Dunn v. Global Trust Mgmt., LLC
| Decision Date | 10 December 2020 |
| Docket Number | Case No. 8:19-cv-2223-WFJ-AEP, Case No. 8:19-cv-2532-WFJ-AEP |
| Parties | Ami DUNN, Plaintiff, v. GLOBAL TRUST MANAGEMENT, LLC, and Frank Torres, Defendants. Ashanti McIntosh, Plaintiff, v. Global Trust Management, LLC, and Frank Torres, Defendants. |
| Court | U.S. District Court — Middle District of Florida |
Bryan James Geiger, Seraph Legal PA, Tampa, FL, for Plaintiff.
Brendan H. Little, Lippes Mathias Wexler Friedman, LLP, Buffalo, NY, Christopher Walker, Lippes Mathias Wexler Friedman LLP, Jacksonville, FL, for Defendants.
The Tunica-Biloxi Tribe of Louisiana ("Tribe") was federally recognized in 1981. Their reservation consists of 1,717 acres sited mainly in Avoyelles Parish, Louisiana. The Tribe has 1,226 enrolled members. According to the Tribe, "Avoyelles Parish was among the poorest in Louisiana, with an unemployment rate higher than the state and national averages." Tunica-Biloxi Tribe of Louisiana Official Website, https://www.tunicabiloxi.org/history (last visited Nov. 12, 2020). This plight started to change in 1994 when the Tribe opened a casino. Id.
The Tribal Center has now expanded and boasts of a museum exhibit hall, conservation and restoration laboratory, gift shop, library, auditorium, class and meeting rooms, and tribal government offices. "Traditions of crafts, music, folklore and dance are shared at the annual inter-tribal pow wow and dance competition." Id.
The Tribe has embraced other ancient traditions, albeit ones that are new to the Tribe: loansharking and usury. Usury is an ancient crime by which the powerful exploit the most poor and desperate. This act is made all the more unsavory when done, as here, with utter cynicism cloaked in legal camouflage that seeks to enforce loans with annual interest rates of up to 440%.
Usury has been forbidden for millennia by civilized society. The strong victimize the weak. It makes the rich richer and the poor poorer.1
The Code of Hammurabi (circa 1750 B.C.) barred usury. Both Plato and Aristotle noted it is immoral and unjust. The Roman Code of Justinian barred usury, as did the Abrahamic religions.2 The prophet Ezekiel listed usury among abominations like violence and rape. See Ezekiel 18:8–21. In The Inferno , Dante placed usurers in the seventh circle of hell—below murderers. Shakespeare of course illustrated its corrosive traits in the notorious The Merchant of Venice. Usury and loansharking were outlawed in all the American colonies, following English common law practice. And usury is a crime in Florida, see Fla. Stat. § 687.071 (2019), as well as the State of Louisiana where the Tribe is located, see La. Stat. § 14:511 (2019).
As ancient as the practice of usury and loansharking may be, equally old are circumvention schemes to avoid its prohibition.
That is what we have here, plain and simple. To permit this conduct to continue will simply eviscerate usury laws in every state where operators, hiding behind the cloak of tribal immunity, seek to go.
Plaintiffs Ami Dunn and Ashanti McIntosh, both Florida residents, received lines of credit from Mobiloans, Inc., an online lending company purportedly owned by the Tunica-Biloxi Tribe. Plaintiffs eventually defaulted on their payments. Defendants Global Trust Management, LLC ("GTM") and Frank Torres, GTM's chief operations officer, purchased the past-due accounts from Mobiloans and tried to collect what Plaintiffs owed. In response, Plaintiffs filed this lawsuit, alleging that Defendants’ collection efforts violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq. , and the Florida Consumer Collection Practices Act ("FCCPA"), Fla. Stat. § 559.55, et seq. D.Dkt. 1; M.Dkt. 1.3
Now before the Court are Defendants’ Motions to Compel Arbitration according to the Mobiloans account terms, and Motions, in the Alternative, for Judgment on the Pleadings, D.Dkt. 13; M.Dkt. 24, along with Plaintiffs’ responses, D.Dkt. 18; M.Dkt. 31, and Defendants’ replies thereto, D.Dkt. 23; M.Dkt. 34. Plaintiffs have also moved in limine to exclude from the Court's consideration what they claim are unauthenticated copies of the Mobiloans account terms that Defendants have produced to support arbitration. D.Dkt. 30; M.Dkt. 43. Defendants have also responded to these motions. D.Dkt. 34; M.Dkt. 44.
After reviewing the parties’ submissions and with the benefit of oral argument, the Court denies Plaintiffs’ Motions in Limine; denies Defendants’ Motions to Compel Arbitration; and grants in part and denies in part Defendants’ Motions for Judgment on the Pleadings. As explained below, the Court finds Plaintiffs, by applying for internet payday loans and clicking boxes, did click the agreement to arbitrate all disputes related to their credit accounts. But the proposed arbitration proceeding strips Plaintiffs of the ability to vindicate any of their substantive state-law claims or rights. This renders any agreement to arbitrate unconscionable and unenforceable on these unique facts. In truth, the setup is a scheme to hide behind tribal immunity and commit illegal usury in violation of Florida and Louisiana law.
This tribal payday lending business model
Before getting to the details of the arbitration agreement, an overview of the tribal payday lending model will afford some useful context.
A payday loan provides a cash advance for people to cover unforeseen expenses. The loan is usually for a small amount, often $500 or so. The borrower must repay the principal plus a finance charge (around 10% of the principal) before the next payday. If the loan is not paid in full, the borrower incurs another finance charge, which is added to the past-due amount. This new balance then becomes due on the borrower's next payday. This process continues until the borrower pays the loan balance. As a result, the costs associated with a payday loan can be astronomical, with interest rates that can top 1,000% when calculated on an annual percentage basis. See Nathalie Martin, 1,000% Interest—Good While Supplies Last: A Study of Payday Loan Practices and Solutions , 52 Ariz. L. Rev. 563, 565 (2010).
The combination of high interest rates and a vulnerable borrower population provides a ripe target for predatory lenders. Because of this risk, the payday loan industry has also become a target of legislators and regulators at both the federal and state levels.
At the federal level, Congress has passed legislation to protect borrowers from deceptive and abusive lending practices. The Truth in Lending Act, 15 U.S.C. § 1601, et seq. , requires lenders to clearly disclose the true costs of a loan, specifically the finance charges and the annual percentage rate (APR). The Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. § 5301, et seq. , established the Consumer Financial Protection Bureau ("CFPB"). The CFPB has authority to bring enforcement actions against lenders for abusive practices that "materially interfere" with consumers’ ability to understand the conditions of a consumer finance product, 12 U.S.C. § 5531(d)(1), or that take "unreasonable advantage" of consumers’ lack of understanding of material risks associated with these products, 12 U.S.C § 5531(d)(2)(A).
States have enacted more comprehensive and direct restrictions. Many states require lenders to obtain a state license to issue low-dollar consumer loans and have capped interest rates on these loans. Florida, the Plaintiffs’ home state, does both. Lenders must obtain a license from the Florida Office of Financial Regulation to issue consumer loans (those under $25,000) within the state. Fla. Stat. § 516.02(1) (2019).4 Florida also caps interest on consumer loans at 30% per year. § 516.031(1). Loans that charge excessive interest are unenforceable.5 § 516.02(2)(c).
Enter the tribes. Native American tribes occupy a unique space in American law. They are "domestic dependent nations that exercise inherent sovereign authority over their members and territories." Okla. Tax Comm'n v. Citizen Band Potawatomi Indian Tribe of Okla. , 498 U.S. 505, 509, 111 S.Ct. 905, 112 L.Ed.2d 1112 (1991). As dependent nations, federally recognized tribes are "subject to plenary control by Congress." Michigan v. Bay Mills Indian Cmty. , 572 U.S. 782, 788, 134 S.Ct. 2024, 188 L.Ed.2d 1071 (2014). With their sovereign status, tribes enjoy common law immunity from suit, absent congressional authorization to the contrary or waiver. Id. at 789, 134 S.Ct. 2024. This immunity applies equally to suits based on a tribe's commercial activities, "even when [the activities] take place off Indian lands." Id. at 790, 134 S.Ct. 2024.
Thus, the tribes’ unique status offers a path around state regulatory regimes. Leveraging their sovereign status, tribes have created payday lending companies, which, as "arms of the tribe," share in the tribe's sovereign immunity. See Williams v. Big Picture Loans, LLC , 929 F.3d 170, 176 (4th Cir. 2019). This cloak of immunity allows tribal lending companies and lenders who partner with them to attempt to avoid state interest caps and licensing requirements.6 If this attempt succeeds, the tribal-affiliated lenders are subject only to more indirect federal regulations.
The rise of internet consumer lending has made the tribal lending model immensely profitable and has spurred an increase in the number of tribal-affiliated lenders.7 Through the internet, these lenders can now reach borrowers across the country, thousands of miles from the reservation.
The internet also allows these lenders to shed the old deferred-presentment model that required a borrower to provide a post-dated check to receive funds. Borrowers can now open "lines of credit" by clicking through a loan agreement offered through a lender's website. The borrowers then give the lender direct access to their bank accounts to deposit funds and withdraw payments. The loan agreement often requires the borrowers to...
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