258 F. Supp. 3d 289
E.D.N.Y2017Background
- Moss (N.Y. resident) sued First Premier Bank over processing online payday-loan ACH debits allegedly used to collect unlawful/usurious debt; she sought RICO (18 U.S.C. § 1962(c), (d)), N.Y. GBL § 349, and unjust enrichment relief on behalf of a putative class.
- Plaintiff alleges First Premier acted as an Originating Depository Financial Institution (ODFI) on the ACH Network, charging origination fees and knowingly enabling payday lenders (e.g., SFS) to debit borrowers’ accounts despite regulatory warnings about payday-lending risk.
- Two enterprise theories: (1) an expansive “ACH Network Enterprise” comprising Originators, ODFIs, RDFIs, ACH Operators and third-party service providers; (2) a narrower “Debt Collection Enterprise” formed by First Premier and SFS to collect unlawful debt.
- First Premier moved to dismiss under Fed. R. Civ. P. 12(b)(6); Court accepted SAC facts as true, considered governing law on RICO enterprise/conduct, Section 349 consumer-deception, and unjust enrichment under New York law.
- Court dismissed substantive RICO counts (no plausible association-in-fact enterprise; no allegation that First Premier operated/managed the enterprise), dismissed RICO conspiracy (no underlying substantive violation), dismissed GBL § 349 claim (no consumer-oriented misleading act by First Premier), but denied dismissal of unjust enrichment (plaintiff plausibly alleged First Premier received fees paid from her account). Plaintiff given one final leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an association‑in‑fact RICO enterprise was plausibly alleged | The ACH Network (or alternatively First Premier+SFS) functioned as an enterprise used to collect unlawful debts | Alleged enterprise is amorphous, too expansive (ACH Network) or merely contractual (two‑party) and lacks common fraudulent purpose and organizational unity | Dismissed: ACH theory is a rimless hub‑and‑spokes; two‑party theory is no more than routine contractual relationship — no plausible association‑in‑fact enterprise |
| Whether First Premier “conducted or participated in the affairs” of the enterprise under § 1962(c) | First Premier, as an ODFI and NACHA member, had gatekeeper/decision‑making roles and originated debits, enabling illegal debt collection | Providing banking/processing services and charging fees does not establish operation/management of an enterprise | Dismissed on independent ground: allegations show provision of services, not operation/management or directing enterprise affairs |
| Whether a RICO conspiracy (§ 1962(d)) was stated | Conspiracy count follows from substantive RICO allegations | Without a viable § 1962(c) violation, conspiracy fails | Dismissed: conspiracy claim depends on substantive RICO, which is deficient |
| Whether GBL § 349 (consumer‑oriented deceptive acts) was pleaded | Debiting plaintiff’s account as if loan were lawful is deceptive conduct toward consumers | No allegations that First Premier made public or consumer‑directed misrepresentations or marketed to consumers; it merely processed transactions | Dismissed: no consumer‑oriented, materially misleading acts alleged |
| Whether unjust enrichment stated | First Premier received and retained origination fees taken from plaintiff’s account, unjustly enriching defendant at plaintiff’s expense | No direct relationship or allegation that plaintiff conferred benefit on First Premier | Survived: SAC plausibly alleges First Premier received fees traceable to plaintiff’s transaction, satisfying unjust enrichment elements |
Key Cases Cited
- Boyle v. United States, 556 U.S. 938 (2009) (association‑in‑fact enterprise requires purpose, relationships, and longevity)
- Turkette (United States v. Turkette), 452 U.S. 576 (1981) (enterprise concept in RICO)
- Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985) (civil RICO not confined to traditional organized crime)
- Reves v. Ernst & Young, 507 U.S. 170 (1993) (RICO requires participation in operation or management of enterprise)
- First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159 (2d Cir.) (2004) (person and enterprise must be distinct; operation/management requirement interpreted)
- Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d 339 (2d Cir.) (1994) (corporate entity cannot be both RICO person and enterprise absent distinct enterprise membership)
- Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) (limitations on RICO proximate causation and scope)