Federal regulation of the $2 trillion consumer credit industry may hinge on how the Supreme Court chooses to interpret a single word.
That became clear after an oral argument yesterday in which attorneys for a Washington-area used car dealer and a disgruntled customer sparred over the meaning of "subparagraph" in the Truth in Lending Act, a federal law that prescribes penalties in cases of unfair or misleading practices by businesses that provide car loans, consumer leases and mortgages.
Donald B. Ayer, representing Alexandria-based Koons Buick Pontiac GMC Inc., told the court that it is "utterly clear" from the context and history of the law that Congress intended to set a $1,000 cap on how much consumers could win by suing for alleged violations of TILA by car dealers -- and that it used the term "subparagraph" to lump such cases together with others subject to the cap.
But A. Hugo Blankingship III, representing Bradley C. Nigh, who was awarded more than $24,000 in damages from Koons for a violation of TILA connected to the purchase of a used car, contended that it was equally clear that the damage cap applies only to a much narrower range of cases in the disputed block of text, and that dishonest lenders should be subject to damages equal to twice the finance charges.
Though the argument sometimes resembled a class on grammar and usage more than a legal case, Koons Buick Pontiac GMC Inc. v. Nigh, No. 03-377, is no mere matter of semantics.
If Nigh wins, car dealers and, potentially, credit card issuers and other consumer lenders could find themselves subject to increased litigation and steeper penalties for misleading customers.
Consumer advocates say that such a result would put real teeth in TILA; banks and car dealers say it would raise their cost of doing business, with the extra expenses being passed on to consumers.
The argument yesterday showed the court to be as divided as ever over how to interpret disputed statutory language.
Nigh's strongest supporter seemed to be Justice Antonin Scalia, who has long advocated a "textualist" approach to statutory interpretation that discounts legislative history and other evidence beyond the plain wording of a statute.
When Ayer argued that the legislative drafting manuals Congress uses assigned "subparagraph" a meaning consistent with his client's position, Scalia interjected: "I don't want to have to go through the legends of the legislative process every time I interpret a statute."
Ayer responded that the meaning of "subparagraph" had not been changed by any of the amendments TILA had gone through in the last 30 years.
But Scalia was countered by Justice Stephen G. Breyer, who described his own method this way: "When I read a statute, I first approach it as an English-speaking Martian would," he told Blankingship. "If I did so in this case, I'd agree with you. But the language does support [Koons's] position in that it is a possible reading. [And] if you factor in the history . . . by the time I'm finished I'm ready to abandon the English-speaking Martian, and I'm looking for the human purpose under the statute."
It is unlikely, he told Blankingship, that Congress would have wanted to permit higher damages in car loan cases than in mortgage cases, which typically involve much higher amounts of money.
But Blankingship insisted that such a choice would have made sense because cases such as Nigh's "are the hardest to prove and succeed."
A decision is expected by July.