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Sharron Poulin, Individually and On Behalf of All Others Similarly Situated v. Balise Auto Sales

July 22, 2011

SHARRON POULIN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, LATISHA FRAZIER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
BALISE AUTO SALES, INC., D/B/A BALISE READY CREDIT, AUTO CREDIT EXPRESS, INC., DEFENDANTS-APPELLEES.



Appeal from a judgment of the United States District Court for the District of Connecticut 20 (Haight, J.), entered on April 6, 2010, dismissing the complaint for failure to state a claim upon which relief can be granted.

The opinion of the court was delivered by: Cedarbaum, District Judge:

Argued: March 1, 2011

Before: RAGGI and LEVAL, Circuit Judges, and CEDARBAUM, District Judge.*fn1

For the reasons that follow, the judgment of the district court is AFFIRMED.

Sharron Poulin and Latisha Frazier appeal from a judgment of the United States District 10 Court for the District of Connecticut (Haight, J.) dismissing their putative class-action complaint 11 for failure to state a claim upon which relief can be granted. Plaintiffs seek to represent a class 12 of customers with poor credit who purchased used automobiles from defendant Balise Auto 13 Sales, Inc. ("Balise") under retail installment contracts that were subsequently assigned to 14 defendant Auto Credit Express, Inc. ("ACE"). The complaint asserts that defendants violated the 15 Truth in Lending Act, 15 U.S.C. § 1601, et seq. ("TILA"), and various state laws by burying 16 hidden finance charges in the prices that plaintiffs were charged for these automobiles. The 17 complaint alleges that Balise advertised the newer, more valuable used cars in its inventory at 18 market prices, as measured by a particular used car buying guide, but sold the older, less 19 valuable used cars to subprime credit customers for prices substantially higher than the market 20 prices listed in the same guide.

Essentially, the complaint alleges that plaintiffs and those similarly situated received a 22 bad bargain. But TILA is a disclosure statute, not a fair pricing law. Because the complaint 23 does not contain any allegation from which it could plausibly be inferred that defendants failed 24 to disclose a finance charge to plaintiffs, the judgment of the district court is affirmed.

Background

According to the complaint, Balise operates car dealerships in Connecticut, Massachusetts, and Rhode Island, and advertises itself as a business that caters to the needs of consumers who have difficulty obtaining automotive loans. ACE accepts Balise's assignment of sales contracts for cars that Balise has sold to customers with poor credit. The two companies are owned by the same or related interests and controlled by the same individuals.

In marketing and pricing the cars in its inventory, Balise distinguishes between newer and older model years. For a newer car, Balise advertises a retail price that roughly tracks the amount at which the NADA Official Used Car Guide, Eastern Edition ("NADA Guide") values the model. For an older car, however, Balise does not advertise any retail price at all. When prospective buyers with poor credit approach Balise about purchasing a car, it steers them toward one of the older cars. Balise sells the older cars at prices that are substantially higher than the market values given in the NADA Guide.

The named plaintiffs' buying experience is typical of a Balise customer with poor credit.

In October 2006, Frazier purchased a 1998 Chevrolet Venture from the dealership for $7,995.

The NADA Guide lists the market value of this model as $4,000. In February 2008, Poulin 16 purchased a 1998 Saturn SL2 from Balise for $8,440. The NADA Guide lists the market value 17 of this model as $3,900. Both Frazier and Poulin executed retail installment contracts which 18 Balise subsequently assigned to ACE.

On October 22, 2008, Frazier and Poulin commenced a putative class action accusing 20 Balise and ACE of violating 15 U.S.C. § 1638(a)(3), a TILA provision requiring a creditor to 21 disclose any finance charge it imposes on a consumer. They also allege the violation of various 22 state laws. Although the complaint does not state the finance charges actually disclosed, it 23 asserts that Balise and ACE are deceptively burying the cost of credit within the purchase prices -3- 1 of the cars that Balise sells to customers with poor credit. Plaintiffs theorize that, for each of 2 these cars, the portion of the purchase price in excess of the model's NADA Guide value is not 3 actually part of the cost of the car itself, but rather a hidden finance charge intended to 4 compensate for the increased risk of lending to customers with poor credit. The complaint does 5 not allege that Balise prices its older cars differently for customers with good credit or customers 6 paying in cash. Indeed, the complaint is entirely silent as to whether such customers purchase 7 cars from Balise's older inventory at all.

The named plaintiffs purport to assert these claims on their own behalf and on behalf of 9 two groups of car purchasers. The "TILA Class," represented by Poulin, consists of individuals 10 who, within the applicable statute of limitations, purchased a motor vehicle from Balise at a 11 purchase price at least 35% greater than the NADA Guide value for the model purchased. The 12 "Connecticut Class," represented by Poulin and Frazier, consists of ...


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