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O'Neal v. Quicken Loans, Inc.

United States District Court, D. South Carolina, Aiken Division

June 30, 2016

Harry O'Neal, Plaintiff,
Quicken Loans, Inc., Defendant.

          Harry O'Neal, Plaintiff, represented by C. Jo Anne Wessinger Hill, Richardson Plowden and Robinson, Charles Bradley Hutto, Williams and Williams, Daniel Webster Williams, Bedingfield and Williams & Steven W. Hamm, Richardson Plowden and Robinson.

          Quicken Loans Inc, Defendant, represented by Allen Mattison Bogan, Nelson Mullins Riley and Scarborough, Benjamin Rush Smith, III, Nelson Mullins Riley and Scarborough, Carmen Harper Thomas, Nelson Mullins Riley and Scarborough & Graham Ross Billings, Nelson Mullins Riley and Scarborough.


          J. MICHELLE CHILDS, District Judge.

         This matter is before the court pursuant to Defendant Quicken Loans, Inc.'s ("Defendant") Motion to Dismiss. (ECF No. 4.) Plaintiff Harry O'Neal ("Plaintiff") opposes Defendant's Motion to Dismiss. (ECF No. 29.) For the reasons set forth below, the court GRANTS Defendant's Motion to Dismiss.


         On April 23, 2015, Plaintiff filed a complaint for a non-jury trial in the Court of Common Pleas in Barnwell County, South Carolina. (ECF No. 1-1 at 7.) Plaintiff alleges that he obtained a real estate loan with Defendant.[1] ( Id. at 7 ¶ 5.) Plaintiff further alleges that pursuant to South Carolina law, Defendant was required to determine Plaintiff's preference for legal counsel to assist him during the closing of the transaction. ( Id. at 7 ¶ 6.) Plaintiff alleges that Defendant provided him with a pre-populated Attorney/Insurance Preference Checklist, which prevented Plaintiff from choosing an attorney to represent him in the transaction. ( Id. at 8 ¶¶ 8-13.) According to Plaintiff, the deprivation of a meaningful choice as to the attorney to represent him in the transaction was unconscionable pursuant to S.C. Code Ann. §§ 37-10-105 (2016), 37-5-108 (2016). ( Id. at 8 ¶ 14.) Plaintiff requests that the court issue an order and grant relief pursuant to S.C. Code Ann. § 37-10-105(c). ( Id. at 9 ¶ 21.) Plaintiff further requests that the court assess a statutory penalty between $1, 500.00 and $7, 500.00. ( Id. at 9 ¶ 22.) Plaintiff also asserts that he is entitled to attorney's fees and costs from Defendant as permitted by statute. ( Id. at 9 ¶ 23.) For jurisdictional purposes, Plaintiff alleged that he is a citizen of the state of South Carolina, and Defendant is a corporation organized under the laws of a state other than the state of South Carolina with a principal place of business in Michigan.[2] (ECF No. 1-1 at 8 ¶¶ 1, 2.) Plaintiff did not specify an amount of damages in the Complaint, but prayed "for the relief set forth above, for attorney fees and the costs of this action, and for such other and further relief as this court deems just and proper, but in no event, for an amount greater than Seventy-Five Thousand Dollars ($75, 000)." ( Id. at 9.)

         On September 16, 2015, Defendant filed a Notice of Removal asserting that the court possessed jurisdiction over the matter because complete diversity of citizenship exists between the parties and the amount in controversy requirement is met. (ECF No. 1 at 2.) That same day, Defendant filed a Motion to Dismiss as well. (ECF No. 4.) Thereafter, on October 15, 2015, Plaintiff moved the court to remand the matter to state court on the basis "that the amount in controversy does not exceed $75, 000.00 as required under 28 U.S.C. § 1332(a)(1)." (ECF No. 9.) Plaintiff further asserted that removal based on bankruptcy jurisdiction is not proper because there is no pending bankruptcy case. ( Id. ) Plaintiff also moved the court to stay all matters related to Defendant's Motion to Dismiss.[3] (ECF No. 9.) After a hearing on the matter, the court denied Plaintiff's Motion to Remand, and extended the time for Plaintiff to respond to Defendant's Motion to Dismiss. (ECF Nos. 25, 26.) On May 9, 2016, Plaintiff filed a Return in Opposition to Defendant's Motion to Dismiss. (ECF No. 29.) Subsequently, Defendant filed a Reply in Support of its Motion to Dismiss. (ECF No. 31.) A hearing on the matter was held on June 28, 2016.


         A Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted tests the legal sufficiency of a complaint. Schatz v. Rosenberg, 943 F.2d 485, 489 (4th Cir. 1991). While the complaint need not be minutely detailed, it must provide enough factual details to put the opposing party on fair notice of the claim and the grounds upon which it rests. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Conley v. Gibson, 355 U.S. 41, 47 (1957)). In order to withstand a motion to dismiss, a complaint must contain factual content that allows the court to reasonably infer that the defendant is liable for the alleged misconduct. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The court must accept the allegations in the complaint as true, and all reasonable factual inferences must be drawn in favor of the party opposing the motion. Id. at 679. If the court determines that those factual allegations can "plausibly give rise to an entitlement to relief, " dismissal is not warranted. Id.

         III. ANALYSIS

         The allegation at the crux of Plaintiff's complaint is that Defendant violated the attorney preference statute, S.C. Code Ann. § 37-10-102 (2016), by providing Plaintiff with an attorney preference form that was already filled in. (ECF No. 1-1 at 8 ¶ 8.) Instead of permitting Plaintiff to select his own attorney, Plaintiff alleges that he was provided with a form in which "I/We will not use the services of legal counsel" was already printed on the form with no option to fill in his own selection. ( Id. at ¶ 9.) Defendant asserts Plaintiff's claims should be dismissed because Plaintiff previously proceeded in bankruptcy whereby his debt pursuant to this loan agreement was discharged, accordingly Defendant asserts that Plaintiff is no longer a debtor with standing to pursue this claim. (ECF No. 4 at 1.) Further, Defendant asserts that because Plaintiff proceeded in bankruptcy and did not disclose this attorney preference violation claim to the bankruptcy court, principles of judicial estoppel, res judicata, and equitable estoppel prevent him from proceeding with this claim now. ( Id. ) Finally, Defendant contends that Plaintiff's claim remains the property of the bankruptcy estate and can only be asserted by the trustee. ( Id. at 10.) Plaintiff maintains that his complaint is legally sufficient to maintain his cause of action, and does not directly address Defendant's assertions regarding the effect of Plaintiff's discharge in bankruptcy on this current claim.

         A. Standing

         The South Carolina Consumer Protection Code ("SCCPC") allows a private right of action for violation of the attorney preference statute, but only a "debtor" has standing to assert a cause of action. S.C. Code Ann. § 37-10-105(a) ("If a creditor violates a provision of this chapter, the debtor has a cause of action... to recover actual damages"). Pursuant to the statute, a debtor is defined as "any person who is an obligor in a credit transaction, including any cosigner, comaker, guarantor, endorsee or surety, and the assignee of any obligor, and also includes any person who agrees to assume the payment of a credit obligation." S.C. Code Ann. § 37-1-301(14). Defendant argues that because Plaintiff's debts were discharged in bankruptcy, ( see ECF No. 4-4), Plaintiff is no longer a "debtor." As such, Defendant contends that Plaintiff cannot maintain a cause of action arising under the Consumer Protection Code. In support of its argument, Defendant cites to West Virginia cases where plaintiffs whose debts were discharged in bankruptcy were deemed unable to pursue a cause of action under the West Virginia Consumer Credit Protection Act ("WVCCPA") because they were no longer "consumers." See, e.g., Fabian v. Home Loan Center, Inc., Case No. 5:14-cv-42, 2014 WL 1648289, at *10-14 (N.D. W.Va. Apr. 24, 2014); McCoy v. S. Energy Homes, Inc., Case No. 1:09-cv-1271, 2012 WL 1409533, at *10 (S.D. W.Va. Apr. 23, 2012) (holding that persons "not in debt" to the defendant are not "consumers" under the WVCCPA, and therefore, lack standing to assert a private cause of action under the WVCCPA); Cather v. Seneca-Upshur Petroleum, Inc., Case No. 1:09-cv-139, 2010 WL 3271965, at *7-8 (N.D. W.Va. Aug. 18, 2010) ("Because the plaintiffs in this case are... not consumers'... the WVCCPA does not provide them with a legal remedy in this case.").

         As a threshold matter, there are no South Carolina cases addressing whether a "debtor" loses standing under the SCCPC by having his or her debts discharged in bankruptcy. As a result, this court is required to determine how a South Carolina court might rule on this issue. In Fabian, the case cited by Defendant that is most analogous to the facts before this court, the West Virginia district court determined that the plaintiffs did not have standing under the WVCCPA to contest the enforceability of the loan agreement for the home equity line of credit they took out on their home because the debt had been discharged in bankruptcy. Fabian, 2014 WL 1648289, at *5. In reaching this conclusion, the court settled on the relevant definition for "consumer" under the WVCCPA, which is defined as "any natural person obligated or allegedly obligated to pay any debt." Id. The court noted that the plaintiffs were no longer obligated to pay the debt, and that "allegedly obligated" did not apply to them because it was intended to provide relief to those ...

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