Purtle v. Eldridge Auto Sales, Inc.

• Decision Date: 01 August 1996
• Docket Number: No. 95-5631,95-5631
• Citation: 91 F.3d 797
• Parties: Renee PURTLE, Plaintiff-Appellee, v. ELDRIDGE AUTO SALES, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 797

91 F.3d 797

65 USLW 2122

Renee PURTLE, Plaintiff-Appellee, v. ELDRIDGE AUTO SALES, INC., Defendant-Appellant.

No. 95-5631.

United States Court of Appeals Sixth Circuit.

Argued May 20, 1996.

Decided Aug. 1, 1996.

Marla K. Williams (argued), Rural Legal Services of Tennessee, Cookeville, TN, Craig P. Fickling, Jr. (briefed), Cookeville, TN, for Plaintiff-Appellee.

William A. Cameron (briefed), Cameron & Cameron, Cookeville, TN, Chantal M. Eldridge (argued and briefed), Cookeville, TN, for Defendant-Appellant.

Before: DAUGHTREY and MOORE, Circuit Judges; FORESTER, District Judge. ^*

FORESTER, District Judge.

The appellant, Eldridge Auto Sales, Inc. ("Eldridge"), appeals the final judgment of the United States District Court for the Middle District of Tennessee, Northeast Division entered against Eldridge for $1,000.00 in statutory damages and $5,444.05 in attorney's fees and costs pursuant to the Truth in Lending Act (the "TILA"), 15 U.S.C. § 1601, et seq. We affirm.

I

The facts of this case are largely undisputed. On July 23, 1993, the appellee, Renee Purtle, purchased a 1986 Chevrolet Blazer from Eldridge. Because she did not have the funds to pay cash for the car, Purtle requested financing from Eldridge and filled out a credit application. On her credit application, Purtle allegedly made several material misrepresentations regarding her employment. Because of these alleged misrepresentations, Eldridge agreed to extend credit to Purtle to purchase the car.

Pursuant to the sale, the parties executed two documents: (1) a Bill of Sale and Car Invoice, and (2) a Conditional Sales Contract. These two documents constitute the entire agreement of the parties. Under the terms of both the Bill of Sale and the Conditional Sales Contract, Purtle was to make weekly payments of $60.00 to Eldridge until the balance of $6,890.60 was paid. Although Purtle made several installment payments to Eldridge, many were late and several tendered checks were worthless. After Purtle defaulted on her payments for several consecutive weeks, Eldridge repossessed the car.

On January 11, 1994, Eldridge filed a state civil warrant against Purtle to recover $823.00, the amount past due and owing on the Blazer. On July 22, 1994, Purtle filed a separate action in federal court against Eldridge, alleging various violations of the TILA. Purtle also removed Eldridge's state civil warrant to federal court based on pendent jurisdiction. Eldridge subsequently filed a motion to remand the state civil warrant to state court and a motion to dismiss the federal action. The district court granted Eldridge's motion to remand, but denied its motion to dismiss. Purtle then filed a motion for partial summary judgment on the issue of Eldridge's TILA liability. Five days prior to trial, Eldridge sought to assert a counter-claim against Purtle alleging fraud and promissory fraud. The district court granted Purtle's motion for partial summary judgment, leaving damages as the only issue to be litigated at trial. In the same order, the district court denied Eldridge's motion for leave to file the counter-claim.

On February 6, 1995, a bench trial was held on the issue of the appropriate statutory damages and attorney's fees to be awarded under the TILA. After hearing proof and receiving affidavits from Purtle's attorneys, the district court entered final judgment on March 9, 1995, awarding Purtle $1,000.00 in statutory damages and $5,444.05 in attorney's fees and costs. Eldridge filed a timely notice of appeal.

II

Eldridge submits the following issues for review:

(1) Whether Purtle is entitled to recover statutory damages under the TILA despite the fact that she fraudulently induced Eldridge to enter into the credit agreement upon which her damages are based and admits that she suffered no actual damages and fully understood all of her credit terms; and

(2) Whether Purtle's award of attorney's fees was excessive in light of her fraudulent inducement of the credit agreement, Eldridge's lack of culpability or bad faith, the Congressional purpose underlying the TILA, and Purtle's actual recovery.

This Court reviews the district court's award of statutory damages under the TILA under the de novo standard of review, Holmes v. Donovan, 984 F.2d 732, 735 (6th Cir.1993), and its award of attorney's fees and costs for an abuse of discretion, Wrenn v. Gould, 808 F.2d 493, 504 (6th Cir.1987).

III

Enacted in 1968, the TILA imposes mandatory disclosure requirements on those who extend credit to consumers. 15 U.S.C. § 1601, et seq. The TILA was specifically designed to remedy problems that had developed from the rapidly expanding use of consumer credit in the 1960s. The purpose of the TILA, as stated by Congress, is as follows:

It is the purpose of this title ... to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit....

15 U.S.C. § 1601(a). The Federal Reserve Board has been delegated the power to promulgate regulations to carry out the TILA's purpose. 15 U.S.C. § 1604. These regulations, among other things, mandate specific disclosures in credit transactions. See 12 C.F.R. § 226. In the event that a creditor fails to disclose any of the credit terms required under the TILA and its regulations, a consumer may bring a civil action against the creditor. 15 U.S.C. § 1640. If a violation is proven, the consumer may recover twice the amount of the finance charge (but not less than $100.00 nor more than $1,000.00). Id. at § 1640(a)(2)(A). The purpose of the statutory recovery is "to encourage lawsuits by individual consumers as a means of enforcing creditor compliance with the Act." Watkins v. Simmons & Clark, Inc., 618 F.2d 398, 399 (6th Cir.1980). The TILA also permits recovery of reasonable attorney's fees and costs. 15 U.S.C. § 1640(a)(3). A plaintiff in a TILA case need not prove that he or she suffered actual monetary damages in order to recover the statutory damages and attorney's fees. Watkins, 618 F.2d at 399. Nor is it necessary to show that the consumer was actually misled or deceived by an ambiguous credit term in order to prevail. Smith v. Chapman, 614 F.2d 968, 971 (5th Cir.1980); Millhollin v. Ford Motor Credit Co., 531 F.Supp. 379, 386 (D.C.Or.1981).

IV

The issue of the appropriate statutory penalty, reasonable attorney's fees, and costs to be awarded Purtle came before the district court on February 6, 1995. After hearing testimony and reviewing the relevant documents, the district court determined that Eldridge violated the TILA in several ways. First, Eldridge failed to disclose the finance charge and the annual percentage rate, in violation of 12 C.F.R. § 226.18(d) and (e). Second, Eldridge used the term "total credits" as opposed to "amount financed," in violation of 12 C.F.R. § 226.18(b). Finally, Eldridge violated 12 C.F.R. § 226.18(j) by failing to disclose the total sales price. Although Purtle admittedly suffered no actual damages as a result of Eldridge's incomplete disclosures, the district court entered judgment against Eldridge in the amount of $1,000.00 pursuant to § 1640(a)(2)(A)(i).

The district court then turned to the issue of attorney's fees and reviewed Purtle's petition for attorney's fees, the accompanying time logs of her attorneys, and Eldridge's specific objections thereto. Noting that this is a straightforward TILA case, the district court determined that it did not require the expertise of more than one lawyer. Thus, to the extent that the fees of Purtle's two attorneys were duplicative, the district court awarded one fee. The district court also declined to award attorney's fees for the time Purtle's attorneys spent conferring with each other. However, the district court did award Purtle $5,242.50 in attorney's fees and $201.55 in costs.

V

On appeal, Eldridge essentially sets forth two arguments. First, Eldridge argues that Purtle is not entitled to recover statutory damages because she fraudulently induced Eldridge to enter into the credit agreement, she suffered no actual damages, and she understood all of her credit terms. Second, Eldridge argues that if statutory damages are appropriate, the district court's award of attorney's fees was excessive because it failed to consider the parties' relative culpability, TILA's congressional purpose, and Purtle's actual recovery. Each argument will be addressed separately below.

A. THE DISTRICT COURT'S AWARD OF STATUTORY DAMAGES

Eldridge does not challenge the district court's application of the TILA to the credit disclosures made to Purtle or its determination that Eldridge failed to make certain disclosures mandated by the TILA. Rather, Eldridge argues that Purtle's alleged misrepresentations in her credit application are a defense to its technical violations of the TILA. This circuit has not yet addressed the issue of whether fraudulent inducement of a credit agreement is a defense to TILA liability.

According to Eldridge, the TILA disclosure requirements only apply to credit transactions which create a contractual relationship between a consumer and a creditor. See, e.g., 15 U.S.C. § 1631(a); 12 C.F.R. §§ 226.2(a)(13) and 226.17(c)(1); Wachtel v. West, 476 F.2d 1062 (6th Cir.), cert. denied 414 U.S. 874, 94 S.Ct. 161, 38 L.Ed.2d 114 (1973). Although the TILA's disclosure requirements do not arise until a contractual relationship exists between the parties, the TILA does not define when such contractual relationship arises. Rather, the TILA relies on state law to define the same. See 12 C.F.R. § 226.2(b)(3). Under Tennessee law, the fraudulent inducement of a contract invalidates the contract because there is no meeting of the minds and illusory consideration. Seaton v. Lawson Chevrolet-Mazda, Inc., 821 S.W.2d 137 (Tenn.1991); Dozier v. Hawthorne Development Co., 37 Tenn.App. 279, 262 S.W.2d 705 (1953). As a result,...