Editor's Note: The Commercial Law League of America's Board of Governors authorized the submission of an amicus curiae brief before the U.S. Supreme Court in the case of Koons Buick Pontiac GMC, Inc. (Petitioner) vs. Bradley Nigh (Respondent). The brief was prepared by CLLA member Manuel H. Newburger of the Austin, Texas law firm of Barren & Newburger, P.C. Counsel for the petitioner and respondent stated they were not opposed to the filing of the brief and it was filed with the U.S. Supreme Court. Oral arguments will be scheduled for the Court's term beginning in October 2004. Following is the argument presented in the brief.
Question prresented
Whether the $1,000 statutory limit originally adopted in 1968 as a cap on the Truth in Lending Act (TILA) recoveries under 15 U.S.C. ยง 1640(a)(2)(A)(i) has been rendered inapplicable to that subpart by subsequent amendments to section 1640(a)(2)(A), so that parties who suffer no actual damages may now recover far in excess of the previous $1,000 cap.
Argument
Introduction
Prior to a 1995 amendment, 15 U.S.C. ยง 1640(a)(2)(A) provided that a creditor who violated the Truth in Lending Act (TILA) was liable in an amount equal to the sum of:
(i) in the ease of an individual action twice the amount of any finance charge in connection with the transaction, or (ii) in the case of an individual action relating to a consumer lease under part E of this subchapter, 25 percentum of the total amount of monthly payments under the lease, except that the liability under this subparagraph shall not be less than $100 nur greater than $1,000.
Prior to the 1995 amendment, the Court of Appeals for the Fourth Circuit had interpreted that final clause establishing the $100 minimum and the $1,000 maximum as applying to claims under both (A)(i) and (A)(ii). See Mars v. Spartanburg Chrysler Plymouth, Inc., 713 F.2d 65, 67 (4th Cir. 1983).
The 1995 amendment changed Section 1640(a)(2)(A) to provide that TILA violators are liable for:
(i) in the case of an individual action twice the amount of any finance charge in connection with the transaction, (ii) in the case of an individual action relating to a consumer lease under part E of this subchapter, 25 per centum of the total amount of monthly payments under the lease, except that the liability under this subparagraph shall not be less than $100 nor greater than $1,000, or (iii) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $200 or greater than $2,000.
The Court of Appeals for the Seventh Circuit has (without substantive discussion) applied the Mars approach to the current version, of the statute. Strange v. Monogram Credit Card Bank, 129 F.3d 943, 947 (7th Cir. 1997). In the case at Bar, the Court of Appeals for the Fourth Circuit held that the 1995 amendment restricted the $100/$1,000 limitation on statutory damages solely to claims under Section 1640(a)(2)(A)(ii). While it dislikes the outcome, the CLLA believes that this was the correct statutory interpretation.
POINT I - Alors is no longer relevant
The starting point in discerning congressional intent is the existing statutory text, and not the version of TILA that predated it. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438, 142 L. Ed. 2d 881, 119 S. Ct. 755 (1999). Since Mars was decided under the old statute it is not an appropriate starting point. Strange is also not an appropriate starting point, because it relied upon cases that were decided prior to the 1995 amendment, and the Seventh Circuit engaged in no independent analysis of the effect of the amendment on the potential recovery to a prevailing plaintiff.
POINT II - The statute is clear
When the statute's language is plain, "the sole function of the courts-at least where the disposition required by the text is not absurd-is to enforce it according to its terms." Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1, 6, 147 L. Ed. 2d 1, 120 S. Ct. 1942 (2000); United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 103 L. Ed. 2d 290, 109 S. Ct. 1026 (1989); Caminetti v. United States, 242 U.S. 470, 485, 61 L. Ed. 442, 37 S. Ct. 192 (1917).
Petitioner presents a cogent argument based upon House Legislative Counsel's Manual on Drafting Style ยง 341(F)(2), at 52 (2d ed. 1995). and United States Senate Office of the Legislative Counsel, Legislative Drafting Manual ยง 129(d)(1), at 43 (1997). If Congress had formally adopted those manuals as a code construction act, such arguments would carry far more weight. Instead, these manuals appear to be non-statutory, after-the-fact guidance that is both outside of the statutory framework and not a part of the legislative history of section 1640. The League suggests that reliance upon such outside references is little different than relying on a post-enactment statement of legislative intent, an approach that this Court has rejected. see, e.g., Heintz v. Jenkins, 514 U.S. 291, 297, 115 S.Ct. 1489, 1492, 131 L.Ed.2d 395, 401 (1995). While the House and Senate manuals may represent aspirational guidelines for legislative drafting, they cannot change what Congress has actually written into that which it should have written.
The only ambiguity in Section 1640(a)(2)(A) is that which Petitioner seeks to manufacture. As the statute is worded there are three types of statutory penalties: Section 1640(a)(2)(A)(iii) deals with mortgage loans and sets $200/$2,000 limits on recovery; section 1640(a)(2)(A)(ii) deals with consumer leases and sets $100/$ 1,000 limits on recovery; and Section 1640(a)(2)(A)(i) deals with other consumer transactions and sets a statutory penalty without a floor nor a ceiling (except the ceiling created by the limits on the loans that are subject to that section). Petitioner argues that "except that the liability under this subparagraph shall not be less than $100 nor greater than $1,000" applies to the entirety of Section 1640(a)(2)(A). If that were true, it would apply to Section 1640(a)(2)(A)(iii), creating a logical absurdity in which Congress added the new $200/$2,000 limits for mortgage loans and then set an additional $100/$ 1,000 limit as an overlay.
The limiting phrase in section 1640(a)(2)(A)(ii) cannot apply to the whole of Section 1640(a)(2)(A), as that would emasculate section 1640(a)(2)(A)(iii). Thus, the ambiguity asserted by Petitioner and the amid who have weighed in on its behalf is illusory. The plain meaning of the statute supports the interpretation given it by Respondent and the Court below. Respondent's position gives effect to each portion of section 1640(a)(2)(A), whereas Petitioner's argument renders Section 1640(a)(2)(A)(iii) meaningless.
POINT III - The end does not justify the means
Petitioner and the amid who support it express concern over the cost both to consumers and the lending industry if the decision of the Court below is affirmed. While the League shares those concerns, it believes that they, too, may be illusory.
The stated concerns are somewhat questionable for four reasons. First, lenders who suffer losses due to dealer errors will be able to recover those losses through indemnification claims against the dealers whose errors cause the losses. (Admittedly, the occasional dealer may not be sufficiently solvent to indemnify the lender, but lenders who exercise good judgment in selecting their business partners and in mandating reserves should not have problems.) Second, the law already protects lenders against mere "picky and inconsequential errors." Brown v. Payday Check Advance, 202 F.3d 987, 991 (7th Cir. 2000), cert, denied, 531 U.S. 820; 121 S. Ct. 61, 148 L.Ed.2d 27 (2000). Third, creditors have an opportunity to avoid liability if they correct errors within sixty days of discovering them. 15 U.S.C. ยง 1640(b). Fourth, creditors can invoke the bonafide error defense contained in 15 U.S.C. ยง 1640(c), which provides that a creditor or assignee may not be held liable in any action brought under TILA if it shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.
