Payday Loan Resolution, LLC v. Wis. Dep't of Fin. Institutions
| Decision Date | 16 May 2019 |
| Docket Number | Appeal No. 2018AP821 |
| Citation | 931 N.W.2d 279,2019 WI App 28,388 Wis.2d 117 |
| Parties | PAYDAY LOAN RESOLUTION, LLC, William Karger and Lauren Petruzzelli, Petitioners-Appellants, v. WISCONSIN DEPARTMENT OF FINANCIAL INSTITUTIONS, Respondent-Respondent. |
| Court | Wisconsin Court of Appeals |
On behalf of the petitioners-appellants, the cause was submitted on the briefs of Jeremy P. Levinson and Stacie H. Rosenzweig of Halling & Cayo, S.C., Milwaukee.
On behalf of the respondent-respondent, the cause was submitted on the brief of Maura FJ Whelan, assistant attorney general, and Brad D. Schimel, attorney general.
Before Lundsten, P.J., Kloppenburg and Fitzpatrick, JJ.
¶1 Payday Loan Resolution, LLC, William Karger, and Lauren Petruzzelli (collectively, Payday) appeal a circuit court order that affirmed an Order of the Administrator of the Wisconsin Department of Financial Institutions, Division of Banking (the Division). The Order requires that Payday, a non-Wisconsin business, cease certain business activities in Wisconsin, pay a forfeiture, and issue refunds for all fees paid by Wisconsin clients to Payday, because Payday "was conducting unlicensed adjustment service company business" in violation of Wisconsin statutes and had not complied with an earlier order issued by the Division.
¶2 The parties do not dispute that the Division was exercising Wisconsin’s "police power" in issuing the Order against Payday, and Payday does not dispute that it "was conducting unlicensed adjustment service company business" as stated in the Order. However, Payday argues that the Division’s exercise of Wisconsin’s police power over Payday violates due process. Payday asserts that this is so because due process limitations on Wisconsin’s exercise of its police power require greater contacts between Payday and Wisconsin than are necessary to establish "personal jurisdiction for judicial process," and because the requirements for "personal jurisdiction" are not present, it necessarily follows that due process bars the exercise of Wisconsin’s police power against Payday. We reject Payday’s argument as contrary to the test set forth by our supreme court for the proper exercise of Wisconsin’s police power over out-of-state entities. Applying that test here, we conclude that the Division’s issuance of the Order falls well within due process limits. Accordingly, we affirm.
¶3 Payday is a limited liability company located in and organized under the laws of Florida, and is engaged in the "debt settlement" business. In 2017, the Division received a consumer complaint against Payday from a Wisconsin resident.1 We will discuss the details of Payday’s contacts with the Wisconsin resident in the discussion section that follows. It suffices to state here that the resident entered into a contract with Payday, which provided that Payday would negotiate to reach settlements or payment plans with the resident’s debtors in return for a "consulting fee" to be paid by the resident.
¶4 On June 9, 2017, the Division sent a letter to Payday informing it that: (1) the Division "administers the adjustment service company law in Wisconsin"; (2) the Division determined that Payday was operating as an unlicensed adjustment service company in Wisconsin contrary to that law; (3) Payday must cease conducting "all such activity involving Wisconsin residents until the company is properly licensed"; and (4) Payday was "prohibited from collecting or receiving fees or other forms of compensation from Wisconsin consumers because it is not licensed." Pursuant to its statutory investigative powers, the Division requested that Payday provide information as to all Wisconsin residents who had contracted with the company. The Division also requested that Payday respond to the complaint that the Division had received and advise the Division of the actions that Payday was taking to avoid future violations.
¶5 Payday sent the Division a letter in response describing its activities as a "debt settlement company" and stating that it is a Florida company "required to abide by" Florida law only.
¶6 On June 27, 2017, the Division issued an Order to Payday, finding that Payday refused to refund the fees that it had collected from the Wisconsin complainant and that Payday was "conducting adjustment service company business with Wisconsin residents without first obtaining a license." The Division ordered that Payday cease conducting "adjustment service company business with a Wisconsin resident without first obtaining a license," provide a list of its Wisconsin clients, and refund to any Wisconsin clients all money paid by those clients to Payday that was not paid to the clients' creditors. The Order required that Payday issue the refunds to any Wisconsin clients by July 28, 2017.
¶7 Payday did not respond to the June Order. On August 9, 2017, the Division served on Payday a Notice of Hearing. The Notice directed Payday to respond in writing to the Notice by August 31, 2017, and to appear at an administrative hearing on September 7, 2017. The Notice asserted that Payday violated the June Order and informed Payday of the potential penalties that the Division might impose upon Payday for failing to appear or upon finding that Payday violated any Wisconsin banking laws or Division rules or orders.
¶8 Payday failed to answer the Notice or appear at the hearing. On September 8, 2017, the Division issued an Order finding Payday in default and, therefore, to have "admitted to the matters asserted and the violations set forth in the Notice." The Division ordered that Payday cease its adjustment service company business activities in Wisconsin, pay a forfeiture, and issue refunds for all fees paid by Wisconsin clients to Payday.
¶9 Payday timely petitioned the Division for a rehearing, asserting that it is not subject to the licensing requirements in Wisconsin law because the Division lacks "personal jurisdiction" over it. Specifically, Payday asserted that because it is a Florida company and its contacts with Wisconsin residents are de minimis , attenuated, and initiated by the customer, the Division lacks "personal jurisdiction" to require Payday to obtain a license or to enforce orders against Payday. The Division denied the petition.
¶10 Payday petitioned for judicial review of the September Order. The circuit court affirmed the September Order, and Payday appeals.
¶11 Payday challenges none of the factual findings or legal conclusions in the Division’s September 2017 Order, which is the subject of this appeal. Rather, Payday’s sole argument is that the Order violates Payday’s due process rights because the connection between Payday and Wisconsin is not sufficient to give the Division "personal jurisdiction" over Payday.
¶12 We review the decision of the Division, and not that of the circuit court. Daniels v. Wisconsin Chiropractic Examining Bd. , 2008 WI App 59, ¶4, 309 Wis. 2d 485, 750 N.W.2d 951. Whether the federal Due Process Clause is satisfied is a question of law that we review de novo. See City of S. Milwaukee v. Kester , 2013 WI App 50, ¶13, 347 Wis. 2d 334, 830 N.W.2d 710 ().
¶13 In the first section that follows, we describe Wisconsin’s law that applies to adjustment service companies such as Payday, and we review the case law that acknowledges Wisconsin’s strong interest in enforcing that law as an exercise of its police power.
¶14 In the second section, we turn to Payday’s challenge to the Division’s exercise of Wisconsin’s police power in enforcing that law against Payday. We conclude that the contacts between Payday and Wisconsin were sufficient to support the Division’s exercise of Wisconsin’s police power over Payday consistent with due process.
¶15 Before proceeding, we observe that this appeal concerns only whether the Division’s exercise of Wisconsin’s police power comports with the federal Due Process Clause. In addition to complying with the federal Due Process Clause, a state’s enforcement of its law against an out-of-state entity must also be consistent with the federal Commerce Clause. See Meyers v. Matthews , 270 Wis. 453, 459-61, 71 N.W.2d 368 (1955) (). Because Payday does not mount a Commerce Clause challenge, we do not discuss whether the Division’s exercise of Wisconsin’s police power here is consistent with the Commerce Clause.
¶16 Under WIS. STAT. §§ 220.02(2)(b) and (3) (2017-18),2 the Division shall "enforce and carry out all laws relating to" adjustment service companies. Payday does not dispute that it is an adjustment service company as defined in the statutes. See WIS. STAT. § 218.02(1)(a) ().
¶17 Wisconsin law provides that "[e]ach adjustment service company shall apply to the division [of banking] for a license to engage in such business." WIS. STAT. § 218.02(2)(a)1. Chapter 218 further provides that, "At the time of making application and before engaging in business," the company must pay a nonrefundable $200 investigation fee as well as a $200 annual license fee. Sec. 218.02(2)(b). The applicable statute also provides that the Division shall issue a license upon finding that the required application has been filed and the fees paid, and that "the financial responsibility, experience, character and general fitness of the applicant ... are such as to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly and efficiently within the purposes of this section." Sec. 218.02(3)(a) and (b). Additional...
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