On May 25, 2023, the U.S. Court of Appeals for the Ninth Circuit, in a two-to-one split decision, held that an exemption to California’s usury laws for certain “aggregate” loan amounts applies only to indebtedness of a single lender at the time of issuance. The district court dismissed the usury claim based on its reading of an exception to a usury claim under California law, which provides that the “purchasers or holders” of “[a]ny one or more evidences of indebtedness . . . shall be exempt from the usury provisions of the California Constitution if . . . [t]he evidences of indebtedness aggregate at the time of issuance at least three hundred thousand dollars ($300,000) in original face amount . . . .” The district court determined LGH was exempt from the usury claim because Social Life received several loans from different lenders that, in the “aggregate,” exceeded $300,000.

In reversing the usury ruling, the Ninth Circuit noted that California courts had not addressed this issue; and, therefore, it had to predict how California courts would do so. The Ninth Circuit held that the “most logical and internally consistent interpretation” of the statute is that it exempts borrowers from usury protections when their “evidences of indebtedness” with a single lender aggregates at least $300,000 “at the time of issuance.” It found that nothing in the California statute indicated that the exemption was meant to “aggregate” indebtedness from transactions with different lenders. One dissenting judge agreed with the district court and noted that he would have held that the exception applied.

The case is Social Life Network, Inc. v. LGH Investments, LLC, No. 22-55774 (9th Cir. May 25, 2023). The borrower is represented by the Basile Law Firm P.C. The lenders are represented by Gibson, Dunn & Crutcher, LLP, Mintz Levin Cohn Ferris Glovsky and Popeo, PC, and Michael Best & Friedrich, LLP. The opinion is available here.