Rilley et al v. MoneyMutual, LLC et al
MEMORANDUM OPINION AND ORDER. Defendants' Amended Motion to Dismiss for Lack of Personal Jurisdiction and for Failure to State a Claim (Doc. No. 11 ) is GRANTED IN PART and DENIED IN PART as follows: 1. Defendants' Motion to Dismiss for La ck of Personal Jurisdiction is DENIED.2. Defendants Motion to Dismiss for Failure to State a Claim is GRANTED IN PART and DENIED IN PART as follows: a. Plaintiffs' claim under Minnesota Statute § 47.60 is DISMISSED WITH PREJUDICE. b. Plain tiffs' RICO claim is DISMISSED WITH PREJUDICE. c. Plaintiffs' claims under the Minnesota Consumer Fraud Act, the Minnesota False Statement in Advertising Act, and the Minnesota Uniformed Deceptive Practices Act are DISMISSED WITH PREJUDICE to the extent that they rely on the nonactionable statements that MoneyMutual offers short-term loans to people with no other alternatives and that getting a payday loan "can help provide the immediate assistance to avoid expensive fees." d. The remainder of Defendants' Motion to Dismiss for Failure to State a Claim is DENIED. (Written Opinion) Signed by Judge Donovan W. Frank on 8/30/2017. (BJS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Scott Rilley, Michelle Kunza, Linda Gonzales
and Michael Gonzales, individually and on
behalf of the putative class,
Civil No. 16-4001 (DWF/LIB)
OPINION AND ORDER
MoneyMutual, LLC, Selling Source, LLC,
and PartnerWeekly, LLC,
E. Michelle Drake, Esq., Jeffrey Laurence Osterwise, Esq., and John G. Albanese, Esq.,
Berger & Montague, PC; and Mark L. Heaney, Esq., Heaney Law Firm, LLC, counsel for
Christina Rieck Loukas, Esq., and Joseph M. Windler, Esq., Winthrop & Weinstine, PA;
and Donald J. Putterman, Esq., Michelle L. Landry, Esq., and Tobias G. Snyder, Esq.,
Putterman Landry & Yu LLP, counsel for Defendants.
This matter is before the Court on the defendants’ motion to dismiss for lack of
personal jurisdiction and motion to dismiss for failure to state a claim. (Doc. No. 11.)
For the reasons discussed below, the Court denies the defendants’ motion to dismiss for
lack of personal jurisdiction, and the Court grants in part and denies in part the
defendants’ motion to dismiss for failure to state a claim. 1
Defendants collectively operate a lead-generating business for various payday
lenders. Consumers would go to the defendants’ website to fill out an application, and
then Defendants would sell the application to lenders. The lenders would independently
decide whether to lend consumers money.
Defendant MoneyMutual, LLC, maintained the website and advertised nationally
on television and the Internet, but had no employees or officers. Defendant
PartnerWeekly, LLC, was MoneyMutual’s managing agent. PartnerWeekly would
purchase the advertising, operate the website, and contract with lenders on behalf of
MoneyMutual. Defendant Selling Source, LLC, is the sole parent of MoneyMutual and
PartnerWeekly. Selling Source provided common services to the subsidiaries (like legal
and accounting), but did not operate the day-to-day business. (Defs.’ Memo. at 11.)
Plaintiffs are consumer-borrowers and have filed a purported class action against
Defendants related to the payday loans. Plaintiffs first filed their complaint in Minnesota
state court, naming only MoneyMutual as a defendant. MoneyMutual moved to dismiss
for lack of personal jurisdiction. In Rilley v. MoneyMutual, LLC (Rilley I), the Minnesota
Supreme Court affirmed the finding of personal jurisdiction. 884 N.W.2d 321 (Minn.
2016). After the United States Supreme Court denied MoneyMutual’s petition for
The Court cites to Defendants’ Memorandum in Support of Their Motion to
Dismiss (Doc. No. 32) as “Defs.’ Memo.”; Plaintiffs’ Opposition (Doc. No. 41) as “Pls.’
Opp.”; and Defendants’ Reply (Doc. No. 43) as “Defs.’ Reply.”
certiorari, 137 S. Ct. 1331, Plaintiffs amended the complaint to add Defendants
PartnerWeekly and Selling Source and to add a claim for violating 18 U.S.C. § 1962(c) of
the federal Racketeer Influenced and Corrupt Organizations (RICO) Act. Defendants
then removed the case to federal court. (Doc. No. 1.)
As relevant here, Plaintiffs have alleged in their Amended Complaint
(Doc. No. 1-2) claims for: (1) violating Minnesota’s payday-lending statutes, Minnesota
Statute §§ 47.60 and 47.601; (2) violating § 1962(c) of the federal RICO Act;
(3) violating the Minnesota Consumer Fraud Act, Minnesota Statute § 325F.69 and the
Minnesota False Statement in Advertising Act, Minnesota Statute § 325F.67;
(4) violating the Minnesota Uniform Deceptive Trade Practices Act, Minnesota Statute
§ 325D.44; (5) unjust enrichment; (6) civil conspiracy and aiding and abetting; and
(7) alter ego/piercing the corporate veil. Defendants have moved to dismiss for lack of
personal jurisdiction and for failure to state a claim.
Motion to Dismiss for Lack of Personal Jurisdiction
Defendants seek to dismiss Plaintiffs’ claims for lack of personal jurisdiction. To
survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must make a
prima facie showing that personal jurisdiction exists; that is, a plaintiff must allege facts
to support a reasonable inference that defendant may be subjected to jurisdiction in the
chosen forum. Steinbuch v. Cutler, 518 F.3d 580, 585 (8th Cir. 2008) (citing Dever v.
Hentzen Coatings, Inc., 380 F.3d 1070, 1072 (8th Cir. 2004)). If, as is the case here, the
defendant denies jurisdiction, the plaintiff bears the burden of proving facts supporting
personal jurisdiction. See Wells Dairy, Inc. v. Food Movers Int’l, Inc., 607 F.3d 515, 518
(8th Cir. 2010) (quotation omitted). Once a defendant offers affidavits to challenge
personal jurisdiction, “facts, not mere allegations, must be the touchstone” in determining
whether personal jurisdiction exists. Dever, 380 F.3d at 1072 (citation omitted); see also
Abbasi v. Leading Edge Aviation Servs., Inc., Civ. No. 16-295, 2016 WL 4007571, at *3
(D. Minn. July 26, 2016).
The Court has Personal Jurisdiction.
Personal jurisdiction is a two-step analysis: the Court must have statutory and
constitutional authority for exercising jurisdiction over the defendant. Charles Alan
Wright, Arthur R. Miller & Edward H. Cooper, 4A Fed. Prac. & Proc. § 1069 (4th ed.
Federal Rule of Civil Procedure 4(k) provides that a court can exercise jurisdiction
over a defendant if: (1) jurisdiction is allowed under the state long-arm statute; (2) the
party is served within 100 miles of the courthouse; or (3) service is allowed under a
federal statute. Plaintiffs argue that the Court has statutory jurisdiction under the federal
RICO Act and under Minnesota’s long-arm statute, Minnesota Statute § 543.19. Under
the federal RICO Act, a court can exercise jurisdiction over a person in any district where
the defendant “resides, is found, has an agent, or transacts his affairs.” 18 U.S.C.
§ 1965(a). Courts have interpreted § 1965(a) as allowing courts to exercise nationwide
personal jurisdiction so long as it comports with due process. See ESAB Grp., Inc. v.
Centricut, Inc., 126 F.3d 617, 626 (4th Cir. 1997). Likewise, Minnesota’s long-arm
statute “extend[s] the personal jurisdiction of Minnesota courts as far as the Due Process
Clause of the federal constitution allows.” Rilley I, 884 N.W.2d at 327 (alterations in the
original). Thus, the analysis for personal jurisdiction under both statutes collapses into
whether constitutional due process allows the Court to exercise jurisdiction over
The United States Supreme Court has explained that constitutional due process
requires that a defendant have “certain minimum contacts” with the forum state such that
“maintenance of the suit does not offend traditional notions of fair play and substantial
justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotations
omitted). A defendant’s conduct and connection with the forum state must be such that
the defendant “should reasonably anticipate being haled into court there.” World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). “It is essential in each case
that the defendant has purposefully availed itself of the privilege of conducting activities
within the forum state, thus invoking the benefits and protections of its laws.” Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v. Denckla, 357
U.S. 235, 253 (1958)).
When a federal statute dictates whether the court has personal jurisdiction, courts’
due-process analysis is pursuant to the Fifth Amendment’s Due Process Clause instead of
the Fourteenth Amendment. ESAB, 126 F.3d at 626 (“The due process constraint on
service under [a federal statute] is not, however, grounded in the Fourteenth Amendment,
which circumscribes service under state process pursuant to [a state long-arm statute].”)
Under the Fifth-Amendment analysis, courts evaluate whether the defendant has
sufficient contacts with the United States. See id. at 627; see also In re Fed. Fountain,
Inc., 165 F.3d 600, 601-02 (8th Cir. 1999) (en banc). The inquiry is still a per-claim,
per-defendant inquiry. ESAB, 126 F.3d at 627. Here, Plaintiffs have brought a claim
against Defendants under the RICO Act, which allows for nationwide personal
jurisdiction. Thus, the question for the Court is whether Defendants have sufficient
minimum contacts with the United States instead of any particular state. See id. at 62627; see also Wright & Miller § 1068.1. Here, there is no question that Defendants—all
U.S. companies—have minimum contacts with the United States. The Court can
therefore properly exercise jurisdiction over Defendants for the RICO claim. 2
Next, the Court turns to the remaining state-law claims. When a court has
personal jurisdiction over a defendant for one claim, the court can usually exercise
personal jurisdiction over the defendant for similar claims that arise out of the same
common nucleus of operative facts. See, e.g., Action Embroidery Corp. v. Atl.
Embroidery, Inc., 368 F.3d 1174, 1181 (9th Cir. 2004); ESAB, 126 F.3d at 628; Aviva
For due-process analysis under the Fifth Amendment, some courts have concluded
that courts must determine whether the exercise of due process would be
unconstitutionally burdensome even though the defendant has minimum contacts with the
United States. Republic of Pan. v. BCCI Holdings (Lux.) S.A., 119 F.3d 935, 947 n.23
(11th Cir. 1997) (noting the split). Here, even if the Court were to examine burden, the
Court concludes that Defendants—again, all U.S. entities—are not unconstitutionally
burdened by a United States court exercising jurisdiction over them. “[W]hen the
defendant is located within the United States, he must look primarily to federal venue
requirements for protection from onerous litigation.” See ESAB, 126 F.3d at 627 (internal
quotation marks omitted).
Life & Annuity Co. v. Davis, 20 F. Supp. 3d 694, 703 n.7 (S.D. Iowa 2014) (collecting
cases). Here, Plaintiffs’ state-law claims arise out of the same common nucleus of
operative facts: All of Plaintiffs’ claims relate to Defendants’ role in facilitating payday
loans. Indeed, Defendants averred as much when they removed the case to federal court.
(Doc. No. 1 ¶¶ 15-18 (“This Court has supplemental jurisdiction over the remaining state
law claims in this action, because such claims are closely related to and arise out of the
same set of operative facts as the federal law claim.”).) Thus, the Court has pendent
personal jurisdiction over Defendants for the state-law claims as well. 3
Defendants’ arguments to the contrary are unpersuasive. Much of Defendants’
briefing focuses on the Minnesota long-arm statute, which does not affect the Court’s
analysis under RICO and the Fifth Amendment. ESAB, 126 F.3d at 626-27 (finding
jurisdiction under RICO and the Fifth Amendment, even though it also concluded that the
district court did not have jurisdiction under South Carolina’s long-arm statute). In
response to Plaintiffs’ RICO argument, Defendants point to Burkhart v. Medserv Corp.,
Because the Court finds that it has personal jurisdiction based on the RICO claim
and pendent personal jurisdiction, the Court declines to address the parties’ arguments
regarding whether the Court could exercise personal jurisdiction over Defendants under
Minnesota’s long-arm statute and the Fourteenth Amendment. But if the Court were to
apply the traditional minimum-contacts analysis consistent with the 14th Amendment, the
Court would have concluded that it has specific personal jurisdiction over MoneyMutual
consistent with the Minnesota Supreme Court’s decision in Rilley I, 884 N.W.2d 321
(Minn. 2016). Similarly, the Court would have concluded that it has specific personal
jurisdiction over PartnerWeekly which operated MoneyMutual. But the Court would also
have concluded that it likely did not have personal jurisdiction over Selling Source. The
Court, however, would have delayed dismissing Selling Source to allow Plaintiffs the
opportunity to conduct discovery into the operation of Defendants to determine whether
their corporate structure justified the Court exercising personal jurisdiction. See Wright
& Miller § 1069.4.
where the district court concluded that the Fifth Amendment still requires contacts with
the forum state. 916 F. Supp. 919, 922 (W.D. Ark. 1996). But in In re Federal Fountain,
Inc., the full Eighth Circuit rejected that argument and concluded that the inquiry under
the Fifth Amendment is whether the defendant has minimum contacts with the
United States. 165 F.3d at 601-02.
Additionally, Defendants argue that Plaintiffs’ RICO claim cannot establish
jurisdiction because it fails as a matter of law. To exercise jurisdiction pursuant to the
RICO Act, Plaintiffs must allege a colorable RICO claim. Republic of Pan. v. BCCI
Holdings (Lux.) S.A., 119 F.3d 935, 941 (11th Cir. 1997). A colorable claim is a lower
pleading standard than required under Rule 12(b)(6): “[T]the court should dismiss for
lack of jurisdiction only if the right claimed is so ‘insubstantial, implausible, foreclosed
by prior decisions of this Court, or otherwise devoid of merit as not to involve a federal
controversy.’” Id. (internal quotation marks omitted) (quoting IUE AFL–CIO Pension
Fund v. Herrmann, 9 F.3d 1049, 1055 (2d Cir. 1993)). The moving party has the “high
burden” of showing that the claim is not colorable. See Herrmann, 9 F.3d at 1056-57.
Here, Defendants have failed to show that Plaintiffs’ RICO claim is not colorable.
To start, Defendants seem to acknowledge that Plaintiffs’ claim is colorable because they
used that claim as a basis for the Court’s jurisdiction in their removal papers. (Doc. No. 1
at ¶ 14 (“The United States District Court for the District of Minnesota has original
jurisdiction over Plaintiffs’ claims pursuant to 28 U.S.C. § 1331 because this action
constitutes a claim by Plaintiffs for violation of a federal statute. Plaintiffs specifically
allege a claim under the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C.
§ 1962).”).) But apart from that, Defendants have not shown how Plaintiffs’ RICO claim
is so implausible that the Court does not have subject matter jurisdiction over the claim,
which would be necessary to preclude the Court from exercising personal jurisdiction
pursuant to RICO. See Republic of Pan., 119 F.3d at 942 n.9; see also Herrmann, 9 F.3d
at 1056-57. Thus, the Court has personal jurisdiction over all three defendants for all of
Plaintiffs’ claims and therefore denies Defendants’ Motion to Dismiss for Lack of
Motion to Dismiss for Failure to State a Claim
Defendants also move pursuant to Rule 12(b)(6) to dismiss Plaintiffs’ claims for:
(1) violating Minnesota’s payday-lending statutes, Minnesota Statute §§ 47.60 and
47.601; (2) violating § 1962(c) of the federal RICO Act; (3) violating Minnesota
Consumer Fraud Act, Minnesota Statute § 325F.69 and Minnesota False Statement in
Advertising Act, Minnesota Statute § 325F.67; (4) violating Minnesota Uniform
Deceptive Trade Practices Act, Minnesota Statute § 325D.44; (5) unjust enrichment;
(6) civil conspiracy and aiding and abetting; and (7) alter ego/piercing the corporate veil.
In deciding a motion to dismiss under Rule 12(b)(6), a court assumes all facts in
the complaint to be true and construes all reasonable inferences from those facts in the
light most favorable to the complainant. Morton v. Becker, 793 F.2d 185, 187 (8th
Cir. 1986). In doing so, however, a court need not accept as true wholly conclusory
allegations, Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th
Cir. 1999), or legal conclusions drawn by the pleader from the facts alleged, Westcott v.
City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). A court deciding a motion to
dismiss may consider the complaint, matters of public record, orders, materials embraced
by the complaint, and exhibits attached to the complaint. See Porous Media Corp. v. Pall
Corp., 186 F.3d 1077, 1079 (8th Cir. 1999).
To survive a motion to dismiss, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007). Although a complaint need not contain “detailed factual allegations,” it must
contain facts with enough specificity “to raise a right to relief above the speculative
level.” Id. at 555. As the Supreme Court reiterated, “[t]hreadbare recitals of the elements
of a cause of action, supported by mere conclusory statements,” will not pass muster
under Twombly. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S.
at 555). In sum, this standard “calls for enough fact[s] to raise a reasonable expectation
that discovery will reveal evidence of [the claim].” Twombly, 550 U.S. at 556.
Minnesota Statutes §§ 47.60 & 47.601.
Plaintiffs brought claims under Minnesota Statute §§ 47.60 and 47.601, which
cover payday lending. Section 47.60 regulates consumer small loans and section 47.601
regulates consumer short-term loans. Defendants move to dismiss Plaintiffs’
payday-lending claims arguing that: (1) Defendants are not covered by the statutes;
(2) even if Defendants are covered, the Minnesota statutes are void for vagueness; and
(3) the Minnesota payday statutes violate the First Amendment as applied to Defendants.
Minnesota Statute § 47.60 regulates consumer small loan lenders, defined as a
financial institution or business entity “engaged in the business of making consumer
small loans.” Id. Defendants argue that they do not make consumer loans, and Plaintiffs
did not respond to Defendants’ argument. Thus, the Court concludes that Plaintiffs
abandoned their claims under § 47.60. Gharwal v. Fed. Nat. Mortg. Ass’n, Civ.
No. 13-0685, 2013 WL 4838904, at *1 n.2 (D. Minn. Sept. 11, 2013) (dismissing a claim
when plaintiff failed to respond to the argument), aff’d, 570 F. App’x 624 (8th Cir. 2014).
But even if the Court were to consider Defendants’ argument, the Court finds that
Plaintiffs have failed to plausibly allege that Defendants were in the businesses of making
consumer small loans. Plaintiffs’ claim under § 47.60 would need to be brought against
the actual lender. Thus, the Court dismisses Plaintiffs’ payday-lending claims to the
extent that they are brought under § 47.60.
Minnesota Statute § 47.601 regulates “individual or entity engaged in the business
of making or arranging consumer short-term loans, other than a state or federally
chartered bank, savings bank, or credit union.” Plaintiffs argue that Defendants arranged
consumer short-term loans and therefore are covered by the statute. “Arrange” is not
defined in the statute. In State ex rel. Swanson v. Cashcall, the Minnesota Court of
Appeals concluded that § 47.601 applied to an entity that serviced the loans. 4 2014 WL
4056028, at *7 (Minn. Ct. App. Aug. 18, 2014). While the case is unpublished, the Court
In Cashcall, the court also noted that the bank and subsidiary allegedly controlled
the loan originator. Id. at *1. The state contended that such control made the bank and
the subsidiary de facto lenders. Id. at *6-7. In analyzing § 47.601, however, the court of
appeals focused on the bank’s and the subsidiary’s roles in servicing the loans after they
were made. In that capacity, the court of appeals affirmed the finding that the bank and
the subsidiary at the very least arranged the loans. Id. at *7. Thus, based on Cashcall,
the Court concludes that Defendants did not have to control the lenders to be covered by
finds it persuasive for the proposition that § 47.601 is not limited to the loan issuers.
“Arrange” is defined, among other things, as “to bring about an agreement.” Arrange,
Merriam-Webster, https://www.merriam-webster.com/dictionary/arrange (last visited
Aug. 28, 2017); see also Shire v. Rosemount, Inc., 875 N.W.2d 289, 292 (Minn. 2016)
(“To determine the plain meaning of a word, we often consider dictionary definitions.”).
Here, Defendants’ business is connecting lenders and borrowers. Defendants therefore
help bring about an agreement. Thus, the Court concludes that, as alleged in the
Amended Complaint, Defendants are covered by Minnesota Statute § 47.601 because
they arrange consumer short-term loans.
Next, Defendants argue that even if the plain language of the statute covers their
business, the Court should still dismiss the claim because the statute is unconstitutionally
vague and the statute violates Defendants’ First-Amendment right as applied. Both
arguments fail. First, Minnesota Statute § 47.601 is not unconstitutionally vague. “[A]
statute must be defined clearly enough that a person of ordinary intelligence has a
reasonable opportunity to know what is prohibited.” Fogie v. THORN Americas, Inc., 95
F.3d 645, 650 (8th Cir. 1996). Additionally, “the statute must provide standards that are
clear enough that those charged with applying the statute are not required to make basic
policy decisions on a subjective or arbitrary basis.” Id. Courts analyze criminal statutes
under a stricter test than economic statutes. Id. Section 47.601 is an economic statute
and therefore a more tolerant test applies—the statute must be impermissibly vague in all
of its applications. See id. (citing Village of Hoffman Estates v. Flipside, Hoffman
Estates, Inc., 455 U.S. 489, 498-99 (1982)).
Here, Minnesota Statute § 47.601 is not impermissibly vague in all of its
application. Indeed, the statute plainly covers the Defendants’ business: Defendants put
consumer-borrowers into contact with lenders of short-term loans. In other words,
Defendants arranged consumer short-term loans. Defendants did not even address
Plaintiffs’ arguments in their reply. Thus, the Court finds that Minnesota Statute
§ 47.601 is not unconstitutionally vague.
Second, Minnesota Statute § 47.601, as applied, does not violate Defendants’
freedom of speech. As relevant here, § 47.601: (1) prohibits certain contractual
provisions—such as class-action waivers—from being in short-term loan contracts;
(2) requires that the short-term loan contract include certain terms, such as the name of
the lender and the APR; (3) requires the lender to make certain disclosures about the
loans to the Minnesota Commissioner of Commerce; and (4) prohibits deceptive debtcollection practices as outlined in Minnesota Statute § 332.37. Minn. Stat. § 47.601
subds. 2-4. Defendants’ motion focuses on only the disclosure requirement. (Defs.’
Memo. at 36-37.) Section 47.601, subdivision 4, requires lenders to disclose the amount
of loans issued, the average APR, how many borrowers are repeat customers, and how
many loans have been written off as bad debt. Id. § 47.601 subd. 4.
When, as here, the restriction on commercial speech is a content- or speaker-based
restriction, the Eighth Circuit has distinguished between bans and compelled disclosures.
See 1-800-411-Pain Referral Serv., LLC v. Otto, 744 F.3d 1045, 1055, 1060 (8th Cir.
2014). A state can compel purely factual commercial speech so long as the compelled
speech is rationally related to a substantial government interest. 5 CTIA-The Wireless
Ass’n v. City of Berkeley, Cal., 854 F.3d 1105, 1117 (9th Cir. 2017); see also
1-800-411-Pain Referral Serv., LLC., 744 F.3d at 1060. Defendants argue that
Minnesota does not have a substantial interest in requiring lead generators to make purely
factual disclosures to the Minnesota Commissioner of Commerce. In Rilley I, the
Minnesota Supreme Court concluded that “Minnesota has a strong interest in protecting
its residents from predatory lending, enforcing consumer protection laws, and providing a
forum for litigating violations of its payday-lending statutes.” Rilley I, 884 N.W.2d at
338. The interests identified by the Minnesota’ Supreme Court are substantial. See
CTIA-The Wireless Ass’n, 854 F.3d at 1117 (“[T]he interest must be more than the
satisfaction of mere ‘consumer curiosity.’”). The Court finds that § 47.601 furthers those
interests by, among other things, requiring every individual who arranges or makes
payday loans to disclose information about those payday loans. The Court therefore finds
§ 47.601 does not violate the First Amendment as applied to lead generators. Thus, the
Court denies Defendants’ motion to dismiss to the extent that it seeks a dismissal of
claims brought under § 47.601.
In CTIA-The Wireless Ass’n, the Ninth Circuit noted that some circuits had
waffled on whether commercial speech could be compelled for less than a substantial
government interest. See 854 F.3d at 1117. The Court is not convinced that commercial
speech can be compelled only in situations involving substantial government interests.
But here Minnesota has a substantial interest in regulating payday lenders, thus the Court
need not resolve the issue.
Defendants also move to dismiss Plaintiffs’ RICO claim. “To plead a viable
RICO claim for damages, a plaintiff must allege ‘(1) conduct (2) of an enterprise
(3) through a pattern (4) of racketeering activity.’” Sebrite Agency, Inc. v. Platt,
884 F. Supp. 2d 912, 918 (D. Minn. 2012) (quoting Wisdom v. First Midwest Bank of
Poplar Bluff, 167 F.3d 402, 406 (8th Cir.1999)). The elements of a RICO claim must be
pleaded with particularity. Crest Const. II, Inc. v. Doe, 660 F.3d 346, 353 (8th Cir.
2011). “‘Because the mere assertion of a RICO claim . . . has an almost inevitable
stigmatizing effect on those named as defendants, . . . courts should strive to flush out
frivolous RICO allegations at an early stage of the litigation.’” Moss v. BMO Harris
Bank, N.A., Civ. No. 13-5438, 2017 WL 2894887, at *5 (E.D.N.Y. July 7, 2017) (quoting
Katzman v. Victoria’s Secret Catalogue, 167 F.R.D. 649, 655 (S.D.N.Y. 1996)
(alterations in the original)). Here, Defendants argue that Plaintiffs have failed to
adequately plead a RICO enterprise or to plead their RICO claim with particularity. 6
A RICO enterprise “includes any individual, partnership, corporation, association,
or other legal entity, and any union or group of individuals associated in fact although not
a legal entity.” 18 U.S.C. § 1961(4). Plaintiffs allege that Defendants along with various
payday lenders formed an association in fact to facilitate illegal payday lending. “[A]n
association-in-fact enterprise must have at least three structural features: a purpose,
relationships among those associated with the enterprise, and longevity sufficient to
Because the Court finds that Plaintiffs have failed to adequately plead an
enterprise existed, the Court does not address Defendants’ other argument.
permit these associates to pursue the enterprise’s purpose.” Crest Const. II, Inc., 660
F.3d at 354 (alteration in the original) (quoting Boyle v. United States, 556 U.S. 938, 946
Plaintiffs contend that a network of lenders used Defendants to connect with
potential borrowers of payday loans. In essence, Plaintiffs’ RICO claim is that
Defendants provided the access to Minnesota by which the network of lenders could
make illegal loans. Courts are necessarily suspicious of RICO claims based on access.
Indeed, “‘inside traders all use the stock market to further their unlawful goals, but that
alone does not plausibly lead to the conclusion that they are all working together as part
of a single enterprise in furtherance of a larger fraudulent scheme.’” Moss, 2017 WL
2894887, at *8 (quoting Anctil v. Ally Fin., Inc., 998 F. Supp. 2d 127, 141-42 (S.D.N.Y.
2014)). To adequately plead an enterprise, the plaintiff must show that all persons joined
the enterprise for a common racketeering purpose. See Nelson v. Nelson, 833 F.3d 965,
968 (8th Cir. 2016). The claim will not survive a motion to dismiss merely by showing
parallel conduct. See id.; see also Target Corp. v. LCH Pavement Consultants, LLC, Civ.
No. 12-1912, 2013 WL 2470148, at *4 (D. Minn. June 7, 2013) (“[A]n
association-in-fact enterprise requires more than parallel conduct; it requires relationships
among those associated with the enterprise, and it requires those associated with the
enterprise to function as a unit, that they be put together to form a whole.” (internal
quotation marks omitted)).
Here, Plaintiffs’ claim fails because they have failed to adequately plead a
common purpose among the various lenders. It is not enough that Plaintiffs allege that
Defendants’ purpose was to facilitate illegal loans and that the various lenders also
wanted to sell illegal loans. A so-called rimless conspiracy does not establish a RICO
enterprise. See LCH Pavement, 2013 WL 2470148, at *4 (“This is because without a
‘rim,’ there are no allegations of concerted actions among the spokes, only allegations of
parallel conduct.”). Plaintiffs allege that the lenders were aware of and benefited from
each other’s participation because Defendants could not advertise the operation without
the network of lenders. (Am. Compl. ¶ 130.) But why did all of the lenders join
together? Plaintiffs argue that the lenders benefit from the inclusion of other lenders, but
Plaintiffs fail to explain why supposedly racketeering lenders would join a network where
they openly compete with one another over the same borrowers. (See Am. Compl. ¶ 67
(noting that borrowers could apply for loans from multiple lenders).) Without particular
allegations regarding the lenders’ concerted effort, Plaintiffs’ RICO claim fails. Thus,
the Court grants Defendants’ motion to the extent it seeks dismissal of Plaintiffs’ RICO
The Court must also address the seeming incongruity between finding a colorable
RICO claim sufficient to exercise personal jurisdiction and its finding that the RICO
claim fails as a matter of law. A colorable claim is the same standard used to determine
whether the Court has subject matter jurisdiction. IUE AFL-CIO Pension Fund v.
Herrmann, 9 F.3d 1049, 1055 (2d Cir. 1993). Applying that standard, a claim is not
colorable only if it is “so insubstantial, implausible, foreclosed by prior decisions of this
Court, or otherwise completely devoid of merit as not to involve a federal controversy.”
Id. Here, as the Court has already explained, Plaintiffs’ RICO claim was colorable but
ultimately failed to state a claim. See Republic of Pan., 119 F.3d at 942 n.9 & 951
(dismissing the plaintiff’s RICO claim even though the court noted in dicta that, if the
defendants had not waived the issue, then the court would have concluded that the
plaintiff stated a colorable RICO claim for the court to exercise personal jurisdiction).
MCFA and FSAA
Defendants also move to dismiss Plaintiffs’ claims for violating the Minnesota
Consumer Fraud Act (“MCFA”) and the Minnesota False Statement in Advertising Act
(“FSAA”). The MCFA prohibits: “[t]he act, use, or employment by any person of any
fraud, false pretense, false promise, misrepresentation, misleading statement or deceptive
practice, with the intent that others rely thereon in connection with the sale of any
merchandise.” Minn. Stat. § 325F.69, subd. 1. “Merchandise” includes loans. Id.
§ 325F.68, subd. 2. Similarly, the FSAA prohibits advertisements that contain “any
material assertion, representation, or statement of fact which is untrue, deceptive, or
misleading.” Minn. Stat. § 325F.67.
Defendants argue that the Court should dismiss: (2) the FSAA and MCFA claims
because Plaintiffs failed to allege false statements; (2) the MCFA claim because Plaintiffs
failed to plead fraud with particularity; and (3) the MCFA claim because Plaintiffs failed
to plead a causal nexus between the misstatements and the Plaintiffs’ injuries.
Plaintiffs identified four allegedly false statements from MoneyMutual’s website:
1. “MoneyMutual carefully chooses its network of lenders and requires
each of them to follow a strict code of conduct, including abiding by all
applicable state and federal laws.”
2. “[U]sing an APR to represent the fees is not only inaccurate, but also
3. “[MoneyMutual] helps provide people who have no other short-term
cash alternatives, access to lenders who offer payday loans and cash
4. “[G]etting a short term cash loan from MoneyMutual’s network of
participating lenders can help provide the immediate assistance to avoid
(Am. Compl. ¶¶ 141(a)-(d) & 150(a)-(d)). 8 Defendants contend that the statements are
not actionable because they are either puffery, opinion, or true. “‘Puffery exists in two
general forms: (1) exaggerated statements of bluster or boast upon which no reasonable
consumer would rely; and (2) vague or highly subjective claims of product superiority,
including bald assertions of superiority.’” Laughlin v. Target Corp., Civ. No. 12-489,
2012 WL 3065551, at *2 (D. Minn. July 27, 2012) (quoting Am. Italian Pasta Co. v. New
World Pasta Co., 371 F.3d 387, 390-91 (8th Cir. 2004)). For product claims “[t]o be
actionable, the statement must be a specific and measurable claim, capable of being
proved false or of being reasonably interpreted as a statement of objective fact.” Cf. Am.
Italian Pasta Co., 371 F.3d at 391 (internal quotation marks omitted); see also Laughlin,
2012 WL 3065551, at *2 (citing American Italian Pasta Co. for MCFA claims).
First, the statement that Defendants “carefully” choose their lenders is actionable.
Plaintiffs contend that Defendants employed no process to select their lenders. Such a
claim can be reasonably interpreted as a statement of objective fact. Thus, Defendants’
statement that they carefully choose lenders is actionable under the MCFA.
Second, the statement that Defendants require their lenders to abide by all
applicable state and federal laws is actionable because it represents an objective fact
Plaintiffs also allege that Defendants violated the MCFA by engaging in conduct
barred by Minnesota’s payday-lending statutes, Minnesota Statute §§ 47.60 and 47.601.
Defendants, however, have not moved to dismiss this part of Plaintiffs’ claim. Even if
the Court were to consider the issue, the Court would not dismiss that part of the claim.
capable of being proven true or false. Defendants argue that the statement is true because
their agreements with the lenders apparently contain a warranty that the lenders will
comply with state and federal law. But given that Defendants have provided only a
“representative” lender agreement, instead of all relevant lender agreements, the Court
declines to resolve this issue on a motion to dismiss. (See Doc. No. 29 ¶ 6, Ex. A.) Thus,
Defendants’ statement that it requires lenders to comply with the law is actionable.
Third, the statement that using annual percentage rates to represent fees is
inaccurate and misleading is actionable. Defendants’ statement is capable of being
proven true or false—whether the APR fairly shows the true costs of the payday loan as
compared to other financial products. Thus, the statement is actionable.
Fourth, the statement that MoneyMutual offers short-term loans to people with no
other alternatives is not actionable. Defendants’ statement is puffery because it is an
exaggerated claim on which no borrower would rely. Indeed, a borrower would know
whether he had other options. Thus, Defendants’ statement that their borrowers have no
other options is not actionable.
Fifth, the statement that getting a payday loan “can help provide the immediate
assistance to avoid expensive fees” is not actionable. Defendants’ statement is mere
puffery because it is an exaggerated claim on which no borrower would rely. Plaintiffs
do not allege that the financial consequences of the payday loans are not disclosed. And,
again, a borrower will likely know whether the payday loan will help him avoid other
expensive fees. Thus, the statement that payday loans will help avoid expensive fees is
not actionable. The Court therefore grants in part Defendants’ motion to dismiss the
MCFA and FSAA claims to the extent that Plaintiffs have failed to identify actionable
Defendants also argue that Plaintiffs’ MCFA claim fails because the claim was not
pleaded with particularity. Claims under the MCFA must be pleaded with particularity
under Rule 9(b). Kinetic Co. v. Medtronic, Inc., 672 F. Supp. 2d 933, 944 (D. Minn.
2009). To satisfy Rule 9(b), “the complaint must plead the ‘who, what, where, when, and
how’ of the alleged fraud.” Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir.
2009) (citation omitted). “Conclusory allegations that a defendant’s conduct was
fraudulent and deceptive are not sufficient to satisfy the rule.” Schaller Tel. Co. v.
Golden Sky Sys., Inc., 298 F.3d 736, 746 (8th Cir. 2002) (citation omitted). Here,
Plaintiffs have adequately alleged their MCFA claim: Plaintiffs alleged that Defendants
made misleading statements in television ads and on their website and engaged in
deceptive conduct by facilitating illegal loans. Thus, the Court denies Defendants’
motion to the extent that it seeks to dismiss Plaintiffs’ MCFA claim for lack of
Defendants also move to dismiss on the basis that Plaintiffs failed to allege a
causal nexus between the deceptive conduct and the injury. But for the plaintiffs to state
a claim under the MCFA, they “need only plead that the defendant engaged in conduct
prohibited by the statutes and that the plaintiff was damaged thereby.” Carlsen v.
GameStop, Inc., 833 F.3d 903, 912 (8th Cir. 2016) (quoting Grp. Health Plan, Inc. v.
Philip Morris Inc., 621 N.W.2d 2, 12 (Minn. 2001)); accord Kinetic Co., 672 F. Supp. 2d
at 946. Thus, Plaintiffs do not need to plead causal nexus, even though they will
eventually have to prove it. Kinetic Co., 672 F. Supp. 2d at 946. Here, Plaintiffs have
adequately pleaded that Defendants violated the MCFA and that Plaintiffs were injured
thereby (in the form of illegal loans). The Court therefore denies Defendants’ motion to
dismiss to the extent it seeks to dismiss Plaintiffs’ MCFA claim for failing to plead a
Defendants move to dismiss Plaintiffs’ claim under the Minnesota Uniform
Deceptive Trade Practices Act (“MUDTPA”). Under the MUDTPA, “a person likely to
be damaged by a deceptive trade practice of another may be granted an injunction against
it under the principles of equity and on terms that the court considers reasonable.” Minn.
Stat. Ann. § 325D.45. “Proof of monetary damage, loss of profits, or intent to deceive is
not required.” Id. Like the MCFA, a claim under the MUDTPA must be pleaded with
particularity. Podpeskar v. Makita U.S.A. Inc., Civ. No. 15-3914, 2017 WL 1169533, at
*6 (D. Minn. Mar. 28, 2017). Plaintiffs bring a claim for the same conduct as alleged for
their MCFA claim. 9 Defendants argue that Plaintiffs’ claim fails because: (1) they fail to
allege any false statement; (2) an injunction is not available; and (3) Plaintiffs have failed
to plead an injury to their commercial interests.
Again, Plaintiffs have alleged Defendants violated the MUDTPA by engaging in
conduct barred by Minnesota’s payday-lending statutes, Minnesota Statute §§ 47.60 and
47.601. Defendants, however, have not moved to dismiss this part of Plaintiffs’ claim.
Even if the Court were to consider the issue, the Court would not dismiss that part of the
First, the Court concludes, consistent with its findings for the MCFA and FSAA
claims, that Plaintiffs’ MUDTPA claim fails to the extent that it is based on
nonactionable statements. Specifically, Defendants’ statements that MoneyMutual offers
short-term loans to people with no other alternatives and that getting a payday loan “can
help provide the immediate assistance to avoid expensive fees” are not actionable. Thus,
the Court dismisses Plaintiffs’ MUDTPA claim to the extent they are based on
Second, Defendants argue that the Court should dismiss the MUDTPA claim
because no remedy is available. An injured party can obtain only an injunction under the
MUDTPA. Defendants argue that some of the misstatements are no longer on their
website, and therefore Plaintiffs’ claim is moot. Defendants, however, have provided no
evidence to support this statement or evidence that anything prevents the Defendants
from reintroducing the statements onto the website. See Minn. Chamber of Commerce v.
Gaertner, 710 F. Supp. 2d 868, 872-73 (D. Minn. 2010) (“[A] defendant claiming that its
voluntary compliance moots a case bears the formidable burden of showing that it is
absolutely clear the allegedly wrongful behavior could not reasonably be expected to
recur.” (quoting Friends of the Earth, Inc. v. Laidlaw, 528 U.S. 167, 170 (2000))). Thus,
the Court concludes that Defendants have failed to show the claim is moot.
Last, Defendants argue Plaintiffs’ MUDTPA claim fails because Plaintiffs have
failed to show an injury to their commercial interests. Defendants argue that the
MUDTPA is coextensive with the federal Lanham Act and uses the same analysis. But
the Eighth Circuit has rejected that conclusion: “The [district court’s] second error was
in equating the standards for relief under the Lanham Act and the Minnesota consumer
protection statutes at issue.” Buetow v. A.L.S. Enterprises, Inc., 650 F.3d 1178, 1183 (8th
Cir. 2011). A consumer can proceed with a MUDTPA claim so long as he alleges a
threat of future injury from the deceptive practices. See id. at 1185. Thus, the Court
concludes that Plaintiffs do not need to allege harm to a commercial interest. The Court
therefore grants Defendants’ motion to dismiss in part. The Court dismisses the
Plaintiffs’ MUDTPA claim to the extent it is based on nonactionable statements.
Defendants argue that the Court should dismiss Plaintiffs’ claim for unjust
enrichment. “In order to establish a claim for unjust enrichment, the claimant must show
that another party knowingly received something of value to which he was not entitled,
and that the circumstances are such that it would be unjust for that person to retain the
benefit.” Schumacher v. Schumacher, 627 N.W.2d 725, 729 (Minn. Ct. App. 2001).
Defendants argue that Plaintiffs’ claim should be dismissed because: (1) the payments
that Defendants received from lenders for leads are not subject to recovery by Plaintiffs;
(2) Plaintiffs had an express contract that governs the conduct in question; and
(3) Plaintiffs have an adequate remedy at law. Plaintiffs’ claim, however, is pleaded in
the alternative to its statutory claims. And at this stage of the litigation, Plaintiffs are
allowed to proceed with alternative theories of law and equity. Khoday v. Symantec
Corp., 858 F. Supp. 2d 1004, 1019 (D. Minn. 2012). Thus, the Court denies the
Defendants’ motion to the extent that it seeks to dismiss Plaintiffs’ claim for unjust
Civil Conspiracy and Aiding and Abetting
Defendants also move to dismiss Plaintiffs’ claims for civil conspiracy and for
aiding and abetting. “To establish civil conspiracy, a claimant must show that two or
more people worked together to accomplish (1) an unlawful purpose or (2) a lawful act
by unlawful means.” Robert Allen Taylor Co. v. United Credit Recovery, LLC, Civ.
No. A15-1902, 2016 WL 5640670, at *11 (Minn. Ct. App. Oct. 3, 2016) (citing Harding
v. Ohio Cas. Ins. Co., 41 N.W.2d 818, 824 (Minn. 1950)). Civil conspiracy is not an
independent claim and is instead a theory of liability premised on an underlying tortious
act. Leiendecker v. Asian Women United of Minn., 848 N.W.2d 224, 228 n.2 (Minn.
2014). Likewise, aiding and abetting requires: “(1) the primary tortfeasor must commit a
tort that causes an injury to the plaintiff; (2) the defendant must know that the primary
tortfeasor’s conduct constitutes a breach of duty; and (3) the defendant must substantially
assist or encourage the primary tortfeasor in the achievement of the breach.” Zayed v.
Associated Bank, N.A., 779 F.3d 727, 733 (8th Cir. 2015).
Here, Defendants argue that Plaintiffs have failed to allege a factual basis for civil
conspiracy or aiding and abetting. The Court, however, concludes that Plaintiffs have
adequately alleged the claims: Plaintiffs allege that Defendants entered into agreements
with various lenders to provide them access to Minnesota to make illegal payday loans.
Further, Plaintiffs contend that the various lenders could not circumvent Minnesota law
without Defendants’ help. (See Am. Compl. ¶ 28 (“For example, Defendants brokered a
payday loan with one of the plaintiffs in this action and Bottom Dollar Payday after it had
been ordered to cease and desist from lending to Minnesotans by the Minnesota
Department of Commerce.”).) Such allegations are sufficient to survive a motion to
dismiss. Thus, the Court denies Defendants’ motion to the extent it seeks to dismiss
Plaintiffs’ claims for civil conspiracy and aiding and abetting.
Defendants also move to dismiss Plaintiffs’ claim for piercing the corporate veil or
alter ego. Defendants cite to a summary judgment order from Missouri to argue that such
a claim is not an independent claim for relief. While it is true that piercing the corporate
veil and alter ego are liability theories which require an underlying tort claim or statutory
claim, courts in Minnesota have allowed them to be pleaded as independent claims. See
Bank of Montreal v. Avalon Capital Grp., Inc., 743 F. Supp. 2d 1021, 1030 (D. Minn.
2010) (allowing a separately pleaded claim for alter ego to proceed past a motion to
dismiss). Defendants’ motion therefore fails.
Based upon the foregoing, IT IS HEREBY ORDERED that Defendants’
Amended Motion to Dismiss for Lack of Personal Jurisdiction and for Failure to State a
Claim (Doc. No. ) is GRANTED IN PART and DENIED IN PART as follows:
Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction is
Defendants Motion to Dismiss for Failure to State a Claim is GRANTED
IN PART and DENIED IN PART as follows:
Plaintiffs’ claim under Minnesota Statute § 47.60 is
DISMISSED WITH PREJUDICE.
Plaintiffs’ RICO claim is DISMISSED WITH
Plaintiffs’ claims under the Minnesota Consumer Fraud Act,
the Minnesota False Statement in Advertising Act, and the Minnesota
Uniformed Deceptive Practices Act are DISMISSED WITH
PREJUDICE to the extent that they rely on the nonactionable statements
that MoneyMutual offers short-term loans to people with no other
alternatives and that getting a payday loan “can help provide the immediate
assistance to avoid expensive fees.”
The remainder of Defendants’ Motion to Dismiss for Failure
to State a Claim is DENIED.
Dated: August 30, 2017
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
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