The DFI Violates the Commerce Clause in as Much as it Requires That Respondents’ Be Members of the Washington State Bar to Qualify for an Exemption From the MBPA

The Department of Financial Institutions (DFI) asserts that out-of-state attorneys must either have acceptable local counsel or have their activities fall under the auspices of the Department. Many recent Respondents are not licensed Washington Attorneys, but utilize local counsel that the DFI asserts are not acceptable. This raises issues about the DFI’s regulation of attorneys. It also raises Constitutional issues. Neither the lenders nor the modification programs are products of Washington law. Therefore, to require licensure in Washington runs afoul of the Commerce Clause.The Commerce Clause is not violated “where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.” Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970). The requirement that to obtain an exemption from licensure one must be licensed in Washington is not evenhanded in that it exempts Washington licensed lawyers but not other-state licensed lawyers. It is particularly discriminatory because loan modification work is federally generic: loan modifications completed in Washington do not vary in substance from loan modifications completed in California or any other state because the lenders that the attorneys are dealing with are multi-state banks and the laws under which modifications are achieved are federal laws. In this way, the exemption favoring Washington attorneys constitutes “differential treatment favoring in-state interests over out-of-state interests,” which violates the commerce clause. See, In re Conner, 181 Vt. 555, 560 (2006). Indeed, though a “State’s right to regulate admission to the practice of law in the state is unquestioned, even though result impedes the interstate mobility of lawyers; but since that is a consequence, the Commerce Clause requires that regulation must be at least minimally reasonable.” Wiesmeuller v. Kosobucki, 571 F.3d 699 (7th Cir. 2009).In the prosecution of many out of state attorneys, there is no minimally reasonable distinction between in and out of state lawyers. This is made clear by comparing the facts here to those questioned by the Seventh Circuit in Wiessmueller. In that case, Wisconsin allowed graduates of Wisconsin law schools to be admitted to the Wisconsin bar without examination, but required examination of graduates of other law schools. As a result, the Court wrote “suppose …that Wisconsin law is no greater a part of the curriculum of the Marquette and Madison law schools than it is of the law schools of Harvard, Yale, Columbia, Virginia, the University of Texas, Notre Dame, the University of Chicago, the University of Oklahoma, and the university of Northern Illinois (which happens to be within a stone’s throw of Wisconsin, as are the four law schools in Minneapolis-St. Paul). That would suggest that the diploma privilege creates an arbitrary distinction between the graduates of the two Wisconsin law schools and graduates of other accredited law schools. And it is a distinction that burdens interstate commerce.” (emphasis added). Id. Exempting Washington lawyers from the licensing requirement but not other states’ lawyers, when the substance of the work has no Washington-specific legal component is an arbitrary distinction that burdens interstate commerce.