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Hamilton v. Car Credit, Inc.

United States District Court, M.D. Tennessee, Nashville Division

December 3, 2014

CAR CREDIT, INC., et al.


TODD J. CAMPBELL, District Judge.

Pending before the Court is Defendants' Motion to Dismiss First Amended Complaint (Docket No. 18). For the reasons stated herein, Defendants' Motion to Dismiss is GRANTED. Plaintiffs' federal claim is dismissed with prejudice, and Plaintiffs' state law claims are dismissed without prejudice.


This action arises from Plaintiffs' May 22, 2013 purchase of a truck from Defendant Car Credit, which is owned and operated by Defendants Tracy and Catherine McMurtry. Plaintiffs allege that Defendants fraudulently misrepresented on the Sales Contract between Plaintiffs and Defendants that Plaintiffs had paid $3, 000.00 cash in a down payment for the vehicle when, in fact, Plaintiffs and Defendants had an oral agreement that Plaintiffs would endorse over to Defendants two checks from their insurance company (totaling $3, 000.00) for the down payment. Plaintiffs aver that Defendants fraudulently misrepresented to Plaintiffs that they could pay the down payment in this manner and, if they did, they could keep their truck.

Plaintiffs further contend that Defendants thereafter assigned Plaintiffs' debt to Pinnacle Bank without notice to Plaintiffs. Plaintiffs assert that Defendants did not tell them that their oral agreement about the down payment could have any effect on the original debt. Plaintiffs allege that they made what they thought was a regular monthly payment to Defendants on or about June 22, 2013. Plaintiffs claim that, at the time, Defendants fraudulently told them that this payment was a regular monthly payment on the debt, when Defendants actually applied the payment to the "side debt" for the down payment. Two days later, Plaintiffs received a statement from Pinnacle Bank, setting payment dates for the original debt which Defendants had sold to Pinnacle. Plaintiffs assert that they then made a timely payment to Pinnacle.

The First Amended Complaint alleges that on July 25, 2013, Plaintiffs began receiving phone calls from Defendants demanding the payment which they had already made to Pinnacle. Moreover, Defendants threatened to repossess the truck unless the down payment was paid in full in three days. Plaintiffs contacted Pinnacle, which advised them that their account was in good standing and not in arrears. On July 28, 2013, Plaintiffs found that their truck was missing and reported the theft to the Nashville police. In fact, the truck had been repossessed by Defendants. Plaintiffs again called Pinnacle Bank and were told that their account was in good standing.

Within a few days, Plaintiffs received another billing statement from Pinnacle and were advised by Pinnacle that the payoff amount on the loan was $13, 758.00. Soon thereafter, an employee of Pinnacle telephoned Plaintiffs and told them the payoff amount on the truck was $15, 938.00 and Pinnacle no longer owned the debt. Later in August 2013, Defendants advised Plaintiffs that the payoff amount was $22, 367.00, and that failure to pay that amount would result in the sale of the truck. In fact, the August 12th date set for sale of the truck had already passed.

Plaintiffs argue that they made their installment payments on time to the entity they were told held their loan. Plaintiffs also aver that Defendants repossessed the truck based upon an oral agreement, with which Plaintiffs had complied, concerning the down payment. Plaintiffs claim that Defendants had no right to repossess the truck because Defendants held no lien. Plaintiffs contend that Defendants' fraudulent misrepresentations to them resulted in the truck's being wrongfully repossessed and sold and resulted in Plaintiffs' loss of a portion of the down payment and the regular monthly payments made. Plaintiffs claim they reasonably relied upon Defendants' misrepresentations that if they paid their monthly payments on time and to the proper party, they would continue to possess their truck. Plaintiffs say they also reasonably relied upon Defendants' misrepresentations that the side debt down payment would not effect their ability to retain their truck if they made timely payments.

Plaintiffs also assert that Defendants, for several years, had operated a criminal enterprise predicated on similar fraudulent and unlawful financing schemes, taking an interest in the customers' initial down payments through oral "side debts" and immediately selling the underlying debts to a third party who eventually sold the debts back to Defendants. Plaintiffs allege that Defendants induced purchasers to enter into these fraudulent transactions, expressly intending to make it impossible for the purchaser/debtor to make his payments by offering to accept contracts as cash down payments. Plaintiffs claim that the scheme involved Defendants' "staying ahead" of the purchaser's good faith payments on the side and underlying debts, thus creating a deficiency.

The First Amended Complaint asserts claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO") and the Tennessee Consumer Protection Act and also alleges state law claims for common law fraud. Defendants have moved to dismiss Plaintiffs' First Amended Complaint for failure to state a claim.


For purposes of a motion to dismiss, the Court must take all of the factual allegations in the complaint as true. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Id. at 1950. A legal conclusion couched as a factual allegation need not be accepted as true on a motion to dismiss, nor are recitations of the elements of a cause of action sufficient. Fritz v. Charter Township of Comstock, 592 F.3d 718, 722 (6th Cir. 2010).

Fed. R. Civ. P. 9(b) requires that a party alleging fraud must state with particularity the circumstances constituting fraud. Fed.R.Civ.P. 9(b) adds additional pleading requirements for allegations of fraud, but it should not be read to defeat the general policy of simplicity and flexibility in pleadings contemplated by the Federal Rules. U.S. ex rel. SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496, 503 (6th Cir. 2008). The principal purpose of Rule 9(b) is to ensure that the complaint provides the minimum ...

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