A recent decision in American Honda Finance Corporation v. D & G Towing and Auto Repair Service, Inc., No. 1:24-cv-12121 (D. Mass.), is an important victory for vehicle lienholders and leasing companies. Its central significance is straightforward: a tow yard that holds a police-towed vehicle as leverage to force payment of towing or storage charges must have its actions reviewed by a neutral source to ensure that the tow yard is acting properly. A tow yard that detains a vehicle as leverage and fails to obtain the necessary neutral review acts unconstitutionally and will not be allowed to recover any fees charged for the improper detention of the vehicle.
This, of course, makes perfect sense as a tow yard that violates the law should not be rewarded for improper conduct.
Correcting the burden
This case corrects a fundamental but mistaken view of a tow yard’s role after it tows a vehicle at police request. A tow yard or garage is not automatically entitled to detain the vehicle as leverage merely because it performed a tow or claims charges. It may retain the vehicle as leverage to force payment only if it provides prompt, constitutionally sufficient notice, and a reasonable procedure for neutral review of the detention and fees. Neutral review generally means that someone unconnected to the dispute listens to both sides and decides thus settling the matter. A court is a form of neutral review.
The prevailing practice has too often been backwards: the garage refuses to release vehicle, charges storage while the vehicle remains unavailable, and tells the lienholder to pay first or sue later. The decision redirects that burden.
If the garage intends to continue holding the vehicle over the lienholder’s demand for its release, the garage must bring on a meaningful hearing or review process through which the continued detention and charges can be justified.
Constitutional role
The constitutional rule is that if a tow yard wants to retain a vehicle as leverage to compel payment, it must provide notice and a meaningful opportunity for neutral review. The owner, lienholder, and leasing company must be told how to seek that review and must have a practical opportunity to contest the tow, continued detention, or charges.
If providing neutral review is inconvenient or undesirable, the tow yard may not simply continue holding the vehicle as payment leverage. It must release the vehicle to the person entitled to possession.
The tow yard’s remedy is to present a bill for whatever charges it believes are lawfully owed. The tow yard cannot act as judge, jury, and collector by retaining someone else’s collateral while disputed fees continue to grow.
Takeaway and future action
To take advantage of this victory, lienholders need to be active in demanding that the tow yard provide the hearing process that the law requires. Tow yards are going to resist because they like the current abusive system where they don’t do anything except pack on unjust fees. But this decision is based on well-established Supreme Court cases, and the tow yards will have to comply. If we push, we will succeed.
This decision can be the building block to stabilize a system for recovering police towed vehicles that is fair to all. If tow yards start setting up hearing processes, like they must do, then the lienholder can address any disputes in that hearing.
Ideally, the tow yards will realize that it does not pay to delay notice and try to gouge unjustly, and the tow yards will just release vehicles instead of trying to use them as leverage. Then, the problem will be solved.