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RIETHMAN v. BERRY

September 15, 2000

HAROLD C. RIETHMAN, ET AL., PLAINTIFFS,
V.
ISOBEL BERRY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Eduardo C. Robreno, Judge.

MEMORANDUM

I. INTRODUCTION

In this case, the court is called upon to interpret two (2) statutes designed to cover consumer credit transactions in the context of an attorney-client relationship. The plaintiffs, Harold C. Riethman and Vicki A. Hagel, husband and wife ("plaintiffs"), brought this action against the defendants, Isobel Berry, David Culp, and Berry and Culp, P.C. (collectively "defendants"), two (2) attorneys and their law firm, alleging violations of the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C.A. § 1691 et seq. and the Truth In Lending Act ("TILA"), 15 U.S.C.A. § 1601 et seq. and asserting various state law claims. TILA is a disclosure statute primarily designed to ensure that a potential debtor is provided with all pertinent information. On the other hand, ECOA is an anti-discrimination statute which prohibits creditors from discriminating in the extension of credit.

Plaintiffs allege that defendants violated ECOA by requiring plaintiff Hagel to co-sign a fee agreement which plaintiff Riethman had already signed without first determining that plaintiff Riethman was unable to comply with the terms of the fee agreement. Plaintiffs allege that defendants violated TILA by, inter alia, imposing an interest charge on unpaid legal fees without providing accompanying disclosures required by TILA. At the completion of discovery, defendants filed a motion for partial summary judgment on plaintiffs' ECOA and TILA claims. Because defendants are not "creditors" subject to either ECOA or TILA, defendants' motion will be granted.

II. FACTS

The following facts are uncontested or viewed in the light most favorable to plaintiffs. Beginning in February, 1995, defendants provided legal representation to plaintiff Riethman in both divorce litigation and a resulting child custody dispute. According to a fee agreement dated February 20, 1995 ("the 1995 agreement"), defendants were to bill plaintiff Riethman on a monthly basis, and plaintiff Riethman was required to pay all outstanding bills in full within thirty (30) days. In May, 1998, prior to resolution of his custody dispute, plaintiff Riethman became financially unable to comply with the terms of the 1995 agreement. At the request of plaintiff Riethman, defendants agreed to modify the 1995 agreement to create a payment plan for plaintiff Riethman ("the 1998 agreement"). Under the 1998 agreement, plaintiff Riethman was required to make an initial payment of $1,000.00 and monthly payments of at least $500.00 until his outstanding balance was paid in full. The 1998 agreement also imposed an interest charge of 18% "per annum" on any unpaid balance. Initially, only plaintiff Riethman signed the 1998 agreement. Later, upon defendants' request, plaintiff Hagel also co-signed the 1998 agreement.

In September, 1998, during plaintiff Riethman's custody trial, plaintiffs received a bill from defendants in an amount exceeding $26,000.00 for services rendered in connection with one day of the custody trial. According to plaintiffs, defendants had previously estimated that the cost for the entire custody trial would be approximately $13,000.00. Plaintiff Riethman, in turn, requested that defendants reduce their $26,000.00 bill. Defendants declined and refused to perform further services for plaintiff Riethman until they were paid in full. Plaintiffs responded by initiating this lawsuit.

Plaintiffs claim that by requiring plaintiff Hagel to co-sign the 1998 agreement without first determining that plaintiff Riethman was unable to comply with the terms of the 1998 agreement, defendants discriminated against plaintiff Riethman based upon his marital status in the extension of credit, in violation of ECOA. Plaintiffs also contend that defendants violated TILA by including a finance charge in the 1998 agreement without providing the requisite TILA disclosures. Under TILA a creditor who imposes a finance charge on the extension of credit must provide the debtor with certain information about the finance charge. According to plaintiffs, the interest charge contained in the 1998 agreement is a finance charge under TILA which is not accompanied by the required disclosures.

In response to plaintiffs' claims, defendants simply argue that they do not "regularly" extend "credit" to their clients, and therefore, they are not "creditors" subject to either ECOA or TILA.

III. LEGAL STANDARD

Summary judgment is appropriate if the moving party can "show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Where the movant is the party bearing the burden of proof at trial, it must come forward with evidence entitling it to a directed verdict. Paramount Aviation Corp. v. Augusta, 178 F.3d 132, 146 (3d Cir. 1999), cert. denied, 120 S.Ct. 188 (1999). When ruling on a motion for summary judgment, the court must view the evidence in the light most favorable to the non-movant. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348 (1986). The court must accept the non-movant's version of the facts as true, and resolve conflicts in the non-movant's favor. See Big Apple BMW, Inc. v. BMW of N. Amer., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied, 507 U.S. 912, 113 S.Ct. 1262 (1993).

The moving party bears the initial burden of demonstrating the absence of genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548 (1986). Once the movant has done so, however, the non-moving party cannot rest on its pleadings. See Fed.R.Civ.P. 56(e). Rather, the non-movant must then "make a showing sufficient to establish the existence of every element essential to his case, based on the affidavits or by depositions and admissions on file." Harter v. GAF Corp., 967 F.2d 846, 852 (3d Cir. 1992); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505 (1986).

IV. ANALYSIS

The issue of whether defendants are "creditors" subject to ECOA and TILA requires the court to inquire into defendants' customary billing practices. Plaintiffs point to fee agreements ("the fee agreements") covering a two (2) year period for several of defendants' present and former clients which require all outstanding bills to be paid in full either immediately or within thirty (30) days. The fee agreements, however, provide that an interest charge will be imposed on any unpaid balance. Plaintiffs also point to billing invoices which indicate that for five (5) clients out of a group of ten (10), defendants continued to perform legal services on behalf of those clients even after they ...


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