United States District Court, D. Oregon, Eugene Division
JOSEPH FRANK MENDOZA, MARTIN and CAROL JOCKS, DAWN CAVEYE and GINA and DANA DALTON, individually and on behalf of all others similarly situated, Plaintiffs,
LITHIA MOTORS, INC., LITHIA FINANCIAL CORPORATION, SALEM-V, LLC d/b/a VOLKSWAGEN OF SALEM, LITHIA KLAMATH, INC. d/b/a LI THIA KLAMATH FALLS AUTO CENTER, and LITHIA MEDFORD HON, INC. Defendants.
OPINION AND ORDER
Aiken United States District Judge
bring this putative class action suit against defendants
Lithia Motors, Inc., et al. ("Lithia"), asserting
various claims, including common law fraud, violations of the
federal Truth in Lending Act ("TILA"), Oregon's
Unlawful Trade Practices Act ("UTPA"), and
Oregon's financial elder abuse statute. On June 19, 2017,
1 granted plaintiffs' Motion for Leave to File Third
Amended Complaint ("TAC") (doc. 40). Defendants now
move to dismiss certain claims contained therein. For the
reasons discussed below, Lithia's motion is GRANTED IN
PART and DENIED IN PART.
following facts are taken from plaintiffs' TAC; they are
accepted as true and construed in the light most favorable to
plaintiffs for purposes of this motion, Skilstaf Inc. v.
CVS Caremark Corp., 669 F.3d 1005, 1014 (9th Cir. 2012).
The named plaintiffs are residents of Oregon or California,
who purchased vehicles and other goods or services from one
or more of the defendants, all of which are headquartered in
about June 6, 2016, plaintiff Joseph Frank Mendoza purchased
a vehicle from Lithia at its Volkswagen of Salem dealership.
The dealership arranged for vehicle financing with an
interest rate of 3.94%, a higher rate than provided by the
lender, In doing so, Lithia retained what plaintiffs term a
kickback in connection with the arrangement of financing.
Lithia also sold Mr. Mendoza products and services obtained
through third parties. Specifically, Mr. Mendoza paid Lithia
$2, 495.00 for a vehicle service contract and $695.00 for gap
insurance; both amounts exceeded Lithia's actual purchase
price. Lithia purchased the service contract for $995 and the
gap insurance for $278 and retained the difference as profit.
Lithia did not disclose its specific fees associated with the
arrangement of financing or the profit margins related to the
sale of third-party products and services.
February 2013, plaintiffs Carol and Martin Jocks purchased a
vehicle from a Lithia dealership in Klamath Falls, Oregon.
Then, in August 2013, the Jocks purchased another vehicle
from the same dealership. Carol Jocks was over the age of
sixty-five at the time of the purchases. Because the facts
surrounding both transactions are identical or substantially
similar, I will limit discussion to the latter of the two. In
August 2013, Lithia arranged for vehicle financing at an
interest rate of 3.99%, a higher rate than provided by the
lender. In doing so, Lithia retained a fee in connection with
the arrangement of financing. Lithia also sold the Jocks
products and services obtained through third parties. For
example, the Jocks purchased a lifetime oil service for $899,
credit life insurance for $2, 644.05, and gap insurance for
$435; each charge exceeds Lithia's actual purchase price.
Lithia purchased the lifetime oil service for $449.50, credit
life insurance for $1, 718.63, and gap insurance for $285;
Lithia then sold these products to the Jocks and retained the
difference as profit. Lithia did not disclose its specific
fees associated with the arrangement of financing or the
profit margins related to the sale of third-party products
Caveye and Dalton also purchased vehicles from Lithia, in
November 2014 and May 2016 respectively. The circumstances
surrounding these purchases are largely similar to those
mentioned above. In both instances, Lithia arranged for
financing and sold third-party products/services to
plaintiffs. In both instances, Lithia retained and did not
disclose fees associated with the arrangement of financing or
profits related to the sale of third-party products and
24, 2016, plaintiffs filed this class action suit. On
September 22, 2016, defendants moved to dismiss
plaintiffs' claims. In ruling on defendants' motion,
I dismissed various claims by plaintiff, but I also granted
plaintiffs leave to amend their complaint. Since the original
filing, I have granted plaintiffs leave to amend on three
separate occasions. Now, in response to plaintiffs' TAC,
defendants again move to dismiss certain claims, all of which
are discussed below.
Rule 12(b)(6), a complaint must contain sufficient factual
allegations, which, if assumed to be true, "state a
claim for relief that is plausible on its face."
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007). A claim is plausible on its face if the factual
allegations in the complaint allow a court to reasonably
infer the defendant's liability based on the alleged
conduct. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). The factual allegations in the complaint must present
more than the mere possibility of misconduct, id. at
679, and more than a "formulaic recitation of the
elements of a cause of action." Tombly, 550
U.S. at 555.
TILA Disclosure Requirements
allege that Lithia failed to meet the disclosure requirements
under TILA in relation to two courses of conduct: (1) sale of
third party products and (2) arrangement of financing.
general matter, the pmpose of TILA is to "assure a
meaningful disclosure of credit terms so that the consumer
will be able to compare more readily the various credit terms
available to him and avoid the uninformed use of
credit." 15 USC § 1601(a). In accordance with this
puipose, TILA requires creditors to, among other things, make
certain disclosures to borrowers. A complete list of the
items TILA requires a creditor to disclose is found in both
the statute and what is commonly known as Regulation Z.
See, e.g., 15 U.S.C. § 1638(a); 12 C.F.R.
§ 226.18. The list of required disclosures includes
items such as the "amount financed, " the
"finance charge, " and the "annual percentage
rate." 15 U.S.C. § 1638(a); 12 C.F.R. §
226.18. Additionally, and of particular relevance to this
case, TILA requires creditors to disclose "each amount
that is or will be paid to third persons by the creditor on
the consumer's behalf, together with an identification of
or reference to the third person." 15 U.S.C. §
l638(b)(iii); 12 C.F.R. § 226.l8(c)(iii).
Sale of Third Party Products
with respect to the sales of third-party products, plaintiffs
allege that defendants "failed to properly disclose to
consumers that a portion of the amount paid was retained by
Lithia." Third Am. Compl. ¶ 94. Plaintiffs further
allege that "Lithia did not itemize each amount that is
or will be paid to third persons by the creditor on the
consumer's behalf, together with an identification of or
reference to the third persons." Id.
simply stated, plaintiffs allege that Lithia failed to
disclose that certain amounts, identified in the retail
installment contracts as "amounts paid to others, "
were actually retained by Lithia. Id. The issue
before me, then, is whether such a failure to disclose is
impermissible under TILA. Importantly, the Federal Reserve
has issued specific guidance to creditors in relation to
requirements imposed by 15 U.S.C, § 1638(b) ...