Automoney, Inc. appeals a January 15, 2021 Order from the Richmond County Superior Court that denied its Motion to Dismiss based on various grounds. The appeal involves a group of North Carolina residents (Plaintiffs) who entered into car title loan agreements with Automoney, a South Carolina corporation. The loans, ranging from $621 to $3,520, were secured by liens on the Plaintiffs' vehicles, which Automoney registered with the North Carolina DMV. The loan agreements stipulated annual percentage rates (APRs) between 129% and 229% and included a choice-of-law provision designating South Carolina law for interpretation and governance. An updated provision in 2018 specified that disputes would be adjudicated exclusively in South Carolina courts, applicable to ten of the fifteen Plaintiffs' agreements.
On June 4, 2020, the Plaintiffs filed a complaint alleging violations of the North Carolina Consumer Finance Act (NCCFA), the Unfair and Deceptive Trade Practices Act (UDTPA), and usury laws. They claimed Automoney charged interest rates exceeding the maximum allowable under North Carolina law, solicited and negotiated the loans while Plaintiffs were in North Carolina, and knowingly extended usurious loans to state residents.
Plaintiffs are seeking a declaratory judgment to deem their loans and associated security interests void and unenforceable, along with statutory damages not exceeding $75,000 each. They assert that the court has jurisdiction over the Defendant under N.C. G.S. 1-75.4 due to Defendant's extensive solicitation and marketing of automobile title loans to North Carolina residents through various communication methods. Plaintiffs claim that Defendant has maintained continuous contacts with North Carolina, thereby establishing personal jurisdiction.
Defendant, positioned just across the North Carolina-South Carolina state line, allegedly structured its advertising to appear in searches by North Carolinians for car title loans, intending to evade North Carolina law. On July 22, 2020, Defendant filed a Motion to Dismiss, arguing lack of personal jurisdiction, improper venue based on a forum selection clause in the loan agreements, and failure to state a claim under North Carolina law. In support, Defendant provided an affidavit from its owner, Linda Derbyshire, denying any allegations of conducting business in North Carolina and presented the loan agreements with choice-of-law provisions.
In response, Plaintiffs submitted affidavits countering Defendant's claims, including evidence from Defendant's website targeting North Carolina residents, an affidavit from a loan officer detailing mail solicitations and phone calls to North Carolinians, an advertisement placed in a North Carolina publication, and documentation of vehicle recoveries conducted for Defendant in North Carolina by a local business.
On 30 November 2020, the Defendant's Motion to Dismiss was heard, and the trial court denied it on 15 January 2021. The Defendant filed a Notice of Appeal on 10 February 2021. The trial court's order involved three interlocutory rulings: denying the Motion to Dismiss for lack of personal jurisdiction, improper venue, and failure to state a claim. Generally, such denials are not immediately appealable as they do not resolve the case, but N.C. Gen. Stat. 1-277 allows immediate appeal if the order affects a substantial right or involves personal jurisdiction. The denial of the Motion concerning personal jurisdiction is immediately appealable under Section 1-277(b). Additionally, the denial regarding improper venue may also affect a substantial right and is therefore appealable. The appeal regarding the failure to state a claim related to a choice-of-law clause is less straightforward; however, the court has previously reviewed similar cases under writ of certiorari. The Defendant filed a Petition for Writ of Certiorari to cover the choice-of-law issue, which is connected to the other two appealable issues. The appellate court granted the petition to ensure jurisdiction over the entire appeal and proceeded to examine the merits. The appeal addresses whether the trial court erred in denying the Motion to Dismiss based on: I) lack of personal jurisdiction due to the Defendant's business activities in North Carolina; II) failure to state a claim related to North Carolina law despite a choice-of-law provision favoring South Carolina; and III) improper venue given the forum selection clause in the loan contracts and the residency of the Plaintiffs.
The excerpt outlines the standard of review for personal jurisdiction motions under Rule 12(b)(2), detailing three procedural contexts: (1) defendant's motion to dismiss without evidence, (2) motion supported by affidavits with no opposing evidence from the plaintiff, and (3) both parties submitting affidavits, which is the scenario in this case. When dueling affidavits are presented, the court can decide the matter based on these affidavits or may opt for oral testimony or depositions. If the defendant presents evidence countering the plaintiff's allegations, the plaintiff must establish a prima facie case for jurisdiction, while still bearing the ultimate burden of proof at an evidentiary hearing or trial. The trial court's decision is reviewed to ensure findings of fact are supported by competent evidence, with a de novo review of whether these findings support the conclusion of personal jurisdiction. Additionally, the North Carolina Supreme Court mandates a two-step analysis to determine a non-resident defendant's in personam jurisdiction, which includes verifying the applicability of the state's 'long-arm' statute and ensuring compliance with the Fourteenth Amendment's due process clause. The parties in this case agree that the 'long-arm' statute applies and focus on the due process issue.
Specific personal jurisdiction is defined by the U.S. Supreme Court’s ruling in Ford Motor Co. v. Montana Eighth Jud. Dist. Ct., which emphasizes that the Fourteenth Amendment's Due Process Clause restricts a state court's jurisdiction over out-of-state defendants. There are two types of personal jurisdiction: general and specific. Specific jurisdiction applies to defendants with limited connections to a state, contingent on purposeful availment—where the defendant intentionally engages in activities within the forum state, rather than through random or isolated acts. The defendant must show deliberate outreach, such as entering into contracts or exploiting the local market.
The plaintiff's claims must arise from these contacts. The case of Travelers Health Association v. Virginia exemplifies this, where jurisdiction was upheld over a Nebraska corporation due to its extensive contracts and interactions with Virginia residents. In this context, the trial court found that the defendant had substantial contacts with North Carolina, including making numerous loans to North Carolinians, conducting business over the phone, establishing ongoing obligations, and actively soliciting and collecting debts in the state.
Defendant is subject to suit in North Carolina due to deliberate and systematic engagement with North Carolina citizens through loan agreements, as established in Ford Motor Co. v. Montana Eighth Judicial Dist. Court. The trial court correctly found that exercising personal jurisdiction over Defendant does not violate the Due Process Clause of the Fourteenth Amendment and denied Defendant's Motion under Rule 12(b)(2) of the North Carolina Rules of Civil Procedure.
Defendant also argued the trial court erred in denying a Motion to Dismiss under Rule 12(b)(6), claiming a choice-of-law provision in the contracts mandated South Carolina law, thus negating Plaintiff’s North Carolina law claims. The standard for dismissing a claim for failure to state a claim requires that the complaint’s allegations are treated as true and must be legally sufficient. Historically, contracts often include provisions related to jurisdiction and governing law to avoid litigation over these issues. A choice-of-law provision specifies which state's laws govern the contract, provided the parties had a reasonable basis for their selection and it does not violate fundamental policies of the state in which the case is litigated. However, such provisions may not apply to extra-contractual statutory claims. North Carolina courts have disregarded choice-of-law provisions when applying the chosen law would conflict with fundamental policies of other states with a greater interest in the matter at hand.
Plaintiffs have filed claims under the North Carolina Consumer Finance Act (NCCFA), the Unfair and Deceptive Trade Practices Act (UDTPA), and North Carolina usury law. The NCCFA deems unenforceable any loan contract made outside North Carolina for amounts of $15,000 or less if charges exceed those specified by state statutes. Lenders can only avoid this application if all contractual activities occur entirely outside the state. The North Carolina legislature has emphasized that the NCCFA should be interpreted broadly to prevent illicit lending practices.
In this case, the Defendant attempted to circumvent the NCCFA by including a choice-of-law provision and requiring Plaintiffs to travel to South Carolina for loan signing. However, Plaintiffs alleged that the Defendant conducted significant activities within North Carolina, such as soliciting and negotiating loans and repossessing vehicles, thus making the NCCFA applicable. The trial court correctly refused to enforce the choice-of-law provision, aligning with North Carolina's public policy to enforce the NCCFA, leading to the denial of Defendant's motion to dismiss this claim.
Regarding the UDTPA, it prohibits unfair or deceptive acts affecting commerce and is intended to protect North Carolina citizens broadly. The removal of geographical limitations in 1977 expanded its application to include any substantial injurious effects on plaintiffs in North Carolina, regardless of where the actions occurred. Thus, the UDTPA claim is also viable based on the Plaintiffs' allegations.
The court examined the applicability of North Carolina's Unfair and Deceptive Trade Practices Act (UDTPA) in the context of the defendant’s lending practices. The statute broadly encompasses commercial dealings and has been interpreted to protect consumers from practices violating public policy. Prior cases establish that offering usurious loans constitutes unfair and deceptive practices. The plaintiffs alleged that the defendant knowingly engaged in high-interest loan agreements with North Carolina residents while intentionally situating their business just outside the state to evade North Carolina’s usury laws. The court found that the plaintiffs had provided sufficient factual allegations to support their UDTPA claim, rejecting the defendant's motion to dismiss based on a choice-of-law provision favoring South Carolina law. The court reaffirmed that North Carolina's usury statute applies if the credit extension occurs within the state, emphasizing the state's public policy to protect its residents from predatory lending practices.
Plaintiffs claimed that the Defendant solicited and made oral loan offers in North Carolina, and that Plaintiffs communicated to Defendant about borrowing from North Carolina. These allegations support the application of North Carolina usury law to the loan contracts. Enforcing the choice-of-law provision would contradict North Carolina's public policy aimed at protecting resident borrowers. Consequently, the trial court correctly determined that Plaintiffs had sufficiently alleged claims under North Carolina usury law, thereby denying Defendant’s Motion to Dismiss.
Defendant challenged the trial court's denial of its Motion to Dismiss based on improper venue, asserting that ten of the fifteen loan agreements contained a forum selection clause requiring disputes to be litigated exclusively in South Carolina. Defendant argued that Richmond County was an improper venue since only three Plaintiffs were residents there.
The standard of review for denying a motion to dismiss for improper venue involving a forum selection clause is typically an abuse of discretion standard. The reviewing court assesses whether the decision lacks reasonable support or is arbitrary. If a motion is based on improper county selection by the plaintiff, the review is de novo.
A forum selection provision indicates a designated jurisdiction for litigation arising from the contract. Such clauses are generally enforceable unless they result from fraud, unequal bargaining power, are unreasonable or unfair, or violate strong public policy in the forum state.
Forum selection clauses in contracts executed in North Carolina are generally unenforceable and void unless they pertain to non-consumer loan transactions. N.C. Gen. Stat. 22B-3 prohibits such clauses from mandating that disputes be resolved in another state, reflecting public policy against enforcement, except when all parties consent at the time the dispute arises. In the context of the North Carolina Consumer Finance Act (NCCFA), the Act applies to loans solicited within the state, regardless of where the loan was made, thus enforcing a forum selection clause would contradict the public policy of regulating out-of-state loans that involve any North Carolina activity. Consequently, the trial court correctly denied the Defendant's motion to dismiss based on improper venue for the NCCFA claim.
Regarding the Unfair and Deceptive Trade Practices Act (UDTPA), the enforcement of a forum selection clause would undermine the law's purpose of ensuring ethical business practices within North Carolina by forcing consumers to litigate outside the state. The UDTPA aims to provide a private cause of action for aggrieved consumers, and enforcing the clause would violate this public policy. Therefore, the trial court did not err in refusing to enforce the forum selection clause in relation to the UDTPA claim.
Usury claims in North Carolina are governed by N.C. Gen. Stat. 22B-3, which deems contracts requiring enforcement actions to be held in another state as void against public policy. The determination of a contract's place is based on where the last essential act for mutual agreement occurs, typically the final signature. However, under N.C. Gen. Stat. 24-2.1(a), a loan agreement is considered made in North Carolina if the lender offers a loan to a resident or the resident accepts the offer within the state, regardless of the contract's stated location. The Plaintiffs’ Complaint indicates that discussions and acceptance of the loan terms occurred while some Plaintiffs were in North Carolina, thus qualifying the agreements as made in the state, rendering any forum selection clause unenforceable under N.C. Gen. Stat. 22B-3.
Furthermore, even if N.C. Gen. Stat. 22B-3 did not apply, enforcing the clause would conflict with North Carolina's public policy aimed at protecting resident borrowers from usurious loans, as stipulated in N.C. Gen. Stat. 24-2.1(g). The trial court's denial of the Defendant's Motion to Dismiss for improper venue was justified; venue is appropriately determined by N.C. Gen. Stat. 1-82, which necessitates that the suit be filed in the county of residence for at least one plaintiff or defendant. Since at least one Plaintiff resided in Richmond County at the time the Complaint was filed, the court affirmed that venue was proper. The trial court's decision was upheld, affirming the denial of Defendant’s Motion to Dismiss.
