Opinion
C21-5827JLR
04-25-2022
DOUGLAS VERNON HUDSON, Plaintiff, v. CHARLES W. SCHARF, et al., Defendant.
ORDER
JAMES L. ROBART, UNITED STATES DISTRICT JUDGE
I. INTRODUCTION
Before the court is Defendant Charles W. Scharf's motion to dismiss pro se Plaintiff Douglas Vernon Hudson's amended complaint. (Mot. (Dkt. # 38); Am. Compl. (Dkt. # 9).) Mr. Hudson opposes dismissal. (Resp. (Dkt. # 39).) Mr. Scharf has also moved to stay all discovery deadlines until the court has ruled on his motion to dismiss. (Stay Mot. (Dkt. # 42); see also id. ¶ 8 (indicating that Defendant Don Fleming does not object to the motion).) Mr. Hudson opposes staying or extending the discovery deadlines. (See id. ¶ 6.) The court has considered the parties' submissions, the relevant portions of the record, and the applicable law. Being fully advised, the court GRANTS Mr. Scharf's motion to dismiss and DENIES his motion to stay or extend discovery deadlines as moot.
No party requests oral argument (see Mot. at 1; Resp. at 1), which the court concludes would not be helpful to its disposition of the motion, see Local Rules W.D. Wash. LCR 7(b)(4).
II. BACKGROUND
The court has previously described the background for this matter, which arises out of Mr. Hudson's purchase of a vehicle from Northwest Motorsports, Inc. (“Northwest Motorsports”) on February 25, 2019. (See 1/26/22 Order (Dkt. # 18) at 2-3; Am. Comp. ¶ 1.) After reviewing Mr. Hudson's amended complaint pursuant to 28 U.S.C. § 1915(e), the court dismissed all of Mr. Hudson's claims with prejudice, except a claim that he brought under the Truth In Lending Act (“TILA”) for rescission of his vehicle purchase. (1/26/22 Order at 8; Am. Compl. ¶¶ 9-26.)
III. ANALYSIS
Mr. Scharf brings this motion pursuant to Federal Rule of Civil Procedure 12(b)(6). (Mot. at 3-4.) He asserts that Mr. Hudson's TILA claim fails, to the extent it is stated against him in his individual capacity, because Mr. Hudson does not allege any involvement by Mr. Scharf in the at-issue vehicle purchase. (Id. at 4-5.) Mr. Scharf further argues that, to the extent Mr. Hudson intended to state the claim against Wells Fargo Bank, N.A. or Wells Fargo Auto (collectively, “Wells Fargo”), the claim fails because the provision of TILA under which Mr. Hudson seeks rescission does not apply to automobile loans and, even if it did, Mr. Hudson failed to execute a valid rescission notice. (Id. at 5-7.) After describing the applicable legal standard on a motion to dismiss, the court considers whether any of Mr. Scharf's arguments warrant dismissal of Mr. Hudson's TILA claim.
A. Legal Standard
Federal Rule of Civil Procedure 12(b)(6) provides for dismissal when a complaint “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). The court construes the complaint in the light most favorable to the nonmoving party. Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005). “To survive a motion to dismiss, 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 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Additionally, the court must exercise its authority to dismiss a claim filed by a litigant proceeding in forma pauperis (“IFP”), if it determines “at any time” that the action fails to state a claim. See 28 U.S.C. § 1915(e)(2)(B). Because Mr. Hudson is a pro se plaintiff, the court must construe his pleadings liberally. See Hebbe v. Pliler, 627 F.3d 338, 342 (9th Cir. 2010).
B. Mr. Hudson's TILA Claim
Mr. Hudson contends that his rights under TILA were violated in various ways in the course of his vehicle purchase from Northwest Motorsports and he thus seeks to rescind that transaction. (See Am. Compl. ¶ 11 (first citing 15 U.S.C. § 1635; and then ORDER citing 12 C.F.R. § 1026.23 (“Regulation Z”).) Mr. Scharf argues that Mr. Hudson has failed to state a TILA claim against him in his individual capacity because he alleges no facts showing any involvement, let alone wrongdoing, by Mr. Scharf in the at-issue vehicle purchase. (Mot. at 4-5.) Mr. Scharf additionally argues that Mr. Hudson fails to state a TILA claim against Wells Fargo because he seeks relief under a provision of TILA that does not apply to automobile loans and, even if it did, Mr. Hudson failed to execute a valid rescission notice. (Id. at 5-7.)
TILA provides that, with certain exceptions, “in the case of any consumer credit transaction . . . in which a security interest . . . is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction.” 15 U.S.C. § 1635(a); see also id. § 1635(e) (excluding certain transactions). Regulation Z, which was promulgated to implement TILA, likewise provides that, with certain exceptions, “[i]n a credit transaction in which a security interest is or will be retained or acquired in a consumer's principal dwelling, each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind the transaction.” 12 C.F.R. § 1026.23(a)(1); see also id. § 1026.23(f) (exempting certain transactions).
Mr. Hudson alleges that he purchased a vehicle from Northwest Motorsports through a financing arrangement and, “[a]s part of this transaction [Northwest Motorsports] retained a security interest in . . . a private automobile.” (See Am. Compl. ¶ 3.) As is clear from TILA's text, however, that statute applies only to consumer credit transactions where the creditor obtains an interest in the consumer's “principal dwelling.” See 15 U.S.C. § 1635(a). Thus, while it “protect[s] consumers whose residences are jeopardized by operation of all types of security interests acquired by creditors, ” N. C. Freed Co. v. Bd. of Governors of Fed. Rsrv. Sys., 473 F.2d 1210, 1216 (2d Cir. 1973), it provides no right of rescission where a security interest is taken in an automobile.
Mr. Hudson argues that the language of section 1635(a) merely “expounds on when conditions are met” for rescission but does not “disqualify all other claims” for that relief. (See Resp. at 2.) Thus, Mr. Hudson seems to argue, if Congress wished to exclude vehicle financing arrangements like his from TILA's protections, they would have included such transactions in section 1635(e). (See id.) Although the court understands the appeal of that argument for Mr. Hudson, it misreads TILA's text and structure. Section 1635(e) creates exceptions to the rescission right established in section 1635(a) and focuses on those transactions in which a creditor might take a security interest in the consumer's home-like a residential mortgage-because those are the only transactions otherwise eligible for rescission under section 1635(a). See 15 U.S.C. §§ 1635(a), (e); see also 12 C.F.R. §§ 1026.23(a)(1), (f); Zakarian v. Option One Mortg. Corp., 642 F.Supp.2d 1206, 1213 (D. Haw. 2009) (“The right to rescind does not arise in all credit transactions in which a security interest in the consumer's principal residence is granted.”). Mr. Hudson would have the court construe section 1635(e)'s limitation on when consumers can back out of an arrangement that puts their home at risk as permitting rescission for any and all credit transactions under section 1635(a). (See Resp. at 2.) Nothing in TILA's text or structure suggests that is a plausible reading. //
Because the consumer transaction Mr. Hudson seeks to rescind is a vehicle purchase that does not have any alleged connection to his principal dwelling, he cannot state a claim for relief under section 1635 of TILA or its implementing regulations. Accordingly, the court GRANTS Mr. Scharf's motion to dismiss without addressing his remaining arguments concerning the capacity in which he is sued or the sufficiency of Mr. Hudson's rescission notice. (See Mot. at 4-5, 6-7.)
Although Mr. Scharf's motion to dismiss does not note until April 29, 2022 (see Mot. at 1), the court has determined, after considering Mr. Hudson's response, that the amended complaint fails to state a plausible claim for relief under TILA. Accordingly, the court exercises its authority under 28 U.S.C. § 1915(e) to dismiss this claim without waiting for Mr. Scharf's motion to note. See 28 U.S.C. § 1915(e)(2)(B)(ii) (requiring the court “to dismiss the case at any time” upon a determination that a claim brought by a plaintiff proceeding IFP “fails to state a claim on which relief may be granted”). Further, because Mr. Hudson has failed to state a claim under TILA for reasons that apply with equal force to Mr. Scharf and Defendant Don Fleming, the claim is DISMISSED as to both defendants. See id.
Mr. Hudson's claim for rescission under TILA was the only claim that that survived the court's prior section 1915(e) review of his amended complaint. (See 1/26/22 Order at 8.)
Finally, given the inapplicability of TILA to the conduct at issue in Mr. Hudson's amended complaint, further amendment of Mr. Hudson's TILA claim would be futile. Thus, the court DISMISSES that claim with prejudice and without leave to amend. See Nat'l Council of La Raza v. Cegavske, 800 F.3d 1032, 1041 (9th Cir. 2015).
C. Mr. Scharf's Motion to Stay Discovery
Mr. Scharf has also moved to stay discovery in this matter pending the court's decision on his motion to dismiss. (See Stay Mot. at 1.) Because this order dismisses Mr. Hudson's only claim, see supra Section III.B, the pending discovery-related deadlines are inapplicable. Accordingly, Mr. Scharf's motion to stay or extend discovery deadlines in this matter is DENIED as moot.
IV. CONCLUSION
For the foregoing reasons, Mr. Scharf's motion to dismiss (Dkt. # 38) is GRANTED. The court DISMISSES Mr. Hudson's claim for rescission under TILA with prejudice and does so as to both Mr. Scharf and Mr. Fleming pursuant to its authority under 28 U.S.C. § 1915(e). Mr. Scharf's motion to stay or extend the discovery deadlines (Dkt. # 42) is DENIED as moot. The court DIRECTS the Clerk to close this case.