BRIEF ON BEHALF OF APPELLEESIn April of 2012, plaintiff obtained an auto title loan from Sovereign Lending Solutions, doing business as Title Loan America (“Sovereign”), a tribal

IN THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 14-3554

________________________________________________________

HEIKO GOLDENSTEIN,

Appellant,

v.

REPOSSESSORS, INC., CHAD LATVAAHO, SHADY OAK ENTERPRISES, INC., d/b/a

PREMIER FINANCE ADJUSTERS, PHILIP J. HOURICAN, AND WILLIAM McKIBBIN,

Appellees.

Appeal from District Court’s Order of July 17, 2014, Granting Summary Judgment to Defendants and Dismissing Plaintiff’s Complaint

________________________________________________________

BRIEF ON BEHALF OF APPELLEES ________________________________________________________

Neal A. Thakkar, Esq. William R. Hourican, Esq. SWEENEY & SHEEHAN, P.C. 527 Swede Street 216 Haddon Avenue, Suite 500 Norristown, PA 19401 Westmont, NJ 08108 (610) 278-1950 (phone) (856) 869-5600 (phone) [email protected] [email protected] Attorney for Philip Hourican Attorney for Repossessors, Inc., Chad Latvaaho, and Shady Oak Enterprises, d/b/a Premier Finance Adjusters

On the Brief: Neal A. Thakkar

Case: 14-3554 Document: 003111824622 Page: 1 Date Filed: 12/17/2014

ii

CORPORATE DISCLOSURE STATEMENTS

HEIKO GOLDENSTEIN, : Civil Action Plaintiff. : : NO. 14-3554 v. : : REPOSSESSORS INC., CHAD LATVAAHO, : SHADY OAK ENTERPRISES, INC., d/b/a : PREMIER FINANCE ADJUSTERS, PHILIP : J. HOURICAN & WILLIAM McKIBBIN, : Defendants. :

DISCLOSURE STATEMENT FORM

Please check one box: ■ The nongovernmental corporate parties, Minnesota Repossessors, Inc. and Shady Oak

Enterprises, Inc., in the above listed civil action do not have any parent corporations or publicly held corporations that own 10% or more of its stock.

□ The nongovernmental corporate party, , in the above listed civil action has the following parent corporation(s) and publicly held corporation(s) that owns 10% or more of its stock:

SWEENEY & SHEEHAN, P.C.

By: Neal A. Thakkar

Neal A. Thakkar, Esq. Pennsylvania Attorney ID #203846 New Jersey Attorney ID #043542004 216 Haddon Avenue, Suite 500 Westmont, NJ 08108 856-869-5600 [email protected] Attorney for Repossessors, Inc., Chad Latvaaho, and Shady Oak Enterprises, d/b/a Premier Finance Adjusters


i

TABLE OF CONTENTS

Table of Authorities . . . . . . . . . ii Statement of the Issues Presented for Review . . . . . 1 Statement of Related Cases . . . . . . . . 2 Statement of the Standard of Review . . . . . . . 2 Concise Statement of the Case . . . . . . . . 3 (a) Facts . . . . . . . . . . 3 (b) Procedural History . . . . . . . . 10 (c) Rulings Presented for Review . . . . . . 10 Summary of Argument . . . . . . . . . 12 Legal Argument . . . . . . . . . . 16

I. DEFENDANTS HAD A “PRESENT RIGHT TO POSSESSION”

OF PLAINTIFF’S VEHICLE WHEN IT WAS REPOSSESSED,

THEREFORE PLAINTIFF’S FDCPA CLAIMS FAIL AS A

MATTER OF LAW . . . . . . . 16

II. PLAINTIFF’S RICO CLAIMS FAIL AS A MATTER OF LAW,

AS HE CANNOT PROVE THE EXISTENCE OF A RICO

ENTERPRISE OR THAT DEFENDANTS COLLECTED

UNLAWFUL DEBT . . . . . . . 24

III. THE WAIVERS PLAINTIFF SIGNED BAR HIS

SUIT AGAINST DEFENDANTS . . . . . 31

IV. PLAINTIFF’S CRITICISMS OF SOVEREIGN’S DISPUTE

RESOLUTION PROCEDURE ARE MISPLACED, AS HE

NEVER ATTEMPTED TO PROCEED IN THAT FORUM . 35 Conclusion . . . . . . . . . . . 37 Certifications . . . . . . . . . . 38


ii

TABLE OF AUTHORITIES

Cases

Boyle v. United States, 556 U.S. 938, 940 (2009) . . . . . . . . . 26

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) . . . . . . . . . 35

Carrier v. William Penn Broad. Co., 233 A.2d 519 (Pa. 1967) . . . . . . . . . 32

Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (2001) . . . . . . . . . 26

City of Cleveland v. Woodhill Supply, Inc., 403 F. Supp. 2d 631 (N.D. Oh. 2005) . . . . . . . 28

Collins v. Siani’s Salvage, LLC, 2014 WL 1244057 (E.D.Pa. Mar. 24, 2014) . . . . . 12, 19

Com. v. Webbs Super Gro Products, Inc., 2 A.3d 591 (Pa. Super. 2010) . . . . . . . . 20

Denlinger, Inc. v. Dendler, 608 A.2d 1061 (Pa. Super. 1992) . . . . . . . 33

Ducrest v. Alco Collections, Inc., 931 F.Supp. 459 (M.D. La. 1996) . . . . . . 23, 29

Durante Bros. & Sons v. Flushing Nat. Bank, 755 F.2d 239 (2d Cir. 1985) . . . . . . . . 25

Goldenstein v. Repossessors, Inc., 2014 WL 3535112 (E.D. Pa. Jul. 17, 2014) . . . . . . 19

Gonzalez v. DRS Towing, LLC, Civ.A.No. 12-cv-05508 (E.D.Pa. Feb. 28, 2013) . . . . 11, 18-19

Hines v. G. Reynolds Sims Assoc., P.C.,

2013 WL1774938 (E.D. Mich. 2013) . . . . . . . 34


iii

In re Insurance Brokerage Antitrust Litigation, 618 F.2d 300 (3d Cir. 2010) . . . . . . . . 26

In re Koresko, 91 B.R. 689 (E.D.Pa. Bankr. 1988) . . . . . . . 33

Jordan v. Kent Recovery Services, Inc., 731 F. Supp. 652 (D. Del. 1990) . . . . . . . 29

Kaneff v. Delaware Title Loans, Inc., 587 F.3d 616 (3d Cir. 2009) . . . . . . . . 35

Malley-Duff & Assoc., Inc. v. Crown Life Ins. Co., 792 F.2d 341 (3d Cir. 1986) . . . . . . . . 24

Manson v. GMAC Mortgage, LLC, 283 F.R.D. 30 (D. Mass. 2012) . . . . . . . 21-22

Mulcahy v. Loftus, 267 A.2d 872 (Pa. 1970) . . . . . . . . passim

Ostroff v. Alterra Healthcare Corp., 433 F. Supp. 2d 538 (E.D. Pa. 2006) . . . . . . . 33

Otoe-Missouria Tribe of Indians v. N.Y. State Dep’t of Financial Serv., 769 F.3d 105 (S.D.N.Y. 2014) . . . . . . . . 35

Pennsylvania Dept. of Banking v. NCAS of Delaware. LLC,

995 A.2d 422 (Pa. Commw. 2010) . . . . . . 17, 18

Revering v. Norwest Bank Minn., N.A., 1999 WL 33911360 (D. Minn. 1999) . . . . . . 22, 23

Rivera v. AT&T Corp., 141 F. Supp. 2d 719 (S.D. Tex. 2001) . . . . . . . 27

Robidoux v. Conti, 741 F. Supp. 1019 (D.R.I. 1990) . . . . . . . 30

Roethlein v. Portnoff Law Associates, Ltd., 81 A.3d 816 (Pa. 2013) . . . . . . . . . 21


iv

Smith v. Transworld Systems, Inc., 953 F.2d 1025 (6th Cir. 1992) . . . . . . . . 29

Sundance Land Corp. v. Community First Fed. Sav. & Loan Ass'n, 840 F.2d 653 (9th Cir. 1988) . . . . . . . . 25

Szerdahelyi v. Harris, 490 N.E.2d 517 (N.Y. 1986) . . . . . . . . 21

Three Rivers Motor Co. v. Ford Motor Co., 522 F.2d 885 (3d Cir. 1975) . . . . . . . . 31

United States v. Bergrin, 650 F.3d 257 (3d Cir. 2011) . . . . . . . . 25

United States v. Biasucci, 768 F.2d 504 (2d Cir. 1986) . . . . . . . . 28

United States v. Riccobene, 709 F.2d 214 (3d Cir. 1983) . . . . . . . 26, 27

United States v. Turkette, 452 U.S. 576 (1981) . . . . . . . . . 26

United States v. Urban, 404 F.3d 754 (3d Cir. 2005) . . . . . . . . 25

Wahsner v. Am. Motors Sales Corp., 597 F. Supp. 991 (E.D. Pa. 1984) . . . . . . . 31

Statutes

15 U.S.C. § 1692f . . . . . . . . . passim

18 U.S.C. § 1961 . . . . . . . . . . 29

18 U.S.C. § 1962 . . . . . . . . . passim

1 Pa.C.S.A. § 1921 . . . . . . . . . . 20

13 Pa. C.S.A § 9609 . . . . . . . . . 22

13 Pa. C.S.A § 9610 . . . . . . . . . 22


v

13 Pa. C.S.A § 9611 . . . . . . . . . 22

13 Pa. C.S.A. § 9623 . . . . . . . . . 22

33 P.S. § 6 . . . . . . . . . . . 32

41 P.S. § 201 . . . . . . . . . . 16

41 P.S. § 501 . . . . . . . . . passim

41 P.S. § 502 . . . . . . . . . 20-21

41 P.S. § 503 . . . . . . . . . . 21

41 P.S. § 504 . . . . . . . . . . 21

McKinney's N.Y. General Obligations Law § 5-511 . . . . 21


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STATEMENT OF THE ISSUES PRESENTED FOR REVIEW

1. Whether defendant repossession companies had a “present right to

possession” of plaintiff’s automobile as contemplated by the Fair Debt Collection

Practices Act, 15 U.S.C. § 1692f(6)(A), when they performed a self-help

repossession over three months after plaintiff had admittedly defaulted on a loan

secured by the automobile after repaying less than half of the principal amount of

the loan?

Suggested Answer: Yes.

2. Whether the act of repossessing an automobile posted as collateral for

a secured loan bearing a usurious interest rate can subject repossession companies

and their principals to liability under the Racketeer Influenced Corrupt

Organizations (“RICO”) Act, 18 U.S.C. § 1962(c), absent proof of an “enterprise”

or the collection of unlawful debt?

Suggested Answer: No.


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STATEMENT OF RELATED CASES

Defendants are unaware of any cases or proceedings related to the case or

issues currently presented by this appeal aside from the cases set forth in plaintiff’s

brief.

STATEMENT OF THE STANDARD OF REVIEW

Defendants concur with the Statement of the Standard of Review set forth in

plaintiff’s brief.


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CONCISE STATEMENT OF THE CASE

This matter involves plaintiff’s attempt to recover damages under the Fair

Debt Collection Practices Act (“FDCPA”) and the Racketeer Influenced Corrupt

Organizations Act (“RICO”) from two repossession companies and their

principals, who were retained by a tribal lender to repossess his automobile, which

had been posted as collateral for a loan that he contends was usurious. The District

Court granted summary judgment to defendants, finding that they had a “present

right to possession” of the collateral when they repossessed it, and that

repossession of collateral is not tantamount to “collection of unlawful debt” under

RICO. Defendants respectfully request that this Court affirm the District Court’s

ruling in all respects.

A. Facts

In April of 2012, plaintiff obtained an auto title loan from Sovereign

Lending Solutions, doing business as Title Loan America (“Sovereign”), a tribal

lending entity of the Lac Vieux Desert Band of Chippewa Indians, a federally

recognized Indian tribe based in Watersmeet, Michigan. App. Vol. II at 3. The

principal amount of the loan was $1,000, and plaintiff was required to post his

1998 Lincoln Town Car as collateral. Plaintiff could not recall if he applied for the

loan online or by other means, but he did remember viewing a website online,

speaking with the lender’s representatives, and faxing information to the lender.


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App. Vol. II at 73. Additionally, plaintiff voluntarily provided his bank account

number and routing number to Sovereign during the application process. App. Vol.

II at 76, 78. On April 19, 2012, Sovereign wired $950 into plaintiff’s bank account,

representing the $1,000 loan minus a $50 wire transfer fee. App. Vol. II at 102.

Plaintiff did not retain a copy of a loan agreement or promissory note, but

his attorney provided a sample copy of a “Pawn Ticket and Agreement” Sovereign

had entered into with another borrower. The sample agreement provided, in

relevant part, that “[c]onsumer will be in default if any of the following happens:

(1) consumer fails to make any redemption payment when due or fails to perform

any other requirements under this Agreement;…(5) consumer fails to maintain

consumer’s depository account in good standing and in active status or fails to

maintain the required amount of funds in consumer’s account…” Upon default, the

Agreement provides that Sovereign may take possession of the pawned vehicle

with or without resort to judicial process. App. Vol. II at 36. The Agreement also

provided that in the event of a dispute between a consumer and Sovereign, the

consumer had the right to submit to a alternative dispute resolution procedure

administered by the Lac Vieux Desert Band of Chippewa Indians. App. Vol. II at

40.

Following his receipt of the funds, no further correspondence took place

between plaintiff and Sovereign. On June 1, 2012 and July 2, 2012, Sovereign


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debited his bank account $207.90. Because plaintiff did not recognize this account

activity (described as “Sovereign Payroll” on his bank statements), he opened a

second checking account and ceased depositing funds into the account from which

Sovereign was drawing payment, but he did not immediately close the account.

App. Vol. II at 79. He did, however, close the account by the end of August of

2012. App. Vol. II at 108.

When Sovereign attempted to obtain payment on August 2, 2012, it could

not do so because plaintiff’s account had insufficient funds to cover the payment.

App. Vol. II at 79-80. Therefore, on August 20, 2012, RS Financial LLC, a

company that services loans on behalf of Sovereign, retained defendant,

Repossessors, Inc. (“Repossessors”), to recover plaintiff’s vehicle. Repossessors is

a Minnesota corporation with a principal place of business in Minneapolis. It

conducts collateral recovery operations in Minnesota, North and South Dakota,

Iowa, Wisconsin, Nebraska, Arizona and New Mexico. App. Vol. II at 126.

Repossessors is a privately held corporation owned by Chad Latvaaho. It is

not an agent or employee of any lender with whom it does business, but rather

functions as an independent contractor. When a lender requests collateral recovery

services, the lender provides Repossessors with relevant information, which

includes the debtor’s personal information, a description of the collateral, the loan

account number, the past due date, and the loan balance. App. Vol. II at 126-127.


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Repossessors does not require that a lender provide a copy of a promissory

note or other instrument conferring a security interest in collateral before agreeing

to perform services. Rather, a lender seeking to engage Repossessors is required to

agree to the following terms and conditions:

TERMS AND CONDITIONS: This is your authorization to act as our agents to collect or repossess the above mentioned collateral. We agree to indemnify and hold harmless from and against any and all claims, damages, losses and actions, including reasonable attorney fees, resulting from and arising out of your efforts to collect and/or repossess claims, except however such as may be caused by or arise out of the negligence or unauthorized act on the part of you, your company, its officers, employees or its agents. The firm/bank issuing this authorization to recover collateral represents and affirms that it has the present right to repossess the collateral as defined in the FDCPA.

Because Repossessors does not conduct business in Pennsylvania, it

subcontracted the repossession to defendant, Shady Oak Enterprises, doing

business as Premier Finance Adjusters (“Premier”), on August 22, 2012. App.

Vol.II at 142. Premier is a Pennsylvania corporation owned by defendant, Philip J.

Hourican, and its business includes conducting collateral recovery services. App.

Vol. II at 59.

The repossession took place at plaintiff’s place of employment on October 6,

2012, and it was witnessed by plaintiff, several of his co-workers, and a police

officer. During the repossession, Premier’s employee permitted Plaintiff to recover


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his personal effects from the vehicle, advised Plaintiff that he could recover his

vehicle the following Monday, and gave him a phone number to call. App. Vol. II

at 82-83. The repossession was accomplished without a breach of the peace, but

plaintiff claims he was embarrassed. App. Vol. II at 81.

When Plaintiff called the phone number he was given, he was told that he

could recover his vehicle from a lot in Pottstown, and that he would need to bring

in excess of $2,000 to do so. To recover his vehicle, he paid $2,143 for the loan

payment redemption, and $250 in expenses for its repossession and storage. App.

Vol. II at 84. When he arrived at Premier’s lot, Plaintiff was advised that he needed

to review and sign a package of release documents. Premier advised him that it

would not accept payment or turn over his vehicle before he signed the documents,

but did not threaten him with bodily harm at any time. App. Vol. II at 85. Plaintiff

signed the documents after consulting with his current attorney. App. Vol. II at 85-

86. The documents indicate that the only money plaintiff paid to Premier consisted

of a $95 administration fee, three days of storage at $35/day, and a $50 redemption

fee, for a total of $250. App. Vol. II at 43, 44, 46.

The documents plaintiff signed include an “Agreement to Redeem

Property”, a “Release Request”, a “Receipt for Redeeming Personal Property”, a

“Release Authorization”, and a “Vehicle Release”. App. Vol. II at 41-46, 85. The

“Agreement to Redeem Property” provides, in relevant part, as follows:


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I, Heiko Goldenstein [,] for good and valid consideration, the receipt and sufficiency of which is hereby acknowledged, do hereby release and forever discharge Auto Portfolio Services, Repossessors Inc. and their respective successors, affiliated companies, officers and directors (hereinafter referred to as “Company(s)”) from all debts, demands, actions, suits, agreements, damages and any and all claims, demands and liabilities whatsoever of every name and nature, both in law and in equity, which I may now have or ever had against Company(s). Nothing herein constitutes an admission of liability and in fact the company(s) deny any and all allegation[s] of wrongdoing.

Without limiting the generality of the foregoing, I specifically release and discharge Company(s) from any debts, demands, actions, suits, agreements, damages and any and all claims, demands and liabilities whatsoever of every name and nature, both in law and in equity, which I may now have or ever had against Company(s) whatsoever with respect to the repossession and/or storage of and with respect to any personal property contained in the 1998 Lincoln Town Car [VIN # omitted]…

[App. Vol. II at 41.]

The “Vehicle Release” which Plaintiff signed provided that:

The undersigned hereby acknowledges receiving and inspecting the vehicle described on this form and finding said vehicle to be in same condition as when repossessed and all personal property and keys accounted for and hereby releases Repossessors Inc. and/or their client and/or agents from any and all claims now and hereafter, whether known or unknown, anticipated or unanticipated.

[App. Vol. II at 45.]


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After he obtained the proceeds of the loan, plaintiff never again attempted to

reach Sovereign to discuss the repayment of his loan, even after he noticed that

“Sovereign Payroll” had debited his checking account in June and July of 2012.

App. Vol. II at 78. Further, at no time prior to the repossession did plaintiff contact

Sovereign to attempt to void the loan, repay the principal, or renegotiate repayment

terms. App. Vol. II at 81. He never gave any notice to Sovereign of his intent to

repay the loan with interest at 6%. Id. He simply made no attempt to repay the loan

whatsoever, and at the time the repossession took place, he had paid only $414.80

to Sovereign. Even after the repossession, and to the current day, plaintiff has

never contacted Sovereign to attempt to avail himself of its dispute resolution

procedure or to recoup any interest payments or fees incurred in connection with

the repossession. Rather, he only filed suit against Repossessors, Inc., its president,

Chad Latvaaho, Shady Oak Enterprises, and its president, Philip Hourican.

Plaintiff’s complaint sets forth three counts. The first alleges that

Repossessors and Premier violated the FDCPA and Pennsylvania’s Fair Credit

Extension Uniformity Act (“FCEUA”), and is primarily premised on the claim that

defendants lacked a “present right to repossess [his] car.” App. Vol. II at 7, ¶-42.

The second count alleges that Latvaaho and Hourican violated 18 U.S.C. § 1962(c)

by repossessing his car to collect unlawful debt, and the third count alleges that

Latvaaho, Hourican and William McKibbin (whom plaintiff was unable to serve)


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violated 18 U.S.C. § 1962(d) by entering into a conspiracy to repossess his car to

collect unlawful debt. App. Vol. II at 1-13. Defendants denied any wrongdoing.

App. Vol. II at 47, 58.

B. Procedural History

Defendants concur with the procedural history set forth in plaintiff’s brief.

C. Rulings Presented for Review

In their motion for summary judgment, defendants set forth the following

arguments, all of which are now properly before this Court for de novo review:

II. PLAINTIFF’S FDCPA CLAIM AGAINST THE

REPOSSESSION DEFENDANTS FAILS AS A MATTER OF

LAW

A. PLAINTIFF CANNOT PROVE THAT THE

TERMS OF THE LOAN HE OBTAINED FROM SOVEREIGN VIOLATED PENNSYLVANIA LAW

B. EVEN ASSUMING THAT THE LOAN’S INTEREST

RATE VIOLATED PENNSYLVANIA’S ANTI-USURY LAW, PLAINTIFF FAILED TO EXERCISE HIS RIGHT TO VOID THE LOAN

C. THE WAIVER AND RELEASE AGREEMENTS BAR

PLAINTIFF’S SUIT D. THE LEGALITY OF THE LOAN PLAINTIFF

OBTAINED FROM SOVEREIGN CAN ONLY BE DECIDED THROUGH THE TRIBAL DISPUTE RESOLUTION PROCEDURE ESTABLISHED BY


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THE LAC VIEUX DESERT BAND OF CHIPPEWA INDIANS

III. PLAINTIFF’S RICO CLAIMS FAIL AS A MATTER OF LAW,

AS HE CANNOT PROVE THAT DEFENDANTS COLLECTED

UNLAWFUL DEBT

The District Court held that defendants had a present right to possession of

plaintiff’s vehicle when it was repossessed, as plaintiff had defaulted on his

obligations under the loan agreement by making only two payments and then

nothing for three months. The court, citing Mulcahy v. Loftus, 267 A.2d 872 (Pa.

1970), observed that under 41 P.S. § 501, a loan that carries a usurious interest rate

is not void, but only voidable as to the excess interest when the borrower notifies

the lender of his intent to repay the loan at the lawful interest rate. Thus, the court

found that the loan was valid, that plaintiff had failed to exercise his statutory right

to modify the interest rate of the loan, and that, in any case, plaintiff had repaid less

than half of the principal amount of the loan (with no payments for three months)

when his vehicle was repossessed. The court found that the repossession

comported with Pennsylvania law governing self-help repossessions, and held that

summary judgment was therefore warranted on plaintiff’s FDCPA and FCEUA

claims, as they share the same elements.

The District Court also held that plaintiff had failed to establish a RICO

violation, as the repossession of collateral is not tantamount to the collection of

unlawful debt. The Court cited to Gonzalez v. DRS Towing, LLC, Civ.A.No. 12-cv-


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05508 (E.D.Pa. Feb. 28, 2013) (Davis, J.), and Collins v. Siani’s Salvage, LLC,

2014 WL 1244057 (E.D.Pa. Mar. 24, 2014) (Schmehl, J.), prior decisions by its

colleagues dismissing identical claims brought by plaintiff’s counsel.

By virtue of its holdings with regard to the FDCPA and RICO claims, the

District Court did not address defendants’ waiver argument, and tangentially

addressed a “best evidence rule” argument defendants raised due to plaintiff’s

failure to produce his loan agreement with Sovereign.

SUMMARY OF ARGUMENT

Defendants respectfully request that this Court affirm the District Court’s

ruling in all respects.

With regard to the FDCPA and FCEUA claim, plaintiff’s argument must

necessarily rest on the premise that defendants did not have a “present right to

possession of the property claimed as collateral through a valid security interest,”

as this is the only portion of the FDCPA that exposes repossession companies to

potential liability. It has long been the law in Pennsylvania that loans that carry a

usurious rate of interest are not void, but are voidable only as to the amount of

excess interest. Mulcahy v. Loftus, supra, 267 A.2d 872. Further, pursuant to 41

P.S. § 501, a borrower must act affirmatively to exercise this right, by giving

notice to the creditor of his intent to repay the loan at the lawful interest rate. Here,


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plaintiff was required to make monthly payments on the loan. He failed to do so,

and had made no payments for three months when his vehicle was repossessed.

When it was repossessed, plaintiff had paid only $414.80 to Sovereign, and

regardless of whether this is characterized as principal or interest, he was in

substantial default of his obligations under the loan. Therefore, at the point in time

when his vehicle was repossessed, defendants had a “present right to possession”

of his vehicle under the relevant portions of Pennsylvania’s Uniform Commercial

Code, since he was in default of a valid secured loan. Moreover, as the

repossession was accomplished without a breach of the peace, it comported with

13 Pa.C.S.A. § 9609.

Plaintiff’s argument to the contrary fails for several reasons, the first and

foremost being that it is built on the faulty premise that a usurious loan is rendered

void by operation of law. Plaintiff has failed to distinguish, let alone cite Mulcahy

v. Loftus, and he fails to acknowledge that 41 P.S. § 501 does not operate to

automatically reform usurious loans to comport with the lawful interest rate. As

such, plaintiff’s arguments concerning the interest he should have been required to

pay are beside the point; the fact is that he made no payments whatsoever for three

months before the repossession. While he claims that FDCPA and FCEUA liability

should be imposed because the purpose of the repossession was to coerce the

payment of unlawful interest, he was under no legal obligation to redeem his


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vehicle. Further, the focus of the FDCPA as it relates to repossession companies is

on whether there is a present right to possession of the collateral at the time it is

recovered, not for events that occur after the repossession is accomplished.

With regard to the RICO violations, the District Court correctly dismissed

these claims as well. Plaintiff’s complaint identifies the repossession of his car as

the single event giving rise to RICO liability, and the Court held that repossession

of collateral is not tantamount to the collection of unlawful debt. As below,

plaintiff has not cited a single case holding otherwise. Instead, plaintiff now

argues, for the first time, that because Premier accepted payment from him, that

liability arises from this post-repossession activity.

While Premier denies accepting any principal or interest and admits only to

collecting fees incurred with the towing and storage of the vehicle, RICO liability

would not arise even had it accepted a payment of principal and interest on the

lender’s behalf. Plaintiff’s proofs fall far short of establishing an “enterprise” that

conspired to collect unlawful debt. Rather, the most plaintiff can show is an ad hoc

arrangement wherein Sovereign’s loan servicer, RS Financial LLC, retained an

independent contractor, Repossessors, who when subcontracted the repossession to

Premier. While Repossessors was provided with a loan number, the arrearage and

days overdue, and a description of the collateral, it was not given a copy of the

loan agreement, nor was it required by any law or statute to ascertain the legality of


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the loan prior to conducting the repossession. Thus, no liability would arise under

RICO, and the District Court’s ruling should be affirmed.

Although not reached by the District Court, in the even this Court finds that

defendants could potentially be liable to plaintiff under the theories advanced,

defendants submit that the waiver agreements plaintiff signed at Premier’s lot, after

speaking with his attorney, are enforceable and bar this suit. As set forth above, the

repossession was lawful, and plaintiff was under no obligation to redeem his

vehicle. He chose to do so, and he signed the releases after receiving advice from

his attorney. They are not illegal exculpatory agreements, as they only purport to

release the repossession companies – not the lender – from liability.

For these reasons, as amplified below, it is respectfully requested that this

Court affirm the District Court’s ruling in all respects.


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LEGAL ARGUMENT

I. DEFENDANTS HAD A “PRESENT RIGHT TO POSSESSION”

OF PLAINTIFF’S VEHICLE WHEN IT WAS REPOSSESSED,

THEREFORE PLAINTIFF’S FDCPA CLAIMS FAIL AS A

MATTER OF LAW

Under Pennsylvania law, a loan issued by an unlicensed lender that has an

interest rate in excess of 6% is not void per se; rather, it is voidable upon notice to

the lender from the borrower. Here, plaintiff never attempted to exercise his right

to declare the loan void, to renegotiate its terms, or to repay the principal plus

interest at 6%. His vehicle was repossessed because he accepted a loan of

$1,000.00, made two payments totaling $414.80, and then failed to make any

additional payments or contact Sovereign to discuss repayment for three months.

Even assuming that Sovereign’s tribal lending activities are subject to

Pennsylvania law, plaintiff cannot advance any credible claim that defendants

lacked the “present right to possession of the property claimed as collateral through

an enforceable security interest” at the time his vehicle was repossessed. The

District Court’s dismissal of this claim should therefore be affirmed.

Pennsylvania’s Loan Interest Protection Law (“LIPL”), 41 P.S. § 201

provides, in relevant part, that “the maximum lawful rate of interest for the loan or

use of money in an amount of fifty thousand dollars ($50,000) or less in all cases

where no express contract shall have been made for a less rate shall be six per cent


- 17 -

per annum.” In the event that a loan carries an interest rate in excess of 6%, 41 P.S.

§ 501 provides as follows:

When a rate of interest for the loan or use of money, exceeding that provided by this act or otherwise by law shall have been reserved or contracted for, the borrower or debtor shall not be required to pay to the creditor the excess over such maximum interest rate and it shall be lawful for such borrower or debtor, at his option, to retain and deduct such excess from the amount of such debt providing the borrower or debtor gives notice of the asserted excess to the creditor. (emphasis added).

[41 P.S. § 501.]

In Mulcahy v. Loftus, 267 A.2d 872, Pennsylvania’s Supreme Court

observed that when a note calls for a usurious rate of interest, this defect does not

render the note void, “but only voidable as to the interest specified beyond the

lawful rate.” Id. at 873. While Mulcahy construed a prior version of the LIPL, its

holding remains valid. In Pennsylvania Dept. of Banking v. NCAS of Delaware.

LLC, 995 A.2d 422 (Pa. Commw. 2010), the Department sought declarative and

injunctive relief against a payday lender. Among other things, the Department

alleged violations of the LIPL. One of the issues addressed by the Commonwealth

Court was whether the LIPL authorized nullification of the principal of a loan

where it included a usurious interest rate; the Court specifically noted:

The Department, under the LIPL and the Banking Code, sought and was granted injunctive relief to enjoin Advance America from continuing to offer its credit line of products to Pennsylvania borrowers. Although, as


- 18 -

referred to earlier, the LIPL does provide numerous remedies for the borrower, in addition to injunctive relief, the LIPL does not contain a provision that authorizes voiding the principal loan. As our Pennsylvania Supreme Court noted, “[t]here is no doubt that the note loan called for a usurious rate of interest... this defect, however, rendered the note not void, but only voidable as to the interest specified beyond the lawful rate “

Id. at 440 (emphasis added).

The District Court for the Eastern District of Pennsylvania twice relied on

Mulcahy in considering and rejecting the arguments plaintiff advances for a third

time in this appeal. In Gonzalez v. DRS Towing, LLC, No. 12-cv-5508, Dkt. #21

(E.D. Pa. Feb. 28, 2013), Judge Legrome D. Davis, in a similar suit brought by

plaintiff’s counsel against a repossession company and its owner, dismissed the

plaintiff’s FDCPA claim on this basis, holding that:

In this case, even if we assume that [the lender]’s interest rate violates Pennsylvania’s usury statute, the loan is not invalidated. Rather, the usurious loan would entitle Plaintiff to pursue a claim against [the lender] for recovery of statutory damages. Moreover, Plaintiff concedes that she did not make a timely payment as required by the valid loan agreement. Plaintiff’s failure to make a timely minimum interest payment permitted [the lender] to find Plaintiff in default of the loan, which it did on September 27, 2011. Once Plaintiff was in default of the loan, Defendant had the right to possess Plaintiff’s Cadillac when it towed her vehicle. Accordingly, Plaintiff fails to state a claim under the FDCPA and her claim must be dismissed.

Gonzalez v. DRS Towing, LLC, No. 12-cv-5508, Dkt. #21 (E.D. Pa. Feb. 28, 2013) (Davis, J.).


- 19 -

Next, Judge Jeffrey L. Schmehl dismissed similar FDCPA claims pursuant

to Fed. R. Civ. P. 12(b)(6) in Collins v. Siani’s Salvage, LLC, 2014 WL 1244057

(E.D. Pa. Mar. 26, 2014) In Collins, as here, plaintiff admittedly defaulted on an

auto title loan, and then sued the repossession company for violations of the

FDCPA and RICO statutes after his vehicle was repossessed. Judge Schmehl fully

concurred with Judge Davis’ reasoning concerning the dismissal of the FDCPA

and RICO counts, as did Judge James Knoll Gardner, who granted the summary

judgment motion from which plaintiff has appealed.

Contrary to plaintiff’s contention that Gonzalez and Collins are not

consistent with Pennsylvania law, it is plaintiff’s argument itself that is

inconsistent with the law. Plaintiff cannot distinguish or even account for Mulcahy

and therefore has pointedly omitted any reference of this controlling case from his

brief. This is in spite of Judge Gardner’s observation that “this Court has

repeatedly followed the Mulcahy rule.” Goldenstein v. Repossessors, Inc., 2014

WL 3535112 at *6 (E.D. Pa. Jul. 17, 2014). Furthermore, plaintiff only fleetingly

references 41 P.S. § 501, and omits reference to the provision which gives

borrowers the right to deduct excess interest upon notice to the creditor. It is only

through these omissions that plaintiff can support his theory of the case.

Plaintiff reasons that because it is unlawful for an unlicensed creditor to loan

money to Pennsylvania residents at an interest rate greater than 6%, that any loan


- 20 -

that carries a rate greater than 6% is reformed by operation of law to comply with

the LIPL’s rate cap. As such, he claims that because he made two payments of

$207.40, he only owed $9.60 in interest at the time that his vehicle was

repossessed, and that such an arrearage was not a material breach of the loan

agreement – notwithstanding that he failed to make any payment for three months.

This argument fails to recognize that, pursuant to 41 P.S. § 501, a borrower

seeking to void the portion of a loan that calls for an excess interest rate must

affirmatively notify the lender of his intent to repay the loan at a lawful rate. Here,

plaintiff failed to do so.

When deciding questions of statutory interpretation, it is the role of a court

to give effect to the intent of the legislature. 1 Pa.C.S.A. § 1921. “A presumption

also exists that the legislature placed every word, sentence and provision in the

statute for some purpose and therefore courts must give effect to every word.”

Com. v. Webbs Super Gro Products, Inc., 2 A.3d 591, 595 (Pa. Super. 2010). The

language of 41. P.S. § 501 is clear, and this Court cannot simply disregard it, as

plaintiff urges.

By reading the relevant portions of the “Remedies and Penalties” section of

the LIPL in pari materia, a comprehensive legislative scheme becomes apparent.

41 P.S. § 501 permits a borrower to void the provisions of a loan calling for an

excess interest rate. If the borrower fails to do so and pays usurious interest, § 502


- 21 -

provides that the borrower may recover triple excess interest from the lender in a

suit at law. § 503 provides that a borrower who prevails in such an action at law

may recover attorney’s fees. Lastly, § 504 confers standing to sue upon

individuals. See Roethlein v. Portnoff Law Associates, Ltd., 81 A.3d 816, 822-23

(Pa. 2013) (discussing legislative history and intent of the LIPL). Nowhere does

the LIPL provide that a loan bearing an excess interest rate is automatically

reformed to comport with the lawful interest rate.1

In any case, plaintiff has not alleged a cause of action against defendants

arising under the LIPL, but rather he seeks damages under the FDCPA. His claim

is premised on the notion that the defendants lacked the present right to repossess

his vehicle because the loan called for a usurious interest rate. However, as set

forth above, plaintiff was in default by virtue of his failure to make any payments

on the loan for three months, and he had never contacted Sovereign to exercise his

statutory right to modify the loan.

“A court should look to state law requirements to determine whether there

was a present right to possession under the FDCPA.” Manson v. GMAC Mortgage,

1 Cf. New York’s Anti-Usury Law, McKinney's General Obligations Law § 5-511, titled “Usurious contracts void.” See also Szerdahelyi v. Harris, 490 N.E.2d 517, 521 (N.Y. 1986) (holding that “when a court deems a transaction to be usurious, it must declare the transaction and its supporting documents void, enjoin prosecution on them and order that all documents and collateral be canceled and surrendered”).


- 22 -

LLC, 283 F.R.D. 30, 43 (D. Mass. 2012), citing Revering v. Norwest Bank Minn.,

N.A., 1999 WL 33911360 at *5 (D. Minn. Nov. 30, 1999). Here, 13 Pa. C.S.A §

9609 clearly establishes that Sovereign had the present right under Pennsylvania

law to repossess Plaintiff’s vehicle on October 6, 2012. § 9609(a) provides that

“[a]fter default, a secured party (1) may take possession of the collateral…” §

9609(b) provides that “a secured party may proceed under section (a) without

judicial process if it proceeds without a breach of the peace.” As plaintiff has

admitted that he defaulted on the loan and that no breach of the peace occurred,

defendants fully complied with the applicable Pennsylvania law regarding the

“present right to possession of the property claimed as collateral through an

enforceable security interest.”

There is no merit to plaintiff’s argument that there was no present right to

possession of his vehicle because the purpose of the repossession was to coerce the

payment of unlawful interest. When his vehicle was repossessed, plaintiff was

under no obligation to redeem it; rather, 13 Pa. C.S.A. § 9623, “Right to Redeem

Collateral,” gives a debtor the option to redeem or to concede possession to the

secured creditor, who may then dispose of the collateral as provided for by 13 Pa.

C.S.A §§9610-11. Thus, plaintiff’s voluntary choice to redeem does not give rise

to liability under the FDCPA.


- 23 -

Furthermore, as recognized by the District Court, repossession companies

are not required by the FDCPA to perform independent investigations into the

validity of the loan or balance due. “A [repossession company] should be able to

rely on the representation and implied warranty from [the creditor]” that the

creditor has a present right to possess the collateral.” Revering, supra, 1999 WL

33911360 at *5, citing Ducrest v. Alco Collections, Inc., 931 F.Supp. 459, 462

(M.D. La. 1996). While plaintiff observes that none of the cases cited by the

District Court specifically addressed § 1692(f)(6)(A), it should be noted that each

case addresses a provision of § 1692(f), and that statutes are to be construed in pari

materia. It follows that unless Congress provided otherwise, that there is no

heightened diligence requirement under § 1692(f)(6)(A) for repossessions of

collateral. Lastly, Revering, supra, involved the repossession of a vehicle.

For the foregoing reasons, it is respectfully submitted that defendants had a

“present right to possession” of plaintiff’s vehicle on October 6, 2012. He was in

substantial default of a secured loan. These facts were pled in his complaint and

confirmed through discovery. The District Court correctly granted summary

judgment and dismissed the plaintiff’s FDCPA claim, and defendants respectfully

request that this Court affirm the order under review.


- 24 -

II. PLAINTIFF’S RICO CLAIMS FAIL AS A MATTER OF LAW,

AS HE CANNOT PROVE THE EXISTENCE OF A RICO

ENTERPRISE OR THAT DEFENDANTS COLLECTED

UNLAWFUL DEBT

Plaintiff has asserted two counts against Defendants, Chad Latvaaho and

Philip Hourican, the principals of the Repossession Defendants, alleging that they

engaged in an enterprise dedicated to the collection of unlawful debt, contrary to

RICO, 18 U.S.C. § 1692(c) and (d). These counts fail for two reasons: Plaintiff

cannot demonstrate that an “enterprise” was in existence, or that any “unlawful

debt” was collected. The recovery of collateral used to secure a debt is not

tantamount to collection of debt, and even if Premier had accepted an interest

payment from plaintiff, there remains no basis to impose liability under RICO, as

the loan remained a valid and binding contract by virtue of plaintiff’s failure to

exercise his right to modify it. Moreover, Premier did not possess the required

scienter required by RICO. The District Court dismissed this claim solely on the

basis that the recovery of collateral is not debt collection, and even if this Court

considers plaintiff’s argument that Premier is liable for accepting payment, it is

requested that the District Court’s order be affirmed.

Courts have recognized that “the civil RICO action is not simply an action to

recover excessive interest or to enforce a penalty for the overcharge. RICO is

concerned with evils far more significant than the simple practice of usury.”

Malley-Duff &Assoc., Inc. v. Crown Life Ins. Co., 792 F.2d 341, 348 (3d Cir.


- 25 -

1986), citing Durante Bros. & Sons v. Flushing Nat. Bank, 755 F.2d 239, 248 (2d

Cir. 1985). Instead, based on its findings that organized crime uses money gained

through illegal activities such as loansharking to infiltrate legitimate businesses,

Congress enacted RICO in an effort “to seek the eradication of organized crime in

the United States ... by establishing new penal prohibitions, and by providing

enhanced sanctions and new remedies to deal with the unlawful activities of those

engaged in organized crime.” Sundance Land Corp. v. Community First Fed. Sav.

& Loan Ass'n, 840 F.2d 653, 666 (9th Cir. 1988). RICO, therefore, was never

intended to penalize legitimate repossession companies or their owners for

engaging in collateral recovery services for their clients.

Plaintiff’s RICO claims are premised on 18 U.S.C. § 1962(c) and (d). To

state a claim under these sections, plaintiff must prove that (1) an enterprise

affecting interstate commerce exists; (2) that defendant were employed by or

associated with the enterprise; (3) that defendants participated, either directly or

indirectly, in the conduct of the affairs of the enterprise; and (4) that defendants

participated through a pattern of racketeering activity or the collection of unlawful

debt. 18 U.S.C. § 1962(c); United States v. Urban, 404 F.3d 754, 769 (3d Cir.

2005), United States v. Bergrin, 650 F.3d 257, 265 (3d Cir. 2011). Plaintiff’s

allegations do not raise a genuine issue of material fact, and his RICO claim fails

accordingly.


- 26 -

Plaintiff cannot establish the existence of a RICO enterprise, which is a

necessary element of his claim. See Cedric Kushner Promotions, Ltd. v. King, 533

U.S. 158, 161 (2001). An enterprise “includes any individual, partnership,

corporation, association, or other legal entity, and any union or group of

individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). To

establish an enterprise, a plaintiff must allege facts showing that: (1) the enterprise

is an ongoing organization with some framework for making or carrying our

decisions; (2) the members of the enterprise function as a continuing unit with

established duties; and (3) the enterprise is separate and apart from the pattern of

activity in which it engages. United States v. Riccobene, 709 F.2d 214, 221 (3d Cir.

1983); In re Insurance Brokerage Antitrust Litigation, 618 F.2d 300, 369 (3d Cir.

2010). Plaintiff has not identified any material factual issues in this regard.

In United States v. Turkette, 452 U.S. 576, 583 (1981), the Supreme Court

held that an association-in-fact enterprise is proven by a showing that: (1) there

exists an ongoing organization, formal or informal; (2) the various associates of the

organization function as a continuing unit; and (3) the organization has an

existence separate and apart from the alleged pattern of racketeering activity. Boyle

v. United States, 556 U.S. 938, 940 (2009), expanded on these requirements and

held that an association-in-fact enterprise must have three structural features: “a

purpose, relationships among those associated with the enterprise, and longevity


- 27 -

sufficient to permit these associates to pursue the enterprise's purpose.” While the

group must function as a continuing unit, it is not required to have a particular type

of organizational structure. The statute is satisfied by an enterprise “whose

associates engage in spurts of activity punctuated by periods of quiescence.” Id.

In order to show that the enterprise operates as an ongoing organization,

plaintiff must demonstrate that “some sort of structure exists within the group for

the making of decisions, whether it be hierarchical or consensual,” or that there

exists “some mechanism for controlling and directing the affairs of the group on an

ongoing rather than an ad hoc basis.” Riccobene, supra, 709 F.2d at 222. Further,

the enterprise must have an existence “separate and apart from the pattern or

activity in which it engages.” Id. at 221.

Here, plaintiff cannot prove that a RICO enterprise existed. The facts clearly

indicate that Sovereign issues loans over the internet; a non-party called RS

Financial services them; that RS Financial requested that Repossessors, Inc.

recover plaintiff’s automobile; and that Repossessors subcontracted the

repossession to Premier, who conducted it. This is an ad hoc group of entities that

were connected solely for the purpose of repossessing plaintiff’s vehicle. As such,

plaintiff cannot prove that an ongoing organization existed, that the various entities

functioned as a continuing unit, or that the organization has an existence separate

and apart from the single repossession. See Rivera v. AT&T Corp., 141 F. Supp. 2d


- 28 -

719, 726 (S.D. Tex. 2001) (dismissing RICO claim where plaintiff failed to plead

facts demonstrating that enterprise existed for purpose other than making usurious

loans); City of Cleveland v. Woodhill Supply, Inc., 403 F. Supp. 2d 631, 636 (N.D.

Oh. 2005) (holding that conspiring to commit fraud is insufficient to trigger the act

if the parties are not organized in a fashion that would enable them to function as a

racketeering organization for other purposes).

Moreover, plaintiff cannot establish that an enterprise existed due to a

complete lack of mens rea on the part of defendants. As set forth above, defendants

did not scrutinize the loan agreement at issue or possess any knowledge that the

loan plaintiff accepted from Sovereign carried a usurious interest rate. In United

States v. Biasucci, 768 F.2d 504 (2d Cir. 1986), the court found that a jury

instruction was proper where the trial court instructed the jury that defendants

could be found guilty of participating in, the collection of an unlawful debt only if

the jury found that they had acted “knowingly, willfully, and unlawfully.” Id. at

512. The trial court further explained that the government could meet this burden

either by proving specific knowledge of the interest rates on the usurious loans, or

by showing the defendants’ awareness “of the generally unlawful nature of the

particular loan in question and also that it was the practice of the lenders to make

such loans.” Ibid. Here, there is no evidence of record that defendants knew or had

reason to know that the loan carried a usurious interest rate, and there was no legal


- 29 -

requirement under the FDCPA for them to make further inquiries prior to

conducting the repossession. Ducrest, supra, 931 F.Supp. at 462, citing Smith v.

Transworld Systems, Inc., 953 F.2d 1025, 1032 (6th Cir. 1992).

Additionally, plaintiff cannot prove that defendants or their principals

collected unlawful debt, which is defined at 18 U.S.C. § 1961(6):

“[U]nlawful debt” means a debt (A) incurred or contracted in gambling activity which was in violation of the law of the United States, a State or political subdivision thereof, or which is unenforceable under State or Federal law in whole or in part as to principal or interest because of the laws relating to usury, and (B) which was incurred in connection with the business of gambling in violation of the law of the United States, a State or political subdivision thereof, or the business of lending money or a thing of value at a rate usurious under State or Federal law, where the usurious rate is at least twice the enforceable rate.

Initially, the recovery of collateral is not collection of a debt. See Jordan v.

Kent Recovery Services, Inc., 731 F. Supp. 652 (D. Del. 1990) (examining

legislative history of the FDCPA and holding that repossession companies are not

debt collectors and that the act of repossessing collateral is not debt collection

activity). This was recognized by the District Court in Gonzales, Collins, and the

decision under appeal.

Second, even if Premier had accepted a payment of premium and interest

from plaintiff, in addition to towing and storage fees, this payment would not meet

RICO’s definition of “unlawful debt.” Plaintiff cannot demonstrate that the loan he


- 30 -

obtained from Sovereign is “unenforceable” because of Pennsylvania’s usury laws.

As discussed above, the LIPL provides that usurious loans are not void, but only

voidable, and unless a borrower affirmatively acts to void the usurious interest

provision, the loan remains valid. Moreover, plaintiff cannot demonstrate that

Repossessors or Premier are in the “business of lending money.” The record is

clear that they hold themselves out as collateral recovery specialists. If, as plaintiff

alleges, Premier accepted principal and interest from him, one instance of it doing

so does not constitute a “business.” See Robidoux v. Conti, 741 F. Supp. 1019,

1022 (D.R.I. 1990) (holding that the legislative policy of RICO confirms the view

of “business” as more than a few isolated transactions). “Since Congress did not

intend to penalize isolated instances of usury, this Court finds that plaintiffs have

failed to meet the second tier requirement of the statute—the need for proof that

the debts relate to the business of gambling or the business of lending.” Id.

For these reasons, plaintiff’s RICO claims fail as a matter of law, and the

District Court correctly granted summary judgment.


- 31 -

III. THE WAIVERS PLAINTIFF SIGNED BAR HIS

SUIT AGAINST DEFENDANTS

As Plaintiff signed waiver and release agreements in which he relinquished

his right to sue defendants for any and all claims, known or unknown, arising out

the repossession of his vehicle after speaking with his attorney and under no

compulsion, it is respectfully submitted that these agreements are enforceable and

bar his claims against all defendants, even if . The releases are not void under

Pennsylvania law because they do not purport to release the lender from liability,

and they are not contracts of adhesion. Therefore, they would bar plaintiff’s suit

even if this Court finds that defendants are subject to liability under the FDCPA

and RICO.

It is well-settled that Pennsylvania law applies to the validity of releases.

Wahsner v. Am. Motors Sales Corp., 597 F. Supp. 991, 997 (E.D. Pa. 1984). “State

law customarily governs the field of contracts and it is to state law rather than

federal law that private parties are likely to refer when formulating the terms of a

contractual release.” Three Rivers Motor Co. v. Ford Motor Co., 522 F.2d 885, 891

(3d Cir. 1975). Under Pennsylvania law, the parties’ intention governs in the

construction of releases and this intention must be determined from the language of

the release. Id. The signed release binds “the parties unless executed and procured

by fraud, duress, accident or mutual mistake.” Id. at 892. Thus, releases that are


- 32 -

executed due to fraud, duress or the like are voidable under Pennsylvania law.

Wahsner, 597 F. Supp. at 997.

Plaintiff can make no valid claim that he was forced to sign the releases

under duress, as it is settled that “in the absence of threats of actual bodily harm

there can be no duress where the contracting party is free to consult with counsel.”

Carrier v. William Penn Broad. Co., 233 A.2d 519, 521 (Pa. 1967). While he may

claim that the releases were void for lack of consideration, 33 P.S. § 6, When

written instruments without consideration valid, provides:

A written release or promise, hereafter made and signed by the person releasing or promising, shall not be invalid or unenforceable for lack of consideration, if the writing also contains an additional express statement, in any form of language, that the signer intends to be legally bound.

The “Agreement to Redeem Property” signed by Plaintiff contains language

indicating an intent to be legally bound. The Agreement releases any and all

“claims, demands, and liabilities whatsoever of every name and nature, both in law

and in equity, which I may now have or ever had against Company(s) whatsoever

with respect to the repossession and storage of…the 1998 Lincoln Town Car.”

App. Vol. II at 41-46. Plaintiff consulted with his attorney prior to signing the

release, and was not threatened with physical violence, so he cannot claim duress.

The release was not procured by fraud, accident, or mutual mistake, and if a

mistake was made, it was solely on Plaintiff’s part.


- 33 -

The waiver agreements are not unconscionable contracts of adhesion or

exculpatory waivers, as plaintiff claims. “Under Pennsylvania law, there must be

both procedural and substantive unconscionability in order to void a contract.”

Ostroff v. Alterra Healthcare Corp., 433 F. Supp. 2d 538, 542 (E.D. Pa. 2006).

Procedural unconscionability is generally found where the agreement is a contract of adhesion. A contract of adhesion is one prepared by a party with excessive bargaining power and presented to the other party on a “take it or leave it” basis. Often the other party to the contract is told that the terms of the contract are non-negotiable.

[Id. at 543 (internal citations omitted).]

In Denlinger, Inc. v. Dendler, 608 A.2d 1061 (Pa. Super. 1992), the court

held that in order to establish procedural unconscionability, a party must

demonstrate that he lacked a meaningful choice in accepting the terms of the

proffered contract. Id. at 1068. Here, the record is devoid of any evidence

indicating that plaintiff made an attempt to negotiate the terms of the waivers and

that he was rebuffed, and there is no evidence that it he was told that it was futile to

ask about modifying the terms of the releases. Therefore, plaintiff cannot

demonstrate procedural unconscionability as a matter of law.

Moreover, the release does not run afoul of Article 9 of the Uniform

Commercial Code, because it does not purport to release any claims that plaintiff

may have against the lender. See In re Koresko, 91 B.R. 689, 699 (E.D.Pa. Bankr.


- 34 -

1988) (holding that the secured party alone is liable under the U.C.C. for a

violation of an obligation imposed by Chapter 9). Indeed, as the District Court

noted, plaintiff remains free to pursue any remedies he has against Sovereign. All

the releases at issue provide for is a waiver of liability against the defendants for

claims arising out of the repossession, including claims for damage to the vehicle.

Lastly, Defendants were unable to locate any case law holding that a release

of liability under the FDCPA is void for public policy concerns; rather, it appears

that a clear and unambiguous release will be enforced. See Hines v. G. Reynolds

Sims Assoc., P.C., 2013 WL1774938 (E.D. Mich. 2013) (finding that release of

FDCPA claims enforceable if fact finder determines that parties intended to release

such claims).

For these reasons, it is respectfully submitted that even if defendants lacked

the present right to possess plaintiff’s automobile, plaintiff’s signature on the

Agreement to Redeem Property bars his claims against all defendants.


- 35 -

IV. PLAINTIFF’S CRITICISMS OF SOVEREIGN’S DISPUTE

RESOLUTION PROCEDURE ARE MISPLACED, AS HE

NEVER ATTEMPTED TO PROCEED IN THAT FORUM

Plaintiff’s argument closes with the strange notion that defendants are not

protected by an arbitration agreement. Defendants have never made such a claim –

in fact, as noted by plaintiff, defendants never sought to compel arbitration. The

District Court found that plaintiff could pursue his remedies against Sovereign in

spite of the grant of summary judgment to defendants, and plaintiff remains able to

do so. The fact remains that he did not, and has not. Rather, he sought to obtain a

judgment by default that tribal lending is subject to regulation by the States,

notwithstanding the fact that federally-recognized Tribes enjoy limited sovereign

immunity in their financial affairs2; to (2) bypass a contractual arbitration forum

despite controlling precedent affirming lenders’ ability to enforce arbitration

clauses in their loan agreements, see Buckeye Check Cashing, Inc. v. Cardegna,

546 U.S. 440 (2006), and Kaneff v. Delaware Title Loans, Inc., 587 F.3d 616 (3d

Cir. 2009); and to (3) obtain a declaration from the District Court that the loan he

obtained is void, without filing suit against Sovereign.

2 During the pendency of this suit, Otoe-Missouria Tribe of Indians v. N.Y. State

Dep’t of Financial Serv., 769 F.3d 105 (S.D.N.Y. 2014) held that tribal lending is subject to New York’s prohibition on usury. The District Court observed that this case did not the change the outcome of the summary judgment motion.


- 36 -

The District Court, in the decision under review, as well as in Gonzalez and

Collins, held that plaintiff’s theory of the case was invalid, because even with the

assumption that Pennsylvania law applied to loans issued by online lenders, the

defendants had a present right to possession at the time of the repossession of the

plaintiffs’ vehicles, by virtue of the plaintiffs’ default of their obligations on the

loans at issue. As such, none of the defendants needed to rely on the outcome of

any contemplated arbitration proceedings involving the lenders, because the right

to possession was not contingent on the outcome.

Plaintiff has made a conscious choice to avoid attempting to pursue

Sovereign. He has not tried and failed; rather, he is content to lampoon the dispute

resolution procedure of a federally-recognized Indian Tribe as a sham while he

pursues a meritless suit against two repossession companies and their principals.

The District Court correctly dismissed this action through summary judgment, and

it is respectfully requested that its ruling be affirmed in all respects.


- 37 -

CONCLUSION

For the foregoing reasons, defendants, Repossessors, Inc., Chad Latvaaho,

Shady Oak Enterprises, Inc., and Philip Hourican, respectfully request that this

Honorable Court affirm the District Court’s order granting summary judgment and

dismissing this action.

Respectfully submitted, SWEENEY & SHEEHAN, P.C.

By: Neal A. Thakkar

Pennsylvania ID #203846 New Jersey ID # 043542004 216 Haddon Avenue, Suite 500 Westmont, NJ 08108 (856) 869-5600 (phone) (856) 869-5605 (facsimile) [email protected] By: William R. HouricanWilliam R. HouricanWilliam R. HouricanWilliam R. Hourican

Pennsylvania ID #22211 527 Swede Street Norristown, PA 19401 (610) 278-1950 (phone) (610) 278-5040 (facsimile) [email protected]

Dated: December 17, 2014


- 38 -

CERTIFICATIONS

I, Neal A. Thakkar, hereby certify as follows:

1. I am a member of the Bar of the United States Court of Appeals for

the Third Circuit.

2. The body of Appellee’s brief contains less than 14,000 words, in

compliance with FRAP 37(a)(7).

3. Counsel for plaintiff is a registered user of the Court’s Electronic

Filing System and will receive service of this Brief through that system.

4. All hard copies of this Brief will be identical to the electronically filed

copy.

5. The .pdf file containing this brief has been scanned for viruses and

was found not to have any.

Respectfully submitted, SWEENEY & SHEEHAN, P.C.

By: Neal A. Thakkar

Pennsylvania ID #203846 New Jersey ID # 043542004 216 Haddon Avenue, Suite 500 Westmont, NJ 08108 (856) 869-5600 (phone) (856) 869-5605 (facsimile) [email protected]


Documents

BRIEF ON BEHALF OF APPELLEESIn April of 2012, plaintiff obtained an auto title loan from Sovereign Lending Solutions, doing business as Title Loan America (“Sovereign”), a tribal