Antitrust Law Daily Wrap Up, RICO—3d Cir.: Borrower gets second chance at ‘collection of unlawful debt’ racketeering claim, (Mar 11, 2016)

By Greg Hammond, J.D.

The federal district court in Allentown, Pennsylvania, erred in granting summary judgment against an individual’s Racketeer Influenced and Corrupt Organizations Act (RICO) claim after the individual defaulted on a $1,000 loan and his vehicle was repossessed. The U.S. Court of Appeals in Philadelphia reversed and remanded, disagreeing with the lower court’s decision that forfeiture of collateral cannot amount to the “collection of unlawful debt” under RICO (Goldenstein v. Repossessors Inc., March 10, 2016, Krause, C.).

The individual obtained a $1,000 online loan from Title Loan America, pledging his car as collateral. After defaulting on his loan, however, his vehicle was repossessed. Shady Oak Enterprises Inc., doing business as Premier Finance Adjusters, refused to return the vehicle unless the individual signed release documents. The individual subsequently paid the remaining balance of the loan and repossession fees, signed the releases, and filed suit, alleging violations of RICO and debt collection laws. The district court granted summary judgment in favor of defendants Repossessors Inc. and Premier, holding that the repossession of collateral could not constitute the “collection of unlawful debt” as a matter of law.

The appellate court disagreed with the lower court’s holding, noting that there is nothing in RICO that 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 collateral used to secure unlawful debt. Rather, the prohibition on the “collection of unlawful debt” under RICO encompasses efforts to collect on a usurious loan, without distinguishing whether the collection is cash or collateral, the appellate court found. The court also stated 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 the plaintiff can establish the other elements of the violation.

The record in the instant action, however, was not sufficiently developed for the appellate court to consider the merits of the parties’ arguments concerning the alleged enterprise or intent required of a RICO claim. The district court’s judgment was therefore reversed and remanded for the lower court’s further consideration of the RICO claim.

The case is No. 14-3554.

Attorneys: Robert F. Salvin for Heiko Goldenstein. Neal A. Thakkar (Sweeney & Sheehan) for Repossessors Inc. and Shady Oak Enterprises Inc.

Companies: Repossessors Inc.; Shady Oak Enterprises Inc.

Cases: RICO DelawareNews NewJerseyNews PennsylvaniaNews