs complain — the blank rescission deadlines — do not, in fact, constitute actionable claims under TILA, Regulation Z or MCCDA. Second, Defendant argues that Plaintiffs' MCCDA claims are preempted by the Home Owners' Loan Act 12 U.S.C. § 1461, et seq.

For the following reasons, the court agrees with Defendant's first argument, namely, that, given Palmer, the Notices did not violate TILA, Regulation Z or MCCDA as a matter of law. Accordingly, the court will recommend that Defendant's motion to dismiss be allowed, making it unnecessary to reach Defendant's second argument.

In Palmer, the First Circuit — viewing the federal and Massachusetts requirements as coextensive, id., 465 F.3d at 27 n. 4 — described the landscape for rescission cases in some detail. Accordingly, this court quotes broadly from that decision:

Congress enacted the TILA in 1968 "to assure a meaningful disclosure of credit terms" and "to protect the consumer against inaccurate and unfair credit ... practices." 15 U.S.C. § 1601(a). To this end, the TILA requires creditors to disclose clearly and accurately all the material terms of a credit transaction. See Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998).

With respect to non-purchase-money mortgages on residential dwellings-the type of credit transaction at issue herethe TILA confers upon the debtor a right to rescind within three days of the transaction's consummation or three days from delivery of the material disclosures, whichever occurs later. See 15 U.S.C. § 1635(a). The creditor also must clearly disclose this rescission right to the debtor. See 12 C.F.R. § 226.23(b)(1). Should a creditor fail to deliver any of the required material disclosures (including notice of the right to rescind), the debtor may rescind at any time up to three years following the consummation of the transaction. See id. § 226.23(a)(3). If a creditor does not respond to a rescission request within twenty days, the debtor may file suit in federal court to enforce the rescission right. See Belini v. Wash. Mut. Bank. 412 F.3d 17, 20 (1st Cir.2005); see also 15 U.S.C. § 1635(b).

Id., 465 F.3d at 27 (footnote omitted).

Here, as in Palmer, the question is whether Defendant clearly disclosed Plaintiffs' rescission rights. See id. If so, Plaintiffs may well be entitled to an extended, three-year rescission period and, in turn, the right to pursue this lawsuit for additional relief. See id.; see also 15 U.S.C. § 1635(g). If not, Plaintiffs' action must be dismissed, as occurred in Palmer. See id. at 27-29.

Defendant concedes that Palmer is not entirely on all-fours with the instant case. There, a specific deadline for rescission (April 1, 2003) had been provided in the blank space. Id. at 26. Moreover, the plaintiff there did not receive the closing documents until later that April. Id. Still, as is true here, the plaintiff argued that the Notice, which also tracked the model form, was "defective" and "confusing." Id. at 27. "Relying on [the First Circuit's] admonition that `a misleading disclosure is as much a violation of TILA as a failure to disc ose at all,' [the plaintiff] asseverate[d] that the confusing nature of the Notice triggered the extended three-year rescission period," Id.(quoting Barnes v. Fleet...