Dormant Commerce Clause
In challenging a law because it violates the dormant Commerce Clause,
the challenger argues that while the federal government has been silent
in the area (meaning that the state law or municipal ordinance is not
preempted by federal law), the state law (or municipal ordinance)
places an
unreasonable burden on out-of-state or interstate commerce and
therefore violates the
dormant Commerce Clause. These cases are analyzed in two different ways
depending on the type of burden placed on interstate commerce. Laws
that discriminate against out-of-state commerce on their face or in
their effect are subject to
very rigorous review whereas laws that burden interstate commerce in a
nondiscriminatory way are subject to a balancing test often referred to
as the Pike balancing test
from the case of Pike v. Bruce
Church, Inc. The very rigorous or strict test
requires that the government prove that the law serves a
legitimate
local purpose and
that the purpose cannot be
adequately served by reasonable nondiscriminatory alternative means
(often described by the Court as a standard of virtual per se
invalidity because of how difficult it is to satisfy). Under the less
strict balancing test, the Court
weighs
the
burdens on interstate commerce as against the local benefits. Each
state or local law that burdens out-of-state commerce in a
significant way is reviewed under one of the two tests unless the state
is acting as a market participant rather than a market regulator. In
choosing between the two tests, the challenger is always trying to
argue, if at all possible, that the strict test applies, but must be
prepared to argue, in the alternative, that the law is unconstitutional
even if the balancing test applies. By contrast, the government is
always trying to argue that the balancing test applies, but must be
prepared to argue, in the alternative, that the law is constitutional
even if the strict test applies.
A. Discrimination Against Interstate Commerce. Two forms of
discrimination justify the application of the strict test: (1) if the
state
or local law discriminates against out-of-state commerce on its face
(such as
by expressly favoring local businesses as in Dean Milk and C & A Carbone, Inc. v. Clarkstown
or hoarding resources for local residents as in Hughes v. Oklahoma and Philadelphia v. New Jersey), or
(2) if the state or local law, while not discriminatory on its face,
nevertheless has a discriminatory effect on out-of-state commerce as
demonstrated by extrinsic evidence (as in Hunt
v.
Washington State Apple Advertising Commission and Bacchus Imports, LTD. v. Dias). If
either of these two types of discrimination exists, the
presumption
of validity normally afforded to such laws disappears, and the
burden of proof shifts to the state or locality to demonstrate that it
has a
legitimate objective and
that it cannot accomplish that objective by alternative means. Under
this test, an
economic protectionist purpose
(to benefit local business at the expense of out-of-state business) is
not a legitimate objective. In addition, under this strict test,
means that discriminate
against interstate commerce may only be used if there are no other
means available to achieve the government's purpose. (Dean Milk v. Madison - alternative
means existed; Maine v. Taylor - alternatives
means did not exist). While laws that discriminate against
interstate commerce on their face are usually easy to identify, laws
that discriminate against interstate commerce in their effect are
harder to identify. In such cases, the challenger will argue that
the discriminatory effect is sufficient to justify applying the strict
test and the government will argue that the discriminatory effect is
insufficient to justify applying the strict test so that the less
strict balancing test should apply. Both parties must also be prepared
to argue in the alternative, if at all possible. The challenger will
also argue that the law is unconsitutional under the balancing test and
the government will also argue that the law is constitutional under the
strict test.
In a recent case, United Haulers
Ass’n v. Oneida-Herkimer Solid Waste
Management Authority,
the Court clarified the meaning of laws
that
discriminate against interstate commerce. It said that a law
that favored a government entity performing a traditional government
activty, waste processing, and discriminated against all in-state
private waste processors as well as all out-of-state waste processors,
did not qualify as a law that
discriminates against out-of-state commerce under the dormant Commerce
Clause. Because the only discrimination
was in favor of a government entity, the Court applied the Pike
balancing test applicable to laws that burden interstate commerce, but
do not discriminate against such commerce rather than the strict test.
B. Balancing Test. Even if the state or local
law does
not discriminate against out-of-state commerce, it can be challenged
under the dormant Commerce Clause if it imposes a significant burden on
interstate commerce. In evaluating the
constitutionality of such a law, the Court will apply a balancing test:
“Where the statute regulates even-handedly 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.” This test is called the Pike balancing test because it
derives from the case of Pike v.
Bruce Church, Inc. Under this balancing test, a presumption of
validity attaches to the
state statute (or municipal ordinance). It will be upheld even
though it burdens interstate commerce so long as the burden it imposes
is not excessive in relation to its value as a health, safety,
environmental protection or consumer protection measure. To win, the
challenger
must show the law burdens interstate commerce in a significant way and
the benefits of the law are not sufficient to outweigh the burdens. For
examples of this balancing approach see Bibb
v. Navajo Freight
Lines, Inc. and Kassel
v.
Consolidated Freightways Corp. In both of these cases, the
Court concluded that the law had no safety benefits at all and so the
balancing test was easy to apply since all the weight on the scale was
on the burden side, sharply tipping the scale in the challenger's
favor. It is less clear how a case would be resolved if there was some
burden, but also some benefit from the law.
C. Economic Protectionism. As Justice Souter stated in Department of Revenue of Kentucky v. Davis,
"The modern law of what has come to be called the dormant Commerce
Clause is driven by concern about 'economic protectionism - that is,
regulatory measures designed to benefit in-state economic interests by
burdening out-of-state competitors.' " If a state or local law is
designed
to achieve some economic benefit for the state or locality in the form
of
hoarding
resources or avoiding economic burdens, the purpose of the law will be
viewed as economic protectionism and this purpose is illegitimate under
the dormant Commerce Clause. Typically, a law that is aimed at
achieving the goal of economic
protectionism will discriminate against out-of-state commerce on its
face
or in its effect. If the law discriminates against out-of-state
commerce, a state or local purpose designed to achieve economic
protectionism will not satisfy the strict test employed to evaluate
such
discriminatory laws
because the law will lack a legitimate objective. In the rare
case that the law is nondiscriminatory, a state or local purpose that
is
designed to hoard resources or avoid economic burdens rather than
sharing them with other states will not be sufficiently weighty under
the balancing test used in such cases and will not outweigh a
substantial burden imposed on interstate commerce. Cases in which laws
are struck
down under the dormant Commerce Clause because they were found to be
motivated by nothing more than economic protectionism include Bacchus
Imports, LTD. v. Dias (state law was discriminatory in its
effect and lacked a legitimate local purpose) and South-Central
Timber v. Wunnicke (state law was discriminatory on its face
and lacked a legitimate local purpose). Frequently, it will not
be clear if the purpose of the law is the illegitimate one of economic
protectionism or some other legitimate purpose such as health, safety,
or consumer protection. In such cases,
the challenger will argue, based on the available evidence, that the
law is designed to accomplish the illegitimate objective of economic
protectionism and the government will argue, based on the available
evidence, that the law is designed to accomplish a legitimate
objective. Since neither party can be certain a court will agree
with its argument, both parties must be prepared to try and argue in
the alternative with the challenger trying to argue, if possible, that
the law is unconstitutional even if it has a legitimate purpose and the
government trying to argue, if possible, that the law is constitutional
even if it has an illegitimate purpose (only possible if the government
can rely on the market participant exception described in D. below).
D. Market Participant Exception. There is also one
additional
argument seen in dormant Commerce Clause cases. It is not an additional
test, but is, instead, a defense that may be available to a state or
locality in
a limited number of cases when the challenger argues that the state or
local law
violates the dormant Commerce Clause. Relying on the market
participant exception, the government may defend itself by arguing that
it is
permitted to engage in protectionist behavior or discriminate against
out-of-state commerce because it is acting as a market participant by
directly engaging in commercial activities rather than by regulating
the
activities of private participants in the market. This exception
permits a state or locality to discriminate against out-of-state
commerce
when it
acts as a market participant, but not when it acts as a market
regulator
(South-Central Timber v. Wunnicke).
The market participant defense is not
limitless and it may not be available if the state is controlling
access to a natural resource, if the state is controlling a market in
which it is not a direct participant (downstream activity), or if the
state is interfering with international commerce. All three of
these factors were present in Wunnicke
and the Court, therefore, rejected the
state's effort to defend its action based on the market participant
exception to the dormant Commerce Clause and found instead that the law
was invalid as a protectionist measure. When the state participates in
a market where it monopolizes the market rather than participating
along with private businesses, it is unlikely that a court will
consider the state to be a market participant within the meaning of the
market participant exception. This is because the premise of the market
participant exception is that the state is only one among a number of
market participants.
E. I want to add a word or two about the relationship between a
preemption argument and a dormant Commerce Clause argument. In
cases where there is no federal law on the subject, obviously there is
no preemption argument, but there could be a dormant Commerce Clause
argument. Where there is a federal statute on point, there may be
a preemption argument and there could also, in the alternative, be a
dormant Commerce Clause claim if interstate commerce is discriminated
against or unduly burdened by the state law being challenged. In
making this claim, the challenger is assuming that the preemption
challenge could fail, and is presenting the court with an alternative
ground of decision in its favor.