Third Circuit says car loan payment agreement not fraudulent in appealed case

By Nicholas Malfitano | Sep 19, 2016

PHILADELPHIA – A federal appellate court denied a Philadelphia man’s attempt to overturn a trial court ruling stating a loan agreement he entered into to purchase an automobile was not fraudulent.

In a per curiam ruling reached Sept. 16, U.S. Court of Appeals for the Third Circuit, judges Cheryl Ann Krause, Anthony J. Scirica and Julio M. Fuentes unanimously upheld the ruling from the U.S. District Court for the Eastern District of Pennsylvania, against plaintiff Khaleem Asiatic Allah-Bey, and in favor of defendants Brett A. Roberts, Steven M. Jones, Kenneth S. Booth, Douglas W. Busk, and Credit Acceptance Corporation.

“Allah-Bey filed a complaint in the District Court against Credit Acceptance Corporation and several of its corporate officers. In the complaint, Allah-Bey stated that he failed to make payments after entering into an installment agreement with Credit Acceptance to purchase an automobile,” the Third Circuit explained.

“Allah-Bey alleged that the loan was deceptive and fraudulent because it ‘resembled’ a process ‘where the borrower funds his own loan,’ that ‘no consideration was provided,’ and that ‘the loan was entered as a liability and an asset’ by Credit Acceptance,” the appellate court stated.

Allah-Bey further claimed Credit Acceptance reported the delinquency to three credit bureaus, which “damaged Allah-Bey’s reputation and credit-worthiness.”

Credit Acceptance moved to dismiss the matter for failure to state a claim, which the District Court granted.

“After briefing on the motion to dismiss, the District Court dismissed Allah-Bey’s complaint with prejudice in a single order that also set out the reasoning for the dismissal,” the appellate judiciary said.

“In sum, the District Court observed that Allah-Bey’s legal theory – i.e. that Credit Acceptance did not actually lend Allah-Bey any money since it treated his promise to pay as an asset – is identical to the ‘vapor money’ legal theory that numerous federal courts have rejected as frivolous,” the Third Circuit added.

The District Court dismissed the case in December and Allah-Bey appealed in January. However, though timely, the federal appellate court did not see the merits of the plaintiff’s case.

“In this case, Allah-Bey’s complaint conceded that Credit Acceptance offered him a loan to purchase an automobile, and conceded that he stopped making payments under that agreement,” the Third Circuit said.

“Allah-Bey’s justification for failing to make those payments was his assertion that the installment agreement was deceptive and fraudulent, but that assertion depended on ‘conclusory statements’ that cannot support any viable cause of action.”

The Third Circuit stated Allah-Bey “offered no basis for his assertion that Credit Acceptance essentially loaned his own money back to him, and the facts that he set out did not support any valid legal theory entitling him to relief.”

“Consequently, Credit Acceptance’s motion to dismiss the appeal is denied, but the appeal presents no substantial question and we will affirm the District Court’s judgment,” the Third Circuit said.

The defendants are represented by Thomas M. Brodowski of Stradley Ronon Stevens & Young, in Philadelphia.

U.S. Court of Appeals for the Third Circuit case 16-1042

U.S. District Court for the Eastern District of Pennsylvania case 2:15-cv-06192

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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