In Aguayo v. U.S. Bank, 2016 WL 2609296, at *2-4 (S.D.Cal., 2016), Judge Whelan granted partial summary judgment to an NOI class action plaintiff who argued that US Bank’s NOI violated state law. First, Judge Whelan rejected US Bank’s conflict preemption argument.
On September 24, 2009, this Court granted U.S. Bank’s motion to dismiss the case based on the finding that the National Banking Act (“NBA”) expressly preempted the Rees–Levering Act. Aguayo appealed, and the Ninth Circuit reversed. The court held section 2893.2 of the Rees–Levering Act is not preempted because it falls within the Office of the Comptroller of the Currency’s (“OCC”) savings clause, and the NOIs are not credit-related documents. Aguayo v. U.S. Bank, 653 F.3d 912, 925–926 (9th Cir.2011). The court also rejected U.S. Bank’s contention that Rees–Levering does “not fall under the umbrella of its ‘right to collect debts’ ” and explained that “Section 2983.2 of the Rees–Levering Act is a state law, directed toward a lender’s debt collection, requiring that the lender inform the borrower of the full amount of his or her ‘indebtedness evidenced by the contract’ or ‘liability,’ Cal. Civ.Code § 2983.2(a)(1),(8), and therefore falls squarely within the OCC savings clause.” Id. at 924–925. U.S. Bank’s amended opposition again raises conflict preemption, the third time since remand. U.S. Bank contends the Court should consider its argument because Aguayo’s motion now concedes that Rees–Levering requires national banks to offer reinstatement. . . U.S. Bank suggests, however, that preventing it from collecting the deficiency is tantamount to preventing the bank from being repaid, an even worse impairment to its lending power: “From a lender’s perspective, a state law that eliminates a bank’s right to be repaid for a loan is a far greater ‘impairment’ than a state law that prohibits the bank from making that loan in the first place.” (Amend. Opp. 24 n.9.) There are at least two problems with this contention. First, U.S. Bank’s contention that Rees–Levering “eliminates” the bank’s right to be repaid lacks merit. Although the bank is prohibited from recovering the deficiency, nothing in the statute prevents the bank from pursuing other debt-collection remedies available under California law. Second, U.S. Bank’s challenge to Rees–Levering is particularly ironic given that the bank’s right to pursue a deficiency is an extraordinary remedy derived entirely from Rees–Levering. In general, California law prohibits lenders from seeking deficiency judgments against consumers. See Cal.Code Civ. Proc. § 580b (prohibiting the deficiency judgment in the sale of real property); Cal. Civ.Code § 1801 et seq. (prohibiting the availability of any deficiency judgment under a retail instalment contract for goods covered by the Act). The same was once true for lenders, such as U.S. Bank, in automobile sales contracts.
Judge Whelan next found that the possibility that some putative classmembers might have purchased their vehicles for commercial used and, thus, been exempt from Rees-Levering did not affect the Plaintiff’s motion, since that issue could play out at the damages phase of the trial.
Next, U.S. Bank contends Aguayo failed to demonstrate that absent class members purchased the vehicles for personal use because some members may have purchased their vehicles for primarily business use. (Amended Opp. 12.) U.S. Bank bases this contention on the following claims: (1) certain conditional sales contracts listed a business entity as the buyer; and (2) testimony from customer service representatives that post-repossession calls often involved concerned customers complaining that “they needed to get their vehicles back for use in their small businesses.” (Id. at 14–16.) These facts, without more, fail to raise a triable issue of material fact. In Ballard v. Equifax Check Servs., Inc., 158 F.Supp.2d 1163, 1172 (E.D.Cal.2001), plaintiff sought summary judgment on his claim that defendant’s practice of sending letters demanding an unauthorized $20.00 service charge violated the FDCPA. Id. at 1167. Similar to U.S. Bank’s argument here, the defendant opposed the motion, arguing the plaintiff failed to establish the transactions were consumer in nature and, thus, within the scope of the FDCPA. Id. at 1170. The court found evidence that the defendant categorized checks as either “personal” or “business” in its computerized database raised a “rebuttable presumption that the underlying transactions were personal in nature.” Id. at 1172–73. The court reasoned that the personal nature of the transaction did not prevent the court from deciding the motion in plaintiff’s favor, but explained that defendant would be permitted to proffer evidence to rebut the presumption on an individual basis during the damages stage of the litigation. Id. at 1173. Athough Ballard involved the FDCPA, this Court is persuaded by its reasoning. Similar to the plaintiff in Ballard, Aguayo has already demonstrated and this Court found that the conditional sales contracts can be segregated between personal and business use. (Class Cert. Order [Doc. 143] 15.) The personal use designations on the conditional sales contracts sufficiently establish that the class members purchased their vehicles primarily for personal use and fall within the provisions of Rees–Levering. For this reason, the Court rejects U.S. Bank’s argument.
Finally, the Court found that US Bank’s NOI violated Rees-Levering, and was inconsistent with Juarez.
U.S. Bank’s NOIs included a reinstatement block containing an itemization of the amount of deficiency up to the date of the notice and the sum of those items under the heading “Reinstatement.” (Aguayo Dec., Ex. 2 at 2.) Following the sum of the total deficiency, the notice states: “Plus payments and expenses that may become due or incurred during the period stated above.” (Id.) Section 2983.2(a)(2) provides “there is a conditional right to reinstate the contract until the expiration of 15 days from the date of giving or mailing the notice and all the conditions precedent thereto or that there is no right of reinstatement and provides a statement of reasons therefor.” Cal. Civ.Code § 2983.2 (emphasis added). California courts have interpreted the clause “all conditions precedent” to require a level of specificity sufficient to inform the buyer exactly what he or she must do to reinstate the contract without the need for inquiry. See Juarez v. Arcadia Financial, LTD, 152 Cal. App. 4th 889 (2007). The legislative intent behind Rees–Levering–” to provide more comprehensive protection for the unsophisticated motor vehicle [buyer]”–justifies this level of particularity. Id. at 901. . . .U.S. Bank does not dispute that its NOIs failed to include the following reinstatement conditions: (1) reinstatement payments to U.S. Bank must be made in guaranteed funds; (2) payment of a $15 law enforcement release fee; (3) payment of a $75 redemption fee to the repossession vendor; (4) payment of applicable storage fees; and (5) payment of late fees incurred after the date stated on the post-repossession notice and the next due payment. (MSJ P & A 6–9; Aguayo Dec., Ex. 2 at 2.) Thus, similar to the NOIs at issue in Juarez, U.S. Bank’s notices did not specifically state every amount and payment required to reinstate or specify the process through which those fees may be paid. Because U.S. Bank’s NOIs failed to include “all conditions precedent” to reinstatement, they did not comply with the disclosure requirements in section 2983.2(a). Moreover, U.S. Bank’s argument disregards that class members, by definition, are limited to those who purchased their vehicles primarily for personal use. (Class Cert. Order 16.) U.S. Bank’s argument is therefore tantamount to a challenge to the number of class members who will ultimately be entitled to damages. See Ballard, 158 F.Supp.2d at 1171. To the extent U.S. Bank has evidence indicating that certain borrowers misrepresented the primary purpose for their purchases and, therefore, are not members of the class, U.S. Bank may present its evidence during the damages phase of the litigation.