HARRISBURG – The Commonwealth Court of Pennsylvania has concurred with a Philadelphia state court, in ordering that a Delaware-based auto loan business must comply with a subpoena from state Attorney General Josh Shapiro.
On March 30, Commonwealth Court judges Anne E. Covey, Christine Fizzano Cannon and Bonnie Brigance Leadbetter ordered Auto Equity Loans of Delaware, LLC to comply with the state’s subpoena, affirming an earlier decision from the Philadelphia County Court of Common Pleas.
Leadbetter authored the Court’s ruling in this matter.
“AEL provides financing to borrowers secured by motor vehicle titles as collateral. Following execution of a loan agreement with a Pennsylvania borrower, AEL submits the necessary documentation to the Pennsylvania Department of Transportation (PennDOT) to record AEL’s lien against the respective borrower’s motor vehicle. Should a Pennsylvania borrower default, AEL pays a third party to effect repossession of the vehicle securing the loan,” Leadbetter said.
“The present action originated with the Commonwealth’s investigation into AEL’s business practices pursuant to Section 918 of The Administrative Code of 1929. Pertinent here, the Commonwealth served a June 2020 subpoena on AEL requesting ‘information and/or copies of documents relating to all vehicle title loans [AEL] made to consumers who have resided in or had a vehicle registered in Pennsylvania during [Jan. 1, 2016, to June 30, 2020].’ Having received no response, the Commonwealth filed an enforcement action.”
The trial court at first granted the Commonwealth’s motion to compel and directing AEL to comply, but subsequently, the Court granted AEL’s motion for reconsideration and vacated the prior order.
In AEL’s response in opposition to the Commonwealth’s motion, AEL contended that the Commonwealth’s service was improper and that the trial court lacked personal jurisdiction, while the Commonwealth disagreed.
“AEL makes three arguments in its brief to this Court. First, it complains that the trial court resolved facts in the Commonwealth’s favor without holding a hearing. Next, it claims that the Commonwealth’s attempt to enforce its usury laws against it violates the dormant Commerce Clause of the United States Constitution. Finally, it argues that it was deprived of due process because it does not have sufficient minimum contacts with Pennsylvania to allow our courts to exercise personal jurisdiction over it,” Leadbetter said.
Leadbetter added that AEL’s argument that it could not have known the trial court’s rationale without an opinion being issued as “defying credulity”, given that it knew that there had been no hearing and that it “neither requested a hearing nor raised a Commerce Clause issue in its response to the motion to compel or in its brief in opposition to that motion.”
In TitleMax of Delaware, Inc. v. Weissman, Leadbetter explained that the U.S. Court of Appeals for the Third Circuit “determined that applying our usury laws to an out-of-state lender did not violate the dormant Commerce Clause, noting that the Commonwealth has a strong interest in preventing usury and that any burden on interstate commerce is incidental.”
“The Court reasoned that TitleMax’s transactions with Pennsylvanians involve both loans and collections, which do not occur ‘wholly outside’ of the Commonwealth. The transactions involve more than a simple conveyance of money at a brick-and-mortar store outside of Pennsylvania because Pennsylvanians make loan payments while physically present in their home state. Under the modern approach to the territorial scope of contracts, contracts formed between citizens in different states implicate both states’ regulatory interests such that it is irrelevant that the consumers were physically outside of Pennsylvania during the contract initiation,” Leadbetter stated.
“Accordingly, the Court held that the Department’s investigation did not violate the dormant Commerce Clause because the loans did not occur wholly outside of Pennsylvania. While we are not bound by opinions of the Circuit Courts, we find the analysis in TitleMax to be persuasive.”
Leadbetter added that in the instant case, the trial court considered the following factors in determining that the criteria for specific jurisdiction were satisfied, which AEL also did not dispute:
• AEL made vehicle title loans to Pennsylvanians for vehicles registered in the state;
• AEL placed liens on their vehicles with PennDOT;
• AEL repossessed vehicles from Pennsylvanians in Pennsylvania;
• AEL sold those repossessed vehicles at motor vehicle auctions in the state; and
• AEL collected payments from Pennsylvanians.
“As for AEL’s lack of physical presence in the Commonwealth, the United States Supreme Court has held that ‘it is settled law that a business need not have a physical presence in a State to satisfy the demands of due process. Due process requirements are satisfied ‘irrespective of a corporation’s lack of physical presence in the [] State.’ The Court has emphasized that ‘parties who ‘reach out beyond one state and create continuing relationships and obligations with citizens of another state’ are subject to regulation and sanctions in the other State for the consequences of their activities.’ In that regard, the Supreme Court of Pennsylvania has held that lending money to Pennsylvanians constitutes ‘doing business’ within our state for purposes of subjecting a foreign company to our laws,” Leadbetter said.
“Moreover, by hiring a company to repossess Pennsylvanians’ vehicles, thereby using our highways and infrastructure, and by registering liens with PennDOT, AEL purposefully availed itself of the privilege of conducting activities within our state and invoked the benefits and protections of our laws. Consequently, the criteria for personal jurisdiction have been met. Accordingly, we affirm.”
Commonwealth Court of Pennsylvania case 89 C.D. 2021
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com