Applebaum v. Nissan Motor Acceptance Corporation

In 1994 Leonard Applebaum (plaintiff) signed a 36-month lease for a 1995 Nissan Maxima (the 1995 model) from Nissan Motor Acceptance Corporation (Nissan) through Reitenbaugh Enterprises (Reitenbaugh) (collectively, the companies) (defendants), a car dealership. The lease included early-termination provisions imposing a penalty for terminating the lease before its expiration date. The early-termination provisions explained that the balance of the lease would be calculated using the constant-yield method. The provisions further explained that the early-termination penalty would be calculated using the residual value of the leased vehicle, meaning the value of the vehicle at the end of the lease term; this residual value was calculated at the beginning of the lease. The early-termination provisions did not define the constant-yield method, nor did they include the residual value that had been assigned to the 1995 model. Applebaum terminated the lease 10 months early to trade the 1995 model in for a 1997 model. Reitenbaugh told Applebaum that the pay-off amount for the 1995 model was $18,111. The trade-in value for the 1995 model was $12,500, making the early-termination penalty $5,611. Applebaum asked Reitenbaugh to explain why the pay-off amount was so high, and Reitenbaugh refused to give an explanation, telling Applebaum that its method for calculating the pay-off amount was proprietary. Applebaum filed a lawsuit in federal court against the companies, alleging that the companies violated the Consumer Leasing Act because the lease did not explain the method for calculating the early-termination penalty or define its use of the constant-yield method. The district court granted summary judgment for the companies, holding that the lease was not required to include the exact method for calculating the early-termination penalty. The court also held that the lease did not have to define the constant-yield method, because the term was well-known in the leasing industry. Applebaum appealed.