Gladys Kessler, United States District Judge.
Two motions are before this Court. The first motion is Federal Defendants' Motion to Dismiss Check Into Cash, Inc. ("Check Into Cash"), NCP Finance Limited Partnership and NCP Finance Ohio, LLC ("NCP Finance"), PH Financial Services, LLC ("PH Financial"), Northstate Check Exchange, and Richard Naumann ("collectively New Plaintiffs") for lack of subject matter jurisdiction or for failure to state a claim upon which relief can be granted or, in the alternative, for summary judgment. [Dkt. No. 152]. The second motion is Federal Defendants' Motion for Summary Judgment against Advance America. [Dkt. No. 101-1].
After consideration of the Motions, all dispositive briefing, and the entire record herein, and for the reasons stated below, the Federal Defendants' Motions are denied as to all Plaintiffs except PH Financial.
On June 5, 2014, CFSA and Advance America (collectively "Original Plaintiffs") commenced this lawsuit. Complaint [Dkt. No. 1]. The Original Plaintiffs alleged that the Federal Defendants — the Federal Deposit Insurance Corporation ("the FDIC"), the Board of Governors of the Federal Reserve System, and both the Office of the Comptroller of the Currency and Thomas J. Curry, in his official capacity as the Comptroller of the Currency ("the OCC") — participated in "Operation Choke Point," a campaign allegedly initiated by the United States Department of Justice to force banks to terminate their business
The Original Plaintiffs brought two distinct categories of claims against the Federal Defendants. First, they alleged that certain actions taken by the Federal Defendants as part of Operation Chokepoint violated the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 551 et seq., FAC ¶¶ 80-108, 116-44, 152-77. Second, they alleged that Operation Chokepoint violated the due process rights of CFSA's members, one of which is Advance America. FAC ¶¶ 109-115, 145-51, 178-84.
On September 25, 2015, in response to Motions to Dismiss brought by the Federal Defendants, the Court dismissed all of the Original Plaintiffs' APA claims.
Prior to the entry of the decision in
As already noted, two new Motions are now before the Court. First, is the Government's Motion to Dismiss, arguing that the New Plaintiffs should be dismissed for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted or, in the alternative, for summary judgment. Corrected Motion to Dismiss [Dkt. No. 152].
The New Plaintiffs filed an Opposition to the Corrected Motion to Dismiss ("Opposition to the Corrected Motion"), [Dkt. No. 153], and the Federal Defendants filed a Reply to the Corrected Motion to Dismiss ("Reply to the Corrected Motion to Dismiss"), [Dkt. No. 156]. Similarly, Advance
As courts of limited jurisdiction, federal courts possess only those powers specifically granted to them by Congress or directly by the United States Constitution.
"[T]he irreducible constitutional minimum of standing contains three elements. First, the plaintiff must have suffered an injury in fact ... which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of ... Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision."
The Federal Defendants argue that the New Plaintiffs lack standing because "[their] conclusory allegations regarding the potential for future loss of access to the banking system, and a future preclusion from the payday lending industry, do not set forth a `real and immediate' threat of injury." Corrected Motion to Dismiss at 22. These are quite similar to the arguments that the Federal Defendants raised in their Motions to Dismiss the claims made by Advance America.
Just as the Court previously rejected those arguments with respect to Advance America, the Court now rejects them with respect to the New Plaintiffs. The New Plaintiffs allege that they have previously lost bank accounts as a result of the actions of Federal Defendants, and that they will continue to do so if those actions continue unabated. TAC ¶¶ 128, 135, 142. Those allegations are sufficient to demonstrate the injury in fact, causation, and redressability necessary to establish New Plaintiffs' standing.
Additionally, the Federal Defendants argue that this case is not ripe because "there are too many `ifs' in the [New Plaintiffs'] asserted causal chain," because it "require[s] the inference that Defendants will cause banks to terminate New Plaintiffs' accounts in the future, that New Plaintiffs will be unable to replace those
Just as the Court rejects Federal Defendants' arguments regarding causation in the standing analysis, the Court rejects that argument with respect to ripeness. The Court considers New Plaintiffs' allegations-that banks regulated by Federal Defendants are terminating relationships with payday lenders as a result of Operation Chokepoint-sufficiently plausible and concrete. Therefore, the New Plaintiffs' claims are suitable for judicial review and are ripe.
The Federal Defendants also contend that Advance America lacks standing because only one remedy is available to Advance America — a name — clearing hearing-and Advance America does not seek that remedy in its Second Amended Complaint. Mot. for Summ. Judgment at 3-5. However, the Plaintiffs have filed a Third Amended Complaint which requests "such other and further relief as this Court deems just and proper," TAC ¶ 146.b, which encompasses Plaintiffs' request for a name-clearing hearing. Opposition to Motion for Summary Judgment at 10. If granted, such a hearing could result in the restoration of banking relationships or a cessation of continued terminations by bringing Plaintiffs out from under a cloud of regulatory scrutiny. That is sufficient to satisfy the standing requirement.
Rule 12(b)(6) of the Federal Rules of Civil Procedure permits dismissal upon the "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face."
At the Rule 12(b)(6) stage, the court accepts all of the complaint's factual allegations as true and draws all reasonable inferences from those facts in plaintiff's favor.
The Federal Defendants raise three arguments as to why the New Plaintiffs have failed to state a claim upon which relief can be granted. First, they contend that the New Plaintiffs failed to plausibly allege a deprivation of a liberty interest, by either establishing that they have already been effectively cut off from the banking system or broadly precluded from the payday lending industry, as required by this Court in
Federal Defendants begin by arguing that the New Plaintiffs have failed to plausibly allege that they have already been effectively cut off from the banking system or broadly precluded from the payday lending industry. That may be true but, ultimately, beside the point. The crux of the New Plaintiffs' allegations is that these harms will occur in the future if Operation Chokepoint is allowed to continue.
The Federal Defendants argue that the New Plaintiffs' allegations of future harm are simply too uncertain to be plausible. Corrected Motion to Dismiss at 13-14. The Court disagrees. It is undisputed that the New Plaintiffs have already lost bank accounts,
Finally, Federal Defendants argue that the New Plaintiffs have not alleged that the Federal Defendants made statements that could plausibly demonstrate a due process violation. For example, they argue that the statements identified by the New Plaintiffs are not stigmatizing. Corrected Motion to Dismiss at 15-18. Instead, Federal Defendants contend that these statements at best constitute "pressure" on regulated banks, and that mere pressure is insufficient to support New Plaintiffs' due process claims.
At this early stage of the litigation, such arguments are unpersuasive. Federal Defendants have raised these arguments before, and the Court has so far declined to resolve them.
It is true that in ruling on the Preliminary Injunction, the Court held that the New Plaintiffs were unlikely to prevail on the merits.
The Court reaches two different conclusions in deciding these two Motions because of the different standards employed when reviewing a motion for preliminary injunction — "likelihood of success on the merits" — and when reviewing a motion to dismiss — "plausibility." The plausibility requirement is not a probability requirement.
Finally, Federal Defendants argue that PH Financial Services should be dismissed because it has failed to state a claim. They note that the crux of the Plaintiffs' argument is that Operation Chokepoint has stigmatized payday lenders, resulting in the termination of their bank accounts. However, PH Financial is not a payday lender, a fact to which Plaintiffs admit.
The Court agrees that PH Financial should be dismissed for failure to state a claim. The underlying theory of the Plaintiffs' due process claim is that the Federal Defendants have stigmatized payday lenders. But if PH Financial is not a payday lender, then it is simply implausible, even under the facts alleged by Plaintiffs, that Federal Defendants stigmatized PH Financial, and it cannot state a claim for which relief can be granted.
Summary judgment may be granted only if the pleadings, the discovery materials, and affidavits on file show that there is no genuine issue as to
In reviewing the evidence on a motion for summary judgment, the court views the evidence in the light most favorable to the nonmoving party and draws all inferences in her favor.
Federal Defendants have moved for Summary Judgment against Advanced America, Check Into Cash, and NCP Finance, arguing that given the undisputed material facts, these Plaintiffs cannot show that they have suffered a deprivation of liberty without due process. Federal Defendants muster a litany of undisputed evidence demonstrating that these Plaintiffs' continue to access the banking system and remain quite profitable. Therefore, Federal Defendants argue that these Plaintiffs cannot prove their due process claims as a matter of law.
However compelling this evidence may appear to be, it is nonetheless insufficient to grant summary judgment to Federal Defendants. The crux of Plaintiffs' argument is that if Operation Chokepoint continues unabated, they will be effectively cut off from the banking system or broadly precluded from the payday lending industry in the future.
In addition, Federal Defendants argue that Check Into Cash and NCP Finance have not been broadly precluded from pursuing their chosen line of business because they are able to pursue other lines of business. This argument has no merit. These Plaintiffs may well have other lines of business that they are able to pursue should the Federal Defendants force the closure of their payday lending operations. However, the Due Process Clause protects one's right to pursue a livelihood of one's choice.
The cases cited by Federal Defendants are distinguishable. All involve instances in which the plaintiff was barred from conducting business with the government, but remained free to continue in her chosen profession by transacting with other individuals and entities outside the government program.
Because the Court cannot say as a matter of law that Plaintiffs have no right to relief, the Motion for Summary Judgment will be denied.
The Federal Defendants' request that Court strike Paragraphs 80-88, 92-93, 96, and 103-106 from the Third Amended Complaint. The Court previously ordered Plaintiffs to "omit references to absent CFSA members who are not Plaintiffs" when it granted Plaintiffs' leave to file a Third Amended Complaint. Order of February 3, 2017, at 2 [Dkt. No. 120]. Nonetheless, these paragraphs contain references to CFSA members who are not Plaintiffs.
The Order of February 3, 2017, reflected the Court's prior holding that resolution of the due process claims would turn on individualized evidence of whether any given Plaintiff had been effectively cut off from the banking system or broadly precluded from the payday lending industry.
At the same time, Plaintiffs' underlying theory is that Federal Defendants engaged in a wide-ranging campaign to put payday lenders out of business. Evidence that the Federal Defendants stigmatized other payday lenders might bolster Plaintiffs' contention that such a campaign exists, and therefore, that Federal Defendants stigmatized them as well.
For that reason, the Court will deny Federal Defendants' request to strike these paragraphs.
For the foregoing reasons, Federal Defendants' Corrected Motion to Dismiss is granted, in part, with respect to the claims brought by PH Financial, and denied, in part, as to the claims of all other Plaintiffs and as to the request to strike, and Federal Defendants' Motion for Summary Judgment is denied.