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Zieger v. Advance America

United States District Court, D. Delaware

December 29, 2014

EDMUND ZIEGER, on behalf of himself and all others similarly situated, Plaintiff,


GREGORY M. SLEET, District Judge.


The plaintiff Edmund Zieger ("Zieger) filed this putative class action on September 25, 2013, against defendants NCAS of Delaware, LLC and Advance America, Cash Advance Centers, Inc. (collectively, "Advance"). (D.I. 1.) Zieger alleges that a loan agreement between Advance (lender) and Zieger (borrower), as well as other similar agreements with other borrowers, are unconscionable and unenforceable. Zieger seeks compensatory damages, as well as declaratory and injunctive relief on behalf of himself and the putative class. ( Id. ) Currently before the court are the Defendants' motion to dismiss for failure to state a claim and lack of subject matter jurisdiction (D.I. 7), and motion to strike class allegations in the complaint.[1](D.I. 9.) For the reasons that follow, the court will grant Advance's motion to dismiss and motion to strike. Zieger will be given leave to amend the complaint with new class allegations in light of the court's ruling.


Zieger entered into a loan agreement ("Customer Agreement") with Advance on August 8, 2013. (D.I. 1, ¶ 5.) Zieger borrowed a principal amount of $650.00. ( Id. ; Ex. G.) Pursuant to the terms of the Customer Agreement, Zieger was to submit payments of approximately $249.50 every month for six months, for a total of $1, 496.94, in order to repay the loan. ( Id. ) Removing the principal from the calculus, this amounted to $846.94 in interest, or an annual percentage rate ("APR") of 387.16%. ( Id. ) The Customer Agreement disclosed each of these terms. ( Id. ) Zieger also granted Advance ACH authorization to make automatic debit withdrawals from his bank account to meet the monthly payments. ( Id. ¶ 6.) Loans of this type have been referred to as "payday" loans in the industry. ( Id., Ex. A.)

In addition, the Customer Agreement contained provisions governing "Dispute Resolution" (the "Dispute Resolution clause"). ( Id. Ex. G.) The Dispute Resolution clause mandated that disputes would be resolved via arbitration or small claims court:

If you have any with us [Advance] or if we have any dispute with you, then both you and we must seek resolution of the dispute in either small claims court or in arbitration. If your dispute cannot be filed in small claims court for any reason, then you must seek resolution of your dispute in arbitration. Regardless of the forum, you may not pursue the resolution of any dispute in a representative, private attorney general, or class action, and you may not be a named or unnamed class member in any such action.

( Id. ) The Customer Agreement provided an opt-out mechanism, however: "You may opt out of the above dispute resolution agreement by sending a letter to [Advance] within 30 days after signing this agreement." ( Id. ) Zieger successfully opted out of the Dispute Resolution clause by following the outlined procedure. (D.I. 10, Ex. B.)

On September 25, 2013, after making one of the scheduled monthly payments, Zieger filed this lawsuit with the putative class action complaint. (D.I. 1.) Subsequently, on October 18, 2013, after a second payment had been withdrawn, the parties reached an agreement whereby Advance would not take or accept further payment from Zieger during the pendency of this action.[3] (D.I. 5, ¶ 2.) The complaint alleges that the Customer Agreement Zieger signed and other similar agreements signed by putative class members are unconscionable. The complaint contains five counts: (1) injunctive relief preventing the enforcement of the Customer Agreement ("Count I"), (2) declaratory judgment that the Customer Agreement and those containing similar terms are unconscionable and enforceable ("Count II"), (3) breach of duty of fair dealing ("Count III"), (4) violation of the Delaware Consumer Fraud Act ("Count IV"), and (5) unjust enrichment ("Count V").


Advance filed a motion to dismiss on the grounds that Zieger lacks standing to assert several of the claims in the complaint and therefore the court lacks subject matter jurisdiction over these matters. (D.I. 7.) Advance also moved to dismiss Counts III, IV, and V for failure to state a claim. ( Id. ) In addition, Advance filed a motion to strike the class allegations of the complaint. (D.I. 9.)

A. Subject Matter Jurisdiction

Federal Rule of Civil Procedure 12(b)(1) provides that a party may bring a motion to dismiss for lack of subject matter jurisdiction. A motion to dismiss for want of standing is also properly brought pursuant to Rule 12(b)(1), because standing is a jurisdictional matter. See St. Thomas-St. John Hotel & Tourism Ass'n v. Gov't of the V.I., 218 F.3d 232, 240 (3d Cir. 2000) ("The issue of standing is jurisdictional."); Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 733 (3d Cir. 1970) ("[W]e must not confuse requirements necessary to state a cause of action... with the prerequisites of standing.").

Pursuant to Rule 12(b)(1), the court must accept as true all material allegations set forth in the complaint, and must construe those facts in favor of the nonmoving party. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Storino v. Borough of Point Pleasant Beach, 322 F.3d 293, 296 (3d Cir. 2003). On a motion to dismiss for lack of standing, the plaintiff "bears the burden of establishing the elements of standing, and each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation." FOCUS v. Allegheny Cnty. Ct. Com. Pl., 75 F.3d 834, 838 (3d Cir.1996) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)) (internal quotation marks omitted). At the motion to dismiss stage, "general factual allegations of injury resulting from the defendant's conduct may suffice." Lujan, 504 U.S. at 561; Ballentine v. United States, 486 F.3d 806, 810 (3d Cir. 2007).

B. Failure to State a Claim

Federal Rule of Civil Procedure 12(b)(6) provides that a party may bring a motion where the plaintiff has failed "to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). In considering a motion to dismiss, the court follows the Third Circuit's two-part analysis. Edwards v. A.H Cornell & Son, Inc., 610 F.3d 217, 219 (3d Cir. 2010); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, a court should separate the factual and legal elements of a claim, accepting the facts and disregarding the legal conclusions. Fowler, 578 F.3d. at 210-11. Second, a court should determine whether the remaining well-pled facts sufficiently show that the plaintiff "has a plausible claim for relief.'" Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). As part of the analysis, a court must accept all well-pleaded factual allegations in the complaint as true and view them in the light most favorable to the plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher v. Harbury, 536 U.S. 403, 406 (2002); Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008). In this regard, a court may consider the pleadings, public record, orders, exhibits attached to the complaint, and documents incorporated into the complaint by reference. Tellabs, Inc. v. Makar Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384-85 n.2 (3d Cir. 1994).

The court's determination is not whether the non-moving party "will ultimately prevail" but whether that party is "entitled to offer evidence to support the claims." United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 302 (3d Cir. 2011). The court's analysis is a context-specific task requiring the court "to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 663-64.

C. Strike Class Allegations

Rule 23 of the Federal Rules of Civil Procedure details the necessary elements for class action certification. Fed.R.Civ.P. 23. Though there is no steadfast rule for when the court should evaluate the class allegations, Rule 23 explains that, "[a]t an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action." Fed.R.Civ.P. 23(c)(1)(A). The focus should be on the term "practicable." Thus, in some cases, discovery into the asserted claims may be required before the court should consider class certification, whereas discovery may not be necessary in others. Compare Pilgrim v. Universal Health Card, LLC, 660 F.3d 943, 949 (6th Cir. 2011) ("[N]othing in the rules says that the court must await a motion by the plaintiffs.... The problem for the plaintiffs is that we cannot see how discovery or for that matter more time would have helped them.... [T]hey do not explain what type of discovery or what type of factual development would alter the central defect in this class claim."); John v. Nat'l Sec. Fire & Cas. Co., 501 F.3d 443 (5th Cir. 2007) ("Where it is facially apparent from the pleadings that there is no ascertainable class, a district court may dismiss the class allegation on the pleadings."); King v. Capital One Bank (USA), NA. No. 3:11-cv-00068, 2012 WL 5570624, at *13 (W.D. Va. Nov. 15, 2012) ("Although Plaintiff has not yet moved to certify a class, such motion is not required for a court to decide the certification issue when doing so is practicable and appropriate."), with Drake v. Hyundai Rotem USA, Corp., No. 13-0868, 2013 WL 4551228, at *6 (E.D. Pa. Aug. 28, 2013) ("Courts have good reason to decline to hastily strike class action allegations early in the litigation life cycle. Specifically, unless the parties have completed discovery and at least one party has moved for class certification, a court very rarely has the information ...

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