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Terry v. Corporate America Family Credit Union

United States District Court, D. Maryland

October 8, 2019

DONALD E. TERRY, SR., et al, Plaintiffs
v.
CORPORATE AMERICA FAMILY CREDIT UNION et al, Defendants

          MEMORANDUM

          James K. Bredar Chief Judge.

         I. Background

         Plaintiffs Donald E. Terry, Sr., and Shemika Terry, who are father and daughter, respectively, filed suit against Corporate America Family Credit Union ("CAFCU") and CUMIS Insurance Society Incorporated d/b/a CUNA Mutual Group ("CUMIS") in Baltimore City Circuit Court. (Compl. ECF No. 3.) The Terrys asserted class action allegations on behalf of the following class: "All persons with loans from CAFCU, whose loans are secured by the borrower's personal vehicle, and who purchased [Guaranteed Asset Protection ("GAP")] coverage from CUNA[1]in conjunction with their CAFCU loan [sic].'" (Id. ¶ 33.) In addition to declaratory and injunctive relief, Plaintiffs seek actual damages, "forgiveness of all loan deficiencies claimed by CAFCU following inadequate CUNA GAP coverage payouts, reimbursement of sums paid by Class members on alleged deficiencies, punitive damages in an amount determined by the trier of fact, an award of their reasonable attorneys' fees and costs in this matter, plus such other and further [appropriate] relief" (Id. Ad damnum clause foil. ¶ 48.)

         Based upon minimal diversity pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d), the case was removed to this Court. (Notice of Removal, ECF No. 1.) After both Defendants filed answers, a scheduling order was entered, pursuant to which the Terrys were granted leave to file an amended complaint. (ECF Nos. 10, 11, 17, 20, 21.) The amended complaint has five counts:

• Count I - Illinois Consumer Fraud Act
• Count II - Illinois Deceptive Trade Practices Act
• Count III - Breach of Contract
• Count IV -Declaratory Judgment
• Count V - Tortious Interference with Contract

         All counts are brought against both Defendants except for the last count, tortious interference with contract, which is only against CUMIS. (Am. Compl. ECF No. 22.) CAFCU has filed an answer to the amended complaint. (ECF No. 29.)

         Now pending before the Court is CUMIS's motion to dismiss for failure to state a claim for relief (ECF No. 30) as well as Plaintiffs' opposition thereto (ECF No. 35) and CUMIS's reply (ECF No. 38). Also pending is CUMIS's unopposed motion to seal Exhibits B and C to its motion to dismiss. (ECF No. 32.) No. hearing is necessary. Local Rule 105.6 (D. Md. 2018). Both motions will be granted.

         II. Standard of Dismissal for Failure to State a Claim

         A complaint must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. An inference of a mere possibility of misconduct is not sufficient to support a plausible claim. Id. at 679. As the Twombly opinion stated, "Factual allegations must be enough to raise a right to relief above the speculative level." 550 U.S. at 555. "A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' . .. Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement."' Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555, 557). Although when considering a motion to dismiss a court must accept as true all factual allegations in the complaint, this principle does not apply to legal conclusions couched as factual allegations. Twombly, 550 U.S. at 555.

         III. Allegations of the Amended Complaint

         The Terrys, who reside in Baltimore, Maryland, purchased a used 2011 Acura TSX in October 2014 from National Motors, Inc., in Baltimore County, Maryland, for the cash price of $22, 648.94. (Am. Compl. ¶¶ 1, 8, 9.) The Terrys put down $1, 000 in cash and financed the balance with a loan arranged through the car dealer. (Id. ¶ 10.) The total amount financed, including various charges for dealer processing, taxes, title, and a GAP insurance policy, was $22, 841.94. (Id. ¶ 11.) In July 2015, the Terrys refinanced their dealer loan by taking out a car loan with CAFCU. (Id. ¶¶ 1, 12.) CAFCU "is a credit union that is headquartered in, and chartered by the State of Illinois," and it "regularly engages in consumer lending in the State of Maryland and throughout the country." (Id. ¶¶ 3, 4.) The Terrys allege their car loan "included the mandatory purchase of 'Guaranteed Asset Protection' insurance coverage from a CUNA Mutual Group (CUNA) GAP insurance program."[2] (Id. ¶ 1.) CUMIS "is an insurance company headquartered in Wisconsin and licensed to sell insurance products in the State of Maryland." (Id. ¶ 5.) CAFCU and CUMIS "entered into a loan and a Guaranteed Asset Protection contract with the Terry's [sic] on or about July 6, 2015." (Id. ¶ 6.) The Terrys allege, "CAFCU's loan agreement was on a form supplied and published by Defendant CUNA, and the GAP insurance CAFCU sold to the Terry's [sic] was with CUNA, or was administered by CUNA, and was memorialized on a CUNA form contract." (Id. ¶ 14.)

         According to the amended complaint, the purpose of GAP insurance "is to protect the borrower and the lender in the event that the car is totaled in an accident (or stolen) at a time when the car's value, as determined by the car owner's property and casualty insurer, is less than the balance owed on the car loan. GAP insurance is supposed to cover the difference (i.e., the 'gap') between the loan balance, and the amount paid out by the car insurance provider, and this purpose is reflected in the CUNA policy definition of the term 'Gap.'" (Id. ¶ 15.) The CAFCU loan was for a principal amount of $25, 407.26.[3] (Id. ¶ 17.)

         The Terrys allege, "The GAP protection was the subject of a separate written contract that the Terry's [sic] executed on July 7, 2015. They were informed by CAFCU that the loan would not be funded until the GAP contract with CUNA was executed." (Id. ¶ 19.) The "parties" to the GAP contract "stipulated that the value of the Acura was $19, 500." (Id. ¶ 20.) Under the GAP contract, "GAP coverage cannot exceed 125% of the ear's value. Thus, per the contract, the GAP coverage started at $24, 375 (i.e., 1.25 x $19, 500), and the GAP coverage appeared to be about $1, 032 short of the loan principal amount." (Id.) The Terry s further allege that, without notice to them,

CUNA later decided (apparently in October 2017) that the car was only worth $18, 250 at the time of the GAP contract, and instructed CAFCU that this lower value should be used to calculate the value of the coverage. The insured balance therefore started at only $22, 812.50 (1.25 x $18, 250). The gap between the value of the insurance, and the principal of the loan, started out at $2, 594.76.

(Id. ¶ 21.)

         In October 2017, the Acura was damaged in a car accident and deemed a total loss by the Terrys' insurer, GEICO. (Id. ¶ 24.) GEICO assessed the car's value at less than $11, 000 and paid CAFCU, after the Terrys' deductible, the amount of $10, 534.06. (Id. ¶¶ 24, 25.) The principal balance remaining on the loan at that time was $21, 203.92. (Id. ¶ 26.) The Terrys allege CUMIS "amortizes the loan" at a rate different from how CAFCU amortizes it. (Id. ¶ 23.) They also allege that CUMIS's "formula depreciated the car more quickly. Thus, as far as the CUNA GAP insurance was concerned, the coverage started at a lower level than was disclosed, and would never cover any actual gap in the event of a total loss, .because the difference between the coverage and the loan balance grew wider as the loan moved forward." (Id.) As a result, CUMIS "determined that the GAP benefit payout should be only $4, 378.41." (Id. ¶ 27.) The Terrys allege the remaining loan deficiency at that time was $6, 291.45. (Id.)

         Pertaining only to CAFCU, they also allege CAFCU has attempted to collect this deficiency from the Terrys and that the loan balance continues to accrue interest. (Id. ¶ 28.) Additionally, CAFCU has failed to provide the Terrys with an accurate accounting of their loan payment history and, further, has added "other loan balances to the account or improperly amortized the Acura car loan." (Id. ¶ 30.)

         With regard to the putative class, the Terrys allege,

CAFCU regularly sells GAP insurance to its car loan customers on standard forms provided by CUNA, and CUNA either routinely issues GAP policies to CAFCU borrowers, or advises CAFCU and provides administrative services to CAFCU regarding GAP underwriting, pricing, and claims processing.
Because CUNA does not adhere to the car values set forth in the GAP contracts, and because CAFCU and CUNA routinely amortize the loans at different rates, the GAP coverage is significantly less than is represented to the CAFCU borrowers at the time of contracting.

(Id. ¶¶ 31, 32.)

         IV. ...


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