Ransom v. GreatPlains Fin.

• Jurisdiction: United States,Federal,New Jersey
• Parties: RASHONNA RANSOM, on behalf of herself and all others similarly situated, Plaintiff, v. GREATPLAINS FINANCE, LLC d/b/a CASH ADVANCE NOW, and JOHN DOES 1-10, Defendants.
• Decision Date: 22 January 2024
• Court: U.S. District Court — District of New Jersey
• Docket Number: Civ. 2:22-cv-01344 (WJM)

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RASHONNA RANSOM, on behalf of herself and all others similarly situated, Plaintiff, v. GREATPLAINS FINANCE, LLC d/b/a CASH ADVANCE NOW, and JOHN DOES 1-10, Defendants.

Civ. No. 2:22-cv-01344 (WJM)

United States District Court, D. New Jersey

January 22, 2024

OPINION

WILLIAM J. MARTINI, U.S.D.J.

PlaintiffRashonna Ransom(“Plaintiff') alleges online lender DefendantGreatPlains Finance, LLC d/b/a Cash Advance Now (“GPF” or “Defendant”) engaged in usurious payday loans, Defendant moves to dismiss pursuant to Fed.R.Civ.P. Rule 12(b)(1) for lack of subject matter jurisdiction based on tribal sovereign immunity, for failure to join a necessary party under Rule 19(a), and alternatively, to dismiss John Doedefendants under Rule 21.ECF No. 51.The Court decides the matter without oral argument.Fed.R.Civ.P. 78(b).For the reasons below Defendant's motion is denied.

I.BACKGROUND

Plaintiff obtained two separate loans from GPF.The first loan was on October 26, 2015 for $300 at an Annual Percentage Rate (“APR”) of 652.36%.SeeCompl.¶¶ 22, 25, ECF No. 1-2.She completed payment on that loan having paid over $1,578.34 in interest.Id.at ¶ 26.On April 18, 2016, Plaintiff borrowed $450 at an APR of 542,39%.Id. at ¶¶ 30-31.She paid over $2,474.23 in interest on the second loan, which still has an outstanding balance.Id.at ¶¶ 32, 34, On October 25, 2021Plaintiff filed a five-count state court action alleging unjust enrichment and violations of New Jersey's Consumer Finance Licensing Act, N.J.S.A, § 17:1 IC-3;Consumer Fraud Act, N.J.S.A. § 56:8-2;Criminal Usury Statute, N.J.S.A. § 2C:21-19;andTruth-in-Consumer Contract Warranty and Notice Act, N.J.S.A. § 56:1215.Defendant removed this matter and then sought dismissal of the action based on arm of the tribe sovereign immunity.SeeECF No. 4.After completing Court-ordered jurisdictional discovery, seeECF No. 10, Defendant renews its motion to dismiss pursuant to Fed.R.Civ.P. Rule 12(b)(1),Rule 19, andRule 21.

GPF

The Fort Belknap Indian Community (the “Tribe” or “FBIC”) is a federally recognized American Indian tribal government in north central Montana.Deci, of Jeffrey Stiffarin (“Stiffarm Deci.”)¶ 2, ECF No 53.On April 16, 2012, the Tribe established GPF under tribal law with the intent that GPF “enjoy the Tribe's sovereign immunity.”Decl., of Evan Azure (“Azure Decl.”)¶¶ 7, 10, ECF No. 52;Art. of Organization, ECFNo. 52-1.GPF is wholly owned by the Tribe through GVA Holdings LLC(“GVA”)^[1] and was initially managed by Dater Portfolio Management LLC(“Dater”), a non-tribal entity.Art. of Operation, ECFNo. 52-2;Resolution 60-2012, ECFNo. 52-3.The same day GPF was established, GPF entered into a “Servicing Agreement” with Cash Advance Servicing LLC(“CAS”), a non-tribal entity, to service GPF's loans.See Resolution 60-2012;Servicing Agreement, ECFNo. 62-5.GFP is licensed by the FBIC Tribal Regulatory Authority and operates pursuant to the FBIC Tribal Online Lending Code, AzureDecl. ¶ 17.

In about 2017, the Tribe terminated GPF's contracts with Dater and CAS, Id. at ¶ 14.Since then, GPF has been exclusively managed by the Fort Belknap Planning and Development Corporation, d/b/a Island Mountain Development Group (“IMDG”), the economic development arm of the Tribe.Id.at ¶¶ 1, 15.All “profit participations” since 2017 from IMDG's investment in GPF were reinvested into GPF, seeSubordination Agreement at GPF01383, ECFNo. 62-10.GPF, however, asserts that since 2017, all of its “cash profitability” has gone to IMDG.AzureDecl. ¶ 16.IMDG makes all management decisions for GPF, including the language in loan documents, what interest rates are charged (subject to tribal law), parameters for loan approval, and what amounts GPF can lend to its customers.Id.at ¶ 15, IMDG

IMDG is currently the sole manager of all Tribe lending entities,^[2] as well as other tribally owned businesses.Id.at ¶¶ 1, 4;PyetteDep. 12:1-4;IMDG Charter¶ 4, ECF No. 53-2.IMDG is wholly owned by the Tribe and was created in 2006 to make “a profit on its operations to benefit the people of the Gros Ventre and Assiniboine Tribes of the Fort Belknap Indian Community.”IMDG Charter¶¶ 3, 4.IMDG has about 394 employees, of which roughly 243 are enrolled tribal members and 89 are enrolled members of other tribes.AzureDecl. ¶ 8.While GPF claims that it and other tribal businesses lease their employees from IMDG, id., GPF's Rule 30 (b)(6) corporate representative testified that GPF and none of the lending subsidiaries have ever had any employees, PyetteDep. 87:13-88:4.

Online consumer lending generates approximately 90% of IMDG's revenue.AzureDecl. ¶ 7.IMDG distributes 20% of its net income to the Tribe.Id.at ¶ 5.IMDG's distributions to the Tribe typically account for approximately 75% of the Tribe's total non-federal tribal budget.StiffarmDecl. ¶¶ 7-8.The remaining 80% of its net income is either directly reinvested in tribally owned businesses or spent on projects that have included the development and management of a wellness center for tribal members and $2,575 million on development of tribal member housing.Azure Deci, ¶ 6.

Newport Funding Loan

On November 23, 2021, GPF obtained a $10 million loan from various non-tribal lenders acting under the administrative agent Newport Funding, LLC(“NF”).Loan and Security Agreement (“NF Loan Agreement”) at GPF00379, ECFNo. 62-11.GPF designated Aaniiih Nakoda Servicing, LLC, a tribal entity, as master servicer and Carmel Solutions, LLC, (“Carmel”) a non-tribal entity, as backup servicer.SeeMaster Services Agreement, ECFNo. 62-12.The NF Loan Agreement provides that certain “Adverse Tribal Actions” constitute default on the loan including: increasing or imposing any taxes, levy, charge or other payment obligation; amending the tribal laws in a manner that would be materially adverse to the lenders; restricting or eliminating the right of any borrower to conduct its business in a manner that would be materially adverse to the lenders.NF LoanAgmt. Art. 1 at GPF00362-365.Moreover, GPF is required under the Loan Agreement to first make payments to NF and Carmel before paying any tribal entities.Id.at ¶ 2.4 GPF00389-391.GPF's payments to NF include: an upfront fee of $100,000 to obtain financing; a monthly audit fee of $2,500 regardless of when any audits actually occur; 21% interest per annum on any outstanding loan balance; and a “facility fee” calculated based on the loan amount.Id.at ¶ 6.6, GPF00415;November 23, 2021 Fee Letter, ECFNo. 6213.GPF also must pay Carmel service fees of $4,500 per month and 3.5% on all unpaid balances on accounts.Master Services Agreement¶¶ 1, 5 at GPF00854, GPF008548.

On January 19, 2023, the Tribe's elected governing body (the “Tribal Council”), replaced the IMDG Board after discovering alleged financial mismanagement.Dep. of Dana Pyette(“Pyette Dep.”)^[3] 59:14-60:7, ECFNo. 62-1;Feb. 20, 2023 Updated Default Notice at GPF00841, ECFNo. 62-16.A few days later, the CEO of IMDG, Terry Brockie, resigned.Feb. 20, 2023 Updated Default Notice at GPF00841.On January 20, 2023, NF declared an Event of Default and asserted the exercise of “immediate control” over GPF's financial accounts “until such time as [NF], in its sole discretion, has determined the Event of Default cured.”January 20, 2023 Default Notice at GPF00840, ECFNo. 62-16.NF directed financial institutions to “prevent the withdrawal, transfer, disposition of, or the exercise of any other form of dominion or control over associated Collateral without [NF's] prior written consent,”Id.NF considered the replacement of the IMDG Board and loss of Mr. Brockie^[4] as the “Key Man” to be Events of Default pursuant to various sections of the NF Loan Agreement including, inter alter.¶ 8.1(m)(unauthorized “Change of Control or Management”), ¶ 8.1 (p)(actions that create a “Material Adverse Effect”), and ¶ 8. l(q)(“any Adverse Tribal Action”).Id.During the continuation of an Event of Default, the NF Loan Agreement gives NF the Power of Attorney to, inter alia, indorse GPF's name “upon any and all checks, drafts, money orders and other instruments for the payment of money,” execute in GPF's name any financing statements, amendments and schedules thereto that GPF is obligated to execute, or “do such other and further acts and deeds” in GPF's name that NF deems necessary to “make, create, maintain, continue, enforce, or perfect” NF's and each lender's lien on or rights in any collateral.NF LoanAgmt. ¶ 2.11 at GPF00397.The Event of Default remains unresolved.PyetteDep. 61:14-24, II.DISCUSSION

A.Rule 12(b)(1)Motion to Dismiss Standard and Tribal Sovereign Immunity

“Tribal sovereign immunity is a matter of subject matter jurisdiction, [citation omitted], which may be challenged by a motion to dismiss under Fed.R.Civ.P. 12(b)(1).”E.F.W. v. St. Stephen's Indian High School,264 F.3d 1297, 1302-03(10th Cir.2001)).Where, as here, Defendant presents a factual attack on jurisdiction, the Court may consider evidence outside of the pleadings to determine whether subject matter jurisdiction exists.Gould Elecs., Inc. v. United States,220 F.3d 169, 176-77(3d Cir.2000).Unlike a facial attack, no presumption of truthfulness attaches to the plaintiffs allegations of jurisdictional facts in a factual attack.CNA v. United States,535 F.3d 132, 139(3d Cir.2008).

Tribal sovereign immunity can apply to governmental as well as commercial activities of the tribe both inside and outside Indian lands.Michigan v. May Mills Indian Community,572 U.S. 782(2014), Generally, the party invoking subject matter jurisdiction bears the burden of persuasion, but because sovereign immunity can be waived “it does...