White v. Wells Fargo Bank

Decision Date17 October 2012
Docket NumberCase No. 1:12 CV 943.
Citation904 F.Supp.2d 756
PartiesLaneeka A. WHITE, Plaintiff, v. WELLS FARGO BANK, NA, Defendant.
CourtU.S. District Court — Northern District of Ohio

OPINION TEXT STARTS HERE

Ronald I. Frederick, Law Office of Ronald Frederick, Cleveland, OH, for Plaintiff.

Chaundra C. Monday, F. Maximilian Czernin, Martha S. Sullivan, Squire Sanders, Cleveland, OH, Keith Shumate, Squire Sanders, Columbus, OH, for Defendant.

MEMORANDUM OF OPINION AND ORDER

DAN AARON POLSTER, District Judge.

Before the Court is Defendant's Motion to Dismiss (“Motion”) (Doc # : 7). The Court has reviewed the motion, the opposition brief (Doc # : 19), and the reply brief (Doc # : 22). For the following reasons, the Motion is GRANTED in part and DENIED in part.

I. Background

On October 24, 2008, Plaintiffs Laneeka White and Timothy Reese bought a car from Cresmont Chrsyler Jeep in Beachwood, Ohio. To finance the car, they entered into a Retail Installment Sales Contract with Cresmont. Cresmont subsequently assigned the contract to Defendant Wells Fargo. A choice-of-law provision states that Federal law and Ohio law shall apply to the contract. The contract also provides that, in the event of default and repossession,

[Wells Fargo] will sell the vehicle if you do not get it back. If you do not do what is required to get the vehicle back, we will sell the vehicle.

[Wells Fargo] will apply the money from the sale, less allowed expenses, to the amount you owe. Allowed expenses are expenses we pay as a direct result of taking the vehicle, holding it, preparing it for sale, and selling it.

(Doc # : 1–2).

In September 2011, Plaintiffs defaulted on the loan, and Defendant repossessed the vehicle. On September 14, 2011, Defendant issued to Plaintiffs a “Notice of Our Plan to Sell Property” (“Notice of Sale”) informing them the vehicle would be sold at public auction. Defendant also sent a “Notice of Intention to Dispose of Motor Vehicle” (“Redemption Notice”) advising Plaintiffs of their right of redemption.

According to the Notice of Sale, the public sale would occur on October 20, 2011; in fact, the sale was not held until November 3, 2011. The Notice of Sale stated the minimum acceptable bid would be $14,850; the actual selling price, however, was $9,600. Defendant applied the sale proceeds to the balance due under the contract, though it was not enough to make up for the deficiency. Defendant therefore sent Plaintiffs a Deficiency Notice, which included, among other charges, “collection fees” in the amount of $1291.21.

In an effort to recover the deficiency and the collection fees, Defendant filed suit against Plaintiffs in state court, asserting its right to retain the vehicle in accordance with Ohio Revised Code (“ORC”) § 1317.02. Defendant later voluntarily dismissed the case without prejudice.1

In this putative class action, Plaintiffs allege Defendant committed multiple violations of the Ohio Retail Installment Sales Act (“RISA”), O.R.C. § 1317.01 et seq., and the Ohio Uniform Commercial Code (“OUCC”), O.R.C. § 1309.101 et seq., by failing to disclose the correct date of the public sale, by failing to disclose the correct minimum bid, by failing to conduct a commercially reasonable sale, and by charging prohibited fees—“collection fees.” Plaintiffs also assert breach of contract and unjust enrichment claims.

Plaintiffs seek class certification, an order declaring Defendant's acts unlawful, an injunction preventing Defendant from seeking to collect any alleged deficiencies, an order declaring that any alleged deficiencies of the proposed class members are not owed, an order requiring Defendant to remove any adverse credit information previously reported to credit reporting organizations, restitution, compensatory damages, statutory damages, pre- and postjudgment interest, attorney fees, costs, and expenses.

II. Standard of Review

Defendants' pending 12(b)(6) motion seeks dismissal of all of Plaintiffs' claims. A 12(b)(6) motion to dismiss tests the sufficiency of a complaint. To survive 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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 550, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

III. Statutory Claims

Defendant does not deny it failed to comply with RISA and OUCC. Instead, it argues the statutory claims are preempted by the National Banking Act (“NBA”), 12 U.S.C. § 1 et seq., and the implementing regulations promulgated by the Office of Comptroller Currency (“OCC”). Congress has authorized the OCC to promulgate those regulations. 12 U.S.C. § 93a; Fid. Fed. Savs. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982).

There are three ways federal law may preempt state law: express preemption; field preemption; and obstacle preemption. First, a state law is expressly preempted when federal law explicitly so states. See Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977). Second, Congress can so extensively regulate a given industry that, in effect, the federal government “occupies the field” and leaves no room for state regulation. See Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947). Third, a state law will not be effective against federal law if the state law functions “as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Barnett Bank of Marion Cty. v. Nelson, 517 U.S. 25, 31, 116 S.Ct. 1103, 134 L.Ed.2d 237 (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)). While the courts have carved out these three categories of preemption, they are often conflated with one another, and, as a result, demand a hybrid analysis that requires pulling from one category to fully analyze another. See, e.g., Epps v. JP Morgan Chase Bank, 675 F.3d 315, 323 (4th Cir.2012) (combining express and conflict analysis).

Defendant argues that the NBA and OCC regulations fall under all three preemption categories. First, Defendant argues that 12 C.F.R. § 7.4008(d) expressly preempts state laws like RISA and the OUCC. Second, Defendant argues that because there is such a long history of federal regulation of the banking industry, there is a strong presumption in favor of preemption as the federal government has “occupied the field.” Third, Defendant argues that RISA and the OUCC are in conflict with federal law and therefore create an obstacle to the bank's exercise of its powers because they prevent the bank from collecting entirely on money that had previously been lent.

A. Express Preemption

The state laws at issue in this case, RISA and the OUCC, require creditors to follow specified procedures when repossessing and disposing of consumers' vehicles. O.R.C. § 1317.12 reads in pertinent part:

[I]f collateral for a consumer transaction is taken possession of by the secured party on default, the secured party shall, within five business days after taking possession, send to the debtor a notice setting forth specifically the circumstances constituting the default and the amount by itemization that the debtor is required to pay to cure the default. Any notice required by section 1309.611 or 1317.16 of the Revised Code may be included as part of the notice required by this section.

Section 1317.16(B) specifies that disposition of collateral may be made at public sale only and that:

At least ten days prior to sale the secured party shall send notification of the time and place of such sale and of the minimum price for which such collateral will be sold, together with a statement that the debtor may be held liable for any deficiency resulting from such sale, by certified mail, return receipt requested, to the debtor at the debtor's last address known to the secured party, and to any persons known by the secured party to have an interest in the collateral. In addition, the secured party shall cause to be published, at least ten days prior to the sale, a notice of such sale listing the items to be sold, in a newspaper of general circulation in the county where the sale is to be held.

As a penalty for failing to abide by these notice requirements, O.R.C. § 1317.12 provides that [a] secured party who disposes of the collateral without sending notice required by this section may not recover the costs of retaking possession of the collateral and is not entitled to a deficiency judgment.”

The OUCC has similar notification requirements, including a provision requiring a secured party to send a notice of disposition stating “the time and place, by identifying the place of business or address or by providing other information that, in each case, reasonably describes the location, of a public disposition or the time after which any other disposition is to be made.” O.R.C. § 1309.613(A)(1)(e). In addition to the notice provisions, § 1309.610(B) requires that [e]very aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable.” The punishment for violating the OUCC notice provisions includes statutory damages in the amount of the “credit service charge” plus ten (10%) percent of the principal amount borrowed. O.R.C. § 1309.625(C)(2).

Defendant argues that 12 C.F.R. § 7.4008(d), an OCC regulation, preempts RISA and the OUCC. That regulation provides:

A national bank may make non-real estate loans without regard to state law limitations concerning:

...

(8) Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit...

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