Donald C. Coggins, Jr. United States District Judge
ORDER GRANTING PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT AS TO DEFENDANTS BAIC , ANDREW GAMBER, SOBELL RIDGE CORP., VOYAGER FINANCIAL GROUP, FINANCIAL PRODUCTS DISTRIBUTORS LLC, AND DAVID WOODARD
The following constitutes the Court's Findings of Fact and Conclusions of Law arising out of the above-captioned matters.
These actions were commenced by Jason Lyons, Chad Wright, Adrian Russo, Charlotte McFerren, Billy Lee Green, Augustus Bostick, Jr., Mark Adragna, and Courtney Koeph, (collectively, "Plaintiffs"). Judgments of default have been entered against Defendants BAIC, Andrew Gamber, Sobell Ridge Corp., Voyager Financial Group, Financial Products Distributors LLC, and David Woodard (collectively, the "Defaulting Defendants") in each action.
Plaintiffs have properly completed service of process on Defaulting Defendants—a combination of actual service of Process and providing notice via publication reasonably calculated under all circumstances to apprise Defaulting Defendants of the pendency of the action—and have provided Defaulting Defendants with notice of the pending motion for entry of a final judgment and affording them the opportunity to answer and present their objections.
The Defaulting Defendants have failed to answer the Amended Complaint or otherwise plead, the time for answering the Complaints in this actions has expired, and the Clerk of the Court has entered default against the Defaulting Defendants.
THIS COURT HEREBY ORDERS that a default judgment shall be entered as to the Defaulting Defendants as described below.
I. FINDINGS OF FACT AND CONCLUSIONS OF LAW
Federal law declares that any agreements purchasing military pensions or benefits are "prohibited . . . and void from inception." See 38 U.S.C. § 5301(a) (veteran benefits); see also 37 U.S.C. § 701 (noting the prohibition on assignment of military retirement pay); see also In re Moorhous, 108 F. 3d 51, 55 (4th Cir. 1997) ("no serviceman may assign his pay in advance of the date it becomes due and payable") (citing United States v. Smith, 393 F.2d 318, 321 (5th Cir. 1968)). In fact, 38 U.S.C. § 5301 unequivocally states that agreements involving military compensation or pensions whereby another person "acquires for consideration the right to receive such benefit by payment of such compensation [or] pension" are "deemed to be an assignment and [are] prohibited." 38 U.S.C. § 5301(a)(3)(A). Likewise, 37 U.S.C. § 701(c) states that the assignment of an enlisted military member's pay is prohibited. This restriction applies equally to military pension payments. See, e.g., Noak and Equity Trust Company v. Byrd, No. 6:13-AP-01078-SY, ECF No. 66, at 3, 9-10 (Bankr. C.D. Cal. Oct. 28, 2015).
The core purpose of these laws is to ensure that retired and disabled military personnel "actually receive the benefits provide to them from being lost through either the predation of others or their own poor judgement." Henry v. Structured Investments Co., LLC, No. 05CC00167 (Cal. Supr. Ct. Orange Cty. Sept. 7, 2011). Because of the purpose of these statutes, the Supreme Court and lower courts have recognized that Section 701 and Section 5301 must be liberally construed. See Porter v. Aetna, 370 U.S. 159, 162 (1962)(discussing predecessor to Section 5301; "legislation of this type should be liberally construed . . . to protect funds granted by the Congress for the maintenance and support of the beneficiaries thereof").
It is against this backdrop that the Defaulting Defendants have devised and engaged in a scheme that induces veterans to enter into costly, unconscionable agreements that directly violate these federal laws. The Defaulting Defendants maintain a network of web sites designed to attract financially desperate veterans (including the Plaintiffs in the Lyons and McFerren matters) seeking a way out of their financial dilemmas. These Defendants promise veterans that they will receive an up-front lump sum distribution in exchange for the veterans' agreement to sell to an investor (i) a certain number and dollar amount of the veteran's military pension or benefits plus (ii) various fees, such as insurance fees to secure the payments in the event the veteran dies before the repayments are made in full. The Defaulting Defendants extract substantial "commissions"—approximately 40% to 50% of the sum deposited by the Purchasers—in connection with these transactions without disclosing this fact to either the Purchaser buying the military pension or benefits or the veteran selling his or her military pension or benefit. Various of the Plaintiffs in these matters have submitted declarations detailing the amounts that they paid in connection with this illegal scheme. The Defaulting Defendants have targeted veterans throughout the United States, including in the state of South Carolina. Indeed, Defaulting Defendants specified in their form agreements that the venue for any dispute raised by a veteran seeking to challenge the agreement shall be in Greenville County, South Carolina.
Consequently, THE COURT FINDS that Defaulting Defendants' contracts with Plaintiffs are unenforceable assignments in violation of 38 U.S.C. § 5301 and 37 U.S.C. § 701 (the "Federal Anti-Assignment Acts"), that they are void from inception, and that the Defaulting Defendants have engaged in a civil conspiracy to identify and solicit pension sales from veterans that they know or should know are prohibited and void under the Federal Anti-Assignment Acts.
THE COURT FURTHER FINDS that it has personal jurisdiction over the Defaulting Defendants. As the Court has previously made clear, Plaintiffs' RICO cause of action authorizes nationwide services of process, 18 U.S.C. § 1965(d), and, therefore, "service of process [in RICO cases] is sufficient to establish the jurisdiction of the federal court over the person of the defendant" as long as such jurisdiction comports with due process." ESAB Group v. Centricut, Inc., 126 F.3d 617, 626 (4th Cir. 1997). Under RICO, a national contacts test is used to evaluate whether the exercise of jurisdiction comports with due process. Weese v. Savicorp, Inc., C/A No. 2:13-cv-41, 2013 WL 6007499 (N.D. W. Va. Nov. 13, 2013). Clearly, the Defaulting Defendants have such contacts, and in any case, Defaulting Defendants have specified in their form agreements that the venue for any dispute raised by a veteran seeking to challenge the agreement shall be in Greenville County, South Carolina, and because Defaulting Defendants directly target their business activities toward consumers in the United States, including those in South Carolina. Moreover, the Defendants used Upstate Law Group, a South Carolina-based firm, as the escrow agent for the transactions, and Defaulting Defendants pocketed their profits from these transactions through the use of a South Carolina-based escrow agent. Accordingly, the Court finds there are sufficient contacts to confer jurisdiction upon South Carolina courts.
Opinion and Order, Lyons et al. v. BAIC et al., No. 6:17-cv-02362-DCC, at 3, ECF No. 77 (March 13, 2018). --------
THE COURT FURTHER FINDS that Plaintiffs have sustained damages as a direct and proximate result of Defaulting Defendants' conduct and in an amount that is ascertainable based on the declarations attached to Plaintiffs' Motion. See Anderson & Strudwick, Inc. v. IBD-Placement & Recruiting Services, LLC, No. 3:11cv818, 2012 WL 1656504, at *4 (E.D. Va. May 10, 2012) (citing Anderson v. Found. for Advancement, Educ. & Emp't of Am. Indians, 155 F.3d 500, 507 (4th Cir.1998)).
Accordingly, IT IS HEREBY ORDERED that this Final Judgment is entered against Defaulting Defendants.
IT IS FURTHER ORDERED that: 1. Defaulting Defendants, their officers, agents, servants, employees, attorneys and other persons acting in active concert or participation with them are permanently enjoined and restrained from:
a. brokering, offering, and/or arranging any Veteran Contracts;
b. consulting in any form whatsoever with respect to Veteran Contracts;
c. formulating or providing, or arranging for the formulation or provision of, any advertising or marketing material, including, but not limited to, any telephone sales script, direct mail solicitation, or the text of any Internet website, email, or other electronic communication with respect to Veteran Contracts;
d. providing names of, or assisting in the generation of, potential customers with respect to Veteran Contracts;
e. participating in or providing services related to the offering, sale, or servicing of Veteran Contracts, or the collection of payments with respect to Veteran Contracts;
f. assisting others in engaging in any conduct proscribed by this Order; and
g. attempting to enforce any Veteran Contract (or any rights purportedly arising from such contract) that has been entered into between any veteran and any Defaulting Defendant.
2. Defaulting Defendants are liable to Plaintiffs as set forth below, jointly and severally, for all sums that Plaintiffs paid in furtherance of their illicit scheme and civil conspiracy to deprive Plaintiffs of their pensions and military benefits in violation of the Federal Anti-Assignment Acts.
a. Jason Lyons: $39,000.00
b. Chad Wright: $19,000.00
c. Adrian Russo: $30,000.00
d. Charlotte McFerren: $1,000.00
e. Billy Lee Green 2013: $65,606.00
The foregoing amounts total One-Hundred Fifty-Four Thousand Six-Hundred Six Dollars and Zero Cents ($154,606.00).
This is a Final Order.
s/Donald C. Coggins, Jr.
United States District Judge October 1, 2019
Spartanburg, South Carolina