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Financial Services Law Insights and Observations

3rd Circuit: Proof of written agreement needed for TILA claims

Courts Appellate Third Circuit TILA Regulation Z Disclosures


On August 20, the U.S. Court of Appeals for the 3rd Circuit concluded that a plaintiff failed to adequately allege the existence of a written agreement for his deductible payment plan and therefore, his surgery institute did not violate TILA’s disclosure requirements. According to the opinion, the day before his surgery, the surgery institute orally agreed to accept a partial deductible payment and agreed to permit the plaintiff to pay the remaining deductible requirements in monthly installments. The plaintiff received two emails, one confirming the initial payment and the other confirming the payment plan and listing the plaintiff’s credit card. The institute performed the surgery, but the plaintiff failed to make any further payments on the deductible. Instead, the plaintiff filed an action against the institute alleging it violated TILA by extending credit and failing to provide the required disclosures. The district court granted judgment on the pleadings for the institute, concluding that the plaintiff' failed to establish a written agreement for the extension of credit. The court also issued sanctions, in the form of attorneys’ fees, against the plaintiff’s counsel, reasoning the counsel could have reasonably discovered the lack of written agreement and lack of payment before initiating the action.

On appeal, the 3rd Circuit affirmed in part and reversed in part in the district court’s judgment. The appellate court agreed with the district court that the plaintiff failed to establish the existence of a written agreement for credit with the institute, noting “the requirement of a written agreement [under TILA] is not satisfied by a ‘letter that merely confirms an oral agreement.’” But the appellate court noted that the district court erred in relying on an admission to that effect by plaintiff’s counsel during a telephone conference. Nonetheless, the error was “harmless” because the plaintiff failed to establish a written agreement was executed and signed, stating “[n]owhere does he allege that he signed a written agreement, and the [] email correspondence was merely ‘confirming’ the ‘previously discussed’ agreement." The appellate court then reversed the district court’s sanctions ruling, concluding it abused its discretion when it imposed them.