The New Hampshire Banking Department (Department) initiated an adjudicative proceeding against CashCall, Inc. (CashCall), WS Funding, LLC (WS Funding), and John Paul Reddam, for violations of RSA chapter 399-A (2006 & Supp. 2012) (repealed and reenacted 2015). By petition for a writ of certiorari,
The following facts come from the parties' stipulation or are otherwise found in the record. Reddam is the president and chief executive officer of CashCall, a lending and loan services corporation headquartered and incorporated in California. Reddam owns all of CashCall's corporate stock. Reddam is also the president of WS Funding, a wholly owned subsidiary of CashCall. WS Funding is a Delaware limited liability company with a principal place of business in California. Neither Reddam, CashCall, nor WS Funding is licensed under RSA chapter 399-A to issue small loans in New Hampshire.
Both CashCall and WS Funding have contractual relationships with Western Sky Financial, which is not a party to this action. Western Sky Financial is wholly owned by an enrolled member of the Cheyenne River Sioux Tribe, which is a sovereign Indian nation located within South Dakota and recognized by the United States Department of the Interior.
CashCall is a licensed mortgage banker in New Hampshire under RSA chapter 397-A (2006 & Supp. 2011). Pursuant to RSA 397-A:12 (Supp. 2011), the Department commenced an examination of CashCall in early 2012. The Department's examiner discovered that CashCall appeared to be engaged in the business of purchasing and servicing small loans or "payday loans" in association with Western Sky Financial.
In June 2013, after analyzing and reviewing CashCall's responses to an administrative subpoena duces tecum and reviewing the business relationships among CashCall, WS Funding, and Western Sky Financial, the Department issued a cease and desist order to CashCall, WS Funding, and Reddam. In the cease and desist order, the Department found that either CashCall, or WS Funding, was the "actual" or "de facto" lender for the payday and small loans, and that Western Sky Financial was a front for the respondents' unlicensed activities.
As relevant here, the relationship among these companies was primarily governed by two agreements that they entered into in 2010: an "Agreement for Service" (Service Agreement) between CashCall and Western Sky Financial; and an "Agreement for the Assignment and Purchase of Promissory Notes" (Assignment Agreement) between WS Funding and Western Sky Financial. (Quotations omitted.) Reddam signed the Service Agreement as president of CashCall, and he signed the Assignment Agreement as president of WS Funding. Through 2013, pursuant to these agreements, CashCall reimbursed Western Sky Financial for numerous office and operational expenses, including payroll expenses, advertising expenses, and fees paid to consumer loan lead generators, and
Between July and October 2013, attorneys from four different law firms filed appearances on behalf of the respondents. The respondents issued discovery requests to the Department and responded to the Department's discovery requests. The Department and the respondents also negotiated a four-page stipulation of uncontested facts.
In December 2013, the respondents moved to dismiss or, alternatively, stay the cease and desist order pending the outcome of arbitration, arguing that: (1) the Department's action violated the dormant Commerce Clause of the Federal Constitution; (2) the Department lacked subject matter jurisdiction to "penalize or halt tribal member conduct"; and (3) the Department's claims were subject to binding arbitration provisions contained in the loan agreements. Reddam additionally argued that he is not subject to personal jurisdiction in New Hampshire, and he attached a supporting affidavit.
As relevant here, Reddam stated in his affidavit that he had never lived in New Hampshire, had not visited New Hampshire in the preceding year, owned no real property in New Hampshire, and had no personal business dealings in New Hampshire. With regard to his activity through CashCall, Reddam stated that, to his knowledge, he had "never personally interacted with any Western Sky borrower whose loan was serviced by CashCall" and had "no personal involvement with CashCall's servicing and collection operation, except that [he] instruct[ed] CashCall managers and supervisors to ensure that all applicable laws are obeyed."
In April 2016, the Department's presiding officer denied the respondents' motion. Regarding Reddam's personal jurisdiction argument, the Department found that it could constitutionally exercise jurisdiction over Reddam. Reddam filed a motion for rehearing, which, in a proposed order, the Department's reviewing officer recommended be denied, and the Department's commissioner accepted the reviewing officer's proposed order as a final order. This petition followed.
In his petition, Reddam argues that the Department erred by ruling that it had personal jurisdiction over him. The Department argues that it properly exercised jurisdiction over Reddam and makes two alternative arguments: (1) that Reddam's petition should be dismissed for failing to exhaust his administrative remedies; and (2) that Reddam waived his personal jurisdiction defense by actively litigating the action for six months before asserting that the Department lacked personal jurisdiction over him.
"Our standard of review for rulings on motions to dismiss for lack of personal jurisdiction varies according to the case's procedural posture."
Determining whether a court may exercise personal jurisdiction over a respondent contemplates a two-part analysis.
We first address the Department's argument that this petition should be dismissed as premature because Reddam did not exhaust his administrative remedies. "The rule requiring administrative remedies to be exhausted prior to appealing to the courts is based on the reasonable policies of encouraging the exercise of administrative expertise, preserving agency autonomy and promoting judicial efficiency."
The Department argues that we should dismiss Reddam's petition because he seeks review of an interlocutory agency order rather than a final order. According to the Department, Reddam should not seek review until after the final hearing on the Department's claims. We disagree.
Reddam argues that it is a violation of the Federal Due Process Clause for New Hampshire to exercise jurisdiction over him. That clause protects a non-resident respondent from the burden of litigating in a foreign forum unless the "respondent has minimum contacts with the forum, such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice."
Therefore, under these circumstances, we reject the Department's argument that we should dismiss Reddam's petition for failing to exhaust his administrative remedies.
We now turn to the substance of Reddam's argument that the Department erred by ruling that it could exercise personal jurisdiction over him. "Under the Federal Due Process Clause, a court may exercise personal jurisdiction over a non-resident respondent if the respondent has minimum contacts with the forum, such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice."
In determining whether the exercise of specific personal jurisdiction over the respondent comports with due process, we examine whether: (1) the contacts relate to the cause of action; (2) the respondent has purposefully availed himself of the protection of New Hampshire's laws; and (3) it would be fair and reasonable to require the respondent to defend the suit in New Hampshire.
The parties first dispute whether Reddam's status as a "control person" of the respondent companies is sufficient to establish personal jurisdiction.
In support of his argument, Reddam cites
We find this reasoning persuasive. The mere fact that a corporate officer can and generally does control a corporation does not mean that the officer directed the
As the court in
Next, we turn to the issue of whether the Department demonstrated that it had specific personal jurisdiction over Reddam. Reddam argues that the Department lacked personal jurisdiction because: (1) his "personal contacts with New Hampshire do not relate to this enforcement action"; (2) he "did not purposefully avail himself of the protections of New Hampshire law"; and (3) "it is not fair or reasonable to require [him] to defend this suit in New Hampshire."
We begin by examining the first factor, whether Reddam's contacts relate to the Department's cause of action. "This factor involves whether the claim underlying the litigation directly arises out of or relates to the defendant's forum-state activities."
Reddam argues that his personal contacts do not relate to the Department's cause of action because the Department alleged only that: (1) he is the president and CEO of CashCall and owns 100% of the company's corporate stock; (2) he has a mailing address identical to CashCall's mailing address; and (3) he is not licensed as a small loan lender in New Hampshire. He argues that the Department "did not allege, nor present any evidence, that Reddam had any individual involvement in CashCall's alleged conduct with respect to New Hampshire."
The Department argues that, in addition to the evidence of Reddam's positions in the respondent companies, the record also reflects that Reddam "had full authority to control, design, and direct CashCall's business activities" and is "the one running" CashCall, which "reached into New Hampshire and made contracts with New Hampshire consumers." (Quotation omitted.)
The Department initiated its action against the respondents for "engag[ing] in the business of making small loans or payday loans in New Hampshire without obtaining a license to do so in violation of [RSA chapter 399-A]." The Department alleged that the respondents employed contractual and other relationships with Western Sky Financial as a mechanism by which the respondents avoided becoming licensed under RSA chapter 399-A and that CashCall operated as the "actual" or "de facto" lender for payday or small loans for itself and on behalf of Western Sky Financial. In other words, based upon the Department's allegations, the asserted purpose of this business relationship was to allow the respondent companies to unlawfully use Western Sky Financial's tribal affiliation as a shield against state lending laws, such as New Hampshire's. Reddam was directly involved with establishing these business relationships to issue small loans in violation of RSA chapter 399-A through his control of the respondent companies
Accepting these evidentiary proffers as true and construing them in the light most congenial to the Department's jurisdictional claim, we find that the Department has shown that Reddam's contacts with the forum relate to the cause of action. By offering evidence of Reddam's positions within the companies and his ownership interest in CashCall, the Department demonstrated that he was in a position to control and direct the actions of the respondent companies. The Department further demonstrated that, by executing the Service Agreement and the Assignment Agreement, Reddam personally participated in creating the business relationship between the respondent companies and Western Sky Financial, and that the primary purpose of this relationship was to issue small loans or payday loans without complying with state licensing and regulatory requirements, including those of New Hampshire. Viewed together, Reddam's control of the respondent companies and his personal participation in the alleged scheme that they used to issue loans to New Hampshire consumers sufficiently relate to the Department's action.
Furthermore, we reject Reddam's argument that his actions were not related to New Hampshire because he "had no specific involvement with any loans made to New Hampshire consumers by Western Sky that were later serviced by CashCall." It would be nonsensical to hold that a person could intentionally create a scheme for the purpose of violating the laws of
"To satisfy the second requirement, the defendant's in-state contacts must represent a purposeful availment of the privilege of conducting activities in the forum state, thereby invoking the benefits and protection of that state's laws and making the defendant's involuntary presence before the state's courts foreseeable."
Reddam argues that the Department did not satisfy this factor because he "filed an uncontested affidavit establishing that he does not have minimum contacts with New Hampshire and did not purposefully avail himself of the protections of New Hampshire law." As relevant here, Reddam stated in his affidavit that he "never personally interacted with any Western Sky borrower whose loan was serviced by CashCall" and had "no personal involvement with CashCall's servicing and collection operations."
Even if we assume that Reddam's affidavit is uncontested, these statements fail to establish that he did not purposefully avail himself of New Hampshire law. As discussed above, it is uncontested that Reddam controlled the respondent companies and personally executed the Service Agreement and Assignment Agreement. These agreements were intended to allow the companies to issue loans to consumers in states, such as New Hampshire, without complying with state laws, such as RSA chapter 399-A. The voluntariness element is satisfied because Reddam personally and deliberately took actions to set up and enable this scheme by controlling the respondent companies and executing the Service Agreement and Assignment Agreement. Moreover, the foreseeability element is satisfied because the very purpose of this business relationship was to make unregulated loans to consumers in states that regulated these types of loans, and Reddam could reasonably have anticipated being haled into court in New Hampshire because he is personally liable as a controlling person of the respondent companies for their noncompliance with RSA chapter 399-A.
The final requirement is whether it is fair to subject Reddam to suit in New Hampshire. In making this assessment, we look to the five "gestalt factors," which consider: (1) the burden on the defendant; (2) the forum State's interest in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several States in furthering fundamental substantive social policies.
With regard to the first factor, the burden on Reddam, he argues that he "face[s] a heavy burden litigating in New Hampshire" and that the "burden is particularly severe and unwarranted because [he] is currently subject to an enforcement action in the United States District Court for the Central District in California related to the very same 787 New Hampshire consumer loans at issue here." We agree with Reddam that, as a California resident, he faces a burden if compelled to litigate in New Hampshire.
However, based upon the information Reddam has provided, the lawsuit to which he refers is an action by the Consumer Financial Protection Bureau (CFPB) against Reddam, the respondent companies, and a company that is not a party to the Department's action for violations of the Consumer Financial Protection Act of 2010 (the Act). The only information that Reddam provided regarding this action is an opinion and order of the United States District Court for the District of Massachusetts that concludes that the "Central District of California is a substantially more convenient forum for this case than this district." This opinion and order does not identify which sections of the Act that Reddam is alleged to have violated. Although it states that "Massachusetts is one of sixteen States whose laws and public interests are implicated by the plaintiff's complaint," it makes no mention of New Hampshire law or the New Hampshire consumers to whom CashCall issued loans. Accordingly, based upon the record provided by Reddam, we have no way of discerning whether, as Reddam argues, "the CFPB seeks redress on behalf of the same New Hampshire consumers identified in the Department's [cease and desist order]." Nor do we know whether that litigation is ongoing. All that is apparent is that, in September 2015, an action by a federal agency for alleged violations of a federal law was transferred to a federal court in California. Based upon this information, we do not agree that Reddam's burden in defending allegations of culpability under RSA chapter 399-A is "particularly severe" simply because this other action may exist.
Furthermore, as the Department notes, Reddam's burden is mitigated by the fact that, as the president of both respondent companies, he "will need to continue litigating on behalf of CashCall regardless of
The next two factors are the Department's interests in adjudicating the dispute and obtaining convenient and effective relief.
The fourth factor is the interstate judicial system's interest in obtaining the most efficient resolution of controversies.
The final factor involves the "substantive social policies of the affected governments."
Therefore, because the Department has made a
DALIANIS, C.J., and HICKS, BASSETT, and HANTZ MARCONI, JJ., concurred.
The Department further argues that we should consider the fact that, after it initiated its action, CashCall applied for (and later withdrew its application for) a small loan license under RSA chapter 399-A, and Reddam submitted an accompanying individual disclosure form. Although the Department could have, but did not, present these documents during the underlying proceeding, it nevertheless requests that we take judicial notice of them in the first instance in this petition.