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Repossessions: 13.7.3.1 Generally

Assuming that the state action requirement is met, debtors in a repossession action still face questions of what defendants to sue. To sort out this question it is important to understand what level of involvement in the illegal acts is necessary for section 1983 liability, and what types of immunity each potential defendant is likely to claim.

Repossessions: 13.7.3.2 The State’s Sovereign Immunity

The state itself is protected by sovereign immunity.529 As a result, neither it nor its officers acting in their official capacities can be held liable for money damages. Injunctive relief can be issued against state officers when they are sued in their official capacities, however.530

Repossessions: 13.7.3.3 Liability of Local Governmental Bodies

Municipalities and other local governmental bodies do not enjoy the immunity from suit that a state enjoys, but they still will not be liable on a respondeat superior basis for the actions of law enforcement officials.531 These units of local government will be liable only if their “official policy” was to allow such police assistance in repossessions.532

Repossessions: 13.7.3.5 Liability of Private Parties

The private party on whose behalf the unlawful state action was undertaken can be liable under section 1983 for participating in a conspiracy with the state actors.548 Merely reporting false information to a law enforcement officer is usually insufficient to show joint action, however.549 A private party can also be liable when a state has delegated a traditionally public function to it.550 A private party that invokes an unconstitutional sta

Repossessions: 13.8 U.S. Bankruptcy Code

The United States Bankruptcy Code553 offers some of the most effective consumer remedies to prevent repossessions. For most debtors, bankruptcy automatically stays all actions against the debtor’s secured property.554 A bankruptcy filing, in appropriate circumstances, can even lead to the return to the consumer of property already repossessed.

Repossessions: 13.9.1 Types of Claims to Raise

Consumers whose property has been repossessed often have not only claims related to the repossession but also claims against the dealer or creditor related to other matters, such as the sale itself. Because many consumers seek legal help only after being sued for a deficiency, the deficiency suit often presents the best opportunity to raise these other claims.

Repossessions: 13.9.2.1 Scope and Effect of the FTC Holder Rule

Seller-related claims can be raised as counterclaims to a deficiency action in a consumer case when the party bringing the deficiency claim is the seller. In many cases, those same seller-related claims can be brought as counterclaims when the party bringing the deficiency claim is an entity other than the seller.

Repossessions: 13.9.2.2 Limits on Creditor Liability for Seller-Related Claims

When a creditor or assignee is subject to seller-related claims by virtue of the FTC Holder Notice, there are limitations to its liability. The holder’s liability pursuant to the Holder Notice for the seller’s misconduct is capped at the amount outstanding on the obligation and the amount already paid.580 This means that the consumer can, at most, cancel the remainder of the debt (that is, the deficiency) and recover everything already paid in, which should include all installment payments.

Repossessions: 13.10.3 Contractual Waivers of Consumer’s Right to Sue for Personal Property Taken with the Collateral

Some creditors attempt to avoid liability for the temporary taking of unsecured property seized with the repossessed collateral by inserting a clause into the security or credit agreement. This clause grants the secured party the right to take unsecured personalty in the course of a repossession and hold it for the debtor without liability. Challenges to these clauses are discussed in , supra.

Repossessions: 13.10.4.2.1 Care in repossession of collateral as a non-delegable duty

Secured parties often claim that the repossessor is an independent contractor and that therefore respondeat superior does not apply.623 While it is generally true that an employer is not liable for the acts of an independent contractor, the responsibility to repossess collateral without breaching the peace is a non-delegable duty for which the secured party is always responsible, even if it hires independent contractors to do the work.624 One court extended this reasoning to allow p

Repossessions: 13.10.4.2.3 Creditor liability based on other statutes

It is always important to examine other state laws regulating the credit transaction to see if they explicitly make the creditor liable for the conduct of the repossessors it hires.633 One such statute is found in the District of Columbia.634 However, California has taken the opposite position, and has specified that neither a secured party nor a licensed repossessor is liable for any act or omission by the other in carrying out an assignment by a creditor to repossess collateral, provided t

Repossessions: 13.11.1 Long-Arm Jurisdiction in Repossession Cases

Often repossession occurs at the direction of an out-of-state creditor. Whether the courts of the state where the repossession occurs have jurisdiction over the out-of-state creditor will depend on the state’s long-arm jurisdiction statute and constitutional standards. Many states’ long-arm statutes allow jurisdiction to the maximum extent allowed by the Constitution, so the statutory and constitutional tests tend to merge.

Repossessions: 13.11.2 Pleadings and Discovery

Sample pleadings and discovery materials under revised Article 9 are included in and , infra. These documents are also available in word-processing format online as companion material to this treatise. The online companion materials also include a variety of pleadings and discovery from repossession cases under the former version of Article 9 that can be adapted for use under revised Article 9.

Repossessions: 13.11.3.1 Introduction

Mandatory arbitration provisions are widespread in consumer credit contracts. Creditors insist on this requirement because it significantly limits their exposure to classwide damages, punitive damages awards, discovery, publicity, and even individual damage claims. As a general rule, consumer litigants will want to avoid arbitration requirements for these very reasons.

Repossessions: 13.11.3.2.1 No arbitration requirement for manufactured home loans

The Truth in Lending Act (TILA) and Regulation Z require that no manufactured home loan include an arbitration requirement.652 “A contract or other agreement for a consumer credit transaction secured by a dwelling (including a home equity line of credit secured by the consumer’s principal dwelling) may not include terms that require arbitration. . .

Repossessions: 13.11.3.2.2 No arbitration requirement for non-purchase-money credit extended to military personnel or dependents

The Military Lending Act (MLA) prohibits arbitration clauses in certain consumer credit agreements made with military personnel or their dependents, or the enforcement of such a consumer credit agreement.657 Department of Defense (DoD) regulations define the scope of consumer credit to which the prohibition applies, including, as of October 3, 2016, any type of automobile title loan or any other closed-end credit that takes a non-purchase-money security interest in a motor vehicle or other collateral.

Repossessions: 13.11.3.2.5 Defendant must produce the arbitration agreement

Arbitration is a matter of agreement between the parties. If there is no arbitration agreement, then there is no arbitration requirement. Before a creditor or the creditor’s assignee can force a claim into arbitration, it must produce an agreement that applies to the particular consumer plaintiff, and that agreement must contain an arbitration clause.673 It cannot just produce evidence that there is an agreement.