2011-00108983-CU-BT

Joshua Bohannan vs. Professional Cycle Parts

Nature of Proceeding: Motion for Summary Judgment and/or Adjudication

Filed By: Abernethy, Ryan E.

Defendant Professional Cycle Parts’ (“PCP”) Motion for Summary Judgment or in the
Alternative for Summary Adjudication of Issues or Finding of No Merit is DENIED.

Defendant’s Request for Judicial Notice is GRANTED.

Plaintiff’s Request for Judicial Notice is GRANTED.

Operative Pleadings

Plaintiff’s operative pleading is the Second Amended Complaint filed by stipulation on
Feb. 19, 2014, after the pending motion for summary judgment/adjudication was filed
on Jan. 21, 2014.

The Second Amended Complaint (“SAC”) is a putative class action, which sets forth
st
three causes of action against defendant Professional Cycle Parts: the 1 Violation of
the Unfair Competition Law, Bus & Prof. Code §17200, et seq., the 2nd cause of action
for Violation of the Consumer Legal Remedies Act, Civil Code 1750, et seq.) and the 3
rd for Declaratory Relief. The first amended complaint alleges the same three causes of
action. The Court therefore addresses the operative pleading.

Plaintiff Bohannan alleges that PCP failed to provide him with a “single document”
regarding the financing of his purchase of a motorcycle from PCP on August 23, 2008.
Plaintiff alleges this was required by the California Automobile Sales and Finance Act
(hereinafter “the ASFA” or “the Rees-Levering Act”).

Bohannan’s SAC alleges that PCP violated the Unfair Competition Law (“UCL”) and
the Consumer Legal Remedies Act (“CLRA”) and should be subject to Declaratory
Relief based solely on PCP’s underlying allegation of ASFA disclosure violation.

Class Certification

A Motion for Class Certification is calendared for hearing on May 29, 2014. Counsel
have stipulated to have this Court to determine the pending motion for summary
judgment/adjudication prior to ruling on the class certification.

A largely settled feature of state and federal procedure is that trial courts in class
action proceedings should decide whether a class is proper and, if so, order class
notice before ruling on the substantive merits of the action. (See, Green v. Obledo
(1981) 29 Cal.3d 126, 146; Fed. Rules Civ. Proc., Rule 23(c) (1) (A); Hickey v. Duffy
(7th Cir. 1987) 827 F.2d 234, 237.) The virtue of this sequence is that it promotes
judicial efficiency, by postponing merits rulings until such time as all parties may be
bound, and also fairness, by ensuring that parties bear equally the benefits and
burdens of favorable and unfavorable merits rulings. The rule stands as a barrier
against the problem of “one-way intervention,” whereby not-yet-bound absent plaintiffs
may elect to stay in a class after favorable merits rulings but opt out after unfavorable
ones. Fireside Bank v. Superior Court (2007) 40 Cal. 4th 1069.

Here, all Counsel have stipulated to waive any objection to one-way intervention, and
the Court has so ordered on March 21, 2014, therefore this Court will determine this
motion on its merits, with counsel’s written waiver of any objection based on Fireside
Bank v. Superior Court (2007) 40 Cal. 4th 1069.

Summary Adjudication/ Civil Code, sec. 1781

Defendant moves for summary adjudication under C.C.P., sec. 437c and/or for a
finding of no merit under Civil Code, sec. 1781 as to each of plaintiff’s three causes of
action.

A motion based upon C.C.P., sec. 437c shall not be granted in any CLRA action if it is
commenced as a class action.

However, Civil Code, sec. 1781 provides for a comparable motion if the “action is
without merit or there is no defense to the action”. Olsen v. Breeze, Inc. (1996) 48 Cal.
App. 4th 608, 623-624. The parties both concur that the Court should rule on this
section 1781 motion as to the 2nd cause of action.

Material Facts

Each cause of action is based upon identical material facts (although renumbered.)
Thus, if any material fact is disputed, the entire motion must fail. Here, plaintiff disputes
MF nos. 1-3, 6, 8-13, 17-18 (and their renumbered counterparts.)

It is undisputed that PCP is an authorized Yamaha motorcycle dealer.

Moving party PCP asserts that it was allowed to offer Yamaha Credit Card applications
to its customers, which were underwritten or financed by HSBC, a national bank.

However, the evidence cited in support is insufficient to support the stated material
fact; it merely reflects that there was “some sort of agreement with HSBC”. (MF 17,
35, 53.)

PCP asserts that HSBC controlled the manner in which PCP was to facilitate customer
credit card applications and sales using its credit cards. (MF 18, 36, 54.) Again,
however, the evidence of the nature of that agreement reflects that the agreement was
between Yamaha and PCP. Insufficient evidence is provided by moving party of any
agreement between itself and HSBC.

PCP asserts that HSBC offered open-ended credit card type financing for the
purchase of Yamaha products at PCP. Close-ended installment financing through
other lenders was also available for Yamaha motorcycle purchases. (MF 2, 20, 38.)
Again, the evidence cited in support is insufficient to support the stated material fact;
the evidence does not refer to close-ended or installment financing to qualified
customers.

It is undisputed that on August 22, 2008, Bohannan went to PCP’s store and discussed
the purchasing of a motorcycle with a PCP salesperson. (MF 4, 22, 40.) In order to
obtain financing, Bohannan signed a Credit Application and PCP ran his credit report.
(MF 5, 23, 41.)

PCP asserts that due to plaintiff’s credit, the only financing plaintiff qualified for was
$5,000 in revolving credit provided by the Yamaha HSBC Credit Card Program.
Plaintiff agrees that he was offered that amount of credit, but disputes that he had a
bad credit score. (MF 6, 24, 42.)

On August 22, 2008, Bohannan applied for, was approved for and obtained a Yamaha
credit card with HSBC, with a $5,000 limit. (MF 9, 27, 45.) While Plaintiff concedes
that he completed a credit application, he disputes that the purpose of the application
was for a Yamaha credit card through HSBC.

Although PCP asserts that plaintiff was approved by HSBC for a credit card with a
$5,000 limit, Plaintiff disputes this material fact, testifying that he was surprised when
he received a credit card in the mail a week later. (MF 9, 27, 45.)

Bohannan acknowledges shredding credit card disclosure documents he received
from HSBC. However, Bohannan asserts that PCP is unable to provide evidence that
he received all required disclosures from HSBC regarding his credit agreement. (MF
10, 28, 46.)

PCP contends that the following day, August 23, 2008, plaintiff purchased a 2003
Yamaha motorcycle for the “cash price” of $5,854.19, using both his HSBC and Bank
of America credit cards. Plaintiff disputes that it was a “cash” transaction, as he paid
$5,000 with the financing he claims to have received from Yamaha. (MF 11, 29, 47.)

California Automobile Sales Finance Act, aka Rees-Levering Act (“ASFA”) Civil Code,
sec. 2981, et seq.

Plaintiff’s allegations as to each cause of action of the SAC are based upon the
predicate statute of the California Automobile Sales Finance Act, also known as the
Rees-Levering Act (“ASFA”) Civil Code, sec. 2981, et seq. It is not stated as a

separate cause of action, but each cause of action is premised upon it.

Because it is not a separate issue for summary adjudication, the Court cannot grant or
deny summary adjudication as to it, but merely summarizes the parties’ contentions
below.

Plaintiff alleges that defendant PCP did not comply with the requirements of a single
document containing all agreements of the buyer and seller as set forth in ASFA Civil
Code § 2981.9 (“single document rule”). (SAC, paras. 2, 18, 26, 27, 37, 57.)

Defendant PCP acknowledges that it did not comply with the ASFA, asserting that the
credit card financing of the Yamaha purchase was not subject to the ASFA because
(1) ASFA does not apply to credit card purchases, (2) the purchase was not a
conditional sales contact (3) Regulation Z does not apply or (3) assuming that the
purchase was a conditional sales contact, ASFA’s regulation of credit cards is
preempted by The National Banking Act.

ASFA Does Not Apply To Credit Card Purchases

Defendant contends that the plaintiff’s motorcycle purchase here is not subject to the
ASFA or the “single document rule” as the purchase was made entirely by credit card.
The California Legislature did not intend for the ASFA to regulate credit card
purchases. The California Legislature enacted the ASFA in 1961, long before state or
federal regulation of the use of credit cards. The ASFA makes no reference to
revolving credit, credit cards, open-end credit, or lines of credit, although the ASFA
was amended many times since its inception.

PCP asserts that Plaintiff only qualified for and obtained an HSBC credit card for
$5,000 on August 22, 2010. The following day, he returned and used both his HSBC
and his Bank of America credit cards to pay the purchase price of the Yamaha
motorcycle from PCP.

Conditional Sales Contact under Civil Code, sec. 2981(a)(1)(A)

Moving party PCP contends that the ASFA’s single document rule only applies to
“conditional sales contracts” as set forth in Civil Code section 2981(a). See Cal. Civ.
Code § 2982 (limiting application of single document rule to “conditional sales
contracts”). A “conditional sales contract” is only found where a lien is held by the
seller or where the buyer does not obtain title until after he or she obtains possession
of the vehicle and makes subsequent installment loan payments.

PCP contends that this was not a “conditional sales contract.” Civil Code § 2981 (a)
provides: “’Conditional sale contract’ means: (1) A contract for the sale of a motor
vehicle between a buyer and a seller, with or without accessories, under which
possession is delivered to the buyer and either of the following: (A) The title vests in
the buyer thereafter only upon the payment of all or a part of the price, or the
performance of any other condition….”

Here, PCP relies upon Vehicle Code § 5901 which requires the dealer upon
transferring by sale any vehicle of a type subject to registration under this code, to give
written notice of the transfer to the department upon an appropriate form. Subsection
(d) provides: “A sale is deemed completed and consummated when the purchaser of

the vehicle has paid the purchase price, or, in lieu thereof, has signed a purchase
contract or security agreement, and has taken physical possession or delivery of the
vehicle.”

Plaintiff asserts that title never vested in Bohannan under Civil Code, sec. 2981(a)(1).
The minimum monthly payment stated in the first monthly bill did not even cover the
interest charges, generating a negative amortization. (PMF, 12.) Plaintiff tried to sell or
trade the motorcycle in. PCP refused because plaintiff did not have clear title and the
motorcycle has since been repossessed. (PMF 14, 5.)

Regulation Z Does Not Apply

Bohannan alleges in his SAC that at the time of his motorcycle purchase, PCP failed to
provide him with disclosures required by Regulation Z. Regulation Z is a federal law
regulating creditors’ disclosure of the terms and costs associated with credit financial
borrowing. 12 C.F.R. 226. ASFA’s “single document rule” incorporates Regulation Z
as follows: “[a] conditional sale contract subject to this chapter shall contain the
disclosures required by Regulation Z, whether or not Regulation Z applies to the
transaction.” Civ. Code, sec. 2982.

For the reasons set forth above, PCP contends that Regulation Z cannot apply here
because there was no “conditional sale contract” between PCP and Bohannan. In
addition, by Regulation Z’s own terms, its general disclosure requirements apply only
to “creditors,” not sellers who accept credit card payments for vehicle purchases. (12
C.F.R. secs. 226.18 and 226.5.)

Assuming that The Purchase Was a Conditional Sales Contact, ASFA’s
Regulation of Credit Cards is Preempted by the National Banking Act

Assuming arguendo that Bohannan’s purchase constituted a “conditional sales
contract,” PCP asserts that the ASFA itself is preempted by federal law as it attempts
to govern the disclosures associated with the issuance of credit cards, which falls
under the exclusive auspices of the National Banking Act (“NBA”). “Federal
regulations may preempt state law just as fully as federal statutes.” Hood v. Santa
Barbara Bank & Trust (2006) 143 Cal. App. 4th 526, 536.

The disclosures associated with Bohannan’s HSBC credit card were governed
exclusively by the NBA, and if the ASFA’s intent was to regulate such, it is preempted
by 12 C.F.R. section 7.4008(d) of the NBA.

However, the evidence provided by moving party in support of the contention that it
was an authorized agent of HSBC is weak.

In opposition, plaintiff asserts that PCP’s business of selling motor vehicles has
nothing to do with the business of banking or the exercise of a bank’s lending powers;
PCP is not a duly authorized agent of a national bank; and PCP deceptively fails to cite
to 12 CFR §7.4008(e), the regulation’s savings clause, which states that state laws
involving contract and tort are not preempted. The allegations of the SAC involve
contract and tort, state law claims.

st
Summary adjudication of the 1 Violation of the Unfair Competition Law, Bus. & Prof.
Code, sec. 17200, et seq., is DENIED.

The moving party has failed to provide sufficient admissible evidence to support each
of its material facts, many of which are disputed by the plaintiff. (Disputed MF nos. 1-3,
6, 8-13, 17-18.) Additionally, plaintiff has submitted its own additional material facts in
opposition. (PMF 1-17.)

Business and Professions Code §17200, et seq. proscribes any unlawful, unfair or
fraudulent business act or practice. Conduct that violates any one of the three stated
prongs will trigger liability under the UCL. The California Supreme Court has held that
the law’s coverage is sweeping, encompassing “anything that can properly be called a
business practice and that at the same time is forbidden by law.” Rubin v. Green
(1993) 4 Cal.4th 1187, 1200. PCP fails to address the unfair and fraudulent prongs of
the UCL and for that reason alone this motion must be denied.

Plaintiff has testified that he was told by the PCP salesperson that his monthly
payment would be about $100, yet the evidence supplied by PCP in support of the
motion contends that PCP’s conduct was not deceptive as the APR and monthly
payments could not be ascertained at the time of the sale. As plaintiff has named only
PCP in this suit, the contention that his claim is properly against HSBC is
disingenuous.

A No-Merit determination of the 2nd cause of action for Violation of the Consumer Legal
Remedies Act, Civil Code, sec. 1750, et seq. (“CLRA”) is DENIED.

Civil Code section 1781(a) permits a consumer to bring an action under the CLRA on
behalf of himself and a class of others similarly situated. Olsen v. Breeze, Inc., supra,
48 Cal. App. 4th 608, 623.

Moving party PCP contends that the ASFA did not apply to this transaction. Plaintiff
Bohannan purchased a motorcycle by using two credit cards-one issued by HSBC and
another by Bank of America-and the ASFA does not apply to credit card transactions,
only installment contracts. Additionally, the ASFA applies only to “conditional sales
contracts,” so the ASFA cannot apply to this “cash sale contract” because title passed
immediately to Bohannan when he purchased the motorcycle and PCP did not retain a
security interest in the motorcycle after the purchase. Finally, even if the ASFA was
intended to regulate a transaction such as this, it would be preempted by the National
Banking Act which maintains exclusive jurisdiction over credit card issuance
disclosures.

Based on the foregoing, PCP contends that Bohannan is unable to establish essential
elements of his causes of action and the causes of action of the SAC are appropriate
for Summary Judgment and a No-Merit determination.

In opposition, plaintiff asserts the CLRA “established a nonexclusive statutory remedy
for unfair methods of competition and unfair or deceptive acts or practices undertaken
by any persons in a transaction intended to result or which results in the sale or lease
of goods or services to any consumers.” See Civ. Code § 1770(a); Wang v. Massey
Chevrolet (2002) 97 Cal.App.4th 856, 869. The purpose of the CLRA is “to protect
consumers against unfair and deceptive business practices and to provide efficient
and economical procedures to secure such protection.” Hogya v. Superior Court
(1977) 75 Cal.App.3d 122, 135. The CLRA is to be broadly construed. Id.

Plaintiff asserts that PCP violated the CLRA, because its deceptive practices were
intended to and did result in the sale of goods, namely motorcycles. It is undisputed
that Bohannan bought a motorcycle from PCP.

PCP’s sole argument under the CLRA, namely that this is not a covered transaction, is
fundamentally flawed. PCP’s misrepresentations to plaintiff resulted in the sale of a
motorcycle. The gravamen of the complaint against PCP is the deceptive conduct of its
salesmen at the time of sale. (SAC, para. 22.) The events described in the SAC,
supported by the evidence, may be found to constitute a covered transaction. (SAC,
paras. 13 – 16.)

The moving party has failed to provide sufficient admissible evidence to support each
of its material facts, many of which are disputed by the plaintiff. (Disputed MF, nos. 19-
21, 24, 26-31, 35-36.) Additionally, plaintiff has submitted its own additional material
facts in opposition. (PMF 1-17.)

rd
Summary Adjudication of the 3 for Declaratory Relief is DENIED.

st nd
The Declaratory relief cause of action is derivative of the 1 and 2 causes of action,
and therefore must fail with them. The Court cannot determine on the record before it
that there no longer exists an “actual controversy relating to the legal rights and duties
of the respective parties.” C.C.P., sec. 1060. As there remain numerous material
issues of disputed fact as to the above- referenced causes of action, an “actual
controversy” remains and the Court must deny PCP’s Motion.

The prevailing party is directed to prepare a formal order complying with C.C.P. §437c
(g) and C.R.C. Rule 3.1312.