Past Cases of Note

Muench vs. Eagle Savings & Hassan Motors, Inc.

Autofraud-Unfair & Deceptive Acts Don’t Require Seller’s Actual Knowledge

This was one of our earlier cases (1987) brought under Ohio’s Consumer Sales Practices Act alleging deceptive, unfair and unconscionable sales practices in connection with the sale of a motor vehicle. Plaintiff had the misfortune of having purchased a “clipped” car from a car dealer. A clipped car is 2 or more cars welded together to form a single car. And, obviously, extremely dangerous when the impact occurs at the location of the welded area. That is exactly what happened in this case. An accident occurred and impacted the welded area where the client found himself driving two cars instead of just one. Fortunately, he was not injured. Suit was brought alleging both civil fraud and statutory claims for failing to disclose. Plaintiff was unable to prove that the seller had knowledge that the vehicle was clipped at the time of the sale which, therefore, ruled out fraud as well asthe statutory element of unconscionability requiring actual knowledge. However, all was not lost. The statute doesn’t require the seller to have specific knowledge or intent if the seller makes an untrue representation concerning the “sponsorship, approval, performance, characteristics, accessories, uses or benefits” of the subject of a consumer transaction or misrepresents that the subject of a consumer transaction is of a “particular standard, quality, grade, style, prescription or model” when it is not. Therefore, the seller was found liable for deceptive and unfair sales practices.

Credit Reporting-Emotional Distress as Damages

An early case we brought under the FCRA (1981) which recognized that emotional distress can be a key element of damages in violating the statute. Plaintiff’s wife had filed bankruptcy prior to their marriage. The credit bureau maintained a system whereby in the case of a non-designated bankruptcy involving husband and wife it automatically assumed it belonged to the husband and reported it as such unless otherwise informed. Each time Mr. Morris applied for credit, he was rejected because of that bankruptcy. He informed the credit bureau each time he was rejected that it was not his bankruptcy. He was then informed that this had been corrected. However, inexplicably, he continued to be rejected for credit. This went on for several years and was extremely frustrating and embarrassing and, not surprisingly, caused friction within his marriage. It was ultimately revealed that the problem was that the credit reporting agency maintained multiple files on Mr. Morris: one under the name of Joseph T. Morris and another under the name of Joe T. Morris. Joseph T Morris’ file was being corrected but not Joe T’s. At trial Mr. Morris could not easily offer proof of a specific dollar amount of economic loss as his damages other than to testify as to his emotional distress. The Judge, however, took note of this and awarded him $10,000 for his emotional distress.

Access to Water Service-Disconnection Without Notice and Due Process of Law

Crothersville is a small town in South Central Indiana which owns its own water utility and which services each of its residents. Plaintiffs, Walter and Melanie Wayt, were customers of that utility by virtue of the fact that they purchased real estate on a land contract in the town and then opened an account in their names. The Wayts, due to economic circumstances, were often required to work out of town which further required them to have friends and family collect their mail which included their bills. At some point the Wayts didn’t receive a monthly bill and, therefore, neglected to pay. It is disputed whether or not the town even sent the bill for that month or whether the bill was returned in view of the fact that they were living and working out of town at the time. Consequently, their water service was disconnected and the service was transferred to the titled owner of the property without notice to them. On their return, upon discovering that their service had been disconnected, they immediately tendered the amount due. However, the Town refused to accept their tender and insisted that only the titled owner had the authority to pay the bill and to have service restored. The Wayts, therefore, were forced to live in unsanitary conditions without water for more than a month before they retained our firm to file suit in the Southern District of Indiana federal court. Upon the filing of the suit, it took a motion for a TRO to convince the town to restore water service pending the outcome of the suit. The suit itself alleged a violation of both due process under the 5th and 14th Amendments to the United States Constitution as to the lack of proper notice prior to termination of their service as well as a violation of the Equal Protection Clause of the 14th Amendment where they were not permitted to re-establish their service. The Court ruled that there had been a due process violation but rejected Plaintiffs’ equal protection claim. It is undisputed that Plaintiffs were not granted due process prior to disconnection. However, the town argued that they had no protected property interest in continued water service required to maintain a due process claim. A property interest is created either by state law, ordinance or contract. The Court rejected the town’s argument and ruled that a property right did existby virtue of an implied contract as they had been customers of the defendants.

Credit Reporting-No PermissiblePurpose to Access Closed Account

Consumer brought suit under the Fair Credit Reporting Act’s provision prohibiting access to a consumer’s personal and confidential credit information except upon having a permissible purpose under the law to do so. Wells Fargo Mortgage was the holder of the consumer’s mortgage. Consumer filed bankruptcy and obtained a discharge of the mortgage as well as the note. Wells Fargo, for several years thereafter, continued to access the credit information of the consumer on the pretext of conducting “account reviews”. The law permits a creditor to periodically access a consumer’s credit information with regard to any open or ongoing account. This is referred to as an “account review.” Only, in this case the consumer filed bankruptcy several years earlier and the account supposedly owned by Wells Fargo no longer existed. When confronted with this fact, Wells Fargo gave the Court the lame excuse that since the title to the property continued to remain in the name of the consumer, it had a legitimate business need to continue to access the consumer’s credit information. It failed, however, to tell the Court that it was the one responsible for the delay in transferring title to the real estate. The Court did not buy this and found that Wells Fargo violated the Act and, more importantly, there is no permissible purpose for an account review of an account that has been discharged in bankruptcy.

Credit Reporting-Snooping is Not aPermissible Purpose to Access

Client was separated from his wife and involved in a nasty divorce. His brother-in-law decided that it would be a good idea to access client’s personal credit information where he and his sister thought they might discover some hidden assets. On 4 occasions on behalf of consumer’s estranged wife, the brother-in-law accessed the client’s credit file from a computer terminal located at a business that he operated. Client brought suit under the Fair Credit Reporting Act’s provision prohibiting access to his personal and confidential credit information except upon having a permissible purpose. The suit charged, among other things, that his brother-in-law was provided personal information by Plaintiff’s estranged wife which allowed him to access client’s personal credit information from Experian. The excuse given by Defendant was creative, however. Defendant claimed that since he had made several loans to his sister, unknown to the client, while the parties were separated, somehow these accesses constituted legitimate account inquiries. Needless to say, this was not considered a permissible purpose under the law by the Court.

Autofraud-Spot Delivery & YoYo

A couple purchased and financed a van at a dealership. At least, they thought they had since the salesman told them so. All the paperwork was filled out and executed and, importantly, they were allowed to drive home with the vehicle. Several weeks later they were surprised to receive a call from the salesman who demanded the return of the car because “it had failed to obtain financing” for them. The dealer pointed to a separate “spot delivery agreement” which informed them that financing was conditional on it being able to obtain financing.” But how could that be? The retail installment sales contract indicated that the dealer was both the “seller and creditor”. The couple sued. The Court ruled that the truth-in-lending act which requires meaningful disclosure of all material credit terms at the time of consummation of any extension of credit had been violated. The dealer had the couple sign both a retail installment sales contract and a spot delivery agreement which were in direct conflict with eachother. That, for the spot delivery agreement to be effective, it must be integrated into a single document which, in this case, would have been the retail installment sales contract.

Autofraud-Spot Delivery & YoYo

In this class action suit defendant automobile dealer entered into a retail installment sales contract [RISC] with consumers and delivered a motor vehicle to them. At the same time consumers were also required to sign a separate agreement which the dealer titled “Limited Right to Cancel-Spot Delivery.” This spot delivery agreement provided that the dealer may cancel the contract if it is unable to obtain financing or unable to sell or assign the RISC. Of course, this dealer previously informed the consumers that financing had already been approved at the time it delivered the vehicle to them. A short time later when the consumers returned to the dealer’s location they were informed that there had been a “mistake” and that financing had been approved by a different lender and under different terms than disclosed in the original RISC. If consumers wanted to retain the vehicle they would have to sign a new RISC with terms more severe which they, in fact, signed. They later brought suit alleging that the initial disclosure made by the dealer violated the federal truth-in-lending act. The Court ultimately ruled in their favor in that the dealer’s spot delivery agreement allowing it to cancel the the Retail Installment Sales Agreement with the consumer, effectively, made its disclosure of credit terms meaningless and, therefore, constututed a violation of the federal Truth-in-Lending Act.

Debt Collection-Bogus or made-up account statements which appear to look like originals could be considered deceptive

Suit brought by consumer against a debt buyer and its attorney for filing a collection  action where an account statement attached as an exhibit to their complaint was made to resemble as if it was generated by the original creditor from whom the debt was purchased by the debt buyer. The object here was clearly to deceive the debtor into believing that the account statement was genuine and legitimate and, therefore, to discourage the consumer from challenging it. In reality, this was a bogus or fake account statement trumped-up and prepared, not by the original creditor, but by the debt buyer itself. The trial judge dismissed the suit finding that the “least sophisticated consumer” would not have been deceived by this. The case was appealed to the United States Court of Appeals for Sixth Circuit which found otherwise. Specifically, it disagreed. It remanded the case to the lower court for trial finding that the least sophisticated consumer could very well be deceived by this and that it was an issue to be determined by a jury.

Debt Collection-Mass Mailed Collection Letters Can Deceive

Collection letters which appear to come from a lawyer are more likely to get the attention of the recipient than ones that don’t. This is why the fdcpa addresses this issue. Attorney Michael P. Margelefsky was the sole owner of the Law Offices of Michael P. Margelefsky, LLC under which he operated both a law office and a debt collection agency. Although these 2 businesses are physically adjacent to one another they maintain separate addresses, telephone numbers and bank accounts. The collection agency sent out thousands of collection letters on behalf of creditors on stationary which contains the letterhead of the “Law Offices of Michael P. Margelfefsky, LLC.” which are not signed by anyone but contain the designation that they are from an “account representative” of the Law Offices. Each of these letters instructed debtors to make their payment to the “Law Offices of Michael P. Margelefsky, LLC”. Attorney Margelefsky who drafted the letters testified that he neither reviewed the letters nor were they even reviewed by an account representative. The FDCPA expressly prohibits a debt collector from falsely creating the impression or implication that any individual is an attorney or that any communication came from an attorney when it did not. In this class action suit filed in the Northern District of Ohio the consumer alleged that the letter she and others received described herein violated this prohibition. The trial judge found that there was nothing wrong with this and dismissed her claim stating the use of the phrase account representative would not cause anyone to have the belief that the letter came from an attorney. On appeal to the United States Court of Appeals for the Sixth Circuit, itunanimously reversed and remanded the case. It found that the “Least Sophisticated Consumer” could conceivably believe that the letters came from a law office or from a lawyer. Additionally, the fact that Margerlefsky conceded that he did not review any of the letters mailed served to support the fact that, while the letters clearly implied that they were from an attorney, they did not come from one.

Adkins, Weltman, Weinberg & Reis

Debt Collection-FDCPA Covers Wrongful Garnishments

Weltman, Weinberg & Reis is the largest debt collection firm in the state of Ohio with offices in Columbus, Cleveland & Cincinnati. It files countless suits, the filing of which is much like production output at large scale factory. The FDCPA requires all legal actions to be filed in the county in which the debtor resides or the county in which the debt originated (most often the same). Weltman managed to accomplish this minor and basic task when it filed most of its collection suits. However, when it came to execution on these judgments such as garnishments, for example,Weltman thought it was okay to file them in a county in which it resided (primarily Franklin, Hamilton & Cuyahoga counties) instead of the debtor’s county of residence. The garnishment statutes provide grounds, albeit somewhat limited, upon which debtors had a right to go the court to defend against them. The problem was that Columbus, Cincinnati and Cleveland where these garnishments were filed by the Weltman were frequently several hundred miles from where the debtor resided and from where the judgments were originally taken. There were countless examples of this which at the time lent itself to class action treatment and one was filed. Unfortunately, at the time of discovery of this violation, class participation was limited by the FDCPA’s one year statute of limitations.Weltman immediately moved to dismiss arguing that garnishments did not constitute a legal action whereby the statute’s prohibition against filing in a distant forum applied. The Court disagreed. A garnishment, at least in Ohio, is considered a separate and new legal action which requires the filer to file in the county of the judgment debtor’s residence.

Ask Steve.