United States District Court, M.D. Pennsylvania
COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF BANKING AND SECURITIES, Plaintiff,
TITLEMAX OF DELAWARE, INC., TITLEMAX OF OHIO, INC., TITLEMAX OF VIRGINIA, INC., TITLEMAX OF SOUTH CAROLINA, INC., TITLEMAX.COM, and TITLEMAX FUNDING, INC., Defendants.
Jennifer P. Wilson Judge
the court in this proceeding that was removed from the
Commonwealth Court of Pennsylvania are two motions:
Plaintiff's motion for remand, Doc. 9, and
Defendants' motion to stay proceedings, Doc. 6. As the
removing party, Defendants bear the burden of proving this
action is properly before this court. The court finds that
Defendants fail to establish jurisdiction, because Plaintiff
is an arm or alter ego of Pennsylvania, not a citizen; the
$75, 000 amount in controversy requirement is not met; and
there is no federal question before the court in this action.
Accordingly, for the reasons that follow, the court will
grant Plaintiff's motion for remand and deny as moot
Defendants' motion to stay proceedings. (Docs. 6, 9.)
Background and Procedural History
December 2016, Plaintiff Commonwealth of Pennsylvania
Department of Banking and Securities (“the
Department”) began an investigation of TitleMax of
Delaware, Inc., TitleMax of Ohio, Inc., TitleMax of Virginia,
Inc., TitleMax of South Carolina, Inc., TitleMax.com, and
TitleMax Funding, Inc. (collectively,
“Defendants”). (Doc. 1.) An investigative
subpoena was issued on August 22, 2017, using the authority
granted to the Department under the Department of Banking and
Securities Code, 71 Pa. Stat. § 733-401.F, the Consumer
Discount Company Act, 7 Pa. Stat. § 6212
(“CDCA”), and the Loan Interest and Protection
Law, 41 Pa. Stat. § 506 (“LIPL”).
(Id. at 9.) The subpoena was issued to obtain
information to determine whether to charge Defendants with
violations of the CDCA and LIPL. (See Doc. 10, p.
September 2017, TitleMax responded by commencing an action in
the United States District Court for the District of Delaware
challenging the Department's “attempt to regulate
commercial activity that takes place wholly outside of the
Commonwealth of Pennsylvania, which violates the United
States Constitution.” (Doc. 44, p. 3.)
on September 22, 2017, the Department filed a petition for
review to enforce an investigative subpoena and enjoin
respondents (“the Petition”) before the
Commonwealth Court of Pennsylvania, as it has jurisdiction
over original actions brought by an agency of the
Commonwealth. (Id. at 8.) The Commonwealth Court
required an answer to be filed by Defendants by November 22,
2017, and scheduled a hearing for December 1, 2017. (Doc.
1-3, p. 2.) On November 16, 2017, Defendants removed the
Department's Petition from the Commonwealth Court to this
court. (Doc. 1.)
December 8, 2017, Defendants filed a motion to stay
proceedings in this court pending the resolution of the
related case in the District of Delaware or, alternatively,
transfer this matter to that District. (Doc. 6.) The
Department then filed a motion to remand this matter to state
court on December 15, 2017, along with a supporting brief.
(Docs. 9-10.) The parties subsequently agreed to several
extensions of time and an eventual stay of this case pending
their attempts to resolve these issues amicably. (Docs. 12,
14, 16, 18, 21, 24, 27, 29, 31, 33.)
10, 2019, the parties agreed to move forward with this case
and requested briefing deadlines for the motion to stay and
motion to remand, which the court granted on June 12, 2019.
(Docs. 34, 36.) Defendants filed a brief in support of their
motion to stay on June 10, 2019, the Department opposed the
motion on July 1, 2019, and Defendants filed a reply on July
29, 2019. (Docs. 35, 37, 41.) On November 15, 2019,
Defendants filed their brief in opposition to the
Department's motion to remand, and the Department replied
on December 9, 2019. (Docs. 44, 47.) Accordingly, both
motions are now fully briefed and ripe for disposition.
defendant can remove a case to federal court if the court has
original jurisdiction over the civil action. 28 U.S.C. §
1441. However, “removal statutes are to be strictly
construed against removal and all doubts resolved in favor of
remand.” Boyer v. Snap-on Tools Corp., 913
F.2d 108, 111 (3d Cir. 1990) (quoting Steel Valley Auth.
v. Union Switch & Signal Div., 809 F.2d 1006, 1010
(3d Cir. 1987)). Furthermore, “[t]he party asserting
jurisdiction bears the burden of showing the action is
properly before the federal court.” Sikirica v.
Nationwide Ins. Co., 416 F.3d 214, 219 (3d Cir. 2005).
motion for remand, the Department argues that the court lacks
diversity jurisdiction because the Department is a sovereign,
not a citizen, and the amount in controversy is not met.
(Doc. 10, pp. 10-21.) Defendants argue that Pennsylvania
borrowers are the real parties in interest and that the
amount in controversy exceeds $75, 000, thus satisfying the
diversity jurisdiction requirements. (Doc. 44, pp. 5-7.)
Alternatively, Defendants assert that the court has federal
question jurisdiction because the Department's actions
raise substantial and disputed issues of federal law.
(Id. at 7-9.)
The Department is an “Arm or Alter Ego” of the
Commonwealth of Pennsylvania
agency, such as the Department, is not a citizen of a state
for the purpose of diversity jurisdiction if it is simply an
“arm or alter ego of the State.” Univ. of S.
Ala. v. Am. Tobacco Co., 168 F.3d 405, 412 (11th Cir.
1999) (citing Moor v. Alameda Cty., 411 U.S. 693,
717-18 (1973)). To determine whether a state agency is an
“arm or alter ego” of the state for establishing
diversity jurisdiction, courts apply Eleventh Amendment
immunity analysis. Id. The Third Circuit developed a
three-part test to determine whether an entity is an
“arm of the state” for the purposes of Eleventh
Amendment immunity. Karns v. Shanahan, 879 F.3d 504,
513 (3d Cir. 2018) (citing Fitchik v. N.J. Transit Rail
Operations, Inc., 873 F.2d 655, 659 (3d Cir. 1989)). The
court should examine: “(1) whether the payment of the
judgment would come from the state; (2) what status the
entity has under state law; and (3) what degree of autonomy
the entity has.” Id. (quoting Bowers v.
Nat'l Collegiate ...