No Actual Damages Equals No ECOA Recovery

In a spot delivery gone bad, James R. and Tricia M. Bertin sued Grant Automotive, Inc., claiming that Grant Automotive violated the Equal Credit Opportunity Act, the Illinois Consumer Fraud and Deceptive Business Practice Act, the Illinois Uniform Commercial Code and the common law tort of trespass to chattels or conversion.

Both parties moved for summary judgment (lawyer talk for asking the judge to decide the case based on the pleadings, motions and perhaps some additional evidence, but without a trial).

Tricia Bertin completed a credit application at Grant Automotive on January 2, 2004. She indicated on the application that she was employed as a waitress. Grant Automotive’s salesperson, Michael Cherry, advised Tricia that he would try to secure financing approval for her and her husband and would contact her with the status of the application.

Nuvell Financial Services conditionally approved the application, provided that the Bertins submitted additional proof of their monthly income. The Bertins returned to Grant Automotive the next day with the required paperwork and decided to buy a car. The parties signed a Retail Installment Contract, a Bill of Sale, a Bail and Hold Harmless Agreement, and a document entitled “I Understand Form.”

The Bill of Sale provided that the dealer was not obligated to sell the car until a bank or finance company was willing to buy the retail installment contract from the dealership. The Bail and Hold Harmless Agreement stated that in the event the terms were unacceptable to the financing institution, the purchaser was required to return the car to the dealer or pay the purchase price in full. If the purchaser failed to return the car or pay, the dealer had the right to take possession of the car.

The “I Understand Form” required the Bertins to remain employed for the next 30 days in order to complete the financing agreement. The dealership did not provide a copy of this form to the Bertins.

The Bertins signed all the documents, paid a $400 down payment, bought temporary insurance for $145, traded-in their vehicle and left the dealership with the new car.

On January 8, 2004, Cherry contacted Tricia and told her that Nuvell Financial had declined to buy her retail installment contract because Tricia had been terminated from her job. Cherry asked the Bertins to return the car. Tricia wanted to keep the car and Cherry said they might be able to get financing if she could find another job. Neither Grant Automotive nor Nuvell Financial gave the Bertins written notice of the denial of their loan application. On January 12, 2004, Tricia returned to Grant Automotive with the new car and stated that she wanted to proceed with the deal, but she was unable to find another job.

Cherry again asked Tricia to return the car and offered to return her trade-in. She refused and drove away in the new car. Grant Automotive later repossessed the car and returned the trade-in to the Bertins.

In their suit, the Bertins claimed that Grant Automotive violated the ECOA by not providing a written adverse-action notice. Grant Automotive admitted that it should have sent a written adverse-action notice.

The court determined that the Bertins failed to show that they sustained any damages as a result of Grant Automotive not sending a written notice. The $400 down payment had not been debited from their account and the $145 for insurance was not connected to Grant Automotive’s failure to provide written notice of adverse-action. The court refused to award punitive damages, because the Bertins failed to show that Grant Automotive’s failure to provide written notice was wanton or malicious or in reckless disregard of the ECOA notice provision.

The Bertins claimed Grant Automotive violated the Illinois Consumer Fraud and Deceptive Business Practice Act because their down payment and trade-in were not returned. The court concluded that the trade-in was returned, and would have been returned sooner, had Tricia not refused to accept it. Again, the court found that the down payment checks, though not returned, had never been cashed and the checks had been marked “Void.” Because the Bertins were unable to show actual damages, the court denied their motion for summary judgment on this issue.

The court denied the Bertins claim that Grant Automotive violated the Uniform Commercial Code by not providing notice of disposition. The court held that Grant Automotive had a legal right to take possession of the car because it owned the car. The court reasoned that the sale transaction was subject to finance company approval, the approval never came, and therefore Grant Automotive never stopped owning the car. The court denied the trespass to chattel claim for the same reason — Grant Automotive owned the car and the Bertins did not have an absolute and unconditional right to it.

The court denied the Bertins’ motion for summary judgment and allowed summary judgment for Grant Automotive on all counts.

This case started as a typical “throw everything against the wall and see what sticks” attack on a plain vanilla spot delivery transaction and ended up as a clean-sweep win for the dealership. That’s always good news.

The court’s determination that absent proof of actual damages the consumer could not recover under the ECOA will be very useful to dealers charged by plaintiffs’ lawyers with failing to provide adverse-action notices. In our experience, plaintiffs often have difficulty showing actual damages for notice and disclosure violations.

One part of the court’s analysis that dealers engaging in spot deliveries should find especially interesting is the discussion of the Uniform Commercial Code claim. We think the court got this one right. The court concluded that the dealership’s interest was an ownership interest and not a security interest that would be governed by the UCC. We’ve seen courts get that analysis wrong in other cases, perhaps because the lawyers representing the dealers didn’t think to make the argument and assumed that the UCC applied to the dealer’s actions.

File this one away somewhere, it might come in handy.

Bertin v. Grant Automotive, Inc., 2007 WL 1257183 (C.D.Ill. April 30, 2007)