Carriere v. Jackson Hewitt Tax Serv. Inc., Civil Action No. 10–1709.

• Decision Date: 03 November 2010
• Docket Number: Civil Action No. 10–1709.
• Citation: 750 F.Supp.2d 694
• Parties: Cecile L. CARRIERE, individually and on behalf of all others similarly situatedv.JACKSON HEWITT TAX SERVICE INC., et al.
• Court: U.S. District Court — Eastern District of Louisiana

750 F.Supp.2d 694

Cecile L. CARRIERE, individually and on behalf of all others similarly situated

v.JACKSON HEWITT TAX SERVICE INC., et al.

Civil Action No. 10–1709.

United States District Court, E.D. Louisiana.

Nov. 3, 2010.

Bryan C. Shartle, David Israel, Justin Harriss Homes, Michael D. Alltmont, Sessions, Fishman, Nathan & Israel, LLP, Metairie, LA, for Plaintiff.Gerard E. Wimberly, Jr., Anthony Rollo, Dylan M. Tuggle, McGlinchey Stafford, PLLC, New Orleans, LA, Richard L. Brusca, Skadden, Arps, Slate, Meagher & Flom, LLP, Washington, DC, Christine Lynn Desue, Richard John Tomeny, Jr., Dutel & Tomeny, LLC, Metairie, LA, for Defendants.

ORDER AND REASONS

SARAH S. VANCE, District Judge.

In this action under the Louisiana loan broker statutes and certain articles of the Civil Code, defendants Jackson Hewitt Tax Service Inc. and Jackson Hewitt Inc. (collectively, “Jackson Hewitt”) and 1040, Inc. move to dismiss plaintiff's claims on numerous grounds.¹ For the following reasons, the Court GRANTS IN PART and DENIES IN PART defendants' motions.

I. BACKGROUND

Defendant Jackson Hewitt is the second largest tax preparation company in the United States. Its franchisee 1040, Inc. owns 16 Jackson Hewitt locations in Louisiana and Mississippi. On January 26, 2009, plaintiff Cecile Carriere visited the Jackson Hewitt location owned by 1040, Inc. in Covington, Louisiana. During that visit, defendants completed plaintiff's 2008 tax return. Plaintiff alleges that defendants also brokered a refund anticipation loan (“RAL”) for her during this visit. An RAL is a loan, secured by a customer's anticipated tax refund, that is made by a third party financial institution. Plaintiff alleges that the defendants acted as loan brokers but were not licensed and bonded as required by Louisiana law. She also alleges that the defendants did not make certain disclosures that state law requires of loan brokers. Plaintiff further contends that defendants received brokering fees that were paid out of her loan proceeds without her knowledge. She also contends that the defendants falsely represented to her that they did not collect such fees and that they had no fiduciary duties regarding the loan.

On April 29, 2010, plaintiff filed a class action petition in state court, on behalf of herself and all Louisiana residents who received a loan through one or more of the defendants during the preceding ten-year period. These loans include transactions other than RALs, such as short term “Flex Loans” to assist customers in paying their taxes. Plaintiff claims that defendants' activities violated three Louisiana loan broker statutes—La. R.S. §§ 9:3572.1, 51:1910, and 9:3574.1, et seq.—and multiple articles of the Louisiana Civil Code. She seeks statutory penalties, rescission of the alleged loan brokering agreements, return of payment of a thing not owed, and injunctive and declaratory relief.

This case was removed to federal court under the Class Action Fairness Act of 2005. Defendants now move to dismiss the case on numerous state law grounds.

II. STANDARD

To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead enough facts “to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A claim is facially plausible when the plaintiff pleads facts that allow the court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. A court must accept all well-pleaded facts as true and must draw all reasonable inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232–33 (5th Cir.2009); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir.1996). But the Court is not bound to accept as true legal conclusions couched as factual allegations. Iqbal, 129 S.Ct. at 1949–50.

A legally sufficient complaint must establish more than a “sheer possibility” that plaintiff's claim is true. Id. It need not contain detailed factual allegations, but it must go beyond labels, legal conclusions, or formulaic recitations of the elements of a cause of action. Twombly, 550 U.S. at 555, 127 S.Ct. 1955. In other words, the face of the complaint must contain enough factual matter to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiffs' claim. Lormand, 565 F.3d at 255–57. If there are insufficient factual allegations to raise a right to relief above the speculative level, Twombly, 550 U.S. at 555, 127 S.Ct. 1955, or if it is apparent from the face of the complaint that there is an insuperable bar to relief, Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007); Carbe v. Lappin, 492 F.3d 325, 328 & n. 9 (5th Cir.2007), the claim must be dismissed.

III. DISCUSSIONA. “Loan Brokers” Under the Louisiana Statutes

Defendants contend that they are not loan brokers under the Louisiana statutes and that those statutes therefore do not apply to them. Each of the three statutes that plaintiff relies upon defines “loan broker” differently, so defendants may be loan brokers for purposes of one statute but not for others. The Court will consider each statute in turn.

1. La. R.S. § 9:3572.1

Plaintiff has adequately alleged that defendants are loan brokers for purposes of R.S. 9:3572.1, the statute that plaintiff relies upon in count one of the petition. Under that statute, a loan broker is “any person who, for compensation or the expectation of compensation, obtains or offers to obtain a consumer loan from a third party ... for another person[.]” This definition requires that the loan broker receive or expect to receive compensation, but it does not require that the loan broker receive that compensation from the borrower.

Plaintiff alleges that defendants received fees from lenders in exchange for brokering loans to their customers.² In the petition, plaintiff refers to Jackson Hewitt's 2007 Program Agreement with Santa Barbara Bank & Trust (“SBBT”), the bank that made the loan to plaintiff.³ In deciding a motion to dismiss, the Court may rely upon documents the plaintiff refers to in the petition. Pechon v. Louisiana Dept. of Health and Hospitals, 368 Fed.Appx. 606, 610 n. 13 (5th Cir.2010). The agreement between Jackson Hewitt and SBBT is attached to Jackson Hewitt's motion to dismiss. ⁴ In that agreement, Jackson Hewitt promises to “facilitate the offer of [SBBT's] Financial Products to consumers.” ⁵ In exchange, the agreement provides that SBBT shall pay fees to Jackson Hewitt.⁶ Those fees are compensation for loan brokering under R.S. 9:3572.1, even though they are not paid by the borrower.

Additional provisions of R.S. 9:3572 support the conclusion that a loan broker may receive compensation from the lender rather than the borrower. First, under R.S. 9:3572.2, an insurance agent or broker is excepted from the definition of “loan broker” when “the compensation received or expected to be received is paid only by the financial institution or insurance premium finance company.” This exception would be unnecessary if a person who does not receive compensation from the borrower would not be considered a loan broker anyhow. Further, R.S. 9:3572 contains provisions that protect consumers whether or not they have paid fees to the loan broker. For example, under R.S. 9:3572.6(A), a loan broker shall broker a loan only to a lender licensed by the office of financial institutions, unless an exemption applies. This broad protection supports the conclusion that loan brokers under R.S. 9:3572.1 need not receive compensation from borrowers. Defendants may therefore be considered loan brokers even though they did not receive compensation from plaintiff.

Jackson Hewitt admits that it received fees from SBBT, but it asserts that it received a flat fee each year and did not receive fees on a per-loan basis. The 2007 Program Agreement between Jackson Hewitt and SBBT does not specify how the fee is calculated, and the actual fee amounts are redacted. ⁷ But even if Jackson Hewitt's assertion is accurate, R.S. 9:3572.1 does not require that a loan broker's fee be calculated by any particular method. Compensation in the form of a flat yearly fee, if that is indeed how Jackson Hewitt's fee was calculated, may still be considered compensation for purposes of R.S. 9:3572.1.

Defendant 1040, Inc., argues that it was paid nothing by SBBT in exchange for allegedly brokering plaintiff's loan. On this motion to dismiss, however, the Court lacks the information to determine whether 1040 received any part of the fees allegedly obtained by Jackson Hewitt. For present purposes, the Court must assume the truth of plaintiff's allegation that defendants, generally, received those fees.⁸

Defendants argue that even if they received compensation, they did not actually engage in any loan brokering activities. The petition alleges, however, that defendants obtained a loan for plaintiff, although it does not use those precise words. Obtaining a loan for another person constitutes loan brokering activities under R.S. 9:3572.1. Further, in the 2007 Program Agreement between Jackson Hewitt and SBBT, Jackson Hewitt promises to “facilitate the offer of [SBBT's] Financial Products to consumers” at its corporate and franchisee locations.⁹ In particular, Jackson Hewitt agrees to conduct advertising, prepare forms, provide computer equipment, maintain and train personnel, and take other actions “as reasonably necessary to advertise and accommodate the facilitation of Financial Products to Applicants[.]” ¹⁰ Jackson Hewitt also agrees to require participating locations to have loan applicants complete and sign an application form developed by SBBT and reviewed by Jackson Hewitt.¹¹ Plaintiff has adequately alleged that defendants brokered a loan for her, and the agreement that plaintiff refers to...