                                        PRECEDENTIAL

       UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT


                Nos. 17-3500 & 18-1182


ANDREW WOLFINGTON, individually and on behalf of all
           others similarly situated,
                         Appellant

                           v.

RECONSTRUCTIVE ORTHOPAEDIC ASSOCIATES II
PC, a/k/a the Rothman Institute; ROTHMAN INSTITUTE;
             DOES 1 THROUGH 10, inclusive


     On Appeal from the United States District Court
        for the Eastern District of Pennsylvania
              (E.D. Pa. No.: 16-cv-04935)
          District Judge: Michael M. Baylson


               Argued: October 23, 2018

            (Opinion filed: August 20, 2019)


Before: KRAUSE, COWEN, and FUENTES, Circuit Judges
Peter H. LeVan, Jr. [ARGUED]
LeVan Law Group
130 North 18th Street
One Logan Square, 27th Floor
Philadelphia, PA 19103
              Counsel for Appellant

Laura D. Ruccolo [ARGUED]
Capehart Scatchard
8000 Midlantic Drive
Laurel Corporate Center, Suite 300S
P.O. Box 5016
Mount Laurel, NJ 08054
             Counsel for Appellee

                       ________________
                   OPINION OF THE COURT
                      ________________

FUENTES, Circuit Judge

       This is an appeal from the District Court’s entry of
judgment on the pleadings against appellant-plaintiff Andrew
Wolfington on his claim under the Truth in Lending Act1 (“the
Act”). Wolfington’s claim under the Act stems from
reconstructive knee surgery he received from defendant-
appellee Reconstructive Orthopaedic Associates II PC, also
known as the Rothman Institute (“Rothman”). Wolfington
alleged that Rothman failed to provide disclosures required by
the Act when it permitted him to pay his deductible in monthly
installments following surgery. The District Court entered

1
    15 U.S.C. § 1601 et seq.




                               2
judgment on Wolfington’s claim because it determined he had
failed to allege that credit had been extended to him in a
“written agreement,” as required by the Act’s implementing
regulation, Regulation Z.2 After entering judgment, the
District Court also sua sponte imposed sanctions on
Wolfington’s counsel. Because we agree that Wolfington
failed to adequately allege the existence of a written
agreement, but conclude that counsel’s investigation and
conduct were not unreasonable, we affirm in part and reverse
in part.

    I.    Background

       Because the District Court granted judgment on the
pleadings,3 we accept the well-pled allegations in Wolfington’s
Complaint as true. Those allegations may be summarized as
follows:

              A.     Wolfington’s Surgery

       Wolfington agreed on January 12, 2016 to have surgery
provided by Rothman, scheduled for January 21, 2016. As part
of the January 12 agreement, Wolfington signed a document
titled “Financial Policy.”4    The Policy provided that
Wolfington agreed to pay any outstanding deductible not

2
  12 C.F.R. § 226.1 et seq.
3
  See JA 16-18, JA 18 n.6. Because the District Court also
purported to grant summary judgment in the alternative, we
note facts outside the pleadings as appropriate.
4
  JA 87; Financial Policy, Mot. J. Pleadings Ex. A, Wolfington
v. Reconstructive Orthopaedic Assocs., II, P.C., No. 16-cv-
4935 (E.D. Pa. Nov. 7, 2016), ECF No. 10-4 at 5.




                              3
covered by his insurance before his surgery took place. The
day before Wolfington’s surgery, however, Wolfington’s
father informed Rothman that Wolfington was unable to pay
his deductible, then around $2,000. Rothman orally agreed to
accept a $200 “initial payment” by Wolfington and to permit
him to pay the remaining deductible in monthly installments of
$100 (the “January 20 Agreement”).5 Wolfington received two
emails on January 20, one confirming the $200 payment and
the other confirming the establishment of the payment plan and
listing the credit card to which payments would be charged.
The Complaint quotes both emails in full. Wolfington had
surgery as scheduled, but subsequently failed to make any
further payments on his outstanding deductible.

         B.    Proceedings in the District Court

       Wolfington filed a putative class action in the District
Court, alleging that Rothman had extended him credit in the
January 20 Agreement, subject to the Truth in Lending Act, but
failed to provide disclosures required by the Act. The
Complaint set forth two claims, including one for violation of
the Act. His second claim, for violation of the Electronic
Funds Transfer Act, was later withdrawn. Rothman filed an
Answer with counterclaims for breach of contract and a Motion
for Judgment on the Pleadings, which included a copy of the
Financial Policy, along with other documents.

       Prior to issuing its decision on Rothman’s Motion, the
District Court conducted a six-minute telephone conference
with the parties on the record on December 14, 2016.6 During

5
    JA 87.
6
    Cf. JA 100, JA 104.




                              4
that telephone conference, the District Court addressed two
factual issues with the parties. First, the District Court
confirmed that Wolfington had made no payments pursuant to
the January 20 Agreement. Second, the District Court asked if
there was “anything in writing confirming this arrangement?”7
Wolfington’s counsel replied, “[T]he only information that we
have is the confirmation receipts with respect to an online bill
payment plan . . . that indicated the $100 a month payments.”8
Defense counsel then stated, “That’s correct . . . . There’s no
signed agreement by the plaintiff to make the payments.”9

       Eight days after the telephone conference, the District
Court granted Rothman’s Motion. In granting the Motion, the
District Court first determined that it could properly rely on the
Financial Policy, reasoning that the allegations in the
Complaint referenced and relied on it. The District Court also
relied on counsel’s statement at oral argument, stating,
“[U]nder the concession of Plaintiff’s counsel . . . there is no
longer any dispute as to any material fact, establishing that
there was no finance charge and no ‘written agreement’
between the parties.”10 Based on that evidence, the District
Court concluded that Wolfington failed to allege the existence
of a written agreement for the extension of credit.

       In its memorandum, the District Court framed its
decision as a judgment on the pleadings under Rule 12(c). The
District Court analyzed Wolfington’s claims only under the
standard for Rule 12(c) and provided no substantive analysis

7
  JA 101.
8
  JA 101-02.
9
  JA 102.
10
   JA 28.




                                5
of the standard for summary judgment under Rule 56. Pursuant
to Rule 12(c), the District Court declined to consider “certain
documents” Rothman attached to its Motion in order to avoid
“converting the instant Motion into one for summary
judgment.”11 After determining it would grant judgment on the
pleadings, however, the District Court stated, “Alternatively,
Defendant’s motion will be converted into one for summary
judgment, pursuant to Rule 12(d), which will also be
granted.”12 Wolfington moved for reconsideration under Rule
59(e), which the District Court denied.

       In granting Rothman’s Motion, the District Court also
sua sponte initiated sanctions proceedings under Rule 11
against Wolfington’s counsel. Prior to imposing sanctions, the
District Court accepted declarations from Wolfington’s
counsel, conducted a hearing, and received supplemental
briefing. The District Court concluded that sanctions in the
form of attorneys’ fees were appropriate, reasoning that
counsel could have reasonably discovered both the lack of a
written agreement and Wolfington’s failure to make any
payments on the deductible before filing the Complaint.
Ultimately, the District Court imposed sanctions under Rule 11
of $38,447.91. The sanctions were imposed solely for

11
  JA 18.
12
   JA 28. The District Court’s later descriptions of its
December 2016 entry of judgment on the pleadings further
muddled the standard it chose to apply. In its September 2017
memorandum imposing sanctions under Rule 11, the District
Court described Rothman’s Motion for Judgment on the
Pleadings both as “pursuant to Rule 12(c) because it attached
factual materials” and “as a Rule 56 motion [upon which]
summary judgment was entered for” Rothman. JA 41, 43.




                              6
Wolfington’s claim under the Truth in Lending Act, and not
for the withdrawn claim under the Electronic Funds Transfer
Act, although the District Court stated it retained the authority
to impose sanctions on the withdrawn claim.

II.    Discussion13

       On appeal, Wolfington challenges the District Court’s
entry of judgment on the pleadings under Rule 12(c) and
imposition of sanctions under Rule 11. For the reasons below,
we conclude that Wolfington has failed to adequately allege a
violation of the Truth in Lending Act, but that his counsel’s
investigation and conduct were not unreasonable. We
therefore affirm the entry of judgment on the pleadings and
reverse the imposition of sanctions.

       A.     Truth in Lending Act

       First, Wolfington challenges the District Court’s entry
of judgment on the pleadings on his claim under the Truth in
Lending Act. In particular, Wolfington contends that (1) the
District Court erred under Rule 12(c) by considering material
outside the pleadings—namely, counsel’s purported
concession that there was no written agreement—and, (2) he
has adequately alleged (a) the extension of credit, (b) the

13
   We have jurisdiction to review the District Court’s final
judgment pursuant to 28 U.S.C. § 1291. The District Court had
subject-matter jurisdiction under 28 U.S.C. § 1331.
Wolfington also alleges that this Court has jurisdiction
pursuant to 28 U.S.C. § 158(d). That provision, however, is
applicable only to appeals from the final judgments of
bankruptcy courts. See Celotex Corp. v. Edwards, 514 U.S.
300, 313 (1995).




                               7
consummation of a credit transaction, and (c) a written
agreement. Although we conclude the District Court erred in
considering material outside the pleadings, we affirm the entry
of judgment on the pleadings because Wolfington has failed to
allege the existence of a written agreement, as required by
Regulation Z.

              1.     Applicable Law

                     (a)    Judgment on the Pleadings

       A motion for judgment on the pleadings under Rule
12(c) “is analyzed under the same standards that apply to a
Rule 12(b)(6) motion.”14 Consequently, the court must “view
the facts presented in the pleadings and the inferences to be
drawn therefrom in the light most favorable to the nonmoving
party,” and may not grant the motion “unless the movant
clearly establishes that no material issue of fact remains to be
resolved and that he is entitled to judgment as a matter of
law.”15 Thus, in deciding a motion for judgment on the
pleadings, a court may only consider “the complaint, exhibits
attached to the complaint, matters of public record, as well as
undisputedly authentic documents if the complainant’s claims
are based upon these documents.”16

      If the court considers matters outside pleadings other
than documents “integral to or explicitly relied upon in the

14
   Revell v. Port Auth. of N.Y. & N.J., 598 F.3d 128, 134 (3d
Cir. 2010).
15
   In re Asbestos Prods. Liab. Litig. (No. VI), 822 F.3d 125, 133
n.6 (3d Cir. 2016) (quoting Jablonski v. Pan Am. World
Airways, Inc., 863 F.2d 289, 290-91 (3d Cir. 1988)).
16
   Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010).




                               8
complaint,”17 the “motion must be treated as one for summary
judgment under Rule 56.”18 Conversion of a motion under
Rule 12 to one for summary judgment requires that “the
procedures of Rule 56 govern.”19 Those procedures include
providing the parties at least ten days’ notice and the
opportunity to submit evidence of record to support or oppose
summary judgment.20 Review on appeal is de novo.21

                     (b)    Truth in Lending Act

      Wolfington brings his sole remaining claim under the
Truth in Lending Act22 and its implementing regulation
promulgated by the Federal Reserve Board, Regulation Z.23



17
   Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (internal
quotation mark and emphasis omitted) (quoting In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d
Cir. 1997)).
18
   Fed. R. Civ. P. 12(d).
19
   Rose v. Bartle, 871 F.2d 331, 340 (3d Cir. 1989).
20
   Id.
21
   Zimmerman v. Corbett, 873 F.3d 414, 417 (3d Cir. 2017).
22
   15 U.S.C. § 1601 et seq.
23
   12 C.F.R. § 226.1 et seq. Primary authority for enforcement
of the Act was transferred from the Federal Reserve Board to
the Consumer Financial Protection Bureau in 2010. Dodd-
Frank Wall Street Reform and Consumer Protection Act, Pub.
L. No. 111-203, § 1100A(1), 124 Stat. 1376, 2107 (codified in
part at 15 U.S.C. § 1602(b)). The Bureau’s regulations are
codified in Part 1026 of Title 12 of the Code of Federal
Regulations and are materially identical to those promulgated
by the Board for purposes of this appeal. Unless noted




                               9
The Act and Regulation Z require a “creditor” extending credit
to make certain disclosures24 before the “consummation” of the
credit transaction.25

       To be subject to the Act’s disclosure requirements, a
lender must qualify as a “creditor” both in general and in the
particular challenged transaction.26 Under Regulation Z, a
creditor is a person “who regularly extends consumer credit
that is subject to a finance charge or is payable by written
agreement in more than 4 installments (not including a down
payment)” and to whom the debt in dispute “is initially
payable, either on the face of the note or contract, or by
agreement when there is no note or contract.”27 “Credit” is “the
right to defer payment of debt or to incur debt and defer its
payment.”28



otherwise, we will refer to both agencies collectively as “the
Board.”
24
   15 U.S.C. § 1638(a).
25
   46 Fed. Reg. 50,288, 50,323 (Oct. 9, 1981), as reprinted in
12 C.F.R. pt. 226, supp. I, cmt. 17(b) (2012), available at
https://www.govinfo.gov/content/pkg/CFR-2012-title12-
vol3/pdf/CFR-2012-title12-vol3-part226-appI-id377.pdf; cf.
Bartholomew v. Northampton Nat’l Bank, 584 F.2d 1288, 1296
(3d Cir. 1978) (“The Truth-In-Lending Act requires that
creditors make full disclosure prior to the extension of
credit.”).
26
   Pollice v. Nat’l Tax Funding, L.P., 225 F.3d 379, 411 (3d
Cir. 2000).
27
   12 C.F.R. § 226.2(a)(17)(i). The parties agree that Rothman
did not extend credit subject to a finance charge.
28
   Id. § 226.2(a)(14).




                              10
        Under Regulation Z, in the Federal Reserve Board
staff’s view, a written credit agreement requires more than an
“informal workout arrangement” of debt or “a unilateral
written communication by either the creditor or the
customer.”29 Instead, a written agreement requires “some new
evidence of indebtedness executed by the customer, such as a
new note, contract or other form of written agreement.”30
However, the requirement of a written agreement is not
satisfied by a “letter that merely confirms an oral agreement.”31

       Once an entity qualifies as a creditor, it must make the
required disclosures before the “consummation” of the credit
transaction.32 A credit transaction is consummated when the
“consumer becomes contractually obligated on a credit
transaction.”33
       It is under this law that we consider Wolfington’s
appeal.
              2.     The District Court Erred in Entering
                     Judgment on the Pleadings or, in the
                     Alternative, Summary Judgment

      Wolfington first argues that the District Court
improperly relied on counsel’s purported admission during the
December 14, 2016 telephone conference that there was no

29
   Part 226—Truth in Lending Official Staff Interpretations, 42
Fed. Reg. 40,424, 40,425 (Aug. 10, 1977).
30
   42 Fed. Reg. at 40,425.
31
   46 Fed. Reg. at 50,293, as reprinted in 12 C.F.R. pt. 226,
supp. I, cmt. 2(a)(17).
32
   46 Fed. Reg. at 50,323. Rothman does not dispute that it did
not make the required disclosures.
33
   12 C.F.R. § 226.2(a)(13).




                               11
written agreement between the parties. Wolfington is correct,
for three reasons.

         First and foremost, the admission was a “matter[]
outside the pleadings”34 and improperly considered in deciding
a motion for judgment on the pleadings. Motions for judgment
on the pleadings under Rule 12(c) are considered under the
same standard as motions to dismiss under Rule 12(b)(6),35 and
it is well established that a motion to dismiss may be decided
based only on the “complaint, exhibits attached to the
complaint, matters of public record, as well as undisputedly
authentic documents if the complainant’s claims are based
upon these documents.”36 Although the District Court stated
that it accepted the facts of Wolfington’s Complaint as true and
that it did not consider matters outside the pleadings,37 it
nonetheless expressly relied on counsel’s purported admission
during oral argument, stating, “[U]nder the concession of
Plaintiff’s counsel . . . there is no longer any dispute as to any
material fact.”38 Because the District Court relied on matters
outside the pleadings, it erred in entering judgment on the
pleadings.

       We have previously determined that admissions by
counsel at oral argument may not support dismissal under Rule
12(b)(6). In Schmidt v. Skolas, we reversed the dismissal of a
suit for breach of fiduciary duty based on an admission by


34
   Fed. R. Civ. P. 12(d).
35
   Revell, 598 F.3d at 134.
36
   Mayer, 605 F.3d at 230.
37
   JA 13, JA 18 n.6.
38
   JA 28.




                               12
counsel.39 In that case, counsel admitted at oral argument that
the relevant conduct occurred outside the applicable statute of
limitations.40 The dissent argued that the plaintiff should have
been bound by counsel’s admission.41 The majority, however,
reversed the dismissal, reasoning that where “the pleading does
not reveal when the limitations period began to run . . . the
statute of limitations cannot justify Rule 12 dismissal,” despite
counsel’s admission.42       Similarly, in Bruni v. City of
Pittsburgh, we concluded that the District Court erred in
granting a motion to dismiss based “upon testimony given at
the [previous preliminary injunction] hearing and the
supplemental declarations filed by” the parties.43 Thus, in this
case, the District Court improperly considered counsel’s
purported admission.




39
    Schmidt, 770 F.3d at 249-50; id. at 254 (Rendell, J.,
dissenting).
40
   Id. at 254 (Rendell, J., dissenting).
41
   Id. at 255 & n.3.
42
   Id. at 251 (majority opinion) (alteration in original) (quoting
Barefoot Architect, Inc. v. Bunge, 632 F.3d 822, 835 (3d Cir.
2011)); accord Baker v. Putnal, 75 F.3d 190, 197 (5th Cir.
1996) (“In effect, the trial court adopted portions of the
defendants’ claims as fact without acknowledging any
contradiction with the complaint. . . . In so doing, the court
failed to apply the standards of Rule 12(b)(6). Dismissal under
these circumstances was error.”)
43
   824 F.3d 353, 361 (3d Cir. 2016).




                               13
        Second, an admission must be “unequivocal” to be
binding.44 Ordinarily, an “admission of counsel during the
course of trial is binding on his client.”45 “However, to be
binding . . . admissions must be unequivocal.”46 Counsel’s
purported admission was not. As noted above, the District
Court asked, “[I]s there anything in writing confirming this
arrangement?”47 Wolfington’s counsel responded that “the
only information that we have is the confirmation receipts with
respect to an online bill payment plan . . . that indicated the
$100 a month payments.”48 Counsel for Rothman then stated,
“That’s correct . . . . There’s no signed agreement by the
plaintiff to make the payments.”49 Notably, in imposing
sanctions later, the District Court placed emphasis on the
statement by Rothman’s counsel, not Wolfington’s.50 The
statement by Wolfington’s counsel did not amount to an
“unequivocal” admission that there was no written agreement,
and the District Court’s reliance on the statement as a binding
admission was improper.


44
   Glick v. White Motor Co., 458 F.2d 1287, 1291 (3d Cir.
1972) 1291 (citing Oscanyan v. Arms Co., 103 U.S. 261
(1880)).
45
   Id. (citing Rhoades, Inc. v. United Air Lines, Inc., 340 F.2d
481 (3d Cir. 1965)); accord Berckeley Inv. Grp., Ltd. v. Colkitt,
455 F.3d 195, 211 n.20 (3d Cir. 2006) (stating that a client may
be bound by counsel’s admissions in “pleadings or briefs”).
46
   Glick, 458 F.2d at 1291 (citing Oscanyan v. Arms Co., 103
U.S. 261 (1880)).
47
   JA 101.
48
   JA 101-02.
49
   JA 102.
50
   JA 42.




                               14
        Third and finally, to the extent that the District Court
converted Rothman’s Motion for Judgment on the Pleadings
into one for summary judgment under Rule 12(d),51 it failed to
provide Wolfington with the required notice. In particular, the
District Court was required to allow “the parties [to] have at
least ten days[’] notice” before converting the Motion under
Rule 12(d).52 “Although notice need not be express, we have
recommended that district courts provide express notice
because it ‘is easy to give and removes ambiguities.’”53

       Here, Wolfington had insufficient notice of the
conversion to summary judgment. The District Court entered
judgment only eight days after counsel’s purported admission
during the December 14, 2016 telephone conference, and it
gave no indication during that conference that it was
considering converting the Motion to one for summary
judgment. Further, Rothman’s motion was captioned only as
a “Motion for Judgment on the Pleadings or in the Alternative
to Bifurcate Discovery,”54 and it was only in Rothman’s Reply
Brief in Support of Its Motion Under Federal Rule 12(c) that
the possibility of conversion was raised.55 Nowhere in the
record before us did the District Court acknowledge that


51
   JA 28 (“Alternatively, Defendant’s motion will be converted
into one for summary judgment, pursuant to Rule 12(d) . . . .”).
52
   Rose, 871 F.2d at 340.
53
   Bruni, 824 F.3d at 360 n.9 (quoting In re Rockefeller Ctr.
Props., Inc. Sec. Litig., 184 F.3d 280, 288 n.11 (3d Cir. 1999)).
54
   JA 74.
55
   Reply Br. at 2, Wolfington v. Reconstructive Orthopaedic
Assocs. II, P.C., No. 16-cv-4935 (E.D. Pa. Dec. 5, 2016), ECF
No. 17.




                               15
possibility. That was insufficient notice of conversion under
Rule 12(d).

                3.     Because Wolfington Failed to Sufficiently
                       Plead the Existence of a Written
                       Agreement, the District Court’s Error
                       Was Harmless

       Despite the erroneous conversion of the Motion for
Judgment on the Pleadings into one for summary judgment, we
conclude that that error was harmless. A district court’s
“failure to give adequate notice [under Rule 12(d)] does not . . .
require automatic reversal.”56 Instead, the error may be
excused if the complaint likewise failed to state a claim under
Rule 12(b)(6), rendering the district court’s failure “harmless
error.”57

        Rothman raises three arguments that Wolfington failed
to state a claim under the Truth in Lending Act: (a) there was
no extension of “credit” by Rothman to Wolfington; (b) any
extension of credit was not “consummated” under the Act; and,
(c) any credit agreement was not in writing. We conclude that,
although Wolfington has sufficiently pled the extension of
credit and consummation of the credit transaction, he failed to
plead the existence of a written agreement.

                       (a)    Extension of credit

      The parties first dispute whether Wolfington’s
arrangements with Rothman constituted an extension of

56
     Rose, 871 F.2d at 342.
57
     Id.; accord Bruni, 824 F.3d at 361-62.




                                16
“credit.” As noted above, under Regulation Z, “credit” is “the
right to defer payment of debt or to incur debt and defer its
payment.”58     The parties’ dispute centers on whether
Wolfington’s arrangements were merely an informal workout
agreement of “preexisting” debt, a requirement they believe is
established by the Seventh Circuit’s decision Bright v. Ball
Memorial Hospital.59 We ultimately conclude that the
presence of “preexisting” debt is irrelevant under the Act and
that the arrangements between Wolfington and Rothman
constituted an extension of credit.

       In Bright, which pre-dated the most relevant
amendments to Regulation Z, the Seventh Circuit concluded
that payment arrangements between a hospital and two former
patients were not subject to the Act. The Bright court affirmed
the dismissal of the plaintiff-debtors’ Truth in Lending claims
on two grounds. First—and discussed more fully below—it
concluded that some of the credit transactions were not
“consummated” because there was no evidence that the debtors
accepted the payment terms offered by the hospital.60
Second—and bearing on this issue—the Bright court
concluded that two of the debtors’ transactions did not
constitute an extension of credit. 61 Instead, it determined the
transactions were “an informal workout arrangement,”62


58
   12 C.F.R. § 226.2(a)(14).
59
   616 F.2d 328, 333 (7th Cir. 1980).
60
    Id. at 333-34. We address Rothman’s contention that
Wolfington’s credit transaction was not “consummated”
below.
61
   Id. at 334.
62
   Id. (quoting 42 Fed. Reg. at 40,425).




                              17
pursuant to a 1977 Federal Reserve Board interpretation of an
older version of Regulation Z.

        That interpretation provided that the Act’s requirements
are applicable only to “formal written workout
arrangement[s],” which “involve some new evidence of
indebtedness executed by the customer, such as a new note,
contract or other form of written agreement.”63 In contrast, “an
informal workout arrangement” does not trigger the Act’s
requirements.64 Because the debtors’ agreements with the
hospital “were reached without a new written evidence of
[their] indebtedness,” the Bright court concluded they were
merely an informal workout arrangement and not an extension
of credit.65

       Pursuant to Bright, Rothman and Wolfington dispute at
length whether the January 12 Financial Policy created a
“preexisting debt” and whether the subsequent January 20
Agreement was merely an “informal workout arrangement” of
that debt.66

       We believe that dispute is misplaced because whether
debt is “preexisting” is irrelevant under both Bright and the
Act. The critical issue in Bright was not whether the debt was

63
   42 Fed. Reg. at 40,425 (citing 12 C.F.R. § 226.2(p) (1977)
(defining “consumer credit”)).
64
   Id.
65
   616 F.2d at 335.
66
   Appellee Br. at 9 (“The District Court correctly concluded
that under the facts as pled Rothman did not extend credit but
instead attempted to collect a pre-existing debt.”); id. at 14-15,
17-20, 24; Reply at 14-17.




                               18
“preexisting” but the level of formality required to establish an
extension of credit.67 In defining that level of formality, the
Bright court relied on the Federal Reserve Board’s 1977 staff
interpretation, which contrasted the extension of credit in a
formal “written” agreement with an “informal workout
arrangement.”68 There was no extension of credit in that case,
not because the debt was preexisting, but because there were
no formal written “evidence” of the credit transaction.69 Thus,
in Bright, the presence of “preexisting” debt was entirely
irrelevant to a claim under the Act.

       Likewise, the presence of “preexisting” debt is
irrelevant under the plain text of the Act and Regulation Z,
amended since Bright, as well. As noted above, the Act defines
credit as “the right granted by a creditor to a debtor to defer
payment of debt or to incur debt and defer its payment.”70 That
“definition contemplates that one who confers a right to pay a
pre-existing debt in more than four installments will be a
‘creditor.’”71 Limited to Wolfington’s pleadings, we conclude
he has sufficiently pled that he was conferred such a right. He
alleges that Rothman permitted him to pay off the remaining
deductible stemming from his surgery at the rate of $100 per
month. Because the Act reaches extensions of credit to defer
payment of both preexisting and newly incurred debts, it is
irrelevant whether the January 12 Financial Policy created a

67
   616 F.2d at 334.
68
   42 Fed. Reg. at 40,425.
69
   616 F.2d at 334 (quoting 42 Fed. Reg. at 40,425).
70
    15 U.S.C. § 1602(f); accord 12 C.F.R. § 226.2(a)(14)
(“Credit means the right to defer payment of debt or to incur
debt and defer its payment.”).
71
   Pollice, 225 F.3d at 413.




                               19
debt or not. Thus, we conclude that Wolfington has
sufficiently pled an extension of “credit.”

        In reaching that conclusion, we part ways with the
Bright court in analyzing whether a written agreement is
required for an extension of “credit.” At the time of the Bright
decision, a written agreement was required only by the Federal
Reserve Board’s 1977 staff interpretation.72 However, that
requirement was expressly added to Regulation Z in 1981,
when the Federal Reserve Board opted to include it under the
definition of “creditor.”73 Consequently, we conclude that the
contrast between a formal “written” agreement and an
“informal workout” of preexisting debt is better analyzed,
infra, under Rothman’s argument that Wolfington failed to
plead a written agreement under the definition of “creditor.”

                     (b)    Consummation

       Second, Rothman and Wolfington dispute whether the
extension of credit was “consummated” under the Act. As
noted above, a creditor must make the Act’s required
disclosures before “consummation” of the credit transaction; a
credit transaction is “consummated” only at “the time that a
consumer becomes contractually obligated on a credit

72
   Compare 42 Fed. Reg. at 40,425, with 12 C.F.R. § 226.2(s)
(1981).
73
   46 Fed. Reg. 20,848, 20,851 (Apr. 7, 1981) (“The definition
has also been revised to require, if there is no finance charge,
that there be a written agreement to pay in more than four
installments, in order for a person offering credit to be
considered a creditor. This is narrower than in the current
regulation, which covers both oral and written agreements.”).




                              20
transaction.”74 Under an older version of that requirement,75
the Bright court concluded that the credit transactions in that
case were not consummated.76 It reached that conclusion
because the debtors’ sporadic payments were “clearly not
responsive to either of th[e] work-out agreements” offered by
the hospital.77 Because the patients in Bright never responded
to the hospital’s offered payment plans, they never manifested
assent to the proposed agreements.78 Consequently, the court
concluded that there was no contractual relationship between
the parties and the credit transaction was never
consummated.79

        We conclude that, unlike the transactions in Bright, the
January 20 Agreement was consummated. The court in Bright
concluded that there was insufficient evidence of a binding
contractual agreement to constitute “consummation” of the
credit transaction. Based solely on the pleadings, however, we
conclude that Wolfington sufficiently pled the formation of a
contractual agreement: offer, acceptance, and “mutual assent
to essential terms.”80 He pled that he reached a payment
agreement with Rothman that involved a down payment and
monthly installments “until the balance of the deductible was
fully satisfied.”81

74
   12 C.F.R. § 226.2(a)(13).
75
   Id. § 226.2(kk) (1980).
76
   616 F.2d at 333.
77
   Id.
78
   Id. at 333-34.
79
   Id.
80
   Flender Corp. v. Tippins Int’l, Inc., 830 A.2d 1279, 1284
(Pa. Super. Ct. 2003).
81
   JA 87.




                              21
       In response, Rothman raises three arguments, none of
which is availing. First, it argues that Wolfington did not enter
into a contractual agreement because he never “signed any
written document agreeing to make payments.”82 Rothman
misconstrues the requirements for formation of a “legally
binding contract.”83 It is black-letter law that, as a general
matter, no signed document is required to create a contractual
obligation. Instead, the exchange of promises to perform is
sufficient to form a contract.84 Wolfington has pled such an
exchange. This is sufficient, on a motion for judgment on the
pleadings, to infer the existence of a contractual agreement.

       Second, Rothman relies on Bright to argue that there
was no contractual agreement because there was “no new
indebtedness”85 as a result of Rothman and Wolfington’s oral

82
   Appellee Br. at 15; see also id. at 16-17 (“Consummation
occurs when the plaintiff becomes legally obligated on the
‘debt.’ Here, the only document legally obligating Plaintiff
was the written Agreement of January 12, 2016.” (citations
omitted)); id. at 21.
83
   Id. at 16.
84
   See Greene v. Oliver Realty, Inc., 526 A.2d 1192, 1195 (Pa.
Super. Ct. 1987). The Federal Reserve Board’s Official Staff
Commentary on Regulation Z provides that state law governs
the consummation of a credit transaction, stating: “State law
governs. When a contractual obligation on the consumer’s part
is created is a matter to be determined under applicable law;
Regulation Z does not make this determination.” 46 Fed. Reg.
at 50,292.
85
   Appellee Br. at 17; see also id. at 20 (“Plaintiff was not
extended credit, Plaintiff was provided an alternative to pay a




                               22
exchange—in other words, that the debt was “preexisting.”86
This argument is unavailing for the reasons described above—
the Act plainly “contemplates that one who confers a right to
pay a pre-existing debt in more than four installments will be a
‘creditor.’”87 Thus, it is irrelevant that the debt was preexisting
so long as the agreement conferred a right to postpone payment
of that debt in four or more installments. As determined above,
Wolfington has sufficiently pled that he was contractually
conferred such a right.

        Finally, Rothman relies on Bright to argue there was no
contract formed between the parties because Wolfington failed
to make payments toward his deductible.88 That argument
misconstrues the analysis in Bright of the debtors’ payments.
As described above, the Bright court analyzed the debtors’
payments, not because payments were required to form a
contract, but because it was analyzing whether there was
evidence that the debtors accepted the terms of repayment
offered by the hospital. Despite Rothman’s arguments, Bright
does not require payments to contractually consummate a
credit transaction, but merely recognizes that performance may
be evidence of acceptance under well-established contract
law.89


debt that was due before his surgery . . . .”); id. at 24
(“Defendant contacted [Wolfington] informally to work out a
payment arrangement of the existing debt in an informal
manner.”).
86
   Id. at 20.
87
   Pollice, 225 F.3d at 413.
88
   Appellee Br. at 13-14, 17-18, 21-24.
89
    Rothman’s arguments regarding “no new indebtedness”
could potentially be relevant to the existence of consideration




                                23
                    (c)    Writing

        Third, the parties dispute whether credit was extended
to Wolfington in a “written agreement,” as required by
Regulation Z. That dispute requires us to resolve two related
issues:     (1) whether Wolfington’s allegations satisfy
Regulation Z’s “written agreement” requirement, and (2)
whether the interpretation of that requirement by the Federal
Reserve Board staff is entitled to deference from this Court.
We conclude that Wolfington’s allegations do not satisfy the
staff interpretation and that interpretation is entitled to
deference. Consequently, we will affirm the District Court’s
grant of judgment on the pleadings.

       As relevant here, Regulation Z defines a creditor as a
“person who regularly extends consumer credit that . . . is
payable by written agreement in more than four installments
(not including a down payment).”90 The requirement of a
formal writing has long been established under the Act and
Regulation Z. Prior to the addition of the “written agreement”
requirement to Regulation Z in 1981,91 the Federal Reserve
Board’s 1977 staff interpretation instructed that the
Regulation’s disclosure requirements were not triggered
without a “formal written workout arrangement [that]
involve[s] some new evidence of indebtedness executed by the


underlying Wolfington’s contractual agreement. Rothman,
however, has failed to raise any argument regarding
consideration on appeal, which it has consequently waived.
See infra Section II.B.2.
90
   12 C.F.R. § 226.2(a)(17)(i).
91
   46 Fed. Reg. at 20,851.




                             24
customer, such as a new note, contract or other form of written
agreement.”92

       Under that long-standing interpretation, the Board does
not consider “a unilateral written communication by either the
creditor or the customer (such as a letter confirming matters
previously discussed either orally or in writing) [to] render[] a
workout arrangement formal and subject to the disclosure
requirements of Regulation Z.”93 A formal agreement is
distinct from “informal” agreements such as those “by
telephone.”94 That interpretation was affirmed by the Board
after amending Regulation Z to expressly require a “written
agreement,” explaining that a “letter that merely confirms an
oral agreement does not constitute a written agreement.”95

       Based on the requirements of Regulation Z, Rothman
contends that Wolfington has failed to allege the existence of
written agreement.96 Wolfington responds that the January 20
emails either constitute a writing for purposes of Regulation Z




92
   42 Fed. Reg. at 40,425.
93
   42 Fed. Reg. at 40,425.
94
   Id.
95
   46 Fed. Reg. at 50,293, as reprinted in 12 C.F.R. pt. 226,
supp. I, cmt. 2(a)(17). The Consumer Financial Protection
Bureau has reissued the Federal Reserve Board staff
interpretation verbatim. 12 C.F.R. pt. 1026, supp. I, cmt.
2(a)(17)             (2019),          available            at
https://www.govinfo.gov/content/pkg/CFR-2019-title12-
vol9/pdf/CFR-2019-title12-vol9-part1026.pdf.
96
   Appellee Br. at 25-28.




                               25
or are “indicative of a separate written agreement between the
parties.”97

        We conclude that, under the staff’s interpretation of
Regulation Z, Wolfington failed to sufficiently plead the
existence of a written credit agreement. Although Regulation
Z does not necessarily require the written agreement itself to
meet all the formalities of a contractual agreement,98 the
official staff interpretation requires, at the very least, that the
agreement be “executed by the customer.”99 Wolfington has
failed to allege that he has executed or signed such an
agreement. Instead, he merely alleges that the January 20
Agreement was negotiated by his father. Nowhere does he
allege that he signed a written agreement, and the January 20
email correspondence was merely “confirming” the
“previously discussed” agreement.

        Further, any written documents in Rothman’s
possession would not meet the requirements of the staff’s
official interpretation. Although it may be reasonable to infer
that Rothman has some documentation regarding the credit
transaction, Wolfington fails to allege that he has signed it.
Under the staff’s official interpretation, those allegations are
insufficient to establish a “written agreement.”

       In supplemental briefing, however, Wolfington
contends that the staff’s interpretation of Regulation Z’s
requirement of a “written agreement” is not entitled to

97
   Appellant Br. at 34.
98
   See 12 C.F.R. § 226.2(a)(17)(i) (defining “creditor” “when
there is no note or contract”).
99
   42 Fed. Reg. at 40,425.




                                26
deference from this Court and that we should construe that term
de novo. Rothman argues that the staff’s interpretation is
entitled to deference under the Supreme Court’s decision Auer
v. Robbins.100

        We agree with Rothman with respect to the deference
owed to the staff interpretation. In Auer, the Supreme Court
determined that an agency’s interpretation of its own
regulations is “controlling unless ‘plainly erroneous or
inconsistent with the regulation.’”101 That basic principle has
been stated in a number of permutations, and in Kisor v. Wilkie,
the Court took “the opportunity to restate, and somewhat
expand on, those principles.”102 According to the decision in
Kisor, Auer deference is “rooted” in “a presumption that
Congress would generally want the agency to play the primary
role in resolving regulatory ambiguities.”103 That presumption,
“though it is always rebuttable,” rests on the inference that

100
    519 U.S. 452 (1997). Although deference to an agency’s
interpretations of its own regulations is often traced to the
Court’s decision in Auer, the doctrine was first formally
articulated in Bowles v. Seminole Rock & Sand Co., 325 U. S.
410 (1945), and existed in the Court’s jurisprudence even prior
to Seminole Rock, Kisor v. Wilkie, 139 S. Ct. 2400, 2411
(2019).
101
    Auer, 519 U.S. at 461 (internal quotation marks omitted)
(quoting Robertson v. Methow Valley Citizens Council, 490
U.S. 332, 359 (1989)).
102
    139 S. Ct. at 2414.
103
    Id. at 2412 (plurality opinion); accord id. at 2416 (majority
opinion) (“[W]e give Auer deference because we presume, for
a set of reasons relating to the comparative attributes of courts
and agencies, that Congress would have wanted us to.”).




                               27
“when granting rulemaking power to agencies, Congress
usually intends to give them, too, considerable latitude to
interpret the ambiguous rules they issue.”104
        That presumption, however, may be rebutted by
showing that “an interpretation does not reflect an agency’s
authoritative, expertise-based, ‘fair[, or] considered
judgment.’”105 Thus, an agency’s interpretation of a regulation
is entitled to deference under Auer only if five criteria are met:
(1) the regulation must be “genuinely ambiguous” after the
court has “exhaust[ed] all the ‘traditional tools’ of


104
    Id.at 2412 (plurality opinion); accord id. at 2415 (majority
opinion) (“[W]hen the reasons for that presumption do not
apply, or countervailing reasons outweigh them, courts should
not give deference to an agency’s reading . . . .” (citation
omitted)). In his supplemental briefing, Wolfington contends
that Rothman has forfeited any argument that the staff
interpretation is entitled to deference under Auer.
Wolfington’s contention, however, is misplaced. As the Kisor
Court noted, deference under Auer is a “presumption”
regarding congressional intent, which may be rebutted as
described below. Thus, the burden rests on the party
challenging the application of Auer. Neither party addressed
Auer in its opening brief or before the District Court, and the
relevant forfeiture here is not Rothman’s, but Wolfington’s
failure to rebut the presumption of deference. Nonetheless,
given our “obligati[on]” to “perform [our] reviewing and
restraining functions” under Auer, we will consider
Wolfington’s arguments. Kisor, 139 S. Ct. at 2415.
105
    Kisor, 139 S. Ct. at 2415 (alteration in original) (quoting
Christopher v. SmithKline Beecham Corp., 567 U.S. 142, 155
(2012)).




                               28
construction”106; (2) the interpretation must be “reasonable,”
falling “within the zone of ambiguity the court has identified
after employing all its interpretive tools”107; (3) “the character
and context of the agency interpretation” must entitle it “to
controlling weight”108 as the agency’s “authoritative” or
“official position”109 such as “‘official staff memoranda’ that
were ‘published in the Federal Register’”110; (4) the agency’s
“interpretation must in some way implicate its substantive
expertise”111; and, finally, (5) the “agency’s reading of a rule
must reflect ‘fair and considered judgment,’” that is more than
a “convenient litigating position” or a “post hoc
rationalizatio[n].”112

        Those five requirements have been met by the staff
interpretation.    First, the term “written agreement” is
ambiguous. On one hand, the plain text of the term suggests
that the extension of credit must be reduced to a fully integrated
written instrument.113 On the other hand, we assume that

106
     Id. (quoting Chevron U.S.A. Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 843, n. 9 (1984)).
107
    Id. at 2415-16.
108
     Id. at 2416 (citing Christopher, 567 U.S. at 155; United
States v. Mead Corp., 533 U.S. 218, 229-31 (2001)).
109
    Id. (quoting Mead, 533 U.S. at 257-259, 258 n. 6 (Scalia, J.,
dissenting)).
110
    Id. (quoting Ford Motor Credit Co. v. Milhollin, 444 U.S.
555, 566 n.9, 567 n.10 (1980)).
111
    Id. at 2417.
112
    Id. (alteration in original) (quoting Christopher, 567 U.S. at
155).
113
    See Agreement, Black’s Law Dictionary (11th ed. 2019)
(defining “formal agreement” as “[a]n agreement for which the




                               29
legislation and regulations are promulgated “against the
background of the total corpus juris of the states,”114 including
principles of contract such as the statute of frauds, which
requires that a “writing” contain only the essential terms of an
agreement.115 Neither the Act nor Regulation Z defines a
“written agreement.” In light of those conflicting principles—
the plain text of the regulation and the background of state
law—the term “written agreement” is ambiguous.


law requires not only the consent of the parties but also a
manifestation of the agreement in some particular form (e.g., a
signed writing), in default of which the agreement is
unenforceable”); Contract, Black’s Law Dictionary (11th ed.
2019) (“A written contract is one which, in all its terms, is in
writing.”).
114
    Atchison, Topeka & Santa Fe Ry. Co. v. Brown & Bryant,
Inc., 159 F.3d 358, 362-63 (9th Cir. 1997) (quoting Atherton v.
Fed. Deposit Ins. Corp., 519 U.S. 213, 218 (1997)); accord
O’Melveny & Myers v. Fed. Deposit Ins. Corp., 512 U.S. 79,
85 (1994) (“Nor would we adopt a court-made rule to
supplement federal statutory regulation that is comprehensive
and detailed; matters left unaddressed in such a scheme are
presumably left subject to the disposition provided by state
law.”).
115
    E.g., Trowbridge v. McCaigue, 992 A.2d 199, 201 (Pa.
Super. Ct. 2010); Strausser v. PRAMCO, III, 944 A.2d 761,
765 (Pa. Super. Ct. 2008) (“We agree with appellant that the
writing requirement of the Statute of Frauds can be satisfied by
the amalgam of multiple documents[.]”); Haines v. Minnock
Constr. Co., 433 A.2d 30, 33 (Pa. Super. Ct. 1981) (“The
Statute of Frauds is satisfied by the existence of a written
memorandum . . . sufficiently indicating the terms of the oral
agreement . . . .”).




                               30
      Second, the staff interpretation is reasonable; it resolves
the ambiguity between the plain text of Regulation Z and state
law closer to the former, requiring more than a
“memorandum . . . indicating the terms of the oral agreement,”
as would be required by the statute of frauds.116

       Third, the “character and context” of the staff
interpretation entitle it to deference.         The 1977 staff
interpretation requiring a formal writing was published in the
Federal Register, and the staff reaffirmed its interpretation after
Regulation Z was amended to require a “written agreement.”
The Consumer Financial Protection Bureau reissued that same
interpretation without alteration. Thus, the staff interpretation
constitutes the agencies’ “official position.”




116
    Haines, 433 A.2d at 33. Wolfington argues that the staff
interpretation is unreasonable because it would allow a creditor
“to exempt itself from TILA’s consumer protections through
the simple expedient of documenting the parties’ credit
arrangements through confirmatory emails rather than a formal
written agreement.” Appellant Letter Br. at 5. That argument
is misplaced for two reasons. First, as discussed at length, the
Board has required a formal writing since at least 1977, and
there is no evidence that creditors have systematically sought
to circumvent the Act’s disclosure requirements by avoiding
formal written agreements. Second, the reasonableness
requirement of Kisor simply requires the agency’s
interpretation to fall within the regulation’s “zone of
ambiguity.” 139 S. Ct. at 2416. The staff interpretation easily
meets that requirement.




                                31
        Fourth, the staff interpretation implicates the agencies’
substantive expertise. Although Wolfington argues that the
scope of a “written agreement” is an “interpretive issue[]” that
“fall[s] more naturally into a judge’s bailiwick,”117 he ignores
the relationship between the scope of a “written agreement”
and the implementation of the Act and Regulation Z. That
implementation is uniquely within the Board’s province, as the
scope of the “written agreement” requirement affects the
efficient enforcement of the Act and the extent of creditors’
disclosure duties. Indeed, the relevance of the agency’s
substantive expertise is particularly apparent in the fact that
Congress has provided a defense for any “act done or omitted
in good faith in conformity with any . . . interpretation” of
Regulation Z promulgated by the Board118—including its
interpretation of the “written agreement” requirement. Under
that statutory scheme, the interpretation of the Act and
Regulation Z are well within the Board’s substantive expertise.

       Finally, the staff interpretation reflects the agencies’
“fair and considered judgment.” 119 The requirement of a
formal writing has been enforced by two different agencies for
more than forty years and has been reaffirmed repeatedly both
in staff interpretations and by the incorporation of the
requirement in Regulation Z.

       Thus, we conclude that the staff interpretation of a
“written agreement” is entitled to deference from this Court.


117
    Appellant Letter Br. at 4 (quoting Kisor, 139 S. Ct. at 2419).
118
    15 U.S.C. § 1640(f).
119
    Kisor, 139 S. Ct. at 2417 (quoting Christopher, 567 U.S. at
155).




                               32
Because Wolfington has not pled such an agreement, we will
affirm the District Court’s judgment on the pleadings.

       B.     Rule 11 Sanctions

        Second, Wolfington’s counsel challenges the District
Court’s sua sponte imposition of sanctions under Rule 11 in
the form of attorneys’ fees. Rule 11 requires that “[e]very
pleading, written motion, and other paper must be signed by at
least one attorney of record.”120 “By presenting to the court a
pleading, written motion, or other paper,” an attorney certifies
“after an inquiry reasonable under the circumstances” that “the
claims, defenses, and other legal contentions are warranted by
existing law or by a nonfrivolous argument for extending,
modifying, or reversing existing law” and that “the factual
contentions have evidentiary support.”121

        Although the imposition of sanctions previously
focused on counsel’s subjective good faith, “the test is now an
objective one of reasonableness.”122 The reasonableness of
counsel’s conduct depends on a number of factors, including,
“the amount of time available to . . . conduct[] the factual and
legal investigation; the necessity for reliance on a client for the
underlying factual information; the plausibility of the legal
position advocated” and “the complexity of the legal and




120
    Fed. R. Civ. P. 11(a).
121
    Fed. R. Civ. P. 11(b)(2)-(3).
122
    Lieb v. Topstone Indus., 788 F.2d 151, 157 (3d Cir. 1986)
(quoting Eavenson, Auchmuty & Greenwald v. Holtzman, 775
F.2d 535, 540 (3d Cir. 1985)).




                                33
factual issues implicated.”123 A court may not sua sponte
initiate proceedings under Rule 11 after “voluntary dismissal
or settlement of the claims” at issue.124 The District Court’s
imposition of sanctions is reviewed for abuse of discretion.125

       The District Court imposed sanctions on Wolfington’s
counsel for three reasons: (1) failing to investigate and obtain
Wolfington’s bank records; (2) alleging that there was a
“written agreement” between the parties and an “extension of
credit”; and, (3) alleging that Wolfington could serve as an
adequate class representative.126 Below, we analyze each of
the District Court’s grounds for imposing sanctions as well as
whether a district court may sua sponte award attorneys’ fees.
Although Wolfington’s counsel raises a number of arguments
challenging the imposition of sanctions, we conclude that
counsel’s conduct did not run afoul of Rule 11 and therefore
do not reach those other arguments.

              1.     Failure to Investigate Bank Records




123
    Mary Ann Pensiero, Inc. v. Lingle, 847 F.2d 90, 95 (3d Cir.
1988).
124
    Fed. R. Civ. P. 11(c)(5)(B).
125
    Ford Motor Co. v. Summit Motor Prods., 930 F.2d 277, 289
(3d Cir. 1991).
126
    JA 59-64. The District Court states that it initiated Rule 11
proceedings for a fourth reason, because “[s]everal of the
allegations in the Complaint were false.” JA 46. However, the
District Court does not discuss any false allegations as an
independent reason to impose sanctions and appears to have
integrated that reason with its other three.




                               34
       The District Court’s first reason for imposing
sanctions—counsel’s failure to investigate and obtain
Wolfington’s bank records—rested on the fact “that
[Wolfington] made no payment to Rothman after his surgery
on January 21, 2016.”127 According to the District Court, had
counsel “taken the simple step of obtaining [Wolfington’s]
bank records . . . it would have been obvious that allegations
that Rothman was deducting $100.00 a month from
[Wolfington’s] bank account beginning in February 21, 2016
were utterly false.”128

        Such payments, however, are irrelevant to a claim under
the Truth in Lending Act. “‘The Truth in Lending Act is a
disclosure law . . . . It is the obligation to disclose, not the duty
of subsequent performance, towards which the Act is
directed.’”129 The irrelevance of actual payments by the debtor
is belied by the Act’s structure. As noted above, a creditor is
required to make the Act’s mandated disclosures before the
credit transaction is consummated—that is, when the borrower
becomes “contractually obligated on a credit transaction.”130
The borrower’s contractual obligation to make payments,
however, does not arise until after the consummation of the
credit transaction and, consequently, after the creditor is
required to make the Act’s mandated disclosures. Thus, a

127
    JA 60 (reasoning that the bank records would show that
“Plaintiff made no payments to Rothman”).
128
    JA 61.
129
    Davis v. Werne, 673 F.2d 866, 869 (5th Cir. 1982) (omission
in original) (internal quotation marks omitted) (quoting
Burgess v. Charlottesville Savings & Loan Ass’n, 477 F.2d 40,
44-45 (4th Cir. 1973)).
130
    12 C.F.R. § 226.2(a)(13).




                                 35
creditor’s obligations under the Act precede a debtor’s
obligations under contract both temporally and logically.

       In this case, Wolfington’s alleged payments were
relevant only to his withdrawn claim under the Electronic
Funds Transfer Act.131 That claim, however, could not serve
as a basis for sua sponte sanctions under Rule 11, because it
was withdrawn. Rule 11 provides, “The court must not impose
a monetary sanction . . . on its own, unless it issued the show-
cause order under Rule 11(c)(3) before voluntary dismissal” of
the claims at issue,132 a provision that was added by
amendments to the Rule in 1993.133 Because that claim was
withdrawn before the District Court ordered counsel to show
cause, it consequently could not serve as grounds for the
imposition of sanctions.

       Despite the express language of Rule 11, the District
Court stated that it did “not credit counsel’s contention that [it]
could not impose sanctions for the voluntarily dismissed EFTA
claim.”134 The District Court cited two pre-amendment cases,
Cooter & Gell v. Hartmarx Corp.135 and Schering Corp. v.
Vitarine Pharm., Inc.136 for the proposition that it may impose
sanctions on withdrawn claims. Neither of those decisions,

131
     JA 95. The factually incorrect allegations regarding
Wolfington’s payments appeared in the Complaint only under
the heading “EFTA.” JA 94.
132
    Fed. R. Civ. P. 11(c)(5)(B).
133
     Fed. R. Civ. P. 11 advisory committee’s note to 1993
amendment.
134
    JA 57 n.12.
135
    496 U.S. 384, 398 (1990).
136
    889 F.2d 490, 496 (3d Cir. 1989).




                                36
however, involved sanctions imposed sua sponte,137 and to the
extent they permit a court to sua sponte impose sanctions on
claims that were withdrawn before any show cause order was
issued, they were superseded by the 1993 amendments to Rule
11. Those amendments expressly provide that “a monetary
sanction imposed after a court-initiated show cause order . . .
be imposed only if the show cause order is issued before any
voluntary dismissal.”138 Consequently, the District Court was
incorrect that it could impose sanctions for Wolfington’s
withdrawn claim if it so determined.

             2.   Allegations of Extension of Credit and a
Written Agreement

       The District Court’s second reason for imposing
sanctions, because there was no “extension of credit” and no
“written agreement,” was also in error. In imposing sanctions,
the District Court concluded that counsel unreasonably alleged
the “extension of credit” because Wolfington failed to make
payments to Rothman.139 The District Court reasoned that
without any payments, there was no consideration, and
consequently, no extension of credit.140 This is incorrect;
under Pennsylvania law, the exchange of bargained-for

137
    496 U.S. at 389; 889 F.2d at 494.
138
     Fed. R. Civ. P. 11 advisory committee’s note to 1993
amendment.
139
    JA 62.
140
    Id. Although the contractual obligations of the parties are
most relevant to consummation of the credit transaction, we
follow the District Court’s analysis of consideration under the
label of “extension of credit,” without adopting or endorsing it.
See supra note 106.




                               37
promises constitutes valid consideration.141 Thus, the District
Court erred in concluding that there was no extension of credit
because Wolfington failed to make payments; instead, the
extension of credit was valid upon the exchange of promises.

       Further, the District Court erred in concluding that
counsel unreasonably alleged the existence of a “written
agreement.” The reasonableness of the allegations in a
complaint and counsel’s underlying investigation depend, in
part, on the “the complexity of the legal and factual issues
implicated.”142 The Federal Reserve Board’s interpretation of
the “written agreement” requirement now in Regulation Z
dates from 1977 and is buried in the annals of the Federal
Register. Although those interpretations are entitled to
deference, counsel’s failure to find them was not unreasonable.
Instead, counsel raised a reasonable argument, interpreting the
text of Regulation Z to require only a “writing . . . to confirm
what the oral agreement was,” an interpretation the District
Court acknowledged was plausible.143 Thus, counsel’s
reliance on the January 20 email as a “written agreement” was
not unreasonable, despite ultimately being incorrect.

              3.     Class Allegations

       The District Court’s third ground for imposing
sanctions—counsel’s class-related allegations—also rested on
counsel’s failure to obtain Wolfington’s bank records. The
District Court stated, “If the bank records had been secured, it
would have been obvious that there was no basis whatsoever

141
    See Greene, 526 A.2d at 1195.
142
    Mary Ann Pensiero, 847 F.2d at 95.
143
    JA 202-03.




                              38
to allege Plaintiff could represent a class,” presumably because
he failed to make payments to Rothman.144 This ground fails
for the same reasons as the first: Wolfington’s failure to make
payments to Rothman is irrelevant to his Truth-in-Lending
claim.

              4.     Sua Sponte Award of Attorneys’ Fees

         Finally, the District Court erred in imposing sanctions
in the form of an award of attorneys’ fees under Rule 11 sua
sponte. Rule 11 does not permit a district court to award
attorneys’ fees in proceedings initiated under the Rule sua
sponte. Rule 11(c)(4) defines the sanctions available to the
sanctioning court. It provides, “The sanction may include
nonmonetary directives; an order to pay a penalty into court;
or, if imposed on motion and warranted for effective
deterrence, an order directing payment to the movant of part or
all of the reasonable attorney’s fees and other expenses directly
resulting from the violation.”145 Unlike for the imposition of
“nonmonetary” sanctions and “penalt[ies]” paid to the court,
Rule 11(c)(4) allows an award of attorneys’ fees only “if
imposed on motion.” That provision was added to Rule 11 as
subsection (c)(2) by the Rule’s 1993 amendments; the
Advisory Committee’s notes to the 1993 amendments confirm
this reading of the Rule.146 The 1993 notes provide, “The
power of the court to act on its own initiative is retained, but
with the condition that this be done through a show cause
order. . . . The revision provides that a monetary sanction

144
    JA 63-64.
145
    Fed. R. Civ. P. 11(c)(4).
146
     Fed. R. Civ. P. 11 advisory committee’s note to 1993
amendment.




                               39
imposed after a court-initiated show cause order be limited to
a penalty payable to the court.”147 Thus, a court may not
require payment of attorneys’ fees in Rule 11 proceedings
initiated sua sponte.148

       For the above reasons, the District Court abused its
discretion in imposing sanctions. Because the imposition of
sanctions is necessarily fact-intensive and only Rule 11 was
briefed by the parties in the District Court or addressed by the
District Court, we decline to consider in the first instance
whether sanctions could have been imposed on other grounds.

       C.     Leave to Amend

       Finally, we consider Wolfington’s belated request for
leave to amend his Complaint. Motions to amend under Rule
15 are typically granted liberally, and a court may deny leave
to amend only when “(1) the moving party has demonstrated
undue delay, bad faith or dilatory motives, (2) the amendment
would be futile, or (3) the amendment would prejudice the
other party.”149 However, “[w]hen a party seeks leave to
amend a complaint after judgment has been entered, it must
also move to set aside the judgment pursuant to Federal Rule
of Civil Procedure 59(e) or 60(b), because the complaint

147
    Id.
148
    Accord Hutchinson v. Pfeil, 208 F.3d 1180, 1184 (10th Cir.
2000); Thornton v. Gen. Motors Corp., 136 F.3d 450, 455 (5th
Cir. 1998).
149
    United States ex rel. Customs Fraud Investigations, LLC v.
Victaulic Co., 839 F.3d 242, 249 (3d Cir. 2016) (quoting
United States ex rel. Schumann v. Astrazeneca Pharm. L.P.,
769 F.3d 837, 849 (3d Cir. 2014)).




                              40
cannot be amended while the judgment stands.”150 “Where a
timely motion to amend judgment is filed under Rule 59(e), the
Rule 15 and 59 inquiries turn on the same factors.”151
Nonetheless, “in non-civil rights cases, district courts have no
obligation to offer leave to amend before dismissing a
complaint unless the plaintiff properly requests it.”152

        Wolfington requests leave to amend in a footnote in a
supplemental letter brief filed with this Court. However, on
appeal, Wolfington fails to address whether he meets the
standards for leave to amend under Rule 15(a). He likewise
failed to move to amend his Complaint in the District Court.
Consequently, we decline to consider those issues.




150
    Jang v. Bos. Sci. Scimed, Inc., 729 F.3d 357, 367-68 (3d Cir.
2013) (citing Fletcher-Harlee Corp. v. Pote Concrete
Contractors, Inc., 482 F.3d 247, 252 (3d Cir. 2007)).
151
     Cureton v. NCAA, 252 F.3d 267, 272 (3d Cir. 2001)
(citations omitted); Newark Branch, NAACP v. Harrison, 907
F.2d 1408, 1417 (3d Cir. 1990) (“Accordingly, courts have
held that grants for leave to amend complaints should be
routinely granted to plaintiffs, even after judgments of
dismissal have been entered against them, if the appropriate
standard for leave to amend under Fed. R. Civ. P. 15(a) is
satisfied.”); Adams v. Gould, Inc., 739 F.2d 858, 864 (3d Cir.
1984) (concluding that Rule 15(a) standard governs motion to
amend after entry of judgment).
152
    Jang, 729 F.3d at 367 (citing Fletcher-Harlee, 482 F.3d at
252).




                               41
IV.   Conclusion

       For the foregoing reasons, we will affirm in part and
reverse in part.




                            42
