Cash America 2011 Annual Report Download - page 142

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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December 31, 2011 and 2010, the amount of consumer loans guaranteed by the Company was $59.4 million and $52.6
million, respectively, representing amounts due under consumer loans originated by third-party lenders under the CSO
programs. The estimated fair value of the liability related to these guarantees of $3.1 million and $2.8 million at
December 31, 2011 and 2010, respectively, is included in “Accounts payable and accrued expenses” in the
accompanying consolidated balance sheets.
Litigation
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 short-term loans in Georgia in violation of Georgia’s usury law, the Georgia Industrial Loan Act
and Georgia’s Racketeer Influenced and Corrupt Organizations Act (“RICO”). First National Bank of Brookings,
South Dakota (“FNB”) and Community State Bank of Milbank, South Dakota (“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 FNB and CSB’s
involvement in the process is “a mere subterfuge.” Based on this claim, the suit alleges that Cash America was the “de
facto” lender and was illegally operating in Georgia. The complaint seeks unspecified compensatory damages,
attorney’s fees, punitive damages and the trebling of any compensatory damages. In November 2009, the trial court
certified the case as a class action lawsuit, and after an appeal by Cash America, the Supreme Court of Georgia upheld
the class certification in March 2011. In August 2011, Cash America filed a motion for summary judgment, and in
October 2011, the plaintiffs filed a cross-motion for partial summary judgment. Hearings on the motions were held in
October and November 2011. The trial court entered an order granting summary judgment in favor of Cash America
on one of plaintiff’s claims, denying the remainder of Cash America’s motion and granting plaintiff’s cross-motion for
partial summary judgment. Cash America filed a notice of appeal in December 2011 on the grant of partial summary
judgment, which plaintiffs sought to dismiss. A hearing was held on plaintiff’s motion to dismiss the appeal in
January 2012, and the trial court denied the motion. The appeal has not yet been scheduled with the Georgia Court of
Appeals. The case is set for jury trial in March 2012. The Company is currently unable to estimate a range of
reasonably possible losses, as defined by ASC 450-20-20, Contingencies—Loss Contingencies—Glossary (“ASC 450-
20-20”), for this litigation. 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 on September 7, 2004 in the U.S. District Court for
the Northern District of Georgia seeking to compel Mr. Strong to arbitrate his 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 in April 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 was granted. The en banc rehearing took
place in February 2008, and at the request of the 11th Circuit panel, the parties provided additional briefing in the
summer of 2009 following a ruling by the United States Supreme Court that federal courts can compel arbitration of a
state court action in certain instances. In August 2011, the 11th Circuit affirmed the trial court’s decision precluding
Cash America from compelling arbitration, and in September 2011, Cash America filed a petition for rehearing en
banc to the 11th Circuit arguing that the panel’s decision should be reversed. The 11th Circuit declined to review the
panel’s decision en banc.
On March 5, 2009, Peter Alfeche and Kim Saunders, on behalf of themselves and all others similarly situated,
filed a purported class action lawsuit in the U.S. District Court for the Eastern District of Pennsylvania against Cash
America International, Inc., Cash America Net of Nevada, LLC (“CashNet Nevada”), Cash America Net of
Pennsylvania, LLC and Cash America of PA, LLC, d/b/a CashNetUSA.com (collectively, “CashNetUSA”). The
lawsuit alleges, among other things, that CashNetUSA’s online consumer loan activities in Pennsylvania were illegal