Lynn et al v. Fort McClellan Credit Union et al

Filing 37

MEMORANDUM OF DECISION. Signed by Judge Virginia Emerson Hopkins on 10/21/2013. (JLC)

FILED
2013 Oct-21 PM 03:42
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION
TIMOTHY STANLEY LYNN,
et al,
Plaintiffs,
v.
FORT MCCLELLAN CREDIT
UNION, et al,
Defendants.

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Case No.: 1:11-CV-2904-VEH

MEMORANDUM OF DECISION1
This is an action arising out of the purchase, by Timothy Stanley Lynn (“Mr.
Lynn”), of a 2003 Chevrolet Cavalier automobile. After Mr. Lynn was in Chapter 13
bankruptcy proceedings, he filed this action as a non-core Adversary Proceeding
against WT Enterprises, LLC, d/b/a/ Family Nissan (“Family Nissan”) and Fort
McClellan Credit Union (“Credit Union”).2 (Doc. 1-1).3 Mr. Lynn sought a
1

No trial transcript having been filed in, this Memorandum of Decision was prepared
based on the undersigned’s recollection and trial notes, the exhibits admitted at trial, and the
pleadings of record in this case.
2

Family Nissan and Credit Union are hereinafter sometimes collectively referred to as the
“Defendants.”
3

References to documents in the court docket are referred to by their cm/ecf number, e.g.
Doc. 1-1. References to exhibits introduced at trial are referred to by their trial exhibit number,
e.g. Def.’s Ex. 101A. Both parties agreed to use Defendants’ exhibits at trial.

declaratory judgment against the Defendants for liability and for monetary relief
under the Truth in Lending Act, 15 U.S.C.A. §§ 1601 et seq. (“TILA”). (Id.). Mr.
Lynn also asserted, against Family Nissan only, a claim for violation of the Alabama
Deceptive Trade Practices Act, Code of Alabama 1975, Sections 8-19-1 et seq. A one
day bench trial was held on July 24, 2013, before the undersigned judge. Post trial
briefs have been filed by all parties.
Pursuant to Rule 52, Fed.R.Civ.P., the Court now finds the facts specially and
states separately its conclusions of law thereon.
FINDINGS OF FACT
A.

The Parties

The plaintiff is Mr. Lynn. The Defendants are Family Nissan and Credit Union.
B.

The Transaction

On June 29, 2009, Mr. Lynn attended a tent sale on the grounds of the former
Fort McClellan. Family Nissan offered him a price on a 2003 Chevrolet Cavalier
automobile. Mr. Lynn countered at “a little over $5,000.” Family Nissan accepted.
Mr. Lynn didn’t sign any papers or receive the car that day because the car needed
work. Mr. Lynn was shown a copy of Def.’s Ex. 101B, the internal document of
Family Nissan dated June 29, 2013, that was turned in by the salesman to Family
Nissan’s finance office for them to prepare the Retail Purchase Agreement (Def.’s Ex.
2

101A) and the Retail Installment Contract and Security Agreement (Def.’s Ex. 102).
The next day, June 30, 2009, Mr. Lynn met the Family Nissan salesman at the
WalMart in Jacksonville, Alabama. At that time, he got the paperwork and the car.
Also on that day, he signed Def.’s Ex. 101A, entitled Retail Purchase Agreement, and
Def.’s Ex. 102, entitled Retail Installment Contract and Security Agreement. Both
documents are dated June 30, 2009. Mr. Lynn does not dispute that he was given a
copy of those documents. Mr. Lynn did not read Def.’s Exs. 101A or 102, although
each document says he agrees to its terms and Def.’s Ex. 102 also says, in all caps and
boldface type right above Mr. Lynn’s signature, that it is important to “thoroughly
read” the document before signing it. Mr. Lynn can read, and he demonstrated to the
court, by reading documents, that he is able to read. What was important to him on
June 30, 2009, was the total amount he paid, and that amount was correct on the
documents.
Mr. Lynn agrees that he was not mislead by Def.’s Ex. 101A or Def.’s Ex. 102,
“other than the fact that the lines didn’t line up.” He learned that the lines didn’t line
up about the time that he filed for bankruptcy.4 The court agrees that, given Mr.
Lynn’s repeated testimony that the amount of money he negotiated to pay was

4

According to the Bankruptcy Docket Sheet, doc. 1-6 in this court’s file, Mr. and Mrs.
Lynn’s bankruptcy proceeding was initiated on February 9, 2010. The court takes judicial notice
of such date.
3

correctly stated on the documents, Mr. Lynn was not in fact mislead.
Def.’s Ex. 101B, the internal document of Family Nissan dated June 29, 2013,
that was shown to Mr. Lynn on June 29, 2013, was turned in by the salesman to
Family Nissan’s finance office for them to prepare the Retail Purchase Agreement
and a Retail Installment Contract and Security Agreement. The Retail Installment
Contract and Security Agreement form used for Mr. Lynn’s transaction was the form
approved by the Credit Union, as the Credit Union had agreed to have the loan
assigned to it.
The tent sale salesman, Bruce Burton, testified. He has been employed by
Family Nissan for four years and nine months, and has been selling cars for eighteen
years - about 150 cars per year. He did not remember meeting with Mr. Lynn at
WalMart on June 30th, but he did remember the June 29th tent sale transaction with
Mr. Lynn. The transaction was negotiated between him and Mr. Lynn. He created
Def.’s Ex. 101B. He showed it to Mr. Lynn. He explained all of it to Mr. Lynn,
including the $399.00 processing fee.
Family Nissan’s finance manager, Andy Cotton, testified that he looked at
Def.’s Ex. 101B the “next day” (that is, July 1, 2009), that the processing fee appears
on all documents of this type, that some of the processing fee goes toward the
preparation of the Truth in Lending Act disclosures, that the processing fee was set
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by Family Nissan and could not be changed by Mr. Cotton, that the processing fee
was always (at that time) $399.00, and that Def.’s Ex. 101B is used by Family Nissan
to create Def.’s Ex. 101A. He also testified that the doc. fee is not preprinted on
Def.’s Ex. 101A. June 30, 2009, was a Tuesday. Tuesdays were Mr. Cotton’s day off
in 2009. Another employee “covered for” Mr. Cotton on Tuesdays in 2009. That
employee is no longer with Family Nissan.
Although Mr. Cotton reviewed Def.’s Ex. 102 on July 1, 2009, he did not
notice the misalignment. If he had noticed it, he would have reprinted the document
and have had the customer come in and sign the reprinted version. There were
procedures in place in 2009 to avoid errors. He did (and does) everything the same
way every time to avoid mistakes. The misalignment of Def.’s Ex. 102 was a mistake
that was missed. Nine and one-half times out of ten, mistakes like the one on Def.’s
Ex. 102 get caught. This is the only misalignment mistake that Mr. Cotton knows of
that did not get “caught before it went to the bank.” It appears to Mr. Cotton that the
wrong code was entered when Def.’s Ex. 102 was generated and that, as a result, the
computer “program didn’t match up to the form put into the printer.” At all times
relevant to this case, Family Nissan used an ADP computer software program to take
the data input by Family Nissan’s finance office employees and input it into the
appropriate (as designated by the code selected and entered by the Family Nissan
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employee) sales contract and security agreement. At all times relevant to this case,
Family Nissan paid a company to make sure that the forms align correctly when they
print.
Def.’s Ex. 101A and Def.’s Ex. 102 must match. The computer software will
not allow a person such as Mr. Cotton to change Def.’s Ex. 102 unless he also
changes Def.’s Ex. 101A.
There are occasional misprints on forms. As of June, 2009, Mr. Cotton had
seen forms print misaligned. He has known banks to reject forms prepared by Family
Nissan.
The “grand total price” shown on Def.’s Ex. 101B was $5,512.60, which is the
total amount that Mr. Lynn had negotiated to pay. This same amount is shown as the
“total due” and the “unpaid balance due” on Def.’s Ex. 101A. This is also the total
amount that was financed.5 Mr. Lynn did not make any down payment toward the
purchase price. The court credits Mr. Lynn’s testimony that what was important to
him on June 30, 2009, was the total amount he paid, and that amount was correct
on the documents he signed on June 30, 2009.

5

To the extent that Mr. Lynn, in response to a leading question by his attorney on redirect, contradicted his initial testimony to state that he thought the agreed price was $4,950 plus
tax and title, the court finds Mr. Lynn’s initial testimony credible and his contradiction of that
testimony not credible.
6

In the section of Def.’s Ex. 102 entitled “ITEMIZATION OF AMOUNT
FINANCED,” there are a series of descriptive words, followed by lines that are either
filled in with dollar amounts or the abbreviation N/A. Of importance to this case, the
first time a dollar amount appears in this section is two lines (or hard returns)
above the section caption. This is totally consistent with Defendants’ unrebutted
testimony that the preprinted form for Mr. Lynn’s transaction was printed in a
misaligned, but otherwise accurate, manner and, as a result, all the information on
Def.’s Ex. 102 in the portion below the words TRUTH IN LENDING
DISCLOSURES is printed two lines higher than the information should have
appeared. Further, an inspection of the document shows such misalignment. Finally,
Mr. Lynn and his counsel do not dispute that such a misalignment occurred. In fact,
at trial, all parties stipulated that the numbers on Def.’s Ex. 102 are printed two lines
higher than they should be. Finally, in his post-trial brief (doc. 36), plaintiff concedes
that this misalignment was an error - that is, done accidentally and without any intent
to deceive.6
Family Nissan personnel prepared all three documents. Other than signatures,

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“Lastly, in response to the Defendants[‘] assertion that the Bona Fide Error Affirmative
Defense shields them from liability, Lynn submits that Defendant[s] have failed to prove the 2nd
part of that defense - that either [of them] had reasonable procedures in place adapted to avoid
such errors.” (Doc. 36, p. 7).
7

all of Def.’s Exs. 101A and 102 are either preprinted forms, or are typed (whether
manually or by computer) additions to those forms. In contrast, all of Def.’s Ex. 101B
is a preprinted form, with every additional piece of information on it, other than the
processing fee of $399.00 (which is typed), handwritten on it. This processing fee is
explained on the form as “This is a fee to cover Dealer’s overhead cost & profit.”
Mr. Burton, the Family Nissan salesman, went over Def.’s Ex. 101B with Mr.
Lynn on June 30, 2009, including explaining the processing fee. He does this with
every customer. There is no fee entitled a “processing fee” on Def.’s Ex. 101A.
However, there is a $399.00 charge shown on that document, entitled “DOC FEE.”
On Def.’s Ex. 102, on the first page, it states “ G You agree to pay a processing
fee of $ N/A .” The unrebutted testimony at trial was that this section of the form is
always completed by filling in “N/A”, which stands for “not applicable,” unless the
Credit Union charged a processing fee in addition to the processing fee charged by
the dealer.7 Because of the printer misalignment, Def.’s Ex. 102 does not show that
there was a processing fee paid to Family Nissan. That processing fee, which was
established to be $399.00, and which was shown on Def.’s Ex. 101B and was
explained to Mr. Lynn on June 30, 2009, as a processing fee paid to Family Nissan,

7

There is no evidence or argument that the Credit Union charged Mr. Lynn a processing
fee in addition to the processing fee charged by Family Nissan.
8

should have appeared in the line on Def.’s Ex. 102 entitled “Processing Fee Paid to
Seller.” However, there is nothing at all written on the line to the right of those words.
Instead, two lines up, next to the words “Insurance Premiums,” the amount of
$399.00 is filled in, although Mr. Lynn did not agree to pay any insurance premiums.
But for the accidental misalignment when printing Def.’s Ex. 102, there would be no
issue of “insurance premiums.” The total amount that the documents show that Mr.
Lynn was obligated to pay was the amount that he agreed to pay.
C.

The Credit Union

The written agreement between the Credit Union and Family Nissan pursuant
to which Credit Union members such as Mr. Lynn can finance the purchase of an
automobile from Family Nissan is set out in Def.’s Ex. 109. Under that agreement,
the Credit Union purchases qualifying loans from Family Nissan.
The established practice of the Credit Union, as to such loans made through
Family Nissan, is for the individual borrower (here, Mr. Lynn) to fill out a loan
application at the dealership. Mr. Lynn did that. The loan application is Def.’s Ex.
105. Family Nissan faxes the application to the Credit Union. The Credit Union either
approves or disapproves the application. All of Mr. Lynn’s loan documents were
completed by Family Nissan employees.
After the loan application is approved by the Credit Union, the finance office
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of Family Nissan prepares the Retail Purchase Agreement (Def.’s Ex. 101A) and
forwards it to the Credit Union after it is signed. The Family Nissan finance office
prepares the Retail Purchase Agreement from its internal document (Def.’s Ex.
101B). Family Nissan’s finance office also prepares the Retail Installment Contract
and Security Agreement (Def.’s Ex. 102) and forwards it to the Credit Union after it
is signed. The numbers on the Retail Installment Contract and Security Agreement
(Def.’s Ex. 102) are taken from the numbers on the Retail Purchase Agreement
(Def.’s Ex. 101A).
There is no discrepancy between the numbers themselves. The only
discrepancy is the one that arose from the mechanical misalignment of the data vis-avis the preprinted form when Def.’s Ex 102 was generated for this transaction.
The Credit Union employee who testified did not personally look at Mr. Lynn’s
documents until after Mr. Lynn took bankruptcy. She has seen a misalignment error
like this before, caused either by a printing error or a computer programming code
entry error.
The $399.00 shown on Def.’s Ex. 102 as “insurance premiums” would have
correctly shown, but for the misalignment, as “processing fee paid to seller” and there
would have been no dollar amount shown for “insurance premiums.” On Def.’s Ex.
101A, the $399.00 charge is identified as a “doc. fee.” The file contains an
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“Agreement to Provide Insurance Form,” signed by Mr. Lynn and dated June 30,
2009. It is Def.’s Ex. 107. Def.’s Ex. 107 would not apply to anything except full
coverage for comprehensive and collision, with a $500 maximum deductible for each.
The words “doc fee” are not defined on Def.’s Ex. 101A.
The words “doc. fee” do not appear on Def.’s Ex. 102.
“Processing fee” is not defined on Def.’s Ex. 102.
A Credit Union loan officer verifies: (1) that the amount financed ( $5,512.60),
as shown on the Retail Installment Contract and Security Agreement (Def.’s Ex. 102)
“matches” the “buyer’s order” and the Retail Purchase Agreement (Def.’s Ex. 101A);
and (2) that the contracts are signed. The Credit Union then “purchases the loan” from
Family Nissan. A loan officer should review the documents to see if the Truth in
Lending Act disclosures are legible. The Credit Union loan officer who testified
stated that the numbers on Def.’s Ex. 102 are “not acceptable but are legible to [her].”
The court agrees that the numbers are legible. Indeed, everyone in the trial referred
to those numbers throughout the trial.
Def.’s Ex. 102 shows the annual percentage rate of 5.75 percent. This is also
the loan rate.

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CONCLUSIONS OF LAW
1.

The Defendants Have Established Their Bona Fide Error
Affirmative Defense.

Mr. Lynn has asserted various TILA violations by the Defendants in regard to
the automobile purchase financing transaction that is the subject of this action.
(Plaintiff’s Post Trial Brief, doc. 36). The Defendants have asserted the “bona fide
error” affirmative defense set out at 15 U.S.C. § 1640(c). (Amended Pretrial Order,
doc. 28, p.3). Mr. Lynn acknowledges that this defense, if established, is a defense
to all of his TILA claims. (Doc. 36, p. 7). He further acknowledges that the
Defendants have proved all the elements of that defense except the element that the
Defendants, or at least one of them, “had reasonable procedures in place adapted to
avoid such errors.” (Id.).
15 U.S.C.A. § 1640(c) reads as follows.
(c) Unintentional violations; bona fide errors
A creditor or assignee may not be held liable in any action brought under this
section or section 1635 of this title for a violation of this subchapter if the
creditor or assignee shows by a preponderance of evidence that the violation
was not intentional and resulted from a bona fide error notwithstanding the
maintenance of procedures reasonably adapted to avoid any such error.
Examples of a bona fide error include, but are not limited to, clerical,
calculation, computer malfunction and programing, and printing errors, except
that an error of legal judgment with respect to a person's obligations under this
subchapter is not a bona fide error.

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15 U.S.C. § 1640(c).
Federal courts that have addressed this affirmative defense have repeatedly
held that, in order to be entitled to the protection of this defense, the defendant must
have and maintain procedures which serve as “a safety catch or rechecking
mechanism.” See Palmer v. Ameribanq Mortgage Group, LLC, 2010 WL 3933273,
11 (E.D.Pa.) (E.D.Pa., 2010) (collecting cases).
The court finds that the facts set out above and summarized in this paragraph
show that Defendants had reasonable procedures in place adapted to avoid such errors
and that Defendants maintained such procedures. Specifically, Family Nissan used
ADP’s computer software to avoid TILA violations. The Family Nissan finance office
employee could not change Def.’s Ex. 102 unless he also changed Def.’s Ex. 101A.
The salesman went over the internal worksheet (Def.’s Ex. 101B) with each buyer,
including Mr. Lynn, and explained all of the charges, including the $399.00
processing fee. The Family Nissan finance office prepared the Retail Purchase
Agreement (Def.’s Ex. 101A) from the salesman’s internal worksheet (Def.’s Ex.
101B). The dollar amounts on the Retail Installment Contract and Security Agreement
(Def.’s Ex. 102) came from the Retail Purchase Agreement. They could not differ.
The dollar amounts shown on both these exhibits were correct and as negotiated by,
and explained to, Mr. Lynn. The Retail Installment Contract and Security Agreement
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printed two lines higher than it should have due to a human error in inputting the code
for the form to be printed. The Retail Installment Contract and Security Agreement
was reviewed by another person in Family Nissan’s office (different from the person
who printed the form) the next day, but the misalignment error was not caught by that
reviewer. If the error had been caught, Mr. Lynn would have been asked to come in
and sign a correctly printed/aligned document. A Credit Union loan officer also was
tasked with reviewing the Retail Installment Contract and Security Agreement. The
numbers on the Retail Installment Contract and Security Agreement were legible and
the terms were as explained to Mr. Lynn.
Accordingly, the court find that judgment is due to be entered in favor of the
Defendants and against Mr. Lynn as to his TILA claims.
2.

Mr. Lynn Has Failed To Establish a Prima Facie Case under the
Alabama Deceptive Trade Practices Act.

The Alabama Deceptive Trade Practices Act (“ADTPA”) is set out at Code of
Alabama 1975, Sections 8-19-1 et seq. The ADTPA provides a private right of action
at § 8-19-10.
(a) Any person who commits one or more of the acts or practices declared
unlawful under this chapter and thereby causes monetary damage to a
consumer, and any person who commits one or more of the acts or practices
declared unlawful in subdivisions (19) and (20) of Section 8-19-5 and thereby
causes monetary damage to another person, shall be liable to each consumer
or other person for:
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(1) Any actual damages sustained by such consumer or person, or the
sum of $100, whichever is greater; or
(2) Up to three times any actual damages, in the court's discretion. In
making its determination under this subsection, the court shall consider,
among other relevant factors, the amount of actual damages awarded,
the frequency of the unlawful acts or practices, the number of persons
adversely affected thereby and the extent to which the unlawful acts or
practices were committed intentionally; and
(3) In the case of any successful action or counterclaim to enforce the
foregoing liability or in which injunctive relief is obtained, the costs of
the action or counterclaim, together with a reasonable attorney's fee. On
a finding by the court that an action or counterclaim under this section
was frivolous or brought in bad faith or for the purpose of harassment,
the court shall award to the defendant (or counterclaim-defendant)
reasonable attorney's fees and costs.
Code of Alabama 1975, Section 8-19-10.
Because it is so short and, frankly, so woefully deficient, the court sets out
below the entirety of Mr. Lynn’s argument regarding his ADTPA claim, as set out in
his Post Trial Brief (doc. 36).
Family Nissan unfairly or deceptively represented the Sale Price of the
vehicle to Lynn, understating same by $399.00, by including that charge
denominated on the Bill of Sale (without explanation) as a Doc Fee and asserts
by its Answer and arguments that it is a “processing fee” (also without any
written explanation) for creating documents in the Lynn transaction, including,
but not limited to, the Truth in Lending disclosures. Plaintiff avers that the act
of surreptitiously hiding the sale price of the vehicle by denominating a portion
thereof as a separate fee is unfair and deceptive and in violation of the ADTPA,
§8-19-5(5),(27), Code of Alabama, 1975, as amended.
Ala. Code §8-19-6 references and gives great weight to the Federal
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Trade Commission decisions and policy under 15 U.S.C.. [sic]. The FTC has
published policy statements for what is “Unfair” and what is “Deceptive” in
trade. These are attached.
(Id.).
Mr. Lynn’s counsel attached to his Post Trial Brief, without any more specifics,
thirty-eight pages of FTC policy statements. This “argument by attachment” is
simply insufficient to put this court on notice of the federal authority upon which Mr.
Lynn relies in support of his ADTPA claim. “Courts are not obligated to read a
party's mind or to construct arguments that it has failed to raise and that are not
reasonably presented in the court file.” Jones v. Pilgrim's Pride, Inc. 741 F.Supp.2d
1272, 1275 (N.D.Ala.,2010) (citing Resolution Trust Corp. v. Dunmar Corp., 43 F.3d
587, 599 (11th Cir.1995) ( “There is no burden upon the district court to distill every
potential argument that could be made based upon the materials before it ....”); also
citing Higgins v. New Balance Athletic Shoe, Inc., 194 F.3d 252, 260 (1st Cir.1999)
(declaring that a “party who aspires to oppose a ... motion must spell out his
arguments squarely and distinctly, or else forever hold his peace,” as district court
may ignore arguments not adequately developed by nonmovant)).
Turning to the ADTPA itself, the court notes Mr. Lynn has pointed to
absolutely no damages incurred. In fact, Mr. Lynn testified that he signed the
documents at issue (although he did not read them), he negotiated the price, and he
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agreed to the “total price” shown on all the documents, $5,512.60. The court
credits Mr. Burton’s uncontroverted testimony that he showed Def.’s Ex. 101B to Mr.
Lynn and went over everything, including the $399.00 fee, with Mr. Lynn, and that
Mr. Lynn agreed to everything, “but at a lower total,” that is, $5,512.60 instead of
$6,586.34.
Since Mr. Lynn proved no monetary damages, he has no claim under the
ADTPA against Family Nissan. Accordingly, judgment is due to be entered in favor
of Family Nissan and Mr. Lynn on his ADTPA claim.
Alternatively and additionally, Mr. Lynn has not show any intent by Family
Nissan to deceive him, or that he was in any way deceived. The court finds Jackson
v. CIT Group/Sales Financing, Inc., 630 So.2d 368 (Ala. 1993) instructive. In
Jackson, the Alabama Supreme Court affirmed the trial court’s grant of summary
judgment in favor of the defendant on the plaintiff’s ADTPA claim under the same
language now found at § 8-19-5(27), that is, that the defendant engaged “in any other
unconscionable, false, misleading or deceptive act or practice in the conduct of trade
or commerce.” It is clear from the statute and from Jackson that, absent any fraud or
actual misrepresentation by Family Nissan, and absent any in-fact deception of Mr.
Lynn, Mr. Lynn’s ADTPA claim fails. The court finds that, although Family Nissan
was undisputedly “in the conduct of trade or commerce” in entering into the
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transaction with Mr,. Lynn, Family Nissan’s affirmative defense under the TILA,
particularly when coupled with the fact that Mr. Lynn got exactly what he thought he
was getting, negates any claim under the ADTPA against Family Nissan for any
“unconscionable, false, misleading or deceptive act or practice.” Accordingly, for this
alternative reason, judgment is due to be entered in favor of Family Nissan and
against Mr. Lynn on his ADTPA claim.
A separate Final Judgment Order will be entered accordingly.
DONE this 21st day of October, 2013.

VIRGINIA EMERSON HOPKINS
United States District Judge

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