Dormant Commerce Clause April 21, 2005

1. Dormant Commerce Clause April 21, 2005

2. Yuck, the Commerce Clause again • The grant of enumerated power “The congress shall have Power … To regulate Commerce with foreign nations, and among the several States, and with the Indian Tribes” • Is this power concurrent or exclusive? • If exclusive, only congress can regulate IC (and those aspects of intra-state commerce that satisfy Lopez). • If concurrent, states can also regulate IC (and intra-state commerce). Con Law I - Manheim

3. Congress’ Power over IC • If congress’ power is concurrent • State law can be preempted by federal law, but otherwise are presumptively valid • If congress’ power is exclusive • State law is precluded whether or not congress legislates • Answer: • Congress’ power over IC is sometimes exclusive and sometimes concurrent • What else would you expect? Con Law I - Manheim

4. A little history doesn’t hurt • Interstate (economic) rivalries • Plagued the Articles of Confederation • States tried (succeeded) to gain economic advantage for their own citizens at expense of other states • States taxed and regulated imports and exports • Annapolis convention called to fix this problem • Constitution • Art. I, § 10: “No state shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports [or] lay any Duty of Tonnage” • Art. I, § 8: Commerce Clause Con Law I - Manheim

5. What’s so good about free trade? • Protectionism creates more costs than benefits • Problem of externalities • Invites retaliation; Balkanization of commerce • Political process cannot cure abuses • In long run, free trade helps all parties • collective AND individual benefits • e.g., NAFTA, WTO • Is this true? • Race to the bottom • Commerce does not outweigh other factors Con Law I - Manheim

6. Working hypothesis • Congress power to regulate IC directly is exclusive • States have no power to directly regulate IC • E.g., the economic aspects of trade (IC qua IC) • Congress’ power to regulate IC indirectly (local matters affecting IC) is concurrent • States can regulate local matters (e.g., health & safety), despite having incidental impact on IC • Unless congress preempts state law • Ex: both congress & states can set food safety stds • States can’t engage in economic protectionism Con Law I - Manheim

7. The “dormant” Commerce Clause • When Congress uses its power under the Com.Cl., it preempts inconsistent state law. • When the commerce power is left unused by Congress (i.e., left “dormant”), • State action is constitutionally precluded if it invades congress’ exclusive power, or if • State action is protectionist (discriminates in favor of in-state commerce over out-state) Con Law I - Manheim

8. The “dormant” Commerce Clause • When Congress uses its power under the Com.Cl., it preempts inconsistent state law. • When the commerce power is left unused by Congress (i.e., left “dormant”), Con Law I - Manheim

9. H.P. Hood v. DuMond (1939) States have police power • Facts: • NY denied permission for Mass. company to build a plant and export milk to Mass. • What is NY regulating? • Health and safety? • Presumptively valid use of state’s police power • Interstate commerce • NY cannot regulate directly • Only congress can directly regulate interstate commerce • Can NY regulate indirectly? • by using police power regulation of health/safety as guise? Not covered Spring 2005 States have no power to regulate interstate commerce per se Con Law I - Manheim

10. H.P. Hood v. DuMond (1939) • When is a state’s use of its police power a disguised regulation of interstate commerce • Clues: • Avowed purpose is to curtail imports/exports (economic protectionism) • Discriminates in favor of in-state business/residents • Connection to health & safety (or other legitimate state interests) is tenuous • Depends upon state’s objective • If to regulate health and safety, consumer protection, etc., then ok, even if IC feels the pinch • If to protect economic interests, then unconst. Not covered Spring 2005 Con Law I - Manheim

11. H.P. Hood v. DuMond (1939) • What is the state’s justification for denying H.P. Hood a permit for new bottling plant? • New plant unnecessary? • What state interest is plausibly at stake? • Lack of legitimate local benefits is indication that state is regulating IC, not health & safety • Promoting state’s own economic interests at expense of out-staters is not a legitimate local interest Not covered Spring 2005 Con Law I - Manheim

12. What if there were no DCC? • States would be free to regulate IC • either directly or indirectly • Unless congress affirmatively preempted • Shift responsibility for protecting national economy from Court to Congress • Can congress overrule a S.Ct. decision holding a DCC violation (or no violation)? authorize state action preempt state action Con Law I - Manheim

13. Cooley v. Bd. of Wardens (1851) • Federal power • Can congress regulate port pilots? • Has it? • State power • Can states regulate port pilots? • Under what power? • Interstate commerce? • Health & Safety? states have no power to regulate IC Con Law I - Manheim

14. Cooley v. Bd. of Wardens (1851) • Federal power • Can congress regulate port pilots? • Has it? • State power • Can states regulate port pilots? • Under what power? • Interstate commerce? • Health & Safety? states have no power to regulate IC Con Law I - Manheim

15. The DCC “Balancing Test” • South Carolina v. Barnwell (1938) • Size & weight limit for trucks on state highways • What power does the state rely on? • Power over IC, which it does not have, or • Power over health & safety, which it does? • Does the S.Car. law discriminate against IC? • Are in-state and out-state trucks treated differently? • Does it depend on source or destination of cargos? • Is this a proper regulation of state highways? • What is the role of federal courts in this analysis? • Can they do a better job than the state legislature? Con Law I - Manheim

16. The DCC “Balancing Test” • Southern Pacific v. Arizona (1945) • Size limit for trains on railroads within state • What power does the state rely on (IC or H/S)? • Does the Arizona law discriminate against IC? • Is the law a proper regulation of railways? • Court focuses on “nature & extent of burden” • Burden on IC imposed by Arizona law • Long trains (commonly used) must decouple • Serious burden on So.Pac. (in economic terms) • Regulation ought to be nationally uniform • probably true generally of instrumentalities of IC Con Law I - Manheim

17. The DCC “Balancing Test” • Southern Pacific v. Arizona (1945) • Serious burden on IC imposed by Arizona law • Local benefit? • Trial court finds “no reasonable relation to safety” • In fact, short trains are more dangerous (number vs length) • Other local benefits? Full employment of engineers? • Role of Court • To balance burdens on IC against local benefits? • If not the court, then who? • Congress • Arizona legislature Con Law I - Manheim

18. The DCC “Balancing Test” • Problems with Balancing • Institutional competence • Consider the evidence adduced in trial court • Institutional legitimacy • Balancing of economics and safety is quintessentially a legislative role • Which weighs more? • Added cost to So.Pac. in transporting goods, or • Health & Safety costs to Arizona? • Scalia: “incommensurate interests” • Easy case if local interests are “illusory” (weigh 0) Con Law I - Manheim

19. Discriminatory State Laws • Rule: • Laws that discriminate against IC are invalid • unless no “non-discriminatory alternatives” • Justification for Rule • Historical basis for non-discrimination principle • Courts are more adept at fereting out discrimi-nation than balancing • Types of discrimination • Facial discrimination (intentional) • Discriminatory effect (intentional/unintentional) Con Law I - Manheim

20. City of Philadelphia v. NJ (1978) • Ban on garbage imports • Questions: • Is garbage (an article of) commerce? • What is the local benefit obtained? • conservation of scarce landfill resources • What is the burden imposed on IC? • increased cost of disposal for Phil. residents • How does NJ balance the benefits & burdens? • Externalizes cost of conservation • Discrimination (econ. protect- ionism) presumptively invalid Con Law I - Manheim

21. City of Philadelphia v. NJ (1978) • Discrimination (economic protect- ionism) is presumptively invalid • but not conclusively invalid • Can NJ protect scarce resources without discriminating against IC? • raise the cost to everyone • Is that fair? Why doesn’t PA have own dumps? • Internalizing benefits and externalizing costs is always politically expedient • and not always remediable by legislature Con Law I - Manheim

22. Facial Discrimination • Hughes v. Oklahoma (1979) • OK bans interstate shipment of local minnows • Strict scrutiny applied • Legitimate local purpose: conservation • “unavailability of nondiscrim-inatory alternatives” • Since conservation can be accomplished by neutral means, this law is protectionist & invalid Con Law I - Manheim

23. Facial Neutrality • Hunt v. WA Apple Com’n (1977) • N.Car. law requires all closed containers of apples to bear USDA grade, and no other • Rationale: • Consumer protection measure to reduce confusion • Is this plausible? NB:applies only to closed containers • Is the S.Car. law discriminatory? • No, treats all apples the same, irrespective of origin • Yes, leveling removes WA competitive advantage • benefiting local apple industry • Non-discriminatory alternatives available? • Facially neutral with necessary discrim. effect intentional discrimination Con Law I - Manheim

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25. Facial Neutrality • Exxon Corporation v. MD (1978) • MD law prohibits refinery-owned retail gas stations • Discriminatory? • On face? No, statute draws no distinction between in-state and out-state refineries • In effect? No MD refineries; all out-state and all affected by law • Necessarily discriminatory? • Burden falls only on out-state companies • Benefits flow to in-state and out-state companies (independent gas stations) But see Blackmun, J. • DCC prohibits discrimination against IC not interstate companies • Can’t tell whether law will ultimately have discriminatory effect • What if law is neither facially nor necessarily discriminatory, but just turns out that way? • Doesn’t matter; not discriminatory for DCC purposes unintentional discrimination Con Law I - Manheim

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27. Unintentional Discrimination • Minn. v. Clover Leaf Creamery(1981) • Prohibition on plastic nonrecyclable containers • Stated purpose: health & safety (solid waste mgmt) • DC finds: economic protectionism • Discrimination against out-state commerce? • Neutral: • Dairy industry; presumably can adjust easily • Losers: • Plastics industry (slightly, only wrt nonrecyclable bottles) • Winners: • Cardboard industry; a major Minnesota product • But out-state pulpwood firms can pick up slack DCC protects I/S commerce not industries Test: Does law necessarily cause a shift in business from out-state to in-state firms? Con Law I - Manheim

28. Standard of Review • Dean Milk v. Madison(1951) • City ordinance requires milk pasteurization within 5 miles of city and production within 25 miles • Is the law discriminatory (intentional or unintentional)? • Discrimination against IC is protectionist unless no non-discriminatory alternative is available to achieve a legitimate local interest • What legitimate local interest at stake? • Healthy milk, verified by inspection • Does it require 5/25 mile restrictions? • Uniform inspection available Con Law I - Manheim

29. Rule in DCC cases Con Law I - Manheim

30. Another Look at Balancing • State directly regulates IC – per se invalid • State intentionally discriminates against IC – strict scrutiny • All other state laws affecting IC – ad hoc balancing • Burdens on IC vs. • Benefits to state especially problematic for channels/instrumentalities especially problematic when local benefits are illusory Con Law I - Manheim

31. Bibb v. Navajo Freight (1959) • Illinois law specifying mudflap size/shape Con Law I - Manheim

32. Bibb v. Navajo Freight (1959) • Illinois law specifying mudflap size/shape • Imposed significant burden on interstate shipping, especially “interline” operations • Who should solve this problem? • State legislature? • Congress? • Courts? • Holding: • At least where burden on IC is substantial, and • Local benefits are slight • Courts will strike state law under DCC Note: this is tantamount to declaring a consti-tutional “right” to free interstate trade Con Law I - Manheim

33. Kassel v. Cons Freightways (1981) • Are twin trailers as safe as semis? • Who decides? Con Law I - Manheim

34. Kassel v. Cons Freightways (1981) • Are twin trailers as safe as semis? • Who decides? Con Law I - Manheim

35. Kassel v. Cons Freightways (1981) • Are twin trailers as safe as semis? • Who decides? shouldn’t a federal judge be making these decisions, instead of a legislat. body? Con Law I - Manheim

36. Kassel v. Cons Freightways (1981) • Balancing in disrepute • 4 Justices found Iowa law invalid per balacing • 2 members concurrence based on discriminat’n • Brennan/Marshall approach • any balancing must be done per RB test • burdens weighed against benefits the state sought to achieve • where law discloses no local benefits, we may presume it was enacted for protectionist purposes • where actual benefits are illusory. • Scalia concurrence in CTS Corp(p.320) Con Law I - Manheim

37. Extra-Territorial Effect • CTS Corp v. Dynamics Corp (1987) • Indiana anti-hostile takeover statute • regulates tender offers for Indiana corporations • most tender offers originate from out of Indiana • does law regulate out-of-state commercial activity? • Rule: State laws cannot have direct extra-territorial effect (operate out-of-state) • Can’t regulate foreign economic activity • Baldwin v. G. A. F. Seelig: New York law regulates wholesale prices of milk purchased in-state. Ok • Also prohibits retail sale of imported milk unless wholesale price paid (out-of-state) is as high as NY Con Law I - Manheim

38. Extra-Territorial Effect • Rule: State laws cannot have direct extra-territorial effect (operate out-of-state) • Can’t regulate foreign economic activity • Edgar v. MITE Corp (1982): Illinois reviewed sale of stock occurring out-of-state to see if met state stds. • Brown-Forman v. NY (1986); Healy v. Beer (1989): Most-favored-nation trading status: Could not sell in-state for more than lowest price sold out-of-state. • Can regulate in-state economic activity, even w/ incidental impact out-of-state • E.g. foreign goods sold in-state must meet standards • Tender offers (wherever made) must meet standards Con Law I - Manheim

39. Bringing it all Home • Pike v. Bruce Church (1970) • Arizona law requires Ariz. cantaloupes to be packed in-state • Discriminatory? • Facial: Ariz. growers may need to build plants • Only in-state firms burdened; not a DCC problem • Effect: enhance reputation of Ariz. growers • Yes, but doesn’t affect mix of IC • Burdensome? • Yes, but all police power regs impose burden • Is the burden justified? Con Law I - Manheim

40. Pike Test • Where the statute regulates evenhandedly • to effectuate a legitimate local public interest, • and its effects on interstate commerce are only incidental, • it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.” discrimination against IC exercise of police not commerce power direct vs. indirect effect balancing of interests - even indirect effects can be too great Con Law I - Manheim

41. Pike Test • Where the statute regulates evenhandedly • to effectuate a legitimate local public interest, • and its effects on interstate commerce are only incidental, • it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.” If a legitimate local purpose is found, then the question becomes one of degree … can the local interst be promoted as well with a lesser impact on IC? are these questions judicial or legislative in character? Con Law I - Manheim