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Diaz v. Paragon Motors of Woodside

January 29, 2007


The opinion of the court was delivered by: Sifton, Senior Judge.


Eddie Diaz brings this action against Paragon Motors of Woodside, Inc. ("Paragon") and Americredit Financial Services, Inc. ("Americredit") alleging that defendant Paragon Motors violated (1) the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq.,*fn1 (2) the Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691,*fn2 (3) New York's Vehicle & Traffic Law § 417-a*fn3 (4) New York's "Used Car Lemon Law," New York General Business Law § 198-b,*fn4 (5) the Magnuson-Moss Warranty Act (MMWA), 15 U.S.C. § 2310,*fn5 by breaching (a) express warranties (b) implied warranties and (c) revocation of acceptance, and (6) New York General Business Law § 349 by its deceptive sales practices.*fn6 In addition, plaintiff alleges that (7) co-defendant Americredit is liable for damages on all claims which plaintiff asserts against co-defendant Paragon, pursuant to 16 C.F.R. § 433.2 (the "Holder Rule"), as a provider of consumer credit.

On March 29, 2006, I issued a Memorandum Opinion and Order with respect to plaintiff's motion for partial summary judgment on liability with respect to the TILA, ECOA and N.Y. Veh. & Traf. Law § 417-a claims and defendants' cross motions for summary judgment on all claims. The March decision granted plaintiff summary judgment on all aspects of TILA and N.Y. Veh. & Traf. Law § 417-a, and therefore on N.Y. Gen. Bus. Law §349 to the extent that such claim was premised on violations of TILA and N.Y. Veh. & Traf. Law § 417-a. I granted defendants' summary judgment on all other claims with the exception of the MMWA as to breach of the implied warranty claim and the revocation of acceptance claim. In June, the parties filed a joint stipulation voluntarily discontinuing the MMWA claim.

What remained for trial was whether (1) the plaintiff suffered any injury, and if so, the extent of his damages, as a result of defendants' violations of TILA and N.Y. Veh. & Traf. Law § 417-a; and (2) whether damages under TILA and N.Y. Veh. & Traf. Law § 417-a established injury with respect to N.Y. Gen. Bus. Law §349.

For the reasons set forth below, I conclude that defendants violated New York General Business Law § 349. Plaintiff is awarded $1000 in damages against Paragon Motors for violations of TILA, and $7,890 in damages against both Paragon Motors and Americredit for violations of N.Y. Veh. & Traf. Law § 17-a.

What follows sets forth the findings of fact and conclusions of law on which these determinations are based as required in Rule 58 of the Federal Rules of Civil Procedure. Fed. R. Civ. P. 58(a)(1).


On May 9, 2003, plaintiff Eddie Diaz visited Paragon's used car dealership at 57-02 Northern Boulevard, Woodside, New York in Queens County. Diaz told Paragon's salesman that he was interested in purchasing a used 2002 Chrysler Town and Country advertised in the New York Daily News on May 8, 2003 for sale at a purchase price of $13,495.00.*fn7 Plaintiff made a deposit of $500.00 towards the purchase of the car in order to assure its availability. He also signed a document noting "$4,000 Cash Down" in the space provided for price, under which was written, "Subject to Bank Approval", but with no total vehicle price or other fees listed. (Joint Trial Ex. 2.) The document, variously described as an "initial intent to buy", "customer's intention to buy" or "a buyer's order" by Paragon, (Benstock Dep., 26, 32-33, 43), included a description of the vehicle, its stock and VIN numbers, mileage of 30,540, and a notation of the $500 deposit. A form intended to disclose by checked boxes prior use of the vehicle as a police vehicle, taxi-cab, driver education or rental vehicle as required by Vehicle and Traffic Law § 417-a, was left blank. (Joint Trial Ex. 2; Benstock Dep., 36.)

At the time, Paragon agreed to assist Diaz in financing the car.*fn8 Paragon thereafter submitted Diaz's loan application via an electronic data system called Dealer Track to determine whether Diaz was eligible for financing by a sub-prime lender, and at what amount.*fn9

On the same day, May 9, Consumer Portfolio Services, Inc. (hereinafter "CPS"), a sub-prime lender, pre-approved a loan to Diaz subject to certain conditions, including income and employment verification and payment by Paragon of an acquisition fee of $199 later charged to Diaz. The pre-approval provided for a maximum payment per month of $350, at an annual interest rate of 19.95%. (Joint Ex. 5 for Motions for Summary Judgment on 9/22/05.) Based on these terms, Paragon set a selling price of $16,130.13, with CPS to provide financing. Additional charges included $1,500 for an extended warranty,*fn10 $1,454.49 in taxes and $140 in license, title, state inspection and processing fees. The total selling price listed on the proposed bill of sale, dated May 10, 2003, was $19,224.62. The down payment was fixed at $6,000, so the total remaining due would be $13,224.62. (Joint Ex. 11 for Motions for Summary Judgment on 9/22/05, Proposed Bill of Sale.) Because Diaz would ultimately send $21,000 in payments to CPS, the total amount financed was $7,775.38 ($21,000 less $13,224.62), according to a proposed Retail Installment Contract, also dated May 10, 2003. (Joint Ex. 10 for Motions for Summary Judgment on 9/22/05, Proposed Retail Installment Contract.) CPS turned down the loan for unexplained reasons, and it was eventually picked up by Americredit.

On the following day, May 10, 2003, Diaz again offered to purchase the car for the advertised price of $13,495, gave an additional deposit of $1,000.00, and again asked Paragon to obtain financing. According to Diaz, there were no further negotiations with respect to the purchase price of the vehicle on May 10. (Diaz Dep. 26.) The next day, May 11, Paragon informed Diaz that in order to obtain financing, he would have to put $6,000 down, instead of $4,000 as previously provided for in the May 9 agreement.

Diaz stated that on May 12, 2003, he returned to Paragon to pay the additional $4,500 requested for the down payment, but did not execute any documents until the following day.*fn11 According to Diaz, on May 13, 2003 he returned to Paragon and executed a Retail Installment Contract ("RISC"), dated May 12, 2003, which disclosed the final details of the sale, and reflected an increase in the purchase price of the vehicle. According to Diaz, the Paragon finance manager told him that the original advertised price of $13,495 was not available because a primary lender would not finance the car, because a secondary lender had to be used, and because the extended warranty was necessary to obtain financing. (Diaz Dep., 34-37.) Because he was putting down $6,000, the balance of $14,047.18 was to be financed by Americredit Financial with 60 monthly payments at $367.87 per month, equaling $22,072.20. The total finance charge listed in the RISC was $8,025.02. The "total sale price" for the vehicle including $16,590 purchase price, $1,517.18 sales tax, $8,025.02 finance charge, $1,800 extended warranty, and other license, title, state inspection and processing fees was stated as $28,072.20. (Joint Trial Ex. 3, Retail Installment Contract.)

On a bill of sale dated May 12, 2003, but not signed until May 13 according to Diaz, the purchase price was listed as $16,590 plus $1,800 described as "Other Equipment" apparently representing the new price for the extended warranty, $1,517.18 sales tax, and $140.00 for license, title, state inspection and processing fees, for a total cash price of $20,047.18.*fn12 (Joint Trial Ex. 6, Bill of Sale.) The bill of sale included a statement, signed by Diaz, that the "principal pride [sic: prior?] use of th[e] vehicle was as a rental vehicle." ...

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