On September 1, the U.S. District Court for the Central District of California determined that certain claims could proceed in a suit alleging a national bank failed to properly refund payments made pursuant to guaranteed asset protection (GAP) waiver agreements entered into in connection with auto loans. According to the plaintiffs’ suit, the bank knowingly collected unearned fees for GAP Waivers and “concealed its obligation to issue a refund on the GAP Waiver fees for the portion of the GAP Waiver’s initial coverage that was cut short by early payoff, and denied any obligation to return the unearned GAP fees.” The bank sought dismissal of the suit, arguing, among other things, that—with the exception of one consumer’s claims—all of the plaintiffs’ contracts include “a condition precedent under which the [p]laintiffs must first submit a written refund request for unearned GAP fees before being entitled to a refund,” which condition was not fulfilled.

The court dismissed breach of contract claims brought by eight of the 11 plaintiffs, noting that seven of these plaintiffs were not excused from complying with the condition precedent in their contracts with the bank, and had not pled sufficient facts to allege compliance; the court held that the eighth plaintiff’s claim was barred by the statute of limitations. The court allowed the breach of contract claims filed by two plaintiffs whose contracts did not contain condition precedent language to proceed, and allowed the final plaintiff’s breach of contract claim to proceed because the bank did not move to dismiss such. The court kept the declaratory judgment requests intact for the three plaintiffs whose contract claims were allowed to proceed, but determined such plaintiffs could not assert standing under laws of states where they do not reside and did not receive an injury. Further, the court granted the bank’s request to dismiss TILA claims—noting that the statute does not apply to indirect auto lenders like the bank—and tossed claims brought under California’s Unfair Competition Law.

The bank also asked the court to strike the six class action claims included in the plaintiffs’ first amended complaint. However, the court denied the bank’s request to strike the plaintiffs’ nationwide class allegations calling it premature. “Deciding whether the alleged classes can be maintained is properly done on a motion for class certification because at that point ‘the parties have had an opportunity to conduct class discovery and develop a record,’” the court noted.