Jones v. Prosper Marketplace, Inc.

• Decision Date: 21 March 2022
• Docket Number: GJH-21-893,GJH-21-1914,GJH-21-1126
• Court: U.S. District Court — District of Maryland
• Parties: QUINCY JONES, et al., Plaintiffs, v. PROSPER MARKETPLACE, INC., et al., Defendants.

QUINCY JONES, et al., Plaintiffs, v. PROSPER MARKETPLACE, INC., et al., Defendants.

Nos. GJH-21-893, GJH-21-1126, GJH-21-1914

United States District Court, D. Maryland, Southern Division

March 21, 2022

MEMORANDUM OPINION

GEORGE J. HAZEL UNITED STATES DISTRICT JUDGE

In this putative class action, Plaintiffs Quincy Jones, Dae Park, and Shahid Khan sue Defendants Prosper Marketplace, Inc., Prosper Funding, LLC, Velocity Investments, LLC, and Crown Asset Management, LLC (collectively “Defendants”).^[1] Plaintiffs allege violations of the Maryland Credit Grantor Closed End Credit Provisions (“CLEC”), Md. Code Ann., Comm. Law. §§ 12-1001 et seq., the Maryland Credit Services Businesses Act (“MCSBA”), Md. Code Ann., Com. Law §§ 14-1901 et seq., the Maryland Consumer Debt Collection Act (“MCDCA”), Md. Code Ann Com. Law §§ 14-201 et seq., and the Maryland Consumer Protection Act (“MCPA”), Md Code Ann., Com. Law §§ 13-101 et seq. See No. 21-893, ECF No. 3 (Jones, et al v. Prosper Marketplace, Inc., et al.); No. 21-1126 ECF No. 4 (Khan v. Crown Asset Management, LLC). Plaintiffs seek declaratory relief under Md. Cts. & Jud. Pro. § 3-406, see No. 21-893, ECF No. 3; No. 21-1126, ECF No. 4; No. 21-1914, ECF No. 9 (Khan et al. v. Crown Asset Management, et al.), restitution and unjust enrichment, and assert a claim for “money had and received, ” id. Pending before the Court are Defendants' Motions to Compel Arbitration, No. 21-893, ECF No. 15; No. 21-1126, ECF No. 15, and Plaintiffs' Motions to Certify Questions to the Maryland Court of Appeals, No. 21-893, ECF No. 19; No. 21-1126, ECF No. 19. No. hearing is necessary. See Loc. R. 105.6 (D. Md. 2018). For the following reasons, the Motions to Compel Arbitration are granted, and the Motions to Certify Questions are denied. The Court also consolidates and stays the action.^[2]

I. BACKGROUND^[3]

In these three cases, Plaintiffs Quincy Jones, Dae Park, and Shahid Khan allege that Defendants undertook predatory and unlawful lending. The Court first looks at the factual and procedural history of each case.

A. The Jones Case (No. 21-893)

Plaintiff Jones is a resident of Maryland. ECF No. 3 ¶ 21 (Jones). Defendant Prosper Marketplace, Inc. (“PMI”), is a Delaware corporation that offers personal consumer loan services online, including to consumers in Maryland. Id. ¶¶ 22, 30. Defendant Prosper Funding, LLC (“PFL”), is a subsidiary of PMI. Id. ¶ 24. PFL has no employees and undertakes its actions through PMI. Id. Collectively, PMI and PFL are known as “Prosper.” Id. Defendant Velocity is a Delaware limited liability company that collects debts. Id. ¶ 25. Velocity is an assignee of Prosper. Id. ¶ 93.

Prosper's business model in Maryland is to advertise and offer personal loan services through its website. Id. ¶ 30. Potential borrowers are directed to loan application forms on the Prosper website and are given instructions on how to complete those forms. Id. ¶ 31. Though the loans are branded as “Prosper” loans, the loans actually originate in the name of a state-chartered bank, WebBank. Id. ¶ 38. Jones alleges that WebBank had agreed with Prosper that “Prosper would advertise and market for these loans, ” as well as “handle all of the work necessary to originate the loans, ” and that each loan would then be sold to Prosper “promptly after origination.” Id. Jones alleges that Prosper also undertook all loan underwriting and credit risk assessment, and then determined whether borrowers satisfied the criteria for the loan and, additionally, the amount of each loan. Id. ¶ 42. Thus, Jones contends that all payments were made to Prosper-unless loans were sold to Velocity or another debt collector. Id. ¶ 51.

As relevant here, on February 12, 2015, Jones received a $15, 000 loan. Id. ¶ 99. Jones was charged a $750 “origination fee” before he received the loan. Id. ¶ 100. Jones alleges that Prosper's loan agreements gave Prosper the right to unilaterally change any of the provisions at any time, with no advance notice and with no opportunity for Jones to object. Id. ¶ 102. These loan agreements also required Jones to authorize both PFL and PMI to act as his attorney-in-fact in order to sign a promissory note agreement, which Jones alleges is in violation of Maryland law. Id. ¶ 103. The agreements also included a written election for CLEC to govern the loan. Id. ¶ 101.

Jones has paid back $18, 296, more than the amount he received, but Prosper claims that Jones still owes more than that. Id. ¶ 106. According to Jones, when Prosper sold his loan to Velocity, it also sold Velocity the right to collect $1, 367. Id. ¶ 107. Velocity has filed a lawsuit against Jones demanding that he pay more than $1, 367 to Velocity. Id. ¶ 108. Plaintiff Dae Park took out a loan of $15, 000 from Prosper on June 8, 2017. Id. ¶ 109. An origination fee of $750 was deducted. Id. ¶ 110. The loan agreements also included a modification provision giving Prosper the right to unilaterally change the terms of the agreements, and authorized both PFL and PMI to act as Park's attorney-in-fact to sign a promissory note for the loan. Id. ¶¶ 112, 113. PMI then signed a promissory note as Park's purported agent. Id. ¶ 114.

Park states that he has paid “thousands of dollars” to Prosper but that Prosper claims that Park still owes even more. Id. ¶¶ 116, 117. According to Park, when Prosper sold his loan to Velocity, it sold Velocity the right to collect more than $14, 282 from him, in addition to what he has already paid. Id. ¶ 117. Velocity has also filed a lawsuit against Park, demanding that Park pay more than $14, 282 to Velocity. Id. ¶ 118.

Jones and Park filed a putative class action complaint against Defendants Prosper Marketplace, Inc., Prosper Funding, LLC, and Velocity Instruments, LLC, in Montgomery County Circuit Court on February 9, 2021. ECF No. 1; ECF No. 3 (“Jones”). Plaintiffs contend that Prosper violated several provisions of Maryland consumer and debt collection law and that, as Prosper's assignee, Velocity is not, and was never, entitled to collect money from them or from any other similarly situated individual. ECF No. 3 ¶¶ 96, 97. Plaintiffs allege that Prosper is unlicensed in Maryland, id. ¶ 70, that Prosper misrepresented to borrowers that Prosper could be appointed as an “attorney-in-fact” and that origination fees could not be refunded, both in violation of Maryland law, id. ¶ 76, and that Prosper misrepresented to borrowers that they could not rescind their loans, also in violation of Maryland law, id. ¶ 79.

Plaintiffs requested declaratory judgment pursuant to Md. Cts. & Jud. Pro. § 3-406 (Count I), and alleged violations of the Maryland Credit Grantor Closed End Credit Provisions (“CLEC”) (Count II), violations of the Maryland Credit Services Businesses Act (“MCSBA”) (Count III), violations of the Maryland Consumer Debt Collection Act (“MCDCA”) (Count IV), violations of the Maryland Consumer Protection Act (“MCPA”) (Count V), restitution and unjust enrichment (Count VI), and money had and received (Count VII).^[4] ECF No. 3 ¶¶ 133, 153, 157, 165, 168, 177, 194, 203. Plaintiffs sue on behalf of the following Class:

All borrowers who obtained a consumer loan through Prosper where each and every one of the following requirements are met:

a. The borrower registered with Prosper in Maryland and was a Maryland resident at the time of registration;

b. The agreement, note, or other evidence of the loan included a written election of the Maryland Credit Grantor Closed End Credit Provisions, Md. Code Ann., Com. Law §§12-1001 et seq. (“CLEC”);

c. The loan was originated in the name of WebBank under an advance agreement that the loan would be sold to Prosper after origination;

d. PMI signed the promissory note in the transaction on WebBank's behalf with the representation that it was the “attorney in-fact” of the borrower; and,

e. The borrower made one or more payments to Prosper on the loan.

Id. ¶ 119. Plaintiffs also sue on behalf of a Sub-Class of “all class members whose Prosper loan accounts were assigned to Velocity.” Id. ¶ 120.

Defendants removed the action to this Court on April 8, 2021, asserting that this Court has federal-question jurisdiction pursuant to the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. § 1332(d). ECF No. 1. On April 30, 2021, Defendants filed the Motion to Compel Arbitration and Dismiss, or, Alternatively, to Stay, and Request for a Hearing. ECF No. 15. Plaintiffs responded in opposition, ECF No. 17, and Defendants replied, ECF No. 18. On August 30, 2021, Plaintiffs filed the Motion to Certify Questions to the Maryland Court of Appeals, ECF No. 19, which Defendants opposed, ECF No. 20. Plaintiffs replied. ECF No. 22.

On September 14, 2021, Defendants filed the Notice of Supplemental Authority in Support of Motion to Compel Arbitration, ECF No. 21, which Plaintiffs opposed as “contain[ing] argument and is an improper surreply[.]” ECF No. 23.

B. The Khan Cases (Nos. 21-1126, 21-1914)^[5]

Plaintiff Khan is a resident and citizen of the State of Maryland, and he was a resident of Maryland at the time he registered, also in Maryland, for a loan from Prosper. No. 21-1126, ECF No. 4 ¶ 21. Crown Asset Management, LLC is a Georgia limited liability company with its principal place of business in Georgia. Id. ¶ 21. Crown is a debt-collector assignee of Prosper. Id. ¶ 77.

On September 24, 2015, Plaintiff Khan received a loan for $10 000 through Defendant Prosper. ECF No. 4 ¶ 83 (Khan I). An amount of $500 was deducted from his loan proceeds as an origination fee before Mr. Khan actually received the loan. Id. ¶ 84. Khan also contends that Prosper's “form adhesion documents” for his loans included a written election for CLEC to govern the loan and that these documents...