Thomas Styczinski v. Grace Arnold ( 2022 )

United States Court of Appeals
For the Eighth Circuit
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No. 21-2936
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Thomas John Styczinski; Tom “The Coin Guy”, LLC;
Treasure Island Coins, Inc.; Numismatist United Legal Defense
Plaintiffs - Appellants
v.
Grace Arnold, in her official capacity as Commissioner
of the Minnesota Department of Commerce
Defendant - Appellee
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Appeal from United States District Court
for the District of Minnesota
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Submitted: July 8, 2022
Filed: August 31, 2022
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Before SHEPHERD, GRASZ, and KOBES, Circuit Judges.
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GRASZ, Circuit Judge.
Appellants (the “Bullion Traders”) are a collection of in-state and out-of-state
precious metal traders or representatives thereof challenging the constitutionality of
Minnesota Statutes Chapter 80G, which regulates bullion transactions. The Bullion
Traders argue the statute violates the dormant Commerce Clause. We agree.
I. Background
The Bullion Traders sued the Minnesota Commissioner of Commerce (the
“Commissioner”) under 42 U.S.C. § 1983, seeking both declaratory and injunctive
relief, claiming (among other things) that Chapter 80G is unconstitutional under the
dormant Commerce Clause because it has an extraterritorial effect and excessively
burdens interstate commerce. The Bullion Traders moved for summary judgment,
and the Commissioner moved to dismiss. The district court partially granted and
partially denied the Bullion Traders’ motion for summary judgment and partially
granted and partially denied the Commissioner’s motion to dismiss. The district
court concluded part of Chapter 80G violated the dormant Commerce Clause but
held the remainder of Chapter 80G withstood the Bullion Traders’ constitutional
challenges. The district court determined the unconstitutional sections of Chapter
80G were severable from the valid provisions and thus upheld those valid provisions.
The Bullion Traders appeal, arguing the district court should have found the
entirety of Chapter 80G unconstitutional. Particularly, the Bullion Traders argue
Chapter 80G’s registration scheme and surety bond requirement are extraterritorial
and excessively burden interstate commerce and that those provisions are
inseverable from the remainder of Chapter 80G.
After the parties briefed and argued this appeal, the Governor of Minnesota
signed 2022 Minn. Sess. Law Serv. ch. 75 (H.F. 4030) into law, which took effect
on August 1, 2022, and substantially amended Chapter 80G. We requested and
received supplemental briefing from the parties regarding the impact of H.F. 4030
on this appeal. The Bullion Traders maintain their argument that Chapter 80G is
extraterritorial and excessively burdens interstate commerce, and the Commissioner
maintains her defense that Chapter 80G only regulates conduct connected to
Minnesota and does not excessively burden interstate commerce.
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Chapter 80G as amended by H.F. 4030 regulates “dealers” and their
“Minnesota transactions.” A “dealer” is “any person who buys, sells, solicits, or
markets bullion products or investments in bullion products to consumers and
conducts Minnesota transactions.”1 Minn. Stat. § 80G.01, subd. 3(a). A “Minnesota
transaction” is a “bullion product transaction” made:
(1) by a dealer that is incorporated, registered, domiciled, or otherwise
located in Minnesota;
(2) by a dealer representative at a location in Minnesota;
(3) between a dealer and a consumer who lives in Minnesota; or
(4) between a dealer and a Minnesota consumer when the transaction
involves:
(i) delivering or shipping a bullion product to an address in
Minnesota;
(ii) delivering to or shipping from a precious metal depository on
behalf of a Minnesota resident; or
(iii) making payment to a consumer or receiving a payment from
a consumer at an address in Minnesota, unless the transaction
occurs when the consumer is at a business location outside of
Minnesota.
Id. § 80G.01, subd. 5a.
“It is unlawful for a dealer or dealer representative to conduct a Minnesota
transaction without being registered by the [C]ommissioner[.]” Minn. Stat.
§ 80G.02, subd. 1. A dealer must apply to register within forty-five days after
conducting at least $25,000 in Minnesota transactions between July 1 and the
following June 30 of any one-year period. Id. Dealers must annually renew their
registration. Id. § 80G.02, subds. 1, 2. A dealer who conducts bullion transactions
without being properly registered is guilty of a misdemeanor. Id. § 80G.08.
1
The statute provides several exceptions to the definition not significant to this
appeal. See Minn. Stat. § 80G.01, subd. 3(b).
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A dealer must also maintain a surety bond. Id. § 80G.06, subd. 1. The amount
of the surety bond required is based on the amount of Minnesota transactions the
dealer conducted twelve months before registration or renewal. Id. The minimum
amount of the surety bond is $25,000 and is triggered after a dealer conducts $25,000
worth of Minnesota transactions. See id. The statute also prohibits dealers from
employing certain sales practices while conducting a Minnesota transaction. See id.
§ 80G.07.
The Commissioner has various civil enforcement powers under Chapter 80G.
If the Commissioner determines a dealer has violated the statute, the Commissioner
may institute a civil action; issue an order directing the dealer to comply with the
statute; or issue an order denying, suspending, revoking, or conditioning the
registration of the dealer. Id. § 80G.10, subds. 1, 4(a). If the Commissioner prevails
in a civil action against a dealer, the court may issue several different forms of relief
including a permanent injunction, an asset freeze, an order for the Commissioner to
take charge of the dealer’s property, or a civil penalty up to $10,000 for each
violation. Id. § 80G.10, subd. 2.
The Bullion Dealers argue Chapter 80G as amended by H.F. 4030 suffers the
same constitutional ill as its predecessor—it violates the dormant Commerce Clause.
We agree Chapter 80G, even as amended, is unconstitutional.
II. Analysis
The Bullion Traders appeal the district court’s partial grant of the
Commissioner’s motion to dismiss and the district court’s partial denial of the
Bullion Traders’ motion for summary judgment. We review both rulings de novo.
See Wheeler v. City of Searcy, 14 F.4th 843, 851 (8th Cir. 2021) (summary
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judgment); Onyiah v. St. Cloud State Univ., 5 F.4th 926, 929 (8th Cir. 2021) (motion
to dismiss).
A. Jurisdiction
Before we address the merits of the Bullion Traders’ appeal, we must ensure
we have jurisdiction over this appeal. “We must consider our own jurisdiction ‘even
if the parties concede the issue,’” United States v. O’Laughlin, 31 F.4th 1042, 1043
(8th Cir. 2022) (quoting Thomas v. United Steelworkers Loc. 1938, 743 F.3d 1134,
1139 (8th Cir. 2014)), as they do here. 2
Article III of the Constitution limits our jurisdiction to “Cases” and
“Controversies.” See U.S. Const. art. III, § 2, cl. 1. This means that for jurisdiction
to continue through an appeal, “an ongoing dispute capable of judicial resolution
must endure throughout all stages of federal judicial proceedings, trial and
appellate.” Cardiovascular Sys., Inc. v. Cardio Flow, Inc., 37 F.4th 1357, 1361 (8th
Cir. 2022) (cleaned up). A question of whether a dispute is moot, depriving a court
of jurisdiction, “is raised by the revision of [a law] that bec[omes] effective while
the case [i]s pending in the Court of Appeals.” City of Mesquite v. Aladdin’s Castle,
Inc., 455 U.S. 283, 288 (1982). We therefore must determine whether H.F. 4030
has left this appeal without an “ongoing dispute capable of judicial resolution.”
Cardiovascular Sys., 37 F.4th at 1361 (cleaned up).
The Supreme Court has previously dismissed appeals for mootness where,
like here, “a challenged statute . . . is . . . significantly amended pending review, and
the only relief sought is prospective[.]” Northeastern Fla. Chapter of the Associated
Gen. Contractors of Am. v. City of Jacksonville, 508 U.S. 656, 669 (1993)
(O’Connor, J., dissenting); see, e.g., Princeton Univ. v. Schmid, 455 U.S. 100, 103
(1982) (dismissing as moot a challenge to a university’s regulations where “the
2
The Commissioner argues some of the Bullion Traders’ arguments are
mooted by H.F. 4030, but she does not argue the appeal itself is moot.
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University substantially amended [the] regulations”). The Court has indicated,
however, that an amended statute does not render an appeal moot where the amended
statute “is sufficiently similar” to the original statute so “that it is permissible to say
that the challenged conduct continues.” Northeastern Fla., 508 U.S. at 662 n.3;
accord Rosenstiel v. Rodriguez, 101 F.3d 1544, 1548 (8th Cir. 1996).
Here, while some of the language in Chapter 80G on which the district court
based its analysis was altered by H.F. 4030, the conduct which the Bullion Traders
originally challenged continues. The Bullion Traders make the same general
argument now as they did before H.F. 4030: Chapter 80G unconstitutionally
prohibits dealers from engaging in transactions wholly outside of Minnesota without
registering with the Commissioner and complying with Minnesota regulations.
Thus, while H.F. 4030 changed much about Chapter 80G, it did not materially
change the conduct about which the Bullion Traders complain. Accordingly, we
conclude H.F. 4030 does not deprive us of jurisdiction to decide this appeal.
B. Dormant Commerce Clause
The Commerce Clause grants Congress the power “[t]o regulate Commerce
. . . among the several States[.]” U.S. Const. art. I, § 8, cl. 3. The Supreme Court
has held the Commerce Clause gives Congress exclusive legislative jurisdiction over
interstate commerce, meaning states may not enact laws that “unduly restrict
interstate commerce.” Tenn. Wine & Spirits Retailers Ass’n v. Thomas, 139 S. Ct.
2449, 2459 (2019); accord Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824). This
restriction on the states is commonly referred to as the “dormant Commerce Clause.”
Tenn. Wine & Spirits, 139 S. Ct. at 2459.
A state statute violates the dormant Commerce Clause if it: (1) “clearly
discriminates against interstate commerce in favor of in-state commerce,” (2)
“imposes a burden on interstate commerce that outweighs any benefits received,” or
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(3) “has the practical effect of extraterritorial control on interstate commerce.”3
Grand River Enters. Six Nations, Ltd. v. Beebe, 574 F.3d 929, 942 (8th Cir. 2009).
The Bullion Traders assert the registration and surety bond provisions in Chapter
80G violate the dormant Commerce Clause in the latter two ways—by imposing an
excessive burden on interstate commerce and by having the practical effect of
extraterritorial control. We agree Chapter 80G unconstitutionally exerts
extraterritorial control.
1. Extraterritoriality
“[T]he ‘Commerce Clause . . . precludes the application of a state statute to
commerce that takes place wholly outside of the State’s borders, whether or not the
commerce has effects within the State[.]’” Healy v. Beer Inst., Inc., 491 U.S. 324,
336 (1989) (ellipses in original) (quoting Edgar v. MITE Corp., 457 U.S. 624, 642–
43 (1982) (plurality opinion)). A statute directly controlling wholly out-of-state
commerce “is invalid regardless of whether the statute’s extraterritorial reach was
intended by the legislature.” Id. Specifically, “no State may force an out-of-state
merchant to seek regulatory approval in one State before undertaking a transaction
in another.” Id. at 337.
Chapter 80G’s registration scheme does exactly what Healy forbids—it
applies Minnesota law to commerce wholly outside of Minnesota. The statute
prohibits “a dealer or dealer representative [from] conduct[ing] a Minnesota
transaction without being registered by the [C]ommissioner[.]” Minn. Stat.
§ 80G.02, subd. 1. While on its face this provision does not appear to regulate out-
of-state commerce, a closer look at the definition of “Minnesota transaction” reveals
an extraterritorial effect. A Minnesota transaction includes a bullion product
transaction conducted “between a dealer and a consumer who lives in Minnesota[.]”
3
We do not address or opine on whether this case could also be analyzed under
the equal sovereignty principle articulated in Franchise Tax Bd. of Cal. v. Hyatt, 139
S. Ct. 1485, 1497 (2019), Shelby Cnty. v. Holder, 570 U.S. 529, 544 (2013), and
Northwest Austin Mun. Util. Dist. No. One v. Holder, 557 U.S. 193, 203 (2009).
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Id. § 80G.01, subd. 5a(3). A “dealer” includes any person (with exceptions),
including an out-of-state person, “who buys, sells, solicits, or markets bullion
products or investments in bullion products to consumers and conducts Minnesota
transactions.” Id. § 80G.01, subd. 3(a). Thus, under a plain reading of the statutory
scheme, a Minnesota transaction includes a transaction anywhere in the world
between a bullion trader and a Minnesota resident. A bullion trader could therefore
become subject to and violate Minnesota law without conducting a single transaction
in Minnesota.
For example, Chapter 80G would require a Las Vegas bullion dealer to
register with the Commissioner after making one $25,000 sale to a Minnesota
resident in Las Vegas. See Minn. Stat. § 80G.01, subds. 3(a), 5a(1); id. § 80G.02,
subd. 1. If that dealer fails to register with the Commissioner within forty-five days
after that transaction, the dealer would be prohibited from making another bullion
transaction with a Minnesota resident in Las Vegas. See id. § 80G.02, subd. 1. Thus,
a dealer who has never set foot or conducted business in Minnesota could violate
Chapter 80G by making a wholly out-of-state transaction without the
Commissioner’s approval. In other words, Chapter 80G would require “an out-of-
state merchant to seek regulatory approval in one State before undertaking a
transaction in another.” Healy, 491 U.S. at 337.
Chapter 80G’s application to out-of-state dealers is not the only suspect
operation of the chapter. Chapter 80G also earmarks Minnesota dealers—individual
and corporate—and regulates them and their transactions wherever they might go.
A “Minnesota transaction” includes a bullion product transaction conducted “by a
dealer that is incorporated, registered, domiciled, or otherwise located in
Minnesota.” Minn. Stat. § 80G.01, subd. 5a(1). Thus, an in-state dealer conducting
a bullion product transaction is always conducting a “Minnesota transaction,”
wherever the dealer might be.
The Commissioner argues that by domiciling in Minnesota, dealers inure the
benefits of Minnesota law and thus subject themselves to Minnesota regulation. But
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while Minnesota residents certainly subject themselves to certain obligations by
residing in Minnesota, this does not give the State carte blanche to regulate all
conduct of residents regardless of where it occurs.
We find persuasive our sister circuit’s reasoning in Midwest Title Loans, Inc.
v. Mills, 593 F.3d 660 (7th Cir. 2010). In that case, an Indiana statute deemed title
loan transactions to have occurred in Indiana—and thus be subject to Indiana’s loan
laws—if a resident of Indiana was part of the transaction and if the creditor had
advertised or solicited business in Indiana, regardless of where the transaction took
place. Id. at 662. The Seventh Circuit held the statute was extraterritorial, reasoning,
“To allow Indiana to apply its law against title loans when its residents transact in a
different state that has a different law would be arbitrarily to exalt the public policy
of one state over that of another.” Id. at 667–68. The same could be said here. To
allow Minnesota to apply its bullion regulatory scheme to transactions its residents
conduct wholly in South Dakota, South Carolina, or South Korea would be to
“arbitrarily [] exalt the public policy” of Minnesota over those jurisdictions. Id.The Commissioner asserts that Minnesota has an interest in regulating out-of-
state transactions involving Minnesota residents to protect Minnesota consumers and
to reduce litigation related to bullion transactions in Minnesota courts. But as the
Seventh Circuit explained when rejecting similar arguments, a State’s interest in a
statute controlling out-of-state commerce—“however well intentioned and
genuinely beneficial to the state imposing it”—does not save the extraterritorial
statute. Id. at 666, 668.
The Commissioner also relies on caselaw from our circuit and our sister circuit
in which the courts upheld laws that relied in part on out-of-state transactions to
calculate in-state obligations. See Grand River, 574 F.3d at 933–34, 941–44; VIZIO,
Inc. v. Klee, 886 F.3d 249, 255–57 (2d Cir. 2018). We agree that certain in-state
obligations, such as a registration fee for traders doing business in Minnesota, even
when calculated considering out-of-state transactions, do not control out-of-state
commerce. See generally Grand River, 574 F.3d at 943–44; VIZIO, 886 F.3d at
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255–57. However, Chapter 80G does not merely burden in-state dealers with a
monetary obligation that considers both in-state and out-of-state transactions.
Rather, it prohibits an in-state dealer who meets the $25,000 threshold from
conducting any bullion transaction, including out-of-state transactions, without first
registering with the Commissioner. See Minn. Stat. § 80G.02, subd. 1. While
Minnesota certainly has an interest in requiring dealers to register before doing
business in Minnesota, such interest does not allow Minnesota to pin its law onto its
in-state dealers and their transactions wherever they travel. See Midwest Title Loans,
593 F.3d at 668. Such a scheme unconstitutionally controls wholly out-of-state
commerce.
The surety bond requirement does not fare any better. The requirement that
dealers maintain a surety bond is triggered by “Minnesota transactions,” which, as
discussed, includes bullion product transactions involving Minnesota residents
regardless of where the transaction takes place. See Minn. Stat. §§ 80G.06 and
80G.01, subd. 5a. Thus, a person located in Las Vegas could become a “dealer” and
subject to Minnesota’s surety bond requirement by conducting one $25,000
transaction in Las Vegas with a Minnesota resident. See id. §§ 80G.06 and 80G.01,
subds. 3(a), 5a. In that case, Chapter 80G’s surety bond requirement could apply to
a Nevadan—unbeknownst to him or her—who has never set foot in Minnesota nor
conducted any business there. Minnesota “has no power to project its legislation
into” other states in such a way. 4 Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 521
(1935).
4
Because we find Chapter 80G unconstitutional under the doctrine of
extraterritoriality, it is unnecessary for us to determine whether Chapter 80G also
imposes an undue burden on interstate commerce. See generally Pike v. Bruce
Church, Inc., 397 U.S. 137, 142 (1970).
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III. Conclusion
For the reasons stated herein, we reverse the district court’s partial grant of
the Commissioner’s motion to dismiss and the district court’s partial denial of the
Bullion Traders’ motion for summary judgment. On remand, we leave to the district
court to decide in the first instance whether the extraterritorial provisions of Chapter
80G, as amended, are severable from the remainder of the statute.
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