Hughes v. Nationwide Bank, 387 F. Supp. 3d 612

Background

Hughes sued Nationwide Bank individually and as a putative class action alleging UCC violations for defective post‑repossession notices after Nationwide repossessed his vehicle. He sought leave to amend to add Ohio‑law claims and reframe class definitions.
The original complaint invoked diversity and CAFA jurisdiction but failed to plead citizenship (used "resident"), creating a subject‑matter jurisdiction defect. The PAC likewise failed to establish Plaintiff's citizenship.
Hughes attached a Promissory Note and a Consumer Security Agreement (CSA). The Note declares Ohio law governs the Note; the CSA states Ohio law governs the agreement "except and only to the extent of procedural matters related to the perfection and enforcement of Lender's rights and remedies against the Property," which are governed by Pennsylvania law (the Exception Clause).
Defendant moved for partial judgment on the pleadings and to strike class allegations; Hughes responded by moving to amend and to have Ohio law apply to his UCC claims.
The Court interpreted the contracts, concluded the CSA controls the repossession/UCC claims, and held that the Exception Clause covers Hughes’s claims — so Pennsylvania law, not Ohio law, applies to his individual claims.
Because (1) the PAC includes many amendments premised on Ohio law and (2) neither the Complaint nor PAC properly plead federal jurisdiction, the Court denied the motion to amend as futile and dismissed without prejudice, giving Hughes one final chance to replead properly.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether federal jurisdiction exists	Hughes alleged diversity/CAFA; implicitly argued jurisdiction exists	Nationwide pointed out pleadings only allege "residence," not citizenship, and no class member citizenship	Complaint and PAC failed to plead citizenship; jurisdiction not established; dismissal without prejudice allowed to cure
Which contract governs UCC repossession claims	Hughes relied on Note and CSA but argued Ohio law should govern his claims	Nationwide argued CSA governs repossession claims and contains the Exception Clause	Court held CSA governs these claims (not the Note) because CSA creates the security interest and covers Article 9 matters
Scope of the CSA Exception Clause (whether claims are governed by PA)	Hughes argued his statutory UCC claims are substantive and thus not "procedural," not covered by Exception Clause; also argued "perfection and enforcement" must be read conjunctively and clause does not concern Lender's rights	Nationwide argued "procedural matters" refers to procedures under the UCC (methods of perfection/enforcement); repossession/sale procedures relate to lender enforcement rights	Court held Exception Clause covers "procedural matters" (methods of perfection/enforcement), read "perfection and enforcement" disjunctively, and found repossession/post‑sale notice claims fall within lender "rights and remedies" — thus Pennsylvania law applies
Whether proposed PAC amendments premised on Ohio law are futile	Hughes sought to add Ohio‑law claims and alternative classes tied to Ohio choice‑of‑law language	Nationwide argued amendments relying on Ohio law would fail because PA governs Hughes's claims; amendments thus futile	Court found the core PAC amendments (premised on Ohio law) futile and denied leave to amend to file the PAC; granted one final chance to replead consistent with opinion

Key Cases Cited

McNair v. Synapse Group, Inc., 672 F.3d 213 (3d Cir. 2012) (mere residency is insufficient to establish diversity citizenship)
Lincoln Benefit Life Co. v. AEI Life, LLC, 800 F.3d 99 (3d Cir. 2015) (burden of establishing federal jurisdiction rests with the party invoking it)
Carter v. HealthPort Techs., LLC, 822 F.3d 47 (2d Cir. 2016) (conclusory allegation that at least one class member is from a different state is insufficient to establish CAFA diversity)
Mullin v. Balicki, 875 F.3d 140 (3d Cir. 2017) (discussing Foman factors and leave to amend)
In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997) (futility assessed under Rule 12(b)(6) standard)
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (U.S. 1941) (federal courts apply forum state's choice‑of‑law rules in diversity cases)
Kruzits v. Okuma Machine Tool, Inc., 40 F.3d 52 (3d Cir. 1994) (Pennsylvania courts generally enforce contractual choice‑of‑law clauses)
Mastrobuono v. Shearson Lehman Hutton, 514 U.S. 52 (U.S. 1995) (ambiguities in contract choice‑of‑law construed against drafter)
Trizechahn Gateway Ltd. Liab. Co. v. Titus, 976 A.2d 474 (Pa. 2009) (contract is ambiguous only if reasonably susceptible to more than one construction)
Sunoco, Inc. (R & M) v. Toledo Edison Co., 953 N.E.2d 285 (Ohio 2011) (give effect to parties' intent; plain language controls in contract interpretation)