# Petition — Aldens, Inc. v. LaFollette > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2271%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1977 - **Citation:** 434 U.S. 880 ## Text fs, Supreme Oourt, u. § FILED al JUL 25 1977 Supreme Court of the United States October Term, 1977. No. 77-1366 ALDENS, INC., Petitioner, v. BRONSON C. LaFOLLETTE, Individually and as Attorney Gen- eral for the State of Wisconsin, and ERICH MILDENBERG, Individually, and as Commissioner of Banking for the State of Wisconsin, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT. BERNARD G. SEGAL, RALPH S. SNYDER, James D. CrawForp, Attorneys for Petitioner. SCHNADER, HARRISON, SEGAL & LEwis, 1719 Packard Building, Philadelphia, Pennsylvania. 19102 Dona.p L. HEANEYy, IsAKSEN, WERNER, LATHROP & HEANEY, 122 West Washington Avenue, Madison, Wisconsin. 53703 RAYMOND N. FRIEDLANDER, 5000 W. Roosevelt Road, Chicago, Illinois. 60607 Of Counsel. International Printing Co., 711 So. 50th St., Phila., Pa. 19143 — Tel. (215) 727-8711 Page SE SED -cediccnetvunshecavéscdnkactdscasuponbias 2 EE So cb icdbec sede va sdesinsadedadoonbescacenece 2 Se IED aks 6k cbeccseccacecqeyesbsadesesocnes 2 CONSTITUTIONAL PROVISIONS AND STATUTE INVOLVED ........ 3 a odd sb ub AEs Shc Aco uwncdes 4560006 dddecsned 5 eerie is eb stepatenieccsue 7 The Decision of the District Court ................+5. 10 The Decision of the Court of Appeals ................ 10 REASONS FOR GRANTING THE WRIT ..........00000eeeceeeee 13 In Upholding the Wisconsin Statute in This Case, the Court Below Sought to Limit or Avoid This Court's Clear Holdings That a State Lacks the Power to Regulate an Interstate Trader Which Has No Pres- ence in the Regulating State, Even Though That State May Have a Substantial Interest in Controlling the Conduct It Seeks to Regulate ................ 13 A. This Court’s Controlling Decisions............. 16 B. The Court of Appeals’ Attempt to Distinguish This Court’s Decisions ................eec00. 19 C. The Policy Behind This Court's Decisions ...... 23 CNG is BS crbeda ed baveninedsusecdvsredeccheceses’s 26 APPENDIX: Opinion of the District Court .............6:2eeeeeeee Al Opinion of the Court of Appeals ...............+0005 Al6 RESETS, SSS EARS EE a A34 TABLE OF CITATIONS. Cases: Page Aldens, Inc. v. Packel, 524 F. 2d 38 (3d Cir. 1975), cert. denied, 425 U. S. 943 (1976) .............00ees 5, 7, 9, 13, 19 Aldens, Inc. v. Ryan, No. CIV-75-0458-O (W. D. Okla., June 34, BOTS) (ompeed OMA: is 6 oi dea ie Cee ck ceccsicdsl g Allenberg Cotton Co. v. Pittman, 419 U. S. 20 (1974) ..5, 6, 10, 12, 16, 18, 20, 21, 22, 23 Baldwin v. G. A. F. Seelig, Inc., 294 U. S. 511 (1935) ....... 17 Comolete Auto Transit, Inc. v. Brady, — U. S. —, 45 U. S. =p Whe Ge CR Oe ENED haa kucckéuscgdn oo pictecss 20 Dahnke-Walker Milling Co. v. Bondurant, 257 U. S. 282 CODED: id ive dvvins COUR Giienkds sha ssSeeese 21 Eli Lilly & Co. v. Sav-On-Drugs, Inc., 366 U. S. 276 (1961) 5, 16, 21 Great Atlantic & Pacific Tea Co. v. Cottrell, 424 U. S. 366 CUE c%sc Vibe basins Kap Cian chad eee ABV dens o se 6,18 Henneford v. Silas Mason Co., 300 U. S. 577 (1937) ........ 16 Hoopeston Canning Co. v. Cullen, 318 U. S. 313 (1943) ....11,15 Huron Portland Cement Co. v. City of Detroit, 362 U. S. 440 CET: cunndh oc seen usccabebasiecaeescitanehakeed paces 10 Memphis Steam Laundry v. Stone, 342 U. S. 389 (1952) .... 17 Milk Control Board v. Eisenberg Farm Products, 306 U. S. 346 SE kouteeend os camanemnnveaih txpmeneuiecckens 17 National Bellas Hess v. Department of Revenue, 386 U. S. 753 CREE cucu Vncuoactaes 5, 6, 7, 9, 10, 12, 15, 16, 18, 19, 20, 21, 23 National Geographic Society v. California Board of Equaliza- tion, — U. S. —, 45 U. S. L. W. 4343 (April 4, 1977) ...5, 6,7, 16, 19, 20 Robbins v. Shelby County Taxing District, 120 U. S. 489 CI Db. . 0 soh-v0004dnd te Nedeashns gard come mpd Ha gor rs state and the open-end creditor or a merchant honoring a credit card issued by the open-end creditor, is a resident of this state or furnishes, mails or delivers the goods, services or credit to a resident of this state while the customer is within this state or receives a writing signed by the customer and evidencing the transaction in state.” A10 Opinion of the District Court firm which has no local activities of any kind in the regu- lating state. Plaintiff asserts that its business activity falls into an area of “pure interstate commerce” which is sub- ject only to regulation by the federal government since it involves no local activity which would justify state regulation. As I understand plaintiffs argument, it is this: both the Due Process Clause and the Commerce Clause pre- clude the states from applying their legislation to business activities carried on exclusively outside their state; the Due Process Clause requires that regulated interstate businesses must have at least “minimal contacts” with the regulating state, but the Commerce Clause imposes more stringent requirements as to the connections which the regulating state must have with an interstate business in order to justify state regulation. Plaintiff contends that in the ab- sence of sufficient local activity, any regulation of inter- state commerce is prohibited by the per se effect of the Commerce Clause. If one accepts plaintiffs basic premise that its busi- ness activities are “pure interstate commerce” and that it has no local activity within this state, then plaintiffs chal- lenge to the Wisconsin Consumer Act would have con- siderable weight. I cannot accept the basic premise on which plaintiff's challenge rests. Plaintiffs activity in Wisconsin constitutes a concerted, systematic exploitation of the Wisconsin market. Plaintiff solicits business from the residents of this state through mailings directed to approximately 65,000 state residents who are listed on plaintiffs active customer lists. Additional mailings are made to as many as 350,000 state residents. Plaintiff deals on a regular basis with about 23,000 state residents to whom it makes sales of about $4,600,000 of which ap- proximately 73% are credit sales. Plaintiff mails credit Opinion of the District Court All application forms and credit sales agreement forms to Wisconsin residents. The forms and agreements are com- pleted in this state by the Wisconsin resident before they are mailed to plaintff in Chicago. Plaintiff's determination of the credit standing of Wisconsin customers sometimes involves telephoning credit bureaus located in this state to make file checks of those customers. The Wisconsin statute at issue herein is part of a comprehensive revision of the state’s consumer credit laws entitled the Wisconsin Consumer Act and enacted as Chapter 421-427 of the Wisconsin Statutes. The Act’s purposes and policies are set forth in § 421.102(2) which provides: “(2) The underlying purposes and policies of this act are: (a) To simplify, clarify and modernize the law governing consumer transactions; (b) To protect customers against unfair, deceptive, false, misleading and unconscionable practices by merchants; (c) To permit and encourage the develop- ment of fair and economically sound consumer practices in consumer transactions; and (d) To coordinate the regulation of con- sumer credit transactions with the policies of the federal consumer credit protection act.” Plaintiff does not dispute the proposition that its con- tacts with Wisconsin residents are sufficient to give the courts of this state personal jurisdiction over the corpora- tion without violating plaintiff's due process rights. Inter- national Shoe v. State of Washington, 326 U. S. 310 (1945); Zerbel v. H. L. Federman & Co., 48 Wis. 2d 54 Al2 Opinion of the District Court (1970). Plaintiff asserts, however, that judicial jurisdic- tion is something quite distinct from jurisdiction for regu- latory purposes and that the opinion of the United States Supreme Court in National Bellas Hess v. Department of Revenue, 386 U. S. 753 (1967) prohibits the states from applying their substantive law to transactions which take place out-of-state. In my opinion, National Bellas Hess is clearly distin- guishable from the present case. In National Bellas Hess the State of Illinois would have required a Missouri mail order merchandiser to collect and remit the Illinois use tax on sales made to Illinois residents. Taxation and the col- lection of taxation have long been regarded as obligations which may be imposed only on those who enjoy the bene- fits of living or operating a business within the taxing unit. The Supreme Court found that National Bellas Hess did not receive benefits from the State of Illinois which would justify requiring the company to act as a tax collector for the state of Illinois and for the myriad of independent taxing units within the state. The level of state activity which would justify taxa- tion is of a far greater magnitude than the level of ac- tivity which justifies the application of state statutes seek- ing to protect the public health or welfare. As the district court in Pennsylvania noted, the states constitutionally can regulate highway speed of trucks engaged solely in interstate commerce or control the emission of smoke from ships in their ports. South Carolina State Highway De- partment v. Barnwell Bros., 303 U. S. 177 (1938); Huron Portland Cement Co. v. City of Detroit, 362 U. S. 440 (1960). While these cases involve physical presence within the state, I have no doubt that a state can act to protect the public welfare from activities affecting the state on the scale of plaintiff's, even though those ac- Opinion of the District Court A13 tivities involve no physical presence. Although plaintiff's contacts with the state of Wisconsin are not such as would justify taxation, they are considerably greater than the minimal contacts which would provide a basis for judicial jurisdiction. There is no violation of due process in sub- jecting plaintiff to the provisions of the Wisconsin Con- sumer Act. Nor am I persuaded that, independently of the Due Process Clause, the Commerce Clause prohibits the state of Wisconsin from regulating plaintiff's credit transactions with Wisconsin residents. As I noted earlier, plaintiff's activity cannot be characterized as exclusively of an inter- state nature. It is activity which is deliberately and care- fully directed into this state. Plaintiff argues that the Commerce Clause prohibits the states from regulating transactions which are part of interstate commerce, even though there may be intrastate aspects of the transaction. Plaintiff contends that in Al- lenberg Cotton Co. v. Pittman, 419 U. S. 20 (1974) the Court rejected the “balancing test” which it had used earlier to weigh the state’s interesi in regulating intrastate aspects of interstate transactions against the national in- terest in maintaning the fee flow of commerce. A careful reading of Allenberg, however, reveals an unarticulated, but implicit, balancing of interests. The interest of the state of Mississippi in denying court access to non-qualify- ing corporations was clearly out-weighed by the national interest in maintaining the integrity of the cotton market. Plaintiffs argument harkens back to an era char- acterized by Justice Rehnquist as one “when the approved judicial technique was to decide whether a subject was or was not interstate commerce; if it was, Congress alone could regulate it, and if not, only the states could.’” Al- lenberg Cotton Co. v. Pittman, supra, at 38-39, Rehnquist, Al4 Opinion of the District Court J., dissenting, quoting Stern, The Commerce Clause and the National Economy, 1933-1946, 59 Harv. L. Rev. 645, 648 (1946). Justice Rehnquist points out that the “doc- trine of mutual exclusively” has been dispelled by such cases as South Carolina Highway Dept. v. Barnwell Bros., supra. The fact that a transaction is a part of interstate commerce no longer prohibits the states from regulating the intrastate aspects of the transaction. In a more recently decided case, The Great Atlantic & Pacific Tea Company, Inc. v. Cottrell, — U. S. — (1976) 44 L. W. 4240, the Supreme Court reiterated its holding in H. P. Hood & Sons, Inc. v. Du Mond, 336 U. S. 525 (1949), that the states retain “broad power” to legislate protection for their citizens in matters of local concern, “and that not every exercise of local power is invalid be- cause it affects in some way the flow of commerce be- tween the states.” Id. at 4241. The Third Circuit correctly applied the “balancing test” to the Pennsylvania law, concluding that the law neither discriminated against persons engaged in inter- state commerce nor unduly burdened interstate commerce. There is nothing in the Wisconsin law nor in the facts concerning plaintiff's operations in Wisconsin which would compel a different result from that reached by the Third Circuit. From my review of the facts and law in this case, I am persuaded that the federal courts in Pennsylvania made the correct disposition of plaintiff's claims. I adopt as my own the reasoning of the Court of Appeals for the Third Circuit. On the basis of the foregoing discussion, Ir Is Or- DERED that plaintiffs motion for summary judgment is Deniep; defendants’ motion for summary judgment is GRANTED. It is the judgment of this court that the re- Opinion of the District Court Al5 volving charge account plan, agreements and transactions thereunder between plaintiff and its Wisconsin mail order customers can constitutionally be regulated or governed by the laws of the State of Wisconsin and that the laws of the State of Wisconsin, as applied to the revolving charge account plan, agreements and transactions there- under between plaintiff and its Wisconsin mail order cus- tomers, do not violate the Commerce Clause or Postal Clause of Article I, Sec. 8, Supremacy Clause of Article VI, the First Amendment or Section 1 of the Fourteenth Amendment of the United States Constitution. Entered this 16th day of March, 1976. By THE COURT: James E. DoyLe District Judge Al6 Opinion of the Court of Appeals OPINION OF THE COURT OF APPEALS. IN THE United States Court of Appeals FOR THE SEVENTH CrrcultT No. 76-1396 ALDENS, INC., Plaintiff-Appellant, vo. Bronson C. LaFou.etre, individually and as Attorney General for the State of Wisconsin, and Erica Mi- DENBERG, individually and as Commissioner of Bank- ing State of Wisconsin, Defendants-Appellees. APPEAL FROM THE UNITED States Districr Court FOR THE WESTERN District OF WISCONSIN. No. 72-C-402—James E. Doy e, Judge. ARGUED NovEeMBER 4, 1976—DecmEp Marcu 25, 1977 Before Cummincs and Tone, Circuit Judges, and CAMPBELL, Senior District Judge.° Cummines, Circuit Judge. Plaintiff is an Illinois cor- poration engaged in the business of selling merchandise by mail order. In the court below, plaintiff sought a de- * Senior District Judge William J]. Campbell orthern District of inots is sittitg by decigrstion = tis Opinion of the Court of Appeals Al7 claratory judgment that Wjsconsin could not constitution- ally regulate its revolving charge account plan and agree- ments and transactions thereunder. In particular, plaintiff asserted that the application to Aldens of the Wisconsin Consumer Act (Wis. Stats. Title XL, Chaps. 421-427; W. S. A. 421-427)' should be declared unconstitutional under the Commerce Clause of Article I, § 8, and the Due Process Clause of the Fourteenth Amendment.’ A stipulation of facts and an affidavit of the Admin- istrator of the Division of Consumer Credit of the Office of the Commissioner of Banking of Wisconsin were filed in the district court, and both parties filed motions for summary judgment. In March 1976, the district court handed down an unreported opinion and order granting summary judgment to the defendants. The Wisconsin Consumer Act was designed to pro- tect its residents from abuses in credit transactions. W. S. A. 421.102(2). One section of the Act provides that 18% per annum should be the maximum permissible finance charge for extension of credit under open-end credit plans such as Aldens offers.’ This ceiling was es- tablished to prevent overreaching and was made applica- ble to all credit grantors competing in the Wisconsin 1. Section 428, concerning first lien real estate loans, was added to the Act in 1973 after the filing of the complaint and is not material to the issues in this case. L. 1973, c. 18, § 4, effective April 22, 1973. 1973 Wis. Leg. Serv. 32-34. 2. In its complaint, the plaintiff also attacked the Wisconsin statute on the ground that it violated the } oy clause of Article I, Section 8, Supremacy Clause of Article VI, and the First Amend- ment. On appeal, the attack is limited to the Commerce and Due Process Clauses. 3. An open-end credit plan is defined in W. S. A. 421.301( 27) as that situation where a creditor allows a customer “to make purchases * * * from time to time, directly from the creditor” and the customer “has the privilege of paying the balance ig full or in installments” and the creditor may compute a finance charge “fr: -n time to time on an outstanding unpaid balance.” A18 Opinion of the Court of Appeals market. The Act applies to transactions involving Wis- consin consumers and open-end creditors who mail or de- liver goods, services or credit to a Wisconsin resident while the customer is within that state. In short, the Consumer Act applies to out-of-state firms that conduct business by mail with Wisconsin residents within Wisconsin.‘ There are no federal laws or regulations for a retailer’s maximum finance or penalty charges. In its opinion granting summary judgment to defend- ants, the district court court set out the salient facts as follows: The two defendants are the Attorney General of Wisconsin and its Commissioner of Banking. They are re- sponsible for the enforcement of the Wisconsin Consumer Act. Plaintiff, an Illinois corporation, has conducted a general retail merchandise mail order business from Chicago, Illinois, since 1902 and sells merchandise to customers in all fifty states. The buyer pays the transpor- tation costs. Aldens’ only physical presence is in Chicago. It has no Wisconsin office or other place of business and has no representative or tangible property there. Aldens does 4. The section on territorial application provides in pertinent part: “(2) For the purpose of this act, a consumer transaction or modificat’ « of a consumer transaction is made in this state if: “(b) The merchant induces the customer who is a resi- dent of this state to enter into the transaction by face-to-face solicitation or by mail or telephone solicitation directed to the particular customer in this state. “(3) With respect to a transaction pursuant to an - end ai plan, this act applies if the customer is a resident of this state and the open-end creditor or a merchant honorin a credit card issued by the open-end creditor, is a resident this state or furnishes, mails or delivers the goods, services or credit to a resident of this state while the customer is within this state or receives a writing signed the customer and evidencing the transaction in state.” W. S. A. 421.201. Opinion of the Court of Appeals Al9 not advertise in the Wisconsin media and has no Wiscon- sin telephone listing although a toll-free Illinois number is provided to its customers. Indeed, Aldens is not re- quired to collect and remit the Wisconsin use tax. Aldens mails catalogs to Wisconsin residents four times a year and also mails them supplemental advertise- ments six to eight times a year. In the spring of 1973, it solicited approximately 350,000 Wisconsin residents by mailing them catalogs and “flyers.” Aldens’ active Wis- consin customer list contains 65,000 names and its inactive customer list sets forth another 9,000. The credit application forms for credit accounts and credit agreement forms are mailed by Aldens to Wisconsin residents. These forms and agreements are signed by Wisconsin residents in that state and are mailed from there to Aldens in Illinois. Aldens then determines the credit worthiness of the Wisconsin customer through a procedure that sometimes includes phoning Wisconsin credit bu- reaus. Aldens rejects about 40% of all its new credit ap- plications and 6% of all orders received from current credit customers. Credit is granted only in Chicago and orders are only accepted there. Aldens’ sales to Wisconsin customers average $4,600,- 000 per year, with 73% of this amount derived from credit sales. Aldens has approximately 23,000 Wisconsin credit customers with an average credit account balance of $164.81. 2.34% of its annual sales are made to Wisconsin customers. It is probable that sales to, as well as the num- ber of, Wisconsin customers will increase. Aldens retains a purchase money security interest in merchandise sold pursuant to the credit agreements with its customers. However, it files no financing statement or security agreement and does not enforce this security in- terest. Merchandise sold by Aldens to Wisconsin cus- A20 Opinion of the Court of Appeals tomers is sent to them by mail or common carrier from Chicago or by shipment from some other place outside Wisconsin. Aldens mails its monthly statements in Chi- cago to its Wisconsin credit customers following their pur- chases of merchandise. These statements set forth the charges to the customer's account and require payment by a stated date to avoid the assessment of finance charges. All monthly payments for merchandise purchased and finance charges assessed are mailed in Wisconsin to Aldens in Chicago by its Wisconsin customers. If a Wisconsin customer becomes delinquent in paying his account, Aldens attempts to collect it through letters and other communications mailed from Chicago to the customer in Wisconsin and sometimes by telephone from Chicago to the Wisconsin customer. If an account has been de- linquent for six months, Aldens writes it off as a bad debt. It turns over half of the Wisconsin written-off accounts to Illinois or Minnesota independent collection agencies for collection. Aldens’ National Credit Agreement provides that it is an Illinois contract permitted by Illinois law and specifies a monthly finance charge at the annual percentage rate of 21%, in excess of the 18% permitted by W. S. A. 422.221.5 The credit agreement is valid under Illinois law and the Federal Truth in Lending Act (15 U. S. C. §§ 1601-1665). In presently complying with the Wisconsin Consumer Act, Aldens incurs the following annual costs, expenses and revenue losses: a. Additional cost of preparing catalogs and ad- vertising materials containing Wisconsin credit terms $51,000 5. Pending the outcome of this litigation, Aldens has adopted a credit agreement for use of its Wisconsin customers that com- plies with the Wisconsin Consumer Act. Opinion of the Court of Appeals A21 b. Special computer processing and handling costs for Wisconsin customers in setting up accounts and producing monthly billing statements 13,700 c. Loss of revenue on elimination of minimum charges 7,200 d. Loss of revenue on account of Wisconsin finance charge rate 92,000 TOTAL $163,900 I Aldens maintains, in short, that it is the quintessential interstate trader with no objective manifestation of itself extant within Wisconsin. Therefore Aldens argues that the Due Process Clause of the Fourteenth Amendment and the Commerce Clause positively deny Wisconsin the power to regulate its operations. Moreover, even if power to regulate Aldens exists, Aldens argues that federalist considerations prevent its exercise here. We shall con- sider these constitutional arguments in reverse order. II The federalist argument appeals to a pair of hoary constitutional doctrines. The argument’s first branch calls on the Commerce Clause cases which invalidate state regulation of a trader in interstate commerce if his regula- tion together with that of other traders similarly situated would place an undue burden upon interstate commerce. Its second prong draws on the line of cases which recog- nize a due process limitation on the extraterritorial exer- 0 Te ae pare ne A22 Opinion of the Court of Appeals cise of a state’s legislative power. If we were presented with these interest-balancing-based arguments as applied to Aldens on first impression, their resolution would not be a trivial matter. However, prior cases involving Aldens = any independent exegesis on our part totally point- ess. Before this case was decided by Judge Doyle, a com- panion case was filed by Aldens seeking a declaratory judgment that the similar Pennsylvania Goods and Ser- vices Installments Sales Act was unconstitutional as ap- plied to Aldens. However, its Commerce Clause and Due Process arguments were rejected. Aldens, Inc. v. Packel, 379 F. Supp. 521 (M. D. Pa. 1974). A year later, the Court of Appeals for the Third Circuit affirmed (424 F. 2d 38), and certiorari was subsequently denied. 425 U. S. 943. Judge Gibbons’ well-considered opinion for the Third Circuit thoroughly discusses the balancing issues raised on appeal before us. We fully agree with his dis- position and adopt his opinion as our own.” Subsequent to the decision below, the United States District Court for the Western District of Oklahoma filed a memorandum opinion that comparable provisions of the Oklahoma statutes do not violate the Commerce or Due Process Clauses. Aldens, Inc. v. Ryan, No. CIV-75-0458-D, decided June 14, 1976. An appeal is now pending before 6. This is a case where the basic premise of the Commerce Clause interest-balancing line of reasoning would be present, viz.: “[a] State interfer[ing] with the natural functioni interstate market either through prohibition or a hPa —— bg al Hughes v. Alexandria Scrap Corp., 426 7. In the court below, Judge Doyle also adopted the i of the Court of Appeals for the Third Circuit in ph hogs sap Packel. Because a petition for certiorari was then pending his opinion, with which we are fully in accord, commented on the issues raised in Aldens’ petition for writ of certiorari to the Third Circuit. Since that petition was denied, we need not consider it. Opinion of the Court of Appeals A23 the Tenth Circuit. We are also in accord with District Judge Daughtery’s reasoning. The relevant post-Packel Supreme Court Commerce Clause opinions which invalidate state legislation as un- duly burdensome on interstate commerce are fully con- sistent with our result on the balancing issue. Great Atlantic & Pacific Tea Co. v. Cottrell, 424 U. S. 366, 370- 372 and n. 6 reaffirms the Pike v. Bruce Church, Inc.* rule that state regulations involving a legitimate local interest are not invalid because they affect interstate commerce unless the burden on such commerce is, on balance, clearly excessive in relation to the local benefits. Dixie Dairy Co. v. City of Chicago, 538 F. 2d 1303 (7th Cir. 1976). A balancing inquiry reveals no such burden here. See Aldens, Inc. v. Packel, supra, 524 F. 2d at 47-50. Boston Stock Exchange v. State Tax Commission, — U. S. —, 45 LW 4093, recently invalidated a tax discrimi- nating against interstate commerce but did not involve the exercise of state police power for the protection of state citizens. The police power of a state and its power to tax are of course treated differently for constitutional pur- poses. See Freeman v. Hewitt, 329 U. S. 249, 253. Un- like the exercise of a state’s police power which is sus- tainable absent an undue burden on interstate commerce which is clearly excessive in relation to local benefits, Great Atlantic & Pacific Tea Co. v. Cottrell, supra, “extra- territorial. impositions of tax collection obligations have been upheld only when it can be said that a benefit has been conferred on the tax collector by virtue of the state’s sovereignty, and the tax is related to that benefit.” Aldens, Inc. v. Packel, supra, 524 F. 2d at 43-44; Colonial Pipeline Co. v. Traigle, 421 U. S. 100, 108. But it is Wisconsin's police power, exercised to protect its citizen-consumers from oppressive credit terms, which is implicated here. 8. 397 U. S. 137, 142. A24 Opinion of the Court of Appeals The question of taxation of business in interstate trans- actions is not involved. The Wisconsin Consumer Act merely regulates plaintiffs dealings with Wisconsin resi- dents and the only fee imposed is to cover the costs of administering the Act. W. S. A. 426.202. Judge Doyle found that the fee provisions of the Act in fact were nec- essary for its administration. Therefore, the Boston Stock Exchange case is of no help to Aldens. Thus federalist considerations do not permit this regulation. Il Aldens’ most vigorous constitutional attack questions the very existence of Wisconsin’s power to regulate a purely interstate trader. To be sure, if not fully equiva- lent, Aldens’ conduct asymptotically approaches that of the paradigm interstate trader. But so long as the inter- state trader’s conduct has a “connection in fact” with a state producing an effect within a state, the interstate char- acter of his conduct is only an element of the interest- balancing analysis of the “federalist” arguments just addressed. Nippert v. Richmond, 327 U. S. 416, 423-424. Most especially in the exercise of the police power, state sovereignty is, in many areas of interstate commerce, par- allel to and concurrent with that of the federal govern- ment. Huron Portland Cement Co. v. City of Detroit, 362 U. S. 440, 442; California v. Thompson, 313 U. S. 109, 112-113; see National League of Cities v. Usery, 426 U. S. 833, 840-845. As we demonstrate below, nothing in the Due Process Clause or the Commerce Clause casts doubt on this tenet of federalism. A. Due Process Clause State sovereignty is not absolute. State power can only be exercised against a person within the confines of Opinion of the Court of Appeals A25 due process of law drawn by its procedural and sub- stantive aspects. However, since substantive due process is now limited to a commitment to fundamental fairness (Whalen v. Roe, — U. S. —, —, 45 LW 4166, 4167-4168), substantive due process analysis is generally academic because the application of any regulation which is funda- mentally unfair also would not withstand a procedural analysis. Here Aldens argues that substantive due process independently denies Wisconsin the jurisdiction to pre- scribe those portions of the Wisconsin Consumer Act which apply to interstate mail order houses.* Cf. Rivard v. United States, 375 F. 2d 882, 885 (5th Cir. 1967), certiorari denied, 389 U. S. 884. Undoubtedly, substantive due process imposes a floor on the nexus between a person and his practices relative to a state which will be sufficient to support legislation running against him.’® Cf. Pacific Seafarers, Inc. v. Pacific Far East Line, Inc., 404 F. 2d 804, 815 (D. C. Cir. 1968), certiorari denied, 393 U. S. 1093. And the connection between a state and the regulated person must be of a more substantial character than the “minimum contacts” needed to support judicial process running against a per- 9. Aldens makes the following distinction: “Judicial jurisdic- tion to enforce the terms of a contract entered into in another state is vastly different from the legislative power which is required to dictate the substantive terms of the contract at its inception. It is the fundamental difference of enforcing the contract in Wisconsin as it was entered into in Illinois on the one hand and establishing the substantive terms of that contract as it was made in Illinois on the other hand that is the very essence of the difference between service of process cases and cases with sufficient contacts to sustain regulatory jurisdiction which can change or dictate the terms of the contract.” (Reply Br. at 8.) 10. Suppose that many Wisconsin citizens have summer homes in Minnesota. Wisconsin could not regulate Aldens’ credit terms in mailings to Wisconsin citizens at their Minnesota summer addresses. New York Life Ins. Co. v. Dodge, 246 U. S. 357, 376- 377; a & Indemnity Co. v. Delta & Pine Land Co., 292 U. S. 143. A26 Opinion of the Court of Appeals son. Travelers Health Assn. v. Virginia, 339 U. S. 643, 652-653 (Douglas, J., concurring); cf. Comment, Cor- porate Registration: A Functional Analysis of “Doing Business,” 71 Yale L. J. 575, 585-586 nn. 54 and 56 (1962). But by now “objective territoriality,” at least in domestic cases, is beyond argument, viz.: “any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends * * *.” United States v. Aluminum Co. of America, 148 F. 2d 416, 443 (2d Cir. 1945). Travelers Health Assn. v. Virginia, 339 U. S. 643, 648; see Hoopeston Canning Co. v. Cullen, 318 U. S. 313, 316-317. As for the Wisconsin Consumer Act, it has not been “shown to be other than what on its face it appears to be a measure to safeguard the members of the public desiring to secure [goods] by [credit]. who are peculiarly unable to protect themselves from fraud and overreaching of those engaged in a business no- toriously subject to those abuses.”" California v. Thompson, 313 U. S. 109, 112-113. 11. Aldens points out that at no time has there ever been an allegation that its credit practices are unfair, deceptive, false, mis- leading or unconscionable. Thus Aldens maintains that applyin the Act to the company is not rationally related to the Pe tm purposes of the Act, ially where Wisconsin is operating near the outer boundary of its legislative power. Aldens apparently (nor : we as containing an equal protection violation. r. 1-7. The Wisconsin Consumer Act is Pare ie the product of an orderly and rational legislative decision.” Whalen v. Roe, — U. S. —, —, 45 LW 4166, 4168. The fact that no rp pa have late equal ; AT be 3 Court eq rar Spine te protection. upreme “frequ - nized that individual States have broad latitude in experimentin with possible solution to problems of vital local concern.” Id Opinion of the Court of Appeals A27 Protecting Wisconsin citizens from usurious credit terms imposed when they are residents of the state certainly meets due process minimums.” L B. Commerce Clause “(T]he Commerce Clause even without implementing legislation by Congress is a limitation upon the power of the States.” Freeman v. Hewitt, 329 U. S. 249, 252. But the scope of the linutation has evolved through a balancing analysis. “The Commerce Clause does not, however, eclipse the reserved ‘power of the States ° °°.” Boston Stock Exchange v. State Tax Commission, — U. S. —, —, 45 LW 4093, 4096; California v. Thompson, 313 U. S. 109. The mere fact that the person regulated is an interstate trader does not ipso facto override the independent sover- eignty of the states. Complete Auto Transit, Inc. o., Brady, — U. S. —, 45 LW 4259; National League of Cities v. Usery, 426 U. S. 833; Robertson v. California, 328 U. S. 440, 458-459. As we noted above, that fact is only rele- vant to the process of balancing those interests which ani- mate the Commerce Clause with the state’s legitimate local interests. See Beaird & Ellington, A Commerce Power Seesaw: Balancing National League of Cities, 11 Ga. L. 11. (Cont’d.) a - is economic legislation,¢learly justified by Wisconsin's ee pra o its po from sharp credit practices, it = not offend the equal protection clause. McGowan v. Maryland, 366 U. S. 420, 425-496. Williamson v. Lee Optical Co., 348 U. S. a that determines the i nature of the state’s action tha ermines kind or Fstop activity in the state ge for satisfying the ements of due process.” Travelers Health Assn. v. Virginia, U. S. 643, 653 (Dou , J., concurring)® The police power requires less of a nexus a state's power to tax or to regulate intrastate commerce. Protection of its citizens is the primary function of state government. Freeman v. Hewitt, 329 U. S. 249, 253. oD Pew AP RENE Ree epee eens ae oS A28 Opinion of the Court of Appeals Rev. 35 (1976). When Congress has chosen not to legis- late in the field, the Commerce Clause cannot ex proprio vigore vitiate state sovereignty unless state regulation creates an undue burden on interstate commerce. Com- plete Auto Transit, Inc. v. Brady, supra. Those cases which find state regulation against a purely interstate trader unconstitutional are best concep- tualized as declaring that regulations of a certain character are per se undue rather than void ab initio as forbidden restraints on a purely interstate trader. Such per se regu- lations may be generically deemed as undue because of a pernicious effect on interstate trade without a correspond- ingly high state justification. See International Harvester Co. v. Dept. of Treasury, 322 U. S. 340, 353 (Rutledge, J., concurring); cf. Northern Pacific Ry. Co. v. United States, 356 U. S. 4, 5. The propriety of such a generic judgment was eloquently demonstrated thirty years ago by Justice Frankfurter: “These principles of limitation on State power apply to all State policy not matter what State inter- est gives rise to its legislation. A burden on interstate commerce is none the lighter and no less objectionable because it is imposed by a State under the taxing power rather than under manifestations of police power in the conventional sense. But, in the neces- sary accommodation between local needs and the overriding requirement of freedom for the national commerce, the incidence of a particular type of State action may throw the balance in support of the local need because interference with the national interest is remote or unsubstantial. A police regulation of local aspects of interstate commerce is a power often es- sential to a State in safeguarding vital local interests. At least until Congress chooses to enact a nationwide Opinion of the Court of Appeals A29 rule, the power will not be denied to the State. State taxation falling on interstate commerce, on the other hand, can only be justified as designed to make such commerce bear a fair share of the cost of the local government whose protection it enjoys. But revenue serves as well no matter what its source. To deny to a State a particular source of income because it taxes the very process of interstate commerce does not im- pose a crippling limitation on a State’s ability to carry on its local function. Moreover, the burden on interstate commerce involved in a direct tax upon it is inherently greater, certainly less uncertain in its consequences, than results from the usual police regu- lations. The power to tax is a dominant power over commerce. Because the greater or more threatening burden of a direct tax on commerce is coupled with the lesser need to a State of a particular source of revenue, attempts at such taxation have always been more carefully scrutinized and more consistently re- sisted than police power regulations of aspects of such commerce.” Freeman v. Hewitt, 329 U. S. 249, 253. (Omitting citations. ) Under this analysis, it can be seen that Aldens’ prin- cipal case, viz., National Bellas Hess v. Dept. of Revenue, 386 U. S. 753, does not aid plaintiff. Aldens’ protestations that Bellas Hess is not a tax case are contradicted by the opinion itself. The initial construction of its constitu- tional argument made clear that Bellas Hess was being analyzed as a tax case: “For the test whether a particular state exaction is such as to invade the exclusive authority of Congress to regulate trade between the States, and the test for a State’s compliance with the requirements of due A30 Opinion of the Court of Appeals process in this area are similiar.” (Emphasis sup- plied.) 386 U. S. at 756. Every case cited by the Court deals not with the power to regulate but rather with the power to tax. Any doubt that Bellas Hess was being analyzed as a tax case, even though strictly speaking the duty imposed on Bellas Hess was to collect a tax falling on someone else, was conclusively dis- spelled by footnote 9. 386 U. S. at 757 n. 9. Thus asa de facto tax on a purely interstate trader, the legislation in Bellas Hess was a per se undue burden. Likewise, Allenberg Cotton Co. v. Pittman, 419 U. S. 20, concerns state regulation which may be generically deemed as an undue burden on interstate commerce. There the Court held unconstitutional a state’s refusal to honor and enforce contracts made for interstate or foreign commerce because of the enforcing corporation’s failure to qualify to do business in the state."* Such a refusal to honor was generically repugnant to the central purposes of the Commerce Clause. Indeed, the opinion implicity declares the refusal to honor to be a heavier burden on interstate commerce than local tax incidents. 419 U. S. at 33-34. Contrary to Bellas Hess and Allenberg, the case now before us is an exercise of the police power. As such it is inappropriate to treat it on a per se basis. See Eli Lilly & Co. v. Sav-On-Drugs, 366 U. S. 276, 284 n. 1 (Harlan, J., concurring). Rather, a balancing test is in order. South Carolina Hwy. Dept. v. Barnwell Bros., 303 U. S. 177. Since the Wisconsin Consumer Act has already been shown not to be an undue burden on interstate commerce 13. Although the transaction had intrastate aspects, they were of the sort which are “in fact ‘a part of interstate commerce.” 419 U. S. at 30. Thus Allenberg was in all material respects purely an interstate trader. Opinion of the Court of Appeals A31 under a balancing analysis, see part II supra, the Act is, therefore, constitutional. IV For the foregoing reasons, we find that the application of the Wisconsin Consumer Act to Aldens is constitutional and therefore affirm the judgment of the district court. AFFIRMED. ae ee ee ee ee A32 Court of Appeals Order on Pet. for Rehearing ORDER OF THE COURT OF APPEALS ON PETITION FOR REHEARING. United States Court of Appeals FOR THE SEVENTH tincurr Cuicaco, ILurnors 60604 No. 76-1396 April 25, 1977 BEFORE Hon. Water J. Cummincs, Circuit Judge Hon. Pup W. Tong, Circuit Judge Hon. Wi.u1aM J. CAMPBELL, Senior District Judge*® ADLENS, INC., Plaintiff-Appellant, Dv. BRONSON C. LaFOLLETTE, etc., et al., Defendants-Appellees. APPEAL FROM THE UNITED STATEs Districr Court FOR THE WESTERN DisTRICT OF WISCONSIN. No. 72-C-402 James E. Doyte, Judge. * Senior District Judge William J. Campbell of the Northern District of Illinois is sitting by designation. Court of Appeals Order on Pet. for Rehearing A33 ORDER On consideration of the petition for rehearing en banc filed in the above-entitled cause by plaintiff-appellant, Aldens, Inc., no judge in active service has requested a vote thereon, and all the judges on the original panel have voted to deny a rehearing en banc. Accordingly, Ir Is Orvenep that the aforesaid petition for rehear- ing be, and the same is hereby, DENIED. It Is FurtHer Orperep that “and Allenberg” be stricken from line 7 of page 14 of the slip opinion. A34 Statutes Involved STATUTES INVOLVED. Wisconsin Consumer Act 421.201 Territorial application (1) Except as otherwise provided in this section, this act applies to consumer transactions made in this state and to modifications including refinancings, consolidations and deferrals, made in this state, of consumer credit transac- tions wherever made. (2) For the purposes of this act, a consumer trans- action or modification of a consumer transaction is made in this state if: (a) A writing signed by the customer and evi- dencing the obligation or an offer of the customer is received by the merchant in this state; or (b) The merchant induces the customer who is a resident of this state to enter into the transaction by face-to-face solicitation or by mail or telephone solic- itation directed to the particular customer in this state. (3) With respect to a transaction pursuant to an open-end credit plan, this act applies if the customer is a resident of this state and the open-end creditor or a mer- chant honoring a credit card issued by the open-end credi- tor, is a resident of this state or furnishes, mails or delivers the goods, services or credit to a resident of this state while the customer is within this state or receives a writing signed by the customer and evidencing the transaction in this state. (4) Chapter 427 applies to any debt collection activ- ity in this state, including debt collection by means of Siatutes Involved A35 mail or telephone communiciations directed to customers in this state. (5) Subchapters I and II of ch. 425, relating to credi- tors’ remedies, including applicable penalties, apply to actions or other proceedings brought in this state to en- force rights arising from consumer transactions or extor- tionate extensions of credit, wherever made, but conduct, action or proceedings to recover collateral shall be gov- erned by the law of the state where the collateral is lo- cated at the time of its recovery unless the collateral is owned by a Wisconsin resident who has removed it from this state only for purposes of transportation to or use in the resident’s employment or for temporary periods which do not exceed 15 days. (6) If a consumer transaction, or modification there- of, is made in another state with a customer who is a resi- dent of this state when the transaction or modification is made, the following provisions apply as though the trans- action occurred in this state: (a) A creditor, or assignee of his rights, may collect through actions or other proceedings charges only to the extent permitted by ch. 422; and (b) A merchant may not enforce rights against the customer to the extent that the provisions of the agreement violate subch. IV of ch. 422 or 423. (7) Except as provided in sub. (4) or (5), a con- sumer transaction or modification thereof, made in another state with a customer who was not a resident of this state when the consumer transaction or modification was made, is valid and enforceable in this state according to its terms to the extent that it is valid and enforceable under the laws of the state applicable to the transaction. A36 Statutes Involved (8) For the purposes of this act, the residence of a customer is the address given by him as his residence in any writing signed by him in connection with a consumer transaction. The given address is presumed to be un- changed until the merchant knows or has reason to know of a new or different address. (9) Notwithstanding other provisions of this section: (a) Except as provided in sub. (4) or (5), this act does not apply if the customer is not a resident of this state at the time of a consumer transaction and the parties then agree that the law of his residence applies; and (b) This act applies if the customer is a resident of this state at the time of a consumer transaction and 4 parties then agree that the law of this state ap- plies. (10) Except as provided in sub. (9), the following terms of a writing executed by a customer are invalid with respect to consumer transactions, or modifications thereof to which this act applies: (a) That the law of another state shall apply; (b) That the customer consents to the jurisdic- tion of another state; and (c) That fixes venue. 422.201 Finance charge for consumer credit transactions (1) With respect to a consumer credit transaction other than one pursuant to an open-end credit plan, the parties may agree to the payment by the customer of a ae charge not in excess of that permitted by subs. ( 2) to , Statutes Involved A37 (2) The finance charge, calculated according to the actuarial/method, may not exceed the equivalent of the total of the following: (a) Eighteen per cent per year on that part of the unpaid balance of the amount financed which is $500 or less; and (b) Twelve per cent per year on that part of the unpaid balance of the amount financed which is more than $500. (3) For licensees under s. 138.09 and under s. 218.01, the finance charge, calculated according to those sections, may not exceed the maximums permitted in ss. 138.09 and 218.01, respectively. (4) For sellers of farm equipment, farm implements and farm tractors, other than licensees under s. 218.01, the finance charge on the sale of equipment may not exceed the Class 2 rate for motor vehicles, as specified in s. 218.01 (6), and calculated in accordance with that section. (5) For the purposes of this section: (a) The finance charge may be calculated on the assmption that all scheduled payments will be made when due; (b) The dollar amount of finance charge shall include the prepaid finance charge excluded from the amount financed; and (c) The effect of prepayment is governed by the provisions on rebate upon prepayment under s. 422.209. (6) For the purposes of this section, the term of a consumer credit transaction other than one pursuant to an open-end credit plan commences with the date the credit A38 Statutes Involved is granted or, if goods are delivered, services performed or proceeds of a loan paid 10 days or more after that date, with the date of commencement of delivery or per- formance. Differences in lengths of months are disre- garded and a day may be counted as one-thirtieth of a month. (7) Subject to classifications and differentiations the merchant may reasonably establish, he may make the same finance charge on all amounts financed within a specified range. A finance charge so made does not violate sub. (2), (3) or (4) as the case may be if: (a) When applied to the median amount within each range, it does not exceed the maximum per- 5 a by sub. (2), (3) or (4) as the case may be; (b) When applied to the lowest amount within each range, it does not produce a rate of finance charge exceeding the rate calculated according to par. (a) by more than 8% of the rate calculated accord- ing to par. (a). (8) Notwithstanding sub. (2), (3 or (4), a merchant may contact for and receive a minimum finance charge with respect to a transaction other than one pursuant to an open-end credit plan, of not more than $5 when the amount financed does not exceed $75, or $7.50 when the amount financed exceeds $75. (9) With respect to consumer credit transactions pursuant to an open-end credit plan the parties may agree to the payment by the customer of a finance charge not in excess of those permitted by sub. (2) or (3), whichever is applicable. ‘ xs Statutes Involved A39 (a) A finance charge shall be deemed not to exceed such rates, if it is determined by applying a periodic rate not in excess of those specified in par. (b) or (c) to: 1. The average daily balance of the account; 2. The unpaid balance of the account on the last day of the billing cycle calculated after first deducting all payments, credits and refunds during the billing cycle; or 3. The median amount within a specified range within which the unpaid balance as calcu- lated according to subd. 1 or 2 is included. A charge may be made pursuant to this paragraph only if the creditor, subject to classifications and differentiations he may reasonably establish, makes the same charge on all balances within the specified range and if the percentage when applied to the median amount within the range does not exceed the charge resulting from apply- ing that percentage to the lowest amount within the range by more than 8% of the charge on the median amount. (b) If the billing cycle is monthly, the maximum periodic rate is 1.5% of that part of the amount spec- ified in par. (a) which is $500 or less, and one per cent of that part of such amount which is more than $500; except that for licensees under s. 138.09 the maximum periodic rate shal] not exceed a periodic rate equivalent to the rate permitted under s. 138.09, as determined by the administrator. (c) If — cycle is not monthly, the maxi- mum tes are those percentages which bear the same relation to the percentages specified in par. A40 Statutes Involved (b) as the number of days in the billing cycle bears to 30. (d) Irrespective of variations from cycle to cycle, a billing cycle is “monthly” for purposes of this section if the average length of 12 successive cycles is not less than 30 or more than 32 days. (10) Anything to the contrary in this chapter not- withstanding, with respect to consumer credit sales and consumer loans secured by real property and insured or guaranteed by the federal government, or any agency or instrumentality thereof, this chapter shall not prohibit or limit any charges which are required by statutes, rules or regulations of such government, agency or instrumen- tality. (11) A violation of this section is subject to s. 425.305. 425.305 Transactions which are void (1) Ina transaction to which this section applies, the customer shall be entitled to retain the goods, services or money received pursuant to the transaction without obli- gation to pay any amount. (2) In addition, the customer shall be entitled to re- ' cover any sums paid to the merchant pursuant to the transaction. 425.306 Unenforceable obligations (1) Any charge, practice, term, clause, provision, se- curity interest or other action or conduct in violation of this act, to the extent that the same is in violation of this act, shall confer no rights or obligations enforceable by action. (2) This section shall not affect the enforcement of any provision that is not prohibited by this act. Statutes Involved A4l 425.401 Wilful violations: misdemeanor A person who wilfully and knowingly engages in any conduct or practice in violation of this act may be fined not more than $2,000. 426.301 Violations and enforcement (1) The administrator may recover in a civil action from a person who violates this act or any rule made pur- suant to any authority granted in this act, a civil penalty of not less than $100 and not more than $1,000 for each violation. (2) In addition to the amount to which he shall be entitled under sub. (1), the administrator may recover in a civil action from a person who knowingly or wilfully violates this act or any rule made pursuant to any author- ity granted in this act, a civil penalty of not less than $1,000 and not more than $10,000 for each violation. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2271%3A1. Public record. Not legal advice.