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Vallies v. Sky Bank

January 5, 2006; as amended February 1, 2006

LOUIS R. VALLIES, INDIVIDUALLY AND ON BEHALF OF ALL SIMILARLY SITUATED VEHICLE BUYERS, APPELLANT
v.
SKY BANK, AN OHIO BANK LICENSED TO DO BUSINESS IN THE COMMONWEALTH OF PENNSYLVANIA



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA (D.C. No. 01-cv-01438). District Judge: The Honorable David S. Cercone.

The opinion of the court was delivered by: Nygaard, Circuit Judge.

PRECEDENTIAL

ARGUED OCTOBER 19, 2005

BEFORE: SMITH, STAPLETON, and NYGAARD, Circuit Judges.

OPINION OF THE COURT

At issue in this appeal is whether the Truth in Lending Act requires all pertinent credit information be disclosed by a single creditor, or whether the requirements of the TILA can be satisfied if some of the required credit information is disclosed by a third party. More specifically, we address the question of whether a creditor violated the provisions of the TILA when it excluded certain debt cancellation fees from the calculation of the finance charge without disclosing the amount of the fees and that the debt cancellation coverage was voluntary, despite the fact that the disclosures were ultimately made by a non-creditor third party.

Appellant Louis Vallies brought a class action on behalf of consumers who obtained loans from Appellee Sky Bank to finance purchase of motor vehicles. Vallies asserted a number of claims, and, after voluntarily dismissing some, the District Court granted Sky Bank's motion to dismiss for failure to state a claim. Vallies argues that the District Court erred by granting the motion dismissing his claim that Sky Bank failed to comply with the provision of the TILA. We agree with Vallies and hold that under the relevant sections at issue, the TILA does not permit a creditor to delegate its disclosure responsibility but requires all pertinent disclosures to be made by a single creditor. Accordingly, we will reverse the judgment of the District Court.

I.

Vallies obtained a loan from Sky Bank to purchase a truck from Phil Fitts Ford. Fitts, a licensed motor vehicle dealer, arranged the loan between Sky Bank and Vallies. It is undisputed that the loan entered into between Vallies and Sky Bank financed, in part, a $395.00 charge for Guaranteed Auto Protection ("GAP"), a form of debt cancellation coverage, that was not incorporated into Sky Bank's calculation of the total finance charge. It is likewise undisputed that the agreement specifying the terms of the loan did not individually itemize the GAP premium but combined the premium with a fee for service contract itemized as "To National Auto." On the same day as he signed the loan agreement with Sky Bank, Vallies signed a separate form entitled "GAP Waiver Agreement" that contained the correct cost of the GAP premium and the required TILA disclosures concerning the exclusion of the GAP premium from finance charges. This separate GAP Waiver form was not incorporated into Sky Bank's loan and Sky Bank was not a party to the GAP Waiver agreement. Moreover, nothing contained in the agreement would suggest to Vallies that Fitts was acting on the bank’s behalf in entering it. Instead, the agreement was signed only by Vallies and Fitts.

II.

We have plenary review over a district court's grant of a motion to dismiss for failure to state a claim and we review the District Court's decision de novo, applying the same legal standard as the trial court to the same record. Lum v. Bank of America, 361 F.3d 217, 223 (3d Cir. 2004); Omnipoint Commc'ns Enters., L.P. v. Newtown Twp., 219 F.3d 240, 242 (3d Cir. 2000).A motion to dismiss pursuant to Federal Rule 12(b)(6) should be granted only if, "accepting as true the facts alleged and all reasonable inferences that can be drawn therefrom" there is no reasonable reading upon which the plaintiff may be entitled to relief. Colburn v. Upper Darby Twp., 838 F.2d 663, 665-66 (3d Cir. 1988).

III.

Vallies challenges the District Court's opinion holding that Sky Bank did not violate the TILA. In its opinion, the District Court conceded that Sky Bank failed to make the GAP disclosures, but held that Sky Bank did not violate the TILA because it could "perceive no substantive difference arising from the fact that disclosures were made on a DNA [third-party] form, rather than on Sky Bank letterhead." In essence then, because the consumer ultimately received the correct disclosure information, Sky Bank did not shirk its disclosure responsibilities and no TILA violation had occurred. Alternatively, the District Court relied on the fact that certain provisions of the TILA allow for separate disclosures to conclude that under the TILA a single creditor is not required to make all relevant disclosures. In so concluding, the District Court noted that under 12 ...


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