Supreme Court
Am. Pearl Group LLC v. Nat'l Payment Sys. LLC
- Case number: 24-0759
- Legal category: Contracts
- Subtype: Contract Interpretation
- Set for oral argument: January 13, 2025
Case Summary
This certified question asks the Supreme Court to construe statutory language governing the computation of interest to determine whether a loan agreement is usurious. American Pearl Group, L.L.C., John Sarkissian, and Andrei Wirth entered into a debt financing agreement with National Payment Systems, L.L.C, which included a specified total amount to be repaid over 42 months of payments and a payment schedule listing each individual payment’s allocation towards principal and interest. However, the agreement did not list an exact percentage interest rate.
American Pearl sued NPS, seeking a declaration that the debt financing agreement and a related option agreement violated Texas’s usurious interest statute because the total amount of interest under the agreement was more than the maximum allowable amount under Texas law. The trial court granted NPS’s motion to dismiss, utilizing the “spreading” method for calculating interest and determining that, based on that calculation, the total amount of interest was less than the statutorily maximum allowable amount.
The Fifth Circuit reversed the dismissal of American Pearl’s usury claim relating to the option agreement but, as to the debt financing agreement, recognized that the “spreading” method was derived from Supreme Court of Texas decisions involving distinguishable interest-only loans and that there was a lack of clear guidance for computing the maximum allowable interest for the loan entered into by the parties. The Fifth Circuit therefore certified the following question to the Supreme Court:
Section 306.004(a) of the Texas Finance Code provides: “To determine whether a commercial loan is usurious, the interest rate is computed by amortizing or spreading, using the actuarial method during the stated term of the loan, all interest at any time contracted for, charged, or received in connection with the loan.” If the loan in question provides for periodic principal payments during the loan term, does computing the maximum allowable interest rate “by amortizing or spreading, using the actuarial method” require the court to base its interest calculations on the declining principal balance for each payment period, rather than the total principal amount of the loan proceeds?
The Court accepted the certified question.
Case summaries are created by the Court's staff attorneys and law clerks and do not constitute the Court’s official descriptions or statements. Readers are encouraged to review the Court’s official opinions for specifics regarding each case.