Quik Payday, Inc. v. Stork

FILED
United States Court of Appeals
Tenth Circuit

December 12, 2008
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

QUIK PAYDAY, INC.,

Plaintiff - Appellant,
v. No. 07-3289
JUDI M. STORK, in her official
capacity as Acting Bank
Commissioner; KEVIN C.
GLENDENING, in his official
capacity as Deputy Commissioner of
the Office Of The State Bank
Commissioner, State Of Kansas,

Defendants - Appellees.
____________________

AMERICANS FOR TAX REFORM;
ONLINE LENDERS ALLIANCE,

Amici Curiae.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D.C. NO. 2:06-CV-02203-JWL)

Daniel V. Folt, Duane Morris, LLP, Wilmington, Deleware (Matt Neiderman,
Duane Morris, LLP, Robert J. Hoffman and Jeremiah J. Morgan, Bryan Cave
LLP, Kansas City, Missouri, with him on the briefs), for Plaintiff - Appellant.

Adrian E. Serene, Staff Attorney (Jacob D. McElwee, Staff Attorney, on the
brief), Office of the State Bank Commissioner, Topeka, Kansas, for Defendants -
Appellees.
Richard P. Bress and Melissa B. Arbus, Counsel for Online Lenders Alliance,
Latham & Watkins LLP, Washington, DC., and Cleta Mitchell, Counsel for
Americans for Tax Reform, Foley & Lardner, LLP, Washington, DC, filed an
amicus curiae brief for Online Lenders Alliance and Americans for Tax Reform.

Before HARTZ, HOLLOWAY, and ANDERSON, Circuit Judges.

HARTZ, Circuit Judge.

Quik Payday, Inc., which used the Internet in making short-term loans,

appeals from the district court’s rejection of its constitutional challenge to the

application of Kansas’s consumer-lending statute to those loans. Defendants were

Judi M. Stork, Kansas’s acting bank commissioner, and Kevin C. Glendening,

deputy commissioner of the state’s Office of the State Bank Commission (OSBC),

both in their official capacities.

Quik Payday argues that applying the statute runs afoul of the dormant

Commerce Clause by (1) regulating conduct that occurs wholly outside Kansas,

(2) unduly burdening interstate commerce relative to the benefit it confers, and

(3) imposing Kansas requirements when Internet commerce demands nationally

uniform regulation. We disagree. The Kansas statute, as interpreted by the state

officials charged with its enforcement, does not regulate extraterritorial conduct;

this court’s precedent informs us that the statute’s burden on interstate commerce

does not exceed the benefit that it confers; and Quik Payday’s national-uniformity

-2-
argument, which is merely a species of a burden-to-benefit argument, is not

persuasive in the context of the specific regulation of commercial activity at issue

in this case. We have jurisdiction under 28 U.S.C. § 1291 and affirm the district

court.

I. BACKGROUND

From 1999 through early 2006, appellant Quik Payday was in the business

of making modest, short-term personal loans, also called payday loans. It

maintained an Internet website for its loan business. The prospective borrower

typically found this website through an Internet search for payday loans or was

steered there by third-party “lead generators,” a term used for the intermediaries

that solicit consumers to take out these loans. In some instances Quik Payday

sent solicitations by e-mail directly to previous borrowers.

Once on Quik Payday’s website, the prospective borrower completed an on-

line application form, giving Quik Payday his or her home address, birthdate,

employment information, state driver’s license number, bank-account number,

social security number, and references. If Quik Payday approved the application,

it electronically sent the borrower a loan contract, which the borrower signed

electronically and sent back to Quik Payday. (In a small number of cases these

last few steps took place through facsimile, with approved borrowers physically

signing the contracts before faxing them back to Quik Payday.) Quik Payday then

transferred the amount of the loan to the borrower’s bank account.

-3-
 Quik Payday made loans of $100 to $500, in hundred-dollar increments.

The loans carried $20 finance charges for each $100 borrowed. The borrower

either paid back the loans by the maturity date—typically, the borrower’s next

payday—or extended them, incurring an additional finance charge of $20 for

every $100 borrowed.

Quik Payday was headquartered in Logan, Utah. It was licensed by Utah’s

Department of Financial Institutions to make payday loans in Utah. It had no

offices, employees, or other physical presence in Kansas.

Between May 2001 and January 2005, Quik Payday made 3,079 payday

loans to 972 borrowers who provided Kansas addresses in their applications.

Quik Payday loaned these borrowers approximately $967,550.00 in principal and

charged some $485,165.00 in fees; it collected $1,325,282.20 in principal and

fees. When a Kansas borrower defaulted, Quik Payday engaged in informal

collection activities in Kansas but never filed suit.

Kansas regulates consumer lending, including payday lending, under its

version of the Uniform Consumer Credit Code. See Kan. Stat. Ann. § 16a-1-101

through 16a-9-102 (KUCCC). The KUCCC defines payday loans, or “supervised

loans,” as those on which the annual percentage interest rate exceeds 12%.

Id. § 16a-1-301(46). Under the KUCCC a payday lender (other than a supervised

financial organization—in essence, a bank with a federal or state charter, see id.

§ 16a-1-301(44)) must obtain a license from the head of the consumer-and-

-4-
mortgage-lending division of the OSBC before it can make supervised loans in

Kansas. See id. §§ 16a-1-301(2), 16a-2-302. Obtaining a license requires paying

an application fee of $425 (and a further $325 to renew each year), posting a

surety bond costing approximately $500 per year, and submitting to a criminal-

background and credit check, for which there is no fee. Supervised lenders may

not charge more than 36% per annum on unpaid loan balances of $860 or less,

and may not charge more than 21% per annum on unpaid balances of more than

$860. See id. § 16a-2-401(2). Supervised lenders are required to schedule

installment payments in substantially equal amounts and at substantially regular

intervals on loans of less than $1,000 and on which the finance charge exceeds

12%. Id. § 16a-2-308. When such loans are for $300 or less, they must be

payable within 25 months, while such loans of more than $300 must be payable

within 37 months. Id. § 16a-2-308(a)-(b). Quik Payday was never licensed to

make supervised loans by the OSBC.

In 1999 Kansas amended the provision of the KUCCC that governs the

statute’s territorial application. See id. § 16a-1-201. Before that year a

consumer-credit transaction was deemed to have been “made in th[e] state,” and

to come under the KUCCC, if either (a) the creditor received in Kansas a signed

writing evidencing the consumer’s obligation or offer, or (b) “the creditor induces

the consumer who is a resident of this state to enter into the transaction by

face-to-face solicitation in this state.” 1993 Kan. Sess. Laws ch. 200 § 3. The

-5-
1999 legislation amended paragraph (1)(b) to say that the transaction is deemed to

have been made in Kansas if “the creditor induces the consumer who is a resident

of this state to enter into the transaction by solicitation in this state by any means,

including but not limited to: Mail, telephone, radio, television or any other

electronic means.” Kan. Stat. Ann. § 16a-1-201(1)(b) (emphasis added). No

party or amicus questions that the catch-all “other electronic means” includes the

Internet.

Under the KUCCC a consumer’s residence is the address given by the

consumer as his or her address “in any writing signed by the consumer in

connection with a credit transaction.” Id. § 16a-1-201(6). The statute does not

define “solicitation.” Defendants conceded in district court, however, that merely

maintaining a website accessible in Kansas that advertises payday loans is not

solicitation in Kansas under § 16a-1-201(1)(b). See Quik Payday, Inc. v. Stork,

509 F. Supp. 2d 974, 982 n.7 (D. Kan. 2007).

In June 2005 the OSBC received a complaint from a Kansas consumer

about a loan transaction with Quik Payday. The agency responded by ordering

Quik Payday, which was not on its list of licensed supervised lenders, to produce

documents regarding its loans to Kansas residents. Quik Payday submitted the

requested documents, which revealed the above-mentioned 3,079 payday loans to

972 Kansas residents. On March 13, 2006, the OSBC issued a summary order

that required Quik Payday to stop all payday lending to Kansas residents, halt any

-6-
collections on outstanding loans, pay a civil penalty of $5 million, and return to

the borrowers the interest, service fees, and profits from the 3,079 loans. The

order also barred Quik Payday from applying in the future to become a licensed

payday lender in Kansas. Quik Payday timely requested an administrative

hearing to challenge the order.

On May 19, 2006, shortly before the scheduled date of the administrative

hearing, Quik Payday filed this lawsuit under 42 U.S.C. § 1983 against

Defendants in the United States District Court for the District of Kansas. (Quik

Payday requested and was granted a stay of the administrative hearing; as a result,

no final order has been entered in that proceeding.) Quik Payday’s complaint in

district court sought a declaratory judgment that Kansas could not regulate Quik

Payday’s loans and an injunction barring such regulation. It claimed that both

Kan. Stat. Ann. § 16a-1-201(1)(b) itself and Kansas’s application of its consumer-

credit laws to Quik Payday under this provision of the statute are unconstitutional

under the Commerce Clause and Due Process Clause.

Quik Payday moved for summary judgment, offering three arguments under

the dormant Commerce Clause: (1) the statute is an impermissible extraterritorial

regulation; (2) the statute impermissibly burdens interstate commerce under the

balancing test of Pike v. Bruce Church, Inc., 397 U.S. 137 (1970); and (3) the

statute subjects Internet lending to inconsistent state regulations. On the same

day, Defendants moved for summary judgment on Quik Payday’s constitutional

-7-
claims, including its contentions under the Due Process Clause that Kansas lacked

the power to regulate it and that Kan. Stat. Ann. § 16a-1-201 is unconstitutionally

vague and overbroad. (Quik Payday did not seek summary judgment on these

due-process claims). The parties stipulated to the facts to be considered by the

district court in deciding their motions.

The district court denied Quik Payday’s motion for summary judgment and

granted Defendants’ cross-motion. It rejected each of Quik Payday’s three

Commerce Clause challenges to the Kansas statute and its application to Quik

Payday. It rejected the contention that Kansas was seeking to regulate conduct

entirely outside its borders because the Kansas statute is triggered only if there is

both solicitation in Kansas and a loan to one of its residents. Quik Payday, 509

F. Supp. 2d at 981. With regard to Pike balancing, the court cited our decision in

Aldens, Inc. v. Ryan, 571 F.2d 1159 (10th Cir. 1978), for the proposition that “a

state’s regulation of the cost and terms on which its residents borrow money from

an out-of-state creditor is not outweighed by the burdens on interstate commerce.”

Quik Payday, 509 F. Supp. 2d at 979. And as to national uniformity, the court

determined that Quik Payday had not shown that “internet payday lending

specifically represents the type of commerce that should only be subject to

nationally-uniform standards,” id. at 983; its regulated conduct was aimed

specifically at Kansas and did not necessarily implicate other states or their

-8-
regulations. The court also entered summary judgment for Defendants on Quik

Payday’s due-process claims. Id. at 984–85.

Quik Payday appeals the district court’s grant of summary judgment to the

Defendants and the denial of summary judgment to itself. 1 It does not challenge

the district court’s due-process rulings but only those regarding the Commerce

Clause.

II. DISCUSSION

We review a district court’s decision to grant summary judgment de novo,

viewing all facts in the light most favorable to the party opposing summary

judgment. See Jacklovich v. Simmons, 392 F.3d 420, 425 (10th Cir. 2004). We

will affirm a grant of summary judgment if there is no genuine issue of material

fact and the prevailing party is entitled to judgment under the law. See id. at 426;

Fed. R. Civ. P. 56(c). Likewise, we conduct de novo review of legal issues,

including challenges to the constitutionality of statutes. See Hoffmann-Pugh v.

Keenan, 338 F.3d 1136, 1138 (10th Cir. 2003).

A. The Dormant Commerce Clause

The Supreme Court “long has recognized that th[e] affirmative grant of

authority to Congress [to regulate interstate commerce] also encompasses an

1
Although the denial of a summary-judgment motion is ordinarily not an
appealable order, it can be reviewed when “it is coupled with a grant of summary
judgment to the opposing party.” Yaffee Cos. v. Great Am. Ins. Co., 499 F.3d
1182, 1184 (10th Cir. 2007) (internal quotation marks omitted).

-9-
implicit or ‘dormant’ limitation on the authority of the States to enact legislation

affecting interstate commerce.” Healy v. Beer Inst., 491 U.S. 324, 326 n.1

(1989); see Dennis v. Higgins, 498 U.S. 439, 447 (1991) (“[T]he Commerce

Clause does more than confer power on the Federal Government; it is also a

substantive restriction on permissible state regulation of interstate commerce.”

(internal quotation marks omitted)). State statutes may violate the dormant

limitation in three ways:

First, a statute that clearly discriminates against interstate commerce
in favor of intrastate commerce is virtually invalid per se and can
survive only if the discrimination is demonstrably justified by a valid
factor unrelated to economic protectionism. Second, if the statute
does not discriminate against interstate commerce, it will
nevertheless be invalidated under the Pike [397 U.S. at 142]
balancing test if it imposes a burden on interstate commerce
incommensurate with the local benefits secured. Third, a statute will
be invalid per se if it has the practical effect of extraterritorial
control of commerce occurring entirely outside the boundaries of the
state in question.

KT & G Corp. v. Att’y Gen. of Okla., 535 F.3d 1114, 1143 (10th Cir. 2008)

(internal quotation marks omitted).

Although Quik Payday treats the need for national uniformity as an

additional ground for determining that a state law violates the Commerce Clause,

concerns about national uniformity are simply part of the Pike burden/benefit

balancing analysis. When assessing the burden of a state law on interstate

commerce, “the practical effect of the statute must be evaluated not only by

considering the consequences of the statute itself, but also by considering how the

-10-
challenged statute may interact with the legitimate regulatory regimes of other

States and what effect would arise if not one, but many or every, State adopted

similar legislation.” Healy, 491 U.S. at 336. For example, in Southern Pacific

Co. v. Arizona ex rel. Sullivan, 325 U.S. 761 (1945), the Supreme Court declared

that states may not “regulate those phases of the national commerce which,

because of the need of national uniformity, demand that their regulation, if any,

be prescribed by a single authority.” Id. at 767. But its holding that a state law

could not limit train lengths was supported by what amounts to Pike

balancing—namely, (1) a thorough analysis of the problems that would be created

for interstate railroad transportation if each state could regulate train lengths and

(2) an assessment that such state regulation would confer little, if any, local

benefit. Id. at 771–79; cf. ACLU v. Johnson, 194 F.3d 1149, 1160 (10th Cir.

1999) (“[T]he Supreme Court has long recognized that certain types of commerce

are uniquely suited to national, as opposed to state, regulation.”).

Quik Payday does not argue that the Kansas statute discriminates against

interstate commerce in favor of the local variety. Rather, it challenges the Kansas

statute only under the extraterritorial-impact and Pike-balancing tests. To the

extent that it also argues what it terms the “national unity” test, we will treat that

issue as part of the balancing process.

B. Extraterritoriality

-11-
 Quik Payday argues that the Kansas statute regulates interstate commerce

that happens entirely outside Kansas. It contends that the Kansas statute reaches

cases in which a Kansas resident is “solicited” while using a work computer in

Missouri and accepts the loan through the same computer. In support, it points to

census data on the number of Kansas residents who work in metropolitan Kansas

City, Missouri, and thus likely use computers that lie in Missouri. Additionally,

it asserts that “lenders, having no ability to determine the physical location of the

consumer at the time of the solicitation, are forced as a practical matter to abide

by the K[U]CCC for all transactions with Kansas residents or refuse to lend to

such residents altogether.” Aplt. Br. at 43.

Defendants, however, have stipulated that such a transaction would not be

governed by the Kansas statute. In district court they conceded that a website

advertisement does not trigger application of Kan. Stat. Ann. § 16a-1-201(1)(b),

even though the website is accessible in Kansas. See Quik Payday, 509 F. Supp.

2d at 982 n.7. Their brief in this court further clarified that the borrower’s

physical location at the time of the solicitation is controlling: it states that “[t]he

[KUCCC] regulates the conduct of Internet payday lenders who choose to make

payday loans with Kansas consumers while they are in Kansas.” Aplee. Br. at 24

(emphasis added). And referring to Quik Payday’s hypothetical “about a Kansas

consumer leaving Kansas to acquire a payday loan,” id. at 25, it declared that “the

OSBC would not try to apply the [KUCCC] to loans that occur under th[ose]

-12-
circumstances,” id. at 26. We adopt this reasonable interpretation of the statute

by those charged with its enforcement. See Vill. of Hoffman Estates v. Flipside,

Hoffman Estates, Inc., 455 U.S. 489, 494 n.5 (1982) (“In evaluating a facial

challenge to a state law, a federal court must, of course, consider any limiting

construction that a state court or enforcement agency has proffered.”).

Quik Payday argues, however, that in practice the KUCCC will set the rules

by which a payday lender deals with a Kansas resident, even if the transaction is

conducted wholly outside Kansas. According to Quik Payday, this result follows

from its inability to tell where the resident is located during Internet

communications between Quik Payday and the resident. For example, it says, if a

Kansas resident communicates with Quik Payday via his office computer in

Missouri, Quik Payday will have to assume that the customer is actually in

Kansas during the communications and it therefore will have to comply with the

KUCCC. In our view, however, Quik Payday has failed to show that this possible

extraterritorial effect of the statute is more than speculation. It has provided no

evidence of any loan transaction with a Kansas resident that was effected totally

outside Kansas. Even if the Kansas resident applied for the loan on a computer in

Missouri, other aspects of the transaction are very likely to be in

Kansas—notably, the transfer of loan funds to the borrower would naturally be to

a bank in Kansas. Although the Kansas statute would not apply to such a loan

transaction (because the solicitation was not in Kansas), the transaction would not

-13-
be wholly extraterritorial, and thus not problematic under the dormant Commerce

Clause. Moreover, Quik Payday has not explained how it would be burdensome

to it simply to inquire of the customer in which state he is located while

communicating with Quik Payday. In this circumstance, we will not hold that the

KUCCC has a prohibited effect on extraterritorial commerce.

We note, however, that despite the failure of its constitutional challenge to

the statute, Quik Payday may still be entitled to some relief. It is unclear whether

any of the 3,079 transactions between Quik Payday and Kansas residents involved

solicitations of Kansas residents while they were in Missouri or elsewhere outside

Kansas. Such a transaction would not have violated Kansas law. That issue,

however, is one for the state administrative proceeding that was stayed pending

this litigation.

C. Pike Balancing

A state law that does not discriminate against interstate commerce may still

be invalidated under the dormant Commerce Clause if it puts a burden on

interstate commerce that is “clearly excessive in relation to the putative local

benefits.” Pike, 397 U.S. at 142. Although evidence regarding a particular

company may be suggestive, the benefit-to-burden calculation is based on the

overall benefits and burdens that the statutory provision may create, not on the

benefits and burdens with respect to a particular company or transaction. “[T]he

[Commerce] Clause protects the interstate market, not particular interstate firms,

-14-
from prohibitive or burdensome regulations.” Exxon Corp. v. Governor of Md.,

437 U.S. 117, 127–28 (1978); see Pharm. Research & Mfrs. of Am. v. Concannon,

249 F.3d 66, 84 (1st Cir. 2002).

We applied Pike balancing in Aldens, which concerned Oklahoma’s

regulation of the interest rates charged to Oklahoma residents on interstate credit

sales by an Illinois-based catalog retailer. The retailer had no physical presence

in Oklahoma; all its advertising in the state was conducted by direct mail.

571 F. 2d at 1161. Its credit agreements with customers, which it also sent only

by mail, recited that they were Illinois contracts and that all orders were deemed

received in Illinois. Id. The retailer challenged the application of Oklahoma’s

statute setting maximum interest rates for credit transactions and prohibiting the

collection of balances when the rates charged exceeded this cap. Id. at 1160.

The parties stipulated that if Oklahoma law applied to the transactions with

Oklahoma residents, Aldens’ “reduction in finance charges, and the special

processing costs directed to Oklahoma separately would amount to some

$160,500.00 per year.” Id. at 1161. Aldens’ annual business in the state was

$2,250,000, of which 81% was on credit. See id. We upheld Oklahoma’s

regulation against the retailer’s Dormant Commerce Clause challenge, reasoning

as follows:

The states can, of course, pass Acts which affect commerce unless
the burden so imposed greatly exceeds the extent of the local
benefits.

-15-
 Thus is this burden an unreasonable one in interstate
commerce? [W]e reach the same conclusion [as other circuit courts].
There is a burden on Aldens to sort out the Oklahoma credit
transactions, and accord them somewhat different treatment. There
are apparently regular mailings to some 34,000 Oklahoma residents;
these are followed by additional flyers and, if required, credit
applications and charge account agreements. The dollar figure of
total sales in Oklahoma is in the record as is an estimated cost of
special treatment for Oklahoma residents. We agree with the trial
court that on balance, a conformance with the Oklahoma cost of
credit rules would not constitute an undue burden on interstate
commerce. In the era of computers, the record shows that a sorting
of this nature, with separate Oklahoma contracts, would not be such
an unreasonable burden as compared to the local interest in the
subject.

Id. at 1162 (citations omitted).

Aldens governs the analysis under the Pike test in this case. To begin with,

we note that our review of the KUCCC is limited. Although Quik Payday might

be burdened by statutory provisions regarding interest rates, repayment schedules,

and loan renewals, we need not concern ourselves with provisions that have never

been applied to Quik Payday (and which, because Quik Payday no longer operates

as a payday lender, never will be). Perhaps some of those unapplied provisions

are unconstitutional and must be stricken. But striking them would not entitle

Quik Payday to relief if the provisions that were applied withstand a Commerce

Clause challenge. Here, the sanction imposed on Quik Payday was based solely

on its failure to obtain a license as a lender of supervised loans. Thus, we address

only the burdens and benefits of the license requirement. Cf. Los Angeles Police

Dep’t v. United Reporting Publ’g Corp., 528 U.S. 32, 38 (1999) (“The traditional

-16-
rule is that a person to whom a statute may constitutionally be applied may not

challenge that statute on the ground that it may conceivably be applied

unconstitutionally to others in situations not before the Court.” (internal

quotation marks omitted)).

The stipulated facts show that the burden of obtaining a license is limited to

a $425 fee, a surety bond whose annual cost would be roughly $500, and a

criminal-background check, for which there is no fee. Quik Payday presented no

evidence of other expenses that it would incur. The burden on Quik Payday of

obtaining a license would not be materially greater than the burden on Aldens.

And on the other side of the ledger, Defendants point to significant benefits from

the licensing requirement: the criminal-background check protects Kansas

consumers from providing felons their financial data and access to their bank

accounts; and the surety-bond requirement ensures that Kansas residents will have

a meaningful remedy if they are harmed by a lender. We follow our decision in

Aldens in holding that the burden of acquiring a license does not outweigh the

benefit from that requirement.

Quik Payday tries to distinguish Aldens by suggesting that regulating

Internet lending cannot, as a practical matter, protect Kansas residents, because

such lenders can go offshore to avoid the reach of the state’s law. In support,

Quik Payday relies on our opinion in Johnson. That case involved constitutional

challenges to a New Mexico statute that criminalized “dissemination of material

-17-
that is harmful to a minor by computer.” 194 F.3d at 1152. The challenged

statute defined the offense as

the use of a computer communications system that allows the input,
output, examination or transfer of computer data or computer
programs from one computer to another, to knowingly and
intentionally initiate or engage in communication with a person under
eighteen years of age when such communication in whole or in part
depicts actual or simulated nudity, sexual intercourse or any other
sexual conduct.

N.M. Stat. § 30-37-3.2(A) (1998). Our Johnson opinion affirmed the district

court’s grant of a preliminary injunction against enforcement of the statute,

agreeing with the district court that the plaintiffs—groups whose Internet speech

concerned women’s health, gay and lesbian issues, and censorship and civil

liberties, 194 F.3d at 1153—were likely to prevail on the merits of their claim

that the statute violated the dormant Commerce Clause. With regard to the

benefit the statute might confer relative to its burden on interstate commerce, we

observed that

[t]he statute will almost certainly fail to accomplish the
Government’s interest in shielding children from pornography on the
Internet. Nearly half of Internet communications originate outside
the United States, and some percentage of that figure represents
pornography. Pornography from, say, Amsterdam will be no less
appealing to a child on the Internet than pornography from
Albuquerque, and residents of Amsterdam have little incentive to
comply with the statute.
.
Id. at 1162 (emphasis added; brackets and internal quotation marks omitted).

This conclusion was reinforced by the state’s proffered construction of the statute

-18-
as governing only one-to-one e-mail communications between New Mexicans.

This construction, we observed, “renders it so narrow in scope that the actual

benefit conferred is extremely small.” Id.

Our case is readily distinguishable from Johnson in this respect. An

offshore lender may well have incentives to comply with Kansas law. Johnson

did not involve credit transactions. One who sent pornography to New Mexico

from Amsterdam needed nothing in the future from the New Mexico resident.

Payday lending, however, would not be very profitable if the borrowers refused to

repay, or were prevented from repaying, their loans. Regulators can educate

borrowers regarding their rights not to repay loans, and they may have authority

to control lenders by seizing assets (such as a bank account) from which a lender

expects to be repaid. We are not persuaded that Kansas would be powerless to

protect its residents from offshore payday lenders who refused to comply with

applicable Kansas laws.

Quik Payday also relies on national-uniformity arguments to support its

Commerce Clause challenge. It contends that the nature of the Internet requires

any regulation of Internet operations to be national in scope, not state-by-state. It

finds support in the following quotation from County of Mobile v. Kimball, 102

U.S. 691 (1880):

Commerce with foreign countries and among the States, strictly
considered, consists in intercourse and traffic, including in these
terms navigation and the transportation and transit of persons and

-19-
 property, as well as the purchase, sale, and exchange of commodities.
For the regulation of commerce as thus defined there can be only one
system of rules applicable alike to the whole country; and the
authority which can act for the whole country can alone adopt such a
system. Action upon it by separate States is not, therefore,
permissible.

Id. at 702. Quik Payday also quotes our comment in Johnson that “[t]he Internet,

like rail and highway traffic, requires a cohesive national scheme of regulation so

that users are reasonably able to determine their obligations.” Johnson, 194 F.3d

at 1162 (ellipses and internal quotation marks omitted).

But Quik Payday reads too much into these statements. The courts have

not held that certain modes of interstate commerce always require uniform

regulation. They have examined particular types of regulation and made

individual determinations. For example, the Supreme Court has not held that all

regulation of interstate railroads must be national in scope. In Southern Pacific

the Court held that the length of interstate trains could not be regulated state by

state, see 325 U.S. at 781–82, but it did not retreat from its prior decisions

allowing individual states to impose some safety measures, such as limitations on

the size and composition of crews on interstate trains, see id. at 779, 782.

Similarly, our language in Johnson must be read in the context of that case.

The New Mexico statute at issue prohibited the use of the Internet “to knowingly

and intentionally initiate or engage in [sexually explicit] communication with a

person under eighteen years of age.” Johnson, 194 F.3d at 1152 (internal

-20-
quotation marks omitted). We rejected the state’s attempt to construe this statute

narrowly to include only Internet communications deliberately sent to a specific

individual whom the sender knew to be a minor, see id. at 1158–59, and said that

the prohibition extended to group communication, see id. at 1160. Our concern

was that the statute would govern websites, bulletin-board services, and chat

rooms, which can be accessed by virtually anyone, anywhere, without control by

the one posting the information. See id. at 1157. If such a posting were subject

to New Mexico law, it would be equally subject to the laws of every jurisdiction

in which the Internet operated. See id. at 1159 (“[V]irtually all communication

on the Internet would meet the statutory definition of ‘knowingly’ and potentially

be subject to liability under [the statute].”) Such a regulatory regime could

obviously cripple that medium of communication.

Regulation of one-to-one commercial exchanges via the Internet, however,

is quite a different matter. The potential for multiple jurisdictions to regulate the

same transaction is much more limited. We reject the argument that the dormant

Commerce Clause prohibits such regulation just because the parties use the

Internet to communicate. Cf. Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.

Supp. 1119, 1124 (W.D. Pa. 1997) (in addressing whether the Due Process Clause

prohibited a state’s assertion of jurisdiction over an Internet transaction, the court

wrote: “Traditionally, when an entity intentionally reaches beyond its boundaries

to conduct business with foreign residents, the exercise of specific jurisdiction

-21-
[by the foreign jurisdiction over that entity] is proper. Different results should

not be reached simply because business is conducted over the Internet.” (citation

omitted)). Surely, for example, a state could prohibit the use of e-mail to convey

an extortionate threat, just as it could prohibit such a threat by telephone. The

possible burden on commerce arising from inconsistency among jurisdictions with

an interest in a one-to-one commercial transaction conducted over the Internet

must be assessed with respect to the specific type of regulation at issue.

Thus, we turn to Quik Payday’s argument based on the specifics of the

KUCCC. It contends that subjecting it to regulation by multiple states will in fact

create inconsistency that would unduly burden interstate commerce. Quik

Payday’s briefs present a compilation of payday-loan laws in various states that,

in its view, reveal how unmanageable its business would be if Kansas and other

states could each enforce its own rules. Our review of those laws raises doubts

about the merits of Quik Payday’s argument. But we need not resolve the matter.

Quik Payday is not being penalized by Kansas for the way it renews loans, or

even for the interest rate it charges. Its misconduct was a simple failure to get a

Kansas license. And requiring a license in each state does not impose an undue

burden. The Supreme Court rejected an analogous argument in American

Trucking Associations, Inc. v. Michigan Public Service Commission, 545 U.S. 429

(2005). In that case, interstate trucking firms challenged Michigan’s flat fee on

trucks engaged in intrastate hauling (i.e., point-to-point deliveries within

-22-
Michigan) under the dormant Commerce Clause. See id. at 431–32. The

challengers’ purely local activity apparently consisted of “topping off” interstate

loads with loads for local delivery, thereby maximizing the profitable use of cargo

space. See id. at 435. They argued that because interstate trucks engaged in less

intrastate trade as a share of their business than did purely local haulers, the flat

fee discriminated against the former in favor of the latter. See id. at 431–32. The

Supreme Court rejected the challenge on several grounds, among them that every

state could legitimately assess such a fee without putting interstate commerce at a

disadvantage:

We must concede that here, as [the challengers] argue, if all States
did the same, an interstate truck would have to pay fees totaling
several hundred dollars, or even several thousand dollars, were it to
“top off” its business by carrying local loads in many (or even all)
other States. But it would have to do so only because it engages in
local business in all those States.

Id. at 438 (emphasis added). If some future Internet payday lender were to point

to potential inconsistency among the states in some other component of the

KUCCC—say the handling of renewals—then a court could address whether the

Commerce Clause bars this type of regulation. For this case, however, we need

not undertake that task.

III. CONCLUSION

We AFFIRM the judgment of the district court.

-23-