Baillie v. Account Receivable Management of Florida, No. 11-00021, 2011 WL 566817 (N.D. Cal. Feb. 14, 2011).
A District Court in California held that an award of attorneys’ fees may not be considered in determining the amount in controversy when there is no basis for estimating the claims of the individual class members.
The plaintiffs brought a class action on behalf of themselves and a class consisting of thousands of California residents who entered into ‘Instant Cash Agreements’ with the defendant lenders, and may have been a recipient of a collection notice from the defendant, Account Receivable Management of Florida, Inc., (formerly known as United Legal Corporation).
The defendant, Thomas Assenzio, owned, controlled, managed and/or directed the defendants, MTE Financial Services, Inc.; Instant Cash USA; Rio Resources; Processing Solutions, LLC; First East Inc.; and Instantcashloantillpayday.com, who conducted business as consumer lenders in California.
In July 2006, the plaintiff, Amy Lynne Baillie, obtained a $300.00 ‘payday loan,’ from MTE Financial, d/b/a Instant Cash USA. In February, 2007, the defendant United Legal, notified Baillie that, notwithstanding her payments, $430.00 remained due on her loan. For her loan, Baillie was charged interest at a rate of 1,216.667% per annum.
In June 2006, the plaintiff, Katherine Rosas, obtained a $300.00 loan from Rio Resources, and in November 2006, Rosas obtained a $300.00 loan from Instant Cash USA. With respect to her November, 2006 loan, Rosas was charged interest at a rate in excess of 700% per annum. The plaintiffs alleged that the interest rate charged was usurious and unconscionable under California law.
With respect to their claim for usury and/or unconscionable lending, the plaintiffs sought a penalty equal to three times the interest paid during the year immediately prior to the filing of their complaint and to cancel all future interest that the defendants claim was due. They also sought to recover all interest paid to the defendants during the two years immediately preceding the filing of their action and to recover all interest they or putative class members paid that is not otherwise allowed by law commencing with the date four years immediately preceding the filing of their action. The plaintiffs also sought trebling of damages suffered by class members 65 years or older.
As for their claims for violation of California’s Unfair Competition Law, the plaintiffs sought restitution for any unlawful, unfair or fraudulent act committed by the defendants. Finally, for their claims for accounting and for unjust enrichment, the plaintiffs sought recovery for all interest payments and other monies the defendants received from them and the putative class, commencing with the date four years immediately preceding the filing of their action. The plaintiffs also sought attorneys’ fees and costs, pursuant to Cal. Code of Civ. P. § 1021.5.
Mr. Assenzio removed the action to federal court pursuant to CAFA, 28 U.S.C. § 1332(d).
The plaintiffs moved to remand, which the District Court granted.
The plaintiffs asserted that Mr. Assenzio had not established that the amount in controversy in their case exceeded $5 million. Mr. Assenzio did not proffer any evidence in support of jurisdiction, but instead extrapolated from the plaintiffs’ limited allegations that the amount in controversy was at least $5,610,000.
The Court, however, found that his assumptions and calculations were flawed.
Mr. Assenzio asserted that there were at least 2,000 putative class members, based on the plaintiffs’ allegation that the class consisted of “thousands” of California residents. The Court, however, observed that the record contained no evidence regarding how many California residents obtained loans through the defendant lenders. The Court remarked that even if the class consisted of 2,000 individuals, Mr. Assenzio failed to show that aggregating their claims would satisfy the jurisdictional amount.
The plaintiffs alleged injury based on amounts paid for interest allegedly charged at usurious and unconscionable rates; they sought restitution for interest paid, a penalty equal to three times the interest paid during the last year and an award of treble damages with respect to all interest paid by those class members aged 65 years or older. The Court, however, found that there was no direct evidence regarding how much interest Baillie and Rosas paid, let alone how much interest each class member paid. Nor was there evidence that the terms of the plaintiffs’ loans and those obtained by putative class members were the same. Even though both the plaintiffs obtained loans for the same amount, the size and frequency of the debits from their checking accounts differed. Further, there was no evidence concerning how many class members were aged 65 years or older.
Mr. Assenzio assumed that the average of the interest allegedly paid by Baillie and Rosas reflected the average paid by the putative class members. The Court, however, found that this assumption also lacked support because there was no evidence that putative class members’ loans were subject to the same interest rate or that payments were allocated between interest and principal in the same way as Baillie’s. Nor was there any evidence concerning the average loan amount or the average duration putative class members held their loans, both of which would impact the amount of interest a class member would have paid.
Finally, the Court observed that because there was no basis for estimating the claims of the individual class members, an award of attorneys’ fees may not be considered in determining the amount in controversy.
Accordingly, the Court concluded that Mr. Assenzio failed to establish that it was more likely than not that the amount in controversy in this action exceeded $5 million, and remanded the action to state court for lack of subject matter jurisdiction over this action.