The Eleventh Circuit Court of Appeals vacated its prior opinion in BankWest v. Baker, 411 F.3d 1289 (11th Cir. 2005), and the opinion of the lower court, 324 F.Supp 2d 1333, and dismissed a pending appeal as moot. BankWest v. Baker, Case No. 04-12420(11th Cir. April 28, 2006). The original action was brought by out-of-state federally insured banks to prevent enforcement of the provision of the Georgia Payday Loan law that restricts a payday loan store from acting as an agent for an out-of-state bank when the agreement grants the in-state agent “the predominate economic interest” in the bank’s payday loan.

    The district court denied the banks’ motions for a preliminary injunction against enforcement of the Georgia Payday Loan law and the Eleventh Circuit affirmed the district court’s decision. On December 28, 2005, the Eleventh Circuit granted appellants’ petition for rehearing en banc and vacated the prior panel decision.

    On March 15, 2006, while the case was being briefed at the en banc stage, the state filed a suggestion of mootness. The state argued that, as a result of regulatory activities of the Federal Deposit Insurance Corporation, the banks are no longer pursuing the short-term loan program and servicing agreements that were the subject of the preliminary injunction motions and appeal.

    The Eleventh Circuit agreed with the state that the present appeal from the preliminary injunction ruling no longer presents a justiciable controversy within the meaning of Article III of the Constitution based on recent developments and significant change in factual circumstances. The court concluded that the payday loan programs that gave rise to the preliminary injunction ruling are no longer being used by any of the banks.

    Regarding the banks’ argument against mootness as to loans already made, the court found that there never was any controversy in the appeal about whether the Georgia Payday Loan law could be applied to uncollected loans that were made before the law’s effective date. The banks also argued that the appeal was not moot because they intend to develop, or are in the process of developing, new consumer loan programs, and the presence of the law interferes with their ability to develop new loan products. The court disagreed, finding that the fact that some banks may be retooling their business plans, may develop another type of short-term loan, and may enter into new servicing agreements with the non-bank parties in Georgia does not keep the appeal from being moot because the precise nature of the new but different loan programs and the manner in which they are to be administered in Georgia remain far to speculative and abstract at this juncture to create an actual case or controversy.

    The court concluded that the district court’s denial of the motion for a preliminary injunction—the only ruling at issue in the appeal—was moot and this conclusion compelled the court to dismiss the appeal and to vacate the prior opinions.

    Mike Tomkies and Elizabeth Anstaett