Usa Check Cashers of Little Rock v. Island

• Decision Date: 30 May 2002
• Docket Number: No. 01-1294.,01-1294.
• Citation: 349 Ark. 71,76 S.W.3d 243
• Parties: USA CHECK CASHERS OF LITTLE ROCK, INC., v. Carolyn ISLAND and Jeanette Carter, Individually and o/b/o A Class of Similarly Situated Persons.
• Court: Arkansas Supreme Court

76 S.W.3d 243

349 Ark. 71

USA CHECK CASHERS OF LITTLE ROCK, INC., v. Carolyn ISLAND and Jeanette Carter, Individually and o/b/o A Class of Similarly Situated Persons.

No. 01-1294.

Supreme Court of Arkansas.

May 30, 2002.

Eubanks Welch Baker & Schulze, by: J.G. "Gerry" Schulze and Lloyd W. "Tre" Kitchens, Little Rock, for appellant.

Friday, Eldredge & Clark, LLP, by: R. Christopher Lawson, Little Rock, Morgan & Turner, by: Todd Turner, Arkadelphia, for appellees.

ROBERT L. BROWN, Justice.

This is a class-certification appeal. The circuit court granted the appellees' motion for class certification, and the appellant, USA Check Cashers of Little Rock, Inc., now contends that the circuit court abused its discretion in certifying this class. We affirm the class certification.

On January 4, 2000, the initial class-action complaint was filed in this matter. On January 30, 2001, a motion for class certification was filed by the proposed class representative. In that motion, the class representative moved for certification of a class of persons who had been charged interest by USA Check Cashers that exceeded the maximum lawful amount set forth in Article 19, § 13, of the Arkansas Constitution. The motion alleged that the class had satisfied the criteria of Arkansas Rule of Civil Procedure 23(a) and (b) for class certification, including numerosity, commonality, typicality, and adequacy of representation. The motion further asserted that class counsel would fairly and competently represent the interests of the class, that common questions of law and fact predominated in the action, and that a class action was the superior method for adjudication of the claims. Attached to the motion were several exhibits including affidavits from USA Check Cashers' customers, including appellees Carolyn Island and Jeanette Carter, and USA Check Cashers' responses to interrogatories which revealed that there were approximately 2,680 customers who had received the described cash advances.

On April 27, 2001, appellees Island and Carter, individually and on behalf of a class of similarly situated persons, filed a third amended complaint against USA Check Cashers.¹ In their complaint, Island and Carter described the action as a "class action brought on behalf of persons who have paid usurious rates of interest to USA for loans originating at USA's branch offices in central Arkansas." The complaint alleged that USA had offered cash advances to its customers in the form of "payday loans." It was further alleged that in those transactions, the customers would receive cash in exchange for personal checks drawn on the customer's bank account which were deferred for collection by USA.

The complaint also stated that the transactions were interest-bearing contracts in violation of the maximum lawful interest rate set forth in the Arkansas Constitution, Article 19, § 13. The complaint described the transactions as follows:

10. The total amount of the customer's personal check which is exchanged for cash is comprised of (a) the amount of each received by the customer, plus (b) a "charge" and/or "fee" for holding the check, i.e., deferring its presentment. The cash received by the customer constitutes the principal amount of the loan. The charge or fee paid by the customer to defer presentment of the check constitutes interest as that term is used in Article 19, § 13 of the Arkansas Constitution. USA agrees not to cash the customer's check for a specified period of time which constitutes the term of the loan. The term of the loan is tied to the customer's pay period at work. The customer is instructed to return to USA's place of business at the end of the loan term, i.e., the customer's "payday," to redeem the loan and pick up the check in exchange for cash in the amount of the check. In the alternative, the customer is given the option of renewing the loan at the end of the loan term by paying an additional charge and presenting a new check for (a) the original amount of cash received by the customer, plus (b) an additional charge for the extended term.

In their prayer for relief, Island and Carter sought class-action certification. USA Check Cashers responded to the third amended complaint and denied the class claims as well as the class-action allegations. It further pled numerous affirmative defenses.

On June 4, 2001, Island and Carter filed a Proposed Trial Management Plan in which they proposed that liability be determined in Phase I of the trial; if liability is found, then aggregate monetary relief should be determined in Phase II of the trial; and distribution to individual class members in Phase III of the trial.

On July 31, 2001, the circuit court granted Island's and Carter's motion for class certification. In its order, the court found that having heard the arguments of counsel and having reviewed the pleadings and attachments, the proposed class representatives had satisfied each of the four requirements set out in Rule 23(a): numerosity, commonality, typicality, and adequacy of representation. As to numerosity, the court found that since January 4, 1997, approximately 2,680 customers had engaged in transactions with USA Check Cashers. Hence, joinder of all members was impracticable. With respect to commonality, the court determined that there were eleven issues of law and fact common to the class:

A. Did the customer receive cash in exchange for a personal check drawn on the customer's bank account which was presented to and held by USA?

B. Was the face amount of the check greater than the amount of cash provided to the customer?

C. Did USA agree to hold the check until a date in the future when the customer was told to return to pay the full face amount of the check?

D. Does the difference between the face amount of the check and the amount of cash provided to the customer constitute the charging of interest for purposes of Article 19, § 13?

E. Was the customer given the option of paying the full face amount of the check or paying an additional charge to extend the time that USA would hold the check?

F. Does the charge paid to extend to the time that USA would hold the check constitute the charging of interest for purposes of Article 19, § 13?

G. What was the annual percentage rate for the interest charged to the customer?

H. Did the annual percentage rate charged to the customer exceed the maximum lawful rate set forth in Article 19, § 13?

I. What is the total amount of interest paid by the customer to USA?

J. Is the customer entitled to twice the amount of interest paid to USA?

K. A common defense is whether the fees paid by customers represent a lawful charge for processing the customer's check or the charge for a service other than the use of cash for a period of time.

The circuit court next stated that the proposed class representatives had engaged in transactions with USA Check Cashers which they were challenging and that their contention that the fees paid in exchange for deferred presentment of their checks was interest on usurious contracts was typical of the claims of the members of the class who engaged in the same transactions. As to defenses, the court ruled that USA Check Cashers' contention that the fees paid for the transactions did not constitute interest was a common defense to all claims as well. Finally, as to the adequacy of representation, the court found that Island and Carter would fairly and adequately protect the interests of the class because they had the requisite intent to serve as class representatives, they were familiar with the practices challenged, and they were capable of assisting in litigation decisions.

The court also found that with respect to Ark. R. Civ. P. 23(b), the questions of law and fact common to the class members predominated over questions affecting only individual members and that a class action was the superior method of resolution. The court then defined the class as follows:

All persons, other than USA Check Cashers, Inc., and its owners and agents, who have received cash advances from USA Check Cashers, Inc., or who have otherwise engaged in deferred deposit or deferred presentment transactions with USA Check Cashers, Inc., at its branch offices in the State of Arkansas from January 4, 1997 through March 1, 2001.

USA Check Cashers appeals from this order granting class certification.

I. Class Certification

a. Adequacy of Representation

USA Check Cashers first claims in its appeal that class certification was not proper in this case because the proposed class representatives, Island and Carter, are less effective as plaintiffs than other persons who might fall within the proposed class. Specifically, the company asserts that the appellees "sacrificed" a claim that the loans were consumer loans under Article 19, § 13(b), of the Arkansas Constitution, which would void the loans entirely. According to USA Check Cashers, this claim might be available to other members of the class but was not raised in the complaint filed by Island and Carter. USA Check Cashers submits that the willingness of the class representatives to sacrifice substantial rights of the class renders them inadequate as class representatives.

The company further maintains that Carter is subject to the affirmative defense of estoppel, and as such, she is subject to a defense that might not be pertinent to other class members. USA Check Cashers also contends that Carter may be subject to the defense of waiver in that she purportedly signed an arbitration agreement in which she waived her right to file a lawsuit like the one at issue.

With regard to Island, USA Check Cashers urges that because she did not sign an arbitration agreement and has no knowledge of the arbitration or deferred-presentment agreements used, she too is prevented from being an adequate representative. In addition, the company argues that Island may be subject to the defense of statute of limitations on many of...