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Rilley v. Money mutual, LLC

United States District Court, D. Minnesota

August 30, 2017

Scott Rilley, Michelle Kunza, Linda Gonzales and Michael Gonzales, individually and on behalf of the putative class, Plaintiffs,
v.
Money Mutual, LLC, Selling Source, LLC, and PartnerWeekly, LLC, Defendants.

          E. Michelle Drake, Esq., Jeffrey Laurence Osterwise, Esq., and John G. Albanese, Esq., Berger & Montague, PC; and Mark L. Heaney, Esq., Heaney Law Firm, LLC, counsel for Plaintiffs.

          Christina Rieck Loukas, Esq., and Joseph M. Windler, Esq., Winthrop & Weinstine, PA; and Donald J. Putterman, Esq., Michelle L. Landry, Esq., and Tobias G. Snyder, Esq., Putterman Landry & Yu LLP, counsel for Defendants.

          MEMORANDUM OPINION AND ORDER

          DONOVAN W. FRANK UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         This matter is before the Court on the defendants' motion to dismiss for lack of personal jurisdiction and motion to dismiss for failure to state a claim. (Doc. No. 11.) For the reasons discussed below, the Court denies the defendants' motion to dismiss for lack of personal jurisdiction, and the Court grants in part and denies in part the defendants' motion to dismiss for failure to state a claim.[1]

         BACKGROUND

         Defendants collectively operate a lead-generating business for various payday lenders. Consumers would go to the defendants' website to fill out an application, and then Defendants would sell the application to lenders. The lenders would independently decide whether to lend consumers money.

         Defendant MoneyMutual, LLC, maintained the website and advertised nationally on television and the Internet, but had no employees or officers. Defendant PartnerWeekly, LLC, was MoneyMutual's managing agent. PartnerWeekly would purchase the advertising, operate the website, and contract with lenders on behalf of MoneyMutual. Defendant Selling Source, LLC, is the sole parent of MoneyMutual and PartnerWeekly. Selling Source provided common services to the subsidiaries (like legal and accounting), but did not operate the day-to-day business. (Defs.' Memo. at 11.)

         Plaintiffs are consumer-borrowers and have filed a purported class action against Defendants related to the payday loans. Plaintiffs first filed their complaint in Minnesota state court, naming only MoneyMutual as a defendant. MoneyMutual moved to dismiss for lack of personal jurisdiction. In Rilley v. MoneyMutual, LLC (Rilley I), the Minnesota Supreme Court affirmed the finding of personal jurisdiction. 884 N.W.2d 321');">884 N.W.2d 321 (Minn. 2016). After the United States Supreme Court denied MoneyMutual's petition for certiorari, 137 S.Ct. 1331, Plaintiffs amended the complaint to add Defendants PartnerWeekly and Selling Source and to add a claim for violating 18 U.S.C. § 1962(c) of the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. Defendants then removed the case to federal court. (Doc. No. 1.)

         As relevant here, Plaintiffs have alleged in their Amended Complaint (Doc. No. 1-2) claims for: (1) violating Minnesota's payday-lending statutes, Minnesota Statute §§ 47.60 and 47.601; (2) violating § 1962(c) of the federal RICO Act;(3) violating the Minnesota Consumer Fraud Act, Minnesota Statute § 325F.69 and the Minnesota False Statement in Advertising Act, Minnesota Statute § 325F.67;(4) violating the Minnesota Uniform Deceptive Trade Practices Act, Minnesota Statute § 325D.44; (5) unjust enrichment; (6) civil conspiracy and aiding and abetting; and (7) alter ego/piercing the corporate veil. Defendants have moved to dismiss for lack of personal jurisdiction and for failure to state a claim.

         DISCUSSION

         I. Motion to Dismiss for Lack of Personal Jurisdiction

         A. Legal Standard

         Defendants seek to dismiss Plaintiffs' claims for lack of personal jurisdiction. To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must make a prima facie showing that personal jurisdiction exists; that is, a plaintiff must allege facts to support a reasonable inference that defendant may be subjected to jurisdiction in the chosen forum. Steinbuch v. Cutler, 518 F.3d 580, 585 (8th Cir. 2008) (citing Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1072 (8th Cir. 2004)). If, as is the case here, the defendant denies jurisdiction, the plaintiff bears the burden of proving facts supporting personal jurisdiction. See Wells Dairy, Inc. v. Food Movers Int'l, Inc., 607 F.3d 515, 518 (8th Cir. 2010) (quotation omitted). Once a defendant offers affidavits to challenge personal jurisdiction, “facts, not mere allegations, must be the touchstone” in determining whether personal jurisdiction exists. Dever, 380 F.3d at 1072 (citation omitted); see also Abbasi v. Leading Edge Aviation Servs., Inc., Civ. No. 16-295, 2016 WL 4007571, at *3 (D. Minn. July 26, 2016).

         B. The Court has Personal Jurisdiction.

         Personal jurisdiction is a two-step analysis: the Court must have statutory and constitutional authority for exercising jurisdiction over the defendant. Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, 4A Fed. Prac. & Proc. § 1069 (4th ed. 2017).

         1. Statutory Jurisdiction

         Federal Rule of Civil Procedure 4(k) provides that a court can exercise jurisdiction over a defendant if: (1) jurisdiction is allowed under the state long-arm statute; (2) the party is served within 100 miles of the courthouse; or (3) service is allowed under a federal statute. Plaintiffs argue that the Court has statutory jurisdiction under the federal RICO Act and under Minnesota's long-arm statute, Minnesota Statute § 543.19. Under the federal RICO Act, a court can exercise jurisdiction over a person in any district where the defendant “resides, is found, has an agent, or transacts his affairs.” 18 U.S.C. § 1965(a). Courts have interpreted § 1965(a) as allowing courts to exercise nationwide personal jurisdiction so long as it comports with due process. See ESAB Grp., Inc. v. Centricut, Inc., 126 F.3d 617, 626 (4th Cir. 1997). Likewise, Minnesota's long-arm statute “extend[s] the personal jurisdiction of Minnesota courts as far as the Due Process Clause of the federal constitution allows.” Rilley I, 884 N.W.2d at 327 (alterations in the original). Thus, the analysis for personal jurisdiction under both statutes collapses into whether constitutional due process allows the Court to exercise jurisdiction over Defendants.

         2. Constitutional Jurisdiction

         The United States Supreme Court has explained that constitutional due process requires that a defendant have “certain minimum contacts” with the forum state such that “maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotations omitted). A defendant's conduct and connection with the forum state must be such that the defendant “should reasonably anticipate being haled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). “It is essential in each case that the defendant has purposefully availed itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)).

         When a federal statute dictates whether the court has personal jurisdiction, courts' due-process analysis is pursuant to the Fifth Amendment's Due Process Clause instead of the Fourteenth Amendment. ESAB, 126 F.3d at 626 (“The due process constraint on service under [a federal statute] is not, however, grounded in the Fourteenth Amendment, which circumscribes service under state process pursuant to [a state long-arm statute].”) Under the Fifth-Amendment analysis, courts evaluate whether the defendant has sufficient contacts with the United States. See Id. at 627; see also In re Fed. Fountain, Inc., 165 F.3d 600, 601-02 (8th Cir. 1999) (en banc). The inquiry is still a per-claim, per-defendant inquiry. ESAB, 126 F.3d at 627. Here, Plaintiffs have brought a claim against Defendants under the RICO Act, which allows for nationwide personal jurisdiction. Thus, the question for the Court is whether Defendants have sufficient minimum contacts with the United States instead of any particular state. See Id. at 626-27; see also Wright & Miller § 1068.1. Here, there is no question that Defendants-all U.S. companies-have minimum contacts with the United States. The Court can therefore properly exercise jurisdiction over Defendants for the RICO claim.[2]

         Next, the Court turns to the remaining state-law claims. When a court has personal jurisdiction over a defendant for one claim, the court can usually exercise personal jurisdiction over the defendant for similar claims that arise out of the same common nucleus of operative facts. See, e.g., Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174, 1181 (9th Cir. 2004); ESAB, 126 F.3d at 628; Aviva Life & Annuity Co. v. Davis, 20 F.Supp.3d 694, 703 n.7 (S.D. Iowa 2014) (collecting cases). Here, Plaintiffs' state-law claims arise out of the same common nucleus of operative facts: All of Plaintiffs' claims relate to Defendants' role in facilitating payday loans. Indeed, Defendants averred as much when they removed the case to federal court. (Doc. No. 1 ¶¶ 15-18 (“This Court has supplemental jurisdiction over the remaining state law claims in this action, because such claims are closely related to and arise out of the same set of operative facts as the federal law claim.”).) Thus, the Court has pendent personal jurisdiction over Defendants for the state-law claims as well.[3]

         Defendants' arguments to the contrary are unpersuasive. Much of Defendants' briefing focuses on the Minnesota long-arm statute, which does not affect the Court's analysis under RICO and the Fifth Amendment. ESAB, 126 F.3d at 626-27 (finding jurisdiction under RICO and the Fifth Amendment, even though it also concluded that the district court did not have jurisdiction under South Carolina's long-arm statute). In response to Plaintiffs' RICO argument, Defendants point to Burkhart v. Medserv Corp., where the district court concluded that the Fifth Amendment still requires contacts with the forum state. 916 F.Supp. 919, 922 (W.D. Ark. 1996). But in In re Federal Fountain, Inc., the full Eighth Circuit rejected that argument and concluded that the inquiry under the Fifth Amendment is whether the defendant has minimum contacts with the United States. 165 F.3d at 601-02.

         Additionally, Defendants argue that Plaintiffs' RICO claim cannot establish jurisdiction because it fails as a matter of law. To exercise jurisdiction pursuant to the RICO Act, Plaintiffs must allege a colorable RICO claim. Republic of Pan. v. BCCI Holdings (Lux.) S.A., 119 F.3d 935, 941 (11th Cir. 1997). A colorable claim is a lower pleading standard than required under Rule 12(b)(6): “[T]the court should dismiss for lack of jurisdiction only if the right claimed is so ‘insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise devoid of merit as not to involve a federal controversy.'” Id. (internal quotation marks omitted) (quoting IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1055 (2d Cir. 1993)). The moving party has the “high burden” of showing that the claim is not colorable. See Herrmann, 9 F.3d at 1056-57.

         Here, Defendants have failed to show that Plaintiffs' RICO claim is not colorable. To start, Defendants seem to acknowledge that Plaintiffs' claim is colorable because they used that claim as a basis for the Court's jurisdiction in their removal papers. (Doc. No. 1 at ¶ 14 (“The United States District Court for the District of Minnesota has original jurisdiction over Plaintiffs' claims pursuant to 28 U.S.C. § 1331 because this action constitutes a claim by Plaintiffs for violation of a federal statute. Plaintiffs specifically allege a claim under the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C.§ 1962).”).) But apart from that, Defendants have not shown how Plaintiffs' RICO claim is so implausible that the Court does not have subject matter jurisdiction over the claim, which would be necessary to preclude the Court from exercising personal jurisdiction pursuant to RICO. See Republic of Pan., 119 F.3d at 942 n.9; see also Herrmann, 9 F.3d at 1056-57. Thus, the Court has personal jurisdiction over all three defendants for all of Plaintiffs' claims and therefore denies Defendants' Motion to Dismiss for Lack of Personal Jurisdiction.

         II. Motion to Dismiss for Failure to State a Claim

         Defendants also move pursuant to Rule 12(b)(6) to dismiss Plaintiffs' claims for: (1) violating Minnesota's payday-lending statutes, Minnesota Statute §§ 47.60 and 47.601; (2) violating § 1962(c) of the federal RICO Act; (3) violating Minnesota Consumer Fraud Act, Minnesota Statute § 325F.69 and Minnesota False Statement in Advertising Act, Minnesota Statute § 325F.67; (4) violating Minnesota Uniform Deceptive Trade Practices Act, Minnesota ...


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