372 F. Supp. 3d 955
N.D. Cal.2019Background
- Plaintiffs are consumers who obtained high‑rate loans issued in the name of tribal lenders (Plain Green and GPL) under loan agreements containing tribal‑law choice‑of‑law and broad arbitration clauses. Plaintiffs sued Haynes and Haynes Investments alleging they funded, organized, and helped operate the rent‑a‑tribe lending scheme.
- Haynes defendants moved to compel arbitration, stay under the first‑to‑file rule, and to dismiss for lack of personal jurisdiction and for failure to state RICO, usury, and unjust enrichment claims. Plaintiffs opposed, arguing the arbitration and choice‑of‑law provisions are unenforceable prospective waivers and claims are properly pled.
- The loan agreements: require arbitration governed by tribal law, restrict arbitrators to tribal law, disavow state law applicability, and allow limited invocation of some federal law/federal statutes as “guidance.” Plaintiffs declined to opt‑out.
- The court found discovery and complaint allegations showing Haynes defendants provided funding, ongoing consulting, ACH/payment connections, and received fees tied to loan collections. Plaintiffs alleged Haynes personally participated in structuring and expanding the enterprise.
- The court denied the motion to compel arbitration (agreements are unenforceable prospective waivers), denied the first‑to‑file stay, denied dismissal for lack of personal jurisdiction, and denied dismissal of RICO, usury, and unjust enrichment claims. The sealing request was denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration clauses / delegation | Arbitration clauses and choice‑of‑law are prospective waivers of federal and state statutory remedies and therefore unenforceable | Delegation clause is clear and disputes over validity belong to arbitrator; agreements invoke some federal law so not a wholesale waiver | Denied motion to compel arbitration; arbitration and choice‑of‑law provisions are unenforceable prospective waivers |
| Whether tribal choice‑of‑law bars plaintiffs’ statutory claims | Choice‑of‑law is unenforceable because it would strip plaintiffs of statutory remedies | Choice‑of‑law is valid and may require tribal law to govern | Choice‑of‑law provisions are unenforceable prospective waivers; court applies plaintiffs’ statutes where appropriate |
| First‑to‑file stay (Gingras) | Plaintiffs: the cases are not substantially similar in parties, class scope, or posture; Gingras is currently stayed | Defendants: Gingras was filed first and concerns substantially same claims / parties; equitable stay appropriate | Motion to stay denied due to limited overlap and equitable factors (Gingras stayed without schedule) |
| Personal jurisdiction over Haynes/Haynes Investments | Plaintiffs: Haynes defendants purposefully directed and benefited from loans to California consumers; prima facie contacts exist | Defendants: acts were committed by tribes/other actors; Haynes lacks sufficient California contacts | Motion to dismiss for lack of personal jurisdiction denied; plaintiff made a prima facie showing of purposeful direction/availment |
| Sufficiency of RICO, usury, unjust enrichment claims | Allegations show Haynes defendants financed, structured, and profited from scheme; proximate causation and receipt of usurious funds plausibly pled | Defendants: too remote, did not personally collect usurious interest, claims time‑barred or precluded by tribal law | Motions to dismiss claims denied: RICO proximate causation and participation pled; usury plausibly alleged (indirect receipt); unjust enrichment survives at pleading stage |
Key Cases Cited
- Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010 (9th Cir.) (court must decide whether valid arbitration agreement exists and whether dispute is within scope)
- Ingle v. Circuit City Stores, Inc., 328 F.3d 1165 (9th Cir.) (apply ordinary state‑law contract formation principles to arbitration agreements)
- Rent‑A‑Center, West, Inc. v. Jackson, 561 U.S. 63 (Sup. Ct.) (validity of delegation clause: challenges to arbitrability must specifically target delegation to be decided by court or arbitrator)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (Sup. Ct.) (resolve doubts about arbitrability in favor of arbitration)
- Mitsubishi Motors Corp. v. Soler Chrysler‑Plymouth, Inc., 473 U.S. 614 (Sup. Ct.) (arbitration agreements cannot prospectively waive statutory remedies)
- Armendariz v. Found. Health Psychcare Services, Inc., 24 Cal.4th 83 (Cal. 2000) (California unconscionability doctrine: procedural and substantive elements)
- Hayes v. Delbert Servs., Corp., 811 F.3d 666 (4th Cir.) (tribal‑law arbitration/choice‑of‑law provisions that renounce federal law are unenforceable prospective waivers)
- Dillon v. BMO Harris Bank, N.A., 856 F.3d 330 (4th Cir.) (similar holding invalidating tribal choice‑of‑law/arbitration clauses as prospective waivers)
- Green Tree Fin. Corp.‑Alabama v. Randolph, 531 U.S. 79 (Sup. Ct.) (speculative risk of waiver insufficient to invalidate arbitration clause)
- Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (Sup. Ct.) (choice‑of‑law and arbitration clauses must be harmonized when possible)
- Vimar Seguros y Reaseguros v. M/V Sky Reefer, 515 U.S. 528 (Sup. Ct.) (choice‑of‑law/forum clauses may be unenforceable if they operate as prospective waivers without adequate review)
- Hemi Group, LLC v. City of New York, N.Y., 559 U.S. 1 (Sup. Ct.) (RICO proximate cause requires a direct relation between injury and conduct)
- Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (Sup. Ct.) (proximate cause in RICO satisfied when injury is foreseeable and directly caused by scheme)
- Roby v. Corp. of Lloyd’s, 996 F.2d 1353 (2d Cir.) (choice‑of‑law/arbitration provisions may be enforced where adequate remedies and review remain)