Davis et al v. Oasis Legal Finance Operating Company, LLC et al, No. 3:2017cv00022 - Document 72 (S.D. Ga. 2020)
Court Description: 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)
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Davis et al v. Oasis Legal Finance Operating Company, LLC et al Doc. 72 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. ) Dockets.Justia.com 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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