June 19, 2018

June 19, 2018

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June 18, 2018

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DOJ announces settlement of SCRA claims for auctioning of towed vehicles without court orders

The Department of Justice recently announced it had entered into an agreement with the City and County of Honolulu, Hawaii (Honolulu) and its general contractor for towing services to settle a lawsuit filed by the DOJ alleging that Honolulu and the general contractor violated the Servicemembers Civil Relief Act (SCRA) by auctioning or otherwise disposing of motor vehicles owned by servicemembers that were deemed abandoned without first obtaining court orders.

The SCRA requires a person holding a lien on the property of an active-duty servicemember to obtain a court order before enforcing the lien.  The DOJ’s complaint alleges that Honolulu and the general contractor violated the SCRA in connection with the towing of vehicles belonging to three active-duty servicemembers identified in the complaint and the subsequent disposition of such vehicles without court orders.  The settlement agreement states that a DOJ investigation (which was launched in response to information provided by military attorneys), revealed that between 2011 and 2016, Honolulu auctioned 1,440 vehicles registered to individuals who had identified themselves as servicemembers on City forms during the motor vehicle registration process.

The settlement agreement requires Honolulu to compensate the three servicemembers identified in the complaint and to establish a $150,000 settlement fund to compensate other servicemembers who are identified pursuant to the notice procedure set forth in the agreement and determined by the DOJ to have been similarly harmed by SCRA violations.  Honolulu must also adopt SCRA-compliant policies and procedures for the disposition of towed vehicles and provide SCRA compliance training to employees involved in Honolulu’s abandoned vehicle program.

Such policies and procedures must include:

  • Steps to prevent the disposition of vehicles registered to active-duty servicemembers without a court order or executed SCRA waiver, such as amending the certificates for military Hawaii residents and non-residents used by Honolulu’s Division of Motor Vehicles, Licensing and Permits to include specified contact information for the servicemember and an emergency contact, and amending  Honolulu’s form for providing notice that an abandoned vehicle is in custody to inform servicemembers that they have 60 days to reclaim a vehicle, complete a power of attorney, and designate a representative to reclaim a vehicle, or complete an SCRA waiver.

  • Providing active-duty servicemembers adequate notice that a vehicle has been taken into custody by using the contact information provided in the certificates to notify the servicemember, or the servicemember’s emergency contact if the servicemember is unreachable, and providing at least 60 days for a servicemember to respond to such a notice before initiating court proceedings to auction, sell or otherwise dispose of the vehicle post-auction.

  • Providing active-duty servicemembers an opportunity to recover or relinquish a vehicle taken into custody by contractually requiring all towing companies providing services to Honolulu to accept a servicemember’s copied, scanned, or faxed power of attorney and release the vehicle to the servicemember’s designated representative upon payment of outstanding towing and storage fees and by accepting a signed SCRA waiver by a representative under a power of attorney if the power of attorney is submitted with the SCRA waiver.

Copyright © by Ballard Spahr LLP

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About this Author

Culhane, Ballard, Partner
Partner

John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

Mr. Culhane addresses issues involving licensing,...

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