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Stone v. Advance America

April 7, 2010

KERRIE STONE, JUSTINA RODRIGUEZ, FRANK BRIGHTWELL, PLAINTIFFS,
v.
ADVANCE AMERICA, CASH ADVANCE CENTERS, INC., ADVANCE AMERICA, CASH ADVANCE CENTERS OF CALIFORNIA, LLC, DEFENDANTS.



The opinion of the court was delivered by: Hayes, Judge

ORDER

The matters before the Court are Defendants' Motion for Judgment on the Pleadings (Doc. # 69) and Defendants' Objection and Motion to Modify the December 4, 2009 Discovery Order of the Magistrate Judge (Doc. # 77).

BACKGROUND

Plaintiffs Kerrie Stone, Justina Rodriguez, and Frank Brightwell initiated this action by filing their complaint on July 16, 2008 in the Superior Court of California for San Diego County against Defendants Advance America, Cash Advance Centers, Inc. and Advance America, Cash Advance Centers of California, LLC. (Doc. # 1). This action is a proposed class action on behalf of Defendants' deferred deposit transaction customers. On August 21, 2008, Defendants filed their Notice of Removal removing the case to this Court pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d). Id. The operative pleading in this case is Plaintiffs' Third Amended Complaint ("TAC") filed on September 29, 2009. (Doc. # 59). The TAC alleges claims for: (1) violation of the California Deferred Deposit Transaction Law; and (2) violation of the California Unfair Competition Law. Id. at 10-11. Among other alleged violations of the California Deferred Deposit Transaction Law, Plaintiffs allege that Defendants electronically deducted the funds to pay off their cash advance transactions from their bank accounts rather than depositing paper checks and that Defendants entered into cash advance transactions with customers with an annual percentage rate ("APR") of 500% or more. Id. at ¶¶ 28-29.

On November 9, 2009, Defendants filed their Motion for Judgment on the Pleadings. (Doc. # 69). On December 4, 2009, the Magistrate Judge entered an order which requires Defendants to provide Plaintiffs with the contact information for customers who do not opt out of having their information shared. (Doc. # 75). On December 18, 2009, Defendants filed their Objection and Motion to Modify the December 4, 2009 Discovery Order of the Magistrate Judge. (Doc. # 77).

ANALYSIS

I. Motion for Judgment on the Pleadings

1. Electronic Deposits

Defendants contend they are entitled to judgment on the pleadings on Plaintiffs' first claim for violation of the California Deferred Deposit Transaction Law as to electronic deposits. (Doc. # 69). Defendants contend the named plaintiffs do not have standing to assert any claims relating to electronic check deposits because Defendants did not process any of their checks electronically. Id. at 8-9.

Plaintiffs concede that none of the named plaintiffs have standing to bring the claims as to the electronic deposits and that those claims should be dismissed. (Doc. # 72 at 2 n. 1). The Court therefore dismisses the claim. Defendants have sought dismissal with prejudice. (Doc. # 76 at 9). The Court finds that dismissal with prejudice is inappropriate at this time.

2. Annual Percentage Rate of 500% or More

Defendants contend they are entitled to judgment on the pleadings on Plaintiffs' first claim for violation of the California Deferred Deposit Transaction Law as to transactions with an APR of 500% or more. (Doc. # 69). Defendants contend unconscionability provisions of the California Deferred Deposit Law cannot, as a matter of law, apply to transactions where the fee is 15% or less than the face value of the check, because the law specifically allows such fees. Id. at 4. Defendants contend "credit contracts charging fees and/or interest expressly permitted by statute are not unconscionable as a matter of law." Id. Defendants contend that the unconscionability provision of the California Deferred Deposit Transaction Law is a general provision and as such "may not be used to nullify or trump" the more specific provision expressly permitting fees up to 15% of the face value of the check. Id. at 5 (citation and internal quotation omitted). Defendants contend the Court need not examine the factual record to determine that the unconscionability provision does not, as a matter of law, apply to the transactions at issue here. Id. at 6-7.

Plaintiffs contend that the California Deferred Deposit Transaction Law establishes a maximum 15% fee for payday loans, but that this does not mean that a 15% is always permitted regardless of the other loan terms. Id. at 2. Plaintiffs contend a 15% fee is only permissible where it does not render the loan unconscionable. Id. Plaintiffs contend the loans made to the named plaintiffs were both procedurally and substantively unconscionable. Id. at 3. Plaintiffs contend that Defendants' superior bargaining power, combined with take-it-or-leave-it contracts and the often dire financial straits of customers of payday lenders, make the loans procedurally unconscionable. Id. Plaintiffs contend that the loans where the fees would exceed a 500% APR are unconscionable in light of the low rate of loss on payday loans and the actual cost of the loans. Id. at 3-4. Plaintiffs contend that the legislature intended to allow courts to examine payday loans for unconscionability even if they did not exceed the 15% maximum fee. Id. at 9-10. Plaintiffs contend that a loan term could be so short that a 15% fee would be unreasonable because the APR of the loan would be exorbitant. Id. at 10-11.

Judgment on the Pleadings is proper pursuant to Federal Rule of Civil Procedure 12(c) "after the pleadings are closed but within such time as not to delay trial," if "the moving party clearly establishes on the face of the pleadings that no material issue of fact remains to be resolved and that it is entitled to judgment as a matter of law." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1990). "For purposes of the motion, the allegations of the non-moving party must be accepted as true, while the allegations of the moving party which have been denied are assumed to be false." Id. If a court grants judgment on the ...


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