Gladys Gardner v. GMAC, Inc.

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 14-1048

GLADYS GARDNER, Individually and on Behalf of All Persons
Similarly Situated,

Plaintiff - Appellant,

v.

GMAC, INC., now known as Ally Financial Incorporated,

Defendant and Third-Party Plaintiff – Appellee,

v.

MANHEIM REMARKETING, INC.,

Third-Party Defendant.

No. 14-1049

RANDOLPH SCOTT, Individually and on Behalf of All Persons
Similarly Situated,

Plaintiff - Appellant,

v.

NUVELL FINANCIAL SERVICES, LLC; NUVELL NATIONAL AUTO
FINANCE, LLC, d/b/a Nuvell National Auto Finance,

Defendants and Third-Party Plaintiffs – Appellees,

v.
MANHEIM REMARKETING, INC.,

Third-Party Defendant.

Appeals from the United States District Court for the District
of Maryland, at Baltimore. J. Frederick Motz, Senior District
Judge. (1:10−cv−01094−JFM; 1:09-cv-03110-JFM)

Argued: May 12, 2015 Decided: August 6, 2015

Before NIEMEYER, KEENAN, and DIAZ, Circuit Judges.

Affirmed by published opinion. Judge Diaz wrote the opinion, in
which Judge Niemeyer and Judge Keenan joined.

ARGUED: Benjamin Howard Carney, GORDON, WOLF & CARNEY CHTD.,
Towson, Maryland, for Appellants. Martin C. Bryce, Jr., BALLARD
SPAHR LLP, Philadelphia, Pennsylvania, for Appellees. ON BRIEF:
Martin E. Wolf, GORDON, WOLF & CARNEY CHTD., Towson, Maryland;
Mark H. Steinbach, Washington, D.C.; John J. Roddy, Elizabeth A.
Ryan, BAILEY & GLASSER, LLP, Boston, Massachusetts, for
Appellants. Robert A. Scott, Glenn A. Cline, BALLARD SPAHR LLP,
Baltimore, Maryland, for Appellees.

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DIAZ, Circuit Judge:

The main question raised by this appeal is when borrowers

may seek a remedy after their creditors violate the repossession

notice requirements in Maryland’s Credit Grantor Closed End

Credit Provisions (“CLEC”), Md. Code Ann., Com. Law § 12-1001 et

seq. Because we conclude that CLEC requires borrowers to have

repaid more than the original principal amount of their loans

before they are entitled to relief, we affirm.

I.

Gladys Gardner and Randolph Scott each entered into a

retail installment sale contract with GMAC, Inc.--now Ally

Financial, Inc.--or its subsidiary, respectively, to finance the

purchase of a car. Both contracts were forms drafted by GMAC

that designated CLEC as the applicable law. Relevant to this

appeal, CLEC establishes rules, including notice requirements,

for creditors that repossess “tangible personal property

securing a loan” after the borrower defaults on that loan. Md.

Code Ann., Com. Law § 12-1021. Creditors who violate CLEC “may

collect only the principal amount of the loan and may not

collect any interest, costs, fees, or other charges with respect

to the loan.” Id. § 12-1018(a)(2).

After making some payments, Gardner and Scott defaulted on

their loans and GMAC repossessed their cars. GMAC sent the

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borrowers notices that the cars would be sold at public sales.

GMAC sold them for less than the amount owed under the contracts

and issued post-sale notices explaining that deficiency.

Gardner and Scott filed separate class action complaints

against GMAC, alleging counts for (1) CLEC violations; (2)

breach of contract; (3) declaratory and injunctive relief; (4)

restitution/unjust enrichment; and (5) violation of Maryland’s

Consumer Protection Act, Md. Code Ann., Com. Law § 13-101 et

seq. The complaints allege that GMAC’s pre-sale notices

mischaracterized the sales as public, when in fact they were

private, due to a $1,000 refundable cash entrance fee required

to view the sale. They further contend that, because of that

mischaracterization, GMAC’s post-sale notices lacked certain

statutorily required disclosures for private sales. See Md.

Code Ann., Com. Law § 12-1021(j)(2).

The district court found that the sales were public and

granted summary judgment to GMAC on that basis. On appeal, we

certified the question to the Court of Appeals of Maryland,

which held that the sales were private. Gardner v. Ally Fin.

Inc., 61 A.3d 817, 828 (Md. 2013). We therefore reversed the

district court’s judgment and remanded the cases. Gardner v.

Ally Fin. Inc., 514 F. App’x 378, 379 (4th Cir. 2013).

On remand, the district court again granted summary

judgment to GMAC. This time, the court reasoned that (1)

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neither Gardner nor Scott had sustained any damages under CLEC

because, based on this court’s decision in Bediako v. American

Honda Finance Corp., 537 F. App’x 183 (4th Cir. 2013), an unpaid

principal balance remained on their loans; and (2) GMAC had, in

a binding judicial admission, abandoned any claim for deficiency

judgments against them. Scott v. Nuvell Fin. Servs., Nos. JFM-

09-3110, JFM-10-1094, 2013 WL 6909518, at *1 (D. Md. Dec. 31,

2013). Gardner and Scott appeal, contending that those rulings

are in error and raising other issues. We review de novo a

district court’s order granting summary judgment. Triton Marine

Fuels Ltd., S.A. v. M/V PACIFIC CHUKOTKA, 575 F.3d 409, 412 (4th

Cir. 2009).

II.

Two CLEC provisions are at issue in this appeal. First,

CLEC’s civil remedies section provides, “Except for a bona fide

error of computation, if a credit grantor violates any provision

of this subtitle the credit grantor may collect only the

principal amount of the loan and may not collect any interest,

costs, fees, or other charges with respect to the loan.” Md.

Code Ann., Com. Law § 12-1018(a)(2). Second, CLEC’s

repossession section states, “If the provisions of this section,

including the requirement of furnishing a notice following

repossession, are not followed, the credit grantor shall not be

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entitled to any deficiency judgment to which he would be

entitled under the loan agreement.” Id. § 12-1021(k)(4).

A.

We have previously interpreted Section 12-1018(a)(2)’s

plain language as limiting “a debtor’s relief under CLEC to any

amounts paid in excess of the principal amount of the loan.”

Bediako, 537 F. App’x at 186. We have also explained that,

unlike statutes such as the federal Fair Debt Collection

Practices Act, CLEC does not establish a fixed statutory damages

award. Id. To add an example from Maryland, a statute

prohibiting unwanted commercial email provides for damages “in

an amount equal to the greater of $500 or the recipient’s actual

damages.” Md. Code Ann., Com. Law § 14-3003 (emphasis added).

The absence of a parallel provision in CLEC is telling.

Gardner and Scott do not say that Bediako was wrongly

decided; they instead attempt to distinguish it by claiming that

the creditor in Bediako fully complied with CLEC. But our

holding in Bediako was premised on the assumption that the

creditor violated CLEC: “[E]ven if Bediako has adequately

alleged a violation of CLEC’s notice provisions, she is unable

to state a claim because she has suffered no actual damages that

are compensable under CLEC.” 537 F. App’x at 188 (emphasis

added). Turning that assumption into an actual violation does

not alter the damages analysis.

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 Because Gardner and Scott have given us no good reason to

depart from Bediako, we will follow it. 1 And like the borrower

there, the borrowers here have not paid anything in excess of

the principal. In Bediako, we recharacterized all of the

borrower’s payments during the life of the loan as payments

toward principal and then subtracted that total and the sale

proceeds from the original principal amount of the loan. Id. at

186 & n.1. Applying that same calculation, Gardner and Scott

each still owe roughly $11,000 in principal on their loans.

B.

Despite the fact that neither Gardner nor Scott has paid

anything in excess of the principal, they nonetheless insist

that they are entitled under CLEC to a refund of (1) the funds

they claim GMAC collected after repossessing their cars 2 and (2)

1Gardner and Scott are correct that the district court
mistakenly referred to our unpublished Bediako decision as
binding authority, but that alone does not require reversal.

2Neither borrower made any payments after repossession.
But they contend that GMAC impermissibly credited their accounts
with refunds it received from insurance companies after their
policies were canceled, instead of forwarding those refunds to
Gardner and Scott.
In their opening brief, Gardner and Scott also argue that
GMAC collected funds that it designated on their accounts as
“PRIN-PAID,” “FIN-PAID,” “LC-PAID,” and “OTHER PAID.” But the
undisputed evidence shows that these are internal accounting
entries used by GMAC to “zero out” the borrowers’ accounts in
its active account management system before reloading them into
the system for accounts in default. J.A. 597.

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their payments to GMAC during the life of their loans to cover

interest, costs, fees, or other charges. That is not correct.

Gardner and Scott build their first argument on a

misreading of two cases from the Court of Appeals of Maryland.

They say that GMAC is now “limited to the proceeds of the sale

as satisfaction of the debt” because it violated CLEC.

Appellants’ Br. at 29 (quoting Gardner, 61 A.3d at 823, and

citing Patton v. Wells Fargo Fin. Md., Inc., 85 A.3d 167, 181

(Md. 2014)). But the full sentence from Gardner gives important

context: “If the debtor can show that the creditor failed to

abide by the requirements of CLEC in selling the collateral, the

creditor may be barred from a deficiency judgment and limited to

the proceeds of the sale as satisfaction of the debt.” 61 A.3d

at 823 (emphasis added). Contrary to Gardner and Scott’s view,

the court was merely acknowledging the practical reality that a

creditor who violates CLEC will likely be unable to collect

anything beyond the proceeds of the sale because CLEC bars

violators from obtaining a deficiency judgment. Nowhere does

the court’s opinion or CLEC itself say that creditors who

violate CLEC cannot try to collect the deficiency by means other

than a judgment, or apply toward the outstanding principal any

funds they receive after the repossession sale.

Gardner and Scott would have us read “judgment” out of

Section 12-1021(k)(4) and ignore the fact that Section 12-

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1018(a)(2) expressly permits creditors who violate CLEC to

collect the principal amount of the loan. We decline to do so.

See Mid-Atlantic Power Supply Ass’n v. Pub. Serv. Comm’n of Md.,

760 A.2d 1087, 1097 (Md. 2000) (“It long has been the law of

Maryland and well settled, that statutes are to be read to give

meaning to every word used and to do otherwise contravenes this

cardinal rule of statutory construction.”); Kaczorowski v. Mayor

& City Council of Balt., 525 A.2d 628, 631 (Md. 1987)

(“[S]tatutes dealing with the same subject matter should, when

possible, be read together and harmonized.”).

As to the second refund claim, Gardner and Scott’s argument

relies solely on a decision by the Commissioner of Financial

Regulation interpreting Maryland mortgage law. Comm’r of Fin.

Regulation v. Ward, No. CFR-FY2010-418 (Nov. 26, 2013), aff’d,

No. C 13-2191 (Md. Cir. Ct. Feb. 23, 2015). Similar to CLEC

Section 12-1018(a)(2), violators of the Maryland Mortgage Lender

Law “may collect only the principal amount of the loan and may

not collect any interest, costs, finder’s fees, broker fees, or

other charges with respect to the loan.” Md. Code Ann., Fin.

Inst. § 11-523(b). Gardner and Scott posit that because the

Commissioner in Ward awarded a reimbursement of all amounts

collected other than principal, CLEC commands the same result.

We are unpersuaded. Ward is easily distinguishable. The

lender there violated Maryland mortgage law at the time the loan

9
was originated by operating without a license. Ward, No. CFR-

FY2010-418, at 13; J.A. 626. As a result, the lender collected

the reimbursed interest, etc. after the violation. Here, by

contrast, GMAC’s pre-repossession collection of interest, etc.

occurred before any violation. This difference in timing

renders Ward inapposite. 3

3 We deny Gardner and Scott’s May 2014 motion to certify a
question to the Court of Appeals of Maryland because that motion
is based entirely on the purported conflict between Bediako and
Ward.
In two Federal Rule of Appellate Procedure 28(j) letters,
Gardner and Scott add that Bediako conflicts with orders of the
Circuit Court for Anne Arundel County, Maryland, denying a
creditor’s motion for summary judgment and granting the
borrower’s motion for class certification. See Patton v. Wells
Fargo Bank NA, No. 02-C-10-149844, (Md. Cir. Ct. Apr. 24, 2015);
Patton, No. 02-C-10-149844 (Md. Cir. Ct. June 18, 2015).
Neither order, however, provides any reasoning on the issue
before us.
In a third Rule 28(j) letter, Gardner and Scott press
another purported conflict between Bediako and Len Stoler, Inc.
v. Wisner, No. 0490, 2015 WL 3421134 (Md. Ct. Spec. App. May 28,
2015). In Wisner, the creditor argued that the borrower lacked
standing because even if the creditor had improperly retained
part of the excise tax in violation of CLEC, it should have sent
the retained amount to the State. As a result, the borrower
sustained no injury. The court rejected that argument by simply
declaring that if a violation occurred, the borrower “would be
entitled to penalties proscribed by CLEC.” Len Stoler, Inc.,
2015 WL 3421134, at *11. However, the court did not analyze
CLEC’s penalties provisions and gave no explanation as to why
the borrower would be entitled to those penalties. Moreover,
the creditor never raised the argument that GMAC has made before
us based on Bediako and CLEC Section 12-1018(a)(2).

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 III.

Gardner and Scott next argue that the district court erred

in denying their claim for declaratory and injunctive relief.

We find no error.

First, the borrowers contend that the district court

erroneously found that no case or controversy existed as to

their claim for a declaratory judgment and an injunction barring

GMAC from seeking a deficiency judgment against them. 4 To

Gardner and Scott, “GMAC’s claim that it is abandoning

deficiency judgments is not the same as a declaratory judgment

in Plaintiffs’ favor” because they could only rely on the latter

if “GMAC, or one of its debt collectors, resumed dunning them.”

Appellants’ Br. at 27. However, we agree with the district

court that, because GMAC expressly abandoned any claim for

deficiency judgments against Gardner and Scott, there is no

actual controversy. See Bediako, 537 F. App’x at 187-88. 5

4
We read the district court’s order together with its
accompanying memorandum as dismissing this particular claim,
rather than entering judgment in favor of GMAC. The district
court ruled that no case or controversy existed as to the
deficiency judgment issue. That, of course, means it lacked
subject matter jurisdiction. S.C. Coastal Conservation League
v. U.S. Army Corps of Eng’rs, No. 14-1796, 2015 WL 3757640, at
*6 (4th Cir. June 17, 2015) (“When a case or controversy ceases
to exist, the litigation is moot, and the court’s subject matter
jurisdiction ceases to exist also.”).

5
Scott contends that because his case was removed from
state court, it must now be remanded. See 28 U.S.C. § 1447(c)
(Continued)
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 Second, Gardner and Scott posit that they are entitled to a

declaratory judgment and an injunction barring GMAC from

pursuing the deficiency balance on their loans, even through

out-of-court debt collection methods. But there is no basis in

CLEC for this claim. CLEC specifically bars violators from

seeking a “deficiency judgment.” Md. Code Ann., Com. Law § 12-

1021(k)(4) (emphasis added). Once again, we decline to read

that word out of the statute.

Lastly, Gardner and Scott argue that the district court

should have awarded them a declaratory judgment and an

injunction barring GMAC from collecting interest, costs, fees,

or other charges on their loans in the future. We find that

CLEC does not permit such relief to borrowers who allege a

violation of the repossession notice requirements. A comparison

of CLEC Sections 12-1007 and 12-1021 illustrates why. The

(“If at any time before final judgment it appears that the
district court lacks subject matter jurisdiction, the case shall
be remanded.”). But the Supreme Court has all but rejected that
interpretation of § 1447(c). Wis. Dep’t of Corr. v. Schacht,
524 U.S. 381, 392 (1998) (“An ordinary reading of the language
indicates that the statute refers to an instance in which a
federal court ‘lacks subject matter jurisdiction’ over a ‘case,’
and not simply over one claim within a case.”). The Court
skeptically acknowledged another possible reading--that the
statute requires remand of the individual claim over which the
court lacks jurisdiction. Id. We agree that the first
interpretation is a better reading of the statute and therefore
hold that § 1447(c)’s mandate applies only when a district court
lacks subject matter jurisdiction over an entire case.

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legislature specifically provided that a violation of Section

12-1007, which covers insurance, entitles the borrower to “[a]n

injunction to prohibit the credit grantor who has engaged or is

engaging in the violation from continuing or engaging in the

violation.” Md. Code Ann., Com. Law § 12-1007(f)(3)(i). In

CLEC Section 12-1021, covering repossession, the legislature did

not authorize similar relief. Instead, Section 12-1021 simply

states that a violation of its provisions means that “the credit

grantor shall not be entitled to any deficiency judgment to

which he would be entitled under the loan agreement.” Id. § 12-

1021(k)(4).

IV.

We turn now to Gardner and Scott’s claims for breach of

contract, restitution/unjust enrichment, and violations of

Maryland’s Consumer Protection Act. None succeed.

A.

Gardner and Scott contend that, regardless of their lack of

actual damages under CLEC, they have a claim for nominal damages

for breach of contract under Maryland law. See Taylor v.

NationsBank, N.A., 776 A.2d 645, 651 (Md. 2001) (“[I]t is well

settled that where a breach of contract occurs, one may recover

nominal damages even though he has failed to prove actual

damages.”). Here, though, the borrowers’ sole basis for a

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breach-of-contract claim is that GMAC violated CLEC. To allow

them to pursue nominal damages by asserting a stand-alone

breach-of-contract claim would effectively render CLEC’s

requirement that a borrower suffer actual damages a nullity.

This is so because the only way for CLEC to govern a dispute is

for the creditor to specifically elect it in the contract. Md.

Code Ann., Com. Law § 12-1013.1(a). We do not think that

Maryland’s highest court would countenance such a result, and

neither shall we. 6

B.

Gardner and Scott also argue that the district court erred

in granting summary judgment to GMAC on their claims for

restitution/unjust enrichment and under Maryland’s Consumer

Protection Act. We disagree.

On the restitution/unjust enrichment claim, the borrowers’

entire argument is that they “are entitled to actual damages in

restitution and unjust enrichment for the amounts unlawfully

collected on their deficiency balances.” Appellants’ Br. at 34.

But GMAC has not collected anything “unlawfully” because it has

6
After we heard oral argument, Gardner and Scott filed a
motion to certify the question about the availability of nominal
damages to the Court of Appeals of Maryland. We decline to
burden that court with a request to rule on what amounts to a
claim for a dollar or less. See Brown v. Smith, 920 A.2d 18, 30
(Md. Ct. Spec. App. 2007) (noting that Maryland courts typically
award nominal damages from one cent to one dollar).

14
yet to recoup the full principal amount of the loan, and has not

collected anything since it sent the repossession notices.

Turning to the borrowers’ claim under Maryland’s Consumer

Protection Act, that statute prohibits “any unfair or deceptive

trade practice” in, among other things, the “extension of

consumer credit” and the “collection of consumer debts.” Md.

Code Ann, Com. Law § 13-303(4)-(5). An unfair or deceptive

trade practice includes a “[f]alse . . . or misleading . . .

written statement . . . which has the capacity, tendency, or

effect of deceiving or misleading consumers” and the “[f]ailure

to state a material fact if the failure deceives or tends to

deceive.” Id. § 13-301(1), (3). The Act allows “any person

[to] bring an action to recover for injury or loss sustained by

him as the result of a practice prohibited by [the Act].” Id.

§ 13-408(a).

“Maryland law requires [Consumer Protection Act] claimants

to show ‘they were actually injured by [the defendant’s]

violation of the [Act].’” Polek v. J.P. Morgan Chase Bank,

N.A., 36 A.3d 399, 417 (Md. 2012) (second alteration in

original) (quoting DeReggi Constr. Co. v. Mate, 747 A.2d 743,

752 (Md. Ct. Spec. App. 2000)). A “conjectural or potential

injury” will not do. Id. at 418.

15
 Gardner and Scott contend that the defective repossession

notices constitute an unfair and deceptive trade practice. Even

assuming this is so, neither has stated a claim.

Scott’s sole argument on this point is that he is entitled

to the “amounts collected” on his deficiency balance. But GMAC

has not collected anything on his loan since sending the

repossession notice. Therefore, Scott has not sustained an

actual injury or loss.

Gardner adds that she sustained an injury or loss because

she traveled to the site listed in the pre-sale notice to view

the sale of her car, but was denied entry because she did not

have the undisclosed $1,000 refundable cash deposit. However,

nowhere in her complaint does Gardner allege that she would not

have traveled to the site had the $1,000 deposit requirement

been disclosed. Without this causal link, she too has failed to

state a claim.

V.

Finally, Gardner and Scott challenge the district court’s

denial of their motion under Rule 23(d)(1)(B) of the Federal

Rules of Civil Procedure for notice to putative class members.

We review that decision for abuse of discretion. See Gulf Oil

Co. v. Bernard, 452 U.S. 89, 99-103 (1981) (applying abuse-of-

discretion review to a district court’s Rule 23(d) order

16
restricting the ability of the named plaintiffs and their

counsel to communicate with potential class members without

advance judicial approval); Cruz v. Am. Airlines, Inc., 356 F.3d

320, 328 (D.C. Cir. 2004) (reviewing for abuse of discretion the

“district court’s decision not to order notice to [putative]

class [members]”).

Rule 23(d)(1)(B) states, “In conducting an action under

this rule, the court may issue orders that: . . . require--to

protect class members and fairly conduct the action--giving

appropriate notice to some or all class members . . . .”

Assuming for the sake of argument, as the district court did,

that this rule permits notice to putative class members before a

class has been certified, we find no abuse of discretion in the

district court’s refusal to give notice.

In a previous case discussing notice to putative class

members after the named plaintiffs agree to a settlement, we

observed that “unlike the situation in a certified class action,

a ‘pre-certification dismissal does not legally bind absent

class members,’ and, before certification, the absent putative

class member has at best a mere ‘reliance interest,’ the

strength of which will vary with the facts of the particular

case.” Shelton v. Pargo, Inc., 582 F.2d 1298, 1314-15 (4th Cir.

1978) (quoting Magana v. Platzer Shipyard, Inc., 74 F.R.D. 61,

69 (S.D. Tex. 1977)). Gardner and Scott have not demonstrated

17
that the reliance interest of putative class members in their

case is so compelling that the district court’s denial of notice

constituted an abuse of its discretion.

VI.

For the reasons given, the district court’s judgment is

AFFIRMED.

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