Justices reverse ruling in pie-maker case

The Arkansas Supreme Court reversed class action certification last week in a lawsuit between a local pie-maker and an out-of-state lender, saying a class-action waiver between the parties is enforceable. The case was sent back to the lower court.

The Supreme Court did not address the underlying merits of the case, Leitha’s Pies, LLC v. Funding Metrics. The case alleges securities fraud by Funding Metrics.

Washington County Circuit Judge John Threet granted class certification in the case June 23, 2021.

Leitha’s Pies sells frozen pies to restaurants. Funding Metrics, under the brands Lendini and Quickfix Capital, is a merchant cash advance company.

In 2017, Leitha’s Pies entered into a written agreement to sell Funding Metrics $21,900 of Leitha’s Pies’ future receivables in exchange for an immediate payment of $15,000 by Funding Metrics.

Funding Metrics was allowed under the agreement to withdraw from Leitha’s Pies’ depository accounts a daily amount corresponding to 11.38% of Leitha’s Pies’ daily receipts. Leitha’s Pies also agreed to pay a one-time 8% origination fee.

The agreement contained a class-action-waiver provision.

In July 2019, Leitha’s Pies filed a class-action complaint against Funding Metrics, claiming it promoted and sold securities in violation of Arkansas securities law. Funding Metrics moved to dismiss in part based on a forum-selection provision and the class-action waiver in the agreement and also asserted the agreement was not a security.

On June 23, 2021, the circuit court granted Leitha’s Pies’ motion for class certification. Threet found the waiver provision was not enforceable.

Funding Metrics’ appeal argued, among other things, that the circuit court abused its discretion by refusing to enforce the class-action waiver in the agreement. Funding Metrics argued that under the Arkansas Supreme Court’s previous precedents, the class-action-waiver provision is enforceable.