On Appeal from the United States District Court for the District of New Jersey (D.C. Civ. No. 94-01875)
BEFORE: GREENBERG, COWEN, and SAROKIN, Circuit Judges
GREENBERG, Circuit Judge.
(Filed: September 12, 1995)
This appeal requires us to address whether rent-to-own agreements which are terminable at any time without additional charges fall under the purview of the Truth in Lending Act (TILA), 15 U.S.C. Section(s) 1601 et seq. The district court, relying primarily on a Federal Reserve Board regulation, concluded that they do not. The court therefore granted the lessor's motion to dismiss the federal count of the complaint, declined to exercise jurisdiction over the supplemental state claims, and remanded the case to the Superior Court of New Jersey. Because we agree with the district court, we will affirm its judgment.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Appellant Naomi Ortiz, the named plaintiff in this putative class action, entered into a rental agreement to lease a sofa and a love seat from appellee Rental Management, Inc. (RMI) in November 1992. The rental agreement specified that Ortiz at her option could make rental payments on any one of four schedules:
- weekly payments of $28.49;
- biweekly payments of $56.98;
- semi-monthly payments of 61.72; or
- monthly payments of $108.63.
The agreement also required her to pay an initial charge of $113.63 for delivery of the furniture, and established a delinquency charge of $5.00 for late payments. Ortiz generally followed the weekly payment plan, although she exercised her option to make some biweekly payments in the summer and fall of 1993. The rental agreement provided that Ortiz could cancel it at any time and return the furniture without further obligation. It also stated that if she made 78 weekly payments or 18 monthly payments (periods that differ in duration by no more than a couple of days), she would own the sofa and love seat. Thus, the agreement is characterized as a rent-to-own (RTO) agreement.
After making about 70 weekly payments -- eight payments less than the number required to transfer ownership of the property to her -- Ortiz ceased making payments, though according to RMI's representations at oral argument before us, she retains possession of the furniture. Instead, on April 13, 1994, she filed this class action in the Superior Court of New Jersey alleging that in offering the RTO agreement, RMI violated the TILA by failing to comply with certain of its disclosure requirements. In support of her claim Ortiz alleged that the wholesale price of the furniture was $380.00, far less than the total amounts in weekly payments required for her to acquire title to the furniture and far less than the amount she had paid at the time she filed the lawsuit. *fn1 She characterizes the difference in the two amounts as a finance charge and based on this ...