Wadlington v. Credit Acceptance Corp.

Decision Date21 February 1996
Docket NumberNo. 94-2143,94-2143
Citation76 F.3d 103
PartiesAlan H. WADLINGTON, Tammy M. Berry, and Chip C. Brunette, Plaintiffs-Appellants, v. CREDIT ACCEPTANCE CORPORATION, Howard A. Katz, Howard A. Katz, P.C., George Leikin, and Leikin & Ingber, P.C., Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

On Appeal from the United States District Court for the Western District of Michigan; Richard A. Enslen, Chief Judge.

Before WELLFORD, NELSON, and SUHRHEINRICH, Circuit Judges.

DAVID A. NELSON, Circuit Judge.

This is an appeal from a judgment for the defendants in a purported class action brought under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. The lead defendant, Credit Acceptance Corporation, maintains that it took assignments of retail installment sales contracts entered into between the named plaintiffs and an automobile dealer. Alleging that the plaintiffs subsequently defaulted, Credit Acceptance sued them through counsel who are co-defendants herein. The collection actions were brought in a venue that was improper under the Act if the company or its lawyers came within the statutory definition of a "debt collector" and if the venue provisions of the Act were not waived by acceptance of the venue provisions of the contracts.

We conclude that defendant Credit Acceptance Corporation was not a "debt collector" within the meaning of the Act, but that its lawyers came within the definition of that term. Because statutory liability is limited to debt collectors, we shall affirm the district court's judgment as to Credit Acceptance. We shall reverse the judgment as to the attorneys, remanding the case to the district court for further proceedings with respect to them.

I

Plaintiff Alan Wadlington, a resident of Kent County in Western Michigan, purchased a 1983 Fleetwood Cadillac from Classic Car Company, Inc., a Kent County car dealer, in March of 1993. Mr. Wadlington made a down payment of $950.80 and agreed to pay an additional $2,851.52 in monthly installments that were to begin in April. Plaintiff Tammy Berry, also a resident of Kent County, purchased a 1985 Ford Escort from the same dealer at about the same time that Mr. Wadlington bought his car. Ms. Berry made a down payment of $500 and agreed to pay an additional $3,033.76 in monthly installments--an obligation guaranteed by plaintiff Chip Brunette as a co-signer of the contract--with the payments likewise to begin in April. These undertakings were memorialized in standard form retail installment sales contracts executed in Kent County.

Each contract disclosed on its face that the dealer was assigning the contract to Credit Acceptance Corporation. A representative of Classic Car Company signed a statement on the face of the contracts that included the following language:

"The dealer assigns this agreement to Credit Acceptance Corp. and agrees to the terms of assignment on the back of this agreement."

A "Notice of Assignment" printed below the dealer's name and address told purchasers that "[y]ou must make all future payments to Credit Acceptance Corp." The address of Credit Acceptance in Southfield, Michigan, was prominently displayed at two places in the contract. Southfield is located near Detroit, in the eastern part of the state.

Among the terms printed on the reverse side of the contracts was a provision reading as follows:

"We may sue the buyer or the guarantor in the city and county in the State of Michigan in which the dealer, the Credit Acceptance Corp., or any other holder of this agreement has its principal office."

At the bottom of the page--under the legend "[t]he following assignment is not part of the buyer's agreement"--this language was printed:

"ASSIGNMENT. For value received, the dealer assigns to the Credit Acceptance Corp. all the dealer's interest in this Motor Vehicle Purchase Agreement...."

The purported assignments of the two contracts were made in accordance with a "servicing agreement" that had been entered into between Credit Acceptance and the dealer some months earlier. 1 The servicing agreement provided that retail installment sales contracts would be assigned to Credit Acceptance "for purposes of administration, servicing and collection...." The dealer warranted that contracts so assigned would not be in default at the date of transfer. It is uncontested that neither of the contracts in question here was in default when formally assigned to Credit Acceptance.

As the dealer's assignee, Credit Acceptance undertook to "service and administer" retail installment sales contracts "on behalf of the Dealer...." In this connection Credit Acceptance sent each customer a payment book with instructions on how payments should be made. The servicing agreement obligated Credit Acceptance to record all of the payments it received and to apply each month's collections as follows:

-- First, to reimburse itself for all collection costs;

-- Second, to pay itself a 20 percent service fee;

-- Third, to liquidate outstanding advances from Credit Acceptance to the dealer; and

-- Fourth, to pay the dealer anything that remained.

Advances to the dealer, the servicing agreement provided, could be made in an amount equal to the lesser of (1) 50 percent of the outstanding principal balance of the retail installment sales contract or (2) 150 percent of the customer's cash down payment. The agreement contemplated that such advances would be made, in Credit Acceptance's discretion, upon acceptance of retail installment sales contracts that were not in default at the time of transfer and that otherwise met the specifications of the agreement. Although the making of advances was discretionary, the plaintiffs tell us that an officer of Classic Car gave a deposition in which he testified that Credit Acceptance did in fact make advances to Classic Car "based on the down payment...."

In sum, then, the program operated as follows. Retail installment sales contracts would be transferred to Credit Acceptance at or about the time they were signed by the dealer's customer. The dealer would receive an advance from Credit Acceptance, and the customer was supposed to make monthly payments to Credit Acceptance. If all monthly payment obligations were met, Credit Acceptance ultimately recovered its advances, its collection costs, and 20 percent of all net collections, with the balance of the contract price going to the dealer.

For one reason or another, Mr. Wadlington and Ms. Berry failed to make their monthly payments. In May of 1993 a collection action was brought against Mr. Wadlington in Michigan's 46th District Court, located in Southfield. A similar action was brought against Ms. Berry and Mr. Brunette in the same court some months later. Both lawsuits were brought through Leikin and Ingber, P.C., and attorney George Leikin on behalf of Credit Acceptance. Motions for a change of venue having been filed, the lawsuits were transferred by stipulation to a district court located in Kent County. (Notwithstanding the venue provisions of the retail installment sales contracts, according to Credit Acceptance's proofs, it has been the company's practice to agree to changes of venue where a consumer seeks a transfer to a forum more convenient for the consumer.)

In April of 1994, while the state court actions were pending in Kent County, the plaintiffs in the instant lawsuit sued Credit Acceptance and its lawyers--including attorney Howard Allen Katz and Howard Allen Katz, P.C., who also did collection work for Credit Acceptance--in the United States District Court for the Western District of Michigan. The complaint set forth claims under the Fair Debt Collection Practices Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., and Michigan's Consumer Protection Act, Mich. Comp. Laws §§ 445.901 et seq.

Although filed as a class action, the suit was never certified as such. Both Credit Acceptance and attorney Leikin and his firm moved for summary judgment a few weeks after commencement of the action. The district court granted the motions, entered judgment in favor of all defendants as to the federal claims, and dismissed the state claims without prejudice. The plaintiffs have perfected a timely appeal.

II

The Fair Debt Collection Practices Act provides, with respect to lawsuits not brought to enforce a security interest in real property, that any "debt collector" who sues a consumer on a debt shall bring the action only in the judicial district

-- "(A) in which such consumer signed the contract sued upon; or

-- (B) in which such consumer resides at the commencement of the action." 15 U.S.C. § 1692i(a)(2).

Debt collectors who fail to comply with this or other provisions of the Act are subject to civil liability under 15 U.S.C. § 1692k.

Acting as attorneys for Credit Acceptance, defendant Leikin and his firm brought actions against plaintiffs Wadlington, Berry and Brunette in a judicial district in which the latter had apparently consented to be sued, but in which § 1692i(a)(2) prohibits "debt collectors" from bringing suit. Unless the provisions of the statute were waived--an issue the district court explicitly refrained from deciding--attorney Leikin and his firm violated the statute if they qualified as "debt collectors."

In Green v. Hocking, 9 F.3d 18, 20 (6th Cir.1993), this court observed that § 1692i "specifically makes it unlawful to instigate a lawsuit in a venue not authorized by the Act, whether as an attorney or as a client." Otherwise, Green, held, "the actions of an attorney while conducting litigation are not covered by the [Fair Debt Collection Practices Act]." Id. at 22. Giving Green a broader application than may have been warranted, the district court held in the case at bar that because the attorneys who filed collection actions for Credit Acceptance in Southfield were functioning as attorneys engaged solely in the practice...

To continue reading

Request your trial
195 cases
  • Long v. Pendrick Capital Partners II, LLC, Case No.: GJH-17-1955
    • United States
    • U.S. District Court — District of Maryland
    • March 18, 2019
    ...that term's meaning under the MCDCA, as a matter of law, vicarious liability could not attach. See e.g. , Wadlington v. Credit Acceptance Corp. , 76 F.3d 103, 108 (6th Cir. 1996) (client may be vicariously liable only if the client qualifies as a debt collector). Defendant Pendrick's motion......
  • Allen v. U.S. Bank, Nat'l Ass'n
    • United States
    • U.S. District Court — Eastern District of California
    • October 10, 2013
    ...status as a debt collector in absence of facts that US Bank acquired Mr. Allen's debt after default. See Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 106 (6th Cir. 1996); Kloth v. Citibank (South Dakota), N.A., 33 F.Supp.2d 115, 1998 (D. Conn. 1998) ("Generally, the FDCPA does not ap......
  • Kolari v. New York-Presbyterian Hosp.
    • United States
    • U.S. District Court — Southern District of New York
    • March 29, 2005
    ...collector is not vicariously liable for the actions of a debt collector it has engaged to collect its debts. Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 107 (6th Cir.1996). Plaintiffs have not named as parties the collection agencies it identifies in the Amended Complaint. On the fa......
  • Stafford v. Cross Country Bank
    • United States
    • U.S. District Court — Western District of Kentucky
    • May 8, 2003
    ...collecting their accounts. See, e.g., Zsamba v. Community Bank, 63 F.Supp.2d 1294, 1299-1300 (D.Kan.1999); Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 107 (6th Cir.1996); Meads v. Citicorp Credit Services, Inc., 686 F.Supp. 330 (S.D.Ga.1988)(holding that banks were not debt collecto......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT