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CEMAIL v. VIKING DODGE

October 28, 1997

ADNAN CEMAIL, TERRY A. CEMAIL, TERRY L. KENNEDY, THOMAS A. KENNEDY, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
VIKING DODGE, INC., AMERI CREDIT CORPORATION, and CHRYSLER FINANCIAL CORPORATION, Defendants.



The opinion of the court was delivered by: MORAN

 This is a class action lawsuit brought by the plaintiffs Adnan and Terry Cemail (the Cemails) and Terry and Thomas Kennedy (the Kennedys) on behalf of themselves and all others similarly situated. Plaintiffs brought this six-count action against defendants Viking Dodge, Inc. (Viking), AmeriCredit Corporation (AmeriCredit) and Chrystler Financial Corporation (CFC) alleging claims under the Truth In Lending Act (TILA), 15 U.S.C. § 1601 et seq., the Illinois Consumer Fraud Act (ICFA), 815 ILCS 505/2 et seq. and the Illinois Motor Vehicle Retail Installment Sales Act (MVRISA) 815 ILCS 375/5 et seq., in connection with their purchase of automobiles from defendant Viking.

 In Count I, plaintiffs allege that all defendants are liable for violating TILA, 15 U.S.C. § 1641, because Viking charged a different price to consumers purchasing automobiles with cash than it did to those using credit, but failed to disclose this difference in price as a "finance charge." In Count II, plaintiffs allege that the same behavior subjected all defendants to liability under ICFA, 815 ILCS 505/2, 10a. In Count III, plaintiffs allege that all defendants violated MVRISA, 815 ILCS 375/5, 24b, and the ICFA, 815 ILCS 505/2E-F, 10a, by engaging in the above-described acts as well as falsely representing that the extended warranty charge listed in the contract was paid to a third party, when in fact a substantial amount of the fee was retained by Viking. In Count IV, the Kennedy plaintiffs allege that defendants Viking and CFC (but not AmeriCredit) violated TILA and accompanying regulations, Regulation Z, 12 C.F.R. § 226.17(a)(1)-18, by falsely representing that the extended warranty charge listed in the consumer contract was paid to a third party, when in fact a substantial amount of the fee was retained by Viking. In Count V, the Kennedy plaintiffs allege that defendants Viking and CFC violated ICFA, 815 ILCS 505/2, 10a, by engaging in the same behavior described in Count IV. In Count VI, the Kennedy plaintiffs allege that Viking and CFC violated MVRISA, 815 ILCS 375/5, 24b, and ICFA, 815 ILCS 5052E-F, 10a, by engaging in the same behavior described in Count IV above.

 Defendants CFC and AmeriCredit have moved to dismiss each of plaintiffs' applicable claims. This memorandum addresses both of these motions, specifying, when appropriate, to which defendant our holdings apply. We conclude that AmeriCredit's motion to dismiss is granted in its entirety and CFC's motion to dismiss is granted in part and denied in part.

 BACKGROUND

 In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim, we accept all well-pled factual allegations in the complaint as true and draw all reasonable inferences from these facts in favor of the plaintiff. Travel All Over the World, Inc. v. The Kingdom of Saudi Arabia, 73 F.3d 1423, 1429 (7th Cir. 1996). Read in this light, the facts are as follows:

 On June 29, 1996, the Cemails purchased a new 1996 Dodge Neon from Viking. They purchased the car for personal, family and household purposes and the transaction was documented as a consumer credit transaction by Viking. At the time of the purchase a sign was on the Neon's window which stated in part, "WAS $ 11,095, IS $ 9345." The Cemails negotiated the purchase of the car relying on the price marked as the "IS" price of $ 9,345. They ultimately agreed to purchase the Neon, and Viking had them sign a blank contract, telling them that certain figures would be filled in once the financing was approved by the lender. When the Cemails received a copy of the contract, however, the figures on the form were based on the $ 11,095 price, rather than the discounted price that had been posted in the car's window on the day of the sale. The Cemails' contract was assigned to AmeriCredit.

 The Kennedys had a similar experience with Viking when they purchased a new Dodge Avenger on August 10, 1996. The car had a sign in its window which said in part, "WAS $ 22,000, IS $ 18,000." The Kennedys accordingly negotiated around the $ 18,000 price and signed a blank contract after Viking showed them figures on a computer screen based on the $ 18,000 price. Once again, however, when the contract arrived in the mail, the figures that had been placed on it were based on the $ 22,000 "WAS" price that had appeared on the vehicle on the day of the sale. The plaintiffs also discovered a discrepancy with the extended warranty disclosures appearing on the contract documents. In a section titled, "Other Charges Including Amounts Paid to Others on Your Behalf," the contract stated that $ 780 had been "paid to" Portfolio, a warranty provider, for the extended warranty. Plaintiffs discovered that, in fact, a substantial portion of the warranty fee was retained by Viking and not paid to Portfolio, as the contract represented. The Kennedys' contract was assigned to CFC.

 When the Kennedys and Cemails questioned Viking about the price difference, Viking responded that the lower price marked on the cars as the "IS" price only applied to cash sales, and not to sales that were being financed. Plaintiffs accordingly brought the present action against Viking, as well as AmeriCredit and CFC.

 DISCUSSION

 I. Standard of Review

 In order to have a claim dismissed under Rule 12(b)(6) the moving party must meet a high standard. The purpose of a motion to dismiss is to test the sufficiency of a complaint, not its merits. Triad Ass'n Inc. v. Chicago Housing Authority, 892 F.2d 583, 586 (7th Cir. 1989), cert denied, 498 U.S. 845, 112 L. Ed. 2d 97, 111 S. Ct. 129 (1990). A complaint should not be dismissed for failure to state a claim "unless it appears beyond a reasonable doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). In order to withstand a motion to dismiss, a complaint must allege facts sufficiently setting forth the essential elements of the cause of action. Gray v. County of Dane, 854 F.2d 179, 182 (7th Cir. 1988). Generally, "mere vagueness or lack of detail does not constitute sufficient grounds for a motion to dismiss." Strauss v. City of Chicago, 760 F.2d 765, 767 (7th Cir. 1985)

 II. Count I: The Relationship Between the Claims Preservations Clause Required by Federal Regulations and TILA

 In Count I, plaintiffs allege that Viking violated TILA by charging a different price to cash and credit purchasers of the same automobile, but failing to disclose that difference in price and classify it as a finance charge. Plaintiff further argues that as creditor assignees of Viking, both CFC and AmeriCredit can be held accountable for any TILA violation for which Viking is liable. Plaintiff bases this claim on a clause contained in the original contracts between the plaintiffs and Viking. That clause provides:

 
Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.

 This provision (commonly known as a "claims preservation" clause) is required by federal regulation, 16 C.F.R. § 433.2, and has the practical effect of eliminating the UCC's holder-in-due-course principle. *fn1" See Armstrong v. Edelson, 718 F. Supp. 1372, 1378 (N.D.Ill. 1989) (observing that all consumer contracts contain such clauses because federal regulations so require). Thus, it enables consumers to bring any claim they have against the seller of a product against subsequent assignees of the sales contract on which the claim is brought.

 TILA also has certain provisions governing the liability of contract assignees in the consumer finance situation. ...


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