The Supreme Court Considers a Case Involving the Dormant Commerce Clause, and the Balance of Federal and State Power:
How Will the New Roberts Court Rule In This Area?

By VIKRAM DAVID AMAR

Friday, Jan. 05, 2007

Read more about the case discussed in this column, United Haulers Ass'n, Inc. v. Oneida-Herkimer Solid Waste Management Auth., including the questions presented, the merits briefs, the docket, and related information at FindLaw's Supreme Court Center. Ed.

When it resumes oral arguments next week, the Supreme Court will take up an interesting case involving the so-called "dormant Commerce Clause" doctrine. The doctrine - less abstruse than it sounds - is one of the legal mechanisms used to determine the boundaries of federal and state power in our constitutional system.

Background: The Dormant Commerce Clause's Prohibition on Protectionism

Most of the time, when the Commerce Clause of the U.S. Constitution - the provision that says Congress may regulate "commerce among the several states" -- is at issue, the legal question involved is whether Congress in fact had the power under that Clause to enact a particular contested federal statute.

(Examples of disputed federal Commerce Clause enactments that have reached the High Court over the past dozen years include an attempt to criminalize the possession of guns near schools, in United States v. Lopez; an attempt to make gender-motivated violence a federal tort, in United States v. Morrison; and a law by which the federal government regulates all marijuana possession and use, including allegedly medicinal use, in Gonzales v. Raich.)

The "dormant" Commerce Clause idea, however, is a bit different. In a dormant Commerce Clause dispute, Congress hasn't passed any law at all; the question is whether states and localities are prevented from passing their own laws on a given subject, simply because the Commerce Clause gives the federal government power to regulate the national economy.

(In legal parlance, the question is whether federal power in the Constitution over interstate commerce preempts certain state or local regulation over the topic.)

In general, the fact that Congress can regulate an activity because it falls within or substantially affects interstate commerce does not mean that state and local governments are constitutionally preempted from regulating that same activity. That is, the Constitution itself does not ordinarily preempt state and local regulation of activities that are interstate enough such that the Commerce Clause allows Congress to reach them too.

So, for example, the fact that Congress can (and does) regulate private workplaces under the Commerce Clause does not prevent, or preempt, states and localities from regulating those workplace activities as well, so long as the state or local laws do not interfere with the federal regulations.

But there is one class of state or local laws that the Supreme Court has held is ordinarily preempted by the presence of the federal Commerce Clause - state and local laws that, on their face or in their obvious effect, discriminate in favor of local economic activity, and against out-of-state economic actors. Such protectionist measures, designed to insulate local economic interests from interstate competition, generally run afoul of the Constitution itself.

So, for example, suppose there is a state law that regulates the price of milk produced by out-of-state companies, so that it cannot be sold at a price lower than milk produced in-state. That law would be viewed as impermissibly protectionist due to its favorable treatment of in-state milk producers.

Or suppose there is a city ordinance that requires all milk sold in a city to have been pasteurized within five miles of the city. Such an ordinance impermissibly discriminates against milk that is produced and pasteurized in other states, in violation of the anti-protectionist dormant Commerce Clause principle.

How the United Haulers Case Next Week Implicates the Dormant Commerce Clause Idea

That's where next week's case, United Haulers v. Oneida-Herkimer Solid Waste Management Authority, comes in. County regulations in New York require that all solid wastes and recyclables generated within Oneida and Herkimer counties (located upstate) must be delivered to one of several waste processing facilities owned by the Oneida-Herkimer Solid Waste Management Authority, a municipal corporation.

The plaintiff challenged these regulations, arguing that these ordinances impermissibly discriminate against interstate commerce by requiring garbage delivery to an in-state facility -- thus necessarily prohibiting the use of facilities outside the state, and thereby diminishing the interstate trade in waste disposal services.

A Supreme Court precedent was arguably directly on point: A decade ago, in C & A Carbone, Inc. v. Town of Clarkstown, the Court invalidated a seemingly similar so-called "flow control" town ordinance because it had "require[d] that all solid waste be processed at a designated [privately-owned] transfer station before leaving the municipality." The Court in Carbone reasoned that the ordinance discriminated against interstate commerce and was invalid under the dormant Commerce Clause doctrine because it "depriv[ed] competitors, including out-of-state firms, of access to a local market."

Despite the Carbone precedent, however, the U.S. Court of Appeals for the Second Circuit in United Haulers found in favor of the counties.

In deciding that Carbone was distinguishable, the Second Circuit relied on the fact that the processing facility in United Haulers was owned and operated by a municipal governmental entity, rather than a private concern. According to the Second Circuit, the dormant Commerce Clause's per se prohibition against "hoard[ing] solid waste," as recognized in Carbone, is inapplicable when the "preferred processing facility" is owned by a public entity

: "[A] municipal flow control law does not discriminate against out-of-state interests in violation of the Commerce Clause when it directs all waste to publicly owned facilities."

The Second Circuit reached this result in part because all of the dormant Commerce Clause cases on which Carbone was based did seem to involve favoritism of local private concerns. After reviewing these cases, the Circuit court concluded that the dormant Commerce Clause's virtually absolute ban on local protectionism is designed to prohibit the favoring of local private business interests, but not intended to eliminate the protection of government-owned and operated services vis-à-vis private enterprise.

The Second Circuit's opinion is not unanimously shared; the Courts of Appeals are split on whether state or local protection of a publicly-owned waste processing facility violates the dormant commerce clause idea, as explicated in Carbone. Thus, the Supreme Court granted review (in legal parlance, certiorari) and will hear the case in its January 2007 calendar.

Was the Public/Private Distinction Rejected in Carbone?

There is a legitimate question whether the Second Circuit's (limited) reading of Carbone is the best one. As the plaintiffs in United Haulers point out, the processing station involved in Carbone had many attributes of publicness: The station was privately built, but built pursuant to an agreement with a town. Under the terms of the agreement, the facility would be purchased by the town itself for the sum of $1 after five years. The town guaranteed that the facility would, during the five years of private ownership, receive enough waste and revenue to operate profitably, by forcing all waste generators to use the facility, and by authorizing the plant to charge a "tipping" fee of $81 per ton, a rate higher than the going market rate. As the Supreme Court in Carbone noted, "[t]he object of this arrangement was to amortize the cost of the station: The town would finance its new facility with the income generated by the tipping fees."

This quasi-public character of the plant in Carbone was, thus, quite apparent from the facts and the record in the case. Indeed, Justice Souter's dissenting opinion (joined by the odd combination of Chief Justice Rehnquist and Justice Blackmun) highlighted the facility's public dimension as grounds for arguing that the law requiring the facility's use should be upheld. According to Justice Souter's dissent, there was no unconstitutional favoritism because "the one proprietor. . . favored [by the flow ordinance] is essentially an agent of the municipal government." Since the ordinance did not result in "the sort of entrepreneurial favoritism [that is, favoritism of one private business over another] we have previously defined and condemned," the dissenters believed, the case should have come out the other way.

And yet, this line of reasoning did not move the majority in Carbone to change its mind, or even respond to the dissent's reasoning directly. There is thus some argument to be made that the public/private distinction, raised at least somewhat by the facts and opinions in Carbone, was implicitly rejected by the majority there.

Is A Market Participant Analogy Convincing?

But it's also apparent from the facts and record that the facility in Carbone was, as a technical matter, privately owned and operated for private profit for at least five years. Moreover the majority there never explicitly rejected the dissenters' suggestion that publicly-owned facilities should fare differently under dormant Commerce Clause principles than privately-owned ones. Rather than such a rejection, there was conspicuous silence: The majority (consistent with the opinion style of Justice Kennedy, who wrote for the Court in Carbone) simply never engaged the dissent in a point-counterpoint style back-and-forth.

Certainly, then, the Court today could embrace the Second Circuit's distinction if it wanted to. But should it?

On one hand, perhaps favoring the counties, there are cases in which dormant Commerce Clause principles have been held not to apply when the favoritism of local interests results from a state or city acting as a "market participant" -- that is, a buyer or seller of goods or services.

In one case, White v. Massachusetts Council of Construction Employers, for example, the "market participant exception" to the dormant Commerce Clause idea allowed a city to choose to hire for public works only contractors that used a workforce comprised of at least 50 percent residents of the city. In another case, Reeves, Inc. v. Stake, the Court allowed a cement company owned by the State of South Dakota to charge less to in-state purchasers and more to out-of-state customers. In these and other cases, the Court has held that where the state or city in question is a "market participant," rather than a market regulator, public favoritism of local businesses or citizens is constitutionally permitted.

There are arguments, on the other hand, that the market participant exception analogy might not be fully applicable in United Haulers. True, the government - the Waste Management Authority -- is acting as a market participant in United Haulers by offering waste disposal services for sale. But the government in United Haulers - unlike in the paradigm market-participant-exception cases mentioned above - is also acting as a regulator, forcing private consumers to use only the designated waste treatment facilities. Thus, it is hard to argue that the market participant idea applies with full force.

If the market participant exception reasoning fails, are there other reasons to exempt publicly-owned facilities from the scope of the dormant commerce clause idea? Perhaps.

First off, because there are only certain, narrowly-limited spheres in which the government owns and operates facilities that compete with the private sector, the potential for excessive protectionism and market disruption arising from protection of such facilities is limited. In other words, if we exempt public facility favoritism from the dormant Commerce Clause ban, we need not slide down a slippery slope of allowing all kinds of other local favoritism that drives up costs and disserves consumers across the national economic board.

Second, suppose, as some have argued, the dormant Commerce Clause ban on local protectionism is less about ensuring unfettered national market operations, and more about promoting national political unity and identity If so, then favoritism benefiting public, as opposed to private, local institutions seems less constitutionally offensive.

On this logic, if a state or city treats its private citizens better than out-of-staters, it really is sending a message of exclusion and faction. If it simply treats its own public entities favorably to ensure their continued viability, the message that is sent to the world about inclusion/exclusion seems somewhat different.

Another Way to Think About the Dormant Commerce Clause Idea

For these reasons, the Court in United Haulers could plausibly read Carbone narrowly, and hold that its ban doesn't necessarily apply in the context of publicly-owned facilities.

Here's another possible reason the Court should think carefully before invalidating the Oneida-Herkimer program: Congress can always expressly legislate to allow local favoritism that would otherwise run afoul of the dormant Commerce Clause principles. That is, if Congress explicitly said it wanted to permit favoritism for local publicly-owned waste treatment facilities, then the dormant Commerce Clause problem would dissolve.

It may seem odd that Congress can make a constitutional problem go away, since the Constitution binds even Congress. But in the dormant Commerce Clause setting, what is constitutionally problematic about local favoritism is that is we don't trust the local governments that engage in it. In particular, we don't trust those local entities to fully take into account the interests of people outside their jurisdictions. But if such favoritism has the blessing of the Congress - a national body that represents all the interests in the nation - then the skepticism about that favoritism largely disappears.

Because ultimately it would be up to Congress, then, to allow or disallow local favoritism of the kind at issue in United Haulers, perhaps the Court should ask itself: "What do we think Congress would do if it had time and space on its legislative agenda to take up this issue?"

If the Court viewed the question in this way, it would be acting a bit like an administrative agency, rather than a pure court of constitutional law, in trying to anticipate what result best accords with Congressional values. (Its role would also be similar to the role the Court plays in interpreting federal statutes, rather than the Constitution. As to statutes, the Court recognizes that any errors it makes are ultimately up to Congress to fix if it wants. Here, instead of interpreting specific Congressional text, the Court would be interpreting a broader sense of expected Congressional intent.)

Relevant questions under this perspective would include: What is this Congress' general attitude toward state and local autonomy in general, and in the area of waste management in particular? Are there federal statutes on the books that touch on waste processing that reflect a Congressional attitude about how trustworthy local governments in this realm are? And so on, and so forth.

I don't know exactly what answers these kinds of questions would yield, but I do think these questions make a difference. That is, a Court that views its answer in United Haulers as merely a first stab - a default position, if you will -- in what ultimately is a question for Congress to resolve if it wants to, will generate a different kind of opinion than a Court that thinks only about the constitutional doctrine of the so-called dormant Commerce Clause.


Vikram David Amar is a professor of law at the University of California, Hastings College of Law in San Francisco. He is a 1988 graduate of the Yale Law School, and a former clerk to Justice Harry Blackmun. He is a co-author, along with William Cohen and Jonathan Varat, of a major constitutional law casebook, and a co-author of several volumes of the Wright & Miller treatise on federal practice and procedure. Before teaching, Professor Amar spent a few years at the firm of Gibson, Dunn & Crutcher.

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