Solomon v. American Web Loan

• Citation: 375 F.Supp.3d 638
• Decision Date: 20 March 2019
• Docket Number: Civil Action No. 4:17cv145
• Parties: Royce SOLOMON, et al., individually and on behalf of all others similarly situated, Plaintiffs, v. AMERICAN WEB LOAN et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

375 F.Supp.3d 638

Royce SOLOMON, et al., individually and on behalf of all others similarly situated, Plaintiffs,

v.AMERICAN WEB LOAN et al., Defendants.

Civil Action No. 4:17cv145

United States District Court, E.D. Virginia, Newport News Division.

Signed March 20, 2019

Filed March 22, 2019

Kathleen Mary Donovan-Maher, Pro Hac Vice, Steven Joseph Buttacavoli, Pro Hac Vice, Steven Lev Groopman, Pro Hac Vice, Justin Nader Saif, Pro Hac Vice, Norman Berman, Pro Hac Vice, Patrick T. Egan, Pro Hac Vice, Stephen Ryan, Jr., Pro Hac Vice, Berman Tabacco, Boston, MA, Leonard Anthony Bennett, Consumer Litigation Associates, Newport News, VA, Matthew Bernard Byrne, Pro Hac Vice, Gravel & Shea PC, Burlington, VT, David W. Thomas, MichieHamlett, Charlottesville, VA, for Plaintiffs.

Charles Kalman Seyfarth, Elizabeth Scott Turner, O'Hagan Meyer PLLC, Richmond, VA, Daniel Volchok, Pro Hac Vice, Jonathan Paikin, Pro Hac Vice, Molly Jennings, Pro Hac Vice, Thomas L. Strickland, Pro Hac Vice, Wilmer Cutler Pickering Hale & Dorr LLP, Saba Bazzazieh, Pro Hac Vice, Rosette LLP, Rachel Shanahan Rodman, Robert Madison Cary, Kathryn Elizabeth Hoover, Pro Hac Vice, Simon Andrew Latcovich, Williams & Connolly LLP, Washington, DC, Robert Allen Rosette, Pro Hac Vice, Rosette, LLP, Chandler, AZ, for Defendants.

OPINION & ORDER I

HENRY COKE MORGAN, JR., SENIOR UNITED STATES DISTRICT JUDGE

These motions arise out of complicated lending scheme that appears to weave tribal immunity, forced arbitration, and several layers of corporate entities together in an attempt to avoid liability for allegedly usurious interest rates. The Court granted the parties additional time to complete extensive jurisdictional discovery. On February 5 and 6, 2019, the Court held a lengthy hearing to hear evidence and arguments concerning the various jurisdictional and related motions filed by Defendants. The Court ruled from the bench but hereby ISSUES this Opinion and Order, along with a companion Opinion and Order, to further explain its decisions.

At its core, this case involves a lending scheme envisioned by Mark Curry ("Curry"), whereby he and his corporate entities attempt to use the sovereign immunity of the Otoe-Missouria Indian Tribe (the "Tribe") to evade this lawsuit. Mindful of the strong federal policy favoring tribal immunity, self-governance, and a safe treasury, the Court cannot accept his arguments. Plaintiffs have produced enough evidence to show that Curry shifted all of the risk of his scheme to the Tribe and kept the lion's share of the revenue for himself, through a scheme that infringed upon the Tribe's self-governance and placed the Tribe's treasury at risk. In other words, Plaintiffs have made a sufficient showing that Curry was acting for himself, not for the Tribe.

In this Opinion and Order I, the Court will address the following:

1) Defendants American Web Loan, Inc., AWL, Inc., and MacFarlane's ("AWL Defendants' " or "AWL's") joint Motion to Dismiss for Lack of Subject Matter Jurisdiction, Doc. 72;

2) Defendant Curry's Motion to Dismiss for Lack of Subject Matter Jurisdiction, Doc. 85;

3) Defendant Sol Partners' ("Defendant Sol's") Motion to Dismiss for Lack of Subject Matter Jurisdiction, Doc. 86;

4) AWL Defendants' Motion to Transfer Venue, Doc. 70;

5) Defendants Curry and Sol's Motion to Transfer Case, Doc. 83;

6) AWL Defendants' Motion to Compel Arbitration, Doc. 74; and

7) Defendants Curry and Sol's Motion to Compel Arbitration, Doc. 84;

For the reasons stated herein, the Court DENIES each of these motions.

I. BACKGROUND

Plaintiffs are four individuals who obtained loans from American Web Loan. ¶¶ 10-13. Plaintiffs allege that Defendant, Mark Curry, with the assistance of defendants American Web Loan, Inc. AWL, Inc., MacFarlane Group, Medley Management, Inc., Medley Group, LLC, Medley LLC, Medley Capital Corp., Medley Opportunity Fund II, LP (collectively "Medley" or "Medley Defendants"), Brook Taube, Seth Taube (collectively "the Taubes"), Middlemarch Partners, Inc. ("Middlemarch"), DHI Computing Service, Inc. d/b/a GOLDPoint ("GOLDPoint"), Sol Partners, Inc. ("Sol"), and John Doe Defendants (1-100), have pleaded the sovereignty of the Otoe-Missouria Indian Tribe (the "Tribe") as a defense to allegedly imposing usurious interest rates on short-term loans issued to individuals throughout the United States. Am. Compl. ¶¶ 1, 6.

Altogether, Plaintiffs' complaint alleges nine (9) different causes of action against the various defendants. In Count One, Plaintiffs allege that AWL, Curry, Sol, Medley and the Taubes engaged in the collection of unlawful debt in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Id. ¶¶ 209-22. In Count Two, Plaintiffs allege that the AWL, Curry, Sol, the Medley Defendants (which includes the Taubes), GOLDPoint, and Middlemarch engaged in a RICO conspiracy.

Id. ¶¶ 223-27. In Count Three, Plaintiffs allege that the AWL Defendants, Curry, Sol, Medley, and GOLDPoint violated the Electronic Funds Transfer Act ("EFTA"). Id. ¶¶ 228-43. In Counts Four through Eight, Plaintiffs allege that Defendant AWL, Inc. committed several violations of the Truth in Lending Act ("TILA"). Id. ¶¶ 244-73. In Count Nine, Plaintiffs allege that Defendants have been unjustly enriched by their continued possession of funds illegally taken from Plaintiffs and members of the putative class. Id. ¶¶ 274-276. Plaintiffs define the putative class of Plaintiffs as:

All persons who took out loans from American Web Loan. Included in the Class are any persons who took out loans through the American Web Loan d/b/a entity known as Clear Creek Lending. The Class period begins on February 10, 2010 and continues through the present.

Am. Compl. ¶ 198.¹

II. PROCEDURAL HISTORY

Plaintiffs initially filed their complaint on December 15, 2017. Doc. 1. An Amended Complaint was filed on March 9, 2018. Am. Compl. On April 9, 2018, the following motions were filed:

(1) Medley Defendants and the Taubes' Motion to Dismiss for Failure to State a Claim and Failure to Join a Necessary Party, Doc. 62;

(2) Medley Defendants and the Taubes' Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue, Doc. 64;

(3) AWL Defendants' Motion to Transfer, Doc. 70;

(4) AWL Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction, Doc. 72;

(5) AWL Defendants' Motion to Compel Arbitration, Doc. 74;

(6) AWL Defendants' Motion to Dismiss for Failure to State a Claim, Doc. 76;

(7) Middlemarch's Motion to Dismiss for Failure to State a Claim, Doc. 77;

(8) GOLDPoint's Motion to Dismiss for Failure to State a Claim, Doc. 81;

(9) Defendants Curry and Sol's Motion to Transfer Case, Doc. 83;

(10) Defendants Curry and Sol's Motion to Compel Arbitration, Doc. 84;

(11) Defendant Curry's Motion to Dismiss for Lack of Subject Matter Jurisdiction, Doc. 85;

(12) Defendant Sol's Motion to Dismiss for Lack of Subject Matter Jurisdiction, Doc. 86; and

(13) Defendants Curry and Sol's Motion to Dismiss for Failure to State a Claim, Doc. 87.

On June 8, 2018, Plaintiffs opposed each of the defendants' motions.² Docs. 109-115. On July 9, 2018, each defendant replied. Docs. 133-145.

On August 2, 2018, the Court held a status conference regarding this matter and then consolidated this action with Hengle v. Curry,³ which had recently been transferred from the Richmond Division. Doc. 160.

Given the nature of the issues raised in the multiple jurisdictional and related motions, on August 2, 2018, the Court granted the parties time to conduct discovery on these issues. Id. The Court allowed the parties approximately three (3) months to conduct discovery on the jurisdictional and venue matters. Doc. 201 (setting the jurisdictional discovery deadline at October 30, 2018). During this time, the parties took extensive discovery, including document production and depositions. Thereafter, the parties fully briefed their positions, attaching documents and deposition transcripts. See Docs. 223, 224, 226, 232, 246, 257, 265, 319. On November 6, 2018, Plaintiffs filed a supplemental brief opposing AWL Defendants' and Defendants Curry and Sol's Motions to Transfer. Docs. 221, 222. On November 13, 2018, AWL Defendants and Defendants Curry and Sol filed a supplemental brief in support of their Motion to Transfer. Docs. 231, 232, 235. On November 20, 2018, AWL Defendants and Defendants Curry and Sol, each filed a supplemental briefs in support of their Motions to Dismiss for Lack of Subject Matter Jurisdiction, and Plaintiffs filed a supplemental opposition to Defendants' Motions. Docs. 245, 246, 256, 257, 264, 265, 272, 273. On November 29, 2018, Plaintiffs filed a corrected supplemental opposition without objection.⁴ Doc. 298-1. On December 11, 2018, AWL Defendants, Defendants Curry and Sol, and Plaintiffs each replied with supplemental briefs regarding subject matter jurisdiction. Docs. 309, 310, 314, 315, 316, 317, 318, 319.

In addition to the extensive briefing, the Court held an evidentiary hearing that spanned two days. Docs. 338, 345. At this hearing, Defendants called two witnesses, John Shotton, the Chairman of the Otoe-Missouria Tribal Counsel, and Mark Curry. Hearing Transcript, Day 1, at 7:4-5, 7:13-16, 70:16-117 (February 5, 2019). While Plaintiffs did not call any witnesses, they did present evidence through cross examination. Id. at pp. 35-68, 82-112. On the second day of the hearing, counsel for AWL Defendants, Medley Defendants, Middlemarch Defendants, DHI, and Plaintiffs presented oral arguments. Hearing Transcript, Day 2, (February 6, 2019). Having reviewed the papers and considered the evidence and arguments in this case, the Court RULED from the bench. It now provides this Opinion and Order to further explain its ruling.

III. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

A. Legal Standard

Federal district courts are courts of limited subject matter jurisdiction. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005). Therefo...