United States District Court, E.D. Virginia, Richmond Division
MEMORANDUM OPINION (DENYING IN PART AND GRANTING IN
PART DEFENDANTS' MOTION TO DISMISS)
E. Hudson United States District Judge.
MATTER is before the Court on Defendants NHCash.com,
LLC ("NHCash"), NHCash SPV, LLC ("SPV"),
NHCash Holdings, Inc. ("Holdings"), and Steven
Mello's (collectively, "Defendants") Motion to
Dismiss. (ECF No. 14.) Defendants seek dismissal on two
grounds, both stemming from the Open-end Credit Account
Agreement ("Agreement") each Plaintiff executed
with NHCash. First, Defendants argue that venue is improper
because Plaintiffs waived their right to bring suit in any
forum other than small claims court. Second, Defendants
contend that, to the extent Plaintiffs seek to bring claims
inappropriate for the jurisdictional limit of small claims
court, Plaintiffs agreed to resolve any such claims through
individualized and binding arbitration. (Br. Supp. Mot.
Dismiss 1, ECF No. 15.)
issues have been fully briefed, and the matter is ripe for
decision. The Court dispenses with oral argument because the
facts and legal contentions are adequately presented in the
materials before the Court, and oral argument would not aid
in the decisional process. E.D. Va. Local Civ. R. 7(J). For
the reasons stated herein, the Court will deny in part and
grant in part Defendants' Motion to Dismiss.
5, 2017, Plaintiffs filed a Class Action Complaint in this
Court, alleging, inter alia, that Defendants
violated the RICO Act, 18 U.S.C. § 1962(c) and (d), and
Virginia's anti-usury statute, Va. Code §
6.2-305(A). (Compl. ¶¶ 104, 114, 124, ECF No. 1.)
Defendants constitute a joint enterprise involved in the
origination and funding of short term loans. (Id.
¶¶ 2, 13-16, 20-21.) NHCash operates a website
through which borrowers apply for loans. (Id. ¶
13.) After NHCash receives an application it originates a
loan, which it then assigns to SPV. (Id. ¶ 14.)
SPV's role is to secure third-party financing for the
loans. (Id.) Holdings is the parent corporation of
NHCash. (Id. ¶ 15.) Steven Mello is the
founder, owner, and sole operator of all three entities, and
in that capacity he "participated in the underwriting,
servicing, marketing, and collection" of Plaintiffs'
loans. (Id. ¶ 16.)
center of this dispute are the Agreements that Plaintiffs
executed with NHCash when taking out their respective loans.
Plaintiffs, as borrowers, each filled out and electronically
signed a form Agreement over the internet. (Id.
¶ 44.) The Agreements set the interest rate for
Plaintiffs' loans at or around thirty-six percent (36%).
(Id. ¶ 46; Compl. Ex. 1, at 1.) The Agreements
all contained a provision entitled "Arbitration, "
which primarily provided that "[a]ny claim or dispute
arising from or in any way related to the Agreement must be
resolved by binding arbitration. . . ." (Compl. Ex. 1,
at 5.) The arbitration provision also established that
"[n]othing in our agreement to arbitrate is intended to
prevent either of us from filing a lawsuit in an appropriate
small claims court for an amount that does not exceed that
courts jurisdictional limit; however all other disputes must
be arbitrated." (Id.)
STANDARD OF REVIEW
motion to dismiss based on a forum-selection clause should be
properly treated under Rule 12(b)(3) as a motion to dismiss
on the basis of improper venue." Sucampo Pharms.,
Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th
Cir. 2006). Similarly, because "the Supreme Court has
characterized an arbitration clause as 4a specialized kind of
forum-selection clause[, ]'" the Court must analyze
the Agreements' disputed arbitration provision under Rule
12(b)(3) as well. Aggarao v. MOL Ship Mgmt. Co.,
Ltd., 675 F.3d 355, 365 n.9 (4th Cir. 2012) (quoting
Scherk v. Alberto-Culver Co., 417 U.S. 506,
a motion to dismiss under Rule 12(b)(3), the court is
permitted to consider evidence outside the pleadings."
Aggarao, 675 F.3d at 365-66 (citing Sucampo
Pharms., 471 F.3d at 550). To survive a motion to
dismiss for improper venue, a plaintiff must make a prima
facie showing of proper venue-in this case, a showing
that the arbitration provision does not control
Plaintiffs' claims against Defendants. Id.
(citing Mitrano v. Hawes, 377 F.3d 402, 405 (4th
Cir. 2004)). In resolving disputes over venue, a court must
view the facts in the light most favorable to the plaintiff.
Id. (citing Global Seafood, Inc. v. Bantry Bay
Mussels, Ltd., 659 F.3d 221, 224 (2d Cir. 2011).
However, "as a matter of federal law, any doubts
concerning the scope of arbitrable issues should be resolved
in favor of arbitration." Moses H. Cone
Mem'l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24-25 (1983).
first issue for the Court to determine is whether the
Agreements' purported forum selection clause limiting
litigation to small claims court is enforceable. Because the
Court finds that it is not, the Court must additionally
determine whether the remainder of the arbitration provision
is enforceable in this instance, such that the Court must
stay the case and compel arbitration.
Forum Selection: Small Claims Court
Agreements provide that "[n]othing in our agreement to
arbitrate is intended to prevent either of us from filing a
lawsuit in an appropriate small claims court for an amount
that does not exceed that courts [sic] jurisdictional limit;
however all other disputes must be arbitrated." (Compl.
Ex. 1, at 5.) Defendants argue that, to the extent Plaintiffs
wish to litigate their claims instead of submitting the
dispute to arbitration, Plaintiffs must file such claims in
General District Court. (Br. Supp. Mot. Dismiss 8.)
Plaintiffs argue that the forum selection clause is
unenforceable. (Opp. Mot. Dismiss 2-4, ECF No. 22.) For the
reasons stated below, the Court agrees with Plaintiffs.
Supreme Court has consistently accorded choice of forum and
choice of law provisions presumptive validity, rejecting the
'parochial concept' that 'notwithstanding solemn
contracts ... all disputes must be resolved under our laws
and in our courts.'" Allen v. Lloyd's of
London, 94 F.3d 923, 928 (4th Cir. 1996) (quoting
The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9
(1972)) (collecting cases). "But the presumption of
enforceability that forum selection and choice of law
provisions enjoy is not absolute and, therefore, may be
overcome by a clear showing that they are 'unreasonable
under the circumstances.'" Id. (quoting
The Bremen, 407 U.S. at 10). "Choice of forum
and law provisions may be found unreasonable if (1) their
formation was induced by fraud or overreaching; (2) the
complaining party will for all practical purposes be deprived
of his day in court because of the grave inconvenience or
unfairness of the selected forum; (3) the fundamental
unfairness of the chosen law may deprive the plaintiff of a
remedy; or (4) their enforcement would contravene a strong
public policy of the forum state." Id.
(internal quotations omitted) (citing Carnival Cruise
Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991); The
Bremen, 407 U.S. at 12-13, 15, 18).
Court finds that the forum selection clause in the Agreements
is unreasonable in this case because, among other things, its
enforcement would deprive Plaintiffs of the remedies
available under the RICO Act. Pursuant to that Act,
"[a]ny person injured in his business or property by
reason of a violation of section 1962 of this chapter may sue
therefor in any appropriate United States district
court and shall recover threefold the damages he
sustains and the cost of the suit...." 18 U.S.C. §
1964 (emphasis added). In contrast, the forum selection
clause in the Agreements limits signatories to "filing a
lawsuit in an appropriate small claims court for an amount
that does not exceed that courts [sic] jurisdictional
limit." (Compl. Ex. 1, at 5.)
Plaintiffs can only file suit in a United States district
court to obtain the remedies created by the RICO Act, the
Court finds that the forum selection clause in this case
deprives Plaintiffs of remedies that they are entitled by law
to pursue. As a result, the forum selection clause is
unreasonable and therefore unenforceable. See Lloyd's
of London, 94 F.3d at 928. Accordingly, to the extent
that Defendants seek dismissal of the Amended Complaint on
the basis of the forum selection clause, the Motion to
Dismiss will be denied.
Forum Selection: Arbitration
parties additionally dispute the controlling effect of the
Agreements' arbitration provision. The provision
provides, in relevant part, as follows:
Any claim or dispute arising from or in any way related
to the Agreement must be resolved by binding arbitration
in the state where you live instead of a lawsuit. ...
Agreeing to arbitration means that you are waiving your right
to a trial by jury and your right to have a court resolve
your dispute. You are waiving your right to participate in a
class action lawsuit.... We both agree that neither you nor
we will request the arbitration to be conducted as a
class-wide arbitration. We both agree that no arbitrator will
have authority to certify a class in the arbitration or
conduct class-wide arbitration and that the arbitrator
can only decide disputes between you and us. If any part
of this arbitration agreement ...