COX v. COMMUNITY LOANS OF AMERICA INC et al

Filing 204

ORDER denying 113 Motion to Certify Class under Rule 23(b)(2); denying 139 Motion for Partial Summary Judgment; granting 190 Motion for Leave to File Amended Complaint and 191 Motion to Certify Class under Rule 23(b)(3); granting in part in part 184 Motion for Summary Judgment. Ordered by U.S. District Judge CLAY D LAND on 03/24/2014. (CGC)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
COLUMBUS DIVISION
JASON M. COX, et al.,

*

Plaintiffs,

*

vs.

*

COMMUNITY LOANS OF AMERICA,
INC., et al.,

CASE NO. 4:11-CV-177 (CDL)

*
*

Defendants.
*
O R D E R
Plaintiffs

seek

to

represent

a

class

of

active

duty

military service members and their dependents in a class action
against

several

companies’
(“MLA”),
vehicle
redeem

vehicle

alleged

violation

10 U.S.C. § 987
title
their

repossessed

or

loan
car

title

loan
of

(2006).1

transactions,
titles,

subject

to

and

companies

the

Military

After

repossession.

on

the

Lending

Act

entering

Plaintiffs
their

based

were

vehicles

into

the

unable

to

were

Plaintiffs

either
maintain

that these vehicle title loan transactions are prohibited by the
1

The “Military Lending Act” is a common name for the John Warner
National Defense Authorization Act for Fiscal Year 2007 § 670,
Limitations on Terms of Consumer Credit Extended to Servicemembers and
Dependents, Pub. L. No. 109–364, 120 Stat. 2083, 2266 (Oct. 17, 2006)
(codified at 10 U.S.C. § 987_. The MLA was amended effective January
2, 2013.
National Defense Authorization Act for Fiscal Year 2013,
Pub. L. No. 112-239, § 662(a), Effect of Violations of Protections on
Consumer Credit Extended to Members of the Armed Forces and their
Dependents, 126 Stat. 1632, 1785-86 (Jan. 2, 2003) (codified at 10
U.S.C. § 987).
Plaintiffs’ claims arose before that date, so the
Court’s references to the MLA are to the pre-2013 version unless
otherwise noted.

MLA because the annual percentage rate of interest for each loan
far exceeded the MLA’s limit of thirty-six percent.
assert

claims

under

the

MLA,

the

Racketeer

Plaintiffs

Influenced

and

Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq.,
and state law.
Presently pending before the Court are Plaintiffs’ motions
for class certification seeking certification of their MLA and
RICO claims under both Federal Rule of Civil Procedure 23(b)(2)
(ECF No. 113) and Rule 23(b)(3) (ECF No. 191).2

Defendants

oppose certification, contending that Plaintiffs’ claims

lack

merit and that Plaintiffs failed to satisfy the requirements of
Rule 23.

Specifically, Defendants argue that Plaintiffs’ MLA

claims fail as a matter of law because the applicable version of
the MLA does not include a private right of action and because,
even

if

it

does,

the

transactions

Defendants are not covered by the MLA.

Plaintiffs

entered

with

Defendants also maintain

that Plaintiffs’ RICO claims fail as a matter of law because no
evidence exists in the present record supporting the essential
elements for these claims.

Defendants argue in the alternative

that even if Plaintiffs’ MLA and RICO claims are viable, a Rule
23(b)(2)

2

class

cannot

be

Plaintiffs initially sought
Rule 23(b)(2) only.
They
Complaint to add a claim for
motion to amend (ECF No. 190)

certified

because

Plaintiffs

seek

certification of their MLA claims under
later filed a motion to amend their
certification under Rule 23(b)(3). That
is granted.

2

damages

that

are

not

merely

incidental

to

their

claims

for

equitable relief.
As explained in the following discussion, the Court finds
that a private right of action exists for violations of the MLA,
so Defendants are not entitled to judgment as a matter of law on
Plaintiffs’ MLA claims.

The Court further finds, however, that

the present record does not support Plaintiffs’ RICO claims, and
Defendants are entitled to judgment as a matter of law as to
those

claims.

Consequently,

Plaintiffs’

certification of the RICO claims is denied.

motion

for

class

The Court also

finds that Plaintiffs seek damages on their MLA claims that are
not merely incidental to equitable relief, so Plaintiffs’ MLA
claims are not suitable for class certification pursuant to Rule
23(b)(2).
23(b)(3)

The Court does find that the certification of a Rule
class

is

warranted

to

the

extent

explained

in

the

remainder of this Order.
In Section I of this Order, the Court addresses Defendants’
merits-based
addresses

objections

whether

to

class

Plaintiffs’

certification.

claims

otherwise

Section
satisfy

II
the

certification requirements of Rules 23(b)(2) and 23(b)(3).
I.

Defendants’ Merits-Based Objections to Class Certification
Generally, class certification determinations should not be

based on whether the plaintiffs will ultimately prevail on the
merits.

See Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133

3

S. Ct. 1184, 1194-95 (2013) (“Rule 23 grants courts no license
to engage in free-ranging merits inquiries at the certification
stage.

Merits questions may be considered to the extent—but

only to the extent—that they are relevant to determining whether
the

Rule

23

satisfied.”);
1426,

1432

prerequisites
see

also

(2013)

certification

for

class

certification

Comcast Corp. v. Behrend,

(noting

determination

that
may

rigorous
involve

are

133 S. Ct.

analysis

of

class

“‘considerations

that

are enmeshed in the factual and legal issues comprising the
plaintiff’s cause of action’”) (quoting Wal-Mart Stores, Inc. v.
Dukes, 131 S. Ct. 2541, 2551 (2011).
some

merits-based

issues

are

But in the present case,

inextricably

Plaintiffs’ class certification motions.
nature

of

the

certification,
permitted

issues
the

class

presented

Court,

with

by
the

certification

intertwined

with

Moreover, due to the

the

motions

consent

discovery

of
and

for

the

class

parties,

some

merits

discovery to proceed simultaneously in an attempt to maximize
judicial economy.

This scheduling approach resulted in motions

for class certification and summary judgment becoming ripe at
the same time.
the

Court’s

Therefore, no party is prejudiced in any way by
consideration

of

merits-based

issues

in

its

evaluation of class certification.
While

these

merits-based

certification—because

if

issues

Plaintiffs’

4

are
claims

relevant
lack

to

merit,

class
they

would

not

actually

be

certified

presented

judgment.

through

Defendants

Plaintiffs’

MLA

for

claims

class

treatment—these

Defendants’

first

seek

through

a

motions

summary

motion

for

issues
for

are

summary

judgment
partial

as

to

summary

judgment (ECF No. 139), arguing that the MLA does not include a
private right of action.

Defendants filed a second motion for

summary judgment (ECF No. 184), contending among other things
that Plaintiffs’ transactions are not covered by the MLA and
that Plaintiffs’ RICO claims fail as a matter of law.

The Court

addresses the issues presented by these motions in turn.
A.
As

Does the Pre-2013 MLA Authorize a Private Right of
Action?
noted

above,

Defendants

seek

summary

judgment

as

to

Plaintiffs’ MLA claims, contending that the applicable version
of the MLA (“pre-2013 MLA”) does not authorize a private right
of action.3

It is undisputed that the pre-2013 MLA does not

expressly provide for a private right of action; the remaining
question is whether the pre-2013 MLA implicitly authorizes a
private

right

of

action.

This

question

is

inextricably

intertwined with the question whether there are common issues of
law for class adjudication, so the Court finds it appropriate to
address this issue now.

This issue appears to be a matter of

first impression in this Circuit.
3

In fact, the parties did not

Again, references and citations to the MLA are to the pre-2013
version of the statute unless otherwise noted. See supra note 1.

5

cite, and the Court has not located, any authority from any
Court

of

Appeals

or

District

Court

specifically

addressing

whether the pre-2013 MLA authorizes a private right of action.
1.

Private Right of Action Jurisprudence

A private right of action “to enforce federal law must be
created by Congress.”
(2001).
private

Alexander v. Sandoval, 532 U.S. 275, 286

The issue of whether a statute creates by implication a
right

construction.”

of

action

is

a

“question

of

statutory

Love v. Delta Air Lines, 310 F.3d 1347, 1351

(11th Cir. 2002) (internal quotation marks omitted).

The court

must “interpret the statute Congress has passed to determine
whether it displays an intent to create not just a private right
but

also

a

private

remedy.”

Sandoval,

“Statutory intent . . . is determinative.”

532
Id.

U.S.

at

286.

“Without it, a

cause of action does not exist and courts may not create one, no
matter how desirable that might be as a policy matter, or how
compatible with the statute.”

Id. at 286-87.

“Congressional

intent to create a private right of action will not be presumed.
There must be clear evidence of Congress’s intent to create a
cause of action.”

Love, 310 F.3d at 1353 (internal quotation

marks omitted).
To determine whether Congress intended to create a private
right of action, the court first “look[s] to the statutory text
for

‘rights-creating’

language.”

6

Love,

310

F.3d

at

1352

(internal quotation marks omitted).

If the language explicitly

confers a right directly on a class of persons or identifies
“the class for whose especial benefit the statute was enacted,”
then such language militates in favor of finding an implied
right of action.

Id. (internal quotation marks omitted); accord

Miller v. Chase Home Fin., LLC, 677 F.3d 1113, 1116 (11th Cir.
2012)

(per

curiam).

Second,

the

court

must

“examine

the

statutory structure within which the provision in question is
embedded.”

Love,

310

F.3d

at

1353.

“If

that

statutory

structure provides a discernible enforcement mechanism, Sandoval
teaches that [the courts] ought not imply a private right of
action

because

‘[t]he

express

provision

of

one

method

of

enforcing a substantive rule suggests that Congress intended to
preclude others.’”

Id. (quoting Sandoval, 532 U.S. at 290).

Third, if “statutory text and structure have not conclusively
resolved whether a private right of action should be implied,
[the

court]

turn[s]

to

the

legislative

within which a statute was passed.”
In

history

and

context

Id. at 1353.

Sandoval, the Supreme Court concluded that § 602 of

Title VI of the Civil Rights Act of 1964 does not create a
private

right

of

action

for

disparate

impact

claims

because

§ 602 contains an extensive administrative remedial scheme and
focuses “neither on the individuals protected nor even on the
funding recipients being regulated, but on the agencies that

7

will do the regulating.”

532 U.S. at 289-91.

Similarly, the

Eleventh Circuit found in Love that the Air Carrier Access Act
does

not

alleging

create

a

private
of

violations

right

provisions,

its

of

action
in

for

individuals

part

because

statute established an administrative enforcement regime.

the

Love,

310 F.3d at 1357-60; accord Miller, 677 F.3d at 1116 (finding
that Home Affordable Modification Program and Emergency Economic
Stabilization Act did not create a private right of action for
homeowners, partly because Congress “gave the Secretary [of the
Treasury]

the

right

to

initiate

a

cause

of

action,

via

the

examines

the

Administrative Procedure Act”).
2.
Using

The MLA: Purpose, Rights, and Remedies

this

analytical

framework,

the

Court

purpose, rights and remedies associated with the pre-2013 MLA.
In

2006,

the

U.S.

Department

of

“predatory lending” to Congress.

Defense

issued

a

report

on

U.S. Dep’t of Defense, Report

On Predatory Lending Practices Directed at Members of the Armed
Forces

and

Their

Dependents

(Aug.

9,

2006)

[DoD

Report],

http://www.defense.gov/pubs/pdfs/Report_to_Congress_final.pdf
(last

visited

predatory
loans,

Mar.

lending

“undermines

19,

to

2014).

military

military

The

report

personnel,

readiness,

concluded

including
harms

the

car

that
title

morale

of

troops and their families, and adds to the cost of fielding an
all-volunteer fighting force.”

Id. at 9.

8

The Department of

Defense recommended prohibiting lenders from using “car title
pawns as security for obligations.”

Id. at 7, 51.

In response to the DoD Report, Congress enacted the MLA.
The MLA provides that a “creditor who extends consumer credit to
a covered member of the armed forces” “may not impose an annual
percentage rate of interest greater than 36 percent with respect
to

the

consumer

credit

extended.”

10

U.S.C.

§

987(a)-(b)

(2006). The MLA also makes it unlawful for a “creditor to extend
consumer credit to a covered member . . . with respect to which”
the creditor uses “the title of a vehicle as security for the
obligation.”

Id. § 987(e)(5).

The

MLA

pre-2013

section.

contains

a

“Penalties

and

Remedies”

That section, which is still part of the current MLA,

provides

four

knowingly

penalties

violate

Id. § 987(f)(1).

the

and

remedies.

MLA

are

First,

guilty

of

creditors
a

who

misdemeanor.

Second, “[t]he remedies and rights provided

under this section are in addition to and do not preclude any
remedy

otherwise

available

under

law

to

the

person

claiming

relief under this section, including any award for consequential
and punitive damages.”

Id. § 987(f)(2).

Third, “[a]ny credit

agreement, promissory note, or other contract prohibited under
[the

MLA]

is

void

from

the

inception

of

such

contract.”

Id. § 987(f)(3).

And fourth, “no agreement to arbitrate any

dispute

the

involving

extension

9

of

consumer

credit

shall

be

enforceable against any covered member or dependent of such a
member, or any person who was a covered member or dependent of
that member when the agreement was made.”

Id. § 987(f)(4).

Although the pre-2013 MLA did not include an express civil
remedy,

the

Court

finds

that

private right of action.

Congress

intended

to

create

a

First, as noted above, the pre-2013

MLA provides that “[a]ny credit agreement, promissory note, or
other

contract

prohibited

under

[the

MLA]

inception of such contract.” Id. § 987(f)(3).

is

void

from

the

The Supreme Court

found a private right of action based on similar language in §
215 of the Investment Advisers Act of 1940.

Transamerica Mortg.

Advisors, Inc. v. Lewis, 444 U.S. 11, 18 (1979) (“By declaring
certain

contracts

void,

§ 215

by

its

terms

necessarily

contemplates that the issue of voidness under its criteria may
be litigated somewhere.”).

Second, the pre-2013 MLA provides

that arbitration clauses in contracts covered by the MLA are not
enforceable against covered borrowers.

10 U.S.C. § 987(f)(4).

Such a provision would not be necessary if there were no private
right of action under the MLA.

Third, the pre-2013 MLA makes

clear that the remedies and rights provided under the MLA “are
in

addition

to

and

do

not

preclude

any

remedy

otherwise

available under law to the person claiming relief under this
section,
damages.”

including

any

award

Id. § 987(f)(2).

for

consequential

and

punitive

Thus, Congress obviously intended

10

that a covered borrower could seek relief through litigation
under the MLA.

It is also significant that unlike the statutes

in Sandoval and Love, the pre-2013 MLA does not establish an
administrative enforcement regime.

For all of these reasons,

the Court finds that the pre-2013 MLA authorizes a private right
of action, including a private right of action for damages.
The Court notes that this conclusion is consistent with the
rationale of many district courts that have considered a similar
provision in the Servicemembers Civil Relief Act (“SCRA”), 50
U.S.C. app. § 501 et seq.

The SCRA caps the amount of interest

that may be charged on obligations incurred by servicemembers
while they are on active duty.

50 U.S.C. app. § 527(a).

Like

the MLA, the SCRA does not provide an express civil remedy or an
administrative enforcement regime for violations of the interest
rate cap.
concluded

It simply sets the cap.
that

Congress

intended

Several district courts have
to

create

a

private

remedy

under § 527 because without it, the relief provided under that
section would be “of no value at all.”

Moll v. Ford Consumer

Fin. Co., No. 97 C 5044, 1998 WL 142411, at *4 (N.D. Ill. Mar.
23,

1998)

(internal

quotation

marks

omitted)

(evaluating

50

U.S.C. app. § 526 (2002), which is now codified as amended at 50
U.S.C. app. § 527).

“That is, if no private cause of action is

implied, creditors could simply ignore the mandate of § 52[7]
and then claim that they cannot be held responsible.

11

Congress

could not have intended such a result.”

Id.; accord Frazier v.

HSBC Mortg. Servs., Inc., No. 8:08-cv-02396-T-24 TGW, 2009 WL
4015574, at *3-*5 (M.D. Fla. Nov. 19, 2009) (finding private
right of action under SCRA § 527); Cathey v. First Republic
Bank, No. 00-2001-M, 2001 WL 36260354, at *6 (W.D. La. July 6,
2001) (noting that without a private right of action, banks
could simply ignore the SCRA and “not worry about lowering the
interest rates.
the

law?”).

If they could not be sued, why bother obeying
The

persuasive

rationale

in

these

SCRA

cases

supports the Court’s finding that a private right of action for
damages

exists

argument

for

under

denial

the
of

MLA.
class

The

Court

thus

certification,

rejects

and

this

Defendants’

Motion for Partial Summary Judgment (ECF No. 139) is denied.4
B.
The

Are Plaintiffs’ Transactions Covered by the MLA?
named

Plaintiffs

in

this

action

entered

transactions in the states of Georgia and Alabama.
argue

that

these

claims

fail

as

a

matter

of

into

Defendants
law

because

Defendants who entered these transactions are not “creditors”
who extend “consumer credit” within the meaning of the MLA.
Specifically,

Defendants

Georgia

Auto

Pawn,

Inc.

and

Alabama

Title Loans, Inc. represent that they are pawnbrokers operating
4

Even if the specific type of remedy is not mentioned in the MLA, the
Court knows of no reason why an unjust enrichment remedy could not be
pursued given that the contracts that violate the MLA are deemed void
from inception. Defendants’ motion for summary judgment on this issue
is also denied.

12

under state pawnshop statutes.

Defendants argue that the “pawn”

transactions are creatures of state law that do not involve
“credit” within the meaning of the MLA.

In support of this

argument, Defendants point out that: (1) the agreements refer to
each transaction as a “pawn transaction,” (2) the agreements use
“pawn” language (pawnbroker not lender, pledgor not borrower),
(3) the customers had no obligation to pay because they had no
obligation to redeem their vehicle titles, and (4) the customers
did

not

face

transaction.
its

denial

arguments

personal

liability

in

connection

with

the

The Court previously rejected these arguments in
of

are

thoroughly

any

Defendants’
no

more

considered

motion

persuasive
them

at

to

dismiss.

today

than

the

motion

to

Defendants’

when

the

dismiss

Court
stage.

Nevertheless, the Court explains its rationale again, starting
with an examination of the applicable MLA provisions followed by
an analysis of the contract language.
1.

MLA Definitions

Under the MLA, a “creditor who extends consumer credit to a
covered member of the armed forces or a dependent of such a
member

. . .

may

not

impose

an

annual

percentage

rate

of

interest greater than 36 percent with respect to the consumer
credit.”

10 U.S.C. § 987(a), (b).

The statute also provides

several limitations on creditors who extend consumer credit to

13

covered borrowers.
state laws.

Id. § 987(e).

The MLA preempts inconsistent

Id. § 987(d).

The MLA does not define “creditor” or “consumer credit.”
Rather,

the

prescribe

statute

directed

regulations

987(h)(2)(D), (3).

the

establishing

Secretary
those

of

Defense

definitions.

to

Id.

§

In the final rule adding new regulations to

implement the provisions of the MLA, the Department of Defense
stated that “vehicle title loans should be included within the
definition

of

consumer

credit,

and

that

covering

transactions is consistent with the law’s purpose.”

such

Limitations

on Terms of Consumer Credit Extended to Service Members and
Dependents, 72 Fed. Reg. 50,580, 50,586 (Aug. 31, 2007).
The regulations contain the following definitions:
“Creditor” is “a person who is engaged in the business of
extending

consumer

credit

with

respect

transaction covered by this part.”
The

term

“‘person’

corporation,

includes

partnership,

a

to

a

consumer

credit

32 C.F.R. § 232.3(e) (2007).

natural

person,

proprietorship,

organization,
association,

cooperation, estate, trust, and any other business entity and
who otherwise meets the definition of ‘creditor’ for purposes of
Regulation Z.”5

5

Id.

“Regulation Z” is a Truth in Lending regulation, 12 C.F.R. pt. 226.

14

“Credit” is “the right granted by a creditor to a debtor to
defer payment of debt or to incur debt and defer its payment.”
Id.

§ 232.3(d).
“Consumer credit” is “closed-end credit offered or extended

to

a

covered

borrower

primarily

for

personal,

family

or

household purposes” and includes “vehicle title loans,” which
are defined as “Closed-end credit with a term of 181 days or
fewer that is secured by the title to a motor vehicle, that has
been registered for use on public roads and owned by a covered
borrower”

other

than

a

“credit

transaction

to

finance

the

purchase or lease of a motor vehicle when the credit is secured
by
Id.

the

vehicle

being

purchased

or

leased.”

§ 232.3(b)(1)(ii), (b)(2)(ii) (emphasis added).
“Closed-end credit” is defined as “credit other than ‘open-

end credit’ as that term is defined in Regulation Z (Truth in
Lending), 12 CFR part 226.” Id.

§ 232.3(a).

This definition of

“closed-end credit” is identical to the definition of “closedend credit” in Regulation Z, which defines “closed-end credit”
as “consumer credit other than ‘open-end credit’ as defined in
this section.”

12 C.F.R. § 226.2(a)(10)

(2011).

“Open-end

credit” is defined in Regulation Z as “consumer credit extended
by a creditor under a plan in which: (i) The creditor reasonably
contemplates repeated transactions; (ii) The creditor may impose
a finance charge from time to time on an outstanding unpaid

15

balance; and (iii) The amount of credit that may be extended to
the consumer during the term of the plan (up to any limit set by
the creditor) is generally made available to the extent that any
outstanding balance is repaid.”
The

Federal

Reserve

Id.

Board

§ 226.2(a)(20).
promulgated

Official

Staff

Interpretations to Regulation Z and included “pawn transactions”
as a type of closed-end credit transaction.
supp.

I,

12 C.F.R.

subpt.
§

C

¶

226.17(c)).

17(c)(1)(18)
“Pawn

12 C.F.R. pt. 226,

(interpretation

transactions”

occur

regarding
when,

“in

connection with an extension of credit, a consumer pledges or
sells an item to a pawnbroker creditor in return for a sum of
money and retains the right to redeem the item for a greater sum
(the redemption price) within a specified period of time.”
The

Department

of

Defense

specifically

adopted

the

Id.

Federal

Reserve Board’s Official Staff Interpretations to Regulation Z.
32 C.F.R. § 232.3(i) (“Regulation Z means any of the rules,
regulations, or interpretations thereof, issued by the Board of
Governors of the Federal Reserve System to implement the Truth
in Lending Act, as amended, from time to time, including any
interpretation or approval issued by an official or employee
duly authorized by the Board of Governors of the Federal Reserve
System to issue such interpretations or approvals.”).
In crafting the implementing regulations, the Department of
Defense emphasized that its major concern was “the debt trap

16

some forms of credit can present for Service members and their
families.”

The

Department

of

Defense

highlighted

that

“[t]he

combination of little-to-no regard for the borrower’s ability to
repay the loan, unrealistic payment schedule, high fees, and
interest and the opportunity to roll over the loan instead of
repaying

it,

can

create

a

cycle

of

debt

for

overburdened Service members and their families.”
at at 50,582.

financially
72 Fed. Reg.

The Department of Defense noted that vehicle

title loans can lead to such a debt trap because they “are
generally made for 30 days with high interest/fee structures
(average of 295 Annual Percentage Rate (APR))” and because many
states allow these loans to “be rolled over by the borrower
several times if the borrower is unable to pay the principal and
interest when due.”

Id.

“If not paid or rolled over, many

states allow the creditor to repossess the vehicle and in some
states

the

borrower

is

not

proceeds of the vehicle sale.”
2.

entitled

to

any

portion

of

the

Id.

The Contract Language

The current record includes exemplar contracts for Alabama
and Georgia, which Defendants contend are substantially similar
to the contracts entered by the named Plaintiffs.

See Defs.’

Mot. for Summ. J. Ex. A, Fields Decl. Tab 1, ECF No. 184-3 at 921.

The Alabama and Georgia documents do use the terms “pawn

transaction,” “pledgor,” and “pawnbroker.”

17

Id. at CLA001414-16,

Ala.

Exemplar

Contract,

ECF

No.

184-3

at

10-12;

Id.

at

CLA001152-54, Ga. Exemplar Contract, ECF No. 184-3 at 14-16.
But

these

agreements

also

include

associated with consumer loan transactions.

language

typically

They refer to the

“cost of [the customer’s] credit,” the “dollar amount the credit
will cost” the customer, and “amount of credit provided to” the
customer.6

Ala. Exemplar Contract at CLA001414; Ga. Exemplar

Contract at CLA001152.

The agreements state that the customers

“are giving a security interest in the certificate of title” to
the vehicle.

Ala. Exemplar Contract at CLA001414; Ga. Exemplar

Contract at CLA001152.

The agreements authorize Defendants to

register a lien on the certificate of title.

Ala. Exemplar

Contract

at

at

CLA001414;

Ga.

Exemplar

Contract

CLA001152.

Also, there is evidence that both Alabama and Georgia customers
received

notices

from

Defendants

which

stated

that

the

customers’ automobiles had “been pledged as security for the
6

Defendants argue that the Court should not consider these
disclosures, which are required under the Truth in Lending Act
(“TILA”).
Defendants do not dispute that the transactions are
“closed-end credit” transactions within the meaning of TILA, but they
contend that the MLA regulation did not adopt TILA’s definition of
“closed-end credit.” Defendants made the same argument at the Motion
to Dismiss stage, and the Court rejected it.
Cox v. Cmty. Loans of
Am., Inc., No. 4:11-cv-177 (CDL), 2012 WL 773496, at *7-*8 (M.D. Ga.
Mar. 8, 2012).
As discussed above and in the Court’s order denying
Defendants’ Motion to Dismiss, the Department of Defense copied
Regulation Z’s definition of “closed-end credit.” The Official Staff
Interpretation to Regulation Z—which was specifically adopted by the
Department of Defense, see 32 C.F.R. § 232.3(i)—included “pawn
transactions” as a type of closed-end credit transaction.
12 C.F.R.
pt. 226, supp. I, subpt. C ¶ 17(c)(1)(18) (interpretation regarding 12
C.F.R. § 226.17(c)).

18

pawn,”

emphasized

that

a

pawn

“is

a

more

expensive

way

of

borrowing money,” asked the customer to acknowledge that he had
“borrowed”
customer

money
to

from

one

acknowledge

of

the

that

Defendants,

“continued

and

asked

ownership”

of

the
the

customer’s vehicle would be “at risk” if the amount due was not
paid.

Am. Compl. Ex. C at 11, Reminder to Pledgor, ECF No. 18-1

at 24; Am. Compl. Ex. D at 4, Reminder to Pledgor, ECF No. 18-1
at 42.
Notwithstanding

this

consumer

credit

language

in

the

agreements, Defendants argue that Plaintiffs did not take on
“debt” because Plaintiffs did not incur any personal liability
to repay the “money advanced.”
Plaintiffs
right

to

sold

their

repurchase

Instead, Defendants contend that

vehicles

the

to

vehicle

Defendants,
and

to

reserving

continue

vehicle until the time for repurchase expired.

using

the
the

Thus, under the

applicable state law, these transactions are not deemed “loans.”
The

Court

rejected

that

Defendants’ Motion to Dismiss.

exact

The

present

record

does

not

argument

in

denying

Cox, 2012 WL 773496, at *6-*8.
warrant

reconsideration

of

this

decision.

If the MLA defined “consumer credit transaction” by

deferring

to

state

law

definitions

of

those

Defendants’ argument would be more persuasive.

terms,

then

But that is not

how the MLA defines covered transactions, and significantly, the
MLA preempts state law that is inconsistent with the MLA.

19

10

U.S.C. §

987(d).

Therefore,

to

the

extent

that

Georgia

or

Alabama law conflicts with the MLA, the state law is preempted.
It does not matter that Georgia and Alabama would categorize the
transactions as “pawns” rather than “loans.”
that,

based

on

the

present

record,

the

What matters is
named

Plaintiffs

deposited a vehicle title with a Defendant as security for the
payment of a debt.

If a specific sum of money is not paid, then

the Plaintiff loses the title to the car, as well as the car
itself.

Even though these transactions may not be considered

“credit” transactions under state law, the Court finds that they
are “consumer credit” transactions within the meaning of the
MLA.7

Accordingly, to the extent that Defendants seek summary

judgment as to these claims, that motion is denied, and any
corresponding argument that these claims are not suitable for
class certification is rejected.
C.
In
assert

Plaintiffs’ RICO Claims
addition
that

to

their

Defendants’

claims

violation

under
of

the

the
MLA

MLA,

Plaintiffs

gives

rise

to

claims under RICO, and they seek to have those claims included

7

Defendants repeat the argument they made at the Motion to Dismiss
stage regarding the Rule of Lenity.
The Court previously rejected
that argument because the record at the Motion to Dismiss stage showed
that Defendants acknowledged that “pawn transactions” are a type of
“closed-end credit transaction” within the meaning of the TILA. Cox,
2012 WL 773496, at *7.
The present record likewise establishes that
Defendants recognized that “pawn transactions” are a type of “closedend credit transaction” within the meaning of the TILA, which has the
same definition of “closed-end credit transaction” as the MLA.

20

in any class certification.

Defendants respond that Plaintiffs’

RICO claims should not be certified because they all fail as a
matter of law, and they move for summary judgment as to those
claims.

Plaintiffs’ RICO claims are against Defendants Robert

I. Reich, Terry Fields, Community Loans, Alabama Title Loans,
and Georgia Auto Pawn.

Reich is the CEO and Fields is the CFO

of Community Loans, Alabama Title Loans, and Georgia Auto Pawn.
They

manage

and

control

the

activities

of

those

companies.

Plaintiffs assert that Alabama Title Loans and Georgia Auto Pawn
constitute an “enterprise” within the meaning of RICO and that
Community

Loans,

Reich,

and

Fields

are

“persons”

who

are

associated with the enterprise and participate in the conduct of
the

enterprise’s

debt.8

affairs

through

the

collection

of

unlawful

Plaintiffs assert RICO claims under each subsection of

18 U.S.C. § 1962.

Plaintiffs’ RICO civil claims are asserted

8

Plaintiffs also contend that Defendants engaged in a pattern of
racketeering activity of mail and wire fraud.
“Mail fraud or wire
fraud occurs when a person (1) intentionally participates in a scheme
to defraud another of money or property and (2) uses the mails or
wires
in
furtherance
of
that
scheme.”
Johnson
Enters.
of
Jacksonville, Inc. v. FPL Grp., Inc., 162 F.3d 1290, 1317 (11th Cir.
1998) (internal quotation marks omitted).
To have a scheme to
defraud, there must be “proof of a material misrepresentation, or the
omission or concealment of a material fact calculated to deceive
another out of money or property.” United States v. Maxwell, 579 F.3d
1282, 1299 (11th Cir. 2009).
Plaintiffs contend that Defendants represented to Plaintiffs that
their title loan transactions and renewals were lawful and valid debts
even though the transactions violated the MLA.
Plaintiffs did not
point to any evidence that Defendants explicitly made representations
about whether the transactions complied with the MLA.
The Court
declines to conclude that implicit misrepresentation of a legal
conclusion
constitutes
fraud
under
the
specific
circumstances
presented here.

21

under 18 U.S.C. § 1964(c), which provides a cause of action to
persons

injured

violation.
(2006)
alleged

“by

reason

of”

a

defendant’s

alleged

RICO

Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 453

(“[A]

plaintiff

RICO

may

violation

sue

was

under
the

§

1964(c)

proximate

only

cause

if

the

of

the

plaintiff’s injury.”).
1.
18

Claim Under 18 U.S.C. § 1962(a)

U.S.C. §

1962(a)

prohibits

the

use

or

investment

of

illegally derived income to acquire, establish, or operate an
enterprise:
It shall be unlawful for any person who has received
any income derived, directly or indirectly, . . .
through collection of an unlawful debt in which such
person has participated as a principal . . . to use or
invest, directly or indirectly, any part of such
income, or the proceeds of such income, in acquisition
of any interest in, or the establishment or operation
of, any enterprise which is engaged in, or the
activities of which affect, interstate or foreign
commerce.
The Eleventh Circuit has not addressed what a plaintiff
must prove to establish a civil RICO claim under § 1962(a).

The

majority of courts that have considered the issue have adopted
the

investment

rule:

the

plaintiff

must

show

that

he

“was

injured by the use or investment of racketeering income[, and
r]einvestment

of

proceeds

from

alleged

racketeering

activity

back into the enterprise to continue its racketeering activity
is

insufficient

to

show

proximate

22

causation.”

Sybersound

Records, Inc. v. UAV Corp., 517 F.3d 1137, 1149 (9th Cir. 2008);
accord Fogie v. THORN Ams., Inc., 190 F.3d 889, 896 (8th Cir.
1999); see also, e.g., Vicom v. Harbridge Merchant Servs., Inc.,
20 F.3d 771, 778-79 n.6 (7th Cir. 1994) (collecting cases which
hold that (1) “injury caused by the predicate racketeering acts
is inadequate” to state a claim under § 1962(a) and (2) “the
mere reinvestment of the racketeering proceeds into a business
activity is not sufficient for § 1962(a) standing”); Ouaknine v.
MacFarlane, 897 F.2d 75, 83 (2d Cir. 1990) (“[T]he essence of a
violation of § 1962(a) is not commission of predicate acts but
investment of racketeering income.”).

But see Busby v. Crown

Supply, Inc., 896 F.2d 833, 839-40 (4th Cir. 1990) (rejecting
“investment rule”).

The Court will follow the majority rule.

Here, Plaintiffs contend that Defendants received income
from the collection of unlawful debts, but they have not pointed
to evidence that Defendants did anything other than reinvest the
proceeds back into the enterprise.

And they have not presented

evidence from which a reasonable jury could conclude that the
investment of illegal income was the proximate cause of their
injury.

Rather,

they

assert

that

they

were

injured

by

the

predicate act—the allegedly unlawful collection of a debt.

For

these

and

reasons,

Plaintiffs’

§

1962(a)

RICO

claim

fails,

Defendants’ summary judgment motion is granted as to that claim.

23

2.

Claim under 18 U.S.C. § 1962(b)

Under 18 U.S.C. § 1962(b), it is “unlawful for any person
. . .

through

collection

of

an

unlawful

debt

to

acquire

or

maintain, directly or indirectly, any interest in or control of
any enterprise which is engaged in, or the activities of which
affect, interstate or foreign commerce.”

Plaintiffs did not

respond to Defendants’ arguments regarding this claim, so the
Court finds that Plaintiffs abandoned it.

Plaintiffs also did

not point to evidence that any of the Defendants acquired or
controlled

the

alleged

enterprise

through

collection

of

an

unlawful debt; the undisputed evidence shows that ownership and
control of Community Loans, Georgia Auto Pawn, and Alabama Title
Loans has not changed since before implementation of the MLA.
For these reasons, Plaintiffs’ § 1962(b) RICO claim fails, and
summary judgment is granted as to that claim.
3.

Claim under 18 U.S.C. § 1962(c)

Under 18 U.S.C. § 1962(c), it is “unlawful for any person
employed by or associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign commerce, to
conduct or participate, directly or indirectly, in the conduct
of

such

enterprise’s

affairs

through

. . .

collection

of

unlawful debt.”

Under this subsection, the enterprise is the

vehicle

which

through

the

unlawful

activity

is

committed.

Section 1962(c) requires that the RICO “person” be “separate and

24

distinct” from the RICO “enterprise.”

United States v. Goldin

Indus., Inc., 219 F.3d 1268, 1270 (11th Cir. 2000) (en banc).
This

“distinctness

requirement”

applies

when

the

“singular

person or entity is defined as both the person and the only
entity

comprising

the

enterprise.”

United

States

Indus., Inc., 219 F.3d 1271, 1275 (11th Cir. 2000).

v.

Goldin

“Under the

‘non-identity’ or ‘distinctness’ requirement, a corporation may
not be liable under section 1962(c) for participating in the
affairs

of

an

enterprise

that

consists

subdivisions, agents, or members.

only

of

its

own

An organization cannot join

with its own members to undertake regular corporate activity and
thereby become an enterprise distinct from itself.”

Davis v.

Mut. Life Ins. Co. of N.Y., 6. F.3d 367, 367 (6th Cir. 1993)
(cited

with

forbids

the

nothing

more

approval

in

imposition
than

a

Goldin,

of

219

liability

subdivision

or

F.3d
where
a

at
the

part

of

1276).

“RICO

enterprise
the

is

person.”

Goldin, 219 F.3d at 1276.
Plaintiffs assert that Reich and Fields, who are officers
of Community Loans and its wholly-owned subsidiaries, Alabama
Title Loans and Georgia Auto Pawn, directed and controlled the
operations of the three companies.

Plaintiffs further assert

that Community Loans, Alabama Title Loans, and Georgia Auto Pawn
engaged in the collection of unlawful debts when they collected
on transactions that violated the MLA.

25

The question for the

Court

is

whether

considered

a

each

corporation

“person”

under

§

and

individual

1962(c)

while

can

also

be

being

considered jointly as the enterprise.
The Eleventh Circuit has not decided whether a corporation
that engages in the collection of unlawful debts (or a pattern
of racketeering activity) through an enterprise comprised only
of itself, its employees, and its wholly-owned subsidiaries is
sufficiently

distinct

from

its

subsidiaries

and

employees

satisfy the § 1962(c) distinctiveness requirement.
F.3d

at

1276

n.7.

The

Eighth

Circuit

to

Goldin, 219

concluded

that

a

subsidiary is not “sufficiently distinct” from its parent for
purposes of the § 1962(c) distinctiveness requirement.

Fogie v.

THORN Ams., Inc., 190 F.3d 889, 898 (8th Cir. 1999).

Likewise,

the Seventh Circuit found that related business entities cannot
serve as both the person and the enterprise:

“A parent and its

wholly owned subsidiaries no more have sufficient distinctness
to

trigger

conspiring
enterprise’s
than

RICO
in

liability

violation

decision

divisions

to

somehow

of

than

to

the

operate

trigger

Sherman
through

facilitated

its

liability

Act,

unless

subsidiaries

unlawful

for
the

rather

activity[.]”

Bucklew v. Hawkins, Ash, Baptie & Co., 329 F.3d 923, 934 (7th
Cir. 2003) (citations omitted) (finding that RICO claim failed
“because the enterprise alleged to have been conducted through a
pattern

of

racketeering

activity

26

. . .

is

a

wholly

owned

subsidiary of the alleged racketeer”); see also Bachman v. Bear,
Stearns & Co., 178 F.3d 930, 932 (7th Cir. 1999) (“A firm and
its employees, or a parent and its subsidiaries, are not an
enterprise separate from the firm itself.”).
Plaintiffs assert that the “enterprise” here is comprised
of two subsidiaries of Community Loans: Georgia Auto Pawn and
Alabama Title Loans.
Pawn

and

Alabama

Plaintiffs argue that when Georgia Auto

Title

Loans

collected

on

transactions

that

violated the MLA, they engaged in the collection of unlawful
debts

within

the

meaning

of

RICO.

Plaintiffs

contend

that

Community Loans and its employees, Reich and Fields (who are
also officers of Georgia Auto Pawn and
directed

and

(Georgia

Auto

controlled
Pawn

the

and

Alabama Title Loans)

operations

Alabama

Title

of

the

Loans).

enterprise
Plaintiffs

directed the Court to no authority supporting the conclusion
that

the

“enterprise”

here

(the

two

subsidiaries)

is

sufficiently distinct from the “persons” (Community Loans and
its employees) such that a RICO claim can be maintained under
§ 1962(c).
single

Where related entities act “within the scope of a

corporate

structure,

guided

by

a

single

corporate

consciousness,” it “would be inconsistent for a RICO person,
acting

within

liability

the

simply

scope

of

because

its
it

authority,
is

to

separately

be

subject

to

incorporated.”

Goldin, 219 F.3d at 1276 (internal quotation marks omitted);

27

accord Lockheed Martin Corp. v. Boeing Co., 357 F. Supp. 2d
1350,

1367

(M.D.

Fla.

2005)

(finding

that

corporation

that

associated with its employees and subsidiaries did not satisfy
§ 1962(c)’s distinctness requirement).

As discussed above, the

courts that have considered the issue concluded that a parent
company which conducts business through an enterprise comprised
only of the parent company’s wholly-owned subsidiaries is not
sufficiently

separate

from

the

enterprise

§ 1962(c)’s distinctness requirement.
Lockheed

Martin

Corp.,

357

F.

Supp.

for

purposes

of

Bucklew, 329 F.3d at 934;
2d

at

1367.

Likewise,

employees of that parent company who make business decisions
relating to the enterprise on behalf of the parent company are
not sufficiently separate from the enterprise for purposes of
section 1962(c).

For these reasons, Plaintiffs’ § 1962(c) RICO

claim fails, and summary judgment is granted as to that claim.
4.

Claim under 18 U.S.C. § 1962(d)

Under 18 U.S.C. § 1962(d), it is “unlawful for any person
to conspire to violate any of the provisions of subsection (a),
(b), or (c) of this section.”

Given that the Court has found

that Plaintiffs’ claims under § 1962(a)-(c) fail, Plaintiffs’
RICO conspiracy claim also fails, and Defendants’ motion for
summary judgment is granted as to that claim.

28

II.

Plaintiffs’ Motions for Class Certification
Based upon the preceding rulings, Plaintiffs’ claims under

the MLA survive while Plaintiffs’ RICO claims fail.

Therefore,

the Court next decides whether Plaintiffs’ MLA claims satisfy
the class certification requirements of Rule 23.

Plaintiffs

seek certification of a class of “[a]ll covered members of the
armed

services

and

their

dependents

who,

while

a

Covered

Borrower, entered into a vehicle title loan by any means with
Defendants in violation of the Military Lending Act . . . from
October 1, 2007 to January 2, 2013.”

Pls.’ Supplemental Br. in

Supp. of Class Certification 2, ECF No. 191.

Plaintiffs propose

that the class be divided into the following subclasses:
1.

Covered Borrowers who entered a transaction for
which Defendants did not obtain a Covered
Borrower
Identification
Statement
prior
to
entering into the transactions;

2.

Covered Borrowers who entered a transaction for
which Defendants obtained a Covered Borrower
Identification Statement after November 11, 2011
in Georgia, Alabama and Puerto Rico; and

3.

Covered Borrowers who entered a transaction in
which there is documentation contained in the
loan file reflecting that the applicant was a
Covered Borrower.

Id.

Plaintiffs propose excluding from the class “anyone who

executed a [Covered Borrower Identification Statement] denying
their

membership

as

or

affiliation

with

a”

member

of

the

military “whose loan file does not contain any documentation
reflecting that the applicant is a covered borrower.”
29

Id.

Plaintiffs initially sought certification only as to their
MLA

claims

(Counts

Procedure 23(b)(2).

II

and

VI)

under

Federal

Rule

of

Civil

Plaintiffs later filed a motion to amend

their Complaint to pursue their MLA and RICO claims under Rule
23(b)(3).

The Court first addresses whether the action should

be certified under Rule 23(b)(2) and then addresses whether the
action should be certified under Rule 23(b)(3).
A.

Plaintiffs’ Motion for 23(b)(2) Class Certification

Plaintiffs seek class certification under Federal Rule of
Civil Procedure 23(b)(2), which permits a class action if “the
party opposing the class has acted or refused to act on grounds
that apply generally to the class, so that final injunctive
relief

or

corresponding

declaratory

respecting the class as a whole.”

relief

is

appropriate

Fed. R. Civ. P. 23(b)(2).

Plaintiffs contend that Defendants collected excessive interest
from all class members in violation of the MLA.

Plaintiffs seek

rescission of the contracts, as well as a return of all interest
and principal they paid to Defendants.
Generally, claims for monetary relief may not be certified
under

Federal

Rule

of

Civil

Procedure

23(b)(2).

Wal-Mart

Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2557 (2011).

“Rule

23(b)(2) applies only when a single injunction or declaratory
judgment would provide relief to each member of the class.”

Id.

Rule 23(b)(2) “does not authorize class certification when each

30

individual

class

injunction

or

member

would

declaratory

be

entitled

judgment

to

against

a

the

different
defendant.

Similarly, it does not authorize class certification when each
class member would be entitled to an individualized award of
monetary damages.”

Id.

Dukes left open the question whether a Rule 23(b)(2) class
may

assert

monetary

claims

that

injunctive or declaratory relief.

are
Id.

merely

incidental

to

But Dukes made it clear

that monetary claims are not merely incidental simply because
they

do

not

predominate

declaratory relief.

over

requests

for

injunctive

Dukes, 131 S. Ct. at 2559.

and

And the Supreme

Court emphasized that Rule 23(b)(2) is not the proper vehicle
for class claims involving “individualized award[s] of monetary
damages.”

Id. at 2557.

That is because a Rule 23(b)(2) class

is mandatory, with no opportunity for class members to opt out;
the relief sought under Rule 23(b)(2) must affect the entire
class at once.
Here,

Id. at 2558.

the

damages

Plaintiffs

seek

would

flow

from

a

declaration that the contracts they signed are void from the
inception.

But

the

damages

sought

here

are

not

merely

incidental to declaratory relief of an indivisible injunction
that benefits all class members.

Rather, the damages sought are

individualized claims for money, which, according to the Supreme
Court, “belong in Rule 23(b)(3)” and not Rule 23(b)(2).

31

Id. at

2558.

Each class member would be entitled to a different amount

of damages, depending on the amount of interest paid and the
amount of the loan.

For these reasons, the Court finds that

this action cannot be certified as a class action pursuant to
Rule 23(b)(2).
B.

Plaintiffs’ Motion for 23(b)(3) Certification

The next question is whether the class may be certified
under Federal Rule of Civil Procedure 23(b)(3).

The Court must

first determine whether Plaintiffs should be permitted to amend
the Complaint a third time to assert claims under Rule 23(b)(3).9
Plaintiffs initially sought certification under Rule 23(b)(2)
only.

Plaintiffs did not seek to add the Rule 23(b)(3) theory

until after the Court held a hearing on their motion for class
certification.
The Court finds that good cause exists to permit Plaintiffs
to

amend

their

complaint.

First,

no

one

contends

that

additional discovery is necessary to support or oppose class
certification

under

Rule

23(b)(3).

Whether

a

Rule

23(b)(3)

class should be certified can be decided based on the current
record.

Second, Defendants have been aware since the beginning

of

litigation

this

that

Plaintiffs

9

seek

to

recover

interest

The Court permitted Plaintiffs to file their Second Amended Complaint
in 2012 under Federal Rule of Civil Procedure 15(a)(2).
The amended
scheduling/discovering order entered after Plaintiffs’ Second Amended
Complaint does not specifically address amendments to the pleadings.
Am. Scheduling/Disc. Order, ECF No. 101.

32

which

they

Defendants.
seek

this

contend

was

unlawfully

charged

and

by

While the procedural rule under which Plaintiffs
recovery

may

have

changed,

the

Plaintiffs’ claims remains exactly the same.

substance

determine

whether

and

to

what

of

Plaintiffs’ motion

to amend the Complaint (ECF No. 190) is granted.
now

collected

extent

The Court must

certification

is

appropriate under Rule 23(b)(3).
“Before

a

district

court

may

grant

a

motion

for

class

certification, a plaintiff seeking to represent a proposed class
must establish that the proposed class is adequately defined and
clearly ascertainable.”

Little v. T-Mobile USA, Inc., 691 F.3d

1302, 1304 (11th Cir. 2012) (internal quotation marks omitted).
“If the plaintiff’s proposed class is adequately defined and
clearly
four

ascertainable,

requirements

23(a)”—“numerosity,
representation.”

the

listed

plaintiff

in

Federal

commonality,
Id.

must

then

Rule

of

typicality,

(internal

quotation

establish

Civil
and

Procedure

adequacy

marks

the

of

omitted.

Finally, the plaintiffs must “establish that the proposed class
satisfies at least one of the three requirements listed in Rule
23(b).”

Id.

Rule 23(b)(3) “permits class certification if ‘the

court finds that the questions of law or fact common to class
members predominate over any questions affecting only individual
members, and that a class action is superior to other available

33

methods

for

fairly

controversy.’”
1.

and

efficiently

adjudicating

the

Id. (quoting Fed. R. Civ. P. 23(b)(3)).
Adequacy of Plaintiffs’ Class Definition

Defendants argue that the proposed class is not adequately
defined

because

Plaintiffs

propose

a

“fail-safe”

class

that

turns on the legal conclusion of whether a transaction violated
the MLA.

A “fail-safe” class exists if the class “is defined in

a way that precludes membership unless the liability of the
defendant is established.”

Kamar v. RadioShack Corp., 375 F.

App’x 734, 736 (9th Cir. 2010); accord Randleman v. Fidelity
Nat’l

Title

Ins.

Co.,

646

F.3d

347,

352

(6th

Cir.

2011)

(explaining the flaw in an improper fail-safe class: “Either the
class members win or, by virtue of losing, they are not in the
class and, therefore, not bound by the judgment”).
issue

has

not

specifically

been

addressed

in

Though this
the

Eleventh

Circuit, courts in other circuits have concluded that a “‘failsafe’ class should not be certified because it is unfair to
defendants,

it

prevents

an

adverse

judgment

being

entered

against plaintiffs, and it is unmanageable because the members
of

the

class

liability.”
2012).

could

only

be

known

after

a

determination

of

Mazzei v. Money Store, 288 F.R.D. 45, 55 (S.D.N.Y.

The Court may, however, “redefine the class to bring it

within the scope of Rule 23.”

Id.

34

Based on the parties’ extensive filings in this case and
hearings that the Court has conducted, there is little mystery
about who Plaintiffs seek to include in the proposed class.

To

the

be

extent

that

Plaintiffs’

definition

of

the

class

may

construed as an impermissible “fail-safe” class, the Court finds
it appropriate to clarify the definition of the class.

The

Court

the

understands

this

clarification

Plaintiffs’ proposed class definition.

is

consistent

with

The Court understands

that Plaintiffs propose the following class:
All covered members of the armed services and their
dependents who, between October 1, 2007 and January 2,
2013, entered into, rolled over, renewed, refinanced,
or consolidated a vehicle title loan by any means with
a Defendant that imposed an annual percentage rate of
greater than 36 percent and required the title of a
vehicle as security for the obligation for a term of
181 days or less.
For purposes of this class
definition, a covered member of the armed services is
a member of the armed forces who is (A) on active duty
under a call or order that does not specify a period
of 30 days or less; or (B) on active Guard and Reserve
Duty.
A dependent of a covered member means the
covered member’s spouse, child, or an individual for
whom the member provided more than one-half of the
individual’s
support
for
180
days
immediately
preceding the extension of consumer credit.
For
purposes of this class definition, the phrase “vehicle
title loan by any means” includes vehicle title loans,
vehicle title pawns, and vehicle title pledges.
The

Court

finds

that

this

definition

class.

35

adequately

defines

the

2.
As
depend

Putative Plaintiffs Who Executed a Negative CBIS

previously
on

noted,

whether

identification

the

Plaintiffs

borrower

statement”

propose

executed

indicating

no

a

subclasses

“covered

affiliation

that

borrower
with

the

military and whether Defendants otherwise had knowledge of that
affiliation.
any

Plaintiffs maintain that even if a borrower denies

affiliation

included

in

nevertheless
military.

with

the

the

class

knew

that

military,

if
the

evidence
borrower

that

borrower

exists
was

that

affiliated

should

be

Defendants
with

the

For the reasons explained below, the Court finds that

the class cannot include such individuals.
The MLA penalizes creditors who knowingly violate the MLA.
10 U.S.C. § 987(f).

Under the MLA’s implementing regulations,

the MLA does not apply to a consumer credit transaction if the
applicant signs a “‘covered borrower identification statement’ .
. . indicating that he or she is not a covered borrower” and the
“creditor

has

verification

not

procedures

covered borrower.”
on

this

determined,

“safe

.

.

.

pursuant

that

any

to

such

the

optional

applicant

32 C.F.R. § 232.5(a)(1)-(2) (2007).

harbor”

provision,

Defendants

asked

is

a

Based

potential

customers to complete a Covered Borrower Information Statement
(“CBIS”).

Defendants continued to make title loans to customers

who executed a negative CBIS—meaning that the customer denied
being an active duty servicemember or a dependent of an active

36

duty servicemember.
individuals

who

Defendants declined to make title loans to
self-identified

as

covered

borrowers

by

executing a positive CBIS.
Two

of

Plaintiffs’

proposed

subclasses

individuals who executed a negative CBIS.

are

comprised

of

Plaintiffs contend

that those individuals, who told Defendants that they were not
covered borrowers, should be included in the class if there is
documentation in their loan files that reflects an affiliation
with

the

military.

“manageability
plaintiffs.

Plaintiffs

concerns”
Pls.’

acknowledge

associated

Supplemental

Br.

that

with

such

in

there

Supp.

are

potential
of

Class

Rule

23(a)

Certification 18, ECF No. 191.
The

Court

finds

that

even

if

the

four

requirements are met for the putative plaintiffs who executed a
negative CBIS but who had conflicting information in their files
regarding

their

military

affiliation,

requirement of Rule 23(b)(3) is not met.

the

predominance

Common issues of fact

and law predominate if they have “a direct impact on every class
member’s effort to establish liability that is more substantial
than the impact of individualized issues in resolving the claim
or claims of each class member.”

Sacred Heart Health Sys., Inc.

v. Humana Military Healthcare Servs., Inc., 601 F.3d 1159, 1170
(11th Cir. 2010) (internal quotation marks omitted).
adjudication

of

the

classwide

issues,

37

plaintiffs

“If after
must

still

introduce a great deal of individualized proof or argue a number
of individualized legal points to establish most or all of the
elements

of

suitable

for

(alteration

their

individual

class
in

claims,

certification

original)

[their]

under

(internal

Rule

quotation

claims

are

23(b)(3).”
marks

not
Id.

omitted).

“[I]f the defendant has non-frivolous defenses to liability that
are unique to individual class members, any common questions may
well be submerged by individual ones.”

Id.

Here, Plaintiffs seek to include in the class individuals
whose loan files contain conflicting information.

On one hand,

the loan files contain a negative CBIS, which means that the
individual denied being a covered borrower.
the

loan

individual

files
may

contain
be

a

documentation

member

of

the

On the other hand,

suggesting
military

affiliation with a member of the military.

or

that
have

the
an

In light of the

conflicting information, it would be necessary to determine for
each potential Plaintiff whether the Defendant may rely on the
CBIS safe harbor.

In other words, a factfinder must decide

whether the Defendant knew that the individual was a covered
borrower and entered the transaction anyway.

This issue must be

resolved on a person-by-person basis, considering the borrower’s
duty status at the time of the transaction as well as when and
under what circumstances the Defendant received documentation
suggesting a military affiliation.

38

Based on these significant

individualized
23(b)(3)’s

determinations,

predominance

the

requirement

Court
is

plaintiffs who executed a negative CBIS.

finds

not

met

that
for

Rule

putative

Therefore, the Court

declines to certify a class that includes these individuals.
This ruling does not mean that the individuals may not bring MLA
claims

individually

against

Defendants;

they cannot proceed as part of a class.

it

simply

means

that

The Court notes that

this ruling does not exclude borrowers who entered more than one
vehicle title loan with Defendants and executed a negative CBIS
in connection with some transactions but not others.

Only those

transactions in which the negative CBIS was executed would be
excluded from the class litigation.
3.

Putative Plaintiffs who Entered Transactions with
Alabama,
Georgia,
Puerto
Rico,
Mississippi,
Tennessee and Texas Defendants

Defendants who operate in Alabama, Georgia, Puerto Rico,
Mississippi, Tennessee, and Texas assert that individuals who
entered transactions in these jurisdictions should be excluded
from the class because these Defendants are not “creditors” who
extend “consumer credit” within the meaning of the MLA.

The

Court has previously rejected these arguments as they relate to
Georgia

and

Alabama

transactions

Plaintiffs in this action.
that

ruling,

the

Court

engaged

in

See supra Part I.B.
rejects

39

Defendants’

by

the

named

Consistent with
contention

that

transactions from these other jurisdictions should be excluded
from the class.
a.

TITLE PAWN JURISDICTIONS

The Court has previously rejected Defendants’ argument that
consumers from “title pawn” jurisdictions are not covered under
the MLA.

See supra Part I.B.

transactions

in

Georgia,

Therefore, persons who entered

Alabama,

and

Puerto

Rico

with

Defendants Georgia Auto Pawn, Inc., Alabama Title Loans, Inc.,
and Puerto Rico Auto Loans, LLC shall not be excluded from the
class.10
b.
Defendants

TITLE PLEDGE JURISDICTIONS

Mississippi

Title

Loans,

Inc.

and

Tennessee

Title Loans, Inc. represent that they operate under state “title
pledge” laws.

Defendants contend that the “pledge” transactions

do not involve consumer credit extended by creditors because (1)
the

customers

had

no

obligation

to

pay

because

they

had

no

obligation to redeem their vehicle titles, and (2) the customers
did

not

face

transaction.
pledge

any

personal

See

Miss.

lender. . .

shall

liability

Code

Ann.

not

§

. . .

in

connection

75-67-415(d)
[m]ake

any

with
(“A

the

title

agreement

requiring or allowing the personal liability of a pledgor.”);
10

As with the Georgia and Alabama exemplar contracts, the present
record includes an exemplar contract for the Puerto Rico transactions,
which Defendants represent is substantively identical to the Georgia
and Alabama contracts.
The Court finds that the same rationale
supporting application of the MLA to the Georgia and Alabama
transactions applies to the Puerto Rico transactions.

40

Tenn. Code Ann. § 45-15-115(14) (“A title pledge lender shall
not . . . [r]equire a pledgor to provide any additional guaranty
as a condition of entering into a title pledge agreement.”).
Therefore, Defendants contend that consumers who entered into
these “pledge” transactions should not be included in the class.
Like the “pawn” contracts, the “pledge” contracts refer to
the “cost of [the customer’s] credit,” the “dollar amount the
credit will cost” the customer, and “amount of credit provided
to” the customer.

Fields Decl. Tab 2 at CLA001301-02, Miss.

Exemplar Contract, ECF No. 184-3 at 28-29; Id. at CLA001582-84,
Tenn. Exemplar Contract, ECF No. 184-3 at 24-26.

The agreements

state that the customers “are giving a security interest” in the
motor

vehicle.

Miss.

Exemplar

Exemplar Contract at CLA001582.

Contract

at

CLA001301;

Tenn.

Unlike the “pawn” contracts,

the “pledge” contracts explicitly refer to the transaction as a
“loan.”

Miss. Exemplar Contract at CLA001301; Tenn. Exemplar

Contract at CLA001582.

The Tennessee Exemplar Contract further

states that the customer “will be required to pay additional
interest and fees if [he] renew[s] this loan rather than pay the
debt in full when due.”

Tenn. Exemplar Contract at CLA001582.

Based on the present record, the Court finds that putative
class

members

who

entered

a

“pledge”

transaction

that

is

substantially similar to the Mississippi and Tennessee Exemplar
Contracts entered a “vehicle title loan” within the meaning of

41

the MLA.

Those Plaintiffs entered a “loan” that was secured by

the title to a motor vehicle.

If the “loan” is not repaid, then

the Plaintiff loses the car title and the car.
non-recourse

loans

are

not

considered

Even if such

“credit”

transactions

under state law, the Court finds that these title loans are
“consumer credit” transactions within the meaning of the MLA,
and the “title pledge”

putative class members

should not be

excluded from the class.
c.

TEXAS CAR TITLE LOANS

Defendant Texas Car Title and Payday Loan Services, Inc.
represents that it is not a “creditor” within the meaning of the
MLA but is a “credit access business” operating under Texas’s
consumer protection laws.
393.221(1).

See Tex. Fin. Code Ann. §§ 393.001,

Therefore, Texas Car Title contends that any claims

against it arising from transactions in Texas should not be
included in the class.

A credit access business “obtains for a

consumer or assists a consumer in obtaining an extension of
consumer
loan.”
In

credit

in

the

form

of

a

. . .

motor

vehicle

title

Id. § 393.221(1).
support

of

their

argument,

Defendants

point

to

an

exemplar contract for Texas, which they contend is substantially
similar to all contracts entered in Texas.

Fields Decl. Tab 3

at CLA001375-77, Tex. Exemplar Contract, ECF No. 184-3 at 32-34.
In the exemplar contract, the “lender” is FC Texas Lending, LLC.

42

Id. at CLA001375.

The contract refers to a “CSO”—Texas Car

Title—which is “the third-party credit services organization who
arranged this loan and will issue a letter of credit to Lender
to secure repayment of the loan.”

Id.

The loan itself has an

interest rate of 10% per annum, which is the cap set by Texas
law.

Id.

But in return for its “loan arranging” services,

Texas Car Title receives a CSO fee that far exceeds 36% per
annum.

Id.

Loan payments, including the principal, interest,

and finance charge, are to be made “in care of” Texas Car Title
and not to the lender.

Id.

Texas Car Title may remind the

borrower to make loan payments and may “withhold and retain”
from the loan payments the CSO fee.

Id. at CLA001376.

Finally,

Texas Car Title “may release Lender’s loan proceeds draft by
issuing its own CSO check(s).”
In

addition

to

the

Id.

loan

agreement,

a

Texas

customer

separately contracts with Texas Car Title “for credit services
related to [the] loan.”

Id.

The CSO fees paid to Texas Car

Title are disclosed in the loan agreement as part of the Truth
in Lending Act disclosures.
Plaintiffs

Id. at CLA001375-76.

acknowledge

that

“lender” in the transactions.

Texas

Car

Title

is

not

the

Plaintiffs nonetheless contend

that Texas Car Title is a creditor within the meaning of the MLA
because

“credit

interest

under

service
the

MLA.

charges”
The

43

MLA

are

treated

regulations

the
state

same
that

as
a

creditor

or

an

assignee

“may

not

impose

a

[military

annual

percentage rate] greater than 36 percent in connection with an
extension

of

consumer

credit

C.F.R. § 232.4(b) (2007).

to

a

covered

borrower.”

32

A military annual percentage rate “is

the cost of the consumer credit transaction expressed as an
annual rate” and must be “calculated and disclosed following the
rules used for calculating the Annual Percentage Rate (APR) for
closed-end

credit

Lending).”

Id. § 232.3(h).

includes

“credit

transactions

service

under

Regulation

Z

(Truth

in

The military annual percentage rate
charges”

“if

they

are

financed,

deducted from the proceeds of the consumer credit, or otherwise
required to be

paid as a condition of the credit.”

Id. §

232.3(h)(1)(i).
Under these regulations, the CSO Fee clearly falls within
the definition of military annual percentage rate.

The issue is

whether Texas Car Title is a “creditor” within the meaning of
the MLA.

Texas Car Title argues that it is not a “creditor”

under the MLA because it does not
credit.

Plaintiffs

otherwise,

including

authorized

to

issue

have
the
the

pointed

regularly extend
to

evidence

following:
loan

check

Texas
to

the

that
Car

consumer
suggests
Title

borrower,

is
loan

payments must be made in care of Texas Car Title, and Texas Car
Title

is

payments.

authorized

to

withhold

the

CSO

fee

from

the

loan

A reasonable factfinder could conclude that Texas Car

44

Title arranges the loan, cuts the loan check, collects the loan
payments, and receives a credit service charge.

Furthermore,

Texas Car Title evidently believed that it could be considered a
creditor

within

required

Truth

Contract.

the
in

meaning

Lending

of

Regulation

disclosures

in

Z:

the

it

made

Texas

the

Exemplar

For the foregoing reasons, the Court finds that the

Texas putative class members should not be excluded from the
class.11
4.

Summary

The Court finds that Plaintiffs may pursue their MLA claims
as a class.

To summarize, the class is ascertainable because

the parties have determined a way to identify covered borrowers
who entered a vehicle title loan transaction during the relevant
timeframe.

There

is

requirement is not met.

no

suggestion

that

the

numerosity

Questions of law and fact common to the

class clearly predominate over individual issues.

The claims of

the representative parties are typical of the claims of the
class, and there is no suggestion that they will not fairly and
adequately protect the interests of the class.
easily

manageable,

and

a

class

action

is

The class is

superior

to

other

available methods for fairly and efficiently adjudicating this
controversy.

For all of these reasons, the following class

11

The Court does leave open the possibility that a subclass may be
appropriate for these Texas claims.

45

meets the requirements of Rule 23(a) and Rule 23(b)(3) and is
certified:
All covered members of the armed services and their
dependents who, between October 1, 2007 and January 2,
2013, entered into, rolled over, renewed, refinanced,
or consolidated a vehicle title loan by any means with
a Defendant that imposed an annual percentage rate of
greater than 36 percent and required the title of a
vehicle as security for the obligation for a term of
181 days or less.
For purposes of this class
definition, a covered member of the armed services is
a member of the armed forces who is (A) on active duty
under a call or order that does not specify a period
of 30 days or less; or (B) on active Guard and Reserve
Duty.
A dependent of a covered member means the
covered member’s spouse, child, or an individual for
whom the member provided more than one-half of the
individual’s
support
for
180
days
immediately
preceding the extension of consumer credit.
For
purposes of this class definition, the phrase “vehicle
title loan by any means” includes vehicle title loans,
vehicle title pawns, and vehicle title pledges, and
the
phrase
“covered
members”
does
not
include
individuals who executed a statement at the time of
the
transaction
indicating
that
they
were
not
affiliated with the military.
CONCLUSION
As

discussed

above,

Plaintiffs’

Motion

for

Class

Certification under Federal Rule of Civil Procedure 23(b)(3) and
Plaintiffs’ Motion to Amend (ECF Nos. 190 & 191) are granted to
the

extent

set

forth

in

this

Order;

Defendants’

Partial Summary Judgment (ECF No. 139) is denied;

Motion

for

Defendants’

Motion for Partial Summary Judgment (ECF No. 184) is granted as
to Plaintiffs’ RICO claims but is otherwise denied to the extent
that

the

remaining

issues

raised

46

by

that

motion

have

been

addressed and ruled upon in this Order; and Plaintiffs’ Motion
for Class Certification under Federal Rule of Civil Procedure
23(b)(2) (ECF No. 113) is denied.
The Court has attempted to address in today’s comprehensive
Order the issues raised by Plaintiffs’ Motion for Declaratory
and Injunctive Relief (ECF No. 180) and the issues raised in
Defendants’ Motion for Summary Judgment (ECF No. 184) to the
extent
rulings

that
in

those
this

issues
Order.

have

not

Therefore,

been

made

those

moot

motions

by

other

shall

be

administratively terminated.
Within twenty-one days of the date of today’s Order, the
parties shall submit a proposed Amended Scheduling and Discovery
Order that includes a timeline for class notice under Federal
Rule of Civil Procedure 23(c)(2)(B) and a proposed schedule for
any additional proceedings in this action.
IT IS SO ORDERED, this 24th day of March, 2014.
S/Clay D. Land
CLAY D. LAND
UNITED STATES DISTRICT JUDGE

47