Ramadan v. Chase Manhattan Corp.

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit

10-6-2000

Ramadan v. Chase Manhattan Corp
Precedential or Non-Precedential:

Docket 99-5709

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Filed October 6, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-5709

SUSANNE H. RAMADAN, on her own behalf
and on behalf of all others similarly situated

v.

THE CHASE MANHATTAN CORPORATION;
HYUNDAI MOTOR FINANCE CO.

Susanne H. Ramadan, Appellant

On Appeal from the United States District Court
for the District of New Jersey
D.C. Civil Action No. 96-cv-03791
(Honorable Maryanne Trump Barry)

Argued: June 1, 2000

Before: SCIRICA and NYGAARD, Circuit Judges,
and POLLAK, District Judge*

(Filed: October 6, 2000)

ANDREA BIERSTEIN, ESQUIRE
(ARGUED)
Kirby, McInerney & Squire
830 Third Avenue, 10th Floor
New York, New York 10022

Attorney for Appellant

_________________________________________________________________
* The Honorable Louis H. Pollak, United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
 WALTER J. FLEISCHER, JR.,
ESQUIRE (ARGUED)
Drinker, Biddle & Shanley
500 Campus Drive
Florham Park, New Jersey
07932-1047

Attorney for Appellee,
Hyundai Motor Finance Co.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

This appeal requires us to apply the Truth in Lending
Act's assignee liability provisions in light of contract
language required by regulatory fiat and to determine the
parameters of assignee liability under the TILA. Asserting a
violation of the Truth in Lending Act, 15 U.S.C.S 1601 et
seq., plaintiff alleges she was harmed by deceptive lending
practices of a dealer from whom she purchased an
automobile. Plaintiff seeks to recover against Hyundai
Motor Finance Co., the assignee of her finance agreement,
rather than against the automobile dealer. Three Circuit
Courts of Appeals have encountered nearly identical TILA
claims and all have concluded plaintiffs could not state a
claim.1 Following those courts, the District Court granted
Hyundai's motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6). We will affirm.

I.

We have jurisdiction under 28 U.S.C. S 1291. We exercise
plenary review over a district court's order dismissing a
complaint under Fed. R. Civ. P. 12(b)(6). See, e.g., Port
Authority v. Arcadian Corp., 189 F.3d 305, 311 (3d Cir.
1999); Alexander v. Whitman, 114 F.3d 1392, 1397-98 (3d
Cir. 1997). In conducting our review, we must
_________________________________________________________________

1. See Green v. Levis Motors, Inc., 179 F.3d 286 (5th Cir. 1999); Ellis v.
GMAC, 160 F.3d 703 (11th Cir. 1998); Taylor v. Quality Hyundai, Inc.,
150 F.3d 689 (7th Cir. 1998).

2
 determine if plaintiff may be entitled to relief under any
reasonable reading of the pleadings, assuming the
truth of all the factual allegations in the complaint. . . .
A court may dismiss a complaint only if it is clear that
no relief could be granted under any set of facts that
could be proven consistent with the allegations.

Alexander, 114 F.3d at 1398 (citations omitted).

II.

As noted by the District Court, the facts in this case are
uncomplicated.2 Ramadan purchased a used Hyundai for
$4,238.50 from automobile dealer Bob Ciasulli, Inc. 3
Plaintiff also purchased an extended warranty contract for
$998.00. Because she purchased on credit, the sale was
achieved through a Retail Installment Contract ("RIC").4
Hyundai provided the RIC form to the dealer.
Contemporaneous with its execution, the RIC was assigned
to Hyundai Motor Finance Corp.

At the time the RIC was assigned to Hyundai, other loan
documents were also transmitted, among them an
accounting of payments made under the RIC, which
plaintiff alleges "reveal the true cost of the warranty, the
actual amount paid to the issuer and the payment of the
undisclosed finder's fee." Compl. at P29. Plaintiff also
alleges Hyundai "issue[d] the checks or credits in payment
for the warranty and in payment for the commission or
finder's fee." Id.
_________________________________________________________________

2. This is the second time this case has been before this court. The first
time, we determined the TILA statute of limitations provision was subject
to equitable tolling. See Ramadan v. The Chase Manhattan Corp., 156
F.3d 499, 504 (3d Cir. 1998).

3. Plaintiff is attempting to bring suit on her own behalf and on behalf
of those similarly situated. See Compl. atP1. The District Court made no
determination with respect to the class action aspects of this case.

4. Plaintiff signed three different RICs in connection with the sale. See
Ramadan v. Chase Manhattan Corp., 973 F. Supp. 456, 457 (D.N.J.
1997). Despite semantic differences, all three are alleged to have
contained the same TILA violating provision. See id. For the sake of
clarity, we will treat this as if plaintiff signed one RIC containing the
alleged misrepresentation, which was then assigned to Hyundai.

3
The RIC contained a provision which itemized "Other
Charges Including Amounts Paid to Others on Your Behalf "
and stated $998.00 had been paid for a service contract.
Ramadan alleges an undisclosed amount of that figure was
retained by the dealer without her knowledge in violation of
the TILA. Given the nature of review of a motion made
under Fed. R. Civ. P. 12(b)(6), we must accept plaintiff 's
assertion as true.

Central to this case are two provisions--TILA's assignee
liability rule and a Holder Notice required by Federal Trade
Commission regulations. The TILA section which governs
assignee liability provides:

Except as otherwise provided in this subchapter, any
civil action for a violation of this subchapter . . . which
may be brought against a creditor may be maintained
against any assignee of such creditor only if the
violation for which such action or proceeding is
brought is apparent on the face of the disclosure
statement, except where the assignment was
involuntary. For the purposes of this section, a
violation apparent on the face of the disclosure
statement includes, but is not limited to (1) a
disclosure which can be determined to be incomplete
or inaccurate from the face of the disclosure statement
or other documents assigned, or (2) a disclosure which
does not use the terms required to be used by this
subchapter.

15 U.S.C. S1641(a) (emphasis added). In accord with FTC
rules, see 16 C.F.R. S433.2(a) (1997), the RIC also
contained a Holder Notice, which stated:

NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT
CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR COULD ASSERT
AGAINST THE SELLER OF GOODS AND SERVICES
OBTAINED PURSUANT HERETO OR WITH THE
PROCEEDS HEREOF. RECOVERY HEREUNDER BY
THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID
BY THE DEBTOR HEREUNDER.

The proper understanding of these two provisions lies at
the heart of this case. Holding the TILA assignee liability

4
provision rather than the Holder Notice governed the
action, the District Court held plaintiff could not state a
claim under 15 U.S.C. S1641(a) because there was no
"violation apparent on the face of the disclosure document."
See Ramadan v. Chase Manhattan Corp., No. 96-3791, slip
op. at 6-8 (D.N.J. Aug. 4, 1999). Lacking guidance from our
circuit, the District Court adopted the views of the three
United States Courts of Appeal that have addressed similar
claims. The Courts of Appeals for the Seventh, Eleventh
and Fifth Circuits have all concluded in situations similar
to those presented here that an assignee could not be held
liable under the TILA. See Green, 179 F.3d at 286; Ellis,
160 F.3d at 703; Taylor, 150 F.3d at 689. 5

III.

Ramadan contends S 1641(a) encompasses her claim that
the TILA violation here was apparent on the face of the
disclosure statement as that concept is statutorily defined.
She also asserts Hyundai is liable because it expressly
assumed assignee liability by including the Holder Notice
clause in the RIC.

A.

As noted, the TILA imposes assignee liability only if a
violation is "apparent on the face of the disclosure
statement." Section 1641(a) further explains:"a violation
apparent on the face of the disclosure statement includes,
but is not limited to (1) a disclosure which can be
determined to be incomplete or inaccurate from the face of
the disclosure statement or other documents assigned, or
(2) a disclosure which does not use the terms required to be
used by this subchapter." 15 U.S.C. S1641(a). Ramadan
never alleged the TILA violation was apparent on the face of
the RIC. She contends her assertion that "[t]he inaccuracies
and misrepresentations regarding the extended warranty
_________________________________________________________________

5. The Taylor and Ellis courts faced practically identical facts. See
Taylor,
150 F.3d at 691-92; Ellis, 160 F.3d at 705. The deception alleged in
Green concerned hidden charges for state licensing fees. See Green, 179
F.3d at 288.

5
disclosures are obvious . . . on the face of the installment
sales contract or from other related documents . . .," Compl.
at P29 (emphasis added), nevertheless suffices to state a
claim. We cannot agree. Even the statute's "but is not
limited to" or "other documents assigned" language does
not permit such an expansive interpretation of what
provides adequate assignee notice to trigger TILA liability.

The disclosure statement assigned to Hyundai was not
transmitted in a vacuum, but together with "related loan
documents, including the accounting of distributions made
pursuant to the contract." Ramadan contends those
documents should be considered to determine whether a
violation was apparent on the face of the disclosure
statement because TILA is a remedial statute which should
be construed broadly. See Ramadan, 156 F.3d at 502
("TILA is a remedial statute and should be construed
liberally in favor of the consumer."); Smith v. Fidelity
Consumer Discount Co., 898 F.2d 896, 898 (3d Cir. 1988)
("TILA, as a remedial statute which is designed to balance
the scales `thought to be weighed in favor of lenders,' is to
be liberally construed in favor of borrowers." (citations
omitted)).

The flaw in that argument is apparent in Ramadan's
restatement of her claim:

Here, plaintiff alleges that the violation is apparent on
the face of the disclosure statement because the
disclosure can be determined to be incomplete or
inaccurate from the face of the disclosure statement or
other documents assigned or transmitted together with
the disclosure statement.

Appellant's Reply Br. at 5 (emphasis altered from original).
The "or transmitted" clause in Ramadan's restatement is a
significant alteration of the statutory language. Section
1641(a) recites "other documents assigned," not "other
documents transferred" or "other documents." If the other
document is "not assigned" it does not fall under the
statutory definition. A document transferred but not
assigned cannot qualify even under a liberal construction of
the statute. Cf. Green, 179 F.3d at 295 (rejecting plaintiff 's
argument that violation was apparent because information

6
on RIC conflicted with publicly available information
because "[t]he only `assigned' document that the [plaintiffs]
point to is the RIC").

Resort to the "but is not limited to" language in S 1641(a)
is similarly unavailing. As noted, our sister circuits have
uniformly held that "apparent on the face" means exactly
that--for an assignee to be liable under TILA, the violation
must be apparent on the face of the assigned disclosure
documents. We agree.

In Taylor, for example, plaintiff asserted the violation at
issue was "apparent on the face" because the lender, given
its experience in the field, must have known that a violation
had occurred. See Taylor, 150 F.3d at 694 (noting
plaintiff 's allegation "the apparentness (or lack thereof) of a
violation should be ascertained in light of the knowledge
that a reasonable assignee similarly situated to the
defendants should have"). The Taylor Court rejected that
argument because "the rule for which the plaintiffs are
arguing would impose a duty of inquiry on financial
institutions that serve as assignees." Id. The Taylor Court
correctly held that S 1641(a) creates no such duty and that
"[o]nly violations that a reasonable person can spot on the
face of the disclosure statement or other assigned
documents will make the assignee liable under the TILA."
Id.

Avoiding the imposition of a duty of inquiry on lenders is
not the sole justification proffered by our sister circuits in
rejecting claims similar to those made here. In fact,
Ramadan's allegations are nearly identical to those rejected
in Ellis. As the United States Court of Appeals for the
Eleventh Circuit explained:

The Ellises argue that since GMAC issued the checks
and credits to [the extended warranty provider] in
payment for the warranty and that related loan
documents reveal the true cost of the warranty as well
as the amount paid to the parties, the discrepancy
between the amount supposedly paid to [the extended
warranty provider] and the amount actually paid by
GMAC reflected a violation on the face of the
documents.

7
160 F.3d at 709. The Ellis Court rejected this argument
because it required the court to "resort to evidence or
documents extraneous to the disclosure statement" and
"[t]his the plain language of [S1641(a)] forbids us to do." Id.

The United States Court of Appeals for the Fifth Circuit
closely followed Taylor and Ellis when it concluded that it
could look at "assigned documents" and only"assigned
documents" to determine liability under S 1641(a). See
Green, 179 F.3d at 295. In Green, plaintiff argued the
additional information assignee needed to determine the
existence of a TILA violation was publically available in the
form of state licencing fee tables. The court rejected that
argument because "[a]lthough Louisiana's fee tables may be
available to the public, those tables do not constitute,
according to S 1641(a)'s text, `documents assigned' " to the
assignee. Id.

Ramadan admits the documents crucial to Hyundai's
ability to determine the existence of a TILA violation were
not assigned to Hyundai. But, as in Ellis and Green,
plaintiff here urges that "apparent on the face of the
disclosure statement" encompasses TILA violations other
than those that can be determined from looking at the
assigned disclosure statement. As the Green, Ellis and
Taylor courts have explained, looking beyond the
documents assigned to determine whether a violation was
"apparent on the face of the disclosure statement" is
inconsistent with S 1641(a). See also Elwin J. Griffith, Truth
in Lending--Recission, Consumer Remedies and Creditor
Defenses in Closed-end Transactions, 19 U. Tol. L. Rev.
491, 538 (1988) ("The rationale for this protection is that
the assignee should not be saddled with violations that are
not readily detectable.").

That Congress meant to exclude resort to outside
documents in defining assignee liability under TILA is clear
both from the changes Congress made in its 1980
amendments to S 1641(a) and from the subsequent addition
of a related subsection.

Prior to the 1980 amendments, S 1641 provided:

[I]n any action or proceeding by or against any
subsequent assignee of the original creditor without

8
 knowledge to the contrary by the assignee when he
acquires the obligation, written acknowledgment of
receipt by a person to whom a statement is required to
be given pursuant to this subchapter shall be
conclusive proof of delivery thereof and, unless the
violation is apparent on the face of the statement, of
compliance with this part.

15 U.S.C. S 1641 (1979). In amending S 1641, Congress
removed the "without knowledge" language from the section
dealing with assignee liability although it left similar
language in another subsection of 1641.6 See 15 U.S.C.
S 1641(b). The removal demonstrates Congress intended
actual knowledge independent of what could be discerned
from the disclosure statement to be insufficient to trigger
assignee liability under S 1641(a).

As noted, Ramadan alleges the TILA violation here was
apparent on the face of the disclosure statement because

Hyundai issue[d] the checks or credits in payment for
the warranty and in payment for the commission or
finder's fee and thus ha[d] actual knowledge of the
falsity of the representation in the contract. . . .

Compl. at P29. Although counsel for plaintiff conceded at
oral argument that liability "can't be [triggered by]
knowledge," her argument indicated an attempt to draw a
distinction between constructive knowledge, which she
contended would be insufficient, and actual knowledge,
_________________________________________________________________

6. As noted, S 1641(a) currently provides:

Except as otherwise provided in this subchapter, any civil action
for
a violation of this subchapter . . . which may be brought against a
creditor may be maintained against any assignee of such creditor
only if the violation for which such action or proceeding is
brought
is apparent on the face of the disclosure statement, except where
the assignment was involuntary. For the purposes of this section, a
violation apparent on the face of the disclosure statement
includes,
but is not limited to (1) a disclosure which can be determined to
be
incomplete or inaccurate from the face of the disclosure statement
or other documents assigned, or (2) a disclosure which does not use
the terms required to be used by this subchapter.

15 U.S.C. 1641(a).
9
which she asserted was sufficient to support assignee
liability. There is nothing in the history or text of S 1641(a)
to support such a differentiation.

That the allegations here fail to state a claim under
S 1641(a) is also apparent from a comparison of that section
with one of its companion subsections. See 15 U.S.C.
S 1641(e). Section 1641(e) creates assignee liability for TILA
violations in transactions secured by real property. As in
S 1641(a), assignee liability is triggered by violations
"apparent on the face of the disclosure statement provided
in connection with such transaction . . . ." Id. But S 1641(e)
provides a different definition of "apparent on the face":

For the purpose of this section, a violation is
apparent on the face of the disclosure statement if--

(A) the disclosure can be determined to be
incomplete or inaccurate by a comparison among the
disclosure statement, any itemization of the amount
financed, the note, or any other disclosure of
disbursement. . . .

Id. Although S 1641(e) was adopted 15 years after S 1641(a),
it demonstrates Congress knows how to adopt a different
formulation of "apparent on the face" if it desires. In this
case of alleged assignee liability in a consumer credit
transaction not involving real property as security, it has
not done so.

As noted by the Taylor court, Congress "narrowed
considerably the potential scope of assignee liability," by
enacting the current version of S 1641(a). Taylor, 150 F.3d
at 693. Plaintiff 's interpretation of S 1641(a) runs counter
to Congress's considered judgment.

A narrowing of assignee liability is consistent with the
overarching reasons put forth by Congress for amending
the TILA in 1980. Explaining the purpose behind the
amendments, the Senate Committee on Banking, Housing
and Urban Affairs noted that "many creditors have
sincerely tried to comply with the act but, due to its
increasing complexity and frequent changes, have
nonetheless found themselves in violation and subject to
litigation." S. Rep. 96-73, reprinted in 1980 U.S.C.C.A.N.

10
236, 281. For that reason, among others, Congress
amended TILA to "mak[e] compliance easier for creditors
[and] limit[ ] creditor civil liability for statutory penalties to
only significant violations . . . ." Id. The reading of S 1641(a)
applied by our sister circuits conforms with Congress's
intent to simplify compliance by creditors and limit liability
while offering protection to consumers against illegal
lending practices.

Congress's narrowing of assignee liability is also
consistent with the other changes Congress made to the
TILA in 1980. Before the 1980 amendments, dealers and
lenders were both treated as "creditors" subject to
consumer suits. See 15 U.S.C. S 1602(f) (1976). See also
Elwin J. Griffith, supra, at 538. Post-1980, there is a clear
divide between the liability of "creditors," defined as "the
person to whom the debt . . . is initially payable," 15 U.S.C.
S 1602(f) (1982), and assignees. This change was made to
"eliminate confusion under the [pre-1980] act as to the
responsibilities of assignees and `arrangers of credit.' " S.
Rep. 96-368 at 24, reprinted in 1980 U.S.C.C.A.N. 236,
259. Plaintiff 's interpretation of S1641(a) would undo the
distinction drawn by Congress.

B.

Ramadan also contends the District Court erred in
granting Hyundai's motion to dismiss because of Hyundai's
express assumption of assignee liability. As noted, the FTC-
required Holder Notice included in the RIC provides for
assignee liability with regard to "all claims and defenses
which the debtor could assert against the seller . .. ." In
light of this provision, plaintiff asserts the RIC should be
enforced as written.

The same argument has been made to, and rejected by,
other courts that have examined assignee liability under
TILA. See, e.g., Green, 179 F.3d at 296; Ellis, 160 F.3d at
709; Taylor, 150 F.3d at 693. The Taylor Court noted that,
by FTC regulation, the RIC must contain the Holder Notice.
See Taylor, 150 F.3d at 692 (citing 16 C.F.R.S433.2).
Because of that requirement, the Taylor Court concluded

11
 The Holder Notice, even though contained within the
contract, was not the subject of bargaining between the
parties, and indeed could not have been. It is part of
the contract by force of law, and it must be read in
light of other laws that modify its reach.

Id. at 693. In the opinion of the Taylor Court, S 1641(a)
"limited one set of claims [the Holder Notice] may carry
through to the assignee . . . ." Id. The Eleventh Circuit
similarly concluded the Holder Notice language "required by
the FTC regulation standing alone does not suffice to
subject [assignee] to liability." Ellis , 160 F.3d at 709. The
notice could not have such an effect because inclusion of
required language did not result from "bargaining or
agreement by the parties to reflect [ ] a voluntary and
intentional assumption of liability." Id. In fact, every federal
court that has considered the Holder Notice argument since
the Taylor decision, including the District Court here,
followed Taylor's reasoning and concluded inclusion of the
Holder Notice cannot trump the assignee liability rules in
S 1641(a).

Plaintiff challenges the soundness of the Taylor , Ellis and
Green decisions and contests whether Hyundai's inclusion
of the Holder Notice was truly involuntary. According to
plaintiff, Hyundai could have carved out an exception to
TILA liability in the Holder Notice. Given that option,
Ramadan asserts inclusion of the unaltered Holder Notice
reflects Hyundai's intent to assume greater liability than
that created by S 1641(a).

That argument misses the point. The FTC rule requiring
the Holder Notice is explicit regarding its inclusion:

In connection with any sale or lease of goods or
services to consumers . . . it is an unfair or deceptive
act or practice . . . for a seller, directly or indirectly, to:

(a) Take or receive a consumer credit contract which
fails to contain the [Holder Notice] provision in at least
ten point, bold face type. . . .

16 C.F.R. S433.2. By its terms, the FTC regulation is
mandatory; it does not contemplate deviations or
modifications. Because regulations cannot trump statutory

12
mandates, the FTC mandated language must be understood
in light of any statutory limitations.

Plaintiff also takes issue with the involuntariness
argument central to the Taylor-Ellis analysis contending it
is inconsistent with the standard of review on a motion to
dismiss. There is, however, no allegation the Holder Notice
was included voluntarily by Hyundai. In fact, plaintiff 's
complaint recognizes the Holder Notice was included in the
RIC in compliance with 16 C.F.R. S422.3. See Compl. at
P41. Given the regulatory requirement, it is reasonable to
assume the Holder Notice was not voluntarily included and
therefore does not manifest Hyundai's intent to contract
around S 1641(a).

Ramadan argues that whether or not our sister circuits
are correct, this case is governed by Ballay v. Legg Mason
Wood Walker, Inc., 878 F.2d 729 (3d Cir. 1989), 7 which she
asserts stands for the proposition that courts should
enforce the clear language of a contract and not look
beyond the contract language to the regulatory background.
See id. at 734.

Ballay concerned an agreement between parties to a
brokerage contract that provided for arbitration of all
claims except those arising from "federal securities laws."
Id. at 731. Investors brought suit asserting a number of
violations, including violations of the Securities Act of 1933.
See id. at 730. The District Court denied defendant's
motion to compel arbitration on all claims including those
arising under "federal securities laws." Id. At the time the
agreement was signed, parties could not agree in advance
to arbitrate Securities Act claims. As a result, SEC rules
required that arbitration clauses, if made part of an
agreement, include a provision noting that Securities Act
claims could not be arbitrated. Subsequent to execution of
the agreement, the SEC rescinded its rule and during the
pendency of the case, the Supreme Court decided securities
claims could be arbitrated. See id. at 734. Defendant, Legg
Mason, argued that because of the SEC rule in effect at the
time of execution, the exception was not bargained for and
_________________________________________________________________

7. The District Court distinguished Ballay . See Ramadan, No. 96-3791,
slip op. at 8 n.7.

13
thus should not be binding. The Court concluded that it
could not look beyond the language of the contract, holding
the defendant should have challenged the rule if it did not
want to be bound by it or at least it should have
renegotiated the arbitration exception after the repeal of the
governing SEC rule. See id.

Ramadan asserts the language in the RIC "admits of no
justification for looking beyond it to the regulatory history
surrounding its inclusion." Id. As with Legg Mason, she
contends Hyundai "cannot now win relief from the specific
language of its own contract simply because it claims not to
have meant what it said." Id.

Despite some similarities, there are stark differences
between this case and Ballay. Ballay did not involve the
interplay of federal regulations and statutory provisions.
The contract provision in question in Ballay was consistent
both with the underlying legal framework at the time it was
agreed upon and at the time it was enforced. Inclusion of
the provision exempting securities claims from arbitration
was consonant with SEC regulations at the time the
contract was executed. See id. Although arbitration of
disputes had been judicially accepted and the SEC
regulation had been rescinded by the time Ballay was
decided, arbitration was not compulsory. See id. at 733
("Although the Federal Arbitration Act establishes a
presumption in favor of arbitrability when arbitrability is in
doubt, it does not prevent parties from agreeing to exclude
matters from arbitration if they so desire."). Therefore, the
exclusion provision at issue in Ballay was not contradicted
by the statutory or regulatory background.

That is not the case here. The Holder Notice language
included in the RIC is far more expansive than TILA's
assignee liability language. Indeed, there is a clear
irreconcilable conflict between the two provisions. The
Ballay Court faced no such conflict.

The Ballay Court also addressed the presumption of
voluntariness in a way that distinguishes it from this case.
As noted, the regulation in Ballay requiring the arbitration
exception language was no longer in effect at the time of the
case. The Ballay Court observed defendant had ample

14
opportunity to renegotiate the terms of the arbitration
clause and chose not to, thereby undermining its
involuntariness argument. See id. at 734. Here, both the
FTC Holder Notice regulation and S 1641(a) have been in
effect at all relevant times. Hyundai has not had the same
opportunity to negotiate in a changed regulatory
environment as did Legg Mason in Ballay. Absent such an
opportunity, inclusion of the Holder Notice in the RIC
cannot be seen as voluntary in the way the continued
presence of the arbitration exception language in the broker
contract was seen as voluntary in Ballay.

Ramadan also relies on a Florida state court decision,
Boden v. Atlantic Fed. Sav. & Loan Ass'n, 396 So.2d 827
(Fla. Dist. Ct. App. 1981). Relying on an exception to a
Florida statute governing assignee liability in home
installment contracts which exempted savings and loans
from such liability, the trial court in Boden held the
defendant could not be liable for a breach of an assigned
home installment contract. See id. at 829. The trial court
reached that conclusion even though the assigned home
installment contract contained a "Holder Notice" provision.
See id. at 828. The Florida appellate court concluded the
savings and loan association could agree to assignee
liability even though it was exempted from such under state
law and that it "voluntarily subject[ed] itself to liability by
the terms of the home improvement contract." Id. at 829.
Plaintiff has offered no reason, other than the Boden court's
adoption of a mode of analysis more sympathetic to its
position than that adopted by our sister circuits, as to why
we should follow the Florida District Court of Appeals. Of
course, Boden did not involve the interplay of federal
statutory law and regulatory requirements and the conflict
between the two.

In short, neither our decision in Ballay nor Boden
compels a different result from that reached by the District
Court here. The FTC-required Holder Notice cannot trump
the TILA's assignee liability mandates.

As the dissent notes, parties to a contract may"waive
statutory protections and assume liabilities not required by
law." Ellis, 160 at 709. But like the court in Ellis, we believe
the defendant has not done so here. There is no allegation

15
or evidence that Hyundai waived its statutory rights or
agreed to assume liability beyond that set forth in
S 1641(a). Hyundai's failure to include with the Holder
Notice a warning or disclaimer does not constitute the type
of intentional relinquishment necessary to give rise to a
waiver of statutory rights. Without some evidence the
parties bargained for and Hyundai waived its statutory
rights, there is no basis to impose waiver or estoppel.

IV.

For the foregoing reasons, we will affirm the District
Court's judgment dismissing plaintiff 's complaint under
Fed. R. Civ. P. 12(b)(6).

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POLLAK, District Judge, dissenting.

I agree with the court's conclusion, in Part III(A) of its
opinion, that the case at bar is not one in which the alleged
violation of the TILA "is apparent on the face of the
disclosure statement" and hence could have been the basis
for Ms. Ramadan's suit "against [Hyundai Motor Finance
(hereinafter "Hyundai") as] assignee of[a] creditor." 15
U.S.C. S 1641(a). But I disagree with the court's conclusion,
in Part III(B) of its opinion, that the language of the Holder
Notice, which was contained in Ms. Ramadan's automobile
finance agreement and which advised Ms. Ramadan that
"ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT
IS SUBJECT TO ALL CLAIMS . . . WHICH THE DEBTOR
COULD ASSERT AGAINST THE SELLER," did not provide a
basis for Ms. Ramadan's suit against Hyundai.

As I understand the court's opinion, its determination
that the Holder Notice is nugatory is the product of the
following syllogism: (1) The Holder Notice appeared in Ms.
Ramadan's finance agreement (and, one must suppose,
hundreds of thousands of other finance agreements) not as
a provision voluntarily acquiesced in by the seller and the
assignee finance company, but in compliance with a
regulation of the Federal Trade Commission making it"an
unfair and deceptive trade act or practice . . . for a seller,
directly or indirectly, to . . . [t]ake or receive a consumer
credit contract which fails to contain the [Holder Notice]
provision. . . ." 16 C.F.R. S 433.2. (2) In determining the
scope of civil liability for violations of the TILA, Congress
has limited the liability of an assignee of a finance
agreement to violations "apparent on the face of the
disclosure statement, except where the assignment was
involuntary." 15 U.S.C. S 1641(a). (3) Since the Holder
Notice's inclusion in the Ramadan finance agreement was,
in the court's view, coerced by the FTC; and since the
Holder Notice, as prescribed by the FTC regulation, is in the
court's view, in "irreconcilable conflict" with the TILA; and
since "regulations cannot trump statutory mandates," the
Holder Notice must give way.

The syllogism has, unquestionably, a straightforward
simplicity which makes it quite compelling. The difficulty
with the syllogism is that its focus is confined to the

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respective interests of Congress, the FTC, and Hyundai. Ms.
Ramadan is, it appears, outside the terms of debate. But it
is the Ramadans of the world to whom the Holder Notice is
addressed. It is the Ramadans of the world who can be
taken to have relied on what the Hyundais of the world
have, by accepting assignment of finance agreements, said
to them. Granted that Congress has authority to negate the
FTC directive that the Holder Notice be incorporated in
every "consumer credit contract." That appears to be what
Congress meant to do when, in 1980, it amended TILA in
a fashion that substantially narrowed the assignee liability
that the FTC had established by regulation several years
before. But if, after 1980, a finance company continued to
accept (or, if new to the financial marketplace, commenced
accepting) finance agreements which contained the Holder
Notice, why--as between the finance company and the
purchaser-borrower--shouldn't the finance company be
held to the representation of holder liability contained in
the finance agreement?

The court's answer, so it would appear, is that the Holder
Notice was never bargained for--that in its inception it was
placed in finance agreements by virtue of FTC ukase. And
presumably the court is also of the view that it is the
enduring in terroremness of the FTC's authority that
accounts for the continuing presence of the Holder Notice
in finance agreements entered into (and sometimes litigated
about) a decade, or even two decades, after Congress
amended the TILA and, by hypothesis, exercised its
authority to deflate the FTC regulation. I will not argue
(although I think the argument could plausibly be made)
that by now the Holder Notices that remain in place are
there because finance companies, well aware that Congress
in 1980 relieved them of any administratively mandated
liability, have decided to accept liability as a contractual
matter. To the contrary, I am prepared to accept, arguendo,
that the Holder Notice remains an unbargained-for
ingredient of the standard finance agreement. But it seems
to me that a finance company, feeling that the Holder
Notice is in place via force majeure and intending to defend
against its applicability in any litigation that may arise,
should, before accepting assignment of a finance
agreement, insist that the Holder Notice be garlanded with

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caveat emptors that warn the purchaser-borrower of the
finance company's view that the 1980 TILA amendment
robs the Holder Notice of substantive effect. Afinance
company has no ground for supposing that more than one
in tens of thousands of purchaser-borrowers (the
Ramadans of the world) will be conversant with the
interplay between the FTC regulation and TILA. Given the
disparity in the possession of crucial information, I would
conclude that an assignee finance company that failed to
insist on inclusion of an appropriate warning adjacent to
the Holder Notice should be estopped from invoking the
Holder Notice in litigation.

Requiring an assignee finance company that wishes to
protect against TILA liability to add the type of warning
described above would avoid the difficulty of frustrating a
purchaser-borrower's expectations. It would also avoid the
consequences the court appears to be concerned about.
Finance companies would no longer have grounds for
feeling that they were being pushed by the FTC to give up
rights guaranteed by Congress. Finance companies would
have the choice to construct a contract that assigned TILA
liability or to construct a contract that did not do so.
Purchaser-borrowers' reasonable expectations, andfinance
companies' freedom to avoid assignee liability (as they are
entitled to do under 15 U.S.C. S 1641(a)), would thus be
preserved.

This approach is possible because the conflict between
the statutory and regulatory provisions is not, as the court
states, "irreconcilable." As was recognized in Ellis v. General
Motors Acceptance Corp., 160 F.3d 703, 709 (11th Cir.
1998), "[i]t is certainly true that parties can waive statutory
protections and assume liabilities not required by law." And
while Hyundai is required by the FTC to include the Holder
Notice as written, the FTC regulation does not prohibit
additional language preserving the finance companies'
rights under 15 U.S.C. S 1641(a). Nor could the FTC
prohibit the inclusion of such language, for the very reason
that animates the court's opinion: the FTC's regulations
cannot trump congressional statutes.

Such an approach would, so it seems to me, be in
harmony with this court's approach to the cognate problem

19
presented in Ballay v. Legg Mason Wood Walker, Inc., 878
F.2d 729 (3d Cir. 1989). In today's opinion the court says
that, "[d]espite some similarities, there are stark differences
between this case and Ballay." I find the differences far less
stark than the court does. And I find compelling the
wisdom animating Judge Rosenn's opinion for the Ballay
court:

[W]e conclude that the unequivocal exclusionary
language in plaintiffs' arbitration agreements creates a
contractual right to litigate plaintiffs' Securities Act
claims. The language admits of no justification for
looking beyond it to the regulatory history surrounding
its inclusion. In any event, even if we were to look at
the regulatory background we see no reason in it for
rejecting customers' reasonable expectations. A
customer reading the exclusionary language could not
be expected to be aware of the regulatory background
or to understand that the language may become
meaningless with the winds of change in the law.

878 F.2d at 734.

For these reasons, I respectfully dissent.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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