Neal v. Pentagon Fed. Credit Union, Civil Action No. ELH-18-451

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtEllen L. Hollander United States District Judge
Decision Date05 November 2018
Docket NumberCivil Action No. ELH-18-451


Civil Action No. ELH-18-451


November 5, 2018


Plaintiff Tiffany Neal, a disabled veteran, filed a class action suit against Pentagon Federal Credit Union ("PenFed"), defendant. ECF 1 (the "Complaint"). In a "First Amended Class Action Complaint" (ECF 13, the "Amended Complaint"), she alleges that PenFed unlawfully withdrew disability benefits from her PenFed deposit account to cover overdue loan payments. Pursuant to Fed. R. Civ. P. 23(b)(3) and (b)(2), Neal brings the action "on behalf of herself and all other similarly situated veterans who have deposit accounts with PenFed and have received disability benefits through these same accounts which were . . . taken to cover loan defaults." ECF 13, ¶ 4.1

In her Amended Complaint, Neal asserts the proverbial kitchen sink of claims. She contends that PenFed's seizure of her benefits violated her federal rights under 38 U.S.C. § 5301, which statutorily protects disability benefits owed to veterans; the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. ("TILA"); and the Electronic Fund Transfer Act, 15 U.S.C. §§ 1693 et

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seq. ("EFTA"). Id. ¶ 6. In addition, she asserts State claims for breach of contract, negligence, negligent misrepresentation, constructive trust, accounting, unjust enrichment, conversion, as well as a violation of the Maryland Consumer Protection Act ("MCPA"), Md. Code (2013 Repl. Vol., 2017 Supp.), §§ 13-101 et seq. of the Commercial Law Article ("C.L."). Id. ¶¶ 85-140. Neal seeks damages and injunctive relief, in addition to attorneys' fees and costs. Id. ¶ 4.

PenFed has moved to dismiss the Amended Complaint, pursuant to Fed. R. Civ. P. 12(b)(6), for failure to state a claim. ECF 16 (the "Motion"). The Motion is supported by six exhibits. See ECF 16-1 to ECF 16-6. In the Motion, defendant argues that all claims fail as a matter of law. Id. at 1. Neal opposes the Motion. ECF 17 ("Opposition"). PenFed has replied. ECF 18 ("Reply").

No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, the Motion shall be granted in part and denied in part.

I. Factual Background2

PenFed is a "United States federal credit union headquartered in McClean, Virginia, chartered and regulated under the authority of the National Credit Union Administration." ECF 13, ¶ 11. It "operates numerous locations in Maryland," but also has locations in Washington, D.C., Virginia, and at several military bases. Id.

Neal is a disabled, honorably discharged veteran of the United States Army. Id. ¶ 10. In or around 2002, Neal opened an account with PenFed. Id. ¶ 14. Since then, "Neal has maintained several accounts" with PenFed (id. ¶ 15), including a deposit account in which "Neal

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has received her Veteran disability benefits." Id. ¶ 16. Neal has relied on these benefits to "meet all her basic needs" and to "maintain and support her family and dependents." Id. ¶ 17.

In addition, "Neal entered into an agreement to access a loan and credit from PenFed." Id. ¶ 18. Neal has two loan accounts with PenFed. Id. Plaintiff asserts that she "did not Specifically [sic] authorize electronic funds transfer and/or assignment of her disability benefits to [PenFed] in the event of a default on repayment of any of the loans or lines of credit." Id. ¶ 20. Moreover, plaintiff asserts that, "[d]ue to the increased financial burden caused by sudden health emergencies she suffered," she "ended up defaulting on her monthly payments to PenFed on the loan accounts." Id. ¶ 21. According to Neal, she "informed [PenFed] of the financial difficulties she was facing." Id. ¶ 22.

On June 28, 2017, Neal "received a direct deposit of her Veterans disability benefits . . . in the amount of $3,282.78." Id. ¶ 23. However, on July 4, 2017, PenFed transferred $49.66 of her disability benefits "to cover a delinquency on her loans accounts without Neal's knowledge, authorization or consent." Id. ¶ 24. That same day, PenFed "subjected" Neal "to a $35.84 interest charge . . . and a $227.14 finance charge" on her loan accounts. Id. PenFed also "transferred $559.26 of [Neal's] veteran's disability benefits from her" deposit account "to cover a default on repayment of her loan." Id. ¶ 25. Further, Neal contends that she "was not immediately notified that her veteran's disability benefits had been taken out by PenFed." Id. ¶ 25.

A few weeks later, on July 29, 2017, Neal received another direct deposit of benefits in the amount of $3,282.78. Id. ¶ 26. Neal claims that on August 2, 2017, PenFed again "transferred $550.65 of [Neal's] veteran disability benefits" from her deposit account "to cover a loan payment delinquency without her knowledge, authorization or consent." Id. ¶ 27.

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On August 30, 2017, Neal received another direct deposit of $3,282.78. Id. ¶ 28. And, on September 2, 2017, defendant "transferred $559.26 of [Neal's] Veteran Disability Benefits . . . to cover a default on repayment of her loans." Id. ¶ 29.

Then, Neal received a fourth direct deposit of $3,282.78 on September 27, 2017. Id. ¶ 30. Over the following week, PenFed withdrew money on three separate occasions—$1,124.00 on September 28, 2017, and $59.05 and $551.59 on October 3, 2017—"to repay a delinquency on her loans." Id. ¶¶ 31-33.

Neal emphasizes that "[f]or all of the foregoing withdrawals PenFed never gave Neal notice that her veteran's disability benefits would be unilaterally taken out to repay any loan delinquencies on her loan accounts with PenFed." Id. ¶ 34. Further, Neal maintains that "PenFed never notified Neal which specific loan delinquencies [were] being repaid." Id. ¶ 35. Moreover, Neal argues that PenFed's "assignment of funds from deposit accounts of members without prior notice deprived Neal" and others of their veterans' benefits. Id. ¶ 42.

Additional facts are included in the Discussion.

II. Legal Standards
A. Rule 12(d)

Defendant's Motion is styled as a motion to dismiss under Fed. R. Civ. P. 12(b)(6). However, buried in a footnote (ECF 16 at 3 n.4), PenFed asks the Court to consider the Motion, in the alternative, as one for summary judgment under Fed. R. Civ. P. 56. A motion styled in this manner implicates the Court's discretion under Fed. R. Civ. P. 12(d). See Kensington Vol. Fire Dept., Inc. v. Montgomery Cty., 788 F. Supp. 2d 431, 436-37 (D. Md. 2011).

Ordinarily, a court "is not to consider matters outside the pleadings or resolve factual disputes when ruling on a motion to dismiss." Bosiger v. U.S. Airways, 510 F.3d 442, 450 (4th

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Cir. 2007). However, under Rule 12(b)(6), a court, in its discretion, may consider matters outside of the pleadings, pursuant to Rule 12(d). If the court does so, "the motion must be treated as one for summary judgment under Rule 56," and "[a]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion." Fed. R. Civ. P. 12(d). When the movant expressly captions its motion "in the alternative" as one for summary judgment, and submits matters outside the pleadings for the court's consideration, the parties are deemed to be on notice that conversion under Rule 12(d) may occur; the court "does not have an obligation to notify parties of the obvious." Laughlin v. Metro. Wash. Airports Auth., 149 F.3d 253, 261 (4th Cir. 1998).

A district judge has "complete discretion to determine whether or not to accept the submission of any material beyond the pleadings that is offered in conjunction with a Rule 12(b)(6) motion and rely on it, thereby converting the motion, or to reject it or simply not consider it." 5C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1366 (3d ed. 2018). This discretion "should be exercised with great caution and attention to the parties' procedural rights." Id. In general, courts are guided by whether consideration of extraneous material "is likely to facilitate the disposition of the action," and "whether discovery prior to the utilization of the summary judgment procedure" is necessary. Id.

In my view, the footnote in defendant's Motion does not provide adequate notice that it "could be disposed of as one for summary judgment." Laughlin, 149 F.3d at 261; see also Tsai v. Md. Aviation, 306 F. App'x 1, 4 (4th Cir. 2008) (finding that the defendant's caption "Motion to Dismiss, or in the Alternative, Motion for Summary Judgment" provided notice of Rule 12(d) conversion). Therefore, I shall consider the Motion as one for dismissal under Rule 12(b)(6).

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B. Rule 12(b)(6)

A defendant may test the legal sufficiency of a complaint by way of a motion to dismiss under Rule 12(b)(6). In re Birmingham, 846 F.3d 88, 92 (4th Cir. 2017); Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016); McBurney v. Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010), aff'd sub nom., McBurney v. Young, 569 U.S. 221 (2013); Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). A Rule 12(b)(6) motion constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law "to state a claim upon which relief can be granted."

Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Fed. R. Civ. P. 8(a)(2). That rule provides that a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." The purpose of the rule is to provide the defendants with "fair notice" of the claims and the "grounds" for entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007).

To survive a motion under Rule 12(b)(6), a complaint must contain facts sufficient to "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570; see Ashcroft v. Iqbal, 556 U.S. 662, 684 (2009) ("Our decision in Twombly expounded the pleading standard for...

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