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Harold v. TMC Enterprises, LLC

United States District Court, W.D. Virginia, Lynchburg Division

October 17, 2016

Amanda Harold, Plaintiff,
TMC Enterprises, LLC, and TMC Finance, LLC, Defendants.



         Amanda Harold (“Plaintiff”) filed this action against TMC Enterprises, LLC (“JD Byrider” or “Defendant”) and TMC Finance, LLC (“CNAC” or “Defendant”) pursuant to the Truth in Lending Act (“TILA”), 14 U.S.C. § 1601, et seq., the Credit Repair Organization Act (“CROA”), 15 U.S.C. § 1679, et seq., and the Magnuson-Moss Warranty Act, 15 U.S.C § 2301, et seq. This Court has jurisdiction over her federal question claims pursuant to 28 U.S.C. § 1331 and 15 U.S.C. § 1640(e). Plaintiff brought supplemental state and common law claims, pursuant to 28 U.S.C. § 1367, for violation of the Virginia Consumer Protection Act (“VCPA”), Va. Code § 59.1-201, et seq., fraud, constructive fraud, and unconscionability. The case centers on Plaintiff's purchase and financing of a 2007 Chevrolet Cobalt from JD Byrider and CNAC, respectively, in May 2015.

         This matter is before the Court upon Defendants' motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim. (Dkt. 8). Taking Plaintiff's factual allegations as true at this stage, I find that Plaintiff has adequately pled all her claims, and Defendants' Motion to Dismiss will be denied.

         I. Legal Standard

         A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) tests the legal sufficiency of a complaint to determine whether the plaintiff has properly stated a claim; “it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Republican Party of North Carolina v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). Although a complaint “does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). A court need not “accept the legal conclusions drawn from the facts” or “accept as true unwarranted inferences, unreasonable conclusions, or arguments.” Eastern Shore Markets, Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). “Factual allegations must be enough to raise a right to relief above the speculative level, ” Twombly, 550 U.S. at 555, 127 S.Ct. 1955, with all allegations in the complaint taken as true and all reasonable inferences drawn in the plaintiff's favor. Chao v. Rivendell Woods, Inc., 415 F.3d 342, 346 (4th Cir. 2005). Rule 12(b)(6) does “not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. Consequently, “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

         II. Facts Alleged

         In May 2015, Plaintiff visited JD Byrider to inquire about purchasing a vehicle. Compl. ¶ 14. Based upon her credit history, Plaintiff was told that she would need a co-signor in order to finance and purchase a vehicle, which she obtained. Id. ¶¶ 16-17. Plaintiff was also told by sales personnel that there were only three cars available for her to purchase. Id. ¶ 18. Because Plaintiff required a four-door vehicle, she was limited to only two vehicles available at JD Byrider. Id. ¶¶ 20-21. Personnel at JD Byrider informed Plaintiff that they offer a plan, which accompanies any vehicle, to help purchasers build credit on a credit report. Id. ¶ 36.

         Plaintiff selected a 2007 Chevrolet Cobalt (“the vehicle”) with 103, 724 miles, a history of front-end damage, and a price of $14, 995.00. Id. ¶¶ 22, 25, 35. The MSRP for the vehicle when it was new in 2007 was $14, 295.00, and the NADA and Kelley Blue Book retail prices for the vehicle when purchased by Plaintiff ranged $5, 000 to $6, 000. Id. ¶¶ 26-27. Plaintiff agreed to an interest rate of 24.989%, and she was required to make bi-weekly payments of $206.25. Id. ¶¶31-32. Plaintiff has remained current on her payments. Id. ¶ 55.

         Plaintiff signed a retail installment sales contract (“RISC”) that stated, “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.” (Dkt. 2-1 at 5). JD Byrider immediately assigned the RISC to CNAC, as it does with all of its RISCs. Compl. ¶ 23.

         The vehicle has had persistent problems with the front-end. The vehicle shakes when driving, and it wears out tires prematurely. Id. ¶ 43. Plaintiff has asked JD Byrider to repair the vehicle, but these attempts have been unsuccessful. Id. ¶ 45. On at least one occasion, Plaintiff was forced to pay for the attempted repairs, and she missed work while waiting for the vehicle. Id. ¶¶ 48, 52. The most recent repair attempt required Plaintiff to leave the vehicle with JD Byrider for seven days. Id. ¶ 53. In addition, JD Byrider has failed to provide Plaintiff with any service or plan to build her credit. Id. ¶ 37.

         JD Byrider and CNAC have a pattern and practice of selling and financing used vehicles at prices at or above the MSRP, their sale prices are typically within a narrow range, and they disclose nearly identical interest rates for most vehicle financing transactions. Id. ¶¶ 30, 33, 34.

         III. Discussion

         A. First Cause of Action: Violation of the Truth in Lending Act

         Based upon the facts above, Plaintiff asserts that Defendants violated the TILA by failing to disclose all financing charges as required. Compl. ¶ 63-65; 15 U.S.C. § 1638 (requiring that all financing charges be disclosed prior to the extension of credit). Plaintiff claims that, although a rate of 24.989%-which amounts to a financing charge of $11, 811.05-was disclosed to Plaintiff, the price of the vehicle was inflated to hide additional financing fees buried within the sales price. Id. ¶ 61; (Dkt. 2-1 at 1).

         Defendants argue that Plaintiff has failed to state a claim upon which relief can be granted because a financing charge does not include the sales price of the vehicle. (Dkt. 9 at 2). They argue that an inflated sales price alone, absent proof that the financing price is higher than the cash price, is insufficient to state a claim under the TILA. See Poulin v. Balise Auto Sales, 2010 U.S. Dist. Lexis 33456, at *14-15 (D. Conn. Apr. 5, 2010). To support this position, Defendants provided an affidavit from JD Byrider stating that the same price would have been quoted to a customer seeking to pay cash rather than finance the purchase. (Dkt. 9 at 2). Thus, they argue that their disclosure of the interest rate and finance charge in the RISC was sufficient to satisfy the TILA, because TILA was not intended to require fair pricing, only proper disclosure.

         Plaintiff responds by citing Limitiaco v. Auction, LLC, No. 2:11-cv-370, 2012 WL 4911726, at *3 (D. Nev. Oct. 15, 2012) for the proposition that “[a] ‘hidden' finance charge may exist where the price is above true market value.” Furthermore, Plaintiff asserts that a “cash sales price might be meaningless if the vast majority of the seller's business is credit sales.” In re Russell, 181 B.R. 6161. 621 (M.D. Ala. 1995). Plaintiff alleges in her brief that JD Byrider has a practice of selling only cars that are financed by CNAC, so there may be little or no history of cash sales, and discovery will be needed in order to investigate further. ...

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