United States District Court, E.D. Texas, Sherman Division
LUCINDA VINE, KRISTY POND, on behalf of themselves and all others similarly situated,
PLS FINANCIAL SERVICES, INC. and PLS LOAN STORE OF TEXAS, INC.
MEMORANDUM OPINION AND ORDER
L. MAZZANT, UNITED STATES DISTRICT JUDGE
matter is before the Court on Plaintiffs Lucinda Vine and
Kristy Pond's Motion for Class Certification [Dkt. #109],
which, after careful consideration, will be granted to the
extent described herein.
PLS Loan Store of Texas, Inc. and PLS Financial, Inc.
(collectively, “PLS”) broker short-term loans
(also known as “payday loans”) to borrowers
throughout Texas. Vine and Pond allege that, to qualify for a
PLS-brokered loan, borrowers must present a post-dated or
blank personal check for the amount borrowed in addition to a
finance charge. PLS allegedly tells borrowers it will not
deposit the check and, as reflected in the Credit Service
Agreement (the “Loan Agreement”) each borrower
must sign, that they will not pursue criminal charges based
on the post-dated check (Dkt. #109, Exhibit 2 at p. 2; Dkt.
#116, Exhibit 2 at p. 48). But Pond and Vine contend that,
when a borrower misses a payment, PLS employees will deposit
the check, threaten her with criminal prosecution if the
check bounces, and send affidavits to the district attorney
(the “District Attorney” or “D.A.”)
falsely stating that her check was not post-dated or meant to
be held (the “Hot Check Affidavits”). This
prompts the district attorney to send the borrower a letter
advising that she will face criminal charges if she does not
pay off the amount of the bounced check as well as statutory
merchant fees and D.A. service fees. The record reflects that
just “a few” PLS employees were responsible for
referring the checks, and that each of these checks was
referred to the Collin County District Attorney's office
(Dkt. #109, Exhibit 5 at p. 7; Dkt. #109, Exhibit 6; Dkt.
#116, Exhibit 2 at p. 3).
and Pond subsequently filed a class action against PLS on
behalf of borrowers who received such letters for common law
fraud and violations of the Texas Deceptive Trade Practices
Consumer Protection Act (the
“DTPA”). Vine and Pond now move to certify a class
comprised of Texas residents who (1) “received a payday
loan (as defined by Tex. Fin. Code §393.221) from a PLS
Loan Store, ” (2) “failed to timely pay back the
payday loan, ” (3) and had a criminal complaint filed
against them by PLS “after December 17, 2011 for a bad
check to collect or recover this payday loan” (Dkt. #76
at p. 2). Plaintiffs seek actual damages for the merchant and
D.A. fees incurred, punitive/fraud damages, reasonable
attorney's fees, and court costs (Dkt. #76 at pp. 9- 10;
Dkt. #109, at p. 14).
questions whether such a class can be certified. PLS notes
that the Loan Agreement, which each borrower must sign,
purportedly requires the parties to waive their rights to
participate a class action lawsuit. The relevant terms,
contained in the Loan Agreement's “Arbitration
Provision, ” states that:
Arbitration is a process in which persons with a dispute: (a)
waives their rights to file a lawsuit and proceed in a court
and to have a jury trial to resolve their disputes; and (b)
agree, instead, to submit their disputes to a neutral third
party (an “arbitrator”) for a decision . . .
Therefore, You acknowledge and agree as follows:
. . .
(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, the
Lender and/or our/its related third parties. Your dispute may
not be consolidated with the dispute of any other person(s)
for any purpose(s).
3. Except as provided in Paragraph 6 below, all
disputes including any Representative Claims against us, the
Lender and/or our/its related third parties shall be resolved
by binding arbitration only on an individual basis
Therefore, the Arbitrator shall not conduct class action
arbitration; that is, the arbitrator shall not allow you to
serve as a representative, as a private attorney general, or
in any other representative capacity for others in the
arbitration. Notwithstanding any other provision herein to
the contrary, the validity, effect, and enforceability of
this waiver of class action lawsuit and class-wide
arbitration shall be determined solely by a court of
competent jurisdiction and not by the arbitrator. If the
arbitrator fails or refuses to abide by the class-action
arbitration waiver and the court refuses to enforce the
class-wide arbitration waiver, the parties agree that the
dispute will proceed in court under applicable court rules
and procedures, following all appeals, if any, of the
(Dkt. #116, Exhibit 1 at p. 18) (emphasis omitted). PLS also
argues that Plaintiffs cannot meet the requirements for class
certification under Federal Rule of Civil Procedure 23.
on the other hand, insist that the Proposed Class definition
does satisfy Rule 23's requirements. They also argue that
the Class Action Clause only applies if the dispute is
arbitrated and not litigated in federal court. They also
argue that, because the Class Action Clause is part of the
Arbitration Provision, Plaintiffs may not invoke its terms in
light of the Court's Orders that PLS waived its right to
compel arbitration (see Dkt. #37; Dkt. #53; Dkt.
#125). See also Vine v. PLS Financial Srvs.,
Inc., 689 Fed.Appx. 800, 802 (5th Cir. 2017) (affirming
the order waiving the right to compel arbitration).
action is “an exception to the usual rule that
litigation is conducted by and on behalf of the individual
named parties only.” Comcast Corp. v. Behrend,
569 U.S. 27, 33 (2013) (quoting Califano v.
Yamasaki, 442 U.S. 682, 700-701 (1979)). “The
purpose of a class action is to avoid multiple actions and to
allow claimants who could not otherwise litigate their claims
individually to bring them as a class.” Id.
(citing Crown, Cork & Seal Co., Inc. v. Parker,
462 U.S. 345, 349 (1983)). Class certification is governed by
Federal Rule of Civil Procedure 23 and subject to the
district court's “great discretion.” See
Mullen v. Treasure Chest Casino, LLC, 186 F.3d 620, 624
(5th Cir. 1999) (citing Montelongo v. Meese, 803
F.2d 1341, 1351 (5th Cir. 1986)) (“[T]he district court
maintains great discretion in certifying and managing a
certify a class under Rule 23, plaintiffs must show that the
proposed class meets the requirements of Rule 23(a) and at
least one of the three criteria for certification under Rule
23(b). See Fed. R. Civ. P. 23. Rule 23(a) imposes
four prerequisites on a class seeking certification:
“(1) numerosity (a ‘class [so large] that joinder
of all members is impracticable'); (2) commonality
(‘questions of law or fact common to the class');
(3) typicality (named parties' claims or defenses
‘are typical ... of the class'); and (4) adequacy
of representation (representatives ‘will fairly and
adequately protect the interests of the class').”
Ackal v. Centennial Beauregard Cellular, LLC, 700
F.3d 212, 216 (5th Cir. 2012) (quoting Amchem Prods.,
Inc. v. Windsor, 521 U.S. 591, 613 (1997)) (alterations
in original). Because this motion seeks to certify a class
action for damages under Rule 23(b)(3), Pond and Vine must
also establish (5) predominance (“that the questions of
law or fact common to class members predominate over any
questions affecting only individual members”); and (6)
superiority (“that a class action is superior to other
available methods for fairly and efficiently adjudicating the
controversy”). Fed.R.Civ.P. 23(b)(3).
the court should “perform a ‘rigorous
analysis' to determine whether to certify a class, it may
not require a plaintiff to establish his claims at the class
certification stage.” See Booth v. Galveston
Cty., No. 3:18-cv-00104, 2019 WL1129492, at *1-*2 (S.D.
Tex. March 12, 2019) (quoting Wal-Mart Stores, Inc. v.
Dukes, 564 U.S. 338, 351 (2011)); see also Amgen
Inc. v. Conn. Ret. Plans and Trust Funds, 568 U.S. 455,
466 (2013) (“Rule 23 grants courts no license to engage
in free-ranging merits inquiries at the certification stage.
Merit questions may be considered to the extent-but only to
the extent-that they are relevant to determining whether the
Rule 23 prerequisites for class certification are
satisfied.”) (citation omitted). Simply stated, the
certification stage is not a “dress rehearsal for the
merits.” In re Deepwater Horizon, 739 F.3d
790, 811 (5th Cir. 2014).
argues that the proposed class members may not participate in
this class action pursuant to terms they signed in standard
Loan Agreements. PLS further argues that the proposed class
cannot be certified under Federal Rule of Civil Procedure 23.
The Court addresses these arguments in turn.
Class Action Waiver
contends that the proposed class may not be certified because
Plaintiffs waived their rights to participate in a class
action pursuant to the Arbitration Provision's Class
Action Clause (Dkt. #116, Exhibit 1 at p. 18). This dispute
thus turns on whether the Class Action Clause is meant to
apply only in arbitration or whether it creates a separate
and independent waiver, regardless. See Cash Biz, LP v.
Henry, 539 S.W.3d 342, 354 (Tex. Civ. App.-San Antonio
2016); accord In re Rivers, No. 03-05671-NPO, 2010
WL 5375950, at *1 (Bankr. S.D.Miss. Dec. 22, 2010); Meyer
v. Kalanick, 185 F.Supp.3d 448, 452-54 (S.D.N.Y.
2016). The Loan Agreement provides that, unlike
other terms, those in the Arbitration Provision are governed
by the Federal Arbitration Act (Dkt. #109, Exhibit 1 at p.
4). This means that state-law principles apply when making
determinations based on general contract principles and
federal law applies when determining issues specific to
arbitration contracts. See Perry v. Thomas, 482 U.S.
483, 492 n.9 (1987). Because this question concerns the scope
of terms in the Arbitration Clause based on general contract
principles, Texas law applies. Compare with Vine,
2019 WL 1325895, at 3 (explaining that issues that pertain
only to arbitration agreements-such as the waiver of an
arbitration provision through substantial invocation of the
judicial process-are based on federal common law) (citing
Miller Brewing Co. v. Fort Worth Distributing Co.,
Inc., 781 F.2d 494, 497 & n.4 (5th Cir. 1986)).
insists that the Class Action Clause was meant to apply
whether or not the dispute is being tried in arbitration,
[The Arbitration Provision] states broadly that each
Plaintiff gave up her right to represent or participate in a
“class of claimants, in any lawsuit, ”
and addresses the enforceability of both “this waiver
of class action lawsuit and class-wide arbitration.
(Dkt. #115 at p.7) (emphasis added in PLS's brief).
According to PLS, “references to ‘class
action' and ‘lawsuit' would be superfluous if
the waiver only applied to arbitration” (Dkt. #115 at
when reading these terms in context, PLS' interpretation
appears to render substantially more language superfluous.
See Tenn. Gas Pipeline Co. v. F.E.R.C., 17 F.3d 98,
102 (5th Cir. 1994) (“A cardinal rule of contract
interpretation in Texas requires courts to review the entire
contract in order to determine its meaning; courts should not
consider any single provision in isolation.”). The
Arbitration Provision-which is separated from the remainder
of the Loan Agreement by a black box (the “Black
Box”)-summarizes the arbitration process before asking
signatories to “[t]herefore . . . acknowledge and
agree” to give up certain rights by agreeing to
arbitrate (Dkt. #116, Exhibit 1 at pp.17-19). The Arbitration
Provision's next eight paragraphs discuss the rights
given up in arbitration, including the right to class-wide
arbitration (Dkt. #116, Exhibit 1 at pp.17-19). PLS's
interpretation-which asks the Court to find that terms in the
Arbitration Provision are meant to apply outside the
arbitration context-would render the Black Box and the
introductory paragraph ending with the use of
“therefore” superfluous. And the need to
interpret the Class Action Clause pursuant to the Federal
Arbitration Act-as the Loan Contract requires of all terms in
the Arbitration Provision-would make little sense.
other courts addressing this issue have recognized, 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.” See
Meyer, 185 F.Supp.3d at 453-54 (finding that the class
action waiver inapplicable in a dispute in court on these
grounds) (emphasis in original); Cash Biz, 539
S.W.3d at 354 (“The class-action waiver provision is
not an independent agreement or provision, but is included
within the arbitration provision in the Loan Contracts.
Therefore applicability of the class action waiver provision
is dependent upon the validity and applicability of the
arbitration provision.”); Rivers, 2010 WL
5375950, at *3 (“The Court finds that it is not
reasonable to read the Purported Class Action Waiver as
applicable to litigation since the Arbitration Provision
disposed of any right Rivers had to litigate claims
‘arising from or related to [the Contract].' Based
on the language in the Arbitration Provision, it is clear
that the parties intended the Purported Class Action Waiver
to apply only to arbitration.”).
Loan Agreement's intent to limit the class action waiver
to arbitrations is especially evident when considering how
the Loan Agreement treats the waiver of the right to a jury
trial. The Loan Agreement advises borrowers that they waive
their right to a jury trial in two separate instances-once as
a clause in the Arbitration Provision and another outside of
it (see Dkt. #116, Exhibit 1 at pp. 17-18). By so
doing, the Loan Agreement makes clear that a borrower has
waived her right to have a jury hear her dispute in
arbitration or in court. It follows that the Class Action
Clause was meant to apply only in arbitration. PLS drafted
the Loan Agreement. If it wanted borrowers to waive their
right to participate in a class action when litigated it
court, it would have made that just as clear. See El Paso
Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d
802, 811 (Tex. 2012) (“[T]hose other contract
provisions support our reading of the contract because they
show that the parties knew how to state clearly when some
risks were not to be assumed by MasTec.”). Any
ambiguity stemming from the Loan Agreement's failure to
do so must be construed against PLS as the drafter. 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.”).
proposed class members did not waive their right proceed to
participate in a class action in federal court for these