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TURNER v. GMAC

October 21, 1997

DAVID C. TURNER, on behalf of himself and all others similarly situated, Plaintiff, against GENERAL MOTORS ACCEPTANCE CORP., Defendant.


The opinion of the court was delivered by: MUKASEY

 MICHAEL B. MUKASEY, U.S.D.J.

 David Turner sues General Motors Acceptance Corporation for failing to disclose in an automobile lease that defendant earns interest and receives certain non-interest benefits based on plaintiff's security deposit, in violation of the Consumer Leasing Act ("CLA"), 15 U.S.C. § 1667 et seq. (1994), and for failing to reduce plaintiff's obligations under the lease in the amount of such benefits in violation of the Uniform Commercial Code ("UCC") and other provisions of New York law.

 Defendant moves for summary judgment on all claims. Plaintiff moves for partial summary judgment on defendant's liability under the CLA and the UCC. Plaintiff moves also for certification of this lawsuit as a class action pursuant to Fed. R. Civ. P. 23. For the reasons stated below, defendant's motion for summary judgment is granted as to plaintiff's CLA claim. Plaintiff's motion for partial summary judgment is denied, and plaintiff's UCC and other state-law claims are dismissed for lack of subject matter jurisdiction. Plaintiff's motion to certify this lawsuit as a class action is denied as moot.

 I.

 The following facts are not in dispute. On September 25, 1995, plaintiff entered into an agreement with defendant to lease a 1995 Chevrolet Geo Prizm through a Chevrolet dealership in Highland, New York. (Compl. P 31) The lease agreement required plaintiff to pay, inter alia, a refundable security deposit of $ 750.00. (Id. P 33) The agreement made the following disclosures with respect to the security deposit:

 
30. SECURITY DEPOSIT. A refundable security deposit may be part of the payment you make when you sign this Lease. We will deduct from the security deposit any amounts you owe under this Lease and do not pay. We will not pay you interest on the security deposit. After the end of this Lease, we will refund to you any part of the security deposit that is left.

 (Id. Ex. A P 30) (emphasis in original) The lease does not disclose whether defendant earns interest or receives any non-interest benefits based on the security deposit.

 Defendant placed plaintiff's security deposit into an escrow account it maintains with Chase Manhattan Bank ("Chase") in New York. (Walker Aff. PP 9-10) Defendant maintains 11 bank accounts with Chase nationwide, including three security deposit escrow accounts in New York. (Id. P 13) As required by New York law, see N.Y. Gen. Oblig. Law § 7-101 (McKinney 1993), defendant places each security deposit that it receives from an automobile lease customer in New York into one of these three escrow accounts and does not commingle these funds with funds it receives from other sources. (Id. PP 9-10)

 Defendant does not earn interest on any funds deposited in these escrow accounts. (Id. P 12) However, defendant does receive certain non-interest benefits from Chase based in part on the funds on deposit in the New York escrow accounts. Chase awards "earnings credits" to defendant based upon the aggregate average monthly balance of its funds on deposit with Chase, including the funds in the three escrow accounts in New York. (Id. P 13) In turn, defendant uses these credits to offset fees that Chase charges defendant for maintaining its accounts. (Id.) In 1995 and 1996, for example, defendant received enough "earnings credits" to offset the maintenance and commitment fees that it owed to Chase for each of its 11 bank accounts. (Id.) "Earnings credits" which exceed fees imposed in a given year are not redeemable in cash and may not be carried over to the following year. (Id. P 14)

 Defendant moves for summary judgment on plaintiff's CLA claim on the ground that the lease agreement at issue satisfied defendant's disclosure obligations. (Def. Moving Br. at 3) *fn1" Plaintiff cross-moves for summary judgment arguing that defendant violated the CLA when it failed to disclose that it earns interest and receives "earnings credits" based in part on the amount of plaintiff's security deposit. (P1. Opp'n Br. at 6) Plaintiff argues also that it is entitled to summary judgment on its UCC claim because defendant failed to reduce plaintiff's obligations under the lease in the amount of the interest and "earnings credits."

 II.

 Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). To defeat a motion for summary judgment, the non-movant must set forth specific facts which establish a genuine issue for trial, or demonstrate that the moving party is not entitled to judgment as a matter of law. Fed. R. Civ. P. 56(e). Although a district court generally considers cross-motions for summary judgment separately in order to view the facts relied on by each in the light most favorable to the non-moving party, see Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993), where, as here, the material facts underlying each party's motion for summary judgment are not in dispute, I decide the parties' cross-motions simultaneously.

 A. "Earnings Credits" vs. Interest

 Plaintiff resists this conclusion -- despite the existence of these undisputed facts -- by arguing that "earnings credits" are "interest equivalent remuneration" and therefore must be disclosed to plaintiff under the CLA. (P1. Opp'n Br. at 4) Plaintiff's argument rests on the following two assumptions: first, that "earnings credits" are "equivalent" to interest; and second, that a failure to disclose the receipt of interest on a lessee's security deposit violates the CLA. Because I reject plaintiff's suggestion that "earnings credits" of the type at issue here are the same as interest, I need not assess the validity of plaintiff's second assumption -- namely that the CLA applies to a lessor's failure to disclose the receipt of earned interest on a lessee's security deposit. *fn2"

 Plaintiff likens "earnings credits" to interest because Chase awards them to defendant as a "percentage of the total dollar value" of its funds on deposit and because it does so at a rate that is "linked to a treasury bill index." (Id.) However, this is the extent of the similarities between "earnings credits" and interest. "Earnings credits" -- unlike interest -- are not paid in cash and can be used only to offset fees that Chase charges defendant to maintain its accounts. (Walker Aff. PP 13-14) "Earnings credits" which remain after the ...


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