All Am. Check Cashing, Inc. v. Corley

• Decision Date: 22 March 2016
• Docket Number: CIVIL ACTION NO. 3:16CV55TSL–RHW
• Citation: 191 F.Supp.3d 646
• Parties: ALL AMERICAN CHECK CASHING, INC., A Mississippi Corporation, and Mid–State Finance, Inc., a Mississippi Corporation, Plaintiffs v. Charlotte CORLEY, in her capacity as Commissioner of the Mississippi Department of Banking and Consumer Finance, and Taft Webb, an individual in his personal capacity, Kris Booker, an Individual in his personal capacity, and Katherine Christian, an individual in her personal capacity, and various John Does and Jane Does, Defendants
• Court: U.S. District Court — Southern District of Mississippi

191 F.Supp.3d 646

ALL AMERICAN CHECK CASHING, INC., A Mississippi Corporation, and Mid–State Finance, Inc., a Mississippi Corporation, Plaintiffs

v.Charlotte CORLEY, in her capacity as Commissioner of the Mississippi Department of Banking and Consumer Finance, and Taft Webb, an individual in his personal capacity, Kris Booker, an Individual in his personal capacity, and Katherine Christian, an individual in her personal capacity, and various John Does and Jane Does, Defendants

CIVIL ACTION NO. 3:16CV55TSL–RHW

United States District Court, S.D. Mississippi, Northern Division.

Signed March 22, 2016

Robin H. Rasmussen, Peter D. Baskind–PHV, Dinkelspiel, Rasmussen & Mink, PLLC, Memphis, TN, Bentley E. Conner, Bentley E. Conner, Attorney, Canton, MS, Dale Danks, Jr., Danks, Miller & Cory, Jackson, MS, for Plaintiffs.

Justin L. Matheny, Douglas T. Miracle, Mississippi Attorney General's Office, Jackson, MS, for Defendants.

MEMORANDUM OPINION AND ORDER

Tom S. Lee, UNITED STATES DISTRICT JUDGE

On January 29, 2016, plaintiff All American Check Cashing (All American) filed a complaint in this cause seeking money damages and injunctive relief prohibiting the Mississippi Department of Banking and Consumer Finance (DBCF or the Department) from revoking its licenses to do business in the state and from seizing assets of All American, which it reported had been threatened and it believed was imminent. Upon filing its complaint, All American contemporaneously moved for a temporary restraining order and preliminary injunction, contending that in the absence of injunctive relief, it faced imminent closure by the Department. At the court's direction, defendant Charlotte Corley, in her official capacity as Commissioner of the DBCF,¹ filed an expedited response to the motion. Therein, she argued that the court should abstain from considering plaintiff's request for injunctive relief based on the doctrine of Younger abstention and further contended, in the alternative, that All American had failed to establish any of the requirements for obtaining injunctive relief. After receiving additional briefing from the parties on the abstention issue, the court scheduled a hearing for February 12, 2016. At the hearing, which was directed primarily to the issue of Younger abstention, All American asserted arguments for rejecting Younger abstention that had not been previously raised. Thus, following the hearing, the court requested and/or permitted additional briefing by the parties addressing these matters. Upon now having considered the parties' submissions and arguments, the court concludes that it must abstain from exercising its jurisdiction over All American's claim for injunctive relief.

Background

All American is in the business of check cashing, short-term lending, and title loans, and has more than forty locations in the state of Mississippi. The Mississippi Department of Banking and Consumer Finance is the state agency responsible for licensing and supervision of these types of financial service businesses in the state. See Miss. Code Ann. § 75–67–503(e) (DBCF Commissioner is state's designated official for purpose of enforcing Check Cashers Act); Miss. Code Ann. § 75–67–505 (establishing licensing requirements for check cashing businesses); Miss. Code Ann. § 75–67–403(c) (Commissioner of DBCF is the designated official for the purpose of enforcing Title Pledge Act); Miss. Code Ann. § 75–67–419 (establishing licensing requirements for title pledge lenders). The Department is authorized by statute to conduct examinations of businesses under its jurisdiction to ensure they are operating in compliance with applicable laws. See Miss. Code Ann. § 75–67–523² and Miss. Code Ann. § 75–67–515(2)³ (Check Cashers Act); Miss. Code Ann. § 75–67–435⁴ and Miss. Code Ann. § 75–67–447⁵ (Title Pledge Act). Pursuant to this authority, agents of the Department appeared at six All American locations and its administrative office in Madison, Mississippi, on the morning of June 16, 2014, to gather information as part of an examination/investigation. Thereafter, on June 19, 2014, the Department issued to All American a cease and desist letter instructing it to cease a program through which All American was alleged to have illegally extended short-term loans by accepting only a fee from the customer, in violation of Miss. Code Ann. § 75–67–519(4) & (5). All American contends it complied with this directive, and that upon a follow-up examination in December 2014, examiners noted the "apparent policy changes" and that no instances of fee-only transactions were found.

Thereafter, on May 12, 2015, the Department issued to All American a 30–page Report of Examination (Report) based on its 2014 investigation in which it reported, among other things, that based on debit card records, it had identified 1,515 illegal fee-only transactions, that would support a penalty of $757,700 ($500 per transaction), see Miss. Code Ann. § 75–67–527(4) (providing that Commissioner may impose a civil penalty, not to exceed $500 per violation, "against any licensee adjudged by the commissioner to be in violation of the provisions of this article"); based on statements from customers, it had identified another 1,789 transactions that it considered were illegal fee-only transactions,⁶ which would support a penalty of $894,500 ($500 per transaction) together with an additional $894,500 for the attendant falsification of records to prevent discovery of the transactions, see Miss. Code Ann. § 75–67–425, –527; and that All American employees at a number of locations had refused the Department's examiners access to at least 7,401 business records, with each refusal constituting a violation of Miss. Code Ann. §§ 75–67–515, –523, –415(b), –447 and –435, supporting a penalty of $740,100. The Report recommended possible remedies, including assessment of penalties, as noted, and refunds to customers of fees wrongly charged, as well as the removal and replacement of management by persons involved with the violations and intentional bad acts described (including All American CEO Michael Gray).

The Report, signed by examiner Mike Garrard and Director of the Department's Consumer Finance Division Taft Webb, directed that All American respond to the Report in writing within 45 days to address the matters contained in the Report, and recited that the Department was not "unwilling to further discuss resolution or consider alternative suggested remedies." It warned, however, that if the parties were unable to agree on specific terms and conditions under which the Licensee might continue to operate, "the Department may recommend that all licenses now held by Licensee be revoked following consideration of Licensee's response and the subsequent issuance ‘Commissioner's Findings and Order’ [sic] in this matter."

All American states that it responded to the Report and undertook to work in good faith with the Department on settlement terms. However, on January 12, 2016, counsel for the Department wrote to All American, stating that it had not received a response to the Department's settlement offer in nearly a month, and advising that

if we cannot reach an arrangement, at least in principle, on or before February 1, 2016, DBCF will move forward with our administrative process. As you are aware from various conversations, the recommendation to the Commissioner will likely include, inter alia , revocation of all licenses granted to any licensee owned by Mr. Michael Gray.

All American's Complaint and Motion

All American did not respond to the letter. Instead, on Friday, January 29, 2016, one business day before the deadline set forth in the Department's letter, All American filed a Verified Complaint for Damages and Injunctive Relief asserting claims against Corley, in her official capacity as Commissioner of the Department, and against John and Jane Doe defendants (identified as agents of the Department), alleging that the Department and its agents have "engaged in an intentional and/or negligent campaign of irrational, unreasonable, unnecessary, and illegal actions intended to deprive All American of its Constitutionally-protected rights." All American pled claims under 42 U.S.C. § 1983 for alleged violation of its rights under the First, Fourth, Fifth and Fourteenth Amendments of the U.S. Constitution and for violation of its rights under Article III of the Mississippi Constitution, and sought damages and injunctive relief.⁷ It contemporaneously filed a Motion for Temporary Restraining Order and Preliminary Injunction, asking that the court enter an order "prohibiting the Defendant from revoking All American's licenses to operate, seizing All American's assets, or taking any other steps intended to bring closure to All American."

All American reports that within an hour of filing its complaint and motion, it received from the Department, under the signature of Taft Webb, a Notice of Recommended Findings, Penalty and Revocation of Licenses (Notice). In that Notice, the Department referenced "the numerous violations of both the Mississippi Check Cashers Act and the Mississippi Title Pledge Act" identified in the May 2015 Report and set out examples of such violations. The Notice further recited that the Department had "discovered other unauthorized activities subsequent to the issuance of the Report, including an unauthorized loan of $950,000 to an entity in which Michael Gray has an ownership interest." The Notice stated that the Department would recommend that the Commissioner levy a total penalty of $3,000,000 against All American pursuant to Miss. Code Ann. §§ 75–67–527(4) (Check Cashers Act provision authorizing civil penalties), and 75–67–431(5) (authorizing penalty under Title Pledge Act), and further, that in light of the "acts or grossly negligent omissions by Mr. Gray that have directly caused the violations detailed in the Report," would also recommend that all licenses held by any entity owned by Mr. Gray...