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Vargas v. Choice Health Leasing

August 26, 2010


The opinion of the court was delivered by: Denise Cote, District Judge


Plaintiff Ibelka Vargas ("Vargas" or "plaintiff") -- by and through her counsel, Phillip Jaffe ("Jaffe"), who was the former named plaintiff in this lawsuit -- brings this putative class action challenging the lawfulness of late fees she incurred in connection with a lease of certain dental equipment taken out in Jaffe's name. On March 4 and 5, 2010, defendants Choice Health Leasing ("Choice") and Citibank ("Citibank")*fn1 respectively moved to dismiss the plaintiff's amended complaint. For the following reasons, Citibank's motion to dismiss, converted to a motion for summary judgment, is granted, while Choice's motion to dismiss is granted in part.


The following facts, taken from the January 30, 2010 amended complaint (the "Amended Complaint"), are assumed to be true for the purpose of deciding these motions. Additional facts are drawn from materials attached to the Amended Complaint.*fn2

The plaintiff, Vargas, graduated from dental college in June 2003. Prior to obtaining her "New York State Dental License," the plaintiff sought to rent certain premises in Washington Heights for the purpose of establishing a dental office. Because the plaintiff lacked a credit history and had not yet acquired her dental license, Jaffe agreed to co-sign the lease for the dental office. In addition, after failing to be approved for a lease of dental equipment necessary for her new practice, the plaintiff asked Jaffe to lease dental equipment on her behalf.

Jaffe contracted with Choice in or about December 2002 to lease certain dental equipment.*fn3 Two separate accounts were opened, each in Jaffe's name (the "Accounts"). Jaffe orally agreed with Vargas that, although Jaffe would be the "legal owner" of the leased equipment, she would be responsible for making all lease payments to Choice.

Thereafter, Vargas began making payments on the Accounts. She paid on time, but "because of the newness of her dental practice," she "ma[de] payments near the deadline for the payment times." At some point, Vargas was told that if she made her monthly payment on the day it was due by telephone, her payment would be timely and would not trigger a late fee. This information was incorrect, however, because even when Vargas paid on time, the Accounts were not instantly credited, and late fees were incurred. According to the Amended Complaint, out of fifty-five timely telephone payments made by the plaintiff on one of the Accounts, she incurred late fees twenty-one times. Likewise, with respect to the other Account, the plaintiff made sixty-eight timely telephone payments, but late fees were incurred twenty-nine times. The plaintiff contends that these late fees were "randomly" imposed insofar as the companies "receive[d] those payments" and "had the cash in hand" immediately, but "did not post the amount of cash received until several days later." The Amended Complaint asserts that, as of January 2010, Vargas has paid $228,671.29 in principal and interest and $24,206.93 in late fees on what was originally a $200,000 loan.


On September 29, 2009, Jaffe, proceeding pro se, filed this lawsuit as a purported class action against Choice and Citibank for violating various federal statutes as well as state common law (the "Initial Complaint"). On October 28, Choice and Citibank filed separate motions to dismiss the Initial Complaint. Choice and Citibank's motions became fully submitted on December 23.

In his opposition to the defendants' motions, Jaffe sought permission to add additional claims to his complaint. Accordingly, by Order of January 11, 2010 (the "January 11 Order"), Jaffe was directed that, should he wish to amend his complaint to add or remove claims or parties, his amended pleading was due by February 5. On or about January 30, Jaffe, now serving as counsel, filed this Amended Complaint on behalf of Vargas and a putative class of similarly situated persons. Although the Amended Complaint no longer identifies Jaffe as a plaintiff, it nevertheless continues to allege that Jaffe is "the legal owner of the equipment leased by ChoiceHealth Leasing" and "legally responsible for any indebtedness to ChoiceHealth Leasing." The Amended Complaint asserts various causes of action, including claims to recover usurious or excessive interest under the National Bank Act, 12 U.S.C. §§ 85-86 ("NBA"), and the Depository Institutions Deregulation and Monetary Control Act, 12 U.S.C. § 1831d ("DIDA"); a civil claim under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1964(c) ("RICO"); and various state-law claims, including fraud; usury; defamation; conversion; and unjust enrichment. The Amended Complaint also enumerates as "cause[s] of action" four requests for particular forms of relief, including damages for pain and suffering, punitive damages, treble damages under RICO, and attorney's fees and costs. The Amended Complaint names as defendants both Choice and Citibank, asserting that they are the same "leasing company."

On March 4 and 5, Choice and Citibank, respectively, moved to dismiss the Amended Complaint in its entirety. Pursuant to an Order of March 8, the plaintiff's opposition papers were originally due on March 26. After multiple extensions of time, the plaintiff filed her opposition papers on June 25. Citibank's motion became fully submitted on July 9, and Choice's motion became fully submitted on July 16.


I. Citibank

Citibank has moved to dismiss the Amended Complaint on the theory that it is an improper defendant. Citibank has attached various affidavits and documentary exhibits to its motion. In turn, the plaintiff has also ...

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