Opinion ID: 626781
Heading Depth: 3
Heading Rank: 2

Heading: .Epps' Other Claims

Text: We next address Epps' argument on appeal that the district court erred in ruling that the RIC is not enforceable as a matter of law, for breach of contract. The RIC clearly provides that it shall be subject to the terms of the CLEC. Thus, the question before us is whether such a term is enforceable against Chase as a matter of contract law. While the district court held that Chase was not bound by the election of the CLEC as a matter of Maryland law, we do not agree. This Court and the Supreme Court have recognized that when a party to a contract voluntarily assumes an obligation to proceed under certain state laws, traditional preemption doctrine does not apply to shield a party from liability for breach of that agreement. See Am. Airlines, Inc. v. Wolens, 513 U.S. 219, 229, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995) (a common-law remedy for a contractual commitment voluntarily undertaken should not be regarded as a requirement imposed under state law[.]) (internal citation, quotation marks, and alteration omitted); College Loan Corp. v. SLM Corp., 396 F.3d 588, 598 (4th Cir.2005) (where parties to an agreement voluntarily assume federal standards in their bargained-for private contract, party's argument that enforcement of the agreement is preempted by that federal law boils down to a contention that it was free to enter into a contract that invoked a federal standard as the indicator of compliance, then to proceed to breach its duties thereunder and to shield its breach by pleading preemption.... [F]ederal supremacy does not mandate such a result.). Nevertheless, under Maryland law, when a contractual term incorporating state or federal law is not the product of a negotiation yielding a freely-entered contract, it will not be enforced. Wells Fargo Home Mortg., Inc. v. Neal, 398 Md. 705, 922 A.2d 538, 546 (2007). In Wolens, the Supreme Court considered whether the Airline Deregulation Act of 1978 (ADA) preempted certain Illinois consumer protection laws that were invoked by plaintiffs challenging American Airlines' retroactive changes in terms and conditions for its frequent flyer program. 513 U.S. at 222, 115 S.Ct. 817. The Court concluded that the ADA's preemption provisions prevent states from regulating air carriers, but allows room for court enforcement of contract terms set by the parties themselves. Id. The Wollens Court reasoned that terms and conditions airlines offer and passengers accept are privately ordered obligations, and thus do not amount to a State's enactment or enforcement of any law, rule, regulation, standard, or other provision having the force and effect of law[.] Id. at 228-29, 115 S.Ct. 817 (internal quotation marks and alterations omitted). The Court of Appeals of Maryland applied Wolens in Wells v. Chevy Chase Bank, F.S.B., 377 Md. 197, 832 A.2d 812 (2003). In Wells, credit card holders brought breach of contract claims against the issuing bank. The agreement between the parties stated that it would be governed by Subtitle 9, §§ 12-901, 12-924 of the Commercial Law Article of the Maryland Annotated Code, and applicable federal laws. Id. at 813. The bank argued, relying on Wolens, that because the contract invoked a specific state statute, the bank's obligations were enlarge[d] or enhance[d] based on state laws or policies external to the agreement, and were therefore preempted. Id. at 831 n. 15. The court rejected the bank's argument, finding instead that compliance with Subtitle 9 is mandated, not from some external force, but only because the agreement between the parties refer to it ...; it was not imposed on [the bank] as a matter of law. Id. at 832. Accordingly, the court concluded that Wolens was applicable and allowed the card holders' breach of contract action to proceed. In Neal, the Court of Appeals of Maryland considered whether a mortgagor had claims against its mortgagee for breach of contract based on Department of Housing and Urban Development (HUD) regulations that were invoked in a Fair Housing Administration (FHA) insured loan agreement between the parties. 922 A.2d at 541. The mortgagor argued that, based on Wolens and Wells, the HUD regulations were applicable and formed the basis for a breach of contract claim. The court rejected that line of argument, holding instead that the paragraph in the FHAapproved deed of trust that contained the reference to the regulations was not a bargained-for term between the parties. Id. at 546. The court noted that Wells Fargo, the mortgagee, took assignment of the loan, and therefore was not a participant in negotiations or the drafting of the agreement. Id. Moreover, the original mortgagee-assignor also had no control over the substantive terms of the contract because it was a prefabricated FHA form. Id. at n. 7. Relying on Neal, Chase argues that it did not negotiate the terms of the RIC, and therefore, it cannot be bound by the election of the CLEC. It also claims that it was forced to include an election of the CLEC, and therefore, the choice was not voluntary and accordingly unenforceable. We do not agree. First, in our view, the facts of this case more closely resemble Wells than Neal. In both this case and Wells, the contract contained an explicit election of a specific Maryland statute. While Chase is correct that it was not a drafter of the RIC, in Neal neither the assignor nor the assignee had any control over the terms of the FHA deed of trust. Here, Thompson (and by extension, its successor-in-interest, Chase), had the option of either electing to have the RIC governed by the CLEC, or instead by the Maryland Retail Installment Sales Act (RISA), Md.Code Ann., Com. Law § 12-601 et seq. Thompson chose to adopt the CLEC when it could have made a different choice, the RISA. Chase is bound by that choice. The differences between the CLEC and the RISA illuminate the flaw in Chase's reasoning. As Chase itself notes, the RISA limits late fees to the lesser of $10 or five percent of the amount due. The CLEC allowed Thompson (and subsequently Chase) to mandate a ten percent late fee. Thompson evidently made a business judgment that it would accept the repossession notice requirements of the CLEC in exchange for the CLEC's less restrictive late fee provisions. In no sense was this decision forced upon Thompson, any more than it was forced upon Chase. Chase bases its argument that the CLEC is mandatory on § 12-1013.1(b)(2), which states that [i]f a person fails to elect in accordance with this section to extend closed end credit under this subtitle, the provisions of this subtitle do not apply. Put another way, a lending agreement must specifically state that the CLEC applies in order for the provisions of the CLEC to govern that agreement. Otherwise, the RISA applies. See Md. Code Ann. Com. Law § 12-601(m). Chase's argument fails because compliance with the CLEC is only mandatory to the extent that parties to a lending agreement agree to be bound by the CLEC. Under Maryland law, the parties could simply choose to be bound by the RISA. Chase has purchased a RIC that elects the CLEC, sought higher late fees from Epps (as authorized by the CLEC), and, upon breaching the RIC by failing to abide by its repossession notice requirements, claimed that the election of the CLEC was foisted upon it. In Wells, the Court of Appeals of Maryland rejected a defendant's efforts to do the same. Similarly, we conclude that Chase may not take advantage of favorable, voluntary, contract terms, and then cry foul when it fails to adhere to its own contractually derived obligations. Accordingly, the district court erred in dismissing Epps' breach of contract claim. Finally, Epps claims on appeal that the district court erred in dismissing her claims unrelated to the CLEC and the RIC. Because we now vacate the court's judgment with respect to the CLEC and contract claims, we do not address whether Epps adequately pled claims under the Maryland Consumer Protection Act, for declaratory and injunctive relief, or for unjust enrichment, particularly since the district court failed to address these claims (other than to dismiss them) in its prior opinion. Instead, our remand will allow the district court the plenary opportunity to address these other claims.