United States District Court, E.D. Arkansas, Western Division
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 ...