United States District Court, D. Minnesota
S. Johnson, Greenwald Davidson Radbil PLLC, Mark L. Vavreck,
Gonko & Vavreck, PLLC, for Plaintiff.
L. Baron, George V. Desh, & Bruce N. Menkes, Mandell
Menkes LLC, Scott S. Payzant, Paul Shapiro, & Eldon J.
Spencer, Jr., Leonard, O'Brien, Spencer, Gale &
Sayre, Ltd., for Nextep Funding, LLC.
Patrick D. Newman, Bassford Remele, Richard M. Scherer, Jr.,
Lippes Mathias Wexler Friedman LLP, for Monterey Financial
MEMORANDUM OPINION AND ORDER
RICHARD NELSON, UNITED STATES DISTRICT JUDGE
matter comes before the Court on the Motions to Dismiss filed
by Defendants Nextep Funding, LLC (“Nextep”)
[Doc. No. 46] and Monterey Financial Services, LLC
(“Monterey”) [Doc. Nos. 22 & 39]. For the
reasons stated below, Defendants' motions are denied.
2017, Plaintiff LuAnn Danger purchased a Yorkshire Terrier
and Maltese mix puppy from Premier Pups. (Am. Compl. [Doc.
No. 35] ¶¶ 46-47.) Premier Pups offered the dog for
sale at a price of $1, 381.89. (Id. ¶ 47.)
financed the purchase through Defendants. (Id.
¶ 48.) Defendant Nextep is a for-profit company that
“offers a retailer to customer closed end consumer
lease platform designed to increase retailer sales by
offering customers the ability to finance goods and services
on the spot, in the store and without delay.”
(Id. ¶ 13.) Defendant Monterey is a for-profit
company that “offers a host of services related to loan
servicing, debt recovery, and consumer finance” in
order to “meet the needs of niche businesses and
consumers . . . .” (Id. ¶ 23.)
16, 2017, Danger entered into an agreement (the
“Agreement”) with Nextep, which allowed her to
take possession of the dog in exchange for 24 monthly
payments of $138.28, plus fees. (Id. ¶ 49.) The
parties dispute whether the Agreement is a consumer lease or
credit sales agreement.
second page of the nine-page Agreement bears Nextep's
logo, and is styled as a “Consumer Pet Lease
Agreement.” (Agmt. at 2,  Ex. A to Am. Compl.) It contains
a provision labeled “Important Information
Concerning Your Lease, ” and appears as
Important Information Concerning Your Lease
By signing the following documents, you are entering into a
Closed End Consumer Product Lease.
You understand that this Agreement is a
lease, not a loan and that you are leasing
You understand that you do not own the product(s)
you are leasing unless:
1) You buy the product through the early buyout option (for
more information see Section 8 of this Agreement or visit
your account at nextepfunding.com); or
2) You pay $207.28 after your final lease payment.
Your lease can be paid off at any time. Call us anytime to
get your payoff amount.
The total value of the product(s), capitalized cost, you are
leasing is $1381.89.
To satisfy your lease obligation you must make one in-store
payment of $173.28 and 23 lease payments of
If you decide to purchase the product(s) at the end of your
lease, you must pay a purchase price of $207.28 plus
any applicable fees or taxes.
The total amount you will have paid by the end of this lease,
at full term, is $3318.73.
You must make each monthly payment by the due date or you may
be subject to additional fees.
(Id.) (emphasis in original).
next page of the Agreement contains the provision that is
most pertinent here, outlined in a box enumerated as Section
2, bearing the heading “Federal Consumer Leasing Act
Disclosures.” (Id., § 2.) It appears as
first column of Section 2, labeled "Amount Due
at Lease Signing or Delivery, " lists a $35
"Warranty Fee," due at signing. (Id.)
(emphasis in original). In the third column, under
"Other Charges (not part of your
monthly payment)," the Agreement identifies a
"Disposition Fee" of $103.64 if Danger ultimately
decides not to purchase the dog. (Id.) (emphasis in
original). At the bottom of the Section 2 box is a provision
labeled "Purchase Option at End of Lease
Term," which applies if Danger decides to keep
the dog. (Id.) (emphasis in original). If she
decides to do so, the purchase option is $207.28, "plus
official fees and taxes related to the purchase."
second column of Section 2, under the sub-heading
"Monthly Payments," the Agreement
provides for 24 payments of $138.28, due on the 20th of each
month, and states that “[t]he Total of your Monthly
Payments is $138.28.” (Id.) (emphasis
in original). Two columns to the right, the Agreement also
states: “Total of Payments (The amount
you will have paid by the end of the Lease)[:]
$3318.73.” (Id.) (emphasis in
is identified in the Agreement as the payee for all of the
debt arising from the Agreement. (Am. Compl. ¶ 27.)
Specifically, the Agreement states that payments are to be
mailed to “Monterey Financial, 4095 Avenida De La
Plata, Oceanside, CA 92056.” (Agmt. § 9, Ex. A to
Am. Compl.) Likewise, all written communications concerning
disputed amounts must be sent to Monterey Financial, at the
same address. (Id.)
has made her required monthly payments since entering into
the Agreement, but will not complete her payments until June
16, 2019. (Am. Compl. ¶¶ 50, 51.)
February 2018, Danger filed this suit, asserting claims
under: (1) the Consumer Leasing Act (“CLA”), 15
U.S.C. § 1667 et seq., and its implementing
regulation, 12 C.F.R. § 1013 (“Regulation
M”); (2) the Truth in Lending Act,
(“TILA”), 15 U.S.C. § 1601 et seq.,
and its implementing regulation, 12 C.F.R. § 1026
(“Regulation Z”); and (3) Minnesota law
prohibiting usurious contracts, Minn. Stat. § 334.01.
She asserts her CLA claim against Nextep, (Am. Compl., Count
I), alleging that prior to the consummation of the Agreement,
Nextep falsely disclosed the total amount of periodic
payments owed under the Agreement. (Id. ¶ 114.)
Her TILA claim, asserted against both Defendants, alleges
that they failed to adequately disclose: (1) the finance
charge; (2) the finance charge expressed as an annual
percentage rate (“APR”); and (3) the sum of the
amount financed and the finance charge, i.e., the
“total of payments.” (Id., Count II.)
Danger asserts that Defendants concealed “the
exorbitant annual percentage rate” of 120% that applied
to her purchase. (Id. ¶¶ 125-26.) Finally,
Plaintiff asserts claims of usury arising under Minnesota
state law against both Defendants. (Id., Count III.)
She contends that the 120% APR to purchase the dog far
exceeds the usury statute's 8% limit for personal debt.
(Id. ¶¶ 141-42.)
her injuries, Plaintiff alleges that Nextep “took from
her the ability to shop intelligently for alternative
financing.” (Id. ¶ 73.) She asserts that
had she known the true effective interest rate in the
Agreement, she would have “pursued other financing
options such as using a credit card or obtaining a personal
loan through her credit union.” (Id. ¶
74.) She contends that these alternative financing options
would have carried a lower interest rate. (Id.
Defendants move to dismiss Plaintiff's claims. Citing
Federal Rule of Civil Procedure 12(b)(1), they argue that
Danger lacks standing to assert her federal claims, requiring
the dismissal of Counts I and II for lack of subject matter
jurisdiction, (Nextep's Mem. at 5-14 [Doc. No. 48];
Monterey's Mem. at 2-7 [Doc. No. 41]), including claims
for which she seeks injunctive relief for future harms.
(Nextep's Mem. at 15-17.) Defendants further argue that
because the Court lacks subject matter jurisdiction over
Counts I and II, it should dismiss the pendent state law
usury claim for lack of supplemental jurisdiction.
(Id. at 14; Monterey's Mem. at 14 n.3.)
the Court finds that Plaintiff has sufficiently alleged
Article III standing, Defendants move to dismiss her claims
pursuant to Federal Rule of Civil Procedure 12(b)(6). Nextep
argues pursuant to Rule 12(b)(6), that Count I should be
dismissed because Danger has not plausibly alleged that
Nextep failed to comply with the CLA. (Id. at
18-22.) Monterey argues that Count II fails under Rule
12(b)(6), because ...