Opinion ID: 3060228
Heading Depth: 3
Heading Rank: 3

Heading: Security Finance’s Motion to Modify

Text: On September 8, 2009, pursuant to Federal Rule of Civil Procedure 60(b)(5), Security Finance moved to modify the settlement agreement and final judgment arguing that the Christ decision constituted a significant change in legal circumstances, which required a modification of the consent decree’s injunction. Security Finance also asserted that the injunction was a hindrance to its ability to operate its business and to compete. To support its position, Security Finance filed the eight paragraph affidavit of Ray Biggs, which made similar assertions but did not provide any factual details to support the conclusory statements.5 While 5 The relevant portions of the Biggs Affidavit state: 4. Since the entry of the Final Judgment in this case ten years ago, the Company has not purchased the product described in the litigation as “non-file insurance” and, likewise, has not charged a fee to customers for this product. Under the permanent injunction entered by the court, the Company is prohibited from doing so, regardless of the manner in which the product was described or disclosed by the Company to its customers. 5. Due to the relatively small size of the loans made by the Company, which are less than $1,500.00, and the nature of the collateral securing the loans (personal property that is often difficult to locate when the debtor fails to pay a loan), the Company’s profitability depends on simplicity. The use of non-file insurance would, for example, allow the Company to avoid the more complicated process of perfecting a lien on the personal property, allow the Company to avoid participation in bankruptcy proceedings by relying on the non-file insurance, and help offset clerical costs incurred by the Company in connection with nonperforming loans. 6. During the last ten years, the Company’s competitors have continued to purchase “non-file insurance” and to charge a fee to their customers for the product, and the Company’s competitors apparently have the right to continue to do so in the future. 7. The permanent injunction imposed by the Court necessarily places the 7 Plaintiffs opposed the motion, they did not file any opposing affidavits; they directed the district court to their evidentiary support for their motion for partial summary judgment. After considering the parties’ submissions, the district court applied the test in Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367 (1992), and denied the motion to modify the consent decree because Security Finance had not met its burden. Rufo’s two prong test requires the moving party to establish, first, that a significant change in circumstances warrants revision of the decree and, second, that the proposed modification is suitably tailored to the changed circumstance. Because the district court found that Security Finance had not established the first prong of the Rufo test, the district court determined it did not need to reach the second prong. In applying the first prong of the Rufo test, the district court found that Security Finance had not carried its burden to establish that factual or legal conditions had significantly changed to justify a modification of the consent decree. The district court also concluded that Christ constituted a clarification of, Company at a competitive disadvantage that hinders the company’s ability to compete in its line of business and to operate its business. 8. Amending the permanent injunction in this case to allow the Company to use “non-file insurance” would give the Company the same rights shared by its competitors with respect to “non-file insurance.” 8 rather than a change in, the law and that Security Finance had not met its burden to establish that the parties entered into the consent decree with a misunderstanding of the law. Security Finance then moved to alter or amend the judgment, pursuant to Federal Rule of Civil Procedure 59, and attached to its new motion the Supplemental Affidavit of Ray Biggs. The new affidavit stated that Security Finance would not have entered into the consent decree had it known that TILA did not provide for injunctive relief and that Security Finance was at a competitive disadvantage with major competitors, who do charge for non-filing insurance.6 6 The relevant portions of the Supplemental Biggs Affidavit state: 5. At the time the Company agreed to the Final Judgment, the Company had the mistaken belief that the Truth in Lending Act likely provided for injunctive relief as well as restitution and disgorgement. 6. Had the Company not been operating under this mistaken belief, I have no doubt that the Company would not have consented to the Final Judgment and the permanent injunction. 7. The injunctions entered in this MDL against several of the other defendants in the Non-File MDL have expired, such as those relating to World Acceptance Corporation, American Bankers Insurance Group, Inc., The Voyager Group, American Security Insurance Company, and Standard Guaranty Insurance Company. 8. World Acceptance Corporation is one of the Company’s major competitors. World Acceptance Corporation is now, and has been for several years, charging its customers for nonfiling insurance. 9. As just one example, World Acceptance Corporation’s publicly-filed 10-K report shows that it earned over $5 million in revenue each year between 2007 and 2009 as a result of nonfiling insurance. An excerpt of this 10-K report is attached hereto as Exhibit 1. 10. The permanent injunction imposed by the Court necessarily places the Company at a competitive disadvantage that hinders the Company’s ability to 9 The district court denied this motion as well, finding that the supplemental affidavit was also conclusory and unsupported by any evidence. This appeal followed.