Opinion
Case No. 6:99-cv-593-Orl-28JGG
February 24, 2003
ORDER
On February 25, 2000 Wendy Betts ("Plaintiff") filed a second amended complaint (Doc. 56) containing the following six counts against Defendants Advance America, Cash Advance Centers of Florida, Inc. ("Advance America"), Steve A. Mckenzie ("Mr. McKenzie"), George R. Johnson, Jr. ("Mr. Johnson"), and Advance America, Cash Advance Centers, Inc. ("AACA") (collectively "Defendants"): Count I alleges that Defendants violated Florida's Lending Practices Act, Chapter 687, Florida Statutes; Count II alleges that Defendants violated Florida's Consumer Finance Act, Chapter 516, Florida Statutes; Count III alleges that Defendants violated Florida's Deceptive and Unfair Trade Practices Act, Chapter 501, Consumer Protection Part II, Florida Statutes; Count IV alleges that Defendants engaged in a fraudulent scheme, artifice and device to extract usurious sums and exorbitant charges through knowing, intentional and willful misrepresentations; Count V alleges that Defendants violated Florida's Civil Remedies for Criminal Practices Act, Chapter 772, Florida Statutes; and Count VI alleges that Defendants violated the Federal Racketeer Influenced and Corrupt Organization Act, ("RICO") 18 U.S.C. § 1961 et seq.
By order dated February 25, 2000, Magistrate Judge James G. Glazebrook granted Plaintiff's motion for leave to file a second amended complaint.
In response to Plaintiff's complaint, Defendants filed a Motion for Summary Judgment on July 19, 2000 (Doc. 73). On November 21, 2000 Magistrate Judge Glazebrook heard Advance America's summary judgment motion and Plaintiff's motion for class certification (Doc. 62). A Report and Recommendation was subsequently issued on January 31, 2001 (Doc. 102) recommending that Defendants' Motion for Summary Judgment be granted and Plaintiff's Motion for Class Certification be denied. Although Magistrate Judge Glazebrook found that the relevant deferred deposit transactions were indeed loans subject to usury laws, the Magistrate Judge also concluded that Advance America fully complied with the law while engaging in these transactions. This Court adopts the Report and Recommendation only to the extent that it comports with the recent decision in Betts v. Ace Cash Express, Inc., 827 So.2d 294 (Fla. 5th DCA 2002).
I. Factual Background
This case involves a series of business transactions between Plaintiff and Advance America. Advance America is engaged in the business of cashing checks and is licensed to conduct such transactions by the Florida Department of Banking and Finance. More significantly, Advance America conducts deferred deposit transactions where Advance America accepts and cashes personal checks, which may be postdated by up to fourteen days. In other words, in exchange for a postdated check, Advance America gives a customer cash in an amount that reflects a 10% deduction and a $5.00 verification fee. Customers then have the option of repurchasing the postdated check or may take no action, thereby allowing Advance America to deposit the postdated check after the fourteen-day period. Because Defendants defer deposit of checks for up to two weeks, Plaintiff opines that this type of transaction constitutes a loan subject to state usury laws. Defendants, on the other hand, contend that deferred deposit transactions are not loans but are merely check-cashing transactions. Essentially, this Court is asked to determine the legality of deferred deposit transactions.
II. Procedural Background
Pursuant to Florida Marine Fisheries Commission v. Pringle, 736 So.2d 17 (Fla. 1st DCA 1999), this Court stayed the instant case on May 29, 2001 pending resolution of Plaintiff's administrative challenge of Administrative Rule 3C-560.803, which deals with the legality of charging fees for deferred deposit transactions. (Doc. 114). On August 30, 2002 the Fifth District Court of Appeal of Florida issued the decision inBetts v. Ace Cash Express. Inc., 827 So.2d 294 (Fla. 5th DCA 2002). TheBetts court held that deferred deposit transactions are check-cashing transactions rather than loans subject to state usury laws.
In light of the Betts decision, Defendants filed a renewed motion to lift the stay in the instant case. (Doc. 134, filed December 6, 2002). The parties also filed supplemental memoranda discussing the significance of the opinion issued by the Fifth District Court of Appeal. Defendants argue that the Betts decision is controlling authority and disposes of Plaintiff's current claim against Defendants. Plaintiff, however, argues that the transactions in this case can be distinguished from those examined in the Betts opinion and therefore, Betts is not controlling authority. By order dated January 23, 2003 this Court granted Defendants' renewed motion and lifted the stay. (Doc. 136).
III. Legal Analysis
A. Summary Judgment Standards
Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the burden of establishing that no genuine issues of material fact remain. Celotex Corp. v. Catrett, 477 U.S. 317 (1986).
In ruling on a motion for summary judgment, the Court construes the facts and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby. Inc., 477 U.S. 242 (1986). However, summary judgment is mandated "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. At the summary judgment stage, "[t]he function of the court is not to `weigh the evidence and determine the truth of the matter but to determine whether there is an issue for trial."' Lockett v. Wal-Mart Stores. Inc., No. Civ. A. 99-0247-CB-C, 2000 WL 284295, at *2 (S.D. Ala. Mar. 8, 2000) (quoting Anderson, 477 U.S. at 249).
B. Merits of Defendants' Motion
1. Deferred deposit transactions are check cashing transactions and are not loans subject to state usury laws.
Plaintiff argues that Defendants' practice of engaging in deferred deposit transactions is unlawful because it constitutes usurious lending. The facts in the Betts case are quite similar to those in the instant matter.
The underlying facts alleged [in Betts] are summarized as follows: Plaintiff visited Defendant's business establishment and would write a check for $120 (as an example). Defendant paid cash to Plaintiff in the amount of $107.50. The difference of $12.50 represented Defendant's fee. Defendant also agreed with Plaintiff that the check would not be deposited for a period of two weeks. Within the two week period, Plaintiff would return to Defendant and deliver a new check to Defendant in exchange for the original check and pay an additional $12.50. This procedure was repeated in successive two week periods for over a year and Defendant allegedly encouraged Plaintiff to deliver a new check and pay the fee every two weeks rather than having Defendant deposit the check with cash.Betts, 827 So.2d at 295. Clearly, the facts in Betts are identical to those alleged in the instant case. Here the Plaintiff tendered a check to Advance America in exchange for cash and also had the option to either redeem the check or allow the check to be deposited. Similarly, Plaintiff was charged a fee by Advanced America for cashing checks and for verification of the customer's financial information. And Plaintiff, in this instance, engaged in these transactions on a bi-weekly basis.
The Betts Court partially relied upon the Deferred Presentment Act set forth in section 560.401-408, Florida Statutes in reaching its decision. "The Act specifically allows `deferred presentment transactions' and defines them in section 560.402(6):
"Deferred presentment transaction' means providing currency or a payment instrument in exchange for a person's check and agreeing to hold that person's check for a period of time prior to presentment, deposit, or redemption."Betts, 827 So.2d at 297. The Betts court explains that "[a]fter considering the (Florida] Department (of Banking and Finance's] advisory opinion solicited by the [Florida Check Cashiers Association] in advance of any deferred presentment transactions between the Plaintiff's and the Defendants, the subsequent authorization of the practice by the Florida Legislature, and the absence of any prohibition against the practice in the interim we disagree with the Plaintiff's characterization of the initial transaction as a loan." Id.
Like the Defendants in the Betts case, Advance America "undertook a concerted effort to ensure that it complied with Florida law and the regulations governing the operation of its business." (Doc. 102 at 12). A representative for Advance America met with members from the Florida Department of Banking and Finance ("the Department") and fully detailed the manner in which it planned to conduct its business in Florida. "By letter dated December 22, 1997, Advance America explicitly stated that `[a]ll the checks to be cashed will be postdated as of the date of the customer's next payday (up to a maximum of 14 days following the date of the transaction)."' (Doc. 102 at 12). Soon thereafter, the Department issued Advance America a license to conduct its business. In light of the Department's authorization of Advance America's deferred deposit transactions, the passage of the Deferred Presentment Act and the factual similarities between the instant matter and the Betts case, this Court finds that the initial transaction between Plaintiff and Advance America did not constitute a loan.
2. All subsequent transactions between Plaintiff and Advance America are check cashing transactions.
Plaintiff further argues, in the instant matter, that the subsequent transactions between Plaintiff and Advance America constitute a loan. According to Plaintiff, these repeated transactions are essentially "rollover" loans which have been eliminated from the Deferred Presentment Act. The same argument was made in the Betts case, and the court concluded that any other subsequent transactions between a customer and check cashing store, by which a customer writes a new check at the end of each redemption period and pays an additional fee, did not transform the transaction into a loan subject to state usury laws. See Betts, 827 So.2d at 298.
"Rollover" transactions are defined in the Deferred Presentment Act as follows:
"Rollover means the termination or extension of an existing deferred presentment agreement by the payment of any additional fee and the continued holding of the check, or the substitution of a new check drawn by the drawer pursuant to a new deferred presentment agreement.
§ 560.402(8), Fla. Stat.
In reaching its conclusion, the Betts court explains "that the parties' options at the end of each redemption period were that the Defendants could deposit a check for payment, or the Plaintiff's could redeem the check." Id. at 298. "If the Plaintiff's wished to redeem the initial check rather than allow the Defendants to deposit it, they would either have to pay the Defendants in cash or deliver still another check that would be honored in a timely fashion. . . . Their choice to again use the Defendants to satisfy their initial obligation that was voluntarily entered was theirs to make." Id. The Betts court concludes that "there is no practical difference between the ritualistic extended transaction and an abbreviated one in which only the fee accompanied the delivery of the new check." Id. Since there are no substantive differences in the nature of the repeated transactions between Plaintiff and Advance America with the subsequent transactions described in the Betts case, this Court concludes that the repeated bi-weekly transactions between Plaintiff and Advance America did not transform into loans but remain check cashing transactions.
3. This Court is bound by the Betts opinion.
This Court is bound by the decision reached in the Betts case. "[T]he rule is that, absent a decision from the state supreme court on an issue of state law, we are bound to follow decisions of the state's intermediate appellate courts unless there is some persuasive indication that the highest court of the state would decide the issue differently."McMahan v. Toto, 311 F.3d 1077, 1080 (11th Cir. 2002) (citing Galindo v. ARI Mut. Ins. Co., 203 F.3d 771, 775 (11th Cir. 2000)). The Florida Supreme Court has opined that "`the decisions of the district courts of appeal represent the law of Florida unless and until they are overruled by this Court."' Pardo v. State of Florida, 596 So.2d 665, 666 (Fla. 1992) (quoting Stanfill v. State, 384 So.2d 141, 143 (Fla. 1980)). "Thus, in the absence of interdistrict conflict, district court decisions bind all Florida trial courts." Pardo, 596 So.2d at 666 (citing Weiman v. McHaffie, 470 So.2d 682, 684 (Fla. 1985)). Since Plaintiff has not made any persuasive arguments or presented any evidence indicating that the Florida Supreme Court would decide this issue differently, this Court finds that the initial transactions between Plaintiff and Advance America do not constitute loans subject to state usury laws, but are check cashing transactions. Moreover, any subsequent transactions between Plaintiff and Advance America where Plaintiff wrote a new check at the end of each redemption period and paid an additional fee constitute check cashing transactions.
III. Conclusion
In light of the opinion of the Fifth District Court of Appeal in Betts v. Ace Cash Express. Inc., 827 So.2d 294 (Fla. 5th DCA 2002), this Court concludes that the initial transaction and all subsequent transactions between Plaintiff and Advance America are not loans but are rather check cashing transactions. Although this Court does not adopt the recommendation of Magistrate Judge Glazebrook that the transactions Plaintiff and Advance America constitute a loan, this Court does adopt the Magistrate Judge's findings of fact and ultimate conclusion that Defendant's Motion for Summary Judgment (Doc. 73) should be granted.
Therefore, it is ORDERED as follows:
1. The Report and Recommendation (Doc. 102, filed January 31, 2001) is ADOPTED and CONFIRMED to the extent that it comports with Betts v. Ace Cash Express. Inc., 827 So.2d 294 (Fla. 5th DCA 2002).
2. The Defendants' Motion for Summary Judgment (Doc. 73, July 19, 2000) is GRANTED.
3. All other pending motions are DENIED as moot.
4. The Clerk is directed to close the case.