Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—9^th Cir.: Auto loan borrower fails to show causal connection between economic loss and any unfair competition, (Nov 26, 2013)

By Linda O’Brien, J.D., LL.M.

A borrower asserting putative class actions claims under California’s Unfair Competition Law (UCL) and Rees-Levering Automobile Sales Finance Act against an automobile financing company for allegedly attempting to collect an invalid loan deficiency lacked standing to bring suit without a showing of a causal connection between the claimed economic injury and any unfair competition by the defendant, the U.S. Court of Appeals in San Francisco has ruled (Wright v. General Motors Acceptance Corp., November 22, 2013, per curiam). Thus, the district court’s grant of the defendant’s motion for summary judgment and denial of the plaintiff’s motion for class certification was affirmed.

In 2007, Roderick Wright purchased a car from an auto dealer and financed the vehicle with a loan from Ally Financial, Inc. (formerly known as General Motors Acceptance Corporation). He made payments for a few years before defaulting on the car loan. Ally repossessed the car and sent Wright a notice of its intent to dispose of the vehicle. The notice stated that the car would be sold at an auction and Wright had a limited statutory right to preempt the sale by either reinstating his contract or redeeming the car. Wright did not exercise his right within the time allowed. The car was sold and the sale proceeds were applied to Wright’s outstanding loan balance. Ally sent a letter to Wright which gave an accounting of the resulting deficiency and stated how to make payments on it. The deficiency was also reported to credit bureaus. Wright made a small partial payment on the deficiency. Subsequently, Wright filed an action against Ally alleging that he did not receive sufficient notice of the amount needed to cure his default or the address to serve Ally with a form that would have extended the statutory redemption period. The failures invalidated Ally’s deficiency claim and rendered its attempt to collect on the invalid deficiency a violation of the UCL. The district court granted Ally’s motion for summary judgment for lack of standing and denied Wright’s motion for class certification.

Wright argued that he suffered economic harm based on a partial payment to offset the deficiency and Ally’s reporting of the deficiency to credit bureaus. The court found that Wright failed to show a causal connection between his claimed injury and any unfair competition by Ally. First, the letter sent by Ally to Wright was not a demand for payment as it merely gave an accounting of how the deficiency was calculated and provided instructions on how to make payment arrangements. Thus, there was no unfair competition by Ally. Second, Wright’s testimony that he was unable to secure financing for another vehicle from six different auto dealers was merely conclusory absent proof that the specific deficiency caused the auto dealers to decline to extend him credit. The court noted that Wright had numerous other delinquent debts and he presented no evidence that he would have obtained credit without the deficiency.

Finally, since Wright had no viable claim for relief in his own right, he could not bring an action on behalf of the class, the court concluded.

The case is No. 12-55319.

Attorneys: Michael Edward Lindsey for Roderick Wright. Jan T. Chilton (Severson & Werson) for Ally Financial, Inc.

Companies: Ally Financial, Inc.

Cases: StateUnfairTradePractices CaliforniaNews