Parnell v. Cashcall, Inc.

• Citation: 181 F.Supp.3d 1025
• Decision Date: 14 March 2016
• Docket Number: CIVIL ACTION FILE NO.: 4:14-CV-0024-HLM
• Parties: Joshua Parnell, Plaintiff, v. CashCall, Inc., Defendant.
• Court: U.S. District Court — Northern District of Georgia

181 F.Supp.3d 1025

Joshua Parnell, Plaintiff,

v.CashCall, Inc., Defendant.

CIVIL ACTION FILE NO.: 4:14-CV-0024-HLM

United States District Court, N.D. Georgia, Rome Division.

Signed March 14, 2016

Christopher Neil Armor, Armor Law, LLC, Atlanta, GA, James W. Hurt, Jr., Hurt, Stolz, LLC, Athens, GA, for Plaintiff.

Austin K. Brown, Jennifer Z. Gindin, Joseph L. Barloon, Skadden Arps Slate Meagher & Flom LLP, Washington, DC, Brian Jason Fischer, Neil M. Barofsky, Katya Jestin, Jenner & Block LLP, New York, NY, Erin McGarry Moore, Nancy H. Baughan, William J. Holley, II, Parker, Hudson, Rainer & Dobbs, LLP, Atlanta, GA, for Defendant.

ORDER

Harold L. Murphy, UNITED STATES DISTRICT JUDGE

This case is before the Court on Defendant CashCall, Inc.'s ("Defendant")¹ Motion to Compel Arbitration and Stay or Dismiss Proceedings ("Motion to Compel") [54].²

I. Procedural Background

The Court incorporates the procedural background portions of its April 28, 2014, Order into this Order as if set forth fully herein, and adds only those procedural background facts that are relevant to the instant Motion. (Order of Apr. 28, 2014 (Docket Entry No. 25).) On April 28, 2014, the Court issued an Order that denied Defendant's Motion to Compel Arbitration and Defendant's Motion to Dismiss Based on Forum Non Conveniens. (Id.) Defendant appealed the denial of its Motion to Compel Arbitration, and, on October 28, 2015, the United States Court of Appeals for the Eleventh Circuit issued an Order reversing and remanding that denial. (Docket Entry No. 40.)³ On December 1, 2015, the Eleventh Circuit issued its mandate. (Docket Entry No. 41.)

On that same day, the Court issued an Order making the Eleventh Circuit's mandate the judgment of this Court. (Order of Dec. 1, 2015 (Docket Entry No. 43).) On December 2, 2015, the Court issued an Order vacating the portion of the April 28, 2014, Order denying Defendant's Motion to Compel Arbitration. (Order of Dec. 2, 2015 (Docket Entry No. 44).) The Court directed Plaintiff to notify the Court within twenty-one days concerning whether Plaintiff intended to seek leave to amend his Complaint to challenge the delegation provision of the arbitration agreement. (Id. at 2-3.) The Court also directed that Plaintiff file his Motion for Leave to Amend, along with an accompanying brief and a copy of the proposed Amended Complaint, within that same twenty-one day period. (Id. at 3.)

On December 23, 2015, Plaintiff filed a Motion to Amend. (Docket Entry No. 45.) On January 14, 2016, the Court granted that Motion. (Order of Jan. 14, 2016 (Docket Entry No. 47).) On that same day, Plaintiff filed his Second Amended Complaint. (Docket Entry No. 48.) Plaintiff asserted a claim for violation of the Georgia Payday Lending Act, O.C.G.A. § 16–17–2. (Second Am. Compl. (Docket Entry No. 48) ¶¶ 129-50.)

On January 28, 2016, Defendant filed its Motion to Compel. (Docket Entry No. 54.) The briefing processes for that Motion is complete, and the Court finds that the matter is ripe for resolution.

II. Discussion

A. Plaintiff's Allegations

1. The Parties

Plaintiff resides in Tunnel Hill, Georgia. (Second Am. Compl. ¶ 7.) Defendant is a California corporation with its principal place of business in Anaheim, California. (Id.¶ 22.) Plaintiff alleges that Defendant "transacts business in Georgia ... by offering, originating, and servicing ..., and collecting payments on payday loans to consumers in Georgia." (Id.¶ 24.) Plaintiff further asserts that Defendant "has not registered with the Georgia Secretary of State and is not authorized to transact business in Georgia." (Id.¶ 25.)

2. Defendant's Business

According to Plaintiff, Western Sky makes "personal, unsecured loans over the internet to consumers in Georgia and throughout the United States." (Second Am. Compl. ¶ 28.) Plaintiff alleges that "[c]onsumers apply for small loans or payday loans through a call center, [Defendant's] website, or www.westernsky.com." (Id.¶ 29.)

According to Plaintiff, Defendant "provides website hosting and support services for Western Sky," and "reimburses Western Sky for all costs of maintenance, repair and/or update costs associated with Western Sky's server." (Second Am. Compl. ¶ 30.) According to Plaintiff, Defendant "reimburses Western Sky for its office, personnel, and postage and provides Western Sky with a toll free telephone and fax number." (Id.¶ 31.) Defendant also allegedly "provides an array of marketing services to Western Sky, including but not limited to creating and distributing print, internet, television, and radio advertisements and other promotional materials." (Id.¶ 32.)

Once an application for a loan is received, Defendant "reviews the application for underwriting requirements." (Second Am. Compl. ¶ 33.) Once the application is approved, "Western Sky executes a promissory note and debits a so-called 'Reserve Account' to fund the promissory note." (Id.¶ 34.) According to Plaintiff, "[t]he Reserve Account is a demand-deposit bank account set up in the name of Western Sky which carries a balance equal to the full value of two days[' worth of] promissory notes calculated on the previous month's daily average." (Id.¶ 35.) Under an agreement between Western Sky and WS Funding, Defendant must "set up, fund, and maintain the balance in the Reserve Account," and "[t]he initial balance in the Reserve Account must be $100,000." (Id.¶ 36.)

According to Plaintiff, "[a]fter a loan is funded, [Defendant] is obligated by agreement to purchase the promissory note from Western Sky." (Second Am. Compl. ¶ 37.) Plaintiff alleges that the agreement between WS Funding and Western Sky "provides that Western Sky can debit the Reserve Account in payment for these purchased promissory notes at the end of every business day." (Id.¶ 38.) Although "[t]he timeframe for when the purchase occurs is not specified in any agreement," Plaintiff alleges that "consumer complaints indicate that [Defendant] generally makes contact with the consumer within one business day of the consumer filing an application for the small loan or payday loan." (Id.¶ 39.) Western Sky does not accept consumer payments for the notes. (Id.¶ 40.)

According to Plaintiff, "[a]s compensation for services provided, Western Sky pays [Defendant] 2.02% of the face value of each approved and executed loan transaction plus any additional charges with a net minimum payment of $100,000 per month." (Second Am. Compl. ¶ 41.) Plaintiff also alleges that "in consideration for the terms of the agreement setting up the Reserve Account, [Defendant] agrees to pay Western Sky 5.145% of the face value of each approved and executed loan credit extension and/or renewal." (Id.¶ 42.) Defendant also "pays Western Sky a minimum monthly administration fee of $10,000." (Id.¶ 43.)

According to Plaintiff, under an agreement, Defendant "agrees to indemnify Western Sky for all costs arising or resulting from any and all civil, criminal, or administrative claims or actions, including but not limited to fines, costs, assessments, and/or penalties which may arise in any jurisdiction." (Second Am. Compl. ¶ 44.) Defendant also has responsibility "for tracking all consumer complaints regarding these payday and small loans and notifying Western Sky of these complaints." (Id.¶ 45.)

According to Plaintiff, Defendant, Western Sky, and Webb "have taken substantial steps to conceal this business scheme from consumers and state and federal regulators." (Second Am. Compl. ¶ 46.) Plaintiff contends that Western Sky "does not identify its relationship with [Defendant] or WS Funding on its website or in any marketing materials." (Id.¶ 47.)

Plaintiff alleges that "[t]he promissory notes identify the 'lender' as Western Sky with an address of Timber Lake, South Dakota." (Second Am. Compl. ¶ 48.) Plaintiff further contends that "[t]he promissory notes state that the loan agreement is subject solely to the exclusive laws and jurisdiction of the Cheyenne River Sioux Tribe, Cheyenne River Indian Reservation." (Id.¶ 49 (internal quotation marks and citation omitted).)

Plaintiff alleges that although "Western Sky holds itself out to the public as a stand alone tribal entity which provides small loans and payday loans to consumers," that is not the case in reality. (Second Am. Compl. ¶ 50.) Specifically, Plaintiff alleges that Defendant: (1) "creates all advertising and marketing materials for Western Sky and reimburses Western Sky for administrative costs" (id.); (2) "reviews consumer applications for underwriting requirements" (id.¶ 51); (3) "funds the loans" (id.¶ 52); and (4) "services the loans" (id.¶ 53). According to Plaintiff, "Western Sky does not receive any payment from consumers for the loans." (Id.¶ 54.)

Plaintiff alleges that "[a]fter detailed review of [the above-described] business scheme, the New Hampshire Department of Banking concluded that Western Sky is nothing more than a front to enable [Defendant] to evade licensure by state agencies and to exploit Indian Tribal Sovereign Immunity to shield its deceptive business practices from prosecution by state and federal regulators." (Second Am. Compl. ¶ 55.) Plaintiff contends that Webb is the sole owner and operator of Western Sky, and that Western Sky is Defendant Webb's alter ego. (Id.¶ 56.)

Western Sky's website "advertises and offers a variety of loan products, including loans of $850.00, $1,500.00, and $2,600.00." (Second Am. Compl. ¶ 57.) Those "loans have annual percentage rates ('APRs') of approximately 140% to 343% and initial fees of $75.00 to $500.00." (Id.¶ 158.) The loans require that payments be "made in monthly installments, and the length of the loan[s] ranges from twelve (12) to forty-seven (47) months." (Id.¶ 59.)

According to Plaintiff, "Georgia consumers interested in obtaining a loan from Western Sky complete an online application via Western Sky's website or call an advertised toll-free telephone number to apply." (Second Am. Compl. ¶ 60.) Once Western Sky receives an application, it...