Flagg v. First Premier Bank

257 F.Supp.3d 1351

Lisa FLAGG, on behalf of herself and all others similarly situated, Plaintiff,

v.FIRST PREMIER BANK, a South Dakota State–Chartered Bank, Defendant.

CIVIL ACTION FILE NO. 1:15-CV-324-MHC.

United States District Court, N.D. Georgia, Atlanta Division.

Signed June 7, 2017

Darren T. Kaplan, Darren Kaplan Law Firm, P.C., Atlanta, GA, Hassan A. Zavareei, pro hac vice, Jeffrey D. Kaliel, pro hac vice, Tycko & Zavareei, LLP, Washington, DC, Jason H. Alperstein, Jeffrey Miles Ostrow, pro hac vice, Kopelowitz Ostrow Ferguson Weiselberg Keechl, Fort Lauderdale, FL, John Austin Moore, pro hac vice, Norman E. Siegel, pro hac vice, Stephen N. Six, pro hac vice, Stueve Siegel Hanson, LLP, Kansas City, MO, for Plaintiff.

Bryan R. Freeman, John C. Ekman, James P. McCarthy, pro hac vice, Lindquist & Vennum, Minneapolis, MN, Scott Eric Zweigel, William J. Holley, II, Parker, Hudson, Rainer & Dobbs, LLP, Atlanta, GA, for Defendant.

ORDER

MARK H. COHEN, United States District Judge

This case comes before the Court on Defendant First Premier Bank's Motion to Dismiss [Doc. 65] and Motion to Continue Certain Preliminary Deadlines [Doc. 66].

I. BACKGROUND

On January 30, 2015, Plaintiff Lisa Flagg ("Plaintiff"), on behalf of herself and a prospective class, commenced this action against Defendant First Premier Bank ("Defendant"), a South Dakota State–Chartered Bank. Plaintiff alleges, inter alia , violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962 (2012). Second Am. Compl. [Doc. 64]. These allegations arise from Plaintiff's interactions with online payday lenders, including Payment Direct, Inc., d/b/a First International SRS ("First International"), and Defendant's role in those transactions. Id.¶¶ 16, 75–77.

According to Plaintiff's Second Amended Complaint, First International is an entity engaged in the practice of making online payday loans, and collecting debts related to such loans, to persons residing in states, including Georgia, where such loans are illegal. Id.¶¶ 16, 95. A payday loan is a short-term, high fee, closed-end loan, traditionally made to borrowers to provide funds in anticipation of an upcoming paycheck. Id.¶ 31. A borrower obtaining a payday loan from an online lender must usually sign an Automated Clearing House ("ACH") authorization agreement which purports to give the lender authority to electronically debit and credit loan transactions. Id.

The "ACH Network" or "Automated Clearing House," a secure electronic payment transfer network, is a processing system in which financial institutions accumulate ACH transactions throughout the day for later batch processing. Id.¶¶ 1, 39. Instead of using paper (like checks) to carry necessary transaction information, ACH Network transactions are transmitted electronically, allowing for faster processing times and cost savings. Id. The debit and credit transactions between borrowers and lenders like First International are performed by entities known as Originating Depository Financial Institutions ("ODFIs"), which are banks, including Defendant, belonging to the ACH Network. Id.¶¶ 8–10, 35–36, 104. An ODFI is supposed to engage in extensive due diligence procedures prior to entering into an agreement with a merchant seeking to use the ACH Network to electronically process transactions. Id.¶ 31.

Plaintiff alleges that Defendant actively participated in an unlawful scheme by granting illegal payday lenders' requests to "initiate" ACH entries representing payday loan credits and debits to and from consumer checking accounts, and knowingly taking affirmative steps to "originate" these illegal entries into the ACH Network, thereby enforcing debts Defendant knew to be unlawful. Id.¶ 10. Defendant allegedly profited from its participation in this scheme by charging payday lenders higher-than-customary fees to originate transactions on the ACH Network. Id.¶¶ 10, 75–78.

The following allegations are specific to Plaintiff Lisa Flagg. In August 2012, First International acquired the customer list of online payday lender First National Funding, Inc. for the sole purpose of soliciting and making new loans to First National Funding, Inc.'s previous or pending customers. Id.¶ 86. During the same month, First International solicited Plaintiff to make a new payday loan and directed her to a website operated by First International. Id.¶ 87. On or about August 31, 2012, May 31, 2013, and July 2, 2013, Plaintiff received payday loans in the amount of $250.00, $225.00, and $220.00, respectively, from First International. Id.¶ 88. The nominal annual interest rate stated in the loan agreements for these loans was 899.46%. Id. Plaintiff was required to provide an ACH authorization for her checking account with JPMorgan Chase Bank, N.A., in order to obtain the loans. Id.

Plaintiff further alleges that, even if timely paid off, payday loans offered by First International automatically renew unless the borrower affirmatively declines the renewal option at least three business days prior to the loan due date. Id.¶ 89. On or about September 14, 2012, October 12, 2012, and July 19, 2013, First International initiated debit transactions in the amount of $335.00, $335.00, and $269.00, respectively, from Plaintiff's checking account in Georgia through the ACH Network. Id.¶ 90. Defendant was the ODFI originating these transactions. Id. Plaintiff alleges that Defendant derived a benefit through the receipt of fees for its origination of debit entries on the ACH Network initiated by First International (or Third–Party Senders acting on their behalf) and received by Plaintiff. Id.¶ 91.

Plaintiff filed her Second Amended Complaint on February 24, 2017, alleging that Defendant violated and/or conspired to violate 18 U.S.C. § 1962 under two separate theories of RICO liability (Counts One through Four). Id.¶¶ 102–40. Plaintiff also brings state law claims for unjust enrichment (Count Five) and for violations of the Georgia Payday Lending Act, O.C.G.A. § 16–17–2 (Count Six). Id.¶¶ 141–49, 150–59. Defendant has filed a motion to dismiss arguing that all counts of the Second Amended Complaint should be dismissed.¹

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Under Federal Rule of Civil Procedure 12(b)(6), a claim will be dismissed for failure to state a claim upon which relief can be granted if it does not plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Supreme Court has explained this standard as follows:

A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully.

Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal citation omitted). Thus, a claim will survive a motion to dismiss only if the factual allegations in the pleading are "enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955.

At the motion to dismiss stage, the court accepts all well-pleaded facts in the plaintiff's complaint as true, as well as all reasonable inferences drawn from those facts. McGinley v. Houston, 361 F.3d 1328, 1330 (11th Cir. 2004) ; Lotierzo v. Woman's World Med. Ctr., Inc., 278 F.3d 1180, 1182 (11th Cir. 2002). Not only must the court accept the well-pleaded allegations as true, but these allegations must also be construed in the light most favorable to the pleader. Powell v. Thomas, 643 F.3d 1300, 1302 (11th Cir. 2011). However, the court need not accept legal conclusions, nor must it accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Thus, evaluation of a motion to dismiss requires the court to assume the veracity of well-pleaded factual allegations and "determine whether they plausibly give rise to an entitlement to relief." Id. at 679, 129 S.Ct. 1937.

III. DISCUSSION

A. Plaintiff Has Failed to Sufficiently Allege Claims under RICO

1. Plaintiff's First Alleged RICO Enterprise (Count One)

Plaintiff brings four claims against Defendant under the RICO statute. Counts One and Two allege alternative theories to support Defendant's participation in a scheme to collect unlawful debts in violation of 18 U.S.C. § 1962(c), according to which is it "unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt." 18 U.S.C. § 1962(c) ; Second Am. Compl. ¶¶ 102–30. Counts Three and Four allege (again based on these respective theories) that Defendant participated in a conspiracy to collect unlawful debts in violation of 18 U.S.C. § 1962(d), which makes it unlawful "for any person to conspire to violate any of the provisions of subsection (a), (b), or (c)[.]" 18 U.S.C. § 1962(d) ; Second Am. Compl. ¶¶ 131–40.

To prove a violation of 18 U.S.C. § 1962(c), a plaintiff must establish: (1) the existence of an enterprise which affects interstate or foreign commerce; (2) that the defendant associated with the enterprise; (3) that the defendant participated in or conducted the enterprise's affairs; and (4) that the participation in or conduct of the enterprise's affairs was through a pattern of racketeering activities. United States v. Goldin Indus., Inc., 219 F.3d 1271, 1274 (11th Cir. 2000) (citing United States v. Weinstein, 762 F.2d 1522, 1536 (11th Cir. 1985) ).

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