Kerr v. Ace Cash Experts, Inc., No. 4:10 CV 1645 DDN, 2010 WL 5177977 (E.D. Mo. Dec. 14, 2010).
A District Court in Missouri declined to remand the action to state court holding that if the amount in controversy is satisfied under the “preponderance of the evidence” standard, remand is appropriate only if the party seeking remand can establish that it is “legally impossible” to recover more than $5 million.
The plaintiffs, customers of the defendant, Ace Cash Experts, commenced this class action in the state court of Missouri alleging that the defendant, provider of personal loans, charged them unlawfully high interest rates and designed their loans in such a way that they would be unable to exercise the maximum number of loan renewals allowed under Missouri law, thereby trapping them into long-term debt.
In Count I of their complaint, the plaintiffs alleged that the defendant violated the Missouri Merchandising Practices Act, Mo. Rev. Stat. §§ 407.010, et seq. In Count II, the plaintiffs alleged that the defendant violated Mo. Rev. Stat. § 408.500.6 by limiting their right to request renewals of their payday loans from six requests, as protected by statute, to three requests. In Count III, the plaintiffs alleged that the defendant violated Mo. Rev. Stat. §§ 408.500.6, 408.505.3, by charging an interest rate greater than the maximum allowed by Missouri law. In Count IV, the plaintiffs alleged that the defendant violated Mo. Rev. Stat. § 408.500.6 by failing to reduce the principal amounts of their loans by at least 5 percent. In Count V, the plaintiffs alleged that the defendant failed to fully and adequately consider their ability to repay their loans, as required by Mo. Rev. Stat. § 408.500.7.
The defendant removed the case to the federal court pursuant CAFA. The plaintiffs moved to remand arguing that the defendant had not established that the amount in controversy exceeded $5 million, as required by CAFA.
The plaintiffs asserted that the class likely included between 33,000 and 100,000 individuals, each sustaining an average of $18 in damages, and argued that even with attorneys’ fees and punitive damages, their recovery would only be $3,160,000.
The defendant responded that the difference between the interest and fees actually charged and the interest and fees that would have been paid at the lower rate that the plaintiffs contend should have been charged far exceeded $5 million. The defendant argued that the plaintiffs did not consider that each individual had more than one loan with it, resulting in hundreds of thousands of transactions, or the addition of punitive damages and attorneys’ fees.
In their reply brief, the plaintiffs stated only that they were unaware of the information contained in the defendant’s response when they filed the motion, and did not challenge the defendant’s contentions.
While denying the motion to remand, the District Court observed that the removing party must prove by a preponderance of the evidence that the amount in controversy is satisfied. In applying the preponderance standard, “the jurisdictional fact is not whether the damages are greater than the requisite amount, but whether a fact finder might legally conclude that they are.” Once this showing is made, remand is appropriate only if the party seeking remand can establish that it is “legally impossible” to recover more than $5 million.
Under the backdrop of these legal principles, the Court remarked that even if the plaintiffs’ calculation of damages were believed, the potential for punitive damages and attorneys’ fees established the required amount in controversy.
In addition, the Court found that the defendant had proffered evidence that it made 205,352 total loans in Missouri during the applicable time period. Applying the plaintiffs’ damage assessment of $18 per transaction, the plaintiffs’ aggregate damages would be $3,696,336, which after adding potential punitive damages and attorneys’ fees, was sufficient to satisfy the requisite amount in controversy.
The defendant also argued that the plaintiffs’ damages could be as high as $9,312,401, based on its calculation that it collected $24,833,069 of relevant interest and fees, and that the plaintiffs alleged it charged proportionally 62.5 percent too much. The plaintiffs, however, did not challenge the defendant’s argument.
Accordingly, the Court concluded that the defendant had established by a preponderance of the evidence that the jurisdictional amount in controversy exceeds $5 million, and the plaintiffs had not proved that it was legally impossible for them to recover that amount.