Court accepts case addressing lawsuit limits over loan deals
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WASHINGTON (AP) -- At first, Bradley Nigh thought he was getting a pretty good deal on the 1997 Chevrolet Blazer that he bought used and financed through the car dealer.
After all, the dealer took his old truck as a trade-in and promised to arrange a loan the 22-year-old could swing. Like many car buyers, Nigh put some money down, signed a sales contract and drove home the same day in his newly bought car.
The Fairfax, Virginia, man began to get cold feet when Koons Buick Pontiac GMC later told him he must put down an additional $2,000 to get a loan. Nigh tried to back out when the dealer called him back a third time and, Nigh claimed, threatened to have him arrested for auto theft if he did not sign yet a different contract.
What happened next is now the subject of a Supreme Court case that Nigh and his lawyer say could cast light on allegedly misleading or high-pressure sales tactics for car loans. The court will examine whether a 1968 consumer protection law allows people like Nigh to collect sizable damage awards if they win their case in court.
In the Koons case, Nigh sued, alleging violations of the Truth in Lending Act among other claims. The dealer countersued, alleging Nigh broke a contract. Ultimately, a jury awarded Nigh about $24,000 under the Truth in Lending Act, plus money to pay his lawyer and an additional $4,000 award under a Virginia consumer law.
Koons, backed by banking industry groups, argued that the consumer protection law caps damages at $1,000. Two lower courts have agreed with Nigh that 1995 amendments to the law allow a wronged consumer to collect much more -- twice what the consumer would have paid in finance charges.
The high court said Tuesday it will hear Koons' appeal in the case. Arguments probably will be in October.
Every year, about 45 million cars are bought and sold in the United States. Most deals involve a financing plan through a bank or other lender. Car loans and other kinds of consumer credit are subject to the Truth in Lending Act, which was intended to force details of loans into the open and allow consumers to evaluate the cost of credit better.
The American Bankers Association told the justices in a friend of the court filing that violations of the Truth in Lending Act often are minor and inconsequential. Koons should not be on the hook for more than $54,000 for a garden variety "canceled used-car transaction" like the Nigh case, Koons' backers said.
Allowing awards in the tens of thousands of dollars will invite more lawsuits, bankers, auto dealers and others argued in asking the high court to hear the case.
"There are technical violations of TILA all the time, in which absolutely no one is harmed," said Roy Englert, a lawyer representing bankers.
Nigh claims he was harmed, and the dealership lied to him.
"I'm not the only person that this has happened to," Nigh said. "It's obviously standard practice in the auto industry for dealers to be taking advantage of the consumer. It shouldn't be that way."
What happened to Nigh is a typical "yo-yo deal," said his lawyer, A. Hugo Blankingship III. A buyer signs a deal thinking he has financing at a certain rate, but the dealer later says the buyer didn't qualify for that rate or that other changes are required before the deal can go through, Blankingship said.
"They try to put you in a car" on the spot, Blankingship said. "Once you're in the car, it's hard for you to get out of it. Your friends have seen it, your family. There are all these expectations, and car dealers take advantage of that."
The case is Koons Buick Pontiac GMC Inc. v. Nigh, 03-377.
Also Tuesday, the court said it would consider whether poor defendants have a right to free legal help in appealing guilty pleas, a case testing a Michigan law that restricts the appointing of attorneys in those cases.
Justices will decide whether the Constitution guarantees poor defendants free attorneys to appeal after pleading guilty or no contest to criminal charges.
Michigan officials argue that limits are needed to prevent unnecessary appeals from clogging courts.
The case is Kowalski v. Tesmer, 03-407.
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