Virginia Lawyers Weekly//August 16, 2023
Virginia Lawyers Weekly//August 16, 2023//
Where multiple defendants sued for their alleged role in a “rent-a-tribe” scheme to avoid usury laws moved to dismiss the complaint on jurisdiction, statute of limitations and plausibility grounds, their motions were denied.
This suit arises out of defendants’ participation in an allegedly unlawful short-term, payday lending operation, elements of which were the subject of earlier litigation before this court. See Hengle v. Asner, 433 F. Supp. 3d 825 (E.D. Va. 2020), aff’d sub nom. Hengle v. Treppa, 19 F.4th 324 (4th Cir. 2021). Defendants have filed multiple motions to dismiss.
Statute of limitations
Several defendants contend that (1) the four-year statute of limitations for civil RICO actions bars plaintiffs’ RICO claims while (2) Virginias two-year statute of limitations for civil conspiracy and three-year statute of limitations for unjust enrichment time bar plaintiffs’ state law claims. Because these statutes of limitation are not clearly applicable from the face of the amended complaint, the court will not dismiss any of the Virginia plaintiffs’ claims as time-barred at this stage.
The Kellner and Signal Light defendants assert that the Virginia plaintiffs’ RICO claims must fail for lack of an underlying “unlawful” debt on which defendants collected. Because the relevant factual allegations in this suit are on all fours with the allegations in Hengle, and because defendants provide no compelling reason for this court to contradict its holding in that case, which the Fourth Circuit affirmed, the court again rejects this argument.
The Kellner defendants also argue that all four of plaintiffs’ RICO counts must fail because plaintiffs “fail to adequately plead the existence of a RICO enterprise.” Because the amended complaint sets forth the nature of the alleged RICO enterprise with great detail, however, the court finds that this argument lacks merit.
Defendants argue that plaintiffs have failed to allege facts sufficient to show that defendants proximately caused plaintiffs’ injuries. Defendants argue that they constitute mere passive investors, and because defendants did not perform the formalities associated with issuing and collecting upon plaintiffs’ loans, they did not proximately cause plaintiffs’ injuries. Because plaintiffs allege facts which, taken as true, demonstrate a “direct relation” between their injuries and defendants’ alleged RICO violations, the court rejects this challenge as well.
Several defendants contend that the amended complaint fails to allege that they participated “as … principal[s]” in the collection of unlawful debts. Those defendants also argue that the amended complaint fails to plead facts supporting a plausible inference that they “received income” from the scheme and subsequently “reinvested that income back into the enterprise.” Both of these challenges amount to veiled factual disputes, which prove premature at the motion to dismiss stage.
Defendants argue that plaintiffs fail to allege that defendants acquired or maintained an interest in or control of an enterprise through their unlawful debt collection. Second, defendants assert that plaintiffs fail to allege an injury caused by defendants’ acquisition of an interest in those same entities.
As to the first argument, the court finds that plaintiffs in fact allege a nexus between defendants’ collection on plaintiffs’ high-interest debts and defendants’ ongoing, indirect interests in the tribal lending entities. As to the second argument, the court finds that plaintiffs need not allege an “acquisition injury” to maintain a RICO claim under that subsection.
Defendants contend that plaintiffs’ allegations merely establish that defendants undertook actions typical of “the day-today activities of passive investors.” Because the court finds that the amended complaint plausibly alleges that each defendant participated “in the operation or management of the enterprise itself,” however, the court rejects these challenges as meritless.
Defendants contend that plaintiffs’ RICO conspiracy claims fail where plaintiffs’ substantive RICO claims under §§ 1962(a)-(c) prove “meritless.” But this court finds that plaintiffs’ claims under §§ 1962(a)-(c) all stand adequately alleged.
Second, the LP investor defendants assert that plaintiffs’ RICO conspiracy claims against them fail under the intracorporate immunity doctrine. The court finds that application of the intracorporate immunity doctrine here would make little sense.
Third, defendants argue that plaintiffs fail to sufficiently allege an agreement among defendants to further the conspiracy’s overall objective, as opposed to an agreement to simply make and collect usurious debts. This argument runs contrary to the allegations on the face of the amended complaint.
As to the unjust enrichment claim, defendants contend that (1) plaintiffs fail to allege that they conferred a benefit on defendants and (2) plaintiffs fail to allege that defendants proximately caused Plaintiffs’ injuries. As to the civil conspiracy claim, defendants assert that, like plaintiffs’ RICO conspiracy claims, plaintiffs’ common law conspiracy claims fail under the intracorporate immunity doctrine.
Moreover, defendants argue, plaintiffs fail to allege a specific agreement to accomplish an underlying unlawful act as the object of the conspiracy. Because the court finds that plaintiffs in fact plead sufficient factual material to make out claims for both unjust enrichment and common law conspiracy, the court will deny defendants’ 12(b)(6) motions with respect to plaintiffs’ state law claims.
Rule 12(b)(2) motions
Upon consideration of the allegations in the amended complaint, alongside the parties’ motions and memoranda in support, the court finds that plaintiffs make an adequate prima facie showing of this court’s personal jurisdiction over defendants. Because the court adjudicates the instant motions on the papers, this prima facie showing suffices to survive defendants’ Rule 12(b)(2) motions.
Defendants’ motions to dismiss denied.
Blackburn v. AC Israel Enterprises, Case No. 3:22-cv-146, July 24, 2023. EDVA at Richmond (Gibney). VLW 023-3-425. 80 pp.