Haynes v. Planet Automall, Inc., 09-CV-03880 (JBW) (RER)

SHERRI HAYNES on behalf of herself and all others similarly situated, Plaintiff, v. PLANET AUTOMALL, INC. PLANET AUTOMOTIVE, INC. d/b/a/ KG SUZUKI, NORTHERN AUTOGROUP LLC, and KANHIYA KINNEY GALANI, Defendants.

09-CV-03880 (JBW) (RER)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

Dated: August 12, 2011

MEMORANDUM & ORDER

JACK B. WEINSTEIN, Senior United States District Judge:

Appearances:

For Plaintiff: LAW OFFICES OF MARTIN MUSHKIN

By: MARTIN MUSHKIN

LEMBERG & ASSOCIATES L.L.C.

By: SERGEI LEMBERG

SUSAN SCHNEIDERMAN

For Defendants: LAW FIRM OF RICHARD SIMON

By: RICHARD SIMON

Table of Contents

I. Introduction..............................................................................................................................3

II. Facts and Procedural Background.......................................................................................5

A. Pleadings..............................................................................................................................5

B. Procedural History...............................................................................................................8

III. Law....................................................................................................................................10

A. Class Certification..............................................................................................................10

1. Numerosity.....................................................................................................................11

2. Commonality..................................................................................................................12

3. Typicality.......................................................................................................................13

4. Adequacy........................................................................................................................13

B. TILA..................................................................................................................................14

1. Finance Charge...............................................................................................................15

2. APR................................................................................................................................22

C. GBL § 349..........................................................................................................................22

IV. Application of Law to Facts...............................................................................................23

A. Class Certification..............................................................................................................23

1. Numerosity.....................................................................................................................23

2. Commonality..................................................................................................................23

3. Typicality.......................................................................................................................26

4. Adequacy........................................................................................................................27

B. Difficulties in Managing Class..........................................................................................27

V. Conclusion.........................................................................................................................28

I. Introduction

Plaintiff Sherri Haynes brings this putative class action against defendants Planet Automall, Inc. ("Planet Automall"), Northern Autogroup, LLC ("Northern AutomaH"), Kanhiya Kinney Galani and Planet Automotive Inc. (d.b.a. "KG Suzuki") for failing to properly disclose information in violation of the federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. The alleged violations occurred when plaintiff purchased a used car from KG Suzuki using credit provided through the dealer. She claims that defendants failed to disclose that various fees charged to customers who received dealer-assisted financing were part of the finance charge, a violation of TILA and section 349 of New York's General Business Law ("GBL § 349").

Sought is certification of a class of individuals who were similarly misled. Plaintiff's motion for class certification relies on statistical analysis of the difference in fees paid by cash and credit customers. Defendants oppose certification on the grounds that plaintiffs' claims are based on different individual oral representations, rendering commonality unlikely and making a class action inappropriate.

In considering plaintiff's motion for class certification, a court recognizes that the class action serves an important function in protecting consumers from abusive business practices. This is particularly true for the type of consumer who would purchase a used car on credit. As agroup, they may be more susceptible to the kind of abuses against which TILA and GBL § 349 are designed to protect. They are also less likely to have the means to pursue claims on an individual basis, and therefore less able to seek redress if they are denied the opportunity to sue as a class.

The procedural mechanism of the class action and the statutory provisions plaintiff invokes are premised on a public policy favoring the protection of the kind of consumers found in the proposed class. Statistical evidence of the kind upon which plaintiff relies is often vital for proving elements of plaintiff's claim on a class-wide basis. Thus, the consideration given to plaintiff's motion for certification must be respectful and generous. Yet, as the Court of Appeals for the Second Circuit instructed in a recent case where less affluent buyers of used cars on credit claimed the seller was "burying hidden finance charges in the prices that plaintiff's were charged," their "bad bargain" could not support class certification; "TILA is a disclosure statute, not a fair pricing law." Poulin v. Batise Auto Sales, Inc., — F.3d —-, 2011 WL 2937210, at *1 (2d Cir. July 22, 2011).

Each used car is unique. Purchases normally involve individual oral negotiations as to price, terms and incidentals, such as warranties, between purchasers of varying experience and skills and an experienced salesperson. Thus, it cannot be assumed that representations to all purchasers will be sufficiently uniform to support necessary class commonality.

On the instant facts, certification is denied. It is inappropriate because of ambiguities in plaintiff's statistical evidence, a lack of other supporting evidence to bolster her claims, the likelihood that the circumstances in oral bargaining for each purchase varied, and the named plaintiff's possible special animus toward defendants that makes her an inappropriate representative.

II. Facts and Procedural Background

A. Pleadings

In September of 2008, plaintiff purchased a used 2006 Toyota Corolla from defendant KG Suzuki. Voytovych Ex. 1. At the time of the purchase, she was a twenty-three year old grocery clerk without a college degree. Haynes Aff. ¶ 6. During the oral negotiations that led to her purchase, Haynes did not meet or speak with Galani, the principle owner of KG Suzuki. Nor did she purchase the vehicle or receive financing from defendants Planet Automall or Northern Automall, although both entities are alleged to be affiliated with KG Suzuki and owned by Galani.

The details of plaintiff's purchase are listed on several documents that she was provided (and which she signed) at the time of the purchase. She was given a bill of sale issued by KG Suzuki and a retail installment contract between herself and KG Suzuki on a form issued by M&T Bank, the supplier of credit. Voytovych Exs. 1, 2.

The bill of sale for plaintiff's purchase lists the price of the car as $12,500. Voytovych Ex. 1. The total cost was higher. She was charged $1,301.80 for a processing fee ("Pro Fee"), which the bill of sale lists as for "Customer Requested Dealer Installed Equipment and Accessories." There is no document explaining what, if anything, she received in exchange for the Pro Fee, how the fee was calculated or why a purchaser would want to pay it. Defendants

contend that the purpose of the Pro Fee was to recoup a portion of internal costs attributed to each vehicle during individual negotiations. Galani Aff. ¶ 9; Memorandum of Law in Opposition to Plaintiff's Motion for Class Certification ("Defs.' Opp"), at 9. There is no evidence that the Pro Fee was in any way related to the cost of sale or preparation of the vehicle. Pl.'s Mem. at 11; Mushkin Aff. ¶ 13. (quoting 9/16/10 Tr. at 8-10).

Plaintiff also purchased an extended warranty for $3,000. Voytovych Exs. 1, 2. Like the Pro Fee, the extended warranty was listed as a "Customer Requested Dealer Installed Equipment and Accessor[y]." To cover the warranty, KG Suzuki paid $775 to Guardian Warranty Corporation and retained $2,225.

With the cost of the Pro Fee and the extended warranty factored in, the "total price of vehicle" was $16,801.89. After taxes (an additional $1008.11), plaintiff's cost was $18,255.

The purchase was financed on credit that she obtained through KG Suzuki. She paid $3,000 in cash and borrowed the remaining $15,255. The retail installment contract, which defendants provided to plaintiff, included the entire $15,255 in a category called "amount financed." Taking this amount, and assuming that plaintiff would pay it plus a "finance charge" of $5006.52 over the course of seventy-two monthly payments, the retail installment contract stated that the "annual percentage rate" ("APR") of the loan would be 9.64%. Voytovych Exs. 1, 2.

Plaintiff asserts that the Pro Fee and the cost of the extended warranty should have been included in the finance charge on plaintiff's retail installment contract, not in the amount financed. The APR...