                       United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 01-1128
                                    ___________

Steve Johnson, PH.D,                     *
                                         *
                  Appellant,             *
                                         * Appeal from the United States
      v.                                 * District Court for the
                                         * Western District of Arkansas.
Bank of Bentonville,                     *
                                         *
                   Appellee.             *
                                    ___________

                               Submitted: September 10, 2001

                                   Filed: October 4, 2001
                                    ___________

Before BOWMAN, HEANEY and BYE, Circuit Judges.
                          ___________

HEANEY, Circuit Judge.

       Appellant Steve Johnson brings this suit to challenge the constitutionality of
section 731 of the Gramm-Leach-Bliley Financial Modernization Act of 1999 (“section
731"), codified at 12 U.S.C. § 1831u(f). Section 731 overrides the interest rate
limitations mandated by Article 19, Section 13 of the Arkansas State Constitution by
allowing banks chartered in Arkansas to charge the same rate of interest as national
banks operating branches within the state. Johnston contends that by enacting section
731, Congress violated the principles of dual sovereignty by overriding Arkansas’ state
constitution, and exceeded its power under the Commerce Clause of the United States
Constitution. The District Court1 granted the Bank of Bentonville’s motion for
summary judgment and dismissed the complaint. We affirm.

I.    BACKGROUND

      Prior to the enactment of section 731, all banks chartered in Arkansas were
subject to the interest rate constraints contained within Article 19, Section 13, of the
Arkansas State Constitution, as modified by Amendment 60. In contrast, national
banks chartered in states other than Arkansas, but operating branches within Arkansas,
were allowed to charge interest at a rate allowed by the laws of the state where the
bank originated. 12 U.S.C. § 85. As a result, national banks operating branches within
Arkansas were able to charge rates of interest greater than those charged by banks
chartered in Arkansas. It is this discrepancy that led Congress to enact section 731.

      In part, section 731 provides that:

             In the case of any State that has a constitutional provision that sets
      a maximum lawful annual percentage rate of interest on any contract at
      not more than 5 percent above the discount rate for 90-day commercial
      paper in effect at the Federal reserve bank for the Federal reserve district
      in which such State is located . . . upon the establishment in such State of
      a branch of any out-of-State insured depository institution . . . the
      maximum interest rate . . . that may be charged . . . shall be equal to no
      more than the greater of –

               (A) the maximum interest rate . . . that may be charged . . . under
      the constitution or any statute or any other law of the home State of the
      out-of-State insured depository institution establishing any such branch
      . . . ; or


      1
       The Hon. Franklin Waters, United States District Judge for the Western District
of Arkansas.

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             (B) the maximum rate or amount of interest . . . that may be
       charged . . . by a State insured depository institution chartered under the
       laws of such State or a national bank . . . whose main office is located in
       such State.


12 U.S.C. § 1831u(f). In effect, this amendment provides loan pricing parity between
local and national banks by allowing local banks to charge interest rates that are
comparable to those imported by branches of national banks.

II.    DISCUSSION

      Section 731 preempts state law without violating the principles of dual
sovereignty. In Gregory v. Ashcroft, the Supreme Court explained that, pursuant to the
power derived from the Supremacy Clause, “[a]s long as it is acting within the powers
granted it under the Constitution, Congress may impose its will on the States . . . [and]
may legislate in areas traditionally regulated by the States.” 501 U.S. 452, 460 (1991).
The Court also stated that, “if Congress intends to alter the ‘usual constitutional
balance between the States and the Federal Government,’ it must make its intention to
do so ‘unmistakably clear in the language of the statute.’” Id. (citations omitted).
Here, the clear language of section 731 leaves no doubt that Congress intended to
preempt state law.

       Moreover, Congress did not exceed its power under the Commerce Clause by
enacting section 731. The Commerce Clause permits Congress “to regulate those
activities having a substantial relation to interstate commerce, . . . i.e., those activities
that substantially affect interstate commerce.” U.S. v. Morrison, 529 U.S. 598, 609
(2000)(citations omitted). Prior to the enactment of section 731, banks operating within
Arkansas were placed at a competitive disadvantage as compared to national banks
because of their inability to charge equivalent interest rates, thereby affecting the flow



                                            -3-
of currency between Arkansas and other states. It was within Congress’s power under
the Commerce Clause to eliminate this disparity by enacting section 731.

      Accordingly, the judgment is affirmed.

      A true copy.

            Attest:

               CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.




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