Procedural Defects and Corporate-Form Arguments Do Not Defeat Younger Abstention in Quasi-Criminal State Usury Enforcement

I. Introduction

In CCFI Companies, LLC v. Secretary Pennsylvania Department of Banking and Securities (Third Circuit, Jan. 7, 2026) (not precedential), a group of affiliated entities referred to collectively as “TitleMax” challenged Pennsylvania’s efforts to enforce state usury laws. In June 2024, the Pennsylvania Department of Banking and Securities issued an order to show cause seeking civil penalties and restitution, alleging that TitleMax violated Pennsylvania’s usury restrictions in connection with loans made to Pennsylvania residents.

Rather than litigate exclusively in the state administrative forum (with state-court review), TitleMax filed multiple federal suits against the Secretary, asserting constitutional claims under the Commerce Clause, the Full Faith and Credit Clause, and the Fourteenth Amendment. The Middle District of Pennsylvania consolidated four of those cases and dismissed them under Younger abstention. The central appellate issues were whether the state matter qualified as a quasi-criminal civil enforcement proceeding, whether the Middlesex factors were satisfied, and whether any exception (notably “bad faith”) defeated abstention—especially in light of TitleMax’s arguments about corporate separateness and alleged procedural/service defects.

II. Summary of the Opinion

The Third Circuit affirmed. It held:

The Department’s usury enforcement action is a civil enforcement proceeding “akin to a criminal prosecution” under the framework drawn from Altice USA, Inc. v. N.J. Bd. of Pub. Utilities and Sprint Commc'ns, Inc. v. Jacobs, including because Pennsylvania could have pursued criminal usury enforcement under 18 Pa. Stat. §§ 4806.1(h), 4806.3.
Alleged naming/service defects and arguments that some affiliates did not directly “make loans” did not alter the analysis; courts look to the general class of proceedings, and procedural defects do not change a proceeding’s “fundamental character,” consistent with Sirva Relocation, LLC v. Richie.
The three Middlesex factors were met: (1) the state matter was ongoing when the federal complaints were filed; (2) Pennsylvania has an important interest in prohibiting usury, reaffirmed by TitleMax of Del., Inc. v. Weissmann; and (3) TitleMax could raise its constitutional challenges through state processes, consistent with Ohio Civ. Rts. Comm'n v. Dayton Christian Sch., Inc..
No exceptional circumstances applied. TitleMax failed to show bad faith (an action brought “without hope” of success), as discussed with reference to Perez v. Ledesma.
TitleMax’s assertedly “prospective” relief was not abstention-proof: a federal injunction restraining future regulation could have preclusive (res judicata) effects in Pennsylvania courts, potentially interfering with the state proceeding, relying on In re Stevenson and Del. Valley Citizens' Council for Clean Air v. Commonwealth.
A separate challenge to the Department’s 2024 subpoena was correctly rejected on ripeness grounds; TitleMax’s “chilling effect” theory depended on a Dormant Commerce Clause premise foreclosed by TitleMax of Del., Inc. v. Weissmann, with ripeness standards drawn from Wayne Land & Min. Grp. LLC v. Del. River Basin Comm'n and Surrick v. Killion.

III. Analysis

A. Precedents Cited

1. The core abstention framework: Younger, Sprint, and Third Circuit refinements

Younger v. Harris: The foundational rule that federal courts should not enjoin certain ongoing state proceedings. The panel reiterated Younger's twin aims: comity (respect for state adjudicatory systems) and restraint in exercising equitable power when state forums provide adequate remedies.
Sprint Commc'ns, Inc. v. Jacobs: Provides the modern taxonomy limiting Younger to three “exceptional” categories, including civil enforcement proceedings “akin to criminal prosecutions.” The opinion uses Sprint (as quoted through later Third Circuit cases) to frame the threshold inquiry: whether Pennsylvania’s proceeding fits the quasi-criminal class.
Altice USA, Inc. v. N.J. Bd. of Pub. Utilities: Supplies the Third Circuit’s articulation of the quasi-criminal factors and the two-step structure: (i) identify whether the proceeding falls within a qualifying category (here, quasi-criminal civil enforcement), and (ii) apply the Middlesex factors. The panel largely tracks Altice’s language and analytical sequence.
PDX N., Inc. v. Comm'r N.J. Dep't of Lab. & Workforce Dev.: Cited for the standard of review (de novo) and for the principle that the “importance of the State’s interest” is assessed by looking to the generic proceedings, not the underlying merits or factual disputes. PDX also anchors the court’s refusal to weigh the ultimate validity of Pennsylvania’s liability theory in the abstention calculus.

2. The Middlesex factors and administrative adjudication

Middlesex Cnty. Ethics Comm. v. Garden State Bar Ass'n: Provides the familiar three-factor test: (1) ongoing state judicial proceedings, (2) important state interests, and (3) an adequate opportunity to raise federal claims. The panel applies each factor directly, using Middlesex as the controlling template.
Gonzalez v. Waterfront Comm'n of N.Y. Harbor: Supports treating administrative processes as “judicial in nature” when they are subject to state judicial review—critical to satisfying the first Middlesex factor in cases where the “proceeding” begins in an agency rather than a court.
Ohio Civ. Rts. Comm'n v. Dayton Christian Sch., Inc.: Bolsters the third factor by making clear it is enough that federal constitutional claims can be raised during state-court judicial review of the agency action; immediate federal adjudication is not required.

3. “Procedural defect” and “party identity” arguments against abstention

Sirva Relocation, LLC v. Richie: Central to the panel’s rejection of TitleMax’s procedural attack. Sirva holds that courts generally look to the general class of proceedings and that alleged procedural shortcomings do not alter a proceeding’s “fundamental character.” The Third Circuit adopts that logic to conclude that alleged defects in naming or service do not stop the proceeding from being quasi-criminal or “ongoing.”
New Orleans Pub. Serv., Inc. v. Council of New Orleans: Used in two ways. First, Sirva cites it for the “general class of proceedings” approach. Second, the panel rebuffs TitleMax’s reliance on language from New Orleans Pub. Serv. by distinguishing it as addressing federal challenges to state legislative—not judicial—proceedings.
Cannatella v. California: TitleMax invoked this Ninth Circuit decision to argue that distinct legal entities should be treated independently for Younger purposes. The Third Circuit distinguishes it because the attorneys in Cannatella lacked a sufficiently close relationship or intertwined interests, unlike affiliated entities within a corporate group facing a unified state enforcement effort.

4. Important state interests in usury enforcement and prior TitleMax litigation

TitleMax of Del., Inc. v. Weissmann: The panel relies heavily on this earlier Third Circuit decision for two propositions: (i) “Pennsylvania has a strong interest in prohibiting usury,” and (ii) Pennsylvania may investigate and apply its usury laws to TitleMax without violating the Commerce Clause because any burden on interstate commerce is “incidental.” The court treats this as effectively dispositive of the “important state interests” inquiry under Middlesex factor two.

5. Merits non-inquiry and the “bad faith” exception

O'Neill v. City of Phila. (cited through PDX N., Inc. v. Comm'r N.J. Dep't of Lab. & Workforce Dev.): Reinforces the principle that abstention analysis does not turn on whether the state will ultimately prevail; it turns on the importance of the proceeding and the adequacy of the state forum.
Mitchum v. Foster: Cited for the proposition that abstention yields only to “exceptional circumstances,” such as bad faith.
Perez v. Ledesma: Provides the “without hope” formulation for bad faith; the panel uses it to reject TitleMax’s attempt to repackage its merits and service objections as proof of bad faith.

6. Prospective relief, interference, and preclusion

In re Stevenson (quoting Del. Valley Citizens' Council for Clean Air v. Commonwealth): Supplies Pennsylvania law recognizing that state courts are bound by federal judgments, and that federal judgments can carry res judicata effect in Pennsylvania. The panel uses these authorities to show how a federal injunction or declaratory judgment could materially interfere with the state enforcement matter.

7. Ripeness doctrine

Wayne Land & Min. Grp. LLC v. Del. River Basin Comm'n (quoting Surrick v. Killion): Provides the ripeness standard requiring a “real and substantial threat of harm” rather than uncertain or contingent events. The court uses this to uphold dismissal of the subpoena-related claim as unripe given TitleMax’s reliance on a Commerce Clause “chilling effect” theory already rejected in TitleMax of Del., Inc. v. Weissmann.

B. Legal Reasoning

1. Step One: Classifying the state matter as quasi-criminal civil enforcement

Following Altice USA, Inc. v. N.J. Bd. of Pub. Utilities (quoting Sprint Commc'ns, Inc. v. Jacobs), the court asks whether the state proceeding is a civil enforcement action “akin to a criminal prosecution.” The panel finds the quasi-criminal markers satisfied: Pennsylvania acted in its sovereign capacity; the proceeding seeks to sanction allegedly wrongful conduct (usury); it followed an investigation culminating in formal charges via the show-cause order; and Pennsylvania could have proceeded criminally (criminal usury statutes are cited).

TitleMax’s primary resistance—insisting the agency did not “investigate TitleMax” because no single “TitleMax” entity exists and because some affiliates are merely back-office service companies—was treated as either (i) a merits defense to the state’s liability theory, or (ii) a case-specific defect that does not reclassify the “general class” of proceedings. By adopting Sirva Relocation, LLC v. Richie, the panel makes a structural move: it divorces the abstention inquiry from disputes over the accuracy, precision, or completeness of the charging document.

2. Step Two: Applying the Middlesex factors

(a) Ongoing judicial proceeding

The court determines the proceeding was “ongoing” when TitleMax filed in federal court because the Department initiated the matter in June 2024 through the show-cause order, and TitleMax sued in August 2024. The “judicial” requirement is satisfied because the administrative process is subject to state-court review, consistent with Gonzalez v. Waterfront Comm'n of N.Y. Harbor.

TitleMax’s attempted detour—arguing improper service meant nothing was truly “pending”—is rejected via the same Sirva-based principle: procedural defects do not alter a proceeding’s “fundamental character” as ongoing state enforcement.

(b) Important state interests

The court holds that Pennsylvania’s interest in prohibiting usury is important, citing TitleMax of Del., Inc. v. Weissmann. It declines to weigh TitleMax’s Commerce Clause framing (federal interest versus state interest) because the earlier TitleMax decision already answered the underlying constitutional contention in Pennsylvania’s favor, at least for purposes relevant here.

The opinion also rejects TitleMax’s argument that the interest is “not relevant” because particular affiliates allegedly made no Pennsylvania loans. Citing PDX N., Inc. v. Comm'r N.J. Dep't of Lab. & Workforce Dev. (quoting O'Neill v. City of Phila.), the court emphasizes it does not adjudicate the merits when assessing “important state interests”; it assesses the importance of the generic proceeding— state usury enforcement—which is plainly significant.

(c) Adequate opportunity to raise federal claims

Relying on Ohio Civ. Rts. Comm'n v. Dayton Christian Sch., Inc., the panel reiterates that it is enough that TitleMax can present its constitutional claims during state-court review of the administrative action. The point is institutional: the state system is competent to hear and decide federal claims, and federal courts should not short-circuit that process absent exceptional circumstances.

3. Exceptions: why “bad faith” did not apply

The “bad faith” exception is demanding: under Perez v. Ledesma, it entails a state action brought “without hope” of success. TitleMax relied on the same themes (no Pennsylvania loans by some entities; improper service) to characterize the proceeding as jurisdictionally or substantively hopeless. The court rejected this reframing: whatever the ultimate answers, the Department’s positions were “colorable,” and abstention doctrine does not permit federal courts to decide the underlying liability or service disputes as a gateway to federal jurisdiction.

4. Prospective relief and “interference” with the state proceeding

TitleMax argued that some requested relief was “prospective” and therefore would not interfere with the state matter. The court treated the requested injunctions as functionally aimed at preventing the Department from enforcing the subpoena, the show-cause order, or otherwise regulating TitleMax—relief that would collide with the state proceeding’s determination of the Department’s authority over the same conduct.

Importantly, the court’s interference analysis is not limited to direct injunctions against the state tribunal. It focuses on preclusion: Pennsylvania courts recognize binding effects of federal judgments. Citing In re Stevenson (quoting Del. Valley Citizens' Council for Clean Air v. Commonwealth), the panel explains that a final federal judgment directing ongoing compliance can have res judicata effect in Pennsylvania. Thus, even “prospective” federal relief could constrain the state proceeding in a legally operative way.

The court also addresses TitleMax’s reliance on a quotation from New Orleans Pub. Serv., Inc. v. Council of New Orleans suggesting that a federal proceeding may affect a state action without triggering Younger. The panel deems it inapposite because that discussion concerned state legislative proceedings, whereas this case involves state judicial proceedings.

5. Ripeness of the subpoena challenge

Separate from abstention, the court upheld the District Court’s determination that TitleMax’s subpoena-focused claim was not ripe under Wayne Land & Min. Grp. LLC v. Del. River Basin Comm'n (quoting Surrick v. Killion), because it depended on speculative and contingent harms rather than a real and substantial threat.

TitleMax’s effort to establish ripeness through a Dormant Commerce Clause “chilling effect” failed because TitleMax of Del., Inc. v. Weissmann had already held that Pennsylvania’s investigation and application of its usury laws to TitleMax does not violate the Commerce Clause. With that predicate removed, TitleMax offered no alternative basis to show the necessary immediacy and hardship.

C. Impact

Reinforcement of “class-of-proceedings” analysis in abstention disputes: By adopting Sirva Relocation, LLC v. Richie to discount alleged procedural defects, the opinion strengthens the practical message that abstention fights should not devolve into mini-trials over whether the agency’s initiating document was perfectly crafted or served. Those disputes are for the state forum.
Corporate separateness is not a universal abstention shield: The court’s distinction of Cannatella v. California signals that affiliated entities with intertwined interests may be treated as collectively implicated for abstention purposes, even if particular affiliates claim they are “back office” companies. Future litigants in regulated industries should expect federal courts to scrutinize functional alignment and practical stakes, not just formal corporate boundaries.
Prospective federal relief can still “interfere” through preclusion: The reliance on In re Stevenson underscores a sophisticated interference theory: federal courts must consider downstream res judicata effects in state proceedings, not merely whether the federal order directly enjoins state adjudicators. This is especially important for plaintiffs who attempt to repackage an injunction as “prospective regulation-only” relief.
Usury enforcement remains a high-interest state domain: By leaning on TitleMax of Del., Inc. v. Weissmann for the “important state interests” factor, the opinion signals that state consumer-protection and anti-usury regimes will routinely satisfy Middlesex factor two—particularly where prior circuit precedent has already rejected the same Dormant Commerce Clause objections.
Litigation strategy implications: For regulated entities facing state administrative enforcement, the decision illustrates the narrowness of the path to federal court before state proceedings conclude. Unless a plaintiff can fit within a recognized exception (e.g., true bad faith under Perez v. Ledesma) or show the proceeding falls outside the Sprint categories, federal constitutional claims generally must be raised and preserved in the state process and then reviewed through state courts (and, if appropriate, via Supreme Court review).

IV. Complex Concepts Simplified

Younger abstention: A doctrine instructing federal courts to refrain from hearing certain cases when doing so would improperly interfere with qualifying ongoing state proceedings. It is grounded in comity (respect for state institutions) and equity restraint (not using federal injunctions when state remedies suffice).
Quasi-criminal civil enforcement: A civil proceeding brought by the state to investigate and sanction wrongdoing, resembling criminal prosecution in function (investigation, charges, penalties), even if labeled “civil” and handled by an agency.
Middlesex factors: The three-part test asking whether there is (1) an ongoing state judicial proceeding, (2) an important state interest at stake, and (3) an adequate opportunity to raise federal constitutional claims in the state system.
Bad faith (abstention exception): Not mere error or aggressive enforcement. Under Perez v. Ledesma, it implies the state action is brought “without hope” of success—i.e., as harassment or with no plausible legal basis.
Res judicata (claim preclusion): A final judgment can bar relitigation of claims or issues. Here, the court emphasized that a federal judgment directing ongoing compliance can bind Pennsylvania courts, meaning even “prospective” federal relief can practically (and legally) interfere with the state proceeding.
Ripeness: A justiciability rule requiring that a dispute be sufficiently concrete and imminent. Speculative future harms or contingent events generally do not qualify.

V. Conclusion

The Third Circuit affirmed dismissal under Younger, holding that Pennsylvania’s usury enforcement proceeding is quasi-criminal and that the Middlesex factors were satisfied. The court’s most consequential doctrinal clarifications are (1) that alleged procedural defects (including naming and service) do not change the “fundamental character” of the class of enforcement proceeding for abstention purposes, (2) that corporate-form separateness does not automatically defeat abstention where affiliates’ interests are intertwined, and (3) that “prospective” federal relief can still interfere with state judicial proceedings through the binding and preclusive force of federal judgments.

Even as a not precedential disposition, the opinion consolidates a pragmatic abstention approach: constitutional defenses to state regulatory enforcement—especially in high-interest areas like usury—should ordinarily be litigated first in the state administrative and judicial review pipeline, absent truly exceptional circumstances.