Taming the Dormant Commerce Clause
A latest Supreme Court opinion is sweet news for state climate regulators.
Although the Structure doesn’t say so directly, the Supreme Court has said there are implied limits on state regulations that interfere with interstate commerce.. That is often known as the dormant commerce clause doctrine. State clean energy laws have been bedeviled by challenges based on this doctrine. The Supreme Court has just made it easier for states to fend off those claims.
For instance, consider laws that encourage a state’s utilities to purchase power from renewables. Those laws encourage the development of latest solar and wind in nearby states, while causing coal plants to lose market share and potentially close. Fossil fuel interests challenged laws like this, claiming that states were meddling in affairs outside their territory by taking account of carbon emissions outside their borders. The Court’s latest ruling puts those arguments to rest.
Some background on the brand new case is so as: California voters decided that they didn’t wish to eat pork produced from animals that were inhumanely treated. They adopted an initiative banning the sale of such pork within the state. Nearly all pork is produced outside California, and California is a giant chunk of the national pork market. Since it’s allegedly not possible for pork suppliers to work out which farms produced their meat, the pork industry complained this is able to in effect require all farmers to comply with California’s standards of humane treatment.
The pork industry made two arguments. First, it said the California initiative was unconstitutional due to its “extraterritorial” effect on industry practices. Second, the industry argued California’s interest in humane treatment of animals was outweighed by the industry disruption. That argument was framed by way of what’s called the Pike balancing test, named after a case where the Court called for such balancing.
In an opinion by Justice Gorsuch, nearly all of the Supreme Court voted to uphold the California law. As the bulk said, “While the Structure addresses many weighty issues, the sort of pork chops California merchants may sell isn’t on that list.”
A part of Gorsuch’s opinion had five votes and subsequently is clearly binding law. In other parts of the opinion he spoke for under three or 4 Justices. There have been two concurrences, a dissent joined by 4 Justices, and one other dissent by Justice Kavanaugh alone. All this makes it harder to find out precisely what the Court held. Nevertheless, two points are clear:
First, with the possible exception of Justice Kavanaugh in his lone dissent, not one of the Justices favored the concept that a special rule applies to laws which have an “extraterritorial” effect, and the bulk squarely rejected such a rule. The bulk explained away earlier precedents that looked as if it would support such a rule. Moderately than being based on a special rule against extraterritorial effects, the Court said, those precedents were really based on findings of intentional discrimination against out-of-state corporations intended to guard local firms. Within the Pork Producers case, nonetheless, nobody claimed that the California law was intended to guard its own pig farmers from competition.
Second, a majority of the Court agreed that the balancing test should mostly apply to 2 categories of cases: those wherein a disparate impact on interstate commerce was evidence of an intent to discriminate against out-of-state firms, and people involving the interstate transportation industry. The second category of cases mostly involves burdensome state regulations of railroads and long-haul trucks.
The confusion is available in when the Court turns to the query of whether to use the balancing test. The Justices were completely fractured on this issue, with no agreement on a typical rationale. Lower courts are going to be struggling to make sense of this.
Nevertheless, what we do know is that a majority of the Court found that the pork producers’ situation was outside what it called the “heartland” of the balancing test, cases involving discriminatory impacts or interstate transportation. The bulk particularly emphasized that nothing concerning the California initiative’s “practical effects” would suggest purposeful discrimination against out-of-state businesses.
While among the specifics are unclear, the final message of the case may be very supportive of state regulation. The bulk simply didn’t see a giant problem with the California law. As the bulk opinion put it, it could see no reason to “prevent a State from regulating the sale of an atypical consumer good inside its own borders on nondiscriminatory terms.” The truth is, it said that the Court had never done so in any previous case.
Moderately, the bulk stressed the necessity for caution in applying the dormant commerce clause: “Stopping state officials from enforcing a democratically adopted state law within the name of the dormant Commerce Clause is a matter of ‘extreme delicacy,’ something courts should do only ‘where the infraction is evident’.”
The import of the case is that courts should think twice about applying the balancing test except where a state law burdens interstate transport or where a disparate impact on out-of-state firms suggests possible discriminatory intent. In any case, virtually no pork is produced in California.
Overall, the end result of the case is excellent news for state regulators. Pork Producers makes it clear that a law isn’t necessarily suspect merely since it has significant effects on how out-of-state firms do business. Thus, out-of-state corporations can’t win a challenge merely by showing a law puts pressure on them to scale back their carbon emissions. Furthermore, unless a state energy or climate law regulates power transmission or pipelines, or has a markedly greater impact on out-of-state firms than local competitors, courts should think twice about applying the balancing test.
As for the allegedly oppressed pig producers, I predict certainly one of two things will occur. Despite all of the gnashing of teeth, the impact of the California law probably won’t be as dramatic because the industry claims for litigation purposes. Either complying with California’s requirements for animal welfare won’t change into all that onerous, or else the pork industry will learn to trace where products are sourced identical to other industries do.
It appears that evidently regulations at all times impose crushing burdens on industry — until the litigation is over, when the previously not possible generally seems to be quite doable.
