Lozada v. Dale Baker Oldsmobile, Inc.

Decision Date27 March 2000
Docket NumberNo. 1:99-CV-620.,1:99-CV-620.
Citation91 F.Supp.2d 1087
PartiesNancy LOZADA, Bob Warren, A.D. Christian and Jeanne Uwamaliya, on behalf of themselves and all other similarly situated, Plaintiffs, v. DALE BAKER OLDSMOBILE, INC., a Delaware corporation, d/b/a Dale Baker Kia, d/b/a Dale Baker Suzuki, d/b/a Fresh Start Auto Center, and d/b/a National Fleet Liquidators of Michigan; and CFC-Consumer Finance Corporation, f/k/a Consumer Finance Corporation, a Virginia corporation, Defendants.
CourtU.S. District Court — Western District of Michigan

John E. Anding, Drew, Cooper & Anding, Phillip C. Rogers, Grand Rapids, MI, for Plaintiffs.

David William Centner, Law, Weathers & Richardson, Michael D. Wade, Garan, Lucow, Miller & Seward, PC, David N. Campos, Grand Rapids, MI, Charles L. McKelvie, Dold, Spath & McKelvie, PC, Troy, MI, William K. Holmes, Warner, Norcross & Judd, LLP, Grand Rapids, MI, for Defendants.

OPINION

HILLMAN, Senior District Judge.

Plaintiffs are consumers who have filed a class action complaint alleging that Defendant Dale Baker Oldsmobile, Inc. ("Dale Baker Olds") failed to provide them a copy of their retail installment contracts at the time of execution, allegedly in violation of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq., the Michigan Consumer Protection Act ("MCPA"), Mich. Comp. Laws §§ 445.901 et seq., the Michigan Motor Vehicle Installment Sales Contracts Act ("MVISCA"), Mich. Comp. Laws §§ 566.301 et seq., the Michigan Motor Vehicle Sales Finance Act ("MVSFA"), Mich. Comp. Laws §§ 492.101 et seq., and the Michigan Vehicle Code, Mich. Comp. Laws §§ 257.1 et seq. Plaintiffs' complaint also names as a defendant CFC-Consumer Finance Corporation ("CFC"), the assignee of a contract between Dale Baker Olds and one of the named plaintiffs. The matter presently is before the court on three motions: (1) a motion to dismiss filed by defendant Dale Baker Olds (docket # 17); (2) a motion to dismiss filed by defendant CFC (docket # 7); and (3) an alternative motion to compel arbitration and to dismiss filed by CFC (docket # 8). I have considered the briefs of the parties, together with oral arguments heard December 12, 1999. For the reasons that follow, I DENY the motions, with the exception of the motion of CFC to dismiss plaintiffs' TILA claim, which is GRANTED.

I.

The following facts are taken from the allegations of plaintiffs' complaint. Plaintiffs Nancy Lozada, Bob Warren, A.D. Christian and Jeanne Uwamaliya were all customers of Dale Baker Olds who sought to purchase motor vehicles on credit. Because of their credit histories, Dale Baker Olds salesmen determined that plaintiffs would not be eligible for conventional auto financing. As a result, the salesmen referred plaintiffs to the Dale Baker Olds special finance department or Credit Resources Center. After selecting a vehicle, each plaintiff was introduced to the Assistant Special Finance Manager, Stormie Moore, to complete the necessary documentation to obtain credit to finance their vehicles in the sub-prime credit market. At that time, each plaintiff was presented with and signed a Retail Installment Contract which contained disclosures of the annual percentage rate, finance charge, amount financed, total sale price, and payment schedule. Those disclosures were contained under the heading "TRUTH IN LENDING DISCLOSURES" and placed immediately above the signature line.

While plaintiffs were shown the retail installment contracts at the time they signed them and while those installment contracts contained disclosures, plaintiffs were not given a copy of the contracts or disclosures until some days after they signed their agreements. Plaintiff Lozada received a copy ten days after signing the document. Plaintiff Warren received a copy two days after signing the document. Plaintiff Christian received a copy fifteen days after signing.

On the basis of this history, plaintiffs contend that Dale Baker Olds failed to make the disclosures required by the TILA and the relevant regulations promulgated by the Federal Reserve Board pursuant to its authority under the TILA. Dale Baker Olds has moved to dismiss plaintiffs' TILA claim pursuant to Fed. R.Civ.P. 12(b)(6) for failure to state a claim, and, assuming dismissal of the federal claim, to dismiss plaintiffs' state law claims for lack of subject matter jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1).

Plaintiffs contend that CFC, as assignee of Dale Baker's contract with plaintiff Christian, is liable both under the federal and state statutes and under the terms of the contract. Defendant CFC also has moved to dismiss for failure to state a claim. CFC moves in the alternative to dismiss and compel arbitration in accordance with the contract.

II.
A. Standard of Review

Under Fed.R.Civ.P. 12(b), a complaint may be dismissed if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). The complaint must be construed in the light most favorable to the plaintiff, and its well-pleaded facts must be accepted as true. Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987). However, the court need not accept as true legal conclusions or unwarranted factual inferences. Lewis v. ACB Business Serv., Inc., 135 F.3d 389, 405 (6th Cir.1998). A complaint fails to state a claim upon which relief can be granted when it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations of the complaint. Jones v. City of Carlisle, 3 F.3d 945, 947 (6th Cir. 1993), cert. denied, 510 U.S. 1177, 114 S.Ct. 1218, 127 L.Ed.2d 564 (1994).

B. Motion to Dismiss of Dale Baker Olds

The TILA grants broad authority to the Federal Reserve Board to promulgate regulations necessary to implement the Act. See Mourning v. Family Publications Service. Inc., 411 U.S. 356, 366, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973); 15 U.S.C. § 1604(a). Courts interpreting the TILA defer to the regulations developed by the Federal Reserve Board. See Begala v. PNC Bank, Ohio, National Ass'n, 163 F.3d 948, 950 (6th Cir.1998). Because the TILA is a remedial statute, the courts also give liberal construction to the Act in favor of the consumer. See id. (citing cases).

Pursuant to its grant of authority, the Federal Reserve Board adopted Regulation Z, 12 C.F.R. § 226.1 et seq. Both the Act and Regulation Z require that a creditor in a closed-end transaction make disclosures to the consumer of the following items: the identity of the creditor, the amount financed, the annual percentage rate, the total of payments, and the total sale price. See 15 U.S.C. § 1638(a); 12 C.F.R. § 226.18. The TILA requires that a creditor make the required disclosures "before the credit is extended." 15 U.S.C. § 1638(b). Regulation Z provides that "[t]he creditor shall make disclosures before consummation of the transaction." 12 C.F.R. § 226.17(b). "Consummation" is defined as the time "the consumer becomes contractually obligated on a credit transaction." 12 C.F.R. § 226.2(a)(13). Regulation Z also provides the manner in which disclosures shall be made. In closed-end credit transactions, "[t]he creditor shall make the disclosures ... clearly and conspicuously in writing, in a form that the consumer may keep." 12 C.F.R. § 226.17(a)(1).

In their complaint, plaintiffs contend that the date of consummation in plaintiffs' credit transactions is the date on which they signed their contracts and thereby became "contractually obligated" to pay. See 12 C.F.R. § 226.2(a)(13). They further contend that Dale Baker Olds failed to comply with Regulation Z because, while Dale Baker Olds showed written disclosures to plaintiffs prior to their signing, it failed to provide those disclosures "in a form that the consumer may keep" prior to plaintiffs becoming contractually obligated to pay. 12 C.F.R. § 226.17(a)(1), (b).

Dale Baker Olds has moved to dismiss, contending that plaintiffs' sole federal claim under the TILA fails to state a claim for relief. Specifically, Dale Baker Olds contends that assuming the date plaintiffs signed their contracts was the date of consummation, it nevertheless complied with the regulation because it made the required disclosures to plaintiffs in writing before plaintiffs signed their contracts of sale. Dale Baker contends that Regulation Z does not require that a copy of the disclosures be delivered to the plaintiffs prior to consummation.

I disagree. The regulation requires that the required disclosures be made "in writing, in a form that the consumer may keep." 12 C.F.R. § 226.17(a)(1). Were the court to accept the position of Dale Baker that the regulation required only that consumers be shown the disclosures before becoming contractually obligated, the phrase "in a form that the consumer may keep" would be rendered meaningless. In other words, if the regulation means no more than that disclosures be made to consumers in writing, no additional meaning would be conveyed by requiring the form be one the consumer could keep.

As a basic principle of statutory construction, in interpreting any statute or regulation, this court must select an interpretation that gives meaning to all parts of that statute or regulation. See Armstrong Paint & Varnish Works v. Nu-Enamel Corp., 305 U.S. 315, 333, 59 S.Ct. 191, 83 L.Ed. 195 (1938) ("Where, as here, the language is susceptible of a construction which preserves the usefulness of the section, the judicial duty rests upon this Court to give expression to the intendment of law."). The presence of the phrase, therefore, compels a conclusion that the regulation requires actual delivery of the disclosures to the consumer.

The language of the phrase itself also suggests that delivery is...

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