Hengle v. Asner

• Decision Date: 09 January 2020
• Docket Number: Civil No. 3:19cv250 (DJN)
• Parties: George HENGLE, et al., on behalf of themselves and all individuals similarly situated, Plaintiffs, v. Scott ASNER, et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

433 F.Supp.3d 825

George HENGLE, et al., on behalf of themselves and all individuals similarly situated, Plaintiffs,

v.Scott ASNER, et al., Defendants.

Civil No. 3:19cv250 (DJN)

United States District Court, E.D. Virginia, Richmond Division.

Signed January 9, 2020

Kristi Cahoon Kelly, Andrew Joseph Guzzo, Casey Shannon Nash, Kelly Guzzo PLC, Fairfax, VA, Craig Carley Marchiando, Leonard Anthony Bennett, Consumer Litigation Associates, Newport News, VA, Elizabeth W. Hanes, Consumer Litigation Associates, James Wilson Speer, Virginia Proverty Law Center, Richmond, VA, for Plaintiffs.

Matthew Lloyd Haws, Jan Amber Larson, Thomas John Perrelli, Pro Hac Vice, Jenner & Block LLP, Matthew Randall Skanchy, Beth Wilkinson, Pro Hac Vice, James Rosenthal, Pro Hac Vice, Kosta Stojilkovic, Pro Hac Vice, Rakesh Kilaru, Pro Hac Vice, Wilkinson Walsh LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

David J. Novak, United States District Judge

Plaintiffs George Hengle ("Hengle"), Sharon Blackburn ("Blackburn"), Willie Rose ("Rose"), Elwood Bumbray ("Bumbray"), Tiffani Myers ("Myers"), Steven Pike ("Pike"), Sue Collins ("Collins") and Lawrence Mwethuku ("Mwethuku") (collectively, "Plaintiffs") bring this action on behalf of themselves and all individuals similarly situated against Scott Asner ("Asner"), Joshua Landy ("Landy"), Sherry Treppa, Tracey Treppa, Kathleen Treppa, Iris Picton, Sam Icay, Aimee Jackson-Penn and Amber Jackson (collectively, "Defendants"), alleging that Defendants issued usurious loans to Plaintiffs in the name of Golden Valley Lending, Inc. ("Golden Valley"), Silver Cloud Financial, Inc. ("Silver Cloud"), Mountain Summit Financial, Inc. ("Mountain Summit"), and Majestic Lake Financial, Inc. ("Majestic Lake") (collectively, the "Tribal Lending Entities") — four entities formed under the laws of the Habematolel Pomo of Upper Lake (the "Tribe"), a federally recognized Native American tribe. Plaintiffs seek to enjoin Sherry Treppa, Tracey Treppa, Kathleen Treppa, Iris Picton, Sam Icay, Aimee Jackson-Penn and Amber Jackson (collectively, the "Tribal Officials") from collecting on the allegedly usurious loans issued by the Tribal Lending Entities and to prevent the Tribal Lending Entities from issuing usurious loans to Virginia consumers in the future. Plaintiffs also seek monetary relief against Asner and Landy for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq. , Virginia's usury and consumer finance statutes and Virginia common law. This matter comes before the Court on Asner and Landy's Renewed Motion to Compel Arbitration (ECF No. 57) and Renewed Motion to Dismiss (ECF No. 59) and the Tribal Officials' Motion to Compel Arbitration (ECF No. 62) and Motion to Dismiss (ECF No. 64).¹

For the reasons set forth below, the Court DENIES Defendants' Motions to Compel Arbitration (ECF Nos. 57, 62), GRANTS IN PART and DENIES IN PART the Tribal Officials' Motion to Dismiss (ECF No. 64) and DENIES Asner and Landy's Renewed Motion to Dismiss (ECF No. 59). The Court DISMISSES WITHOUT PREJUDICE Count Five of Plaintiffs' Amended Complaint and Count Seven to the extent that it seeks to enjoin future lending activities by the Tribal Lending Entities and to the extent that Bumbray, Blackburn and Collins seek to enjoin future collection of any outstanding loans.²

I. BACKGROUND

In considering Defendants' Motions to Compel Arbitration, the Court may consider materials outside of the pleadings, including all relevant, admissible evidence submitted by the parties. Nicosia v. Amazon.com, Inc. , 834 F.3d 220, 229 (2d Cir. 2016) (citations omitted). "In doing so, the court must draw all reasonable inferences in favor of the non-moving party." Id. (citations omitted). To the extent that Defendants challenge the plausibility of Plaintiffs' claims pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court will accept Plaintiffs' well-pleaded factual allegations as true, though the Court need not accept Plaintiffs' legal conclusions. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Similarly, to the extent that Defendants challenge the Court's personal jurisdiction over them "on the basis only of motion papers[,]... the court must construe all relevant pleading allegations in the light most favorable to [Plaintiffs], assume credibility, and draw the most favorable inferences for the existence of jurisdiction," Combs v. Bakker , 886 F.2d 673, 676 (4th Cir. 1989), though the Court need not consider only Plaintiffs' proof of personal jurisdiction to decide which inferences it will make, Mylan Labs., Inc. v. Akzo, N.V. , 2 F.3d 56, 62 (4th Cir. 1993). And to the extent that Defendants raise substantive challenges to the Court's jurisdiction over the subject matter of Plaintiff's Amended Complaint, the Court may consider facts outside of the Amended Complaint and need not accept the allegations in the Amended Complaint as true. Kerns v. United States , 585 F.3d 187, 192 (4th Cir. 2009). Based on these standards, the Court accepts the following facts.

A. Origins of the Tribe's Lending Businesses

Plaintiffs are consumers residing in either this Division or District. (Am. Compl. (ECF No. 54) ¶¶ 11-18.) Asner resides in Kansas City, Missouri, and served as the owner and manager of National Performance Agency, LLC ("NPA"), Nagus Enterprises and Edison Creek. (Am. Compl. ¶ 20.) Landy resides in Kansas and served as an owner of NPA. (Am. Compl. ¶ 19.) Sherry Treppa, Tracey Treppa, Kathleen Treppa and Iris Picton serve respectively as the chairperson, vice chairperson, treasurer and secretary of the Tribe's Executive Council. (Am. Compl. ¶¶ 21-24.) Sam Icay, Aimee Jackson-Penn and Amber Jackson serve as members-at-large on the same Council. (Am. Compl. ¶¶ 25-27.)

As early as 2008, the Tribe retained Rosette, LLP, a law firm that advertises itself as a majority-Native-American firm that represents tribal governments and entities, including tribes interested in starting payday lending operations. (Am. Compl. ¶¶ 38-41, 47.) The Tribe's Executive Council engaged Rosette, LLP, in its capacity as the Tribe's governing body, " ‘responsible for acting in all matters that concern the general welfare of the Tribe.’ " (Am. Compl. ¶ 51 (quoting Aff. of Sherry Treppa in Supp. of Tribal Defs.' Mot. to Dismiss & Mot. to Compel Arbitration ("Treppa Aff.") (ECF No. 44) ¶ 44).)

Out of this engagement, in August 2012, the Tribe established Golden Valley, which provided short-term loans of up to $1,000.00 to approved consumers. (Am. Compl. ¶¶ 55-56.) Soon thereafter, in June 2013, Defendants began issuing identical loans through Silver Cloud, a separate lending entity. (Am. Compl. ¶ 59.) And, in January 2014, Defendants began offering loans through Mountain Summit. (Am. Compl. ¶ 61.) All three entities advertised that they were wholly owned by the Tribe and based out of the Tribe's reservation in Upper Lake, California. (Am. Compl. ¶¶ 57-58, 60, 62.)

Despite the Tribal Lending Entities' representations regarding their ownership and operations, "nearly all activities performed on behalf of Golden Valley, Silver Cloud, and Mountain Summit were performed by owners and employees of non-tribal companies, primarily [NPA] and its affiliated companies, including National Processing of America and Nagus Enterprises." (Am. Compl. ¶ 67.) These non-tribal businesses operated out of Overland Park, Kansas, at the same address now used by Upper Lake Processing Services, Inc. ("ULPS"), a tribal entity created after the merger between NPA and Clear Lake TAC G (a tribal entity) and Nagus Enterprises and Clear Lake TAC S (a tribal entity). (Am. Compl. ¶¶ 3, 5, 68.)

The Tribal Lending Entities distributed the vast majority of the revenues received from their operations to NPA, Edison Creek, Nagus Enterprises and Cobalt Hills (the "Non-Tribal Entities"), companies owned and operated by Asner, Landy and other unknown individuals. (Am. Compl. ¶¶ 71-74.) In his capacity as an owner and operator of the Non-Tribal Entities, Landy supervised dozens of employees and had signatory authority on bank accounts opened by each entity. (Am. Compl. ¶¶ 75-76.) Similarly, Asner signed multiple documents on behalf of NPA and Nagus Enterprises, including the documents effectuating the merger between those companies and Clear Lake TAC G and Clear Lake TAC S. (Am. Compl. ¶¶ 77-78.)

B. Events Leading to the Merger of the Non-Tribal and Tribal Entities

Soon after the Tribal Lending Entities began operating, in August 2013, the New York State Department of Financial Services ("NYDFS") issued a cease and desist letter to thirty-five online lending companies, including Golden Valley, after discovering that those companies offered payday loans to New York consumers with annual interest rates as high as 1,095 percent, in violation of New York law. (Am. Compl. ¶¶ 80-81.) In response, several other tribal lending entities and the respective tribes that formed them sued NYDFS, seeking declaratory and injunctive relief to prevent the enforcement of New York law against them as sovereign tribes. (Am. Compl. ¶ 85 (citing Otoe-Missouria Tribe of Indians v. New York State Dep't of Fin. Servs. , 974 F. Supp. 2d 353, 361 (S.D.N.Y. 2013), aff'd , 769 F.3d 105 (2d Cir. 2014) ).) The Southern District of New York denied the tribal plaintiffs' request for relief, finding that the tribes' loans were not exempt from New York's nondiscriminatory usury laws. (Am. Compl. ¶¶ 87-88 (citing Otoe-Missouria Tribe of Indians , 974 F. Supp. 2d at 361 ).)

Soon after losing their lawsuit in the Southern District of New York, two tribal lending enterprises, Western Sky Financial, LLC, and CashCall, Inc., entered into a settlement with the New York Attorney General, agreeing to refund borrowers who paid more than the legal rate of interest and to pay $1.5 million in penalties. (Am. Compl.¶¶ 89-90.) The federal government also intervened, with the Department...