Goldenstein v. Repossessors Inc.

Decision Date10 March 2016
Docket NumberNo. 14–3554.,14–3554.
Citation815 F.3d 142
Parties Heiko GOLDENSTEIN, Appellant v. REPOSSESSORS INC.; Chad Latvaaho; Shady Oak Enterprises Inc., doing business as Premier Finance Adjusters; Philip J. Hourican; William McKibbin.
CourtU.S. Court of Appeals — Third Circuit

Robert F. Salvin, Esq. (Argued), Bala Cynwyd, PA, for Appellant.

Neal A. Thakkar, Esq. (Argued), Sweeney & Sheehan, Westmont, NJ, William R. Hourican, Norristown, PA, for Appellees.

Before: GREENAWAY, JR., KRAUSE, and GREENBERG, Circuit Judges.

OPINION OF THE COURT

KRAUSE

, Circuit Judge.

After he defaulted on a $1,000 loan and his car was repossessed, Appellant Heiko Goldenstein brought suit against Appellees Repossessors, Inc. and Shady Oak Enterprises, Inc., d/b/a Premier Finance Adjusters and their individual owners, alleging the repossession was unlawful and seeking treble damages, attorney's fees, and costs. Specifically, Goldenstein claimed violations of various state and federal consumer protection statutes, as well as the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Because we conclude that the District Court erred in the basis on which it granted summary judgment against Goldenstein on his RICO claim and two of his state law claims, we will affirm in part and reverse and remand in part for the District Court's further consideration of those claims.

I. FACTUAL AND PROCEDURAL HISTORY 1

In April 2012, Goldenstein, a resident of Pennsylvania, obtained a $1,000 online loan from Sovereign Lending Solutions, LLC, d/b/a Title Loan America. As a consumer lending company wholly owned by the Lac Vieux Desert Band of Lake Superior Chippewa Indians and incorporated under Chippewa tribal law, Sovereign was authorized to issue loans secured by vehicles at interest rates far greater than permitted under Pennsylvania law. App. vol. 2, 123, 264. Goldenstein pledged his car as collateral and was charged 250 percent interest for his loan.2

Accounting for the interest due, Sovereign, after deducting a $50 transfer fee and wiring the remaining $950 of the loan to Goldenstein's bank account, withdrew monthly installments of $207.90 from Goldenstein's bank account in June 2012 and again in July 2012. The District Court found for the purposes of summary judgment that Goldenstein removed his funds from the account because he did not recognize the account activity on his bank statements. As a result, when Sovereign attempted to collect a third installment payment in August 2012, it was rejected for insufficient funds. Sovereign then contracted with Repossessors, Inc. to forfeit Goldenstein's collateral, and Repossessors, Inc., in turn, contracted with Shady Oak Enterprises, Inc., d/b/a Premier Finance Adjusters ("Premier"), which took possession of Goldenstein's car. When Goldenstein attempted to recover his car a few days later, App. vol. 2, 45, Premier informed Goldenstein that his payment would not be accepted nor his car returned unless he signed release documents. After conferring with his attorney, Goldenstein paid Premier $2,393 ($2,143 to satisfy the loan and $250 in repossession fees) and signed the releases.

Goldenstein filed suit in the United States District Court for the Eastern District of Pennsylvania in a three-count complaint. In the first count, Goldenstein claimed violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692

–1692p, and Pennsylvania's Fair Credit Extension Uniformity Act ("PFCEUA"), 73 Pa. Stat. and Cons.Stat. Ann. §§ 2270.1–2270.6 based in part on alleged violations of Pennsylvania's Uniform Commercial Code ("UCC"), 13 Pa. Cons.Stat. §§ 1101 –9710.3 The FDCPA claim was premised on the notion that Appellees had no present right to possession of Goldenstein's car because the loan was usurious under Pennsylvania law. As for the PFCEUA and UCC claims, Goldenstein alleged that the Appellees made "false, deceptive, or misleading representations" and engaged in "unfair or unconscionable means of debt collection" when, among other things, they required Goldenstein to sign the releases before recovering his car. App. vol. 2, 8. The second and third counts of the complaint claimed that Repossessors, Inc. and Premier, both individually and jointly, constituted a RICO "enterprise" and that the repossession of Goldenstein's car involved the "collection of unlawful debt," in violation of 18 U.S.C. § 1962(c), and gave rise to a RICO conspiracy, in violation of 18 U.S.C. § 1962(d). App. vol. 2, 9–12.

The District Court granted Appellees' motion for summary judgment and entered judgment against Goldenstein on all claims. Goldenstein v. Repossessors, Inc., No. 13–cv–02797, 2014 WL 3535112, at *1, 2014 U.S. Dist. LEXIS 97002, at *2 (E.D.Pa. July 17, 2014)

. As to the FDCPA claim, the District Court held there was no violation because the Appellees had a right to possess the car as collateral for the unpaid loan. Id. at *6–8, 2014 U.S. Dist. LEXIS 97002, at *19–22. As to the RICO claim, the District Court held that the repossession of collateral could not constitute the "collection of unlawful debt" as a matter of law; it therefore did not address any other element of the RICO claim. Id. at *7–8, 2014 U.S. Dist. LEXIS 97002, at *22–23. Nor did the District Court address Goldenstein's claims for violations of the PFCEUA and the UCC relating to the releases.4 This appeal followed.

II. JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction pursuant to 28 U.S.C. § 1331

. We have jurisdiction pursuant to 28 U.S.C. § 1291.

We exercise plenary review of a district court's grant of summary judgment. Reedy v. Evanson, 615 F.3d 197, 210 (3d Cir.2010)

(citing Horn v. Thoratec Corp., 376 F.3d 163, 165 (3d Cir.2004) ). Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Thomas v. Cumberland Cty., 749 F.3d 217, 222 (3d Cir.2014) (quoting Fed.R.Civ.P. 56(a) ) (internal quotation marks omitted). When deciding a motion for summary judgment, "[a]ll reasonable inferences from the record must be drawn in favor of the nonmoving party" and the court "may not weigh the evidence or assess credibility." MBIA Ins. Corp. v. Royal Indem. Co., 426 F.3d 204, 209 (3d Cir.2005) (citations omitted).

In a motion for summary judgment, it is initially the moving party's burden to "demonstrate the absence of a genuine [dispute] of material fact." Mathews v. Kidder, Peabody & Co., 260 F.3d 239, 250 (3d Cir.2001)

(citing Celotex Corp. v. Catrett, 477 U.S. 317, 322–24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). A factual dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Conversely, "where a non-moving party fails sufficiently to establish the existence of an essential element of its case on which it bears the burden of proof at trial, there is not a genuine dispute with respect to a material fact and thus the moving party is entitled to judgment as a matter of law." Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 265 (3d Cir.2014).

III. DISCUSSION

We agree with the District Court that, although the loan may have been usurious under Pennsylvania law, Appellees nonetheless had a present right to possession of Goldenstein's car and their repossession of it therefore did not violate the FDCPA. We cannot agree, however, that forfeiture of collateral cannot amount to the "collection of unlawful debt" under the RICO statute. And as the District Court did not address the merits of Goldenstein's claims alleging violations of the PFCEUA and the UCC, we decline to do so in the first instance. We address these issues in turn.

A. Goldenstein's FDCPA Claim

Goldenstein raises two challenges to the District Court's holding that, because Goldenstein defaulted on his loan, Appellees had a present right to possession of his car as collateral and therefore did not violate the FDCPA.

First, he contends that no present right to possession could attach to his car because the loan it secured was made at a usurious rate of interest in violation of Pennsylvania's Loan Interest and Protection Law ("LIPL"), 41 Pa. Stat. and Cons.Stat. Ann. § 201

. Even when the interest rate is usurious, however, the LIPL does not void the entire loan or the legal interest, nor does it make it illegal for a lender to collect an unpaid debt. Instead, the LIPL only makes voidable "the interest specified beyond the lawful rate," Pa. Dep't of Banking v. NCAS of Del., LLC, 995 A.2d 422, 440 (Pa.Cmwlth.2010) (emphasis omitted) (quoting Mulcahy v. Loftus, 439 Pa. 111, 267 A.2d, 872, 873 (1970) ), and Pennsylvania law expressly permits a secured party to "take possession of the collateral" after default, "without judicial process if it proceeds without breach of the peace," 13 Pa. Cons.Stat. § 9609. Thus, having admittedly defaulted on his loan—including removing the funds from his bank account without further communication with the lender and failing to make three monthly payments before his car was repossessed—Goldenstein cannot now contest Sovereign's right to repossess the collateral he posted in the event of just such a default.

Second, Goldenstein argues that the repossession was unlawful because his arrearage—assuming he had been accruing interest at a six percent rate as permitted by Pennsylvania law and deducting Sovereign's first two deductions from his bank account from his overall balance—would have been a mere $9.60, and his failure to make this de minimis payment could not constitute a material breach of the loan contract. That argument, however, finds no support in the LIPL. While that statute provides important protections to borrowers who fall victim to usurious loans, it does not empower borrowers to recalculate what they owe by construing interest paid in excess of the legal rate as paid...

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