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Pawn shop owner loses case based on ‘class-of-one’ theory

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An Evansville pawn shop owner couldn’t convince the 7th Circuit Court of Appeals that the state singled him out for disparate treatment without a rational basis when it initially denied his application for a pawnbroking license.

William Saalwaechter, owner of Fares Pawn LLC, applied for a pawnbroking license with the Indiana Department of Financial Institutions. DFI’s director, David Mills, had just started the job when Saalwaecther applied for the license. So instead of making a decision on the application as is allowed under statute, Mills sent the application to the full board for consideration, but it was denied. The agency cited concerns about previous pawnbroking on the property and about his store manager’s criminal history. He eventually received the license after he signed a memorandum of understanding that he would comply with certain conditions, including not employ the store manager in question.

Convinced the license application process should have gone more smoothly, he sued the DFI in federal court alleging it violated the equal protection clause. He argued the state singled him out without a rational basis, the “class-of-one” theory, which rests on the premise that the equal protection clause requires at least a rational reason for the difference to ensure all persons are being treated alike under like circumstances and conditions.

The District Court ruled in favor of the agency.

“We agree with the district court that for each proposed  comparator, either no reasonable jury could conclude that Saalwaechter and the comparator were similarly situated, or there was a rational basis for any differential treatment,” Judge Joel Flaum wrote in Fares Pawn LLC and William K. Saalwaechter v. Indiana Department of Financial Institutions, et al., 13-3240.

The defendants also asked the Circuit Court to extend the U.S. Supreme Court’s holding Engquist v. Oregon Department of Agriculture to Indiana’s pawn-licensing scheme, or at least to Mills’ decision not to exercise delegated authority, both of which the defendants suggest also demand consideration of subjective, discretionary factors.

In Engquist, the Supreme Court held that public employees cannot bring class-of-one claims against their public employers because the theory is a poor fit in the employment context, which involves “discretionary decisionmaking based on a vast array of subjective, individualized assessments.”

The practical problem with allowing class-of-one claims to go forward in the public employment context is … “‘that governments will be forced to defend a multitude of such claims in the first place, and courts will be obliged to sort through them in a search for the proverbial needle in a haystack,’” Judge Joel Flaum wrote, citing Engquist. “Because ‘taking the equal protection route bypasses the administrative and judicial review procedures established to remedy arbitrary official action,’ such a task seems especially wasteful when Indiana already offers an administrative channel to challenge the wrongful denial of license applications.”

“Regardless, having sorted through this haystack and found no needle, the judgment of the district court is affirmed.”
 

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  1. I can understand a 10 yr suspension for drinking and driving and not following the rules,but don't you think the people who compleate their sentences and are trying to be good people of their community,and are on the right path should be able to obtain a drivers license to do as they please.We as a state should encourage good behavior instead of saying well you did all your time but we can't give you a license come on.When is a persons time served than cause from where I'm standing,its still a punishment,when u can't have the freedom to go where ever you want to in car,truck ,motorcycle,maybe their should be better programs for people instead of just throwing them away like daily trash,then expecting them to change because they we in jail or prison for x amount of yrs.Everyone should look around because we all pay each others bills,and keep each other in business..better knowledge equals better community equals better people...just my 2 cents

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