SUPERIOR COURT OF NEW JERSEY Freehold by jennyyingdi

VIEWS: 7 PAGES: 19

									                                        SUPERIOR COURT OF NEW JERSEY
                                        MONMOUTH comm
                                        LAW DlVISIOM - C I V I L PART
                                        DOCKET NO.:MN-L-89-05
    x - - - - - - - - - -       -   X
    JACQUELINE PEPE ,
                                             TRANSCRIPT
                  Plaintiff,
                                                   OF
           -vs-
                                                MOTION
    TRUST COMPANY OF N.J.,          :

                  Defendant.
    x - ' . . - - - - - - - --      X

                         Held at:       Monmouth County Courthouse
                                        71 Monument Park
                                        Freehold, New Jersey

                       Heard on:        June 2 0 , 2005

    B E F O R E :

         THE HONORABLE ROBERT A. COOGAN, J.S.C.

    TRANSCRIPT ORDERED BY:

         ROBERT M. TRAVISANO, ESQ.
         (Entwistle & Cappucci, LLPf

    A P P E A R A N C E S

         JONATHAN RUDNICK, ESQ.
         (Rudnick Addonizio Pappa & Comer)
         Attorney for the Plaintiff

         AMANDA N. CALDWELL, ESQ.
         (Wilson Eiser Moskowitz Edelman & Dicker)
         Attorney for Ford and Mazda Credit



    Audio Operator:                                        K. Wolcott
    ........................................................
              TERRY GRIBBEX'S TRANSCRIPTION SERVICE
                          TRACY GRIBBEN
                     27 BEACH ROAD - UNIT 4
                MONMOUTH BEACH, NEW JERSEY 07750
              (732) 263-0044 FAX #   (732) 263-0075


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                    Terry Gn'bben's Transcription Servim
1    ADDITIONAL APPEARANCES
2
           WILLIAM S . GYVES, ESQ.
3          (Entwistle & Cappucci, LLP)
           Attorney for North Fork Bank
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           ROBERT TRAVISANO, ESQ.
6          (Sedgwick Detert Moran h A r n o l d )
           Attorney for North Fork Bank
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                              I N D E X
     O   W ARGUMENT                        PAGE
         BY Tvlfil. G W E S                 5

         BY Mi?. RUDNICK                    8

     DECISION                              10
SHEET 3
                                Colloquy                          4
     1                   THE COURT: The matter before the Court is
     2         captioned Jacqueline Pepe on behalf of herself and
     3         other similarly situated plaintiffs versus the Trust
     4         Company of New Jersey, North Fork Bank, Mazda American
     5         Credit and Ford Credit. The Docket is MOM-L-089-05.
     6                   The Court notes the following appearances of
     7         counsel. Jonathan Rudnick, Esquire appears on behalf
     8         of the plaintiffs; Amanda N. Caldwell, Esquire, appears
     9         on behalf of Ford Credit and Nazda Credit; and on
     10        behalf of the movant, North Fork Bank, the Court
      3
     1"        acknowledges the appearances of William S . Gyves,
     12        Esquire and Robert M. Travisano, Esquire.
     13                  Disclaimer by the Court at the outset.
     14        Although it has no impact in my ability to remain in
     15        the case, but you deserve to know it. North Fork Bank
     16        is a successor, I believe, to the Trust Company of New
     17        Jersey. My wife has a checking account, had it, at the
     18        Trust Company of New Jersey, continues to have it at
     19        North Fork Bank.
     20                  I have the ability to sign on that account,
     21        although the account is in her name. Ford Credit,
     22        which I think at one time was Ford Motor Credit
     23        Corporation, they are the holder, they are a lien
     24        holder of on a rented, a leased vehicle that my wife
     25        drives. That's the history of myself with regard to



                                  Gyves/Argument                 5
               these litigants.
                         I ' m satisfied it does not cause me to
               disqualify myself. Mr. Rudnick or anybody else, if you
               want to comment, feel free to do it.
                         MR. RUDNICX: No comment, Your Honor.
                         THE COURT: All right. This is a motion to
               dismiss a segment of the first amended complaint. It
               is pursued by North Fork Bank, - - why is it so
               difficult for me to pronounce, - -
                         MR. GYVES: You know what 1 do, Your Ronor?
               I just say NF'B. It's a little bit easier. I have the
               same problem.
                         THE COURT: North Fork Bank. Mr. Gyves and
               Mr. Travisano, which of you are going to argue?
                         MR. GYVES: It will be me, Your Honor.
                         THE COURT: Okay. Mr. Gyves, you are the
               movant, and I will start the argument off with you. I
               have had a chance to read everything.
                         MR. GYVES: Thank you, Your Honor. Good
               morning. Our motion to dismiss is based on Federal
               branching grounds, We've covered a lot of ground in
               our papers. I don't want to rehash that ground here.
               I just want to highlight a couple of points that I
               think are importank for the disposition of the motion.
                         I thlnk surprisingly a good portion of the


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                           Teny GribWs Transcription Senrice
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                          Gyves/~rgument                    6
     1   factors that go into the analysis of this motion are
     2   conceded, acknowledged. For example, 1 don't think
     3   there's any dispute that under the Federal Preemption
     4   Doctrine if a Federal statute is in conflict with a
     5   State statute, Federal statute trumps the State. The
     6   State has to step aside. So I think thereis concession
     7   on that.
     8             I think, as you read the opposition papers,
     9   there is a concession, I believe, that the two statutes
     10 involved here are in conflict. The New Jersey Holder
     11 Rule, and the Federal T m t h in Lending Act statute. I
     12 believe thereisa concession that thereis a conflict
     13 there. The conflict being that a bank thatis a
     14 subsequent holder of a retail installment contract,
     15 such as North Fork or the Trust Company, is exposed to
     16 greater liability under state law, New Jersey law, than
     17 it is under the Federal statute.
     18            And that is the essence of a conflict
     19 preemption as we discuss in our papers. In this case,
     2 0 plaintiff relies on the New Jersey Holder Rule to get
     21 to us under the Consumer Fraud Act. I the plaintiff
                                                f
     22 loses the ability to rely upon the Mew Jersey Holder
     23 Rule, we submit there can be no liability under the
     24 Consumer Fraud Act. I think that's the only claim
     25 that's asserted against us in this case.




                            Gyves/Argument                   7
                     So we argue, as we set forth in some detail
          in our papers, that the Federal statute does preempt
          the State statute here. The ALEXIOW case could not be
          more on point. The Appellate Division in the
          RICHARDSON case acknowledges the holding of ALEXIOU
          which is basically that New Jersey Holder Rule is
          inconsistent with the Federal statute and it is
          trumped. Itisout. The ALEXIOU court dismissed a
          Consumer Fraud Act case on precisely the same theory
          that's asserted in this case.
                     And finally, I think it's important to note
          that if the Court were to dismiss the complaint as we
          requested in our motion papers, it does not deprive her
          of: a remedy here. She still theoretically has an
          ability to pursue a claim under the Federal statute. I
          donitknow if sheisable to do that, but we have no
          problem with the Court affording her that opportunity.
          I think there are obstacles there for her, but we are
          not looking to deprive her of any opportunity to seek
          redress against us.
                     I'm happy to answer any questions you have,
          Your Honor.
                     THE COURT: Ms. Caldwell, do you wish to add
          anything?
                     MS. CALDWELL: No, Your Honor.



                      Terry Gribben's Transcription Service
                  Rudnick/Argument                  8
          THE COURT: Mr. Rudnick?
          MR. RUDNICK: Your Honor, I don't think I
concede to a number of those points. The problem is
there are matching Federal and State statutes on the
Holder Rule that Federal law requires. The reason the
language in the contract that we're here about is
because Federal law says that language has to be in the
contract which is matched by the State law statute.
          So to say there's the Federal statute truth
and lending statute, I think, preempts the State Holder
statute, I don't think is really a solid argument
because there's the identical Federal statute. But the
problem is that the reason the State and Federal law
requires this language to be in the contract, is to
provide the consumer with appropriate remedies in
situations like this where the dealer, or the person
who originates a transaction, goes out of business and
there's a claim against the original seller of the
goods.
          It's a form of insurance which is required by
both State and Federal Government. And it's clear that
all the cases cited by the defense are cases involving
with truth in lending. There is no question that
unless subject to one or two minor exceptions, a
consumer or plaintiff cannot pursue a subsequent holder



                 Rudnick[Argument                  9
of a retail contract for a truth and lending violation
unless it's apparent on the face.
          And that would be, - - the interest rate would
have to be wrong or the dollar amounts don't add up,
something to that extent. We're not proceeding that.
We're not making a truth and lending claim. We are
saying that the dealer committed certain inappropriate
acts pursuant to the terms in their own contract, they
are subject to the claims that the plaintiff would have
against the seller of the goods for the policies which
have been set forth under both New Jersey as well as
Federal law.
          And it's pretty clear that truth in lending,
there's no cause of action for truth in lending against
a subsequent holder under most circumstances. But
there clearly is for these types of either warranty or
consumer fraud, otherwise the purpose in having them in
the contract would be completely pointless. There
would be no reason for Federal or State law to require
that to be in the contract.
          To say truth in lending preempts every other
area of law or every other legal theory, f don't think
really makes much sense at all. And as I see forth in
the brief and analyze the cases, all those cases really
deal with disclosure violations or some violation which



            Tcrry Gribbcn's Transcription Service
                 Decision                         10
is asserted under truth in lending against a subsequent
holder, not for consumer fraud. Truth in lending was
the basis for those claims, not consumer fraud.
          And it's clear in SCOTT. It's clear in
TROUP, that the cause of action and the theory it's
permitted to proceed against a subsequent holder of a
retail agreement.
          THE COURT: The Court is satisfied from the
submissions before me that the following findings of
fact are derivable from the submission.
          On January 5th of this year, the plaintiff,
Jacqueline Pepe, speaking on behalf of her own behalf
and others, files a complaint against the Trust Company
of New Jersey, the North Fork Bank, Mitsubishi Motor
Credit of America, Inc. and some John Doe corporate
others.
          Ms. Pepe resides in Middletom Township. She
avers in her complaint that she entered into a
transaction that took place on the 30th of June, 2001
with an automobile dealership identified as Richard's
Imports of Freehold, Incorporated for her acquisition
or purchase of a 2000 Isuzu Rodeo.
          Plaintiff alleges in her complaint that the
vehicle was advertised in the Asbury Park Press, and
thereafter plaintiff approached Richard's Imports of



                  Decision                         11
Freehold concerning her desire to buy or acquire the
vehicle that was advertised in the paper.
           The plaintiff asserts in her complaint that
there was no price listed on the vehicle in question
contrary to the consumer fraud statute. And
ultimately, Ms. Pepe negotiates a price for the vehicle
and signs a buyer's order that indicates the price to
be $18,140; an additional $1,099.74 for the sales tax;
$173 for registration and title fee for the transfer of
the plates; an additional $289 for documentation fee
including a $20 Internet service, $25 for messenger
services, $89.50 for clerical services, $25 for notary
service, $7.50 for a GSS service fee and a seven-year
archiving of documents fee of $122.
           Plaintiff subsequently receives a retail
installment contract and alleges that there is a
discrepancy in the price of the contract of about
$1,000 or more. And she also alleges, all of this
being found in the complaint, that Richard's Imports of
Freehold failed to disclose that she was purchasing
certain items including, but not limited to a simonize
system, a guaranteed price refund program and a
preferred customer tire and wheel repair or replacement
guarantee.
          It is her contention that she was


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specifically told that these items were included in the
sale price of the vehicle. She asserts that the
defendant has charged her an inappropriate fee which
were not justified in the transaction including, but
not limited to the registration or title fee of $173
for transferring the plates, as well as the items in
the documentary fee including, but not limited to, the
Internet service of $20, a notary service of $25, the
GSS service fee of $7.50 and the archives storage fee
of $122.
          Plaintiff alleges that those fees are
inappropriate and improper under the New Jersey
Consumer Fraud Act, Plaintiff again, in her amended
complaint, indicates that the defendant Trust Company
of New Jersey succeeded to by North Fork Bank, was
licensed to do business in this jurisdiction as a
result of a corporate merger of the bank of The Trust
Company of New Jersey, into North Fork Bank that
occurred May 14th of 2004.
          Plaintiff's assertion is that North Fork is a
successor in interest to the Trust Company of New
Jersey and therefore would be subject to all the
liability established by the prior bank, if any.
          Plaintiff alleges that Mazda American Credit
and Ford Credit were New Jersey corporations that, to



                 Decision                             13
quote the complaint, "It is believed finance many
contracts for vehicles which were purchased by
consumers at Richard's Mazda."
          Plaintiff alleges that Mazda American Credit
and Ford Credit are holders of many retail installment
sales contracts for consumers who were defrauded by the
actions of Richard's Mazda.
          Plaintiff also alleges that, "it is also
believed that the other defendants, Trust Company o    f
New Jersey and North Fork Bank, have holder liability,
and as such, they are liable for the actions of
Richard's Mazda.
          Plaintiffs assert that North Fork Bank, Mazda
American Credit and Ford Credit are the holders of the
retail installment sales contract or contracts and are
contractually bound, as well as being statutorily bound
for the liability of the selling dealership for
allegatians and the liability and damages as averred in
the amended complaint.
          Citing the Court to ASSOCIATES HOME EQUITY
SERVICES, INC, versus TROUP, 343 New Jersey Superior
254 (Appellate Division, 2 0 0 1 ) . And SCOTT versus
MAYFLOWER HOME IMPROVEMENT CORPORATION, 155 New Jersey
Superior 585 (Law Division, 1998). The plaintiff also
cites to N.J.S.A. 17:lgC-38.2 which reads, "That any



            Teny Gribben's Transcription Service
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                           Decision                         14
          subsequent holder of a consumer note shall be subject
          to all claims and defenses of the retail buyer against
          the retail seller arising out of the transaction. But
          no such claim or defense may be asserted against such
          holder in excess of the time sales price under the
          retail installment contract for any sales except that
          in the case of the sale of a new motor vehicle, no
          claim or defense may be asserted against such holder in
          excess of the time balance under the retail installment
          contract."
                    Plaintiff originally started the lawsuit
          against Richard's Mazda about three years ago based
          upon similar factual allegations. That case then had
          as its docket, WN-L-1801-02.
                    On November 30th of last year, Judge Gilroy
          entered an order noting the action had been voluntarily
          dismissed without prejudice, and that then led to the
          filing in January of this year wherein the lawsuit was
          pursued against North Fork, the Trust Company of New
          Jersey and the entity known as Mitsubishi Motor Credit
          of America.
                    Plaintiff asserts three claims in her first
          amended complaint. The first count is directed at
          Richard's Mazdals overcharging. The second count
          targets improper document fees. The third count



                           Decision                          15
          targets Richard Mazdalsprice packing.
                    North Fork files a motion to dismiss on the
          basis that the attempt to hold North Fork liable under
          New Jersey's Retail Installment Sales Act fails as a
          matter of law. The defendant asserting that the
          reliance by the plaintiff on the Retail Installment
          Sales Act, the New Jersey Holder rule is misplaced
          because that statutory scheme is preempted by the
          Federal Truth in Lending Act which is 15 U.S. Code
          Service, paragraph 1601, et sec.
                    Defendant notes that the Retail Installment
          Sales Act states that any subsequent holder of such a
          consumer note relating to a retail installment contract
          shall be subject to all claims and defenses of the
          retail buyer against the retail seller arising out of
          the transaction.
                    It is the contention of North Fork that the
          Retail Installment Sales Act is in direct conflict with
          the Truth in Lending Act which Act provides that,
          "Except as otherwise provided in this chapter, any
          civil action or a violation of this subchapter which
          may be brought against a creditor may he maintained
          against an assignee of such creditor only if the
          violation for which such action or proceeding is
          brought is apparent on the face of the disclosure



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                   Decision                       16
statement except where the assignment was invol~ntauy.~
Citing 15 U.S. Code Service, paragraph 1641A.
          The Act also states that "a violation is
apparent on the face of the disclosure statement where,
       ah
1) it c s be determined to be incomplete or inaccurate
from the face of the disclosure statement or other
assigned documents, or 2) it does not use the terms
required to be used under this subchapter."
          Defendant argues that in light of the Federal
statute assignee has no obligation to inquire beyond
the face of the documents. Even if the assignee had
knowledge that a creditor's contract in practices may
otherwise violate the Truth in Lending Act. Citing
GREEN versus LEVIS MOTORS, INCORPORATED, 179 Federal
Third, 286 at 2 9 5 by the Fifth Circuit.
          Additionally, defendant notes that the
Federal law makes a clear distinction between creditors
and assignees under the Truth in Lending Act mainly
that creditors remain liable, but their subsequent
assignees da not. Defendants also argue that because
the State statute, Retail Installment Sales Act,
conflicts with the Federal statute with regard to the
scope of assignee liability, the Retail Installment
Sales Act must yield to the Truth in Lending Act.
          Defendant notes that under the Truth in



                  Decision                          17
Lending Act an assignee is shielded from liability when
the alleged disclosure violation is not apparent on the
face of the disclosure statement. Whereas, the New
Jersey Holder rule does not limit assignee liability to
those circumstances in which the violation is apparent
on the face of the disclosure statement. Citing
ALEXIOU versus BRAD BENSON MTTSUBXSWX, found at 17
Federal Supplement Second at page 557 by the District
Court of this District in the vear 2000.
           In a word, the ALEXI~Uholding is that the
schema that is found in the Retail Installment Sales
Act and the Truth in Lending Act are in irreconcilable
conflict because the T n t h in Lending Act greatly
limits the liability of assignees of retail installment
sales contracts while the New Jersey scheme leaves a
subsequent holder open to a far more expansive scope of
liability for the conduct of its assignor.
           Defendant also argues that plaintiff cannot
make out a consumer fraud claim against North Fork
'inasmuch as they rely on the Mew Jersey Holder rule to
hold North Fork liable under the Consumer Fraud Act.
Defendants noting that the Court in ALEXIOU found that
because the Truth in Lending Act preempted the New
Jersey Holder Rule, the bank could not be held liable
under New Jersey law as the dealership's assignee for
                 Decision                           18
purposes of the Consumer Fraud Act or any other state
law claims, and the Court ultimately, in ALEXIOU,
dismissed the Consumer Fraud Act cause of action.
          In addition, the defendant argues that
independent of the Holder Rule, lai in tiff cannot hold
North Fork vicariouslv liable under the consumer fraud
statute. Defendant nbtes that there is no authority
for the proposition that a mere assignee of a retail
installment's contract that had no dealings with the
consumer could be held liable under the Consumer Fraud
Act.
          Defendant also points out that plaintiff has
not alleged any unlawful conduct on the part of either
the trust company of New Jersey or North Fork. And
defendant also notes that imposing liability under the
Consumer Fraud Act to North Fork would conflict with
the Truth in Lending Act's limitations on assignee
liability and would not advance the purpose of the
Consumer Fraud Act.
          And defendant further asserts that they
cannot be held liable under any theory sounding in
contract because there is an absence of privity between
Ms. Pepe and either the Trust Company of New Jersey or
North Fork.
          On May 26th, the plaintiff files in



                 Decision                          19
opposition to the motion to dismiss arguing that the
defendant's argument that the Truth in Lending Act
prevents the application of the New Jersey consumer
fraud statute or State law claims is simply incorrect
asserting that since plaintiffs have never sought to
hold any defendant here liable under the Truth in
Lending Act that the defendant is not able to use a
Truth in Lending defense where a Truth in Lending claim
does not exist. Citing the court to SCOTT versus
MAYFLOWER HOME IMPROVEMENT CORPORATION, 363 New Jersey
Superior 145 (Law Division, 2001).
          Plaintiffs also note that the Court in TAYLOR
versus QUALITY IEUNDAI, INCORPORATED, 150 Federal Third
689, a Seventh Circuit case, 1998 cited by the
defendants dealt with the statutory defenses afforded
to assignees by paragraph 1641A and the FTC Holder
Rule.
          The Court in TAYLOR in noting that the FTC
Holder notice continues to allow a debtor to raise many
claims and defenses against the assignee that he or she
may have against the original seller. Paragraph 1641
limits only certain Truth in Lending Act claims.
          Plaintiff argues in this case that the Pepe
claims against the original seller, being Richard's
Mazda, have nothing to do with Truth in Lending Act


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                 Decision                          20
violations. They cite the Court to the unrewarded
opinion in GONZALES versus NORTH HUDSON DODGE AND
CHRYSLER CREDIT CORPORATION. Plaintiffs note that the
Court in GONZALES found that pursuant to 15 U.S. Code
Service, paragraph 1641, Chrysler did not have any
liability to the plaintiff or NORTM HUDSON DODGE'S
Truth in Lending Act violation, but found that Chrysler
did have liability to the plaintiff in that case for
NORTH HWDSON's failure to furnish a copy of the retail
installment sales contract to the retail buyer at the
time that the retail buyer signs the contract.
          Chrysler's liability in that case was
premised on the State Holder Rule set forth in N.J.S.A.
17:16C-38.2. Plaintiff also argues that the Federal
Trade Commission has promulgated a rule which required
the following language to be placed in all consumer
retail installment contracts. "Anv holder of this
consumer credit contract is subject to any claims and
defenses which the debtor could assert against the
seller of goods or services obtained pursuant hereto or
with the proceeds hereof, recovery hereunder by the
debtor shall not exceed amounts paid by the debtor
hereunder.   Citing the Court to 13 Code of Federal
Regulations, paragraph 433.2.
          This language, plaintiffs assert, require



                 Decision                         21
subsequent holders of commercial paper who purchased
the paper from the original creditor to be held equally
liable with the original creditor for any claims by the
debtor. Plaintiffs argue that the FTC Holder notice
does not limit a holder's liability to claims apparent
on che face of the assigned document. And they argue
that in this case the defendant, as a potential holder,
clearly had notice that if it accepted an assignment af
the retail installment contract arranged by Richard's
Mazda, it would be stepping into liability created by
the dealership.
          Plaintiffs also assert that discovery still
needs to be taken concerning the defendant's knowledge
of and participation in Ridhard's Mazdals fraudulent
schemes. Plaintiff argues that the Retail Installment
Sales Act requires that a copy of the contract be
furnished by a retail seller to a retail buyer at the
time that the buyer signs the contract, that such a
contract is designed as a consumer note under the Act
and any subsequent holder o a consumer note is subject
                           f
to all claims and defenses of a retail buyer against
the retail seller arising out of the transaction.
          Plaintiff also contends in its opposition
that the defendant's reliance upon W A N versus CHASE
MANHATTAN CORPORATION, is misplaced since it is a


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                 Decision                          22
Federal case having no precedential value in State
court. And the Court in RAMADAN only held that which
is apparent on the face of the retail contract can give
rise to assignee liability for a defendant's failure to
make disclosures as required by the Truth in Lending
Act.
          Plaintiff argues that in this case no truth
in lending allegations relating to a liability for
disclosures have been raised. And again, they cite the
Court to SCOTT versus MAYFLOWER HOME IMPROVEMENT
CORPORATION, 363 New Jersey Superior 145 (Law Division,
20011, a case that they claim to be directly applicable
here.
          In SCOTT, the assignee's contended that the
Truth in Lending Act barred claims against them by
consumers unless the violations of law are apparent on
the face of the loan instruments. The claims before
the Court were State law claims based upon State
consumer laws. And according to the SCOTT Court,
nothing in the Legislative history of the Truth in
Lending Act and its amendments suggests that Congress
intended to abolish the FTC rule in cases in which the
consumer's claim is brought under State rather than
Federal law.
          Plaintiffs also note that the Mew Jersey



                 Decision                            23
Supreme Court in LEMELLEDO versus BENEFICIAL MANAGEMENT
CORPORATION OF AMERICA, 150 New Jersey 255 at 270,
indicated that in order to overcome the presumption
that the Consumer Fraud Act applies to a covered
activity, the Court must be satisfied that a direct and
unavoidable conflict exists between the application of
the Consumer Fraud Act and the application of the other
regulatory scheme.
          Plaintiff asserts that in this case, the
assignee could not overcome the presumption that the
Consumer Fraud Act applies, and if any conflict does
exist, it is not patent and sharp.
          On June 6th, 2 0 0 4 the Bank filed a reply to
plaintiff's opposition arguing that plaintiff
improperly attempts to salvage the complaint by
recasting the nature of her claims. Defendant noting
that the first amended complaint is based solely on a
theory that Richard's Mazda failed to disclose the
nature of certain fees in connection with the
transaction and that North Fork and Trust Company are,
as assignees, are liable for those nondisclosures.
          Defendant argues that these nondisclosures
constitute the only wrongful conduct alleged in the
first amended complaint. Defendants note that
plaintiffs contend that because the Truth in Lending



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                 Decision                         24
Act's limitation on assignee liability is applicable
only in the context of claims for disclosure violations
brought under the Truth in Lending Act itself. And
defendant argues that nothing in the Truth in Lending
Act reflects Congress's intent to limit the scope of
the protection it afforded to assignees when it amended
the statutory scheme.
          Defendant notes that the Truth in Lending Act
expressly provides in its provision, "do not annul,
alter or affect the laws of any state relating to the
disclosure of the terms of consumer credit transactions
except to the extent that those State laws are
inconsistent with the provisions of the Act and then
only to the extent of the inconsistency. See 1 5 U.S.
Code Service, paragraph 1 6 1 0 , subparagraph A.
          Defendant argues that the Truth in Lending
Act annuls any inconsistent State law. Defendants
argue that the Truth in Lending Act expressly applies
beyond the confines of Truth in Lending Act base claims
and will preempt any State law to the extent that the
latter conflicts with the former and that the
limitation liability reflected in Section 1641A was
intended to shield lenders from liability for all
disclosure violations other than those which are
apparent on the face of the assigned disclosure



                  Decision                          25
document.
          Defendant notes that plaintiff has not
articulated any viable theory of liability under the
Consumer Fraud Act. Defendant asserts that they
engaged in no conduct for which they could be held
directly liable under the New Jersey Consumer Fraud
statute.
          Plaintiffs also are chastised, if you will,
by the defendant by not citing a single allegation in
the first amended complaint to support the conclusion
that either North Fork or its predecessor engaged in a
deceptive act against Ms. Pepe.
          The defendant/movant argues that they cannot
be held liable as mere assignees who had no interaction
with the plaintiff. Defendant notes that plaintiff's
argument essentially is that North Fork and the Trust
Company are derivatively liable under the Consumer
Fraud statute pursuant to the holder in due course
contract language and holder in due course law that has
developed both on a Federal and State level.
          Defendant argues that the application of
either the New Jersey Holder Rule or the Federal Holder
Rule as the basis for imposing derivative liability
upon the assignees under the Consumer Fraud Act, would
expose the defendants to greater liability than that


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                            Decision                          26
           which is permitted under the Truth in Lending Act.
                     Again, defendants note that under plaintiff's
           theory of liability, the Trust Company of New Jersey
           and it successor North Fork, should be held liable for
           failing to inquire into the veracity of the disclosures
           made by Richard's Mazda, and that the Truth in Lending
                        impose such a duty to investigate.
           Act does n ~ t
                     Defendant argues that the fact that they
           could be simultaneously liable under the Consumer Fraud
           Act and not liable under the Truth in Lending Act for
           the same conduct, is the essence of the concept of
           conflict preemption.
                     Defendant also argues that plaintiff has
           misconstrued the cited case laws, specifically in
           ALEXIOU, defendant argues that the assertion that the
           question of whether assignees may be sued under a State
           law theory was never addressed is incorrect since
           defendant asserts that this case addressed that issue
           and resolved it in the defendant's favor.
                     With regard to RAMADAN, defendant argues the
           significance of that case is that the Third Circuit
           found a clear irreconcilable canflict between the
           Federal Holder Rule and the Truth in Lending Act and
           held that the Holder Rule cannot trump the Truth in
           Lending Acts assignee liability mandates.



                            Decision                          27
                     In TAYLOR, the defendants assert that the
           Court actually held that the claims unrelated to
           disclosure violations, that is a lemon law violation,
           were not necessarily preempted by the Truth in Lending
           Act. However, defendants also argue that nothing in
           TAYLOR stands for the proposition that a State law
           claim based on disclosure violation relating to a
           consumer credit transaction can trump the Truth in
           Lending Act's limitation on assignee liability.
                     In the SCOTT decision, defendant notes that
           the case is a Law ~ivision case only, not binding on
           this Court, but nonetheless defendant argues that it is
           not clear whether the SCOTT Court even addressed the
           Federal preemption issue and says that in addition the
           SCOTT case is flawed in two other areas. First is the
           Court's emphasis there on the Federal Holder Rule and
           the deemphasis on the plain language of the Truth in
           Lending Act.
                     Second, defendant argues that SCOTT does not
           reference either ALEXIOU or WA M and asserts that
                                         I D
           the facts in SCOTT are distinguishable from the facts
           here because the plaintiff in SCOTT sought recision of
           the underlying contract where plaintiff here seeks
           monetary damages under the Consumer Fraud Act.
                     With regard to the opinion in GORZPLLES,



                       Terry Gribben's Transcription Service
                 Decision                          28
defendant argues that $he GONZALES Court did not
address the issue of whether the Truth in Lending Act's
limitation on assignee liability preempts State law.
It is also argued that GONZALES is an unpublished pro
curiam opinion, that they are not deemed binding
precedent or binding on this Court.
          With regard to the citation of SINPSON, the
defendant points out that they did not involve claims
based upon disclosure violations in the context of a
consumer credit transaction since the allegations there
were of State and Federal law violations relating to
                       f
the illegal roll back o odometers.
          With regard to the decision in ASSOCIATES
HOME EQUITY, defendant argues that the Federal
preemption doctrine was not even addressed in that
case, and appears not to have been raised by the
parties because the claims in that case did not involve
disclosure violations concerning a consumer credit
transaction, but rather involved the defendant's
predatory discrimatatory lending practices.
          Defendant argues that there is nothing in
ASSOCIATES HOME EQUITY to suggest that the Appellate
Division found that State law claims based upon
disclosure violations are viable notwithstanding
conflicting Truth in Lending Act provisions limiting



                 Decision                         29
assignee liability.
          And in LEMELLEDO, defendant asserts that the
issue is whether certain State agency regulations
trumped the Consumer Fraud Act or whether the Act
applies to industries that are already regulated by
State agencies. However, there is no discussion of
preemption of State law by a Federal statute in that
opinion.
          The standard that the Court must apply when
considering a motion to dismiss for failure to state a
claim under Rule 4:6-2(e) is that the Court is
obligated to search the complaint in depth, do so with
liberality, to determine if a cause of action can be
gleaned even from an obscure statement of claim. And
that comes from the what has become now the seminal
case on this topic PRINT MART versus SHARP ELECTRONICS,
160 New Jersey beginning at page 739, decided by the
Court in 1989.
          The following constitutes my analysis.
Congress has the power to preempt State laws when it
chooses to do so. That power is given to the Congress
by virtue of a provision. In the Constitution, it's
Article VI, Clause 11, Federal Paw may preempt State
law either by expressed provision, by implication or by
a conflict between Federal and State law. See NEW YORK



            Terry Gribben's Transcription Service
                     Decision                           30
1   STATE CONFERENCE OF BLUE CROSS AND BLUE SHIELD PWlsNS
2   AND OTHERS versus TRAVELER'S I N S M C E COMPANY, 514
3   U.S. 645 at 654 decided by the Supreme Court of the
                                    -


    United States in 1995.
              Congress has expressly addressed the issue of
    when the Truth in Lending Act preempts related State
    laws by stating, "This subchapter does not annul, alter
    or affect the laws of any state relating to the
    disclosure of information in connection with credit
    transactions except," -- emphasis added, --   "to the
    extent that these laws are inconsistent with provisions
    of this subchapter and then only to the extent of the
    inconsistency." 15 U.S. Code Service at 1610
    Subparagraph AZ.
              This language clearly indicates that Congress
    only intended to preempt State laws that conflict with
    provisions of the Truth in Lending Act. See MORALES
    versus TRANS WORLD AIRLINES, INCORPORATED, 504 U.S. 374
    decided by the Supreme Court of the United States in
    1992. Where a Federal statute requires inconsistency
    in order for it to preempt State law, the Federal
    statute cannot be one which preempts the field. State
    and Federal laws are inconsistent when compliance with
    both Federal and State regulations is a physical
    impossibility or when State law stands as an obstacle



                     Decision                           31
    to the accomplishment and the execution of the full
    purposes and objects of Congress. See FIDELITY FEDERAL
    SAVINGS AND LOAN versus DeLaCWESTA 458 U , S . 141,
    decided by the Court in 1982.
              The Truth in Lending Act in pertinent part
    reads as follows. It says, nExcept as otherwise
    specifically provided far in this subchapter, any civil
    action for a violation of this subchapter or a
    proceeding under Section 1607 of the title, which may
    be brought against a creditor may be maintained against
    any assignee of such creditor only if the violation for
    which such action o r proceeding is brought is apparent
    on the face of the disclosure statement except where
    the assignment was involuntary."
              Section 1501A further explains that a
    violation apparent on the face of the disclosure
    statement includes, but is not limited to, I f a
    disclosure which can be determined to be incomplete or
    inaccurate from the face of the disclosure statement or
    other dacuments assigned, or 2) a disclosure which dues
    not use the terms required ta be used by the
    subchapter.
              The Retail Installment Sales Act of this
    state found at N.J.S.A. 17:16C-38.2 reads as follows.
    It says, "Any subsequent holder of a consumer note
                 Decision                          32
shall be subject to all claims and defenses of the
retail buyer against the retail seller arising out of
the transaction, but no such claim or deZense may be
asserted against such holder in excess of the time
sales price under the retail installment contract for
any sale except that in the case of the sale of a new
motor vehicle no claim or defense may be asserted
against such holder in excess of the time balance under
the retail installment contract."
          In ALEXIOU versus BRAD VINCENT MITSUBISHI,
127 Federal Supplement Second at 557, buyers of
automobiles brought an action against the seller and
also against the bank as the assignee of retail
installment sales contracts alleging violations of the
Truth in Lending Act and the New Jersey law including a
claim under the New Jersey Consumer Fraud Acts.
          The plaintiffs in ALEXIOU relied upon the New
Jersey Retail Installment Sales Act in their
allegations against the Bank. The Court in ALEXIOU
noted that because the Bank is an assignee of
plaintiff's loans, the viability of all State law
claims against the Bank hinges on whether the Bank can
be held liable as an assignee under the New Jersey
Holder Rule.
          Ultimately, the ALEXlOU Court held that the



                     Decision                         33
New Jersey Holder Rule is preempted by the Federal
t r v t h in lending provision on assignee liability and
therefore, the bank could not be held liable as an
assignee of the plaintiff's retail installment
contracts.
              The ALEXIOU Court reasoned that because the
Third Circuit has instructed that the FTC Holder Rule
is inconsistent with Paragraph 1641A of the Truth in
Lending Act, and thus preempted by 1641A of the Truth
in Lending Act, it follows that the State Holder Rule
is similarly inconsistent and preempted by 1641A to the
extent that that Rule is inconsistent with 1641A.
              The Court also noted that because the New
Jersey rule puts an additional burden on creditors the
State law is contrary to the intent of Congress in
enacting the Truth in Lending Act and its amendments
and stands as an obstacle to the accomplishment and
execution of the full purpose and objectives of the
Congress.
              In the case at hand, plaintiff alleges that
North Fork and Trust Company have holder liability.
And as such, are liable for the actions of Richard's
Mazda on the basis of the New Jersey Retail Installment
Act as well as the citation to both ASSOCIATES HOME
EQUITY and SCOTT.


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                Teny Gribben's Transcription Service
                 Decision                         34
          Plaintiffs assert that North Fork and its
predecessor are holders of retail installment contracts
for consumers who were defrauded by the actions of
Richard's Mazda. Plaintiffs allege that there was no
price listed on the vehicle purchased contrary to the
Consumer Fraud Act and that the defendant, Richard's
Mazda, failed to disclose certain items to Ms. Pepe
that she was purchasing including, but not limited to,
a guaranteed price refwd program and a preferred
customer tire and wheel repair guarantee.
          It is abundantly clear that the plaintiff is
asserting that North Fork and Trust Company are liable
to Pepe through the New Jersey Retail Installment Sales
Act for Richard Mazda's alleged failure to disclose and
other related consumer fraud acts.
          Plaintiff's claims are not based upon the
face of the installment contract. And therefore, this
Court needs to determine whether the New Jersey Retail
Installment Sales Act conflicts with the Truth in
Lending Act. That issue has already been decided. I'm
satisfied that ALEXIOU constitutes good law. And the
clear import of that decision is that the New Jersey
Retail Installment Sales Act is preempted by the
Federal Truth in Lending Act provision.
          And it does so on the basis of the two



                 Decision                         35
statutes being inconsistent and that the New Jersey
statute places an additional burden on creditors and
that is contrary to the intent of the Congress in
enacting the Truth in Lending statute.
          Plaintiffs argue that since they never sought
to hold the defendant liable, under the Truth in
Lending Act statute, that the defendant is unable to
assert a Truth in Lending Act defense. That argument
is made. However, the decisions that this Court has
cited, both RAMADAN and ALEXIOU, stand clearly for the
proposition that the Federal Truth in Lending Act is
available, and as I have indicated earlier, the case
law, ALEXIOU and RAMADAN, have held that the Truth in
Lending Act provision that limits liability of a
creditor's assignee to situations solely where the
violations are apparent on the face of the disclosure
statement causing a preemption of the New Jersey Retail
Installment Sales Act which is the very setting that is
here, che very setting that was before the Court in
both RAMADAN and ALEXIOU.
          And for these reasons, I am satisfied that
the moving party, the Bank, North Fork and it's
predecessor, is entitled to have the complaint
dismissed for the reasons I've articulated. My hope is
that by Monday or Tuesday of the week we'll get the



            Teny Gribben's Transcription Service
                 Decision                          36
orders all processed, in the mail and to you.
          MR. RUDNICK: Your Honor, as a practical
matter, I know the other entities, Ford Credit and
Mazda Credit have not made the motion, but now it's the
law of the case. You might as well dismiss against all
of the defendants rather than having them to file
another motion or, - - I know there is a pending motion,
but this would obviously moot the necessity of the
other motion.
          THE COURT: My suggestion would be that Ms.
Caldwell simply submit an order based upon what counsel
has said here at the end of the oral argument, and I
will include it with the sign off of the other order.
          MS. CUDWELL: Thank you, Your Honor.
          THE COURT: Thank you all.
          MR. GYVES: Thank you, Your Honor.
              *                   *                     *




                                                              37
                         CERTIFICATION
          I, TRACY GRLBBEN, Certified, Agency Director/
Transcriber do hereby certify that the foregoing
transcript of proceedings on copied Tape Number
CV-219-05, Index 1012 to 4614, is prepared in full
compliance with the current Transcript Format far
Judicial Proceedings and is a true and accurate
compressed transcript of the proceedings as recorded in
the matter of PEPE v s . TRUST COMPANY OF NEW JERSEY
heard by the Manmouth County Superior Court on June 10,
2005.

                                                    /
                                                 AOC Number

TERRY GRXBBEN'S TRANSCRIPTION SERVICE




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