Jones v. Ipawn Rodney Parham LLC

          OPINION AND ORDER

          KRISTINE G. BAKER, UNITED STATES DISTRICT COURT JUDGE

         Before the Court is defendants iPawn Rodney Parham, LLC (“iPawn Rodney Parham”), iPawn Baseline, LLC (“iPawn Baseline”), iPawn Arkansas, Inc. (“iPawn Arkansas”), and Steve Landers Jr.'s motion for summary judgment (Dkt. No. 44). Plaintiffs Vincient Jones and Alrick Powell responded in opposition (Dkt. No. 53), and defendants replied (Dkt. No. 57). Defendants also filed two supplemental filings in support of their motion for summary judgment (Dkt. Nos. 66, 69). The Court concludes that there are disputed genuine issues of material fact with respect to all the claims brought by plaintiffs. The Court therefore denies defendants' motion for summary judgment (Dkt. No. 44).

         I.Overview

         In their operative third amended complaint, plaintiffs assert the following claims: (1) defendants charged usurious rates of interest in violation of Amendment 89, § 3 of the Arkansas Constitution; (2) defendants charged usurious rates of interest in violation of the Arkansas Deceptive Trade Practices Act (“ADTPA”), Arkansas Code Annotated § 4-88-101, et seq.; (3) defendants made false statements on the face of their pawn loan contracts in violation of the ADTPA; (4) defendants charged usurious rates of interest in violation of Arkansas Code Annotated § 4-57-105; (5) iPawn Rodney Parham failed to identify creditors on the face of its pawn loan contracts in violation of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1638(a)(1), and its implementing regulations (“Regulation Z”); and (6) defendant iPawn Baseline failed to identify creditors on the face of its pawn loan contracts in violation of the TILA and its implementing regulations (Dkt. No. 33). For relief, plaintiffs seek injunctive, declaratory, and monetary relief.

         II.Background

         This action was commenced on June 20, 2016, in the Circuit Court of Pulaski County, Arkansas (Dkt. No. 54, at 1). Mr. Jones was the sole plaintiff (Id.). The original complaint was amended on August 31, 2016, to allege a TILA violation, and the case was then removed to this Court on September 6, 2016 (Id.). After removal, a second amended complaint was filed on September 5, 2017, adding Mr. Powell as a plaintiff (Id.). The third amended complaint was filed on February 22, 2018, in which the class definition was altered (Id., at 1-2). Plaintiffs filed a motion to certify class on January 26, 2018 (Dkt. No. 29). The Court denied the motion to certify class (Dkt. No. 71).

         Mr. Jones is a resident of Pulaski County, Arkansas, who pawned three items with iPawn Arkansas (Dkt. No. 54, at 3). The name of “iPawn Arkansas, Inc.” is shown on each of Mr. Jones' pawn tickets (Id.). Mr. Jones has admitted that each of his pawn tickets states the name “iPawn Arkansas, Inc.” at the top of the pawn ticket (Id.). Mr. Jones admits that he did not read his pawn tickets in their entirety (Id., at 4). Mr. Jones admits that he is not aware of the TILA (Id.). Mr. Jones did not understand what the phrase “annual percentage rate” meant (Id.). Mr. Jones is also unable to explain how he was harmed by the tickets not having either “iPawn Rodney Parham, LLC” or “iPawn Baseline, LLC” on them (Id.). Mr. Jones did not pay a finance charge (Id.).

         Mr. Powell is currently in the Faulkner County, Arkansas, jail awaiting trial on felony charges (Id., at 5). Mr. Powell's detention is indefinite (Id.). He is a felon who was convicted of conspiracy to commit capital murder and drug possession (Id.). Mr. Powell entered into two pawn transactions with iPawn Arkansas that are the subject of this action (Id., at 6). Mr. Powell did not redeem the items that he pawned (Id.). Mr. Powell further admits that he did not pay any interest (Id.). Mr. Powell also concedes that he did not pay a finance charge (Id.). Mr. Powell admits that at the top of each of his pawn tickets is the statement “iPawn Arkansas, Inc.” (Id.). Mr. Powell thought he did business with iPawn Baseline because he was at the Baseline location (Id.). This was the only reason he thought he did business with iPawn Baseline (Id.). Mr. Powell admits that he has not been harmed by iPawn Baseline's name not appearing on his pawn tickets (Id., at 7). Further, Mr. Powell has never met Steven Landers, Jr. (Id.).

         In a pawn transaction, a customer will present an item of personal property to the pawn shop (Id.). The customer and pawnshop will negotiate the value of the personal property that the customer seeks to pawn (Id.). iPawn Arkansas' customers sign a pawn ticket, which, among other things, contains the required TILA disclosures (Id., at 9). iPawn Arkansas uses a standard form pawn ticket that it purchases from an out of state vendor (Id.). The exhibits attached to the third amended complaint are examples of the form of pawn ticket that iPawn Arkansas purchases from an out-of-state printing company (Id.). Steven Landers, Jr. is the president and sole shareholder of iPawn Arkansas (Id., at 12). iPawn Arkansas is the sole member of iPawn Rodney Parham and iPawn Baseline (Id.).

         In support of their motion for summary judgment, defendants present the affidavit of Michael Willingham, the Vice President and Chief Operating Officer of iPawn Arkansas (Dkt. No. 44-1). Mr. Willingham avers that he has been employed by iPawn Arkansas since March 2011 and that he is familiar with the pawn business in general and the operation of iPawn Arkansas in particular (Id., ¶ 2-3). Mr. Willingham states that a pawn transaction at iPawn Arkansas commences when a customer enters the store and presents an item of personal property to an employee for the purpose of pawning it (Id., ¶ 4). At that point, according to Mr. Willingham, the customer and pawn shop negotiate the value of the item of property, and if the customer and the pawn shop agree to a price, the customer is given cash for the merchandise (Id., ¶ 5).

         Mr. Willingham asserts that, at the time the item is exchanged for the agreed-upon price, “the transaction is concluded and the customer has no obligation to the pawn shop.” (Id.). He also states that “[a] pawn customer is never in debt to iPawn Arkansas, Inc.” and that “[o]nce the customer receives the cash from iPawn Arkansas, Inc., he or she has no obligation to iPawn Arkansas, Inc.” (Id., ¶ 6). Mr. Willingham notes that “the customer may, at his or her option, redeem the pawned property for a cash price which is stated on the pawn ticket.” (Id., ¶ 7). He states that “[t]he customer has no obligation to redeem the property which is pawned, ” though “[a] significant percentage of customers extend the redemption period for a fee.” (Id., ¶ 8). The redemption rate at iPawn Arkansas averaged 56% in 2015, 66% in 2016, and 59% in 2017 (Id., ¶ 9). In the event “the property is not redeemed during the redemption period, or an extension of the redemption period, the merchandise is placed in the pawn shop's inventory for sale to the public.” (Id., ¶ 8).

         Mr. Willingham states that, at iPawn Arkansas, “there is no such thing as a standard pawn transaction.” (Id., ¶ 10). He notes that “[w]hile the methodology for each transaction is similar, each transaction widely varies.” (Id.). He further notes that “[t]he items offered for pawn vary significantly” and that “[a]lmost any item of personal property one can own may be pawned.” (Id.). Mr. Willingham states that iPawn Arkansas “charges each customer a pawn service charge.” (Id., ¶ 13). The pawn service charge is an amount associated with the pawn of the item “and includes research as to the valuation of the merchandise, cost of holding the merchandise, insurance on the merchandise, ” and other costs (Id.). The amount of the pawn service charge is shown on each pawn ticket in the box labeled “Finance Charge.” (Id., ¶ 14).

         Mr. Willingham's affidavit also discusses the form of the pawn tickets. According to him, “[t]he pawn tickets used by iPawn Arkansas, Inc. are ordered from a printing company who prints forms for use by pawnbrokers throughout the United States, ” and “[o]ther than name, address, and company logo, the forms are standard to the State of Arkansas.” (Id., ¶ 15). Furthermore, since June 2016, “all pawn tickets of iPawn Arkansas, Inc. have contained an arbitration clause.” (Id., ¶ 16).

         Mr. Willingham also states that iPawn Arkansas is the only entity sued in this litigation that is in the pawn business; according to him, “[n]either iPawn Rodney Parham, LLC or iPawn Baseline, LLC operate a pawn business.” (Id., ¶ 17). He further states that iPawn Arkansas conducted its pawn business “at two locations, one located on Rodney Parham Road in Little Rock Arkansas, and one on Baseline Road in Little Rock, Arkansas (Id., ¶ 18). He avers that “iPawn Rodney Parham, LLC was formed on November 12, 2015, and iPawn Baseline, LLC was formed on October 6, 2015” and that “[t]hose LLCs were formed to enter into leases with the owner of the realty on which each of the iPawn Arkansas, Inc. stores were located.” (Id.). According to him, neither of these entities are engaged in the pawn business (Id.). Mr. Willingham also testified at a deposition in this litigation (Dkt. No. 53-28). He testified that iPawn intends to make a profit on its transactions (Id., at 4-5). Mr. Willingham stated that iPawn makes profit through the “sale of merchandise” or by making a profit “on the pawn service charge.” (Id., at 5). In Mr. Willingham's deposition, he testified that, if pawn customers “choose to extend it out for 30 days, we make a profit on the pawn service charge.” (Id., at 5).

         Mr. Landers also provides an affidavit in support of the motion for summary judgment (Dkt. No. 44-5). Mr. Landers avers that he is “the sole shareholder [] of iPawn Arkansas, Inc.” and that “[i]Pawn Arkansas, Inc. is the sole member of iPawn Rodney Parham, LLC, and iPawn Baseline, LLC.” (Id., ¶ 2). He also avers that iPawn Arkansas is engaged in pawn business at “1108 N. Rodney Parham Rd[.], Little Rock, Arkansas 72212” and at “6115 Baseline Rd., Little Rock, Arkansas, 72209.” (Id., ¶ 3). He notes that the Baseline Road location has closed (Id.). He states that neither iPawn Rodney Parham nor iPawn Baseline have been, or are, engaged in the pawn business (Id., ¶ 4). Further, he states that he is not involved in the day-to-day management of iPawn Arkansas, and he affirms that he neither has an office at iPawn Arkansas or “regularly visit[s] the pawn stores.” (Id., ¶ 5). Finally, he avers that he did not participate in any pawn transactions with Mr. Jones or Mr. Powell and that he did not set the rate of interest, the finance charge, or the language contained in the pawn tickets used by iPawn Arkansas (Id., ¶¶ 6-10).

         Defendants also present the expert report of Robert T. Gammill in support of their motion for summary judgment (Dkt. No. 44-2). According to his report, Mr. Gammill is a bank consultant at DD&F Consulting Group working in the areas of regulatory intervention, mergers and acquisitions, bank recapitalizations, acquisitions of failed banks, strategic planning, and board training (Id., at 3). Counsel for defendants retained Mr. Gammill “to examine the distinctions, if any, between a traditional or typical loan and a pawn transaction.” (Id.). Mr. Gammill's opinion is based on his “experience and [his] review of documents set forth in Appendix A [of his report] as well as observations [he] made at iPawn's location on Rodney Parham.” (Id., at 3-4). Furthermore, his opinion “is based on [his] 40 plus years of experience in managing and advising community banks . . . .” (Id.). Mr. Gammill's report is dated November 30, 2017 (Id., at 2). In his report, Mr. Gammill finds that “there are significant differences between a ‘loan' and a ‘pawn.'” (Id., at 5). Mr. Gammill's report includes, among other things, a chart comparing bank loans with pawn transactions (Id., at 6). According to this chart, bank loans and pawn transactions differ in six different respects: loan size, loan term, requirement to be repaid, credit checks, credit reporting, and pawn charge versus interest (Id.).

         The record evidence also includes the defense expert report of David Johns, whose “opinions are based on [his] experience in the pawn industry and [his] visits to the iPawn stores over past years.” (Dkt. No. 53-29, at 2). Mr. Johns avers that “there is very little in common between each transaction, other than the reference to these transactions as ‘pawns.'” (Id.). Mr. Johns further states that “[t]he typical pawn at iPawn is written for a thirty day period with availability to the individual who requests the pawn to extend it beyond thirty days if their particular need dictates.” (Id.). He also states that “[t]he amount of a pawn is not predictable, as the amount extended a customer depends on need and the value of the merchandise offered by the customer as collateral for the pawn.” (Id.). He opines that the “difference between the value of merchandise offered for pawn collateral and the amount requested by the customer for the pawn is the subject of negotiation between iPawn and customers” and that “[m]erchandise offered as collateral for a pawn varies significantly, ” ranging from “appliances to jewelry, to electronics, to guns, and can include almost any type of personal property a customer might possess.” (Id., at 3). Thus, he opines that “no two pawn transactions are alike.” (Id.).

         Mr. Jones was deposed in this case. He states that he has done business with pawn shops for “probably about seven or eight years . . . .” (Dkt. No. 44-3, at 2). He further states that he went back to pawn shops to pick up his merchandise (Id., at 3-4). Mr. Jones states that he picked up merchandise at iPawn's Rodney Parham location (Id., at 4). Mr. Jones states that, after this lawsuit was filed, he went to the iPawn Rodney Parham location and retrieved his items (Id.). He notes that he did not have to pay a fee (Id., at 4-5). Mr. Jones also testifies that he has “twice” gone back and obtained an extension on his merchandise from iPawn (Id., at 5). In response to a question as to whether he was “not obligated to get [his] stuff back, ” Mr. Jones answered, “I guess you can say that.” (Id., at 7). Mr. Jones further testified that there have been occasions when he pawned an item at an iPawn location and his property was sold (Id., at 53-20, at 11). Mr. Jones testified that, as to his property, “[m]y intentions were to go back and get it, and the money wasn't right, so I wasn't able to go back and get it.” (Id.).

         Attached as exhibits to Mr. Jones' deposition are five pawn tickets (Dkt. No. 44-3, at 22-27). The first pawn ticket is for a pawn transaction on December 5, 2015, involving a “Boss BV93648 CD Player” (Id., at 22). This pawn ticket has Mr. Jones' name and personal information on it (Id.). The “amount financed” is $100.00, the “finance charge” is $25.00, the “total of payments” is $125.00, and the annual percentage rate is listed as 300.00% (Id.).

         Mr. Jones also pawned a weed trimmer, which is recorded on pawn ticket number 116589 (Id., at 11, 25). The pawn ticket for this transaction states that the merchandise being pawned was a “Homelite UT3 String Trimmer.” (Id., at 23). The “amount financed” is $40.00, the “finance charge” is $10.00, the “total of payments” is $50.00, and the listed annual percentage rate is 300.00% (Id., at 23).

         The third pawn ticket attached to Mr. Jones' deposition is for a “Car Ster[e]o Power Acoustik . . . .” (Id., at 24). This is pawn ticket number 116741 (Id., at 10, 24). In this transaction, which occurred on June 20, 2016, the amount financed was “$15.00” and the finance charge was “$3.75, ” with a total of payments indicated as “$18.75” on the pawn ticket (Id., at 24). The pawn ticket for this transaction includes an arbitration clause (Id.).

         Pawn tickets 116589 and 116741 have the phrase “iPawn Arkansas, Inc.” in the header, followed by “11108 N. Rodney Parham Rd.” (Id., at 23-24). Pawn ticket # 107937 says “iPawn Arkansas, Inc. #2” in the header, followed by “6115 Baseline Rd.” (Id., at 22). Each of these pawn tickets also contain the following language:

You are giving a security interest in the following pledged goods.

See the remainder of this contract for any additional information concerning nonpayment and default and prepayment refunds or penalties.

The undersigned Pledgor agrees that the term of this loan shall be for the period set forth herein and that at the end of such period, all charges due on this loan shall be paid in full.

I also understand and acknowledge that I am giving a security interest in the pledged goods.

(Id., at 22-24).

         Also attached to Mr. Jones' deposition are two separate pawn tickets, though these take a different form from the three discussed above (Id., at 25). Mr. Jones states that he received these pawn tickets when he received his stereo and weed trimmer back from the pawnshop (Id., at 16). Both pawn tickets are dated July 11, 2016, and Mr. Jones testified that he initialed both (Id., at 13). Both pawn tickets also state “ACCOUNT PAID IN FULL.” (Id., at 25). At the top of each of these pawn tickets is the title “IPAWN ARKANSAS, INC., ” followed by “11108 N. Rodney Parham Rd.” (Id.). Defendants also present a check from iPawn Arkansas to Mr. Jones in the amount of $36.25 (Id., at 26-27). Mr. Jones concedes that his signature is on the back of this check (Id., at 13, 27). Mr. Jones stated, “I don't know what [the check] was for.” (Id., at 14).

         Mr. Powell was deposed in this matter. In his own words, Mr. Powell described a pawn transaction as one where “[y]ou pledge property for a loan” and “[y]ou lose your property” if you do not pay the money back (Dkt. No. 44-4, at 9). Attached to Mr. Powell's deposition are two pawn tickets (Id., at 19-20). The first pawn ticket, which is number 108913, lists three items: a “Actron CP9175 Orang Tool, ” a “Kenwood KDC-1028 Blk Stereo, ” and a “Logic CPX420 Silver Amplifier.” (Id., at 19). The amount financed on this pawn ticket is $40.00, the finance charge is $10.00, the total of payments is $50.00, and the annual percentage rate is noted as 300.00% (Id.). At the top of the pawn ticket is the title “iPawn Arkansas, Inc.” immediately followed by the address “6115 Baseline Rd.” (Id.). Mr. Powell testified that he was not able to go back and redeem this merchandise (Id., at 11). He also testified that he read the pawn ticket to the extent it listed the finance charge and the annual percentage rate (Id.). He also confirmed that he signed this pawn ticket (Id., at 10). Mr. Powell further testified that he “thought” he was doing business with iPawn Baseline “[b]ecause that's where I was at.” (Id., at 13). Mr. Powell testified that he “wasn't able to” redeem this merchandise (Dkt. No. 53-24, at 10).

         The second pawn ticket for Mr. Powell-number 112532-is for a “Poulan 3450 Green Chainsaw” and a “Champion 42432 Yellow Tool.” (Dkt. No. 44-4, at 20). The amount financed on this pawn ticket is $115.00, the finance charge is $28.75, the total of payments is $143.75, and the annual percentage rate is 300.00% (Id.). The title and address also reference iPawn Arkansas and the Baseline Road location (Id., at 20). Mr. Powell testified that he signed this pawn ticket (Id., at 12).

         Both pawn tickets attributable to Mr. Powell contain the following language:

You are giving a security interest in the following pledged goods.

See the remainder of this contract for any additional information concerning nonpayment and default and prepayment refunds or penalties.

The undersigned Pledgor agrees that the term of this loan shall be for the period set forth herein and that at the end of such period, all charges due on ...