PHILADELPHIA – A judge in the U.S. District Court for the Eastern District of Pennsylvania has dismissed one part of the claims related to a putative class action suit against a local retail automobile dealership.
Judge Gerald A. McHugh ruled Metro Auto Sales, Inc.’s motion to dismiss plaintiff Rodney Gregory’s claims they violated the Truth In Lending Act (TILA), but retained Gregory’s claim of a violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL).
Metro does business as Value Kia in Philadelphia.
Metro ran a “Cash For Clunkers” program in 2014, in which it promised to provide “at least $4,500 for any trade accepted towards a vehicle purchase” from them. In June 2014, Gregory sought to trade in his 1995 Jeep Cherokee for a 2012 Ford Escape and signed a contract that set the terms of the trade and sale. The cash sale price of the Ford Escape was $29,214; the down payment was $1000, and Defendant valued the trade-in vehicle at $4,500.
Gregory claims Metro engaged in deceptive trade practices; namely that they “secretly inflated the price of the vehicle he purchased in order to offset the generous credit it offered for trade-ins as part of a sales promotion” (thereby violating the TILA) and “failed to disclose frame damage to the vehicle” (likewise violating the UTPCPL).
Gregory cast his complaint as a class action on behalf of all those wronged by Metro’s alleged practices, while Metro moved to dismiss the matter entirely – believing the dispute is governed by an arbitration agreement and Gregory’s claims are insufficiently pleaded.
First, McHugh’s rejected Metro’s argument as to the applicability of the arbitration agreement.
“The Federal Arbitration Act (FAA) provides that valid arbitration agreements shall be enforceable and entitle a party to a valid agreement to an order compelling the arbitration,” McHugh said. “Here, the [contract] does not contain the arbitration agreement defendant seeks to enforce. I conclude that there is not a valid arbitration agreement binding the Plaintiff under Pennsylvania law.”
As to Metro’s alleged violation of the TILA, McHugh decided it did not commit such an act.
“[Gregory’s] argument fails because the availability of the $4,500 trade-in was not contingent on a consumer’s use of credit,” McHugh said. “A sum that a consumer must pay whether a consumer is paying in cash or with credit is not a ‘finance charge.”
McHugh added the full disclosure of all terms and charges was made in the transaction contract Gregory signed, thus nullifying his claim of Metro violating the TILA.
Regarding Metro’s alleged violation of the UTPCPL, McHugh made clear despite some “persuasive” arguments from the defense that was a different story.
“I find that plaintiff has stated a claim under the UTPCPL,” McHugh said. “The significance of damage to a vehicle frame presents issues of fact, in that such damage can indicate that a vehicle was previously involved in some form of meaningful impact. I cannot broadly hold as a matter of law that vehicle damage supposedly repaired need not be disclosed.”
Finally, McHugh decided the existence of a class in this suit had yet to be officially determined and couldn’t be done based on the evidence presented so far. McHugh cited precedent from the U.S. Court of Appeals for the Third Circuit, in stating the belief that further discovery had to be conducted before a class status could be finalized.
“I cannot make this complex decision on the bare allegations now before me,” McHugh said.
“For these reasons, defendant’s motion will be granted as to the TILA claim but denied as to plaintiff’s UTPCPL claim and his class claims,” McHugh concluded.
The plaintiff was represented by Robert P. Cocco in Philadelphia and Ann Miller in Jenkintown.
The defendant was represented by Marisa J. Hermanovich and Matthew S. Wolf in Cherry Hill.
U.S. District Court for the Eastern District of Pennsylvania case 2:15-cv-02601
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com