Garcia v. Dezba Asset Recovery, Inc.

Background

Christopher Garcia sued Dezba Asset Recovery, Inc. and Capital One Auto Finance, Inc. He alleged that the defendants illegally repossessed his 2018 Dodge Challenger, breached the peace during the repossession, and induced him to make a payment before repossessing the vehicle anyway. His claims included an alleged violation of Section 1692f of the Fair Debt Collection Practices Act, unlawful repossession under New York’s Uniform Commercial Code, conversion, and deceptive business practices under New York General Business Law § 349.

Garcia alleged that he had fallen behind on his vehicle-loan payments after losing income during the pandemic. On January 7, 2022, he said, a Capital One representative told him he could enter a six-month temporary payment-reduction plan by making a good-faith payment of $262.63. Capital One’s January 12 email stated that Garcia needed to make that payment by January 16 and then sign and return an agreement letter to complete enrollment. Garcia made the payment on January 14 but alleged that he never received the agreement letter. On February 7, at about 2:30 a.m., a Dezba employee attempted to tow the vehicle. Garcia confronted the employee and objected, but the employee continued the repossession.

Materials Considered on the Motion

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint adequately states a legal claim. The court considered the original retail installment contract because Garcia relied on it and referred to it in his complaint. The court also considered Capital One’s email because the complaint quoted it directly. The court did not consider the temporary payment-reduction agreement because Garcia alleged that he did not receive it until the defendants attached it to their motion, so he could not have relied on it in preparing the complaint.

Unlawful Repossession and the Alleged Payment Plan

The court held that Garcia had not plausibly alleged that the temporary payment-reduction plan cured his default. The email stated that Garcia had to make the good-faith payment to move forward with enrollment and then sign and return the agreement letter to complete enrollment. The court treated signing and returning the letter as a condition that had to occur before enrollment was complete. Because Garcia did not allege that he signed and returned the letter, he did not plausibly allege that a binding agreement cured his default.

The court also held that the original contract’s no-oral-modification provision required any modification to be in writing and signed by Capital One. The temporary payment plan would have changed the payment obligations under the original contract and therefore was a modification, not a separate new loan program. The email did not contain a name or signature and therefore did not satisfy the signature requirement. Garcia’s payment also did not qualify as partial performance that could overcome the requirement, because paying a lesser amount was consistent with making a payment toward the original debt and was not conduct referring only to the alleged modification.

Because Garcia did not plausibly allege a modification that cured his default, the court concluded that he had not plausibly alleged that the defendants lacked a present right to repossess the vehicle.

Breach of the Peace

New York law permits a secured party to repossess collateral after default without judicial process if it does not breach the peace. The court recognized that New York courts had not clearly resolved whether repossessing a vehicle over the owner’s verbal objection, without more, constitutes a breach of the peace. The court found persuasive decisions holding that an objection alone is insufficient unless accompanied by facts suggesting violence, threats, force, or public distress.

Garcia alleged that he confronted the Dezba employee and verbally objected to the repossession. He did not allege facts approaching the force, threats, trespass-related conduct, or other aggravating circumstances present in cases where courts found a breach of the peace. The court therefore concluded that Garcia had not stated a sufficient breach-of-the-peace claim.

Fair Debt Collection Practices Act

Section 1692f(6) of the Fair Debt Collection Practices Act prohibits certain nonjudicial efforts to take collateral when the debt collector lacks a present right to possess it. The court concluded that Garcia had not plausibly alleged that Dezba lacked that right because he had not plausibly alleged either that the payment plan cured his default or that the repossession involved a breach of the peace. The court dismissed the Fair Debt Collection Practices Act claim.

Conversion

A conversion claim requires a possessory interest in property and unauthorized control over or interference with that property. Because Garcia had not plausibly alleged that the payment plan cured his default, the court concluded that he had not plausibly alleged a superior possessory right to the vehicle. The court dismissed the conversion claim.

New York General Business Law § 349

Section 349 prohibits materially misleading, consumer-oriented conduct in business, trade, or commerce. Garcia alleged that Capital One tricked him into making the reduced payment by telling him that the payment was all he needed to make, then repossessed the vehicle. The court concluded that the defendants’ motion did not adequately address this separate theory against Capital One. It therefore denied the motion as to Garcia’s Section 349 claim against Capital One.

The court reached a different result for Dezba because Garcia did not allege that Dezba engaged in consumer-oriented conduct that was materially misleading. The court granted the motion as to the Section 349 claim against Dezba.

Disposition

The court stated that the motion was denied in part and granted in part. It granted the motion as to Garcia’s unlawful-repossession, Fair Debt Collection Practices Act, and conversion claims, and as to the Section 349 claim against Dezba. It denied the motion as to the Section 349 claim against Capital One. Because this was the first adjudication of the claims on the merits, the court dismissed the dismissed claims without prejudice and allowed Garcia 30 days to file a third amended complaint alleging additional facts and addressing the identified deficiencies. The court also scheduled a status conference for May 10, 2023.