MN Appeals Court Upholds $7M Judgment Against Payday Lender

Minnesota case law summary by Attorney Richard Clem: payday loans, dormant commerce clause.

State of Minnesota by its Attorney General, Lori Swanson, v. Integrity Advance, LLC. payday loans, dormant commerce clause

Integrity Advance, LLC, a Delaware limited liability company, is an online payday lender and had a website at That website is no longer active, but Integrity claimed that it prohibited Minnesota applicants from applying. The Minnesota Attorney General received complaints from Minnesota residents who had received payday loans from the site. Integrity initially claimed that these complaints must have been from people who previously lived in other states or claimed on the online form that they lived in another state.

The statue sued Integrity in Ramsey County District Court. The state alleged that Integrity violated the Minnesota payday lending statutes, Minnesota Statutes 47.60 and 47.601 by not having a license, by automatically "rolling over" loand, and by charging interest rates as high as 1369% per annum.

Integrity moved to dismiss, alleging that the Minnesota Statute violated the Dormant Commerce Clause of the U.S. Constitution. The district court denied this motion, and the case proceeded to discovery. Discovery revealed that Integrity had made 1,269 loans to people who indicated on their applications that they lived, worked, and banked in Minnesota. Integrity followed up by contacting these people at their Minnesota homes, called their Minnesota employers, and contacted their Minnesota financial institutions. In all, it had made over 27,000 contacts with Minnesota, deposited loans into Minnesota bank accounts, and made over 20,000 withrawals from Minnesota accounts.

Both sides moved for summary judgment. The district court ruled in favor of the state, and awarded over $700,000 in restitution and $7 million in statutory damages and penalties, as well as costs and attorney fees. Integrity appealed to the Minnesota Court of Appeals, once again arguing that the case was barred by the dormant commerce clause. It argued that the loans were consumated in Delaware, and that Minnesota could not regulate them.

The Court of Appeals first cited one of the leading dormant commerce clause cases, Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which prohibits states from discriminating against or unduly burdening interstate commerce. However, the court also noted that a state may incidentally regulate interstate commerce, and cited Great Atl. & Pac. Tea Co., Inc. v. Cottrell, 424 U.S. 366 (1976).

The court held that the regulation was proper in this case. The loans in question did not take place completely outside of Minnesota. Minnesota residents applied from their computers in Minnesota, and Integrity contacted them at their homes in Minnesota and called Minnesota employers and banks.

The court also addressed the amount of damages and the appropriateness of an injunction and affirmed the trial court on these grounds as well.

For these reasons, the Court of Appeals affirmed the district court's holding. The Court's opinion was released on March 31, 2014, and was authored by Judge Klaphake. Judges Halbrooks and Schellhas concurred. The state was represneted on the appeal by Assistant Attorney General Nathan Brennaman. Integrity was represented by Minneapolis attorneys Scott A. Benson and Mark J. Briol, and Washington, D.C., attorneys Katten Muchin Rosenman and Claudia Callaway.

No. A13-1388 (Minn. Ct. App. Mar. 31, 2014).

Please see the original opinion for the court's exact language.


Richard P. Clem is an attorney and continuing legal education (CLE) provider in Minnesota. He has been in private practice in the Twin Cities for 25 years. He has a J.D., cum laude, from Hamline University School of Law in St. Paul and a B.A. in History from the University of Minnesota. His reported cases include: Asociacion Nacional de Pescadores a Pequena Escala o Artesanales de Colombia v. Dow Quimica de Colombia, 988 F.2d 559, rehearing denied, 5 F.3d 530 (5th Cir. 1993), cert. denied, 510 U.S. 1041 (1994); LaMott v. Apple Valley Health Care Center, 465 N.W.2d 585 (Minn. Ct. App. 1991); Abo el Ela v. State, 468 N.W.2d 580 (Minn. Ct. App. 1991).

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