Gregoria v. Total Asset Recovery, Inc., CIVIL ACTION 12-4315
| Decision Date | 07 January 2015 |
| Docket Number | CIVIL ACTION 12-4315 |
| Court | U.S. District Court — Eastern District of Pennsylvania |
| Parties | CONSTANTINE J. GREGORIA, et. al., Plaintiffs, v. TOTAL ASSET RECOVERY, INC., et. al., Defendants. |
Constantine J. Gregoria and Christie J. Hudson bring this action against Total Asset Recovery, Inc., and its owner and CEO Matthew Howard alleging violations of the Fair Debt Collection Practices Act,1 15 U.S.C. § 1692, et seq., and the Racketeer Influenced and Corrupt Organizations Act,2 18 U.S.C. § 1962(c). These claims arise from the repossession of the plaintiffs' car as collection for an allegedly usurious loan. The defendants filed a motion to dismiss pursuant to Rules 12(b)(6), 12(b)(7), and 19 of the Federal Rules of Civil Procedure, and the plaintiffs responded. For the following reasons, I will grant the motion in part.
The plaintiffs were the owners of a 2006 Nissan Altima with a clear title, valued at over $10,000. The vehicle was titled, registered, and licensed in Pennsylvania, and was kept at the plaintiffs' personal residence in Marcus Hook. The plaintiffs were in need of a personal loan and went to a Delaware company known as Delaware Title Loans [DTL] for an auto title loan. The complaint describes an auto title loan as a
Beginning in June 2011, DTL entered into a series of five loan agreements with the plaintiffs wherein it lent the plaintiffs a total of $4,039 at 150% A.P.R. The plaintiffs were able to repay $2,013 but most of that money was applied to interest. By December 2012, the monthly payment for these loans had reached $630. Because the plaintiffs were late on their payments for February and March 2012, DTL sought to repossess their vehicle.
The complaint alleges that Defendant Total Asset Recovery [TAR], under the authority of Defendant Matthew Howard, agreed to work for DTL to repossess the plaintiffs' vehicle. TAR is a Delaware corporation. The complaint further alleges that "Total Asset Recovery is in the automobile repossession business and qualified as a debt collector under the Fair Debt Collection Practices Act." Its principal business is the collection of debts through the enforcement of security interests and uses various instrumentalities of interstate commerce in the course of its business including motor vehicles (tow trucks), the internet, telephones, and the mail.
On April 25, 2012, TAR "crossed the border into Pennsylvania" and repossessed the plaintiffs' vehicle in the vicinity of their home. The complaint insists that the repossession was performed pursuant to the express authorization and direction of Mr. Howard who had decided that his business would perform repossessions within Pennsylvania to enforce usurious auto title loans from Delaware. The plaintiffs believe that the defendants agreed to this repossession either knowing that the auto title loan was illegal or without performing any due diligence to determine the validity or legality of the loan or their right to enter Pennsylvania and repossess a car to enforce a 150% annual interest rate.
The plaintiffs had various personal effects and possessions in their vehicle which have never been returned to them. Although the car was valued at over $10,000, the plaintiffs have not received any money back from the repossession. Accordingly, in bringing this action, the plaintiffs seek in Count I an award of actual and statutory damages including damages for the deprivation of their vehicle, expenses for alternative transportation, emotional distress, attorney's fees, and costs. In Count II, they seek an award of damages against Defendant Howard equivalent to three times their actual damages including their economic and noneconomic injuries.
A complaint must set forth "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This statement must "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (quoting Conley v. Gibson, 355 U.S. 41,47 (1957)). A complaint need not contain detailed factual allegations, but a plaintiff must provide "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action" to show entitlement to relief as prescribed by Rule 8(a)(2). Id. at 1965; Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005). A defendant may attack a complaint by a motion under Rule 12(b)(6) for failure to state a claim upon which relief can be granted.
In deciding a motion to dismiss under Rule 12(b)(6), I may consider "the allegations contained in the complaint, exhibits attached to the complaint and matters of public record." Pension Ben.Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). I must accept as true all of the factual allegations in the complaint, Erickson v. Pardus, 551 U.S. 89 (2007), and all reasonable inferences permitted by the factual allegations, Watson v. Abington Twp., 478 F.3d 144, 150 (3d Cir. 2007), viewing them in the light most favorable to the plaintiff. Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007). However, I am not "compelled to accept unsupported conclusions and unwarranted inferences or a legal conclusion couched as a factual allegation." Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007) (internal quotation marks and citations omitted). If the facts alleged are sufficient to "raise a right to relief above the speculative level" such that the plaintiffs' claim is "plausible on its face," a complaint will survive a motion to dismiss. Bell Atlantic Corp., 127 S. Ct. at 1965, 1974; Victaulic Co. v. Tieman, 499 F.3d 227, 234-35 (3d Cir. 2007).
Plaintiffs seek relief from TAR through Section 808 of the Fair Debt Collection Practices Act [FDCPA]. 15 U.S.C. § 1692f(6)(A). Pursuant to the statute, a "debt collector may not ... tak[e] or threaten[] to take any nonjudicial action to effect dispossession or disablement of property if there is no present right to possession of the property claimed as collateral through an enforceable security instrument." Id. For the purposes of this section of the FDCPA only, the term debt collector includes "... any business the principal purpose of which is the enforcement of security interests." § 1692a(6). A repossession agency, such as TAR, is an enforcer of security interests. See Jordan v. Kent Recovery Servs., Inc., 731 F. Supp. 652, 657 (D. Del. 1990). There appears to be no real dispute that TAR falls within the ambit of the statute. Mot. to Dismiss 8.
The issue for this motion to dismiss is whether DTL had a present right to possession of the vehicle. This point is critical because the FDCPA imposes no liability on a repossessor "who enforce[s] security interests when a 'present right' to the collateral exists...." Jordan, 731 F. Supp. at 657. Plaintiffs allege that the loan agreement is not legally enforceable because the 150% APR violates Pennsylvania Law. Noting that the contract provides that it shall be governed by Delaware Law, Defendants contend that, even if Pennsylvania law applies, the note is not void, and DTL had a present right of possession in the vehicle when plaintiffs were late on their payments for February and March 2012.
To resolve this dispute, I must first decide whether Pennsylvania or Delaware law governs the agreement. Kaneff v. Delaware Title Loans, Inc., 587 F.3d 616, 621 (3d Cir. 2009) (). In a federal question case, I look to the choice of law principles of the forum state to determine which state's law applies. Gay v. CreditInform, 511 F.3d 369, 389 (3d Cir. 2007) (). Accordingly, I will apply Pennsylvania's choice of law principles. In doing so, my analysis is controlled by the Third Circuit's decision in Kaneff which interpreted an identical title loan agreement between a Pennsylvania borrower and DTL.3 587 F.3d at 621-624.
Under Pennsylvania choice of law principles, I must first determine if a true conflict exist. A 150% annual interest rate applies to the loan agreement between Mr. Gregoria and DTL. Such an exorbitant rate of interest is perfectly legal and enforceable in Delaware which has no usury laws. Id. at 622. On the other hand, Pennsylvania's LoanInterest and Protection Law [LIPL] provides that the maximum lawful rate of interest which an unlicensed lender may charge is 6%. 41 Pa.C.S. § 201. A Pennsylvania lender licensed under the Consumer Discount Company Act [CDCA] may charge an annual interest rate not to exceed 24%. 7 Pa. C. S. §§ 6213.E and 6217.1.A; Cash Am. Net of Nevada, LLC v. Com., Dep't of Banking, 8 A.3d 282, 285 (Pa. 2010). Accordingly, the plaintiffs would not be obligated to pay the interest in excess of the applicable LIPL or CDCA rate in Pennsylvania. 41 Pa.C.S. § 501.4 "There can be no question that there is a true conflict between Delaware and Pennsylvania in their approach to and treatment of usurious interest." Kaneff, 587 F.3d at 622.
Pennsylvania choice of contract law principles "generally honor the intent of the contracting parties and enforce choice of law provisions in contracts executed by them." Gay, 511 F.3d at 389 (citing Kruzits v. Okuma Machine Tool, Inc., 40 F.3d 52, 55 (3d Cir.1994)). Contractual choice of law provisions will be enforced unless:
(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable...
To continue reading
Request your trial