WEST VIRGINIA RECORD

CHARLES TOWN – State Attorney General Patrick Morrisey is seeking to add a third company making title loans in Virginia to a lawsuit that alleges the loans are being illegally made to West Virginians.

On April 26, Morrisey’s office asked Jefferson County Circuit Judge David Sanders to allow it to amend its complaint, originally filed in June, to include Virginia Auto Loans as a party. The defendants named in the original complaint are Fast Auto Loans, Community Loans of America and Robert I. Reich, the president and CEO of both.

The title loans offered by the defendant include the lender putting his or her car title up as collateral. The lawsuit alleges the interest rates charged can go as high as 300 percent.

The interest rates exceed the 18 percent maximum allowed in West Virginia, and the loans themselves are a type not allowed by state law, the AG’s office is arguing.

“The interest rates charged by Fast Auto Loans violate the long-standing public policy established by the Legislature to protect West Virginia residents from predatory, usurious loans,” the complaint says.

The complaint says the companies have placed liens on 512 West Virginia vehicles in 24 different counties worth a total of $371,883.48.

However, since the loans are being made in Virginia at locations in Wytheville and Winchester, the companies argue they’ve done nothing wrong.

In a motion to dismiss filed Feb. 11, one month after it was remanded from federal court by U.S. District Judge Gina Groh, the companies wrote that the AG’s office has “not alleged that either (business) resides or transacts business and where not even WVAG can attribute a single contact between these defendants and West Virginia.”

The claims in the complaint are “rank, globalized allegations” and “incurably deficient,” the motion to dismiss adds.

The company had removed the case to federal court in July, and Groh decided it should be heard in Jefferson Circuit Court.

“(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.’”

Former Attorney General Darrell 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.

Assistant attorneys general Norman Googel and Tayna L. Godfrey are handling the case for Morrisey. The title lenders are represented by Christopher Robertson and William J. Powell of Jackson Kelly.

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