Commonwealth v. NC Fin. Solutions of Utah, LLC
| Decision Date | 28 October 2018 |
| Docket Number | Case No. CL-2018-6258 |
| Court | Circuit Court of Virginia |
| Parties | Re: Commonwealth of Virginia v. NC Financial Solutions of Utah, LLC |
BRUCE D. WHITE, CHIEF JUDGE RANDY I. BELLOWS ROBERT J. SMITH JAN L. BRODIE BRETT A. KASSABIAN MICHAEL F. DEVINE JOHN M. TRAN GRACE BURKE CARROLL DANIEL E. ORTIZ PENNEY S. AZCARATE STEPHEN C. SHANNON THOMAS P. MANN RICHARD E. GARDINER DAVID BERNHARD DAVID A. OBLON JUDGES
THOMAS A. FORTKORT JACK B. STEVENS J. HOWE BROWN F. BRUCE BACH M. LANGHORNE KEITH ARTHUR B. VIEREGG KATHLEEN H. MACKAY ROBERT W. WOOLDRIDGE, JR. MICHAEL P. McWEENY GAYLORD L. FINCH, JR. STANLEY P. KLEIN LESLIE M. ALDEN MARCUS D. WILLIAMS JONATHAN C. THACHER CHARLES J. MAXFIELD DENNIS J. SMITH LORRAINE NORDLUND DAVID S. SCHELL RETIRED JUDGES
LETTER OPINION
Ms. Erin E. Witte (Lead Attorney)
Assistant Attorney General
Mr. David B. Irvin (Supervising Attorney)
Mr. James E. Scott
Assistant Attorney General
Office Mark R. Herring, Attorney General of Virginia
Consumer Protection Section, Predatory Lending Unit
202 North Ninth Street
Richmond, Virginia 23219
Counsel for Plaintiff
Mr. Charles K. Seyfarth
Ms. Elizabeth Scott Turner
Mr. C. Quinn Adams
O'Hagan Meyer PLLC
411 E. Franklin Street, Suite 500
Richmond, Virginia 23219
Counsel for Defendant
Dear Counsel:
This cause comes before the Court on motion of NC Financial Solutions of Utah, LLC ("Net Credit" or "Defendant") for a Change of Venue and on its Demurrer to the Complaint of the Commonwealth of Virginia ("Commonwealth" or "Plaintiff"), alleging multiple violations of the Virginia Consumer Protection Act ("VCPA"). The Court is presented with the question whether unlicensed entities engaged in noncommercial personal financial lending activities to Virginia consumers are exempt from application of the VCPA as "small loan companies." For the reasons as more fully stated herein the Court holds as follows: 1) venue is proper in Fairfax County as the Complaint alleges violations of the VCPA respecting several consumer transactions in this jurisdiction, Defendant admits making consumer loans in Fairfax County, and Net Credit has failed to overcome the factual inference of a sufficient nexus to Fairfax County derived from the pleadings of the Plaintiff, despite being in the position as lender to posit to the Court with particularity the exact number of customers with whom it has transacted business in this forum; 2) the exemption contained in the VCPA for "small loan companies," a term synonymous with "consumer finance companies," does not apply to Defendant because it is unlicensed in Virginia, and not regulated and supervised by the State Corporation Commission or comparable federal regulating body; 3) the choice of Utah law provided in Defendant's loan agreement with its Virginia customers is unenforceable as neither supported by the required nexus to Utah nor overcoming the strong public policy that deceptive consumer trade practices not escape remedy under the VCPA; and 4) the Commonwealth has adequately pled misrepresentations by Net Credit in violation of the VCPA. Accordingly, the Motion of Defendant to Change Venue is denied and its Demurrer is overruled.
The case before the Court is an action brought by the Commonwealth against Net Credit for violations of the Virginia Consumer Protection Act, Virginia Code §§ 59.1-96 - 59.1-207. The Commonwealth's Complaint alleges Net Credit violated the VCPA by misrepresenting to consumers they were required to make payments on their loans after filing for bankruptcy, collecting payments in violations of the automatic stay pursuant to 11 U.S.C. § 362(a)(6), misrepresenting its licensure by the Utah Department of Financial Institutions ("DFI"), misrepresenting that its lending in Virginia was regulated by the Utah DFI, misrepresenting its Virginia loans were governed by the Utah Consumer Credit Code and not subject to the law of Virginia, and misrepresenting the legality of charging more than twelve percent (12%) annual interest. See Compl. ¶ 76(a)-(g).
Net Credit is a Chicago-based, internet lender which has allegedly provided closed-end installment loans to over 47,000 Virginia consumers at annual interest rates ranging from 35% to 155% between 2012 and 2018. Id. ¶ 1. Net Credit is not a Virginia-licensed consumer finance company, and relies on a Utah choice-of-law contractual clause in defense of this case. The Commonwealth posits this choice-of-law provision is void, as the purpose of the loan agreements with Virginians bears no reasonable relationship to Utah and further violates Virginia public policy against usury. Id. ¶ 41-43. Plaintiff also alleges Net Credit misrepresented to Virginia consumers in bankruptcy they were required to pay loans which had been stayed or discharged, and that Net Credit continued to collect against Virginians in derogation of their filing for bankruptcy. Id. ¶ 62-71.
The Commonwealth is seeking restitution, civil penalties, attorneys' fees, and injunctive relief.
As a preliminary matter, Net Credit challenges the propriety of venue in Fairfax County, maintaining this Court should transfer the case to the Circuit Court for the City of Richmond. A county or city is a permissible venue "[p]rovided there exists any practical nexus to the forum including, but not limited to, the location of fact witnesses, plaintiffs, or other evidence to the action, wherein the defendant regularly conducts substantial business activity...." Va. Code § 8.01-262(3). There is a rebuttable presumption Plaintiff's choice of venue is correct. See Norfolk & W. Ry. Co. v. Williams, 239 Va. 390, 394, 389 S.E.2d 714, 717 (1990); see also Hernandez v. E. Coast Barge & Boat Co., 85 Va. Cir. 103, 103-04 (Norfolk 2012). The Court may, upon motion by a party and for good cause shown, transfer an action to any fair and convenient forum having jurisdiction within Virginia. Va. Code § 8.01-265. "Good cause shall be deemed to include, but not to be limited to, the agreement of the parties or the avoidance of substantial inconvenience to the parties or the witnesses, or complying with the law of any other state or the United States." Id. Moreover, "[t]he party objecting to venue has the burden to establish that the venue chosen by the plaintiff was improper." Hawthorne v. VanMarter, 279 Va. 566, 581 (2010) (citing Barnett v. Kite, 271 Va. 65, 69, 624 S.E.2d 52, 54 (2006); Meyer v. Brown, 256 Va. 53, 57, 500 S.E.2d 807, 809 (1998)).
The Commonwealth asserts venue is proper in Fairfax County because Net Credit conducts "substantial business activity" in the forum, as "several" consumers who reside in the County have received loans from Net Credit and continue to pay on those loans. Compl. ¶ 2-3. Plaintiff does not, however, specify how many of the 47,000 Virginians given loans by Net Credit reside in Fairfax County. Taking the facts alleged in the Complaint as true, Net Credit conducts substantial business activity in Fairfax County as several of those Virginians with whom it conducts business reside in the forum. Further, Net Credit has admitted Fairfax County is a proper venue. Mot. ¶ 3. Moreover, in oral argument of this Motion, Net Credit admitted doing business in Fairfax. It did not avail itself of the opportunity to persuade the Court of the absence of substantial business connection to the jurisdiction despite the fact that, inferentially as a purveyor of loans, Defendant knows exactly from how many customers it collects loan repayments and their location.
Net Credit argues that Fairfax County does not have a practical nexus to this case, and cites Williams to substantiate that claim. Mot. ¶ 10. Williams, however, specified that the lack of a practical nexus alone is not enough to prove good cause to transfer the case. Williams, 239 Va. at 396, 389 S.E.2d at 717-18. This view expressed in Williams was affirmed in later decisions. See Virginia Elec. & Power Co. v. Dungee, 258 Va. 235, 246, 520 S.E.2d 164, 170 (1999); Kollman v. Jordan, 60 Va. Cir. 293, 295 (Chesterfield 2002). The requisite nexus to Fairfax is further enhanced beyond Net Credit's business activities in that Plaintiff has an office in the chosen forum. With all relevant factors considered, Fairfax County is thus a permissible venue for adjudication of this case.
Net Credit did not meet its countervailing burden of proving good cause to transfer the case to the Circuit Court for the City of Richmond. That both parties have counsel in Richmond which location might also constitute a practical venue for adjudication of this case is not a factor to be considered in determining good cause for transfer. City of Danville v. Virginia State Water Control Bd., 18 Va. App. 594, 599, 446 S.E.2d 466, 469 (1994). In addition, Net Credit did not proffer substantial inconvenience to the parties were the case to be tried in Fairfax beyond the statement that more customers live in the Richmond metropolitan area than in Fairfax County. As the Commonwealth points out, this broad statement is not enough to show good cause to transfer without identifying witnesses who will actually be inconvenienced. See Bradley v. Kellum, 55 Va. Cir. 397, 399 (Charlottesville 2001). While Net Credit claims Richmond is a more convenient forum, it has not met its burden to demonstrate good cause to transfer venue in this case.
Net Credit demurs to the Commonwealth's Complaint A demurrer admits the truth of the facts contained in the pleading to which it is addressed, as well as any facts that may be reasonably and fairly implied and inferred from those allegations. See McDermott v. Reynolds, 260 Va. 98, 100, 530 S.E.2d 902, 903 (2000). A demurrer does not, however, admit the correctness of the pleader's conclusions of law. Yuzefovsky v. St. John's Wood Apartments, 261 Va. 97, 102, 540 S.E.2d 134, 137 (2001). To survive a challenge by demurr...
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