JACKSON, Miss. (Legal Newsline) – Mississippi's attorney general doesn't have authority to pursue an unfair and deceptive trade practices lawsuit, according to a recent filing from a Michigan subprime auto lender that is being sued by the state via a team of outside trial lawyers.
In its 33-page memorandum of law filed May 24, in U.S. District Court for Mississippi's Southern District Jackson Division, Credit Acceptance Corporation argued it can't be successfully sued by Attorney General Jim Hood and the court shouldn't allow the case to move forward.
Hood "lacks any Mississippi authority whatsoever, which might support a conclusion that the sales and financing practices as alleged in the complaint are unlawful," Credit Acceptance said in its memorandum, filed in support of its motion to dismiss. "The court should be unwilling to create such authority on its own and accordingly should dismiss the complaint in its entirety and with prejudice."
Credit Acceptance, with headquarters in Southfield, Michigan, alleged in its memorandum that Hood is using its case against Credit Acceptance "as a vehicle to legislate new regulations governing the entire subprime auto lending industry."
Hood's case "remarkably" does not mention "a single provision" of state and federal statutes and regulations that Credit Acceptance is alleged to have violated, the memorandum said.
"Rather, in apparent disagreement with the Mississippi legislature and U.S. Congress over the appropriate balance between consumer protection and consumers' necessary access to credit, the attorney general seeks to implement his own public policy agenda by asserting that Credit Acceptance's lawful business practices purportedly violated the general prohibition on 'unfair' and 'deceptive' practices in the Mississippi Consumer Protection Act (“MCPA”)," the memorandum said.
"Specifically, the complaint asserts that it is 'unfair' and 'deceptive' to lend to consumers with impaired or limited credit histories or use lawful means to collect amounts concededly owed on contracts."
Hood is trying to use the MCPA "to circumvent the legislative process." the memorandum said.
Mississippi is represented by private law firm Motley Rice LLC, which is well known for its part in asbestos litigation, the major tobacco settlement of the late 1990s and the BP Deepwater Horizon settlement. In its retention agreement with the Mississippi attorney general's office, signed in April, Motley Rice agreed to work on a contingency fee basis in the state's litigation against Credit Acceptance and potentially other entities.
The agreement sets up a tiered system in which Motley Rice's percentage will be determined by how much it recovers in the case.
Mississippi's case against Credit Acceptance is far from the first time that the state has retained outside counsel to pursue its litigation.
That high payday amount for Mississippi's outside counsel looked particularly suspicious given the hundreds of thousands of dollars Hood received in campaign contributions from trial law firms.
In 2017 the Mississippi House tried to reign in the attorney general's use of outside trial lawyers by requiring approval from a counsel oversight commission before his office could bring certain lawsuits. That attempt, in the form of House Bill 555, passed the House that year but died after it reached the state Senate.
This month, a radio ad paid for by Mississippi Civil Justice Alliance, calls out Hood, currently running for governor, and his "gang of trial lawyers" for not doing enough for coastal state homeowners following Hurricane Katrina insurance claims.
"With Jim Hood's plan, all the money goes to the government and trial lawyers," the ad says. "Trial lawyers can grab 25 percent of the anticipated multimillion-dollar scheme. And the homeowners? Not a dime. All you get is higher insurance rates."
Hood responded to the ad by saying insurance companies currently being sued on behalf of his office by trial lawyers are to blame for the difficulties of coastal Mississippi property owners.
"Had the greedy insurers paid what they truly owed to those homeowners, Mississippi could have devoted hundreds of millions more to other Katrina recovery and infrastructure repair projects," Hood was quoted in a Clarion Ledger story.
Last month Hood announced more than $5.7 million had been recovered is settlements with insurance companies with eight cases still outstanding. The money, intended to reimburse the state for damages paid out by the state's Homeowner Assistance Program that had been distributed to Hurricane Katrina victims, will go back into that program's fund, according to Hood's announcement.
Meanwhile in Hood's case against Credit Acceptance, Mississippi isn't the only state going after the subprime lender.
Credit Acceptance has faced litigation in Arkansas, probes into its business practices by New York and Maryland, and the Massachusetts attorney general last year reopened an investigation into the auto lender.
Allegations against Credit Acceptance in Mississippi stem mostly from the subpoena served on the lender in October 2017 about Credit Acceptance's loan organization and collection practices. Earlier that year, the Federal Trade Commission looked into Credit Acceptance's use of "kill switches," physical devices used to track down delinquent borrowers' vehicles, remotely disable their automobiles prior to repossession and make noises to remind them to pay up.
In its memorandum, Credit Acceptance asked the district court to not allow Hood's office to used litigation to impose additional regulatory requirements on indirect auto lenders. In its memorandum, Credit Acceptance maintained the MCPA applies only to trade or commerce in goods and 'service, not credit or debt, and that even if the statute were applicable, Hood's office "fails to allege a plausible MCPA violation."
Credit Acceptance alleged that Hood "apparently dislikes" the auto lender contracts with "certain consumers who voluntarily entered into these contracts" who shouldn't have "because, with the benefit of hindsight, he believes they could not afford them," the memorandum said.
Hood has no legal basis for the case against Credit Acceptance over borrowers who decided for themselves to enter into their subprime contracts, the memorandum said.
"Mississippi law is clear that all borrowers are presumed to have read and understood the terms of the contracts they execute and the complaint elides any allegation that Credit Acceptance inhibited consumers from making free and informed choices," the memorandum said. "The complaint also fails to allege any material misstatements made by Credit Acceptance that were likely to deceive reasonable consumers."