The opinion of the court was delivered by: Politan, District Judge.
This matter comes before the Court on the Motion of Defendant
First Bank of Central Jersey ("First Bank") to Dismiss
Plaintiffs Complaint pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure. Oral argument was initially heard on
September 11, 2000. At oral argument the Court dismissed the
First Count of Plaintiffs' Complaint against First Bank, which
alleged assignee liability under the Truth In Lending
Act.*fn1 First Bank also seeks dismissal of Counts Two
through Six, all of which allege violations of New Jersey state
At oral argument on September 11, the Court directed
Plaintiffs' counsel to file a supplemental brief addressing the
issue of federal preemption of the state law claims, and
adjourned the hearing on that issue until October 23, 2000.
Plaintiffs' counsel and First Bank filed supplemental preemption
briefs, and on October 23, 2000 the Court entertained additional
argument on the issue of whether the Federal Truth In Lending
Act preempts the New Jersey state law claims alleged by
Plaintiffs against First Bank.
For the reasons stated herein, the Court finds that all of the
remaining state law claims against First Bank are preempted by
federal law, and as such, must be dismissed.
Plaintiffs*fn2, Nicholaos Alexiou ("Mr.Alexiou") and
Veronica Ortiz ("Ms.Ortiz") (collectively "Plaintiffs"),
purchased automobiles from Brad Benson Mitsubishi. Mr. Alexiou
purchased a 1999 Hyundai Elantra on or about April 29, 1999. Ms.
Ortiz purchased a 1999 Hyundai Accent on or about July 23, 1999.
Plaintiffs obtained financing from Defendant Brad Benson
Mitsubishi for the purchase of their vehicles. Plaintiffs also
financed the purchases of extended warranties and either Credit
or GAP insurance. Plaintiffs and Brad Benson Mitsubishi entered
into retail installment contracts which reflect the financing
transactions. Upon execution, the retail installment contracts
were contemporaneously assigned to First Bank.
The remaining counts against First Bank allege violations of
state law only. Count Two alleges violation of the New Jersey
Consumer Fraud Act, N.J. STAT. § 56:8-1 et seq. Specifically,
Plaintiffs allege that they were unconscionably overcharged for
the extended warranties and insurance and that they were not
notified that the dealer was retaining a portion of the sales
price as a commission.
Count Three alleges breach of contract and breach of the
implied covenant of good faith and fair dealing, in violation of
state common-law principles. Plaintiffs rely on the "Holder
Rule" as set forth in the New Jersey Retail Installment Sales
Act of 1960 ("NJRISA"), codified at N.J. STAT. § 17:16C-38.2, in
their allegations against First Bank. Plaintiffs allege that
under the Holder Rule, First Bank is a subsequent holder and is
thus liable to Plaintiffs for any claims they would have had
against the retail seller, Brad Benson Mitsubishi, assignor of
Count Four alleges a cause of action for money paid by
mistake, in violation of state common-law principles. The two
remaining counts are alleged against all defendants as
individuals; both counts repeat and reallege all preceding
paragraphs of the Complaint.
Because First Bank is an assignee of Plaintiffs' loans, the
viability of all state law claims against First Bank hinges on
whether First Bank can be held liable as an assignee under the
New Jersey Holder Rule.
Rule 12(b)(6) of the Federal Rules of Civil Procedure
instructs that a court may dismiss a complaint if it fails to
state a claim upon which relief can be granted. In deciding a
motion to dismiss, courts must accept all allegations in the
complaint as true. Nami v. Fauver, 82 F.3d 63, 65 (3d Cir.
1996). If "it appears beyond doubt that the plaintiff can prove
no set of facts in support of his claim which would entitle him
to relief," dismissal pursuant to Rule 12(b)(6) is proper.
Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d
The specific issue before the Court is whether a provision of
the Federal Truth In Lending Act ("TILA"), 15 U.S.C. § 1641(a),
which governs assignee liability preempts the NJRISA Holder
Rule, N.J. STAT. § 17:16C-38.2, which also governs assignee
liability. This issue appears to be one of first impression in
As previously stated, if the TILA preempts the State Holder
Rule, then an assignee of a loan can only be held liable as an
assignee where that assignee has violated § 1641(a) of the TILA.
The alleged TILA violations against First Bank have already been
dismissed by this Court pursuant to Rule 12(b)(6). If the Court
finds that the TILA preempts the State Holder Rule, the
remaining state law claims against First Bank must be dismissed.
Congress clearly has the power to preempt state laws where it
chooses to do so. U.S. CONST., Art. 6, cl. 2. Federal law may
preempt state law "either by express provision, by implication,
or by a conflict between federal and state law." New York State
Conference of Blue Cross & Blue Shield Plans et al. v. Travelers
Ins. Co. et al., 514 U.S. 645, 654, 115 S.Ct. 1671, 131 L.Ed.2d
695 (1995). The Court must therefore analyze the preemption
question with respect to each of these potential preemption
avenues. However, the Court must begin its analysis with the
presumption that Congress typically "does not intend to supplant
state law." Id. at 654-55, 115 S.Ct. 1671. (citing Maryland
v. Louisiana, 451 U.S. 725, 746, 101 S.Ct. 2114, 68 L.Ed.2d 576
First Bank argues that, in enacting TILA, Congress has
impliedly preempted any state laws relating to disclosure in
loan transactions. This type of preemption is commonly referred
to as "preempting the field." First Bank contends that because
Congress has preempted the field, the New Jersey Holder Rule is