McClain v. AC Motors

Background

Kremeaka D. McClain, representing herself, purchased and financed a vehicle through AC Motors and Flagship Credit Acceptance LLC. She filed a state-court complaint alleging that the defendants violated the Truth in Lending Act by including a finance charge but not including insurance in that charge. She cited 15 U.S.C. §§ 1601, 1605, and 1611. The defendants removed the case to federal court.

McClain filed two motions for default judgment, arguing that the defendants had not responded within 21 days. The defendants filed a motion to dismiss seven days after removal. Documents attached to the filings showed that McClain signed the vehicle financing agreement on February 23, 2019, and that the agreement stated no insurance had been purchased from the defendants. An insurance acknowledgment indicated that McClain could obtain insurance from a company of her choice and that she chose Progressive Direct Insurance.

Default-judgment motions

The court denied both motions for default judgment. Under the federal rules, a defendant who had not answered before removal had seven days after removal to answer or raise defenses. The defendants removed the case on September 30, 2021, and filed their motion to dismiss on October 7, 2021. The court therefore found that they responded on time and were not in default. The court also found that additional facts and claims raised in McClain’s second motion, including allegations concerning fraud and identity theft, did not establish entitlement to default judgment.

Motion to dismiss

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. The court considered the complaint and documents whose contents were part of or necessarily connected to the pleadings.

Section 1605 claim. McClain alleged that the defendants violated 15 U.S.C. § 1605 by failing to include insurance in the finance charge. The court gave three reasons for dismissing this claim. First, the Truth in Lending Act provides a one-year deadline for a civil action. The alleged violation occurred when McClain purchased and financed the vehicle on February 23, 2019, but she filed the action on August 30, 2021. Second, the complaint did not allege that McClain purchased insurance payable directly or indirectly through the defendants, so it did not allege facts showing that the defendants had to include insurance in the finance charge. Third, the financing agreement and insurance acknowledgment showed that McClain obtained insurance from a third party rather than from or through the defendants. The court concluded that this insurance was not part of the finance charge covered by § 1605.

Section 1611 claim. The court dismissed McClain’s claim under 15 U.S.C. § 1611 because that provision imposes criminal liability for willful and knowing violations of the Truth in Lending Act but does not create a private right of action—a right for an individual to sue under the provision. The court noted that the Act’s civil-liability provision is 15 U.S.C. § 1640(a).

Section 1601 claim. The court dismissed McClain’s claim under 15 U.S.C. § 1601 because that section states congressional findings and the Act’s purposes but does not impose an obligation that a consumer can privately enforce.

Disposition

Judge Tunheim ordered that McClain’s two motions for default judgment were DENIED, the defendants’ motion to dismiss was GRANTED, and the action was DISMISSED with prejudice. The court directed that judgment be entered accordingly.