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JOHNSON v. ASSOCIATES FINANCE

November 15, 1973

JUDITH JOHNSON, PLAINTIFF,
v.
ASSOCIATES FINANCE, INC., A CORPORATION, AND JAMES WARD, DOING BUSINESS AS WARD'S AUCTION HOUSE, DEFENDANTS.



The opinion of the court was delivered by: Robert D. Morgan, Chief Judge.

DECISION AND ORDER

The statute challenged by the plaintiff provides:

  "Unless otherwise agreed a secured party has on
  default the right to take possession of the
  collateral. In taking possession a secured party
  may proceed without judicial process if this can
  be done without breach of the peace or may
  proceed by action." Ill. Rev.Stat., ch. 26, §
  9-503.

Section 9-504, which the plaintiff also attacks, authorizes and establishes a procedure for the sale of goods repossessed by a secured party. It is the plaintiff's contention that because the repossession was accomplished under the auspices of state statutory law that there is, therefore, sufficient state action to give this court jurisdiction over the cause asserted.

There are District Court decisions supporting each party's position and the jurisdictional issue is an admittedly close one. Only one Court of Appeals' decision on the question herein presented appears presently to exist. It was decided only very recently by the Ninth Circuit in Adams v. Southern California First National Bank (C.A.9 1973). See Judicial Highlights, p. 1, 301 N.E.2d, Advance Sheet No. 6, dated November 7, 1973. In that case the Court held that California, which has adopted the Uniform Commercial Code, could not be held responsible for creating the conditions which resulted in standardized contracts which are typically used in the credit industry and provide for self-help repossession without notice or a hearing prior to seizure. Though this court is not bound by that decision, it is the carefully considered opinion of this court that the decision rendered in Adams is the correct one. Consequently, the motion to dismiss Counts 3 and 4, as well as Counts 2, 5, 6 and 7, which are ancillary actions arising under state law, will be granted.

The preeminent case in this area of constitutional law is Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), wherein the Supreme Court held that Pennsylvania and Florida laws which authorized the summary seizure of personal property by a writ of replevin and without notice or a pre-seizure hearing were violative of the Fourteenth Amendment. In Fuentes, however, unlike the instant case, state officials played an active role in the summary-taking. Herein, the repossession was accomplished wholly by the actions of private persons. Thus, it is evident that a decision in the plaintiff's favor would require an expansion of the law as stated by Fuentes.

Plaintiff urges such an expansion on the ground that secured parties are persuaded or induced to assert their allegedly unconstitutional rights to self-help repossession by the fact that such repossession is permitted by statute. Reitman v. Mulkey, 387 U.S. 369, 87 S.Ct. 1627, 18 L.Ed.2d 830 (1967), is cited for the proposition that under such circumstances state action exists. Reitman is, however, different than the present case on at least two important points. First, Reitman involved racial discrimination, an evil against which the Fourteenth Amendment was specifically directed. And, secondly, in the civil rights arena there is a long history of state efforts to do indirectly what cannot be done directly, a motive which the Supreme Court perceived to be behind the law in issue in that case.

Defendant Ward's motion to dimiss Count I, as to himself, is unnecessary, as that count and cause of action is directed solely at Associates Finance, Inc.

Accordingly, it is ordered that the Motion for Dismissal of Counts 2, 3, 4, 5, 6 and 7 is allowed and said counts are dismissed as to both defendants.

19731115

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