BROWN v. BASSETT USED CARS LLC (2023)

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF No. 26)

I. INTRODUCTION

This matter is before the court on Plaintiff Daija Brown's Motion for Partial Summary Judgment. (ECF No. 26). Plaintiff filed her Complaint on May 20, 2022, against Defendant Bassett Used Cars, LLC, for alleged violations of the Truth in Lending Act (TILA) (Count I), the Magnuson-Moss Warranty Act (Count II), Michigan's Motor Vehicle Sales Finance Act, Mich. Comp. Laws § 492.101 et seq. (Count VII), and Michigan's Motor Vehicle Installment Sales Contract Act, Mich. Comp. Laws § 566.302 et seq., as well as for Misrepresentation (Count III), Breach of Contract (Count IV), Breach of Warranties (Count V), and Revocation of Acceptance (Count VI). (ECF No. 1). This case was originally before District Judge Mark A. Goldsmith, but was reassigned to the undersigned on February 6, 2023.

On February 21, 2023, Plaintiff filed a Motion for Partial Summary Judgment as to Count I of her complaint, arguing there is no genuine dispute as to any material fact that Defendant violated the disclosure requirements under the TILA. (ECF No. 26). The court held a hearing on this motion on August 2, 2023, and both parties participated in oral argument. (See ECF No. 27). For the reasons stated below, the court GRANTS summary judgment as to Count I of Plaintiff's complaint.

II. FACTUAL BACKGROUND

On February 24, 2022, Plaintiff purchased a 2015 GMC Acadia from Defendant. The Bill of Sale for the transaction lists the price of the vehicle as $12,195.00, which includes a base price of $11,995.00 and a “Dealer Service Fee” of $200.00. (ECF No. 26-2, “Bill of Sale”). The total amount due on the sale includes various other fees, including $731.70 in sales tax, a $15.00 title fee, a $235.00 license fee, and an additional $1,300 listed as “BUY HERE PAY HERE.” (Id.). The total amount due is listed as $14,476.70. (Id.). Plaintiff agreed to finance her purchase with Defendant and made two down payments at the time of purchase, “Down Payment 1” of $5,000 and “Down Payment 2” of $1,300. (Id.). Likewise, the total amount remaining to be financed was $8,176.70. (Id.). Plaintiff agreed to pay this remaining amount by making weekly payments of $250 directly to Defendant. (Id.). These payments were subject to a “$60 late fee after 2nd late day.” (Id.).

Plaintiff alleges that the vehicle suffered from a failed transmission and a blown engine shortly after purchase. (ECF No. 1, PageID.5). She argues that these issues caused the vehicle to be “rendered unmerchantable, unfit, and of diminished value” and, as a result, she “properly rescinded, cancelled, or otherwise terminated the contract of sale, by requiring [Defendant] to return of all [sic] payments for the vehicle, cancel the security interest in the vehicle, and return the motor vehicle retail instalment [sic] sales contract.” (Id.). Defendant argues that Plaintiff failed to make the required payments and, therefore, they repossessed the vehicle as collateral. (See ECF No. 26-3, PageID.211, Bassett Deposition Transcript).

The allegations specifically relevant to this motion involve Count I of Plaintiff's complaint and the additional $1,300 labeled as “BUY HERE PAY HERE.” (ECF No. 1, PageID.6). The “BUY HERE PAY HERE” amount was listed at the end of the additional charges on the bill of sale, but Plaintiff alleges that it was not defined, and she did not receive any of the required TILA disclosures or statements. (See ECF No. 29, PageID.287-88; ECF No. 26-4, PageID.227, Affidavit of Daija Brown). Plaintiff further argues that this additional $1,300 meets the definition of a “finance charge,” and Defendant's failure to make any of the required disclosures was a violation of the TILA. Likewise, Plaintiff asks the court to grant summary judgement as to this count.

III. LEGAL STANDARD

Under Federal Rule of Civil Procedure 56(c), summary judgment is proper “if the movant shows that there is no genuine issue as to any material fact and the movant 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 of showing that a fact “cannot be or is genuinely disputed,” and “must support the[ir] assertion by: (A) citing to particular parts of materials in the record ․; or (B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed. R. Civ. P. 56(c)(1). The facts and any reasonable inferences drawn from the facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Once the movant establishes the lack of a genuine issue of material fact, the burden of demonstrating the existence of such an issue then shifts to the non-moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmoving party must come forward with “specific facts showing that there is a genuine issue for trial.” Id. Mere allegations or denials will not satisfy this burden, nor will a “scintilla of evidence” supporting the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court's role in motions for summary judgment is limited to determining whether there is a genuine dispute about a material fact, that is, if the evidence in the case “is such that a reasonable jury could return a verdict for the nonmoving party.” Id. at 248, 106 S.Ct. 2505.

IV. ANALYSIS

A. The Disclosure Requirements

The TILA was passed by Congress in 1968 in an effort to remedy problems that developed as a result of the growing consumer credit market. Mourning v. Family Publications Service, Inc., 411 U.S. 356, 363-64, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973). One such problem was the “divergent, and at times, fraudulent, practices by which consumers were informed of the terms of the credit extended to them” which prevented them from “shopping for the best terms available.” Id. at 363, 93 S.Ct. 1652. Likewise, the TILA created specific uniform disclosure rules 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 TILA specifically requires a creditor to disclose the following items, among others, for each consumer credit transaction:

(3) The “finance charge,” not itemized, using that term.

(4) The finance charge expressed as an annual percentage rate, using that term. This shall not be required if the amount financed does not exceed $75 and the finance charge does not exceed $5, or if the amount financed exceeds $75 and the finance charge does not exceed $7.50.

(5) The sum of the amount financed and the finance charge, which shall be termed the total of payments.

15 U.S.C. § 1638(a). The regulation promulgated in connection with the TILA, known as “Regulation Z,” requires disclosures to be made “clearly and conspicuously in writing, in a form that the consumer may keep” and requires that they are made “before consummation of the transaction.” 12 C.F.R. § 226.17(a)(1), (b).

The TILA defines a “creditor” as “a person who both (1) regularly extends ․ consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness ․” 15 U.S.C. § 1602(g). Regulation Z includes a similar definition, except that it clarifies: “a person regularly extends consumer credit only if it extended credit ․ more than 25 times (or more than 5 times for transactions secured by a dwelling) in the preceding calendar year.” 12 C.F.R. § 226.2(17). Defendant does not explicitly contest that they fall under the definition of a “creditor” in either their answer or their response to Plaintiff's motion. (See ECF No. 4, PageID.18 (“Defendant neither admit [sic] nor deny the allegations contained therein for the reason that the allegations refer to a statute that speaks for itself.”)). Additionally, Plaintiff points to Martha Bassett's ¹ Deposition, where she testified that Defendant sold “roughly 100” vehicles in 2021, the “majority” of which were sold on credit.² (ECF No. 26-3, PageID.210-11). Following this testimony, Defendant has not met its burden to show any facts suggesting there is still a genuine question of fact remaining on this issue. See Celotex Corp., 477 U.S. at 321, 106 S.Ct. 2548. Likewise, the court finds that Defendant meets the definition of a creditor and, therefore, is subject to the TILA's disclosure requirements.

B. The “BUY HERE PAY HERE” Charge

The TILA defines a “finance charge” as “the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit.” 15 U.S.C. § 1605(a). Finance charges do not include “charges of a type payable in a comparable cash transaction,” or “fees and amounts imposed by third party closing agents (including settlement agents, attorneys, and escrow and title companies) if the creditor does not require the imposition of the charges or the services provided and does not retain the charges.” Id. Regulation Z similarly defines “finance charge” as “the cost of consumer credit as a dollar amount ․ [including] any charge payable directly or indirectly as an incident to or a condition of the extension of credit.” 12 C.F.R. § 226.4. This definition also specifically exempts “any charge of a type payable in a comparable cash transaction.” Id.

Plaintiff argues that the additional $1,300 listed as “BUY HERE PAY HERE” meets the definition of a finance charge under the TILA. (ECF No. 26, PageID.194). Plaintiff further argues that Defendant previously admitted this was a finance charge in the October 24, 2022, hearing before District Judge Goldsmith, and asks the court to accept this as a judicial admission. (ECF No. 30, PageID.296). However, Defendant's statements during the previous hearing were not sufficiently “deliberate, clear, and unambiguous” to constitute a judicial admission. See In Re Kattouah, 452 B.R. 604, 608 (E.D. Mich. 2011). Even if Defendant did not make a judicial admission, given the context and the way in which it was applied, the “BUY HERE PAY HERE” amount certainly falls under the definition of a finance charge.

i. Judicial Admission

Plaintiff first argues there is no question of fact that Defense counsel admitted the “BUY HERE PAY HERE” amount is a finance charge and Defendant is now bound by that admission. (ECF No. 30, PageID.296). Judicial admissions are “formal admissions in the pleadings which have the effect of withdrawing a fact from issue and dispensing wholly with the need for proof of the fact.” In re Kattouah, 452 B.R. at 608 (citing Barnes v. Owens-Corning Fiberglas Corp., 201 F.3d 815, 829 (6th Cir. 2000)). Such admissions are “generally binding within the proceeding in which they are made.” Id. (citing Brown v. Tenn. Gas Pipeline Co., 623 F.2d 450, 454 (6th Cir. 1980)). However, in order to be a judicial admission, a statement must be “deliberate, clear, and ambiguous” and must “amount to an express concession of a fact.” Id.

At the relevant October 24, 2022, hearing, Judge Goldsmith directly asked Defense counsel: “So is your position this was a finance charge, but it was a disclosed finance charge?” (ECF No. 29, PageID.289). Defense counsel responded: “Yes, it was disclosed.” (Id.). Later in the hearing, Plaintiff's counsel asked whether Defendant “would be willing to admit that the buy-here-pay-here charge is a finance charge.” (Id., PageID.293). Judge Goldsmith responded: “He just said it on the record. He's stuck with it. He's admitted on the record that it was a finance charge.” (Id.). Importantly, nowhere in the transcript did Defense counsel verbally state or concede that the charge was a finance charge. Rather, he argued “it was disclosed” and later did not object when Judge Goldsmith characterized his position as conceding it was a finance charge. (Id., PageID.289, 293). These ambiguous statements do not meet the standard for a judicial admission, and the court will not bind Defendant to this concession.

ii. Finance Charge

To show that the additional “BUY HERE PAY HERE” amount is a finance charge, it must be: (1) “payable ․ by the person to whom the credit is extended, (2) “imposed ․ by the creditor as an incident to the extension of credit,” and (3) not similarly imposed on a cash transaction. See 15 U.S.C. § 1605(a). Specifically, it must be shown that “credit customers pay more ․ than cash customers because they are credit customers.” Kilbourn v. Candy Ford-Mercury, Inc., 209 F.R.D. 121, 128 (W.D. Mich. 2002). First, there is no question that this amount was payable by Plaintiff, “the person to whom the credit is extended.” Id. Additionally, Defendant has repeatedly affirmed that the “BUY HERE PAY HERE” amount is applied only to credit transactions specifically because they are credit transactions. (See ECF No. 28, PageID.236 (“one cannot charge a cash purchaser the same as one who buys over time as that destroys the incentive to pay cash.”)). They have emphasized that the charge is “only for people who want to pay over time,” and is used directly as a “mechanism to effectuate and encourage the cash buyer to cash out rather than drag out payments.” (ECF No. 28, PageID.236, 239). Defendant argues that the $1,300 “BUY HERE PAY HERE” amount is not an additional charge, but instead is a “discount.” However, Defendant has admitted that it is added to the final price, making it a charge, not a discount. (See ECF No. 26-3, PageID.217 (“it's added to the price of the car, which makes it the car more than the cash price.”); PageID.218 (“․ and then we add the additional fee because she – because of the price of the car.”)).

While Defendant's goal may reasonably be to encourage cash payments, if a merchant charges credit customers a higher price for an item than cash customers, the extra charge is a finance charge by definition. See, e.g., Cornist v. B.J.T. Auto Sales, Inc., 272 F.3d 322, 327 (6th Cir. 2001) (“An increase in the base price of an automobile that is not charged to a cash customer but is charged to a credit customer, solely because he is a credit customer, triggers TILA's disclosure requirements.); Gibson v. Bob Watson Chevrolet-Geo, Inc., 112 F.3d 283, 286 (7th Cir. 1997) (“we emphasize that the claim has merit only if the dealer's markup on third party charges is systematically higher on sales to credit customers than sales to cash customers.”). Defendant openly admits that they charge credit customers an extra $1,300 specifically because they have not paid in cash. Likewise, the “BUY HERE PAY HERE” charge is a finance charge under the TILA.

C. Disclosure

Plaintiff next argues that, because the “BUY HERE PAY HERE” charge is a finance charge under the TILA, it must have been disclosed using the term “finance charge” and as an “Annual Percentage Rate” in writing prior to the consummation of the sale. 15 U.S.C. § 1638(a); 12 C.F.R. § 226.17(a), (b). Plaintiff alleges she “never received any document from Defendant which specified the ‘finance charge’ using that term” and “never received any document from Defendant which specified the ‘annual percentage rate’ using that term.” (ECF No. 26-4, PageID.227). Defendant disputes these statements, arguing the amortization schedule was the required disclosure which “arguably meets the parameters of the code.” (ECF No. 28, PageID.248). However, Defendant also admits that the amortization schedule listed the finance charge as “zero.” (Id., PageID.239 (“amortization schedule ․ which specifically noted the finance charge was ZERO”); PageID.249 (“The amortization schedule has the payments, the finance charge (zero), the last payment date, the amount at issue, etc.”)). Because there was no finance charge listed in the amortization schedule, it could not have met the disclosure requirements. Likewise, Defendant failed to make the required disclosures and violated the TILA, 15 U.S.C. § 1638(a)(4).

V. CONCLUSION

Even viewing the facts in the light most favorable to Defendant, there is no question of fact remaining that the additional $1,300 listed as “BUY HERE PAY HERE” was a finance charge under the relevant TILA provisions and Defendant failed to provide Plaintiff with the required disclosures. Likewise, Plaintiff is entitled to summary judgment on Count I of her complaint. This does not close the case, as Counts II, III, IV, V, and VI remain.

SO ORDERED.

FOOTNOTES

1.   Martha Bassett testified that she is the “Office Manager, sales” of Bassett Used Cars, LLC. (ECF No. 26-3, PageID.206).

2.   Defense counsel objected to this line of questioning at the deposition based on relevance. At a deposition, “counsel may instruct a deponent not to answer only when necessary to preserve a privilege, to enforce a limitation on evidence directed by the court, or to suspend a deposition in order to present a motion under Fed. R. Civ. P. 30(d)(3).” Collier v. LoGiudice, 818 F. App'x 506, 512-13 (6th Cir. 2020) (citing Resolution Trust Corp. v. Dabney, 73 F.3d 262, 266 (10th Cir. 1995)). It is generally “inappropriate to instruct a witness not to answer a question on the basis of relevance.” Id.

F. Kay Behm, United States District Judge