Opinion
Order June 12, 2002.
Page 587
Joseph G. Murray, Wilkes-Barre, PA, for Plaintiff, Trustee.
William G. Schwab, Trustee in Bankruptcy, Lehighton, PA.
William Gibbons, Patrick E. Gibbs, Latham & Watkins, Chicago, IL, Charles J. Phillips, Baskin, Leisawitz, Heller & Abramowitch, P.C., Wyomissing, PA, for Defendants.
OPINION
JOHN J. THOMAS, Bankruptcy Judge.
On October 18, 2000, in disposing of cross-motions for summary judgment, I concluded that Sears, Roebuck & Co. (SRC) and Sears National Bank (SNB) were liable to the Trustee-Plaintiff, in a host of related litigations stemming from the changeover of credit cards from SRC to SNB. The details of that decision can be found in In re Derienzo, 254 B.R. 334 (Bankr.M.D.Pa.2000). With one exception, that decision disposed of the liability issues of this trial.
The Trustee's Complaint consisted of four Counts: (1) "Complaint to Determine Lien Status Under 11 U.S.C. § 506," (2) "Complaint for Violation under the Truth in Lending Act (15 U.S.C. § 1637 et seq.), Seeking Damages and Lien Avoidance," (3) "Complaint for Violation under the Pennsylvania Unfair Trade Practices and Consumer Protection Law" (73 P.S. § 201 et seq.), and (4) "Complaint under Plain Language Consumer Contract Act of the Commonwealth of Pennsylvania (73 P.S. § 2201 et seq.)." Counts 3 and 4 were disposed of by my grant of summary judgment in favor of the Defendants. Hereinafter, Truth in Lending Act is referred to as "TILA".
Count 1 of the Trustee's Complaint asked the Court to determine the lien status of SRC and SNB's claim vis-a-vis each Debtor. The documentation supplied at trial included language that each item charged stood as security for the contemporaneous obligation. The Trustee argues that the poorly formatted periodic statements render it virtually impossible to ascertain the balance due on individual secured items during the existence of two accounts. (See, for example, Transcript of 2/5/00 at 50-52.) The Trustee maintains that this is so extreme no determination of what is secured and what is not can be made. While the Trustee has not offered any evidentiary contest to the security interest as set forth in paragraph 12 of the SNB agreement, (Plaintiff's Exhibit P-12), the Trustee has challenged the lien based on vague assertions of "confusion" without advancing any specific example of inability to determine the security attached to a given obligation. The Trustee, as the Plaintiff, carries the burden on this issue and has simply failed to meet that task. Matter of Decker, 595 F.2d 185, 190 (3d Cir.1979). Accordingly, judgment should be entered in favor of the Defendants on this Count.
Having found liability on Count 2 regarding TILA, it is now incumbent upon me to adjudicate damages. In anticipation of this litigation, the parties stipulated that the underlying 200+ cases could be grouped into four principle categories by reference to the use of the charge card during a time when SNB was extending credit as well as the existence of any delinquency.
A. Category I--These actions involve Debtors' accounts which did not incur any charges after the May 1, 1995 transfer, whose finance charge designation on the monthly billing statement is "ALL," and which were delinquent at some time prior to the Debtors' bankruptcy petition date.
In its initial defense to the damage claim, SRC and SNB presented a dispositive motion to the Court to bar evidence on damages regarding Category I and II cases. It was stipulated that these categories of cases only involved one charge account advanced by SRC to each Debtor. That motion was taken under advisement prior to the trial. (Adversary Doc. No. 203A.) In opposition to that motion, the Trustee argues that merely because an individual Debtor did not utilize the line of credit tendered by SNB does not mean a violation of TILA did not occur. I believe the Trustee has misinterpreted my earlier holding. I did not find the disclosure documents were misleading. Rather, I found that monthly statements, as they pertained totwo accounts, did not comport with TILA. They did not have beginning or ending balances for each account. Neither did they identify what debits and credits were entered on each account. Accordingly, if there was but one account, there would have been no confusion by the periodic statements. According to the terms of credit issued by SNB, the SNB account did not exist until the consumer utilized the new SNB charge card. (Exhibit P-2 at 4.) Since categories one and two only pertained to the SRC account, no violation of TILA would have been found to exist based on my earlier findings. Thus, I now find in favor of SRC and SNB regarding liability and damages arising out of Category I and II cases.
Most emphatically, it is clearly the law that financial loss need not be demonstrated to claim damages under TILA. Dzadovsky v. Lyons Ford Sales, Inc., 593 F.2d 538, 539 (3d Cir.1979). Moreover, reliance on an improper disclosure statement is not material. Schnall v. Amboy Nat. Bank 279 F.3d 205, 2002 WL 104903 at *11 (C.A.3 (N.J.) 2002).
In a similar vein, SRC and SNB argue that damages should cease when one of the two accounts maintained by an individual Debtor was paid off. While this may sound logical, the Debtor was never told, orally or in writing, expressly or implicitly, that only one account remained. Presumably this was due to SRC and SNB's steadfast position that there was but one account. It was at the point that the two accounts were created that the periodic statements became misleading and the violations occurred. Those violations continued for the duration of the billing process thereafter since it would have been quite impossible for a consumer to calculate the ongoing account balance or balances without reference to information available only to SNB and SRC.
See testimony of SRC paralegal, Matthew Chamberlain, that payments were first applied to finance charges on SRC and SNB charges and then on the principal balance of the oldest billings. (Transcript of 2/6/01 at 75 and 112.)
SRC and SNB argue that the damages in this case are limited by the provisions of 15 U.S.C.A. § 1640(a)(2)(A)(i) to a cap of $1000 per claim.
§ 1640. Civil liability
For this proposition, they ask the Court to ignore the plain language of subparagraph (i) and rely on the 7th Circuit case of Strange v. Monogram Credit Card Bank of Georgia, 129 F.3d 943, 946 (7th Cir.1997) which implies that Congress, in its careless effort to expand coverage to violations of this nature, failed to properly articulate the limitations they "intended". This conclusion is demonstrably at odds with the fact that, since Strange pointed out this oversight in 1997, Congress has made no effort to address their so-called "error".
It is a fundamental principle of statutory construction that "[i]f Congress has mistakenly disguised its actual intent by incorporating language pointing in a different direction, it is not up to us to rewrite the statute unless, perhaps, a literal reading produces a truly absurd result." See Holy Trinity v. United States, 143 U.S. 457, 12 S.Ct. 511, 36 L.Ed. 226 (1892), Napotnik v. Equibank & Parkvale Savings Ass'n, 679 F.2d 316, 321 (3d Cir.1982). Moreover, trial courts are regularly reminded to apply the "plain meaning" of legislation. United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 242, 109 S.Ct. 1026, 1031, 103 L.Ed.2d 290 (1989); Connecticut Nat. Bank v. Germain, 503 U.S. 249, 254, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) (Congress "says in a statute what it means and means in a statute what it says there"); In re Continental Airlines, Inc., 932 F.2d 282, 287 (3d Cir.1991). Because there is nothing "absurd" when applying the plain meaning of the statute, I decline to limit damages to the sum of $1000 per account. In further support of this interpretation, I rely on the fact that TILA is remedial legislation and thus should be construed liberally in favor of the consumer. Ramadan v. Chase Manhattan Corp., 156 F.3d 499, 502 (3d Cir.1998). Any ambiguities in interpretation should be resolved in favor of the Plaintiff. Rossman v. Fleet Bank (R.I.) Nat. Ass'n, 280 F.3d 384 (3d Cir.2002).
The trustee has submitted much information on the finance charge pertaining to various cases. Nevertheless, it appears that the confluence of the limitations period of TILA claims, (one year pursuant to 15 U.S.C.A. § 1640(e)), and the statutory extension period provided by 11 U.S.C. § 108, necessarily limit the attributable finance charge to one year prior to bankruptcy. Schmidt v. Citibank (South Dakota), N.A., 677 F.Supp. 687, 690-691 (D.Conn.1987).
SRC and SNB have argued that, when internal accounting assesses a specific period of nonpayment, then the account is deemed "uncollectible" and the account ceases accruing finance charges. Their argument continues that, since they no longer accrue finance charges, then no basis for additional damage can be supported under 15 U.S.C.A. § 1640(a)(2)(A)(i). (Transcript of 2/6/01 at 132-136.)
The exhibits submitted by the parties include credit card agreements which provide for the accrual of finance charges on average daily balances. My attention has not been drawn to any provision in the agreement that would suspend the accrual of finance charges by reason of any extended period of nonpayment. Moreover, the record includes no indication that individual consumers were told that additional finance charges were waived by either SRC or SNB. Furthermore, I am aware of no legal bar to a creditor, after the fact, recalculating an obligation to include all finance charges provided by the original contract, notwithstanding inconsistent interim calculations. I conclude that the finance charge provided by the original agreements should represent the fair measure of statutory damages under § 1640(a)(2)(A)(i). An itemization of those finance charges is attached as Appendix "A". Such finance charges are calculated in Category III and IV cases only since it is these cases where SNB charges were incurred while there remained an outstanding SRC balance. Periodic statements issued thereafter would have been confusing and violative of TILA. Moreover, I have limited damages to the time period occurring within one year of the bankruptcy filing date pursuant to the limitation period present in section 1640(e). These finance charges are doubled in arriving at the proper award in these cases as mandated by section 1640(a)(2)(A)(i).
Section 1640(a)(3) of TILA provides that the liability of the Defendants in a successful action brought by the Trustee should include the costs of the action as well as reasonable legal fees.
In determining the amount of reasonable legal fees, it is fairly well established the starting point to utilize should be calculated by using the "lodestar" method. As pointed out by our Circuit, such a calculation "assures counsel undertaking socially beneficial litigation ... an adequate fee irrespective of the monetary value of the final relief achieved" while also "avoiding subjective evaluations of the monetary worth of the intangible rights." In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768, 821 (3d Cir.1995), cert. denied, 516 U.S. 824, 116 S.Ct. 88, 133 L.Ed.2d 45 (1995).
My review of the itemization of the fees, together with the fact that there was virtually no challenge to their legitimacy, satisfies me that attorneys' fees should be awarded in Category III and IV cases as well as in advancing this litigation. An itemization of said fees are attached as Appendix "B".
Due to the difficulties involved in calculating individual judgments regarding these consolidated proceedings, final judgment(s) shall be deferred pending a telephone conference with the parties hereby scheduled for Monday, April 29, 2002 at 9:30 o'clock a.m. The Court will initiate the telephone conference and the following parties will be contacted by a teleconferencing service at the numbers listed: William Schwab, Esq. and/or Michele Wolfe, Esq. at # 610-377-5200; Joseph Murray, Esq. at # 570-822-1959; William J. Gibbons, Esq. and/or Patrick E. Gibbs, Esq. at # 312-876-7700; and Charles J. Phillips, Esq. at # 570-372-8427.
ORDER
On May 8, 1998, pursuant to Federal Rules of Bankruptcy Procedure 7042, the parties entered into a stipulation agreeing to consolidate over 200 trials. The Court issued a decision on October 18, 2000 disposing of virtually all of the liability questions and scheduling a consolidated trial on damages. That decision on damages was rendered on April 15, 2002 and the parties were invited to assist in drafting dispositive judgment(s), to streamline the administration of individual cases and/or to facilitate a possible appeal. In apparent disagreement as to the extent of the consolidation stipulation, a Motion for Entry of Consolidated Judgment was filed by the Defendants, which was opposed by the Plaintiff.
The extent of consolidation is decided on a case-by case-approach. Bergman v. Atlantic City, 860 F.2d 560, 566 (3d Cir.1988). Because of what was stipulated to be the substantial similarity of facts and common questions of law and because all outstanding issues have been addressed in the liability and damage opinions, I conclude that the pending Motion of the Defendants to consolidate should be denied as being unnecessary since the earlier Order of consolidation was effective for all purposes, including judgment. (Doc. # 80A, Adv. No. 5-96-00248A.)
Judgment was rendered in favor of the Defendants on Counts 3 (Consumer Protection Law) and 4 (Plain Language Consumer Contract Act) of all Complaints, by virtue of my earlier disposition of a Summary Judgment Motion. In re Derienzo, 254 B.R. 334 (Bankr.M.D.Pa.2000). Furthermore, for the reasons set forth in opinions of October 18, 2000, and April 15, 2002, judgment is rendered in favor of the Defendants on Count 1(lien avoidance) in all cases. With regard to Count 2 (Truth in Lending), judgment is rendered in favor of the Defendants in all Category I and II cases, and judgment is rendered in favor of the Plaintiff and against the Defendants on Count 2 of all Category III and IV cases in the total amount of $150,565.18 as apportioned in the damage opinion of April 15, 2002. Attorney fees are awarded to the office of William G. Schwab and Associates in the amount of $134,758.70 together with costs of $31,349.45; and to Attorney Joseph G. Murray in the amount of $30,768.02 together with costs of $85.52, all of which is more specifically set forth in the April 15, 2002 opinion of this Court. APPENDIX "A"
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TABULAR OR GRAPHIC MATERIAL SET AT THIS POINT IS NOT DISPLAYABLE TABULAR OR GRAPHIC MATERIAL SET AT THIS POINT IS NOT DISPLAYABLE TABULAR OR GRAPHIC MATERIAL SET AT THIS POINT IS NOT DISPLAYABLE
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B. Category II--These actions involve Debtors' accounts which did not incur any charges after the May 1, 1995 transfer, whose finance charge designation on the monthly billing statement is "ALL," and which remained current up to the time of the Debtors' bankruptcy petition date.
C. Category III--These actions involve Debtors' accounts which incurred charges both before and after the May 1, 1995 transfer, whose finance charge designation on the monthly billing statement is "ALLOCATED" between SEARS, ROEBUCK AND CO. and SEARS NATIONAL BANK, and which remained current up to the Debtors' bankruptcy petition date.
D. Category IV--These actions involve Debtors' accounts which incurred charges both before and after the May 1, 1995 transfer, whose finance charge designation on the monthly billing statement is "ALLOCATED" between SEARS, ROEBUCK AND CO. and SEARS NATIONAL BANK, and which were delinquent at some time up to the Debtors' bankruptcy petition date.
In re Derienzo, 254 B.R. at 338.
(a) Individual or class action for damages; amount of award; factors determining amount of award
Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part, including any requirement under section 1635 of this title, or part D or E of this subchapter with respect to any person is liable to such person in an amount equal to the sum of
(1) any actual damage sustained by such person as a result of the failure;
(2)(A) (i) in the case of an individual action twice the amount of any finance charge in connection with the transaction, (ii) in the case of an individual action relating to a consumer lease under part E of this subchapter, 25 per centum of the total amount of monthly payments under the lease, except that the liability under this subparagraph shall not be less than $100 nor greater than $1,000, or (iii) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $200 or greater than $2,000; ...
15 U.S.C.A. § 1640(a)