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Challenge to ‘diploma privilege’
reinstated by U.S. Court of Appeals

By Alex De Grand, Legal Writer, State Bar of Wisconsin

July 9, 2009 – A challenge to Wisconsin’s diploma privilege has been remanded to federal district court following the U.S. Seventh Circuit Court of Appeals’ decision in Wiesmueller v. Kosobucki, 08-2527.

Under SCR 40.03, a diploma from an ABA-accredited law school whose curriculum includes the specific study of Wisconsin law is sufficient evidence of competency to practice in Wisconsin without a bar examination.

A class of recent graduates from ABA-accredited schools outside Wisconsin who seek a law license in Wisconsin argued that the privilege infringes on the Commerce Clause because only graduates of the law schools at Marquette and the University of Wisconsin benefit from it.

The Wisconsin Attorney General, defending the diploma privilege, has argued that the privilege is not discriminatory because of its availability to residents of any state who attend a school where Wisconsin law is taught. And if it does have an effect on interstate commerce, it is outweighed by the state’s interest in competent lawyers who know Wisconsin law, the attorney general asserts.

In its opinion, the court of appeals said that the district court’s dismissal of the action left it in “an evidentiary vacuum.” The plaintiffs had been appealing that order issued by U.S. District Judge John Shabaz.

The court indicated that the plaintiffs should build its evidentiary record before the diploma privilege’s effect on interstate commerce can be assessed.

“[S]uppose – a supposition not only consistent with but actually suggested by the scanty record that the plaintiffs were not allowed to amplify – that Wisconsin law is no greater part of the curriculum of the Marquette and Madison law schools than it is of the law schools of Harvard, Yale, Columbus, Virginia, the University of Texas, Notre Dame, the University of Chicago, the University of Oklahoma, and the University of Northern Illinois (which happens to be within a stone’s throw of Wisconsin, as are the three law schools in Minneapolis),” the court wrote.

“That would suggest that the diploma privilege creates an arbitrary distinction between graduates of the two Wisconsin law schools and graduates of other accredited law schools. And it is a distinction that burdens interstate commerce,” the court concluded.

A difficult case

Under Commerce Clause analysis, a court looks to see if a law or regulation is facially, effectually, or purposefully “discriminatory” against out-of-state interests to benefit in-state interests. If it is, the state’s enactment is presumed unconstitutional and can only survive a court’s strict scrutiny with a showing of no other nondiscriminatory means to serve a compelling state interest. If it is not, a reviewing court applies a balancing test weighing the law or regulation’s burden on interstate commerce versus the state's purported interest.

The court acknowledged that there is “no clear line” separating these two types of regulations, and this case illustrates that point.

“On the one hand, the diploma privilege does favor the economic interests of Wisconsin law schools, but on the other hand, it ‘has only indirect effects on interstate commerce and regulates evenhandedly,’ For the privilege is not limited to state residents … nor do Wisconsin law schools admit only Wisconsin residents,” the court wrote.

The court did agree that there is an effect, writing that “[t]he effect of the diploma privilege on the decision where to attend law school is well recognized.” But the court left open the question of whether it is a constitutionally permissible effect.

“The effect on commerce of the discriminatory diploma privilege may be small and, if so, not much would be required to justify it,” the court said. “Our concern is that there may be nothing at all to justify it.”

Is Wisconsin law taught?

One of the arguments in defense of the diploma privilege is that Wisconsin is not discriminating among similar educations. That is, the out-of-school law schools do not offer the instruction in Wisconsin law that UW or Marquette offer. The court expressed skepticism in its order.

“For all that appears, the faculties of the Wisconsin law schools use the same casebooks and other teaching materials used at schools in other states – which is likely, since the authors of casebooks aim at a national market,” the court wrote.

Further, the court remarked, “Marquette and Madison are law schools of national stature, and we can hardly infer without any evidence that they concentrate on educating their students in the law of the state that these law schools happen to be located in rather than prepare them to practice anywhere in the United States.”

The court added that without a bar exam requirement for their graduates, these Wisconsin schools have “less incentive to spend time drilling them on Wisconsin law than the faculty of most law schools in other states would have” to ensure their students’ passage.

Challenging one of the premises of the argument that instruction in Wisconsin law justifies the diploma privilege, the court noted SCR 40.03 does not necessarily require a state-specific legal education.

“The rule merely requires the law schools to offer a rigorous, well-rounded legal education, and it cannot be assumed that such an education must be oriented toward the law of a particular state, even the state in which the school is located,” the court wrote, adding that this interpretation is consistent with the fact that Wisconsin admits lawyers on proof of practice in another state.

Additionally, the court said that the inclusion of the Multistate Professional Responsibility Examination and the Multistate Essay Examination “is a further indication that the state supreme court does not believe that saturation in Wisconsin law is a prerequisite for members of its bar.”

Bar exam is a burden

In its ruling, the court rejected the attorney general’s argument that the bar exam does not impose any special disability on out-of-state law school graduates.

“The amount of preparation required for taking the bar exam with a  good chance of passing it is significant, and, for applicants who prudently enroll in a bar-review course, also costly,” the court held. The court added that applicants who take the bar exam are delayed admission to the profession and they also pay a higher fee for admission than do graduates of UW or Marquette.

Market regulator or participant?

The court noted that the attorney general argued a state may discriminate against interstate commerce when it is acting as a market participant rather than a market regulator. This exception allows states to provide for the welfare of their residents, the court said.

But the court remarked that this argument does not account for Marquette, a private university.

“The state does not connect the diploma privilege to its ownership of the latter school, and how could it since the privilege applies equally to Marquette?” the court wrote.

“The only governmental function that the state claims to be engaged in that bears on this case is regulating the practice of law, and while that is a legitimate government function it is not exempt from scrutiny under the commerce clause,” the court concluded.

Possible remedies

If the diploma privilege is invalidated, the court noted that “unequal treatment can be eliminated without conferring any benefit on the plaintiff that challenged it.” Accordingly, the court said Wisconsin may only require all applicants take the bar exam.

“Leveling down is a permissible form of compliance with a command to end unequal treatment,” the court wrote.

However, the court offered that Wisconsin might also choose “to require all applicants (or perhaps all applicants who had not practiced for a period of time in another state) to take a continuous legal education course in Wisconsin law in lieu of a bar exam.”

Related: Constitutionality of 'diploma privilege' scrutinized in legal challenge

Related: Recording of oral arguments  heard in April before Seventh Circuit