Jones et al v. Pohanka Auto North, Inc. et al, No. 8:2013cv03238 - Document 34 (D. Md. 2014)

Court Description: MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 9/2/14. (sat, Chambers)

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : EUNICE JONES, et al. : v. : Civil Action No. DKC 13-3238 : POHANKA AUTO NORTH, INC. : MEMORANDUM OPINION Presently pending and ready for resolution in this putative class action is the motion to dismiss filed by the remaining eleven Defendants: Pohanka Auto North, Inc.; Pohanka Chevrolet, Inc.; Pohanka Hyundai, Inc.; Pohanka Imports, Inc.; Pohanka MB, Inc.; Pohanka NMH, Inc.; Pohanka of Clarksville, Inc.; Pohanka of Salisbury, Inc.; Pohanka Oldsmobile-GMC Truck, Inc.; Pohanka SHO, Inc.; and Pohanka TM, Inc. (ECF No. 17). The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the motion to dismiss will be granted. I. Background A. Factual Background On August 15, 2008, proposed Named Plaintiffs Eunice and Barbara Jones ( Plaintiffs ) purchased from Pohanka Isuzu a used 2007 Mercedes-Benz C230 for $35,153.20, with financing they obtained by executing a Retail Installment Sale Contract ( RISC or credit contract ). (ECF No. 1-2). Defendants represent and Plaintiffs do not challenge - that Pohanka Isuzu is now closed and that it was operated by Defendant Pohanka Auto North, Inc. ( Pohanka Auto North ). (ECF No. 17-1, at 9). The RISC lists Eunice and Barbara Jones as the Buyers and Pohanka Isuzu as the Creditor-Seller. (Id. at 1). The total price of the vehicle included a $750 charge for an optional debt cancellation agreement, which Plaintiffs purchased. No. 1-3).1 (Id. at 1; see also ECF The Applicable Law section of the contract stated: Federal law and Maryland law apply to this contract. This contract shall be subject to the Credit Grantor Closed End Credit Provisions (Subtitle 10) of Title 12 of the Commercial Law Article of the Maryland Code. (ECF No. 1-2, at 4). The contract also contained a Holder Notice that stated: Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder. (Id.) (emphasis removed). Plaintiffs credit contract, including the GAP Agreement, was assigned to SunTrust, which is identified as the lienholder in the GAP Agreement. (ECF No. 1-3, at 1). 1 The debt cancellation agreement is also called a Guaranteed Asset Protection Deficiency Waiver Addendum ( the GAP Agreement ). 2 Plaintiffs that they agreement contend entered under that the debt is not a into Maryland Credit cancellation true Grantor debt agreement cancellation Closed End Credit Provisions ( CLEC ), Md. Code Ann., Com. Law § 12-1001 et seq. Under CLEC, a debt cancellation agreement requires a lender to cancel the remaining loan balance when a car is totaled and the insurance payout does not cover the entire outstanding balance. The debt cancellation agreement that was part of Plaintiffs contract differed cancellation cancellation from the agreement agreement - statutory under which CLEC. they definition of debt Plaintiffs debt believe was phony - stated: If the Insurance Company providing physical damage coverage on the Vehicle described above determines that Vehicle is a Total Loss, then You will be responsible for paying only the following to the Lienholder you make payments to under the Contract: 1. A) The Value of the Vehicle as determined by the physical damage insurance company on the Date of Loss or the Nada Retail Value of the Vehicle, whichever is greater, plus any physical damage insurance deductible over $1,000 which reduces that settlement, or B) If there is no physical damage insurance in effect on the Date of Loss, the average retail price of the Vehicle on the Date of Loss based on a current edition of the NADA Used Vehicle Price Guide. (ECF No. 1-3, at 1). According to the complaint, [t]he phony GAP Agreements purchased by Plaintiffs and the Class, [] only 3 agree to relieve the borrower of the obligation to pay the difference between the Value of the Vehicle and the amount owed on the financing contract, which Plaintiffs presumably believe will be less than the remaining loan balance in the event of total loss. (Id.). Plaintiffs assert that if they had purchased and financed a true debt cancellation agreement as defined by Maryland s credit statutes . . . Plaintiffs would not have had any obligation to make any payments toward the remaining loan balance on their vehicle loan for the [vehicle] after a total loss or insurance proceeds. because the GAP theft, after the (ECF No. 1 ¶ 41). agreement is not a application of the Plaintiffs aver that true debt cancellation agreement, it does not relieve them of that potential obligation but they [were] Agreement]. still required to pay $750 for [the GAP (Id.). Although Plaintiffs did not actually suffer any loss on their used Mercedes-Benz cancellation agreement (thus was the allegedly not applied in phony debt case), they their contend that Maryland law does not permit the financing of the phony GAP Agreements in question or the charging or collection of charges creditors for to cancellations such finance phony GAP and charge agreements remaining on an account. which Agreements and cancel (Id. ¶ 43). 4 it collect the only for permits true debt outstanding debt Plaintiffs allege that eleven dealerships associated with one another under the nonincorporated Pohanka Automotive advertise as one entity. Group (Id. ¶ 8). umbrella in order to Plaintiffs contend that the entities that are part of the Pohanka Automotive Group aided and abetted one another and conspired regularly to sell and finance, and regularly Agreements which did agreements eligible statutes. (Id. ¶ 47). sold not for and financed, constitute true financing under the debt form GAP cancellation Maryland s credit According to the complaint, the Pohanka Automotive Group agreed to assign credit contracts financing the GAP Agreements to SunTrust Bank. (Id. ¶ 48). Plaintiffs assert that Pohanka Isuzu is a name under which the Pohanka Defendants associate in order to conduct their conspiracy. The complaint identifies multiple (Id. ¶ 51). transactions in which the Pohanka Automotive Group and its co-conspirators financed phony GAP Agreements transaction. [t]he actions (ECF Pohanka in the No. in 1, a similar at 17-21). manner to Plaintiffs Plaintiffs aver Automotive Group repeatedly undertook course their conspiracy. Each of that similar and every Pohanka Defendant took part in the sale and financing of GAP Agreements to Class members in violation of CLEC, and directly sold illegal GAP Agreements to Class members in numerous similar transactions. (ECF No. 1 ¶ 56). The complaint avers that the Pohanka Automotive Group and SunTrust Bank have conspired to 5 collect and members have collected from Named costs, fees, and interest, Plaintiffs other and class charges which Plaintiffs maintain are uncollectible and must be forfeited on each credit Agreements. contract due to the financing of the phony GAP (Id. ¶ 58). B. Procedural Background Plaintiffs filed a putative class action complaint on October 31, 2013 against the eleven Defendants identified above and SunTrust Bank. counts including: breach of (Count contract; enrichment. dismiss or to I) and Plaintiffs relief (count III). to (ECF No. 1). The complaint alleges four violations (Count also IV) seek of CLEC; restitution declaratory (Count and and II) unjust injunctive On January 9, 2014, SunTrust filed a motion strike class allegations. (ECF No. 18). Plaintiffs subsequently accepted Rule 68 offer of judgment from SunTrust Bank and the undersigned issued an order on February 26, 2014 entering judgment for Plaintiffs on the terms set forth in the Rule 68 Offer of Judgment dated February 10, 2014. No. 23). (ECF On March 13, 2014, an order was entered certifying as final the judgment entered on February 26, 2014 as to all claims of Plaintiffs against Defendant SunTrust Bank. 2 (ECF No. 26).2 The accepted Rule 68 offer of judgment moots the motion to dismiss or to strike class allegations filed by SunTrust Bank. (ECF No. 18). 6 The eleven remaining Defendants also moved to dismiss on January 9, 2014. (ECF No. 17). Plaintiffs opposed the motion (ECF No. 24), and Defendants replied (ECF No. 30). II. Standard of Review The purpose of a motion to dismiss under Rule 12(b)(6) is to test the sufficiency of the complaint. Charlottesville, 464 F.3d 480, Presley v. City of (4th 483 Cir. 2006). A plaintiff s complaint need only satisfy the standard of Rule 8(a), which requires a short and plain statement of the claim showing that the pleader is entitled to relief. 8(a)(2). Fed.R.Civ.P. Rule 8(a)(2) still requires a showing, rather than a blanket assertion, of entitlement to relief. v. Twombly, 550 U.S. 544, 556 (2007). Bell Atl. Corp. That showing must consist of more than a formulaic recitation of the elements of a cause of action or naked enhancement. assertion[s] Ashcroft v. Iqbal, devoid 556 of U.S. further 662, 678 factual (2009) (internal citations omitted). At this stage, all well-pleaded allegations in a complaint must be considered as true, Albright v. Oliver, 510 U.S. 266, 268 (1994), and all factual allegations must be construed in the light most favorable to the plaintiff. See Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). In evaluating the complaint, unsupported legal 7 allegations need not be accepted. Revene Comm rs, 882 F.2d 870, 873 (4th Cir. 1989). v. Charles Cnty. Legal conclusions couched as factual allegations are insufficient, Iqbal, 556 U.S. at 678, as are conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). III. Analysis A. Standing Defendants challenge Plaintiffs standing to bring claims against the dealership defendants with whom Plaintiffs did not transact. Specifically, Plaintiffs entered into their financing contract with a single dealership, Pohanka Isuzu, operated by Pohanka Auto North at the time. (See ECF No. 1-2). The Pohanka Defendants3 argue that Plaintiffs lack standing to assert any claims against them. assuming Plaintiffs financing of a (ECF No. suffered phony debt an 17-1, at injury cancellation 39). arising Thus, even from the agreement, Pohanka Defendants maintain that it cannot be attributed to them because they were not in contractual privity with the Joneses (thus they were not credit grantors as to Plaintiffs transaction under CLEC). 3 The Defendants other than Pohanka Auto North, Inc. will be referred to as Pohanka Defendants. 8 Article III requirement. standing is a threshold jurisdictional See Central Wesleyan College v. W.R. Grace & Co., 6 F.3d 177, 188 (4th Cir. 1993) ( standing is a jurisdictional issue, and courts should attempt to resolve such issues as soon as possible. ). The Supreme Court has consistently required that a litigant have standing to challenge the action sought to be adjudicated in federal court. 471. Valley Forge, 454 U.S. at In order to have standing, a plaintiff must demonstrate some actual or threatened injury as a result of the putatively illegal conduct of the named defendant, and must show that the injury can be fairly traced to the challenged action and that the injury is likely to be redressed by a favorable decision. Herlihy (D.Md. v. Ply-Gem 1990); see Industries, also Gladstone, Bellwood, 441 U.S. 91 (1979). standing result in the Inc., 752 F.Supp. Realtors v. 1282, Village 1290 of The constitutional limits on elimination of a claim in which the plaintiff has failed to make out a case or controversy between himself and the named defendant. Herlihy, 752 F.Supp. at 1290. As the Supreme Court of the United States noted: That a suit may be a class action . . . adds nothing to the question of standing, for even named plaintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other unidentified members of the class to which they belong and which they purport to represent. 9 Lewis v. Casey, 518 U.S. 343, 357 (1996) (alteration in original) (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 n.20 (1976)). The United States Court of Appeals for the Fourth Circuit has echoed this outlook, stating that in the class action context, it is essential that named class representatives demonstrate standing through a requisite case or controversy defendant]. between themselves personally and [each Cent. Wesleyan Coll. v. W.R. Grace & Co., 6 F.3d 177, 188 (4th Cir. 1993) (emphasis added); Lieberson v. Johnson & Johnson Consumer Co., Inc., 865 F.Supp.2d 529, 537 (D.N.J. 2011) (holding that the plaintiff lacked standing to pursue putative class action claims of consumer fraud against a baby bath product manufacturer as to any products the named plaintiff did not allege she used or purchased). Plaintiffs assert that they have standing over Pohanka Defendants based on each Defendant having aided and abetted one another and conspired to finance vehicle sales using phony debt cancellation agreements that violated Maryland law. With respect to aiding and abetting, the complaint asserts that each Pohanka Defendant aided and abetted one another in selling and financing the illegal GAP Agreement . . . and knowingly provided substantial assistance, aid, and encouragement in the commission dealerships of that for the conduct sale by of providing the 10 illegal forms GAP to the other Agreements, by agreeing on and encouraging the other dealerships to sell and finance the illegal GAP Agreements. Pohanka attempt to allegations, Defendants hold them their interpretation. assert (ECF that liable effort No. (ECF No. 1 ¶ 80). to the through extent Plaintiffs aiding and abetting matter of statutory fails as a 17-1, at 41). They argue that [b]ecause the CLEC is silent as to aiding and abetting or other derivative liability, this Court may not read into that statute a cause of action against the Non-Seller Pohanka Defendants. (ECF No. 17-1, at 41). Plaintiffs counter that unlike cases that have declined to uphold claims for aiding and abetting where the statute did not explicitly provide for such liability, CLEC includes a broad definition of credit grantor. 24, at 50). (ECF No. Section 12-1001(g)(1) defines a credit grantor as: any individual, corporation, business trust, statutory trust, estate, trust, partnership, association, two or more persons having a joint or common interest, or any other legal or commercial entity making a loan or other extension of credit under this subtitle . . . or is a retailer. Md. Code Ann., Com. Law § 12-1001(g)(1). Plaintiffs argue that the regulation statutory text contemplates broad of credit grantor association[s] like Pohanka, thus making them liable as aiders and abettors. (ECF No. 24, at 50 n.24). 11 Plaintiffs arguments are unavailing. Although Maryland law recognizes aider and abettor civil liability for those who actively participate . . . in the commission of a tort, Alleco, Inc. v. Harry & Jeannette Weinberg Found., 340 Md. 176, 200 (1995), Maryland courts have not yet extended the scope of aiding and abetting liability or assignee liability to statutes providing for civil liability where the statute does not expressly impose this additional avenue of liability, Petry v. Wells Fargo Bank, N.A., 597 F.Supp.2d 558, 565 (D.Md. 2009). [C]ivil aiding and abetting statute-by-statute basis. liability is determined on a Baltimore-Washington Tel. Co. v. Hot Leads Co., LLC, 584 F.Supp.2d 736, 745 (D.Md. 2008) (citing Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 181-82 (1994)). The legislature [knows] how to impose aiding and abetting liability when it [chooses] to do so. Cent. Bank of Denver, 511 U.S. at 176. In this case, the statutory language of CLEC does not specifically provide for such liability. See, e.g., Petry, 597 F.Supp.2d at 565 (declining to extend aiding and abetting liability under the Finder s Fee Act and the Maryland Consumer Protection Act). The broad definition of credit grantor under CLEC does not qualify as an express imposition of aiding and abetting liability for violations thereof. See Baltimore-Washington Tel. Co., 584 F.Supp.2d at 746 (refusing to expand liability under federal 12 statute for aiding and abetting where statute did not expressly provide for such liability). Plaintiffs also premise their claims against Pohanka Defendants on the theory that they conspired to finance phony debt cancellation agreements in contravention of CLEC and charge interest and Plaintiffs fees contend in that connection Defendants therewith. Specifically, developed and agreed to implement a fraudulent scheme and conspiracy through the Pohanka Automotive Group to market, sell and finance GAP Agreements . . . with misleading and fraudulent representations and omissions concerning the nature of the GAP Agreements. (ECF No. 1 ¶ 9). Plaintiffs aver that in their transaction: the other Pohanka Defendants all conspired in the sale of the phony GAP Agreement. For example, the Buyer s Order for this transaction, which includes the $750 GAP charge, specifically lists Pohanka Hyundai, Pohanka Isuzu, Pohanka Imports, Pohanka Honda, Saturn of Bowie, Saturn of Marlow Heights, Saturn of Waldorf, and Pohanka Used Cars on these transaction documents. (Id. ¶ 49).4 In a multi-defendant action or class action, the named plaintiffs must establish that they have been harmed by each of 4 Plaintiffs refer to the Buyer s Order as listing other dealerships, but have not supplied a copy of such a document. The RISC and debt cancellation agreement included as exhibits to the complaint identify only Pohanka Isuzu as the seller. Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002) (a court need not accept as true allegations that contradict matters properly subject to judicial notice or by exhibit. ). 13 the defendants and they may not use the procedural device of a class action to bootstrap themselves into standing they lack. Crowder v. Master Financial, 176 Md. App. 631, 646 (2007). In a situation where a named plaintiff did not deal directly with the named defendants, a plaintiff may be able to satisfy the injury aspect of standing conspiracy. through sufficient allegations of See Cent. Wesleyan Coll., 6 F.3d at 188 ( [w]hile allegations of conspiracy among parties with whom a plaintiff did not directly deal may confer standing upon the plaintiff to sue the nondealing parties,[] the Supreme Court has emphasized that indirectness of injury, though not fatal to standing, may make it substantially more difficult to meet the minimum requirement of Art. III, Warth v. Seldin, 422 U.S. 490, 505 (1975). ); Brown v. Cameron-Brown Co., 652 F.2d 375, 378 (4th Cir. 1981) ( [w]e are in full accord with the district court that when plaintiffs alleged injury as a result of a conspiracy in which the non-dealing defendants participated, plaintiffs have alleged standing to sue the non-dealing defendants. ). Under Maryland combination of two law, civil or more conspiracy persons by is defined an as the agreement or understanding to accomplish an unlawful act or to use unlawful means to accomplish an act not in itself illegal, with the further requirement that the act or the means employed must result in damages to the plaintiff. 14 Hoffman v. Stamper, 385 Md. 1, 24 (2005). In addition to proving an agreement, [t]he plaintiff must also prove the commission of an overt act, in furtherance of the agreement, suffer actual injury. that Id. at 25. caused the plaintiff to In Shenker v. Laureate Education, Inc., 411 Md. 317, 352 (2009), the Court of Appeals of Maryland held that a defendant may not be held liable for civil conspiracy where that defendant is legally incapable of committing the underlying tort. Because one of the defendants owed no fiduciary duty to the plaintiffs, the court held that this defendant could not be held liable for conspiracy to breach a fiduciary duty and affirmed the dismissal of the conspiracy claim against the defendant. Id. In dismissing the civil conspiracy claim, the Shenker court explained: [T]ort liability arising from a conspiracy presupposes that the coconspirator is legally capable of committing a tort, that is, that [the co-conspirator] owes a duty to the plaintiff recognized by law and is potentially subject to liability for breach of that duty. . . . [A] cause of action for civil conspiracy may therefore not arise if the alleged conspirator, though allegedly a participant in the agreement underlying the injury, was not personally bound by the duty violated by the wrongdoing. Id. at 352 (quoting Bahari v. Countrywide Home Loans, No. 052085, 2005 WL 3505604, at *6 (D.Md. Dec. 16, 2005)); BEP, Inc. v. Atkinson, 174 F.Supp.2d 400, 409 (D.Md. 2001)). conspiracy requires an agreement, 15 and an Thus, civil overt act in furtherance of the agreed-to unlawful conduct that causes injury, as well as the legal capacity of the conspirators to complete the unlawful conduct. Pohanka Defendants argue that they cannot be liable on the basis of civil conspiracy because they were not legally capable of committing the underlying violations. 42). Pohanka SunTrust Defendants were in assert privity with that the (ECF No. 17-1, at 41 only Joneses breached any contractual obligation to them. 43). Auto and North could and have (ECF No. 17-1, at Moreover, Pohanka Defendants point out that CLEC applies only to credit grantors and no entities other than Pohanka Auto North and SunTrust Bank acted as a credit grantor in Plaintiffs transaction. Plaintiffs disagree, taking the position that Pohanka Defendants are all credit grantors within the meaning of CLEC, thus legally capable of violating the statute. They contend that because CLEC regulates each Pohanka Defendant, they are legally violations. capable of Plaintiffs committing maintain the that underlying alleged complaint asserts the that each Pohanka entity did, in fact, owe direct duties under CLEC to Plaintiffs and putative class members with whom they had direct putative dealings class and members, that in and as each part such of transaction their with overarching conspiracy, they each directly violated CLEC. . . . Each Pohanka entity owed a direct duty under CLEC to putative class members, 16 a direct duty each Pohanka entity breached. (ECF No. 24, at 56). The relevant inquiry is whether Pohanka Defendants are legally capable of violating CLEC in Plaintiffs transaction, not in some other transaction they may have entered into with putative class members where each Pohanka Defendant functioned as a credit grantor. See, e.g., Pashby v. Delia, 709 F.3d 307, 316 (4th Cir. 2013) ( When the case is a class action lawsuit, the named class representatives must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong. (quoting Blum v. Yaretsy, 457 U.S. 991, 1001 n.13 (1982))). GAP Thus, the argument that Pohanka Defendants financed Agreements sold to putative class members and are thus legally capable of committing the underlying statutory violation misses the mark, as Plaintiffs must establish their standing to sue Pohanka Defendants. Indeed, this same argument was rejected in Minter v. Wells Fargo Bank, N.A., 924 F.Supp.2d 627, 647-48 (D.Md. 2013). In that case, plaintiffs argued (unsuccessfully) that it did not matter that two of the defendants are not alleged to have [acted as mortgage brokers] in the transactions in this case as long as they could have in some transaction. Id. at 647 (emphasis in original). The court held that the fact that defendants are hypothetically capable of functioning as 17 mortgage brokers in some other context, does not render them capable of committing the tort that is underlying the conspiracy claims. Id. at 648; see also Lombel v. Flagstar Bank F.S.B., No. PWG-13-704, 2013 WL 5604543, at *4 n.5 (D.Md. Oct. 11, 2013) ( The decisive fact is that Defendant was not a mortgage broker in this transaction; there is no need to consider whether facts could ever arise that could render Defendant liable under the FFA. ). Similarly, the fact that Pohanka Defendants may be regulated by CLEC as credit grantors in other lending transactions does not establish that they are legally capable of violating the statute as to Plaintiffs. Plaintiffs also argue that the entire Pohanka Automotive Group has the status transaction under CLEC. of credit grantor (ECF No. 24, at 49). in Plaintiffs Plaintiffs state for the first time in their opposition that Pohanka Defendants are retailers, which is included in the definition of credit grantor under Section 12-1001(g). (ECF No. 24, at 49-50). This allegation is nowhere in their complaint, however. They also argue that the Pohanka Automotive Group qualifies as an association, which also is credit grantor under CLEC. Defendants them credit alleged grantors included the definition of Plaintiffs believe that Pohanka association in in or Plaintiffs retailer transaction. several problems with Plaintiffs arguments. 18 status makes There are First, Plaintiffs reliance on the definition of credit grantor is misplaced. Specifically, credit grantor is defined as any . . . association . . . making a loan or other extension of credit under this licensed subtitle pursuant which to is State or incorporated, federal chartered, law, the or lending operations of which are subject to supervision, examination, and regulation by a State or federal agency or which is licensed under Title 12, Subtitle 4 of the Financial Institutions Article or is a retailer. (emphasis added). Md. Code Ann., Com. Law § 12-1001(g)(1) Notably, the complaint refers to Pohanka Defendants as The Pohanka Automotive Group, but alleges that this group is comprised of entities associated with one another under the non-incorporated (ECF No. 1 ¶ 8). nothing to Pohanka Automotive Group umbrella. As Pohanka Defendants point out, [t]here is suggest that the legislature used the word association to create derivative liability of one legal entity for a credit transaction entered into by another. (ECF No. 30, at 24). Second, Plaintiffs actual contract Pohanka Isuzu as the only Creditor-Seller. documents That is the sole entity that extended the credit and elected CLEC. at 24). As Pohanka Defendants point identify out, (ECF No. 30, the fact that affiliate companies may advertise together or share order forms does not, [] create derivative liability or make one affiliate 19 the credit grantor on a contract made by another affiliate. (ECF No. 30, at 24). Only Pohanka Isuzu entered into a credit contract and a debt cancellation agreement with Plaintiffs (with SunTrust Bank dealerships as the engaged in lienholder). a uniform The fact practice of that other financing debt cancellation agreements that Plaintiffs allege did not comply with the Pohanka statutory Defendants underlying definition were contractual is legally and insufficient capable statutory of to show that committing violations the as to Plaintiffs. Even assuming Plaintiffs could show that Pohanka Defendants were legally capable of committing the underlying violations as to them, the allegations are insufficient to plead a conspiracy among all Defendants. Detrimental to Plaintiffs conspiracy allegations here is the requirement that plaintiff must set forth more than just conclusory allegations of [the] agreement. Brady v. Livingood, 260 F.Supp.2d 94, 104 (D.D.C. 2004). complaint should include factual allegations that The provide an indication of when and how the agreement was brokered and how each of the agreement. defendants specifically were parties to the Day v. DB Capital Grp., LLC, Civ. Action No. DKC 10- 1658, at *6 (D.Md. Mar. 11, 2011); Acosta Orellana v. CropLife Int l, 711 F.Supp.2d 81, 113-14 (D.D.C. 2011). merely alleges that [t]he 20 Defendants The complaint conspired among themselves, by agreement and understanding, to engage in the acts which resulted in legal damages to Named Plaintiffs and the Class they represent. (ECF No. 1 ¶ 6). The complaint further states that the Defendants developed and agreed to implement a fraudulent scheme and conspiracy through the Pohanka Automotive Group to market, sell and finance GAP Agreements in a uniform way. (Id. ¶ 9). These allegations do not support a true conspiracy, but rather concerted action. Cf. DB Capital Grp., 2011 WL 887544, at *7 (finding conspiracy allegations sufficient where plaintiff s complaint referenced specific instances when alleged co-conspirators met, and engaged in acts to defraud plaintiff). The analysis instructive. group of plywood in Herlihy, 752 F.Supp. at 1290, is That case involved a putative class action by a homeowners products, against alleging manufacturers that the of products fire were retardant defective. The court reasoned: Nowhere in the complaint is there an allegation that a named plaintiff suffered any injury or damage because of the wrongful act or conduct of a named defendant. Rather than relying on any allegation in the complaint of a specific injury [caused by a named defendant], plaintiffs contend that they have standing to sue under a so-called concert of action theory. Plaintiffs argue that a defendant may be liable for an injury caused by the product of another if the plaintiff can prove that multiple defendants acted tortuously pursuant to a 21 common plan or design. [] Plaintiffs contend that they have sufficiently alleged in this case a concert of action and that therefore they have standing to sue the six named defendants. Id. The court rejected this argument, noting that Maryland law does not concert recognize of action. a cause Here, of action although based upon Plaintiffs an use alleged the word conspiracy in the complaint, the factual allegations support, at most, the inference of concerted action among Pohanka Defendants, which does not confer standing.5 Based on the foregoing, there is no standing over Pohanka Defendants (other than Pohanka Auto North) and all counts against them will be dismissed. B. CLEC In Count I of the complaint, Plaintiffs allege that Pohanka Auto North violated CLEC, Md. Code Ann., Com. Law § 12-1005, by charging and collecting from Plaintiffs and members of the class impermissible charges for the phony GAP Agreements charges which are not permitted to be financed under CLEC. ¶ 75). (ECF No. 1 The CLEC claim is premised on the allegation that the debt cancellation agreement which they entered into was not a 5 For instance, in Acosta, 711 F.Supp.2d at 114, the court dismissed a civil conspiracy claim because the plaintiff failed to provide any factual support that the defendant CropLife had an agreement with the other defendants and found that it was just as likely that they were acting independently with a common motivation or goal. 22 true debt cancellation agreement because it was inconsistent with the statutory definition of a debt cancellation agreement. Specifically, under CLEC, a debt cancellation agreement requires a lender to cancel the remaining loan balance when a car is totaled and insurance payout does not cover the entire outstanding balance. Decohen v. Capital One, N.A., 703 F.3d 216, 219 (4th Cir. 2012). debt cancellation At the time Plaintiffs executed the agreement in August 2008 - Section 12- 1001(h) defined a debt cancellation agreement as: an agreement between a credit grantor and a borrower which provides for cancellation of the remaining loan balance in the event of theft or total destruction of the collateral for the loan after application of the proceeds of any insurance maintained on the collateral for the loan. Md. Code Ann., Com. Law. § 12-1001(h) (effective to May 31, 2010). Plaintiffs assert that the debt cancellation agreement that was part of their contract did not comply with Maryland law because it did not require cancellation of the remaining loan balance, instead requiring the cancellation of the difference between the remaining loan balance and the value of the vehicle, as determined by the greater of the casualty insurer s determination or the book value of the vehicle at the time of the loss or destruction. assert that because the (ECF No. 1-3, at 1). debt cancellation 23 Plaintiffs agreement did not comply with CLEC, it could not be financed, and they should not have incurred any charges in connection therewith. The remaining Defendant argues that Plaintiffs have not stated a claim because: (1) the contract incorporated CLEC s definition of a debt cancellation agreement, thus it would have been enforced in accordance with the statute; and (2) Plaintiffs have never suffered a loss of their vehicle or made any GAP claim, much less had a claim that was handled inconsistently with the statutory debt (ECF No. 17-1, at 17). cancellation agreement description. Defendant maintains that [w]here, as here, the [P]laintiffs have never suffered a loss or made a request for debt cancellation, there is no CLEC violation unless and until a defendant fails accordance with the statute. to honor such (Id. at 14). a request in Plaintiffs take the position that a debt cancellation agreement may be financed under CLEC only if, at the time of origination, it provides for the violation lender of origination. to CLEC cancel is the remaining committed, (ECF No. 24, at 25). and debt. . . . The determinable, at They assert that [b]ecause the [] credit contract violated CLEC, [] no interest, costs, fees, or other charges could be collected with respect to it. . . . Accordingly, contract and undisputably at the financed did not time the Pohanka originated phony provide GAP for the 24 Plaintiffs Agreement cancellation which of the remaining loan balance in violation of CLEC Plaintiffs were entitled to a loan free of interest, costs, (including the charge for their GAP Agreement). and charges (ECF No. 24, at 22). CLEC provides that [i]n connection with closed end credit offered and extended . . . a credit grantor may charge and collect the subtitle. interest Md. Code and other Ann., Com. charges Law § permitted 12-1002(b). by this Other charges permitted include [t]he cost to the borrower of an optional debt cancellation agreement, provided that the cost of the debt cancellation agreement is separately itemized in the financing agreement. Id. § 12-1005(c)(1). As Defendant points out and Plaintiffs do not dispute - CLEC was incorporated into the parties credit contract. Specifically, the credit contract stated that [t]his contract shall be subject to the Credit Grantor Closed End Credit Provisions (Subtitle 10) of Title 12 of the Commercial Law Article of the Maryland Code. 1-2, at 4). (ECF No. Thus, the credit contract incorporated the terms and requirements of CLEC. See, e.g., Decohen, 703 F.3d at 229 ( Decohen s credit contract, in which the parties elected to be governed by the CLEC, thus incorporated the terms of the CLEC to govern the attached debt cancellation agreement. ); Patton v. Wells Fargo Financial Maryland, Inc., 437 Md. 83, 114 (2014) ( Wells Fargo Financial voluntarily chose to take assignment of 25 a loan contract that incorporated CLEC . . . In accepting the assignment, Wells governed CLEC by contract. ). Fargo in Financial the exercise expressly of its agreed rights to under be the It is undisputed that Defendant has not enforced any conflicting provision as to Plaintiffs, to the extent that the debt cancellation agreement conflicted with CLEC. Plaintiffs have suffered no loss of their vehicle (e.g, no theft or total destruction of the collateral securing the loan) and cannot allege any failure by Defendant to honor the debt cancellation agreement in accordance with CLEC as to Plaintiffs. Plaintiffs rely on Decohen and Patton for the proposition that a Agreement credit grantor violates which permits the CLEC credit by grantor financing to a GAP determine the remaining loan balance to be cancelled by reference to a NADA valuation guide. (ECF No. 24, at 20). In Decohen, 703 F.3d 216, the borrower financed the purchase of a used car under a loan contract identical to that those also of incorporated the credit CLEC contract in terms here. The contract also financed a debt cancellation agreement. dealer assigned the loan contract to a bank. nearly loan The car Unlike this case, however, plaintiff s car was totaled, but Capital One refused to wipe out Plaintiff the in existing Decohen loan filed balance a class in violation action of lawsuit CLEC. against Capital One, the assignee bank, Beacon Industries Worldwide, the 26 servicer of the debt cancellation agreement, and Abassi LLC. Judge Quarles dismissed the CLEC claim on the basis that it was preempted by the National Bank Act (NBA), and this portion of his opinion was later reversed Decohen, 703 F.3d at 225. by the Fourth Circuit. See Plaintiffs find persuasive, however, a portion of Judge Quarles s opinion which was not appealed, in which he declined to dismiss the CLEC claim for failure to state a claim. See Decohen v. Abbasi, LLC, Civ. No. WDQ-10-3157, 2011 WL 3438625, at *3-4 (D.Md. July 26, 2011). Quarles [t]he applied CLEC the claim following will not be rationale dismissed Specifically, Judge in on concluding that the that basis Decohen s allegations fail to state a basis for relief under Maryland law : The definition of debt cancellation agreement does not provide that a creditor may apply a retail guide value to calculate the amount of debt cancelled. Instead, it only provides that such an agreement cancels the remaining loan balance less the proceeds of any insurance. Md. Code. Ann., Comm. L. § 12-1001(h). Further, none of the items that may be excluded from remaining loan balance allow the creditor to deduct the difference between the insurance payout and the car s retail value. Accordingly, Decohen s complaint is sufficient to show that the GAP Agreement is not a debt cancellation agreement within the meaning of the CLEC, and therefore may not be financed in connection with closed end credit offered and extended under the statute. Md. Code. Ann., Comm. L. § 1002(b). 27 Id. at *4. The facts of Decohen, however, are readily distinguishable. Although Judge Quarles declined to dismiss the CLEC claim where the debt cancellation agreement conflicted with CLEC - which also was incorporated into the parties credit contract - in that case, the conflicting provision was actually applied to plaintiff. In other words, in Decohen, Capital One demanded payment of the remaining loan balance in violation of CLEC. The Fourth Circuit noted that [u]nder Maryland law, [] the holder of the note on the vehicle would have been compelled to cancel the remaining balance. Id. at 220. Here, there was no such refusal to cancel the outstanding loan balance in violation of CLEC; in fact, there was no theft or total destruction of property even to trigger the terms of the debt cancellation agreement.6 Moreover, CLEC was incorporated into the contract, thus to the extent certain terms of the debt cancellation agreement entered into by Plaintiffs conflicted with CLEC, CLEC governed the contractual relationship. As held by the Court of Appeals 6 The parties in Decohen eventually entered into a settlement agreement, which Judge Quarles approved. See Decohen v. Abbasi, LLC, --- F.R.D. ----, 2014 WL 1603735, at *3 (D.Md. Apr. 17, 2014). Notably, the settlement agreement defined the settlement class as borrowers in up to 2,027 transactions who financed GAP Agreements which allow for the use of retail car guides in the calculation of the vehicle s value, where the borrowers suffered a total loss of the vehicle. (emphasis added). 28 of Maryland, a contract provision that violates public policy set forth in a statute is invalid to the extent of the conflict between the contract and that policy. John Deere Const. & Forestry Co. v. Reliable Tractor, Inc., 406 Md. 139, 153 (2008). In John Deere, the contractual provision conflicted with the statutory provision. The court held that the provisions of the contracts at issue in this case that allow termination without good cause are invalid to the extent that they conflict with the good cause provision set forth in § 19-103. Id.; Ins. Comm r v. Metro. Life Ins. Co., 296 Md. 334, 340 n.6 (1983) ( clauses in insurance mandating policies, certain inconsistency. ). which coverages, are are inconsistent void to the with statutes extent of the Thus, the inconsistency between terms in the debt cancellation agreement and the statutory definition of CLEC at the time inconsistent August But provision. (in as provision 2008) invalidates explained was above, never in triggered the inconsistent this (thus, case, the Defendant never had occassion to enforce it). Plaintiffs reliance on Patton, 437 Md. 83, is similarly misplaced. First, Patton involved the repossession provisions of CLEC, not a debt cancellation agreement. violation alleged in Patton was the Second, the CLEC creditor s failure to perform in accordance with CLEC, not its failure to set forth the applicable terms of CLEC in 29 the RISC. Moreover, the specific issue addressed in Patton concerned the applicable statute of limitations for claims under CLEC, which is no longer at issue as Defendant statute of limitations. has withdrawn all arguments regarding (ECF No. 30, at 31 ( Pohanka hereby withdraws its argument to dismiss the [c]omplaint based on the statute Patton of as limitations )). holding that the Thus, Plaintiffs failure of a mischaracterize GAP Contract to provide for cancellation of the remaining loan balance is a violation of CLEC. (ECF No. 24, at 24).7 Plaintiffs insist that a violation of CLEC is committed, and determinable, at origination of the loan contract, but this principle is not supported by any factually analogous cases involving CLEC claims premised on the inclusion of a debt cancellation agreement that does not conform to the statutory definition but is not actually enforced. Plaintiffs next argue that the legislative history of CLEC supports their position that a debt cancellation agreement that 7 Plaintiffs also misconstrue Defendant s argument as suggesting that Decohen should be read as immunizing credit grantors from violations of CLEC by magically changing the terms of written agreements to conform with the law. (ECF No. 24, at 24). That is not what Defendant argues. Defendant argues quite persuasively that when there is an actual or potential incompatibility between a stated term of a contract and incorporated statutory provisions, the contractual terms are interpreted as a matter of law [] to be consistent with the statutory provisions and liability may be premised on enforcement of an inconsistent contractual provision. (ECF No. 30, at 9). 30 is contrary to the statutory definition cannot be financed. The problem is that Plaintiffs discuss the legislative history of a different statute, the Retail Installment Sales Act ( RISA ), Md. Code Ann., Com. Law II, § 12-601, et seq. Plaintiffs argue that [t]he Maryland Court of Appeals specifically noted that RISA, the predecessor to CLEC, is designed to remedy the situation where the buyer probably is discouraged from reading the contract and might not fully understand its terms even if he did read it. Plaintiffs appreciate (ECF No. 24, at 27) (internal citations omitted). appear their to argue rights under that some CLEC when consumers a may contract not includes terms inconsistent with a statute expressly incorporated into the contract. Plaintiffs conveniently ignore that in the very same case they cite, the Court of Appeals of Maryland noted that CLEC clearly is intended to be construed independently from RISA. Ford Motor Credit Co., LLC v. Roberson, 420 Md. 649, 667 (2011). RISA governs extensions of credit that are not made pursuant to CLEC. Epps v. JPMorgan Chase Bank N.A., Civ. Action No. WMN-10-1504, 2012 WL 5250538, at *3 (D.Md. Oct. 22, 2012) (emphasis added). Indeed, provisions. RISA expressly prohibits certain See Md. Code Ann. Com. Law II, § 12-607. contract Section 12-630(d) explicitly states that [i]f an instrument contains any provision prohibited by § 12-607 of this subtitle, that 31 provision is void and the holder may not collect or receive from the buyer, in instrument charge. connection relates, any with the finance, transaction to or delinquency, which the collection There is no provision in CLEC that prohibits financing of a debt cancellation agreement that contains conflicting terms with the statutory definition. The subsection concerning prohibited clauses in [a]n agreement, note, or other evidence of a loan is found in Section 12-1023 of CLEC. Although Plaintiffs maintain that Section 1023 has no application here, that subsection is quite instructive. Specifically, Section (ECF No. 24, at 32 n.10). 12-1023(b)(3) states that [e]xcept as expressly allowed by law, an agreement, note, or other evidence of a loan may not contain a provision by which the borrower waives any right accruing to the borrower under this subtitle [CLEC]. 8 Section 12-1023(b)(4)(i) states that [a]ny clause or provision in agreement, note, or other evidence of a loan that is in violation Furthermore, of Section this subsection 12-1018(a)(2) 8 shall contains be a unenforceable. general civil Plaintiffs assert that [a]s this Court held in Decohen, a creditor violates a different section of CLEC - § 12-1001 by financing a phony GAP Agreement. (ECF No. 24, at 32 n.10). First, Section 12-1001 is a definitions section; Section 121001(h) defines a debt cancellation agreement. It does not contain any prohibition on financing of a debt cancellation agreement that is different from the statutory definition. Indeed, Section 12-1023 covers prohibited clauses in an agreement and the consequences associated with including prohibited clauses. 32 penalty provision for any violation of CLEC. Specifically, Section 12-1018 states that [e]xcept for a bona fide error of computation, if a credit grantor violates any provision of this subtitle the credit grantor may collect only the principal amount of the loan and may not collect any interest, costs, fees, or other charges with respect to the loan. Notably, Section set under 12-1023(b)(4)(ii) §§ penalties] states 12-1017 [criminal of subtitle this that the penalties] do not penalties and apply 12-1018 unless the out [civil credit grantor attempts to enforce a provision prohibited under this subsection [Section 12-1023]. (emphasis added). Here, Defendant did not attempt to enforce any provision of CLEC. Plaintiffs agreement that argue that conflicts by with issuing the a statutory debt cancellation definition under CLEC, Defendant attempts to circumvent the statute s disclosure requirement. Plaintiffs assert: If it were the case that the law automatically re-wrote illegal contracts, and deficient disclosures, to comply with the law, there could never be an unlawful contract, nor could there ever be a case for disclosure violations. Instead, perversely, creditors and others who failed to comply with disclosure requirements would be saved by the very laws that were intended to ensure that consumers were aware of their rights. The Truth In Lending Act, the Fair Debt Collection Practices Act, and numerous other federal and state laws requiring disclosures and prohibiting the inclusion of illegal contract terms with the penalty of 33 statutory damages for non-compliance be rendered essentially meaningless. (ECF No. 24, at 30). would Unfortunately for Plaintiffs, this case does not involve claims under TILA or the FDCPA. Circuit recently explained, unlike the Fair As the Fourth Debt Collection Practices Act, which provides for statutory damages as long as the claimant can establish a violation, 15 U.S.C. § 1692k(a)(2), CLEC does not provide for any fixed statutory damages beyond the plaintiff s actual loss. Bediako v. Am. Honda Fin. Corp., 537 F.App x 183, 187 (4th Cir. Aug. 1, 2013) (Table opinion). The analysis recently undertaken by Judge Bennett in Askew v. HRFC, LLC, Civ. Action No. RDB-12-3466, (D.Md. Mar. 25, 2014), is instructive. purchase of a used vehicle. credit contract (RISC) to here, was governed by CLEC. 2014 WL 1235922 That case arose out of a The parties also entered into a finance the purchase, which, like The plaintiff in Askew was charged an interest rate exceeding the Maryland statutory maximum for that specific type of loan under CLEC. The plaintiff argued that disclosing an interest rate that is higher than 24% creates a separate violation itself based on the following provision: The rate of interest chargeable on a loan must be expressed in the agreement as a simple interest rate or rates. Ann., Com. Law § 12-1003(a). argument: 34 Judge Bennett Md. Code rejected this The [p]laintiff has cited no case law to support the rather creative proposition that simply disclosing an improperly high interest rate is a separate violation from actually charging that interest rate. The interest rate in the RISC was expressed as a simple interest rate, albeit higher than allowed by the CLEC. The only violation that has occurred in this case is the actual charging of an interest rate higher than 24%. Askew, 2014 WL 1235922, at *5 (emphasis added). applies here. The same logic As Defendant points out, the remedy under the CLEC for inconsistent terms is unenforceability and there is no civil penalty enforced. for unlawful contract terms that are not (ECF No. 30, at 15).9 Based on the foregoing, the CLEC claim will be dismissed. C. Breach of Contract In Count II, Plaintiffs allege that Defendant is liable for breach of contract because compliance with CLEC was made a part of the RISC and Defendant breached the contract by violating 9 Plaintiffs also argue that certain arguments made by Defendant in a memorandum in opposition to a motion for a protective order filed in a different case that has settled, Holland v. Pohanka Auto North, Inc., et al., Case No. 8:12-cv02141 (D.Md.), support Plaintiffs allegations here. The only specific example offered by Plaintiffs, however, is a prior reference allegedly made by Defendants in the Holland litigation to Section 12-1018(a)(2) & (3) as providing a penalty for violations of CLEC, but noting that violations can be cured. (ECF No. 24, at 33). Plaintiffs take this to mean that [t]o invoke § 12-1018 is to admit there is a violation to cure. (Id.). This argument is a stretch and by no means constitutes a judicial admission by Defendant. 35 CLEC. To state a cause of action for breach of contract in Maryland, a plaintiff must allege that the defendant owed a contractual duty and that the defendant materially breached that duty. Taylor v. NationsBank, N.A., 365 Md. 166 (2001). Because Plaintiffs have not asserted a CLEC violation, the breach of contract claim also fails. 228-29, is instructive. that the district The analysis in Decohen, 703 F.3d at In Decohen, the Fourth Circuit found court erred in dismissing the breach contract claim, but on readily distinguishable facts. of In that case, as explained above, there was a total loss on the vehicle, yet Capital One refused to cancel the remaining loan balance in violation of Section 12-1001(h). reasoned that remaining Capital loan One s balance Indeed, the Fourth Circuit refusal would to constitute cancel a breach contract, which incorporated the terms of CLEC. (emphasis added). Decohen s of that Id. at 229 Here, there was no such refusal because the debt cancellation agreement was never triggered to begin with. Accordingly, this claim will be dismissed. D. Restitution and Unjust Enrichment In Count IV, Plaintiffs assert a claim for restitution and unjust support enrichment of their based CLEC upon the claim. same (ECF facts No. 1, they at allege 31-33). in In Maryland, to state a claim for unjust enrichment, a plaintiff must allege that: (1) a benefit conferred on the defendant; (2) 36 the defendant knew and appreciated the benefit; and (3) under the circumstances, the defendant s acceptance or retention of the benefit would be inequitable. Mona v. Mona Elec. Group, Inc., 176 Md.App. 672 (2007). The unjust enrichment claim premised on a CLEC violation fails because Plaintiffs have not alleged an actionable CLEC claim. here Moreover, as Defendant points out, a contract exists (the RISC) that covers unjust enrichment claim. in the alternative. the same subject matter as the Plaintiffs argue that they can plead Where a contract exists between the parties covering the same subject matter as the unjust enrichment claim, however, a plaintiff s claim for unjust enrichment must include an allegation of fraud or bad faith in the formation of the contract. (D.Md. Kwang Dong Pharm. Co. v. Han, 205 F.Supp.2d 489, 497 2002); Dashiell & Cnty. Sons, Com rs Inc., 358 of Md. Caroline 83, 100 Cnty. (2000) v. J. Roland ( Generally, courts are hesitant to deviate from the principle of the rule and allow unjust enrichment claims only when there is evidence of fraud or bad faith, there has been a breach of contract or a mutual rescission of the contract, when rescission is warranted, or when the express contract does not fully address a subject matter. ). Although Plaintiffs state in the opposition to the motion to dismiss that they plainly allege bad faith, alleging Defendant[] regularly sold and conspired to sell unlawful debt 37 cancellation agreements, with knowledge that they were unlawful, (ECF No. 24, at 35), nowhere in the complaint do Plaintiffs actually allege bad faith in the formation of the RISC. Although the complaint includes general averments of fraud, Plaintiffs do not plead fraud with particularity required under Fed.R.Civ.P. 9(b). Instead, the complaint includes conclusory allegations that Defendants developed and agreed to implement a fraudulent scheme and conspiracy through the Pohanka Automotive Group to market, sell and finance GAP Agreement in a uniform manner . . . with misleading and fraudulent representations and omission concerning the nature of the GAP Agreement, and with the specific intent to deceive and defraud Named Plaintiffs and members of the Class. (ECF No. 1 ¶ 9). Plaintiffs fail to delineate the fraudulent misrepresentation or omissions made in the formation of the contract. See, e.g., Epps, 2012 WL 5250538, at *6 (dismissing unjust enrichment claim where the claim was premised on a violation of CLEC, which was incorporated allegations into of the fraud written or bad contract, faith in the and the necessary formation of the contract were missing). Based on the foregoing, the unjust enrichment claim will be dismissed. 38 E. Declaratory or Injunctive Relief Plaintiffs include as a separate count in the complaint a claim for declaratory and injunctive relief (Count III). No. 1, at 29-31). and members of (ECF The complaint alleges that Named Plaintiffs the Class have received or will receive collection notices from one or more Defendants and/or creditors or debt amounts collectors demanding attributable Plaintiffs assert[] payment to the sale could not be of of amounts phony financed including GAP under Agreement CLEC[], and payment of interest, costs, fees and other charges in connection with the Credit Contracts of Plaintiffs and the Class, which are not collectible Agreements. due to the financing (ECF No. 1 ¶ 93). of the phony GAP Plaintiffs seek a declaration that Defendants may not collect any amounts attributable to phony debt contracts cancellation signed by agreements Plaintiffs and financed the in Class, the and credit may not collect any interest, fees, costs or other charges in connection with their Credit Contracts. (Id. ¶ 94). The Declaratory Judgment Act provides that [i]n a case of actual controversy within its jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such a declaration, whether or not further relief is or could be sought. § 2201(a). The Fourth Circuit has explained: 39 28 U.S.C. [I]t is elementary that a federal court may properly exercise jurisdiction in a declaratory judgment proceeding when three essentials are met: (1) the complaint alleges an actual controversy between the parties of sufficient immediacy and reality to warrant issuance of a declaratory judgment; (2) the court possesses an independent basis for the jurisdiction over the parties (e.g., federal question or diversity jurisdiction); and (3) the court does not abuse its discretion in its exercise of jurisdiction. Volvo Const. Equip. N. Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, 592 (4th Cir. 2004). Plaintiffs cannot meet the first prong because there is no actual controversy between Plaintiffs and Defendant of sufficient immediacy and reality to warrant issuance of a declaratory judgment. The accepted Rule 68 offer of judgment by SunTrust Bank included a waiver of the Joneses loan balance and satisfaction of the loan, thus Plaintiffs cannot be pursued for any payments in connection with the credit contract. (See ECF No. 23). The RISC and debt cancellation agreement were terminated without the Joneses ever requiring any benefit conferred by the debt cancellation agreement. To the extent Plaintiffs seek a declaratory judgment based on claims of other potential cancellation class agreement members was in triggered whose and cases Defendant the debt failed to comply with the statutory definition, Plaintiffs claim is not typical of the class. n.8 ( A class that See, e.g., Epps, 2012 WL 5250538, at *9 includes both 40 individuals who have been pursued for payments or judgments and those, like Epps, who have not, also fails to satisfy the commonality requirement of Rule 23(a)(2).). Moreover, dismissed contract for and Defendant the GAP argues additional Agreement that reason were Count that III should Plaintiffs assigned to be finance SunTrust; thus, Defendant is not the holder of the finance contract at issue here and does not seek to collect payment on those contracts. (ECF No. 17-1, at 45). Plaintiffs respond to this argument in a footnote in their opposition to the motion to dismiss, (ECF No. 24, at 47 n.18), citing a decision rendered by the Maryland Commissioner of Financial Regulation as holding that interest and costs collected in violation of a statute are not collectible only from an assignee (thus Defendant can be on the hook for prohibited costs). First, as Judge Motz pointed out in Scott v. Nuvell Fin. Servs., Civ. Nos. JFM-09-3110, JFM-10-1094, 2013 WL 6909518, at *1 n.2 (D.Md. Dec. 31, 2013), this court is not bound by an administrative law decision. involved application of Mortgage Lender although provision Law, analogous to a different the CLEC s Second, that case statute, Commissioner Section the interpreted 12-1018(a)(2). summarized by Judge Motz: [The Commissioner] recognized the fundamental proposition that a lender is entitled to recover the principal amount of 41 Maryland a As any loan it has made despite being prohibited from recovering interest, costs, fees, or other charges with respect to the loan. The Commissioner held, however, that the lender was required to give the defendants a choice of either receiving a refund of the fees and interest already paid or having those fees and interest credited against the remaining principal. Nuvell Financial Services, 2013 WL 6909518, at *1 n.2. the actual Defendant) lienholder would Accordingly, be the is SunTrust assessing declaratory Bank, interest, judgment thus it costs, claim fails (and and for Here, not fees. this additional reason. Plaintiffs request for injunctive relief has the been mooted by complete satisfaction of their loan through the accepted Rule 68 offer of judgment.10 IV. Conclusion For the foregoing reasons, the motion to dismiss will be granted. A separate order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 10 Additional arguments addressed in Defendants motion to dismiss and reply brief regarding joinder of necessary parties need not be addressed considering the dismissal of Plaintiffs claims on other grounds. 42

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