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The Commerce Clause and the Necessary and Proper Clause
The Dormant Commerce Clause
In General
The so-called "dormant" Commerce Clause was developed by the Court to restrain states from enforcing laws that burdened interstate commerce
The textual foundations of the dormant commerce clause:
The Commerce Clause empowers Congress to regulate commerce "among the several states," Art. I, § 8, cl. 3, but does not explicitly grant power to federal courts to invalidate state laws in the absence of congressional action.
From this "great silence," H.P. Hood & Sons, Inc. v. Du Mond, the Court has inferred that absent congressional action, states have a "residuum of power" to regulate local affairs, even if their actions affect interstate commerce, provided that their regulation does not impermissibly "trespass upon national interests." Great Atl. & Pac. Tea Co. v. Cottrell.
Congress today legislates against a backdrop of default rules generated by the Court's dormant Commerce Clause doctrine.
It appears by Congress' actions and inactions over many decades, that Congress has rather forcefully embraced the federal judiciary as its partner in keeping states under control in the economic domain.
The Balancing Test
Pike v. Bruce Church Inc. (pg. 731)
General Rule:
"Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will upheld unless the burden imposed in 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. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities." Pike v. Bruce Church Inc. (pg. 731)
In Pike, the Court, in applying the above balancing test, invalidated an Arizona statute requiring that all cantaloupes grown in Arizona and offered for sale be packed in Arizona before being shipped out of state.
Here, the Court found that Arizona's interest in protecting the reputation of its produce "minimal" when placed against the requirement that the packer "build and operate and unneeded $200,000 packing plant in the state."
The Court in Pike explicitly rejected the dichotomy, employed in earlier cases, between "direct" and "indirect" burdens on commerce.
Hughes v. Oklahoma (pg. 731)
The Pike test was refined in Hughes v. Oklahoma.
The Hughes decision developed the Pike test into a three-pronged test:
The Court considered (1) whether the challenged statute regulates even-handedly with only "incidental" effects on interstate commerce, or instead discriminates against interstate commerce either on its face or in practical effect; (2) whether the statute serves a legitimate local purpose; and if so, (3) whether alternative means could promote this local purpose as effectively without discriminating against interstate commerce.
Thus, the Hughes test, like the Pike test, balances the state's interest in promulgating a statute against the burden that the statute imposes on interstate commerce.
Cooley v. Board of Wardens (pg. 204)
In Cooley, the Court determined that a local Pennsylvania law regulating the qualifications of pilots and the times and modes of their offering and rendering their services (the law required vessels entering and leaving the port of Philadelphia to engage a local pilot to guid them through the harbor) did not run afoul of the commerce clause.
"That the power to regulate commerce includes the regulation of navigation, we consider settled." Cooley v. Board of Wardens (pg. 204)
"And . . . the regulation of the qualifications of pilots, of the modes and times of offering and rendering their services . . . do constitute regulations of navigation, and consequently of commerce, within the just meaning of this clause of the Constitution." Cooley v. Board of Wardens (pg. 204)
"Whatever subjects of this power are in their national, or admit only of one uniform system, or plan of regulation, may justly be said to be of such a nature as to require exclusive legislation by Congress." Cooley v. Board of Wardens (pg. 204)
"That this cannot be affirmed of laws for the regulation of pilots and pilotage, is plain." Cooley v. Board of Wardens (pg. 204)
"The act of 1789 contains a clear and authoritative declaration by the first Congress, that the nature of this subject is such, that until Congress should find it necessary to exert its power, it should be left to the legislation of the States; that it is local and not national; that it is likely to be the best provided for, not by one system, or plan of regulation, but by as many as the legislative discretion of the several States should deem applicable to the local peculiarities of the ports within their limits." Cooley v. Board of Wardens (pp. 204-05)
"It is the opinion of a majority of the court that the mere grant to Congress of the power to regulate commerce, did not deprive the States of power to regulate pilots, and that although Congress has legislated on this subject, its legislation manifests and intention . . . not to regulate this subject, but to leave its regulation to the several States." Cooley v. Board of Wardens (pg. 205)
"We are of the opinion that this State law was enacted by virtue of a power, residing in the State to legislate; that it is not in conflict with any law of Congress; that it does not interfere with any system which Congress has established by making regulations, or by intentionally leaving individuals to their own unrestricted action; that this law is therefore valid . . . ." Cooley v. Board of Wardens (pg. 205)
RE State regulation of transportation
On the one hand, the Court has recognized a state's strong safety interests in controlling its own streets and thoroughfares; on the other hand, the Court has been sensitive to the need for each state to bear its share of supporting a national transportation network that can be threatened by unnecessary or conflicting local laws.
In South Carolina State Highway Dept. v. Barnwell Brothers, the Court upheld a state law regulating truck size in a nondiscriminatory way, whose burden fell largely on intrastate shippers, and whose specifics plausibly served legitimate interests in safety and road conservation.
In contrast, in South Pacific Co. v. Arizona, the Court struck down a state law regulating train size that had dubious safety benefits and that interfered with the "national uniformity . . . practically indispensable to the operation of an efficient and economical national railway system," and whose burdens fell on train traffic that was more than 90 percent interstate.
In Bibb v. Navajo Freight Lines, Inc., the Court struck down a state law regulating truck mud flaps differently than, and partly inconsistent with, the mud flap regulations of sister states.
The "Per Se Invalidity" Test
In cases where state law overtly discriminates against out-of-state economic interests in a fashion akin to a tariff, quota, or outright embargo, the Supreme Court has routinely abandoned the balancing approach in favor of a "virtually per se rule of invalidity." See, e.g., City of Philadelphia v. New Jersey.
In City of Philadelphia v. New Jersey, the Court invalidated a New Jersey statute that prohibited the importation of most solid or liquid waste originating outside the borders of the state.
The Court concluded that "whatever New Jersey's ultimate purpose, it may not be accomplished by discriminating against articles of commerce coming from outside the State unless there is some reason, apart from their origin, to treat them differently." City of Philadelphia v. New Jersey (pg. 732)
The State could not achieve the legitimate goals of conservation of landfill facilities by "the illegitimate means of isolating the State from the national economy. . . . [T]here is no basis to distinguish out-of-state waste from domestic waste. . . ." City of Philadelphia v. New Jersey (pg. 732)
The Market Participant Exception
When a state enters the market as purchaser for end use of the items in interstate commerce, it may restrict its trade to its own citizens or businesses within the state. Hughes v. Alexandria Scrap Corp. (pg. 732)
Because "the Commerce Clause responds principally to state taxes and regulatory measures," the state is exempt when acting in its proprietary capacity. Reeves, Inc. v. Stake (pg. 733)
Congressional Consent
Even where the Court has spoken to strike down a state law, the Wheeling Bridge cases establish that Congress can consent to state regulation of interstate commerce which would otherwise be held to run afoul of the commerce clause.
The Wheeling Bridge cases arose out of the competition between Pennsylvania and Virginia regarding where the Cumberland Road, one of the major national thoroughfares of the time, would cross the Ohio River.
In the first Wheeling Bridge case, Pennsylvania v. Wheeling & Belmont Bridge Co., where the Virginia legislature charted a corporation to build the bridge across the Ohio River in Virginia (today it is in West Virginia), Pennsylvania sought to enjoin the construction. The Court held that the bridge impermissibly obstructed interstate navigation. (Although the bridge was already built by the time this ruling came down)
After this, Congress passed a bill whereby the bridge was declared to be a lawful structure in its existing position and elevation and was declared to be a post road for the passage of the mails.
In the second Wheeling Bridge case, the Court sustained the statute and denied the injunction:
"So far . . . as this bridge created an obstruction to the free navigation of the river, in view of the previous acts of congress, they are to be regarded as modified by this subsequent legislation; and, although it still may be an obstruction in fact, it is not so in the contemplation of the law. . . . The regulation of commerce includes intercourse and navigation, and of course, the power to determine what shall or shall not be deemed in judgment of law, an obstruction to navigation." Second Wheeling Bridge case (pg. 206)
"[W]henever Congress' judgment has been uttered affirmatively to contradict the Court's previously expressed view that specific action taken by the states in Congress' silence was forbidden by the commerce clause, [the Court] has accommodated its previous judgment to Congress' express approval." Prudential Insurance Co. v. Benjamin (pg. 207)
In Prudential, the Court sustained Congress' consent to state regulation and taxation of the interstate insurance business after the Court had struck down such regulation as beyond states' authority because of its "interstate character."
The Commerce Clause
The Constitution of the United States provides that "[t]he Congress shall have Power . . . To regulate Commerce with foreign Nations, and among the several States, and the Indian tribes . . . ." Art. 1, § 8, cl. 3.
United States v. Lopez (Kennedy, J., concurring) - History of the Commerce Clause (in March 11, 2013 folder)
Chief Justice Marshall announced that the national authority reaches "that commerce which concerns more States than one" and that the commerce power "is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the constitution." Gibbons v. Ogden
His statements can be understood now as an early and authoritative recognition that the Commerce Clause grants Congress extensive power and ample discretion to determine its appropriate exercise.
"The progression of our Commerce Clause cases from Gibbons to the present was not marked, however, by a coherent or consistent course of interpretation." United States v. Lopez (Kennedy, J., concurring)
"Furthermore, for almost a century after the adoption of the Constitution, the Court’s Commerce Clause decisions did not concern the authority of Congress to legislate. Rather, the Court faced the related but quite distinct question of the authority of the States to regulate matters that would be within the commerce power had Congress chosen to act." United States v. Lopez (Kennedy, J., concurring)
At the midpoint of the 19th century, the Court embraced the principle that the States and the National Government both have authority to regulate certain matters absent the congressional determination to displace local law or the necessity for the Court to invalidate local law because of the dormant national power. Cooley v. Board of Wardens of Port of Philadelphia
One approach the Court used to inquire into the lawfulness of state authority was to draw content based on subject matter distinctions, thus defining by semantic or formalistic categories those activities that were commerce and those that were not.
For instance, in deciding that a State could prohibit the in state manufacture of liquor intended for out of state shipment, it distinguished between manufacture and commerce.
"No distinction is more popular to the common mind, or more clearly expressed in economic and political literature, than that between manufactur[e] and commerce. Manufacture is transformation—the fashioning of raw materials into a change of form for use. The functions of commerce are different." Kidd v. Pearson
Though that approach likely would not have survived even if confined to the question of a State's authority to enact legislation, it was not at all propitious when applied to the quite different question of what subjects were within the reach of the national power when Congress chose to exercise it.
This became evident when the Court began to confront federal economic regulation enacted in response to the rapid industrial development in the late 19th century.
Thus, the Court relied upon the manufacture commerce dichotomy in United States v. E. C. Knight Co., 156 U.S. 1 (1895), where a manufacturers’ combination controlling some 98% of the Nation’s domestic sugar refining capacity was held to be outside the reach of the Sherman Act. Conspiracies to control manufacture, agriculture, mining, production, wages, or prices, the Court explained, had too "indirect" an effect on interstate commerce.
And in Adair v. United States, 208 U.S. 161 (1908), the Court rejected the view that the commerce power might extend to activities that, although local in the sense of having originated within a single state, nevertheless had a practical effect on interstate commercial activity. The Court concluded that there was not a "legal or logical connection . . . between an employee’s membership in a labor organization and the carrying on of interstate commerce," id., at 178, and struck down a federal statute forbidding the discharge of an employee because of his membership in a labor organization.
The Court disavowed E. C. Knight’s reliance on the manufacturing commerce distinction in Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 68-69 (1911), declaring that approach "unsound."
The Court likewise rejected the rationale of Adair when it decided, in Texas & New Orleans R. Co. v. Railway Clerks, 281 U.S. 548, 570-571 (1930), that Congress had the power to regulate matters pertaining to the organization of railroad workers.
In another line of cases, the Court addressed Congress’ efforts to impede local activities it considered undesirable by prohibiting the interstate movement of some essential element.
In the Lottery Case, 188 U.S. 321 (1903), the Court rejected the argument that Congress lacked power to prohibit the interstate movement of lottery tickets because it had power only to regulate, not to prohibit.
In Hammer v. Dagenhart, 247 U.S. 251 (1918), however, the Court insisted that the power to regulate commerce "is directly the contrary of the assumed right to forbid commerce from moving," id., at 269-270, and struck down a prohibition on the interstate transportation of goods manufactured in violation of child labor laws.
In the Minnesota Rate Cases, 230 U.S. 352 (1913), the Court upheld a state rate order, but observed that Congress might be empowered to regulate in this area if "by reason of the interblending of the interstate and intrastate operations of interstate carriers" the regulation of interstate rates could not be maintained without restrictions on "intrastate rates which substantially affect the former."
And in the Shreveport Rate Cases, 234 U.S. 342 (1914), the Court upheld an ICC order fixing railroad rates with the explanation that congressional authority, "extending to these interstate carriers as instruments of interstate commerce, necessarily embraces the right to control their operations in all matters having such a close and substantial relation to interstate traffic that the control is essential or appropriate to the security of that traffic, to the efficiency of the interstate service, and to the maintenance of conditions under which interstate commerce may be conducted upon fair terms and without molestation or hindrance."
Even the most confined interpretation of "commerce" would embrace transportation between the States, so the rate cases posed much less difficulty for the Court than cases involving manufacture or production.
In Swift & Co. v. United States, 196 U.S. 375 (1905), the Court upheld the application of federal antitrust law to a combination of meat dealers that occurred in one State but that restrained trade in cattle "sent for sale from a place in one State, with the expectation that they will end their transit . . . in another."
The Court explained that "commerce among the States is not a technical legal conception, but a practical one, drawn from the course of business."
Chief Justice Taft followed the same approach in upholding federal regulation of stockyards in Stafford v. Wallace.
In addressing New Deal legislation the Court resuscitated the abandoned abstract distinction between direct and indirect effects on interstate commerce. See Carter v. Carter Coal Co.
The case that seems to mark the Court’s definitive commitment to the practical conception of the commerce power is NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937), where the Court sustained labor laws that applied to manufacturing facilities, making no real attempt to distinguish Carter, supra, and Schechter, supra.
The deference given to Congress has since been confirmed.
United States v. Darby overruled Hammer v. Dagenhart.
And in Wickard v. Filburn, the Court disapproved E C. Knight and the entire line of direct indirect and manufacture production cases, explaining that "broader interpretations of the Commerce Clause [were] destined to supersede the earlier ones," id., at 122, and "whatever terminology is used, the criterion is necessarily one of degree and must be so defined. This does not satisfy those who seek mathematical or rigid formulas. But such formulas are not provided by the great concepts of the Constitution. . . ."
Later examples of the exercise of federal power where commercial transactions were the subject of regulation include Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241 (1964), Katzenbach v. McClung, 379 U.S. 294 (1964), and Perez v. United States, 402 U.S. 146 (1971).
The history of our Commerce Clause decisions contains at least two lessons of relevance to this case.
(1) The first, as stated at the outset, is the imprecision of content based boundaries used without more to define the limits of the Commerce Clause.
(2) The second, related to the first but of even greater consequence, is that the Court as an institution and the legal system as a whole have an immense stake in the stability of our Commerce Clause jurisprudence as it has evolved to this point.
Stare decisis operates with great force in counseling us not to call in question the essential principles now in place respecting the congressional power to regulate transactions of a commercial nature.
Congress can regulate in the commercial sphere on the assumption that we have a single market and a unified purpose to build a stable national economy.
In referring to the whole subject of the federal and state balance, we said this just three Terms ago:
"This framework has been sufficiently flexible over the past two centuries to allow for enormous changes in the nature of government. The Federal Government undertakes activities today that would have been unimaginable to the Framers in two senses: first, because the Framers would not have conceived that any government would conduct such activities; and second, because the Framers would not have believed that the Federal Government, rather than the States, would assume such responsibilities. Yet the powers conferred upon the Federal Government by the Constitution were phrased in language broad enough to allow for the expansion of the Federal Government's role." New York v. United States, 505 U. S. 144, 157 (1992) (emphasis omitted).
Gibbons v. Ogden (pg. 168) - STILL GOOD LAW
In Gibbons, the state of New Jersey granted Robert Livingston and Robert Fulton the exclusive right to operate steamboats in New York waters for a period of years, and the exclusive right operate steamboats between New York and various places in New Jersey was assigned to Ogden. Ogden sued to enjoin Gibbons from operating steamboats between New York and Elizabethtown, New Jersey. Notwithstanding the state granted monopoly, Gibbons replied that his steamboats were licensed pursuant to a 1793 Act of Congress and that his license entitled to navigate between New York and New Jersey. The Court held for Gibbons as the state law was preempted by the federal law. This case is all about preemption.
Holdings:
(1) Commerce is intercourse; commerce comprehends navigation.
"Commerce . . . is traffic, but it is something more - it is intercourse. It describes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse. . . . All America understands, and has uniformly understood, the word 'commerce,' to comprehend navigation." Gibbons v. Ogden (pg. 170)
MODES OF INTERPRETATION:
(1) Look at words in their "natural sense."
"As men, whose intentions require no concealment, generally employ the words which most directly and aptly express the ideas they intend to convey, the enlightened patriots who framed our constitution, and the people who adopted it, must be understood to have employed words in their natural sense, and to have intended what they have said." Gibbons v. Ogden (pg. 169)
(2) Look at the objects expressed in the Constitution.
"If, from the imperfection of human language, there should be serious doubts respecting the extent of any given power, it is a well settled rule, that the objects for which it was given, especially when those objects are expressed in the instrument itself, should have great influence in the construction." Gibbons v. Ogden (pp. 169-70)
(2) The Court rejects the idea that there is not concurrent power between the Congress and the States to regulate Commerce BUT if there is a conflict between state law and federal law, the federal law preempts the state law.
"It is obvious, that the government of the Union, in the exercise of its express powers, that, for example, of regulating commerce with foreign nations and among the States, may use means that may also be employed by a State, in the exercise of its acknowledged powers; that, for example, of regulating commerce within the State." Gibbons v. Ogden (pp. 173-74)
"Since . . . in exercising the power of regulating their own purely internal affairs, whether of trading or police, the States may sometimes enact laws, the validity of which depends on their interfering with, and being contrary to, an act of Congress passed in pursuance of the constitution, the Court will enter upon the inquiry, whether the laws of New-York, as expounded by the highest tribunal of that State, have, in their application to this case, come into collision with an act of Congress, and deprived a citizen of a right to which that act entitles him. Should this collision exist, it will be immaterial whether those laws were passed in virtue of a concurrent power ‘to regulate commerce with foreign nations and among the several States,’ or, in virtue of a power to regulate their domestic trade and police. In one case and the other, the acts of New-York must yield to the law of Congress . . . ." Gibbons v. Ogden (pg. 170)
(3) Congress can regulate commerce within a state at least insofar as goods being shipped are coming from, or going to, another state.
"If congress has the power to regulate it, that power must be exercised whenever the subject exists. If it exists within the states, if a foreign voyage may commence or terminate at a port within a state, then the power of congress may be exercised within a state." Gibbons v. Ogden (pg. 171)
"The genius and character of the whole government seem to be, that its action is to be applied to all the external concerns of the nation, and to those internal concerns which affect the States generally; but not to those which are completely within a particular State, which do not affect other States, and with which it is not necessary to interfere, for the purpose of executing some of the general powers of the government. The completely internal commerce of a State, then, may be considered as reserved for the State itself." Gibbons v. Ogden (pp. 170-71)
"Inspection laws, quarantine laws, health laws of every description, as well as laws for regulating the internal commerce of a state, and those which respect turnpike roads, ferries, etc. are component parts of" that "immense mass of legislation, which embraces everything within the territory of a state, not surrendered to the general government." Gibbons v. Ogden (pg. 173)
"No direct general power over these objects is granted to Congress; and, consequently, they remain subject to State legislation. If the legislative power of the Union can reach them, it must be for national purposes; it must be where the power is expressly given for a special purpose, or is clearly incidental to some power which is expressly given. It is obvious, that the government of the Union, in the exercise of its express powers, that, for example, of regulating commerce with foreign nations and among the States, may use means that may also be employed by a State, in the exercise of its acknowledged powers; that, for example, of regulating commerce within the State." Gibbons v. Ogden (pp. 173-74)
In Gibbons, Chief Justice Marshall announced that the national authority reaches "that commerce which concerns more States than one" and that the commerce power "is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the constitution." Gibbons v. Ogden
His statements can be understood now as an early and authoritative recognition that the Commerce Clause grants Congress extensive power and ample discretion to determine its appropriate exercise.
The Daniel Ball (in March 11, 2013 folder) - SUPERCEDED BY STATUTE (But, the statute simply broadened the definition of "navigable waters" found in The Daniel Ball)
The Court held that where commerce is conducted on the "navigable waters of the United States," the Congress has the power to regulate such commerce.
In this case the Court found that the waters at issue were "navigable water" where (1) the stream was capable of bearing a steamer of one hundred and twenty-three tons burden, laden with merchandise and passengers, as far as Grand Rapids, a distance of forty miles from its mouth in Lake Michigan; and (2) by its junction with the lake, the stream formed a continued highway for commerce, both with other States and with foreign countries.
The Commerce Clause "authorizes all appropriate legislation for the protection or advancement of either interstate or foreign commerce, and for that purpose such legislation as will insure the convenient and safe navigation of all the navigable waters of the United States, whether that legislation consists in requiring the removal of obstructions to their use, in prescribing the form and size of the vessels employed upon them, or in subjecting the vessels to inspection and license, in order to insure their proper construction and equipment." The Daniel Ball
"'The power to regulate commerce,' this court said in Gilman v. Philadelphia, 'comprehends the control for that purpose, and to the extent necessary, of all navigable waters of the United States which are accessible from a State other than those in which they lie. For this purpose they are the public property of the nation, and subject to all the requisite legislation of Congress.'" The Daniel Ball
In response to the contention that the commerce was only conducted within Michigan and thus was not "interstate commerce," the Court stated that "[s]o far as she was employed in transporting goods destined for other States, or goods brought from without the limits of Michigan and destined to places within that State, she was engaged in commerce between the States, and however limited that commerce may have been, she was, so far as it went, subject to the legislation of Congress." The Daniel Ball
"[W]henever a commodity has begun to move as an article of trade from one State to another, commerce in that commodity between the States has commenced." The Daniel Ball
"The fact that several different and independent agencies are employed in transporting the commodity, some acting entirely in one State, and some acting through two or more States, does in no respect affect the character of the transaction. To the extent in which each agency acts in that transportation, it is subject to the regulation of Congress." The Daniel Ball
United States v. DeWitt (pg. 435) - STILL GOOD LAW
The regulation of interstate commerce does not extend to sales once the goods have reached their final destination. See United States v. DeWitt (pg. 435)
In DeWitt, the Court held that a congressional safety regulation prohibiting the sale of highly combustable illuminating oils law beyond congressional power:
"[T]he express grant of power to regulate commerce among the States has always been understood as limited by its terms; and as a virtual denial of any power to interfere with the internal trade and business of the separate States."
Almost anything connected to the railroads has long been held to be within Congress' powers. See, e.g., Southern Railway v. United States (upholding the Federal Safety Appliances Act as applied to railroad cars with defective couplers moving solely within a state); Baltimore & Ohio Railroad Co. v. Interstate Commerce Commission (upholding congressional regulation of the hours of employees working on the intrastate operations of railroads that also conducted interstate operations); Shreveport Rate case (holding that the Interstate Commerce Commission (ICC) could prohibit railroads from charging lower rates for transportation within Texas than the rates set by the ICC for identical distances between Texas and other states).
United States v. E.C. Knight Co. (pg. 436) - DISAVOWED (STANDARD OIL/WICKARD)
In United States v. E.C. Knight Co., the Court relied upon the manufacture commerce dichotomy where a manufacturers’ combination controlling some 98% of the Nation’s domestic sugar refining capacity was held to be outside the reach of the Sherman Act.
Conspiracies to control manufacture, agriculture, mining, production, wages, or prices, the Court explained, had too "indirect"...
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