In Their Opinion : Seventh Circuit Court of Appeals Commentary : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

MIDWEST TITLE LOANS v. MILLS (January 28, 2010)

Midwest Title Loans is a "title lender." Title loans are high-cost, high-risk loans. Car owners, generally from the lower income segment of the population, pay triple digit interest rates to borrow against their car titles. Midwest is located in Illinois but loaned to Indiana residents. All the loans were made in-person in Illinois. Midwest did advertise in Indiana and, when necessary, executed repossessions in Indiana. The State of Indiana considered Midwest's practices predatory. In 2007, it amended its Uniform Consumer Credit Code to provide the a loan is deemed to occur in Indiana if an Indiana resident enters into such loan with an out-of-state company that advertised or solicited in Indiana. Once a loan is deemed to occur in Indiana, the lender is subject to the provisions of the code, including interest rate caps and license requirements. Indiana advised Midwest of this amendment in August of 2007. Midwest was not licensed in Indiana and its products exceeded the interest rate cap. Midwest brought suit under §1983, alleging that the amendment violated the commerce clause. The district court permanently enjoined application of the amendment. Indiana appeals.

In their opinion, Judges Posner and Flaum and District Judge Der-Yeghiayan affirmed. The Court noted that the commerce clause of the Constitution has been interpreted to preclude states from erecting barriers to interstate trade. The clause is frequently applied when a state legislates in favor of its in-state businesses. Although Indiana is not discriminating in favor of its local business, that does not end the inquiry. First, a non-discriminatory statute that protects a legitimate local interest will be upheld unless the effects on interstate commerce are clearly excessive as compared to the local benefits. But second, a non-discriminatory statute that actually regulates out-of-state activities will not be upheld regardless of the balancing of the local interest. The Court concluded that out-of-state regulation was present here. Every Midwest loan was made in Illinois by a check drawn on an Illinois Bank, title was transferred in Illinois, and payments were received in Illinois. The facts that the proceeds were probably spent in Indiana, that Midwest advertised in Indiana, and that the collateral was generally located in Indiana did not change the Court’s conclusion.

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WIESMUELLER v. KOSOBUCKI (July 9, 2009)

The State of Wisconsin hosts two law schools, at Marquette University and at the University of Wisconsin. Graduates of these schools have a “diploma privilege.” That is, they are admitted to practice law in the State of Wisconsin without taking the bar exam. A graduate of any other law school in the United States must take the bar exam before being admitted to practice in Wisconsin. A group of those out-of-state graduates sued the Wisconsin Board of Bar Examiners and the Supreme Court of Wisconsin, alleging a violation of the Commerce Clause. The district court granted the defendants' motion to dismiss. The class appeals.

In their opinion, Judges Posner, Ripple and Wood reversed and remanded. The Court first addressed defendants' argument that the plaintiffs lacked standing because they challenged only that part of the Supreme Court Rule granting admission to graduates of state law schools without contending that they met a second requirement of the rule that their law school credits primarily focused on Wisconsin law. The Court concluded that the rule did not impose the latter requirement and that every class member could meet the actual requirements of the rule, as it read it. The Court next addressed the standing argument that Wisconsin could comply with an injunction by requiring all law school graduates to take the bar. This would certainly correct the problem but it would provide no relief to plaintiffs. But the Court reasoned that that was not the only outcome of such an injunction. There were numerous outcomes that would provide relief to the plaintiffs. Since the Court was unable to say that the plaintiffs have nothing to gain, they recognized their standing. On the merits, the Court conceded a state's right to regulate admission to its bar, even if the result impedes commerce. When it does, however, the regulation must be minimally reasonable. Here, the Court concluded that the record did not support any justification. It allowed the plaintiffs an opportunity on remand to establish the absence of a minimally reasonable justification.

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