Cash America 2007 Annual Report Download - page 39

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19
The Company considers its equipment, furniture and fixtures and owned buildings to be in good
condition. The Company has its own construction supervisors who engage local contractors to selectively
remodel and upgrade its lending facilities throughout the year.
The Company’s leases typically require the Company to pay all maintenance costs, insurance costs
and property taxes. For additional information concerning the Company’s leases, see Item 8. Financial
Statements and Supplementary Data, Note 10 of “Notes to Consolidated Financial Statements.”
ITEM 3. LEGAL PROCEEDINGS
On August 6, 2004, James E. Strong filed a purported class action lawsuit in the State Court of
Cobb County, Georgia against Georgia Cash America, Inc., Cash America International, Inc. (together with
Georgia Cash America, Inc., “Cash America”), Daniel R. Feehan, and several unnamed officers, directors,
owners and “stakeholders” of Cash America. The lawsuit alleges many different causes of action, among
the most significant of which is that Cash America made illegal payday loans in Georgia in violation of
Georgia’s usury law, the Georgia Industrial Loan Act and Georgia’s Racketeer Influenced and Corrupt
Organizations Act. Community State Bank (“CSB”) for some time made loans to Georgia residents through
Cash America’s Georgia operating locations. The complaint in this lawsuit claims that Cash America was
the true lender with respect to the loans made to Georgia borrowers and that CSB’s involvement in the
process is “a mere subterfuge.” Based on this claim, the suit alleges that Cash America is the “de facto”
lender and is illegally operating in Georgia. The complaint seeks unspecified compensatory damages,
attorney’s fees, punitive damages and the trebling of any compensatory damages. A previous decision by the
trial judge to strike Cash America’s affirmative defenses based on arbitration (without ruling on Cash
America’s previously filed motion to compel arbitration) was upheld by the Georgia Court of Appeals, and
on September 24, 2007, the Georgia Supreme Court declined to review the decision. The case has been
returned to the State Court of Cobb County, Georgia, where Cash America filed a motion requesting that the
trial court rule on Cash America’s pending motion to compel arbitration and stay the State Court
proceedings. The Court denied the motion to stay and ruled that the motion to compel arbitration was
rendered moot after the discovery sanction was handed down by the Court. Cash America is currently in the
process of appealing these latest orders from the Court. If Cash America’s further attempts to enforce the
arbitration agreement are unsuccessful, discovery relating to the propriety of continuing this suit as a class
action would proceed. Cash America believes that the plaintiffs’ claims in this suit are without merit and is
vigorously defending this lawsuit.
Cash America and CSB also commenced a federal lawsuit in the U.S. District Court for the
Northern District of Georgia seeking to compel Plaintiffs to arbitrate their claims against Cash America and
CSB. The U.S. District Court dismissed the federal action for lack of subject matter jurisdiction, and Cash
America and CSB appealed the dismissal of their complaint to the U.S. Court of Appeals for the 11th
Circuit. The 11th Circuit issued a panel decision on April 27, 2007 reversing the district court’s dismissal of
the action and remanding the action to the district court for a determination of the issue of the enforceability
of the parties’ arbitration agreements. Plaintiff requested the 11th Circuit to review this decision en banc
and this request has been granted. The en banc rehearing took place on February 26, 2008. The Strong
litigation is still at an early stage, and neither the likelihood of an unfavorable outcome nor the ultimate
liability, if any, with respect to this litigation can be determined at this time.
On October 23, 2007, a complaint, styled Ryan Bonner, individually and on behalf of all others
similarly situated, v. Cash America International, Inc., Cash America Net of Nevada, LLC, Cash America
Net of Pennsylvania, LLC and Cash America of PA, LLC, d/b/a CashNetUSA.com (collectively,
“CashNetUSA”), was filed in the United States District Court for the Eastern District of Pennsylvania,
alleging, on behalf of a purported class, that the defendants located outside Pennsylvania had engaged in
unfair or deceptive acts or practices by making loans to Pennsylvania consumers in violation of
Pennsylvania law, including its usury, fair credit extension, and unfair trade practices and consumer
protection laws. The complaint also alleges that the arbitration, class action waiver and dispute resolution
provisions contained in the loan documents involved in these loans are unenforceable. The complaint seeks