By Catherine C. Worthington and Anastasia V. Caton*

Repossessing vehicles from consumers is an activity fraught with legal risk. A Debtor who faces the loss of a vehicle can be furious and unpredictable, and repossession companies, unless carefully vetted, can be, shall we say, less than entirely punctilious when it comes to observing the pesky legal requirements that apply to these situations.

It sometimes seems that topics run in bunches for us. So it is with repossession cases this month. Let’s explore a couple of them to see what we can learn.

Patrick and Jennifer O’Connell sued Pursuit, LLC, and Primeritus Financial Services, Ind., for violating the Fair Debt Collection Practices Act and the Kentucky Consumer Protection Act and for negligence per se and conversion in connection with Pursuit’s repossession of their vehicle. The O’Connells moved for summary judgement on the FDCPA and negligence claims, and the defendants moved for summary judgement on the KCPA and conversion claims.

Because a violation of state laws triggers liability for an illegal repossession under both the FDCPA and Kentucky’s negligence per se statute, the federal trial court first considered whether the defendants violated Kentucky Revised Statutes 355.9-6.9, the state’s repossession stature under Article 9 of the Uniform Commercial Code.

The court found that the defendants elected to repossess the vehicle without judicial process. A repossessor may not breach the peace when it proceeds without judicial process.

One way a secured part can breach the peace is by enlisting the assistance of law enforcement without judicial approval. When Pursuit repossessed the O’Connells’ vehicle, a police officer was present, and he directly involved himself in the repossession by interacting with Patrick and the Pursuit employees.

The court noted that “[w]hether law enforcement confirmed Pursuit’s rights to repossess the truck is inconsequential. Nor does the court need to answer the question of whether law enforcement’s participation was the but-for cause of [Patrick] surrendering his truck. Instead, the court only asks if law enforcement’s connection gives any impression that the state is involved in the repossession.”

In this case, the court found that the state was involved. Therefore, the court concluded that the vehicle repossession violated Kentucky law by breaching the peace. Accordingly, the court granted summary judgement for the O’Connells on the FDCPA and negligence per se claims.

However, the court grant summary judgement for the defendants on the KCPA and conversion claims. The court rejected the KCPA claim because it requires “privity of contract” between the consumer and the provider of goods or services (“privity of contract” is a fancy legal term that means a contractual relationship). The court found that the O’Connells were not in a privity with Pursuit or Primeritus because they did not buy goods from them and did not enter into a contract with them. The vehicle financing was provided by SunTrust.

With respect to the conversion claim, the court concluded that the O’Connells did not support every element of the tort of conversion, specifically the element requiring that the defendants use the property for their own beneficial enjoyment. The court noted that collecting compensation for repossessing a vehicle does not satisfy this requirement.

Finally, the court granted the defendants’ motion to dismiss the O’Connells’ request for emotional and punitive damages.

In another case, this one from Ohio, George and Maria Oliver financed the purchase of their car through their credit union, but ARS Ohio LLC, a repossession company, acting on behalf of Westlake Services LLC, a sales finance company, repossessed the car.

Westlake had no business relationship with the Olivers. Instead, it mistakenly repossessed their car because the previous owner had defaulted on a credit agreement with Westlake. The Olivers eventually got their car back from ARS, with damage from improper towing.

The Olivers sued Westlake and ARS, claiming, among other things, that the two violated the Fair Debt Collection Practices Act and Ohio’s Consumer Sales Practices Act and that they committed a civil theft. Westlake moved to dismiss, and ARS moved for judgement on the pleadings.

The federal trial court denied the defendants’ motions on the Olivers’ FDCPA claims but granted their motions of the OCSPA and civil theft claims. ARS claimed that the Olivers could not bring a claim under the FSCPA because they were not “consumers,” a term that invludes only the person who owes or allegedly owes a debt. Westlake claimed that it was not a “debt collector” under the FDCPA.

The court first found that a plaintiff can still bring a claim for unfairness under Section 1692f of the FDCPA even if the plaintiff does not actually owe the debt. The court looked to the purpose of the FDCPA, which is to protect debtors and third parties from unconscionable debt collection practices. As a result the court found that the Olivers could bring their claim even though they were not in a credit relationship with Westlake or ARS.

Next, the court considered whether ARS and Westlake were debt collectors under the FDCPA. The court found that Westlake was not a debt collector because it was a creditor and that ARS was not a debt collector because its primary business was enforcing security interests. However, the court explained that a person who is not otherwise a debt collector is nonetheless subject to one provision of the FDCPA–Section 1692f(6), the provision under which the Olivers brought their claim. Section 1692f(6) makes it an unfair practice to repossess property when there is no present right to possession of the property. Because the Ovlers pleaded facts sufficient to show that ARS and Westlake violated Section 1692f(6), the court denied the defendants’ motions on the Olivers’ FDCPA claim.

The court next considered the Olivers’ OCSPA claim. A plaintiff can bring a claim against a defendant under the OCSPA only if the parties have a business relationship. Because the Olivers did not have a business relationship with either Westlake or ARS, the court dismissed their OCSPA claim.

Finally, the court considered the Olivers’ civil theft claim. In Ohio, civil theft occurs only when the defendant causes the plaintiff to execute a writing that disposes of or encumbers property or by which a monetary obligation is incurred. Because the Olivers presented no evidence that either Westlake or ARS had them execute any documents, and because they eventually got their car back, the court found that the Olivers failed to state a claim for civil theft. Accordingly, the court dismissed their civil theft claim.

Finance companies, banks, and credit unions care about the intricacies of repossession, but should dealers care? Certainly, buy-here, pay-here dealers should and, believe it or not, there are even occasions when a dealership might find itself in a position to exercise the right of repossession. These cases, and others like them, illustrate the potential pitfalls all these folks face when they elect to put a consumer’s car “on the hook.”

O’Connell v. Pursuit, LLC, 2019 U.S. Dist. LEXIS 17951 (E.D. Ky. February 5, 2019).

Olicer v. ARS Ohio LLC, 2019 U.S. Dist. LEXIS 13201 (N.D. Ohio January 28, 2019).

*Catherine C. Worthington is a managing editor at CounselorLibrary.com, LLC. She can be reached at 410.782.2349 or by email at cworthington@hudco.com. Anastasia V. Caton is a partner in the Washinton, D.C., officer of Hudson Cook, LLP. She can be reached at 202.715.2001 or by email at acaton@hudco.com.