United States District Court, D. Delaware
HERMAN DHADE, as an individual and on behalf of others similarly situated, Plaintiff,
HUNTINGTON LEARNING CENTERS, INC. Defendant.
J. Cahall, MCCORMICK & PRIORE, P.C., Wilmington,
Delaware; Cary Ichter, ICHTER DAVIS LLC, Atlanta, Georgia;
William Daniel Davis, ICHTER DAVIS LLC, Atlanta, Georgia
Counsel for Plaintiff
J. Katzenstein, SMITH, KATZENSTEIN & JENKINS LLP,
Wilmington, Delaware; Scott Mcintosh, QUARLES & BRADY
LLP, Washington, D.C. Counsel for Defendants
Herman Dhade filed this putative class action on behalf of
himself and all others similarly situated against Defendant
Huntington Learning Centers, Inc. (Huntington). The single
count of Dhade's complaint alleges that Huntington
violates the Equal Credit Opportunity Act (ECOA), 15 U.S.C.
§ 169 et seq. That act creates a private right
of action for applicants for credit.
has moved to dismiss the complaint pursuant to Federal Rules
of Civil Procedure 12(b)(1) and 12(b)(6). D.I. 7. In support
of its motion, it argues, among other things, that because
Dhade alleges he is a prospective applicant and not an
applicant for credit, the complaint fails to state a claim
upon which relief can be granted and Dhade lacks standing. I
agree that the ECOA's private right of action only covers
applicants and not prospective applicants. Accordingly, I
will grant Defendant's motion to dismiss with prejudice.
is a Delaware corporation that sells Huntington Learning
Center® franchises. D.I. 1 at ¶ 3. These franchises
offer tutoring and test preparation services to customers.
D.I. 1 at ¶ 3. Dhade applied to Huntington on April 5,
2017 for two franchises in Michigan. D.I. 1, ¶ 25; D.I.
5-2 at 2. In his application, Dhade answered "yes"
to the question: "Would you like to discuss our in-house
financing option with us?" D.I. 1, ¶ 27.
next day, Huntington provided Dhade a package that contained
a Franchise Agreement, numerous related contracts, and a
franchise disclosure document (FDD). D.I. 1 at ¶ 28;
D.I. 5-1. The FDD identified six "risk factors" for
Dhade to "please consider ... before buying this
franchise." D.I. 5-1 at 3. Risk factor number six read:
THE FRANCHISEE'S SPOUSE MUST SIGN A PERSONAL GUARANTEE
MAKING SUCH SPOUSE JOINTLY AND SEVERALLY LIABLE FOR THE
OBLIGATIONS UNDER THE FRANCHISE AGREEMENT, WHICH ALSO PLACES
THE SPOUSE'S PERSONAL ASSETS AT RISK. YOU MAY WANT TO
CONSIDER THIS WHEN MAKING A DECISION TO PURCHASE THIS
Id. A copy of the personal guarantee, titled
"Guarantee Agreement," was attached as Exhibit A to
the Franchise Agreement. The Guarantee Agreement obligated
each of its signatories to be "bound by, and perform
according to, each and all of the provisions, covenants, and
conditions of the Franchise Agreement and this
Guarantee[.]" Id. at 127.
"Item 10" of the FDD, titled "Financing,"
Huntington disclosed that new franchisees in Michigan and all
states other than California could borrow from
Huntington's affiliate, Huntington Learning Corporation,
up to $100, 000 for working capital and opening expenses.
Id. at 22. Item 10 also provided in relevant part:
If you obtain financing from [Huntington Learning
Corporation], you must sign [Huntington Learning
Corporation's] negotiable promissory note (the
"Promissory Note") in the form attached as Exhibit
S and the security agreement (the "Security
Agreement") in the form attached as Exhibit T. Each of
borrower's partners, shareholders, and members must
personally guarantee the Promissory Note by signing the
promissory note guarantee ("Promissory Note
Guarantee") in the form attached as Exhibit U. The
Security Agreement provides that financing will be secured by
the Franchise Agreement, related agreements, and all
Franchised Business assets.
Id. at 23.
April 26, 2017, Huntington sent Dhade a document titled
"Huntington Learning Center In-House Financing" and
a Huntington Learning Corporation form for Dhade to complete
titled "Request for Huntington Financing." D.I. 1,
¶ 29; D.I. 5-3 at 1, 5. In an email sent to Huntington
two days later, Dhade stated that his spouse "will not
be involved in the business" and therefore asked if
"she still need[ed] to sign" the personal
guarantee. D.I. 1, ¶ 31. Huntington responded that same
day: "Yes, she will need to sign absolutely."
Id. ¶ 32.
2017, Dhade emailed Huntington a "Request to be Awarded
a Huntington Learning Center Franchise." D.I. 5-5 at 1.
In his franchise request, Dhade stated that the purchasers of
the franchises would be two companies he wholly owned, Fluffy
Bunny, Inc. and Purple Butterfly, Inc. D.I. 5-5 at 1; D.I. 1,
¶ 34. Dhade also emailed Huntington "a request to
remove my spouse from the personal guarantee." D.I. 5-5
at 1. In response to these requests, Huntington sent Dhade a
proposed limited guarantee that capped the amount of his
spouse's potential monetary obligations. D.I. 1 at
¶38. Dhade's spouse refused to sign this limited
guarantee, and, "as a result," Dhade "withdrew