Wright v. Oasis Legal Fin., Case No. 4:19 CV 926 RWS
| Decision Date | 24 March 2020 |
| Docket Number | Case No. 4:19 CV 926 RWS |
| Parties | RONALD WRIGHT, et al, Plaintiffs, v. OASIS LEGAL FINANCE, LLC, d/b/a/ OASIS FINANCIAL, Defendant. |
| Court | U.S. District Court — Eastern District of Missouri |
This case concerns the financial lending practices of Defendant Oasis Legal Finance, LLC. Plaintiffs Ronald Wright and Jeremy Smith ("Wright")1 filed this case as a proposed class action lawsuit. Wright alleges in his amended complaint that Oasis loan agreements are void and invalid contracts. Oasis filed a motion to dismiss based on the merits as well as based on the agreements' forum selection clauses. Because Wright fails to state a claim for relief in the amended complaint I will grant Oasis' motion to dismiss.
The loans at issue in this case are short term loans made for the purpose of providing cash to a borrower who has filed a personal injury lawsuit. The borrower anticipates that the loan will be re-payed with funds received from a judgment or settlement of the lawsuit. However, the loan must be repaidregardless of whether the borrower prevails in the lawsuit. The borrower promises to pay back the loan from the first proceeds otherwise payable to the borrower until the loan is paid in full.2
The loan agreements and promissory notes are executed by the borrower and have a fixed maturity date. The three loan agreements submitted in support of the amended complaint all have a two-year maturity date and an annual interest rate of 72%.3 The loan agreements clearly state on the first page the amount of the loan, the amount of finance charge and the amount of the total payment when the loan is paid-off in one payment at the maturity date. Doc. # 4, Ex. A at 1. The loan agreements also contain a provision that the borrower fully understands the terms and conditions of the agreement and has had the opportunity to read the agreement and to consult with an attorney before entering into the agreement. Id. at 3 ¶ 3.5. The borrower also confirms that lender recommends he should engage counsel regarding the loan agreement and that the borrower is represented by counsel or has had the opportunity to obtain such representation. Id. at 8 ¶ 9.16.
The loan agreements also contain a governing law and forum selection clause which mandates that Missouri law governs the construction and enforcement of the agreement. The clause mandates that the parties "irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the CircuitCourt of Cook County, Illinois for any disputes, claims or other proceedings arising out of or relating to this Agreement." Id. at 7 ¶ 9.9.
As a condition precedent to obtaining the loan, the borrower must execute and return to Oasis another document entitled "Irrevocable Letter of Direction to Borrower's Attorney." Id. at 2 ¶ 2.3. In that document the borrower acknowledges that he read the loan the agreement and fully understands his obligations under the agreement. The Irrevocable Letter of Direction must also be signed by borrower's attorney in the personal injury action. By signing the document the borrower's attorney acknowledges and agrees to comply with borrower's promise to repay the loan from the proceeds of any settlement in the lawsuit before any proceeds are disbursed to the borrower. Doc. # 18, Ex. 2.
Plaintiff Wright brings this action as a proposed class action suit. In the first amended compliant he alleges that the agreements with Oasis are invalid because the loan interest rate is unconscionable, unfair and otherwise illegal. The amended complaint asserts four grounds for relief: Count I - A per se violation of the Missouri Merchandizing Practices Act; Count II - Unjust Enrichment; Count III - Usury; Count IV - Constructive Trust. Oasis has moved to dismiss all claims for a failure to state a claim, and alternatively, for failing to file the case in the proper forum. Wright opposes both grounds for dismissal.
When ruling on a motion to dismiss, I must accept as true all factualallegations in the complaint and view them in light most favorable to the Plaintiff. Fed. R. Civ. P. 12(b)(6); Erickson v. Pardus, 551 U.S. 89, 94 (2007). The purpose of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is to test the legal sufficiency of the complaint. An action fails to state a claim upon which relief can be granted if it does not plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). To survive a motion to dismiss, a plaintiff's factual allegations "must be enough to raise a right to relief above the speculative level. Id. at 555.
In its motion to dismiss Oasis first argues that Wright's claims should be dismissed on the merits. As an alternative, Oasis argues that the loan agreement's forum selection clause should be enforced and this case should be dismissed to allow Wright to refile his claim in the Circuit Court of Cook County, Illinois. In the interest of justice, and the fact that both parties have fully briefed the motion to dismiss on the merits, I will rule upon the motion to dismiss.
Wright claims in Count I that Oasis violated the Missouri Merchandising Practices Act ("MMPA"), section 407.020 R.S.Mo., by systematically using the loan agreements at issue which contain "an unconscionably high interest rate ... with other unconscionable provisions." In Count III Wright claims that the loan agreements violate Missouri's usury law under section 408.030 R.S.Mo. whichprohibits interest in excess of 10% per annum.
In its argument on the merits, Oasis asserts that Wright's claim under the MMPA fails because Oasis' loans are not subject to the MMPA's provisions. The MMPA exempts from its coverage:
[a]ny institution, company, or entity that is subject to chartering, licensing, or regulation by the director of the department of commerce and insurance ..., the director of the division of credit unions ..., or the director of the division of finance ...
section 407.020.2(2) (emphasis added).
Oasis is a consumer credit loan company undisputedly subject to licensing and regulation by the Missouri Division of Finance. See Doc. # 18, Ex. 1. Oasis' loan agreements are clearly exempt from the provisions of the MMPA. See Reitz v. Nationstar Mortg., LLC, 954 F. Supp. 2d 870, 893 (E.D. Mo. 2013) (). In his opposition brief Wright concedes that his claim under the MMPA should be dismissed. As a result, I will grant Oasis' motion to dismiss this claim.
Similarly, Oasis argues Wright's claim for usury under section 408.030 R.S.Mo. should be dismissed because that statute does not apply to Oasis' loans. Section 408.030 limits an annual interest rate to 10% on "money due or to become due on any contract." Wright's annual interest rate is 72%. However, section 408.100 R.S.Mo. exempts loans from the 10% cap which are "permitted by otherlaws of this state ...". Oasis is licensed by the Division of Finance as a lender of consumer credit loans under Chapter 376 R.S.Mo. The loans Oasis makes are permitted "by other laws of the state" under Chapter 376. As a result, the interest limitation in section 408.030 does not apply to Oasis' loans.
Moreover, even if the usury statute applied to Oasis under Chapter 408, section 408.100 provides that under this section the interest rate on an unpaid principle balance can be "any rate agreed to by the parties." This provision applies to Oasis as a lender of consumer credit loans under section 367.100(1)(b) and (3). See Ponca Finance v. Esser, 132 S.W.3d 930, 932 (Mo. Ct. App. 2004). In Esser a consumer credit lender obtained a default judgment against a borrower. The circuit court entered a judgment for the lender but only awarded judgment interest on the loan at the rate of 9% rather than at the loan agreement's rate of 125.96%. The lender appealed that ruling. The court of appeals "appreciated the circuit court's effort to reach a fair result in this case" but reversed the circuit court's judgment because the parties agreed to an interest rate of 125.96%. That rate should have been applied in the judgment because section 408.100 permitted that interest rate. Id. The appeals court noted that the Missouri legislature "has decided not to put a limit on the interest rates for small loans." Id. In the loan agreements at issue, Oasis and Wright agreed to an annual interest rate of 72%. Because this rate does not violate Missouri's usury law, I cannot and will not substitute my judgment for that of the Missouri legislature. As a result, I will grant Oasis' motion to dismissCount III.
In Count II Wright asserts a claim for unjust enrichment. Count IV seeks the imposition of a constructive trust to hold the alleged illegal proceeds from Oasis' violation of Counts I, II, and III.
Wright's claim for unjust enrichment is based in part on his assertion that the interest rate of the loan agreements is illegal. He also alleges that it is based on "other unconscionable provisions." Doc. #4, ¶ 35. Wright argues that the provisions of the agreements are so unconscionable that the agreements should be voided and that the class members should recover any money paid to Oasis in excess of the original loan amount. In addition, Wright seeks statutory penalties.
"To establish the elements of an unjust enrichment claim, the plaintiff must prove that (1) he conferred a benefit on the defendant; (2) the defendant appreciated the benefit; and (3) the defendant accepted and retained the benefit under inequitable and/or unjust circumstances." Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo. Ct. App. 2010). "In addition, there can be no unjust enrichment if the parties receive what they intended to obtain." Id. (internal quotation and citation omitted). Under Missouri law, "if a...
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