Case Information
*1 BEFORE: BATCHELDER аnd DAUGHTREY, Circuit Judges; O’KELLEY, [*] District Judge. *2
ALICE M. BATCHELDER, Circuit Judge. This is a consolidated appeal involving two
cases, which presents issues arising under the federal Truth In Lending Act (“TILA”), 15 U.S.C. §§
1638, 1640, and the Michigan Motor Vehicle Installment Sales Contract Act (“MVISCA”), M.C.L.
§ 566.302. In
Daenzer v. Wayland Ford, Inc.
, Defendant-Appellant Wayland Ford, Inc.
(“Wayland”) appeals the district court’s rulings granting Plaintiff-Appellee Christine Daenzer
(“Daenzer”) summary judgment on her claim for statutory damages under § 1638(b) and § 1640(a)
of TILA, summary judgment on the plaintiff class’s claim fоr damages under § 566.302 of
MVISCA, and an award of attorney fees and costs under § 1640(a)(3) of TILA. Wayland also asks
that if we find in its favor in
Daenzer
, we apply that judgment as res judicata against the other
consolidated plaintiffs in the companion case,
Dykstra v. Wayland Ford, Inc
. Because our decision
in
Baker v. Sunny Chevrolet, Inc.
,
BACKGROUND
On January 31, 2001, Daenzer entered into a purchase agreement to buy a vehicle from Wayland. Daenzer signed the necessary documents, including a retail installment sales contract (“RISC”), and took possession of the vehicle that day. It is undisputed that the RISC contained all the disclosures mandated by the federal TILA and state MVISCA. It is also undisputed that Daenzer did nоt receive her own copy of her RISC on the day she signed it. Wayland disputes this fact with respect to the plaintiffs, however. Daenzer claims that she never received a copy of this RISC, but her deposition testimony indicates that she did ultimately receive a copy. Daenzer claims that on February 8, 2001, she returned to the dealership to execute a second RISC with different terms, ostensibly because Wayland had been unable to sell the first one to a finance company. Daenzer also claims that Wayland failed to provide her with a copy of this alleged second RISC. Wayland responds by pleading lack of information with respect to Daenzer, but that its policy was to provide a copy of the RISC tо the buyer upon execution in accordance with state and federal law, an assertion supported by deposition testimony from several Wayland employees.
On February 27, 2001, Daenzer filed a class action complaint on behalf of herself and others similarly situated, alleging violations under TILA, MVISCA, and various other theories under Michigan state law. Wayland mоved for judgment on the pleadings, and before the district court ruled on that motion, submitted two motions for summary judgment. Wayland argued, among other things, that Daenzer’s TILA claim should be dismissed because statutory damages are unavailable under § 1638(b) of TILA (and Daenzer was not claiming any actual damages), and that Daenzer’s MVISCA claim should be dismissed because Wayland met the statute’s stаndard of substantial compliance. Daenzer filed her own summary judgment motion on her TILA and MVISCA claims.
In the meantime, Daenzer succeeded in having two classes certified: one for her TILA claims (the “TILA Class”), and one for her state law claims (the “State-Law Class”).
On March 15, 2002, the district court granted in part and denied in part Wayland’s motion for judgment on the pleadings. The court upheld Daenzer’s TILA and MVISCA claims, but dismissed her other state law claims. [1] Regarding the TILA claim, the court interpreted § 1640(a) as providing for statutory damages for a violation of § 1638(b), even though Wayland argued that § 1640(a) only provided for statutory damages under certain enumerated subsections and that § 1638(b) was not one of them. The district court also interpreted the “substantially comply” language of MVISCA § 566.302 in a manner that was unfavorable to Wayland.
On May 7, 2002, the district court denied Wayland’s motions for summary judgment and granted summary judgment in favor of Daenzer as to liability on the remaining TILA and MVISCA claims, leaving the damages issue to a future proceeding. This opinion did little in the way of application of law to undisputed fact. It relied heavily upon the law explicаted in the court’s previous 12(b)(6) opinion and seems to have taken all the facts alleged by Daenzer as true, even though Wayland repeatedly disputed some of the important ones, such as whether it provided RISC copies to the other TILA Class plaintiffs.
On May 22, 2002, Daenzer moved for summary judgment on the issue of damages. She conceded on the TILA claim that she wаs not seeking actual damages, and that the TILA Class was not entitled to statutory damages under § 1640 because it had been discovered that Wayland had a negative net worth, thus preventing statutory damages under § 1640(a)(2)(B). Therefore, on her TILA claim Daenzer sought only costs and attorney fees, arguing that her case constituted “a *5 successful action to enforce [TILA] liability” in accordance with § 1640(a)(3). In her revised motion for summary judgment on damages, Daenzer explicitly admitted that any recovery was based on Wayland’s failure to provide a copy of the RISC prior to consummation of the transaction. On behalf of the State-Law Class, Daenzer sought money damages under MVISCA.
In response to Daenzer’s motion the district court аnnounced, sua sponte , that it would consider decertifying the TILA Class so the members could pursue individual statutory damages. [2] After allowing briefing on the issue, the court entered an order decertifying the TILA Class only as to the issue of damages and granting Daenzer’s summary judgment motion as to damages, awarding her costs and attorney fees under § 1640(a)(3). The court further held that its previous liability decision is rеs judicata in any damages actions filed by individual class members, and that under MVISCA, Daenzer and the State-Law Class were entitled to recover the finance charges paid or owed under the relevant contracts.
With the TILA Class decertified, only Daenzer’s individual TILA claim remained before the court, [3] along with the MVISCA class action for which she remained the named plaintiff. Daenzer’s TILA statutory damages and the State-Law Class’s MVISCA damages were determined according to the relevant statute by the simple act of identifying the amount of finance charges associated with each transaction. The court later issued an order setting forth the specific awards of costs and attorney fees, including attorney fees under TILA pursuant to the lodestar analysis and under MVISCA as a percentage of the common fund of recovered damages.
*6 After the district court decertified the TILA Class so that its members could seek individual statutory damages, twenty-eight plaintiffs (the “ Dykstra plaintiffs”) filed their own actions against Wayland, noting that the decertification “did not affect the earlier liability determination which is res judicata on any further proceeding between these parties.” The Dykstra plaintiffs eventually obtained judgment in their favor in all but one of the cases. [4] The district court also awarded the plaintiffs costs and attorney fees pursuant to TILA § 1640(a)(3).
The district court executed a Final Judgment dated June 19, 2003, from which Wayland timely appealed.
ANALYSIS
I. Standard of Review
We review de novo a district сourt’s ruling on a motion for summary judgment.
Terry Barr
Sales Agency, Inc. v. All-Lock Co.
, 96 F.3d 174, 178 (6th Cir. 1996). We also review mixed
questions of law and fact de novo.
Williams v. Mehra
,
II. TILA Statutory Damages
The district court granted summary judgment in Daenzer’s favor on her TILA claim, holding
that she had established a violation of § 1638(b)’s form and timing requirements, which entitled her
to statutory damages under § 1640(a). Five months after final judgment in the district court, we
issued our decision in
Baker v. Sunny Chevrolet, Inc.
,
Under the TILA statutory regime, § 1638(a) specifies the substantive requirements of creditors’ disclosures, § 1638(b) specifies the form and timing of such disclosures, and § 1640(a) creates a cause of action for certain violations of TILA. Section 1640(a) sets out the various damages remedies, and then states the following:
In connection with the disclosures referred to in section 1638 of this title, a creditor shall have a liability determined [regarding individual statutory damages] only for failing to comply with the requirements of section 1635 of this title or of 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). Baker held that this language does not provide a statutory damages remedy for a violation of § 1638(b).
Baker clearly requires that we reverse the district court’s decision awarding summary judgment to Daenzer, which is based solely on its finding that Wayland violated § 1638(b)’s form and timing of disclosure requirements by failing to give Daenzer a copy of her RISC at signing. In light of Baker , Daenzer now tries to argue that the district court found a violation of § 1638(a) as well as § 1638(b). This argument is clearly meritless. Even in the district court, Daenzer never argued that Wayland had directly violated § 1638(a), [5] and the district court’s written opinions clearly indicate that the liability ruling for Daenzer was based entirely on a § 1638(b) violation meriting statutory damages under § 1640(a). Since the basis for that ruling is now clearly erroneоus in light *8 of Baker , we must reverse the district court’s decision granting summary judgment to Daenzer on the issue of TILA statutory damages.
III. TILA Attorney Fees and Costs
The district court awarded Daenzer attorney fees and costs under TILA § 1640(a)(3) because it determined that she had maintained a “successful action to enforce the foregoing [TILA] liability.” For purposes of determining the right to attorney fees and costs, the relevant portions of § 1640(a) state as follows:
(a) Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part . . . is liable to such person in an amount equal to the sum of–
(1) any actual damage sustained . . . ;
(2) [statutory damages]; and
(3) in the case of any successful action to enforce the foregoing liability or in any action in which a person is determined to have a right of rescission under section 1635 of this title, the costs of the action, togethеr with a reasonable attorney’s fee as determined by the court.
§ 1640(a) (emphasis added). Wayland argues that “the forgoing liability” refers only to actual and statutory damages under § 1640(a)(1) and (2), and that since Daenzer is not entitled to damages under either of those provisions, she is also not entitled to an award of attorney fees and costs. Daenzer argues for a broad interpretation of the word “liability” in § 1640(a)(3) that would encompass any judgment declaring a violation of TILA, regardless of whether that violation warranted actual or statutory damages. Daenzer reasons that under such a broad reading, she is entitled to her award of costs and attorney fees because she has obtained a judgment that Wayland violatеd § 1638(b).
Although we are concerned about the lack of incentives to enforce TILA violations that are
not subject to actual or statutory damages, we are convinced that § 1640(a)(3) provides for attorney
fees and costs in only three instances: when actual damages are established under § 1640(a)(1);
when statutory damages are established under § 1640(a)(2); and when a § 1635 right of rescission
operates under § 1640(a)(3). Daenzer’s argument that “liability” refers to the entire TILA is simply
not supported by the statute’s language and structure. Section 1640 is titled “Civil liability,” thereby
strongly implying that use of the term “liability” therein applies within the parameters of § 1640
rather than to the entire TILA statute (including all the provisions not referring to liability). In that
context, use of the phrasе “the foregoing liability” in § 1640(a)(3) seems naturally to refer to the
actual and statutory damages set forth in § 1640(a)(1) and (2) rather than every preceding provision
of the entire TILA statute. Finally, Daenzer’s suggested construction would render superfluous the
portion of § 1640(a)(3) specifically providing costs and attorney fees for establishing a right to
rescission under § 1635.
See Broadcast Music, Inc. v. Roger Miller Music, Inc.
,
Once the TILA Class was decertified, twenty-еight plaintiffs filed actions pursuing individual TILA statutory damages against Wayland. These actions were consolidated into the Dykstra case. After the district court made its TILA rulings regarding statutory damages and attorney fees/costs in Daezner , it applied these rulings as res judicata to the plaintiffs. *10 Because the district court’s rulings in Daenzer regarding statutory damages and attorney fees/costs are erroneous, Wayland argues, we must nоt only reverse them, but apply our holdings as res judicata to the Dykstra plaintiffs. We agree.
In
Erbia v. Chrysler Plastics Prods. Corp.
,
When a judgment has been subjected to appellate review, the appellate court’s disposition of the judgment generally provides the key to its continued force as res judicata and collateral estoppel. A judgment that has been vaсated, reversed, or set aside on appeal is thereby deprived of all conclusive effect, both as res judicata and as collateral estoppel.
Our reversal of the district court’s rulings granting statutory damages and attorney fees/costs to Daenzer under TILA deprives the district court’s judgment of its conclusive effect. Therefore, we reverse the res judiсata application of the district court’s erroneous rulings on statutory damages and attorney fees/costs to the plaintiffs.
V. MVISCA Claim
The district court interpreted the “substantially comply” language of MVISCA § 566.302 in a manner favorable to Daenzer, and it granted summary judgment to Daenzer and the State-Law Class on the MVISCA claim. Wayland argues on appeal that the district court erroneously interpreted the “substantially comply” language, and that under a proper interpretation Daenzer and the State-Law Class have no valid MVISCA claim. We agree.
MVISCA § 566.302 establishes substantive disclosure requirements for credit transactions similar to those in the TILA. Like the TILA, the first paragraph of § 566.302 requires that the “written instrument [evidencing the credit transaction] shаll contain” several specific disclosures. It also requires that a copy of the written instrument “shall be delivered to [the retail buyer] by the *11 retail seller at the time of its execution.” The primary focus of this appeal is the fourth paragraph of § 566.302–the remedy portion of the statute–which states the following:
Under a written instrument evidencing a retail installment sale which does not substantially comply with the requirements of this section, the seller shall not be entitled to recover, collect or retain that part of the obligation which represents the finance charge and the buyer shall not be liable therefor.
The district court held, and Daenzer argues in this appeal, that the phrase “substantially comply” modifies “retail installment sale,” and that a retail installment sale in which Daenzer did not receive a copy of her RISC at the time of signing–a fact admitted by Wayland–did not substantially comply with the requirements of § 566.302.
Wayland argues, on the other hand, that “substantially comply” modifies the broader phrase “written instrument evidencing a retail installment sale,” so that the focus of the remedy provisiоn would be upon the substantive disclosures in the RISC (the “written instrument”) rather than the entire “retail installment sale,” which would arguably include the timing of the disclosure. A focus on the content of the written instrument would benefit Wayland because Daenzer does not argue that her RISC was incomplete.
No Michigan state appellate court has interpreted this provision, which leaves to us the task of doing so in the first instance.
We agree with Wayland that the district court erred when it interpreted “substantially comply” as modifying the entire “retail installment sale” rather than the narrower “written instrument evidencing a retail installment sale.” The remedy provision of § 566.302 requires the “written instrument evidencing a retail installment sale” to “substantially comply with the requirements of this section .” (emphasis added). “This section” is 566.302, which deals with the written instrument (the RISC) specifically, not the broader retail installment sale. This fact is clear *12 not only from the content of § 566.302, but from its title, which reads, “Contract, contents; delivery of copy of contract and insurance policy to buyer.” Given the language and structure of § 566.302, it is the “written instrument evidencing a retail installment sale” that must “substantiаlly comply” with the requirements of § 566.302, not the broader “retail installment sale.”
Since Daenzer’s MVISCA claim is based entirely on the delivery of her RISC–she does not claim that its substantive contents were deficient–our interpreting “substantially comply” to apply to the contents of the “written instrument,” rather than the broader “retail installment sale” process, leaves her and the State-Law Class without a claim under MVISCA. Therefore, we reverse the district court’s grant of summary judgment to Daenzer and the State-Law Class on the MVISCA claim, and we grant summary judgment to Wayland on that claim.
CONCLUSION
For the foregoing reasons, we REVERSE the district court’s summary judgment orders granting plaintiffs statutory damages and attorney fees/costs under TILA and damages under MVISCA, and we GRANT summary judgment to Wayland on plaintiffs’ TILA and MVISCA claims.
Notes
[*] The Honorаble William C. O’Kelley, United States District Judge for the Northern District of Georgia, sitting by designation.
[1] The district court also upheld Daenzer’s claim under the Michigan Consumer Protection Act (“MCPA”). The MCPA claim is not an issue on appeal, however, so we make no further reference to it in this opinion.
[2] Under § 1640 the defendant’s negative net worth limits only recovery by a class, not an individual plaintiff.
[3] Twenty-eight members of the former TILA Class filed their own actions for damages. Those actions were consolidated into the case that is also before us on appeal.
[4] One of these cases, Holts v. Wayland Ford, Inc. , No. 1:02-CV-863, was dismissed with prejudice by the parties’ stipulation.
[5] Daenzer’s only claim that Wayland had violated § 1638(a) was through a “backdoor theory,” which basically contended that any violation of § 1638(b) automatically constitutes a violation of § 1638(a) as well. The Baker court explicitly rejected this argument.