Smith v. Fidelity Consumer Discount Co., 88-1444

• Decision Date: 27 June 1989
• Docket Number: No. 88-1444,88-1444
• Parties: , RICO Bus.Disp.Guide 7441 SMITH, Annabelle and Coplin, Charles, Coplin, Margaret, Appellants, v. FIDELITY CONSUMER DISCOUNT CO. and Silver, Jerry and Gorson, Marshall and Kutner Buick, Inc. and Samson Motors, Inc.
• Court: U.S. Court of Appeals — Third Circuit

Page 907

898 F.2d 907

58 USLW 2558, RICO Bus.Disp.Guide 7441

SMITH, Annabelle and Coplin, Charles, Coplin, Margaret, Appellants, v. FIDELITY CONSUMER DISCOUNT CO. and Silver, Jerry and Gorson, Marshall and Kutner Buick, Inc. and Samson Motors, Inc.

No. 88-1444.

United States Court of Appeals, Third Circuit.

Argued Nov. 29, 1988

Opinion filed on June 27, 1989 in Nos. 88-1406 and 88-1444.

Opinion Withdrawn as to Nos. 88-1406 and

88-1444 and, As Modified, filed on

March 15, 1990.

Jeffrey S. Saltz (argued), Alan S. Kaplinsky, Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pa., for appellees.

Eric L. Frank (argued), David A. Searles, Community Legal Services, Inc., Law Center Northeast, Philadelphia, Pa., for appellants.

Alan C. Gershenson, Dennis H. Replansky, Leonard A. Bernstein, Blank, Rome, Comisky & McCauley, Philadelphia, Pa., for amicus curiae Pennsylvania Financial Services Ass'n.

Jordan Luke, Gen. Counsel, Dorothy Nichols, Sr. Associate Gen. Counsel, Thomas T. Segal, Associate Gen. Counsel, Charlotte Kaplow, Asst. Gen. Counsel, Thomas L. Holzman, Sr. Trial Atty., Office of Thrift Supervision Dept. of the Treasury, Washington, D.C., for amicus curiae Office of Thrift Supervision.

Frank M. Salinger, Robert E. McKew, American Financial Services Ass'n., Washington, D.C., Craig Ulrich, Consumer Bankers Ass'n., Arlington, Va., Thomas A. Pfeiler, U.S. League of Sav. Institutions, Chicago, Ill., for amicus curiae American Financial Services Ass'n, Consumer Bankers Ass'n and United States League of Sav. Institutions.

Before SEITZ, ^* STAPLETON and COWEN, Circuit Judges.

OPINION OF THE COURT

STAPLETON, Circuit Judge:

This appeal requires us to answer a discrete, but important, legal question: Does Sec. 501(a) of the Depository Institutions Deregulation and Monetary Control Act of 1980 ("DIDMCA"), 94 Stat. 165, codified as amended, 12 U.S.C. Sec. 1735f-7a(a)(1), ¹ preempt a state usury law's application to loans secured by first liens on residential property that were obtained by borrowers to finance the purchase of used cars? We hold, as did the district court, 686 F.Supp. 504, that it does. As this conclusion is dispositive of plaintiffs' claims under the Pennsylvania Usury Law, 41 P.S. Secs. 502-504, as well as their claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. Sec. 1961 et seq., and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. Sec. 201-1 et seq., we affirm the final judgment entered below granting the defendants' motion for summary judgment on these claims.

I.

Plaintiffs Annabelle Smith, Charles Coplin and Margaret Coplin have filed this appeal from a final judgment entered against them. ² The district court had jurisdiction pursuant to 28 U.S.C. Sec. 1331 as well as the doctrine of pendent jurisdiction. We have jurisdiction under 28 U.S.C. Sec. 1291.

The plaintiffs' appeal is actually a cross-appeal to an appeal by the defendants in this same litigation; the appeal of the defendants has been disposed of by an opinion of even date that thoroughly discusses the relevant facts. See Smith v. Fidelity Consumer Discount Company, 898 F.2d 896 (3d Cir.1990). Hence, our factual recitation will be brief.

The plaintiffs' claims arose from loans extended to them, or their relations, by defendant Fidelity Consumer Discount Corporation ("Fidelity"), a wholly-owned subsidiary of Equitable Credit and Discount Company ("Equitable"). ³ In each of the loan transactions, Fidelity gave credit to a borrower to buy a used car and received as security a first lien on the borrower's (or a cosigner's) home. Plaintiffs' claims under the Truth-in-Lending Act, 15 U.S.C.A. Sec. 1601 et seq. in connection with these loans are addressed in our companion opinion. Here, we address plaintiffs' allegations that the loans violated the Pennsylvania Usury Laws. ⁴

The sole issue presented by this claim is whether the district court correctly held that Sec. 501(a) of DIDMCA preempts Pennsylvania's usury laws with respect to these transactions. It is undisputed that, absent preemption, Fidelity will have violated these statutes, the most generous of which allows lenders to charge up to 24% interest per annum. Consumer Discount Company Act, 7 P.S. Sec. 6201 et seq. In this case, Fidelity wrote loans with disclosed annual interest rates ranging from approximately 31% to 41%. Moreover, Fidelity required, as a condition of extending credit, that the borrowing parties satisfy all existing liens on their homes, accomplished in one case by lending the borrower additional money at interest rates higher than the outstanding loans, to enable Fidelity to obtain a first lien on the borrower's or cosigner's home.

II.

This is the kind of case in which we need to remain mindful of Lord Campbell's admonition that "it is the duty of all courts of justice to take care, for the general good of the community, that hard cases do not make bad law." East India Company v. Paul, 7 Moo. P.C.C. (1849). However we may feel about the defendants' interest rates and business practices, it is our duty to give effect to that construction of Sec. 501(a)(1) of DIDMCA that is most consonant with its text, its legislative history and the interpretations of the agency entrusted to administer DIDMCA.

In exercising our plenary review over the district court's interpretation of the statute, Grocery Town Market, Inc. v. United States, 848 F.2d 392, 394 (3d Cir.1988), we are guided by well-settled principles of statutory construction. "We begin with the familiar canon of statutory construction that the starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive." Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). While the Supreme Court has sometimes said that statutory interpretation should halt at such time as the court determines the text at issue to be plain and unambiguous, see e.g. Rubin v. United States, 449 U.S. 424, 430, 101 S.Ct. 698, 701, 66 L.Ed.2d 633 (1981), it has also indicated that the plain meaning rule is "an axiom of experience" and does not preclude consideration of persuasive legislative history if it exists; the "circumstances of particular legislation may persuade a court that Congress did not intend words of common meaning to have their literal effect." Watt v. Alaska, 451 U.S. 259, 266, 101 S.Ct. 1673, 1678, 68 L.Ed.2d 80 (1981) (citations omitted). As we look to the legislative history, however, we must remember that " '[t]here is, of course, no more persuasive evidence of the purpose of a statute than the words by which the legislature undertook to give expression to its wishes.' " Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 570, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982) (quoting, United States v. American Trucking Ass'n, Inc., 310 U.S. 534, 543, 60 S.Ct. 1059, 1063, 84 L.Ed. 1345 (1940)). In sum, if the statutory language is clear and plain, a court must give it effect unless the legislative history is such that a literal reading "will produce a result demonstrably at odds with the intention of [the] drafters," Id. 458 U.S. at 571, 102 S.Ct. at 3251, or in other words, "would thwart the obvious purposes of the ... [statute]." Mansell v. Mansell, --- U.S. ----, 109 S.Ct. 2023, 2030, 104 L.Ed.2d 675 (1989); see also United States v. Ron Pair Enterprises, Inc., --- U.S. ----, 109 S.Ct. 1026, 1031, 103 L.Ed.2d 290 (1989); American Tobacco Co. v. Patterson, 456 U.S. 63, 68, 102 S.Ct. 1534, 1537, 71 L.Ed.2d 748 (1982); United States v. Turkette, 452 U.S. 576, 593, 101 S.Ct. 2524, 2533, 69 L.Ed.2d 246 (1981); Ford Motor Credit Co. v. Cenance, 452 U.S. 155, 101 S.Ct. 2239, 68 L.Ed.2d 744 (1981); GTE Sylvania, 447 U.S. at 108, 100 S.Ct. at 2056; Consumer Party v. Davis, 778 F.2d 140, 147 (3d Cir.1985) ("An interpretation contrary to the plain meaning of a statute is justifiable only in the presence of clear indications of legislative intent....").

Another principle of statutory interpretation is relevant in this case. In a case where the statute's language and legislative history do not speak directly to the issue before the court, the court must uphold a construction of the statute rendered by the agency entrusted with the responsibility for administering and interpreting it if the administrative interpretation "is based on a permissible construction of the statute." Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-843, 104 S.Ct. 2778, 2781-2782, 81 L.Ed.2d 694 (1984). If such an agency has rendered a relevant construction of the statute, our approach to "interpreting the statute ... is significantly affected" and if the "agency's construction is reasonable, we must defer to that construction, although it may not be the only or even the most reasonable one." Kean v. Heckler, 799 F.2d 895, 899 (3d Cir.1986).

A.

With the foregoing principles in mind, we turn to the statute. Section 501 of DIDMCA provides in pertinent part:

The provisions of the constitution or the laws of any State expressly limiting the rate or amount of interest, discount points, finance charges, or other charges which may be charged, taken, received, or reserved shall not apply to any loan, mortgage, credit sale, or advance which is--

(A) secured by a first lien on residential real property, by a first lien on all stock allocated to a dwelling unit in a residential cooperative housing corporation, or by a first lien on a residential manufactured home;

(B) made after March 31, 1980; and

(C) described in section 527(b) of the National Housing Act....

12 U.S.C. Sec. 1735f-7a (emphasis added).

Thus, for the Pennsylvania state usury laws to be preempted here, all three of the requirements outlined above must be met. The parties agree and the...