United States District Court, W.D. Texas, El Paso Division
LUCINDA VINE, KRISTY POND, on behalf themselves and for all others similarly situated, Plaintiffs,
PLS FINANCIAL SERVICES, INC., and PLS LOAN STORE OF TEXAS, INC., Defendants.
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY
MARTINEZ, UNITED STATES DISTRICT JUDGE.
day, the Court considered Defendants PLS Financial Services,
Inc. and PLS Loan Store of Texas, Inc.'s [hereinafter
“Defendants”] “Motion for Summary
Judgment” (ECF No. 83) [hereinafter
“Motion”], filed on October 13, 2017, Plaintiffs
Lucinda Vine and Kristy Pond's [hereinafter
“Plaintiffs”] “Response to Defendants'
Motion for Summary Judgment” (ECF No. 86) [hereinafter
“Response”], filed on October 27, 2017, and
Defendants' “Reply in Support of Their Motion for
Summary Judgment” (ECF No. 87) [hereinafter
“Reply”], filed on November 3, 2017, in the
above-captioned cause. After due consideration, the Court is
of the opinion that Defendants' Motion should be granted
in part and denied in part for the reasons that follow.
case arises out of a dispute concerning Plaintiffs'
default on payday loans they acquired through Defendants.
Defendants are “loan brokers” that connect
customers with lenders who can provide short-term loans.
Reply 13. Both Plaintiffs applied for and obtained short-term
loans through Defendants in 2012. Mot. 3-4. In connection with
those loans, both Plaintiffs executed Credit Services
Agreements (“CSAs”) and related loan
documentation. Id. Additionally, both Plaintiffs
provided Defendants with a signed, postdated check for the
amount of their loan plus interest and loan fees, as is
customary. Id. at 4-5. According to Plaintiffs,
Defendants assured them that they would not ever deposit the
postdated checks. Pls.' Second Am. Class Action Compl. 4,
Sep. 26, 2017, ECF No. 76 [hereinafter
“Complaint”]. Rather, Defendants informed them
that they secured the postdated checks solely to verify that
the borrowers had functional bank accounts. Id.
Plaintiffs defaulted on the loan payments shortly after
receiving the loans. Mot. 7. Despite allegedly knowing that
Plaintiffs' bank accounts had insufficient funds,
Defendants cashed the postdated checks they had been
provided, which “bounced.” Id. at
7-8. Defendants thereafter submitted “Worthless Check
Affidavits” to the Collin County District
Attorney's Office [hereinafter
“DA”]. The DA requires that merchants who were
the victims of “theft arising from the passing of
worthless checks” submit these affidavits in order to
utilize the County's “Hot Check Loss Prevention
Program” [hereinafter “Program”]. See
Hot Checks, CollinCountyDA.com/hot-check/ (last visited
Jan. 16, 2018). The Program's “primary purpose is
to receive complaints of theft arising from the passing of
worthless checks and to develop those complaints into
prosecutable cases.” Id. Plaintiffs claim that
Defendants' use of the Program was a fraudulent and
improper attempt to collect on Plaintiffs' debt
obligations. This is because Defendants allegedly knew that
providing a postdated check as security for a loan does not
constitute “theft arising from the passing of worthless
checks.” See Id. (informing those who wish to
utilize the Program that the “DA's Office cannot
accept the following kinds of checks for prosecution:
Post-dated or ‘hold' checks” . . . [or]
Checks given to pay a pre-existing debt”); Resp. Ex. A.
(affiant in Worthless Check Affidavit swearing and affirming
“that said check(s) was not postdated or a hold
check(s)”). Further, despite the borrowers'
undisputed innocence of any criminal misconduct, Defendants
allegedly knew that the DA would send letters threatening
those borrowers with arrest and criminal prosecution if they
did not pay restitution. See Resp. Ex. B (ledger
information provided by Defendants indicating that other
borrowers had been sent letters by the DA in early 2012).
Defendants submitted the affidavits, Plaintiffs each received
letters from the DA claiming that checks “have been
presented to this office for criminal prosecution[ ]”
and demanding Plaintiffs pay the “amount of the
check[s], [the] statutory merchant's fees, and [the]
statutory DA service fees.” See Mot. 9
(confirming that both plaintiffs received letters); Resp. Ex.
H (DA's letter to Plaintiff Pond). The letters also warn
that if “you do not pay the check(s) and fees within
ten (10) days of the date of this letter, we will refer the
matter for criminal prosecution, in which case a warrant will
be issued for your arrest.” Resp. Ex. H. Plaintiffs
thereafter made full payments to the DA's office and
neither of their cases was ever referred for criminal
prosecution. Mot. 10. Plaintiffs object to Defendants'
practice because, they claim, it misused the Hot Check
Program as a means of debt collection by indirectly
threatening borrowers with arrest and prosecution if they did
filed their original complaint on December 17, 2015. Mot. 11.
Plaintiffs, on behalf of themselves and others similarly
situated, allege (1) malicious prosecution, (2) violations of
the Texas Deceptive Trade Practices Act (“DTPA”),
(3) fraud, and (4) violations of Texas Finance Code §
392.301 (Texas Debt Collection Act-“TDCA”).
Compl. 5─7. Defendants removed the case on January 26,
2016, based on diversity jurisdiction. Not. Removal, ECF No.
1. On March 23, 2016, Defendants filed a “Motion to
Dismiss and to Compel Lucinda Vine to Arbitration” (ECF
No. 19). The Court denied that motion. Order, June 6, 2016,
ECF No. 37. Defendants moved for reconsideration, which the
Court also denied, Order, Aug. 11, 2016, ECF No. 53, and
Defendants filed an interlocutory appeal. See Mot.
to Stay Proceedings Pending Mot. to Reconsider and
Interlocutory Appeal, July 1, 2016, ECF No. 44.
Fifth Circuit upheld the Court's denial of
Defendants' motion to compel arbitration on May 19, 2017.
See Vine v. PLS Fin. Servs., Inc., 689 F. App'x
800 (5th Cir. 2017). The Court thereafter held a status
conference to discuss class action certification and how to
proceed with discovery. After the conference, the Court
granted the parties sixty days to conduct limited discovery
“for matters relating to class certification[.]”
Preliminary Scheduling Order, June 26, 2017, ECF No. 64.
Shortly after Plaintiffs filed a motion for class
certification on September 12, 2017, Defendants filed the
instant Motion requesting summary judgment on October 13,
2017. In the Motion, Defendants argue that all of
Plaintiffs' claims are either legally invalid or
unsupported by the evidence adduced during the limited
discovery phase. The Court will address each argument raised
in the Motion in turn.
to Federal Rule of Civil Procedure 56(a), a court
“shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” A
genuine dispute will be found to exist “if the evidence
is such that a reasonable jury could return a verdict for the
nonmoving party.” Rogers v. Bromac Title Servs.,
LLC, 755 F.3d 347, 350 (5th Cir. 2014) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
Federal Rule of Civil Procedure 56(c), the party moving for
summary judgment bears the initial burden of . . .
‘identifying those portions of [the record] which it
believes demonstrate the absence of a genuine issue of
material fact.'” Norman v. Apache Corp.,
19 F.3d 1017, 1023 (5th Cir. 1994) (quoting Celotex Corp.
v. Catrett, 477 U.S. 317, 323 (1986)).
56(c) mandates the entry of summary judgment . . . upon
motion, against a party who fails to make a showing
sufficient to establish the existence of an element essential
to that party's case, and on which that party will bear
the burden of proof at trial.” Celotex Corp.,
477 U.S. at 322. Where this is the case, “there can be
‘no genuine issue as to any material fact, ' since
complete failure of proof concerning an essential element of
the nonmoving party's case necessarily renders all other
facts immaterial.” Id. at 323 (quoting Rule
adjudicating a motion for summary judgment, a court
“consider[s] evidence in the record in the light most
favorable to the non-moving party and draw[s] all reasonable
inferences in favor of that party.” Bluebonnet
Hotel Ventures, LLC v. Wells Fargo Bank, N.A., 754 F.3d
272, 276 (5th Cir. 2014).
Whether PLS Financial is a Proper Defendant
initial matter, the Court must address whether PLS Financial
is a proper defendant in this case. Defendants aver that PLS
Financial and PLS Loan Store are “distinct
entities” and that “PLS Financial is entitled to
summary judgment on all claims because it was not involved in
any way in the conduct alleged in this lawsuit.” Mot.
13. Defendants claim PLS Financial is an Illinois corporation
with no offices or operations in Texas and that it “was
never involved in the process by which PLS Loan Store
arranged, approved, or denied any loan[.]” Id.
Accordingly, they request that the Court grant summary
judgment on all claims in favor of PLS Financial. Mot. 13.
do not distinguish PLS Financial and PLS Loan Store at all in
their Complaint, and simply refer to both Defendants jointly
as “PLS.” Id. However, Plaintiffs
counter that they have not had an opportunity to discover
facts that might allow them to contest Defendants' claim
that PLS Financial was never involved in the alleged conduct.
Resp. 19. While Plaintiffs admit that they “cannot
verify or refute” this claim, they “request this
Court allow Plaintiffs to conduct written discovery into this
issue and take all necessary depositions before this Court
rules on whether PLS [Financial] is a proper party[.]”
judgment [should] be refused where the nonmoving party has
not had the opportunity to discover information that is
essential to his opposition.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 250 n.5 (1986); see also
Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d
1257, 1267 (5th Cir. 1991) (“[W]e believe that the
district court in this case should have deferred ruling on
the motion for summary judgment until the necessary discovery
was complete.”). Federal Rule of Civil Procedure 56(e)
provides that “[i]f a party fails to properly support
an assertion of fact . . . the court may: (1) give an
opportunity to support or address that fact . . . [or] (4)
issue any other appropriate order.”
the Court concludes that summary judgment regarding PLS
Financial's involvement in any alleged wrongdoing is
premature at this time. As Plaintiffs highlight, the only
discovery that the Court has allowed thus far is a two-month
period to complete limited discovery “for matters
relating to class certification[.]” Preliminary
Scheduling Order, June 26, 2017, ECF No. 64. Thus, the Court
will allow Plaintiffs an opportunity to support their claim
that PLS Financial is involved in the alleged wrongdoing and
deny without prejudice Defendants' request for summary
judgment on this ground.
first claim that “PLS wrongfully initiated criminal
proceedings against Lucinda Vine, Kristy Pond and the
remaining class members.” Compl. 6. Defendants argue
that Plaintiffs cannot legally satisfy the elements of a
malicious prosecution claim. Mot. 14. The Court agrees with
Defendants, and will therefore grant summary judgment in
their favor on Plaintiffs' malicious prosecution claim.
interests motivate the law of malicious prosecution in the
State of Texas.
The first is the interest of society in the efficient
enforcement of the criminal law, which requires that private
persons who aid in the enforcement of the law should be given
an effective protection against the prejudice that is likely
to arise from the termination of the prosecution in favor of
the accused. The second is the interest that the individual
citizen has in being protected against unjustifiable and
oppressive litigation of criminal charges, which not only
involve pecuniary loss but also distress and loss of
Browning-Ferris Indus., Inc. v. Lieck, 881 S.W.2d
288, 290 (Tex. 1994) (quoting RESTATEMENT (SECOND) OF TORTS
SEVEN ch. 29 intro. note (1977)). “These interests are
balanced by carefully defining the elements of an action for
malicious prosecution, and the balance is maintained by
strictly adhering to these elements.” Id. at
291. “To prevail on a malicious-prosecution claim, a
plaintiff must establish the following elements: (1) the
commencement of a criminal prosecution against the plaintiff;
(2) causation (initiation or procurement) of the action by
the defendant; (3) termination of the prosecution in the
plaintiff's favor; (4) the plaintiff's innocence; (5)
the absence of probable cause for the proceedings; (6) malice
in filing the charge; and (7) damage to the plaintiff.”
Vine v. PLS Fin. Servs., Inc., 226 F.Supp.3d 719,
728 (W.D. Tex. June 6, 2016), reconsideration denied, 226
F.Supp.3d 708 (W.D. Tex. Aug. 11, 2016), and aff'd, 689
F. App'x 800 (5th Cir. 2017) (citing Davis v.
Prosperity Bank, 383 S.W.3d 795, 802 (Tex. App.- Houston
[14th Dist.] 2012, no pet.)).
to Texas Law, a “criminal prosecution is initiated when
a formal charge is made to law enforcement authorities, that
is, when the charging instrument which goes before the
magistrate is executed.” Fishman v. C.O.D. Capital
Corp., No. 05-16-00581-CV, 2017 WL 3033314, at *5 (Tex.
App.-Dallas 2017, no pet.). A criminal investigation, without
any subsequent prosecution, is insufficient to support a
malicious prosecution claim. Id. at *17; see
also Thompson v. City of Galveston, 979 F.Supp. 504, 509
(S.D. Tex. 1997), aff'd, 158 F.3d 583 (5th Cir. 1998)
(“Mere interrogation or announcing the confession of a
suspect does not constitute ‘prosecution' for that
Plaintiffs allege that “after the check[s] bounced, PLS
contacted the District Attorney's Office” and
informed them that “the members of the [putative] Class
wrote bad checks and committed theft by check.” Compl.
5. They allege that “PLS had the District
Attorney's Office send demand letters threatening
criminal prosecution.” Id. Further, they claim
that “PLS knowingly, fraudulently, and falsely
threatened and/or filed criminal charges against
borrowers.” Id. Finally, they allege
“PLS agents pursued criminal actions against more than
600 of its customers[.]” Resp. 2.
Plaintiffs do not allege that the State of Texas ever
initiated any formal criminal proceedings against any PLS
customers. While the demand letters that Plaintiffs received
threatened future prosecution, Plaintiffs point to
no precedent supporting a malicious prosecution claim where
the prerequisite criminal charges are merely hypothetical.
Further, Plaintiffs all but admit that such a claim is
insufficient in their Response by acknowledging that
“they may not meet the requirements of a malicious
prosecution claim at this time[.]” Resp. 19.
Accordingly, the Court concludes that Plaintiffs'
malicious prosecution claim fails as a matter of law and that
Defendants' Motion should be granted with respect to this
Texas Deceptive Trade Practices Act
next claim that Defendants' practices violated the DTPA.
Compl. 6. The DTPA protects consumers against “false,
misleading, and deceptive business practices, unconscionable
actions, and breaches of warranty[.]” Tex. Bus. &
Com. Code Ann. § 17.44 (West). Claims brought pursuant
to the DTPA are subject to a two-year statute of limitations,
which accrues on the date the plaintiff discovers, or
reasonably should have discovered, the alleged false,
misleading, or deceptive act or practice giving rise to the
claim. Id. at § 17.565. Plaintiffs bring
multiple causes of action pursuant to the DTPA. First, they
bring DTPA claims “[p]ursuant to Chapters 392 and 393
of the Texas Finance Code” which are “actionable
under” the DTPA. Compl. 6; see Tex. Fin. Code
Ann. § 392.404 (West) (“A violation of this
chapter is a deceptive trade practice actionable under [the
DTPA]”); id. at § 393.504 (same). These
are referred to as “tied-in” claims. Second, they
claim that Defendants' alleged actions violate
“numerous provisions” of the DTPA itself,
specifically including § 17.46, which concerns failure
to disclose material information about a transaction in order
to induce a consumer into making the transaction.
Whether Plaintiffs are DTPA “Consumers”
argue that Plaintiffs are not “consumers” within
the meaning of the DTPA, and thus are prohibited from filing
suit pursuant to that statute. Mot. 18. “As a general
rule, only consumers have standing to file DTPA
claims.” Wicker v. Bank of Am., N.A., No.
EP-14-CV-91-PRM, 2014 WL 10186157, at *4 (W.D. Tex. Aug. 27,
2014) (citing Riverside Nat. Bank v. Lewis, 603
S.W.2d 169, 173 (Tex.1980)). To qualify as a consumer,
“a person must have sought or acquired goods or
services by purchase or lease.” Id. (citing
Cameron v. Terrell & Gerrett, Inc., 618 S.W.2d
535, 539 (Tex. 1981)). “‘Goods' are defined
as ‘tangible chattels or real property purchased or
leased for use.'” Knight v. Int'l Harvester
Credit Corp., 627 S.W.2d 382, 388 (Tex. 1982) (quoting
Tex. Bus. & Com. Code Ann. § 17.45(1) (West)).
“‘Services' include ‘work, labor, or
service purchased or leased for use, including services
furnished in connection with the sale or repair of
goods.'” Id. (citing Tex. Bus. & Com.
Code Ann. § 17.45(2) (West)). Further, “the goods
or services purchased or leased must form the basis of the
complaint.” Hopkins v. Green Dot Corporation,
No. 5:16-CV-365-DAE, 2016 WL 4468272, at *4 (W.D. Tex. Aug.
24, 2016) (citing Cameron, 618 S.W.2d at 539).
Riverside Nat. Bank v. Lewis, the Texas Supreme
Court considered “the question whether one who seeks a
loan from a bank in order to refinance a car qualifies as a
‘consumer' under the Deceptive Trade Practices
Act.” 603 S.W.2d 169, 170 (Tex. 1980). The court
rejected the notion that money was a “good” and
held that a lender does not provide a “service”
under the DTPA. Id. at 174-75. Thus, a borrower
typically cannot bring a DTPA claim against a lender.
initially argue that since Plaintiffs here “only sought
to borrow money, ” they are not DTPA consumers because
money is not a good and lending is not a service. Mot. 19.
However, the issue is not so simple. Defendants are
“loan brokers” rather than lenders-they act as a
middleman between the borrower and lender and charge a fee to
connect the two entities. Riverside explicitly refused
to decide whether collateral services incidental to obtaining
a loan, including loan brokerage services, constitute
actionable “services” under the DTPA. 603 S.W.2d
at 175 n.5.
after Riverside, a Texas court of appeals allowed
DTPA claims against a loan brokerage service where the
complaint was directed at the “characteristics, uses,
benefits and standards” of that service. Lubbock
Mortg. & Inv. Co. v. Thomas, 626 S.W.2d 611, 613
(Tex. App.-El Paso 1981, no writ) (“Thus, in
consideration for the value it received, [the loan broker]
could and did offer only a ‘service' as that term
is used in Riverside.”).
Thomas, Texas courts have consistently reaffirmed
the validity of DTPA claims against loan brokers. See
Lubbock, E.F. Hutton & Co. v. Youngblood, 708 S.W.2d
865, 868 (Tex. App.-Corpus Christi 1986, writ granted),
aff'd, 741 S.W.2d 363 (Tex. 1987) (holding that
“services” under the DTPA includes
“services of a ‘loan broker' in attempting to
obtain a loan for a borrower”); Mercantile Mort.
Co. v. Univ. Homes, 663 S.W.2d 45, 47-48 (Tex.
App.-Houston [14th Dist.] 1983, no writ) (“[B]rokers of
loans, unlike lenders, are subject to the provisions of the
DTPA.”); see also Montalvo v. Bank of Am.
Corp., 864 F.Supp.2d 567, 575-77 (W.D. Tex. Mar. 30,
2012) (reaffirming that “loan broker” customers
are consumers pursuant to the DTPA). Thus, the Court
concludes that Texas state law dictates that loan brokerage
services, like those at issue in this case, are actionable
under the DTPA.
the clear language in these cases, Defendants argue that
subsequent decisions have eroded their legal foundation. They
claim that while the loan-broker cases have never been
explicitly overruled, they are “contrary to the
established law in both Texas and the Fifth Circuit that
incidental services do not suffice” to create DTPA
standing. Reply 3. In support of this counter-argument,
Defendants cite an unpublished Fifth Circuit opinion, a