TitleMax of Delaware Inc v. Robin Weissmann ( 2022 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 21-1020
______________
TITLEMAX OF DELAWARE, INC., d/b/a TitleMax;
TITLEMAX OF OHIO, INC., d/b/a TitleMax; TITLEMAX
OF VIRGINIA, INC., d/b/a TitleMax; TMX FINANCE OF
VIRGINIA, INC.
v.
ROBIN L. WEISSMANN, in Her Official Capacity as
Secretary of the Pennsylvania Department of Banking and
Securities,
Appellant
______________
On Appeal from the United States District Court
for the District of Delaware
(D.C. Civil No. 1:17-cv-01325)
Magistrate Judge: Honorable Mary Pat Thynge
______________
Argued December 8, 2021
______________
Before: SHWARTZ, PORTER, and FISHER, Circuit Judges.
(Filed: January 24, 2022)
Douglas D. Herrman
Troutman Pepper Hamilton Sanders LLP
Hercules Plaza, Suite 5100
1313 N. Market Street, P.O. Box 1709
Wilmington, DE 19899
Richard J. Zack [ARGUED]
Troutman Pepper Hamilton Sanders LLP
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
Counsel for Plaintiffs-Appellees
Sean A. Kirkpatrick
Office of Attorney General of Pennsylvania
Strawberry Square
Harrisburg, PA 17120
Claudia M. Tesero [ARGUED]
Office of Attorney General of Pennsylvania
1600 Arch Street
Suite 300
Philadelphia, PA 19103
Counsel for Defendant-Appellant
______________
OPINION OF THE COURT
______________
2
SHWARTZ, Circuit Judge.
In this case, we are required to determine whether
applying Pennsylvania usury laws to an out-of-state lender
violates the dormant Commerce Clause. We conclude that it
does not.
I
A
TitleMax Delaware, TitleMax Virginia, TitleMax Ohio,
and TMX Finance Virginia (collectively “TitleMax”) provide
motor vehicle loans. When any customer, including a
Pennsylvanian, seeks a loan from TitleMax, “[t]he entire loan
process—from the application to the disbursement of funds—
takes place . . . at one of TitleMax’s brick-and-mortar locations
. . . . If a loan is approved and TitleMax is the lender, TitleMax
and the borrower execute a loan agreement . . . and the
borrower receives the loan proceeds,” App. 19, in the form of
“a check drawn on a bank outside of Pennsylvania,” App. 96.
The loan agreement sets forth an interest rate as high as 180%
and terms to secure the loan.
Under the agreement, the borrower grants TitleMax a
security interest in the vehicle. To perfect the lien, the
borrower provides TitleMax with the vehicle identification
number, license plate number, and title certificate number.
TitleMax then records its lien on the motor vehicle with the
appropriate state authority, such as the Pennsylvania
Department of Transportation (“PennDOT”).
3
In addition to perfecting the lien in the borrower’s state,
TitleMax conducts servicing activities there, such as collecting
payments, sending “phone calls[] or text messages,” and
“repossess[ing vehicles].” App. 326, 337. Borrowers can
make payments while physically present in their home state in
a variety of ways, including mailing, calling TitleMax to use a
debit card, or visiting a “local money transmitter . . . to have
fees transmitted to a TitleMax location.” App. 181, 339.
TitleMax does not dispute that, prior to 2017, it engaged
in these activities with Pennsylvania residents and repossessed
vehicles located in Pennsylvania when a Pennsylvania-resident
borrower defaulted.
TitleMax does not have any offices, employees, agents,
or brick-and-mortar stores in Pennsylvania and is not licensed
as a lender in the Commonwealth. TitleMax claims that it has
never used employees or agents to solicit Pennsylvania
business, and it does not run television ads within
Pennsylvania, but its advertisements may reach Pennsylvania
residents.
B
Two statutes, the Consumer Discount Company Act
(“CDCA”), 7 Pa. Stat. §§ 6201-6221, and the Loan Interest and
Protection Law (“LIPL”), 41 Pa. Stat. §§ 101-605, address
lending activity. For example, the CDCA provides that “no
person shall . . . make[] loans or advance[] money on credit, in
the amount or value of . . . []$25,000[] or less, and charge,
collect, contract for or receive interest . . . which aggregate in
excess of the interest that the lender would otherwise be
permitted by law to charge.” 7 Pa. Stat. § 6203(A). The LIPL
4
sets forth a maximum interest rate of 6% for most loans below
$50,000. 41 Pa. Stat. § 201(a).
Pursuant to its authority to enforce these laws,
Pennsylvania’s Department of Banking and Securities (the
“Department”) issued a subpoena requesting documents
regarding TitleMax’s interactions with Pennsylvania residents.
7 Pa. Stat. § 6212, 41 Pa. Stat. § 506. The subpoena sought
loan agreements between TitleMax and Pennsylvania
consumers, information presented to Pennsylvania consumers
through the mail or internet, solicitations or offerings
circulated or aired in Pennsylvania, records of TitleMax
employees who traveled to Pennsylvania, a list of vehicles
repossessed in Pennsylvania, a record of complaints from
Pennsylvania consumers, a record of invoices or bills sent to
Pennsylvania consumers, and any electronic transfers of funds
from Pennsylvania consumer bank accounts.1
TitleMax stopped making loans to Pennsylvania
residents after receiving the subpoena and asserts that it has
lost revenue as a result.
1
TitleMax claims it does not have the “technological
capability to identify all TitleMax entities that provided loans
and/or credit services to borrowers who resided in
Pennsylvania at the time their loan was originated or the
arrangement of their loan was facilitated,” and thus “does not
know the identity of all TitleMax entities that provided loans
to Pennsylvania residents.” App. 207.
5
C
TitleMax filed this action in the United States District
Court for the District of Delaware, seeking injunctive and
declaratory relief for, among other things, violations of the
Commerce Clause. Separately, the Department filed a petition
to enforce the subpoena in the Pennsylvania Commonwealth
Court (the “Petition Action”).2
In this action, the parties conducted discovery and filed
cross-motions for summary judgment based on Younger
abstention and the dormant Commerce Clause. The District
Court granted TitleMax’s motion and denied the Department’s.
The Court held that Younger abstention did not apply but
found that, because TitleMax’s loans are “completely made
and executed outside Pennsylvania and inside TitleMax [brick-
and-mortar] locations in Delaware, Ohio, or Virginia,” the
Department’s subpoena’s effect is to apply Pennsylvania’s
usury laws extraterritorially in violation of the Commerce
Clause. TitleMax of Del., Inc. v. Weissmann, 505 F. Supp. 3d
353, 357-60 (D. Del. 2020).
The Department appeals.
2
TitleMax removed the Petition Action to the Middle
District of Pennsylvania. Pa. Dep’t of Banking and Sec. v.
TitleMax of Del., Inc. et al., No. 1:17-cv-02112-JPW (M.D.
Pa. Nov. 16, 2017), ECF No. 1. The District Court remanded
the case for lack of subject matter jurisdiction. Id., ECF No.
49. The Petition Action remains pending.
6
II3
We agree with the District Court that Younger
abstention does not bar us from hearing this case but hold that
applying4 the CDCA and LIPL to TitleMax’s conduct does not
violate the Commerce Clause.5
A
In general, federal courts are “obliged to decide cases
within the scope of federal jurisdiction.” Sprint Commc’ns,
3
The District Court had jurisdiction under 28 U.S.C.
§§ 1331 and 1343. We have jurisdiction under 28 U.S.C.
§ 1291. We review a district court’s order granting summary
judgment de novo, Mylan Inc. v. SmithKline Beecham Corp.,
723 F.3d 413, 418 (3d Cir. 2013), and we view the facts and
make all reasonable inferences in the non-movant’s favor,
Hugh v. Butler Cnty. Fam. YMCA, 418 F.3d 265, 267 (3d Cir.
2005). Summary judgment is appropriate where “there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
The moving party is entitled to judgment as a matter of law
when the non-moving party fails to make “a sufficient showing
on an essential element of her case with respect to which she
has the burden of proof.” Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986).
4
The parties agree that TitleMax’s challenge to an
investigation into a violation of Pennsylvania law is ripe.
5
In its single-count Amended Complaint, TitleMax
listed both the Commerce Clause and the Due Process Clause
as grounds to enjoin the Department’s investigation, but
TitleMax did not rely on the Due Process Clause in its motion
7
Inc. v. Jacobs, 571 U.S. 69, 72 (2013). In certain limited
circumstances, however, “the prospect of undue interference
with state proceedings counsels against federal relief.” Id.Under the Younger abstention doctrine, federal courts must
refrain from interfering with three types of state proceedings.
One of these is civil enforcement proceedings. Id. at 78.
A “civil enforcement proceeding” warrants Younger
abstention where the proceeding is “akin to a criminal
prosecution” in “important respects.” Id. at 79 (citation
omitted). To determine if a civil enforcement proceeding is
quasi-criminal in nature, we consider whether (1) the action
“was commenced by the state in its sovereign capacity,” (2) the
action was “initiated to sanction the federal plaintiff for some
wrongful act,” (3) there are “other similarities to criminal
actions, such as a preliminary investigation that culminated
with the filing of formal charges,” and (4) “the State could have
alternatively sought to enforce a parallel criminal statute.”
ACRA Turf Club, LLC v. Zanzuccki, 748 F.3d 127, 138 (3d
Cir. 2014); see also Sprint, 571 U.S. at 79 (“Investigations are
commonly involved.”).
The Petition Action is not a “civil enforcement
proceeding[].” Sprint, 571 U.S. at 73; ACRA Turf Club, 748
F.3d at 138. Although the Petition Action was commenced by
the Department, a state agency, it was filed to enforce a
for summary judgment and mentioned due process only in a
footnote in its brief before us. Thus, TitleMax has not
preserved its due process claim. See Resol. Tr. Corp. v.
Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995) (“[G]rounds
alleged in the complaint but not relied upon in summary
judgment are deemed abandoned.”).
8
subpoena, not to sanction TitleMax. See Pa. Dep’t of Banking
& Sec. v. TitleMax of Del., Inc., 1:17-cv-02112-JPW (M.D.
Pa. Nov. 16, 2017), ECF No. 1-2 (Petition to Enforce an
Investigative Subpoena and Enjoin Respondents), at 10 (“In
the event that a person fails to comply with a subpoena for
documents or testimony issued by the [D]epartment, the
[D]epartment may request an order from the Commonwealth
Court requiring the person to produce the requested
information.”), 13 (requesting relief of an “Order against
[TitleMax] requiring them to provide the information or
documents required by the investigative subpoena, to enjoin
them from further refusing any future requests for information
made by the department, and to require Respondents to pay
costs associated with bringing this action and conducting this
investigation”). While enforcement of the subpoena may
require TitleMax to produce information, it is not “retributive
in nature” or “imposed to punish . . . some wrongful act.”
ACRA Turf Club, 748 F.3d at 140 (citation and quotation
marks omitted). Indeed, no activity has occurred in the Petition
Action, and the threat of contempt of court for noncompliance
with an order that the state court may enter in the future is
insufficient to convert the Petition Action as it currently stands
into a quasi-criminal case. See also Malhan v. Sec’y U.S.
Dep’t of State, 938 F.3d 453, 464 (3d Cir. 2019) (holding that
an unfiled state proceeding cannot be part of an abstention
analysis). Finally, while Pennsylvania has a parallel statute
that make usury a crime, see, e.g., 18 Pa. Stat. § 4806.3
(“Whoever engages in criminal usury . . . is guilty of a felony”),
the existence of that criminal statute does not outweigh the
other facts that show that the Petition Action here is not quasi-
criminal.
9
Another type of case in which Younger abstention may
apply is one that furthers the state court’s ability to perform its
judicial function. Sprint, 571 U.S. at 78. The Department
relies on Juidice v. Vail, 430 U.S. 327 (1977), to argue that the
threat of contempt for noncompliance with the subpoena
invokes a unique judicial function. In Juidice, the Supreme
Court held that federal-court interference with a state’s
contempt process is “an offense to the State’s interest . . . likely
to be every bit as great as it would be were this a criminal
proceeding.” Id. at 336 (citing Huffman v. Pursue, Ltd., 420
U.S. 592, 604 (1975)). There, however, the defendant was held
in contempt for failing to comply with a subpoena for a
deposition. In contrast, the Petition Action presents only a
possibility of contempt, akin to any other case where courts
issue orders and a party’s noncompliance can lead to contempt.
The Commonwealth Court has neither issued orders enforcing
the subpoena nor made contempt findings. Id. at 329-30.
There is thus no judicial contempt process with which this
federal case can interfere. See Malhan, 938 F.3d at 464-65
(noting that Juidice only required abstention because the state
courts had issued contempt orders at the time the federal
lawsuit was commenced and holding that, because a
garnishment order against the plaintiff was vacated a year
earlier, the purported judicial action was not “wait[ing] to be
entered” as required for abstention).
Thus, Younger abstention does not bar us from reaching
the merits of this case.6
6
The third category of cases to which Younger may
apply is state criminal prosecutions, Sprint, 571 U.S. at 78, but
the Petition Action is not a criminal prosecution.
10
B
The Commerce Clause provides that “Congress shall
have Power . . . To regulate Commerce . . . among the several
States.” U.S. Const., art. I, § 8, cl. 3. This affirmative grant of
authority to Congress “also encompasses an implicit or
‘dormant’ limitation on the authority of the States to enact
legislation affecting interstate commerce.” Instructional Sys.,
Inc. v. Comput. Curriculum Corp., 35 F.3d 813, 823 (3d Cir.
1994) (citing Healy v. Beer Inst., 491 U.S. 324, 326 n.1
(1989)). When evaluating whether a state statute violates the
Commerce Clause, we examine the statute’s effect on interstate
commerce. Brown-Forman Distillers Corp. v. N.Y. State
Liquor Auth., 476 U.S. 573, 579 (1986). For example,
[w]hen a state statute directly regulates or
discriminates against interstate commerce, or
when its effect is to favor in-state economic
interests over out-of-state interests, we have
generally struck down the statute without further
inquiry. When, however, a statute only has
indirect effects on interstate commerce and
regulates evenhandedly, we have examined
whether the State’s interest is legitimate and
whether the burden on interstate commerce
clearly exceeds the local benefits.
Instructional Sys., 35 F.3d at 824 (quoting Brown-Forman, 476
U.S. at 579). One way a challenged statute can “directly
regulate” interstate commerce is if the statute has
“extraterritorial effects that adversely affect economic
production (and hence interstate commerce) in other states.”
Cloverland-Green Spring Dairies, Inc. v. Pa. Milk Mktg. Bd.,
11
462 F.3d 249, 261-62 (3d Cir. 2006). A state law that directly
controls commerce wholly outside its borders violates the
dormant Commerce Clause, regardless of whether the state
legislature intended for the statute to do so. Healy, 491 U.S. at
336.7 If the state statute does not have such extraterritorial
reach or discriminate against out-of-staters, then it will be
upheld unless the burden on interstate commerce is “clearly
excessive in relation to the putative local benefits.” Pike v.
Bruce Church, Inc., 397 U.S. 137, 142 (1970). This
examination is sometimes referred to as Pike balancing.
We thus follow a two-step approach in analyzing
TitleMax’s Commerce Clause claim here. Initially, we address
the “territorial scope of the transaction that [Pennsylvania] has
attempted to regulate”8 and whether such transactions occur
7
TitleMax argues that “[w]here the extraterritoriality
doctrine has been invoked . . . discrimination does not matter
and is not an element of the claim,” and that therefore “the Pike
balancing test and related principles are . . . not relevant.”
Appellees’ Br. at 38 n.14. This argument misunderstands the
necessary analysis. Extraterritorial effect does not
automatically trigger special examination. Indeed, some
extraterritorial effect must be tolerated because, by analogy,
courts routinely decide choice-of-law questions for contracts
that cover multiple states, and there is “nothing untoward about
applying one state’s law” to “activities outside [that] state.”
See Instructional Sys., 35 F.3d at 825 (“[I]t is inevitable that a
state’s laws, whether statutory or common law, will have
extraterritorial effects.”).
8
By issuing the subpoena, the Department is thus
asserting that its usury laws may apply to TitleMax’s conduct.
12
“wholly outside” the state. A.S. Goldmen & Co., Inc. v. N.J.
Bureau of Sec., 163 F.3d 780, 786 (3d Cir. 1999). If the
transactions do not occur wholly outside of Pennsylvania, then
“we determine whether the [regulation] is invalid under the
[Pike] balancing test.” Am. Exp. Travel Related Servs., Inc. v.
Sidamon-Eristoff, 669 F.3d 359, 372 (3d Cir. 2012).
1
The CDCA regulates loans and collection activity. 7 Pa.
Stat. § 6213(A). TitleMax’s transactions with Pennsylvanians
involve both loans and collection, and these activities do not
occur “wholly outside” of Pennsylvania. TitleMax’s
transactions involve more than a simple conveyance of money9
at a brick-and-mortar store in a location beyond Pennsylvania’s
border. Rather, the loan creates a creditor-debtor relationship
We therefore examine whether applying Pennsylvania’s usury
laws to TitleMax’s conduct violates the Commerce Clause.
9
Moreover, even if TitleMax’s transactions were
understood to be limited to the “origination” of the loan, our
precedent makes clear that contracts between a Pennsylvanian
and an out-of-stater do not occur “wholly outside”
Pennsylvania. In A.S. Goldmen, we noted that conceptions of
the territorial scope of contracts have evolved over time.
Under the “traditional” approach, a contract is “made” in the
state where the offer is accepted. 163 F.3d at 786-87. Under
the “modern” approach, contracts formed between citizens in
different states “implicate the regulatory interests of both
states.” Id. Here, TitleMax extended credit to Pennsylvanians
and, under the modern view, it does not matter that the
consumers would have been physically outside of
Pennsylvania when the transaction was initiated.
13
that imposes obligations on both the borrower and lender until
the debt is fully paid. For instance, Pennsylvanians with
TitleMax loans made payments to TitleMax while physically
present in the state. See Quik Payday, Inc. v. Stork, 549 F.3d
1302, 1308 (10th Cir. 2008) (holding that a loan transaction is
not “wholly extraterritorial” and thus not problematic under the
dormant Commerce Clause where the “transfer of loan funds
to the borrower would naturally be to a bank in [the consumer’s
state]”). In addition, TitleMax’s loan agreements grant
TitleMax “a security interest in the Motor Vehicle,” which in
the case of a Pennsylvania borrower is a Pennsylvania-
registered automobile. App. 567-68. TitleMax records these
liens with PennDOT and may repossess the vehicle if the
consumer defaults on his loan. Thus, by extending loans to
Pennsylvanians, TitleMax takes an interest in property located
and operated in Pennsylvania.
These aspects of loan servicing make TitleMax’s
conduct different from that in the Healy line of cases, which
largely involved transactions in goods that ended at the point
of sale. See, e.g., Healy, 491 U.S. at 327 (price of beer);
Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 519-20 (1935)
(price of milk for producers); see also Pharm. Rschs. & Mfrs.
of Am. v. Walsh, 538 U.S. 644, 669 (2003) (noting the
extraterritoriality rule in Healy is “not applicable” to cases
where a statute does not tie prices of in-state products to out-
of-state prices).10 Unlike the sale of a good, a TitleMax loan
10
For this reason, the authorities TitleMax relies upon
are inapt. See Dean Foods Co. v. Brancel, 187 F.3d 609, 620
(7th Cir. 1999) (volume premiums on milk); Legato Vapors,
LLC v. Cook, 847 F.3d 825 (7th Cir. 2017) (construction and
maintenance of manufacturing facilities); Carolina Trucks &
14
has a longer lifespan: it involves later payments and permits a
physical taking (repossession) from inside another state.
Because TitleMax both receives payment from within
Pennsylvania and maintains a security interest in vehicles
located in Pennsylvania that it can act upon, its conduct is not
“wholly outside” of Pennsylvania.11
Equip., Inc. v. Volvo Trucks of N. Am., Inc., 492 F.3d 484 (4th
Cir. 2007) (sales by truck dealers); Ass’n for Accessible Med.
v. Frosh, 887 F.3d 664 (4th Cir. 2018) (price of prescription
drugs); Sam Francis Found. v. Christies, Inc., 784 F.3d 1320(9th Cir. 2015) (terms and conditions of artwork sales).
11
A lack of “physical presence” in a state is not
dispositive under a Commerce Clause analysis. See South
Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2095, 2099 (2018).
In Wayfair, the Supreme Court rejected the “physical
presence” rule from Quill Corp. v. North Dakota, 504 U.S. 298(1992), which held that States could not require businesses
without a physical presence in their state to collect its sales tax
and that mere shipment of goods into a consumer’s state was
insufficient for “presence.” 138 S. Ct. at 2099. The Wayfair
Court held that the Quill rule was incorrect and unworkable
because “[m]odern e-commerce” facilitates closer connections
between consumers and businesses regardless of physical
presence or proximity. Id. at 2095. The Court explained that
“a company with a website accessible in South Dakota may be
said to have a physical presence in the [customer’s] State via
the customers’ computers.” Id. Applying the same reasoning
here, the fact that TitleMax operates no brick-and-mortar stores
in Pennsylvania does not close TitleMax off from
Pennsylvania consumers. On the contrary, TitleMax’s
advertisements, through its website and through third-parties,
reach customers in Pennsylvania and TitleMax informs
15
For these reasons, applying the Pennsylvania statutes to
TitleMax does not violate the extraterritoriality principle.
Pennsylvania callers that they need to “come into the store to
further discuss anything as far as the loan products,” not that
they cannot do business with them, App. 174. Indeed, their
business relationship continues after the Pennsylvanian leaves
the store and returns to Pennsylvania.
As a result, Midwest Title Loans, Inc. v. Mills, 593 F.3d
660 (7th Cir. 2010), on which the District Court relied in
finding TitleMax’s conduct was “wholly outside”
Pennsylvania, is unpersuasive. Midwest relied in part on the
reasoning of Quill, see, e.g., 593 F.3d at 668 (“[Quill] is an
example of extraterritorial regulation held to violate the
[C]ommerce [C]lause even though the entity sought to be
regulated received substantial benefits from the regulating
state, just as Indiana’s regulation of Illinois lenders furthers a
local interest—the protection of gullible or necessitous
borrowers”), which is no longer good law. Aside from the
“physical presence” rule in Quill, Midwest’s primary authority
was Healy, see 593 F.3d at 666, which involved a price
affirmation statute, not a statute regulating loans and
continuing obligations to pay. Moreover, Midwest took a
narrower view of the loan transaction than our Circuit has
taken. Cf. Aldens, Inc. v. Packel, 524 F.2d 38, 45 (3d Cir.
1975) (holding that a Chicago mail-order business’s credit
transactions with Pennsylvanians were subject to
Pennsylvania’s Goods and Services Installment Act because
the burden on interstate commerce from regulating interest
rates—the “time-price differential”—does not depend on “the
happenstance of respective locations of buyer and seller”).
Thus, its analysis does not govern.
16
2
Having determined that TitleMax’s conduct does not
occur wholly outside of Pennsylvania, we must determine
“whether the burdens [from the state law being applied] on
interstate commerce substantially outweigh[] the putative local
benefits.” Cloverland-Green, 462 F.3d at 258; see also Pike,
397 U.S. at 142 (holding that where a statute addresses “a
legitimate local public interest, and its effects on interstate
commerce are only incidental, it will be upheld unless the
burden imposed on such commerce is clearly excessive in
relation to the putative local benefits”). The only burdens to
be considered in the balancing test are those that “discriminate
against interstate commerce.”12 Old Bridge Chems., Inc. v.
N.J. Dep’t of Env’t Prot., 965 F.2d 1287, 1295 (3d Cir. 1992).
On the interstate commerce burdens side, application of
Pennsylvania’s usury laws to transactions with Pennsylvanians
puts TitleMax in no different position than an in-state lender.
See Instructional Sys., 35 F.3d at 826-27 (“[W]here the burden
on out-of-state interests rises no higher than that placed on
competing in-state interests, it is a burden on commerce rather
than a burden on interstate commerce.” (emphasis in original)).
While it may be true that TitleMax could be subject to different
interest rate caps depending on the borrower’s state of
residence, this result is not a “clearly excessive” burden on
12
“If a legitimate local purpose is found, then the
question becomes one of degree. And the extent of the burden
that will be tolerated will of course depend on the nature of the
local interest involved, and on whether it could be promoted as
well with a lesser impact on interstate activities.” Pike, 397
U.S. at 142.
17
interstate commerce. First, a burden on a lender is not a burden
on interstate commerce. Exxon Corp. v. Gov. of Md., 437 U.S.
117, 127-28 (1978) (“The [Commerce] Clause protects the
interstate market, not particular interstate firms, from
prohibitive or burdensome regulations.”). Second, a lack of
uniformity in state interest rates is not an undue burden, as
“Congress has deferred to the states on the matter of maximum
interest rates in consumer credit transactions.” Aldens, Inc. v.
Packel, 524 F.2d 38, 45, 48-49 (3d Cir. 1975) (holding that
application of Pennsylvania’s installment contracts law to a
mail-order creditor’s business with Pennsylvania residents did
not violate the Commerce Clause). Once it is clear that the
laws do not discriminate between in-staters and out-of-staters,
“the inquiry as to the burden on interstate commerce should
end” and further analysis of the local benefits is unnecessary.
Instructional Sys., 35 F.3d at 827.
Even if we consider the local benefits, we would
conclude that they weigh in favor of applying Pennsylvania
laws to TitleMax. The laws protect Pennsylvania consumers
from usurious lending rates. TitleMax’s interest rates may be
as high as 180% but if the CDCA and LIPL applied, TitleMax’s
rates for Pennsylvania customers would be capped at 6%.13
Cash Am. Net of Nev., LLC v. Pa. Dep’t of Banking, 8 A.3d
282, 285-86 (Pa. 2010). “Pennsylvania’s interest in the rates
which its residents pay for the use of money for purchase of
goods delivered into Pennsylvania is substantial enough to
satisfy any due process objection to its attempt at regulating
[credit on installment contracts].” Aldens, 524 F.2d at 43. The
13
Not all car loans in Pennsylvania are capped at 6%.
See 12 Pa. Stat. § 6243(e)(2) (capping interest rates at 21% for
older, used motor vehicles).
18
local interest in prohibiting usurious lending is equally
important when evaluating a Commerce Clause challenge.
See, e.g., Aldens, Inc. v. LaFollette, 552 F.2d 745, 751, 753
(7th Cir. 1977) (holding that “[p]rotecting . . . citizens from
usurious credit terms imposed when they are residents of the
state” is a local interest sufficient for due process and for
interstate-commerce balancing); Cash Am., 8 A.3d at 292 (“It
is well established that public policy in this Commonwealth
prohibits usurious lending, and this prohibition has been
recognized for over 100 years.”). Thus, any burden does not
clearly exceed the local benefits. Pike, 397 U.S. at 142.
Pennsylvania has a strong interest in prohibiting usury.
Applying Pennsylvania’s usury laws to TitleMax’s loans
furthers that interest, and any burden on interstate commerce
from doing so is, at most, incidental. Pennsylvania may
therefore investigate and apply its usury laws to TitleMax
without violating the Commerce Clause.
III
For the foregoing reasons, we will reverse the judgment
in favor of TitleMax and direct that the District Court enter
judgment in favor of the Department.
19