Duggan v. Martorello

596 F.Supp.3d 195

Dana DUGGAN, individually and on behalf of persons similarly situated, Plaintiff,

v.Matt MARTORELLO and Eventide Credit Acquisitions, LLC, Defendants.

CIVIL ACTION NO. 18-12277-JGD

United States District Court, D. Massachusetts.

Filed March 30, 2022

Amy E. Tabor, Pro Hac Vice, Cynthia B. Chapman, Pro Hac Vice, John B. Scofield, Jr., Pro Hac Vice, Michael A. Caddell, Caddell & Chapman, Houston, TX, John J. Roddy, Elizabeth A. Ryan, Bailey & Glasser LLP, Boston, MA, for Plaintiff.

Ian D. Roffman, Ashley M. Paquin, Michael J. Leard, Nutter, McClennen & Fish, LLP, Boston, MA, Benjamin Rottenborn, Pro Hac Vice, Woods Rogers PLC, Roanoke, VA, Bernard Robert Given, Pro Hac Vice, William Nathaniel Grosswendt, Pro Hac Vice, Loeb & Loeb LLP, Los Angeles, CA, Elaine McCafferty, Pro Hac Vice, Karen Stemland, Pro Hac Vice, Woods Rogers PLC, Charlottesville, VA, Patrick Daugherty, Pro Hac Vice, Van Ness Feldman LLP, Washington, DC, for Defendant Matt Martorello.

Ian D. Roffman, Michael J. Leard, Nutter, McClennen & Fish, LLP, Boston, MA, Benjamin Rottenborn, Pro Hac Vice, Woods Rogers PLC, Roanoke, VA, Bernard Robert Given, Pro Hac Vice, William Nathaniel Grosswendt, Pro Hac Vice, Loeb & Loeb LLP, Los Angeles, CA, Elaine McCafferty, Pro Hac Vice, Karen Stemland, Pro Hac Vice, Woods Rogers PLC, Charlottesville, VA, Jon Hollis, Pro Hac Vice, Woods Rogers PLC, Richmond, VA, for Defendant Eventide Credit Acquisitions, LLC.

MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS’ MOTION TO DISMISS UNDER FEDERAL RULE OF CIVIL PROCEDURE 19

DEIN, U.S.M.J.

I. INTRODUCTION

This is a putative class action in which the plaintiff, Dana Duggan ("Duggan"), claims that the defendants, Matt Martorello ("Martorello") and his company, Eventide Credit Acquisitions, LLC ("Eventide"), engaged in an internet-based predatory lending scheme in which they charged Duggan and other consumers unconscionably high interest rates, often exceeding 500%, for short-term loans. According to Duggan, Martorello and Eventide sought to evade state and federal laws prohibiting usurious lending practices by partnering with the Lac Vieux Desert Band of Lake Superior Chippewa Indians ("LVD" or the "Tribe") to set up a lending entity. Under this so-called "rent-a-tribe" scheme, LVD, through a company known as Big Picture Loans, LLC ("Big Picture Loans"), allegedly acted as the nominal lender while Martorello and Eventide operated and exercised actual control over the lending business under the cloak of the Tribe's sovereign immunity. Duggan claims that this arrangement enabled the defendants to take advantage of the privileges and immunities available to Native American tribes to carry out their fraudulent enterprise and enrich themselves at the expense of borrowers. By her Second Amended Class Action Complaint, Duggan has asserted claims against Martorello and Eventide for violations of Massachusetts lending, licensing and consumer protection laws, violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. ("RICO"), unjust enrichment and declaratory judgment. Additionally, Duggan is seeking to certify a class and a subclass of similarly situated borrowers residing in Massachusetts and in other states around the country.

The matter is before the court on "Defendants’ Motion to Dismiss Under Federal Rule of Civil Procedure 19" (Docket No. 199). By their motion, the defendants argue that LVD, Big Picture Loans and Ascension Technologies, LLC ("Ascension"), an affiliate of Big Picture Loans, are necessary and indispensable parties to this action pursuant to Rule 19 of the Federal Rules of Civil Procedure. They further argue that LVD, Big Picture Loans and Ascension (collectively, the "Tribal Entities") cannot be joined because they are arms of the Tribe who are protected from suit under the doctrine of sovereign immunity, and that the inability to join indispensable parties warrants the dismissal of this case.

The Tribal Entities are no strangers to this litigation. Either they or their members were previously joined as defendants in this case but were dismissed voluntarily following a settlement with the plaintiff. This court finds that as a result, and for the additional reasons described below, the Tribal Entities cannot be deemed necessary or indispensable parties to this action under Rule 19. Accordingly, the defendants’ motion to dismiss is DENIED.

II. FACTUAL AND PROCEDURAL BACKGROUND

Martorello and Eventide have moved to dismiss Duggan's Second Amended Class Action Complaint, pursuant to Fed. R. Civ. P. 19, for failure to join necessary and indispensable parties.¹ In considering such a motion, the court must "accept the allegations contained in the plaintiff's complaint as true." Romero v. Clean Harbors Surface Rentals USA, Inc., 368 F. Supp. 3d 152, 158 (D. Mass. 2019) (quoting J & J Sports Prods. Inc. v. Cela, 139 F. Supp. 3d 495, 499 (D. Mass. 2015) ). Additionally, the court "may consider other relevant extra-pleading evidence, such as declarations or affidavits." Id. Applying this standard to the instant case, the relevant facts are as follows.

Duggan's Loan Agreements

This case arose out of two short term loans that the plaintiff received from Big Picture Loans in 2017 and 2018. The first loan, which Duggan received in October 2017, was for $425 and the second loan, which she received in April 2018, was for $775. (Compl. ¶¶ 9-10).² The plaintiff obtained the loans after filling out application materials on the internet and speaking with a representative of Big Picture Loans from her home in Massachusetts. (Id. ). Duggan claims that Big Picture Loans’ representative failed to explain the terms of the loans or provide her with an opportunity to review the loan agreement before she digitally signed the agreement and submitted it over the internet. (Id. ¶¶ 30, 32, 40). As a result, Duggan was unaware that the interest rate on each of the loans would exceed 500 percent or that the loan agreement contained provisions that allegedly required her to relinquish her rights as a consumer under Massachusetts law. (Id. ¶¶ 30, 34, 40, 120-21). Specifically, according to the plaintiff, the loan agreements used by Big Picture Loans, including the agreement that controlled Duggan's loans, contained choice of law, forum selection, class action waiver and dispute resolution provisions that allegedly sought "to disclaim federal and state laws in favor of Tribal law[,]" "deprive[ ] Massachusetts borrowers of any forum [in which] to bring state or federal law claims" and violate the borrower's "statutory right to maintain a class action to redress unfair or deceptive acts or practices in accordance with Massachusetts law."³ (Id. ¶¶ 121-23, 126, 140-41 & Ex. 1 at 5-6 (emphasis in original)).

Duggan claims that she repaid the $425 over the course of six months, with Big Picture Loans deducting $191.52 per month from her bank account during the first five months and deducting $125.62 in the final month. (Id. ¶¶ 35-36). Accordingly, the plaintiff's repayments on the first loan totaled $1,083.22. (Id. ¶ 37). Prior to filing this lawsuit, Duggan paid a total of $875 on the $775 loan. (Id. ¶ 42). Big Picture Loans contends that she owes it at least an additional $719.06 in repayments on that loan. (Id. ¶¶ 10, 43-45). Duggan alleges that the interest rate charged on each of her loans was usurious and violated Massachusetts lending laws. (See id. ¶¶ 9-11). She also claims that "[t]he Big Picture Loans representative was operating under the instruction, direction, and/or supervision" of Martorello and Eventide, and that the defendants’ conduct violated federal as well as state law. (Id. ¶¶ 11-13, 33, 41).

The Instant Litigation

Duggan initiated this action on October 31, 2018 by filing a Class Action Complaint against Martorello, Big Picture Loans and Ascension, the company that allegedly handled the day-to-day operations of the defendants’ lending business. (Docket No. 1). Therein, Duggan alleged that the defendants engaged in an illegal online "rent-a-tribe" lending scheme that was designed to evade state lending and consumer protection laws and enable the defendants to charge exorbitant interest rates in exchange for short term "payday" loans. (See id. ¶¶ 1-9). Specifically, Duggan describes the scope of the Complaint as follows:

Payday lenders, such as Big Picture Loans, LLC, claim that they are exempt from usury laws because they are supposedly wholly-owned by a Native American tribe. But the reality is that a complicated corporate management structure masks the fact that non-tribal members reap the overwhelming majority of the profits. The purpose of this litigation is to expose this criminal enterprise that was established with the intent of evading the state lending laws, to return the illegal gains to the exploited borrowers, to obtain statutory damages in accordance with Massachusetts and federal law, and to enjoin the Defendants from collecting on their illegal loans or otherwise continuing their illegal practices with Massachusetts borrowers.

(Id. ¶ 1). According to the Complaint, Martorello used the Tribe "to set up a lending entity supposedly beyond the reach of state and federal licensing and lending laws" while his own company "funded the loans, controlled the underwriting, and handled the day-to-day operations of the business." (Id. ¶ 3). Thus, Duggan asserts that Big Picture Loans was just a "front to disguise Martorello's and his company's roles and to ostensibly shield the scheme by exploiting tribal sovereign immunity." (Id. ¶ 4). In exchange for allowing Martorello to use its name and status, "the Tribe received about two percent of the revenue from the loans." (Id. ).⁴

By her original Class Action Complaint, Duggan asserted claims against the defendants, on behalf of herself and other similarly situated Massachusetts borrowers, for violations of RICO, Massachusetts lending, licensing and consumer protection laws, and state...