Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39495 Filed 09/15/21 Page 1 of 83
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
`IN RE: AUTOMOTIVE PARTS
`ANTITRUST LITIGATION,
`
`)))))))))
`
`Master File No. 12-md-02311
`
`
`
`THIS DOCUMENT RELATES TO:
`
`ALL END-PAYOR ACTIONS
`
`ELEMENT FLEET CORPORATION, WHEELS, INC.,
`DONLEN LLC, AND AUTOMOTIVE RENTALS, INC.’S MOTION
`TO ENFORCE SETTLEMENT AGREEMENTS
`Element Fleet Corporation, Wheels, Inc., Donlen LLC, and Automotive
`
`Rentals, Inc., all of which are fleet management companies (collectively, the “FMCs”),
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`hereby move this Court to enforce the settlement agreements in the End-Payor
`
`Actions by (1) declaring these FMCs to be Settlement Class Members because they
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`are included by the plain language of the settlement agreements, and (2) directing
`
`the Claims Administrator to apply the Court-approved Plan of Allocation to the
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`FMC’s claims.
`
`The FMCs rely on the following brief in support of their motion.
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`In accordance with E.D. Mich. LR 7.1(a)(2), counsel for the FMCs explained to
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`Class Counsel the nature of the motion and its legal basis. Class Counsel advised that
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`they oppose the motion. Defendants take no position on the motion.
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`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39496 Filed 09/15/21 Page 2 of 83
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`Respectfully submitted this 15th day of September, 2021.
`
`/s/ L. Conrad Anderson IV
`Gregory C. Cook
`L. Conrad Anderson IV
`BALCH & BINGHAM LLP
`1901 6th Avenue North, Suite 1500
`Birmingham, AL 35203
`Telephone: (205) 251-8100
`Facsimile:
`(205) 226-8799
`Email: gcook@balch.com
`Email: canderson@balch.com
`Tyler P. Bishop
`BALCH & BINGHAM LLP
`30 Ivan Allen, Jr. Blvd., NW, Suite 700
`Atlanta, Georgia 30308-3036
`Telephone: (404) 962-3521
`Email: tbishop@balch.com
`
`Counsel for Element Fleet Corporation, Wheels,
`Inc., Donlen LLC, and Automotive Rentals, Inc.
`
`2
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39497 Filed 09/15/21 Page 3 of 83
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF MICHIGAN
`SOUTHERN DIVISION
`IN RE: AUTOMOTIVE PARTS
`ANTITRUST LITIGATION,
`
`))))))))))
`
`Master File No. 12-md-02311
`
`
`
`THIS DOCUMENT RELATES TO:
`
`ALL END-PAYOR ACTIONS
`
`MEMORANDUM OF LAW IN SUPPORT OF ELEMENT FLEET
`CORPORATION, WHEELS, INC., DONLEN LLC, AND AUTOMOTIVE
`RENTALS, INC.’S MOTION TO ENFORCE SETTLEMENT AGREEMENTS
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39498 Filed 09/15/21 Page 4 of 83
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`TABLE OF CONTENTS
`INTRODUCTION ............................................................................................... 1
`BACKGROUND .................................................................................................. 3
`A.
`The FMCs’ purchase of Vehicles and lease to their corporate
`customers .................................................................................................. 3
`The End-Payor Actions and the resulting settlement agreements ........ 6
`B.
`ARGUMENT ....................................................................................................... 8
`A.
`The settlement agreements’ plain language governs whether FMCs
`are Settlement Class Members. ............................................................... 8
`FMCs are clearly and unambiguously Settlement Class Members
`under the settlement agreements’ plain language. ................................ 8
`1.
`The FMCs “purchased” new vehicles. ........................................... 9
`2.
`The FMCs did not purchase vehicles “for resale.” ........................ 9
`3.
`Manufacturers bought global peace with broad settlement
`agreement language. ................................................................... 13
`Whether FMCs’ customers may also be Class Members is irrelevant.
` ................................................................................................................. 15
`Postponing resolution of this dispute will further delay distribution.
` ................................................................................................................. 18
`Conclusion ......................................................................................................... 19
`
`B.
`
`C.
`
`D.
`
`I.
`II.
`
`III.
`
`IV.
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`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39499 Filed 09/15/21 Page 5 of 83
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`ISSUE PRESENTED
`Whether the Court should enforce the settlement agreements in the End-Payor
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`Actions by entering an order (1) declaring the FMCs to be Settlement Class Members,
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`and (2) directing the Claims Administrator to apply the Court-approved Plan of
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`Allocation to the FMCs’ claims.
`
`Brief Answer: Yes. The Settlement Class consists of “[a]ll persons and entities
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`that . . . purchased or leased a new Vehicle in the United States not for resale, which
`
`included one or more [of the applicable component parts].” PageID.12034-36. The
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`FMCs purchased new Vehicles that they subsequently leased to their customers, but
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`they still maintained ownership and title, and an FMC lease is not considered a
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`“resale” under settled commercial law. Thus, they “purchased a new Vehicle . . . not
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`for resale” and are Settlement Class Members.
`
`i
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`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39500 Filed 09/15/21 Page 6 of 83
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`TABLE OF AUTHORITIES
`
`Page(s)
`
`Cases
`
`Converge, Inc. v. Topy Am., Inc.,
`316 F. App’x 401 (6th Cir. 2009) ................................................................................ 8
`Fletcher v. Bd. of Educ. of Sch. Dist. Fractional No. 5,
`323 Mich. 343 (1948) .................................................................................................. 8
`In re Architectural Millwork of Virginia,
`226 B.R. 551 (Bankr. W.D. Va. 1998) ...................................................................... 12
`In re Auto. Parts Antitrust Litig.,
`997 F.3d 677 (6th Cir. 2021) .......................................................................... 8, 13, 14
`In re Beckham,
`275 B.R. 598 (D. Kan.) ............................................................................................. 12
`In re Charles,
`278 B.R. 216 (Bankr. D. Kan. 2002) ........................................................................ 12
`In re Damron,
`275 B.R. 266 (Bankr. E.D. Tenn. 2002) ................................................................... 12
`In re Double G Trucking of the Arklatex,
`432 B.R. 789 (Bankr. W.D. Ark. 2010) .................................................................... 12
`In re Fine Paper Antitrust Litig.,
`695 F.2d 494 (3rd Cir. 1982) ...................................................................................... 2
`In re HP Distribution,
`436 B.R. 679 (Bankr. D. Kan. 2010) ........................................................................ 12
`In re HP Logistics,
`460 B.R. 291 (Bankr. N.D. Ala. 2011) ..................................................................... 12
`In re MEPCO, Inc.,
`276 B.R. 94 (Bankr. W.D. Va. 2001) ........................................................................ 12
`In re Otasco, Inc.,
`196 B.R. 554 (N.D. Okla. 1991) ............................................................................... 12
`In re Owen,
`221 B.R. 56 (Bankr. N.D.N.Y. 1998) ........................................................................ 11
`Michigan Mut. Ins. Co. v. Dowell,
`204 Mich. App. 81 (1994) ........................................................................................... 8
`
`Statutes
`La. Stat. Ann. § 32:1252(66) ........................................................................................ 17
`N.Y.V. & TL § 397-b ..................................................................................................... 11
`Tex. Transp. Code Ann. § 501.002 (31) (West) ........................................................... 17
`
`ii
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`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39501 Filed 09/15/21 Page 7 of 83
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`Other Authorities
`UCC § 1-103(a) ....................................................................................................... 12, 13
`UCC § 1-201(b)(35) ...................................................................................................... 10
`UCC § 1-203 ................................................................................................................. 10
`UCC § 2-106(1) ............................................................................................................. 10
`UCC § 2A-103(j) ........................................................................................................... 10
`
`iii
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`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39502 Filed 09/15/21 Page 8 of 83
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`I.
`
`INTRODUCTION
`Element Fleet Corporation (“Element”), Wheels, Inc. (“Wheels”), Donlen LLC
`
`(“Donlen”), and Automotive Rentals, Inc. (“ARI”), all of which are fleet management
`
`companies (collectively, the “FMCs”), purchased millions of new vehicles containing
`
`component parts manufactured by the settling defendants (“Manufacturers” or
`
`“Defendants”).1 The FMCs purchased those vehicles not for resale, but rather to lease
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`to their corporate customers. Class Counsel nevertheless contend FMCs are not Class
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`Members under the settlement agreements and have presumably instructed (or will
`
`instruct) the Claims Administrator to deny their claims.
`
`The FMCs thus move to enforce the settlement agreements. Specifically, the
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`FMCs move for an order declaring them to be “Settlement Class Members” because
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`they are included in each settlement agreement’s definition of “Settlement Class”:
`
`All persons and entities that . . . purchased or leased a new
`Vehicle in the United States not for resale, which included one
`or more [of the applicable component parts].
`See, e.g., PageID.12034-36.
`
`Under the Plan of Allocation, no settlement funds will be distributed until after
`
`the Claims Administrator determines “the amounts recommended to be paid to
`
`Authorized Claimants” and the Court approves those recommendations. See, e.g.,
`
`PageID.10328. Although the Claims Administrator has not yet notified the FMCs (or
`
`1 This Motion relates to the distribution of settlement funds recovered in all of the
`End-Payor Actions and has therefore been filed in Master File No. 12-md-02311. All
`citations are to the Master File unless otherwise noted. Should the Court prefer to
`receive a separate Motion in each action, the FMCs will file in the individual cases.
`
`1
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39503 Filed 09/15/21 Page 9 of 83
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`any other claimants) that it will recommend the Court deny their claims, there is no
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`reason to wait until the end of the administrative process to resolve this issue. This
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`dispute is simply a matter of interpreting and enforcing the settlement agreements.
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`Indeed, because the settlement funds will be distributed pro rata among all eligible
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`Class Members, setting aside the claims for the millions of vehicles purchased by the
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`FMCs and waiting months—if not longer—to review and process their claims will
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`only add to an already substantial delay.
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`The circumstances giving rise to this Motion are distinguishable from those
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`recently brought before the Court via a motion to intervene by Financial Recovery
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`Services, LLC (“FRS”). The Court denied that motion to intervene because it was
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`untimely and would prejudice other parties by allowing thousands of contested claims
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`to be submitted after the deadline. PageID.38269. Unlike FRS, the FMCs do not claim
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`to be subrogated to the rights of Settlement Class Members and therefore entitled to
`
`recovery—rather, the FMCs are Settlement Class Members. See In re Fine Paper
`
`Antitrust Litig., 695 F.2d 494, 499 (3rd Cir. 1982) (“As purported members of the
`
`class, [claimants] did have standing” to request “that the court interpret the class
`
`order so as to include [claimants] and on that basis direct the payment of [their]
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`claims.”). And the FMCs are not requesting permission to file untimely claims once
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`this Motion is granted; the FMCs all timely filed their claims, with most having filed
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`2
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`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39504 Filed 09/15/21 Page 10 of 83
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`almost four years ago.2 For the reasons set forth below, this Court should grant this
`
`Motion.
`
`II.
`
`BACKGROUND
`
`A.
`
`The FMCs’ purchase of Vehicles and lease to their corporate
`customers
`Many companies require a sizeable fleet of vehicles to carry out their business.3
`
`Numerous legal and financial attributes uniquely apply to the FMC lease and fleet
`
`management model that attract corporate fleets to utilize FMCs, as opposed to
`
`purchasing the vehicles themselves or pursuing a normal lease from a manufacturer-
`
`authorized dealership. Pfeifle & Ley, supra note 3, at 15.
`
`Under this arrangement, an FMC purchases and takes title to the new
`
`vehicles; the FMC maintains exclusive ownership, while the customer is merely
`
`granted the right to possession and use of the vehicles. Id. at 5 & 8. This provides
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`customers flexibility in managing the size and composition of their fleet while
`
`2 Element, Wheels, and ARI initially filed their claims in September 2017.
`Declaration of Matt Farley (Element), attached hereto as Exhibit A, at ¶ 5;
`Declaration of Shlomo Y. Crandus (Wheels), attached hereto as Exhibit B, at ¶ 5;
`and Declaration of Brian Creelman (ARI), attached hereto as Exhibit C, at ¶ 5. All
`three sets of claims were supplemented and re-submitted in March 2020 to include
`additional vehicles that had become eligible under subsequent settlements and to
`meet the parameters of the revised Plan of Allocation approved in December 2019.
`Farley Decl. at ¶ 6; Crandus Decl. at ¶ 6; Creelman Decl. at ¶ 6. Donlen first filed its
`claims on March 16, 2020—within the deadline. Declaration of Khalid Latif (Donlen),
`attached hereto as Exhibit D, at ¶ 5.
`3 See Sebastian Pfeifle & Christopher Ley et al., Fleet leasing & management in North
`America,
`Deloitte:
`Future
`of Mobility,
`at
`5,
`available
`at
`https://www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-
`cp-fleet-leasing-and-management-in-north-america.pdf. (January 2018; see also
`What is a Fleet Management Company?, CARADVISE, https://caradvise.com/what-is-a-
`fleet-management-company/ (October 3, 2018.
`
`3
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39505 Filed 09/15/21 Page 11 of 83
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`outsourcing the legal and financial burdens associated with vehicle purchase and
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`ownership. The vast majority of the leases used by FMCs are open-ended TRAC
`
`leases,4 which are different than those used by dealerships.5 See id. at 30-31.
`
`Standard terms in these FMC leases include:
`
`FMC’s Ownership
`
`Title in name of FMC
`
` Element: “Lessor will be the sole legal and equitable
`owner of the Vehicles and Lessor has the right to
`mark the Vehicles stating its interest as owner.”
`Farley Decl. at Exhibit 1, § 1.(d).
` Wheels: “It is expressly agreed that the Lessee by
`virtue of this Lease acquires no ownership, title,
`property, right, interest, (or any option therefor) in
`any leased motor vehicle.” Crandus Decl. at Exhibit
`1, § 15.
` Donlen: “This agreement is one of leasing only, and
`Lessee shall not have or acquire any right, title, or
`interest in or to any Vehicle except the right to use
`and operate it as provided herein.” Latif Decl. at
`Exhibit 1, § 3.
` ARI: “All vehicles leased hereunder shall be owned
`by, and titled and/or registered in the name of
`Lessor.” Creelman Decl. at Exhibit 1, art. 1.
` Element: “Vehicles will be titled in the name of
`Lessor or such other name as Lessor may designate
`from time to time in its sole discretion.” Farley Decl.
`at Exhibit 1, § 1.(d).
` Wheels: “All motor vehicles shall be registered in the
`name of Lessor during the entire term of the Lease,
`and any certificates of title required shall likewise be
`
`4 TRAC is an acronym for “Terminal Rental Adjustment Clause.” TRAC leases, which
`are used only for titled equipment (like motor vehicles), provide for a final rental
`adjustment on the lease after the vehicle is removed from service and sold.
`5 See also Lease v. ownership: 4 reasons to lease your fleet, HERTZ LEASING,
`https://images.hertz.com/pdfs/lease-verse-ownership.pdf, at 2, 5.
`
`4
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39506 Filed 09/15/21 Page 12 of 83
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`in the name of the Lessor.” Crandus Decl. at Exhibit
`1, § 4.
` Donlen: “Lessee shall pay for the initial registration,
`titling and licensing for each Vehicle and shall
`thereafter obtain and pay for all required plates,
`permits or licenses (in the name of Lessor as
`applicable) and for all inspections required by any
`governmental authority.” Latif Decl. at Exhibit 1, §
`7.
` ARI: “All vehicles leased hereunder shall be owned
`by, and titled and/or registered in the name of
`Lessor.” Creelman Decl. at Exhibit 1, art. 1.
`
` Element: “Lessee has no right, title or interest
`(neither legal nor equitable) in any Vehicle, nor to the
`proceeds of Sale of any Vehicle, except as expressly
`set forth in this Agreement.” Farley Decl. at Exhibit
`1, § 1.(d).
` Wheels: “During the term of this Lease, Lessee shall
`have possession of and right to use the said motor
`vehicle[.]” Crandus Decl. at Exhibit 1, § 4. “It is
`expressly agreed that the Lessee by virtue of this
`Lease acquires no ownership, title, property, right,
`interest, (or any option therefore) in any leased motor
`vehicle[.]” Id. at § 14 (emphasis in original).
` Donlen: “This Agreement is one of leasing only and
`Lessee shall not have or acquire any right, title or
`interest in or to any Vehicle except the right to use
`and operate it as provided herein.” Latif Decl. at
`Exhibit 1, § 3 (emphasis added).
` ARI: Only a right to use. Creelman Decl. at Ex. 1,
`art. 11 (“Lessee may use the vehicles at any and all
`times for any and all legal purposes.”) (emphasis
`added).
`
`this
`[]
`“Lessor and Lessee agree
` Element:
`Agreement will be characterized as a lease for income
`tax purposes . . . .” Farley Decl. at Exhibit 1, § 21.(a).
`“The parties intend the lease of Vehicles to be a true
`lease . . . .” Id. at § 21.(b).
`
`5
`
`Lessee’s Limited Rights
`
`Intent of the Parties
`
`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39507 Filed 09/15/21 Page 13 of 83
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` Wheels: “COMMERCIAL LEASE. This Lease is for
`agricultural, business or commercial purposes, and is
`not primarily for personal, family or household
`purposes.” (emphasis in original). Crandus Decl. at
`Exhibit 1, § 16.
` Donlen: “This Agreement is intended to be and shall
`be treated by the parties hereto as a true lease.” Latif
`Decl. at Exhibit 1, § 3.
` ARI: “[T]he parties to this Agreement intend to
`create a true lease.” Creelman Decl. at Ex. 1, art. 1.
`
`The FMCs also provide a variety of other ancillary, turn-key fleet management
`
`services, saving their customers from having to devote their own internal resources
`
`and personnel. Pfeifle & Ley, supra note 3, at 15 (“fleet customers also value the
`
`transfer of paperwork and risk responsibility of fleet compliance and regulatory
`
`requirements into the hands of the [FMCs], which typically have dedicated regulatory
`
`and legal departments to assist their clients”), 26 (“Fleet management is evolving into
`
`a service business to lower operating costs for customers.”).
`
`The End-Payor Actions and the resulting settlement agreements
`B.
`These actions were commenced nearly a decade ago by a putative class of
`
`vehicle purchasers (EPPs), alleging that the Manufacturers conspired to fix prices of
`
`vehicle component parts. The EPPs asserted claims under the antitrust laws of states
`
`that allow indirect purchasers to recover monetary damages, and under various
`
`states’ consumer protection statutes. Settlements have been reached with all but one
`
`6
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39508 Filed 09/15/21 Page 14 of 83
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`of the Manufacturers.6 This Court approved those settlements and certified
`
`nationwide classes (“Settlement Class”) encompassing:
`
`All persons and entities that . . . purchased or leased a new Vehicle in
`the United States not for resale, which included one or more [of the
`applicable component parts].
`See, e.g., PageID.12034-36.
`
`The settlement agreements define “Settlement Class Member[s]” as “each
`
`member of the Settlement Classes who has not timely elected to be excluded from the
`
`Settlement Classes.” PageID.12036. The only entities excluded from these definitions
`
`are Defendants and their related entities, governmental entities, direct purchasers,
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`purchasers for resale, and timely objectors. Id.
`
`In exchange, the Settlement Class Members “completely released, acquitted,
`
`and forever discharged” each Manufacturer “from any and all claims, demands,
`
`actions, suits, causes of action”—whether class or individual in nature—that each
`
`Class Member “ever had, now has, or hereafter can, shall or may ever have . . . in any
`
`way arising out of or relating in any way” to the conduct alleged in the subject
`
`complaint or to “any act or omission” of any of the Manufacturers concerning the parts
`
`at issue (the “Released Claims”). PageID.5306.
`
`6 This Court granted preliminary approval to the settlement with the last defendant
`in the Exhaust Systems Action on September 8, 2021. No. 2:16-cv-03703, at
`PageID.7071.
`
`7
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39509 Filed 09/15/21 Page 15 of 83
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`III. ARGUMENT
`
`A.
`
`The settlement agreements’ plain language governs whether
`FMCs are Settlement Class Members.
`A settlement agreement is a contract governed by principles of state contract
`
`law. Converge, Inc. v. Topy Am., Inc., 316 F. App’x 401, 404–05 (6th Cir. 2009). Under
`
`Michigan law, where the contract language is clear and unambiguous, “the terms are
`
`to be taken and understood in their plain, ordinary, and popular sense.” Id. (quoting
`
`Michigan Mut. Ins. Co. v. Dowell, 204 Mich. App. 81, 87 (1994)). “Courts are governed
`
`by what the parties said and did, and not merely by their unexpressed subjective
`
`intent.” Id. at 405 (quoting Fletcher v. Bd. of Educ. of Sch. Dist. Fractional No. 5, 323
`
`Mich. 343, 348 (1948)).
`
`The Sixth Circuit recently illustrated the application of this plain language
`
`analysis when it held that the end-payor settlement agreements’ exclusion of direct
`
`purchasers from the “settlement class” definitions prevented certain plaintiffs from
`
`filing subsequent actions against the same Manufacturers (or entities they owned or
`
`controlled) as direct purchasers. See In re Auto. Parts Antitrust Litig., 997 F.3d 677,
`
`683-84 (6th Cir. 2021), attached hereto as EXHIBIT E (“Yamashita”). The Yamashita
`
`plain language analysis applies with equal effect here and leads to the inescapable
`
`conclusion that the FMCs are settlement class members.
`
`B.
`
`FMCs are clearly and unambiguously Settlement Class Members
`under the settlement agreements’ plain language.
`The settlement agreements define Settlement Class Members as:
`
`All persons and entities that . . . [1] purchased or leased a new Vehicle
`in the United States [2] not for resale, which included one or more [of
`the applicable component parts].
`
`8
`
`

`

`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39510 Filed 09/15/21 Page 16 of 83
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`See, e.g., PageID.12034-36.
`
`Whether FMCs are Settlement Class Members turns on the answers to two
`
`objective questions derived from the class definition:
`
`(1) Did the FMCs purchase new vehicles? The answer must be: “Yes”;
`and
`(2) Did the FMCs purchase those vehicles for resale? The answer
`must be: “No.”
`The FMCs answer both questions correctly. Therefore, they are Settlement
`
`Class Members who can enforce and participate in the settlements.
`
`The FMCs “purchased” new vehicles.
`1.
`The FMCs do not believe there is any dispute that they “purchased” new
`
`vehicles, nor could there be—they paid for and took title to the vehicles. More
`
`specifically, the FMCs purchased new vehicles from a dealership (or ordered them
`
`directly from a manufacturer’s fleet department, a non-defendant, in which case the
`
`order still goes through a selling dealership). See Farley Decl. at ¶ 2; Latif Decl. at ¶
`
`2; Creelman Decl. at ¶ 2; Crandus Decl. at ¶ 2.
`
`The FMCs did not purchase vehicles “for resale.”
`2.
`The FMCs did not purchase the new vehicles “for resale” because they do not
`
`sell the vehicles that they purchase; they lease them to their corporate customers. As
`
`a matter of law, a lease is not a “sale.” Sales and leases are different types of
`
`transactions governed by different sections of the UCC (sales by Article 2, and leases
`
`by Article 2A). And although a TRAC lease has features that resemble a sale or the
`
`creation of a security interest (e.g., by adjusting rental prices based on later sale of
`
`9
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`

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`Case 2:12-md-02311-SFC-RSW ECF No. 2149, PageID.39511 Filed 09/15/21 Page 17 of 83
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`the vehicle), all 50 states have enacted laws specifically establishing that a TRAC
`
`lease is by law not a sale.
`
`a.
`Sales and leases are different under the UCC and statute.
`The UCC explicitly defines a “sale” as “the passing of title from the seller to
`
`the buyer for a price.” UCC § 2-106(1). As noted above, the FMCs’ lease agreements
`
`provide that the FMC is the owner and that the customer does not acquire title to the
`
`vehicles. Farley Decl. at Exhibit 1, § 1.(d) (“Lessor will be the sole legal and equitable
`
`owner of the Vehicles . . . . Lessee has no right, title or interest (neither legal nor
`
`equitable) in any Vehicle. . . . Vehicles will be titled in the name of Lessor”); Crandus
`
`Decl. at Exhibit 1, § 14 (“It is expressly agreed that the Lessee by virtue of this Lease
`
`acquires no ownership, title, property, right, interest, (or any option therefore) in any
`
`leased motor vehicle[.]”) (emphasis in original) Latif Decl. at Exhibit 1, § 3 (“This
`
`Agreement is one of leasing only and Lessee shall not have or acquire any right, title
`
`or interest in or to any Vehicle except the right to use and operate it as provided
`
`herein.”); Creelman Decl. at Exhibit 1, art. 1. (“All vehicles leased hereunder shall be
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`owned by, and titled and/or registered in the name of Lessor.”).
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`Moreover, the UCC’s definition of “lease” explicitly excludes sales: “‘Lease’
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`means a transfer of the right to possession and use of goods for a term in return for
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`consideration, but a sale, including a sale on approval or a sale or return, or retention
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`or creation of a security interest is not a lease.” UCC § 2A-103(j) (emphasis added).
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`See also Official Comment, UCC § 2A-103(j) (“Further, a lease is neither a sale
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`(Section 2-106(1)) nor a retention or creation of a security interest (Sections 1-
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`201(b)(35) and 1-203).”) (emphasis added); id. (explaining that under UCC § 1-203,
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`“a sale or a security interest is not a lease. Since there is no passing of title,
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`there is no sale.”) (emphasis added).
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`b.
`TRAC leases do not create a “sale” or “security interest.”
`In response to concerns by lessors wanting to protect their investment but also
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`wanting to ensure that these transactions qualify as “true leases” (as opposed to a
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`“sale” or “security interest”), all 50 states and the District of Columbia have enacted
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`“TRAC Statutes” in substantially the form originally promulgated by the draftsmen
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`of the UCC and providing generally as follows:
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`Notwithstanding any other provision of law, in the case of motor vehicles
`or trailers which are not vehicles or trailers leased or used primarily for
`personal, family, or household purposes, a transaction does not create
`a conditional sale or security interest merely because it provides
`that the rental price is permitted or required to be adjusted under the
`agreement either upward or downward by reference to the amount
`realized upon sale or other disposition of the motor vehicle or trailer.
`See, e.g., N.Y.V. & TL § 397-b.
`
`c.
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`Commercial law recognizes that TRAC leases are “true
`leases”—not sales.
`Courts have uniformly observed that the legislative intent in enacting TRAC
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`statutes was “to provide that fleet leasing contracts that contain TRAC provisions are
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`true leases and should be accorded the same treatment in the area of bankruptcy
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`which currently exists in the area of taxation. . . . TRAC leasing is a commercial
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`custom and has been specifically validated as such in our federal tax laws.” See, e.g.,
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`In re Owen, 221 B.R. 56, 63 (Bankr. N.D.N.Y. 1998) (internal citation omitted).
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`Bankruptcy courts, for example, universally hold that because these
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`transactions are “true leases” and not sales, the vehicles are not part of an FMC
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`customer-debtor’s bankruptcy estate and the customer must assume or reject the
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`leases. See, e.g., In re Otasco, Inc., 196 B.R. 554 (N.D. Okla. 1991) (holding that
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`vehicles leased from FMC were not the debtor’s property, and specifically finding
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`“that the provision for the sale of vehicles, with proceeds credited toward the
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`stipulated cost, and the obligation of the Lessee to pay a shortfall, was not designed
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`to create an equity interest in the lessee, but rather to protect the lessor from
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`untoward abuse of its vehicle during the lease term, and any resultant loss in its
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`equity, upon reversion of a vehicle.”) (emphasis in original).7
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`These bankruptcy courts’ holdings are consistent with the UCC’s rules of
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`construction and purpose. The Uniform Commercial Code “must be liberally
`
`construed and applied to promote its underlying purposes and policies, which are: (1)
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`to simplify, clarify, and modernize the law governing commercial transactions; (2) to
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`permit the continued expansion of commercial practices through custom, usage, and
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`agreement of the parties; and (3) to make uniform the law among the various
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`jurisdictions.” UCC § 1-103(a). Whether a transaction constitutes a sale is question
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`of law governed by the UCC. The UCC’s purpose is to make the law governing
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`commercial transactions such as FMC leases uniform among jurisdictions and allow
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`7 Accord In re HP Logistics, 460 B.R. 291 (Bankr. N.D. Ala. 2011) (same); In re HP
`Distribution, 436 B.R. 679 (Bankr. D. Kan. 2010) (same); In re Double G Trucking of
`the Arklatex, 432 B.R. 789 (Bankr. W.D. Ark. 2010) (same); In re Beckham, 275 B.R.
`598, 606 (D. Kan.), affirmed, 52 F. App’x 119 (10th Cir. 2002) (same); In re Charles,
`278 B.R. 216, 224 (Bankr. D. Kan. 2002) (same); In re Damron, 275 B.R. 266, 270
`(Bankr. E.D. Tenn. 2002) (same); In re Architectural Millwork of Virginia, 226 B.R.
`551, 556 (Bankr. W.D. Va. 1998) (same); In re MEPCO, Inc., 276 B.R. 94, 103 (Bankr.
`W.D. Va. 2001) (same).
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`for certainty and clarity. Id. This uniformity has been enforced by the bankruptcy
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`courts holding FMC leases are not sales. It should not be destroyed by another court
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`holding the leases are sales for some other purpose (e.g., class membership). Such a
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`result is antithetical to the purposes of the UCC and interpretive precedent.
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`There is no basis in statute or precedent to treat the FMC leases as resales,
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`and concluding otherwise would create conflicts with well-settled commercial law.
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`Consequently, the Court should determine that FMCs are Settlement Class
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`Members.
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`3.
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`Manufacturers bought global peace with broad settlement
`agreement language.
`In discussions preceding this Motion, Class Counsel have taken the blanket
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`position that FMCs are not part of these settlements because, according to Class
`
`Counsel, they are not “end payors” under antitrust law. Class Counsel submit that
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`FMCs are simply part of a chain of indirect purchasers that passed costs through to
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`businesses and consumers that ultimately leased the vehicles. Class Counsel are
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`incorrect based on the unambiguous terms of the FMCs’ leases and the financial
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`obligations and risks of the parties. Further explanation is unnecessary (nor even
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`permitted), however, because whether FMCs are “end payors” is a question of
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`antitrust standing that is moot in light of the settlements; it has no bearing on
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`whether FMCs are Settlement Class Members as defined by the settlement
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`agreements.8 Yamashita, 997 F.3d at 683 (“Whether Plaintiffs can maintain their
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`8 The term “end payor” is not used or defined in any