In a series of four opinions issued on July 19, 2022, the North Carolina Court of Appeals addressed personal jurisdiction and what constitutes a fundamental public policy of North Carolina. The four cases, arising in three North Carolina counties, involved a single South Carolina auto finance company and almost twenty different plaintiffs. Each of the plaintiffs were represented by the same law firm in all four cases, as was the defendant.
In each of the cases discussed here, the plaintiffs, all residents of North Carolina, borrowed money from AutoMoney, Inc., a car title loan provider based in South Carolina, securing the loans with their automobiles. The amounts of the loans ranged from $621.00 to $3,520 and the annual percentage rates ranged from 129% to 229%; it is notable that South Carolina law permits finance companies to charge borrowers significantly higher interest rates than does North Carolina law. All of the loan agreements noted that the loans were entered into in South Carolina, were subject to South Carolina law, and in at least some cases also included, in bold caps, a notice to North Carolina borrowers that South Carolina law applied. Almost all of the agreements also noted that the parties “knowingly, voluntarily, and irrevocably” consented to jurisdiction and venue in South Carolina in case of any litigation.
In May and June of 2020, all the plaintiffs, represented by the same law firm, in four separate actions in three separate counties, filed suit against AutoMoney alleging violations of the North Carolina Consumer Finance Act, the North Carolina Unfair and Deceptive Practices Act, and North Carolina usuary laws. AutoMoney filed motions to dismiss, arguing that North Carolina lacked personal jurisdiction over it, that the plaintiffs failed to state a claim in light of the South Carolina choice of law provisions in the loan agreements, and that the forum selection clauses mandated that any litigation take place in South Carolina. The four trial courts denied all of AutoMoney’s motions, and AutoMoney appealed in all four cases.
In its motions to dismiss on grounds of lack of jurisdiction, AutoMoney argued that it did not have contacts with North Carolina sufficient to subject it to jurisdiction in North Carolina. AutoMoney argued that (1) it was located only in South Carolina, (2) engaged in business only in South Carolina, (3) all the contracts were signed in South Carolina, (4) almost all the contracts provided for jurisdiction in South Carolina, and (5) it did not operate in North Carolina. AutoMoney pointed out that it is not and never has been registered to do business in North Carolina; does not make title loans in North Carolina; does not maintain offices in North Carolina; does not have a representative agent in North Carolina; and does not have a mailing address or telephone number in North Carolina. AutoMoney also claimed that it does not advertise through radio, television, or billboards within North Carolina; does not directly market into North Carolina; and borrowers can only enter into loans with it at one of its physical offices in South Carolina because its website prevents customers from submitting loan applications over the Internet.
The Plaintiffs, however, successfully challenged several of AutoMoney’s claims. In three of the cases (Hundley, Leake, and Troublefield), the facts are generally similar. The plaintiffs all called AutoMoney from North Carolina and provided information about the year, make, model, and condition of their automobiles. The AutoMoney employees asked the callers if they wanted car title loans in varying amounts; when the plaintiffs answered in the affirmative, the AutoMoney employees told them to drive to South Carolina to obtain the loans at one or more AutoMoney offices. When Mr. Hundley arrived at the AutoMoney location, he noticed a sign reading, “NC Titles Welcomed.” Ms. Troublefield’s paperwork included a specific notice titled, in part, “Attention North Carolina Customers.” After completing the paperwork, AutoMoney recorded a lien on the plaintiffs’ automobiles with the North Carolina Department of Motor Vehicles. Thereafter, the plaintiffs made payments from North Carolina. In the case of Mr. Hundley and Ms. Leake, AutoMoney called them in North Carolina for collection purposes, and, eventually, repossessed their automobiles in North Carolina.
In Wall, the plaintiffs established that AutoMoney’s website specifically targeted North Carolina residents by claiming to have made “thousands” of loans to North Carolinians and to be the “trusted name in title loans” in North Carolina. A AutoMoney assistant manager and loan officer swore that AutoMoney mailed loan solicitation flyers into North Carolina to both current and former borrowers and regularly engaged in phone conversations with North Carolina residents about loans. A North Carolina weekly publication ran an advertisement for AutoMoney’s title loans to residents of North Carolina for over six years and a North Carolina auto repossession business admitted that it recovered 442 motor vehicles in North Carolina for AutoMoney over the course of four years. AutoMoney customerwho were North Carolina residents attested to viewing television advertisements in North Carolina for AutoMoney.
Each of the four cases was considered by the same three judge panel. In each case, the Court of Appeals engaged in a standard personal jurisdiction analysis, addressing first whether the transactions fell within North Carolina’s long arm statute. Upon determining they did, the Court considered whether the exercise of jurisdiction would violate due process. Ultimately, the issue came down to whether AutoMoney had sufficient minimum contacts with North Carolina for the North Carolina courts to exercise specific personal jurisdiction over AutoMoney. The Courts of Appeals answered in the affirmative in all four cases.
Practice pointer – The Court found the following factors in determining that the North Carolina longarm statute reached AutoMoney: AutoMoney sent written solicitations into North Carolina; AutoMoney actively advertised to residents of North Carolina; AutoMoney solicited directly AutoMoney advertised that it had made thousands of loans to North Carolinians; AutoMoney spoke with potential borrowers in North Carolina and instructed them to travel to South Carolina to do business; AutoMoney’s loan documents explicitly anticipated making loans to residents of North Carolina; AutoMoney secured the loans using the North Carolina Department of Motor Vehicles; and AutoMoney directed third-parties to enter into North Carolina to take possession of collateral.
Choice of Law
AutoMoney did not fare any better with its contention that the plaintiffs failed to state a claim due to the choice of law provision in the loan agreements calling for the application of South Carolina law. AutoMoney argued that the choice of law provision mandating the application of South Carolina law precluded the plaintiffs’ claims, all of which arose under North Carolina law. While the Court of Appeals acknowledged that choice of law provisions are generally binding, it relied on an exception when the law of the chosen State violates a fundamental public policy of North Carolina.
Since the plaintiffs claimed that AutoMoney violated the usury provisions of General Statute section 53-190, the Court of Appeals considered whether a statute that “aims to protect North Carolina residents from predatory lending by nonresident, predatory loan corporations that infiltrate North Carolina through the contractual activities [described in the jurisdiction section of this blog] constitutes a fundamental public policy of North Carolina.” Troublefield, at *21; Leake, at *21. With that description of the issue, we all know where the cases were heading.
And indeed that is where the cases went. Troublefield, and Leake noted the paramount public policy” of “protect[ing] North Carolina resident borrowers through the application of North Carolina interest laws,” Troublefield, at *21; Leake, at *21, while Wall noted that the Court of Appeals “has consistently held [that] defendants who offer usurious loans to residents of North Carolina commit unfair and deceptive trade practices as a matter of law.” Wall, at *20.
Troublefield referenced legislation enacted by the General Assembly specifically to legislatively reverse a state Supreme Court case, Skinner v. Preferred Credit, 361 N.C. 114, 119, 638 S.E.2d 203, 208 (2006), which had limited the judiciary’s jurisdiction in a case against a nonresident lender. In addition, Troublefield cited four other North Carolina statutes enacted to protect “unwitting victims of predatory lending practices.” Troublefield, at *21-23. In Wall, the Court provided a broad interpretation of the North Carolina Consumer Finance Act, allowing its enforcement “unless all contractual activities occur entirely outside of” North Carolina. Wall, *17-19.
Forum Selection Clause
AutoMoney’s arguments for dismissal based on the forum selection clauses in its loan agreements fared no better than its other arguments. Noting that “protecting North Carolina residents from predatory lending is a strong public policy of this State,” the Court held that “[t]he enforcement of [the] forum selection clause would contravene [North Carolina’s] interest in offering such protection by allowing corporations to circumvent [North Carolina’s] laws through merely establishing themselves in a different state.” Troublefield, at *21; see also Wall, at *29. Moreover, both Troublefield and Wall reference General Statute section 22B-3, which provides that any provision in a contract entered into in North Carolina that requires filing a lawsuit arising from the contract to be filed outside North Carolina is, as a matter of law, against public policy, void, and unenforceable. Here, the plaintiffs were citizens and residents of North Carolina, received solicitations in North Carolina, and discussed the loan with AutoMoney while in North Carolina, so the Court had no trouble finding that AutoMoney offered, solicited, and/or communicated in North Carolina to lend money to the plaintiffs residents of North Carolina. In short, the loan agreements were made in North Carolina. As a result, it was against North Carolina’s public policy to require the plaintiffs to file suit against AutoMoney in South Carolina. In addition, as the Troublefield court pointed out, any other conclusion would undermine its ruling refusing to dismiss the case on the basis of the choice of law provision in the loan agreement. Troublefield, at *27.
All businesses rely on the supposed sanctity of contract. Certainly lenders of money do so in order to insure they can recover their loans. AutoMoney was no different in that regard than any other lender, and it certainly drafted its contracts to insure it stood the best chance of recovering its loans: it limited its physical footprint to South Carolina, and made sure its paperwork included clear references about its interest rates, the application of South Carolina law, and limiting litigation to South Carolina. However, ample evidence indicated that AutoMoney aggressively marketed itself in North Carolina, and the Court of Appeals quite plainly did not like what it saw. These cases were all remanded by to their respective trial courts for further action, so we may not have seen the last of these cases in the appellate courts.
 Joshua Hundley v. AutoMoney, Inc., 2022-NCCOA-489 (19 July 2022); Jennifer Leake and Elizabeth Wakeman v. AutoMoney, Inc., 2022-NCCOA-490 (19 July 2022); Doris Wall, et. al., v. AutoMoney, Inc., 2022-NCCOA-498 (19 July 2022); Becky Troublefield v. AutoMoney, Inc., 2022-NCCOA-497 (19 July 2022);
 Except for the Hundley case, where the Court decided that the issue was more appropriate for determination on summary judgment, rather than a motion under Rule 12(b)(6) and instead denied AutoMoney’s motion for that reason.