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STEWART v. ASSOCIATES CONSUMER DISCOUNT CO.

April 15, 1998

TAMI M. STEWART
v.
ASSOCIATES CONSUMER DISCOUNT COMPANY, ASSOCIATES INSURANCE COMPANY AND ASSOCIATES FINANCIAL SERVICES COMPANY, INC.



The opinion of the court was delivered by: JOYNER

MEMORANDUM AND ORDER

 JOYNER, J.

 April 15, 1998

 This class action lawsuit is presently before the Court for disposition of the Rule 12(b)(6) motion of the Defendants to dismiss Counts VI and VII of Plaintiff's complaint for failure to state claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et. seq. For the reasons which follow, defendants' motion is denied.

 History of the Case

 Plaintiff is Tami Stewart, a resident of Schuylkill County, Pennsylvania, who in October, 1994, owed approximately $ 23,000 on her home mortgage with Schuylkill Savings and Loan Association, and another $ 23,000 in installment credit obligations to various other lenders, including $ 1,000 to defendant Associates Consumer Discount Company ("Discount"). At about this same time, plaintiff was looking to refinance her mortgage and consolidate her other debts. Plaintiff avers that she was contacted by defendant Discount and repeatedly told that Discount would refinance its loan and all of plaintiff's other debts at a rate that was better than any rate which could be obtained from a competing lender and that its closing costs were lower than those of any of its competitors. Plaintiff subsequently entered into an agreement with Discount to refinance the first mortgage on her home in Schuylkill Haven, PA, together with her other debts at a rate of 9.8% per year for ten years with resulting payments of approximately $ 421 per month.

 Unbeknownst to plaintiff and despite Discount's repeated assurances that the proceeds from the refinancing would be used to pay off her existing mortgage to Schuylkill Savings and her other outstanding debts, the loan on which she closed with Discount on November 30, 1994, was classified as a consumer loan with an interest rate of 15.08% and was not used to retire the loan to Schuylkill Savings and Loan. Instead, Discount secured its loan to plaintiff with a second mortgage lien against her residence. Plaintiff further avers that the principal balance of her loan was determined solely by Discount and was in excess of the amount required to repay plaintiff's home improvement, motor vehicle and other consumer credit debts but not sufficient to retire those obligations along with her existing mortgage. However, when plaintiff attempted to question Discount about these facts and the higher rate of interest, she was told only that the company computed interest in a different manner for principal and finance charges which caused a higher interest rate to be shown and that it would be sending a check directly to Schuylkill Savings and Loan subsequent to closing because of the large amount and nature of the loan.

 Plaintiff alleges that these lending practices and Defendant's requirement that plaintiff purchase "Lender's Security Insurance" and $ 100,000 of "Credit Life Insurance" through its affiliate, Associates Insurance Company, which are in reality nothing more than additional finance charges are unlawful, fraudulent and part of ongoing racketeering activity and conspiracy between the defendants. As a result of defendants' conduct, plaintiff avers that she has now incurred additional debt and financial obligations which she cannot pay. Ms. Stewart seeks actual, statutory, treble and punitive damages on behalf of herself and all other persons similarly situated under theories of Fraud and Deceit (Count I), Unlawful Finance Charges in violation of 41 P.S. § 101, et. seq. (Count II), Unjust Enrichment (Count III), Conspiracy (Count IV), Breach of Warranty (Count V), Racketeer Influenced and Corrupt Organizations Act, ("RICO"), 18 U.S.C. §§ 1962(c) and (d) (Counts VI and VII), Violation of the Truth in Lending Act, 15 U.S.C. § 1600, et. seq. (Count VIII) and for Violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-2, et. seq. (Count X)(sic).

 Defendants move to dismiss Counts VI and VII which allege claims under RICO on the grounds that the complaint fails to allege, inter alia, (1) a RICO enterprise which is separate and distinct from the RICO persons, (2) that the defendants acted through the alleged enterprise or (3) that the defendants committed two or more predicate acts of racketeering activity.

 Standards Governing Rule 12(b)(6) Motions

 The rules governing the pleading of cases in the district courts are clear. Under Fed.R.Civ.P.8(a),

 "A pleading which sets forth a claim for relief, whether an original claim, counterclaim, cross-claim, or third-party claim, shall contain (1) a short and plain statement of the grounds upon which the court's jurisdiction depends, unless the court already has jurisdiction and the claim needs no new grounds of jurisdiction to support it, (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks. Relief in the alternative or of several different types may be demanded.

 It is equally clear that the issue of the sufficiency of a pleading may be raised by the filing of a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6) or through a motion for a more definite statement under Rule 12(e). In resolving a Rule 12(b)(6) motion, the court primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case and exhibits attached to the complaint may also be taken into account. Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3rd Cir. 1990). In so doing, the court must accept as true the facts alleged in the complaint, together with all reasonable inferences that can be drawn therefrom and construe them in the light most favorable to the plaintiff. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3rd Cir. 1990); Hough/Loew Associates, Inc. v. CLX Realty Co., 760 F. Supp. 1141 (E.D.Pa. 1991). The court's inquiry is directed to whether the allegations constitute a statement of a claim under Rule 8(a) and whether the plaintiff has a right to any relief based upon the facts pled. Dismissal under Rule 12(b)(6) for failure to state a claim is therefore limited to ...


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