Fares Pawn, LLC v. Indiana Department of Financial Institutions, 2014 U.S. App. LEXIS 11813

Background

Saalwaechter owned Fares Pawn LLC in Evansville and applied for an Indiana pawnbroker license in March 2009; DFI denied the application citing concerns about prior activity at the location and his proposed manager’s criminal history.
The location had a long, troubled pawnbroking history (prior straw-licensing issues, investigations involving prior owners and managers), and ownership/transactional relations among sellers and operators (including Tom Carroll and Jeremy Kamuf) were murky.
Saalwaechter initially sought to employ John Jones (experienced manager); DFI later learned Jones had an undisclosed prior felony (and had been untruthful in a prior licensing interview), prompting DFI to condition licensure on Saalwaechter not employing Jones in an MOU.
Director Mills declined to exercise delegated approval and referred the application to the full seven-member board; the board voted to deny the application after hearing concerns about clarity of Saalwaechter’s transactions and his choice of manager.
After administrative challenge and mediation, Saalwaechter signed the MOU (agreeing not to employ Jones) and received a license ~15 months after his application; he then sued under § 1983 alleging a class-of-one Equal Protection violation.
The district court granted summary judgment for defendants; the Seventh Circuit affirmed, concluding Saalwaechter failed to show he was treated differently from similarly situated applicants without a rational basis.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a class-of-one Equal Protection claim exists here	Saalwaechter: DFI singled him out for disparate, irrational treatment in licensing	DFI: decisions had legitimate regulatory reasons and discretionary licensing judgment	Court held: even assuming animus, there is a conceivable rational basis; no viable class-of-one claim succeeded
Whether Saalwaechter identified similarly situated comparators	Saalwaechter: Carroll, Fiechter, and Deal Brothers were treated better despite similar circumstances	DFI: comparators differed materially (timing, prior lies, straw-license history, facts DFI found credible)	Court held: none of the proposed comparators were sufficiently similarly situated for a jury to find unequal treatment without rational basis
Whether DFI’s differential treatment lacked a rational basis	Saalwaechter: denial and board referral were arbitrary and inconsistent (e.g., Carroll got license earlier with Jones listed)	DFI: learned new, adverse facts about Jones in 2009; concerns about straw licensing and messy transactions; valid regulatory purposes justify different treatment	Court held: rational-basis inquiry satisfied — DFI had legitimate, conceivable reasons to act as it did
Whether discretionary/licensing decisions are immune to class-of-one claims (Engquist issue)	Saalwaechter: class-of-one claim permissible in licensing context	DFI: discretionary licensing like employment decisions may be poor fit for class-of-one claims; administrative channels exist	Court held: did not decide broad extension of Engquist but observed licensing discretion and administrative remedies make class-of-one a poor fit; disposition affirmed on rational-basis/comparator grounds

Key Cases Cited

Engquist v. Oregon Dep’t of Agriculture, 553 U.S. 591 (2008) (class-of-one theory is a poor fit in public-employment/discretion contexts)
Village of Willowbrook v. Olech, 528 U.S. 562 (2000) (elements of a class-of-one Equal Protection claim)
Del Marcelle v. Brown County Corp., 680 F.3d 887 (7th Cir. 2012) (en banc) (divided Seventh Circuit en banc treatment of motive in class-of-one claims)
Geinosky v. City of Chicago, 675 F.3d 743 (7th Cir. 2012) (example of arbitrary enforcement forming an equal protection claim)
Bell v. Duperrault, 367 F.3d 703 (7th Cir. 2004) (burden on class-of-one plaintiff to show lack of rational basis in differential treatment)