McCollough v. Insight Capital LLC

Filing 30

MEMORANDUM OPINION. Signed by Judge Virginia Emerson Hopkins on 6/5/2014. (JLC)

FILED
2014 Jun-05 PM 02:55
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
SOPHIA MCCOLLOUGH,
Plaintiff,
v.
INSIGHT CAPITAL, LLC,
Defendant.

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) Case No.: 2:13-CV-1551-VEH
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MEMORANDUM OPINION
INTRODUCTION
The defendant (Insight) has filed a Motion to Dismiss. It seeks to dismiss all
claims the plaintiff (Ms. McCollough) filed in her original and Amended Complaint.
Insight is a “payday” lender that extended a series of short-term loans to Ms.
McCullough over the course of 2011-12. Ms. McCullough claims that Insight’s
conduct during this period violated the federal Truth in Lending Act (TILA), the
Alabama Deceptive Trade Practices Act (DTPA),1 and an injunction filed by an
Alabama state-court judge in a separate case against Insight. She also claims that
Insight fraudulently suppressed and misrepresented certain material facts in its
1

In the course of litigating the present Motion to Dismiss, Ms. McCullough has
voluntarily withdrawn her two DTPA-related claims. Docs. 24 at 6, 25 at 6.

dealings with her. These claims target Insight’s disclosures – or lack thereof – in
several loan agreements she signed with the company over 2011-12.
In its present Motion, Insight argues that Ms. McCullough has failed to state
any facts that – even if true – would secure her legal relief. The court disagrees in
part. Ms. McCullough has plausibly alleged a misleading disclosure in violation of
TILA. However, she has otherwise misconstrued the statute, and her other two
allegations under it are invalid. She has also misinterpreted federal and Alabama law
regarding injunctions and deferred presentment arrangements of the kind she
voluntarily entered. Finally, she has not plausibly claimed that Insight defrauded her
in any way. The court will therefore GRANT in part and DENY in part Insight’s
Motion to Dismiss the claims made in her original and Amended Complaint.
STANDARD OF REVIEW
Generally, the Federal Rules of Civil Procedure require only that the complaint
provide “a short and plain statement of the claim showing that the pleader is entitled
to relief.” Fed. R. Civ. P. 8(a). However, to survive a motion to dismiss brought under
Rule 12(b)(6), a complaint must “state a claim to relief that is plausible on its face.”
Bell Atl. Corp. v. Twombly (Twombly), 550 U.S. 544, 570 (2007).2

2

Ms. McCullough repeatedly misstates the proper standard of review in her filings before
this court. She states, “[A] complaint should not be dismissed for failure to state a claim unless it
appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which
2

A claim has facial plausibility “when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal (Iqbal), 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 556). That is, the complaint must include enough facts “to raise
a right to relief above the speculative level.” Twombly, 550 U.S. at 555 (citation and
footnote omitted). Pleadings that contain nothing more than “a formulaic recitation
of the elements of a cause of action” do not meet Rule 8 standards, nor do pleadings
suffice that are based merely upon “labels or conclusions” or “naked assertion[s]”
without supporting factual allegations. Id. at 555, 557 (citation omitted).
Once a claim has been stated adequately, however, “it may be supported by
showing any set of facts consistent with the allegations in the complaint.” Id. at 563
(citation omitted). Further, when ruling on a motion to dismiss, a court must “take the
factual allegations in the complaint as true and construe them in the light most
favorable to the plaintiff.” Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir.
2008) (citing Glover v. Liggett Group, Inc., 459 F.3d 1304, 1308 (11th Cir. 2006)).

would entitle him to relief.” Doc. 16 at 2 (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957))
(alterations in original). This is inaccurate. Seven years ago, the Supreme Court, in Twombly,
flatly rejected Conley’s applicability to Rule 8 pleading requirements. See 550 U.S. at 562-563
(stating that Conley’s “no set of facts” language had “earned its retirement”); accord Simpson v.
Sanderson Farms, Inc., 744 F.3d 702, 714 (11th Cir. 2014) (observing that Conley’s “no set of
facts” language had been “categorically retired” by the Supreme Court in Twombly). The Court
instead substituted the plausibility standard outlined above as the proper measure in this arena.
3

PRELIMINARY ISSUE: STATUTE OF LIMITATIONS
Before the court may consider Insight’s Motion, it must first discern the scope
of its analysis. Ms. McCullough claims that she entered into roughly 40 “Alabama
Deferred Presentment Arrangements” with Insight between January 2011 and October
2012. See, e.g., Doc. 1 ¶ 13(b). She has attached a timeline to her Complaint that lists
the dates on which these agreements were formed. Doc. 1-1 at 11.3 TILA has a statute
of limitations provision that requires a plaintiff to file his or her case “within one year
from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e) (emphasis
added).
Ms. McCullough filed her Complaint on August 22, 2013. Doc. 1. She alleges
that Insight violated TILA through the disclosures it made – or failed to make – on
these agreements when she signed them. The court therefore finds as a matter of law
that TILA bars consideration of any claims arising from contracts she signed with
Insight before August 22, 2012. After reviewing her attached timeline, the court finds

3

When considering a Rule 12(b)(6) Motion, a district court is generally “constrained to
review the allegations as contained within the four corners of the complaint.” Crowell v. Morgan,
Stanley, Dean Witter Servs. Co., Inc., 87 F. Supp. 2d 1287, 1290 (S.D. Fla. 2000) (citations
omitted). However, a court may consider documents attached to such a motion if they are (1)
referred to in the complaint and are (2) central to the plaintiff’s claim. Starship Enters. of
Atlanta, Inc. v. Coweta County, Ga., 708 F.3d 1243, 1252 n.13 (11th Cir. 2013) (citation
omitted). Because Ms. McCullough has referred to this timeline in her Complaint and because it
is incontestably central to her TILA claims, this court will consider it here.
4

that it will thus only consider the agreements she formed with Insight on the
following dates: August 24, 2012; September 7, 2012; September 21, 2012; and
October 20, 2012. See Doc. 1-1 at 11. Ms. McCullough has also attached these four
agreements (in their presumable entirety) to her Complaint. Doc. 1-1 at 7-10. So, the
court will rely upon these reproductions in deciding the present Motion.
DISCUSSION
I.

Ms. McCullough Has Plausibly Stated a Single TILA Claim.
In her Complaint, Ms. McCullough claims that Insight violated TILA in three

respects: (1) by inaccurately stating in the loan agreements that it was holding her
personal checks as security; (2) by misrepresenting its identity on these agreements;
and (3) by disclosing excessive information in these agreements. The court finds that
only the first claim is plausible.
A.

Ms. McCullough has plausibly alleged that Insight’s loan agreements
inaccurately described how it would treat her checks.

TILA, 15 U.S.C. §§ 1601-67f, “is a consumer protection statute that seeks to
‘avoid the uninformed use of credit’ through the ‘meaningful disclosure of credit
terms,’ thereby enabling consumers to become informed about the cost of credit.”
Tribble v. Deutsche Bank Nat. Trust Co., No. 13-80938-CIV, 2014 WL 186126, at
*2 (S.D. Fla. Jan. 6, 2014) (quoting 15 U.S.C. § 1601(a)); see also Mourning v.

5

Family Publ’ns Serv., Inc., 411 U.S. 356, 377 (1973) (“The Truth in Lending Act
reflects a transition in congressional policy from a philosophy of ‘Let the buyer
beware’ to one of ‘Let the seller disclose.’”). “Besides imposing criminal liability,
TILA creates a private cause of action for actual and statutory damages for certain
disclosure violations.” Tribble, 2014 WL 186126, at *2 (citing 15 U.S.C. § 1640(a)).
“In essence, a creditor is liable under TILA if the disclosure of the credit terms is
inaccurate or misleading.” Hahn v. McKenzie Check Advance of Ill., LLC, 61 F. Supp.
2d 813, 815 (C.D. Ill. 1999). “[A]n objective standard is used in determining
violations of TILA.” Smith v. Chapman, 614 F.2d 968, 971 (5th Cir. 1980).4 In other
words, “[i]t is not necessary that the plaintiff-consumer actually have been deceived
in order for there to be a violation.” Id. (citing McGowan v. King, Inc., 569 F.2d 845,
849 (5th Cir. 1978)). Moreover, “the applicable standard is strict compliance with the
technical requirements of the Act.” Id. “Only adherence to a strict compliance
standard will promote the standardization of terms which will permit consumers
readily to make meaningful comparisons of available credit alternatives.” Id.
(citations omitted); accord Parker v. DeKalb Chrysler Plymouth, 673 F.2d 1178,
1181 (11th Cir. 1982). To that end, courts should liberally construe TILA in the

4

This authority is controlling in the Eleventh Circuit. See Bonner v. City of Prichard, Ala.,
661 F.2d 1206, 1209 (11th Cir. 1981) (holding that decisions of the former Fifth Circuit handed
down prior to the close of business on September 30, 1981, are binding in the Eleventh Circuit).
6

consumer’s favor to best effect the legislation’s goals. Williams v. Pub. Fin. Corp.,
598 F.2d 349, 355 (5th Cir. 1979) (citation omitted).
Ms. McCullough claims that Insight violated TILA’s disclosure requirements
in the loan agreement forms the lender had her sign. In an outlined box at the top of
each of the four relevant contracts, a line reads as follows:
SECURITY: Lender takes and holds the Customer’s check under the Alabama
Deferred Presentment Services Act.
Doc. 1-1 at 7-10. According to Ms. McCullough, because the Deferred Presentment
Services Act (DPSA) forbids holding her check as security, this statement is a
misleading disclosure in violation of TILA. Doc. 1 ¶ 13(a). Given the strict
compliance standard outlined above, this claim is sufficiently plausible to survive
Insight’s dismissal motion.
The second part of the above loan statement is accurate: under Alabama law,
Insight legally could have taken Ms. McCullough’s check in return for extending her
a loan. The plausible inaccuracy arises when that statement is juxtaposed next to the
term “SECURITY.” Why that is so requires a brief review of both federal and
Alabama law on this subject. Regulation Z, 12 C.F.R. §§ 226.1-226.59, implements
TILA’s dictates. TILA, through Regulation Z, “requires creditors to disclose
accurately any security interest taken by the lender and to describe accurately the

7

property in which the interest is taken” Smith v. Cash Store Mgmt., Inc., 195 F.2d
325, 328 (7th Cir. 1999) (citing 15 U.S.C. § 1638; 12 C.F.R. § 226.18). Regulation
Z defines a “security interest” as “an interest in property that secures performance of
a consumer credit obligation and that is recognized by state or federal law.” 12 C.F.R.
§ 226.2(a)(25). Alabama law, in turn, defines a “security interest” as:
an interest in personal property or fixtures which secures payment or
performance of an obligation. “Security interest” includes any interest of a
cosignor and a buyer of accounts, chattel paper, a payment intangible, or a
promissory note in a transaction that is subject to Article 9A [which relates to
secured transactions].
Ala. Code § 7-1-201(35).
While this language might encompass personal checks in certain situations, the
DPSA apparently does not consider checks to be security interests in the context of
deferred presentment transactions. One may infer this from its competing provisions.
One section of the statute defines a deferred presentment transaction as
[a] transaction pursuant to a written agreement involving the following
combination of activities in exchange for a fee:
a. Accepting a check or authorization to debit a checking account and,
in connection with that acceptance, advancing funds to the checking
account holder.
b. Holding the check or authorization to debit checking account for a
period of time prior to payment or deposit.
Ala. Code § 5-18A-2(3). The statute sanctions this type of arrangement, which
8

evidently depicts the one formed between Ms. McCullough and Insight. Yet, another
provision prohibits a deferred presentment vendor from “requir[ing] a customer to
provide security for the transaction or requir[ing] the customer to provide a guaranty
from another person.” Ala. Code § 5-18A-13(k). Reading these provisions together,
the court concludes that the DPSA does not regard a personal check given in a
deferred presentment transaction as a security interest.
This conclusion underscores the plausible inaccuracy in the contracts Insight
offered to Ms. McCullough. Insight’s statement that it was taking and holding her
checks under the DPSA was itself a legally accurate statement. But, placing this
statement next to the term “SECURITY” misleadingly suggested that Insight was
taking a security interest in her checks when the company was not (and could not).
Although this is a technical construction of the language at issue, TILA demands such
a construction.
In its Motion to Dismiss, Insight confirms that it was not holding Ms.
McCullough’s checks as security for the loans it issued her. Doc. 6 at 3. It claims that
its contracts did not state such but instead faithfully tracked the DPSA’s language. Id.
at 5-6. In its defense, Insight cites the district court’s decision in Butler v. First
Credit, Inc., No. 4:07-CV-01908-UWC (N.D. Ala. Nov. 13, 2008). However, Butler
actually undermines Insight’s argument. That case did involve a deferred presentment
9

arrangement. But, the analogous contract provision in the case differed in material
respects from the present one. In Butler, the relevant provision read:
SECURITY: No security interest has been given
****
We (a) hereby give you $500 in cash, and (b) agree to hold the Check until the
presentment date, as set out above, before depositing it. In consideration for
our cashing and delaying the deposit of the Check you agree to pay a service
charge in the amount shown in the Finance Charge box above, and to cause the
Check to be paid by your bank on the presentment date.
Doc. 6-1 at 3 (citation omitted). The creditor in that case thus explicitly disclaimed
that it was taking a security interest from the debtor. It also segregated its explanation
of the deferred presentment transaction from the line discussing “SECURITY.” It thus
avoided any possibility of misleading confusion. As has been shown, Insight’s
statement was objectively misleading. Insight’s reliance on Butler is therefore
misplaced. Accordingly, the court will deny its Motion to Dismiss this one of Ms.
McCullough’s TILA claims.
B.

Ms. McCullough has not plausibly alleged that Insight misrepresented
its identity.

Ms. McCullough also alleges that Insight illegally failed to disclose its identity
on the agreements it had her sign. Doc. 1 ¶ 13(b). She specifically complains that
Insight only identified itself as her creditor by one of its licensed trademarks, “Easy

10

Money Cash Center.” Id. According to Ms. McCullough, Insight’s failure to list its
true corporate name on the contracts violated TILA. Id.
She provides no legal authority for this notion. Regulation Z simply requires
the disclosure of “the identity of the creditor making the disclosures.” 12 C.F.R. §
226.18(a). TILA defines a “creditor” as “the person to whom the debt arising from the
consumer credit transaction is initially payable on the face of the evidence of
indebtedness or, if there is no such evidence of indebtedness, by agreement.” 15
U.S.C. § 1602(g). And, Federal Reserve Board staff interpretations of Regulation Z
suggest that a creditor satisfies its legal obligations by merely providing its name,
address, and/or telephone number. See 12 C.F.R. Pt. 226, Supp. I, Subpt. C; see also
Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 566-68 (1980) (advising courts to
give special deference to interpretations of TILA and Regulation Z issued by the
Federal Reserve Board and its staff). Further, Ms. McCullough does not cite any case
law in which a court has found that an incorporated entity violates TILA by only
disclosing its licensed trademark. In short, there does not seem to be any legal basis
for her proffered disclosure requirement.
Moreover, contrary to Ms. McCullough’s insinuations otherwise, Insight’s
corporate title does appear on the contracts at issue. On each of the four relevant
contracts, there was a section titled “Truth of Application.” Doc. 1-1 at 7-10. This
11

section read, in relevant part:
You certify that the information stated on this Agreement is true and correct.
You also warrant and represent to us, Insight Capital LLC, dba Easy Money
Cash Center, that you are not a debtor under any proceeding in bankruptcy,
insolvency or reorganization and have no intention to file a petition for relief
under any chapter of the United States bankruptcy code as presently published
and existing.
Id. Insight thus disclosed its authentic name to Ms. McCullough and explicitly
indicated that “Easy Money Cash Center” was the business name under which it was
operating. In her surreply, Ms. McCullough concedes this fact, although she attempts
to downplay it by stating that it was printed in smaller type. Doc. 24 at 5. However,
she does not persuasively argue that Insight’s disclosures of its identity were in any
way inaccurate or misleading. For these reasons, the court will grant Insight’s Motion
to Dismiss this claim.
C.

Ms. McCullough has not plausibly alleged that Insight violated TILA
by including superfluous disclosures in its agreements.

In Count Four, Ms. McCullough claims that Insight violated Regulation Z by
“including disclosures that are not related to the terms of the loan agreement.” Doc.
17 ¶ 24 (citing 12 C.F.R. § 226.17(a)(1)). She asserts generically that Insight
disclosed “overinclusive” information that was “totally unrelated” to mandatory
disclosures that it was required to make regarding annual percentage rates, finance
charges, and finance amounts. Id. She specifically cites Insight’s “relating of facts in
12

the loan agreements that the checks could be used for criminal prosecution purposes.”
Id. In the contracts at issue, the referenced disclaimer appeared in the following
manner:
THINGS WE HAVE THE RIGHT TO DO TO PROTECT OURSELVES IF
YOU DEFAULT: Whenever you are in default under this agreement we can,
after providing 15 days written notice, go to court and get a judgment against
you for the then unpaid amount of your debt. If the check presented on this
agreement is found to be altered, forged, stolen, obtained through fraudulent
or illegal means, negotiated without proper legal authority or represents the
proceeds of illegal activity, the licensee is required to notify the District
Attorney of the circuit in which the check was received.
E.g., Doc. 1-1 at 7.
Regulation Z “requires lenders to accurately disclose, inter alia, the amount
financed, an itemization of the amount financed, the finance charge, the annual
percentage rate of the loan, and the payment schedule.” Pendleton v. Am. Title
Brokers, Inc., 754 F. Supp. 860, 863 (S.D. Ala. 1991) (citing 12 C.F.R. § 226.17).
There are certain requirements as to how this information is presented. "First, the
disclosure[s] must be made clearly and conspicuously, and second, the disclosures
must be grouped together, segregated from everything else and not contain
information not directly related to the required disclosures." Id. (quoting In re Cook,
76 B.R. 661, 663 (Bankr. C.D. Ill. 1987)). “The terms ‘amount financed,’ ‘finance
charge,’ ‘annual percentage rate,’ a[nd] ‘total of payments’ must appear on the

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disclosure document.” Id. (quoting 12 C.F.R. § 226.18(b), (d), (e), and (h)). “Further,
the ‘finance charge’ and ‘annual percentage rate’ must be made ‘more conspicuous
than any other disclosure.’” Id. (quoting 12 C.F.R. § 226.17(a)(2)). The sufficiency
of these disclosures must be examined from the "standpoint of an ordinary consumer,
not the perspective of a Federal Reserve Board member, federal judge or English
professor." In re Jones, 06-81987-JAC-13, 2007 WL 1725593, at *5 (Bankr. N.D.
Ala. June 13, 2007) (quoting Lifanda v. Elmhurst Dodge, Inc., 237 F.3d 803, 806 (7th
Cir. 2001)), aff'd, 279 F. App'x 825 (11th Cir. 2008) (unpublished).
Federal Reserve Board staff interpretations of Regulation Z have further
clarified these requirements. These interpretations specify that the “clear and
conspicuous” injunction means that the disclosures must:
•

appear in a reasonably understandable form;

•

be presented in a way that does not obscure the relationship of the terms
to each other; and

•

be legible.

12 C.F.R. Pt. 226, Supp. I, Subpt. C. Additionally, the disclosures “may be grouped
together and segregated from other information in a variety of ways.” Id. They may
appear on a separate sheet of paper or may otherwise be set apart by:
•

outlining them in a box;

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•

bold print dividing lines;

•

a different color background; or

•

a different type style.

Id. Finally – and most importantly – these staff interpretations provide examples of
information that is “directly related” to these mandatory disclosures. These include,
inter alia:
•

a description of a grace period after which a late payment charge will be
imposed;

•

a statement that the transaction is not secured;

•

the basis for any estimates used in making disclosures; and

•

the conditions under which a demand feature may be exercised.

Id.
Ms. McCullough’s vague allegation that Insight violated Regulation Z’s
mandates in this arena is implausible because Insight’s agreements with her evidently
complied with them. In the contracts at issue – under the sub-title, “Federal Truth-inLending Disclosure” – Insight disclosed the required material in segregated, outlined
boxes that contained legible script larger than the information found below and
outside the boxes. Doc. 1-1 at 7-10. The disclosures were thus “clear and
conspicuous” as that term has been construed by the official commentary.

15

The segregated disclosures also did not contain extraneous material. Every item
of information found within the outlined boxes disclosed information required by
Regulation Z:
•

the identity of the creditor, 12 C.F.R. § 226.18(a);

•

the amount financed, Id. § 226.18(b);

•

the finance charge, Id. § 226.18(d);

•

the APR, Id. § 226.18(e);

•

the payment schedule, Id. § 226.18(g);

•

the total of payments, Id. § 226.18(h);

•

the absence of either a penalty or a refund in the case of prepayment, Id.
§ 226.18(k); and

•

the security interest taken, Id. § 226.18(m).

Doc. 1-1 at 7-10.5 Ms. McCullough does not specifically claim, because she cannot,
that any of these disclosures is superfluous. Her implication otherwise – to the degree
that it is not impermissibly vague – does not withstand scrutiny.

5

There is a segregated box in the various agreements that identifies Ms. McCullough’s
name, address, and Customer ID. E.g., Doc. 1-1 at 7. Such disclosures are permissible under
Regulation Z. 12 C.F.R. § 226.17(a)(1) n.37. Further, under the “Prepayment” disclosure, there is
a statement that reads, “See the rest of this Agreement for additional information about
nonpayment, default, late payment charges, and any required repayment before the scheduled
Presentment Date and prepayment refunds and penalties.” E.g., Doc. 1-1 at 7. Ms. McCullough
does not maintain that this language violates 12 C.F.R. § 226.17 – nor would the court find such
an allegation plausible.
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This leaves Ms. McCullough’s specific allegation concerning Insight’s
aforementioned disclaimer regarding the possibility of criminal penalties. This
disclaimer – appearing where and how it did within the agreements at issue – did not
plausibly violate Regulation Z. The issue might be different if the disclaimer appeared
within the segregated portion of the agreements. It did not. It appeared far below this
section of the various documents. The mandates established by 12 C.F.R. § 226.17
– and interpreted above by the Federal Reserve Board staff – only apply to the
information found within the segregated disclosures. See 12 C.F.R. § 226.17(a)(1)
(“The disclosures shall be grouped together, shall be segregated from everything else,
and shall not contain any information not directly related to the disclosures required
under § 226.18 or § 226.47.”) (footnotes omitted). They have no evident bearing on
other information within these documents – as long as that information does not
compete with the clear and conspicuous disclosures made within the segregated
sections. Because Insight’s disclaimer concerning possible criminal penalties
appeared safely below the mandatory, segregated disclosures – and in inconspicuous,
smaller type – it did not plausibly violate Regulation Z. The court will thus grant
Insight’s Motion to Dismiss this claim.
II.

Ms. McCullough Has Not Plausibly Alleged an Enforceable Injunction
Violation.

17

Ms. McCullough’s next claim involves an injunction supposedly issued by a
state court against Insight in in an unrelated case involving a separate plaintiff. Doc.
1 ¶¶ 15-19. Insight – via “Easy Money Cash Centers” – was the defendant in an
action brought in 2009 in the Circuit Court of Jefferson County, Alabama. Doc. 1-1
at 1-2. The plaintiff, Ms. Ame Cherie Thomas, apparently alleged that Insight had
violated the DPSA. On September 9, 2009, the matter was referred to arbitration in
the Consumer Arbitration Tribunal of the American Arbitration Association. Id. at 9.
On October 22, 2009, Mr. Allen Schrieber, the presiding arbitrator, found – among
other things – that Insight had violated the DPSA by taking Ms. Thomas’s checks as
security interests. Id. at 4. Mr. Schrieber also entered an order for Insight to “cease
and desist from violating the rule against obtaining a security interest pursuant to the
Alabama Deferred Presentment Act.” Id. at 4. On May 3, 2011, Judge Caryl P. Privett
of the Jefferson County Circuit Court entered an Order making this arbitration award
“a FINAL JUDGMENT in accordance with the Alabama Rules of Civil Procedure.”
Id. at 2. Notably, Judge Privett stated in this Order the following disclaimer: “The
Court specifically declines to make any finding as to the effect of the injunctive
language contained therein.” Id.
In her Complaint, Ms. McCullough claims that Insight has violated Judge
Privett’s Order by failing to “cease and desist” the taking of checks as security. Doc.
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1 ¶ 16. She presently requests that this court enforce the injunction. Id. ¶ 19. But –
again – she provides no authority to support this unusual request. Even were this an
enforceable injunction – a contestable claim in and of itself – Ms. McCullough does
not explain why a federal court such as this one could enforce it. A court that grants
an injunction generally has the inherent power to enforce it. See Smith Barney, Inc.
v. Hyland, 969 F. Supp. 719, 722 (M.D. Fla. 1997) (citation and footnote omitted),
aff'd, 148 F.3d 1070 (11th Cir. 1998). For this reason, the court that issues an
injunction generally administers the sanctions that arise from its violation. Baker by
Thomas v. Gen. Motors Corp., 522 U.S. 222, 236 (1998) (citation omitted). Assuming
for the sake of argument that Insight has legitimately violated the injunction in
question, Ms. McCullough has not shown any reason why this court is the forum to
redress the violation. For these reasons, the court finds that Ms. McCullough has not
stated a claim upon which relief can be granted.
III.

Ms. McCullough Has Not Plausibly Alleged Fraud of Any Kind.
A.

Ms. McCullough has not plausibly claimed that Insight had a duty to
disclose any material facts to her outside of those mandated by TILA.

In Count Six, Ms. McCullough claims that Insight committed “fraud and
fraudulent suppression of material facts” in violation of Alabama Code § 6-5-102.
Doc. 17 ¶¶ 29-38. She alleges that Insight violated this statutory provision in the

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following ways:
•

by “utilizing false and misleading characterizations concerning the
potential for criminal activity and notifying the District Attorney in the
loan agreements”;

•

by “[o]therwise engaging in other fraudulent conduct which ‘creates a
likelihood of confusion or of misunderstanding’ concerning the potential
and probability for criminal activity by use of the words and discussions
of criminal activity concerning the check and delivering information to
the District Attorney”;

•

by “suppress[ing] the fact that the check could not be used for criminal
purposes if the check was returned for insufficient funds or closed
account.”

Id. ¶¶ 30-31. Regarding this final accusation, Ms. McCullough specifically complains
that Insight failed to disclose to her that the DPSA protected her from criminal
prosecution if the checks she gave to Insight bounced. Id. ¶¶ 33-35.
Under the Alabama Code, “Suppression of a material fact which the party is
under an obligation to communicate constitutes fraud. The obligation to communicate
may arise from the confidential relations of the parties or from the particular
circumstances of the case.” Ala. Code § 6-5-102. Thus, in order to establish a cause
of action for fraudulent suppression, the plaintiff must show that:
•

the defendant had a duty to disclose material facts;

•

the defendant concealed or failed to disclose those facts;

•

the concealment or failure to disclose induced the plaintiff to act; and
20

•

that the defendant's action resulted in harm to the plaintiff.

Jewell v. Seaboard Indus., Inc., 667 So. 2d 653, 658 (Ala. 1995) (citing Interstate
Truck Leasing, Inc. v. Bender, 608 So. 2d 716 (Ala. 1992)).
Insight denies that it had any duty to disclose material facts to Ms. McCullough
outside of those TILA required it to divulge to her. Doc. 21 at 8-9. Whether such a
duty exists is for the court to decide as a matter of law. State Farm Fire & Cas. Co.
v. Owen, 729 So. 2d 834, 839 (Ala. 1998). As suggested from the statutory language
above, a duty to disclose “can arise from a confidential relationship between the
plaintiff and the defendant, from the particular circumstances of the case, or from a
request for information, but mere silence in the absence of a duty to disclose is not
fraudulent.” Jewell, 667 So. 2d at 658 (citations omitted). “In the absence of a
fiduciary relationship, courts have discretion to consider the value of the nondisclosed information, the relative knowledge and bargaining power of the parties,
and other factors that may be appropriate.” Shutter Shop, Inc. v. Amersham Corp.,
114 F. Supp. 2d 1218, 1225 (M.D. Ala. 2000) (citing Hines v. Riverside
Chevrolet–Olds, Inc., 655 So. 2d 909, 918 (Ala.1994)). “In commercial transactions
involving parties to arm's length negotiations, however, a bright line rule generally
applies: The parties have no general obligation to disclose.” Id. (citing Simpson v. Sto
Corp., 951 F. Supp. 202, 205–06 (M.D. Ala. 1996)). Nevertheless, “each has an
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affirmative duty to respond ‘truthfully and accurately’ to direct questions from the
other.” Id. (quoting Ex parte Ford Motor Credit Co., 717 So. 2d 781, 787
(Ala.1997)).
During her interactions with Insight, Ms. McCullough apparently did not ask
direct questions to the lender regarding any ramifications that might arise if her
checks bounced. She instead maintains that Insight’s duty to disclose this information
to her arose from either a fiduciary relationship between them, or Insight’s superior
knowledge on the subject. Doc. 17 ¶ 37. Neither argument is persuasive. The court
has been unable to find any Alabama authority supporting the notion that a payday
lender forms a fiduciary relationship with a customer when it extends her a payday
loan – and neither does Ms. McCullough cite any such authority. Instead, as Insight
points out, Alabama courts “have traditionally viewed the relationship between a
bank and its customer as a creditor-debtor relationship that does not impose a
fiduciary duty on the bank.” Flying J Fish Farm v. Peoples Bank of Greensboro, 12
So. 3d 1185, 1191 (Ala. 2008) (quoting K & C Dev. Corp. v. AmSouth Bank, 597 So.
2d 671, 675 (Ala.1992)). However, “a fiduciary duty may arise when the customer
reposes trust in the bank and relies on the bank for financial advice, or in other special
circumstances.” Id.
Ms. McCullough does not claim that she reposed any trust in Insight or relied
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on it for financial advice. Moreover, no special circumstances apply. There are
certainly knowledge disparities between payday lenders and their customers – a
dynamic that may be prone to abuse. However, Congress has acknowledged this
phenomenon by enacting TILA. The statute already designates specific information
that payday lenders must disclose in closed-end transactions. This court is unwilling
to superimpose any further obligations onto these existing disclosure duties. Because
Ms. McCullough engaged in a series of arms-length transactions with Insight, Insight
had no duty to disclose material facts to her on any subject outside of those mandated
by TILA. For this reason, the court will grant Insight’s Motion to Dismiss Ms.
McCullough’s fraudulent suppression claim.
B.

Ms. McCullough has not
misrepresentation claim.

adequately

plead

a

fraudulent

In Count Seven, Ms. McCullough claims that Insight violated Alabama Code
§ 6-5-101 by negligently, wantonly, willfully, maliciously, and recklessly
misrepresenting information to her. Doc. 17 ¶ 40. According to Ms. McCullough,
Insight did this “for no reason other than to create an impression and bring forward
to the mind of the borrower the potential for criminal activity with respect to the
checks she was issuing and particularly knowing that the checks she was giving were
not sufficient to be cashed.” Id. Under this statutory provision, “Misrepresentations

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of a material fact made willfully to deceive, or recklessly without knowledge, and
acted on by the opposite party, or if made by mistake and innocently and acted on by
the opposite party, constitute legal fraud.” Ala. Code § 6-5-101. In order to make a
prima facie claim under this section, a plaintiff must prove the following elements:
•

a misrepresentation of a material fact;

•

made either innocently, or willfully to deceive, or recklessly without
knowledge;

•

which under the circumstances was justifiably relied upon by the
plaintiff; and

•

which caused injury as a proximate consequence.

Applin v. Consumers Life Ins. Co. of N.C., 623 So. 2d 1094, 1097-98 (Ala. 1993),
overruled on other grounds by Boswell v. Liberty Nat. Life Ins. Co., 643 So. 2d 580,
582 (Ala. 1994).
Even with the most generous construction put on her Complaint, Ms.
McCullough has not satisfactorily plead these elements. She first does not clarify with
any coherence what material fact Insight misrepresented to her. From other parts of
the Complaint, the court infers that she is referring to the criminal penalties
disclaimer language already referenced above. Assuming that she has plausibly
claimed a misrepresentation here, she makes no effort whatsoever to demonstrate how
she relied on this misrepresentation or how her reliance was justified in the
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circumstances. Because her claim is thus impermissibly vague, the court will grant
Insight’s Motion to Dismiss it.
IV.

Ms. McCullough’s Claim for “Money Had and Received” Is Implausible
Because It Derives From Her Previous Invalid Claims.
Ms. McCullough’s final cause of action is for “Money Had and Received.”

Doc. 17 ¶ 42-44. “An action for money had and received is founded upon the
equitable principle that no one ought justly to enrich himself at the expense of
another, and is maintainable in all cases where one has received money under such
circumstances that in equity and good conscience he ought not to retain it because in
justness and fairness it belongs to another.” Jewett v. Boihem, 23 So. 3d 658, 661
(Ala. 2009) (quotation and internal alterations omitted). As a cause of action, it is
“less restricted and fettered by technical rules and formalities than any other form of
action. It aims at the abstract justice of the case, and looks solely to the inquiry,
whether the defendant holds money, which belongs to the plaintiff.” Id. (citation and
internal alterations omitted).
In her Complaint, Ms. McCullough claims this cause of action applies in her
case because “the loan agreements and money paid to Defendant thereunder were in
violation of the State Court Injunction.” Doc. 17 ¶ 43. She also claims the cause of
actions applies because “[t]he proceeds of the loan agreements retained and held by

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Defendant are the product of fraud and misrepresentation.” Id. The court has found
that the antecedent claims from which this claim derives are invalid as a matter of
law. For this reason, the court will dismiss this claim as well.
CONCLUSION
For the foregoing reasons, the court will GRANT in part and DENY in part
Insight’s Motion to Dismiss. The court will enter a contemporaneous Order reflecting
this opinion.
DONE this the 5th of June, 2014.

VIRGINIA EMERSON HOPKINS
United States District Judge

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