Lucinda Vine v. PLS Financial Services, Inc ( 2020 )

Case: 19-40353 Document: 00515364519 Page: 1 Date Filed: 03/30/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 19-40353 March 30, 2020
Lyle W. Cayce
Consolidated with 19-40414 Clerk
LUCINDA VINE; KRISTY POND,
Plaintiffs - Appellees
v.
PLS FINANCIAL SERVICES, INCORPORATED; PLS LOAN STORE OF
TEXAS, INCORPORATED,
Defendants - Appellants
Appeals from the United States District Court
for the Eastern District of Texas
USDC No. 4:18-CV-450
Before CLEMENT, HIGGINSON, and ENGELHARDT, Circuit Judges.
PER CURIAM:*
We hold that this court’s prior opinion in Vine v. PLS Financial Services,
Inc. (Vine I), 689 F. App’x 800 (2017), remains the law of the case, and therefore
affirm the district court’s order denying PLS’s motion to reconsider. We also
affirm the district court’s class-certification order.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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I
Vine I describes the background of this case in detail, so we will add only
the subsequent developments.
After this court affirmed the district court’s denial of PLS’s motion to
compel arbitration, the parties conducted discovery. The district court later
granted PLS summary judgment on several of Vine and Pond’s (the
“Borrowers”) claims. Among these were the Borrowers’ malicious-prosecution
claims, which the district court dismissed because the district attorney never
filed criminal charges against the Borrowers in response to PLS’s worthless-
check affidavits. The partial grant of summary judgment left pending only the
claims for common-law fraud and for violating Texas Finance Code § 393.305,
which prohibits a “credit services organization” like PLS from “directly or
indirectly engag[ing] in a fraudulent or deceptive act, practice, or course of
business relating to the offer or sale of [its] services.” See also TEX. FIN. CODE
§ 393.504 (designating a violation of § 393.305 as a “deceptive trade practice
actionable under” the Texas Deceptive Trade Practices Act).
The following month, the Texas Supreme Court decided Henry v. Cash
Biz, LP, 551 S.W.3d 111 (Tex. 2018). Under facts largely mirroring this case,
the court held that “providing information to the district attorney and letting
the chips fall where they may” did not amount to a substantial invocation of
the judicial process, and thus did not waive the defendant’s contractual right
to arbitrate. Id. at 118. The court noted that its decision conflicted with Vine I,
and it expressly agreed with the Vine I dissent. Id. at 118–19.
Back in the Western District of Texas, the district court then asked the
parties for status updates “regarding whether the present case should proceed
any differently in light of the clarification of state law” in Cash Biz. Per the
court’s order, the parties filed their status updates a few days later. PLS
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argued that Cash Biz obligated the district court to reconsider its arbitration
order. The Borrowers, unsurprisingly, argued that it did not.
On May 15, 2018, the district court held a status conference. The court
stated: “I think there is nothing in [Cash Biz] I see that binds me to a certain
result given the fact that issues relating to Texas substantive law and the Federal
Arbitration Act are quite different. I will leave it at that.” But the court went on
to say that it would “watch that [case] and other litigation that may be going on
that contains similar issues,” and that it would “wait and see what happens.”
Counsel for PLS asked the court to clarify whether it planned “to actually issue
some sort of order or opinion” on the effect of Cash Biz. The court responded: “I
don’t know I have a pending motion. I don’t anticipate I will be issuing anything
other than what has been issued to date.”
At this conference, the court also discussed whether venue was proper in
the Western District of Texas given the Borrowers’ and the identified class
members’ domiciles. The following day, the court issued an order to show cause
why it should not transfer the case to the Eastern District of Texas. The parties
responded, and the court transferred the case to the Eastern District on June 25,
2018. Pursuant to the Eastern District’s local rule, the transfer mooted any
pending motions. See LOCAL RULE CV-7.
The next month, the Borrowers filed a motion for class certification in the
Eastern District. Five days later, PLS filed a motion to reconsider the arbitration
order in light of Cash Biz. The district court denied the motion to reconsider on
March 25, 2019, and granted the motion for class certification on March 30. The
court certified a class containing (1) “all Texas residents who defaulted on a
payday loan from a PLS store,” (2) “against whom [PLS] filed a criminal complaint
to the District Attorney,” and (3) “who paid some or all of the additional fines and
fees to the D.A.’s office in connection with the letter” the DA sent threatening
prosecution if the recipient did not pay.
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On April 15, PLS filed a notice of appeal from the Eastern District’s March
25 and March 30 orders, as well as the original arbitration order entered in the
Western District.
II
Before we address the merits of the appeal, we must verify that we have
appellate jurisdiction.
We have jurisdiction to review the district court’s class-certification
order because this court granted PLS’s timely petition for permission to appeal.
See FED. R. CIV. P. 23(f) (“A court of appeals may permit an appeal from an
order granting or denying class-action certification under this rule . . . .”); 28
U.S.C. § 1292(e) (authorizing Supreme Court to prescribe rules permitting
interlocutory appeals).
Whether we have jurisdiction to review the order denying PLS’s motion
to reconsider its original motion to compel arbitration is more complicated. The
Federal Arbitration Act provides that “[a]n appeal may be taken from . . . an
order . . . denying an application . . . to compel arbitration.” 9 U.S.C. § 16(a).
As with other civil appeals, the notice of appeal “must be filed . . . within 30
days after entry of the judgment or order appealed from.” FED. R. APP. P.
4(a)(1)(A). PLS filed its notice of appeal on April 15, 2019, nearly three years
after the district court entered its original order denying PLS’s motion to
compel arbitration on June 6, 2016.
PLS argues that its notice was timely because the 30-day window to
appeal began when the Eastern District denied PLS’s motion to reconsider the
arbitration order in light of Cash Biz. The Borrowers, by contrast, argue that
the motion to reconsider did not toll the time for appealing the original
arbitration order because PLS filed the reconsideration motion long after the
time to appeal the original order had passed. True enough. This is not a case
about “tolling” the time for appeal. See FED. R. APP. P. 4(a)(4)(A). We do not
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have jurisdiction to review the original arbitration order. Rather, for us to have
appellate jurisdiction, the Eastern District’s order denying the motion to
reconsider must itself be an immediately appealable order denying an
application to compel arbitration. See 9 U.S.C. § 16(a).
As the Borrowers correctly point out, a party cannot circumvent
jurisdictional time-limits for an appeal by filing a successive motion that
“presents the same factual and legal bases” as the first motion and then
appealing the denial of the successive motion. Kossman Contracting Co. v. City
of Houston, 128 F. App’x 376, 377–78 (5th Cir. 2005); see also Charles L.M. v.
N.E. Indep. Sch. Dist., 884 F.2d 869, 870 (5th Cir. 1989) (“We have squarely
held that where an appellant files a second motion to reconsider ‘based upon
substantially the same grounds as urged in the earlier motion,’ the filing of the
second motion does not interrupt the running of the time for appeal, and the
appeal must be dismissed.”). There is, however, an exception to this general
rule “against appealing from a successive motion if there are changed
circumstances, new evidence, or a change in the law.” Kossman, 128 F. App’x
at 378 (quoting Birmingham Fire Fighters Ass’n 117 v. Jefferson County, 290
F.3d 1250, 1254 (11th Cir. 2002)). In assessing changed circumstances, we
must not conflate this threshold jurisdictional question with the merits of the
appeal. See Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 627–29 (2009). The
purpose of this rule is to separate “manipulative” litigation tactics that are
“nothing more than an attempt to circumvent the . . . time restriction
applicable to the appeal” from “good faith” arguments—even if they are
ultimately unsuccessful—that changed circumstances should alter the
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outcome of the motion. French v. Wachovia Bank, 574 F.3d 830, 833–34 (7th
Cir. 2009). 1
Here, PLS had a good-faith argument that the Cash Biz decision
constituted a change in the law that justified a renewed motion to compel
arbitration. We do not believe that PLS filed the motion to reconsider for the
purpose of evading Rule 4’s time restrictions. Thus, whether PLS’s motion to
reconsider has merit or not, the district court’s order denying that motion was
an order denying an application to compel arbitration, and we have jurisdiction
to review the order pursuant to 9 U.S.C. § 16(a). 2
III
Having confirmed our jurisdiction, we turn to the district court’s denial
of PLS’s motion to reconsider the motion to compel arbitration. The Western
District’s initial arbitration order concluded that PLS waived its right to
arbitrate by “substantially invok[ing] the judicial process to the detriment or
prejudice of the other party.” Subway Equip. Leasing Corp. v. Forte, 169 F.3d
324, 326 (5th Cir. 1999) (quoting Miller Brewing Co. v. Ft. Worth Distrib. Co.,
781 F.2d 494, 497 (5th Cir. 1986)). Ordinarily, a district court is free to revise
an interlocutory order like this one “at any time before the entry of a judgment
1 Thus, our jurisdictional holding does not dictate the result of our law-of-the-case
inquiry. See infra part III.
2 The Borrowers assert that this was actually PLS’s second motion to reconsider in
light of Cash Biz. By the Borrowers’ account, PLS’s response to the Western District’s request
for a status update was effectively a motion to reconsider, which the Western District then
denied at the status conference. If this were correct, then the time to appeal that order
expired before PLS filed the successive motion, meaning that the motion did not toll the
appeal deadline. But the transcript of the status conference contradicts the Borrowers’
argument. True, the district court expressed doubt that Cash Biz made a relevant change in
the law. But it explicitly left the issue open for further discussion. The court also made clear
it was not entering an order regarding Cash Biz because there had been no motion to
reconsider. So there was nothing for PLS to appeal at that point.
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adjudicating all the claims and all the parties’ rights and liabilities.” FED. R.
CIV. P. 54(b).
Here, however, given our previous decision in Vine I, the law-of-the-case
doctrine potentially limited the district court’s review. “Under that doctrine,
the district court on remand, or the appellate court on a subsequent appeal,
abstains from reexamining an issue of fact or law that has already been decided
on appeal.” United States v. Teel, 691 F.3d 578, 582 (5th Cir. 2012).
Reexamination is permitted only if (1) there is a substantial change in the
evidence, (2) there is a change in controlling law, or (3) the original decision
was clearly erroneous and failing to correct it would be manifestly unjust.
Fuhrman v. Dretke, 442 F.3d 893, 897 (5th Cir. 2006). Whether the law of the
case precludes reconsideration is a question of law that we review de novo.
Med. Ctr. Pharm. v. Holder, 634 F.3d 830, 834 (5th Cir. 2011). We agree with
the district court that none of the exceptions applies here.
Two of the exceptions are quickly dismissed. First, Cash Biz is not an
intervening change in controlling law. Whether PLS substantially invoked the
judicial process is a question of federal substantive law. See Miller Brewing,
781 F.2d at 497 n.4 (“dismiss[ing] out of hand” the argument that it was a
question of state contract law). The fact that the Texas Supreme Court
disagreed with this court on a question of federal law cannot change the law of
the case.
Second, PLS cannot show that Vine I was clearly erroneous or that
relying on it would cause manifest injustice. For us to ignore the law of the
case under this exception, the prior decision must be “dead wrong.” Hopwood
v. Texas, 236 F.3d 256, 273 (5th Cir. 2000). Multiple courts have now issued
thoughtful—though divergent—opinions on whether filing worthless-check
affidavits waives arbitration. Even if Vine I was wrong, “the question is close.”
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Vine I, 689 F. App’x at 807 (Higginson, J., dissenting). Vine I was not dead
wrong. 3
Only the new-evidence exception requires a closer look. At the time Vine
I was decided, the parties had yet to conduct discovery. Accordingly, the court
accepted the Borrowers’ well-pleaded facts as true, Vine I, 698 F. App’x at 802,
including the allegation that PLS “file[d] criminal charges against borrowers.”
Discovery later revealed that, though the DA had threatened to have the
Borrowers arrested and prosecuted, the Borrowers ultimately avoided
prosecution by paying the DA’s office the amounts of their bounced checks plus
fees. PLS argues that the absence of criminal charges of prosecution
undermines Vine I’s holdings that PLS substantially invoked the judicial
process and that the Borrowers suffered any prejudice. We disagree with PLS
on both counts.
Vine I held that PLS substantially invoked the judicial process by
“submitting false worthless[-]check affidavits” to the DA’s office, thereby
“initiat[ing] a process that invite[d] [the DA] to address issues that [were] at
stake in the instant action.” Vine I, 689 F. App’x at 806. Nothing in this holding
depended on whether the DA actually prosecuted the Borrowers. Per Vine I,
PLS’s “invocation” was complete as soon as PLS tried to use the criminal-
justice system rather than arbitration to collect from the Borrowers.
On the prejudice prong, Vine I held that the borrowers showed sufficient
prejudice because they “would have borne the costs of defending against any
theft by check prosecution,” and “would have suffered the preclusive effect of a
conviction in any subsequent litigation.” Id. at 807 (emphasis added). This
3 Were this panel writing on a blank slate, we might have agreed with the Texas
Supreme Court that submitting affidavits to the DA’s office is not sufficient invocation of the
judicial process to waive arbitration. In fact, the Texas Supreme Court cited the dissenting
opinion from Vine I that a member of this panel wrote. See Cash Biz, 551 S.W.3d at 118–19.
But we too are constrained by the law of the case.
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hypothetical language suggests that the ultimate lack of prosecution does not
undermine Vine I’s holding. In any event, PLS was successful in using the
criminal-justice system to get exactly what it wanted from the Borrowers—
repayment of the loans—and additional fees to boot. These out-of-pocket
expenses are independently sufficient to constitute “prejudice.”
PLS asserts that the Borrowers suffered no prejudice because PLS later
refunded them an amount greater than the fees they paid to the DA. Assuming
this is true (something Vine and Pond dispute), PLS sent the checks years after
causing the prejudice, and only after the Borrowers had filed suit. PLS has
provided no argument or authority that supports it having the ability to “buy
back” its right to arbitrate years after invoking the judicial process to the
Borrowers’ detriment. Thus, even if there is a factual dispute about the
existence or amount of the refunds, this ultimately goes to the Borrowers’
damages claims, not to PLS’s waiver of arbitration.
IV
We next address the district court’s class-certification order. “We review
a district court’s certification of a class for abuse of discretion, but if the court’s
error is a matter of law, the court necessarily abuses its discretion.” Torres v.
S.G.E. Mgmt., L.L.C., 838 F.3d 629, 635 (5th Cir. 2016) (en banc). We review
questions of law de novo. Regents of Univ. of Cal. v. Credit Suisse First Bos.
(USA), Inc., 482 F.3d 372, 380 (5th Cir. 2007).
PLS argues that the district court abused its discretion in certifying this
case as a class action because (1) the Borrowers signed a waiver of their right
to participate in a class action, and (2) the class does not meet the requirements
of Rule 23(b)(3) of the Federal Rules of Civil Procedure. We conclude that the
district court did not abuse its discretion in either respect.
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A
PLS argues that the Borrowers’ loan agreements waived their right to
participate in a class action. The relevant language appears in section 2(c) of
the loan agreement’s “Waiver of Jury Trial and Arbitration Provision”:
2. You acknowledge and agree that by entering into this
Arbitration Provision:
(a) YOU ARE GIVING UP YOUR RIGHT TO HAVE A
TRIAL BY JURY TO RESOLVE ANY DISPUTE ALLEGED
AGAINST US . . . ;
(b) YOU ARE GIVING UP YOUR RIGHT TO HAVE A
COURT, OTHER THAN A SMALL CLAIMS TRIBUNAL,
RESOLVE ANY DISPUTE ALLEGED AGAINST US . . . ;
(c) YOU ARE GIVING UP YOUR RIGHT TO SERVE AS A
REPRESENTATIVE, AS A PRIVATE ATTORNEY GENERAL,
OR IN ANY OTHER REPRESENTATIVE CAPACITY, OR TO
PARTICIPATE AS A MEMBER OF A CLASS OF CLAIMANTS,
IN ANY LAWSUIT FILED AGAINST US . . . . YOUR DISPUTE
MAY NOT BE CONSOLIDATED WITH THE DISPUTE OF ANY
OTHER PERSON(S) FOR ANY PURPOSE(S).
We agree with the district court that “the most plausible way to interpret
a class action waiver in the middle of an arbitration provision is as part of the
explanation of the rules, rights, and procedures that apply if a dispute is
arbitrated—‘not as an independently effective waiver of the right to pursue a
class action outside the arbitration context,’” (quoting Meyer v. Kalanick, 185
F. Supp. 3d 448, 454 (S.D.N.Y. 2016). The Borrowers gave up their right to
participate in a class action by virtue of their agreement to resolve disputes
exclusively through individual arbitration. But once PLS waived the
arbitration provision, the Borrowers were free to select another form of dispute
resolution, including a class action.
The loan agreement’s jury-trial waiver provision confirms our
conclusion. The right to a jury trial, like a class action, is included as one of the
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rights given up as a result of agreeing to arbitrate. But the loan agreement
includes an additional jury-trial waiver outside the arbitration provision to
show that the parties waived their right to a jury trial, full stop—not just as a
consequence of agreeing to arbitrate. PLS chose to treat the class-action waiver
differently when it drafted the form contract. See Gonzalez v. Mission Am. Ins.
Co., 795 S.W.2d 734, 737 (Tex. 1990) (“It is well-established law that where an
ambiguity exists in a contract, the contract language will be construed strictly
against the party who drafted it since the drafter is responsible for the
language used.”). Thus, once PLS waived the arbitration provision, the
Borrowers were free to proceed as part of a class action.
B
Finally, we address the district court’s findings that this case meets the
requirements for class certification under Rule 23 of the Federal Rules of Civil
Procedure. Our review of these findings is deferential. Torres, 838 F.3d at 635.
“Implicit in this deferential standard is a recognition of the essentially factual
basis of the certification inquiry and of the district court’s inherent power to
manage and control pending litigation.” Allison v. Citgo Petroleum Corp., 151
F.3d 402, 408 (5th Cir. 1998).
We need not spend much time discussing the district court’s findings on
numerosity, commonality, typicality, or adequacy of representation. See FED.
R. CIV. P. 23(a)(1)–(4). We affirm these findings for essentially the same
reasons that the district court articulated.
The parties’ principal dispute about Rule 23 is whether the district court
abused its discretion in finding “that the questions of law or fact common to
class members predominate over any questions affecting only individual
members.” FED. R. CIV. P. 23(b)(3). PLS argues that individualized questions
predominate because the case will require individualized proof of each class
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member’s (1) damages and (2) actual and justifiable reliance on PLS’s
misrepresentations.
The district court did not abuse its discretion in concluding that
individualized proof of damages would not predominate over common
questions. Its finding that the requests for actual economic damages are “fairly
uniform” is supported by the evidence. The “merchant fee” and DA “service fee”
are set by statute. And the DA’s office provided a table from its database
showing the amount it collected from each class member. Even if damages
required separate litigation, that would not preclude class certification on the
central, common questions. See Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct.
1036, 1045 (2016). 4
Nor did the court abuse its discretion in finding that proof of the
Borrowers’ reliance on PLS’s misrepresentation would not defeat
predominance. Generally, “[f]raud actions that require proof of individual
reliance cannot be certified as [Rule 23(b)(3)] class actions because individual,
rather than common, issues will predominate.” Sandwich Chef of Tex., Inc. v.
Reliance Nat’l Indem. Ins. Co., 319 F.3d 205, 211 (5th Cir. 2003). But this rule
has an exception. As the en banc court in Torres explained, common issues can
still predominate if common evidence of fraudulent misrepresentation “gives
rise to a reasonable inference that that misrepresentation induced [the class
members’ actions] and caused their losses.” 838 F.3d at 641. Other circuits
have likewise “permitted inferences of reliance when [they] follow[ ] logically
from the nature of the scheme, and there is common, circumstantial evidence
that class members relied on the fraud.” Id.
4The Borrowers have expressly disclaimed any request for damages from reputational
harm, such as reduced credit scores. Thus, we do not decide whether a request for such
damages would preclude class certification.
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Here, the district court rejected two of the Borrowers’ fraud theories
because they fell within the general rule. But it found that the third fraud
theory—that PLS filed affidavits with the DA’s office fraudulently
representing that the Borrowers had committed theft by check—could rely on
common evidence and reasonable inferences to prove reliance. This was not an
abuse of discretion under Torres. The record contains enough evidence for a
jury to find that PLS knew that post-dated checks offered as security for a loan
could not be referred to the DA’s office for collection or prosecution as theft-by-
check cases. Yet PLS filed affidavits representing to the DA’s office that the
Borrowers’ bounced checks were not post-dated. In other words, PLS
represented to the DA that the Borrowers’ checks were the type that could be
collected by the DA on threat of arrest and prosecution. A jury could find that
PLS did so hoping that the DA, relying on PLS’s assertion, would threaten
prosecution and that the Borrowers, fearing prosecution, would then repay the
loans. Under these circumstances, a jury may reasonably infer that the
Borrowers would not have paid the DA’s office had they not believed that their
bounced checks could actually constitute theft by check—the very
misrepresentation PLS made in its affidavits and that the DA’s threat of
prosecution conveyed to the borrowers. See Torres, 838 F.3d at 643.
This case is much like In re U.S. Foodservice Inc. Pricing Litigation,
which the Torres majority relied on. See 729 F.3d 108 (2d Cir. 2013). There, the
Second Circuit explained that, “[i]n cases involving fraudulent overbilling,
payment may constitute circumstantial proof of reliance based on the
reasonable inference that customers who pay the amount specified in an
inflated invoice would not have done so absent reliance upon the invoice’s
implicit representation that the invoiced amount was honestly owed.” Id. at
120. Just as it may reasonably be inferred that someone who paid a bill did so
because they believed what the bill told them, a jury may infer that the
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Borrowers believed what the DA’s letter told them, which was in turn based on
what PLS’s affidavits told the DA. Under these circumstances, the district
court did not abuse its discretion in concluding that class-wide issues will
predominate over individual ones.
AFFIRMED.
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