In re Reddam

• Decision Date: 09 February 2018
• Docket Number: No. 2016–0567,2016–0567
• Citation: 170 N.H. 590,180 A.3d 683
• Parties: PETITION OF John Paul REDDAM (New Hampshire Banking Department)
• Court: New Hampshire Supreme Court

170 N.H. 590

180 A.3d 683

PETITION OF John Paul REDDAM (New Hampshire Banking Department)

No. 2016–0567

Supreme Court of New Hampshire.

Argued: September 20, 2017

Opinion Issued: February 9, 2018

McLane Middleton, Professional Association, of Manchester (Wilbur A. Glahn, III, Michael A. Delaney, Andrew R. Hamilton, and Benjamin B. Folsom on the brief, and Mr. Glahn orally), for John Paul Reddam.

Gordon J. MacDonald, attorney general (Seth M. Zoracki, assistant attorney general, on the brief and orally), for the New Hampshire Banking Department.

LYNN, J.

The New Hampshire Banking Department (Department) initiated an adjudicative proceeding against CashCall, Inc. (CashCall), WS Funding, LLC (WS Funding), and John Paul Reddam, for violations of RSA chapter 399–A (2006 & Supp. 2012) (repealed and reenacted 2015). By petition for a writ of certiorari, see Sup. Ct. R. 11, Reddam challenges the Department's denial of his motion to dismiss for lack of personal jurisdiction.¹ We affirm and remand.

I

The following facts come from the parties' stipulation or are otherwise found in the record. Reddam is the president and chief executive officer of CashCall, a lending and loan services corporation headquartered and incorporated in California. Reddam owns all of CashCall's corporate stock. Reddam is also the president of WS Funding, a wholly owned subsidiary of CashCall. WS Funding is a Delaware limited liability company with a principal place of business in California. Neither Reddam, CashCall, nor WS Funding is licensed under RSA chapter 399–A to issue small loans in New Hampshire.

Both CashCall and WS Funding have contractual relationships with Western Sky Financial, which is not a party to this action. Western Sky Financial is wholly owned by an enrolled member of the Cheyenne River Sioux Tribe, which is a sovereign Indian nation located within South Dakota and recognized by the United States Department of the Interior.

CashCall is a licensed mortgage banker in New Hampshire under RSA chapter 397–A (2006 & Supp. 2011). Pursuant to RSA 397–A:12 (Supp. 2011), the Department commenced an examination of CashCall in early 2012. The Department's examiner discovered that CashCall appeared to be engaged in the business of purchasing and servicing small loans or "payday loans" in association with Western Sky Financial.

In June 2013, after analyzing and reviewing CashCall's responses to an administrative subpoena duces tecum and reviewing the business relationships among CashCall, WS Funding, and Western Sky Financial, the Department issued a cease and desist order to CashCall, WS Funding, and Reddam. In the cease and desist order, the Department found that either CashCall, or WS Funding, was the "actual" or "de facto" lender for the payday and small loans, and that Western Sky Financial was a front for the respondents' unlicensed activities.

As relevant here, the relationship among these companies was primarily governed by two agreements that they entered into in 2010: an "Agreement for Service" (Service Agreement) between CashCall and Western Sky Financial; and an "Agreement for the Assignment and Purchase of Promissory Notes" (Assignment Agreement) between WS Funding and Western Sky Financial. (Quotations omitted.) Reddam signed the Service Agreement as president of CashCall, and he signed the Assignment Agreement as president of WS Funding. Through 2013, pursuant to these agreements, CashCall reimbursed Western Sky Financial for numerous office and operational expenses, including payroll expenses, advertising expenses, and fees paid to consumer loan lead generators, and provided website hosting and support services for Western Sky Financial's website.

CashCall informed prospective borrowers that it was assisting them with the loan application process on behalf of Western Sky Financial. Pursuant to the Assignment Agreement, Western Sky Financial agreed to assign and WS Funding agreed to purchase all loans made through Western Sky Financial's website. Every borrower received a notice of assignment that identified WS Funding as the purchaser of the loan and directed the borrower to remit all payments to CashCall.

Between July and October 2013, attorneys from four different law firms filed appearances on behalf of the respondents. The respondents issued discovery requests to the Department and responded to the Department's discovery requests. The Department and the respondents also negotiated a four-page stipulation of uncontested facts.

In December 2013, the respondents moved to dismiss or, alternatively, stay the cease and desist order pending the outcome of arbitration, arguing that: (1) the Department's action violated the dormant Commerce Clause of the Federal Constitution; (2) the Department lacked subject matter jurisdiction to "penalize or halt tribal member conduct"; and (3) the Department's claims were subject to binding arbitration provisions contained in the loan agreements. Reddam additionally argued that he is not subject to personal jurisdiction in New Hampshire, and he attached a supporting affidavit.

As relevant here, Reddam stated in his affidavit that he had never lived in New Hampshire, had not visited New Hampshire in the preceding year, owned no real property in New Hampshire, and had no personal business dealings in New Hampshire. With regard to his activity through CashCall, Reddam stated that, to his knowledge, he had "never personally interacted with any Western Sky borrower whose loan was serviced by CashCall" and had "no personal involvement with CashCall's servicing and collection operation, except that [he] instruct[ed] CashCall managers and supervisors to ensure that all applicable laws are obeyed."

In April 2016, the Department's presiding officer denied the respondents' motion. Regarding Reddam's personal jurisdiction argument, the Department found that it could constitutionally exercise jurisdiction over Reddam. Reddam filed a motion for rehearing, which, in a proposed order, the Department's reviewing officer recommended be denied, and the Department's commissioner accepted the reviewing officer's proposed order as a final order. This petition followed.

In his petition, Reddam argues that the Department erred by ruling that it had personal jurisdiction over him. The Department argues that it properly exercised jurisdiction over Reddam and makes two alternative arguments: (1) that Reddam's petition should be dismissed for failing to exhaust his administrative remedies; and (2) that Reddam waived his personal jurisdiction defense by actively litigating the action for six months before asserting that the Department lacked personal jurisdiction over him.

II

"Our standard of review for rulings on motions to dismiss for lack of personal jurisdiction varies according to the case's procedural posture." N.H. Bank Comm'r v. Sweeney, 167 N.H. 27, 32, 104 A.3d 171 (2014). When, as in this case, the Department rules on the motion without holding an evidentiary hearing, the Department employs a prima facie standard, and we review its decision de novo. See id. Under the prima facie standard, the inquiry is whether the Department has proffered evidence which, if credited, is sufficient to support findings of all facts essential to personal jurisdiction. See id. The Department ordinarily cannot rest upon the pleadings, but must adduce evidence of specific facts. See id. Both the Department and this court, when undertaking de novo review, must accept the Department's properly documented proffers as true for the purpose of determining the adequacy of the prima facie jurisdictional showing. See id. The Department's evidentiary proffers must be construed in the light most congenial to its jurisdictional claim, and facts put forward by a respondent may be considered to the extent they are uncontradicted. See id.

Determining whether a court may exercise personal jurisdiction over a respondent contemplates a two-part analysis. Id. "First, the State's long-arm statute must authorize such jurisdiction." Id. (quotation omitted). "Second, the requirements of the [F]ederal Due Process Clause must be satisfied." Id. (quotation omitted). "However, because New Hampshire's long-arm statute authorizes the exercise of personal jurisdiction over a non-resident to the extent permissible under the Federal Due Process Clause, the due process analysis is normally dispositive of the matter." Id. (quotation and citation omitted); see also Metcalf v. Lawson, 148 N.H. 35, 37, 802 A.2d 1221 (2002) (stating that, in determining whether a New Hampshire court may exercise personal jurisdiction over a non-resident defendant, "our primary analysis relates to due process").

III

We first address the Department's argument that this petition should be dismissed as premature because Reddam did not exhaust his administrative remedies. "The rule requiring administrative remedies to be exhausted prior to appealing to the courts is based on the reasonable policies of encouraging the exercise of administrative expertise, preserving agency autonomy and promoting judicial efficiency."

Konefal v. Hollis/Brookline Coop. School Dist., 143 N.H. 256, 258, 723 A.2d 30 (1998) (quotation omitted). We have recognized that the exhaustion of administrative remedies doctrine is flexible, and that exhaustion is not required under certain circumstances. Id.

The Department argues that we should dismiss Reddam's petition because he seeks review of an interlocutory agency order rather than a final order. According to the Department, Reddam should not seek review until after the final hearing on the Department's claims. We disagree.

Reddam argues that it is a violation of the Federal Due Process Clause for New Hampshire to exercise jurisdiction over him. That clause protects a non-resident respondent from the burden of litigating in a foreign forum unless the "respondent has minimum contacts with the forum, such that the maintenance of the suit does not offend traditional notions of...