IN THE COURT OF APPEALS OF TENNESSEE
FILED
May 21, 1999
AT KNOXVILLE Cecil Crowson, Jr.
Appellate C ourt
Clerk
MIKE HAR VEY , on behalf of himself
) C/A NO. 03A01-9807-CV-00235
and all others similarly situated,
)
) ROAN E CIRC UIT
Plaintiff-A ppellant, )
) RUS SELL SIMM ONS , JR.,
v. ) JUDGE
)
FORD MOTOR CREDIT COMPANY, ) AFFIRMED
) AND
Defendant-Appellee. ) REMANDED
GOR DON BAL L, Knox ville, for Plaintif f-Appe llant.
STEVEN D. LIPSEY, STONE & HINDS, P.C., Knoxville, and THOMAS M.
BYRNE and DANIEL H. SCHLUETER, SUTHERLAND, ASBILL & BRENNAN,
LLP, Atlanta, for Defendant-Appellee.
PAUL G. SUM MERS, Tennessee Attorney General and Reporter, and
TIMOTHY C. PHILLIPS, Assistant Attorney General, Nashville, Amicus Curiae for
the State of Tennessee.
O P I N IO N
Franks, J.
Appellant filed his complaint designated a class action, alleging that
Ford Moto r Credit Compa ny (“Ford Credit”) engag ed in a scheme w ith Ford dealers
to mislead consumers and conceal the practice of dealer reserve. The complaint
initially alleged two causes of action based on Ford Credit’s violation of the
Tennessee Consumer Protection Act (“TCPA”) and unjust enrichment. The Trial
Court conditionally certified the requested class of consumers, but subsequently set
aside th at order .
Appe llant pur chased a used v an at a F ord dea ler in H arriman in 1996 .
The dea ler arranged financing for the veh icle through appellee, Fo rd Moto r Credit
Comp any, and acco rding to the c omplaint, ap pellant wa s unawa re that the intere st rate
he rece ived inc luded n ot only Fo rd Cred it’s regu lar rate, b ut an ad ditional percen tage.
A portion of the ad ditional interest rate is generally payable to the dealer by Ford
Credit. T his prac tice is co mmo nly know n as “de aler rese rve”.
Appellant subsequently amended his Complaint to include a third cause
of action for civil conspiracy. Responding to Ford Credit’s Motion to Dismiss, the
Trial Court dismissed the Amended Complaint, holding (1) that the Amended
Complaint failed to comply with Tenn.R.Civ.P. 9.02; (2) that reliance was a required
element under the T.C.P.A. which had not been plead; (3) that the unjust enrichment
claim was invalid since the basis of the parties’ relationship was a written contract; (4)
that the conspiracy claim could not stand because appellant had not alleged any
unlawful or tortious act. Appellant has appealed the dismissal of the T.C.P.A. and
conspiracy claims, but has not appealed the dismissal of the unjust enrichment claim.
Under T.R.C.P. §12.02(6), we are required to construe the complaint
liberally in f avor of the plain tiff, takin g all alleg ations a s true. Sullivant v. Americana
Hom es, Inc., 605 S.W.2d 246 (Tenn.App. 1980). A complaint should not be
dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff
can prove no set of facts in support of the claim that would entitle him or her to relief.
Id.
The appellee argues that T.C.P.A. is not applicable in this case. The
appellee contends that its conduct is permitted by the federal Truth in Lending Act
(“T.I.L.A.”), and that the T.C.P.A., by its own terms, does not apply. The T.C.P.A.
2
does not apply to “[a]cts or transactions required or specifically authorized under the
laws administered by, or rules and regulations promulgated by, any regulatory bodies
or offic ers actin g unde r the auth ority of this state or o f the U nited S tates.” T .C.A. §
47-18-111(a)(1).
Appellee insists that since the disclosure portions of the appellant’s sales
contract are governed by the T.I.L.A., failure to disclose “dealer reserve” is not
actionable. T his argum ent fails for tw o reasons. F irst, courts hav e generally
construed the preemptive scope of the T.I.L.A narrowly. The T.I.L.A.’s own
preemptiv e provision s are narrow ly worded a nd were intended “ to extend o nly to
specific state disclosure requirements, in the interest of preserving uniform methods of
disclosure.” Heastie v. Community Bank, 690 F.Su pp. 716, 72 0 (N.D. Ill., 19 88); See
also 17 Am.Jur.2d Consumer Protection § 259 (1990). Second, the appellant does not
contend that the appellee failed to comply with the T.I.L.A. Rather, he alleges that the
appellee en gaged in a scheme to mislead co nsumers c oncerning the true natu re of their
financing. In Heastie, the Court considered language under the Illinois Consumer
Fraud Act identical to the T.C.P.A.’s exclusionary provision and concluded that
compliance with the T.I.L.A. “should not be a complete defense to allegations of
fraudulent schemes.” Id. at 721. This result is consistent with a privately reported
decision of this Court, holding that a dealer’s failure to disclose “dealer reserve” was
actiona ble wh en the d ealer en gaged in a patte rn of d eceptiv e cond uct. See Adkinson v.
Harpeth Ford-Mercury, Inc., 1991 WL 17177 (Tenn.App.). Thus, appellee’s claims
of compliance with the T.I.L.A. are not dispositive.
The Trial Court determined that “[a]s to any averment of fraud, the
complain t must be dis missed fo r the plaintiff’s [appellan t’s] failure to state with
particularity as required by Rule 9.02 of the Tennessee Rules of Civil Procedure.”
Rule 9.02 requires that th e circumsta nces con stituting fraud must be p lead with
3
particularity. The parties dispute whether this requirement applies to claims under the
T.C.P .A. Th is Cou rt has ap plied R ule 9.02 to claim s unde r the T.C .P.A. Humphries v.
West End Terrace, Inc., 795 S.W.2d 128 (Tenn.App. 1990). Other jurisdictions have
also required that claims u nder state co nsumer p rotection acts be plead w ith
specifi city. See e.g., Connick v. Suzuki Motor Co., 675 N.E.2d 584 (Ill. 1996). Thus,
the Ame nded C omplaint m ust be scrutin ized in light of these require ments. D espite
Rule 9.02's particularity requirements, we must determine the sufficiency of the claims
in light o f Tenn .R.Civ .P. 8.01 's liberal p leading standa rds. Dobbs v. Guenther, 846
S.W.2 d 270 ( Tenn .App. 1 992).
The Amended Complaint essentially alleges that the appellee and
various Ford dealers violated the T.C.P.A. by misleading consumers and
misrepresenting to them the practice of “dealer reserve.” Although the Amended
Complaint alleges misrepresentations by the Ford dealer, it lists two principal actions
by the appellee that could link it to the dealer’s conduct or otherwise violate the
T.C.P.A . First, the Am ended C omplaint sta tes that the app ellee has “q uoted its
financing rates in the national media and press.” According to the Amended
Complaint, the effect of this advertising is to indicate to consumers that these rates
“are fixed and not variable and that each Ford Motor Company . . . dealer will make
available to consumers precisely those rates which Ford Motor Credit quotes.”
Nowhere in the Amended Complaint, however, does the appellant allege that he ever
saw or heard any of these advertisements. Regardless of whether reliance is a
required element und er the T.C.P.A., plaintiffs mu st at least allege that they were
exposed to the offensive conduct. Thus, the Amended Com plaint fails to state a cause
of action for this alleged violation.
The Amended Complaint also states that the appellee “through its dealer
manuals and oth er policies and procedu res, instructs its dealers to inform custome rs
4
that the quo ted Ford M otor Cred it rates are fixed and non -negotiable .” This claim
also fails to alleg e any actionab le conduc t by the appellee . Although not entirely
clear, the phra se “quoted Ford M otor Cred it rates” presum ably refers to the same retail
rates alleged ly quoted by the a ppellee in its ad vertisemen ts. Althoug h the term c ould
arguably me an the fina l rate quoted to the custom er by the dealer, th at meanin g would
be inconsistent with language in the section of the Amended Complaint describing the
appelle e’s adv ertising.
Whether the appellee’s rates are negotiable does not affect the practice
of “dealer reserve.” According to the Amended Complaint, once the appellee quotes
the fixed ra te, the dealer a dds any add itional percen tage. Thus , there is nothin g unfair
or deceptive about the appellee “fixing” its quoted rates. In fact, if the appellee
instructs dealers to inform customers that the appellee’s rates are fixed and non-
negotiable, this instruction would better inform customers about the practice of dealer
reserve. Customers would realize that the final rate quoted by the dealer was higher
than the appellee’s rate. Although the Amended Complaint alleges that the dealers do
not tell customers about the disparity in financing, it does not recite any actions that
could r ender th e appe llee liable for this a lleged m isrepres entation or non disclosu re.
Thus, the allegation fails to state a claim under the T.C.P.A.
The rem ainder of th e conduc t recited in the A mended Comp laint with
appropriate specificity refers to actions allegedly taken by the Ford dealer. The dealer
is not a party in this case and the Amended Complaint does not contend that the
appellee sh ould be liab le for the de aler’s individu al conduc t. Thus, the co mplaint fails
to state a claim against the appellee for T.C.P.A. violations. It therefore fails to allege
a consp iracy to vio late the T .C.P.A .
We hold that the Trial Court correctly dismissed the Amended
Complaint, but we pretermit the issue of whether reliance is a required element under
5
the T.C.P.A. because we conclude the complaint does not otherwise state a cause of
action. Accordingly, we affirm the judgment of the Trial Court and remand with cost
of the app eal assessed to the appe llant.
__________________________
Herschel P. Franks, J.
CONCUR:
___________________________
Houston M. Godd ard, P.J.
___________________________
William H. Inman, Sr.J.
6