Consumer Protection: ‘Rent a tribe’ defendant fails to vacate $43 million award

Where the architect behind a “Rent-A-Tribe” scheme challenged the district court’s judgment on multiple grounds, each of his arguments was rejected.

Background

Matt Martorello was the architect behind a “‘Rent-A-Tribe’ scheme in which a payday lender partners with a Native American tribe to cloak the lender in the sovereign immunity of the tribe, thereby precluding enforcement of otherwise applicable usury laws that cap interest rates.” The district court ultimately granted summary judgment to the borrowers’ certified class and awarded damages in the amount of $43,401,817.47.

Joinder

Martorello first contends the district court abused its discretion in denying his motion to dismiss under Federal Rule of Civil Procedure 19 for failure to join necessary and indispensable parties. The district court denied the motion for three reasons.

First, it relied on the reasoning of several district court decisions that had rejected similar arguments in other rent-a-tribe cases. Second, it endorsed the principle that joint tortfeasors are not necessary parties in the context of a civil Racketeering Influenced and  Corrupt Organizations, or RICO, Act claim. And third, it noted that Rule 19 was inapplicable as to the tribal entities because they had, in fact, been parties to this litigation, but had settled the claims brought against them.

The district court did not abuse its discretion in denying Martorello’s motion. At the outset, the court is skeptical of his argument that the tribe or its entities are necessary parties to this action. But even assuming that the tribe or tribal entities were necessary parties, Martorello still has not shown that they were indispensable ones.

Choice of law

Martorello next asserts the district court erred in concluding that Virginia, rather than tribal, law applied when determining whether the challenged loans were unlawful. He maintains that the district court should have applied the test set out in White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980), to identify the federal, tribal and state interests at stake before deciding what usury laws apply to the tribe’s online lending practices.

Contrary to Martorello’s contention, a Bracker analysis was not required under the circumstances presented here because that analysis aids courts in determining when state laws can be applied to a tribe’s conduct on a reservation or toward its own members. Neither of those scenarios is implicated in this case.

The tribe’s online lending activities were broadly marketed online and in direct mailings to consumers. The borrowers lived off the reservation when they applied for and made payments under the loans. The effect of the challenged conduct was also felt off the reservation through collection and other actions. And the borrowers are not tribe members.

RICO

Martorello challenges the district court’s ruling that he could not assert a mistake- of-law defense to the borrowers’ civil RICO claims. The court agrees with the district court that a mistake-of-law defense would not negate any element of the borrowers’ civil RICO claims. The relevant statutory language has no requirement that the defendant knew that the debt being collected was “unlawful.” This interpretation of the statutory language is consistent with that of the other circuit courts of appeals to recognize that § 1962 “on its face is silent on the issue of mens rea.”

Martorello relies on the principle that, when interpreting criminal statutes, courts will usually read a mens rea requirement into a statute when it is otherwise silent, absent evidence that Congress intended otherwise. But no such analogous presumption exists in the civil context.

When Congress has intended for civil liability to be based on proof that a defendant acted with knowledge that his conduct violated the law, it has used language expressly calling for such proof. Congress refrained from including such language in § 1962, and this absence matters for purposes of understanding what a plaintiff must prove to establish a civil RICO violation.

Martorello argues that the court should read § 1962 in tandem with §§ 1963 and 1964 to implicitly require proof of a specific mens rea as part of establishing every RICO violation under § 1962, regardless of whether it results in civil or criminal liability. No circuit court of appeals has adopted this understanding of how the RICO statutes operate. And even assuming that a mens rea requirement should be implied to obtain some criminal RICO convictions, it does not follow that such a requirement exists in a civil RICO claim.

Affirmed.

Williams v. Martorello, Case No. 23-2097, July 16, 2025. 4th Cir. (Agee), from EDVA at Richmond (Payne). Steven D. Gordon for Appellant. Matthew W.H. Wessler for Appellees. VLW 025-2-263. 26 pp.