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BSCR Helps Auto Finance Company Client Avoid Class Action Lawsuit

BSCR secured a dismissal in St. Louis County Circuit Court for an Arkansas auto finance company client facing a potential class action lawsuit comprised of a nationwide class of people who purchased automobiles financed by the company.

Originally, the company was sued in associate circuit court by a Missouri resident claiming the company had violated numerous statutory requirements a creditor must meet when repossessing and seeking a deficiency judgment against a borrower. However, the borrower had defaulted in the deficiency judgment action, failed to seek a set aside within the one-year time period prescribed by Mo. R. Civ. Pro. 74.05(d), and instead filed a separate lawsuit months after the one-year set aside period had expired, seeking relief under the consumer credit statute.

BSCR opposed the borrower’s motion for leave to add class claims against the company, arguing that amendment would be futile because the borrower’s claims should have been brought as defenses to the deficiency judgment action and thus were barred by the compulsory counterclaim rule (Mo.R.Civ.P. 55.32(a)). The borrower argued Rule 55.32(a) precluded him from bringing the statutory claims in a separate action because counterclaims are not compulsory in associate circuit court. BSCR countered that, despite the non-compulsory nature of counterclaims in associate circuit court, the borrower’s claims in the second lawsuit were an impermissible collateral attack on the default judgment entered in the deficiency action. This would have been an issue of first impression for the court.

Simultaneous to the arguments being made on our client’s behalf, the Missouri Supreme Court was considering the same issue on a writ in prohibition involving the same consumer class action attorneys in a similar case. In deciding whether class certification was proper, the Supreme Court had to consider whether there was any preclusive effect of prior deficiency judgments against the putative class plaintiffs. Based on the premise that the deficiency judgments resolved the issue of the finance company’s compliance with the statutory requirements, the Supreme Court answered that question affirmatively, finding the class action claims alleging violation of the statute were an impermissible collateral attack on the deficiency judgments and, therefore, anyone who had a deficiency judgment against them was not eligible for the class.

The Supreme Court also noted that although the deficiency judgments were entered in associate circuit court where no counterclaim is required, the collateral attack on those judgments in a subsequent action was not justified, the same argument BSCR made in opposing the borrower’s motion for leave to add class claims to his lawsuit.

As a result, just before the hearing on the borrower’s motion for leave to add class claims, the borrower dismissed its case against BSCR’s client for the return of monies collected through garnishment. 

Services: Automotive, Banking, Complex, Class Action & MDL and Financial Services Litigation
Attorneys: Martha Charepoo and John P. Lord