Dillon v. BMO Harris Bank, N.A., 1:13–CV–897.
| Decision Date | 23 April 2014 |
| Docket Number | No. 1:13–CV–897.,1:13–CV–897. |
| Citation | 16 F.Supp.3d 605 |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | James DILLON, Plaintiff, v. BMO HARRIS BANK, N.A., et al., Defendants. |
Darren T. Kaplan, Chitwood Harley Harnes LLP, New York, NY, F. Hill Allen, IV, Tharrington Smith, Raleigh, NC, Hassan A. Zavareei, Jeffrey D. Kaliel, Tycko & Zavareei LLP, Washington, DC, Jeffrey M. Ostrow, Kopelowitz Ostrow P.A., Ft. Lauderdale, FL, John Austin Moore, Norman E. Siegel, Steve Six, Stueve, Siegel, Hanson, LLP, Kansas City, MO, for Plaintiff.
Debra Bogo–Ernst, Lucia Nale, Matthew C. Sostrin, Mayer Brown, LLP, Chicago, IL, Kevin S. Ranlett, Mayer Brown, LLP, Washington, DC, Mary Kathryn Mandeville, Alexander Ricks PLLC, Charlotte, NC, Carl N. Patterson, Jr., Clifton Lennis Brinson, Isaac Augustin Linnartz, Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, Raleigh, NC, Reid Calwell Adams, Jr., Garth A. Gersten, Jonathan Reid Reich, Womble, Carlyle, Sandridge & Rice, Winston–Salem, NC, Eric A. Pullen, Etan Tepperman, Leslie S. Hyman, Pulman, Cappuccio, Pullen, Benson & Jones, LLP, San Antonio, TX, Mark Vasco, Bryan Cave, LLP, Charlotte, NC, Ann W. Ferebee, Michael P. Carey, Bryan Cave LLP, Atlanta, GA, Eric Rieder, Bryan Cave LLP, New York, NY, for Defendants.
This matter is before the Court on motions to dismiss for failure to join an indispensable party and failure to state a claim filed by defendants BMO Harris Bank, Bay Cities Bank, and Four Oaks Bank & Trust.1 Defendant Generations Community Federal Credit Union has joined these motions.2 Also pending are BMO Harris's motion to sever and motion to transfer.3
The Court will deny the motions to dismiss for failure to join an indispensable party, the motion to sever, and the motion to transfer. The Court will grant in part and deny in part the motions to dismiss for failure to state a claim. Specifically, the Court will grant the motions to dismiss Mr. Dillon's usury and money had and received claims as to all defendants and will grant the motions to dismiss Mr. Dillon's Consumer Finance Act (“CFA”) claim as to defendants BMO Harris, Generations, and Four Oaks. The motion to dismiss the CFA claim will be denied as to defendant Bay Cities. The Court will deny the motions to dismiss as to Mr. Dillon's.
Trade Practices Act (“UDTPA”), and unjust enrichment claims as to all Defendants.4
According to the complaint, plaintiff James Dillon, a North Carolina resident, obtained five loans over the internet from lenders based offshore or on Indian reservations.5 The loans carried interest rates ranging from 139% to over 700% and, in some cases, thousands of dollars in finance charges.6 According to Mr. Dillon, these loans violate North Carolina's usury statute and various other state laws.
Mr. Dillon has not, however, sued these internet lenders. Instead, he has brought suit against the banks which served as Originating Depository Financial Institutions (“ODFIs”) in connection with transactions related to the loans. To electronically deposit the loan proceeds and then to debit Mr. Dillon's bank account for repayments, the lenders needed access to the Automated Clearing House (“ACH”) Network.7 The defendant banks here, in their role as ODFIs, provided that access by “originating” debits and credits on the ACH Network for the lenders.8 NACHA, a non-profit association, oversees the ACH Network and has mandatory rules for ODFIs using the ACH Network.9 Under NACHA rules, ODFIs must enter into an origination agreement with the party seeking to access the ACH Network or use a Third–Party Sender that already has such an agreement.10 ODFIs are responsible for all entries they originate and are required to ensure that entries comply with applicable state and federal laws.11 In this way, ODFIs are the “gatekeepers” of the ACH Network.12
Mr. Dillon alleges that the defendant ODFIs knew or should have known that the lenders were engaged in making payday loans in states where the loans were unlawful and that they violated RICO by knowingly facilitating the collection of usurious loans through the ACH Network. Mr. Dillon also asserts various claims pursuant to North Carolina law.
The defendants contend that Mr. Dillon's case must be dismissed because he failed to join his lenders as party-defendants. It is the defendants' burden to demonstrate that the lenders are indispensable parties under Rule 19.13 The defendants must show: first, that the lenders are “required” parties as defined by Rule 19(a) ; second, that the lenders cannot be joined; and third, that the action should not, “in equity and good conscience,” proceed without the lenders, considering the factors set forth in Rule 19(b).14 This burden is a high one, as “[d]ismissal for non-joinder is a remedy employed extremely reluctantly, ‘only when the defect cannot be cured and serious prejudice or inefficiency will result.’ ”15
Under Rule 19(a), a person is a “required party” if one of three factual situations is present.16 They are:
The defendants contend this case falls into all three categories.
Defendants first contend that the Court cannot accord complete relief among the existing parties because two of Mr. Dillon's requests for injunctive relief directly affect the lenders. Mr. Dillon seeks a “release from any further obligation to make payments” to the lenders18 and asks the Court to direct each defendant to “immediately credit to all ... borrowers[ ] any money it has debited from borrowers' accounts but has not yet remitted to [the lenders].”19 At oral argument, the defendants also contended that these requests for injunctive relief raised the prospect of multiple or inconsistent obligations on their part.20 The Court need not decide whether these claims make the lenders required parties under Rule 19(a) because the plaintiff abandoned them at oral argument.21
The defendants next contend that the lenders are required parties because they were parties to Mr. Dillon's loan agreements, and any decision rendered in the lenders' absence will impair the lenders' interests in those agreements. It is generally true that “in an action to set aside a lease or a contract, all parties who may be affected by the determination of the action are indispensable.”22 However, this is not an action to set aside a contract or for breach of contract; Mr. Dillon's RICO and UDTPA claims arise under statutory schemes analogous to tort law.23
The lenders are at most joint tortfeasors or co-conspirators. Neither are necessary parties under Rule 19.24
Next, the defendants contend that the lenders' interests will be impaired because Mr. Dillon's “lawsuit challenges ... his lenders' entire business model.”25 Defendants rely on Hardy v. IGT, Inc.26 for this proposition. Hardy, however, was an “action seeking rescission of a contract.”27 The plaintiff sued the manufacturers of electronic bingo machines used in Tribal gaming facilities under an Alabama statute that voids gambling contracts.28 The plaintiff did not sue the Tribe.29 The court found that the Tribe was a required party because the action threatened the Tribe's contractual interests with gamblers and the manufacturers—the remedy for the only claim in the case was rescission.30 The Hardy court explicitly distinguished the case from lawsuits involving tort claims.31 Therefore, Hardy supports Mr. Dillon's argument that the lenders here are not required parties to the RICO and UDTPA claims.
It is possible that Mr. Dillon's claim against Bay Cities under the CFA32 has only rescission as a remedy,33 which would seem to be in the nature of a contractual remedy, not a tort remedy. However, this particular issue has not been fully briefed by the parties. If the plaintiffs have not withdrawn this aspect of their claim34 and if Bay Cities later establishes that rescission is the only remedy, the Court can determine at that point how best to deal with this claim.35
Defendant Four Oaks also contends that lender White Hills Cash is a required party because Mr. Dillon's case impinges on White Hills Cash's sovereign rights as an arm of a federally recognized Indian tri be.36 Four Oaks relies on a number of cases for this point, most notably Yashenko v. Harrah's NC Casino Co.37 In Yashenko, a Tribe contracted Harrah's to run its gaming enterprise.38 Harrah's agreed to “give preference in recruiting, training and employment to qualified members of the Tribe and their spouses and adult children in all job categories.”39 The plaintiff claimed that Harrah's, in enforcing this policy, discriminated on the basis of race in violation of 42 U.S.C. § 1981.40 The plaintiff did not sue the Tribe, and Harrah's contended that the Tribe was an indispensable party.41
The Fourth Circuit held that the Tribe was a required party under Rule 19(a) for three reasons. First, it was impossible to accord complete relief without the Tribe because judgment against Harrah's alone would not stop the Tribe from enforcing its tribal preference policy, which was part of the relief the plaintiff requested.42 Second, any judgment “would threaten to impair the Tribe's contractual interests” and its...
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