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Price v. Murdy

United States District Court, D. Maryland

March 30, 2018

WILLIAM PRICE, et al., Plaintiffs,
v.
RALPH M. MURDY, et al., Defendants.

          MEMORANDUM OPINION

          George L. Russell, III United States District Judge.

         THIS MATTER is before the Court on Defendant Ralph M. Murdy's Motion to Dismiss the First Amended Complaint or, in the Alternative, Motion for Summary Judgment and Request for a Hearing (ECF No. 17) and Defendant Samuel Spicer's Motion to Dismiss the First Amended Complaint or, in the Alternative, Motion for Summary Judgment and Request for a Hearing (ECF No. 18).[1] Also pending are Plaintiffs William Price, Deborah Price (collectively, “the Prices”), and Frank P. Chovan's Motion to Certify Legal Question to the Court of Appeals (“Motion to Certify Question”) (ECF No. 22) and Motion to Strike New Argument (ECF No. 23), which the Court construes as a motion for leave to file a surreply.[2] This action arises from Plaintiffs' putative class action against Defendants related to transactions for the purchase of motor vehicles.

         The Motions are ripe for disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the reasons outlined below, the Court will grant Plaintiffs' Motion to Strike and Murdy's Motion to Dismiss the First Amended Complaint or, in the Alternative, Motion for Summary Judgment and grant in part and deny in part Spicer's Motion to Dismiss the First Amended Complaint or, in the Alternative, Motion for Summary Judgment and Plaintiffs' Motion to Certify Question.

         I. BACKGROUND[3]

         A. Factual Background

         Defendant Auto Smart, LLC (“Auto Smart”) is an automobile dealership located in Harford County, Maryland. (1st Am. Class Action Compl. [“Am. Compl.”] ¶ 2, ECF No. 14). Auto Smart refers its customers to Spicer for financing when they buy its motor vehicles. (Id. ¶¶ 3-4). Once Auto Smart and the customer agree on a purchase price, the customer “enter[s] into a loan agreement with Spicer to provide financing” for buying the vehicle. (Id. ¶¶ 4-5). Auto Smart accepts payments on the loans on behalf of Spicer. (Id. ¶ 6). While servicing the loans, Spicer assesses compound interest, even though the financing agreements “did not include any language allowing” the assessment of such interest. (Id. ¶¶ 72, 73, 107, 109).

         When a borrower defaults on one of his loans, Spicer repossesses the vehicle, and then Spicer and Auto Smart refer the loan to Murdy for collection.[4] (Id. ¶ 23). Murdy then files lawsuits on Spicer's behalf in Maryland state court to collect on the defaulted loans. (Id. ¶ 24).

         1. The Prices

         The Prices purchased three motor vehicles from Auto Smart, and entered into loans with Spicer to finance the purchase of each vehicle. (Id. ¶¶ 47-48, 53-54, 59-60). At some point before March 23, 2009, the Prices bought their first vehicle from Auto Smart, a Mercury Mountaineer. (Id. ¶ 47). After the purchase of their first vehicle but before March 23, 2009, the Prices purchased their second vehicle from Auto Smart. (Id. ¶ 54). The total amount of financing for each of these vehicles was less than $6, 000, and Spicer assessed a 24% interest rate on the principal. (Id. ¶¶ 50-51, 56-57).

         Around March 23, 2009, the Prices bought their third vehicle from Auto Smart, a 1996 Ford. (Id. ¶ 59). Spicer provided financing for the principal amount of $5, 319.00 and assessed a 15% interest rate. (Id. ¶¶ 62-63; Def. Murdy's Mot. Dismiss [“Murdy's Mot.”] Ex. 1 [“Murdy's 1st Mot.”] at 37, ECF No. 17-2; Pls.' Opp'n Defs.' Mot. Dismiss [“Pls.' Opp'n”] Ex. A at 4, ECF No. 19-2).[5] The terms of the “Installment Note” between Mr. Price and Spicer required thirty-three monthly payments of $200.00, totaling $6, 600.00.[6] (Am. Compl. ¶ 64; Murdy's 1st Mot. at 37; Pls.' Opp'n Ex. A at 4).

         At an unspecified date, Spicer, “through his agent Auto Smart, ” repossessed the 1996 Ford. (Am. Compl. ¶ 77). Auto Smart then resold the vehicle to another customer and did not credit the sale amount to Mr. Price's outstanding loan balance. (Id. ¶¶ 79, 82). Spicer also did not provide Mr. Price with any pre-sale or post-sale repossession notices. (Id. ¶ 78).

         In 2012 or 2013, Spicer referred Mr. Price's Installment Note for the 1996 Ford to TCA for collection. (Id. ¶ 83; see Murdy Supp. Aff. ¶ 9, ECF No. 17-3). On March 4, 2013, Murdy filed a debt collection suit against Mr. Price on Spicer's behalf in the Circuit Court for Harford County, Maryland. (Murdy's 1st Mot. at 38). Spicer sued Mr. Price for a $5, 567.63 principal balance, $430.86 in interest, $1, 320.00 in late fees, and $556.76 in attorney's fees. (Am. Compl. ¶ 84; Pls.' Opp'n Ex. A at 1). Spicer and Murdy requested that judgment be entered against Mr. Price in 2015. (Am. Compl. ¶ 88).

         2.Frank P. Chovan

         Chovan purchased two motor vehicles from Auto Smart, and entered into loans with Spicer to finance the purchase of each vehicle. (Id. ¶¶ 89-90, 95-96). At some point before November 1, 2006, Chovan bought his first vehicle from Auto Smart, a Chevrolet Cavalier. (Id. ¶ 89). Spicer provided less than $6, 000.00 in financing for the purchase of the Cavalier, and assessed a 24% interest rate on the principal. (Id. ¶ 92-93).

         Around November 1, 2006, Chovan purchased his second vehicle from Auto Smart, a 1999 Ford Escort. (Id. ¶ 95). Spicer provided financing for the principal amount of $5, 500.00 and assessed a 24% interest rate. (Id. ¶¶ 98-99). The terms of the “Installment Note” between Chovan and Spicer required thirty monthly payments of $245.57, totaling $7, 367.10. (Id. ¶ 100). By assessing compound interest on Chovan's loan, Chovan incurred $26, 786.69 in debt. (Id. ¶ 108).

         At an unspecified date, Spicer, “through his agent Auto Smart, ” repossessed the 1999 Ford Escort. (Id. ¶ 112). Auto Smart then resold the vehicle to another customer and did not credit the sale amount to Chovan's outstanding loan balance. (Id. ¶¶ 114, 117). Spicer also did not provide Chovan with any pre-sale or post-sale repossession notices. (Id. ¶ 113).

         In 2012 or 2013, Spicer referred Chovan's debt to Murdy for collection. (Id. ¶ 118; Murdy Supp. Aff. ¶ 9). On February 18, 2015. Murdy filed suit against Chovan. (Am. Compl. ¶ 119; Murdy's 1st Mot. at 34). Spicer sued Chovan for a $26, 786.69 principal balance and $2, 678.67 in attorney's fees. (Am. Compl. ¶ 119).

         B. Procedural History

         On March 17, 2017, Plaintiffs sued Murdy, Spicer, and Auto Smart. (the “Original Complaint”). (ECF No. 1). On May 19, 2017, Murdy filed his Motion to Dismiss the Original Complaint. (ECF No. 5). Spicer filed his Motion to Dismiss the Original Complaint on June 22, 2017. (ECF No. 11).

         On July 6, 2017, Plaintiffs filed their First Amended Class Action Complaint [the “First Amended Complaint”], alleging the following counts: (1) violations of Maryland Consumer Loan Law (“MCLL”), Md. Code Ann., Com. Law [“CL”] § 12-301 et seq. (West 2018) (Count I); violations of the Maryland Consumer Debt Collection Practices Act (“MCDCA”), CL § 14-201 et seq. (West 2018) (Count II); (3) violations of 8 U.S.C. § 1962(a) (2018) the Racketeering Influenced Corrupt Organizations (“RICO”) Act (Count III); violations of RICO 18 U.S.C. § 1962(c) (Count IV); and violations of RICO 18 U.S.C. § 1962(d) (Count V). (ECF No. 14).[7]

         On August 4, 2017, both Murdy and Spicer filed Motions to Dismiss the First Amended Complaint or, in the Alternative, Motion for Summary Judgment and Request for Hearing. (ECF Nos. 17, 18). Plaintiffs filed a combined Response to Murdy's and Spicer's Motions on August 25, 2017. (ECF No. 19). On September 8, 2017, Murdy and Spicer filed separate Replies. (ECF Nos. 20, 21).

         On September 29, 2017, Plaintiffs filed a Motion to Certify Legal Question to the Court of Appeals. (ECF No. 22). On October 2, 2017, Plaintiffs filed a Motion to Strike Spicer's Reply in Response to Motion. (ECF No. 23). On October 12, 2017, Murdy filed a Response to Plaintiffs' Motion to Certify Legal Question. (ECF No. 25). On October 13, 2017, Spicer filed a combined Response in Opposition to Plaintiffs' Motion to Certify Legal Question and Motion to Strike. (ECF No. 26). Plaintiffs filed separate Replies in support of the Motion to Certify Legal Question and Motion to Strike on October 24, 2017. (ECF Nos. 27, 28).

         On December 15, 2017, the Court issued an Order that Plaintiffs show cause why Auto Smart, having not been served, should not be dismissed from the case. (ECF No. 29). Because the Court did not receive a response to the Show Cause Order, the Court dismissed Auto Smart from the case on January 5, 2018. (ECF No. 30).

         II. DISCUSSION

         A. Conversion of Defendants' Motions

         Defendants style their Motions as a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, for summary judgment under Rule 56. A motion styled in this manner implicates the Court's discretion under Rule 12(d). See Kensington Vol. Fire Dept., Inc. v. Montgomery Cty., 788 F.Supp.2d 431, 436-37 (D.Md. 2011), aff'd, 684 F.3d 462 (4th Cir. 2012). Pursuant to Rule 12(d), when “matters outside the pleadings are presented to and not excluded by the court, the [Rule 12(b)(6)] motion must be treated as one for summary judgment under Rule 56.”

         The Court “has ‘complete discretion to determine whether or not to accept the submission of any material beyond the pleadings that is offered in conjunction with a Rule 12(b)(6) motion and rely on it, thereby converting the motion, or to reject it or simply not consider it.'” Wells-Bey v. Kopp, No. ELH-12-2319, 2013 WL 1700927, at *5 (D.Md. Apr. 16, 2013) (quoting 5C Wright & Miller, Federal Practice & Procedure § 1366, at 159 (3d ed. 2004, 2012 Supp.)). “This discretion ‘should be exercised with great caution and attention to the parties' procedural rights.'” Id. (quoting Federal Practice & Procedure § 1366, at 149). When exercising this discretion, the Court should assess whether considering materials beyond the pleadings “‘is likely to facilitate the disposition of the action, ' and ‘whether discovery prior to the utilization of the summary judgment procedure' is necessary.” Id. (quoting Federal Practice & Procedure § 1366, at 165-67).

         Here, Plaintiffs and Murdy submitted copies of the Installment Notes. Murdy submitted copies of the state court dockets, and Plaintiffs submitted copies of the complaints filed in state court. Because these materials will aid the Court in deciding a question of law raised in Spicer's Motion for Summary Judgment, i.e., whether the transactions at issue are loans and more discovery is not necessary on this issue, the Court will convert Spicer's Motion as to the MCLL claims into one for summary judgment. The Court declines, however, to convert Spicer's and Murdy's Motions to Dismiss as to the MCDCA claims into ones for summary judgment because considering the extra-pleading materials does not facilitate the Court's decision on these Motions.[8]

         B. Motion to Certify Question

         Plaintiffs request that the Court certify the following questions to the Maryland Court of Appeals regarding the MCLL:

1. Whether an advance of money with a principal balance less than six thousand dollars entered into between Party A and Party B to finance the purchase of a motor vehicle from Party C is a “loan” under the MCLL?
2. Whether the MCLL § 12-302's licensing requirement is an “other specialty” subject to Maryland's twelve year limitations period under Md. Code Ann., Cts. & Jud. Proc. 5-102(a)(6)?

         As discussed below, the Court will deny Plaintiffs' request as to the first question and grant Plaintiffs' request as to the second question. The ...


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