Hеiko GOLDENSTEIN, Appellant v. REPOSSESSORS INC.; Chad Latvaaho; Shady Oak Enterprises Inc., doing business as Premier Finance Adjusters; Philip J. Hourican; William McKibbin.
No. 14-3554.
United States Court of Appeals, Third Circuit.
Argued: May 20, 2015. Filed: March 10, 2016.
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Neal A. Thakkar, Esq. (Argued), Sweeney & Sheehan, Westmont, NJ, William R. Hourican, Norristown, PA, for Appellees.
Before: GREENAWAY, JR., KRAUSE, and GREENBERG, Circuit Judges.
OPINION OF THE COURT
KRAUSE, Circuit Judge.
After he defaulted on a $1,000 loan and his car was repossessed, Appellant Heiko Goldenstein brought suit against Appellees Repossessors, Inc. and Shady Oak Enterprises, Inc., d/b/a Premier Finance Adjusters and their individual owners, alleging the repossession was unlawful and seeking treble damages, attorney‘s fees, and costs. Specifically, Goldenstein claimed violations of various state and federal consumer protection statutes, as well as the Racketeer Influenced and Corrupt Organizations Act (“RICO“). Because we conclude that the District Court erred in the basis on which it granted summary judgment against Goldenstein on his RICO claim and two of his state law claims, we will affirm in part and reverse and remand in part for the District Court‘s further consideration of those claims.
I. FACTUAL AND PROCEDURAL HISTORY1
In April 2012, Goldenstein, a resident of Pennsylvaniа, obtained a $1,000 online loan from Sovereign Lending Solutions, LLC, d/b/a Title Loan America. As a consumer lending company wholly owned by the Lac Vieux Desert Band of Lake Superior Chippewa Indians and incorporated under Chippewa tribal law, Sovereign was authorized to issue loans secured by vehicles at interest rates far greater than permitted under Pennsylvania law. App. vol. 2, 123, 264. Goldenstein pledged his car as collateral and was charged 250 percent interest for his loan.2
Goldenstein filed suit in the United States District Court for the Eastern District of Pennsylvania in a three-count complaint. In the first count, Goldenstein claimed violations of the Fair Debt Collection Practices Act (“FDCPA“),
The District Court granted Appellees’ motion for summary judgment and entered judgment аgainst Goldenstein on all claims. Goldenstein v. Repossessors, Inc., No. 13-cv-02797, 2014 WL 3535112, at *1, 2014 U.S. Dist. LEXIS 97002, at *2 (E.D.Pa. July 17, 2014). As to the FDCPA claim, the District Court held there was no violation because the Appellees had a right to possess the car as collateral for the unpaid loan. Id. at *6-8, 2014 U.S. Dist. LEXIS 97002, at *19-22. As to the RICO claim, the District Court held that the repossession of collateral could not constitute the “collection of unlawful debt” as a matter of law; it there-
II. JURISDICTION AND STANDARD OF REVIEW
The District Court had jurisdiction pursuant to
We exercise plenary review of a district court‘s grant of summary judgment. Reedy v. Evanson, 615 F.3d 197, 210 (3d Cir.2010) (citing Horn v. Thoratec Corp., 376 F.3d 163, 165 (3d Cir.2004)). Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Thomas v. Cumberland Cty., 749 F.3d 217, 222 (3d Cir.2014) (quoting
In a motion for summary judgment, it is initially the moving party‘s burden to “demonstrate the absence of a genuine [dispute] of material fact.” Mathews v. Kidder, Peabody & Co., 260 F.3d 239, 250 (3d Cir.2001) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). A factual dispute is genuine “if the evidence is such that a reasonable jury could return a verdict fоr the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Conversely, “where a non-moving party fails sufficiently to establish the existence of an element essential of its case on which it bears the burden of proof at trial, there is not a genuine dispute with respect to a material fact and thus the moving party is entitled to judgment as a matter of law.” Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 265 (3d Cir.2014).
III. DISCUSSION
We agree with the District Court that, although the loan may have been usurious under Pennsylvania law, Appellees nonetheless had a present right to possession of
A. Goldenstein‘s FDCPA Claim
Goldenstein raises two challenges to the District Court‘s holding that, because Goldenstein defaulted on his loan, Appellees had a present right to possession of his car as collateral and therefore did not violate the FDCPA.
First, he contends that no present right to possession could attaсh to his car because the loan it secured was made at a usurious rate of interest in violation of Pennsylvania‘s Loan Interest and Protection Law (“LIPL“),
Second, Goldenstein argues that the repossession was unlawful because his arrearage — assuming he had been accruing interest at a six percent rate as permitted by Pennsylvania law and deducting Soverеign‘s first two deductions from his bank account from his overall balance — would have been a mere $9.60, and his failure to make this de minimis payment could not constitute a material breach of the loan contract. That argument, however, finds no support in the LIPL. While that statute provides important protections to borrowers who fall victim to usurious loans, it does not empower borrowers tо recalculate what they owe by construing interest paid in excess of the legal rate as paid principal, nor does it preclude lenders from repossessing the collateral on a defaulted loan. See
The District Court thus correctly concluded that the Appellees had a present right to possession and did not violate the FDCPA when they repossessed Goldenstein‘s car.
B. Goldenstein‘s RICO Claim
1. The Collection of Unlawful Debt
RICO makes it unlawful for a person associated with a RICO “enterprise” to participate in the conduct of such enterprise “through a pattern of racketeering activity or collection of unlawful debt.”5
No Court of Appeals has yet addressed this question; nor are the District Judges unanimous, even in the Eastern District of Pennsylvania. On the contrary, in a thoughtful and well-reasoned oрinion in Gregoria v. Total Asset Recovery, Inc., No. 12-4315, 2015 WL 115501, 2015 U.S. Dist. LEXIS 1818 (E.D.Pa. Jan. 8, 2015), Judge Lawrence F. Stengel held that the distinction between the collection of debt and the collection of collateral for a debt is a “distinction without a difference,” and observed that when a lender repossesses a debtor‘s car as collateral for a loan it does so “to liquidate the collateral to satisfy the unpaid balance of [thе] loan.” Id. at *5, 2015 U.S. Dist. LEXIS 1818, at *18 (internal quotation marks omitted). Citing the “broad construction [it] must give the RICO statute,” Judge Stengel recognized that “[w]hether the [lender] collected the car or cash, the purpose of the collection was to satisfy the debt.” Id. at *5 & n. 11, 2015 U.S. Dist. LEXIS 1818, at *18 & n. 11.
We agree with the reasoning in Gregoria. Nothing in RICO suggests that Congress intended to limit its prohibition on the “collection of unlawful debt” to the seizure of cash and to exclude the forfeiture of collatеral used to secure unlawful debt. Quite the opposite. The statute defines “unlawful debt” as “a debt (A) incurred ... 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 lending money or a thing of value at a rate usurious under State or Federal law, where the usuriоus rate is at least twice the enforceable rate.”
Goldenstein‘s is a case in point. Premier repossessed Goldenstein‘s car for one of two purposes: either Goldenstein would pay off the loan for the return of his car or the car would be liquidated with the proceeds used to pay off that loan. Either way, thе debt would be collected and the usurious loan discharged. It so happens that Goldenstein opted to pay so that Premier collected the outstanding loan balance (and then some) in cash. Thus, the collection of collateral and the “collection of unlawful debt” in this very case was a “distinction without a difference.” See Gregoria, 2015 WL 115501, at *5, 2015 U.S. Dist. LEXIS 1818 at *18.
This practical reality, along with the Supreme Court‘s instruction that RICO should “be read broadly,” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), and its clarification that Congress intended RICO to reach both legitimate and illegitimate enterprises, id. at 499-500, 105 S.Ct. 3275; United States v. Turkette, 452 U.S. 576, 584-85, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981), confirm that RICO‘s prohibition on the “collection of unlawful debt” can reach even a legitimate repossession company that forfeits on collateral for a usurious loan — assuming, that is, that the plaintiff can establish the other elements of the violation. To that subject, we now turn.
2. The Existence of a RICO Enterprise
Here, Appellees urge that Goldenstein cannot satisfy other RICO elements, specifically that he cannot prove the existence of an “enterprise” because Appellees consisted of an “ad hoc group of entities that were connected solely for the purpose of repossessing plaintiff‘s vehicle,” Appellees’ Br. 27, and that he cannot establish that Appellees possessed the mens rea they argue is required by RICO. The District Court did not address these arguments, which is unsurprising, given that, as Appellees conceded at oral argument, they did not raise them in their motion for summary judgment. See Oral Argument at 31:17-32:10 (argued May 20, 2015).
As a general rule, “a federal appellate court does not consider an issue not passed upon below.” Singleton v. Wulff, 428 U.S. 106, 120, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976). While we may make exceptions “when the factual record is developed and the issues provide purely legal questions, upon which an appellate court exercises plenary review,” we will remand “when the issue to be addressed is not a purely legal question,” requiring either “the exercise of discretion or fact finding.” Hudson United Bank v. LiTenda Mort. Corp., 142 F.3d 151, 159 (3d Cir.1998).
Here, thе record is not sufficiently developed for us to consider the merits of the parties’ arguments as to the alleged enterprise or mens rea. In light of Appellees’ failure to raise these arguments until their responsive brief on appeal, Goldenstein did not have the opportunity to supplement the factual record on those points, nor to fully brief them for us or the District Court. Under these circumstances, we will leave these issues for the District Court to consider in the first instance on remand.
C. Goldenstein‘s PFCEUA and UCC Claim
The District Court granted summary judgment against Goldenstein on his PFCEUA and UCC claims without addressing the substance of the PFCEUA claim, without even mentioning the UCC claim, and despite the fact that Appellees did not argue those claims in their motion
As to the PFCEUA, the District Court granted summary judgment on the ground that there was no FDCPA violation based on the Appellees’ present right to possession. In so doing, the District Court appears to have misapprehended the substance of Goldenstein‘s PFCEUA claim. Consistent with his argument on appeal, Goldenstein urged before the District Court that the PFCEUA‘s broad definition of “debt collector” encompasses repossession companies, see
IV. CONCLUSION
For the foregoing reasons, the District Cоurt erred in granting summary judgment in favor of the Appellees for alleged violations of RICO, the PFCEUA, and the UCC, and its judgment, to that extent, will be vacated and the case remanded for proceedings consistent with this opinion.
KRAUSE
CIRCUIT JUDGE