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United States District Court, N.D. Illinois

February 5, 2004.

JESUS and LETICIA NEVAREZ, on behalf of themselves and all others similarly situated, Plaintiff's,

The opinion of the court was delivered by: GERALDINE SOAT BROWN, Magistrate Judge


Defendants O'Connor Chevrolet, Inc. ("O'Connor") and Evergreen Finance Company ("Evergreen") (collectively, "Defendants") move for summary judgment against Plaintiff's Jesus and Leticia Nevarez: (collectively, "Plaintiff's") on Counts l and II of the Second Amended Class Action Complaint. [Dkt 57.]*fn1 Defendants also request dismissal of Counts III through VII if summary judgment is granted on Counts I and II. For the reasons set out below, summary judgment in favor of Defendants is granted on Count l but denied on Count II, and Defendants' request to dismiss Counts III through VII is moot.*fn2 Page 2


  Federal jurisdiction exists under 28 U.S.C. § 1331 (federal question jurisdiction) and 28 U.S.C. § 1367 (supplemental jurisdiction). 28 U.S.C. § 1331 provides that "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." A complaint that specifically invokes federal law "`arises under' federal law for purposes of § 1331." International Bhd. of Teamsters, Local 734 Health & Welfare Trust Fund v. Phillip Morris Inc., 196 F.3d 818, 822 (7th Cir. 1999). Federal question jurisdiction is proper for Counts I and II because Count I invokes the Truth in Lending Act, 15 U.S.C. § 1640(e), and Count II invokes the Equal Credit Opportunity Act, 15 U.S.C. § 1691e.*fn3 Supplemental jurisdiction exists over Counts III through VII under 28 U.S.C. § 1367. 28 U.S.C. § 1367 provides that, with the exception of actions brought solely under 28 U.S.C. § 1332:

[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.
28 U.S.C. § 1367(a), Because the court has original jurisdiction over Counts I and II, and Counts III through VII are related state law claims, supplemental jurisdiction is proper. Although a court may decline to exercise supplemental jurisdiction pursuant to 28 U.S.C. § 1367(c), none of the circumstances set forth in § 1367(c) exist in this case. The parties have consented to the jurisdiction Page 3 of a Magistrate Judge. [Dkt 7, 8.]


  According to Plaintiff's, in late April or early May 2001, Leticia Nevarez contacted O'Connor via telephone, asked for a representative who spoke Spanish and was connected to Juan Soto ("Soto"). (Compl. ¶¶ 7-9.)*fn5 During that conversation, Leticia Nevarez; allegedly told Soto that she Page 4 wished to purchase a car and provided Soto with her social security number, income and address. (Id. ¶ 9.) Plaintiff's claim that Soto then pulled Leticia Nevarez's credit report and informed Leticia Nevarez that she was approved for $22,000 to $25,000 if she made a down payment of $3,000 to $5,000. (Id.)*fn6

  It is undisputed that on or about May 5, 2001, Plaintiff's met with Soto at O'Connor and began looking at the selection of cars. (Id. ¶ 10; Answer ¶¶ 10, 12,) Soto informed them that they did not qualify for a Tahoe, so the Plaintiff's selected a 1999 Mercury Mountaineer (the "Mountaineer"), (Compl. ¶ 12; Answer ¶ 12.) Plaintiff's allege that Soto went to talk to a manager and ultimately stated that "he could get them the price they wanted, and the best interest rate, and only Jesus Nevarez needed to sign the contract." (Compl. ¶ 13.) Defendants deny that allegation. (Answer ¶ 13.)

  Plaintiff's claim that they "arranged to leave" a $5,0000 down payment check but told Soto that checks were being deposited into the checking account and the $5,000 check would not clear for a few days. (Compl, ¶ 14.) According to Plaintiff's, Soto told them "not to worry" because no one at O'Connor would cash the check immediately. (Id.) Defendants deny those allegations. (Answer ¶ 14.) Jesus Nevarez signed a retail installment contract (the "May 5, 2001 contract"), which was Page 5 written entirely in English. (Pls.' LR Stmt., Ex. 10.)*fn7 Plaintiff's claim, however, that their conversations with Soto and all of the negotiations surrounding the May 5, 2001 contract were conducted in Spanish. (Compl. ¶¶ 15, 16.) Defendants deny those allegations. (Answer ¶¶ 15, 16.) After Jesus Nevarez signed the May 5., 2001 contract, Plaintiff's left O'Connor with the Mountaineer. (Compl. ¶ 17; Answer ¶ 17.) The copy of the May 5, 2001 contract provided to the court does not bear any signature on behalf of O'Connor. (App. A.)*fn8

  Sometime before May 17, 2001, Soto contacted Leticia Nevarez and informed her that the check she had written on May 5, 2001 was returned "NSF." (Compl. ¶ 18; Answer ¶ 18.) Leticia Nevarez returned to O'Connor on May 17, 2001, and tendered another $5,000 check, which Soto accepted. (Compl ¶¶ 19, 20; Answer ¶¶ 19, 20.) According to the parties, "[i]t appears" that O'Connor presented Plaintiffs' second $5,000 check to its bank for payment on May 18, 2001, (Compl. ¶ 21; Answer ¶ 21.)

  Plaintiff's claim that, on either May 18th or 19th, Soto called Leticia Nevarez and told her that the financing on the May 5, 2001 contract was "not able to be sold to the bank, i.e. [as]signed to a third party lender." (Compl. ¶ 22.) Soto also allegedly told Leticia Nevarez that she and her husband would need to return to the dealership and sign a different contract and that Mr. Nevarez would need Page 6 a co-signer. (Id. ¶ 23.) Defendants deny that allegation. (Answer ¶ 23.) Plaintiff's claim that, on May 19, 2001, they returned to O'Connor with their cousin, Juan Huerta, who was willing to serve as a co-signer. (Compl. ¶ 24.) But, when they arrived, Soto allegedly told Plaintiff's that he was able to get them financed through Evergreen and that Mr. Huerta would not need to co-sign, but they would need to provide an additional $3,000 for the down payment. (Id. ¶ 25.) Plaintiff's then signed a second retail installment contract (the "May 19, 2001 contract"), which was written entirely in English. (Id. ¶ 26; Pls.' LR Stmt., Ex. 10.) Plaintiff's claim that, like the negotiations surrounding the May 5, 2001 contract, the negotiations surrounding the May 19, 2001 contract were conducted entirely in Spanish. (Compl. ¶ 27.) Defendants deny that allegation. (Answer ¶ 27.)

  On or about November 7, 2001, a representative from Evergreen contacted Leticia Nevarez via telephone, (Compl. ¶ 30; Answer ¶ 30.) According to Plaintiff's, the Evergreen representative told Leticia Nevarez that she did not have insurance for the Mountaineer. (Compl. ¶ 30.) Plaintiff's insist that "[a]t no time were [they] in default of their obligation to retain insurance for the . . . Mountaineer." (Id. ¶ 31.) Evergreen allegedly repossessed the Mountaineer on or about November 13, 2001. (Id.)

  On November 17, 2001, Plaintiff's, through their counsel, sent a letter to O'Connor and Evergreen, which allegedly revoked acceptance of the Mountaineer and rescinded their contracts with O'Connor and Evergreen. (Id. ¶ 32.) Plaintiff's contend that their attorney also sent demand/notice letters to O'Connor and Evergreen in compliance with 815 Ill. Comp. Stat. 505/10a. (Id.) O'Connor and Evergreen did not make a counter-offer and stated that they did not violate any laws. (Id.; Answer at ¶ 32).

  At all relevant times, Evergreen was the assignee of the May 19, 2001 retail installment Page 7 contract and is the holder of the consumer credit contract, (Compl. ¶ 33; Answer ¶ 33). Caryl O'Connor is the agent, President and Secretary of O'Connor, and the agent and Secretary of Evergreen. (Compl. ¶ 33; Answer ¶ 33.)

  Plaintiff's assert seven counts.*fn9 Count I alleges that O'Connor violated the Truth in Lending Act. Count II alleges that O'Connor violated the written notice requirements of the Equal Credit Opportunity Act. Count III alleges that O'Connor and Evergreen violated Section 2N of the Illinois Consumer Fraud Act, Count IV alleges that O'Connor violated Section 2C of the Illinois Consumer Fraud Act. Count V alleges that O'Connor and Evergreen made certain misrepresentations and omissions in violation of the Illinois Consumer Fraud Act. Count VI alleges that O'Connor delivered the car in violation of the Illinois Consumer Fraud Act and Deceptive Business Practices Act, Count VII alleges that Evergreen wrongfully repossessed the Mountaineer


  Summary judgment is proper when there is no genuine issue of material fact in dispute and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see also Indiana Funeral Dirs. Ins. Trust v. Trustmark Ins. Corp., 347 F.3d 652, 654 (7th Cir. 2003). "Judgment as a matter of law is appropriate when a party `fails to make a showing sufficient to establish the existence of an essential element to that party's case, and on which that party will bear the burden of proof at trial,'" Indiana Funeral Dirs., 347 F.3d at 654 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). "Indeed, if it is clear that a plaintiff will be unable to satisfy the legal Page 8 requirement necessary to establish its case, summary judgment is not only appropriate but required." Id.

  A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), However, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Id. at 252. In determining whether a genuine issue of fact exists, the court must construe all facts and draw all reasonable and justifiable inferences in favor of the non-moving party. Id. at 255, However, the court "is not required to draw unreasonable inferences from the evidence," St. Louis N. Joint Venture v. P & L Enters., Inc., 116 F.3d 262, 265 n. 2 (7th Cir. 1997).

  The initial burden is on the moving party to demonstrate, "with or without supporting affidavits," the absence of a genuine issue of material fact and that judgment as a matter of law should be granted in the moving party's favor. Celotex Corp, v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has met the initial burden, the opposing party must support its contentions with admissible evidence and may not rest upon the mere allegations in the pleadings or conclusory statements in affidavits. Id. at 324. The non-moving party must designate specific facts showing that there is a genuine issue for trial, Id. It is not the duty of the court to scour the record in search of evidence to defeat a motion for summary judgment; rather, the nonmoving party bears the responsibility of identifying the evidence upon which it relies. Bombard v. Fort Wayne Newsps., Inc., 92 F.3d 560, 562 (7th Cir. 1996). Page 9


  Defendants argue that they are entitled to summary judgment on Counts I and II and, if summary judgment is granted, the remaining state law claims (Counts III through VII) should be dismissed for lack of subject matter jurisdiction. The court finds: (1) Defendants are entitled to summary judgment on Count I; (2) Defendants are not entitled to summary judgment on Count IT; and (3) Defendants' request to dismiss Counts III through VII is moot.

  I. Defendants are entitled to summary judgment on Count I.

  In Count I, Plaintiff's claim that O'Connor violated the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., because O'Connor failed to itemize accurately the amount financed on the May 19, 2001 contract. TILA and its implementing regulation ("Regulation Z"), 12 C.F.R. § 226.18, require, inter alia, that creditors or lenders provide a written itemization of the amount financed, including "each amount that is or will be paid to third persons by the creditor on the consumer's behalf, together with an identification of or reference to the third person." 15 U.S.C. § 1638(a)(2)(B)(iii).

  It is undisputed that a fee for a Lyndon American service contract was included in the May 19, 2001 contract. (Compl. ¶ 47; Answer ¶ 47; Pls.' LR Stmt., Ex. 10.) According to Plaintiff's, however, the amount paid to Lyndon American under the service contract was not accurately disclosed. (Compl. ¶ 47.) Plaintiff's claim that, on the May 19, 2001 contract, O'Connor indicated that Lyndon American would be receiving payment in the amount of $1495.00 when, in fact, the Page 10 amount paid to Lyndon American was "less than that," (Id.)*fn10 According to Plaintiffs, O'Connor's profit recap sheet suggests that O'Connor was to retain more $200,00 of the $1495.00 price. (Id.; Pls.' LR Stmt., Ex. 13.) Plaintiffs further claim that, as a result of that inaccurate disclosure, they suffered "actual damages . . . because they were unable to make an informed decision about the true cost of the credit." (Compl. ¶ 49.)

  Defendants argue that "[e]ven if Plaintiffs could establish facts to establish [a] violation of TILA and Regulation Z, O'Connor would still be entitled to summary judgment on [Count I]" because Plaintiffs "suffered no actual damages, and they further are not entitled to statutory damages." (Defs.' Mot. ¶ 3.) The court agrees.

  A. Plaintiffs are not entitled to statutory damages.

  The statutory damages available for a TILA violation are outlined in 15 U.S.C. § 1640(a), which provides in relevant part:

In connection with the disclosures referred to in section 1638 of this title, a creditor shall have a liability determined under paragraph (2) [i.e., statutory damages under § 1640(a)(2)] only for failing to comply with the requirements of section 1635 of this title or paragraph (2) (insofar as it requires a disclosure of the "amount financed"), (3), (4), (5), (6), or (9) of section 1638(a) of this title.
15 U.S.C. § 1640(a). In other words, "[t]he only part of g 1638(a)(2) that gives rise to a right to recover statutory damages under § 1640(a)(2) is that concerning disclosure of the `amount financed.'" Kent v. Celozzi-Ettleson Chevrolet, Inc., et al., No. 99 C 2868, 1999 WL 1021044 at *8 Page 11 n. 2 (N.D. Ill. Nov. 3, 1999) (Kermelly, J.).

  Here, the alleged violation of § 1638(a)(2) is not the failure to disclose the "amount financed," bat the failure to itemize accurately the components of the amount financed. Therefore, Plaintiff's are not entitled to statutory damages.*fn11 See e.g., Rugumbwa v. Betten Motor Sales, 200 F.R.D. 358, 364 (W.D.Mich. 2001) (stating that "[statutory damages are not available under § 1638 for failure to disclose the itemization of the amount financed").

  B. Plaintiff's cannot prove they suffered actual damages.

  Rather than seeking statutory damages, Plaintiff's claim that they suffered "actual damages" as result of O'Connor's inaccurate disclosure. (Compl. ¶ 49.) In order to recover actual damages under TILA, a plaintiff must establish "a causal connection between the inaccurate disclosure and [her] injury by demonstrating that [s]he relied on the inaccurate disclosure and thereby was effectively prevented from obtaining better credit terms elsewhere." Groth v. Rohr-ville Motors, Inc., No. 95 C 05429, 1997 WL 630189 at *4 (N.D. Ill Sept. 30, 1997) (Williams, J.) (quoting Adiel v. Chase Fed. Sav. & Loan. Ass'n, 630 F. Supp. 131, 133 (S.D. Fla. 1986)) (alterations in original). Specifically, Plaintiff's must demonstrate that: (1) they read the TILA disclosure statement; (2) they understood the charges being disclosed; (3) had the disclosure statement been accurate, they would have sought a different warranty or a lower price; and (4) they would have obtained another warranty or a lesser price. Id. (citing Romaker v. Cropland Mortgage Corp., No. 94 C 3328, 1996 WL 254299 at *2 (N.D. Ill. May 10, 1996) (Grady, J.)), Here, Plaintiff's cannot prove actual damages Page 12 because they cannot show that they read or understood the disclosure.

  It is readily apparent that the May 19, 2001 contract was written entirely in English. (Pls.' LR Stmt, Ex. 10.) Jesus Nevarez testified in his deposition that he does not understand, write or read English. (Defs.' LR Stmt., Ex. A, Jesus Nevarez Dep. at 14-15; Defs.' LR Stmt, ¶ 1.) Leticia Nevarez testified in her deposition that she cannot write in English and can only speak 10% or 15% of the English language (Defs.' LR Stmt., Ex. B, Leticia Nevarez Dep. at 6; Defs.' LR Stmt. ¶ 2); that she must have her brother interpret forms delivered from the State of Illinois relating to her beauty shop (Leticia Nevarez Dep. at 7-8); that she has trouble reading first grade books to her daughter, even after she took an English language class one and a half years ago (id. at 9-11); and that she can only read about ten percent of the English language (id. at 11), Significantly, Plaintiffs have presented no evidence that they actually read the May 19, 2001 contract or had it read to them at any time. In fact, Plaintiffs submitted to the court Leticia Nevarez's statement that "[t]he entirety of the retail installment contract was never translated for [her] or [her] husband." (Pls.' LR Stmt., Ex. 12, Certification of Leticia Nevarez ¶ 4) (emphasis added).*fn12

  Plaintiffs argue that "when the contract was translated for [them] . . . they finally learned that the proceeds of the service contract were not accurately disclosed." (Pl.'s Mem. Opp'n at 3). If that is the case, Plaintiffs did not have the contract translated for them until sometime during the course of this lawsuit. According to Plaintiffs, the amount retained by O'Connor was only disclosed on the Page 13 dealership's profit-recap sheets, which are "internal documents" that "the customer never sees." (Pls.' Mem. Opp'n at 6.) Thus, Plaintiff's could only have learned that the amount paid to Lyndon American was incorrect after O'Connor's recap sheet was produced in discovery (which is presumably why the claim relating to the overstatement of Lyndon American's fee was pleaded in the Second Amended Class Action Complaint and not in the original complaint). In short, Plaintiff's could not have relied on a statement when they have presented no evidence that they ever were aware of that statement,

  Plaintiff's further argue that since the inaccurate disclosure was an "omission," the tact that Plaintiff's cannot read English should not preclude liability under TILA. (Pls.' Mem. Opp'n at 3-6.) That argument, however, is not supported by any authority and is based on a mischaracterization of the disclosure as an "omission." The Complaint states:


O'Connor disclosed on the retail installment contract that Lyndon American would be receiving payment for the service contract in the amount of $1495.00. However, the amount paid to Lyndon American for the service contract was less than that. O'Connor's profit recap sheet shows that the dealer was to retain over $200.00 of the $1495,00 "price."
(Compl. ¶ 47) (emphasis added). What Plaintiff's have alleged is not that an amount subject to financing was omitted but rather that the amount paid to Lyndon American (the disclosure required by § 1638(a)(2)(B)(iii)) was overstated.

  Plaintiff's also point out that O'Connor failed to provide them with a Spanish copy of their retail installment contract as required by Illinois law. (Pls.' Mem. Opp'n at 3.) However, there is no such requirement under TILA. Plaintiff's claim that "O'Connor cannot violate one law and the[n] somehow claim that such a violation exculpates them from liability under another." (Id. at 6.) But, Page 14 even if O'Connor was required to provide Plaintiff's with a Spanish contract under Illinois law, its failure to do so is irrelevant in determining whether TILA was violated,

  Because Plaintiff's cannot demonstrate that they either read the disclosure statement or that they understood the charges being disclosed, they cannot show that they relied on the inaccurate disclosure. See, e.g., Rugumbwa, 200 F.R.D. at 364-65 (holding that a plaintiff could not prove actual damages under TILA because he did not understand English and therefore could not have relied on the disclosure statements). Accordingly, Plaintiff's cannot prove actual damages and Defendants are entitled to summary judgment on Count I.*fn13

  II. Defendants are not entitled to summary judgment on Count II.

  In Count II, Plaintiff's claim that O'Connor violated the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. § 1691, by failing to notify them in writing of the reasons why financing under the May 5, 2001 contract was rejected. (Compl. ¶¶ 57-59). The ECOA contains broad antidiscrimination provisions that make it "unlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction . . . on the basis of race, color, religion, national origin, sex or marital status, or age." 15 U.S.C. § 1691(a)(1). The ECOA also contains notice requirements, providing that an applicant for credit "against whom adverse action is taken" is entitled to a statement of reasons for such an action from the creditor. Id. § 1691(d). An aggrieved applicant may bring a civil action against "[a]ny creditor who fails to comply with any Page 15 requirement imposed under [the ECOA]." Id. § 1691e(a). The ECOA delegated to the Federal Reserve Board (FRB) the power to implement regulations in furtherance of carrying out the ECOA's purpose. Id. § 1691b(a). These regulations, known as "Regulation B," are found under 12 C.F.R. § 202.1 — 12 C.F.R. § 202.17 (2003).

  Defendants do not dispute that § 1691(d) of the ECOA requires "creditors" to provide a notification of the denial of credit and a statement of the reasons for such actions. (Defs.' Mem. Supp. Mot, at 7.) Rather, Defendants argue that O'Connor is not a "creditor" as that term is defined by the ECOA. (Id.)

  The ECOA defines the term "creditor" as follows:

any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.
15 U.S.C. § 1691a(e). Furthermore, the version of Regulation B in effect at the time of the transaction in this case defined "creditor" as:
a person who, in the ordinary course of business, regularly participates in the decision of whether or not to extend credit. . . . For purposes of §§ 202.4 [prohibiting discrimination in credit decisions] and 202.5(a) [prohibiting discouragement of applying for credit], the term also includes a person who, in the ordinary course of business, regularly refers applicants or prospective applicants to creditors, or selects or offers to select creditors to whom requests for credit may be made.
20 C.F.R. § 202.2(I) (Jan. 2001). Comment 2 to § 202.2(I), which is also known as an Official Staff interpretation of Regulation B, explains that:

  For certain purposes, the term creditor includes persons such as real estate brokers who do not participate in credit decisions but who regularly refer applicants to creditors or who select or offer to select Page 16 creditors to whom credit requests can be made. These persons must comply with § 202.4, the general rule prohibiting discrimination, and with § 202.5(a), on discouraging applications.

 12 C.F.R. Pt. 202, Supp. I, Section 202.2(I) (Jan. 2001).*fn14

  Effective April 15, 2003, § 202.2(I) was revised in that the first sentence was changed to define creditor as "a person who, in the ordinary course of business, regularly participates in a credit decision, including setting the terms of the credit." 12 C.F.R. § 202.2(I) (March 2003). The comment to this new definition states as follows:

For certain purposes, the term creditor includes persons such as real estate brokers, automobile dealers, home builders, and home-improvement contractors who do not participate in credit decisions but who only accept applications and refer applicants to creditor or select or offer to select creditors to whom credit requests can be made. These persons must comply with § 202.4(a), the general rule prohibiting discrimination, and with § 202.4(b), the general rule against discouraging applications,
12 C.F.R. Pt. 202, Supp. I, Section 202.2(I) (March 2003).*fn15 The FRB elaborated on this comment in a final rule amending Regulation B, as follows:
Comment 2(I)-2 has been revised to clarify the type of creditors subject only to the general prohibitions against discrimination in §§ 202.4(a) and (b), respectively.
  Some industry commenters expressed concern that the clarification would include in the definition of creditor persons without discretion to decide whether credit will be extended. The Board recognizes that Page 17 in the credit application process persons may play a variety of roles, from accepting applications through extending or denying credit. Comment 2(I)-2 is intended to clarify that where the only role a person plays is accepting and referring applications for credit, or selecting creditors to whom applications will be made, the person meets the definition of creditor, but only for purposes of the prohibitions against discrimination and discouragement. For example, an automobile dealer may merely accept and refer applications for credit, or it may accept applications, perform underwriting, and make a decision whether to extend credit. Where the automobile dealer only accepts applications for credit and refers those applications to another creditor who makes the credit decision-for example, where the dealer does not participate in setting the terms of the credit or making the credit decision-the dealer is subject only to §§ 202.4(a) and (b) for purposes of compliance with Regulation B.

 68 Fed. Reg. 13144, 13155 (March 18, 2003) (emphasis added).

  Where Congress has expressly delegated to an agency the responsibility of articulating standards governing a particular area, the courts must accord the ensuing regulation substantial deference. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984). Because the FRB has been given explicit authority to prescribe regulations to carry out the purpose of the ECOA, the court should give substantial deference to the interpretations of the FRB. Roseman v. Premier Financial Services-East, L.P., No. Civ.A. 96-4669, 1997 WL 570919 at *3 n. 3 (E.D. Pa. Sept. 3, 1997) (Pollak, J.). Moreover if an agency sets forth a new rule which clarifies an unsettled or confusing area of the law, that rule can be applied retroactively to the case at hand just as a judicial determination construing a statute can be applied to the case at hand. Clay v. Johnson, 264 F.3d 744, 749 (7th Cir. 2001). The courts give great deference to an agency's expressed intent as to whether its rule changes the taw or merely clarifies it. Id. Here, the final rule amending Regulation B specifically states that Comment 2(I)-2 is "intended to clarify" the ECOA Page 18 definition of creditor. Thus, the comment to revised Regulation B and the final rule are to be afforded substantial deference and applied to this case, notwithstanding the fact that the events giving rise to this case preceded the issuance of the ruling.

  The regulatory definitions and agency interpretations set out above differentiate between two types of "creditors" based on the extent of their role in the credit decision. The first class (described herein as "Referring Creditors") do not participate in the credit decision, but merely refer applications to third-party credit institutions. Members of that class are considered "creditors" in a limited sense and are subject only to the requirements set forth in §§ 202.4(a) and (b), which prohibit discrimination and discouraging applications. 12 C.F.R, §§ 202.4(a) and (b), The second class of creditors (described herein as "Participating Creditors"), on the other hand, accept applications, perform underwriting and actually participate in setting the terms of credit or making the credit decision, "Participating Creditors" are required to comply with all of the statutory requirements, including § 202.4(d), which requires written notice of adverse action."*fn16

  The issue in this case is whether O'Connor was a "Referring Creditor" or a "Participating Creditor" at the time Plaintiff's were denied financing under the May 5, 2001 contract. (Compl. ¶ 22.) Defendants argue that O'Connor merely accepts credit applications and refers applications to Page 19 various lending institutions. (Defs.' Mem. Supp. Mot. at 8; Defs.' LR Stmt. ¶ 9.) The evidence shows that O'Connor also selects which potential lenders would be interested in which contracts. (Pls.' Resp. to Defs.' LR Stmt. ¶ 10; Pls.' LR Stmt., Ex. 3 at 17.) if those actions were the extent of O'Connor's participation in credit decisions, O'Connor would appear to fall into the category of "Referring Creditors" who are not required to provide consumers with written notice of adverse action pursuant to § 202.4(d).*fn17

  However, there is evidence that O'Connor did more than just refer Jesus Nevarez's application to potential third-party lenders. In the May 5, 2001 contract, O'Connor is designated as the "Seller" and Jesus "Nevarez is designated as the "Buyer." (App. A at 1.) The May 5, 200I contract also provides:

Seller hereby sells and Buyer or Buyers, jointly and severally, hereby purchase the following motor vehicle with accessories and equipment thereon for the deferred payment price and on the terms set forth in this contract. Buyer acknowledges delivery and acceptance of said motor vehicle in good condition. . . . This contract shall be binding upon and inure to the benefit of the parties, their heirs, personal representatives, successor and assigns.
(Id. at 1, 3) (emphasis added). The terms of the financing arrangement are set forth in the contract (id. at 1), and nowhere in the contract does it indicate that any entity other than O'Connor is the creditor for purposes of the transaction. (Id. at 1.) Although the May 5, 2001 contract provides that Page 20 Jesus Nevarez should make payments at the offices of "Harris Bank Barrington, National Association/J-N (Assignee)," the contract requires that the payments be made "to the order of Seller," and the "Seller" was given a security interest in the vehicle. (Id.) Although there is a section on the second page of the contract whereby O'Connor could have assigned the contract to a third-party, that section was never completed.*fn18 (Id. at 4.) The terms of the May 5, 2001 contract are not set out as an "application" for credit; those terms appear to be a credit contract that O'Connor could have enforced against Plaintiff's.

  Defendants submit the affidavit of O'Connor's General Sales Manager, Sean Galvin, staling that O'Connor "does not make any credit decisions on whether a third party extends credit to a customer" and "does not [itself] finance customers]," (Defs.' LR Stmt. ¶¶ 10-11; Defs.' LR Stmt., Ex. C, Aff. of Sean Galvin ¶ 4-5.) Defendants also state that "[n]owhere in the May 5, 2001 [contract] did O'Connor . . . promise to finance the [Plaintiffs'] vehicle purchase." (Defs.' Add'l Authority at 2,) However, the terms of the May 5, 200I contract set out an agreement under which O'Connor was extending credit to Plaintiff's pursuant to the financing terms set forth in the contract. Thus, when O'Connor could not find another lender to whom it could assign the contract, presumably O'Connor could have financed the transaction itself. O'Connor, however, declined to finance the transaction and voided the contract on May 19, 2001.

  Defendants claim that Plaintiff's cannot use the May 5, 2001 contract to establish liability for Defendants under ECOA because Plaintiff's breached the May 5, 2001 contract when the check they Page 21 issued on May 5, 2001 was dishonored by TCF Bank on May 9, 2001, (Defs.' Add'l Authority at 3-4) (citing Streit v. Fireside Chrysler-Plymouth, Inc., 697 F.2d 193 (7th Cir. 1983)), In Streit, the Seventh Circuit concluded that the plaintiff who never paid the balance of his down payment on the car he purchased could not make a claim against the dealership under TILA. Id. at 197, In this case, although Plaintiffs' May 5, 2001 check was dishonored by the Bank, O'Connor accepted another check from Plaintiff's on May 17, 2001 and presented that check to its bank on May 18, 2001 — prior to voiding the May 5, 2001 contract on May 19, 2001, Therefore, a jury could find that even if Plaintiff's breached the May 5, 2001 contract, O'Connor waived the breach and accepted substitute performance. See Gmurzynska v. United Exposition Serv. Co., Inc., No. 86 C 8845, 1989 WL 27137 at *3 (N.D. Ill. Mar, 23, 1989) (Williams, J.) ("A party to the contract may waive a condition precedent to performance on his part . . . by conduct manifesting a continued recognition of the contract's existence after learning of the breach thereof, such as `by continuing to accept performance of the contract and to have the benefits thereof.'") (quoting Chicago Collage of Osteopathic Med. v. George A. Fuller Co., 719 F.2d 1335, 1343 (7th Cir. 1983)); see also Whalen v. K-Mart Corp., 519 N.E.2d 991, 994 (Ill.App. 1st Dist. 1988) ("An implied waiver of a legal right may arise when conduct of the person against whom waiver is asserted is inconsistent with any other intention than to waive it.").

  Defendants also point to other evidence in the record indicating the parties' understanding that O'Connor was not financing the transaction from May 5, 2001 to May 19, 2001, specifically, the Affidavit of Spot Delivery, which was signed by Jesus Nevarez on May 5, 2001. That affidavit Staten: Page 22


I am taking possession of this vehicle prior to approval from the finance institution. I further understand that by taking possession of this vehicle I have agreed to [i]ts purchase at the price agreed upon by myself and the transferor [O'Connor] as shown below.
I give [O'Connor] authorization to investigate my credit history and place the contract with the lender of their choosing, I understand that if [O'Connor] is unable to obtain credit approval on my loan within three business days, and if I am unable to obtain financing on my own within 24 hours after notification from [O'Connor] that my loan has been denied, I will be required to bring the vehicle back to [O'Connor].
(Pls.' Add'l Facts, Ex. 7, Aff. Spot Delivery) (emphasis added). That paragraph suggests that the purchase and possession of the Mountaineer were contingent upon the ability of O'Connor to obtain credit approval from a third-party lender. However, the Affidavit of Spot Delivery is at odds with the May 5, 2001 contract. Additionally, the Affidavit of Spot Delivery is incomplete. Except for Jesus Nevarez' signature and the earnest deposit amount, the rest of the affidavit, including the dealer's signature and the year, make, model and VEN for the vehicle, was left blank, (Id.)

  Defendants claim that O'Connor "promised to deliver a vehicle to Plaintiff's, contingent upon a third party's financing of the vehicle." (Defs.' Add'l Authority at 2.) However, when Leticia Nevarez was asked: "Did Juan Soto ever explain [to you] that if [O'Connor] could not sell your contract to a bank within three days . . . they could have you return the vehicle?," she responded: "No." (Leticia Nevarez Dep. at 134-35.)

  Defendants have not demonstrated that there is no genuine issue of fact as to whether O'Connor was functioning as a "Participating Creditor," subject to the requirements of § 202.4(d), from May 5, 2001 through May 19, 2001. For that reason, summary judgment on Count III is denied. Page 23

  III. Defendants' request to dismiss Counts III though VII is moot.

  Defendants argue that, if counts I and II are dismissed, the remaining state law claims should be dismissed for lack of jurisdiction. (Defs.' Mem. Supp. Mot. at 9.) A district court may decline to exercise supplemental jurisdiction over a claim if the district court has dismissed all claims over which it has original jurisdiction. 28 U.S.C. § 1367(c). As set forth above, however, Defendants are not entitled to summary judgement on Count II — Plaintiffs' ECOA claim. Thus, Defendants' request to dismiss the state law claims is moot.


  For the foregoing reasons, Defendants' Motion for Summary Judgment on Counts I and II is GRANTED in part and DENIED in part. Summary judgment is granted on Count I but denied on Count II, and Defendants' request to dismiss Counts III through VII for lack of subject matter jurisdiction is moot.


  See Case File For Exhibits

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