Davis et al v. Oasis Legal Finance Operating Company, LLC et al
Filing
72
ORDER granting 56 Motion for Judgment on the Pleadings; denying 59 Motion to Amend/Correct. The Clerk is directed to enter judgment in favor of Defendants. This case stands closed. Signed by Judge Dudley H. Bowen on 1/24/2020. (pts)
MLED
U.S. OiSTRiCT COljjIi
IN THE UNITED STATES DISTRICT COURT^"''-
FOR THE SOUTHERN DISTRICT OF GEORGIA.^,
DUBLIN DIVISION
,
Mira2l. PH3^ l6
CLERK,
LIZZIE DAVIS; PAMELA DAVIS;
*
DENNIS GREEN; JOHNNY MOODY; JOHN
*
SUBER; and SHIRLEY WILLIAMS,
*
Individually and on Behalf of
all Others Similarly Situated,
SO, lXL .'V. GA.
*
*
■k
Plaintiffs,
*
*
V.
*
CV
317-022
*
OASIS
OPERATING
*
COMPANY, LLC; OASIS LEGAL
FINANCE, LLC; and OASIS LEGAL
FINANCE HOLDING COMPANY, LLC,
LEGAL
FINANCE
*
*
*
*
Defendants.
*
ORDER
Plaintiffs in this putative class action have asserted claims
under the Georgia Payday Lending Act
et seq.,
("PLA") ,
and the Georgia Industrial Loan Act
7-3-1 et seq.^
O.C.G.A.
("GILA") ,
Presently before the Court is
§ 16-I7-I
O.C.G.A.
Defendants'
§
motion
for judgment on the pleadings, which relies upon a case decided by
the Georgia
Supreme Court
while
review,
and with reluctance,
dismiss
the
case
as
this
case was
on
appeal.
Upon
the Court must grant the motion and
discussed below.
1 The Court previously dismissed Plaintiffs' claim for usury under
O.C.G.A.
§ 7-4-18.
(See Order of Nov.
15,
2017,
Doc.
No.
38. )
I.
BACKGROUND
Plaintiffs were personal injury plaintiffs in the State of
Georgia who had entered into what even this Court has referred to
as "loan agreements" with Defendant Oasis.^
15, 2017 & Dec. 12, 2019, Doc. Nos. 38 & 55.)
(See Orders of Nov.
Oasis refers to the
subject agreements as "Nonrecourse Purchase Agreements."
Oasis' Mot. to Dismiss, Doc. No. 9, Exs. 1-6.)
(See
For purposes of
this Order, the Court will simply refer to the subject agreements
as
"Agreements."
In
any
event,
pursuant
to
the
Agreements,
Plaintiffs received money, in amounts of $3000 or less, to pay for
personal expenses while they pursued their personal injury claims
against third parties.
money through
claims.
basis
any
Plaintiffs were obligated to repay the
damages
recovery from their
The amount owed to Oasis upon recovery was on a graduated
dependent
upon
the
time
it
took
personal injury claim plus certain fees.
nothing
personal injury
through
the
personal
injury
for
resolution
of
the
If a plaintiff recovered
claim,
he
or
she
had
no
obligation to repay Oasis.
The operative complaint in the case is the First Amended and
Recast Class Action Complaint filed in state court on March 30,
2017.
The
First
Amended
Complaint
alleges
that
the
named
Plaintiffs repaid Oasis at an annual percentage rate in excess of
2
For ease of reference, the Court collectively refers to all
three Defendants as the singular "Oasis."
100%.
Plaintiffs allege that the Agreements therefore violate the
PLA and GILA.
On May 5, 2017, Oasis filed a motion to dismiss the complaint
based upon venue, forum nan conveniens, statute of limitations,
and a class action waiver in the Agreements.
that
the
forum
selection
clause
and
class
This Court concluded
action
waiver
in
the
Agreements were unenforceable as against Georgia public policy.
(See Order of Nov. 15, 2017.)
Oasis appealed the decision.
While the appeal was pending before the Eleventh Circuit, the
Georgia Supreme Court decided Ruth v. Cherokee Funding, LLC, 820
S.E.2d 704 (Ga. 2018).
plaintiffs
who
had
litigation
financing
The Ruth case also involved personal injury
entered
into "financing
company,
Cherokee
agreements" with
Funding.
Id.
at
a
707.
Similar to the case at bar, the Ruth plaintiffs were provided funds
for personal expenses, the repayment of which was contingent upon
the success of their personal injury lawsuits.
plaintiffs
similarly
asserted
that
violated the Georgia PLA and GILA.
the
Id.
financing
The Ruth
agreements
Id. at 708.
The Georgia Supreme Court affirmed the dismissal of the Ruth
complaint, holding that the financing agreements did not involve
"loans"
because
repayment
was
contingent
upon
successful
resolution of the plaintiffs' personal injury lawsuits.
709-10.
Id. at
Thus, the PLA and GILA did not apply to the financing
agreements.
The
Georgia
Supreme
Court
concluded
that
"[a]n
agreement that involves such a contingent and limited obligation
3
of repayment is not a
^contract requiring repayment,
' as those
words are commonly and ordinarily understood in the context of the
law of usury."
Id. at 710 (quoted sources omitted).
On August 28, 2019, the Eleventh Circuit affirmed this Court's
Order denying Oasis's motion to dismiss and remanded the matter
candidly noting "we think the district court got it right."
Davis
V. Oasis Legal Fin. Operating Co., 936 F.3d 1174, 1180 (ll'^'^ Cir.
2019).
On December 19, 2019, Oasis filed the instant motion for
judgment on the pleadings contending that the Ruth case forecloses
Plaintiffs' Georgia FLA and GILA claims.
the motion, arguing that their
case
Plaintiffs have opposed
may be
saved
by a
Second
Amended and Recast Class Action Complaint, which they now seek
leave to file.
II.
LEGAL STANDARDS
"After the pleadings are closed — but early enough
not to
delay trial — a party may move for judgment on the pleadings."
Fed. R. Civ. P. 12(c).
A motion for judgment on the pleadings is
governed by the same standard as a Rule 12(b)(6) motion to dismiss.
Carbone v. Cable News Network, Inc., 910 F.3d 1345, 1350 (11^*^ Cir.
2018) .
"Judgment on the pleadings is proper when no issues of
material fact exist, and the moving party is entitled to judgment
as a matter of law based on the substance of the pleadings and any
judicially noticed facts."
Cunningham v. Dist. Attorney's Office
for Fscambia Cnty., 592 F.3d 1237, 1255 (ll^h Cir. 2010) (quoted
4
source omitted).
pleadings, the
When considering a motion for judgment on the
Court
must "accept
as
true
all
material
facts
alleged in the non-moving party's pleading, and . . . view those
facts in the light most favorable to the non-moving party."
Perez
V. Wells Fargo N.A., 774 F.3d 1329, 1335 (ll^i^ Cir. 2014).
When,
however,
on
the
basis
construction
of the
support
cause
the
appropriate.
of
a
factual
of
dispositive
allegations
action,
issue
of
dismissal
the
of
of
law,
complaint
the
no
will
complaint
is
See Allen v. USAA Gas. Ins.^ Co., 790 F.3d 1274, 1278
(11^'^ Cir. 2015) (applying Rule 12(b) (6) standard).
Further,
when
pleading, "the
requires."
a
party
seeks leave
court should freely
Fed. R. Civ. P. 15(a) (2).
of
court to
give leave
amend
its
when justice so
The district court, however,
need not "allow an amendment (1) where there has been undue delay,
bad
faith,
dilatory
motive,
or
repeated
failure
to
cure
deficiencies by amendments previously allowed; (2) where allowing
amendment would cause undue prejudice to the opposing party; or
(3) where amendment would be futile." Bryant v. Dupree, 252 F.3d
1161, 1163 (ll^h cir.
2001) .
Here, the
parties
disagree
with
respect to whether Plaintiffs' proposed amendment would be futile.
III.
LEGAL ANALYSIS
In response to Oasis's motion for judgment on the pleadings.
Plaintiffs
do
Complaint does
not
necessarily
not state
a
disagree
that the
First
legally cognizable claim
5
Amended
under the
Georgia PLA and GILA after the Ruth decision.
the
Agreements
entered
into
by
Plaintiffs
Indeed, pursuant to
in
this
case,
each
Plaintiff's obligation to repay the money received from Oasis is
unequivocally contingent upon the individual Plaintiff's recovery
from his or her legal claim against a third party.
Rather, Plaintiffs seize upon the Ruth court's discussion of
an argument raised by the plaintiffs therein that the contingent
repayment obligation in their financing agreements was illusory.
In Ruth the plaintiffs argued that because Cherokee Funding only
makes loans when the risk that the contingency will fail to arise
is "close to null," the contingency is a sham, i.e., an attempt to
evade the usury laws.
Ruth, 820 S.E.2d at 710-11.
The Georgia
Supreme Court stated:
It is easy to imagine an agreement with a sham contingent
repayment provision that reflects an attempt to evade
the usury laws.
And a court properly presented with a
claim that a contingent repayment provision is a sham
should look beyond the text of the agreement to
"penetrate to the substance" and perhaps find an
unlawful loan, notwithstanding the contingency.
Id. (quoted source omitted).
The Georgia Supreme Court, however,
found that the Ruth plaintiffs' complaint did not allege that the
contingencies in the financing agreements were illusory; thus, the
complaint failed to state a claim under the PLA or GILA.
Id. at
711.
In this case. Plaintiffs seek to amend the PLA claim in their
complaint to allege that the repayment obligation of the Oasis
Agreements is illusory because Oasis never, or virtually never,
6
bore any risk of non-repayment.^
In support of their illusory
contention, Plaintiffs provide the affidavit of Dr. John Douglas
Cook, a mathematician, who purports to demonstrate to the Court
that the probability of Oasis losing money on just over 50 of these
Agreements with similarly situated plaintiffs is so slight that
for the large number of Agreements Oasis actually enters into,
"the
risk
of
losing
infinitesimally small."
money
on
them
(See Cook Aff.
in
the
aggregate
is
7, Ex. A to Pis. Resp.
'
to Mot. for J. on the Pleadings, Doc. No. 64.)
Stated another
way. Plaintiffs allege that Oasis's exorbitant interest rate was
high enough that the effective risk of loss is zero.
(See Proposed
Second Am. Compl., Doc. No. 59-1, 1 51 (alleging Oasis "cannot
lose money in the aggregate, as any loss on an individual claim
will have no impact on the overarching scheme").)
2 Plaintiffs also seek to dismiss their GILA claim, but add a claim
for violation of O.C.G.A. § 44-12-24. Section 44-12-24 prohibits
the assignment of rights of action for personal torts. Here, in
their proposed Second Amended Complaint, Plaintiffs assert in
conclusory fashion that the Oasis Agreements assigned some or all
of their rights of actions for personal torts to Oasis; thus, the
Agreements are illegal and void ab initio.
The Agreements,
however, explicitly state that Oasis is not entitled to any control
over Plaintiffs' personal injury claims. (See Proposed Second Am.
Compl., Doc. No. 59-1, Exs. B & C, if 2.2, 2.5; Exs. D-G, ff 3.2,
4.1.) Rather, the Agreements only grant Oasis an interest in the
proceeds of their claims.
Georgia courts have held that this is
not sufficient to violate Section 44-12-24.
See, e.g., Sheppard
V. State Farm Fire & Cas. Co., 475 S.E.2d 675, 676 (Ga. Ct. App.
1996); Santiago v. Klosik, 404 S.E.2d 605, 606 (Ga. Ct. App. 1991);
Shook V. Pilot Life Ins. Co., 373 S.E.2d 813, 815 (Ga. Ct. App.
1988). The Agreements simply do not constitute illegal assignments
of personal injury claims and an amendment to add such claim would
be futile.
7
The problem with Plaintiffs' aggregation argument is that
this Court is obligated to evaluate the adequacy of the FLA claim
with
respect
to
each
individual
transaction-by-transaction basis.
conclude,
and
there
are
no
Plaintiff,
that
is,
on
a
In doing so, the Court cannot
allegations,
that
the
contingency in an individual Agreement is illusory.
repayment
The overall
profitability of Oasis's business notwithstanding. Oasis bore a
real risk with regard to each Plaintiff in this case that it would
receive
nothing
if
that
personal injury claim.
Plaintiff
recovered
nothing
for
the
Not only does Dr. Cook concede this point
in his affidavit, noting that there are a number of individual
transactions in which Oasis had not been repaid, but the Georgia
Supreme Court noted:
"It is unclear whether the outcome of yet-
to-be resolved litigation ever can be certain enough to render a
contingency based on the result of pending litigation illusory."
Ruth, 820 S.E.2d at 711 n.l6.
The Court therefore is constrained to conclude that the Ruth
decision forecloses Plaintiffs' claims under the PLA and GILA in
their First Amended Complaint and the PLA claim in their proposed
Second
passage
Amended
quoted
Complaint.
by the
The
Eleventh
Court
must
Circuit in
note,
this
public policy.
The Eleventh Circuit observed:
all
justice
courts
of
to
keep
their
eye
however,
case
the
regarding
"It is the duty of
steadily
up
on
the
interests of the public, . . . and when they find an action is
founded up on a claim injurious to the public . . . to give no
countenance or assistance in foro civili."
Davis v. Oasis Legal
Fin. Operating Co., 936 F.3d 1174, 1176 (11^^ Cir. 2019).
Here,
the Georgia Supreme Court may have abdicated this responsibility
in the Ruth case when it failed to find "any meaningful distinction
between a '^contract requiring repayment' [under the GILA] and an
agreement pursuant to
[under the PLA]."
which
^funds
are
advanced to be
See Ruth, 820 S.E.2d at 710.
repaid'
Nevertheless,
this Court will apply Ruth as it must.
IV.
CONCLUSION
Upon the foregoing. Defendants' motion for judgment on the
pleadings (doc. no. 56) is hereby GRANTED.
Plaintiffs' motion for
leave to amend their complaint (doc. no. 59) is DENIED.
is directed to CLOSE this case, terminating
The Clerk
all deadlines and
motions, and ENTER JUDGMENT in Defendants' favor^____
ORDER ENTERED at Augusta, Georgia, this '^/
.
day of January,
2020.
UNITED STATES DISTRICT
J
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