Brice v. Haynes Investments, LLC.

Background

These consolidated class actions concern short-term loans made through entities associated with the Chippewa Cree Tribe, the Otoe-Missouria Tribe, and the Tunica-Biloxi Tribe. The plaintiffs, including Kimetra Brice, Earl Browne, and Jill Novorot, were California residents who took out loans that allegedly charged illegally high interest. The remaining defendants were alleged to be founders, funders, owners, shareholders, consultants, or other participants in Think Finance, LLC, which allegedly organized, financed, and operated the tribal lending arrangement.

Defendants’ Motion for Summary Judgment

Summary judgment is a decision without a trial when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The defendants sought summary judgment on the plaintiffs’ federal Racketeer Influenced and Corrupt Organizations Act (RICO) claims and California claims, along with arguments concerning individual liability, the corporate form, bankruptcy releases, and the statute of limitations.

The court denied the defendants’ motion. It found disputed evidence about the roles, control, knowledge, and financial benefits of Linda Stinson, Stephen J. Shaper, 7HBF No. 2, Ltd., Michael Stinson, Haynes Investment, LLC, and L. Stephen Haynes. The court concluded that a jury could determine whether certain defendants acted as owners, shareholders, consultants, or other participants rather than only in released roles as Think Finance directors. It also found disputed evidence about whether 7HBF acted through associated individuals to fund, advise, or control Think Finance. The court held that the possible release of individual conduct did not automatically eliminate 7HBF’s potential liability.

The court also denied summary judgment on the RICO claims under 18 U.S.C. §§ 1962(a) through (d). It found sufficient, though disputed, evidence concerning proximate cause, the defendants’ direction or control of the alleged RICO enterprise, the collection of unlawful debts, investment injury under § 1962(a), control of the enterprise under § 1962(b), operation or management under § 1962(c), and agreement to facilitate the alleged scheme under § 1962(d). The court emphasized that the jury could ultimately reject the plaintiffs’ evidence or find that some defendants’ conduct was too remote, but those disputes prevented summary judgment.

The court also rejected the defendants’ arguments concerning the statute of limitations, at least at this stage, because equitable tolling appeared potentially applicable based on provisions in the loan contracts that allegedly discouraged or complicated litigation. The court held that the usury claim could proceed even though some defendants allegedly received loan-related payments indirectly. It also declined to grant summary judgment on the unjust-enrichment claim and allowed the plaintiffs’ Unfair Competition Law theories to proceed.

Plaintiffs’ Motion for Partial Summary Judgment

The plaintiffs’ motion was granted in part and denied in part. The court granted judgment for the plaintiffs on the enforceability of the loan contracts’ tribal-law choice-of-law provisions, ruling that those provisions were unenforceable. The court also ruled that California law applies to the plaintiffs’ and class members’ claims. It explained that California had the materially greater interest in enforcing its usury laws and protecting California consumers from allegedly usurious conduct.

The court granted the plaintiffs’ motion on the defendants’ tribal-immunity defense. The defendants acknowledged that they personally could not invoke sovereign immunity, and the court held that the claims focused on the defendants’ personal conduct. Because the tribes and tribal entities were not defendants in these cases, the court concluded that tribal immunity did not apply.

The court denied the plaintiffs’ request for summary judgment establishing a RICO conspiracy under § 1962(d). It also denied their request for summary judgment establishing a substantive RICO violation under § 1962(c). The court found disputed facts about each defendant’s knowledge, role, benefits, the scope of the alleged enterprise, the relationships among the entities, and the defendants’ responsibility for managing, controlling, or directing the enterprise. The court further stated that the plaintiffs would need to authenticate and establish the contents of the RSM data at trial to show how much allegedly usurious interest class members actually paid.

Motions to Exclude Expert Testimony

The court granted the plaintiffs’ motions to exclude the testimony of Lance G. Morgan and Eric C. Henson under Federal Rule of Evidence 403. Rule 403 permits exclusion when the risk of confusing or misleading the jury, or wasting trial time, substantially outweighs the testimony’s useful value. The court found that the proposed testimony about tribal business structures, economic development, tribal revenues, and the social benefits of the arrangements was not directly relevant to the remaining claims. The relevant issues could instead be presented through documents and testimony from people with firsthand knowledge.

Sealing

The plaintiffs had filed documents and information under seal because third parties had marked them confidential. The court stated that no supporting declarations had been submitted under the applicable standard for continued sealing. It allowed representatives of the third parties or aligned interests to submit declarations showing compelling reasons to keep the materials sealed by August 2, 2021. Without those declarations, the court stated that it would unseal the information.

Disposition

The defendants’ motion for summary judgment was denied. The plaintiffs’ motion for partial summary judgment was granted in part and denied in part. The plaintiffs’ motions to exclude the two experts were granted. Judge William H. Orrick left the disputed liability and RICO issues for further proceedings, including trial.