Wiley v. Earl's Pawn & Jewelry, Inc.

• Decision Date: 09 January 1997
• Docket Number: Civil Action No. 95-0196-CB-C.,Civil Action No. 95-0195-CB-C.
• Citation: 950 F.Supp. 1108
• Court: U.S. District Court — Southern District of Alabama
• Parties: Dewey T. WILEY, on behalf of himself and all others similarly situated, Plaintiff, v. EARL'S PAWN & JEWELRY, INC., Defendant. Dewey T. WILEY, on behalf of himself and all others similarly situated, Plaintiff, v. EDDIE'S WHOLESALE JEWELRY & PAWN and Eddie's Wholesale Jewelry # 3, Defendants.

950 F.Supp. 1108

Dewey T. WILEY, on behalf of himself and all others similarly situated, Plaintiff, v. EARL'S PAWN & JEWELRY, INC., Defendant.

Dewey T. WILEY, on behalf of himself and all others similarly situated, Plaintiff, v. EDDIE'S WHOLESALE JEWELRY & PAWN and Eddie's Wholesale Jewelry # 3, Defendants.

Civil Action No. 95-0195-CB-C.

Civil Action No. 95-0196-CB-C.

United States District Court, S.D. Alabama, Southern Division.

January 9, 1997

COPYRIGHT MATERIAL OMITTED

James E. Atchison, Mona A. Vivar, Mobile, AL, C. Knox McLaney, III, Montgomery, AL, for plaintiff.

James B. Newman, Mobile, AL, P. Russell Myles, Henry T. Morrissette, Mobile, AL, for defendants.

ORDER

BUTLER, Chief Judge.

This matter is before the Court on motions for summary judgment filed by defendants Earl's Pawn & Jewelry, Inc., Eddie's Wholesale Jewelry & Pawn and Eddie's Wholesale Jewelry & Pawn # 3. After careful consideration of the motions, the briefs filed by the parties and the relevant evidence on file in light of the applicable law, the Court enters the following findings of fact and conclusions of law.

Findings of Fact

On October 6, 1994, plaintiff Dewey T. Wiley pawned the title to his 1984 Toyota Tercel automobile at Eddie's Wholesale Jewelry & Pawn (Eddie's)¹ in exchange for $300. Wiley retained possession of the car while Eddie's took possession of the title. The pawn ticket which Wiley signed and received, states as follows:

CASH ADVANCED $300.00, WITH OPTION TO REDEEM ON OR BEFORE MATURITY DATE OF 11/06/94 FOR $375.00 OR RENEW FOR $75.00 FOR THIRTY DAYS. MONTHLY RATE: 25.00%. MONTHLY CHARGES: $75.00.

There was no annual percentage rate stated. On November 8, 1994, Wiley renewed the pawn transaction for another 30 days by paying the $75 renewal fee and $25 toward the principal. A new pawn ticket was issued with revised amounts and a new maturity date. Wiley renewed the transaction again on December 7, 1995, by paying the renewal fee plus an extra $5 toward the principal. Again, a revised pawn ticket was issued. Wiley failed to pay either the renewal fee or the redemption price by the January 9, 1995, due date. On January 19, 1995, Eddie's took possession of the car at a cost of $100. Wiley redeemed the vehicle from Eddie's on February 21, 1995, by paying the redemption amount plus accrued pawn charges.

On December 22, 1994, Wiley pawned the title to his 1985 Honda Accord to Eddie's in exchange for $400. As with the previous transaction, Wiley retained possession of the automobile while Eddie's took possession of the title. The pawn ticket Wiley signed stated:

CASH ADVANCED $400.00, WITH OPTION TO REDEEM ON OR BEFORE MATURITY DATE OF 01/23/95 FOR $400.00 OR RENEW FOR $100.00 FOR THIRTY (30) DAYS. MONTHLY RATE 25.00%. MONTHLY CHARGES: $100.00 ... APR 300.00%.

On February 18, 1995, Wiley redeemed the car title by paying the redemption amount plus accrued pawn charges. The pawn tickets Wiley received from Eddie's also contained the following language:

IN CONSIDERATION OF THEIR MUTUAL PROMISES AND OTHER GOOD AND VALUABLE CONSIDERATION THE PARTIES AGREE AS FOLLOWS: A PLEDGOR SHALL HAVE NO OBLIGATION TO REDEEM PLEDGED GOODS OR MAKE ANY PAYMENT ON A PAWN TRANSACTION ...

Wiley also entered into two pawn transactions with defendant Earl's Pawn & Jewelry, Inc. ("Earl's"). He pawned a ring on December 23, 1994, and a watch and a ring on February 13, 1995. The first pawn ticket recited the following terms:

CASH ADVANCED $150.00 WITH OPTION TO REDEEM ON OR BEFORE MATURITY DATE OF 1/23/95 FOR $187.50. OR RENEW FOR $37.50 FOR THIRTY (30) DAYS. MONTHLY RATE: 25.00% MONTHLY CHARGES: 37.50.

The pawn ticket from the second transaction contained similar terms:

CASH ADVANCED $40.00, WITH OPTION TO REDEEM ON OR BEFORE MATURITY DATE OF 03/13/95 FOR $50.00. OR RENEW FOR $10.00 FOR THIRTY (30) DAYS. MONTHLY RATE: 25.00% MONTHLY CHARGES: 10.00

Wiley redeemed each of these pawns without renewing them.

Conclusions of Law

Procedural Background

On March 13, 1995, plaintiff filed the instant actions against Earl's and Eddie's alleging that these defendants failed to make certain disclosures required by the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. ("TILA") and Regulation Z, 12 C.F.R. §§ 226.1 et seq., the regulation by which the Federal Reserve Board implements TILA. In addition, plaintiff has asserted a fraudulent suppression claim under state law based on defendants' failure to make the disclosures required under TILA. Plaintiff seeks class certification and has filed these actions on behalf of himself and on behalf of persons who have engaged in pawn transactions with Earl's and Eddie's.² The Court has consolidated the two actions for pretrial and discovery purposes.

Summary Judgment Analysis

Summary judgment should be granted only if "there is no issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The party seeking summary judgment bears "the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991). Once the moving party has satisfied his responsibility, the burden shifts to the nonmoving party to show the existence of a genuine issue of material fact. Id. "If the nonmoving party fails to make `a sufficient showing on an essential element of her case with respect to which she has the burden of proof,' the moving party is entitled to summary judgment." Id. at 1438 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)) (footnote omitted). "In reviewing whether the nonmoving party has met its burden, the court must not weigh the evidence or make credibility determinations and must draw all inferences in favor of the nonmoving party." Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 999 (11th Cir.1992), cert. denied, 507 U.S. 911, 113 S.Ct. 1259, 122 L.Ed.2d 657 (1993).

Issues Raised

All defendants have moved for summary judgment on the issue of liability. Defendants contend that they are entitled to summary judgment as to liability because TILA does not govern pawn transactions. If they were not required to make TILA disclosures, they could not be liable under TILA. Defendant Eddie's argue that it is not liable for fraudulent suppression based on failure to disclose TILA information since it was not required to disclose that information. Alternatively, Eddie's argues that plaintiff cannot satisfy other elements necessary to prove fraudulent suppression. Defendant Earl's does not raise the fraudulent suppression argument but does argue that it is entitled to partial summary judgment on the issue of actual damages under TILA.

Analysis

Applicability of TILA

The Court must first determine whether the pawn transactions at issue here are among the types of transactions TILA was designed to regulate. One of the primary purposes of TILA is "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. § 1610(a). "TIL[A] is a remedial statute that is to be liberally construed in favor of the consumer." Cody v. Community Loan Corp., 606 F.2d 499, 505 (5th Cir.1979), cert. denied, 446 U.S. 988, 100 S.Ct. 2973, 64 L.Ed.2d 846 (1980). Due to the "complexity and variety" of credit transactions which "defy exhaustive regulation by a single statute", Congress "delegated expansive authority to the Federal Reserve Board to elaborate and expand the legal framework governing commerce in credit." Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 560, 100 S.Ct. 790, 794, 63 L.Ed.2d 22 (1980). Hence, the Board has promulgated Regulation Z to fill[] the statutory gaps." Id.; see also 15 U.S.C. § 1604 (delegating to Board power to "prescribe regulations to carry out the purposes of this subsection").

Defendants argue that they are not required to make TILA disclosures because pawnbrokers in Alabama do not extend credit. TILA defines credit as "the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment." 15 U.S.C. § 1602(e). Neither TILA nor Regulation Z defines the word "debt". Defendants, citing various dictionary definitions, contend that a debt must be accompanied by an obligation to repay. They argue that there is no debt because the Alabama Pawnshop Act, Ala.Code §§ 5-19A-1 et seq. (1996 Repl.Vol.) imposes no obligation on a pledgor "to redeem pledged goods or make any payment on a pawn transaction." Id. § 5-19A-6.

Defendants' contention that pawnbrokers are not subject to TILA is in conflict with the Federal Reserve Board's recently adopted amendment to its official staff commentary to Regulation Z. The revised commentary states that "[w]hen, in connection with an extension of credit, a consumer pledges or sells an item to a pawnbroker creditor in return for a sum of money and retains the right to redeem the item for a greater sum (the redemption price) within a specified period of time, disclosures are required." 61 Fed.Reg. 14952 (amending Regulation Z, Supplement I — Official Staff Interpretations, 12 C.F.R. § 226.18 (1996)) ("Revised Commentary"). The Court is bound to follow the official staff interpretations of Regulation Z unless they are "demonstrably irrational". Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565, 100 S.Ct. 790, 797, 63 L.Ed.2d 22 (1980).

Defendants contend that the Revised Commentary is not applicable because it was enacted after the incidents giving rise to these claims. An agency rule which clarifies an unsettled area of law does not change the law; therefore, it may be applied to claims arising before its effective date. Pope v. Shalala, 998 F.2d 473, 483 (7th Cir.1993); Smith v. Highland Bank, 915 F.Supp. 281, 286-87 (N.D.Ala.1996) (applying clarifying...