                                                                                                                           Opinions of the United
1998 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


9-22-1998

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Precedential or Non-Precedential:

Docket 97-5282




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Recommended Citation
"Ramadan v. Chase Manhattan Corp" (1998). 1998 Decisions. Paper 231.
http://digitalcommons.law.villanova.edu/thirdcircuit_1998/231


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Filed September 22, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 97-5282

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

       Appellant

v.

THE CHASE MANHATTAN CORPORATION;
HYUNDAI MOTOR FINANCE CO.

ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civ. No. 96-03791)

Argued June 8, 1998

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

(Opinion Filed: September 22, 1998)

Andrea Bierstein, Esq. (Argued)
Kaufman Malchman Kirby & Squire
919 Third Avenue, 11th Floor
New York, NY 10022



_________________________________________________________________

*Honorable Marvin Katz, District Judge for the United States District
Court for the Eastern District of Pennsylvania, sitting by designation.
       Robert J. Berg
       Bernstein, Leibhard & Lifshitz
       One Bridge Plaza, Suite 400
       Fort Lee, NJ 07024

       Counsel for Appellant

       Andrew P. Napolitano, Esq. (Argued)
       Sills, Cummis, Zuckerman, Radin,
       Tischman, Epstein & Gross
       One Riverfront Plaza
       Newark, NJ 07102

       Counsel for Appellee
       Chase Manhattan Corp.

       Walter J. Fleischer, Jr., Esq.
        (Argued)
       Shanley & Fisher
       131 Madison Avenue
       Morristown, NJ 07962-1979

       Counsel for Appellee
       Hyundai Motor Finance Co.

OPINION OF THE COURT

NYGAARD, Circuit Judge.

Susanne H. Ramadan brought a federal claim under the
Truth in Lending Act, 15 U.S.C. SS 1601 et seq., and
pendent state law claims against Chase Manhattan Corp.
and Hyundai Motor Finance Co. alleging that she was given
false financing disclosures when she purchased an
automobile. The district court granted defendants' motion
to dismiss for lack of subject matter jurisdiction. Fed. R.
Civ. P. 12(b)(l). We will reverse.

I.

The essential facts are undisputed. On May 6, 1993,
Ramadan purchased a 1990 Hyundai Excel automobile
from Bob Ciasulli Hyundai, Inc., for $4,041.04. She also
purchased an extended warranty contract for $998.

                               2
Ramadan financed the entire sum through a Retail Install
Contract with Ciasulli. Ciasulli immediately assigned the
loan to defendants Hyundai Motor Finance Co. and
Chemical Bank, N.A.1

Ramadan signed three copies of the Retail Install
Contract. Each copy itemized the $998 charge for the
warranty as being paid to a third party. This breakdown is
mandated by 15 U.S.C. S 1638(a)(2)(B)(iii), which requires a
creditor to disclose to a borrower "each amount that is or
will be paid to third persons by the creditor on the
consumer's behalf, together with an identification of or
reference to the third person." Ramadan alleges that only a
portion of the $998 charge for the warranty went to the
third party to pay for the warranty, while Ciasulli pocketed
the rest as a commission or finder's fee. Because of the
inflated warranty charge, Ramadan alleges she overpaid for
the warranty and paid additional interest on the
commensurately inflated loan principal.

Ramadan did not commence this action until August 2,
1996. She claims that the inaccurate disclosure of amounts
paid for the warranty violated the Truth in Lending Act
("TILA"). Hyundai and Chase filed motions to dismiss under
Federal Rules of Civil Procedure 12(b)(1) and (6), arguing
that the district court lacked subject matter jurisdiction
over the claim because Ramadan had filed her complaint
after the applicable one-year time limit contained within
TILA. See 15 U.S.C. S 1640(e). Ramadan contended that her
complaint was timely because the limitation period was
tolled during the time when the defendants concealed the
true cost of the warranty. The district court granted the
motion to dismiss solely under Rule 12(b)(1), finding that
the one-year limitation period in S 1640(e) is a jurisdictional
provision, and therefore not subject to equitable tolling. See
Ramadan v. Chase Manhattan Corp., 973 F. Supp. 456
(D.N.J. 1997). Our review of federal jurisdiction is plenary.
See Stehney v. Perry, 101 F.3d 925, 929 (3d Cir. 1996).
_________________________________________________________________

1. Chase Manhattan Corp. has since acquired Chemical Bank, the
parent company of Chemical Bank, N.A., and has merged its auto
financing division with Chemical Bank, N.A.'s.

                               3
II.

The sole issue on appeal is whether equitable principles
can apply to toll the limitation period contained inS 1640(e)
of TILA. The answer turns on a determination of whether
the limitation period is jurisdictional or merely an ordinary
statute of limitations engrafted upon a separate
jurisdictional grant. A limitation period is not subject to
equitable tolling if it is jurisdictional in nature. See, e.g.,
Shendock v. Director, Office of Workers' Compensation, 893
F.2d 1458, 1466-67 (3d Cir. 1990).

TILA requires lenders to make certain disclosures to
borrowers and gives borrowers a civil cause of action
against creditors who violate these disclosure provisions.
See 15 U.S.C. S 1640. Subsection (e) grants jurisdiction
over such claims to federal and state courts and imposes a
one-year time limitation for bringing actions:

       (e) Jurisdiction of courts; limitation on acti ons;
       State attorney general enforcement

        Any action under this section may be brought in any
       United States district court, or in any other court of
       competent jurisdiction, within one year from the date
       of the occurrence of the violation. This subsection does
       not bar a person from asserting a violation of this
       subchapter in an action to collect the debt which was
       brought more than one year from the date of the
       occurrence of the violation as a matter of defense by
       recoupment or set-off in such action, except as
       otherwise provided by State law.

Id. S 1640(e).

The Courts of Appeals for the Sixth and Ninth Circuits
have held that the statute of limitation under S 1640(e) is
not jurisdictional and can be equitably tolled. See King v.
California, 784 F.2d 910 (9th Cir. 1986); Jones v. TransOhio
Savings Ass'n, 747 F.2d 1037 (6th Cir. 1984). The Court of
Appeals for the District of Columbia Circuit, however, has
indicated a contrary view in dicta. See Hardin v. City Title
& Escrow Co., 797 F.2d 1037 (D.C. Cir. 1986).

When determining whether a limitation period is
jurisdictional, the Supreme Court has stated that while

                                4
several factors must be examined, the main purpose of the
inquiry is to discover "whether congressional purpose is
effectuated by tolling the statute of limitations in given
circumstances." Burnett v. New York Central R.R. Co., 380
U.S. 424, 427, 85 S. Ct. 1050, 1054 (1965). As we have
previously recognized, "attachment of the label`jurisdiction'
to a statute's filing requirements without examination of its
language and structure, as well as the congressional policy
underlying it, would be an abdication of our duty to
interpret the language of a statute in accordance with
Congress's intent in passing it." Shendock, 893 F.2d at
1462; see also Zipes v. Trans World Airlines, 455 U.S. 385,
393, 102 S. Ct. 1127, 1132 (1982); Burnett, 380 U.S. at
427, 85 S. Ct. at 1054.

The King and Jones decisions followed the analytical
framework contained in Burnett. In Burnett, the plaintiff
brought a timely claim against a railroad in state court
under the Federal Employers' Liability Act. However, the
plaintiff filed the action in the wrong venue, and his claim
was dismissed. When the plaintiff refiled the claim eight
days later in the proper federal court, it was dismissed
again because the suit was filed after the three-year statute
of limitation contained in 45 U.S.C. S 56 had passed. The
Court of Appeals for the Sixth Circuit affirmed the
dismissal on the grounds that the time limitation was
"substantive," not "procedural." The Supreme Court
reversed and held that the timely filing in the state court
tolled the statute of limitations as to the federal action. The
Court stated,

       The basic question to be answered in determining
       whether . . . a statute of limitations is to be tolled, is
       one "of legislative intent whether the right shall be
       enforceable . . . after the prescribed time."
       Classification of such a provision as "substantive"
       rather than "procedural" does not determine whether
       or under what circumstances the limitation period may
       be extended.

Burnett, 380 U.S. at 426-27, 85 S. Ct. at 1053-54 (citations
and footnote omitted). To determine congressional intent,
the Court looked to "the purposes and policies underlying
the limitation provision, the Act itself, and the remedial

                               5
scheme developed for the enforcement of the rights given by
the Act." Id. at 427, 85 S. Ct. at 1054.

Based on the reasoning in Burnett, the Courts of Appeals
in Jones and King held that equitable tolling would further
the congressional purpose underlying TILA to "assure a
meaningful disclosure of credit terms so that the consumer
will be able to compare more readily the various credit
terms available to him and avoid the uninformed use of
credit." 15 U.S.C. S 1601. Those courts found that the time
period was not jurisdictional and allowed the use of
equitable principles to toll the limitations period in
S 1640(e).

In Jones, the court noted that several factors supported
its conclusion. First, the court argued that TILA, as a
remedial statute, should be construed liberally in favor of
the consumer. See Jones, 747 F.2d at 1040. Second, the
court noted that the remedial scheme of the Act was to
create a system of private attorneys general and that,
therefore, a technical reading would be "particularly
inappropriate." Id. (citations omitted). Third, the court
observed that S 1640(e) is not the sole provision granting
jurisdiction to the district courts, but that it must be read
together with 28 U.S.C. S 1337. Id. at 1040-41. The Jones
court concluded that "[o]nly if Congress clearly manifests
its intent to limit the federal court's jurisdiction will [the
court] be precluded from addressing allegations of
fraudulent concealment which by their very nature, and if
true, serve to make compliance with the limitations period
imposed by Congress an impossibility." Id. at 1041.

This methodology is supported by the analysis used in a
post-Burnett Supreme Court case, Zipes v. Trans World
Airlines, 455 U.S. at 385. Zipes concerned alleged sex
discrimination by TWA against female flight attendants. The
Court of Appeals for the Seventh Circuit held that since the
flight attendants had not filed a complaint with the Equal
Employment Opportunity Commission within the statutory
time limit, and since that time limitation was a
jurisdictional prerequisite, approximately ninety-two
percent of the female flight attendants were barred from
suing. The Supreme Court reversed, holding that timely
filing was not a jurisdictional prerequisite, "but a

                               6
requirement that, like a statute of limitations, is subject to
waiver, estoppel, and equitable tolling." Zipes, 455 U.S. at
393, 102 S. Ct. at 1132. Like the Court in Burnett, the
Zipes Court examined several factors when making its
determination. It looked to the structure of the act, the
underlying policy of the act, and prior federal case law. Id.
at 392-98, 102 S. Ct. at 1132-35.

A.

The purpose underlying TILA is "to assure meaningful
disclosure of credit terms . . . and to protect the consumer
against inaccurate and unfair" practices. 15 U.S.C. S 1601.
Thus Congress enacted TILA to guard against the danger of
unscrupulous lenders taking advantage of consumers
through fraudulent or otherwise confusing practices. As the
Burnett Court noted, the main inquiry is whether allowing
tolling of the statute of limitations is consistent with this
policy. We believe that it is.

First, it must be noted that TILA is a remedial statute
and should be construed liberally in favor of the consumer.
See Johnson v. McCrackin-Sturman Ford, Inc., 527 F.2d
257, 262 (3d Cir. 1975). Allowing lenders to violate TILA,
but avoid liability if they successfully concealed the
violation from the debtor for a year, would undermine the
core remedial purpose of TILA. As the Supreme Court
recognized years ago, "[t]o hold that by concealing a fraud,
or by committing a fraud in a manner that it concealed
itself until such time as the party committing the fraud
could plead the statute of limitations to protect it, is to
make the law which was designed to prevent fraud the
means by which it is made successful and secure." Bailey
v. Glover, 88 U.S. (21 Wall.) 342, 349 (1874) (applying
equitable tolling to Bankruptcy Act of 1874). Disallowing
equitable tolling in S 1640(e) would allow lenders to avoid
liability through intentionally fraudulent actions using a
statute designed to prohibit that same conduct.

B.

The structure and language of the statute also provide
insight into the intent of Congress. In Zipes, the Supreme
Court's examination revealed that

                                7
       the provision granting district courts jurisdiction . . .
       contain[ed] no reference to the timely-filing
       requirement. The provision specifying the time forfiling
       charges with the EEOC appear[ed] as an entirely
       separate provision, and it [did] not speak in
       jurisdictional terms or refer in any way to the
       jurisdiction of the district courts.

Id. at 394, 102 S. Ct. at 1133 (footnotes omitted). Unlike in
Zipes, the limitation here is contained in the same statutory
provision as the grant of jurisdiction. In Burnett, the Court
downplayed the importance of this distinction, stating,
"[T]he fact that the right and limitation are written into the
same statute does not indicate a legislative intent as to
whether or when the statute of limitations should be tolled."2
380 U.S. at 427 n.2, 85 S. Ct. at 1054 n.2.

In Hardin v. City Title & Escrow, the Court of Appeals for
the District of Columbia Circuit determined whether a time
limitation within the Real Estate Settlement Procedures Act
("RESPA") was jurisdictional in nature. The court examined
S 1640(e) of TILA for comparison, concentrating on the
language of the statute to discern the intent of Congress.3
_________________________________________________________________

2. The Burnett Court indicated that placing the time limitation in the
same section as the jurisdictional grant may be important when dealing
with choice of law. It stated, "the embodiment of a limitations provision
in the statute creating the right which it modifies might conceivably
indicate a legislative intent that the right and limitations be applied
together when the right is sued upon in a foreign forum." Burnett, 380
U.S. at 427 n.2, 85 S. Ct. at 1054 n.2. That is not the case here.

3. The court in Hardin also engaged in a lengthy discussion of the
legislative history of TILA. It pointed to the 1980 Amendments that
added the recoupment and set-off exceptions to S 1640(e) as evidence
that the provision was intended to be jurisdictional. The court argued
that since defensive actions in recoupment are never barred by a statute
of limitations, by amending the limitation to except these actions from
the time limit, Congress must have been treating it as a jurisdictional
limitation. Otherwise, the amendment would have been unnecessary. See
Hardin, 797 F.2d at 1039-40 & n.4. In fact, it appears that whether
defensive actions were barred or not was far from clear at the time of the
amendments. The court in Kerby v. Mortgage Funding Corp., 992 F.
Supp. 787, 796-97 (D. Md. 1998), presents a compelling
counterargument to Hardin concerning the legitimacy of its analysis of

                               8
In doing so, the court concluded that "[b]ecause the time
limitation . . . is an integral part of the same sentence that
creates federal and state court jurisdiction, it is reasonable
to conclude that Congress intended thereby to create a
jurisdictional time limitation." Hardin, 797 F.2d at 1039.
The court concluded that since "jurisdictional provisions in
federal statutes are to be strictly construed, . . .[and
w]here a time limitation is jurisdictional, it must be strictly
construed and will not be tolled or extended on account of
fraud[ulent concealment]." Id. at 1040.

The Seventh Circuit recently declined to follow Hardin,
concluding that it was inconsistent with Supreme Court
precedent and the "particular[ly] relevan[t]" cases of Jones
and King. Lawyers Title Ins. Corp. v. Dearborn Title Corp.,
118 F.3d 1157, 1166-1167 (7th Cir. 1997) (allowing
equitable tolling in RESPA case); see also Kerby v. Mortgage
Funding Corp., 992 F. Supp. 787 (D. Md. 1998) (allowing
equitable tolling in RESPA and S 1640(e) case); Moll v. U.S.
Life Title Ins. Co. of N.Y., 700 F. Supp. 1284 (S.D.N.Y. 1988)
(allowing equitable tolling in RESPA case). Indeed, as
Lawyers Title indicated, although states are more likely to
treat their statutes of limitations as jurisdictional, "periods
of limitations in federal statutes . . . are universally
regarded as nonjurisdictional. . . . Only rules limiting the
commencement of actions against the United States have
been given the `jurisdictional' treatment." Lawyers Title,
118 F.3d at 1166.

Appellee Chase also argues that by excluding recoupment
and set-off claims from the operation of S 1640(e), Congress
demonstrated its intention not to allow any other
exceptions to the time period. We think Houghton v.
Insurance Crime Prevention Institute, 795 F.2d 322 (3d Cir.
1986), a case construing a very similar provision of the Fair
_________________________________________________________________

the legislative history of the 1980 amendments. We will not rehash these
arguments here, except to agree with Kerby that it appears that
Congress enacted the 1980 amendments in response to conflicting
applications of S 1640(e). This conclusion would be consistent with a
reference, overlooked in Hardin, to the time limit as a "statute of
limitation" in the legislative history of the 1980 amendment. S. Rep. No.
96-368, at 32 (1979), reprinted in 1980 U.S.C.C.A.N. 236, 268.

                               9
Credit Reporting Act, is instructive. The section at issue
there provided in pertinent part:

       An action to enforce any liability . . . may be brought
       within two years from the date on which the liability
       arises, except that where a defendant has materially
       and willfully misrepresented any information required
       under this subchapter to be disclosed to an individual
       and the information so misrepresented is material to
       the establishment of the defendant's liability to that
       individual under this subchapter, the action may be
       brought at any time within two years after discovery by
       the individual of the misrepresentation.

15 U.S.C. S 1681p. In Houghton, we determined that the
discovery rule, which tolls the running of statutes of
limitation while a plaintiff is duly unaware of a violation did
not apply to S 1681p. We noted that statutes of limitation,
whether substantive or procedural, could be tolled by the
discovery rule. See Houghton, 795 F.2d at 324-25. Citing
Burnett, we reiterated our obligation to determine whether
tolling was consistent with the congressional purpose. See
id. at 325 (citing Burnett, 380 U.S. at 426, 85 S. Ct. at
1053). We then concluded that since Congress explicitly
provided for one exception to the statute of limitations, we
would not presume the intent to allow others. See id. We
did not construe the time period as jurisdictional.

Chase points to the similarity between S 1640(e) and
S 1681p to argue that Congress knew how to create
equitable exceptions to the time period. By not doing so in
S 1640(e), Chase asserts, Congress did not intend equitable
tolling principles to apply. This argument, however,
contradicts a well-established principle of law that equitable
tolling doctrines are "read into every federal statute of
limitation." Holmberg v. Armbrecht, 327 U.S. 392, 396-97,
66 S. Ct. 582, 585 (1946). This strong presumption may
only be rebutted if "Congress expressly provides to the
contrary in clear and unambiguous language." Atlantic City
Elec. Co. v. General Elec. Co., 312 F.2d 236, 241 (2d Cir.
1962). Therefore, by not explicitly limiting the allowable
equitable tolling exceptions as they did in S 1681p, it is
much more likely that Congress anticipated that courts
would apply traditional equitable tolling principles as they

                                10
do in all other statutes where there is no explicit limitation
to their application.

Although the structure of S 1640(e) could support an
argument that the time limitation is jurisdictional, when
looked at in light of the underlying policy of TILA and case
law, it becomes clear that the time limitation is not
intended to operate jurisdictionally. If Congress had
intended otherwise, they could have explicitly linked the
expiration of jurisdiction to the expiration of the statute of
limitation. They did not, therefore, we will read equitable
tolling into the statute.

C.

Finally, the language and analysis of our prior case law
is consistent with the conclusion that S 1640(e) is not a
jurisdictional limitation but rather in the nature of a
statute of limitations and amenable to tolling.

In Smith v. Fidelity Consumer Discount Co., 898 F.2d 896
(3d Cir. 1988), the parties whose claims were asserted past
the time limit did not argue for the application of any
equitable tolling principles under TILA. We did, however,
refer to the time limit in S 1640(e) as a "statute of
limitation." Id. at 903 & n.6. While informative, this
unexplained reference in dicta is by no means dispositive.
In Zipes, the Supreme Court noted that its previous
decisions describing the time limitation for filing EEOC
charges as jurisdictional were not dispositive because the
nature of the time limit was not at issue in those cases and
other decisions had identified the provision as a statute of
limitation.

Our decision in Bartholomew v. Northampton National
Bank of Easton, 584 F.2d 1288 (3d Cir. 1978), provides
more guidance. In Bartholomew, the plaintiff claimed that
two equitable tolling doctrines applied. 584 F.2d 1288,
1296-97 (3d Cir. 1978). We reviewed the record and held
that there was "no arguable basis . . . for plaintiff's . . .
contention" and that the facts did "not, as a matter of law,
constitute such conduct that would estop the banks from
raising the bar of the statute of limitations." Id. at 1297.
Although we held that equitable tolling did not apply, the

                               11
simple fact that we analyzed whether equitable principles
would apply is important. In Zipes, the Court buttressed its
conclusion that the time limitation was not jurisdictional by
noting that prior cases had actually reached the merits of
arguments concerning whether the limitation period should
be tolled. 455 U.S. at 397, 102 S. Ct. at 1134-35. The
Court asserted that to pursue such an examination in the
face of a jurisdictional prerequisite would have been
"gratuitous." Id., 102 S. Ct. at 1134. It follows that if the
time limitation is jurisdictional, we would not have
examined the record in Bartholomew to determine whether
a factual basis existed for the application of equitable
tolling principles. That investigation would also have been
"gratuitous" because even if a sufficient factual basis
existed, equitable tolling would not have been possible.

D.

In Beach v. Ocwen Federal Bank, 118 S. Ct. 1408 (1998),
the Supreme Court held that the time limit for rescinding a
loan transaction under a separate provision of TILA
extinguishes the right itself, as opposed to the right to a
remedy, and thus is not a typical statute of limitations.
Although the Court did cite to Burnett, it did so to provide
an example of a rule of statutory construction not actually
utilized in Beach: "the creation of a right in the same
statute that provides a limitation is some evidence that the
right was meant to be limited, not just the remedy." Id. at
1412. It observed that the " `ultimate question' is whether
Congress intended that `the right shall be enforceable in
any event after the prescribed time.' " Id. (quoting Midstate
Horticultural Co. v. Pennsylvania R.R. Co., 320 U.S. 356,
360, 64 S. Ct. 128, 130 (1943)). The Beach Court found its
answer in the language of the statute itself. Section 1635
states that "[an] obligor's right of rescission shall expire
three years after the date of consummation of the
transaction." 15 U.S.C. S 1635(f). The Court held that
Congress had explicitly linked the right and the remedy in
this section, and therefore the right to sue expired at the
end of the period. As discussed above, that is not the case
here.

                               12
III.

In sum, based on the structure and purpose of TILA, we
hold that the statute of limitations contained in S 1640(e) is
not jurisdictional and is therefore subject to equitable
tolling. Accordingly, we will reverse the district court's order
and remand the cause to the district court.

A True Copy:
Teste:

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

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