Opinion
No. 1:99-cv-698
Dated December 30, 1999.
OPINION AND ORDER ON DEFENDANT'S MOTION TO DISMISS BASED ON FAILURE TO STATE A CLAIM (STATUTE OF LIMITATIONS) AND LACK OF JURISDICTION
Plaintiff Patricia A. Weston filed this action, purportedly on behalf of herself and others similarly situated, alleging violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., by defendant AmeriBank ("AmeriBank" or "the bank"). Plaintiff has also asserted various related causes of action against AmeriBank under Michigan law. Weston, who borrowed money from AmeriBank for a real estate loan secured by a mortgage, alleges that as part of the transaction the bank charged her a $350 fee disclosed as being for "document preparation," when in fact the fee was for loan "processing" or "loan origination" and should have been disclosed as such.
AmeriBank, as it turns out, has already been sued, unsuccessfully, in a Michigan court, in a class action which arose from these same alleged disclosures/nondisclosures, albeit without the assertion of a claim under the TILA. This federal action is currently before the court on AmeriBank's "Motion to Dismiss Based on Failure to State a Claim (Statute of Limitations) and Lack of Jurisdiction" (docket no. 3). Plaintiff has opposed the motion, which has been exhaustively briefed by the parties, each making their own submissions outside the pleadings.
For the reasons to follow, the court grants the motion and dismisses this action with prejudice.
FACTS
The following is Ms. Weston's version of the facts, as stated in her Brief in Opposition to AmeriBank's motion. For purposes of deciding this motion, the court assumes these facts to be true.
Ms. Weston closed a loan with AmeriBank on April 1, 1998. She was charged a "document preparation" fee of $350, which was disclosed on Line 1105 of her HUD-1 Settlement Statement. This $350 "document preparation" fee was not, however, disclosed on Weston's Truth in Lending disclosure as an element of the "finance charge," and was not included in the annual percentage rate disclosed to Ms. Weston. According to Weston, the $350 charge vastly exceeds the cost of preparing closing documents.
A copy of this document has been submitted as an exhibit to AmeriBank's Reply Brief.
Less than nine months after AmeriBank closed Weston's loan, the bank was sued in Michigan's Kent County Circuit Court. Paul and Theresa Dressel, acting on behalf of a class of similarly situated borrowers, filed a complaint alleging that AmeriBank had violated Michigan law by charging the document preparation fee. Among the Dressels' allegations was the specific allegation that AmeriBank had violated Michigan law by charging a "document preparation" fee that exceeded its actual costs in preparing closing documents. See Dressel v. AmeriBank, No. 98-13017-CP (Kent County Circuit Court, Complaint dated Dec. 21, 1998). On March 22, 1999, the Circuit Judge assigned to the case certified Dressel as a class action. According to plaintiff Weston here, however, before the class notice was sent, tile Circuit Judge dismissed the Dressel case. According to the judge's ruling, [AmeriBank's] practice of preparing documents and charging a fee for that preparation does not constitute the unauthorized practice of law; it is neither the practice of law, nor is it unauthorized if it is the practice of law. This Court also concludes that, likewise as a matter of law, the fee charged by the bank is not illegal, even if it exceeds the costs of preparing the loan documents. Accordingly, since all of plaintiffs' various theories of recovery are predicated on the contentions that the bank is engaged in the unauthorized practice of law and/or is charging an illegal fee, the entire case must be dismissed. . . . The Dressel case was dismissed by an order entered on July 2, 1999. Subsequently, the plaintiffs in that case sought reconsideration of the dismissal, and also sought leave to amend their complaint to assert additional theories of recovery, including a federal claim of violation of the TILA. By order entered on September 3, 1999, the circuit judge denied their requests. According to plaintiff, the Dressel plaintiffs have appealed the circuit judge's decision. Brief in Opposition at 5, n. 3.
See Order attached as Exhibit 1 to Plaintiff's Surreply Brief
A copy of the circuit judge's Opinion in Dressel is attached as Exhibit C to AmeriBank's motion.
See Exhibit D to AmeriBank's motion.
See Exhibit F to AmeriBank's motion.
Plaintiff Weston filed this action on September 10, 1999, seven days after the state circuit judge denied the Dressel plaintiffs' motion for reconsideration in that case, and approximately one year and five months after closing her loan with AmeriBank. Ms. Weston is represented in this action by the same counsel which represented the plaintiffs in Dressel.
ANALYSIS
In its motion, AmeriBank argues that plaintiff's TILA claim is barred by the one-year statute of limitations contained in 15 U.S.C. § 1640(e). In evaluating the sufficiency of a complaint under Rule 12(b)(6), the court must construe all well-pleaded factual allegations favorably to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief Id. (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). If, on a motion under Rule 12(b) (6), matters outside the pleadings are presented and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.
Under Rule 56(c), summary judgment is proper where the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The party moving for summary judgment bears the burden of establishing the non-existence of any genuine issue of material fact and may satisfy this burden by showing — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). While inferences drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party, when the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The substantive law identifies which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Here, both sides have presented materials outside the pleadings which the court has not excluded. Therefore, the court is required to treat the motion as one for summary judgment under Rule 56. Although Rule 12(b) provides that in such instances the parties "shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56[,]" because the parties have had more than a reasonable opportunity to present material (having submitted written materials exceeding those typically allowed by the district's rules), the court concludes that the motion is ripe for decision.
Title 15 U.S.C. § 1640(e) provides, in pertinent part, as follows:
Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation. . . .
Plaintiff does not dispute that the applicable limitations period is one year. However, she argues that the statute was tolled on her TILA claim during the pendency of the Dressel class action and that once tolling is applied, her complaint in this action was filed well within the applicable one-year period.
In support of her position, plaintiff states that "federal law recognize[s] that the filing of a class complaint tolls the statute of limitations for absent class members, both for claims actually alleged and those growing out of the same conduct, transaction, or occurrence." In general, this statement is true; however, whether the reasoning behind it permits the extension of tolling to the plaintiff's claims in this action is by no means certain.
In American Pipe and Construction Co. v. Utah, 414 U.S. 538 (1974), the Supreme Court explained the reason for this general rule:
. . . Whatever the merit in the conclusion that one seeking to join a class after the running of the statutory period asserts a `separate cause of action' which must individually meet the timeliness requirements, . . . such a concept is simply inconsistent with Rule 23 as presently drafted. A federal class action is no longer `an invitation to joinder' but a truly representative suit designed to avoid, rather than encourage, unnecessary filing of repetitious papers and motions. Under the circumstances of this case, where the District Court found that the named plaintiffs asserted claims that were `typical of the claims or defenses of the class' and would `fairly and adequately protect the interests of the class,' Rule 23(a)(3), (4), the claimed members of the class stood as parties to the suit until and unless they received notice thereof and chose not to continue.
Thus, the commencement of the action satisfied the purpose of the limitation provision as to all those who might subsequently participate in the suit as well as for the named plaintiffs. To hold to the contrary would frustrate the principal function of a class suit, because then the sole means by which members of the class could assure their participation in the judgment if notice of the class suit did not reach them until after the running of the limitations period would be to file earlier individual motions to join or intervene as parties — precisely the multiplicity of activity which rule 23 was designed to avoid in those cases where a class action is found `superior to other available methods for the fair and efficient adjudication of the controversy.' Rule 23(b)(3). 414 U.S. at 550-551.
In American Pipe, however, the district court had ordered that the suit could not continue as a class action. Id. at 552. Therefore, the Court held that in this posture, at least where class action status has been denied solely because of failure to demonstrate that `the class is so numerous that joinder of all members is impracticable,' the commencement of the original class suit tolls the running of the statute for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status. As the Court of Appeals was careful to note in the present case, `[m]aintenance of the class action was denied not for failure of the complaint to state a claim on behalf of the members of the class (the court recognized the probability of common issues of law and fact respecting the underlying conspiracy), not for lack of standing of the representative, or for reasons of bad faith or frivolity.' Id. at 552-553 (citation omitted).
As one member of the Court later observed in Crown, Cork Seal Co. v. Parker, 462 U.S. 345, 354 (1983), "[t]he tolling rule of American Pipe is a generous one, inviting abuse[,]" which "should not be read . . . as leaving a plaintiff free to raise different or peripheral claims following denial of class status." (Powell, J., concurring). The Court in that case held that
Once the statute of limitations has been tolled, it remains tolled for all members of the putative class until class certification is denied. At that point, class members may choose to file their own suits or to intervene as plaintiffs in the pending action.
Id. at 354.
Plaintiff Weston is not however, in this case, merely attempting to bring her own individual claims against AmeriBank. Instead, Weston, like her predecessors in Dressel, seeks classwide relief. As the Court of Appeals to which this district court must answer has clearly held, in such cases although the limitations period for filing individual claims is tolled during the pendency of the earlier class action, "there is no tolling for future class actions by putative class members." Andrews v. Orr, 851 F.2d 146, 149 (6th Cir. 1988). As the panel observed in Andrews,
The courts of appeals that have dealt with the issue appear to be in unanimous agreement that the pendency of a previously filed class action does not toll the limitations period for additional class actions by putative members of the original asserted class. See Korwek v. Hunt, 827 F.2d 874, 879 (2d Cir. 1987) (`The Supreme Court . . . certainly did not intend to afford plaintiffs the opportunity to argue and reargue the question of class certification by filing new but repetitive complaints.'); Salazar-Calderon v. Presidio Valley Farmers Ass'n, 765 F.2d 1334, 1351 (5th Cir. 1985), cert. denied, 475 U.S. 1035, 106 S.Ct. 1245, 89 L.Ed.2d 353 (1986) (`Plaintiffs have no authority for their contention that putative class members may piggyback one class action onto another and thus toll the statute of limitations indefinitely. . . .'); Robbin v. Fluor Corp., 835 F.2d 213, 214 (9th Cir. 1987) (adopting reasoning of Korwek). These decisions reflect the concern expressed by Justice Powell, concurring separately in Crown, Cork Seal: `The tolling rule of American Pipe [ Constr. Co. v. Utah, 414 U.S. 518, 94 S.Ct. 756, 38 L.Ed.2d 713 (1974)] is a generous one, inviting abuse.' 462 U.S. at 354, 103 S.Ct. at 2398. 851 F.2d at 149; accord, Basch v. Ground, Inc., 139 F.3d 6, 11 (1st Cir. 1998) ("Plaintiffs may not stack one class action on top of another and continue to toll the statute of limitations indefinitely. Permitting such tactics would allow lawyers to file successive putative class actions with the hope of attracting more potential plaintiffs and perpetually tolling the statute of limitations as to all such potential litigants, regardless of how many times a court declines to certify the class"); Griffin v. Singletary, 17 F.3d 356, 359 (11th Cir. 1994) (acknowledging "the wisdom of the rule against piggybacked class actions"). More recently, the Ninth Circuit has also recently held that tolling does not apply to successor class actions even where the original class was certified. Catholic Social Serv., Inc. v. Immigration and Naturalization Serv., 182 F.3d 1053, 1059 (9th Cir. 1999). Therefore, this action filed by Weston could not, under any circumstances, proceed as a class action. But can it proceed at all, even as an individual claim?
Had plaintiff Weston filed this action in a Michigan state court, little doubt exists that her TILA claim would be subject to dismissal. In Lee v. Grand Rapids Bd. of Educ., 148 Mich. App. 364, 384 N.W.2d 165, 168 (1986), Michigan's court of appeals held that federal claims which a United States District Court had refused to certify in a previous class action were time-barred. In that case, the plaintiffs had been members of a class in the prior federal action alleging claims including violations of 42 U.S.C. § 1983, Title VII of the Civil Rights Act of 1964, and the Fourteenth Amendment. The federal court certified the case as a class action, but only as to the claims under Title VII. Ultimately, the federal appeals court reversed the class certification and remanded the case to the district court, which issued an order providing for notice of decertification. At about this same time, the plaintiffs in Lee filed their state court action, asserting claims under 42 U.S.C. § 1983, the Fourteenth Amendment, and state law. The Michigan Court of Appeals concluded that the plaintiffs' state law claims, which had been included in an amended complaint filed in the class action, were not time-barred because the filing of the federal lawsuit had tolled the operation of the statute of limitations on those claims. However, the court also concluded that the plaintiffs' claims under the Fourteenth Amendment and § 1983 were time-barred because the federal district court's refusal to certify these claims as class claims — a decision made in excess of six years before the individual plaintiffs filed their action — caused the three-year statute of limitation to begin to run. 384 N.W.2d at 166-69.
Here, plaintiff Weston's TILA claim was not asserted in the prior class action. It was not included in the Dressel class action complaint, and, although the plaintiffs sought to assert claims under the TILA after the circuit judge dismissed the action on the merits, the circuit judge denied them leave to amend to assert the claims.
Title 28 U.S.C. § 1738 requires that federal courts give state court decisions the same full faith and credit that they would receive "in the courts of such State." Thus, a prior state court adjudication has the same effect in federal court as it would in state court. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 379 (1985). "There is of course no dispute that under elementary principles of prior adjudication a judgment in a properly entertained class action is binding on class members in any subsequent litigation." Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867, 874 (1984). Moreover, "a judgment entered in a class action, like any other judgment entered in a state judicial proceeding, is presumptively entitled to full faith and credit" under § 1738. Matsushita Elec. Indus. Co. V. Epstein, 516 U.S. 367, 374 (1996).
Under Michigan law, res judicata, or claim preclusion, prevents a plaintiff from litigating a claim that actually was litigated or could have been litigated in all earlier proceeding. Brownridge v. Michigan Mutual Ins. Co., 115 Mich. App. 745, 321 N.W.2d 798, 799 (1982); see also City Communications, Inc. v. City of Detroit, 888 F.2d 1081, 1089 (6th Cir. 1989) ("Since 1980, Michigan courts have followed a broad application of res judicata, using it to bar both claims actually litigated by parties in prior actions and claims that could have been, but were not, litigated") (citations omitted). Under the doctrine, a subsequent legal action is barred if (1) the parties or their privies are the same; (2) the prior judgment was rendered by a court of competent jurisdiction; (3) the prior judgment was a final judgment on the merits; and (4) the two suits involve the same cause or causes of action that were brought, or could have been brought, in the prior litigation. Smith, Hinchman Grylls, Assocs., Inc. v. Tassic, 990 F.2d 256, 257-58 (6th Cir. 1993). A "party" in this connection is one who is "directly interested in the subject matter, and had a right to make defense, or to control the proceedings, and to appeal from the judgment." Id., 459 N.W.2d at 65 (citing Howell v. Vito's Trucking and Excavating Co., 386 Mich. 37, 191 N.W.2d 313 (1971)).
Each of the elements of claim preclusion is present here. Even though she was not a named plaintiff in the prior action, Weston clearly had a direct interest in the subject matter of the action, being a member of the class on behalf of which relief was sought. (Indeed, Weston's membership in the Dressel class forms the basis of her argument that the limitations period was tolled.) In addition, there is no doubt that the state circuit court was a court of competent jurisdiction for the claims which were or could have been asserted in that action, including the TILA claims. Thirdly, the circuit court entered a final decision on tile merits. See e.g., Carter v. Southeastern Michigan Transp. Auth., 135 Mich. App. 261, 351 N.W.2d 920, 922 (1984) (involuntary dismissal was an adjudication on the merits); Brownridge, 321 N.W.2d at 799 (voluntary dismissal with prejudice is a final judgment on the merits for res judicata purposes). Finally, as the circuit judge noted in denying the Dressel plaintiffs' motion for leave to amend, the TILA claims could have been brought in that action, had they been asserted on a timely basis.
Although Weston contends that the Dressel plaintiffs filed all appeal, "Michigan and federal courts agree that an appeal of a judgment does not alter the preclusive effect of the same." Chakan v. City of Detroit (Detroit Fire Dep't.), 998 F. Supp. 779, 783 (E.D.Mich. 1998) (citation omitted).
It is also noted that under Michigan's court rules, "[a] judgment entered in an action certified as a class action binds all members of the class who have not submitted an election to be excluded, except as otherwise directed by the court." M.C.R. 3.501(D)(5).
M.C.R. 3.501(E) provides that an action certified as a class action "may not be dismissed . . . without the approval of the court, and notice of the proposed dismissal . . . shall be given to the class in such manner as the court directs." In this instance, the plaintiffs in Dressel had the same counsel as does Weston in this case. Under the circumstances, assuming that the issue of notice is relevant in some cases, the court would conclude that Weston had constructive notice of the proposed dismissal.
Plaintiff has vehemently denied AmeriBank's allegation that she has "forum shopped." The fact that she filed this action a mere seven days after the circuit judge denied the Dressels' motion for reconsideration, and without filing her own appeal or even her own state court action, however, strongly supports AmeriBank's allegation of forum shopping. The strong aroma of forum shopping has caused this court to reject application of a case on which plaintiff heavily relies, Cullen v. Margiotta, 811 F.2d 698 (2d Cir. 1987). See Wade v. Danek Medical, 182 F.3d 281, 287-88 (4th Cir. 1999) (in diversity action, panel concluded that Virginia Supreme Court would not adopt a cross-jurisdictional tolling rule, because, among other reasons, "if Virginia were to adopt a cross-jurisdictional tolling rule, [it] would be faced with a flood of subsequent filings once a class action in another forum is dismissed, as forum-shopping plaintiffs from across the country rush into the Virginia courts to take advantage of its cross-jurisdictional tolling rule"). Moreover, unlike Cullen's interpretation of New York law, Michigan courts do not allow tolling where the new case involves different legal theories than those pled in the first case. Given the holding in Andrews v. Orr, the court also believes it unlikely that the Sixth Circuit would follow Cullen, a decision which is of questionable authority even in the Second Circuit where it was decided.
Plaintiff, in summary, must take the bitter with the sweet. If she is to rely on the filing of a prior state court action to toll the limitations period for her own individual action, equitable considerations require that she be bound, if not by the substantive rulings made in the prior action, then at least by the scope of the prior litigation, including the legal theories asserted by her own counsel, who presented himself in that action as being a suitable representative of all putative class members.
Equitable Estoppel
As noted above, plaintiff's response to AmeriBank's argument that her TILA claim is time-barred (or, at least, her response as originally briefed) consists of her contention that the pendency of the Dressel suit tolled the statute of limitations on her claim. Brief in Opposition at 5. However, in her "Surreply" brief, plaintiff Weston has for the first time argued that the limitations period should be equitably tolled for another reason. Why should it be so tolled, says Weston? Because AmeriBank engaged in fraudulent concealment, Weston contends. More specifically, she argues that because AmeriBank did not disclose its "document preparation" fee as a "finance charge," and because during depositions the bank's representatives "lied" by stating otherwise, the limitations period should be equitably tolled.
Equitable tolling "is the doctrine under which plaintiffs may sue after the statutory time period has expired if they have been prevented from doing so due to inequitable circumstances." Ellis v. General Motors Acceptance Corp., 160 F.3d 703, 706 (11th Cir. 1998) (citations omitted). Courts have held that the limitations period contained in 15 U.S.C. § 1640(e) is subject to equitable tolling in "appropriate circumstances." Jones v. TransOhio Savings Ass'n, 747 F.2d 1037, 1043 (6th Cir. 1984); accord Ellis, 160 F.3d at 708. However, such circumstances are not, as a matter of law, present here.
On its face, Weston's complaint alleges that AmeriBank charged her "a fee disclosed on the HUD-1 Settlement Statement purportedly for the service of "Document preparation[.]" Complaint, ¶ 1. Weston's complaint therefore alleges not that AmeriBank failed to disclose that it was charging the fee, but rather that AmeriBank somehow "misled" her and other customers by failing to include the fee in the "Finance Charge" and the "Annual Percentage Rate" of the TILA disclosure. Id. at 5, ¶ 16. Thus, according to Weston, AmeriBank failed to disclose that it "as charging the fee as a finance charge, concealing the true nature of the charge if not the fact of the charge itself.
The court concludes, as a matter of law, that AmeriBank's actions do not amount to fraudulent concealment which would merit the application of equitable tolling. Nothing which AmeriBank has done, or failed to do, prevented Weston from filing suit in a timely manner. AmeriBank did not hide the fact of the charge, nor did it conceal to whom the fee would be paid. Given these undisputed facts, the court concludes that the circumstances present fail to justify equitable tolling.
As the circuit judge noted in denying the plaintiffs' motion for leave to amend in the Dressel case, the plaintiffs — who were represented by the same counsel representing Weston here — had information sufficient to enable them to assert the purported TILA violations against AmeriBank by not later than March 2, 1999. Defendant's Exhibit E at 8-10. In spite of possessing such knowledge, the Dressels did not even seek leave to file an amended pleading asserting a TILA claim until after the circuit judge granted AmeriBank's motion to dismiss the action in July, 1999.
CONCLUSION
For the foregoing reasons, and because the court concludes that Weston's TILA claim is time-barred, the court grants AmeriBank's motion and dismisses Weston's claim under the TILA with prejudice.Title 28 U.S.C. § 1367(c)(3) provides that the district court may decline to exercise supplemental jurisdiction where all claims over which the court had original jurisdiction are dismissed. This action is still in its early stages, and therefore the court concludes that dismissal of the non-federal claims is appropriate. In conclusion, the court declines to exercise its supplemental jurisdiction here, and also dismisses plaintiff's state law claims without prejudice.