Williams v. Empire Funding Corp.
| Decision Date | 07 August 2000 |
| Docket Number | No. CIV. A. 97-4518.,CIV. A. 97-4518. |
| Citation | 109 F.Supp.2d 352 |
| Parties | Kim WILLIAMS, Plaintiff, v. EMPIRE FUNDING CORP., et al., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Henry J. Sommer, Miller, Frank and Miller, Philadelphia, PA, David A. Searles, Donovan, Miller, LLC, Philadelphia, PA, for Plaintiff.
Patricia M. Hamill, Conrad, O'Brien, Gellman & Rohn, Philadelphia, PA, Paul J. Halasz, Loryn P. Riggiola, J. Michael Nolan, Jr., Joy Harmon Sperling, Pitney, Hardin, Kipp & Szuch, Florham Park, NJ, Mina A. Brees, Munsch Hardt Kopf & Harr, Austin, TX, Kevin M. Lippman, Munsch Hardt Kopf & Harr, Dallas, TX, for Defendants.
In this case, the court is called upon to enter the labyrinthian world of federal and state consumer disclosure law. Plaintiff Kim Williams on behalf of herself and others similarly situated (plaintiffs) brought this action alleging violations of the Truth in Lending Act (TILA), 15 U.S.C.A. § 1601 et seq., the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.A. § 1692 et seq., and the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 Pa. Cons.Stat. § 201-1 et seq., as well as various common law claims. Defendants Fredmont Builders, Inc. and Stanley Rabner (collectively Fredmont defendants) are building contractors. Defendants Empire Funding Corp. (Empire), TMI Financial, Inc., EFC Servicing, LLC and First Bank, N.A. (collectively Empire defendants) are financial institutions.
Plaintiff Williams moved to certify a general class and three (3) subclasses under Fed.R.Civ.P. 23(b)(2) and (b)(3). The court conditionally certified a general class according to Fed.R.Civ.P. 23(b)(2) "for the purpose of determining whether plaintiffs are entitled to seek recission under TILA." Williams v. Empire Funding Corp., 183 F.R.D. 428, 433 (E.D.Pa.1998). The court deferred ruling on plaintiffs' request to certify the state law claims of the general class and all of the claims of the prospective subclasses. Williams, 183 F.R.D. at 433.
Presently before the court are the parties' cross motions for summary judgment on plaintiffs' TILA recission claim.1 Plaintiffs' motion will be granted and Empire defendants' motion will be denied for three reasons. First, Empire defendants did not include a clear notice of plaintiffs' right to recission guaranteed under TILA in the financing agreement executed by plaintiffs. Second, Empire defendants' failure to provide a clear notice of plaintiffs' right to recission guaranteed under TILA in the parties' financing agreement extended the period of recission to three (3) years from the date of the transaction. Third, Empire defendants were not justified in including in the financing agreement executed by plaintiffs a notice of plaintiffs' right to recission which is required under Pennsylvania law, but which is inconsistent with TILA, on the ground that the Board of Governors of the Federal Reserve System (the Board) has not determined that the Pennsylvania law requiring inclusion of the one (1) day notice is preempted by TILA. Thus, plaintiffs are entitled to rescind the financing agreement which they executed with Empire defendants.2
Plaintiffs claim that they were victims of a fraudulent scheme executed by Fredmont defendants with the knowledge and consent of Empire defendants. Under a so called "two-contract scheme," plaintiffs contend that Fredmont defendants' sales-people targeted low-income areas, going door-to-door promoting a program of home improvements and repairs. During the initial home visits, the homeowners signed a "Work Order Contract" (the "sales agreement"), under which the homeowners agreed to retain Fredmont defendants to perform the home improvement work.
At a subsequent visit by Fredmont defendants' salespeople, the homeowners signed a "Home Improvement Installment Contract" (the "financing agreement"), under which the homeowners agreed to finance the debt owed to Fredmont defendants for the home improvements through Empire defendants. As required under TILA, the financing agreement executed by plaintiffs contains a notice of plaintiffs' right to rescind the contract "without cost or obligation ... within 3 business days of the date of this Contract" (the three (3) day notice). However, directly below the three (3) day notice, and as required under Pennsylvania law, the financing agreement contains a notice of a right to recission "subject to liability for any liquidated damage provision ... [if the right to recission is exercised] not later than five (5) p.m. on the business day following the date [of the contract]" (the one (1) day notice).3
Long after both the one (1) day and the three (3) day periods for recission described above expired, plaintiff Williams sought to rescind the financing agreement. Empire defendants denied plaintiff Williams' request. Consequently, plaintiff Williams initiated this action against both Fredmont and Empire defendants.
Under TILA, a consumer is entitled to rescind a transaction which results in the creation of a security interest in the consumer's home within three (3) days of the date of the transaction. TILA requires that financing agreements evidencing this type of transaction provide the consumer with a clear and conspicuous notice of the consumer's right to rescind the contract. If the financing agreement does not contain a clear and conspicuous notice of the consumer's right to rescind the contract within three (3) days of the date of the transaction, the period during which the consumer may rescind the contract is extended to three (3) years from the date of the transaction. In turn, Pennsylvania law similarly mandates that financing agreements resulting in the creditor taking a security interest in the consumer's home contain a notice of the consumer's right to rescind the contract. Under Pennsylvania law, however, the notice is required to inform the consumer that she must exercise the right to rescind within one (1) day of the date of the contract.
Plaintiffs contend that including both the three (3) day notice required under TILA and the inconsistent one (1) day notice required under Pennsylvania law in the financing agreement renders the three (3) day notice unclear. Therefore, plaintiffs claim, they are permitted to trigger recission of the financing agreement within the three (3) year period which TILA affords to consumers who are not provided with a clear notice of their right to recission.
Defendant4 counters that inclusion of both the three (3) day notice and the one (1) day notice in the financing agreement does not render the three (3) day notice unclear because plaintiffs were merely afforded two (2) separate and overlapping rights of recission. In other words, defendant claims, the one (1) day notice does not detract from the three (3) day period of recission afforded to plaintiffs under TILA. Consequently, defendant maintains, since the notice of recission required by TILA in the financing agreement is clear, plaintiffs are not entitled to trigger recission of the financing agreement within the three (3) year default period available to consumers who do not receive a clear notice of their right to recission.
The interplay between TILA and Pennsylvania law presents a further related issue in this case. Defendant argues that under TILA, the Board is charged with the responsibility of determining whether a state mandated consumer disclosure requirement is preempted by TILA. Defendant contends that since Pennsylvania law requires inclusion in the financing agreement of the one (1) day notice and, further, since the Board has never found the Pennsylvania one (1) day notice requirement to be preempted by TILA, defendant was required to include both the TILA and the Pennsylvania required notices in the financing agreement.
The parties cross swords on two basic issues. First, whether a notice of the right to recission referencing both the three (3) day recission period under TILA and the one (1) day recission period under Pennsylvania law renders the three (3) day notice under TILA unclear. Second, assuming that the one (1) day notice rendered the three (3) day notice under TILA unclear, whether defendant was obligated to include the one (1) day notice in the financing agreement because the Board has not found that the one (1) day notice is preempted by TILA. The latter issue appears to be one of first impression.
Summary judgment is appropriate if the moving party can "show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). When ruling on a motion for summary judgment, the court must view the evidence in the light most favorable to the non-movant. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The court must accept the non-movant's version of the facts as true, and resolve conflicts in the non-movant's favor. See Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1363 (3d Cir.1992), cert. denied, 507 U.S. 912, 113 S.Ct. 1262, 122 L.Ed.2d 659 (1993).
The moving party bears the initial burden of demonstrating the absence of genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant has done so, however, the non-moving party cannot rest on its pleadings. See Fed.R.Civ.P. 56(e). Rather, the non-movant must then "make a showing sufficient to establish the existence of every element essential to his case, based on the affidavits or by depositions and admissions on file." Harter v. GAF Corp., 967 F.2d 846, 852 (3d Cir.1992); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
TILA is designed to address the `divergent and...
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