362 F.3d 971 (7th Cir. 2004), 03-2828, Treadway v. Gateway Chevrolet Oldsmobile Inc.

Docket Nº:03-2828.
Citation:362 F.3d 971
Party Name:Tonja TREADWAY, Plaintiff-Appellant, v. GATEWAY CHEVROLET OLDSMOBILE INC., Defendant-Appellee.
Case Date:April 02, 2004
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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362 F.3d 971 (7th Cir. 2004)

Tonja TREADWAY, Plaintiff-Appellant,



No. 03-2828.

United States Court of Appeals, Seventh Circuit

April 2, 2004

Argued Jan. 20, 2004.

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[Copyrighted Material Omitted]

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Christopher V. Langone (argued), Chicago, IL, for Plaintiff-Appellant.

Ira M. Levin (argued), Burke, Warren, Mackay & Serritella, Chicago, IL, for Defendant-Appellee.

Before CUDAHY, KANNE and EVANS, Circuit Judges.

CUDAHY, Circuit Judge.

Tonja Treadway sought financing to buy a used automobile through Gateway Chevrolet Oldsmobile. After reviewing her credit report, Gateway decided that it would be futile to send her application to any lender. Instead of notifying her of this decision, however, Gateway indicated that it could get her financing if she had a cosigner. Treadway was able to produce her godmother as a "cosigner", but it ultimately turned out that Gateway had never obtained financing for Treadway, and her godmother was led to purchase the car herself. Treadway filed a suit against Gateway under the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA) based on its failure to notify her that it did not send her application to any lender. The district court dismissed both claims, and this appeal followed.


Tonja Treadway received a direct-mail solicitation from Gateway Chevrolet Oldsmobile, a seller of new and used automobiles, indicating that she was "pre-approved" for the financing of the purchase of a car. Treadway called the number listed on the mailing and gave Gateway

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her social security number so that it could access her credit report. Gateway insists that it does not itself provide financing for the cars it sells or leases. Instead, it attempts to arrange for financing through banks or finance companies. Gateway obtained a copy of Treadway's credit report. Based on the credit report, Gateway determined that Treadway would not be eligible for financing. This could not have been particularly surprising to Gateway given that it had purchased her name (in order to send the direct-mail solicitation) from a list of people who had recently filed for bankruptcy. Because she was not creditworthy, Gateway unilaterally decided not to seek financing on behalf of Treadway from any bank or finance company. In fact, it was common practice for Gateway not to seek financing for those that it determined to be ineligible for credit. See Supp.App. at 3, ¶ 5 (Gateway's statement of uncontested facts) ("If the review of the credit report shows that the customer would not likely be eligible for financing with any bank or finance company, Gateway would not submit an application for financing with any bank or finance company because there would be no benefit to the customer or Gateway.").1 Of course, it is not surprising that this has occurred regularly in the course of Gateway's business, given that it sometimes solicits potential customers from amongst those who have declared bankruptcy.

Shortly after her call, Treadway received a return call from Gateway inviting her to come to the dealership. On October 17, 2001, she made a visit to Gateway. According to Treadway, Gateway failed to inform her that it had decided not to seek credit on her behalf. To the contrary, it indicated that it had found a bank that would finance Treadway, but the bank would not finance a used car--only a new car. Moreover, Treadway would need a cosigner. Treadway agreed to purchase a new car instead of a used car and came up with Pearlie Smith, her godmother, to serve as a cosigner. Concerned as it was with customer convenience, Gateway had an agent deliver papers directly to Smith's house to be signed immediately. Treadway asserts that Smith signed the papers without reading them. After Smith signed, Gateway sold the note to Household Automotive Finance. It turned out that, if Smith had read the papers Gateway hand-delivered, she might have realized that she had committed herself to be the purchaser and sole owner of the car. See App. at 17, ¶ 81 (Plaintiff's local rule 56.1 statement: plaintiff's statement of additional facts). This became clear to Smith when she started receiving statements requiring payment on the car note. After Treadway made the first payment on the note on behalf of Smith, both Smith and Treadway refused to make further payment. The car was repossessed and Household continues to demand payment on the note.

On December 28, 2001, Treadway filed a suit against Gateway under the ECOA and the FCRA. In an order dated April 12, 2002, the district court granted in part and denied in part Gateway's motion to dismiss. Specifically, the district court dismissed Treadway's FCRA claim because Gateway was not a "user" of credit reports. See Treadway v. Gateway Chevrolet, Oldsmobile Inc., No. 01-C-9921, 2002 WL 554513 (N.D.Ill. April 12, 2002). The district court, however, declined to dismiss Treadway's ECOA claim because it found that, contrary to Gateway's assertion, the notification requirement of ECOA does not require an allegation of discrimination. Id. Later, in an order dated June 13, 2003, the district court granted Gateway's motion

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for summary judgment finding that Treadway had not alleged an "adverse action" as required by the ECOA. See Treadway v. Gateway Chevrolet, Oldsmobile Inc., No. 01-C-9921, 2003 WL 21372469 (N.D.Ill. June 13, 2003). This appeal followed.


A. Equal Credit Opportunity Act

We review de novo the district court's decision to grant summary judgment as to Treadway's ECOA claim, construing all facts and drawing all reasonable inferences from those facts, in favor of the plaintiff, the non-moving party in this case. See Cerutti v. BASF Corp., 349 F.3d 1055, 1060 (7th Cir. 2003). Summary judgment is proper when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56.

The ECOA was originally enacted in 1974 to prohibit discrimination in credit transactions. See Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 146 (5th Cir. 1983). It was amended in 1976 to require creditors to furnish written notice of the specific reasons why an adverse action was taken against a consumer. Id.; 15 U.S.C. §§ 1691(d)(2) and (3) ("A statement of reasons meets the requirements of this section only if it contains the specific reasons for the adverse action taken.").2 In this case, although Gateway ultimately got Treadway into a vehicle based on her godmother's credit, it did not even attempt to obtain financing for Treadway based on her own credit, as she requested. While an automobile dealership is sometimes considered merely an "arranger" or "referrer" with regard to credit, here Gateway effectively became the denier of credit. Therefore, we must decide as a matter of first impression whether an automobile dealership's unilateral decision not to submit a credit application to any lender constitutes an "adverse action" for purposes of the ECOA. Based upon the plain language, the commentary to and the purpose of the statute, we find that the decision not to submit a credit application to any lender does constitute an adverse action.

Any analysis must begin with the language of the statute itself. See Pittway Corp. v. United States, 102 F.3d 932, 934 (7th Cir. 1996). The term, "adverse action" is defined in relevant part by the ECOA as "a denial or revocation of credit." 15 U.S.C. § 1691(d)(6).3 By unilaterally deciding not to send Treadway's application to any lender, Gateway effectively denied credit to Treadway. Whether it is the lender or the dealership that makes the

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decision, both the action and the outcome are the same. In both cases, the decision maker (1) reviews the applicant's credit report to determine whether she is creditworthy, (2) makes a determination adverse to the applicant (i.e., that she is not creditworthy), (3) decides not to proceed any further in arranging credit and (4) as a result the applicant is not granted credit. There is no logical reason why these same steps would be considered an "adverse action" when taken by a lender but not when taken by a dealership, given that the result is the same in either case.

We interpret statutes to avoid absurd results. See FutureSource L.L.C. v. Reuters Ltd., 312 F.3d 281, 284-85 (7th Cir. 2002) ("Nonsensical interpretations of contracts, as of statutes, are disfavored ... [n]ot because of a judicial aversion to nonsense as such, but because people are unlikely to make contracts, or legislators statutes, that they believe will have absurd consequences."). Under a contrary interpretation of the statute, if the dealer forwarded the credit application to a lender and that lender determined that the applicant was not creditworthy, either the lender or the dealer would have to provide notice to the applicant. See 15 U.S.C. § 1691(d)(4). However, if it is the dealer, itself, that makes the same determination and therefore fails to forward the application to any lender, the applicant would receive no notice. This result is inconsistent at best.

Gateway responds with the syllogism that one who is unable to grant credit cannot deny credit either. The facts of this case, however, demonstrate otherwise. Nothing in the definition of "denial" requires that the party doing the denying have the ability to grant as well. See Black's Law Dictionary (7th ed.1999) (defining "denial" as "a refusal or rejection"). To the contrary, courts frequently deny motions which they lack the jurisdiction, discretion or authority to grant. See, e.g., United States v....

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