TILA - disclosure violations - actual damages - detrimental reliance
The District Court, following persuasive authority from our sister courts of appeals, concluded that detrimental reliance was required, and granted summary judgment for defendant because plaintiff failed to plead and could not prove detrimental reliance. We will affirm.
In fact, every court of appeals that has spoken on this issue has required a showing of detrimentalreliance.5 Most district courts are in accord.6
Courts of appeal cases 5Kline, 557 F.3d 285, 297 (6th Cir. 2009) (“[A]ctual damages require a showing of detrimental reliance.”); McDonald v. Checks-N-Advance, Inc. (In re Ferrell), 539 F.3d 1186, 1192 (9th Cir. 2008) (finding no valid basis to overturn the rule requiring a showing of detrimental reliance to establish actual damages); Gold Country Lenders v. Smith (In re Smith), 289 F.3d 1155, 1157 (9th Cir. 2002) (“We join with other circuits and hold that in order to receive actual damages for a TILA violation . . . a borrower must establish detrimental reliance.”); Turner v. Beneficial Corp., 242 F.3d 1023, 1028 (11th Cir. 2001) (en banc) (“We hold that detrimental reliance is an element of a TILA claim for actual damages . . . .”); Perrone v. Gen. Motors Acceptance Corp., 232 F.3d 433, 434–40 (5th Cir. 2000) (holding that detrimental reliance is an element of a claim for actual damages and rejecting numerous arguments to the contrary); Stout v. J.D.Byrider, 228 F.3d 709, 718 (6th Cir. 2000) (affirming the denial of class certification based on the need for individualized assessment of whether “each putative class member relied upon false representations or failures to disclose”); Peters v. Jim Lupient Oldsmobile Co., 220 F.3d 915, 917 (8th Cir. 2000) (requiring a showing of proximate causation and adopting a four-prong reliance test for establishing actual damages); Bizier v. Globe Fin. Servs., Inc., 654 F.2d 1, 4 (1st Cir. 1981) (noting in dicta the need to show causation for an award of actual damages “in addition to a threshold showing of a violation of a TILA requirement”).
District court cases 6 Inc., No. 04-2474, 2005 WL 1398512, at *9–10 (D.N.J. June 13, 2005); Nevarez v. O’Connor Chevrolet, Inc., 303 F. Supp. 2d 927, 934 (N.D. Ill. 2004); In re Currency Conversion Fee Antitrust Litig., 265 F. Supp. 2d 385 (S.D.N.Y. 2003); Cannon v. Cherry Hill Toyota, Inc., 161 F. Supp. 2d 362 (D.N.J. 2001); Anderson v. Rizza Chevrolet, Inc., 9 F. Supp. 2d 908, 913–14 (N.D. Ill. 1998); Brister v. All Star Chevrolet, Inc., 986 F. Supp. 1003, 1008 (E.D. La. 1997); Barlow v. Evans, 992 F. Supp. 1299, 1301 (M.D. Ala. 1997); Cirone-Shadow v. Union Nissan, 955 F. Supp. 938, 943 (N.D. Ill. 1997); Wiley v. Earl’s Pawn & Jewelry, Inc., 950 F. Supp. 1108, 1114–15 (S.D. Ala. 1997); Adiel v. Chase Fed. Sav. & Loan Ass’n, 630 F. Supp. 131, 133–35 (S.D. Fla. 1986), aff’d, 810 F.2d 1051 (11th Cir. 1987); McCoy v. Salem Mortgage Co., 74 F.R.D. 8, 12–13 (E.D. Mich. 1976). But see Lopez v. Orlor, 176 F.R.D. 35, 40 (D. Conn. 1997) (granting class certification and rejecting the argument that TILA plaintiffs cannot recover actual damages unless they could have gotten more favorable terms elsewhere); Sutliff v. County Sav. & Loan Co., 533 F. Supp. 1307, 1313 (N.D. Ohio 1982) (measuring actual damages to be the difference between the improperly increased interest rate and the original interest rate); In re Russell, 72 B.R. 855, 857 (Bankr. E.D. Pa. 1987) (concluding that actual damages are available for “substantial” TILA violations without the need to prove detrimental reliance).
What constitutes detrimental reliance not decided - This case does not present an occasion to evaluate which specific facts and circumstances constitute detrimental reliancebecause Vallies does not contend that he relied on Sky Bank’s disclosure violations. Because we find that a showing of detrimental reliance is required to recover actual damages for a TILA disclosure violation, and Vallies neither pled nor made such showing, the grant of summary judgment was proper on the claim for actual damages.19
19The District Court supported its grant of summary judgment by reciting a four-prong test from the Eighth Circuit: “a plaintiff must show that ‘(1) he read the TILA disclosure statement; (2) he understood the charges being disclosed; (3) had the disclosure statement been accurate, he would have sought a lower price; and (4) he would have obtained a lower price.’” Mem. Order at 10 (citing Peters, 220 F.3d at 917). No doubt a plaintiff who can satisfy the Peters test will successfully establish detrimental reliance. Although Peters has been influential in many courts, including those in our circuit, e.g., Cannon v. Cherry Hill Toyota, Inc., 161 F. Supp. 2d 362 (D.N.J. 2001), others have used different language. For accuracy-of-disclosure violations like the ones presented here of determining actual (in contrast to statutory) damages.”). In sum, we have never rejected the requirement of detrimental reliance to recover actual damages for TILA disclosure violations.
For accuracy-of-disclosure violations like the ones presented here, other courts have held that detrimental reliance can be shown where plaintiffs can establish that they would have foregone the loan completely had they received and reviewed an accurate disclosure. See, e.g., United States v. Petroff-Kline, 557 F.3d 285, 297 (6th Cir. 2009) (“To establish detrimental reliance, the debtor must demonstrate that he or she would either have received a better interest rate for the loans elsewhere or would have elected not to take the loan had the required information been available.”); McDonald v. Checks-N-Advance, Inc. (In re Ferrell), 539 F.3d 1186, 1192 (9th Cir. 2008) (“The consumer must show that she ‘would either have secured a better interest rate elsewhere, or foregone the loan completely.’” (quoting Gold Country Lenders v. Smith (In re Smith), 289 F.3d at 1157)); Stout v. J.D. Byrider, 228 F.3d 709, 718 (6th Cir. 2000). Nevertheless, plaintiff here does not assert and cannot prove he detrimentally relied. This case does not present the occasion to formulate factors that may constitute detrimental reliance.