McGraw's title loans case remanded to Jefferson court

MARTINSBURG – One of the lawsuits new state Attorney General Patrick Morrisey has inherited from his predecessor will be heard in his home county.

On Jan. 11, U.S. District Judge Gina Groh remanded former AG Darrell McGraw’s lawsuit against a Virginia-based title loan company to state court in Jefferson County. Morrisey, of Harpers Ferry, defeated McGraw in the November general election.

McGraw sued Fast Auto Loans of Virginia, Community Loans of America of Georgia and Robert Reich – the president and CEO of both – in June, alleging illegal debt collection practices.

Companies that engage in title loans offer loans while placing a lien on the borrower’s vehicle.

Fast Auto Loans said the question of whether McGraw had the authority under the West Virginia Consumer Credit and Protection Act to enjoin the company from making loans in Virginia to West Virginia residents depends entirely on the federal Commerce Clause.

“(T)he court finds that to the extent the defendants seek to argue that the relief sought by the plaintiff conflicts with the Commerce Clause, such an argument merely constitutes a federal defense to the plaintiff’s complaint, which is not grounds for removal,” Groh wrote, citing a 2009 decision in McGraw’s case against CashCall.

“A defense to the plaintiff’s sought-after injunction, even a defense which is based upon federal law, is an issue that can and should ordinarily be raised in state court. After all, state courts ‘are presumed competent to resolve federal issues,’ and ‘ when a state proceeding presents a federal issue, even a preemption issue, the proper course is to seek resolution of that issue by the state court.’”

Groh wrote that any federal question that might have existed was rendered moot by the vacation of a state court injunction.

In July, Jefferson County Circuit Court Judge David Sanders entered a temporary injunction that ordered Fast Auto Loans to stop collecting payments, seizing vehicles and entering into new loans with West Virginia residents.

Groh noted the injunction was entered without a hearing on the issue. When Fast Auto Loans removed the case to federal court in July, it moved to stay and declare void the circuit court’s injunction.

The parties stipulated to an entry of an order that vacated the injunction. Fast Auto Loans agreed to voluntarily discontinue making loans to West Virginians.

McGraw’s first lawsuit against Fast Auto Loans sought to enforce a subpoena sent to the company. He filed it in April 2011.

Kanawha County Circuit Court Judge Charles King ruled the subpoena was procedurally defective after Fast Auto Loans argued McGraw ignored procedural requirements for the issuance of an out-of-state subpoena.

McGraw did not directly appeal to the state Supreme Court. Instead, he filed a petition for writ of prohibition.

The court denied the request and said McGraw should have filed a direct appeal. His lawsuit followed months later.

From the West Virginia Record: Reach John O’Brien at jobrienwv@gmail.com.