Gibbs v. Rees

• Decision Date: 23 March 2018
• Docket Number: Civil Action No. 3:17cv386
• Parties: DARLENE GIBBS, et al., individually and on behalf of a class of similarly situated persons, Plaintiffs, v. KENNETH REES, et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

DARLENE GIBBS, et al., individually and on behalf of a class of similarly situated persons, Plaintiffs, v. KENNETH REES, et al., Defendants.

Civil Action No. 3:17cv386

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division

March 23, 2018

MEMORANDUM OPINION

This matter comes before the Court on Defendant Kenneth Rees's Motion to Transfer Case Under 28 U.S.C. § 1412 ("Rees's Motion to Transfer"), (ECF No. 92), and Defendant GPL Servicing's ("GPL") Motion to Transfer Case Under 28 U.S.C. § 1412 ("GPL's Motion to Transfer"), (ECF No. 111). All responses and replies have been filed. The Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. Accordingly, all matters are ripe for disposition. The Court exercises jurisdiction pursuant to 28 U.S.C. § 1331.¹ For the reasons that follow, the Court will grant Rees's Motion to Transfer and GPL's Motion to Transfer. The Court will transfer this case to the District Court for the Northern District of Texas.

I. Factual and Procedural Background

A. Summary of Allegations in the Complaint

In their four-count class complaint, Plaintiffs challenge an allegedly predatory lending scheme developed and implemented by Defendants. According to Plaintiffs, in an effort to circumvent Virginia and federal lending laws, Rees contacted members of two Native American tribes—the Chippewa Cree Tribe and the Otoe-Missouria Tribe (collectively, the "Tribes")—in order to establish "rent-a-tribe" enterprises.² Plaintiffs contend that, through his rent-a-tribe schemes, Rees sought to "disguise Rees and his companies' roles and to ostensibly shield the scheme from liability" based on the Tribes' sovereign immunity. (Compl. ¶ 2, ECF No. 1.) Through these activities, Plaintiffs aver that Defendants made payday loans to people in Virginia with annual percentage rates that exceeded 400%.

1. The Parties

All named plaintiffs are residents of Virginia who obtained loans online from Plain Green, LLC ("Plain Green") or Great Plains, LLC ("Great Plains"). Defendants' identities and relationships are slightly complex, but, according to Plaintiffs, "although Plain Green and GreatPlains held themselves out as the actual lenders of these internet payday loans, Defendants marketed, funded, collected the loans, and controlled the day-to-day operations and major business decisions of Plain Green and Great Plains." (Id. ¶ 48.) Plaintiffs assert that Rees and others created Defendant Think Finance, Inc., ("Think Finance") "to locate, arrange[,] and funnel the lending capital to the Tribes." (Id. ¶ 14.) According to Plaintiffs, Think Finance "procured the investment capital for Plain Green and Great Plains," and "initially performed the application processing, underwriting, and customer service support for the loans." (Id.)

Defendants Think Finance SPV, LLC ("Think Finance SPV"), TC Decision Sciences, LLC ("TC Decision"), TC Loan Services, LLC ("TC Loan"), and Tailwind Marketing, LLC ("Tailwind Marketing") are all limited liability companies with principal places of business at the same address in Texas. Plaintiffs allege that each of these companies either performed some role in the lending scheme or served as a holding company for one of the other companies in an attempt to avoid liability. Specifically, Plaintiffs claim that, after several lawsuits, Rees conveyed all of Think Finance's assets and responsibilities to Think Finance SPV "in an effort to avoid liability for the illegal loans made to consumers." (Id.)

Tailwind Marketing was the "marketing and solicitation arm to disguise the involvement of Rees and Think Finance." (Id. ¶ 52.) Tailwind Marketing received $100 for every borrower provided to Plain Green and Great Plains. Plaintiffs assert that "this money ended up back in the pocket of Rees through his ownership interest in Tailwind." (Id. ¶ 55.) TC Loan was "the controlling member of Tailwind Marketing," and, according to Plaintiffs, its purpose was to "insulate Defendants from liability by adding an extra layer of corporate protection to the misconduct of Tailwind Marketing." (Id. ¶ 17.)

TC Decision was the "website operator and software administrator for Plain Green and Great Plains," and "handled customer service responsibilities, such as communications with consumers under the guise of Plain Green and Great Plains." (Id. ¶¶ 56-57.) TC Decision was paid five dollars per month for each active account with Plain Green and Great Plains. This money, too, "ended up back in the pocket of Rees through his ownership interest in TC Decision." (Id. ¶ 58.)

Defendant GPL Servicing ("GPL") is a corporation incorporated under the laws of the Cayman Islands. (Compl. ¶ 19.) Plaintiffs aver that all loans were assigned to GPL "within two days . . . for the purpose of servicing and collection." (Id. ¶ 19.) All payments for loans from Plain Green or Great Plains were made to GPL. Plaintiffs allege upon information and belief that Rees, Think Finance, "and several other individuals" own GPL and "incorporated the collection arm of the operation in the Cayman Islands in further attempts to avoid legal liability." (Id.)

Plaintiffs contend that Rees "was the architect of the lending scheme, participated in the day-to-day operations of the scheme, and controlled the businesses." (Id. ¶ 97.) According to Plaintiffs, Rees "established the plan and strategy" to create each of the defendant companies, and "established their role in the making, marketing, and collection" of the high-interest online loans. (Id. ¶ 30.) Further, Plaintiffs assert that "[a]s chief executive officer of Think Finance and the sole member of several other affiliated entities, Rees intentionally directed and personally participated in the creation, management, and operations of the tribal lending enterprises." (Id. ¶ 31.)

2. The Loans

Each of Plaintiffs' loans ranged in amounts from $300 to $3,000, and had interest rates from 118% to 448% and higher.³ Each of the named Plaintiffs paid amounts on their loans ranging from $566.82 to $15,399.04, "most of which Defendants credited as payment for interest or other fees."⁴ (Id. ¶¶ 76-80.) Plaintiffs declare that these loans are "null and void" under Virginia law because the interest rates vastly exceeded the twelve percent APR limit Virginia law places on contracts.⁵ (Id. ¶ 75.)

3. The Class Claims

Plaintiffs assert the following four class claims, each against all Defendants:

Count One: Violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) - Defendants collected "unlawful debts" from the Plaintiffs because the Defendants collected debts on loans that included an interest rate "far in excess of twice the enforceable rate in Virginia." Plaintiffs seek "treble their actual damages, which would include any interest, fees, or other sums collected by Defendants." (Id. ¶¶ 114-18.)

Count Two: Violations of RICO, 18 U.S.C. § 1962(d) - Defendants "enter[ed] into a series of agreements to violate § 1962(c)." Plaintiffs seek actual damages, treble damages, costs, and attorneys' fees. (Id. ¶¶ 126-27.)

Count Three: Violations of Virginia Usury Laws - Every loan Defendants made to the Plaintiffs used an interest rate over Virginia's statutorily permissible rate of twelve percent. Plaintiffs seek "an amount equal to the total amount of interest paid" over twelve percent interest, "twice the amount of such usurious interest that was paid in the two years preceding the filing of this action," costs, and attorneys' fees. (Id. ¶¶ 136-37.)

Count Four: Declaratory Judgment - Defendants violated Virginia's usury law, Virginia Code § 6.2-1541(A), and all loan agreements are therefore "void and unenforceable." Plaintiffs seek a "declaratory judgment that the loan agreements are void and unenforceable pursuant to § 6.2-1541(A)." In the alternative, Plaintiffs seek a declaratory judgment that the loan agreements' choice-of-law, forum-selection, and arbitration provisions are "void and unenforceable as a matter of public policy." (Id. ¶¶ 145-50.)

For Counts One and Two, Plaintiffs seek to certify a class that includes "[a]ll Virginia residents who executed a loan with Plain Green or Great Plains where the loan was originated and/or any payment was made on or after May 19, 2013." (Id. ¶¶ 107, 120.) For Count Three, Plaintiffs seek to certify a class of "[a]ll Virginia residents who executed a loan with Plain Green or Great Plains where any interest was paid," and a subclass consisting of "[a]ll Virginia residents who executed a loan with Plain Green or Great Plains where any interest was paid on or after May 17, 2015." (Id. ¶ 129 (emphases added).) Finally, for Count Four, Plaintiffs seek to certify a class of "[a]ll persons who . . . executed a loan with Plain Green or Great Plains [] when they resided or were located in Virginia, [] which contained an interest rate greater than 12%," and a subclass consisting of "[a]ll persons who . . . executed a loan with Plain Green or Great Plains [] when they resided or were located in Virginia, [] which contained a choice-of-law provision, arbitration provision, or forum selection clause similar or identical to Plaintiffs[']." (Id. ¶ 139 (emphases added).)

B. Procedural Background

Plaintiffs filed their Complaint on May 19, 2017. After several extensions of time, the defendants filed a slew of motions seeking the dismissal, stay, or transfer of the entire action. Defendants Think Finance, Think Finance SPV, TC Decision, TC Loan, and Tailwind Marketing (collectively, the "Think Finance Defendants") and Rees each filed a Motion to Compel Arbitration, (ECF Nos. 16, 26), a Motion to Dismiss for Failure to Join Indispensable Parties, (ECF Nos. 18, 28), a Motion to Dismiss for Lack of Jurisdiction and Failure to State a Claim, (ECF Nos. 20, 22), and a Motion to Transfer or Stay Pursuant to the First-to-File Rule, (ECF...