# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 8- 24 16

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Dol la r Loa n C en te r of

So ut h Dak ot a, LLC, do in g b us in es s as Dol la r Loa n C en te r

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el le e

v.

Bret Afda hl , in di vi du al ly and in hi s o ffi ci al cap aci ty as di rect or of t he So ut h

Dak ot a Div is io n o f Ban ki ng

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll an t

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No. 1 8- 24 97

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Dol la r Loa n C en te r of

So ut h Dak ot a, LLC, do in g b us in es s as Dol la r Loa n C en te r

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Bret Afda hl , in di vi du al ly and in hi s o ffi ci al cap aci ty as di rect or of t he So ut h

Dak ot a Div is io n o f Ban ki ng

ll ll ll ll ll ll ll ll ll ll l

Defe nd an t - Ap pe ll ee

__ __ __ __ __ __

App eal s fr om

Uni te d S ta te s Di st ric t Co ur t
fo r th e Dis tri ct of S ou th Dako ta - Pie rre

__ __ __ __ __ __Su bm it te d: Ju ne 12 , 20 19

Fi le d: Aug us t 1 4, 2 01 9

__ __ __ __ __ __

Befo re LOKEN, KE LLY, and ERICKSON, Ci rcu it Ju dg es

.

__ __ __ __ __ __

ERICKSON, Ci rcu it Ju dg e.

Dol la r Loa n Cen te r (“ DLC”) an d fo ur of it s br an ch es were pr ev io us ly li cen se d

as m on ey le nd ers by th e So ut h Dak ot a Div is io n of B a n k i n g ( “Div is io n” ). On

Sep te m be r 13 , 2 01 7, Bret Afd ah l, Dire ct or of th e Div is io n, se nt DLC a “ Cea se an d

Des is t an d Lice ns e Rev oc at io n Ord er.” Thi s or de r req ui red DLC to : (1 ) im m ed ia te ly

s t o p le nd in g m on ey in So ut h Dak ot a; (2 ) to no ti fy al l co ns um ers who ha d l o a n s

is su ed aft er Ju ne 21

, 20 17

, th at th e l o a n s w e r e vo id an d un co ll ect ib le ; an d (3 ) to

su rre n d e r a ll of it s m on ey le nd in g li cen se s an d ret ur n th em to th e Div is io n. DLC

co m m en ced th is act io n un de r 42 U.S.C. § 19 83 ag ai ns t Afd ah l, al le gi ng th at li cen se

rev oc at io n wit ho ut a pr e-d ep riv at io n he a r i n g de pr iv ed DLC of it s pr oc ed ur al du e

pr oc es s rig ht s un de r th e Fo ur te en th Am en dm en t. Afd ah l ap pe al s th e di st ric t co ur t’s

de ni al of ab so lu te or qu al ifi ed im m un it y an d it s de ci si on th at th e q u i c k act io n

ex cep ti on to a pr e-d ep riv at io n he ari ng was no t ap pl ic ab le

. Afte r care fu l rev ie w of th e

reco rd , we con cl ud e th at Afda hl is en ti tl ed to qu al ifi ed im m un it y . W e rev ers e wit h

di rect io ns to en te r jud gm en t i n fa vo r of Afda hl on th e b as is of q ua li fie d i m m un it y

.

I. Ba ck gr ou nd

In So ut h Dak ot a, th e Div is io n of Ban ki ng is ad m in is te red un de r th e di rect io n

an d su pe rv is io n of the Dep art m en t of Lab or an d R eg ul at io n a nd it s Secret ary. S.D.

Co di fie d Laws § 51 A2- 2. The Div is io n is ve st ed wit h t h e a u t h o r i t y to co nt ro l an d

su pe rv is e ba nk in g act iv it ie s wit hi n th e st at e an d is to ex erci se it s “ qu as i-ju di ci al

,
qu as i-l eg is la ti ve , ad vi so ry , an d ot he r no na dm in is tra ti ve fu nc ti on s in de pe nd e n tl y .”

-2

-Id

. Und er Ch ap te r 54 -4

, th e Dire ct or of th e Div is io n is res po ns ib le fo r ap pr ov in g or

de nyin g li cen se ap pl ic at io ns an d ren ewal s. S.D. Co di fie d Laws §§ 54 -4 -4 1, 54 -4 -4 5.

If th e Dire c t o r d e t erm in es th at a li cen se e is en ga gi ng in a pr act ic e th at fai ls to

co nf or m to th e la w o r a co m

m is si on ru le

, or de r, or co nd it io n, he m ay is su e a ceas e

an d de si st or de r. S.D. Co di fie d Laws § 54 -4 -4 8. He is al so au th or iz ed to “ co nd it io n,

de ny, de cl in e to ren ew, su sp en d fo r a pe rio d no t to ex ceed 6 m on th s, or rev ok e a

li cen se fo r ‘goo d cau se .’ ” Und er So ut h Dak ot a’s Adm in is tra ti ve Pro ced ur e an d

Ru le s, un le ss an ag en cy fin ds th at pu bl ic he al th

, sa fet y , or welf are req ui re em erg en cy

act io n, a li cen se can no t be rev ok ed or su sp en de d un le ss th e ag en cy ha s gi ve n no ti ce

an d affo rd ed th e li cen se e an op po rtu ni ty to be he ard

. S.D. Co di fie d Laws § 1- 26 -2 9.

In Ju ly 20 10

, DLC s ub m it te d m on ey le nd in g li cen se ap pl ic at io ns to th e

Div is io n fo r it s m ai n pl ace of bu si ne ss in Si ou x Fal ls an d a br an ch lo cat io n in Rap id

Ci ty. The ap pl ic at io ns st at ed th at th e bu si ne ss es wou ld n o t p ro vi de sh or t te rm

co ns um er l oa ns , payday lend in g, o r ti tl e lo an s as de fin ed un de r So ut h Dak ot a Law.

A “ sh or t te rm lo an ” is an y lo an wit h a du rat io n of si x m on th s or le ss

. S.D. Co di fie d

Laws § 54 -4 -3 6. Bas ed on th e in fo rm at io n pr ov id ed in th e ap pl ic at io ns , th e Div is io n

a pp ro ve d m on ey le nd in g li cen se s to DLC. DLC su bm it te d th e req ui red an nu a l

ren ewal ap pl ic at io ns fro m 20 11 to 20 16

. W it h th e ex cep ti on of th e y ear 20 12

, DLC

affi rm ed on it s ren ewal ap pl ic at io ns th at th ere ha d no t be en an y su bs ta nt iv e ch an ge s

to th e lo an pr od uc ts of

fere d si n c e th e la st ap pl ic at io n or ren ewal

. In 20 12

, DLC

in fo rm ed th e Div is io n th at it was c ha ng in g fr om a 52 week to a 65 week am or ti zed

lo an pro du ct

.

In 20 17

, DCL s u b mi t te d m on ey le nd in g li cen se ap pl ic at io ns fo r br an ch es in

Si ou x Fal ls

, Abe rd een , an d W at ert own , So ut h Dak ot a. The se ap pl ic at io ns al so

in di cat ed th at th e b us in es se s wou ld no t pr ov id e sh or t te rm co ns um er lo an s, p ay da y

le nd in g, o r ti tl e lo an s.

-3

-Befo re Ju ly 1, 2 0 17

, DLC or ig in at ed an d se rv ic ed un se cu red lo an s ran gi ng

fro m $1 00 to $2 ,00 0. The cu st om er was req ui red to m ak e week ly in te res t pa y m en ts

fo r 51 week s (b eg in ni ng in 20 12 , a p e r i od of 64 week s) an d th en on th e fin al week

a ba ll oo n pa y m en t co ns is ti ng of to ta l pr in ci pa l pl us in te res t. The an nu al pe rcen ta ge

rat e (“ APR”) on th es e lo an s va rie d fro m 25 9 pe rcen t to 49 2 pe rcen t. The rat e va rie d

ba se d on th e l o a n a mo un t an d whe th er th e cu st om er ha d a ch eck in g acco un t. In

Nov em be r 20 16

, DLC was fo rced to ch an ge it s lo an pr od uc t aft er In it ia te d Mea su re

21 was ap pr ov ed by th e vo te rs an d be cam e la w. The m eas ur e se t a m ax im um fin an ce

ch arg e fo r al l m on ey le nd ers li cen se d un de r So ut h Dako ta la w. Tot al in te res t, fe es ,

an d c ha rg es co ul d n ot be gr eat er tha n an APR of 36 pe rcen t. S.D. Co di fie d Laws §

54 -4 -4 4 pr oh ib it ed m on ey le nd ers fro m ev ad in g th e rat e li m it at io n by im po si ng ot he r

ch arg es or f

ees

.

The Div is io n un de rs to od th at DLC wou ld no t m ak e ad di ti on al lo an s aft er th e

m eas ur e wen t in to effe ct

. Howev er, in a le tt er da te d Ju ly 12

, 20 17

, DLC di sp ut ed th e

Div is io n’s un de rs ta nd in g an d st at ed it ha d in fo rm ed th e Div is io n th at DLC “ pl an ne d

to m ai nt ai n it s m on ey le nd in g li cen se fo r each of it s lo cat io ns an d th at it res erv ed th e rig ht to len d m on ey

an d s erv ic e lo an s co ns is te nt wit h S ou th Dako ta law.”

DLC in fo rm ed th e Div is io n th at be gi nn in g so m et im e aft er Ju ly 1, 20 17

, it

w o u l d b eg in us in g a ne w lo an pr od uc t. Upo n rev ie win g th e ne w pr od uc t, t h e

Div is io n ex pr es se d co nc er n t o D LC in a le tt er da te d Ju ly 7, 20 17

, th at DLC’s ne w

lo an pr od uc t was at te m

pt in g to us e th e la te fee pr ov is io n in it s ne w lo an co nt ract s as

a “ de vi ce, su bt erfu ge , or pr et en se to ev ad e” th e ne w la w. The D i v i s i o n in fo rm ed 1

So ut h Dak ot a la w pro vi de s: 1

5 4- 4- 44 .1. Dev ic e, su bt erfu ge , or pr et en se to ev ad e m ax im um fin an ce ch arg e pr oh ib it ed --Pe na lt ie s. No pe rs on m ay en ga ge in an y de vi ce,

su bt erfu ge , or pr et en se to ev ad e th e req ui rem en ts of § 54 -4 -4 4,

in c l u d i ng , bu t no t li m it ed to

, m ak in g lo an s di sg ui se d as a pe rs on al

-4

-DLC th at it wou ld b e c o n d u c t in g an ex am in at io n wit hi n th e ne xt 30 da y s. The

Div is io n co nd uc te d a “ ta rg et ed ” ex am in at i o n o n J ul y 13

, 20 17

, an d a “ fu ll sc op e”

ex am in at io n o n Au gu st 17 -1 8, 2 01 7.

The Div is io n’s i nv es ti ga ti on rev eal ed th at DLC’s ne w lo an pr od uc t in vo lv ed

un se cu red lo an s ran gi ng fro m $2 50 to $1 ,00 0 wit h a se ve n da y te rm , whi ch un de r

So ut h Dak ot a la w was a sh or t te rm lo an

. The s ta te d APR on th e ne w lo an pr od uc t

was be twee n 35 .87 pe rcen t an d 3 5.9 8 p erce nt an d wee kl y lat e fee s vari ed fro m $2 5

to $7 0 pe r week

. The m ai n di ffer en ce be twee n th e ne w lo an pr od uc t an d th e pr ev io us

lo an pr od uc t was th e am ou nt du e th e fir st week

. On th e ne w lo an , th e fir st pa y m en t

in cl ud ed pr in ci pa l pl us th e in te res t. If th e cu st om er di d no t m ak e th e pa y m en t, a $7 0

la te fee was im

po se d ev ery se ve n da y s un ti l th e lo an , al l accr ue d in te res t, an d la te fees

were pa id in fu ll

. Thi s ne w lo an pr od uc t wit h a su bs ta nt ia ll y hi gh er pa y m en t du e th e

fir st week cau se d th e lo an po rtf ol io ’s d el in qu en cy rat e to ex ceed 50 pe rcen t. Afte r

la te fees are in cl ud ed in th e APR as fin an ce ch arg es , th e Div is io n de te rm in ed th at th e

APR ran ge d fr om

30 0.8 6 p erce nt to 48 7.6 4 p erce nt

.

The Div is io n al so di sc ov ered th at be twee n Ju ly 1, 20 17

, an d Aug us t 17

, 20 17

, la te fees acco un te d fo r 90 .22 pe rcen t of DLC’s to ta l in co m e. The Div is io n co nc lu de d

th at DLC’s ne w lo an pr od uc t was a s h o r t te rm co ns um er lo an ; th at th e la te fees

pr op ert y sa le an d le as eb ack tra ns act io n; di sg ui si ng lo a n p r o c eed s as a

cas h reb at e fo r th e pr et ex tu al in st al lm en t s a l e of go od s or se rv ic es ; or

m ak in g, o ffer in g, as si st in g, or arra ng in g a d eb to r to ob ta in a lo an wit h

a gr eat er rat e of in te r e s t

, c o ns id erat io n, or ch arg e th an is pe rm it te d by

th is ch ap te r th ro ug h an y m et ho d in cl ud in g m ai l, te le ph on e, in te rn et

, or

an y el e c t r o n i c m ean s reg ard le ss of whe th er th e pe rs on ha s a ph y si cal

lo cat io n in th e st at e. Not wit hs ta nd in g an y ot he r pr ov is i o n o f th is

ch ap te r, a v io la ti on of t hi s s ect io n i s s ub ject t o t he pe na lt ie s i n § 54 -4

- 44

.

-5

-ch arg ed are an ti ci pa te d fees th at m us t be in cl ud ed in th e fin an ce ch arg e cal cu la ti on ;

an d th at th e pr od uc t vi ol at ed th e m ax im um APR al lo wed to be ch arg ed un de r So ut h

Dak ot a la w. In li gh t of th es e fin di ng s, Dire ct or Af d a h l i s su ed on Sep te m

be r 13

, 20 17

, a ceas e an d de si st or de r an d a li cen se rev oc at io n or de r. H e r e v o k e d DLC’s

m on ey le nd in g li cen s e s a n d al so or de red DLC to st op en ga gi ng in th e bu si ne ss of

le nd in g m on ey in So ut h Dak ot a; to no ti fy co ns um ers th at an y lo an m ad e aft er Ju ne

21

, 20 17

, was vo id an d un co ll ect ib le ; an d to su rren de r i mm e d i a t el y th e m on ey

le nd in g l ic en se s an d re tu rn th em to th e Div is io n.

F i f t e e n da y s aft er is su in g hi s fin di ng s an d rev oc at io n or de r, Afd ah l is su ed a

li m it ed st ay

. The st ay al lo wed DLC to co nt in ue se rv ic in g an y lo an s or ig in at ed be fo re

Nov em be r 16

, 20 16

, so lo ng as th e se rv ic in g of th e lo an s was no t in vi o l at io n of

So ut h Da k o t a l a w

. On Octo be r 3, 20 17

, th e Div is io n se rv ed on DLC’s at to rn ey a

no ti ce of he ari ng to ad dr es s th e st at us of DLC’s m on ey le nd in g li cen se s. The he ari ng

was se t fo r Octo be r 17

, 20 17

. The no ti ce id en ti fie d t he fo ll owi ng is su es : (1 ) th at

DLC was or ig in at in g an d se rv ic in g sh or t te rm s lo an s whe n it ha d no t be en au th or iz ed
by th e Div is io n to do so ; (2 ) th e lo an s of fere d b y DLC aft er Ju ne 21

, 20 17

, were

de si gn ed to in cu r la te fees an d as s uc h were co ns id ered an ti ci pa te d fees th at were

req ui red to be in cl ud ed in th e fin an ce char ge cal cu la ti on ; and (3 ) DLC ha d vi ol at ed

st at ut es pe rta in in g to c o n s um er cred it an d en ga ge d in un fai r pr act ic es in vo lv in g it s

le nd in g act iv it y

. DLC req ue st ed a co nt in ua nc e an d qu es ti on ed whe th er the he ari ng

was “ juri sd ic ti on al ly ap pr op ria te ” si nc e it be li ev ed th e Div is io n ha d ta ke n “ fin al

act io n.” No h eari ng was h el d.

DLC co m

m en ced th is a c ti on , al le gi ng Afd ah l vi ol at ed DLC’s cl earl y

es ta bl is he d rig ht to pr oc ed ur al du e p ro ces s by rev ok in g DLC’s m on ey le nd in g

li cen se s wit ho ut a pr e-d ep riv a t i o n h e a r in g. Afd ah l m ov ed to di sm is s fo r fai lu re to

st a t e a cl ai m

. The pa rti es al so fil ed cro ss -m ot io ns fo r su m m ary jud gm en t. The

di st ric t co ur t de n i e d A fd ah l’s m ot io n to di sm is s, fin di ng he was no t en ti tl ed to

ab so lu te im m

un it y be cau se hi s d eci si on to rev ok e th e m on ey len di ng li cen se s pr io r

-6

-to affo rd in g DLC a he ari ng ex ceed ed th e st at ut or y au th or it y ve st ed by So ut h Dak ot a

la w an d was no t th e type of co nd uc t th at ab so lu te im m un it y was in te nd ed to pr ot ect

. The co ur t de ni e d Afd ah l’s m ot io n fo r su m m ary jud gm en t, de te rm in in g th at he was

no t en ti tl ed to qu a l i fie d im m un it y an d th e qu ic k act io n ex cep ti on ob vi at in g a pr ede pr iv at io n h eari ng di d n ot ap pl y

. It gr an te d pa rti al su m m ary jud gm en t i n fa vo r of

DLC as to th e 15 da y pe rio d be twee n Afd ah l’s rev oc at io n or de r an d whe n he is su ed

th e st ay , n ot in g th at “ da m ag es ap pe ar to be li m it ed in th is cas e” an d c au ti on in g th e

pa rti es th at “ no th in g in th is op in io n sh ou ld be ta ke n as an en do rs em en t of th e ex te nt

of DLC’s d am ag es cl ai m s.” The di st ric t co ur t la te r cl ari fie d wh en it de ni ed DLC’s

m ot io n to reco ns id er th at th e is su e of whe th er th ere was a de pr iv at io n ou ts id e of th e

15 -d ay pe rio d was an un res ol ve d f a c t q u e s ti on

. Afd ah l ap pe al s th e di st ric t co ur t’s

de ni al of im m

un it y an d ru li ng th at th e qu ic k act io n ex cep ti on pe rm it te d hi m t o a ct

wit ho ut a pr e-d ep riv at io n h eari ng

. 2

II

. Dis cus si on

W e rev ie w th e de ni al of qu al ifi ed im m un it y de no vo

. Dad d v. Ano ka Ct y ., 82 7

F.3 d 74 9, 75 4 (8 th Ci r. 20 16 ) (q uo ti ng Hag er v. Ark

. Dep ’t of Heal th

, 73 5 F.3 d 10 09

, 10 13 (8 th Ci r. 20 13 )). To warra nt rev ers al , Af da hl m us t s ho w t ha t he is en ti tl ed to

im m un it y on th e face of th e co m pl ai nt

. Id

. (q uo ti ng Brad fo rd v. Huc ka be e, 39 4 F.3 d

10 12

, 10 15 (8 th Ci r. 20 05 )). Thi s req ui res us to an al y ze whe th er DLC “ ha s st at ed a pl au si bl e cl ai m fo r a vi ol at io n of a co ns ti tu ti on al or st at ut or y r i g h t [ of whi ch a

reas on ab le pe rs on wou ld ha ve kn own ] an d whe th er th e rig ht was cl earl y es ta bl is he d

a t t h e t i m e of th e al le ge d in frac ti on .” Hag er, 73 5 F.3 d at 10 13 (ci ti ng Po well v

. Jo hn so n

, 40 5 F.3 d 65 2, 65 4– 55 (8 th Ci r. 20 05 )). “ Abs en t ei th er a cl earl y es ta bl is he d
rig ht or a co ns ti tu ti on al vi ol at io n, qu al ifi ed im m un it y ap pl ie s

. ” D i l l ard v. Ci ty of

DLC fil ed a cro ss -ap pe al on th e is su e of whe th er th e di st ric t co ur t erre d in 2

fin di ng th e co ns ti tu ti on al de pr iv at io n las te d on ly 15 da y s. DLC ha s no t pu rs ue d it s

cro ss -ap pe al aft er t he co ur t i ss ue d i ts ord er o n DLC’s m ot io n t o re co ns id er.

-7

-S p r i n g d a le , Ar ka ns as , No . 1 7- 32 84 ; No. 17 -3 28 7,

__ F.3 d

__ , 2 01 9 W L 3 04 90 10

,

at *3 (8t h C ir. J ul y

12 , 20 19 ).

DLC’s a ll eg ed co ns ti tu ti on al cl ai m is th at Afda hl de pr iv ed it of a pr oc ed ur al

du e pr oc es s rig ht whe n Afd ah l rev ok ed DLC’s m on ey le nd in g li cen se s on Sep te m be r

13

, 20 17

, be fo re ho ld in g a pr e-d ep riv at io n he ari ng

. In a qu al ifi ed im m un it y an al y si s,

“ a rig ht is ‘clear ly es ta bl is he d’ if th e ‘con to ur s of th e rig ht [are ] su ffi ci en tl y cl ear th at

a reas on ab le of

fic ia l wou ld un de rs ta nd th at wha t he is do in g vi ol at es th at rig ht .’ ”

Su tt on v. Bai le y , 70 2 F.3 d 44 4, 44 7 (8 th Ci r. 20 12 ) (q uo ti ng And ers on v. Crei gh to n

, 48 3 U.S. 6 35 , 64 0 (1 98 7) ).

The di st ric t co ur t, rel y in g on Fre e man v

. Bl ai r, 79 3 F.2 d 16 6 (8 th Ci r. 19 86 )
(Fre em an I) an d Free m an v. Bl ai r, 86 2 F.2 d 13 30 (8 th Ci r. 19 88 ) (Fre em an II), fo un d

th at th e rig ht to a pr e-d ep riv at io n he ari ng un de r t h e s e c irc um st an ces was cl earl y

es ta bl is he d. In Free m an I, we co nc lu de d th at st at e of fic ia ls who so ug ht to pe rfo rm

warra nt le ss cam

pg ro un d in sp ect io ns an d the n sus pend ed th e cam pg ro un d’s op erat in g

li cen se wit ho ut a pr e-d ep riv at io n he ari ng , de sp it e la ck in g a fact ua l ba si s to in vo ke th e

pu bl ic welf

are exc ep ti on , were no t en ti tl ed to qu al ifi ed im m un it y

. 79 3 F.2d at 17 8.

Afte r th e de ci si on was va cat ed an d rem an de d by th e Su pr em e Co ur t, we reco ns id ered

th e qu al ifi ed im m

un it y q u e s t io n an d co nc lu de d th at ev en if ob jecti ve ly reas on ab le

of fic ia ls co ul d ha ve be li ev ed a warra nt le ss se arch o f th e cam pg ro un d was

co ns ti tu ti on al ly pe rmi s s i bl e, it do es no t fo ll ow th at th ey co ul d ha ve be li ev ed a

su mm a r y su sp en si on of th e cam pg ro un d li cen se was co ns ti tu ti on al ly pe rm is si bl e.

86 2 F .2d at 1 33 2.

W e di sa gr ee wit h th e di st ric t co ur t’s c o n c lu si on th at pr oc ed ur al du e pr oc es s

req ui res m or e th an wha t th e Div is io n di d an d DLC’s rig ht t o a p re-d ep riv at io n

he ari ng was cl earl y es ta bl is he d by Free m an

. The pr oc es s and pr oc ed ur e em pl oyed
by th e Div is io n is di st in gu is ha bl e fro m th at ut il iz ed by th e of fic ia ls in Free m an su ch

th at a reas on ab le of

fic ia l in Afd ah l’s p o s i t i on wou ld no t be on no ti ce th at he was

-8

-vi ol at in g a cl earl y es ta bl is he d rig ht whe n he is su ed th e co m bi ne d ceas e an d de si st an d

rev oc at io n or de r in th is cas e. Befo re ta k i n g ad ve rs e ad m in is tra ti ve act io n, th e

Div is io n co nd uc te d an ex te ns iv e ex am in at io n of DLC’s ne w lo an pr od uc t. Sev en

st at e ba nk in g of

fic ia ls were in vo lv ed in ex am in in g DLC’s op erat io ns

. Thre e

pe rfo rm ed th e on si te “ ta rg et ” ex am in at io n in Ju ly, i n c l u di ng th e Dep ut y Dire ct or

. The y rev ie wed 20 “ act iv e” lo an s an d se ve ral “ de ni ed ” lo an s. Bec au se th e ne w lo an

pr od uc t was on ly 10 da y s ol d at th e ti m e an d on ly lo an s or ig in at ed fro m Ju ly 3 to Ju ly

5 co ul d co nt ract ua ll y be de em ed pa st du e, th e ex am in ers de te rm in ed th at ad di ti on al

in fo rm at io n a nd a la rg er s am pl e was ne ed ed to co m

pl et e th ei r in ve st ig at io n.

Afte r th e ex am in ers de te rm in ed th at DLC’s res po ns es to fo ll ow- up writ te n

qu es ti on s were in co m

pl et e or un res po ns iv e, a two da y ex am in at io n was sc he du le d in

Aug us t. In ad di ti on to th e Dep ut y Dire ct or , th ree ex am in ers no t in vo lv ed in th e fir st

ex am in at io n pa rti ci pa te d in th e se co nd ex am in at io n. DLC’s r e g i on al m an ag er an d

it s la wy er, whi ch th e Div is io n fo un d un us ua l, were pr es en t du rin g bo th ex am in at io ns

. The ex am in ers se le ct ed 30 8 ne w lo an pr od uc ts fro m th e 63 3 sh or t te rm lo an s th at ha d

or ig in at ed fro m Ju ly 1 to Aug us t 17

, 20 17

. Of th e lo an s se le ct ed fo r rev ie w, 27 6 ha d

a m at ur it y da te pr io r to Aug us t 17

. The rev ie w d em on st rat ed to th e ex am in ers th at

DLC was ov erwh el m in gl y rel ia nt on la te fees to ge ne rat e rev en ue an d th at DLC was

i s s u i n g sh or t te rm lo an s wit ho ut au th or iz at io n to do so

. Afte r th is in te ns e

in ve st ig at io n, th e ex am in ers reac he d th e co nc lu si on th at DLC’s lo an pr od uc t vi ol at ed

So ut h Dak ot a la w. Co n t r a r y t o th e of fic ia ls ’ act io ns in Free m an , th e pr oc ed ur es

em pl oyed by t he Div is io n arm ed Afd ah l wi th a su bs ta nt ia l fa ct ua l fo un da ti on up on

whi ch he ba se d hi s le ga l co nc lu si on th at DLC was vi ol at in g So ut h Dak ot a’s le nd in g

la ws.

DLC’s cl ai m th at it ha d no no ti ce th at it co ul d no t is su e s h o r t t e r m lo an s is

di si ng en uo us

. DLC was a ware th at it ha d to no ti fy th e Div is io n of an y su bs ta nt iv e

ch an ge s to th e lo a n p r o du ct s it of fere d. The ren ewal ap pl ic at io n in qu ire d ab ou t

su bs ta nt iv e ch an ge s an d DLC no ti f i e d th e Div is io n in 20 12 of a ch an ge whe n it

-9

-ex te nd ed it s am or ti zat io n sc he du le fro m 52 to 65 week s. Yet, th e Div is io n rece iv ed

DLC’s ne w m on ey le nd in g lic en se ap pli ca tio ns fo r br an ch es in Abe rd een , W at ert own ,

an d Si ou x Fal l s o n J u n e 1, 20 17

, ap pr ox im at el y a m on th be fo re DLC was to be gi n

us in g it s ne w sh or t te rm lo an pr od uc t. In th os e ap pl ic at io ns , DLC in di cat ed no sh or t

te rm lo an s were be in g p ro vi de d. Des pi te be in g aware of it s ob li ga ti on , DLC ne ve r

no ti fie d th e Div is io n of th e su bs ta nt ia l ch an ge in it s lo an p r od uc t. DLC kn ew or

sh ou ld ha ve kn own th at it was p ro vi di ng a lo an pr od uc t in co ns is te nt wit h th e te rm s

on th e fac e o f it s ap pl ic at io ns

.

It is in di sp ut ab le th at Dire ct or Afd ah l act ed wit hi n hi s au th or it y whe n he is su ed

th e ceas e an d de si st or de r. So ut h Dak ot a la w pe rm it s su mm a r y c eas e an d de si st

or de rs

. The ceas e an d de si st or de r pr oh ib it ed DLC fro m en ga gi ng in th e bu si ne ss of

le nd in g m on ey in So ut h Dak ot a. DLC ha d so ug ht ap pr ov al fro m th e Div is io n to of fer

th is si ng le lo an pr od uc t. W it ho ut an ot he r ap pr ov ed pr od uc t, DLC co ul d no t or ig in at e

an y ne w lo an s. W hi le it wou ld ha ve be en m or e pr eci se to pr oh ib it DLC fro m

or ig in at in g or se rv ic i n g th e ne w lo an pr od uc t, th e po te nt ia ll y ov erb ro ad or de r was

swi ftl y co rrec te d. App ro xi m at el y two week s la t e r, Afd ah l is su ed a st ay al lo win g

DLC to co nt in ue to se rv ic e an y l a w f ul lo an or ig in at ed be fo re Nov em be r 16

, 20 16

. Alt ho ug h th e Div is ion re que ste d a lis tin g of un pa id lo an s or ig in at ed be fo re Nov em be r

16 , 20 16 , fro m

DLC, th e rec or d d oe s n ot ap pe ar to co nt ai n DLC’s r es po ns e, if an y ,
to th e req ue st

.

Afd ah l’s Sep te m

be r 13

, 20 17

, or de r al so rev ok ed D LC ’s m on ey le nd in g

li cen se s. Befo re th e rev oc at io n, DLC, th ro ug h it s reg io na l m an ag er an d it s co un se l,

ha d be en gi ve n an op po rtu ni ty to r e s p on d to se ve ral of th e Div is io n’s co nc ern s

reg ard in g DLC’s ne w lo an pr od uc t. DLC p r e s en te d writ te n res po ns es to th e

Div is io n’s qu es t io ns

. DLC di sp ut es th e Div is io n’s le ga l co nc lu si on s, no t th e da ta

rel ie d on by th e Div is io n, whi ch was su pp li ed by DLC. W hi le a tri al -li ke he ari ng was

no t co nd uc te d, du e pr oc es s has be en de sc rib ed by th e Uni te d Stat es Su pr em e Co ur t

as a “ fle xi bl e” co nc ep t. Mat h e w s v. Eld rid ge , 42 4 U.S. 31 9, 33 4 (1 97 6) (q uo ti ng

-1 0-Mo rri ss ey v. Brewe r, 40 8 U.S. 47 1, 48 1 (1 97 2) ). In th is cas e, th ere is no ev id en ce

th at ad ve rs e ad m in is tra ti ve act io n ag ai ns t DLC’s p ro pe rty i nt eres t was ba se d on an

erro ne ou s fact ua l ba si s. It was Afd ah l’s res po ns ib il it y to m ak e a le ga l in te rp ret at io n

reg ard in g th e la wfu ln es s of DLC’s ne w lo an pr od uc t. He di d so on ly aft er an in te ns e

in ve st ig at io n al lo win g DLC’s reg io na l m an ag er an d co un se l to pa rti ci pa te in bo th on

si te ex am in at io ns an d to res po nd to fo ll ow- up qu es ti on s. Und er th es e ci rcu m st an ces

whe re DLC was on no ti ce th at th e Div is io n was in ve st ig at in g th e la wf ul ne ss of it s

ne w lo an pr od uc t, DLC w a s a ffo rd ed an op po rtu ni ty to pr ov id e ad di ti on al

inf orm at io n ad dr es si ng th e Div is io n’s co nc ern s, an d th e rev oc at io n or de r ha d no m or e

of an effe ct on DLC’s bu si ne ss th an th e si m ul ta ne ou sl y is su ed ceas e an d de si st or de r,

we co nc lu de th at DLC has no t s ho wn a p ro ced ur al du e p ro ces s v io la ti on

.

Mo re im por ta ntl y , qua lif

ie d im m uni ty is in te nd ed to gi ve “ go ve rn m en t of fic ia ls

br eat hi ng ro om to m ak e reas on ab le bu t m is ta ke n jud gm en ts

, an d [to ] pr ot ect [] al l bu t

th e pl ai nl y in co m

pe te nt or th os e who kn owi ng ly vi ol at e th e la w.” Mes se rs ch m id t v.

Mi ll en de r, 56 5 U.S. 5 3 5

, 5 4 6 ( 20 12 ) (in te rn al qu ot at io ns om it te d)

. Eve n if Afd ah l

sh ou ld ha ve do ne so m et hi ng m or e be fo re ta ki ng ad ve rs e act io n ag ai ns t DLC’s m on ey

le nd in g li cen se s, he m ad e a reas on ab le m is ta ke in th e ex erci se of hi s of fic ia l du ti es

. Thi s is th e type o f m is ta ke th at th e qu al ifi ed im m un it y ru le was in te nd ed to pr ot ect

. Viewi ng th e ev id en ce in th e li gh t m os t fav or ab le to th e co m pl ai nt

, we fin d DLC ha s

fai le d to sh ow a vi ol at io n of a co ns ti tu ti on al rig ht th a t w a s c l e arl y es ta bl is he d.

Afd ah l i s en ti tl ed to qu al ifi ed im m un it y

.

II I. Con cl us io n

Fo r th e fo reg oi ng reas on s, we rev ers e th e di st ric t co ur t’s de ni al of qu al ifi ed

im m un it y

. W e di rect th e di st ric t co ur t to en te r jud gm en t in fav or of Afd ah l on th e

ba si s o f qu al ifi ed im m

un it y

.

-1 1-KELLY, Cir cu it Ju dg e, co nc ur rin g i n t he jud gm en t.

Afd ah l exp res sl y st at es th at

, fo r pu rp os es of ap pe al

, he as su m es th at “ DLC is

no rm al ly en ti tl ed t o a pr e-d ep riv at io n he ari ng .” In ot he r wor ds

, he co nc ed es th at

DLC was no t affo rd ed th e pr e-d ep riv at io n he ari ng th at it wou ld no rm al ly be en ti tl ed

to

. He arg ue s th at he is no ne th el es s en ti tl ed to qu al ifi ed im m un it y ei th er be cau se th e

“ qu ic k act io n ex cep ti on ” ap pl ie s— as th ere was a co m pe ll in g st at e in te res t in ta ki ng

im m ed ia te act io n— or be cau se i t was no t cl earl y es ta bl is he d th at th e qu ic k act io n

ex cep ti on di d no t ap pl y

. See Mo or e v. W arwi ck Pu b. Sch

. Dis t. No. 29

, 7 9 4 F

. 2 d

32 2, 32 7 (8 th Ci r. 19 86 ) (n ot in g “ si tu at io ns req ui rin g qu ic k act io n by th e St at e whe n

th ere is a co m

pe ll in g o r o v e r r i d in g st at e in te res t in a su m m ary ad jud ic at io n” are

ex em pt fro m th e pr e-d ep riv at io n he ari ng req ui rem en t). W he th er Afd ah l a f f o rd ed

DLC su ff

i c i e nt pr oc es s ab se nt th e ex is te nc e of ci rcu m st an ces th at a reas on ab le

of fic ia l wou ld co nc lu de req ui red im m ed ia te act io n to sa feg ua rd pu bl ic welf are is no t

a qu es ti o n b e f

o r e u s , so I wou ld no t reac h it

. Bu t I co nc ur in th e res ul t th e co ur t

reac he s be cau se I ag ree th at at th e ti m e Afd ah l to ok th e act io n he di d wit h res pe ct to

th e ceas e an d de si st or de r an d th e li cen se rev oc at i o n , it was no t cl earl y es ta bl is he d

th at th e q ui ck act io n e xc ep ti on di d no t j us ti fy th e la ck of a pre -d ep riv at io n h eari ng

.

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