Williams v. American Honda Finance

United States Court of Appeals
For the First Circuit
No. 16-1275
RACHEL C. WILLIAMS,
on behalf of herself and others similarly situated,
Plaintiff, Appellant,
v.
AMERICAN HONDA FINANCE CORPORATION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Leo T. Sorokin, U.S. District Judge]
Before
Torruella, Thompson, and Kayatta,
Circuit Judges.
John Roddy, with whom Elizabeth Ryan, Bailey & Glasser LLP,
Steven R. Striffler, and Law Office of Steven R. Striffler were on
brief, for appellant.
Stuart T. Rossman, National Consumer Law Center, and Jennifer
P. Nelson on brief for National Consumer Law Center, amicus curiae
in support of appellant.
Eric S. Mattson, with whom Daniel R. Thies, Sidley Austin
LLP, Tracy M. Waugh, and Wilson Elser Moskowitz Edelman & Dicker,
LLP were on brief, for appellee.
Frederick S. Levin, John C. Redding, Ali M. Abugheida, and
Buckley Sandler LLP, on brief for American Financial Services
Association, amicus curiae in support of appellee.
October 24, 2018
KAYATTA, Circuit Judge. Rachel Williams brought this
putative class action, alleging that American Honda Finance
Corporation ("Honda") violated Massachusetts consumer protection
laws by affording her inadequate loan-deficiency notifications
after she fell behind on her automobile-loan payments. This appeal
followed the district court's entry of summary judgment in favor
of Honda. Recognizing that Williams's claims hinge entirely on
questions of Massachusetts law, we certified three questions to
the Massachusetts Supreme Judicial Court. After the Supreme
Judicial Court issued an opinion responding to our questions, see
Williams v. Am. Honda Fin. Corp., 98 N.E.3d 169 (Mass. 2018), the
parties filed supplemental briefs addressing the ramifications of
those answers. For the reasons explained herein, we now reverse
the district court's findings that Honda's notices were compliant
with Massachusetts law, vacate its dismissal of Williams's claims
under the Massachusetts UCC and chapter 93A, and otherwise affirm
its judgment.
I. Background
The pertinent facts are set out in Williams v. Am. Honda
Fin. Corp., 858 F.3d 700 (1st Cir. 2017). In brief, Williams
purchased a Honda Accord in 2007, which she partly financed through
a retail-installment-sale contract with Honda. After Williams
failed to make her loan payments, Honda repossessed the automobile
and sent her a post-repossession notice that advised her of Honda's
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intent to sell the car at auction. The notice also described
Williams's deficiency liability as follows: "The money received
from the sale (after paying our costs) will reduce the amount you
owe. If the auction proceeds are less than what you owe, you will
still owe us the difference."
At auction, Honda fetched $8,900.00 for the automobile.
Honda then sent Williams a second notice that apprised her of the
sale and of her deficiency balance, calculated in accordance with
the post-repossession notice by subtracting the price obtained at
auction from her outstanding loan balance plus the additional costs
associated with repossessing and selling the automobile.
Williams claims that Honda's notices violate provisions
of the Massachusetts version of the Uniform Commercial Code
("UCC"), Mass. Gen. Laws ch. 106, §§ 9-614, 9-616, and the
Massachusetts consumer protection statute, Mass. Gen. Laws
ch. 93A, § 2(A), by telling Williams that her deficiency liability
would be calculated using the automobile's sale price obtained at
auction (rather than its fair market value). The district court
rejected this challenge to Honda's notices for two reasons. First,
it noted that Honda's pre-sale notice "track[ed] the safe harbor
language in section 9-614(3)," which uses auction-sale proceeds as
the measure of a debtor's deficiency. Williams v. Am. Honda Fin.
Corp., No. 14-CV-12859, 2014 WL 11090919, at *8 (D. Mass. July 3,
2014). Further, the court concluded that Williams had presented
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"no evidence that the auction proceeds were less than the
[automobile's] fair market value." Id. 1
On appeal, Williams argues that summary judgment dismissing
her challenges to Honda's notices was improper. She maintains
that Massachusetts law requires a lender to give credit for the
fair market value of the car -- determined using a car's estimated
retail-market value -- when calculating deficiencies owed, and she
therefore challenges the district court's conclusion that Honda's
use of the auction-sale price in its deficiency notices was
accurate and reasonable under the circumstances. Acknowledging
that a resolution of Williams's claims would require this court to
reconcile Massachusetts's Motor Vehicle Retail Installment Sales
Act ("MVRISA"), Mass. Gen. Laws ch. 255B, § 20B, with provisions
of the Massachusetts UCC, we certified the following three
questions to the Massachusetts Supreme Judicial Court:
1
Honda would seem to have us read the second of the two
reasons the district court provided as sufficient, by itself, to
find its pre- and post-sale notices to be compliant with
sections 9-614 and 9-616. This makes no sense at all, nor does
Honda explain how it might make sense; i.e., how deficient notices
could be deemed compliant with the statutory-notice requirements
merely because the auction sale netted a price that is in line
with the collateral's fair market value. We therefore read the
district court's holding as saying that the notices must both be
facially compliant and the sale proceeds need be equal to fair
market value. Whether it is correct that an otherwise compliant
notice could be rendered noncompliant by a defective sale, we need
not -- and do not -- decide because, as we will explain, it is now
clear that the notices did not accord with sections 9-614 and 9-
616.
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1. Whether the "fair market value" of collateral under
Massachusetts General Laws chapter 255B, section 20B, is
the fair market retail value of that collateral?
2. Whether, and in what circumstances, a pre-sale notice
is "sufficient" under UCC section 9-614(4) and (5), and
"reasonable" under UCC section 9-611(b), where the
notice does not describe the consumer's deficiency
liability as the difference between what the consumer
owes and the "fair market value" of the collateral, and
the transaction is governed by MVRISA?
3. Whether, and in what circumstances, a post-sale
deficiency explanation is "sufficient" under UCC
section 9-616 where the deficiency is not calculated
based on the "fair market value" of the collateral, and
the transaction is governed by MVRISA?
Williams, 858 F.3d at 703.
In June, the Supreme Judicial Court issued an opinion that
addressed our questions. Williams, 98 N.E.3d at 171. In brief,
the Supreme Judicial Court answered the first question in the
negative, concluding that "the Legislature did not dictate the
creditor's market choice in the first instance." Id. at 179–80.
Nevertheless, the court opined that, in disputed cases, a
rebuttable presumption exists that the estimated retail-market
value of the repossessed collateral is its fair market value in
MVRISA-governed transactions. Id. at 174. As to the second and
third questions, the Supreme Judicial Court concluded that notices
provided under sections 9-614 and 9-616 "must describe the
[debtor's] deficiency as the difference between the fair market
value of the collateral and the debtor's outstanding balance."
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Id. at 179. Applying these answers, we now address the merits of
Williams's appeal.
II. Analysis
A.
We first address the district court's conclusion that
Williams failed to offer any evidence to show that Honda sold her
vehicle for less than fair market value in violation of MVRISA
§ 20B. See Williams, 2014 WL 11090919, at *7. In so ruling, the
district court rejected as unauthenticated the only evidence
Williams offered to prove fair market value, retail or otherwise.
Id. We review evidentiary decisions at the summary judgment stage
for abuse of discretion. See Hoffman v. Applicators Sales & Serv.,
Inc., 439 F.3d 9, 13 (1st Cir. 2006) ("[T]he Court should review
the district court's evidentiary rulings made as part of its
decision on summary judgment for abuse of discretion." (citing
Alt. Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 31 (1st
Cir. 2004))).
We see no reason to upset the district court's conclusion
concerning the adequacy of Williams's proof. On appeal, Williams
offers no argument at all that the court abused its discretion in
finding that Williams did not authenticate the sole exhibit -- a
National Automobile Dealers Association values printout -- that
she offered to support her claim that Honda sold her vehicle for
less than fair market value. Her challenge to the court's ruling
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that Honda sold the car for fair market value is therefore waived.
See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)
("[I]ssues adverted to in a perfunctory manner, unaccompanied by
some effort at developed argumentation, are deemed waived.").2
B.
We turn now to the main issue in this case: Williams's
challenge to the district court's determination that the post-
repossession and post-sale notices Honda sent to Williams complied
with the requirements of Massachusetts law. See Williams, 2014
WL 11090919, at *8.
The Massachusetts Supreme Judicial Court has now opined that
the post-repossession and post-sale notices of the type Honda sent
to Williams must "expressly describe the deficiency as the
difference between the amount owed on the loan and the fair market
value of the vehicle." Williams, 98 N.E.3d at 171; see also id.
at 179 ("The notice . . . must describe the deficiency as the
2Williams does briefly contend on appeal that other evidence
in the record filled the gap in proof that the exclusion of her
exhibit created. She never made this argument below, so we deem
it forfeited. See Davila v. Corporación de Puerto Rico para la
Difusión Pública, 498 F.3d 9, 14 (1st Cir. 2007) (deeming forfeited
an argument not raised before the district court). And with
Williams having made no attempt on appeal to explain how she
satisfies the demanding plain-error test, "[w]e are under no
obligation to do [her] work for [her]." United States v. Morosco,
822 F.3d 1, 22 (1st Cir. 2016), cert. denied, 137 S. Ct. 251(2016).
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difference between the fair market value of the collateral and the
debtor's outstanding balance.").
Honda's notices to Williams, which describe Williams's
deficiency as the difference between "the amount you owe" and
"[t]he money received from the sale," plainly do not provide this
necessary express description, and therefore do not comply with
the requirements of Mass. Gen. Laws ch. 106, §§ 9-614, 9-616.
Honda argues that, under the facts presented here, "fair
market value" is no different than the auction price and, thus,
its notices, which parrot the so-called safe-harbor language in
Mass. Gen. Laws ch. 106, § 9-614(3), "conveyed the 'fair market
value' concept." The Supreme Judicial Court, however, has now
made it clear that a creditor's use of the UCC safe-harbor language
in deficiency notifications is inadequate under Massachusetts law.
See Williams, 98 N.E.3d at 179.
In the wake of the Supreme Judicial Court's opinion, Honda
argues for the first time that applying the Supreme Judicial
Court's interpretation of Mass. Gen. Laws ch. 106, §§ 9-614, 9-
616 to notices sent before the court announced its decision would
violate its "constitutional right to due process." But Williams's
challenge to Honda's notices -- and the prospect that a court might
read the ambiguous statutory requirements adversely to Honda just
as the Supreme Judicial Court did -- has been pending since 2014.
Yet, in neither the district court nor in this court nor before
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the Supreme Judicial Court did Honda raise this due process
argument. Accordingly, the argument is three-times waived to the
extent Honda would rely on it to establish that its notices were
compliant. See Lawless v. Steward Health Care Sys., LLC, 894 F.3d
9, 25 (1st Cir. 2018) (finding an argument waived when a party
failed to raise it in their opening brief); Nat'l Ass'n of Soc.
Workers v. Harwood, 69 F.3d 622, 627 (1st Cir. 1995) ("Ordinarily,
an appellant who has not proffered a particular claim or defense
in the district court 'may not unveil it in the court of appeals.'"
(quoting United States v. Slade, 980 F.2d 27, 30 (1st Cir. 1992))).
Given the above, entry of summary judgment on Williams's UCC
notice and chapter 93A claims was improper. Whether and to what
extent Honda acted in good faith and whether and to what extent
good faith provides any defense or mitigation in connection with
any claims or remedies, we leave to the district court to determine
on remand.
III.
For the foregoing reasons, we reverse the district
court's findings that Honda's notices were compliant with
Massachusetts law, we vacate its dismissal of Williams's claims
under chapter 93A and Massachusetts' version of the UCC,
challenging the adequacy of Honda's notices, and we otherwise
affirm its judgment. Costs are awarded to Williams.
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