Cornist v. B.J.T., 00-5751

• Decision Date: 19 September 2001
• Docket Number: No. 00-5751,00-5751
• Parties: (6th Cir. 2001) Kellena Cornist and David Jones, Plaintiffs-Appellants, v. B.J.T. Auto Sales, Inc.; B.J.T. Finance, Inc.; James Hadley; Bill R. Hatcher; Thomas Tepe, Defendants-Appellees. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 322

272 F.3d 322 (6th Cir. 2001)

Kellena Cornist and David Jones, Plaintiffs-Appellants, v. B.J.T. Auto Sales, Inc.; B.J.T. Finance, Inc.; James Hadley; Bill R. Hatcher; Thomas Tepe, Defendants-Appellees.

No. 00-5751

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: September 19, 2001

Decided and Filed: November 16, 2001

Appeal from the United States District Court for the Eastern District of Kentucky at Covington. No. 97-00041. William O. Bertelsman, District Judge. [Copyrighted Material Omitted] Candace J. Smith (argued and briefed), Ron Parry, ARNZEN, PARRY & WENTZ, Covington, Kentucky, Stephen R. Felson (briefed), FELSON & FELSON, Cincinnati, Ohio, for Appellants.

Frank C. Woodside III (briefed), Jon D. Brittingham (argued and briefed), DINSMORE & SHOHL, Cincinnati, Ohio, A. Dennis Miller (briefed), Dennis Wood Van Houten (briefed), DRODER & MILLER CO., L.P.A., Cincinnati, Ohio, Gary J. Sergent (briefed), O'HARA, RUBERG, TAYLOR, SLOAN & SERGENT, Covington, Kentucky, for Appellees.

Before: RYAN and BOGGS, Circuit Judges; and WILLIAMS, District Judge. ^*

OPINION

BOGGS, Circuit Judge.

Kellena Cornist and David Jones ("Cornist") appeal the judgment of the district court granting B.J.T. Auto Sales, Inc. ("BJT") summary judgment on all claims. Cornist's federal claims arise under the Truth in Lending Act, 15 U.S.C. § 1601 et seq. Cornist alleges that BJT charged prices and fees to credit customers that were lower or non-existent for cash customers without disclosing the items as "finance charges." Additionally, Cornist contends that BJT failed properly to disclose whether some of the fees were paid to third parties. For the reasons set forth below, we affirm in part and reverse in part the district court's summary judgment.

I

In 1996, Cornist purchased a 1987 Dodge automobile from BJT. The purchase was executed under a retail installment contract, and BJT assigned its interest in the contract to another defendant, B.J.T. Finance, Inc.

Cornist filed her complaint in this action on May 2, 1997, alleging that BJT had failed to make disclosures required by the Truth in Lending Act in connection with the purchase of her automobile from BJT. Cornist listed as defendants BJT, BJT Finance, and several owners of the two corporations. Among Cornist's Truth in Lending Act allegations were that BJT charged increased base prices for cars to credit customers without disclosing such increased prices as finance charges, failed to disclose the distribution of document fees and service agreement fees to third parties, and assessed those fees only on credit customers without disclosing them as finance charges.

Cornist sued individually and as representative of a class of individuals who had bought automobiles on credit from BJT. Later, Cornist filed a Motion for Class Certification.

After relatively contentious discovery proceedings, BJT and its co-defendants filed motions for summary judgment. In response, Cornist presented data on nineteen cash transactions for comparison to hundreds of credit transactions, while also noting that BJT had not produced documentation on over 139 cash transactions that Cornist had identified. Cornist compiled this data into a chart that compared, among other things, the "mark-up," or the premium over its cost of acquisition at which BJT sold automobiles, on each of the transactions. The mark-up appeared from the chart to be consistently and significantly higher for cars sold on credit.

The district court granted summary judgment for the defendants on all of Cornist's Truth in Lending Act claims. The court held that, in order to satisfy the legal elements of the Truth in Lending Act, Cornist must demonstrate a "systematic" disparity in pricing between credit and cash customers. At best, according to the court, Cornist's responsive evidence showed "sporadic rather than systematic" price increases for credit customers. The court similarly held that Cornist had not created any genuine issue of material fact that BJT violated any of the Truth in Lending Act's disclosure requirements by its allocation of the service agreement and document fees.

Having dismissed all of Cornist's federal claims under the Truth in Lending Act, the court dismissed the remaining state claims for lack of subject matter jurisdiction, declining to exercise continuing supplemental jurisdiction over the claims. Additionally, the court held that Cornist's motion for class certification was moot, all her substantive claims having been dismissed.

II

We are asked in this case to review a district court's summary judgment. This court reviews grants of summary judgmentde novo, under the same standard as the district court. See Owens Corning v. National Union Fire Ins., 257 F.3d 484, 490-91 (6th Cir. 2001). Summary judgment is appropriate 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 a judgment as a matter of law." Fed. R. Civ. P. 56(c). In reviewing a summary judgment, this court reviews the factual evidence and draws all reasonable inferences in favor of the non-moving party. See B.F. Goodrich Co. v. United States Filter Corp., 245 F.3d 587, 591-92 (6th Cir. 2001). To prevail, the non-movant must show sufficient evidence to create a genuine issue of material fact. A mere "scintilla of evidence" will not suffice for the non-movant to overturn the summary judgment, but instead, the non-movant must show evidence "on which the jury could reasonably find for the non-movant." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

The Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., on which the claims in this case are based, was designed to increase the information available to consumers in credit transactions. TILA seeks to foster the "informed use of credit" by revealing the full price of credit to the consumer. Mourning v. Family Publications Service, Inc., 411 U.S. 356, 364-65 (1973). Through requiring relatively uniform disclosures by sellers, TILA endeavors to enable consumers to evaluate credit offers separately from the purchase of merchandise, and thereby to create an active market providing more efficient credit prices. Although the disclosures undoubtedly increase transaction costs, TILA represents Congress's determination that those costs are outweighed by the benefits of the information produced. Because Cornist purchased her car through a retail installment contract, BJT was obligated to make the disclosures required by TILA.

Cornist's arguments against the district court's summary judgment on her TILA claims concern three categories of BJT's conduct. The first matter in dispute is BJT's pricing of its automobiles. Cornist argues that the evidence created a genuine issue of material fact with regard to whether BJT imposed higher automobile prices on credit customers "as an incident to the extension of credit," triggering BJT's disclosure responsibilities under TILA. Second, Cornist contends that summary judgment was inappropriate on several features of BJT's "service agreement fee." According to Cornist, BJT was required to disclose the partial allocation of the service agreement fee to a third party vendor. Additionally, Cornist asserts that the service agreement fee was imposed disparately on credit customers and was really an undisclosed finance charge in violation of TILA. Third, Cornist argues that the court incorrectly evaluated BJT's document fee. Cornist insists that BJT indicated that it had paid the document fee to third parties when in reality it had retained the fee for itself. Again, Cornist asserts that the document fee was imposed only on credit customers making it too an undisclosed finance charge. We discuss these categories of arguments separately below.

A. BJT's Pricing Structure

Cornist argues that BJT violated the Truth in Lending Act by charging higher base prices for automobiles sold to credit customers than for those sold to cash customers, without disclosing the higher prices as finance charges. The Act provides in relevant part: "For each consumer credit transaction other than an open end credit plan, the creditor shall disclose . . . [t]he 'finance charge,' not itemized, using that term." 15 U.S.C. § 1638(a)(3). The term "finance charge" is defined earlier: "[T]he amount of the finance charge in connection with any consumer credit transaction shall be determined as the sum of all charges payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. The finance charge does not include charges of a type payable in a comparable cash transaction." 15 U.S.C. § 1605(a) (emphasis added). These provisions require sellers to disclose as "finance charges" fees payable by credit customers, but not by cash customers, in comparable transactions. Although there are certainly exceptions to this rule, none is relevant here.

This statutory language brings us close to the case at hand. An increase in the base price of an automobile that is not charged to a cash customer, but is charged to a credit customer, solely because he is a credit customer, triggers TILA's disclosure requirements. The problem of proof is that there could be many other reasons, to which TILA is indifferent, for a comparatively higher base price. One customer could be a better bargainer than another. TILA is not an affirmative action statute for those unskilled in negotiation. Consumer demand may appear higher to the seller when a particular buyer approaches than when others do. Accordingly, the comparison of two spot transactions, even on nearly identical cars, would do little to establish the reason why the credit customer paid a higher price. See Gibson v. Bob Watson Chevrolet-Geo, Inc., 112 F.3d 283, 286 (7th...