Virginia Lawyers Weekly VA Lawyers Weekly
Where the wife and a company owned by a man who allegedly engaged in a “rent-a-tribe” scheme in order to make usurious short-term loans moved to dismiss for lack of personal jurisdiction, their motion was denied. The complaint plausibly alleged a colorable Racketeer Influenced and Corrupt Organizations Act, or RICO, claim, which allows personal jurisdiction in any federal court that properly effectuates service.
Background
Matt Martorello allegedly engaged in a “rent-a-tribe” scheme in order to make usurious short-term loans with interest rates in the triple digits. Rebecca Martorello is Matt Martorello’s wife. She is alleged to have been an employee of one of her husband’s numerous companies and allegedly “assisted her husband with the conspiracy to collect high-interest loans from consumers.”
Eventide Credit Acquisitions LLC is a Delaware company allegedly formed by Matt Martorello and others as part of a larger corporate restructuring in an effort to hide allegedly ill-begotten profits. Rebecca Martorello and Eventide have filed motions to dismiss, arguing that the court lacks personal jurisdiction over them.
Standard
The RICO nationwide service of process provision allows for personal jurisdiction in any federal court that properly effectuates service, so long as the exercise of jurisdiction comports with the Fifth Amendment. To successfully invoke RICO’s personal jurisdiction provision, the asserted RICO claim needs to be “colorable” or, in other words, not “implausible, insubstantial, or frivolous.” Thus, to satisfy Fed. R. Civ. P. 4(k)(1)(C), two things need to be true: (1) the complaint makes out a “colorable” RICO claim and (2) service must be proper.
In addition to satisfying the statutory requirements, a court’s exercise of personal jurisdiction must be consistent with Due Process. When United States-based defendants receive service in compliance with a nationwide service of process provision, like RICO’s, the Fifth Amendment’s Due Process provision only overcomes “the congressionally articulated policy” allowing in personam jurisdiction if the defendant can prove “extreme inconvenience or unfairness.”
Analysis
Rebecca Martorello and Eventide only challenge whether the complaint presents a colorable RICO claim against them. The court has already held that the RICO claims against Rebecca Martorello and Eventide are “plausible.” Thus, the applicable standard is satisfied here. And, indeed, it is the law of this case that the complaint articulates a colorable claim for a RICO violation against both moving defendants.
This alone is enough to establish personal jurisdiction. The Rule 12(b)(6) standard for sufficiency is more exacting than the sufficiency standard under Rule 12(b)(2). Because plaintiffs have met the 12(b)(6) standard, they have, of necessity, met the 12(b)(2) standard. Therefore, plaintiffs have made a colorable RICO claim within the meaning of Rule 4(k)(1)(C), satisfying this element.
Notwithstanding the defendants’ claims to the contrary, the Fourth Circuit’s holding in Williams v. Big Picture Loans, 929 F.3d 170 (4th Cir. 2019), does not affect the analysis. Nor does that decision alter this court’s holdings respecting the sufficiency of the RICO claims.
The question presented to the Fourth Circuit in Williams was whether two of the other companies allegedly part of the illegal lending scheme could claim sovereign tribal immunity. The Fourth Circuit did not decide whether a RICO enterprise existed. Nor did it decide the roles played Rebecca Martorello or Eventide in the RICO enterprise. In sum, the Fourth Circuit’s decision does not cast doubt on the colorability of the RICO claim. Nor does it otherwise aid Martorello and Eventide in their challenge to the exercise of personal jurisdiction.
Thus, considering that: (1) there is a colorable RICO claim as to the moving defendants; (2) neither defendant makes any allegations that they were improperly served and (3) they have not met their burden to show that it is extremely inconvenient or unfair for them to litigate in Virginia, the challenges to the exercise of personal jurisdiction as to the RICO claim fail.
Moreover, once there is personal jurisdiction over the RICO claim, there is personal jurisdiction over all state claims arising “from a common nucleus of operative facts.” Neither moving defendant has argued that any of the remaining counts are unrelated to the central RICO claim, nor could they. All the claims arise from the same allegedly illegal lending operation. Accordingly, the court has personal jurisdiction over Rebecca Martorello and Eventide as to all pending counts.
Rebecca Martorello’s motion to dismiss denied. Eventide’s Credit Acquisitions LLC’s motion to dismiss denied.
Galloway v. Martorello, Case No. 3:19-cv-314, Nov. 29, 2022. EDVA at Richmond (Payne). VLW 022-3-539. 8 pp.
