Newsletter - November 2011

Our firm recently secured an appellate win in the U.S. Court of Appeals for the Eleventh Circuit, which upheld the U.S. District Court for the Middle District of Florida’s grant of summary judgment to our client, Toyota of Winter Haven.

The case involved a spot delivery transaction. Spot delivery is the conditional delivery of a vehicle in a sales transaction pending approval of financing for the deal by a third-party lender. In this case, on May 16, 2007, Toyota entered into a sales contract contingent on lender approval with Patricia Diane Meeks to sell her a new 2007 Camry Solara and allowed her to take delivery of the vehicle that day. The dealership had found a lender who would conditionally approve her for financing, pending the submission of documents to support the salary and employment information contained in her financing documents. However, when Meeks failed to provide supporting documentation that was acceptable to the lender, the lender’s conditional approval expired. As Meeks was unable to arrange alternative financing and the dealership could not secure financing on her behalf, the dealership asked for the return of the vehicle. Meeks refused and concealed the vehicle’s whereabouts. During this time, she did not make any payments on the vehicle. Ultimately, Toyota of Winter Haven had to file a state court lawsuit and secure a court order to get the vehicle back. The vehicle was returned six months after the initial delivery in a damaged, depreciated condition.

Subsequently, on June 6, 2009, Meeks filed a federal lawsuit accusing the dealership of violating the Fair Credit Reporting Act (FCRA) by unlawfully accessing her credit information and of violating the Equal Credit Opportunity Act (ECOA) by taking adverse action against her credit without providing the statutorily required notice.1

On August 25, 2010, we filed a Motion for Summary Judgment on behalf of Toyota of Winter Haven. We argued that the dealership did not violate the FCRA, which forbids any person or business from obtaining a consumer’s credit information without a permissible purpose, as the dealership had more than one permissible purpose for accessing Meeks’ credit report. First, it is a permissible purpose under the FCRA to pull a credit report pursuant to the consumer’s written authorization. As pointed out in our motion, Meeks signed not one, but two credit applications authorizing Toyota of Winter Haven to investigate her credit history. Second, it is permissible under the FCRA to obtain a credit report if there is a legitimate business need for the information in connection with a business transaction that is initiated by the consumer. Consistent with this law, the dealership pulled Meeks’ credit in connection with its attempts to find a lender to finance the transaction Meeks initiated. Lastly, the FCRA also permits a credit report to be obtained for the review or collection of an account of the consumer. As Toyota of Winter Haven was forced to take steps, after Meeks’ refusal to return the vehicle, to enforce its rights to either seek the return of the vehicle or payment on the account, Toyota of Winter Haven acted lawfully in seeking a credit report at that time to evaluate its options.

Additionally, we argued that the elements had not been met to show a violation of the ECOA’s notice requirement, which requires a creditor who takes adverse action against an applicant for credit to send a notice detailing the reasons for the decision. However, not all creditors are subject to the ECOA’s notice requirement. Thus we argued as to Meeks’ ECOA claims that Toyota of Winter Haven was neither a “creditor” for purposes of the notice requirement under the ECOA, nor did Toyota of Winter Haven take “adverse action” against Meeks by denying or revoking credit. First, it was argued that as a “referring creditor” under the ECOA, Toyota of Winter Haven merely referred Meeks’ credit application to a lender and did not participate in setting the terms of credit or making the credit decision. Therefore, under the ECOA, there is no obligation on the part of the dealership to send out an adverse action notice. Second, facts were presented showing that there was no “adverse action” taken by the dealership within the meaning of the ECOA because financing was secured for Meeks, and that approval only expired because Meeks did not provide supporting documentation. Thus, there was no “denial” of credit.

The Middle District granted Toyota of Winter Haven’s Motion for Summary Judgment in a twenty-eight page order dated December 15, 2010. See Meeks v. Murphy Auto Group, Inc., 2010 U.S. Dist. LEXIS 132693 (M.D. Fla. 2010), also available at http://law.justia.com/cases/federal/district-courts/florida/flmdce/8:2009cv01050/227639/88. The court concluded that Toyota of Winter Haven accessed Meeks’ credit with a permissible purpose and observed that Meeks failed to demonstrate that Toyota of Winter Haven accessed her credit for any reason other than to put her in the vehicle she sought to buy and to protect its interests in the vehicle when she failed to return it. The court also found that Toyota of Winter Haven did not violate the ECOA. While the court did not decide the issue of whether the dealership was a creditor for purposes of the notice requirement, the court found that based upon the evidence, Toyota of Winter Haven did not deny Meeks credit, and thus was not required to issue an adverse action notice.

On January 18, 2011, Meeks appealed the Middle District’s grant summary judgment in Toyota of Winter Haven’s favor to the U.S. Court of Appeals for the Eleventh Circuit. On September 27, 2011, after both sides had briefed the issues on appeal, the Eleventh Circuit affirmed the grant of summary judgment. See Meeks v. Murphy Auto Group, Inc., 2011 U.S. App. LEXIS 19801 (11th Cir. 2011), also available at http://www.ca11.uscourts.gov/unpub/ops/201110149.pdf. The court found that the Middle District’s “thorough and well-reasoned decision” correctly construed the parties’ contract and the applicable law and found in favor of Toyota of Winter Haven.