Barber v. Kimbrell's, Inc.

• Decision Date: 04 May 1978
• Docket Number: No. 77-1195,77-1195
• Parties: Polly Ann BARBER, Appellee, v. KIMBRELL'S, INC., and Furniture Distributors, Inc., Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 216

577 F.2d 216

Polly Ann BARBER, Appellee, v. KIMBRELL'S, INC., and Furniture Distributors, Inc., Appellant.

No. 77-1195.

United States Court of Appeals, Fourth Circuit.

Argued Feb. 9, 1978.

Decided May 4, 1978.

Fenton T. Erwin, Jr., Charlotte, N. C. (Lindsey, Schrimsher, Erwin, Bernhardt & Hewitt, Dickson Phillips, on brief), for appellant.

Donald S. Gillespie, Jr., Legal Aid Society of Mecklenburg County, Charlotte, N. C. (G. Miller Jordan, Ernest L. Sarason, Jr., National Consumer Law Center, Inc., on brief), for appellee.

Richard A. Hesse, Franklin Pierce Law Center, on brief, for amicus curiae, North Carolina Consumers Council.

Before BRYAN, Senior Circuit Judge, WINTER and HALL, Circuit Judges.

WINTER, Circuit Judge:

For herself and a class that she represented, Polly Ann Barber sued Kimbrell's, Inc. (Kimbrell's), which operates a furniture store in Charlotte, North Carolina, and Furniture Distributors, Inc., Kimbrell's corporate parent, alleging that both defendants were liable for statutory damages under the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., for violations of certain disclosure requirements set forth in the Federal Reserve Board's Truth in Lending Regulations (Regulation Z), 12 C.F.R. Part 226. The district court certified a class consisting of plaintiff and persons who, between July 16, 1973 and May 3, 1974, entered into add-on credit transactions at Kimbrell's downtown Charlotte furniture store. It ruled that Kimbrell's and its corporate parent were liable under the Act to plaintiff and the members of the class and, proceeding non-jury, it assessed statutory damages in the amount of $100,000 plus costs and attorneys' fees. Barber v. Kimbrell's, Inc., 424 F.Supp. 42 (W.D.N.C.1976).

We affirm the district court's determination of liability against both defendants but reverse and remand for a redetermination of damages. We conclude that the district court improperly computed the maximum class recovery allowable by statute and erred in not submitting the damages question to a jury. Moreover, we conclude that the district court should have made findings to support its award of attorneys' fees. We therefore vacate the judgment as to the penalty and attorneys' fees and remand the case for further proceedings.

I. Facts

On July 16, 1973, plaintiff entered into a retail installment contract with Kimbrell's, Inc. for the purchase of various items of household furniture totalling $592.70. Because she already owed Kimbrell's $65.00 from a previous credit purchase, the July 16th agreement consolidated both the old and new balance and required repayment of the combined debt in twelve equal monthly installments. The written contract reflecting this agreement purported to disclose credit information as to both the new and combined transactions. ¹

On May 3, 1974, plaintiff filed this action, alleging that Kimbrell's, Inc. had violated § 121 of the Truth in Lending Act, 15 U.S.C. § 1631, ² and praying statutory damages as provided for in § 130(a) of the Act, 15 U.S.C. § 1640(a). ³ On October 29, 1974, Barber amended her complaint so as to maintain the suit as a class action pursuant to F.R.Civ.P. 23(b)(3). ⁴ Five months later, after substantial discovery had been conducted, plaintiff, with leave of court, amended her complaint a second time to add Kimbrell's parent, Furniture Distributors, Inc., as a party defendant. ⁵ On June 11, 1975, the court certified a plaintiff class consisting of those persons who entered into add-on credit transactions ⁶ at Kimbrell's downtown Charlotte store between July 16, 1973 and May 3, 1974. At the time of judgment, this class numbered approximately 740 members. ⁷

The case was heard on June 7, 1976, on cross-motions for summary judgment. Concluding that the defendants, as a matter of law, had violated certain of the disclosure requirements set forth in Regulation Z, 424 F.Supp. at 47-50, the district court granted plaintiff's motion for summary judgment as to defendants' liability. After carefully canvassing the factors specified by Congress as relevant to the determination of statutory damages in the class-action context, 424 F.Supp. at 51-2, the district court awarded the class $100,000, the maximum award then allowable under § 1640(a)(2)(B). ⁸ Although plaintiffs' counsel sought combined attorneys' fees of $19,955, the district court, pursuant to § 1640(a)(3), awarded them $25,000 as "a reasonable sum under the circumstances." 424 F.Supp. at 52.

II. Liability

Kimbrell's concedes liability as to one violation of Regulation Z. It admits that the use of the term "Total Time Balance" in its disclosure document ⁹ rather than the term "Total of Payments," as required by § 226.8(b)(3) of Regulation Z, ¹⁰ constitutes a technical violation of the Act sufficient to subject it to civil liability under § 1640. Furniture Distributors, Inc. contends, however, that the district court erred in holding it jointly liable with Kimbrell's for this or any other violation of the Act on the ground that it is not a statutory creditor within the meaning of 15 U.S.C. § 1602(f). Further, both defendants argue that the district court erred in granting summary judgment as to their liability for any of the other disclosure violations alleged by plaintiff.

A.

Section 1640 imposes civil liability on any "creditor" who fails to comply with the disclosure provisions of the Act. Section 1602(f) defines a creditor as one "who regularly extend(s) or arrange(s) for the extension of credit . . . ." There is no doubt that Kimbrell's, the corporate entity with which plaintiff dealt, is a creditor within the meaning of § 1602(f). Furniture Distributors contends, however, that it neither extends nor arranges for the extension of credit on a regular basis and that, therefore, it cannot be held to be a statutory creditor. The district court rejected this argument, 424 F.Supp. at 46, and we agree.

Section 226.2(h)(2), Regulation Z, provides that a person is an " arranger of credit" if he "(h)as knowledge of the credit . . . terms and participates in the preparation of the contract documents required in connection with the extension of credit . . . ." The district court found that the "officers and directors of . . . Furniture Distributors, Inc. participated in the development and preparation of the standard contract form . . . and distributed the form for use in Kimbrell's, Inc. and each of the other forty-seven retail stores in the Kimbrell's chain." Further, the district court found that "Furniture Distributors, Inc. has knowledge of the credit terms for all the consumer credit sales by its subsidiaries in that each consummated contract is sent to (Furniture Distributors) for review." 424 F.Supp. at 46. From our review of the record, we cannot say that these two findings are clearly erroneous, F.R.Civ.P. 52(a), and they place Furniture Distributors squarely within the definition of "arranger," 12 C.F.R. § 226.2(h)(2), and, hence, within the statutory definition of creditor, 15 U.S.C. § 1602(f). See Zale Corp. and Corrigan-Republic, Inc v. Federal Trade Commission, 473 F.2d 1317, 1320-22 (5 Cir. 1973).

B.

In addition to finding defendants in violation of § 226.8(b)(3), Regulation Z, as both now concede, the district court found multiple and substantial violations of § 226.6(a) (disclosures not made in meaningful sequence) and § 226.6(c) (misleading or incorrect additional information). 424 F.Supp. at 48-50. ¹¹ Defendants contend that the district court erred in finding these violations as a matter of law and urge that we remand this portion of the case for further proceedings on the merits. ¹² We are of the opinion that the district court acted properly in disposing of the question of defendants' liability by way of summary judgment.

Of course, F.R.Civ.P. 56(c) provides that summary judgment is appropriate only where there is "no genuine issue as to any material fact . . . ." The questions of whether additional information is presented in a misleading or confusing manner, § 226.6(c), and whether the sequence of disclosed information is meaningful, § 226.6(a), are not usually susceptible to summary judgment, because the adequacy or inadequacy of defendants' disclosure under these provisions, depending as it does on the perceptions of a " reasonable" consumer, presents a factual issue about which there is ofttimes a dispute. The questions are similar to that of materiality in federal securities litigation, the resolution of which depends upon the perceptions of a " reasonable" investor, where summary judgment is normally inappropriate. TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976).

Nonetheless, even as to a question of materiality in federal securities litigation, summary judgment will lie in an appropriate case. Quoting from an earlier decision in this circuit, Mr. Justice Marshall, speaking for the Court in TSC Industries, wrote: "Only if the established omissions are 'so obviously important to an investor, that reasonable minds cannot differ on the question of materiality' is the ultimate issue of materiality appropriately resolved 'as a matter of law' by summary judgment. Johns Hopkins University v. Hutton, 422 F.2d 1124, 1129 (CA 4 1970)." 426 U.S. at 450, 96 S.Ct. at 2133. In Johns Hopkins, we held that, under the facts of that case, reasonable minds would not differ as to the materiality of the facts misrepresented and withheld and that the disposition of the case by way of summary judgment was therefore appropriate. 422 F.2d at 1129. Likewise, in the instant case, we conclude that reasonable minds would be in agreement that defendants' disclosure statement was confusing and misleading in the respects documented in the district court opinion. We, therefore, agree with the district court that defendants violated the disclosure requirements of Regulation Z, §§ 226.6(a) and (c). ¹³

III. Damages

We consider next the appropriate...