United States District Court, E.D. Virginia, Richmond Division
Hannah Lauek United States District Judge.
matter comes before the Court on
Plaintiffs' "Motion for Enlargement of Time and
Motion for Jurisdictional and Venue Discovery" (the
"Motion for Extension and Discovery"), (ECF No.
70),  and Plaintiffs' Motion to Strike
(collectively with the Motion for Extension and Discovery,
the "Motions"), (ECF No. 80).
Defendants responded to the Motion for Extension and
Discovery, and Plaintiffs replied. (ECF Nos. 74, 76.)
Defendants responded to the Motion to Strike, and Plaintiffs
replied. (ECF Nos. 89, 97.)
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
will grant in part and deny in part the Motion for Extension
and Discovery and will grant the Motion to Strike.
Summary of Allegations in the Amended
controversy arises out of Defendants' involvement in an
allegedly unlawful lending operation. The lending operation,
which Plaintiffs describe as a "rent-a-tribe"
scheme,  allegedly offered loans to Plaintiffs and
charged interest rates ranging from 118% to 448%. (Am. Compl.
case,  Plaintiffs bring claims against
individuals and entities that owned and invested in Think
Finance and its subsidiaries (collectively, "Think
Finance"). According to Plaintiffs, non-party Think
Finance spearheaded efforts to establish and
control the three Native American-owned lending companies at
the heart of the allegedly unlawful lending
operation."For more than seven years, Think
Finance ... operated a rent-a-tribe scheme, which sought to
evade the usury laws of certain states by using [the Tribes]
as the conduit for their loans." (Am. Compl. ¶ 2.)
Plaintiffs aver that Think Finance proposed the formation of
the lending operation, asking the Tribes to establish the
lending companies in their respective names. In exchange,
"Think Finance agreed to provide the infrastructure to
run the lending operations, including the software, 'risk
management, application processing, underwriting assistance,
payment processing, and ongoing service support' for
[the] consumer loans." (Id. ¶ 80 (quoting
Am. Compl. Ex. 6 "Chippewa Cree Term Sheet" 1, ECF
No. 43-6).) Through this business arrangement, Think Finance
maintained control over, and derived "the vast majority
of the profits" from, the lending operation.
(Id. ¶ 85.) Plaintiffs represent consumers who
took out loans with the Tribal lending entities, including
Great Plains, Plain Green, and MobiLoans.
Plaintiffs aver that each Defendant, in an attempt to avoid
liability, either performed a role in the lending scheme or
served as a holding company for one of the other companies.
"Through their ownership of Think Finance, Defendants
participated in the business's key decisions, strategies,
and objectives and, in return, generated large profits from
their ownership interest in Think Finance."
(Id. ¶ 4.) Plaintiffs claim that
"Defendants personally participated in and oversaw the
illegal lending enterprise rendering them personally liable
to consumers." (Id.)
February 1, 2019, Plaintiffs filed a putative class action
Amended Complaint against Defendants, asserting various
federal and state violations associated with the allegedly
unlawful lending operation. Plaintiffs pursue this suit on
behalf of Virginia residents who entered into loan agreements
with the Tribal lending entities Plain Green, Great Plains,
or MobiLoans. They bring six class counts, including four
RICO claims, a claim for violation of Virginia usury law, and
a common law claim for unjust enrichment. Plaintiffs seek:
(1) class certification; (2) declaratory and injunctive
relief and damages; and, (3) attorney's fees, litigation
expenses, and costs of suit.
The Instant Motions: Background and
February 15, 2019, Defendants filed a Motion to Transfer this
Action to the Northern District of Texas (the "Motion to
Transfer"). (ECF No. 61.) Defendants ask the Court
to transfer this case to the United States District Court for
the Northern District of Texas, so that this case may then be
transferred to the United States Bankruptcy Court for the
Northern District of Texas (the "Bankruptcy
Court"). Defendants aver that this case relates to
In re Think Finance, an ongoing bankruptcy
proceeding in the Bankruptcy Court. In the alternative,
Defendants argue that this Court should transfer this matter
based on the first-to-file rule.
support of the Motion to Transfer, Defendants attached a
declaration by Mr. Richard L. Scheff (the "Scheff
Declaration"). (ECF No. 62-1.) Scheff self-identifies as
an attorney of record in this matter,  as well as an
attorney for Kenneth Rees, a former executive of Think
Finance. (Scheff Decl. 1.) Scheff states that, through his
representation of various defendants across these related
cases, he has become familiar with the allegations and
proceedings in this matter, in Rees, and in In
re Think Finance. Scheff states that, "[t]o the
best of [his] knowledge," Think Finance's offices,
employees, and operations are in Texas, as well as documents
and witnesses related to Think Finance. (Scheff Decl.
response to the Motion to Transfer, Plaintiffs filed the
Motion for Extension and Discovery, asking the Court for
venue-related discovery. Specifically, Plaintiffs seek to
depose Scheff and "obtain discovery as to what he knows
and how he knows it regarding" the assertions in the
Scheff Declaration. (Mem. Supp. Mot. Extension & Disc. 2,
ECF No. 71.) Plaintiffs also seek an extension of time to
respond to the Motion to Transfer until fourteen days after
the deposition and discovery take place, or, if the Court
denies the request for discovery, for thirty days. Plaintiffs
also stated that they would move to strike Scheff s
declaration, citing Virginia Rule of Professional Conduct
3.7(a)(1) because "Mr. Scheff cannot serve as
both contested fact witness and counsel in this case."
(Mem. Supp. Mot. Extension 1 n.2, ECF No. 71.) Defendants
opposed the Motion for Extension and Discovery, (ECF No. 74),
and Plaintiffs replied, (ECF No. 76).
March 18, 2019, the Court ordered expedited briefing "on
the issue of the propriety of the Scheff Declaration"
and suspended further briefing on the Motion to Transfer.
(Mar. 18, 2019 Order 2, ECF No. 79.)
March 28, 2019, Plaintiffs filed the Motion to Strike. In the
Motion to Strike, Plaintiffs ask the Court to strike the
Scheff Declaration, or in the alternative, to disqualify
Scheff as counsel for Defendants. On April 4, 2019,
Defendants responded in opposition to the Motion to Strike,
(ECF No. 89), and filed a declaration by David F. Herman (the
"Herman Declaration"), (ECF No. 90), as well as
several attachments, (ECF No. 90). On April 11, 2019,
Plaintiffs replied to Defendants' Response opposing the
Motion to Strike. (ECF No. 97.)
The Court Will Strike the Scheff Declaration Pursuant to Its
argue in their Motion to Strike that, pursuant to Virginia
Rule of Professional Conduct 3.7 ("VRPC 3.7" or
"Rule 3.7"), "one cannot act as fact witness
and attorney in the same case." (Mem. Supp. Mot. Strike
1, ECF No. 81.) Although the Court finds that Rule 3.7 does
not compel disqualification, it provides an appropriate
guiding principle because the Scheff Declaration raises the
same concerns that Rule 3.7 seeks to guard against.
Accordingly, the Court will exercise its inherent authority
to strike the Scheff Declaration. The Court will also deny
Plaintiffs' request to depose Scheff and grant Plaintiffs
an extension of time to respond to the Motion to Transfer.
Relevant Legal ...