Opinion
Civil Action 00-586 Section "T"(4)
October 25, 2000
The defendant, ACE Cash Express, Inc. ("ACE"), filed a Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c) which was set for hearing on August 16, 2000. While this matter was pending, Magistrate Judge Roby granted plaintiffs' Motion for Leave to file a Second Amended Complaint. In response, defendant, ACE, filed a Motion to Dismiss pursuant to Rule 12(b)(6) which was set for hearing on October 11, 2000. In each instance, the parties waived oral argument such that these motions were taken under submission on the briefs only. The Court, having considered the memoranda filed, the evidence submitted, the record, the law and applicable jurisprudence, is fully advised in the premises and ready to rule.
ORDER AND REASONS
I. BACKGROUND:
ACE is a consumer finance company. Plaintiffs, Shirley Porter and Joyce Davis, filed this putative class action against ACE and "other unknown defendants" alleging that the loans they received from ACE were in violation of (1) the former Louisiana Small Loan Act (prior La. R.S. 9:3577.1-3577.8.) ("Small Loan Act" or "LSLA") which was repealed under Act 1315 of 1999, effective January 1, 2000; (2) the Louisiana Deferred Presentment Act (present La. R.S. 9:3577.1-3577.8) ("LDPA"), which became effective January 1, 2000; (3) the Louisiana Consumer Credit Law (La. R.S. 9:3510, et seq.) ("LCCL"); and, (4) the Racketeer Influenced and Corruption Organization Act ( 18 U.S.C. § 1961, et seq.) ("RICO").
The Second Amended Complaint is identical to the First Amended Complaint, with the exception that it substitutes the previous "unknown defendants" with named officers and/or directors of ACE as defendants in this action. The Second Amended Complaint asserts that these newly named defendants "were associated with, or employed by, an enterprise that engages in activities that affect interstate commerce and conducted such enterprise's affairs, and obtained income for such enterprise, through a pattern of collection of unlawful debt, in violation of 18 U.S.C. § 1962(c)." Second Amended Complaint Paragraph 60.
II. ARGUMENTS OF THE RESPECTIVE PARTIES:
A. Arguments of ACE in support of its motions:
ACE contends that it made a series of eight (8) consecutive single payment loans to Porter commencing on April 5, 1999. Each loan was in the amount of $250.00 and had a contractual term of thirty-five (35) days. Each loan was evidenced by a separate promissory note. The final loan was executed on December 4, 1999. Similarly, ACE entered into twelve (12) consecutive single payment loans with Davis, commencing on June 23, 1998, with the final loan of September 16, 1999. As with the Porter loans, each of Davis' loans were in the amount of $250.00 and had a contractual term of thirty-five (35) days. Moreover, each loan was evidenced by a separate promissory note.
First, ACE asserts that plaintiffs' loans did not qualify as, and did not constitute "small loans" under the Small Loan Act and as such, plaintiffs do not have a claim for violation of the former Louisiana Small Loan Act. Next, ACE argues that the plaintiffs' loans could not be governed by the LDPA as each of the loans were entered into prior to the January 1, 2000 effective date, thus these claims must be dismissed as well. Because neither of these acts apply to the loans at issue, ACE submits that the LCCL governs the plaintiffs' loans and that these loans comply with the general provisions of the LCCL, including the minimum loan finance charge provisions of LCCL § 3519(E), the loan origination fee provisions of LCCL § 3530(A), and the loan documentation fee provisions of LCCL § 3530(C). Because the fees are authorized by the LCCL, the plaintiffs' unconscionability claim is without basis. Finally, ACE asserts that the RICO claims fail as plaintiffs have not alleged that ACE committed any RICO "predicate acts", or that the plaintiffs sustained any "investment" or acquisition injury" as a result of ACE's conduct. Additionally, ACE contends that the plaintiffs failed to allege the existence of a RICO "enterprise" or "conspiracy", which is necessary to maintain a claim under RICO § 1962(c) and (d). As such, ACE requested that the Court grant ajudgment on the pleadings in favor ofACE and "other unknown defendants" dismissing with prejudice the claims asserted by plaintiffs. In response to the Second Amended Complaint filed, ACE argues that plaintiffs' amended complaint remains flawed as plaintiffs have not satisfied the "person/entity" distinction necessary to allege a violation of RICO § 1962(c) such that the claims should be dismissed.
B. Arguments of Plaintiffs in opposition to the motions:
The plaintiffs maintain that ACE is not entitled to judgment on the pleadings as factual issues exist which must be resolved by the trier of fact. Namely, plaintiffs assert that the loans were not "consecutive single payment loans" as contended by the defendant, but instead, should be characterized as a single extension of credit to each plaintiff which was repeatedly rolled over for an additional thirty-five (35) days until the debt was finally paid. Next, plaintiffs argue that the Small Loans Act was intended to apply to these transactions as these were "payday loans" or "small loans" for which this Act was passed to regulate. Under this law, the charges imposed by ACE are not authorized. Moreover, even if the LCCL applies, plaintiffs contend that ACE overcharged the plaintiffs under those provisions as well, since this is a "revolving loan account". Finally, plaintiffs contend that the complaint and subsequent RICO Case Statement adequately set forth viable claims under the RICO statute. Specifically, plaintiffs submit that the RICO claims are based upon collection of an unlawful debt which does not require proof of"predicate acts" and further that the existence of an "enterprise" has been alleged. As such, it is argued that ACE has failed to demonstrate the absence of factual issues that deserve a chance to be developed by way of discovery, and ultimately presented to the trier of fact. Moreover, in response to the Motion to Dismiss the Second Amended Complaint, plaintiffs contend that the RICO claims against ACE remain the same. Plaintiffs allege RICO violations against ACE under 18 U.S.C. § 1962(a) and (b) only. The 18 U.S.C. § 1962(c) allegations apply only to the individual defendants. Accordingly, plaintiffs contend that a request by ACE to dismiss a § 1962(c) claim should be denied as moot since there is no such claim pending. As the individual defendants have not yet made an appearance in this lawsuit and the only defendant appearing for these motions is ACE, relief in favor of the individual defendants should be denied.
III. LAW AND ANALYSIS:
A. Law on Rule 12(c) Judgment on the Pleadings:
A motion brought pursuant to Federal Rule of Civil Procedure 12 (c) is designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noted facts. Hebert Abstract Co. v. Touchstone Properties. Ltd., 914 F.2d 74, 76 (5th Cir. 1990).
Rule 12(c) Federal Rule of Civil Procedure reads as follows:
Motion for Judgment on the Pleadings
After the pleadings have been closed but within such time as not to delay the trial, any party may move for judgment on the pleadings. If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such motion by Rule 56.
In considering a motion for judgment on the pleadings, the court must view the facts presented in the pleadings and the inferences to be drawn therefrom in a light most favorable to the nonmoving party. Resolution Trust Corp. v. Gaudet, 891 F. Supp. 301 (E.D.La. 1995). The court may grant judgment on the pleadings where it is beyond doubt that the nonmovant can prove no set of facts in support of his claim that would entitle him to relief and where material facts are not in dispute. Caletka v. State Farm Automobile Ins. Co., 936 F. Supp. 380 (W.D.La. 1996).
B. Law on Summary Judgment:.
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56 (c). "The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact." Stults v. Conoco, 76 F.3d 651 (5th Cir. 1996), (citingSkotak v. Tenneco Resins, Inc., 953 F.2d 909, 912-13 (5th Cir.) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. The nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (emphasis supplied);Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995).
Thus, where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial." Matsushita Elec. Industrial Co., 475 U.S. at 588. Finally, the Court notes that substantive law determines the materiality of facts and only "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
C. Law on 12(b)(6) Motions:
A motion to dismiss under FRCP 12(b)(6) "is viewed with disfavor and is rarely granted." Lowery v. Texas AM University System, 117 F.3d 242, 247 (5th Cir. 1997); Kaiser Aluminum Chem. Sales v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir. 1982). The complaint must be liberally construed in favor of the plaintiff, and all facts pleaded in the original complaint must be taken as true. Campbell v. Wells Fargo Bank, 781 F.2d 440, 442 (5th Cir. 1980). A district court may not dismiss a complaint under FRCP 12(b)(6) "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957); Blackburn v. Marshall, 42 F.3d 925, 931 (5th Cir. 1995). The Fifth Circuit defines this strict standard as, "The question therefore is whether in the light most favorable to the plaintiff and with every doubt resolved in his behalf, the complaint states any valid claim for relief" Lowrey, 117 F.3d at 247, citing 5 Charles A. Wright Arthur R. Miller, Federal Practice and Procedure, § 1357, at 601 (1969).
D. The Court's Analysis:
The parties have introduced exhibits that fall outside of the pleadings and thus this Court is therefore required to treat the motion for judgment on the pleadings as one for summary judgment and dispose of it as provided in Rule 56.
1. Claims under the former Louisiana Small Loan Act (at former R.S. 9:3577.1-3577.8 — effective August 15, 1997 through December 31, 1999)
While this Court agrees that the purpose of the Small Loan Act was to regulate so called payday loans", the Legislature clearly defined the scope of that Act. LSLA § 3577.3(2) defined a small loan" as "a loan of five hundred dollars or less made to a consumer and which is due and payable within thirty days or less". § 3577.3(2). Pursuant to this definition, the loans at issue in this case do not meet the definition of a "small loan" to fall within the scope of the former Louisiana Small Loan Act. While each of the loans executed in this case comply with the monetary criteria, each loan executed was for a term of thirty-five (35) days and thus fall outside the provisions of this Act. Plaintiffs' argue that it should be left to the trier of fact to determine what sort of label to put on the loans at issue in this case and further that it was the legislature's intent to regulate the sort of loans we have in this case; however, the legislature has clearly defined the label to put on the transactions at issue and this Court is bound by those provisions. It is the letter rather than the spirit of the law which this Court is obliged to follow. Therefore, based upon the clear wording of the Legislative enactment and the provisions of the notes executed, it is the finding of this Court that pursuant to the definition provided in the Small Loan Act, no genuine issue of material fact exist; thus, plaintiffs have no claims against ACE under the former Louisiana Small Loan Act and said claims must be dismissed.
2. Claims under the Louisiana Deferred Presentment andSmall Loan Act (R.S. 9:3577.1-3577.8 — effective January 1, 2000)
The LDPA which replaced the former Small Loan Act on January 1, 2000, defines a "small loan" differently than the former act. LDPA § 3577.3(6) provides that a "small loan" is "a consumer loan, as defined in R.S. 9:3516(14), of three hundred fifty dollars or less, made for a term of sixty days or less". A "consumer loan" as defined in § 3516(14) is:
. . . a loan of money or its equivalent made by a supervised financial organization, a licensed lender, or lender in which the debtor is a consumer, and the loan is entered into primarily for personal, family, or household purposes and includes debts created by the use of a lender credit card, revolving loan account, or similar arrangement, as well as insurance premium financings. A "consumer loan" further includes a loan of money or its equivalent to a consumer entered into primarily for personal, family, or household purposes, which is secured by a second or junior lien or mortgage on owner-occupied one-to-four family residential immovable property, or which is secured by a first lien or mortgage on owner-occupied one-to-four family residential immovable property to the extent that the loan does not qualify as a federally related mortgage loan.
As such, the various loans at issue in this case would have satisfied the definition of a "small loan" under the LDPA; however, this definition applies only to loans executed on or after the effective date of January 1, 2000. All loans at issue in this case were executed in 1998 and 1999 and thus the LDPA is inapplicable. As such, the plaintiffs' LDPA claims against the defendant must likewise be dismissed.
3. Claims under the Louisiana Consumer Credit Law (R.S. 9:3510 et seq.)
Because the plaintiffs' loans did not fall within the provisions of the LSLA or LDPA, the loans are subject to the general provisions of the LCCL. Plaintiffs contend that the loan finance charges, origination fees, and documentation fees were excessive and did not comply with the applicable statute. This Court disagrees. The LCCL limits loan finance charges or interest on consumer loans as defined in § 3519(A). This statute provides that the maximum loan finance charge may equal but not exceed 36% for a loan not exceeding $1,400.00; 27% for a loan exceeding $1, 400.00 and not exceeding $4,000.00; 24% for a loan exceeding $4, 000.00 and not exceeding $7,000.00; and, 21% for a loan exceeding $7,000.00. § 3519(A). However, § 3519(E) states:
Notwithstanding any provision of Subsection A the extender of credit may contract for and receive a minimum loan finance charge of not more than fifteen dollars when the amount advanced does not exceed two hundred dollars or twenty-five dollars when the amount advanced exceeds two hundred dollars; such charge shall be in lieu of all other finance charges.
In this case, the loans exceeded $200 and ACE charged plaintiffs a $25 loan finance charge as permitted under LCCL § 3519(E).
Moreover, the LCCL allows a lender to charge an origination fee on a consumer loan or revolving loan account, so long as it does not exceed twenty-five dollars ($25). § 3530(A)(1). Section 3530(A)(2) goes on to provide that:
[t]he origination fee may be charged only once in connection with a single loan to one borrower over any consecutive thirty-day period, regardless of the number of renewals or refinances during the same thirty-day period. An origination fee maybe charged on any new loan made during a prior loan's consecutive thirty-day period provided the new loan is not a renewal, refinance, or rollover of the prior loan. When a loan is paid in full, an origination fee may be charged on any subsequent new loan without regard to the prior loan's consecutive thirty-day period.
§ 3530(A)(2). As such, a lender may assess the foregoing fees and charges each time a loan is renewed or refinanced with the exception that the $25 loan origination fee may only be charged once over any consecutive thirty-day period. § 3530(A)(2). However an origination fee may be charged on any new loan, in this case, we do not have any loans being renewed or refinanced during the thirty-day period; instead we have new loans being executed every thirty-five days. In this case, the plaintiffs were charged origination fees in the amount of $25 on each loan in accordance with this provision. The notes show that ACE collected an origination fee only once on each single loan to plaintiff over a 35-day period. ACE made no loans to plaintiffs during the thirty day period of any prior loan. As such, ACE has complied with the provision of § 3530 relating to origination fees. Likewise, the LCCL allows lenders to charge a documentation fee as reimbursement for actual costs incurred, not to exceed five dollars. § 3530(C). ACE charged the plaintiffs a $5 documentation fee as permitted by this statute.
The plaintiffs have argued that the loans at issue constitute a single extension of credit to each plaintiff that were repeatedly rolled over until the debt was finally paid, thus the fees are not lawful because the loans are "revolving loan accounts." As stated previously, it is the finding of this Court that this is not the case. The LCCL defines a "revolving loan account" as:
an arrangement between a lender and a consumer pursuant to which:
(i) The creditor may permit the consumer to obtain consumer loan advances on a preauthorized basis;
(ii) The creditor reasonably contemplates repeated transactions;
(iii) The creditor may impose a loan finance charge from time to time on the outstanding unpaid balance of the consumer's account; and,
(iv) The amount of credit that may be extended to the consumer under the account, up to any limit set by the creditor, is generally made available to the extent that any unpaid balance is repaid.
R.S. 9:3516(30)(a). Each of the promissory notes executed by the plaintiffs show a series of separate loans, each of which were to be repaid in a single payment due thirty-five (35) days after the note was signed. There is no language in the notes to suggest that this was a single extension of credit or revolving loan account. Moreover, there is no language to suggest that loan advances on a preauthorized basis were permitted. There is no language to establish that ACE or plaintiffs reasonably contemplated repeated transactions, nor is there any authorization for ACE to impose periodic loan finance charges on the outstanding unpaid balance of the account. Finally, there is no language in the notes reflecting an agreement to make credit available to the plaintiffs to the extent that they repaid each loan. As such, it is the finding of this Court that the loans at issue are not revolving loan accounts" as defined by the LCCL, as a matter of law.
Finally, plaintiffs have asserted that the charging of these fees is "unconscionable" within the context of LCCL § 3551. That section provides that:
. . . an agreement, clause, charge or practice expressly permitted by this chapter or any other law or regulation of this state or of the United States or subdivision of either, or an agreement, clause, charge or practice necessarily implied as being permitted by this chapter or any other law or regulation of this state or the United States or any subdivision of either is not unconscionable.
Assessing loan finance charges, loan origination fees, and loan documentation fees on multiple renewal loans is expressly permitted by the LCCL and thus cannot be deemed unconscionable. As such, the claim of unconscionability must be dismissed as well. As the loans comply with the requirements of the LCCL, plaintiffs do not have a claim against ACE and these claims must be dismissed.
4. Claim under the RICO Act
Plaintiffs have alleged "collection of an unlawful debt" in the form of fees and interest charges that exceed the amount allowed by law as its basis for the RICO claims. An "unlawful debt," as referred to in RICO § 1962(a), (b), and (c) is defined in § 1961(6) as:
. . . a debt (a) incurred or contracted in gambling activity which was in violation of the law of the United States, a State or political subdivision thereof, or which is unenforceable under State or Federal law in whole or in part as to principal or interest because of the laws relating to usury, and (b) which was incurred in connection with the business of gambling in violation of the law of the United States, a State or political subdivision thereof, or the business of lending money or a thing of value at a rate usurious under State or federal law, where the usurious rate is at least twice the enforceable rate . . .18 U.S.C. § 1961(6) emphasis added. As discussed above, this Court finds that the fees and charges were in accordance with the applicable law and thus were not usurious and thus do not constitute an unlawful debt" such that plaintiffs have failed to state a RICO claim against ACE pursuant to § 1962(a) or (b). SeeNelson v. Nationwide Mortgage Corp., 758 F. Supp. 747, 749 (D.D.C. 1991). Plaintiffs' RICO claims against ACE, therefore, must likewise be dismissed. As the individually named defendants are not parties to this motion and have not yet made appearances in this matter, this Court is not in a position to address the merits of the allegations set forth against them, while this Court is mindful of the fact that the same arguments made herein will be asserted as to those parties in the future.
As such, it is the finding of this Court that plaintiffs' complaint fails to state a claim upon which relief may be granted and ACE is entitled to a judgment on the pleadings.
Accordingly,
IT IS ORDERED that the Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c) and Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) filed on behalf of defendant, ACE Cash Express, Inc., be and the same is hereby GRANTED in part, DENIED in part. Said motions are GRANTED to the extent that they pertain to ACE Cash Express, Inc. only and DENIED to the extent that they apply to the individually named defendants.
IT IS FURTHER ORDERED that there be Judgment in favor of the defendant, ACE Cash Express, Inc., and against the plaintiffs, Shirley Porter and Joyce Davis, Individually and on behalf of others similarly situated, DISMISSING WITH PREJUDICE all plaintiffs' claims against said defendant, each party bearing their own taxable costs and expenses.
New Orleans, Louisiana, this 25th day of October, 2000.