Rivera v. Grossinger Autoplex Inc., PLAINTIFF-APPELLANT

• Decision Date: 10 December 2001
• Docket Number: DEFENDANT-APPELLEE,No. 01-1015,PLAINTIFF-APPELLANT,01-1015
• Citation: 274 F.3d 1118
• Parties: (7th Cir. 2001) FRANCISCA RIVERA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,, v. GROSSINGER AUTOPLEX, INC.,
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1118

274 F.3d 1118 (7th Cir. 2001)

FRANCISCA RIVERA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT, v. GROSSINGER AUTOPLEX, INC., DEFENDANT-APPELLEE.

No. 01-1015

IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

Argued September 28, 2001

December 10, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 00 C 0442--Suzanne B. Conlon, Judge. [Copyrighted Material Omitted] Jonathan Nachsin (argued), Chicago, IL, for appellant.

Francis A. Spina, Cheri K. Trites-Versluis (argued), Cremer, Kopon, Shaughnessy & Spina, Chicago, IL, for appellee.

Before Flaum, Chief Judge, Bauer and Evans, Circuit Judges.

Bauer, Circuit Judge.

The plaintiff-appellant, Francisca Rivera, initiated a class action against the defendant-appellee, Grossinger Autoplex, Inc., seeking damages under the Truth in Lending Act ("TILA") and Illinois statutory law. After dismissing Rivera's state law claims, the district court granted summary judgment in favor of Grossinger on the remaining TILA claims. Rivera and the class members now appeal that ruling. For the following reasons, the decision of the district court is AFFIRMED in part; REMANDED in part.

I. Background

On January 25, 1999, Rivera bought a used 1995 Chevrolet Lumina automobile from Grossinger. Pursuant to the contract for sale entered into by Rivera and Grossinger, the parties executed a financing agreement, which included an Addendum that provided for "GAP" coverage. GAP (an acronym for "Guaranteed Auto Protection") insurance is a form of debt cancellation coverage. The practical function of GAP coverage is to cancel any loan deficiency that may remain if property insurance on a given automobile is insufficient to fully pay off the loan on that automobile in the event of theft or destruction.

The Addendum of the financing agreement providing for GAP coverage read in relevant part:¹

AGREEMENT--Although not required to do so, YOU have elected to participate in this Financial GAP Program . . . .

ENROLLMENT--YOU understand and agree that YOUR acceptance or rejection of enrollment in this Program is voluntary and is not a condition precedent to, or a consideration required to obtain credit . . . .

BY YOUR SIGNATURE(S) BELOW, YOU ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTAND AND ACCEPT THIS WAIVER, ALL ITS PROVISIONS, AND THAT NO VERBAL REPRESENTATIONS HAVE BEEN MADE TO YOU WHICH DIFFER FROM THESE PROVISIONS.

Rivera signed the Addendum at the time of purchase and paid $500 to enroll in the GAP program offered by Grossinger. Rivera's $500 payment was not included in the "finance charges" assessed for the car. Rather, the $500 GAP fee was included in the amount financed and was thereby subject to interest charges.

Rivera later sued Grossinger in federal court, alleging violations of TILA and Illinois statutory law. All of Rivera's causes of action arose from her purchase of GAP coverage. Rivera claimed that Grossinger did not comply with its legal obligations to clearly and conspicuously disclose in writing: (1) that GAP coverage was voluntary; (2) that GAP cov erage was not a prerequisite to receiving credit; and (3) the term of GAP coverage.² Rivera further claimed that Grossinger failed to obtain from her an affirmative written request for GAP coverage.

Following the dismissal of Rivera's state law claims, the district court certified a class of Grossinger customers to pursue the remaining TILA claims, with Rivera as the consumer class representative. After class notice was given, Rivera moved for and was denied summary judgment. Grossinger then filed its own motion for summary judgment, which was granted on December 1, 2000. In granting that motion, the court found that Grossinger had complied with all applicable TILA requirements when it sold GAP coverage to Rivera.

II. Discussion

We review the district court's grant of summary judgment de novo, viewing all facts and drawing all reasonable inferences in the non-moving party's favor. Spearman v. Ford Motor Co., 231 F.3d 1080, 1084 (7th Cir. 2000). Summary judgment is proper when the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Berry v. Delta Airlines, Inc., 260 F.3d 803, 808 (7th Cir. 2001). Further, judgment as a matter of law should be entered against a party "who fails to make a showing sufficient to establish the existence of an element essential to that party's case . . . on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

A) TILA Requirements

TILA requires creditors to disclose any finance charges that a consumer will pay under a given credit transaction. 15 U.S.C. sec. 1638(a)(3). "Finance charges" can include debt cancellation fees, like those Grossinger charged customers who chose to enroll in its GAP program. 12 C.F.R. sec. 226.4(b)(10). However, debt cancellation fees may be excluded from finance charges if the following requirements are met:

(A) The debt cancellation agreement or coverage is not required by the creditor, and this fact is disclosed in writing;

(B) The fee or premium for the initial term of coverage is disclosed. If the term of coverage is less than the term of the credit transaction, the term of coverage shall also be disclosed . . .; and

(C) The consumer signs or initials an affirmative written request for coverage after receiving the disclosures specified in this paragraph.

12 C.F.R. sec. 226.4(d)(3)(i). Additionally, any disclosures made in compliance with these requirements must be clear and conspicuous as well as in writing. 12 C.F.R. sec. 226.17(a)(1).

B) Grossinger's Compliance With TILA Requirements

Because Grossinger included the $500 fee Rivera paid for GAP coverage in the amount financed and excluded the same from the finance charges assessed, it must comply with the above-outlined requirements. Rivera argues that the Addendum she signed at the time of purchase did not meet these requirements. Specifically, Rivera asserts that Grossinger did not clearly and conspicuously disclose in writing: (1) that GAP coverage was voluntary; (2) that GAP coverage was not a...