COMMONWEALTH OF VIRGINIA STATE CORPORATION COMMISSION AT RICHMOND,FEBRUARY 19,2016 TITLEMAX OF VIRGINIA,INC. d/b/a TITLEMAX Petitioner, CASE NO. BFI-2015-00061 v. COMMONWEALTH OF VIRGINIA STATE CORPORATION COMMISSION, Respondent, TITLEMAX OF VIRGINIA,INC.'S SUPPLEMENTAL BRIEF IN SUPPORT OF ITS PETITION PURSUANT TO 5 VAC 5-20-100(B) Pursuant to the Commonwealth of Virginia State Corporation Commission's (the "Commission") Order during the January 27, 2016 Hearing, Petitioner TitleMax of Virginia, Inc. ("TitleMax") respectfully submits this supplemental brief in support of its Petition pursuant to 5 VAC 5-20-100(B). The Commission should grant TitleMax's Petition and prohibit public disclosure of TitleMax's financial information and its confidential, proprietary, and trade secret information contained in its 2014 annual report (the "2014 Annual Report") filed with the Bureau of Financial Institutions (the "Bureau")for the following reasons.~ First, TitleMax's detailed financial information constitutes "personal financial information" exempt from public disclosure under Virginia Code Sections 6.2-100 and 6.2~ For the same reasons applicable to its 2014 Annual Report, TitleMax also objects to the full public disclosure of its financial information and its confidential, proprietary, or trade secret information submitted to the Commission in conjunction with any other annual reports, applications, or other submissions, other than the 2014 Annual Report. Likewise, TitleMax objects to the full public disclosure of any financial information or confidential, proprietary, or trade secret information submitted to the Commission by TitleBucks of Virginia, Inc. or TMX Finance of Virginia, Inc. 101(A). Second, TitleMax's confidential, proprietary, and trade secret information is exempt from public disclosure under Virginia's Uniform Trade Secret Act. Finally, the presumption against retroactivity precludes the Bureau from altering its historical practice to require public disclosure of the information at issue in the 2014 Annual Report. For these reasons, and for the reasons set forth more fully in TitleMax's November 30, 2015 Petition; TitleMax's January 14, 216 Response to the Commission's January 6, 2016 Order Scheduling Additional Proceedings; and during the January 27, 2016 hearing on this matter, the Commission should grant TitleMax's Petition and prohibit public disclosure of the information sought by the Center for Public Integrity (the "Center").2 BACKGROUND By letter dated November 19, 2015, the Commission notified TitleMax that it had received a request from the Center for a copy of TitleMax's 2014 Annual Report. See Letter from E.J. Face, Jr, to TitleMax (Nov. 19, 2015) (the "Nov. 19 Letter"). The Commission informed TitleMax that the Bureau was "unable to identify a statutory or other legal basis that would prohibit the Bureau from treating [TitleMax's] annual report (including its attachments) as a public record," and advised TitleMax that any petition requesting withholding of all or portions of the 2014 Annual Report must be filed by November 30, 2015. Id. On November 30, 2015, TitleMax filed its Petition with the Commission seeking to withhold from public disclosure portions of its 2014 Annual Report. At the request of the Commission, on January 14, 2016, TitleMax filed a redacted version of its 2014 Annual Report z TitleMax hereby adopts and incorporates by reference the arguments made by copetitioners Fast Auto Loans, Inc. ("Fast Auto") and Anderson Financial Services, LLC d/b/a .Loan Max ("Loan M~"}. See Case Nos. BFI-2015-00059, BFI-2015-00060. 2 and an accompanying reference chart explaining the legal bases for withholding the information subject to redaction. On January 27, 2016, the Commission entertained oral argument from petitioners TitleMax, Fast Auto, and Loan Max; the Center; and the Bureau. At the conclusion of the hearing, the Commission requested further briefing concerning the use of the phrase "personal financial information" in the Virginia Code, particularly given the definition of"person" set forth in Section 6,2-100; the construction of Section 6.2-101(A), considering subsections 6.2101(A)(ii) and (iii); whether information disclosed by motor vehicle title lenders in response to Section 12 of Form CCH-5529 constitutes "personal financial information"; and, any other relevant legal issues. ARGUMENT The Commission should adopt TitleMax's redactions to its 2014 Annual Report, in accordance with well-established legal principles. I. The Virginia Code Precludes Public Disclosure of TitleMax's Financial Information and Other Portions of Its 2014 Annual Report. When a statute is "clear and unambiguous," a court must determine its meaning based solely on the words of the statute. Hubbard v. HenNico Ltd. P'ship, 255 Va. 335, 337, 497 S.E.2d 335, 339(1998)(holding that the plain language of the statute at issue defeated plaintiff's interpretation)(internal citations omitted); see also Commonwealth v. Leone, 286 Va. 147, 15152, 747 S.E.2d 809, 811-12 (2013) (reversing decision of the circuit court because under the plain language of the statute, the circuit court lacked territorial jurisdiction to adjudicate the petition). "The intention of the legislature must be determined from those words, unless a literal construction would result in a manifest absurdity. Thus, when the legislature has used words of a clear and definite meaning, the courts cannot place on them a construction that amounts to 3 holding that the legislature did not intend what it actually has expressed." Hubbard, 497 S.E.2d at 339. A. The Plain Language of Sections 6.2-100 and 6.2-101(A) Precludes Disclosure of TitleMax's Financial Information. Here, the plain language of Title 6.2 of the Virginia Code prohibits the Bureau from disclosing TitleMax's financial information. Section 6.2-101(A) states: Except as otherwise provided in this title or § 12.1-19, the following shall not be disclosed by the Commission or any of its employees: (i) a report of examination of any person subject to this title, including any contents thereof; (ii) any information furnished to or obtained by the Bureau, the disclosure of which, in the opinion of the Commissioner, could endanger the safety and soundness of a bank, savings institution, or credit union; or (iii) any personal financial information furnished to, or obtained by the Bureau. "Person" means "any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or other legal or commercial entity." Va. Code § 6.2-100. Thus, under the plain language of the statute, all "personal financial information"—including that of a corporation—is exempt from public disclosure under Section 6,2-101(A) of the Virginia Code. TitleMax is a Delaware corporation doing business in Virginia. Therefore, TitleMax is a "person" under Section 6.2-100, and its "personal financial information" is exempt from disclosure under Section 6.2-101(A). B. The Bureau and the Center Interpret Sections 6.2-100 and 6.2-101(A) in Contravention of Settled Principles of Statutory Construction. The Bureau ignores the clear and unambiguous statutory language at issue. Instead, it advises the parties and the Commission that it "historically has interpreted [personal financial information] as an individual's financial information." Dec. 18, 2.015 Response, n.3; Transcript of Oral Argument at 77-78, TitleMax of Virginia, Inc. v. ViNginia State Corp. Comm'n, No. BFI- 4 2015-00061 (Va. State Corp. Comm'n Jan. 27, 2016).3 Not only does this interpretation contravene the statutory definition, it, in fact, renders a portion of the definition of "person" meaningless. Settled principles of statutory construction, of course, prohibit such a result. See Hubbard, 497 S.E.2d at 340; Sansom v. Bd. ofSupervisors ofMadison Cnty., 257 Va. 589, 595, 514 S,E.2d 345, 349(1999). Under settled principles of statutory construction, "every part of a statute is presumed to have some effect and no part will be considered meaningless unless absolutely necessary." Hubbard, 497 S.E.2d at 340. For example, in Hubbard, the Supreme Court of Virginia rejected the plaintiff's statutory interpretation because it "would require us to render meaningless the statutory language." Id. Likewise, in Sansom, the Supreme Court of Virginia rejected the plaintiffls statutory interpretation, noting that the County used the disjunctive term "or" in the statute, and therefore the plaintiff's interpretation would render part of the statute meaningless, contrary to Virginia principles of statutory construction, Sansom, 514 S.E.2d at 349, Here, adoption of the Bureau's position requires the Commission to ignore the statutory definition of "person" immediately preceding the use of the phrase "personal financial information," and to find "that the legislature did not intend what it actually has expressed." Hubbard, 497 S.E.2d at 339. The Commission should not do so. In contrast, adoption of TitleMax's position gives meaning to each phrase in the statute and, thus, comports with wellaccepted cannons of statutory construction. For the same reasons set forth above, each of the exclusions in Section 6.2-101(A)(i) — (iii) must be presumed to have some effect. Principles of statutory construction not only permit 3 The Center adopted this position at oral argument. Sections 6.2-101(A)(ii) and (iii) to be read together, but in fact require the provisions to be read so as to give each subsection effect. Hubbard,497 S.E.2d at 340; Sansom, 514 S.E.2d at 349, The plain language of subsection (ii) requires the Bureau to withhold from public disclosure information which may cause consumers to fear for the solvency of a bank, savings institution, or credit union—in other words, any information that might cause a run on the bank. V a. Code § 6.2-1 U 1(A)(ii), In contrast, subsection (iii) requires the Bureau to withhold from public disclosure "any personal financial information" obtained by the Bureau—that is, detailed financial information specific to particular individuals, corporations, partnerships, associations, cooperatives, limited liability companies, trusts, joint ventures, governments, political subdivisions, or other legal or commercial entities. Va. Code §§ 6.2-101(A)(iii), 6.2-100. To read these subsections in such a way that one subsumes the other would violate well-established principles of statutory construction that require giving meaning to every provision of a statute. Hubbard,497 S.E.2d at 340; Sansom, 514 S.E.2d at 349. C. Even if "Personal Financial Information" Is Construed with Reference to the Other Language Used in Title 6.2, Settled Principles of Statutory Construction Still Support TitleMax's Position. Even if "personal financial information" may be construed without reference to the plain language of the statutory definitions immediately preceding it, as the Bureau and the Center contend, settled principles of statutory construction nevertheless support TitleMax's position. When a statute does not expressly define a term, "the general rule of statutory construction is to infer the legislature's intent from the plain meaning of the language used." Hubbard, 497 S.E,2d at 340. "An undefined term must be given its ordinary meaning, given the context in which it is used. The context may be examined by considering the other language used in the statute." Sansom, 514 S.E.2d at 349 (internal quotations omitted). D Here, as explained above, language used elsewhere in Title 6.2 gives context for the meaning of the phrase "personal financial information" as used in Section 6.2-101(A). In the section immediately preceding Section 6.2-101, the legislature defined "person" to mean "any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or other legal or commercial entity." Va. Code § 6.2-100. Likewise, in the specific provisions governing motor vehicle title lenders, the legislature defined "person" to mean "any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, or other legal or commercial entity." Va. Code § 6.2-2200. The Commission need not look further to determine the meaning of this phrase. Cf. Ratzlaf v, United States, 510 U.S. 135, 148 (1994) (courts "do not resort to legislative history to cloud a statutory text that is clear"). The Bureau's reference to the use of the phrase "personal financial information" in Section 6.2-2008 is unavailing. See Va. Code § 6.2-2008(A). This provision applies to agencies providing debt management services, through which "a person agrees to engage in debt pooling and distribution services on behalf of a consumer, or multiple consumers if a joint account." Va. Code § 6.2-2000 (defining "debt management plan"). Thus, by definition, debt management plans contemplate use of consumer personal financial information. See id. The Virginia Code is interpreted in such a way that specific provisions control general provisions. Conger v. Barrett, 280 Va. 627, 629-34, 702 S.E.2d 117, 118-20 (2010). Accordingly, the specific provisions governing debt management plans set forth in Section 6.2-2000 necessarily control over the definitions and general provisions set forth in Sections 6.2-100 and 6.2-101(A). See id. 7 D. Information Responsive to SECTION II, Questions 12 and 13 of TitleMax's 2014 Annual Report Constitutes Personal Financial Information Exempt from Public Disclosure. The detailed information provided in response to SECTION II, Questions 12 and 13 of TitleMax's 2014 Annual Report, and the corresponding attachments, constitutes personal financial information exempt from public disclosure.4 Information about TitleMax's business model and products, including detailed information concerning specific transactions during a particular reporting period, the average term and principal loan amount of such transactions, the total principal amount of such transactions, the total number of defaults, and the total number of vehicles repossessed and vehicles sold, is proprietary, confidential, and non-publics Disclosure of such information could cause irreparable damage to TitleMax or place TitleMax at a competitive disadvantage because, upon disclosure, competitors would have access to non-public information sufficient to provide a cross section of TitleMax's business model and financial strategies, which would cause substantial competitive harm to TitleMax. See Transcript of Oral Argument at 35, 38, 46-47. 6 ~ The Bureau's long-standing practice of holding such financial information in confidence is also practiced by the Department of Agriculture and Consumer Services. Va. Code § 3.2-103 ("[t]rade secrets and commercial or financial information supplied by individuals or business entities" to the Department of Agriculture and Consumer Services must not be publicly disclosed). 5 TitleMax may take possession of a vehicle once a customer defaults pursuant to the terms of the Motor Vehicle Title Loan Agreement. A court order is not required to repossess, and, therefore, this information is confidential. A title is arguably public record. However, an individual cannot search a Department of Motor Vehicles database for all titles on which TitleMax is a lienholder. An individual must request a title by owner's name and Vehicle Identification Number, confidential customer information. An individual would need a list of TitleMax customers and their vehicles in order to request such information, See Transcript of Oral Argument at 43-44, 49-50. 6 Moreover, information sought in SECTION I, Question 10, which concerns the existence of any regulatory investigation is presumptively non-public, confidential and cannot be disclosed. The Virginia Freedom of Information Act and the federal Freedom of Information Act recognize the need to maintain the confidentiality of agency investigations, including the fact 8 II. TitleMax Is Entitled to Withhold Its Confidential, Proprietary, and Trade Secret Information from Public Disclosure Under Virginia's Uniform Trade Secret Act. A. State and Federal Law Recognize that Trade Secrets Are Exempt from Public Disclosure. Both Virginia and federal law recognize that confidential, proprietary, and trade secret information is exempt from public disclosure. Va. Code § 2.2-3705.6 (identifying exclusions to the Virginia Freedom of Information Act for "proprietary records and trade secrets," including, e.g., proprietary, commercial, or financial information, including "balance sheets, trade secrets, and revenue and cost projections" provided to various public bodies); 5 U.S.C. § 552b(c)(4j (excluding from the federal Freedom of Information Act "trade secrets and commercial or financial information obtained from a person and privileged or confidential"). The reason for this is commonsense; public disclosure of such information could cause immediate and irreparable competitive harm to a company. See, e.g., Adams v. Object Innovation, Inc., No. 3:l 1cv272, 2011 WL 7042224, at *4 (E.D. Va. Dec. 5, 2011)(granting motion to seal, stating, "there is no legitimate public interest in disclosing the proprietary and confidential information of[defendant], a closely held corporation, and disclosure to the public could result in significant damage to the company"), report and recommendation adopted by 2012 WL 135428. of any such investigation. Both statutes exempt from public disclosure records compiled for purposes of administrative or law enforcement investigations. Va. Code § 2.2-3705.3 (identifying exclusions to the Virginia Freedom of Information Act for "records relating to administrative investigations"); 5 U.S.C. § 552b(c)(7)(exempting from disclosure "investigatory records compiled for law enforcement purposes"). Federal regulatory agencies have also promulgated rules that mandate such confidentiality. For example, investigations conducted by the Consumer Financial Protection Bureau ("CFPB") are presumptively non-public. 12 C.F.R. 1080.14(b). Similarly, Federal Energy Regulatory Commission ("FERC") are generally nonpublic, 18 C.F.R. 1b.9, as are investigations initiated by the Federal Trade Commission ("FTC"). Media Resources, Federal Trade Commission, available at https://www.ftc.gov/newsevents/media-resources ("All FTC investigations are non-public. "). D B. TitleMax's 2014 Annual Report Contains Confidential, Proprietary, and Trade Secret Information Exempt from Disclosure. Under Virginia law, a "trade secret" is "information ...that: 1. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and 2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." Va. Code § 59.1-336. The court in Mic~oStrategy Inc. v. Business Objects, S.A., 331 F. Supp. 2d 396, 416-19 (E.D. Va. 2004) echoed the trade secret definition set forth in Section 59.1-336 of the Virginia Code. Id. at 401. That court explained that the economic value of information to a competitor is a key factor in determining whether that information is a trade secret and thus protected from disclosure. Id. at 416, 421-22, 424, 429. For example, in MicroStrategy, the court found that a list of accounts targeted by MicroStrategy and one of its business partners "would be of value to a competitor that could determine where to apply its resources and who to target ....," as MicroStrategy had presented testimony explaining the substantial economic value of these accounts to the company. Id. at 424-25. Similarly, the Microstrategy court found that pricing information documents, were "[o]bviously" of economic value to plaintiff's competitors, because "a competitor possessing knowledge of such pricing could undercut MicroStrategy or price differently to influence a prospect's decision of which product to purchase." Id. at 424. In MicroStrategy, the court concluded that an internal company document describing competitive strategy, pricing, target accounts, and technical details concerning the plaintiff's products constituted trade secrets. Id. at 411-12, 422-23 (holding that "Competitive Recipe" document, in essence plaintiff's "playbook," constituted a trade secret); id. at 423-24 (holding that "a schedule of discounts that MicroStrategy would give to its customers at certain amount thresholds" constituted a trade secret); id. at 424-25 (holding that target accounts list constituted a trade secret); id. at 428-29(holding that detailed and comprehensive technical overview of MicroStrategy architecture constituted a trade secret). 10 Here, too, TitleMax seeks to prevent the disclosure of trade secrets comprised of precisely the same types of information that the MicroStrategy courtdeemed trade secret material. For example, TitleMax "[o]bviously" derives significant economic value from its competitors not knowing the specifics of the pricing it offers to consumers, as "a competitor possessing knowledge of such pricing could undercut [TitleMax] or price differently to influence a prospect's decision of which product to purchase." Id, at 424. Additionally, this information is not easily ascertained by legitimate means by competitors, and TitleMax makes reasonable efforts to protect the secrecy ofthe information. Similarly, the list of "Pending Stores —Not Opened" provided as an attachment in response to SECTION I, Question 9 and the information concerning any regulatory actions or investigations responsive to SECTION I, Question 10 of the 2014 Annual Report qualifies as a trade secret. Like the list of target accounts or pricing documents at issue in MicroStrategy, if disclosed, this information would permit TitleMax's competitors to analyze TitleMax and to "determine where to apply [] resources" and how to target TitleMax's business. Id. at 424. TitleMax does not share this information publicly and takes reasonable steps to protect this information from disclosure. Trade secret information contained in the 2014 Annual Report should be exempt from disclosure, including especially: (1) pricing information; (2) the list of not-yet-open stores; and (3) any information concerning the potential existence of any regulatory investigations or actions. See Transcript of Oral Argument at 34, 51, 58. III. Any Change to the Bureau's Historical Practice with Respect to Information Submitted to the Bureau by Motor Vehicle Title Lenders Should Apply Prospectively, Not Retroactively. In its December 18, 2015 response, the Bureau states: "Due to potentially sensitive information in these annual reports, the Bureau formerly treated these reports as confidential." 11 Dec. 18, 2015 Response at 1 n.l. Its practice to date comports with this view; the Bureau has historically collected company-specific information submitted in annual reports, aggregated that information, and produced a publicly available consolidated report from which the general public cannot determine company-specific information. Annual Industry Reports, Bureau of Financial Institutions, https://www.scc.virginia.gov/bfi/annual.aspx. Now, however, the Bureau purports to do an about-face, deeming everything in the annual reports subject to public disclosure, See Nov. 19 Letter. It cannot do so. The Supreme Court has explained that "retroactivity is not favored in the law," and "congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result." Landgraf v. USI Film Prods., 511 U.S. 244, 264 (1994) (internal quotation marks and citations omitted). "Elementary considerations of fairness dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly" before they are found in violation. Id. at 265. Virginia principles of statutory construction similarly disfavor retroactive laws and hold "that a statute is always construed to operate prospectively unless a contrary legislative intent is manifest." Berner v. Mills, 579 S.E.2d 159, 161 (Va. 2003). For the same reasons, any change to the Bureau's historical practice regarding annual reports submitted by motor vehicle title lenders under Title 6.2 should be applied prospectively only, and should not be applied retroactively to require public disclosure of the information at issue in the Petitioners' 2014 Annual Report. CONCLUSION For the foregoing reasons, and for the reasons set forth in TitleMax's November 30, 2015 Petition; TitleMax's January 14, 2016 Response to the Commission's January 6, 2016 Order Scheduling Additional Proceedings; and during the January 27, 2016 hearing on this matter, the 12 Commission should grant TitleMax's Petition and prohibit public disclosure of the information sought by the Center for Public Integrity. Dated: February 19, 2016 r Respectfully submitted, yson B. Baker essica A. Swauger VENABLE LLP 575 7th Street NW Washington, DC 20004 (202)344-4000 telephone (202)344-8300 facsimile abbaker@venable.com jaswauger@venable.com Attorneysfog Petitioner TitleMax of Virginia, Inc. 13 Certificate of Service I certify that on February 19, 2016,a copy ofthe foregoing was filed electronically with the State Corporation Commission. I also emailed and mailed by U.S. mail the foregoing to: John B. Mumford, Jr., Esquire Eileen R. Geller, Esquire Hancock, Daniel, Johnson &Nagle,P.C. Post Office Box 72050 Richmond, VA 23255 Christopher R. Nolen, Esquire Robert W. Loftin, Esquire Steven G. Popps, Esquire McGuireWoods LLP Gateway Plaza 800 East Canal Street Richmond, VA 23219 DeMarion Johnston, Esquire Todd Rose, Esquire Office of General Counsel State Corporation Commission P.O. Box 1197 Richmond, VA 23218 Erin E. Witte, Esquire Surovell Isaacs Peterson &Levy PLC 4100 University Drive, 2nd Floor Fairfax, Virginia 22030 Peter Bale Chief Executive Officer Center for Public Integrity 910 17th Street, N.W., 17th Floor Washington, D.C. 20006 Jessica A. Swauger 14