Dwyer v. Barco Auto Leasing Corp.

• Decision Date: 05 October 1995
• Docket Number: Civ. A. No. 95-10888-WGY.
• Citation: 903 F. Supp. 205
• Parties: Christopher DWYER and Sandy K. Barlow, on behalf of themselves and all others similarly situated, Plaintiffs, v. BARCO AUTO LEASING CORP., Barron Chevrolet, Inc., and Bernardi, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

903 F. Supp. 205

Christopher DWYER and Sandy K. Barlow, on behalf of themselves and all others similarly situated, Plaintiffs, v. BARCO AUTO LEASING CORP., Barron Chevrolet, Inc., and Bernardi, Inc., Defendants.

Civ. A. No. 95-10888-WGY.

United States District Court, D. Massachusetts.

October 5, 1995.

Michelle Ann Weinberg, Daniel A. Edelman, Edelman & Combs, Chicago, IL, John Roddy, Grant & Roddy, Boston, MA, for Christopher Dwyer.

Robert H. Gaynor, Sloane & Walsh, Boston, MA, W. Paul Needham, Kevin M. Hensley, Needham & Warren, Boston, MA, for Barco Auto Leasing Corp.

Robert G. Eaton, Robert H. Gaynor, Sloane & Walsh, Boston, MA, for Barron Chevrolet Inc.

Gary S. Matsko, Davis, Malm & D'Agostine, P.C., Boston, MA, for Bernardi, Inc.

Michelle Ann Weinberg, Edelman & Combs, Chicago, IL, John Roddy, Grant & Roddy, Boston, MA, for Sandy K. Barlow.

MEMORANDUM AND ORDER

YOUNG, District Judge.

In this putative class action, lessees of motor vehicles challenge the business practices of a financing company, Barco Auto Leasing Corp. ("Barco" or the "financer"), and two dealerships, Barron Chevrolet, Inc. ("Barron") and Bernardi, Inc. ("Bernardi") (collectively, the "dealers" or the "dealerships"). The plaintiffs allege violations of the Consumer Leasing Act of 1976, 15 U.S.C. § 1667a (the "Act"),¹ and the Massachusetts Consumer Protection Act, Mass.Gen.Laws ch. 93A, §§ 2, 9 ("Chapter 93A"), and also assert claims for breach of contract. Each defendant moved for summary judgment on all claims. At a motion hearing on September 13, 1995, the Court denied Barco's motion out of hand save for the issue whether the applicable Massachusetts statute of limitations bars the chapter 93A claims against all defendants. The Court also took under advisement the federal question whether the dealers are "lessors" under, and therefore subject to, the Act.² The Court here deals with the federal statutory question first.

I. Background

For the purpose of resolving the defendants' motions for summary judgment, the Court recounts the evidentiary record properly before it in the manner most favorable to the plaintiffs. Continental Grain Co. v. Puerto Rico Maritime Shipping Auth., 972 F.2d 426, 429 (1st Cir.1992). In the spring of 1989, the plaintiff Christopher Dwyer ("Dwyer") went to Barron to lease a 1989 Chevrolet Fleetside pickup, ultimately entering into a lease agreement with Barco. According to Dwyer, the lease was arranged by, and signed on the premises of, Barron. Similarly, in the summer of 1990, plaintiff Sandy K. Barlow ("Barlow") entered into a lease agreement with Barco for a 1990 Honda Accord EX sedan. Barlow claims the lease was arranged by, and signed on the premises of, Bernardi.

Dwyer and Barlow both claim to have leased their vehicles primarily for personal, family, or household use, and not for business or commercial purposes. Barlow avers that the Bernardi salesperson with whom she dealt asked her whether she planned to use the car for personal or business use, and that she responded that she would use it "entirely for personal and family purposes," and never for business.

The defendants have produced documents, however, signed by Dwyer and Barlow, which state in their entirety:

Please be advised that Barco Auto Leasing Corp. is relying upon your representation that the vehicle you are leasing from us ... is primarily for business or commercial, as opposed to personal, household, or family purposes.

Affidavit of Stephen Baron, Exhs. 1, 2 (emphasis in original). Dwyer and Barlow do not recall seeing or signing such documents, admit that they did not carefully read the documents presented to them for signature at the lease closings, and were not given copies of the business-use statements along with copies of all other documents necessary to the transactions.

In the spring of 1995, Barlow sought to terminate her lease prior to its expiration, and returned the Honda to Barco by delivering it to Bernardi. As a result, Barco sent her a bill for $1,768.36, which Barlow characterizes as a penalty for early termination of the lease.³

II. The Consumer Leasing Act

A. Background

Bernardi and Barron assert that the Act does not apply to them because they neither entered into lease agreements with the plaintiffs nor "arranged" for such leases. See 15 U.S.C.A. § 1667(3) (West 1982) (defining lessor to include one who regularly "arranges to lease under a consumer lease"). Dwyer and Barlow admit that they did not enter into leases with the dealers, but argue strenuously that they are liable as arrangers. To determine the status of Barron and Bernardi and the applicability of the Act's disclosure requirements to them, the Court must examine the events surrounding, and the dealerships' role in, the execution of the leases.

What emerges most strikingly from the materials before the Court is the fact that the parties entertained radically different perceptions of the essential nature of the transactions into which they had entered. To Barron and Bernardi, two separate and unrelated transactions occurred: they sold the vehicles to Barco and then Barco leased them to Dwyer and Barlow. The dealerships thus draw precise distinctions between themselves and the financer as separate corporate entities engaging in arms-length business dealings. By so doing, the dealers disavow any contractual relationship with the consumers whatsoever. To consumers who walk on the dealership's lot to lease a car or truck, the view is entirely different: the dealer and the financer are, to them, a single entity, or at the very least, two indivisibly related entities working in tandem towards a single goal, with whom they must deal in order to obtain the desired lease. To the extent consumers are even aware of the existence of the financer as a distinct corporate entity, they believe, and the dealer and the financer do little to disabuse them of the notion, that such division is necessary for technical or legal reasons which do not concern them or affect their rights. The legal niceties of the neatly filled out paperwork placed before them by representatives of the dealers, and from which they could discern the "true" nature of the transaction by careful study, simply does not concern the average consumer.

Turning from the general to the specific, Bernardi asserts that it received no fee or other compensation for referring customers to Barco; its personnel had no knowledge of the lease terms, other than the interest rates; and its personnel did not participate in the preparation of the lease documents. Kenneth Mastrangelo, the Bernardi salesman who handled Barlow's transaction, states that Bernardi's practice was to sell vehicles to Barco which then, in turn, leased the vehicle to its customers. He admits that he assisted Barlow in completing the customer credit application, which was then sent by Mastrangelo by telecopier to Barco. Barco approved the application and then drafted and executed all lease documents. Mastrangelo disavows any role in the drafting, negotiation, or execution of any lease documents, and provided no assistance in relation to the drafting of the lease. To like effect are affidavits submitted by Bernardi's Business Manager, Office Manager, and Assistant Office Manager.

Barlow states that when she inquired at Bernardi about leasing a Honda, she dealt with a young man named Ken, presumably Kenneth Mastrangelo. Barlow agreed with Ken that she would lease the car, and Ken introduced her to another person who was to "handle the lease paperwork." This second person, she claims, prepared the lease forms while she waited. Several days later, she returned to Bernardi to sign the lease papers and to pick up the car. She met again with the second man, who had her sign numerous documents, including the lease.

Dwyer tells a similar story. He states that when he went to Barron to lease a pickup truck, he dealt with a salesman named Tim Lawler ("Lawler"). Dwyer ordered the truck, through Lawler, and returned to pick it up. Upon his arrival at the dealership, he found the lease documents prepared and awaiting his signature. Dwyer signed them with Lawler present.⁴

B. Are the Dealerships "Lessors"?

Lessors of certain property to be used primarily for personal, family, or household purposes are required to make disclosures to consumer lessees. 15 U.S.C.A. §§ 1667, 1667a (West 1982). The Act defines a lessor as a "person who is regularly engaged in leasing, offering to lease, or arranging to lease under a consumer lease." Id. § 1667(3). Pursuant to statutory authority, see id. § 1604, the Board of Governors of the Federal Reserve System (the "Board") has promulgated regulations ("Regulation M") to implement the Act. See 12 C.F.R. § 213 (1995). Regulation M explains that to "arrange for lease of personal property" means:

to provide or offer to provide a lease which is or will be extended by another person under a business or other relationship pursuant to which the person arranging such lease:

(i) Receives or will receive a fee, compensation, or other consideration for such service; or (ii) Has knowledge of the lease terms and participates in the preparation of the contract documents required in connection with the lease.

Id. § 213.2(a)(4). The Board's Division of Consumer and Community Affairs issued an "Official Staff Commentary" interpreting Regulation M in 1981. See 12 C.F.R. 213, Supp. I-CL-1 (1995); id. § 213.1(d). The commentary, which has the force and effect of law, see Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 567-68, 100 S.Ct. 790, 797-98, 63 L.Ed.2d 22 (1980); Candelaria v. Nissan Motor Acceptance Corp., 740 F.Supp. 806, 807 (D.N.M.1990), attempts to provide guidance on the question of who is an arranger of a consumer lease by giving two examples:

An automobile dealer who, pursuant to a business relationship, completes the necessary lease agreement before forwarding it to the leasing company (to whom the

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