United States District Court, E.D. Virginia, Richmond Division
HANNAH LAUCK JUDGE
matter comes before the Court on Plaintiffs Darlene Gibbs,
Stephanie Edwards, Lula Williams, Patrick Inscho, and
Lawrence Mwethuku's ("Plaintiffs") Motion to
Permit Jurisdictional Discovery (the "Motion for
Discovery"), (ECF No. 34), and Defendant Great Plains
Lending, LLC's ("Great Plains") Motion to Stay
Proceedings (the "Motion to Stay"), (ECF No. 64).
Defendants Plain Green, LLC ("Plain Green") and
Great Plains (collectively, "Defendants") responded
to the Motion for Discovery, (ECF Nos. 43, 45), and
Plaintiffs replied, (ECF Nos. 51, 55). Plaintiffs responded
to Great Plains's Motion to Stay, (ECF No. 67), and Great
Plains replied, (ECF No. 69).
the matters are ripe for disposition. The Court dispenses
with oral argument because the materials before it adequately
present the facts and legal contentions, and argument would
not aid the decisional process. The Court exercises
jurisdiction pursuant to 28 U.S.C. §§
and 1367. For the reasons that follow, the Court
granted the Motion for Discovery and denied the Motion to
Procedural and Factual Background
Summary of Allegations in the Complaint
operate internet lending websites offering short-term loans
to consumers. Allegedly, Defendants offered loans to
Plaintiffs in amounts ranging from $300 to $3, 000, charging
interest rates ranging from 118% to 448%. Plaintiffs bring
this suit on behalf of themselves and all individuals
similarly situated, alleging that Defendants' lending
enterprises violate state and federal lending laws.
Plaintiffs allege that Defendants structured their businesses
to benefit from the protections of tribal sovereign immunity
even though they do not constitute tribal entities.
Defendants did so, Plaintiffs contend, in order to evade
state and federal lending laws. Plaintiffs contend that
Defendants' fraudulent posture as tribal entities
eradicates any potential claim to the protection of tribal
to Plaintiffs, Kenneth Rees,  not a tribal member, orchestrated
the so-called "rent-a-tribe" scheme at issue in
this case. (Compl. ¶ 26-27, ECF No. 1.) Under a
"rent-a-tribe" model, a non-tribal entity and a
tribe agree to establish a lending company in the tribe's
name. The tribe nominally establishes the company, ostensibly
extending its sovereign immunity to the new tribal entity, in
exchange for a small percentage of the revenue. This is
designed to allow the company to evade compliance with state
usury laws because, as an arm of the tribe, it cannot be sued
by consumers or prosecuted by the government. See, e.g.,
Thomas v. Dugan, 168 F.3d 483 (4th Cir. 1998)
("Tribal entities and individual tribal officers acting
within their representative capacity within the scope of
their authority are also shielded by sovereign
immunity.") The non-tribal entity retains the majority
of the profits and controls the lending entity, from major
business decisions to day-to-day operations.
allege that in early 2011, Rees sent a letter to the Chippewa
Cree Tribe proposing a joint lending venture with a company
owned by Rees. Plaintiffs contend the tribe agreed to
participate in the lending scheme within two weeks of
receiving this letter, and subsequently formed Plain Green.
Shortly thereafter, Rees allegedly contacted the
Otoe-Missouria Tribe in Oklahoma with a similar proposal, and
that tribe formed Great Plains.
Green and Great Plains are structured almost identically.
According to Plaintiffs, the Chippewa Cree Tribe and the
Otoe-Missouria Tribe (collectively, the "Tribes")
were paid a nominal fee for establishing the entities under
their names, but "otherwise had no control over the
income, expenses, or day-to-day operations of the
entities." (Compl. ¶ 35.) Plaintiffs state that
third parties who were not members of the tribes or located
on the reservations performed nearly all activities
associated with the companies, including processing payments,
maintaining the call centers, and servicing the loans.
Plaintiffs claim Rees controls multiple companies that
actually operate the lending businesses and reap the profits.
For example, GPL Servicing, Ltd. ("GPLS"), owned by
Rees, accepted consumer payments on behalf of the Tribes
after loan agreements were executed rather than either Plain
Green or Great Plains. GPLS, according to Plaintiffs,
transferred no more than 4.5% of the revenue to the Tribes,
though Plaintiffs allege the actual amount is even lower
because "most of this money was siphoned for the
personal benefit of certain tribal members." (Compl.
¶ 46.) Furthermore, Plaintiffs contend, the money lent
to Plaintiffs was transferred from a bank account owned and
operated by Think Finance, LLC, another company Rees owned.
Allegedly, Tailwind Marketing, LLC, also owned by Rees,
generated leads to identify potential consumers to solicit.
Plaintiffs further contend that Rees's company TC
Decision Sciences operated Defendants' websites, served
as the administrator of their software, and handled customer
service responsibilities at a monthly cost to Defendants.
Although Defendants present themselves as the lenders of the
loans they issued, Plaintiffs assert that Rees and the
companies he formed control day-to-day operations and major
business decisions on behalf of Defendants.
filed a five-count putative class action Complaint against
Defendants alleging various state and federal violations
associated with an illegally usurious loan
enterprise. Plaintiffs seek: (1) a declaratory
judgment that the loan agreements are void and unenforceable;
(2) injunctive relief ordering the defendants to divest
themselves of any interest in the enterprise pled in the
complaint, including the receipt of racketeering profits,
prohibiting the defendants from continuing to engage in the
enterprise, and ordering the dissolution of each defendant
that has engaged in the enterprise; (3) compensatory damages;
and, (4) costs and attorney's fees.
Green filed a Motion to Dismiss without Leave to Amend or, in
the Alternative, to Compel Arbitration. (ECF No. 26.) Great
Plains filed three separate motions: (1) a Motion to Dismiss
for Lack of Jurisdiction, (ECF No. 28); (2) a Motion to
Compel Arbitration, (ECF No. 30); and, (3) a Motion to
Transfer Case, (ECF No. 32). Defendants each moved to dismiss
based on a claim of sovereign immunity under Rule 12(b)(1).
(ECF Nos. 26, 28).
filed the Motion for Discovery, seeking jurisdictional
discovery on the issue of Defendants' claim of sovereign
immunity. (ECF No. 34.) Defendants each opposed the Motion
for Discovery. (ECF Nos. 43, 45.) The Court suspended
briefing on Defendants' Motions to Dismiss pending its
ruling on the Motion for Discovery. (ECF No. 42.) On May 9,
2018, Plaintiffs filed a Motion for Leave to File
Supplemental Authority ("Plaintiffs' Motion to File
Supplemental Authority"), (ECF No. 62) requesting leave
to submit a recent court order in a case they allege is
similar to the one at bar.
9, 2018, Great Plains filed the Motion to Stay based on a
case development. (ECF No. 64.) Specifically, Great Plains
has moved to consolidate and transfer this case in the
Judicial Panel on Multidistrict Litigation
("JPML"). (ECF No. 64.) Great Plains seeks to
consolidate three cases in a multi-district litigation
("MDL"). Great Plains requests a stay of these
proceedings pending the JPML ruling on Defendants'
pending Motion for Consolidation and Transfer filed in In
Re: Great Plains Lending, LLC Litigation, MDL No. 2851.
The JPML was scheduled to hear the motion on July 26, 2018.
No. MDL exists until the JPML rules on the Motion for
Consolidation and Transfer. On June 13, 2018, Great Plains
filed a Motion for Leave to File Supplemental Authority
("Great Plains's Motion to File Supplemental
Authority"), (ECF No. 71), requesting leave to submit a
recent court order granting a stay in one of the two other
cases that is part of its JPML request.
Great Plains's Motion to Stay
Legal Standard for a Motion to Stay
decision of whether to stay proceedings is entrusted to the
discretion of the district court. See Landis v. N. Am.
Co., 299 U.S. 248, 254-55 (1936). "[T]he power to
stay proceedings is incidental to the power inherent in every
court to control the disposition of the causes on its docket
with economy of time and effort for itself, for counsel, and
for litigants." Id. at 254.
party seeking a stay must justify it by clear and convincing
circumstances outweighing potential harm to the party against
whom it is operative." Williford v. Armstrong World
Indus., Inc., 715 F.2d 124, 127 (4th Cir. 1983).
"In considering a motion to stay, a district court must
'weigh competing interests and maintain an even
balance.'" Sehler v. Prospect Mortg, LLC,
No. 1:13-CV-473 (JCC/TRJ), 2013 WL 5184216, at *2 (E.D. Va.
Sept. 16, 2013) (quoting Yearwood v. Johnson &
Johnson, Civil Action No. RDB-12-1374, 2012 WL 2520865,
at *3 (D. Md. June 27, 2012)).
a district court should consider three factors:
"(1)me interests of judicial economy; (2)
hardship and equity to the moving party if the action is not
stayed; [and, ] (3) potential prejudice to the non-moving
party." Buzzell v. JP Morgan Chase Bank, No.
3:13- CV-668, 2015 WL 5254768, at *2 (E.D. Va. Sept. 9, 2015)
(quoting Meyers v. Bayer AG, 143 F.Supp.2d 1044,
1049 (E.D. Wis. 2001)).
The Court Finds that Balancing the Interests at Stake Weighs
Against Granting a Stay
Plains asserts that Plaintiffs provide "no sound basis
to deny the requested stay." (Reply Mot. Stay 1, ECF No.
69.) Great Plains mischaracterizes the applicable standard:
the burden is on Great Plains, the party requesting a stay,
to show "clear and convincing circumstances"
justifying it. Williford, 715 F.2d at 127. Because
Great Plains fails to meet its burden, the Court denied the
Motion to Stay.
The Interest of Judicial Economy Does Not Justify a
the district court can resolve preliminary matters while the
JPML deliberates, general delays are "rarely ...
advisable." Weisman v. Se. Hotel Props. Ltd.
P'ship, No. 91 Civ. 6232, 1992 WL 131080 at *6
(S.D.N.Y. 1992) (quoting Manual for Complex Litigation,
Second § 31.121 (1986)). Furthermore, the JPML has
expressly stated: "the use of stay orders by the
district courts, particularly in the area of discovery, is
usually undesirable." Sehler, 2013 WL 5184216,
at *2 (quoting In re Penn Cent. Sec. Litig, 333
F.Supp. 382, 384 n.4 (J.P.M.L. 1971)). Great Plains fails to
show clear or convincing circumstances showing that the
interest of judicial economy justifies granting a stay.
Great Plains seeks to consolidate only three cases in the
JPML, the risk of needless duplication of work and waste of
judicial resources is low. In the context of the motions to
consolidate and transfer actions before the JPML,
Defendants' three pending actions pale in comparison to
the typical number of actions consolidated to MDL. This Court
need not make any conclusion regarding the likelihood that
the JPML will grant Great Plains's Motion for
Consolidation and Transfer to conclude that judicial
resources would not be wasted if the case at bar is allowed
to proceed. The exceptionally low volume of actions that
Great Plains seeks to consolidate and transfer to an MDL by
itself evinces a very low risk of duplicative work and
judicial waste, even if the ...