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Brian K. Cosgrove, On Behalf of Himself and All Others Similarly Situated v. Citizens Automobile Finance

August 25, 2011

BRIAN K. COSGROVE, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
CITIZENS AUTOMOBILE FINANCE, INC.,
DEFENDANT.



The opinion of the court was delivered by: Schiller, J.

MEMORANDUM

Plaintiff moves for final approval of a class action settlement involving allegedly defective repossession notices Defendant Citizens Automobile Finance, Inc. ("CAF") sent to Pennsylvania automobile purchasers. Class counsel has also moved for attorneys' fees, reimbursement of costs and expenses, and for an incentive award for Brian Cosgrove. After a fairness hearing conducted on August 18, 2011 pursuant to Federal Rule of Civil Procedure 23(e), the Court will grant these motions.

I. BACKGROUND

A. Class Claims

Plaintiff filed this action on behalf of himself and similarly situated consumers, alleging that CAF violated Pennsylvania law when it sent class members defective automobile repossession notices after they fell behind on payments and had their cars repossessed. The class members all entered into automobile finance contracts which stated, "[i]f the vehicle has been repossessed, you may reinstate this Contract and the vehicle will be returned to you provided you pay all past due payments or agree with us on mutually satisfactory arrangements, plus accrued late charges . . ." (Am. Compl. Exs. A, B [Cosgrove Finance Contracts].) Despite this language, CAF sent class members notices that either demanded the entire amount due on the contract (not just past due payments) or were sent no notice at all.

Under Pennsylvania law, "[e]very aspect of a disposition of collateral, including the method, manner, time, place and other terms, must be commercially reasonable." 13 Pa. Cons. Stat. § 9610(b). Furthermore, "a secured party that disposes of collateral under § 9610 (relating to disposition after default) shall send . . . a reasonable authenticated notification of disposition." 13 Pa. Cons. Stat. § 9611(b). The Pennsylvania Uniform Commercial Code ("UCC") does not define "reasonable" notice, but Pennsylvania courts define the term by looking to statutes governing vehicle finance and repossession. See Indus. Valley Bank and Trust Co. v. Nash, 502 A.2d 1254, 1263 (Pa. Super. Ct. 1985). The relevant section of Pennsylvania's Motor Vehicle Sales Finance Act ("MVSFA") states:

[w]hen repossession of a motor vehicle, which is the subject of an installment sale contract, is effected otherwise than by legal process, the holder shall immediately furnish the buyer with a written 'notice of repossession' . . . . [that] shall set forth the buyer's right as to reinstatement of the contract, if the holder extends the privilege of reinstatement and redemption of the motor vehicle [and] shall contain an itemized statement of the total amount required to redeem the motor vehicle. 69 Pa. Cons. Stat. § 623D; see Nash, 502 A.2d at 1263 (nothing that Article 9 and the MVSFA should be construed together). The class alleges that the repossession notices - or lack thereof - ran afoul of the UCC because they did not properly set forth consumers' reinstatement rights, and in many cases overstated consumers' obligations.

Pennsylvania law provides for recovery of statutory damages for failure to comply with Article 9. 13 Pa. Cons. Stat. § 9625(c)(2) states:

If the collateral is consumer goods, a person that was a debtor or a secondary obligor at the time a secured party failed to comply with this chapter may recover for that failure in any event an amount not less than the credit service charge plus 10% of the principal amount of the obligation or the time price differential plus 10% of the cash price.

Accordingly, the class submits that damages are easily calculated by applying a uniform formula.

B. Class Composition

Upon considering Plaintiff's unopposed class certification motion, the Court preliminarily certified the following settlement class on June 20, 2011, which includes approximately 1,800 Pennsylvanians:

(a) All persons who entered into a Pennsylvania Retail Installment Sales Contract ("RISC") for the purchase and financing of a motor vehicle;

(b) Who purchased the vehicle primarily for consumer use;

(c) Where the RISC was assigned to or the auto was otherwise financed by Citizens Automobile Finance, Inc., or any similar name under which Defendant did business (collectively, "Citizens");

(d) In which the RISC stated in part, "if the vehicle has been repossessed, you may reinstate this Contract and the vehicle will be returned to you provided you pay all past due installments . . .";

(e) Who had their vehicle(s) repossessed by or at the behest of Citizens; and

(f) Between March 25, 2005, and the date of the signing of this Order:

(i) were sent a notice of repossession or comparable post-repossession notice of plan to sell property from CAF ("Class Notice") which stated substantially as follows:

(1) "You may redeem the vehicle by paying the entire amount you owe on the Contract (not just past due payments) plus, to the extent permitted by law, the cost of taking and storing the vehicle, and other expenses that we incurred"; or

(2) "State law may permit you to get it back (redeem) [or "reinstate"] by curing any payment or other default(s) within the time allowed in the cure notice. If state law does not permit you to cure your default(s) in this manner, you may redeem the vehicle by paying the entire amount you owe on the contract (not just past due payments) . . ."; or

(ii) were sent no Class Notice at all.

C. Class Settlement

The significant terms of the class settlement are as follows:

1. CAF has paid $2.9 million into a settlement fund, which will be used to pay class members, class counsel fees and costs, and administration expenses.

2. Class memberswill receive a pro rata share of the settlement fund after the deduction of court-approved attorneys' fees, costs, and administration.

3. CAF will release all class members with a post-repossession deficiency balance claimed by CAF. The aggregate deficiency balances approximate $7.75 million.

4. CAF will satisfy any outstanding monetary judgments it presently holds against class members related to claimed deficiency balances due. CAF will use its best efforts ensure that any judgments previously entered against class members have been satisfied or released.

5. CAF will cease all collection activity on any deficiency balance allegedly ...


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