Tyson v. Sterling Rental, Inc.

Decision Date02 September 2016
Docket NumberNos. 15-1465/1468,s. 15-1465/1468
Citation836 F.3d 571
CourtU.S. Court of Appeals — Sixth Circuit
Parties SeTara Tyson, Plaintiff–Appellee/Cross–Appellant (15–1465 & 15–1468), v. Sterling Rental, Inc., dba Car Source, Defendant–Appellant/Cross–Appellee (15–1465 & 15–1468), Al Chami; Rami Kamil, Defendants–Appellees (15–1468).

ARGUED: Ziyad Kased, Kased Law, PLLC, Troy, Michigan, for Appellant/Cross–Appellee in 15–1465 and 15–1468 and for Appellees in 15–1468. Deepak Gupta, Gupta Wessler PLLC, Washington, D.C., for Appellee/Cross–Appellant. ON BRIEF: Ziyad Kased, Kased Law, PLLC, Troy, Michigan, for Appellant/Cross–Appellee in 15–1465 and 15–1468 and for Appellees in 15–1468. Deepak Gupta, Gupta Wessler PLLC, Washington, D.C., Ian B. Lyngklip, Lyngklip & Associates, Southfield, Michigan, for Appellee/Cross–Appellant.

Before: BOGGS, CLAY, and SUTTON, Circuit Judges.

OPINION

CLAY, Circuit Judge.

In this case arising out of the sale of an automobile, Defendants Sterling Rental, Inc., dba Car Source (Car Source), Al Chami, and Rami Kamil appeal from the district court's order granting Plaintiff SeTara Tyson summary judgment on her claim that Defendants violated the Equal Credit Opportunity Act (“ECOA” or “the Act”), 15 U.S.C. § 1691 et seq. , by changing the terms of her credit arrangement without providing a written notice setting forth the specific reasons.1 Plaintiff cross-appeals, arguing that the district court erred by: (1) holding that private parties may not obtain injunctive relief under the ECOA; and (2) granting Defendants' motion for summary judgment as to Plaintiff's claims for conversion on the basis that such claims are barred by Michigan's economic loss doctrine.

For the reasons set forth below, we AFFIRM the district court's grant of summary judgment in favor of Plaintiff on her ECOA claim; we REVERSE the district court's determination that injunctive relief was not available to Plaintiff under the ECOA, and we REMAND for an initial determination of whether such relief is warranted; and we REVERSE the district court's grant of summary judgment in favor of Defendants on Plaintiff's statutory conversion claims and REMAND for further proceedings on those claims.

BACKGROUND
Factual History

On August 10, 2013, Plaintiff purchased a used 2006 Chevrolet Cobalt from Car Source for $8,525.00. Plaintiff could not afford to pay that price outright, but she was able to put $1,248 towards a down payment with the help of a grant from the state of Michigan. Defendants told Plaintiff that she had been approved for financing of the remainder of the vehicle's purchase price. To aid in the preparation of a financing agreement, Plaintiff provided Car Source salesman Rami Kamil with copies of her two most recent pay stubs, as well as a recent bank statement. With these documents in hand, Kamil entered Plaintiff's financial information—including the date she began working at her job, her year-to-date earnings, and the fact that she received paychecks every two weeks—into a computer program called “CAPS” provided to Car Source by non-party Credit Acceptance Corporation (“CAC”). Using the data entered by Kamil, CAPS calculated that Plaintiff's monthly income was approximately $1,817.38.

The parties do not dispute that this estimate of Plaintiff's monthly income was incorrect. In fact, Plaintiff's pay stubs indicated that her actual income was closer to $900 per month. CAC's designated representative, Jon Lun, later testified at deposition that based on his knowledge of the CAPS software, it appeared that Kamil had entered Plaintiff's information into the program incorrectly. Lun opined that had Kamil used CAPS correctly, the information on Plaintiff's pay stubs would have accurately estimated her monthly income. For his part, Kamil asserted during deposition that Plaintiff told him she was paid about $900 every two weeks; thus, he had no reason to question CAPS's estimate that Plaintiff's monthly income was $1,817.38.

Kamil thereafter used CAPS to “structure” a financing agreement by setting the price of the vehicle, the amount of Plaintiff's down payment, the APR, and the amount of monthly payments. Kamil stated that he structured the agreement so that Plaintiff's monthly payments would stay below a certain dollar amount, calculated by CAPS, that was a set percentage of Plaintiff's estimated monthly income. According to Kamil, so long as Plaintiff's monthly payments stayed below that specified amount, the financing agreement would be “funded” by CAC. Kamil explained that after a financing agreement was structured by Car Source, Car Source would assign the agreement to CAC, which would then “fund” the agreement by paying Car Source an advance. However, in the event the terms of the financing agreement were not acceptable to CAC, CAC would not issue an advance and would only collect monthly payments. In that scenario, the purchaser's monthly payments would go towards a “pool” of loans assigned to CAC, and Car Source would receive profits on a “zero-advance” agreement only after CAC had been reimbursed for the advances paid to Car Source on all the agreements in the pool.

Kamil testified that in addition to maximizing the chance of receiving an advance on Plaintiff's financing agreement, he structured the agreement with the goal of keeping Plaintiff's monthly payments near the maximum amount allowed by CAC. Keeping the payments high, he explained, would help to cover his credit risk. With these goals in mind, Kamil manipulated the APR on the loan until CAPS's calculations suggested that ideal terms had been achieved. Under those terms, which were based on the incorrect estimate of Plaintiff's income and her $1,248 deposit, the APR on Plaintiff's loan was set at 24.49%.

When the terms of Plaintiff's financing agreement had been finalized, Kamil used the CAPS software to generate two physical documents: a Retail Installment Contract (the “RIC”) and a “multi-state application” for credit from CAC (the “credit application”). On the first page of the two-page credit application, Plaintiff's monthly income was listed as $1,817.38. The second page of the application stated that by signing, Plaintiff was “certify[ing] that the above information is complete and accurate.” (R. 33–1, PageID 310.) Plaintiff signed the document, but the parties dispute whether the first page of the credit application was attached at that time. Plaintiff also signed the RIC, which contained the material terms of the financing agreement and listed Car Source as the “Creditor–Seller.” (R. 33–2, PageID 312.) Notably, the RIC contained a clause automatically assigning the contract to CAC upon execution. Finally, Plaintiff signed an “RD–108” form prepared by Car Source, which operated to register Plaintiff's title to the vehicle with Michigan's Secretary of State. After the paperwork had been signed, Plaintiff received the keys to the car and a receipt; she left the dealership in her new car that day.

The precise circumstances surrounding what happened next are disputed by the parties. It is undisputed, however, that Plaintiff drove her car back to Car Source on August 12, 2013—two days after the sale—in response to a phone call from Kamil. When Plaintiff arrived at the dealership, a Car Source employee told her that the RIC would need to be modified. It seems that during those two intervening days, CAC informed Car Source that it would not be paying an advance on the financing agreement due to the discrepancy in Plaintiff's monthly income. Plaintiff was given an invoice stating that under her new financing agreement, she would need to put an additional $1,500 towards a down payment. Plaintiff declined to sign the new agreement and ultimately left the Cobalt with Car Source.

Plaintiff paints a more troubling picture of that day's events. She asserts that she returned to Car Source on August 12, 2013, after Kamil called and told her that her car required a new GPS unit, and that without the unit her car might shut off without warning. She was also informed that Car Source had a new contract for her to sign, under which she would make lower monthly payments. Plaintiff testified that she traveled to the dealership and parked outside; she entered the showroom and gave her keys to a Car Source employee. At that point, she was asked to produce her copy of the RIC. When Plaintiff responded that she had not brought her copy, the employee began “yelling and swearing” at her. Plaintiff states that a porter then retrieved the personal belongings in the Cobalt and “dumped them” at her feet. According to Plaintiff, she was told that if she wanted her car back, she would have to make an additional payment of $1,500.

Importantly, it is undisputed that Plaintiff was never provided with written notice explaining why the terms of her credit arrangement had been or needed to be changed. In fact, Kamil testified at deposition that Car Source never “issue [s] adverse action notices” informing customers that they've been denied credit and telling them why.”

Procedural History

Plaintiff filed suit against Defendants in federal district court on August 14, 2013— two days after leaving her car with Car Source. Her complaint alleged that she was entitled to damages and injunctive relief for, inter alia : (1) Car Source's failure to provide an adverse action notice as required under the ECOA, 15 U.S.C. § 1691(d) ; and (2) Defendants' conversion of the vehicle under Michigan common law and Mich. Comp. Laws § 600.2919a. After the completion of discovery, the parties filed cross-motions for summary judgment. The district court granted Plaintiff's motion as to her claims brought under the ECOA, holding that undisputed evidence in the record established Car Source's status as a “creditor” subject to the ECOA's adverse action notice requirement, and that Car Source admitted that it never issues such notices. However, the district court denied Plaintiff's request for an...

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