Nos: 02-2432 & 02-2573 BRIAN S. MILLER v. NISSAN MOTOR ACCEPTANCE CORP. Nissan Motor Acceptance Corporation "NMAC"

PRECEDENTIAL
UNITED STATES COURT OF
APPEALS
FOR THE THIRD CIRCUIT
Nos: 02-2432 & 02-2573
BRIAN S. MILLER; MICHAEL ROSE;
MICHELLE ROSE, H/W, ON BEHALF
OF THEMSELVES AND ALL
OTHERS
SIMILARLY SITUATED
v.
NISSAN MOTOR ACCEPTANCE
CORP.
Nissan Motor Acceptance Corporation
("NMAC"),
Appellant in No. 02-2432
Brian S. Miller; Michael Rose; and
Michelle Rose,
Appellants in No. 02-2573
Appeal from the United States District
Court
for the Eastern District of Pennsylvania
(Civ. No. 99-cv-04953)
District Judge: Hon. Stewart Dalzell
Argued: February 11, 2003
(Opinion filed: March 22, 2004)
Before: ALITO and M cKEE, Circuit
Judges, and
SCHW ARZER, District Judge*
DARRYL J. MAY, ESQ. (Argued)
RAYMOND A. QUAGLIA, ESQ.
AMY B. CARVER, ESQ.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attorneys for Appellant/Cross-Appellee,
NMAC
CARY L. FLITTER, ESQ. (Argued)
Lundy, Flitter, Beldecos & Berger, P.C.
450 N. Narberth Avenue
Narberth, PA 19072
MICHAEL D. DONOVAN, ESQ.
Donovan Searles, LLC
1845 Walnut Street
Philadelphia, PA 19103
Kirby, McInerney & Squire, LLP
830 Third Avenue
*The Hon. William W. Schwarzer,
United States District Judge for the
Northern District of California, sitting by
designation.

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New York, NY 10022
Attorneys for Appellees/Cross-
Appellants,
Miller and Rose
OPINION
McKEE, Circuit Judge.
In these cross-appeals, we are
presented with a number of questions
concerning certain requirements of the
Consumer Leasing Act (“CLA”), 15
U.S.C. §§ 1667-1667e, as they apply to
automobile leases. As we will explain in
some detail, when the plaintiffs/lessees
terminated their leases prior to the
expiration of the terms of their respective
leases, the lessor required that they pay the
balance of the remaining monthly
payments due under their leases rather than
charge them the early termination fee in
accordance with a formula contained in
their leases. The lessees paid that charge
and then instituted suit claiming that the
method for determining the early
termination charges they actually paid
violated the disclosure requirements of the
CLA § 1667a. The lessees also claimed
that the early termination charge they
actually paid violated the substantive
reasonableness requirements of CLA §
1667b(b), and that the method for
calculating the early termination charge
contained in their leases violated the
substantive requirements of the CLA as
well as its disclosure requirement.1
The district court agreed with the
lessees’ disclosure claims. It also agreed
that the method for calculating an early
termination charge that was contained in
the leases violated the CLA reasonableness
requirement. However, it disagreed that
the early termination charge actually paid
violated the CLA’s reasonableness
requirement.
We agree that the leases violated
the CLA ’s disclosure requirements
because the method for determining the
early termination charges actually assessed
was not contained in the respective leases.
We also agree that the method for
determining the early termination charges
actually assessed did not violate the CLA’s
reasonableness requirement. However,
since we conclude that the lessees had no
standing to challenge the early termination
charge that was never applied to them, we
will not address lessees’ challenge to that
formula.
I. BACKGROUND
Brian Miller executed a 36-month
closed-end lease with Nissan Motor
Acceptance Corporation (“NMAC”) for a
1997 Nissan Altima on December 26,
1996. Pursuant to that lease he agreed to
1The lessees also asserted a number of
state law claims against the lessor.
However, as will be explained, those
claims are not before us because the
district court entered judgment under
Fed.R.Civ.P. 54(b) as to the CLA claims
and suspended adjudication of the state
law claims.

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make monthly payments of $267 through
December 1999. Michael and M ichelle
Rose executed a 39-month closed-end
lease with NMAC for a 1996 Nissan
Altima GXE on March 25, 1996. They
agreed to make monthly payments of
$237.87 through June 1999.2
Both leases contain a “Paragraph
18,” captioned: “Early Termination
Liability,” which provides in relevant part:
At any time after 12
monthly payments have
been paid, I [the lessee] may
terminate this lease on the
due date of a monthly lease
payment if this lease is not
in default as disclosed in
paragraph 19 [“Default”],
and I have given you
[NMAC] 30 days written
notice. Except as otherwise
provided in paragraph 22
[ c o n c e r n i n g N M A C ’ s
acceptance of insurance
settlement if the vehicle is
lost through theft o r
destruction], if I terminate
early, in addition to the
amounts indicated in items a
through d of paragraph 17
[“Termination Liability”], I
must pay you an Early
Termination Charge which
is determined as follows:
First, all monthly lease
payments, which under the
terms of this lease, are not
yet due and the residual
value of the Vehicle are
discounted to present value
by the Constant Yield
Method at the rate implicit
in this lease (the “Adjusted
Lease Balance”). This
amount is then reduced by
the Realized Value (and
insurance) proceeds which
you receive for the Vehicle.
. . .
NMAC refers to the formula in Paragraph
18 as either the “paragraph 18 formula,” or
the “early termination formula.”
Miller and the Roses claim that they
made inquiries and took actions with
respect to early termination of their
respective leases. Miller claimed that he
telephoned NM AC in March 1999 to
2“A closed-end lease is a lease in which
the lessee is not responsible for the
difference if the actual value of the vehicle
at the scheduled end of the lease is less
than the residual value, but the lessee may
be responsible for excess wear and excess
mileage charges and for other lease
requirements.” Applebaum v. Nissan
Motor Acceptance Corporation, 226 F.3d
214, 216 n.1 (3d Cir. 2000) (citation and
internal bracket and quotations omitted).
In contrast, an open-end lease “is one in
which the lessee’s liability at the end of the
lease term is based on the difference
between the residual value and its realized
value.” Id. at 223. The residual value of a
vehicle is the projected value of the
vehicle at the end of the lease that is
assigned at the beginning of the lease. Id.
at 222 (citation omitted).

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request the amount he would owe if he
terminated his lease early.3 Miller said
that a NMAC representative gave him a
figure so high that he gave no
c o n s i d eration w hatever to earl y
termination. However, on March 4, 1999,
NMAC mailed Miller a letter which
contained a quote that was considerably
lower than the phone quote. The letter
stated that paying all of the remaining
payments that would have been due under
the lease – $3,064.81, including taxes and
disposition fees – would be a less
expensive option for Miller.
Dissuaded in part by what he
considered two pricey early termination
quotes, Miller said that he decided not to
terminate his lease until November 1999.
At that time, Miller terminated his lease in
the process of trading-in the leased vehicle
for a new lease on another Nissan vehicle.
However, NM AC did not apply the
Paragraph 18 formula to that trade-in.
Instead, NM AC charged Miller only his
final month’s lease payment, which was
less than the charge derived under
Paragraph 18 would have been. Miller
paid this lesser charge.
The Roses terminated their lease on
March 23, 1999, less than three months
before its scheduled expiration, by turning
over their leased Nissan vehicle to a
Mitsubishi dealership as part of a trade-in
for a Mitsubushi vehicle. NMAC did not
apply the Paragraph 18 formula to the
Roses either. Rather, it only charged the
sum of their two remaining monthly
payments, which was less than the amount
they would have owed under the Paragraph
18 formula. The Roses paid this charge
“under protest.” It is agreed that the
method of paying early termination
liability by paying only the amount of the
remaining monthly payments is not
contained in either lease agreement.
Miller and the Roses (“the
Plaintiffs”) claim that NMAC uses inflated
residual values for its leased vehicles.
They contend that if NMAC had used
bona fide residual values and charged
them for early termination pursuant to the
Paragraph 18 formula, they would have
been charged less than they were actually
charged, or nothing at all, for early
termination. Their theory about the
inflated residual values is as follows:
They submit that the early
termination charges under the Paragraph
18 formula are astonishingly high in part
because of NMAC’s undisclosed practice
of using inflated or “subvented” residual
values in calculating lease payments.4,5
3NM AC claims that Miller’s call was “a
lawyer-staged phone call rather that a bona
fide early termination request.” NMAC’s
Reply Br. and Answering Br. as Cross-
Appellee, at 1. NMAC further claims that
Miller never had any intention of
terminating his lease in March of 1999 and
that Miller made the phone call to NMAC
from his lawyer’s office for litigation
purposes only. See NMAC’s Reply Br. at
13. According to NMAC, this whole
lawsuit is a fabrication.
4A “subvented” residual value is one
which is raised in order to lower a

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They claim that the relationship between
the residual value and the lease payments
is simple. The total payments over the life
of the lease are determined by lease
depreciation and lease charges. The lease
charges are analogous to interest
payments. The lease depreciation pays for
the depreciation of the leased vehicle over
the life of the lease and reflects that the
car will be worth less at the end of the
lease than it was at the beginning. The
less depreciation NMAC assumes the car
will undergo during the life of the lease,
the smaller the lease depreciation
component of the monthly lease payments
will be. In order to reduce lease payments
and price Nissan vehicles more
competitively with other manufacturers’
cars, NMAC can, and does, use an
artificially high residual value. This
results in an artificially low estimate of the
amount of depreciation the car will
experience during the term of the lease.
Put another way, NMAC assumes, for
purposes of computing lease payments,
that the car will be worth more at the end
of the lease (because it experienced less
depreciation) than it actually expects will
be the case.
However, Plaintiffs claim that
NMAC does not disclose that it inflates the
residual values used to compute lease
payments. They also claim that NMAC
does not disclose the actual residual values
NMAC has assigned to the lessee’s car.
Therefore, according to the Plaintiffs,
lessees can not ascertain if the assumed
residual value is inflated.
Plaintiffs concede, however, that
since NMAC is responsible for the
difference between the residual and
realized values (a “closed lease”), the
inflated residual values make no practical
or economic difference to lessees whose
leases go to maturity.6 However, they say
that a problem arises with inflated residual
values when a lessee seeks to terminate the
lease early. Under the Paragraph 18
customer’s monthly payments under a
lease. NMAC’s Br. as Appellant, at 29
n.12. “A higher residual value results in
less scheduled depreciation over the term
of the lease, and hence lower monthly
payments.” Id.
5NMAC claims that, contrary to the
Plaintiffs’ characterizations, subvention
(or inflating residual values) is not a
uniform practice. NMAC says that the
record clearly shows that there were
extraordinary variations in subvention
depending on, inter alia, the model car, the
lease term and date of the lease. NMAC’s
Reply Br. at 22 n.4. These claimed
variations are not significant here because
NMAC concedes that the residual values
under the Plaintiffs’ leases were
subvented.
6In fact, the inflated residual values the
Plaintiffs complain of can dramatically
advantage the lessee who holds his/her
vehicle for the full term of the lease
because monthly payments during the
course of the lease will be less than they
would have been had the lessor based
monthly payments on a more realistic
residual value.

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formula, the early termination charge is
based, in part, on the difference between
the assigned, though undisclosed, residual
value and the realized value upon the sale
of the vehicle. Miller and the Roses
allege that under the Paragraph 18 formula
NMAC shifts to the early terminating
lessee the risk, otherwise borne by NMAC,
that the vehicle will turn out to be worth
less than the residual value that was used
to compute the lease payments.
According to Plaintiffs, where the
residual value is inflated, NMAC’s
contractual early termination formula
causes an early terminating lessee to pay
more upon returning the car than if the
lessee had made all of the payments for the
full term of the lease. In Miller’s case, the
early termination charge under the
Paragraph 18 formula as of November
1999 (one month early) was $5,336.95.
Miller claimed that when added to the 35
monthly payments of $267 each that he
had already paid ($9,345), NMAC’s
Paragraph 18 formula called for him to pay
a total of $14,681.95. Full performance
under the lease, in contrast, required Miller
to pay only $9,612. Accordingly, under
the Paragraph 18 formula, Miller was
required to pay $5,069.95 to return his car
one month early.
In the Roses’ case, the Paragraph 18
formula called for them to pay $2,282.28
as a charge to terminate the lease early.
When this charge is added to the monthly
payments they had already made, totaling
$8,796 ($237.87 x 37), the Roses would
have been required to pay a total of about
$11,078. Just two months later at the
natural end of their lease, their total
payments through maturity would have
been only $9,276.93. Pursuant to the
Paragraph 18 formula, surrounding the car
two months early would have required the
Roses to pay NMAC $1,801.07 more than
keeping it to the end of the term.
Plaintiffs claim that even though
NMAC’s early termination formula
recoups for NMAC the difference between
the residual value and the realized value of
the car, NMAC’s controller admitted that
the cause of Nissan’s unrecouped
depreciation, if any, is not the early
termination, but the terms of the lease
agreement itself.
Finally, Plaintiffs contend that the
charges produced by NM AC’s early
termination formula are so outrageously
high that NMAC hesitated to apply the
Paragraph 18 formula in their cases.
Instead, NMAC demanded that Plaintiffs
pay the accelerated sum of all future,
unearned lease payments, undiscounted,
even though NMAC got the cars back
early. They claim that NMAC explained
that its standard practice is to compute the
early termination liability under the
Paragraph 18 formula, compare it to the
sum of all unearned lease payments due
under the lease as if the lessees held the
car to term, then assess the lesser of the
two charges. They call NMAC’s method
of charging the early terminating lessee the
total of remaining lease payments the
“Alternative Charge” or “Alternative
Formula.”7 However Plaintiffs claim that
7We will adopt the term “Alternate
Formula” in referring to this method here.

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NMAC is not entitled to the accelerated
sum of the remaining lease payments and
it is therefore not relevant that the
arbitrarily chosen Alternative Formula is
less than the charge under the Paragraph
18 formula.
II. DISTRICT COURT
PROCEEDINGS
Plaintiffs filed a complaint and an
amended complaint as a class action, with
the parties agreeing to determine liability
before class certification. The essence of
the amended complaint is that NMAC
violated the CLA by making the residual
value one component of the equation by
which early termination liability is
calculated under the Paragraph 18 formula.
They claim that the formula thereby shifts
to early terminating lessees, the risk that
the residual value in the lease is
overstated. They allege that the risk is
ordinarily borne by NMAC under what
purport to be “closed end leases.” The
amended complaint alleged that this risk
shifting is unreasonable because it bears
no relationship to the harm that NMAC
incurs as a result of early termination. The
amended complaint also alleged that the
inflated residual values used for lowering
lessees’ monthly lease payments also
violate the CLA.
More particularly, Count I is a
disclosure claim alleging that the
Paragraph 18 formula violates the
disclosure requirements of the CLA, 15
U.S.C. § 1667a and Federal Reserve
Regulation M, 12 C.F.R. § 213. The
Count I disclosure claim is referred to as
an Applebaum claim, which is a CLA
disclosure claim brought under 15 U.S.C.
§ 1667b(a) named after our decision in
Applebaum v. Nissan Motor Acceptance
Corp., 226 F.3d 214 (3d Cir. 2000). Count
II alleges substantive violations of the
CLA, 15 U.S.C. § 1667b(b), and
Regulation M. Count III is a common-law
unjust enrichment claim against NMAC.
Count IV seeks declaratory and injunctive
relief. Count V seeks damages, both
actual and treble, pursuant to the
Pennsylvania Unfair Trade Practices and
Consumer Protection Law, 73 PA. CONS.
STAT. ANN. § 201-1 et seq. Count VI
seeks damages pursuant to Article 2A of
the Uniform Commercial Code, alleging
that the early termination formula is a
provision for liquidated damages that is
unreasonable as written.
Following discovery, the district
court granted summary judgment to
NMAC on a portion of Count II. The
court found that the method of determining
early termination charges by charging
Plaintiffs the remaining lease payments
was reasonable and, therefore, did not
violate the substantive provisions of the
CLA, i.e., 15 U.S.C. § 1667b(b).
However, the district court also held that
the Paragraph 18 early termination formula
was unreasonable under CLA § 1667b(b).
Accordingly, the district court granted
summary judgment on that portion of
Count II to Plaintiffs and awarded them
statutory (as opposed to actual) damages of
$100. The district court also entered
summary judgment in favor of Plaintiffs
on Count I, the § 1667a disclosure claim,
and on Count IV. It then suspended
adjudication of Counts III, V and VI, the
state law claims, and granted Rule 54(b)

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certification as to claims brought in Counts
I and II, the federal CLA claims. Miller v.
Nissan Motor Acceptance Corp., No.
Civ.A. 99-4953, 2000 WL 1599244
(E.D.Pa. Oct. 27, 2000).
Cross-appeals followed. However,
in a Bench Opinion, issued on September
24, 2001, we dismissed the appeals for
lack of appellate jurisdiction after holding
that the district court improvidently
granted Rule 54(b) certification. We
reached that conclusion because the
federal claims certified by the district court
were inextricably intertwined with the
Count I disclosure claim which had not
been completely adjudicated. Miller v.
Nissan Motor Acceptance Corp., Nos. 01-
1038/1114 (3d Cir. Sept. 24, 2001).
Thereafter, the district court fully
adjudicated the Count I Applebaum
disclosure claim in favor of Plaintiffs and
once again granted Rule 54(b) certification
on the CLA claims. Both NMAC and the
Plaintiffs have filed appeals from that
ruling.
III. THE CONSUMER LEASING
ACT
“In 1976, in response to an
emerging trend toward automobile leasing,
Congress passed the Consumer Leasing
Act, 15 U.S.C. §§ 1667-1667e, as Chapter
5 of the Truth in Lending Act (“TILA”),
15 U.S.C. § 1607 et seq.” Applebaum, 226
F.3d at 217.
The CLA was intended ‘to
a s s u r e a m e a n i n g f u l
disclosure of the terms of
leases of personal property
for personal, family, or
household purposes so as to
enable the lessee to compare
more readily the various
lease terms available to him,
limit balloon payments in
consumer leasing, enable
comparison of lease terms
with credit terms where
appropriate, and to assure
meaningful and accurate
disclosures of lease terms in
advertisements.
Id. at 217-18 (quoting 15 U.S.C. §
1601(b )). “The S enate Report
accompanying the CLA explained that
‘[t]he purpose of the legislation is to
provide consumers with meaningful
information about the component and
aggregate costs of consumer leases, so
they can make better informed choices
between leases, and between leases and
credit sales.’” Id. at 218 (citation omitted).
“The Federal Reserve Board has
been given the authority to issue rules
implementing the CLA, see 15 U.S.C. §
1604, and the Board has exercised that
authority by promulgating ‘Regulation M,’
12 C.F.R. § 213 et seq.” Id. “The Board’s
staff has also issued official commentary
regarding these provisions.” Id. “In Ford
Motor Credit Co. v. Milhollin, 444 U.S.
555, 568 (1980), the Supreme Court
instructed that the Board’s interpretation of
the TILA and Regulation M should be
accepted so long as they are ‘not
irrational.’” Id.
The CLA contains a section
captioned “Consumer lease disclosures”
that provides, in pertinent part, as follows:
Each lessor shall give a

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lessee prior to the
consummation of the
lease a dated written
statement on which
the lessor and the
lessee are identified
setting out accurately
and in a clear and
conspicuous manner
t h e f o l l o w i n g
information wit h
respect to that lease,
as applicable:
******************
(4) The amount of other
charges payable by the
lessee not included in the
p e r i o d i c p a y m e n t s , a
description of the charges
and that the lessee shall be
liable for the differential, if
any, between the anticipated
fair market value of the
leased property and its
appraised value at the
termination of the lease, if
the lessee has such liability;
******************
(11) A statement of the
conditions under which the
lessee o r l es so r m ay
terminate the lease prior to
the end of the term and the
amount or method of
determining any penalty or
o t h e r c h a r g e f o r
delinquency, default, late
p a y m e n t s , o r e a r l y
termination.
15 U.S.C. § 1667a(4) and (11). The CLA
also contains a section captioned “Lessee’s
liability on expiration or termination of
lease” which provides, in pertinent part, as
follows:
Penalties or other charges
for delinquency, default or
early termination may be
specified in the lease but
only at an amount which is
reasonable in the light of the
anticipated or actual harm
caused by the delinquency,
default or early termination,
the difficulties of proof of
loss, and the inconvenience
o r n o n f e a s i b i l i t y o f
otherwise obtain ing an
adequate remedy.
15 U.S.C. § 1667b(b).8
Regulation M, which was in effect
8The section of the CLA immediately
preceding § 1667b(b) concerns a lessee’s
liability upon the expiration of an open-
end lease, i.e., one where the lessee’s
liability upon expiration is based on the
difference between residual and realized
value. In such a lease, § 1667b(a)
explicitly provides that “[t]here shall be a
rebuttable presumption that the estimated
residual value is unreasonable to the
extent that the estimated residual value
exceeds the actual residual value by more
than three times the average payment
allocable to a monthly period under the
lease.” (emphasis added).

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at the time of the Plaintiffs’ leases,9
required that lessors’ disclosures “be made
clearly, conspicuously, in meaningful
sequence, and in accordance with the
further requirements of this section.” 12
C.F.R. § 213.4(a)(1). The Official Staff
Commentary for this provision explained
that “clearly, conspicuously, and in
meaningful sequence” required “that the
disclosure s be in a reaso n a b ly
understandable form.” 12 C.F.R. Pt. 213,
¶ 4(a)(1). The Commentary stated, “while
the regulation requires no particular
mathematical progression or format, the
disclosures must be presented in a way that
does not obscure the relationship of the
terms to each other.” Id. Regulation M
mandated that various disclosures be made
with respect to lease provisions imposing
an early termination penalty including: (1)
“[a] statement of the conditions under
which the lessee or lessor may terminate
the lease prior to the end of the lease term
and the amount or method of determining
the amount of any penalty or other charge
for early termination, 12 C.F.R. §
213(g)(12), and (2) “[a] statement that the
lessee shall be liable for the difference
between the estimated value of the
property and its realized value at early
termination or end of the lease term, if
such liability exists,” 12 C.F.R. §
213(g)(13).
IV. DISCUSSION
As noted, both sides to this dispute
have appealed the district court’s
adjudication of the CLA claims. Briefly
stated, the parties’ arguments are as
follows: NMAC argues (1) that the
district court’s grant of summary judgment
on the CLA § 1667a disclosure claim (the
Applebaum claim) was error; (2) that
Plaintiffs do not have standing to
challenge the Paragraph 18 formula; (3)
but if they do have standing, that the
district court erred in ruling that the
Paragraph 18 formula for early termination
is unreasonable and violates the CLA §
1667b(b).
Plaintiffs argue that the district
court erred in finding that the formula
NMAC actually applied on early
termination, i.e., making them pay the
remaining lease payments due on their
respective leases (referred to by NMAC as
t h e i r “ U n s a t i s f i e d C o n t r a c t
Obligations”),10 was reasonable and
consistent with the CLA § 1667b(b).
Each argument is discussed separately
below.
A. The § 1667a disclosure claims.
Count I of Plaintiffs’ amended
complaint asserted three disclosure claims.
Plaintiffs claim (1) that the “Alternative
Formula” NMAC charged for terminating
9Regulation M was revised in 1996.
Applebaum, 226 F.3d at 218 n.3.
Although the revisions became effective
on October 31, 1996, compliance was
optional until October 1, 1997. Id. The
leases at issue here were entered into in
1996. All parties agree that the pre-
revision 1995 Regulation M is applicable.
10As recited earlier, Plaintiffs refer to
charges they actually paid as the
“Alternative Formula.”

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early, i.e., having them pay the sum of the
remaining monthly payments on their
respective leases, should have been
disclosed in their leases; (2) that the
amount of the residual value should have
been disclosed; and (3) that the fact that
under the Paragraph 18 formula, an early
terminating lessee would be responsible
for the difference between residual and
realized value should have been disclosed.
The district court granted summary
judgment in favor of the Plaintiffs on each
component of their disclosure claims.11
1. The “Alternative Formula” claim.12
The district court found that NMAC
violated § 1667a and Regulation M
because it used a different early
termination formula than disclosed under
the lease. NMAC argues that was error
because it claims that the amount that was
actually charged was readily ascertainable
from what was disclosed.
CLA § 1667a(11) requires that a
lessor provide a lessee with a statement
setting forth, inter alia, “the amount or
method of determining any penalty or
other charge for . . . early termination.” 15
U.S.C. § 1667a(11). NMAC submits that
the Alternative Formula was disclosed in
the lease. It argues that, at the inception of
Plaintiffs’ leases, in return for Plaintiffs’
use of the leased cars, NMAC was entitled
to either (1) the full contract price,
disclosed as the Total of Monthly
Payments, or (2) if lessee terminated early,
the monthly payments paid at time of
termination, plus an early termination
charge calculated under the Paragraph 18
formula. But, says NMAC, where the
monthly lease payments made prior to
early termination, combined with the
Paragraph 18 formula early termination
charge would be greater than the disclosed
Total of Monthly Payments, the use of the
early termination charge would result in
NMAC receiving more than the leases’
total contract obligation as measured by
the Total of Monthly payments.
Therefore, says NMAC, when it relied
instead on the Alternative Formula, it only
received a sum equal to the Total of
Monthly Payments, which does not violate
either the CLA or Regulation M.
H o w e v e r , g iv e n N M A C ’ s
disclosure obligation under the CLA, its
defense of this practice amounts to
nonsense. The issue is not whether the
Alternative Formula produced an early
termination charge that was reasonable
under § 1667b(b), but whether it was
disclosed in the lease. Clearly, it was not.
Nothing in the lease suggests that there are
two different methods by which NMAC
can determine an early termination charge.
On the contrary, the lease provides that
early termination charges are to be
determined only in accordance with the
Paragraph 18 formula. Therefore, we
agree that NMAC violated § 1667a(11).
See Channell v. CitiCorp Nat’l Servs., Inc.,
89 F.3d 379 (7th Cir. 1996).
In Channell, the lessor disclosed in
11Our standard of review on an appeal
from the entry of summary judgment is
plenary. Hines v. Consolidated Rail Corp.,
926 F.2d 262, 267 (3d Cir. 1991).
12Referred to by NMAC as the
“Unsatisfied Contract Obligation.”

-- 11 of 22 --

12
its car lease that its early termination
formula used the “Rule of 78s” to compute
the amount of unearned interest to be
credited upon early termination of a
consumer lease. However, instead the
lessor used the actuarial method. Id. at
383. The court of appeals held that this
violated the CLA even though the
undisclosed method benefitted the lessee.
Id. Similarly, in Highsmith v. Chrysler
Credit Corp., 18 F.3d 434 (7th Cir. 1994),
the lessee brought a disclosure claim
against the lessor for omitting from its
disclosed early termination formula certain
elements that were used to reduce the
amount of the early termination formula.
Id. at 438. The court of appeals ruled that
the lessor’s failure “to disclose any portion
of the formula that a lessor actually used
for calculating the early termination
charge, will give rise to a technical
violation of the disclosure provision found
in 15 U.S.C. § 1667a(11) and Regulation
M.” Id. at 439.
2. The residual value (Applebaum)
claim.
In Applebaum, we held that the
“requirement to disclose in a ‘clear and
conspicuous manner’ the method of
determining the amount of an early
termination charge [under the CLA and
Regulation M] includes the obligation to
disclose the value of a variable, such as
residual value, that is used in calculating
the charge.” 226 F.3d at 223 (emphasis
added). It is undisputed that Plaintiffs’
leases did not disclose the residual value of
their leased vehicles. Consequently, the
district court found that NMAC’s leases
violated the CLA.
NMAC argues that Applebaum was
wrongly decided because the model forms
promulgated by the Federal Reserve Board
at the time the leases were entered into did
not require disclosure of the residual value.
However, Applebaum is binding on this
panel and controls.13 Accordingly, we
hold that NMAC violated § 1667a by not
disclosing the residual value of Plaintiffs’
leased cars.
3. The differential claim.
In their amended complaint,
Plaintiffs alleged that NMAC violated §
1667a(4) because NM CA did not disclose
that they, as lessees, would be liable for
the difference between the residual and
realized values under the early termination
formula. Section 1667a(4) requires “clear
and conspicious” disclosure, inter alia, of
the fact “that the lessee shall be liable for
the differential, if any, between the
anticipated fair market value of the leased
property and its actual appraised value at
the termination of the lease, if the lessee
has such liability.” 15 U.S.C. § 1667a(4).
The district court found that the
“anticipated fair market value of the leased
property . . . at the time of termination” is
the residual value and that the “fact of the
liability for the differential is disclosed.”
2000 WL 1599244 at *14-15. However,
the district court also found that NMAC
must disclose the residual value at the
inception of the lease.
This holding is nothing more than
13See, IOP 9.1; Jaguar Cars, Inc. v.
Royal Oaks Motor Car Co.., 46 F.3d 258,
266 n.6 (3d Cir. 1995).

-- 12 of 22 --

13
the logical extension of its analysis of the
residual value claim, viz., that Applebaum
requires disclosure of the residual value.
In any event, NMAC argues, as it did on
the residual value claim, that the district
court’s holding on the differential value
claim was error because Applebaum was
wrongly decided. However, as noted,
Applebaum is binding, and we therefore
reject NMAC’s argument.
We thus affirm the district court’s
grant of summary judgment to Plaintiffs on
Count I.
B. The § 1667b(b) reasonableness
claims.
1. Standing to Challenge the
Paragraph 18 Formula.
In Count II of their amended
complaint, Plaintiffs alleged, inter alia,
that the Paragraph 18 formula violated the
reasonableness requirements of §
1667b(b).14 NMAC argued in the district
court that Plaintiffs did not have standing
to challenge the Paragraph 18 formula for
early termination because the formula was
not applied to them. As noted, they were
charged only the sum of the remaining
payments under their respective leases.
The district court rejected NMAC’s
standing argument. It held:
It is certainly true that
neither Miller nor the Roses
paid an early termination
charge that was directly
c a l c u la t e d u s i n g th e
Paragraph 18 fo rmu la.
However, we cannot ignore
the fact that the amount that
the Roses and Miller paid
did result indirectly from the
Paragraph 18 calculation.
The undisputed evidence
shows that NMAC decided
what to charge early
t e r m i n a t i n g l e s s e e s ,
including Miller and the
Roses, by calculating both
the sum of the remaining
payments charge and the
Paragraph 18 formula, and
then selecting the lesser of
these actually to levy upon
the lessee. Thus, while the
dollar figure Miller and the
Roses paid was not arrived
14As noted earlier, § 1667b(b) provides:
Penalties or other charges
for delinquency, default or
early termination may be
specified in the lease but
only at an amount which is
reasonable in the light of the
anticipated or actual harm
caused by the delinquency,
default or early termination,
the difficulties of proof of
loss, and the inconvenience
o r n o n f e a s i b i l i t y o f
otherwise obtain ing an
adequate remedy.
15 U.S.C. § 1667b(b).

-- 13 of 22 --

14
at using Paragraph
1 8 , t h e a m o u nt
derived from the
P a r a g r a p h 1 8
c a l c u l a t i o n
nevertheless helped
to determine what
they in fact paid. If
the Paragraph 18
formula had resulted
in a number lower
than the sum of the
remaining payments,
then the Paragraph
18 formula amount
would have been
levied on them.
We therefore find that
NMAC’s position that the
Paragraph 18 formula was
not used to calculate the
Roses’ and M iller’s liability
is without merit. Thus, to
the extent that the Paragraph
1 8 f o r m u l a w a s
unreasonable under the
CLA, [Miller and the Roses]
suffered injury thereby and
have standing to pursue
their claim.15
2000 WL 1599244 at *23 (emphasis in
original). After holding that Miller and the
Roses had standing, the district court held
that the Paragraph 18 formula for early
termination was unreasonable under §
1667b(b). Not unexpectedly, in its
appeal, NMAC renews its argument that
the Plaintiffs do not have standing to
challenge the Paragraph 18 formula
because it was not applied to them when
they terminated their leases.
“In essence the question of standing
is whether the litigant is entitled to have
the court decide the merits of the dispute
or of particular issues.” Trump Hotels &
Casino Resorts, Inc. v. Mirage Resorts
Inc., 140 F.3d 478, 484 (3d Cir. 1998)
(quoting Warth v. Seldin, 422 U.S. 490,
498 (1975)). “Standing ‘subsumes a blend
of constitutional requirements and
prudential considerations.’” Id. (quoting
Valley Forge Christian College v.
Americans United for Separation of
Church and State, Inc., 454 U.S. 464, 471
(1982)). “Obviously, satisfying the Article
III ‘case or controversy’ requirement is the
‘irreducible constitutional minimum’ of
standing.” Id. (quoting Lujan v. Defenders
of Wildlife, 504 U.S. 555, 560 (1992)).
Article III constitutional
standing contains three
elements: (1) the Plaintiff
must have suffered an injury
in fact – an invasion of a
legally protected interest
which is (a) concrete and
particularized and (b) actual
or imminent, not conjectural
or hypothetical; (2) there
must be a causal connection
15This court exercises “plenary review
of standing . . . issues, but review[s] for
clear error the factual elements underlying
the district court’s determination of
standing.” General Instrument Corp. v.
Nu-Tek Electronics & Mfg., Inc., 197 F.3d
83, 86 (3d Cir. 1999).

-- 14 of 22 --

15
between the injury
and the conduct
complained of – the
injury has to be fairly
tracea ble to the
challenged action of
the defendant and not
t h e r e s u l t o f
independent action
of some third party
not before the court;
and (3) it must be
likely, as opposed to
merely speculative,
that the injury will be
r e d r e ss e d by a
favorable decision.
Id. at 484-85 (citing Lujan, at 560-61).
“In addition to the ‘immutable
requirements of Article III,’ the federal
judiciary has also adhered to a set of
prudential principles that bear on the
question of standing.”16 Id. at 485
(quoting Bennett v. Spear, 520 U.S. 154
(1997)). These principles are:
(1) the Plaintiff generally
must assert his own legal
rights and interests, and
cannot rest his claim to
relief on the legal rights or
interests of third parties; (2)
even when the Plaintiff has
alleged redressable injury
sufficient to meet the
requirements of Article III,
the federal courts will not
adjudicate abstract questions
of wide public significance
w h i c h a m o u n t t o
g e n eralized grievan c e s
s h a r e d a n d m o s t
appropriately addressed in
the representative branches;
and (3) the Plaintiff’s
complaint must fall within
the zone of interests to be
protected or regulated by the
statute or constitutional
guarantee in question.
Id. (quoting Valley Forge Christian
College, 454 U.S. at 474-75) (internal
quotation marks omitted).
In light of these general principles,
we agree that the claim that the Plaintiffs
lack standing to challenge the Paragraph
18 formula has considerable force. They
never paid the early termination charge
pursuant to the Paragraph 18 formula.
Therefore, they were not harmed by it,
even assuming it is unreasonable and
violates § 1667b(b). They nevertheless
suffered no “injury in fact” because of it.
Although there is a paucity of case
law on the issue of standing in this context,
two cases support NMAC’s position, viz.,
Kedziora v. Citicorp Nat’l Servs., Inc., 780
F.Supp. 516 (N.D.Ill. 1991), aff’d sub
nom. in relevant part, Channell v. Citicorp
Nat’l. Servs., Inc., 89 F.3d 379 (7th Cir.
1996), and Highsmith v. Chrysler Credit
16Article III constitutional standing is a
threshold issue that must be addressed
before considering issues of prudential
standing. Joint Stock Society v. UDV
North America, Inc., 266 F.3d 164, 175
(3d Cir. 2001).

-- 15 of 22 --

16
Corp., 18 F.3d 434 (7th Cir. 1994). In
Kedziora, the lessees defaulted on their 60-
month car lease after 22 months and
thereby incurred a substantial termination
charge. However, they attempted to
challenge the reasonableness of an early
termination formula applicable to defaults
within the first 12 months of the lease
under § 1667b(b). The district court held
that the lessees lacked standing to
challenge the formula applicable within
the first 12 months because it “caused him
or her no actual injury because it never
became applicable to him or her.” 780
F.Supp. at 523. In Highsmith, the court of
appeals held that a lessee who had not
terminated his lease, or even alleged that
he intended to terminate his lease, had no
standing to challenge the reasonableness of
an early termination provision in his car
lease because “the early termination clause
has not been applied to him and he has
suffered no harm from it.” 18 F.3d at 437.
Both of these cases, although not on all
fours with Plaintiffs’ suit, lend support to
NM AC’s argument.
Plaintiffs initial standing argument
is that, because their leases contained the
Paragraph 18 formula, they were bound by
it and therefore they have standing to
challenge it. They cite County of Oakland
v. City of Detroit, 866 F.2d 839, 845 (6th
Cir. 1989), which they say stands for the
proposition that “[a] contracting party has
standing to challenge the reasonableness of
a clause which, by its terms, applies to him
as enforcement vel non may cause him
economic harm.” Miller/Roses’ Br. as
Appellees, at 17. However, we do not
believe that County of Oakland stands for
that proposition. County of Oakland was
an antitrust case and the standing issue
discussed therein centered on the contours
of the Illinois Brick doctrine.17 Quite
simply, the question raised in County of
Oakland – whether an intermediate user
who pays illegal antitrust overcharges that
are passed along to end users has antitrust
standing – has nothing to do with the issue
17In Illinois Brick Co. v. Illinois, 431
U.S. 720, 730-731 (1977), the Court held
that persons who are not direct purchasers
from the defendant antitrust violator
cannot maintain an antitrust action. In
Illinois Brick, it was alleged that concrete
block manufacturers had engaged in a
conspiracy to fix the price of concrete
block. The concrete block manufacturers
sold the concrete block to masonry
contractors who, in turn, sold the concrete
block to general contractors, who used the
concrete block to build masonry structures
which were incorporated into buildings
which the general contractors sold to the
State of Illinois. The Court held that the
State of Illinois could not bring an antitrust
action against the concrete block
manufacturers wh ose product was
incorporated into the buildings it bought.
That holding is based largely upon the
difficulty of establishing the extent to
which an indirect purchaser was actually
injured by the underlying antitrust
violation and the difficulty inherent in
prorating the fixed-price overcharge
among the number of entities in the chain
of manufacture and distribution. 431 U.S.
at 732-733.

-- 16 of 22 --

17
of whether a lessee who pays an early
termination charge has standing to
challenge a formula for calculating an
early termination fee that was never
applied to him/her.
Plaintiffs also look to two other
cases to support their standing. However,
neither case supports their argument. In
Lundquist v. Security Pacific Automotive
Financial Servs. Corp., 1992 WL 475651
(D.Conn. June 9, 1992), aff’d 993 F.2d 11
(2d Cir. 1993), the lessee filed a class
action challenging, inter alia, the
reasonableness of an early termination
provision in an automobile lease. The
lessor moved to dismiss the § 1667b(b)
reasonableness challenge under Rule
12(b)(6), arguing that because the lease
had not been terminated, the lessee lacked
standing because she had not suffered any
injury. A magistrate judge held that the
lessee did have standing because
[t]he Plaintiff is a party to
the lease and bound by its
terms. If the Plaintiff
decides to default on the
lease, she will be subject to
t h e e a r l y t e r m i n ati o n
charges. There is an
immediate threat of injury to
her because if she returns
the car she would be subject
t o t h o s e a l l e g e d l y
unreasonable charges.
1992 WL 475651 at *6. A district court
judge adopted the magistrate judge’s
reasoning. However, the court of appeals
did not discuss the standing issue on
appeal. Rather, it affirmed both the denial
of class certification and a finding that the
early termination provision violated the
disclosure requirements of the CLA.
Therefore, the magistrate judge’s standing
discussion does not have much force. In
fact, we believe that it is plainly wrong.
Article III constitutional standing requires
that an injury in fact must be “actual or
imminent, not conjectural or speculative.”
Trump Hotels, 140 F.3d at 484 (citation
omitted). The magistrate judge’s
discussion in Lundquist is purely
speculative. The magistrate judge
reasoned that: if the lessee decides to
default and if she returns the car, she
would be liable for the early termination
charges. Damage was, therefore, neither
actual nor imminent.
The second case Plaintiffs rely upon
is Johnson v. Steven Sims Subaru, Inc.,
U.S. Dist. Lexis 11694 (N.D.Ill. 1993).
Plaintiffs claim that Johnson holds that a
lessee has standing to challenge early
termination provisions in his/her auto lease
before suffering adverse consequences.
Johnson does, in fact, say that. 1993
U.S.Dist.Lexis 11694, at *5-11. The
lessee in Johnson, like the lessee in
Lundquist, had not terminated the lease.
However, the lessee in Johnson had
written a letter to the lessor saying that she
wanted to terminate early but could not
afford the early termination charges. A
magistrate judge found that the lessee had
standing because if the lessee actually
terminated her lease she would become
liable for the early termination charges.
However, we believe that
Johnson’s standing analysis is just as
speculative as Lundquist’s. We fail to see

-- 17 of 22 --

18
any Article III injury-in-fact based solely
on a lessee saying that she prefers to
terminate a lease and then refraining from
doing so.18 Moreover, Johnson is a
m a g i s t r a t e j u d g e ’ s R e p o r t a nd
Recommendation, which, as NMAC is
quick to point out, a district court judge in
the district where Johnson was decided,
has noted was never adopted by the district
court. The suit was settled before the
district court ruled on objections that were
filed. NMAC’s Reply Br. at 26-27
(quoting Demitropoulos v. Bank One
Milwaukee, N.A., 915 F.Supp. 1399, 1415
n.14 (N.D.Ill. 1996).
Plaintiffs make a number of
additional arguments which they claim
demonstrate their standing to challenge the
Paragraph 18 formula. First, they argue
that they have standing to challenge the
Paragraph 18 formula because the formula
was used as a “benchmark” in determining
whether the early termination charges
actually paid were reasonable. And, argue
Plaintiffs, if the Paragraph 18 formula was
used as a “benchmark” to determine
whether the charges they actually paid
were reasonable, “the district court
necessarily had to consider whether the
lease formula itself violated the CLA by
residual-risk shifting or otherwise.”
Miller/Roses Br. as Appellees, at 18.
Therefore, conclude the Plaintiffs, the
Paragraph 18 formula was applied to them
because NMAC charged them the balance
of lease payments due under the lease only
after comparing the Paragraph 18 formula
to the balance of lease payments due.
Consequently, they contend that they have
standing to challenge the reasonableness of
the Paragraph 18 formula.
We disagree. We do not believe
that the district court necessarily
considered whether the Paragraph 18
formula violated the CLA in determining
whether the charges they actually paid for
early termination were reasonable. The
district court merely noted that, because
NMAC compared the charges under the
Paragraph 18 formula to the charges under
the remaining payments method, the
charges Plaintiffs actually paid resulted
indirectly from the Paragraph 18 formula.
That is not the same as holding that the
Paragraph 18 formula actually violates the
CLA.
Moreover, the fact that NMAC
compared the charges under the Paragraph
18 formula to the charges under the
remaining payments methods does not
mean that the Paragraph 18 formula was
indirectly applied to the Plaintiffs. On the
contrary, the fact that NM AC chose not to
charge Plaintiffs an early termination fee
based on the Paragraph 18 formula
actually shows that the Paragraph 18 was
18Our fairly narrow view of the standing
issue here is confined to the specific
context of consumer car leases. Issues of
standing can arise in so many varied
settings that we think it appropriate to
caution that our analysis ought not be
automatically extended to other situations
where the possibility of injury may be
sufficiently real to support standing, both
in the Article III context and the prudential
sense, even though no actual injury has yet
been inflicted.

-- 18 of 22 --

19
not applied to Plaintiffs.
Second, Plaintiffs argue that they
have standing to challenge the Paragraph
18 formula because they alleged and
produced evidence that if they had
received an honest residual value, instead
of NMAC’s inflated one, the Paragraph 18
formula would have yielded a figure lower
than the charge they paid under the
remaining payments method, i.e., the so-
called Alternative Formula charge. They
claim that the district court found that had
NMAC used an accepted industry standard
for the residual, specifically something
called the “Auto Lease Guide,” the early
termination charge under the Paragraph 18
formula would have been $300 less than
the sum of the remaining payments under
Miller’s lease. They also claim that the
district court found that had NMAC used
the “revenue-neutral residual” for the
Roses, the Paragraph 18 formula would
have been $438.79, rather than the $480.00
remaining payments meth od they
ultimately paid. Accordingly, Plaintiffs
contend that they demonstrated harm from
NMAC’s use of both the Paragraph 18
formula and the remaining payments
method, and therefore have standing to
challenge the reasonableness of the
Paragraph 18 formula under § 1667b(b).
These calculations do not prove
standing. In the first place, Plaintiffs are
being disingenuous in stating what the
district court found. All that the district
court did in its standing discussion is recite
that Plaintiffs claimed that had NMAC
used different residual values, the
Paragraph 18 formula would have
produced a lower termination charge than
the remaining payments method. 2000
WL 1599244 at *22. That along with
allegations and averments by both parties
allowed the district court to conclude that
the Plaintiffs had standing because the
amount charged under the remaining
payments method indirectly resulted from
the Paragraph 18 formula.
Moreover, an allegation that the
Paragraph 18 formula would have
generated a lower termination charge than
the remaining payments if NMAC had
used an accurate residual value method
does not prove standing. As recited
above, the fact that NMAC used the
remaining payments method because it
was lower than the Paragraph 18 formula
shows that the Paragraph 18 formula was
not applied to them and, therefore, they
have no standing. As noted above, injury
can not be conjectural. Essentially,
Plaintiffs are relying upon a hypothetical
to manufacture standing. We will not now
speculate about the amount of early
termination charges that would have been
produced using different residual values.
Third, Plaintiffs argue that they
have standing because, in March 1999,
Miller obtained a phone quote from
NMAC of over $3,000 for the cost of
terminating his lease about 9 months
early. Miller claims that the district court
found that after receiving the $3,000 early
termination quote, he decided not to
terminate until November 1999.
However, the district court never made any
such finding. The district court merely
recited that Miller made a phone call to
obtain an early termination quotation. 2000
WL 1599244 at *2. In any event, Miller

-- 19 of 22 --

20
never explains how a lessee has standing
to challenge an early termination fee
simply because he/she obtains a quotation
of the early termination fee. See
Highsmith, 18 F.3d at 437 (suggesting that
Plaintiff must at least allege that he intends
to terminate his lease in order to obtain
standing).
Fourth, and finally, Plaintiffs
suggest that because they have standing to
assert disclosure claims under § 1667a of
the CLA, they have standing to assert
substantive claims under § 1667b of the
CLA. However, standing to assert § 1667a
disclosure claims does not establish the
injury required to assert substantive claims
under § 1667b. A Plaintiff may have
standing to challenge certain practices, but
not others. See Pryor v. Nat’l Collegiate
Athletic Ass’n., 288 F.3d 548, 561 (3d Cir.
2002).
2. Reasonableness of the Alternative
Formula Charge.
The Alternative Formula charges
that NMAC assessed were the two
remaining months lease payments in the
case of the Roses and the one month
payment remaining in the case of M iller.
The district court found that these “early
termination charges” were reasonable
under § 1667b(b). 2000 WL 1599244 at
*31-32. In their cross-appeal, Plaintiffs
argue that was error.
They first argue that the district
court erred by analyzing the Alternative
Form ula under t h e § 1 6 6 7 b(b)
reasonableness standard because the
Alternative Formula was not disclosed in
the lease. In Plaintiffs’ view, the
Alternative Formula charges were not
early termination charges at all, but were
extra contractual charges imposed by
NMAC. Therefore, because they were
imposed extra-contractually, they contend
that the district court should have analyzed
the Alternative Formula charges under
basic contract law and the Uniform
Commercial Code (“UCC”).
However, this argument is
conceptually flawed from the outset. The
claims that are the subject of these Rule
54(b) appeals are the Plaintiffs’ federal
claims that NMAC’s leases violated the
CLA. Because Plaintiffs challenged the
Alternative Formula charges under the
CLA, we fail to see the relevance of state
contract law and/or the UCC, and
Plaintiffs have offered no authority to
convince us their reliance on state law is
proper. Indeed, if taken to its logical
conclusion, their argument suggests that
their Alternative Formula claim is really a
state law claim and not a federal law claim
at all. In addition, Plaintiffs appear to be
trying to force the non-disclosure of the
Alternative Formula under § 1667a(11)
into a substantive violation under §
1667b(b) using the wedge of contract law.
In any event, Plaintiffs argue that if
the district court had analyzed the
Alternative Formula charges under UCC
and/or contract law damages standards,
they should have been granted summary
judgment. They argue that, under those
standards, it was NMAC’s burden to offer
proof it was damaged by their early lease
terminations and the surrender of their
vehicles before the leases had expired. In
their view, the Alternative Formula charge
was a liquidated damages formula and,

-- 20 of 22 --

21
therefore, the party seeking to enforce the
liquidated damages has the burden of
establishing the reasonableness of the
formula. See Finkle v. Gulf & Western
Mfg. Co., 744 F.2d 1015, 1021 (3d Cir.
1984). However, since NMAC offered no
proof of harm, Plaintiffs claim NMAC did
not establish the reasonableness of the
liquidated damages.
Moreover, their claim that NMAC
offered no proof of harm is incorrect. The
district court expressly found that
“NM AC’s harm. . . is the loss of the
remaining monthly payments and the car is
returned for disposition sooner than
NMAC expected, thereby resulting in
earlier than expected disposition costs and
risks.” 2000 WL 1599244 at *32
(emphasis in original). The district court
found that the Alternative Formula charge
was reasonable “in light of” that actual
harm. Id. Plaintiffs do not bother to
mention the district court’s finding that
NMAC suffered this harm.
NMAC counters by arguing that it
was not its burden to prove that the
Alternative Formula charges were
reasonable. NMAC claims it was
Plaintiffs’ burden to prove that the charges
were unreasonable under § 1667b(b)
standards. See Kedziora, 780 F.Supp. at
535 n.12 (Plaintiffs who seek to avoid
enforcement of lease term bear burden of
proof). Plaintiffs respond by arguing that
even if it is their burden to demonstrate
unreasonableness, they have done so.
They contend that even though they turned
their cars in prior to the expiration of their
leases, NMAC is not entitled to charge
them anything, because a lessor cannot
both recover the leased property and
accelerate the remaining monthly
payments under the lease. Rather, a lessor
must chose between those two remedies.
In support of that proposition, they cite to
Finkle, 744 F.2d at 1021-1022. Finkle
does say that a lessor cannot both recover
the leased property and accelerate the
m onthly paym ents . However ,
Finkle concerned a commercial property
lease and refers to a principle applicable to
c o m m e r c i a l p r o p e r t y le a s e s i n
Pennsylvania. Mo reover, Finkle
concerned non-renewal options under a
lease for a commercial property.
Depreciation is not a factor in that context.
However, depreciation is a driving factor
under vehicle leases such as the ones
before us here.
Finally, Plaintiffs argue that even if
the district court was correct that the
Alternative Formula charg e w as
reasonable under § 1667b(b), the charges
should have been discounted to present
value. According to Plaintiffs, without
discounting the Alternative Charge to
present value, NMAC would be recovering
interest on sums that had already been
repaid, putting NMAC in a better position
than if the lease had been fully performed.
In the abstract, Plaintiffs are correct.
Absent discounting, NMAC is receiving
unearned interest or rents. However, the
district court properly addressed this
argument in its opinion:
The Roses terminated their
lease two months early, and
Miller only one month early,
and the discounting of the
monthly payments would

-- 21 of 22 --

22
logically be done at
the rate implicit in
the lease, pursuant to
Paragraph 18. The
rate implicit in the
R ose leas e w a s
5.99%, and the rate
implicit in the Miller
lease was 7.6%.
T h u s , j u s t a s
N M A C ’ s
representative Robin
Norris testified, the
g a i n to N M A C
resulting from its
p r a c t ic e o f n o t
discounting was “a
couple of bucks” as
to the Rose and
Miller leases. This
slight overage is de
minimis and not
enough, in the cases
of Miller and the
Roses, to render the
early termin ation
charge unreasonable
in light of the harms
to NMAC arising
f r o m t h e e a rl y
termination pursuant
to § 1667b(b).
2000 WL 1599244 at *32. NMAC
claims that it gained only a “couple of
bucks” as a result of not discounting
because the Plaintiffs’ remaining payments
consisted almo st entirely o f the
depreciation that had not yet been paid. It
was the interest or rent charge component
that amounted only to a “couple of bucks.”
Plaintiffs do not dispute this.
Consequently, we agree with the district
court’s conclusion that the de minimis
overage resulting from NMAC’s failure to
discount to present value does not make
t h e Alt ernative Fo rmula C harg e
unreasonable under § 1667b(b).
V. CONCLUSION
For all of the above reasons, we
will affirm the district court’s grant of
summary judgment to Plaintiffs on their
Count I disclosure claims and on Count
IV. We will also affirm the grant of
summary judgment to NMAC on the
reasonableness of the Alternative Formula
component of Count II. However, we will
reverse and vacate the grant of summary
j u d g m e n t t o P l a in t i f fs o n t h e
reasonableness of the Paragraph 18 early
termination formula component of Count
II for lack of standing.

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