Moss v. BMO Harris Bank, N.A. et al

Filing 135

ORDER granting in part and denying in part 125 Motion to Dismiss. For the reasons set forth herein, the Court grants in part and denies in part defendant's motion to dismiss. Plaintiff's RICO New York GBL claims are dismissed for failur e to state a cause of action, and the motion is denied with respect to the unjust enrichment claim. Any amended complaint must be filed within thirty (30) days of this Memorandum and Order. SO ORDERED. Ordered by Judge Joseph F. Bianco on 7/7/2017. (Zbrozek, Alex)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 13-CV-5438 (JFB) (GRB)
_____________________

DEBORAH MOSS,
ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED,

Plaintiff,
VERSUS

BMO HARRIS BANK, N.A., FIRST PREMIER BANK, AND BAY CITIES BANK,
Defendants.
___________________
MEMORANDUM AND ORDER
July 7, 2017
___________________

JOSEPH F. BIANCO, District Judge:
Plaintiff Deborah Moss (“Moss” or
“plaintiff”) brings this putative class action
against defendant First Premier Bank 1 (“First
Premier” or “defendant”) alleging (1) a
substantive violation of the Racketeer
Influenced and Corrupt Organizations
(“RICO”) Act pursuant to 18 U.S.C.
§ 1962(c) and conspiracy to violate RICO
pursuant to 18 U.S.C. § 1962(d); and (2) New
York State law claims for a violation of the
General Business Law (the “GBL”), N.Y.
Gen. Bus. Law § 349, and for unjust
enrichment. 2 Defendant now moves to
dismiss plaintiff’s Second Amended

1

Plaintiff’s initial complaint and first amended
complaint also asserted claims against BMO Harris
Bank, N.A. and Bay Cities Bank, and the latter party
joined the instant motion. (See ECF Nos. 1, 38.)
However, plaintiff stipulated to dismissal of those
parties from this action on January 7, 2016 and March
27, 2017, respectively. (See ECF Nos. 111, 133.)

Complaint (“SAC”) pursuant to Federal Rule
of Civil Procedure 12(b)(6).
For the reasons set forth below, the Court
dismisses plaintiff’s substantive RICO claim
because plaintiff has not adequately alleged
(1) the existence of an association-in-fact
enterprise; and (2) that defendant conducted
or participated in the affairs of a RICO
enterprise. As a result, the RICO conspiracy
claim must also be dismissed because there is
no plausible underlying substantive violation.
With respect to plaintiff’s state law
claims, the Court agrees with defendant that
plaintiff has failed to state a cause of action
under the GBL because there are no
allegations that defendant engaged in
2

At oral argument on the instant motion, plaintiff
conceded that the applicable statute of limitations
barred her New York State law claim for aiding and
abetting violations of the Civil Usury Law, N.Y. Gen.
Oblig. Law § 5-501, and she voluntarily withdrew that
cause of action. Accordingly, the Court dismisses that
claim with prejudice.

prohibitions and offer payday loans to
consumers residing in these states” through
the Automated Clearing House (“ACH”)
Network, a payment “processing system in
which financial institutions accumulate ACH
transactions throughout the day for later
batch processing.” (Id. ¶¶ 5, 34.)

consumer-oriented, misleading conduct.
However, defendant’s motion is denied with
respect to the unjust enrichment claim
because the Court concludes that plaintiff has
adequately alleged that she conferred a
benefit on defendant.
Finally, in an abundance of caution, the
Court will permit plaintiff to amend her
pleading one final time to attempt to allege
plausible RICO and GBL claims.

3. The ACH Network
ACH transactions are the debits and
credits necessary for an exchange between a
payday creditor and lender, and they are
performed by entities known as Originating
Depository Financial Institutions (“ODFIs”),
which are banks belonging to the ACH
Network that transmit the funds from one
party to the other party’s bank, which is the
Receiving Depository Financial Institution
(“RDFI”). (Id. ¶¶ 8, 26-27, 40.) Plaintiff
alleges that ODFIs allow payday lenders to
access the ACH Network and electronically
debit a borrower’s deposit account for the
loan payment amounts and associated fees.
(Id. ¶ 27.) Without the participation of
OFDIs to “initiate” debit entries and
“originate” those entries into the ACH
Network, a payday lender cannot reach a
borrower’s account. (Id.)

I. BACKGROUND
A. Factual Background
The Court takes the following facts from
the SAC. (ECF No. 123.) The Court assumes
these facts to be true for purposes of deciding
this motion and construes them in the light
most favorable to plaintiff as the non-moving
party.
1. The Parties
Plaintiff Deborah Moss is a citizen and
resident of New York and resides in the
hamlet of Bay Shore, Town of Islip, County
of Suffolk. (SAC ¶ 13.) Defendant First
Premier is a South Dakota state-chartered
bank with main offices in Sioux Falls, South
Dakota. (Id. ¶ 14.)

The National Automated Clearing House
Association (“NACHA”), which is the
organization that provides governing rules
for the ACH Network, refers to ODFIs as
“the gatekeepers of the ACH Network.” (Id.
¶ 45.) The NACHA Operating Rules govern
ACH Network participants and provide a
legal framework for the ACH Network. (Id.
¶ 37.) They require ODFIs to perform due
diligence so as to ensure that entities, like
payday lenders, that seek to introduce a debit
into the ACH Network (known as
“Originators”) comply with federal and state
law. (Id. ¶¶ 39, 42-43.) In addition, the
NACHA Operating Rules require ODFIs to
enter into agreements with Originators, and
when an ODFI transmits a debit over the

2. Nature of the Action
This case arises out of online payday
loans, which are “short-term (typically a
matter of weeks) high fee, closed-end loan[s],
traditionally made to consumers to provide
funds in anticipation of an upcoming
paycheck.” (Id. ¶ 26.) They “feature
exorbitant
interest
rates
(sometimes
misleadingly referred to as ‘fees’) and require
‘balloon’ repayments shortly after the loan is
made.” (Id. ¶ 29.) Several states, including
New York, have banned payday loans. (Id.
¶¶ 2, 4, 32.) However, certain payday lenders
“make use of the Internet to circumvent these
2

In addition, plaintiff asserts that
defendant knew that it processed unlawful
ACH transactions on behalf of payday
lenders, including SFS. (Id. ¶¶ 78, 81, 8487.) Plaintiff contends that defendant did so
and ignored certain warning signs, such as
high return rates for those transactions, in
return for fees paid by the payday lenders,
and she claims that defendant was able to
charge the lenders higher fees than for other
ACH transactions because of the risks
inherent in online payday lending. (Id. ¶¶ 8182, 85-87, 89.)
Further, according to
plaintiff, 99% of financial institutions on the
ACH Network have never originated entries
at the request of unlicensed, online payday
lenders; in contrast, however, defendant was
purportedly one of the most active originators
of ACH WEB and ACH TEL entries on the
ACH Network. (Id. ¶¶ 80-81.)

ACH Network, it must warrant that the entry
has been properly authorized by the
Originator. (Id. ¶¶ 7, 49.)
Plaintiff also alleges that NACHA and
other financial regulatory bodies have
specifically warned ODFIs about the risk of
processing ACH transactions related to
payday loans. (See generally id. ¶¶ 57-77.)
In addition, NACHA has identified two
high-risk entry codes—ACH WEB and ACH
TEL—for entries into the ACH Network that
are often used by payday lenders. (Id. ¶ 57.)
When requesting a WEB entry, NACHA
requires that an ODFI certify that it has
implemented fraud detection systems,
verified the identity of the receiver, and
verified the routing number. (Id. ¶¶ 58-60.)
4. Plaintiff’s Payday Loans
Plaintiff applied for and received two
payday loans: one for $350 on June 17, 2010;
and one for $400 on October 15, 2010. (Id.
¶¶ 92-96.) SFS, Inc. (“SFS”), a Nebraskabased entity, was the lender for these
transactions. (Id. ¶¶ 16, 92-96.) Defendant
was the ODFI for the June 2010 loan. (Id.
¶ 94.)
Plaintiff asserts that defendant
received a benefit from processing this loan
in the form of an origination fee paid from
plaintiff’s account. (Id. ¶ 97.)

B. Procedural Background
Plaintiff commenced this action on
November 30, 2013 and filed an amended
complaint on January 3, 2014. (ECF Nos. 1,
38.) On June 9, 2014, the Court granted
defendant’s motion to compel arbitration and
stayed this action. See Moss v. BMO Harris
Bank, N.A., 24 F. Supp. 3d 281, 284
(E.D.N.Y. 2014). Thereafter, on July 16,
2015, the Court vacated its arbitration order
and lifted the stay after plaintiff informed the
Court that the designated forum had declined
to arbitrate the case. See Moss v. BMO
Harris Bank, N.A., 114 F. Supp. 3d 61, 63
(E.D.N.Y. 2015). Following an interlocutory
appeal, the Second Circuit affirmed that
decision. See Moss v. First Premier Bank,
835 F.3d 260 (2d Cir. 2016).

5. Defendant’s Business
Plaintiff alleges that defendant “was one
of only thirty ‘Direct Financial Institution
Members of NACHA’ [that] influences the
governance and direction of the ACH
Network and the NACHA Operating Rules
. . . .” (Id. ¶ 36.) As a result, defendant “is
eligible to serve on the NACHA Board of
Directors and further shape regulatory,
legislative, and ACH Network policies.”
(Id.)

Plaintiff then filed the SAC on October
4, 2016. (ECF No. 123.) Defendant moved
to dismiss on November 17, 2016 (ECF No.
125); plaintiff filed her opposition on January
4, 2017 (ECF No. 127); and defendant replied
on January 24, 2017 (ECF No. 130). The
3

plausibly give rise to an entitlement to relief.”
Id. A claim has “facial plausibility when the
plaintiff pleads factual content that allows the
court to draw the reasonable inference that
the defendant is liable for the misconduct
alleged. The plausibility standard is not akin
to a ‘probability requirement,’ but it asks for
more than a sheer possibility that a defendant
has acted unlawfully.” Id. at 678 (quoting
and citing Twombly, 550 U.S. at 556-57
(internal citation omitted)).

Court heard oral argument on February 13,
2017, and defendant subsequently filed
letters providing additional, unpublished
legal authority in support of its motion on
March 7, 2017 and June 7, 2017 (ECF Nos.
131, 134). The Court has fully considered the
parties’ submissions.
II. STANDARD OF REVIEW
In reviewing a motion to dismiss pursuant
to Federal Rule of Civil Procedure 12(b)(6),
the Court must accept the factual allegations
set forth in the complaint as true and draw all
reasonable inferences in favor of the plaintiff.
See Cleveland v. Caplaw Enters., 448 F.3d
518, 521 (2d Cir. 2006); Nechis v. Oxford
Health Plans, Inc., 421 F.3d 96, 100 (2d Cir.
2005). “In order to survive a motion to
dismiss under Rule 12(b)(6), a complaint
must allege a plausible set of facts sufficient
‘to raise a right to relief above the speculative
level.’” Operating Local 649 Annuity Trust
Fund v. Smith Barney Fund Mgmt. LLC, 595
F.3d 86, 91 (2d Cir. 2010) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555
(2007)). This standard does not require
“heightened fact pleading of specifics, but
only enough facts to state a claim to relief that
is plausible on its face.” Twombly, 550 U.S.
at 570.

The Court notes that in adjudicating a
Rule 12(b)(6) motion, it is entitled to
consider:
(1) facts alleged in the complaint and
documents attached to it or
incorporated in it by reference,
(2) documents ‘integral’ to the
complaint and relied upon in it, even
if not attached or incorporated by
reference,
(3)
documents
or
information contained in defendant’s
motion papers if plaintiff has
knowledge or possession of the
material and relied on it in framing
the complaint, (4) public disclosure
documents required by law to be, and
that have been, filed with the
Securities
and
Exchange
Commission, and (5) facts of which
judicial notice may properly be taken
under Rule 201 of the Federal Rules
of Evidence.

The Supreme Court clarified the
appropriate pleading standard in Ashcroft v.
Iqbal, setting forth a two-pronged approach
for courts deciding a motion to dismiss. 556
U.S. 662 (2009). The Supreme Court
instructed district courts to first “identify[]
pleadings that, because they are no more than
conclusions, are not entitled to the
assumption of truth.” Id. at 679 (explaining
that though “legal conclusions can provide
the framework of a complaint, they must be
supported by factual allegations”). Second,
if a complaint contains “well-pleaded factual
allegations, a court should assume their
veracity and then determine whether they

In re Merrill Lynch & Co., 273 F. Supp. 2d
351, 356-57 (S.D.N.Y. 2003) (internal
citations omitted), aff’d in part and reversed
in part on other grounds sub nom. Lentell v.
Merrill Lynch & Co., 396 F.3d 161 (2d Cir.
2005), cert. denied, 546 U.S. 935 (2005); see
also Cortec Indus., Inc. v. Sum Holding L.P.,
949 F.2d 42, 48 (2d Cir. 1991) (“[T]he
district court . . . could have viewed [the
documents] on the motion to dismiss because
there was undisputed notice to plaintiffs of
4

A. RICO

heir contents and they were integral to
plaintiffs’ claim.”).

1. Applicable Law
III. DISCUSSION
Under RICO, it is “unlawful for any
person employed by or associated with any
enterprise engaged in, or the activities of
which affect, interstate or foreign commerce,
to conduct or participate, directly or
indirectly, in the conduct of such enterprise’s
affairs through a pattern of racketeering
activity or collection of unlawful debt.” 18
U.S.C. § 1962(c). “When § 1962 is violated,
in addition to criminal penalties, the RICO
statutes also authorize civil lawsuits, which,
if successful, can entitle a plaintiff to treble
damages, costs, and attorney’s fees.” DLJ
Mortg. Capital, Inc. v. Kontogiannis, 726 F.
Supp. 2d 225, 236 (E.D.N.Y. 2010) (citing 18
U.S.C. § 1964(c)).
Specifically, RICO
provides a private cause of action for “[a]ny
person injured in his business or property by
reason of a violation of section 1962 of this
chapter.” 18 U.S.C. § 1964(c).

Defendant moves to dismiss plaintiff’s
substantive RICO claim for failure to state a
plausible cause of action because plaintiff has
not adequately pled (1) the existence of an
association-in-fact enterprise; and (2) that
defendant conduct or participated in the
affairs of a RICO enterprise. In addition,
defendant argues that the RICO conspiracy
claim must be dismissed because plaintiff has
not plausibly alleged an underlying
substantive violation. For the reasons set
forth below, the Court agrees with all of these
arguments and dismisses plaintiff’s RICO
claims. 3
In addition, the Court agrees with
defendant that plaintiff has not adequately
pled a cause of action under the GBL because
there are no allegations that defendant
engaged in consumer-oriented, misleading
conduct. However, the Court concludes that
plaintiff has sufficiently alleged her unjust
enrichment claim because the SAC states that
defendant received a benefit from plaintiff in
return for processing a payday loan.

To establish a civil RICO claim for
unlawful debt collection, a plaintiff must
allege, inter alia, (1) the existence of a RICO
enterprise; and (2) that the defendant
conducted the affairs of the enterprise,
Durante Bros. & Sons v. Flushing Nat. Bank,
755 F.2d 239, 248 (2d Cir. 1985), as well as
“injury to business or property as a result of
the RICO violation,” Lundy v. Catholic
Health Sys. of Long Island Inc., 711 F.3d 106,
119 (2d Cir. 2013). A RICO claim thus

Finally, in an abundance of caution, the
Court will permit plaintiff to file an amended
complaint to attempt to allege plausible
RICO and GBL claims.

3

Accordingly, the Court need not, and does not,
address defendant’s additional arguments that
dismissal is warranted because (1) plaintiff has not
sufficiently pled that defendant knew of the unlawful
debt collection; (2) plaintiff has not sufficiently pled
that defendant was in the business of making usurious
loans or collected an unlawful debt; and (3) even
assuming that plaintiff has pled a plausible RICO
claim, she has not alleged a cognizable injury. See,
e.g., First Capital Asset Mgmt., Inc. v. Satinwood, Inc.,
385 F.3d 159, 182 (2d Cir. 2004) (“Because we agree

with the District Court that [RICO] Counts Five and
Six were insufficiently pled, we need not—and do
not—reach the merits of the District Court’s decisions
regarding either ripeness, standing, or personal
jurisdiction.”); Boritzer v. Calloway, No. 10 CIV.
6264 JPO, 2013 WL 311013, at *13 (S.D.N.Y. Jan. 24,
2013) (“Here, as Plaintiffs have not adequately
pleaded a RICO violation, the first element is not met.
Accordingly, Plaintiffs lack standing due to their
failure to plead a RICO violation. The Court does not
reach the issues of injury or causation.”).

5

Tobacco Holdings, Inc., 268 F.3d 103, 139
n.6 (2d Cir. 2001) (citing Sedima, S.P.R.L. v.
Imrex Co., 473 U.S. 479 (1985)). In Sedima,
the Supreme Court rejected an interpretation
of civil RICO that would have confined its
application to “mobsters and organized
criminals.” 473 U.S. at 499. Instead, the
Court held: “The fact that RICO has been
applied in situations not expressly anticipated
by Congress does not demonstrate ambiguity.
It demonstrates breadth.”
Id. (internal
citation and quotation marks omitted); see
also Anza v. Ideal Steel Supply Corp., 547
U.S. 451, 479 (2006) (Breyer, J., concurring
in part and dissenting in part) (“RICO
essentially seeks to prevent organized
criminals from taking over or operating
legitimate businesses. Its language, however,
extends its scope well beyond those central
purposes.”). Thus, a court should not dismiss
a civil RICO claim if the complaint
adequately alleges all elements of such a
claim, even if the alleged conduct is not a
quintessential RICO activity.

contains three principal elements: “(1) a
violation of 18 U.S.C. § 1962; (2) injury to
plaintiff’s business or property; and
(3) causation of the injury by the violation.”
Sky Med. Supply Inc. v. SCS Support Claims
Servs., Inc., 17 F. Supp. 3d 207, 222
(E.D.N.Y. 2014).
Courts have described civil RICO as “‘an
unusually potent weapon—the litigation
equivalent of a thermonuclear device.’”
Katzman v. Victoria’s Secret Catalogue, 167
F.R.D. 649, 655 (S.D.N.Y. 1996) (quoting
Miranda v. Ponce Fed. Bank, 948 F.2d 41, 44
(1st Cir. 1991)), aff’d, 113 F.3d 1229 (2d Cir.
1997). “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.’”
Id. (quoting
Figueroa Ruiz v. Alegria, 896 F.2d 645, 650
(1st Cir. 1990)); see also DLJ Mortg. Capital,
726 F. Supp. 2d at 236. Indeed, although
civil RICO may be a “potent weapon,”
plaintiffs wielding RICO almost always miss
the mark. See Gross v. Waywell, 628 F.
Supp. 2d 475, 479-83 (S.D.N.Y. 2009)
(conducting survey of 145 civil RICO cases
filed in the Southern District of New York
from 2004 through 2007, and finding that all
thirty-six cases resolved on the merits
resulted in judgments against the plaintiffs,
mostly at the motion to dismiss stage).
Accordingly,
courts
have expressed
skepticism toward civil RICO claims. See,
e.g., DLJ Mortg. Capital, 726 F. Supp. 2d at
236 (“[P]laintiffs have often been
overzealous in pursuing RICO claims,
flooding federal courts by dressing up run-ofthe-mill fraud claims as RICO violations.”).

2. Analysis
Here, plaintiff has attempted to plead a
substantive RICO claim based on the
collection of unlawful debt. (See SAC
¶¶ 105-33.) However, the SAC fails to state
a plausible cause of action because it does not
adequately allege (1) the existence of a RICO
enterprise; and (2) that defendant conducted
or participated in an enterprise’s affairs. The
RICO conspiracy claim is, thus, also
deficient because the SAC does not plead an
underlying substantive violation of RICO.
a. Enterprise
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). Although RICO “does not

Although civil RICO presents many
hurdles for a plaintiff to overcome, the
Supreme Court has also “made clear that it
would not interpret civil RICO narrowly.”
Attorney Gen. of Canada v. R.J. Reynolds
6

as the “ACH Network Enterprise” and the
“Debt Collection Enterprise.” Count 1 of the
SAC posits that the ACH Network
constitutes an enterprise consisting of
(1) “Originators” that “initiate entries into the
ACH Network”; (2) “ODFIs” that include
“all financial institutions participating in the
ACH Network that originate ACH entries”;
(3) “RDFIs” that include “all depository
financial institutions participating in the
ACH Network that receive ACH transaction
instructions”; (4) “ACH Operators” that
include “two central clearing facilities, the
Federal Reserve Banks and Electronic
Payments Network”; and (5) “Third Party
Service Providers” that include other entities
that “perform any function on behalf of the
Originator, ODFI, or RDFI with respect to
the processing of ACH entries.” (SAC
¶ 107.)

specifically define the outer boundaries of the
‘enterprise’ concept,” Boyle v. United States,
556 U.S. 938, 944 (2009), it is clear that “any
legal entity may qualify as a RICO
enterprise,” First Capital Asset Mgmt., 385
F.3d at 173.
“[A]n association-in-fact enterprise is ‘a
group of persons associated together for a
common purpose of engaging in a course of
conduct.’” Boyle, 556 U.S. at 946 (quoting
United States v. Turkette, 452 U.S. 576, 583
(1981)). In Boyle, the Supreme Court held
that “an association-in-fact enterprise must
have at least three structural features: a
purpose,
relationships
among
those
associated with the enterprise, and longevity
sufficient to permit these associates to pursue
the enterprise's purpose.” Id. Where a
complaint alleges an association-in-fact
enterprise, courts in this Circuit look to the
“hierarchy, organization, and activities” of
the association to determine whether “its
members functioned as a unit.” First Capital
Asset Mgmt., 385 F.3d at 174 (internal
citations omitted).

Plaintiff alleges that the components of
the “ACH Network Enterprise share the
common lawful and legitimate purpose of
facilitating batch processing of electronic
payments (credit and debit transactions) for
and between participating depository
financial institutions.” (Id. ¶ 108.) In
addition, plaintiff contends that the ACH
Network Enterprise’s participants “preserve
close business relationships and maintain
established and defined roles within the
enterprise,” and that the enterprise “has been
in existence for many years, is still ongoing,
and has longevity sufficient to permit the
participants to achieve their common
purpose.” (Id.)

The Second Circuit has made clear that
“the person and the enterprise referred to
must be distinct,” and, therefore, “a corporate
entity may not be both the RICO person and
the RICO enterprise under section 1962(c).”
Riverwoods Chappaqua Corp. v. Marine
Midland Bank, N.A., 30 F.3d 339, 344 (2d
Cir. 1994). However, “[t]his does not
foreclose the possibility of a corporate entity
being held liable as a defendant under section
1962(c) where it associates with others to
form an enterprise that is sufficiently distinct
from itself.” Id. (emphasis added). Thus, “a
defendant may be a RICO person and one of
a number of members of the RICO
enterprise.” Id.

In Count 2 of the SAC, plaintiff asserts,
in the alternative, that First Premier and SFS
“associated together to use their respective
roles in the ACH Network for the common
purpose of profiting through the collection of
unlawful debt.” (Id. ¶ 122.) As with the
ACH Network Enterprise, plaintiff alleges
that the Debt Collection Enterprise exhibits a
mutual goal, a defined relationship between

Here, plaintiff propounds two alternative
theories as to the existence of an associationin-fact enterprise that the Court will refer to
7

collecting unlawful debt. Moreover, plaintiff
claims that NACHA represents more than
10,000 entities (SAC ¶ 80), and it is
implausible based upon the allegations that
each of those institutions possesses the
unlawful intent required to transform that
cooperative into an association-in-fact
enterprise for RICO purposes.

its members, and sufficient longevity. (Id.
¶ 128.)
i. ACH Network Enterprise
Defendant argues (and the Court agrees)
that plaintiff’s first theory is too amorphous
to meet the Boyle standard. In essence,
plaintiff seeks to implicate an entire
industry—from the Federal Reserve to local
banks that participate in the ACH Network—
in the efforts by SFS and other payday
lenders to collect unlawful debt.

Nevertheless, plaintiff argues that
when the alleged enterprise is a
“legitimate” one—like the ACH
Network Enterprise alleged here—it
makes little difference whether [the]
enterprise is expansive or whether
participants come and go. Instead,
the relevant inquiry is simply whether
the defendant used its role within the
enterprise to facilitate unlawful
activity. . . . Thus, as long as the
enterprise meets the “low threshold”
of Boyle, the Court need not concern
itself with whether every good actor
in the enterprise can be identified.

However, to satisfy the first prong of the
Boyle test, the participants in an associationin-fact enterprise “‘must share a common
purpose to engage in a particular fraudulent
course of conduct and work together to
achieve such purposes.’” New York v. United
Parcel Serv., Inc., No. 15-CV-1136 (KBF),
2016 WL 4203547, at *3 (S.D.N.Y. Aug. 9,
2016) (emphasis added) (quoting First
Capital Mgmt., 385 F.3d at 174).
Accordingly, failing to allege that members
of an association-in-fact enterprise shared a
wrongful intent to violate RICO is fatal to an
18 U.S.C. § 1962(c) claim. See Cruz v.
FXDirectDealer, LLC, 720 F.3d 115, 121 (2d
Cir. 2013) (affirming dismissal of
association-in-fact RICO claim where the
amended complaint admitted that certain
participants in purported enterprise were not
aware of deceptive practices at issue); First
Nationwide Bank v. Gelt Funding, Corp., 820
F. Supp. 89, 98 (S.D.N.Y. 1993), aff’d, 27
F.3d 763 (2d Cir. 1994).

(Pl.’s Opp’n Br., ECF No. 127, at 8.)
However, plaintiff’s effort to inject a
dichotomy into the case law by delineating
one pleading standard for “legitimate”
enterprises and another for “illegitimate”
enterprises has no legal support. In Anctil v.
Ally Fin., Inc., 998 F. Supp. 2d 127 (S.D.N.Y.
2014), aff’d in part, rev’d in part on other
grounds sub nom. Babb v. Capitalsource,
Inc., 588 F. App’x 66 (2d Cir. 2015), the
district court dismissed RICO claims alleging
that the defendants used the Mortgage
Electronic Registration System (“MERS”) to
conceal unlawful mortgage transfers. The
court found that the complaint “contain[ed]
insufficient factual allegations to plausibly
support the existence of a RICO associationin-fact enterprise among the Defendants
collectively” because, irrespective of their

In the SAC, plaintiff affirmatively states
that the myriad institutions that utilize the
ACH Network “share the common lawful
and legitimate purpose of facilitating batch
processing of electronic payments . . . .”
(SAC ¶ 108 (emphasis added).) Further,
there are no allegations that the Originators,
ODFIs, RDFIs, ACH Operators, and Third
Party Service Providers comprising the ACH
Network joined together with the goal of
8

MasterCard and lender is a RICO
enterprise”). As the Anctil court adroitly
observed, such a holding would extend RICO
liability to a vast marketplace based on one
bad actor’s mere association with the other
members of that collective.

membership in and use of MERS, there were
no allegations of
coordinated activity to jointly achieve
a common fraudulent purpose. The
allegation that each of the Defendants
uses the MERS system to further its
own business goals is insufficient to
plausibly support the existence of a
RICO enterprise; 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.

Further, in addition to alleging a common
fraudulent purpose, a plaintiff must “provide
[the Court] with . . . solid information
regarding the hierarchy, organization, and
activities of [an] alleged association-in-fact
enterprise.” First Capital Asset Mgmt., 385
F.3d at 174. The SAC fails on this account,
as well, because besides describing the roles
played by the various ACH Network
participants, plaintiff has not set forth any
allegations, outside of conclusory statements,
to support a plausible claim that those entities
formed an “‘ongoing organization, formal or
informal,’” or any allegations tending to
show that “‘the various associates [of the
alleged enterprise] function as a continuing
unit.’” Id. at 173 (quoting Turkette, 452 U.S.
at 583). Although a RICO enterprise need
not have a formal hierarchy, see Boyle, 556
U.S. at 948, plaintiff only alleges that
“participants in the ACH Network Enterprise
preserve close business relationships and
maintain established and defined roles within
the enterprise” (SAC ¶ 108). This allegation
is insufficient to state a RICO claim.

Id. at 141-42 (emphasis added).
Likewise, in the instant case, the SAC
states that “[w]hile First Premier shares in the
common purpose of the ACH Network and
uses the ACH Network to originate lawful
and legitimate transactions, First Premier
also uses its role within the ACH Network
Enterprise to conduct and participate in the
collection of unlawful debts . . . .” (Id. ¶ 113.)
This claim thus parallels the enterprise theory
that the court correctly found wanting in
Anctil because plaintiff asserts that defendant
used an otherwise legitimate network to
advance its own, illegitimate business
interests. However, defendant’s alleged
illicit ACH transactions do not render the
entire ACH Network a RICO enterprise
absent a common purpose among the other
network participants to violate RICO. See
Jubelirer v. MasterCard Int’l, Inc., 68 F.
Supp. 2d 1049, 1053 (W.D. Wis. 1999)
(dismissing RICO claim predicated on
alleged association between credit card
issuers and Internet casino because
“[a]ccepting plaintiff’s allegations as
sufficient to allege a RICO enterprise would
lead to the absurd conclusion that each of the
many million combinations of merchant,

In a recent decision, Judge Azrak
correctly dismissed a RICO complaint based
on an alleged association-in-fact enterprise of
hundreds of pharmacies, distributors,
importers, and online sellers because the
plaintiff’s “allegations fail[ed] to support an
inference that the defendants []—distributors
from dozens of states as well as overseas and
small, independent pharmacies similarly
widespread—had a relationship amounting to
a RICO enterprise.” Abbott Labs. v. Adelphia
Supply USA, No. 15-CV-5826 (CBA) (LB),
2017 WL 57802, at *4 (E.D.N.Y. Jan. 4,
2017). “Without factual allegations showing
9

spokes” enterprise structure that other courts
have consistently and correctly rejected. In
essence, plaintiff asserts that defendant
contracted with payday lenders to process
usurious loan transactions, and those
allegations are insufficient to support a
conclusion that the ACH Network entities
associated with one another for a common
purpose. See Cedar Swamp Holdings, Inc. v.
Zaman, 487 F. Supp. 2d 444, 449-50
(S.D.N.Y. 2007) (stating that a “‘hub-andspokes’ structure—that is, allegations that a
common defendant perpetrated various
independent frauds, each with the aid of a
different co-defendant—do not satisfy the
enterprise element of a RICO claim”); see
also, e.g., Abbott Labs., 2017 WL 57802, at
*5 (“The parallel conduct of a number of
‘spokes,’ even through a central ‘hub,’ is not
a RICO enterprise without more—that is,
without a ‘rim’ that connects the spokes.”);
N.Y. Automobile Insurance Plan v. All
Purpose Agency and Brokerage, Inc., No. 97
Civ. 3164 (KTD), 1998 WL 695869, at *6
(S.D.N.Y. Oct. 6, 1998) (denying plaintiff’s
motion for summary judgment and holding
that a series of discontinuous independent
frauds does not constitute an enterprise, but
rather a series of two-party conspiracies).

these 300 defendants had an interpersonal
relationship in which they worked together
for a common illicit interest, [the plaintiff’s]
pleadings constitute[d] nothing more than
the ‘conclusory naming of a string of
entities’ combined with legal conclusions.”
Id.
Similarly, here there are “no alleged facts
[that] support an inference that the [ACH
Network] entities were acting in any way but
in their own independent interests.” Id.
Plaintiff has not described with any
specificity the personal relationships among
the various Originators, ODFIs, RDFIs, ACH
Operators, and Third Party Service Providers
in the ACH Network, let alone how those
entities coordinate their activities so as to
advance a collective goal outside of their own
discrete pecuniary objectives. 4 “[W]ithout
factual allegations that [these entities]
cooperated to form a continuing unit working
toward a common purpose, their mere
independent, uncoordinated participation in
this market does not create a RICO
enterprise.” Id.; see also Cont’l Petroleum
Corp. v. Corp. Funding Partners, LLC, No.
11-CV-7801 (PAE), 2012 WL 1231775, at
*6 (S.D.N.Y. Apr. 12, 2012) (dismissing
RICO claim for failure to “make any concrete
factual assertions as to the mechanics of the
interactions among defendants, including
facts indicating that the disparate defendants
functioned as a unit, or supporting the
inference that defendants had a common
interest in the success of the so-called
enterprise”).

The Third Circuit rejected an associationin-fact enterprise similar to the ACH
Network in In re Insurance Brokerage
Antitrust Litigation, 618 F.3d 300 (3d Cir.
2010). There, the plaintiff alleged “massive
conspiracies throughout the insurance
industry” carried out by the defendant
insurers and insurance brokers through anticompetitive practices. Id. at 308. However,
the court held that, “[e]ven under the
relatively undemanding standard of Boyle,”

Moreover, plaintiff’s inclusion of nondefendants in the alleged ACH Network
Enterprise is emblematic of a “hub and
4

Insofar as the SAC alleges that the NYCHA
Operating Rules create cohesion within the ACH
Network sufficient to meet the Boyle standard,
“defendant’s membership in a trade association hardly
renders plausible the conclusion that entity and certain
other members are functioning as an ongoing,

organized, structured enterprise in conducting their
business.” Anctil, 998 F. Supp. 2d at 142 (citing
Purchase Real Estate Grp. v. Jones, No. 05-CV10859, 2010 WL 3377504, at *6 (S.D.N.Y. Aug. 24,
2010)).

10

found that the “mere size of the ACH
Network Enterprise alone may be insufficient
to preclude the existence of a RICO
enterprise, but its expansive size combined
with its amorphous and constantly changing
members along with the minimal connection
between the various merchants allegedly
involved in the enterprise” a RICO claim. 5
Id. at *23. Further, in Flagg v. First Premier
Bank, No. 1:15-CV-00324-MHC (N.D. Ga.
June 7, 2017) (unpublished decision), the
court held that the “the alleged ACH Network
enterprise [was] rendered equally defective
by its sheer scope and imprecision.” Slip op.
at 14.
Of the “nearly innumerable
participants in the ACH Network, who
together constitute much of the nation’s
banking industry, only [First Premier] [was]
accused of wrongdoing; in other words,
Plaintiff’s allegations, while creative,
essentially attempt[ed] to recast a contractual
relationship as a RICO enterprise.’” Id. at 1415. The Court agrees with both of these
decisions. 6

the “plaintiff had failed to plead facts
plausibly suggesting collaboration among the
insurers” and “therefore [could not] provide
a ‘rim’ enclosing the ‘spokes’ of the[] alleged
‘hub-and-spoke’ enterprises.” Id. at 374
(citing, inter alia, Elsevier Inc. v. W.H.P.R.,
Inc., 692 F. Supp. 2d 297, 307 (S.D.N.Y.
2010) (holding that a RICO claim pleading
“nothing more than parallel conduct by
separate actors” is insufficient: “there has to
be something that ties together the various
defendants allegedly comprising the
association in fact into a single entity that was
formed for the purpose of working
together—acting in concert—by means of”
racketeering acts)). Otherwise, “competitors
who independently engaged in similar types
of transactions with the same firm could be
considered associates in a common
enterprise. Such a result would contravene
Boyle’s definition of ‘enterprise.’” Id. at 375.
So, too, has plaintiff in the instant case pled a
“hub and spokes” enterprise without a
unifying rim because she alleges that
defendant separately agreed with payday
lenders like SFS to collect unlawful debt, but
does not explain how the other members of
the ACH Network collaborated with
defendant to advance that goal.

Finally, plaintiff’s efforts to distinguish
this case law are unavailing. As previously
noted, there is no legal support for her
argument that this Court should ignore In re
Insurance Brokerage Antitrust Litigation and
First Nationwide Bank because those cases
concerned
“illegitimate
enterprise[s],”
whereas “the ACH Network Enterprise is
pleaded as a ‘legitimate’ enterprise which
Defendant[] use[s] as a ‘vehicle through
which unlawful . . . activity is committed.’”
(Pl.’s Opp’n Br. at 9 (quoting Cedric Kushner
Promotions, Ltd. v. King, 533 U.S. 158, 164
(2001).)
Plaintiff has not provided any

The deficiencies discussed above led the
U.S. District Court for the Northern District
of Georgia to reject substantially similar
claims in two separate cases brought by
counsel for plaintiff in this action. In Parm
v. Nat’l Bank of California, N.A. (“Parm I”),
No. 4:14-CV-0320-HLM, 2015 WL
11605748 (N.D. Ga. May 20, 2015), aff’d,
835 F.3d 1331 (11th Cir. 2016), the court
5

As discussed infra, the Parm court granted the
plaintiff leave to submit an amended pleading that
included an enterprise theory identical to the Debt
Collection Enterprise at issue here, and it subsequently
dismissed that claim, as well.

2014), to be persuasive. In that action, which was also
brought by plaintiff’s counsel, the district court
summarily denied the defendants’ motions to dismiss
after reciting the elements necessary to state a RICO
claim and finding—without explanation or analysis—
that the plaintiff had “adequately alleged each of these
elements as to each defendant.” Id. at 618.

6

In contrast, the Court does not find Dillon v. BMO
Harris Bank, N.A., 16 F. Supp. 3d 605 (M.D.N.C.

11

distinctness between the ‘enterprise’ and
‘pattern of racketeering activity’ elements.”
(citing Turkette, 452 U.S. at 583)). Beyond
describing the roles defendant and SFS
played within the ACH Network, the SAC
“gives no basis for inferring that these two
[entities] in isolation formed ‘an ongoing
organization, formal or informal,’ let alone a
coherent ‘entity separate and apart’ from the
alleged fraudulent scheme.” D. Penguin
Bros. v. City Nat. Bank, 587 F. App’x 663,
668 (2d Cir. 2014) (quoting Turkette, 452
U.S. at 583). In D. Penguin Bros., the Second
Circuit, after finding that the plaintiff had
failed to allege a “plausible common
purpose” uniting a group of defendants,
rejected
the
plaintiffs’
alternative
association-in-fact theory premised on the
relationship between two of those
defendants. Id. The Court held that the
plaintiffs had “fail[ed] to provide a plausible
basis for inferring that [the two defendants]
acted ‘on behalf of the enterprise as opposed
to on behalf of [themselves] in their
individual capacities, to advance their
individual
self-interests.’” Id.
(third
alteration and emphasis in original) (quoting
United Food & Comm. Workers Unions &
Emp’rs Midwest Health Benefits Fund v.
Walgreen Co., 719 F.3d 849, 854 (7th Cir.
2013)). Although the plaintiffs may have
adequately pled the defendants had “worked
together in some respects to steal [the]
plaintiffs’ funds,” there were no plausible
allegations that “that they did so to advance
the [] agenda of their purported ‘enterprise’
or for any shared purpose. As the Seventh
Circuit has observed, ‘RICO is not violated
every time two or more individuals commit
one of the predicate crimes listed in the

authority that supports this disjunction, and
on the contrary, Anctil and Jublelirer
correctly make clear that the same pleading
standards apply irrespective of whether the
alleged association-in-fact is inherently
legitimate or illegitimate. 7
In sum, plaintiff’s ACH Network
Enterprise fails because she has not alleged
that the participants in that association shared
a common fraudulent purpose and has not
alleged that association functioned as a
continuing unit with a clear organizational
structure. At best, the SAC asserts a rimless
“hub and spokes” relationship between
defendant and payday lenders like SFS that
courts have consistently found insufficient to
state a RICO claim.
ii. Debt Collection Enterprise
As an alternative to her ACH Network
Enterprise theory, plaintiff alleges that
defendant and SFS together formed an
association-in-fact by virtue of their
relationship with each other and their
participation in the ACH Network as an
ODFI and an Originator, respectively. The
SAC states that “First Premier and SFS
associated together to use their respective
roles in the ACH Network for the common
purpose of profiting through the collection of
unlawful debt.” (SAC ¶ 122.) Further, “First
Premier charged SFS a fee for every ACH
debit entry First Premier originated on behalf
of SFS.” (Id. ¶ 125.)
This enterprise also fails to support a
plausible RICO claim. See Anctil, 998 F.
Supp. 2d at 142 n.11 (“To the extent some of
the RICO claims allege smaller associationsin-fact among certain Defendants and other
nonparty entities, those claims fail for lack of
7

In addition, plaintiff’s attempt to characterize Anctil
as a decision involving an “an illegitimate associationin-fact enterprise” (Pl.’s Opp’n Br. at 10) is at odds
with the facts of that case because there, as here, the

defendants used an otherwise lawful industry network
to further their own illicit ends. Anctil, 998 F. Supp.
2d at 142.

12

between defendant and SFS, and insofar as
plaintiff states that there was a contract
between the two entities for the purpose of
processing ACH Transactions (see SAC
¶¶ 112, 120), such an agreement does not
plead a RICO enterprise. See id. (holding
that a RICO “enterprise must be more than a
routine contractual combination for the
provision of financial services”) (quoting
Jubelirer, 68 F. Supp. 2d at 1053) (citing
Bonadio v. PHH Mortg. Corp., No. 12 CV
3421(VB), 2014 WL 522784, at *3
(S.D.N.Y. Jan. 31, 2014) (dismissing RICO
claim when plaintiff’s “only factual
allegations relating to the enterprise are that
its members had ongoing business
relationships”); Nordberg v. Trilegiant
Corp., 445 F. Supp. 2d 1082, 1092 (N.D. Cal.
2006) (rejecting a RICO enterprise based
upon “the existence of routine contractual
relationships”)); see also Chi v. MasterCard
Int’l, Inc., No. 1:14-CV-614 (TWT), 2014
WL 5019917, at *2 (N.D. Ga. Oct. 7, 2014)
(“Courts have specifically held that where
credit card companies are carrying out their
business of processing transactions, they are
not participating in a RICO enterprise.”).

statute.’” Id. (quoting Walgreen Co., 719
F.3d at 851).
Similarly, beyond asserting here that
defendant processed a single payday loan on
behalf of SFS (SAC ¶¶ 92-94); that defendant
received a fee for that service (id. ¶ 125); and
that defendant and SFS “share the common
unlawful purpose of using their respective
roles in the ACH Network to profit through
the collection of unlawful debt” and
“preserve a close business relationship and
maintain established and defined roles within
enterprise” (id. ¶ 128), there are no
allegations in the SAC that these entities
“acted on behalf of the enterprise as opposed
to on behalf of [themselves] in their
individual capacities,” or “any basis for
inferring that [they] in isolation formed an
ongoing organization, formal or informal, let
alone a coherent entity separate and apart
from the alleged fraudulent scheme.” 8 D.
Penguin Bros., 587 F. App’x at 668. At best,
plaintiff has alleged a single fraudulent
transaction carried out by defendant and SFS,
and the SAC thus “lacks well-pleaded factual
allegations that [they] worked together as
part of a cohesive criminal enterprise.” Singh
v. NYCTL 2009-A Trust, No. 14 CIV. 2558,
2016 WL 3962009, at *10 (S.D.N.Y. July 20,
2016), aff’d, --- F. App’x ---, No. 16-2814CV, 2017 WL 1087936 (2d Cir. Mar. 21,
2017).

For these reasons, the Parm and Flagg
courts also rejected the Debt Collection
Enterprise theory. In Parm v. Nat’l Bank of
California, N.A. (“Parm II”), No. 4:14-CV0320-HLM (N.D. Ga. Mar. 6, 2017)
(unpublished decision), the district court
dismissed an amended complaint filed by the
plaintiff that alleged a two-party associationin-fact enterprise comprising a payday lender
and an ODFI because those allegations
evinced, “at most, a routine contractual
combination to provide financial services.
That type of enterprise is not generally
sufficient to constitute a RICO enterprise

Moreover, beyond describing how ODFIs
process ACH transactions on behalf of
Originators like SFS, the SAC “fail[s] to
make any concrete factual assertions as to the
mechanics of the interactions among
defendants.” Id. (quoting Cont’l Petroleum
Corp., 2012 WL 1231775, at *6). There are
no allegations of any communications
8

Plaintiff’s argument that defendant misconstrues the
Second Circuit’s citation to Turkette in D. Penguin
Brothers because Turkette “requires only the presence
of the structural features necessary to form an
enterprise separate and distinct from just the ‘pattern

of racketeering activity’” (Pl.’s Opp’n Br. at 18
(quoting Turkette, 452 U.S. at 583)) is irrelevant. On
its own terms, D. Penguin Brothers holds that simply
alleging that two entities together violated RICO does
not, without more, plead a RICO enterprise.

13

and spokes” enterprise consisting of
defendant and payday lenders that lacks a rim
connecting defendant with the other ACH
Network participants. Second, the Debt
Collection Enterprise fails because the SAC
does not allege that defendant and SFS
formed an ongoing organization and pursued
goals on behalf of that integrated entity, as
opposed to their own business interests.
Thus, plaintiff’s substantive RICO claim
(Counts 1 and 2 of the SAC) must be
dismissed.

under § 1962(c).” Slip op. at 91. Likewise,
Flagg held that “while the Complaint
allege[d] that [First Premier] and [the payday
lender] ‘associated together,’ had a ‘close
business relationship,’ and that [First
Premier] played a ‘distinct role’ in the
‘operation, management, and control’ of their
shared enterprise, it [made] no specific
allegations concerning any association,
communication, or collaboration between the
two that would suggest they in fact had a
‘business relationship.’” Slip op. at 21. The
Court again agrees with both decisions.

b. Conduct

Finally, plaintiff’s reliance on Reyes v.
Zion First Nat. Bank, No. CIV.A. 10-345,
2012 WL 947139 (E.D. Pa. Mar. 21, 2012),
is misplaced. There, the district court found
that the plaintiff adequately pled a RICO
enterprise based on allegations that a bank
and a payment processor “each serve[d]
independent and crucial roles in conducting
an enterprise with the common purpose of
earning fees for facilitating fraudulent
telemarketing schemes.” Id. at *6. Crucially,
however, there were allegations in that case
that those entities “discussed the high return
rates” they received from processing illicit
transactions, and that one of the defendants
“communicated frequently with the allegedly
fraudulent telemarketers about their return
rates.” Id. There are no comparable
assertions here or anything indicating
coordination between defendant and SFS
beyond that of an ordinary business
relationship.

In addition, even assuming that plaintiff
had articulated a cognizable enterprise
theory, the SAC would still fail to state a
substantive RICO claim because she has not
adequately alleged that defendant conducted
or participated in the affairs of that enterprise.
“For RICO purposes, simply establishing
the presence of an enterprise is not enough.
Plaintiffs must also allege that the defendants
‘conducted or participated, directly or
indirectly, in the conduct of such enterprise’s
affairs through a pattern of racketeering
activity.’” First Capital Asset Mgmt., 385
F.3d at 175-76 (quoting 18 U.S.C. § 1962(c)).
The Supreme Court has interpreted this
statutory language to mean that the RICO
defendant must have participated “in the
operation or management of the enterprise.”
DeFalco v. Bernas, 244 F.3d 286, 309 (2d
Cir. 2001) (citing Reves v. Ernst & Young,
507 U.S. 170, 185 (1993)); see, e.g., First
Capital Asset Mgmt., 385 F.3d at 176
(holding that “‘one is liable under RICO only
if he participated in the operation or
management of the enterprise itself’”
(quoting Azrielli v. Cohen Law Offices, 21
F.3d 512, 521 (2d Cir. 1994))). Under this
standard, a person may not be held liable
merely for taking directions and performing
tasks that are “necessary and helpful to the
enterprise,” or for providing “goods and

***
For the reasons set forth above, the SAC
does not allege an association-in-fact
enterprise under either theory propounded by
plaintiff. First, there are no allegations that
the numerous and sundry members of the
ACH Network share a common fraudulent
purpose, and plaintiff has failed to allege that
the ACH Network exhibits unity and
cohesion. At best, plaintiff has pled a “hub
14

substantially similar assertions with respect
to the Debt Collection Enterprise and
specifically alleges that “[w]ithout First
Premier’s participation as an ODFI in the
ACH Network and agreement to originate the
debit entries initiated by SFS, SFS would be
unable to debit the bank accounts of its
borrowers in order to collect unlawful debts
on illegal payday loans.” (Id. ¶ 130.)

services that ultimately benefit the
enterprise.” U.S. Fire Ins. Co. v. United
Limousine Serv., Inc., 303 F. Supp. 2d 432,
451-52 (S.D.N.Y. 2004) (citations omitted).
Instead, “the RICO defendant must have
played ‘some part in directing [the
enterprise’s] affairs.’” First Capital Asset
Mgmt., 385 F.3d at 176 (quoting DeFalco,
244 F.3d at 310) (brackets in original). “In
this Circuit, the ‘operation or management’
test typically has proven to be a relatively low
hurdle for plaintiffs to clear, especially at the
pleading stage.” Id. (citations omitted); see,
e.g., AIU Ins. Co. v. Olmecs Med. Supply,
Inc., No. 04-CV-2934 (ERK), 2005 WL
3710370, at * 8 (E.D.N.Y. Feb. 22, 2005)
(“[W]here the role of the particular defendant
in the RICO enterprise is unclear, plaintiffs
may well be entitled to take discovery on this
question.”).

Defendant argues that, under either
theory, plaintiff has alleged nothing more
than that First Premier provided financial
services to the ACH Network and SFS in
furtherance of defendant’s own interests, and
that such allegations do not satisfy the
“conduct” element of a RICO claim. In
response, plaintiff contends that the SAC
alleges that (1) defendant “conduct[s] and
participate[s] in the affairs of the ACH
Network Enterprise by using [its]
‘gatekeeper’ function as [an] ODFI[] to
determine which merchants are permitted to
originate credit and debit entries on the ACH
Network”; and (2) defendant “played an
essential role in furthering [the Debt
Collection Enterprise] by entering into an
agreement with SFS to debit illegal loan
debits and then actually initiating the debits.”
(Pl.’s Opp’n Br. at 13, 19.)

Here, Count 1 of the SAC alleges that
First Premier, as an ODFI, plays a
distinct role in the operation,
management, and control of the ACH
Network Enterprise. Under the
NACHA Operating Rules, First
Premier serves the critical function of
“gatekeeper of the ACH Network”
and is responsible for all entries
originated through First Premier,
whether initiated by an Originator, or
by a Third Party Service Provider
acting on the Originator’s behalf.
First Premier has decision-making
authority within the ACH Network
Enterprise
regarding
which
Originators to accept or reject into the
ACH Network.

The Court agrees with defendant. Even
construing the SAC in a light most favorable
to plaintiff, its allegations establish that
defendant “merely provide[d] professional
services” to both the ACH Network and SFS
by (1) originating ACH transactions into the
Network; and (2) entering into an agreement
with SFS to facilitate ACH transactions. Sky
Med., 17 F. Supp. 3d at 224. In contrast,
there are no allegations that defendant had
any role in devising payday loans or
determining which individuals to debit, or
that defendant “had any control” over the
ACH Network entities or SFS; instead, the
SAC states that defendant engaged in “arms
length commercial transaction[s]” with those

(SAC ¶ 110.) In addition, plaintiff claims
that defendant “plays a distinct role in the
operation, management, and control of the
ACH Network Enterprise by participating in
the NACHA rule making process . . . .” (Id.
¶ 111.) Count 2 of the SAC contains
15

Corp., No. 93-CV-9032 (LLS), 1994 WL
286162, at *3 (S.D.N.Y. June 27, 1994)
(dismissing RICO claim against bank and
individual officers on basis that providing
“banking services—even with knowledge of
the fraud—is not enough to state a claim
under § 1962(c)”).

parties. Berry v. Deutsche Bank Trust Co.
Americas, No. 07CIV.7634 (WHP), 2008
WL 4694968, at *6 (S.D.N.Y. Oct. 21, 2008),
aff’d, 378 F. App’x 110 (2d Cir. 2010).
Courts have routinely and correctly held
that such a relationship does not qualify as
“conducting or participating” in the affairs of
a RICO enterprise, even when the defendant
is aware of the enterprise’s unlawful activity.
See Azrielli, 21 F.3d at 521-22 (2d Cir. 1994)
(holding that provision of legal services
related to fraudulent real estate transaction
was not management of RICO enterprise);
Abbott Labs., 2017 WL 57802, at *7 (“Even
assuming the truth of [the plaintiff’s]
conclusory allegations that the pharmacies
and defendants ‘have a long-standing
relationship,’ no factual allegations suggest
that that relationship was other than an arm’slength business relationship between a buyer
and a seller. Courts reject such RICO
allegations, in which the conduct alleged was
taken only for the defendants’ benefit, not a
separate enterprise’s.”); Berry, 2008 WL
4694968, at *6 (“Lending money to an
enterprise does not establish a role in
‘directing the enterprise’s affairs.’”), aff’d,
378 F. App’x 110; Rosner v. Bank of China,
528 F. Supp. 2d 419, 431 (S.D.N.Y. 2007)
(“Rosner’s sole allegation is that BoC
provided banking services that aided in the
perpetration of the fraudulent scheme.
Regardless of how indispensable or essential
such services may have been, rendering a
professional service by itself does not qualify
as participation in a RICO enterprise.”);
Hayden v. Paul, Weiss, Rifkind, Wharton &
Garrison, 955 F. Supp. 248, 254 (S.D.N.Y.
1997) (“[I]t is well established that the
provision of professional services by
outsiders, such as accountants, to a
racketeering enterprise, is insufficient to
satisfy the participation requirement of
RICO, since participation requires some part
in directing the affairs of the enterprise
itself.”); Indus. Bank of Latvia v. Baltic Fin.

As the Third Circuit observed in a RICO
case concerning real estate financing,
to hold that merely because a lender
requires security and approval of
aspects of construction, [that] the
lender thereby takes ‘control’ of the
project . . . would wreak havoc on the
lending industry, for any lender who
reasonably wished to protect itself
would be forced to run the risk of
being sued for the unknown
fraudulent acts of its borrowers.
Dongelewicz v. PNC Bank Nat’l Ass’n., 104
F. App’x 811, 817 (3d Cir. 2004). Plaintiff’s
theory of RICO liability would similarly
embroil any bank or credit card company that
processed
an
unlawful,
debt-related
transaction. Defendant’s role as an ODFI
may have been essential in enabling the
payday loan at issue by allowing SFS to
access the ACH Network, but the important
role it played does not, without more,
constitute “conduct” within the meaning of
RICO. See, e.g., Flexborrow LLC v. TD Auto
Fin. LLC, --- F. Supp. 3d ---, No. 16-CV6359 (JFB) (ARL), 2017 WL 2609605, at *6
(E.D.N.Y. June 16, 2017); Rosner, 528 F.
Supp. 2d at 431; Indus. Bank of Latvia, 1994
WL 286162, at *3.
With respect to Count 1 of the SAC,
plaintiff attempts to distinguish this body of
precedent by arguing that defendant had
“decision-making functions” within the ACH
Network Enterprise and, thus, was a
controlling member of that collective, as
opposed to an outside service provider.
However, that conclusory argument is belied
16

two that would suggest they in fact had a
‘business relationship.’”)

by the sheer scope of the ACH Network, as
discussed above.
Notwithstanding that
defendant had a role in drafting the NACHA
Operating Rules, plaintiff does not claim that
defendant oversaw or controlled the conduct
of the 10,000 institutions that are members of
that association. Further, although NACHA
characterizes ODFIs as the “gatekeepers” of
the ACH Network, simply providing access
to that payment system by originating a
transaction does not evince control by
defendant of the functions performed by the
other independent entities—such as the ACH
Operators and RDFIs—who also participate
in that system. See Chi, 2014 WL 5019917,
at *2 (“Simply providing financial services or
processing credit card transactions is not
enough to establish ‘operation or
management’ of an enterprise.”); Super
Vision Int’l, Inc. v. Mega Int’l Commercial
Bank Co., 534 F. Supp. 2d 1326, 1338 (S.D.
Fla. 2008) (“[B]ankers do not become
racketeers by acting like bankers.”).

In sum, because plaintiffs have asserted
that defendant only originated transactions
into the ACH Network at the behest of SFS,
there are no allegations in the complaint that
defendant played “some part in directing
[the] affairs” of either the ACH Network or
SFS. First Capital Asset Mgmt., 385 F.3d at
176. Accordingly, plaintiff’s substantive
RICO claim fails for this independent reason.
c. Conspiracy
In the absence of any viable underlying
18 U.S.C. § 1962(c) claim, plaintiff’s RICO
conspiracy claims (Counts 3 and 4 of the
SAC) pursuant to 18 U.S.C. § 1962(d) must
also fail. See First Capital Asset Mgmt., 385
F.3d at 182 (“[B]ecause Plaintiffs did not
adequately allege a substantive violation of
RICO . . . the District Court properly
dismissed Count Six, which alleged a RICO
conspiracy in violation of 18 U.S.C. §
1962(d).”); Abbott Labs., 2017 WL 57802, at
*9 (dismissing RICO conspiracy claim
“because its underlying RICO claims [were]
deficient”).
Accordingly, the Court
dismisses those causes of action.

As for the Debt Collection Enterprise,
both Parm II and Flagg found that similar
complaints failed to allege control, and the
Court agrees with their well-reasoned
conclusions. See Parm II, slip op. at 103-04
(“Here,
Plaintiff’s
non-conclusory
allegations simply indicate that Defendant
transmitted debits originated at the request of
the payday lenders to the ACH Network.
Those allegations are not sufficient to show
that Defendant engaged in the operation or
management of the RICO enterprise.”);
Flagg, slip op. at 21 (“But while the
Complaint alleges that [First Premier] and
[the payday lender] ‘associated together,’ had
a ‘close business relationship,’ and that
Defendant played a ‘distinct role’ in the
‘operation, management, and control’ of their
shared enterprise, it makes no specific
allegations concerning any association,
communication, or collaboration between the

B. GBL Claim
Plaintiff also asserts a New York State
law claim under Section 349 of the GBL
(Count 11 of the SAC), which prohibits
“[d]eceptive acts or practices in the conduct
of any business, trade or commerce or in the
furnishing of any service.” N.Y. Gen. Bus.
Law § 349(a); accord Securitron Magnalock
Corp. v. Schnabolk, 65 F.3d 256, 264 (2d Cir.
1995). “A plaintiff under section 349 must
prove three elements: first, that the
challenged act or practice was consumeroriented; second, that it was misleading in a
material way; and third, that the plaintiff
suffered injury as a result of the deceptive
act.” Stutman v. Chem. Bank, 95 N.Y.2d 24,
17

29, (2000). Under this provision, “the
gravamen of the complaint must be consumer
injury or harm to the public interest,” and, as
such, “[t]he critical question . . . is whether
the matter affects the public interest in New
York, not whether the suit is brought by a
consumer or a competitor.” Securitron
Magnalock, 65 F.3d at 264 (citation omitted).
“Based on this standard, courts have found
sufficient allegations of injury to the public
interest where plaintiffs plead repeated acts
of deception directed at a broad group of
individuals.” New York v. Feldman, 210 F.
Supp. 2d 294, 301 (S.D.N.Y. 2002)
(collecting cases); see also Jones v. Bank of
Am. Nat. Ass’n, 97 A.D.3d 639, 640 (N.Y. 2d
Dep’t 2012) (“Under General Business Law
§ 349 (h), a prima facie case requires a
showing that the defendant engaged in a
consumer-oriented act or practice that was
‘deceptive or misleading in a material way
and that [the] plaintiff has been injured by
reason thereof.’” (quoting Goshen v. Mutual
Life Ins. Co. of N.Y., 98 N.Y.2d 314, 324
(2002)).

Nevertheless, plaintiff argues that “the
mere fact that Defendant[] debited Plaintiff’s
account as if the payday loan[] [was a]
legitimate, enforceable transaction[] and not
in violation of New York law, was deceptive
conduct directed at consumers like Plaintiff.”
(Pl.’s Opp’n Br. at 31.) However, the New
York Court of Appeals rejected a similar
argument in Schlessinger v. Valspar Corp.,
21 N.Y.3d 166 (2013), where it rebuffed the
plaintiff’s contention that inserting an
unlawful provision into a contract violated
Section 349 of the GBL because the
defendant “impliedly represented that this
provision was valid and thereby engaged in a
deceptive act or practice.” Id. at 172. The
Court held that it “cannot fairly be
understood to mean that everyone who acts
unlawfully, and does not admit the
transgression, is being ‘deceptive’” within
the meaning of the GBL. Id. Likewise,
although debiting plaintiff’s account may
imply that the transaction at issue was legal,
it does not constitute “deceptive” conduct
under the GBL.

Here, there are no allegations that
defendant engaged in any “deceptive or
misleading practices,” whether directed at the
public generally or plaintiff specifically.
Indeed, the SAC does not assert any contact
between defendant or plaintiff whatsoever,
nor are there any assertions that “defendant[]
maintained a website, circulated marketing
materials, or made other efforts to make
misrepresentations to the public generally, or
even to a broad group of people.” Marini v.
Adamo, 812 F. Supp. 2d 243, 272 (E.D.N.Y.
2011) (granting summary judgment to
defendants on GBL claim).
In short,
plaintiff’s GBL claim does not state a cause
of action because she does not allege an
“actual misrepresentation or omission to a
consumer” by defendant.
Goshen, 98
N.Y.2d at 325.

Further, as defendant notes, the SAC does
not actually allege that First Premier debited
plaintiff’s account; on the contrary, it states
that plaintiff’s own bank withdrew the funds
for the payday loan in response to an ACH
instruction sent by defendant on behalf of
SFS.
(SAC ¶¶ 26-27, 40, 92-96.)
Accordingly, plaintiff mistakenly relies on
this Court’s decision in Kapsis v. Am. Home
Mortg. Servicing Inc., 923 F. Supp. 2d 430
(E.D.N.Y. 2013), because there, the Court
found that the plaintiff had “alleged that [the
defendant] engaged in deceptive practices
directed not just at him, but also at a large
class of similarly situated debtors” based on
assertions that the defendant, inter alia,
“fail[ed]
to
timely
respond
to
communications sent by debtors, issu[ed]
false or misleading monthly statements and
escrow projection statements, and refus[ed]
to provide detailed accountings to debtors for
18

The SAC alleges that defendant (1) “used
[its] roles as [an] ODFI[] to originate debit
entries on the ACH Network initiated by”
payday lenders like SFS; (2) “charged and
retained a transaction fee for each debit entry
it originated on the ACH Network initiated
by” the payday lenders; (3) “received and
retained wrongful benefits from Plaintiff . . .
in the form of such transaction fees”; and
(4) was unjustly enriched as a result of this
conduct. (SAC ¶¶ 184-87.) Defendant
argues that plaintiff’s claims fails because
(1) “there are no allegations regarding any
relationship between her and either
Defendant, much less a relationship that
could have caused reliance or inducement by
Moss”; and (2) “nowhere does Moss allege
that she (as opposed to someone else)
conferred a benefit upon either Defendant.”
(Def.’s Mot. Br., ECF No. 126, at 30-31.)

sums allegedly owed.” Id. at 450. In
contrast, the SAC does not allege any direct
contact between defendant and plaintiff or
the general public.
Thus, for these reasons, plaintiff has not
stated a claim under Section 349 of the GBL
because the SAC does not assert that
defendant engaged in conduct that was
consumer-oriented
and
misleading.
Accordingly, the Court dismisses that cause
of action.
C. Unjust Enrichment Claim
Finally, Count 9 of the SAC asserts a
cause of action for unjust enrichment. “To
prevail on a claim for unjust enrichment in
New York, a plaintiff must establish:
‘(1) defendant was enriched; (2) the
enrichment was at plaintiff’s expense; and
(3) the circumstances were such that equity
and good conscience require defendant[ ] to
make restitution.’” Hughes v. Ester C Co.,
930 F. Supp. 2d 439, 471 (E.D.N.Y. 2013)
(quoting Intellectual Capital Partner v.
Institutional Credit Partners LLC, No. 08
Civ 10580(DC), 2009 WL 1974392, at *8
(S.D.N.Y. July 8, 2009)). “Under New York
law, unjust enrichment does not require a
direct relationship between the parties.” Id.
(citing In re Canon Cameras Litig., No. 05
Civ. 7233(JSR), 2006 WL 1751245, at *2
(S.D.N.Y. June 23, 2006); Cox v. Microsoft
Corp., 8 A.D.3d 39, 40-41 (N.Y. 1st Dep’t
2004) (finding plaintiffs’ allegations that
defendant's deceptive practices “caused them
to pay artificially inflated prices for its
products [sufficient for purposes of] stat[ing]
a cause of action for unjust enrichment”)).

The SAC clearly rebuts defendant’s
second contention because it states that
defendant “derived a benefit through the
receipt of fees for [its] origination of debit
entries on the ACH Network initiated by SFS
. . . and withdrawn from Plaintiff Moss’s
account.” (SAC ¶ 97 (emphasis added).)
Accordingly, defendant’s reliance on M+J
Savitt, Inc. v. Savitt, No. 08 CIV. 8535
(DLC), 2009 WL 691278 (S.D.N.Y. Mar. 17,
2009), is misplaced because, in that case, the
court found that the unjust enrichment claim
failed because the plaintiff did not allege that
the defendant received any benefit from the
loans at issue. Id. at *10. Here, plaintiff
asserts that the transaction fee First Premier
received for processing her payday loan was
paid from her own funds. 9

9

Further, even assuming that the SAC asserted that
SFS paid defendant the transaction fee from the money
it received from plaintiff (as opposed to defendant
receiving the fee directly from plaintiff’s bank
account), such an allegation would not necessarily be
fatal to plaintiff’s unjust enrichment claim. See, e.g.,

Cox, 8 A.D.3d at 40-41; Bildstein v. MasterCard
International, Inc., 03-CV-9826I (WHP), 2005 WL
1324972, *5 (S.D.N.Y. 2005) (credit card user stated
unjust enrichment claim against MasterCard, despite
receiving card through an issuing bank).

19

Accordingly, defendant’s motion to
dismiss is denied with respect to plaintiff’s
unjust enrichment claim.

Further, as plaintiff notes—and as this
Court has previously observed—New York
law does not require “some of type of direct
dealing or actual, substantive relationship
with a defendant.”
Waldman v. New
Chapter, Inc., 714 F. Supp. 2d 398, 403
(E.D.N.Y. 2010). Instead, the New York
Court of Appeals has said that “the plaintiff's
relationship with a defendant [must] not be
‘too attenuated’” to support an unjust
enrichment claim. Id. (quoting Sperry v.
Crompton Corp., 8 N.Y.3d 204, 215-16
(2007)). Although defendant is correct that
the Court of Appeals has also affirmed
dismissal of unjust enrichment claims in
cases where the pleadings “failed to indicate
a relationship between the parties that could
have caused reliance or inducement,”
Georgia Malone & Co. v. Rieder, 19 N.Y.3d
511, 517 (2012) (quoting Mandarin Trading
Ltd. v. Wildenstein, 16 N.Y.3d 173, 182
(2011)), this Court cannot, at this juncture,
conclude that plaintiff’s payday loan
“transaction [is not] one of equitable injustice
requiring a remedy to balance a wrong,”
Mandarin Trading, 16 N.Y.3d at 183.
Construing the SAC and drawing all
inferences therein in plaintiff’s favor,
plaintiff has asserted that defendant profited
at the expense of funds withdrawn from her
own bank account. Notwithstanding the
absence of any allegations of direct contact
between plaintiff and defendant, or that
plaintiff knew of defendant’s role in
processing her payday loan, such an assertion
states a plausible claim for unjust enrichment
under New York law. See In re DDAVP
Indirect Purchaser Antitrust Litig., 903 F.
Supp. 2d 198, 234 (S.D.N.Y. 2012) (denying
motion to dismiss unjust enrichment claim
because “despite not having direct dealings
(contractual or otherwise) with Defendants,
Plaintiffs plausibly conferred some benefit on
Defendants, albeit indirectly”).

D. Leave to Amend
Plaintiff has requested leave to amend her
pleading in the event that the Court dismisses
any of her claims. (Pls.’ Opp’n Br. at 34.)
Federal Rule of Civil Procedure 15(a)
provides that a party shall be given leave to
amend “when justice so requires.” Fed. R.
Civ. P. 15(a). “Leave to amend should be
freely granted, but the district court has the
discretion to deny leave if there is a good
reason for it, such as futility, bad faith, undue
delay, or undue prejudice to the opposing
party.” Jin v. Metro. Life Ins. Co., 310 F.3d
84, 101 (2d Cir. 2002); see Local 802, Assoc.
Musicians of Greater N.Y. v. Parker
Meridien Hotel, 145 F.3d 85, 89 (2d Cir.
1998) (finding that leave to amend may be
denied based upon the “futility of
amendment”). As to futility, “leave to amend
will be denied as futile only if the proposed
new claim cannot withstand a 12(b)(6)
motion to dismiss for failure to state a claim,
i.e., if it appears beyond doubt that the
plaintiff can plead no set of facts that would
entitle him to relief.” Milanese v. RustOleum Corp., 244 F.3d 104, 110 (2d Cir.
2001) (citing Ricciuti v. N.Y.C. Transit Auth.,
941 F.2d 119, 123 (2d Cir. 1991)).
It is unclear to the Court that plaintiff can
remedy the pleading deficiencies discussed
above regarding her RICO and GBL claims.
In particular, plaintiff appears unable to
allege a cognizable RICO enterprise or that
defendant made any misrepresentations to
plaintiff or the general public. However, in
an abundance of caution, the Court exercises
its discretion to grant plaintiff leave to amend
her complaint one further time.

20

IV. CONCLUSION
For the foregoing reasons, the Court
grants in part and denies in part defendant’s
motion to dismiss. Plaintiff’s RICO New
York GBL claims are dismissed for failure to
state a cause of action, and the motion is
denied with respect to the unjust enrichment
claim. Any amended complaint must be filed
within thirty (30) days of this Memorandum
and Order.
SO ORDERED.
______________________
JOSEPH F. BIANCO
United States District Judge
Dated:

July 7, 2017
Central Islip, NY

***
Plaintiff is represented by Darren T. Kaplan
of Darren Kaplan Law Firm, P.C.,
1359
Broadway,
Suite
2001,
New York, New York 10018; Jeffrey Ostrow
of Kopelowitz Ostrow P.A., 200 SW 1st
Avenue, Fort Lauderdale, Florida 33301;
Hassan Zavareei and Jeffrey D. Kaliel of
Tycko & Zavareei LLP, 2000 L Street NW,
Suite 808, Washington, DC 20036; and John
A. Moore, Norman Siegel, and Stephen N.
Six of Stueve Siegel Hanson LLP, 460
Nichols Road, Suite 200, Kansas City,
Missouri 64112.
Defendant is represented by Barry Werbin of
Herrick, Feinstein LLP, 2 Park Avenue, New
York, New York 10016; and John C. Elkman,
Bryan Freeman, and James P. McCarthy of
Lindquist & Vennum, 4200 Ids Center, 80
South 8th Street, Minneapolis, Minnesota
55402.

21