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Grice v. VIM Holdings Group, LLC

United States District Court, D. Massachusetts

December 8, 2017

SHEENA GRICE, Plaintiff,
v.
VIM HOLDINGS GROUP, LLC, MICHAEL D'AMBROSE, HIRSCH MOHINDRA, B FINANCIAL, LLC, JOHN BARTLETT, U SOLUTIONS GROUP, LLC, THERESA D'AMBROSE, GLOBAL SERVICE GROUP, LLC, RUTH POUTANEN, KRW ATTORNEYS & ASSOCIATES, LLC, and GEORGE WAHBEH, Defendants.

          MEMORANDUM OF DECISION

          WILLIAM G. YOUNG, DISTRICT JUDGE

         I. INTRODUCTION

         The plaintiff, Sheena Grice (“Grice”), filed this action against the defendants VIM Holdings Group, LLC (“VIM”), its manager Michael D'Ambrose and its member Hirsch Mohindra (“Mohindra”), B Financial, LLC (“B Financial”) and its manager John Bartlett (“Bartlett”), U Solutions Group, LLC (“U Solutions”), its organizer Theresa D'Ambrose and its owner Michael D'Ambrose, Global Service Group, LLC (“Global”) and its manager Ruth Poutanen (“Poutanen”), and KRW Attorneys & Associates, LLC (“KRW”)[1] and its member attorney George Wahbeh (“Wahbeh”), asserting violations of the Massachusetts Small Loan Laws (“MSLL”), Massachusetts General Laws chapter 140, sections 96-113 (Count I)(against VIM Holdings, LLC and B Financial, LLC), the Massachusetts Debt Collection Practices Act (“MDCPA”), Massachusetts General Laws chapter 93, section 24 (Count II), the Federal Debt Collection Practices Act (“FDCPA”), 15 U.S.C. sections 1692, et seq. (Count III)(against VIM Holdings Group, B Financial, U Solutions Group, Global Service Group. KRW, and Wahbeh), asserting fraud (Count IV), civil conspiracy to commit fraud (Count V), and violations of the Consumer Protection Act (“CPA”), Massachusetts General Laws chapter 93A, section two (Count VI). The defendants[2] filed a joint motion to dismiss all counts for lack of personal jurisdiction and moved to compel Grice to submit her claims to the forum selection clause.

         A. Procedural History

         On or about April 21, 2017, Grice filed this suit against the defendants in the Massachusetts Superior Court sitting in the and for the County of Suffolk. Notice Removal, ECF No. 1. On May 22, 2017, the defendants removed the suit to the United States District Court for the District of Massachusetts on diversity grounds. Id. Grice's complaint contains six claims: (1) a MSLL claim against VIM and B Financial, id. at ¶¶, 56-72, (2) a MDCPA claim against all defendants, id. at ¶¶ 73-86, (3) a FDCPA claim against VIM, B Financial, U Solutions, Global, KRW and Wahbeh, id. at ¶¶ 87-110, (4) a claim for fraud against all defendants, id. at ¶¶ 111-17, (5) a claim for civil conspiracy to commit fraud against all defendants, id. at ¶¶ 118-23, and (6) a CPA claim, id. at ¶¶ 124-30.

         On October 10, 2017, the Defendants moved to dismiss all counts for lack of jurisdiction, Joint Mot. Dismiss Lack of Jurisdiction (“Defs.' Joint Mot. Lack of Jurisdiction”), ECF No. 51; Joint Mem. Supp. Joint Mot. Dismiss Lack of Jurisdiction (“Defs.' Joint Mem. Lack of Jurisdiction”), ECF No. 52, and moved to dismiss all counts for failure to state a claim or, in the alternative, to transfer venue. Joint Mot. Dismiss Failure to State a Claim, ECF No. 49; Joint Mem. Supp. Joint Mot. Dismiss Failure to State a Claim (“Defs.' Joint Mem. Failure to State a Claim”), ECF No. 50. On October 20, 2017, Grice filed her opposition to the defendants' joint motions to dismiss. Pl.'s Opp'n Joint Mot. Dismiss Lack of Jurisdiction (“Pl.'s Mem. Opp'n Lack of Jurisdiction”), ECF No. 56; Pl.'s Opp'n Joint Mot. Dismiss Failure to State a Claim (“Pl.'s Mem. Opp'n Failure to State a Claim”), ECF No. 55. The parties appeared before the Court for oral argument on November 9, 2017, Electronic Notice, ECF No. 57.

         B. Factual Allegations

         Grice is a single parent and resides in Roslindale, MA. Compl. ¶ 4. She earns less than $15.00 an hour -- her only source of income to support herself and her minor child. Id. at ¶ 49. VIM is a Delaware limited liability company with a principal place of business in Addison, Illinois. Id. at ¶ 5. It operates several payday loan websites, including www.guaranteedcashnow.net (“Website”). Id. Michael D'Ambrose resides in Chicago, Illinois and is the registered principal of VIM. Id. at ¶ 6. Mohindra also resides in Illinois and is a managing member of VIM. Id. at ¶ 7. B Financial is a Delaware limited liability company with a principal place of business in Bloomingdale, Illinois. Id. at ¶ 8. It is a payday lender affiliated with VIM. Id. Bartlett is the registered principal and managing member of B Financial. Id. at ¶ 9. Through the Website, VIM and B Financial conduct business together as Guaranteed Cash Now, a payday lender offering small loans to low income consumers with poor credit at high rates. Id. at ¶¶ 29-30.

         U Solutions is a Wyoming limited liability company with principal places of business in Addison, Illinois and Wood Dale, Illinois. Id. at ¶ 10. U Solutions handles the debt collection for payday loans issued through the Website. Id. Theresa D'Ambrose, who resides in Chicago, Illinois, is the registered principal and organizer of U Solutions and is also the wife of Michael D'Ambrose. Id. Global is a Delaware limited liability company with a principal place of business in Chicago, Illinois. Id. at ¶ 12. It was registered with the Secretary of the Commonwealth of Massachusetts as a foreign limited liability company doing business as a “collection company” in Massachusetts.[3] Pl.'s Mem. Opp'n Lack of Jurisdiction at 10. Global handles the Automatic Clearing House (“ACH”) transactions on behalf of VIM and B Financial for loans issued through the Website. Compl. ¶ 12. Poutanen, who resides in Wausau, Wisconsin, is the managing member of Global and is also the mother of Theresa D'Ambrose. Id. at ¶ 13. In addition, the telephone number of Global is registered to Nascent Holdings, LLC, which is owned by Michael D'Ambrose. Id. at ¶¶ 26-27.

         KRW is an Illinois law firm located in Chicago, Illinois, and is the corporate counsel for Guaranteed Cash Now. Id. at ¶ 14. Wahbeh, who resides in Morton Grove, Illinois, is an attorney licensed to practice in Illinois and is one of the three members of KRW. Id. at ¶ 15.

         On July 14, 2015, Grice applied for and received a $200 loan (“Loan”) through the Website using her Massachusetts address. Id. at ¶¶ 31, 65. Grice was directed to the Website after B Financial successfully bid on a consumer's loan application. Defs.' Joint Mem. Lack of Jurisdiction Ex. 2 at ¶¶ 7-8. After Grice submitted her loan application through the Website, a loan specialist contacted her regarding her application and then provided her with the login information to the customer section of the Website. Id. at ¶ 4.

         Shortly after receiving the loan, Global began withdrawing money from Grice's online account with Citibank, N.A., which was registered with Grice's address in Massachusetts. Compl. at ¶¶ 41, 65. Because such withdrawals continued after Grice believed that she had fully repaid the Loan, at some unspecified time, Grice closed her account with Citibank, N.A., hoping to stop the withdrawals. Id. at ¶ 42.

         After she closed the account, Grice received many telephone calls from U Solutions, informing her that she could be arrested and compelled to defend a lawsuit in Chicago, Illinois, if she did not provide her new account number. Id. at ¶ 43. U Solutions sent emails to Grice's work place, in which U Solutions threatened to garnish her wages if she did not make timely payments, id. at ¶ 44, and sent invoices to Grice for payments which she believed that she did not owe, id. at ¶ 114. U Solutions also left recorded messages for Grice stating that her balance would be reset to start over if she missed a payment. Id. On June 14, 2016, Wahbeh drafted and sent a letter on KRW letterhead to Grice's work email, stating that Guaranteed Cash Now had a right to garnish Grice's wages without a court order and would sue her and potentially add “thousands of dollars in attorney's fees, legal expenses and court costs to the judgment amount.” Id. at ¶¶ 45, 114; Pl.'s Mem. Opp'n Lack of Jurisdiction Ex. 1. The letter was addressed to “Employer of Sheena Grice” without any specific mailing address. Pl.'s Mem. Opp'n Lack of Jurisdiction Ex. 2. Wahbeh's name appeared at the bottom of the letter. Id.

         Grice informed U Solutions of her new bank account number with Account Now after she received the letter from Wahbeh. Id. at ¶¶ 46-47. Between June 21, 2016 and November 18, 2016, Global had withdrawn at least an additional $982 from Grice's new bank account. Id. at ¶ 47. Grice believes that she has paid more than $1, 600 for the $200 loan. Id. at ¶ 48.

         Grice was not asked to sign any loan documents or contracts and did not receive any agreement with regard to the Loan until U Solutions sent a copy of a loan agreement to Grice upon request on December 22, 2016. Id. at ¶ 32. The “Consumer Line of Credit” agreement (“Agreement”) governs the Loan and indicates that B Financial is the lender. Id. at ¶ 33. The Agreement specifies Utah law as the governing body of law and the State of Illinois as the venue for any suits or proceedings arising from or relating in any way to the Agreement. Agreement, Ex. A, ECF No. 1-1 at 2.

         The Agreement also includes a list of fees and payment requirements:

(1) a $15.00 annual membership fee, a draw fee of $5.00 every time money was taken out, and interest at 9.99% annually. The billing cycle was two weeks and repayments would be drawn from the borrower's account at the end of every billing cycle. Id. at ¶ 35;
(2) only 3% of each bi-weekly minimum payment would be applied toward the outstanding principal. Id. at ¶ 36;
(3) a transaction fee of $30.00 for every $100.00 of outstanding principal and a billing cycle fee of $2.50 would be assessed at every billing cycle. Id. at ¶ 37;
(4) late fee of $10.00 for any billing cycle (two weeks), in which a payment was not made timely, and a $25.00 penalty for any payment that was dishonored. Id. at ¶ 38.

         On December 31, 2016, U Solutions emailed Grice an invoice indicating that she had a balance of $1, 042.44 and an amount of $848.44 would be due on January 13, 2017. Id. at ¶ 55. The effective interest rate of her Loan, including all fees, exceeded 800% and totaled more than $1, 650.00 a year. Id. at ¶¶ 39, 40. As a result of the drafts from her account, Grice fell behind in car payments (the car was repossessed on November 18, 2016), and in her rent. Id. at ¶¶ 51, 52. A charitable organization, Interfaith Social Services, paid her outstanding rent of $800.00 to stop eviction proceedings. Id. at ¶¶ 50-54.

         II. PERSONAL JURISDICTION

         The Defendants claimed that Grice's complaint should be dismissed in its entirety for lack of jurisdiction because none of the Defendants were Massachusetts residents or had sufficient in-forum contacts for this Court to assert personal jurisdiction. Defs.' Joint Mem. Lack of Jurisdiction at 5-6. This Court denied the motion with respect to Wahbeh, KRW, VIM and Global and granted the motion with respect to Bartlett, Theresa D'Ambrose, Michael D'Ambrose and Poutanen.

         A. Standard of Review

         In ruling on a motion to dismiss for lack of personal jurisdiction without an evidentiary hearing under the Federal Rules of Civil Procedure 12(b)(2), the plaintiff bears the burden of proving to the Court that such jurisdiction exists, Griffiths v. Aviva London Assignment Corp., 187 F.Supp.3d 342, 346 (D. Mass. 2016) (Gorton, J.) (citing Massachusetts Sch. Of Law v. ABA, 142 F.3d 26, 34 (1st Cir. 1998)), and the district court must apply the prima facie standard of review, Katz v. Spiniello Cos., 244 F.Supp.3d 237, 241 (D. Mass. 2017) (Casper, J.) (citing United States v. Swiss Am. Bank, Ltd., 274 F.3d 610, 618 (1st Cir. 2001)). The plaintiff must show that “jurisdiction is 1) statutorily authorized and 2) consistent with the Due Process Clause of the United States Constitution.” Provanzano v. Parker View Farm, Inc., 796 F.Supp.2d 247, 252 (D. Mass. 2011) (Gorton, J.) (citing Astro-Med, Inc. v. Nihon Kohden Am., Inc., 591 F.3d 1, 9 (1st Cir. 2009)).

         Specifically, the plaintiff must “go beyond the pleadings and make affirmative proof.” Id. at 253 (quoting Swiss Am. Bank. Ltd., 274 F.3d at 619 (internal citation and quotation marks omitted)). Conclusory allegations or farfetched inferences in the pleading will not be sufficient to make a prima facie showing of personal jurisdiction. See Ticketmaster-N.Y., Inc. v. Alioto, 26 F.3d 201, 203 (1st Cir. 1994); Boit v. Gar-Tec Prods., Inc., 967 F.2d 671, 675 (1st Cir. 1992). In addition, the Court must take all alleged facts as true and construe them in the light most favorable to the plaintiff. Griffiths, 187 F.Supp.3d at 346 (citing Massachusetts Sch. of Law., 142 F.3d at 34).

         Under the Due Process Clause, a defendant must “have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Baskin-Robbins Franchising LLC v. Alpenrose Dairy, Inc., 825 F.3d 28, 35 (1st Cir. 2016) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). “[A] federal district court may exercise either general or specific jurisdiction over a defendant.” Id.; Mueller Sys., LLC v. Robert Teti & Itet Corp., 199 F.Supp.3d 270, 278 (D. Mass. 2016) (Gorton, J.).

         In Massachusetts, the Court may proceed directly to the Constitutional analysis because the long-arm statute is “coextensive with the limits allowed by the United States Constitution.” Hannon v. Beard, 524 F.3d 275, 280 (1st Cir. 2008); see Acushnet Co. v. Zimventures, LLC, 155 F.Supp.3d 97, 101 (D. Mass. 2015) (noting that “the Court need only analyze the Due Process component”); Provanzano, 796 F.Supp.2d at 253 (“Massachusetts long-arm statute reaches to the full extent that the Constitution allows” (internal citation omitted)).

         B. General Jurisdiction

         "For an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011). In addition to domicile, a court may also assert general jurisdiction over an individual when the person offers explicit consent, J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 880 (2011) (citing Insurance Corp. of Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703 (1982)), or is physically present in the forum state, Burnham v. Superior Court of California, County of Marin, 495 U.S. 604, 619 (1990) (“[J]urisdiction based on physical presence alone constitutes due process because it is one of the continuing traditions of our legal system that define the due process standard of ‘traditional notions of fair play and substantial justice.'”).

         A court may exercise general jurisdiction over foreign corporations “when their affiliations with the State are so ‘continuous and systematic' as to render them essentially at home in the forum State.” Goodyear, 564 U.S. at 919 (citing International Shoe Co., 326 U.S. at 317). Specifically, the paradigm forum for all-purpose general jurisdiction are a corporation's place of incorporation and principal place of business. Daimler AG v. Bauman, 134 S.Ct. 746, 760 (2014) (citing Goodyear, 564 U.S. at 924).

         Here, none of the individual defendants are domiciled in Massachusetts and none of the corporate defendants are incorporated or have principal places of business in Massachusetts. Compl. ¶¶ 5-15. In addition, Grice did not make any allegations with regard to whether any individual defendants have consented to the forum or are physically present in the forum. Therefore, this Court concluded that there was no general jurisdiction.

         C. Specific Jurisdiction

         A court may exercise personal jurisdiction under the Due Process Clause when “the defendant has maintained certain minimum contacts with the forum state such that the maintenance of the suit does not offend traditional notions of fair play and substantial injustice.” Katz, 244 F.Supp. at 244 (quoting International Shoe Co., 326 U.S. at 316 (internal quotation marks omitted)). The First Circuit adopts a three-part inquiry to determine whether a Court is authorized to assert specific jurisdiction over an out-of-state defendant. EMC Corp. v. Petter, 104 F.Supp.3d 127, 133 (D. Mass. 2015) (Hillman, J.).

First, the legal claims must relate to or arise out of the defendant's contacts in the forum. See Phillips Exeter Acad. v. Howard Phillips Fund, Inc., 196 F.3d 284, 288 (1st Cir. 1999). Second, the defendant's contacts must constitute “purposeful availment of the benefits and protections” of the forum's laws. Id. Third, the exercise of jurisdiction must be reasonable, in light of the First Circuit's “gestalt factors.” Id.

EMC Corp., 104 F.Supp.3d at 133. A plaintiff must prevail on all three prongs to establish specific jurisdiction. Mukarker v. City of Phila., 178 F.Supp.3d 8, 10-11 (D. Mass. 2016) (Saris, C.J.) (citing C.W. Downer & Co. v. Bioriginal Food & Sci. Corp., 771 F.3d 59, 65 (1st Cir. 2014)). A court need not reach the reasonableness inquiry if the plaintiff fails to succeed on the first two prongs. Id. at 11 (citing Sawtelle v. Farrell, 70 F.3d 1381, 1394 (1st Cir. 1995)).

         1. Specific Jurisdiction over Wahbeh and KRW

         a. Relatedness

         The defendants claimed that this Court ought not assert personal jurisdiction over Wahbeh and KRW because a single contact is insufficient to confer personal jurisdiction. Defs.' Joint Mem. Lack of Jurisdiction at 7. This Court disagreed.

         The relatedness inquiry is a “flexible, relaxed standard, ” which focuses on “whether the claim underlying the litigation . . . directly arise[s] out of, or relate[s] to, the defendant's forum-state activities.” Katz, 244 F.Supp.3d at 244 (internal citations and quotation marks omitted). It requires a “demonstrable nexus” between the claims and the defendant's in-forum contacts. Mukarker, 178 F.Supp.3d at 11 (internal citations omitted).

         Wahbeh and KRW's only forum-based contact is that Wahbeh drafted the letter on KRW's letterhead, which was later sent to Grice's work email. Compl. ¶ 45. The letter stated that KRW was the general counsel to Guaranteed Cash Now, Guaranteed Cash Now had a right to garnish Grice's wages without a court order, and would sue her and potentially add “thousands of dollars in attorney's fees, legal expenses and court costs to the judgment amount.” Id. at ¶¶ 45, 114; Pl.'s Mem. Opp'n Lack of Jurisdiction Ex. 1. Grice's claims against Wahbeh and KRW were premised on the allegations that they engaged in debt collecting activities on behalf of VIM and B Financial by making false representations and threatening to sue her in the letter. Compl. ¶¶ 79, 103, 113-14, 127.

         Wahbeh and KRW argued that the single email addressed generically to Grice's employer was insufficient to confer jurisdiction. Defs.' Joint Mem. Lack of Jurisdiction at 7. Specifically, they compared this case to the facts of Krambeer v. Eisenberg, 923 F.Supp. 1170 (D. Minn. 1996), where a Connecticut attorney sent one debt collection letter to the plaintiff in Minnesota on behalf of a third party and the plaintiff alleged a violation of the FDCPA. Id. at 1172-73. The District Court of Minnesota ruled that a single debt collection letter was not sufficient to establish personal jurisdiction over the nonresident defendant because the very limited contact with one resident of Minnesota did not ...


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