Monday, July 22, 2019

Should Congress Codify the Dormant Commerce Clause?

by Michael C. Dorf

On Thursday of next week, I shall participate (as I have since its inception two decades ago) in the annual Practicing Law Institute Supreme Court Review. As always, it's a star-studded cast. Tickets for the live full-day panel, whether in-person in NYC, at a groupcast location, or via your computer, are still available. (I don't get a cut of the door; we panelists all volunteer our time.)

I'll be on just about all of the panels, mostly discussing cases that I've blogged or written Verdict columns about already, but invariably something falls through the cracks. Accordingly, today's entry discusses a case that involved the intersection of the 21st Amendment and the Dormant Commerce Clause. In the next two installments of my preview of the Review, I'll say something about the Establishment Clause case involving the "Bladensburg Peace Cross" (beyond what I wrote here and here), and I'll also provide my take on the Term as a whole.

But for now I want to say a few words about Tennessee Wine & Spirits Retailers Ass'n v. Thomas. After a very brief summary of the facts and holding, I'll turn to a questionable assertion by the majority in support of a proposition with which I ultimately agree.

A Tennessee law requires that in order to operate a retail (wine and/or) liquor store, the owners must: (1) have been residents of the state for two years for an initial license; (2) have resided in the state for 10 consecutive years for a license renewal; and (3) have shareholders who are all state residents if the owner is a corporation. Recognizing that the law discriminates against interstate commerce, the state initially declined to enforce it, whereupon a trade association of in-state retailers threatened to sue.

After some procedural complications, the case ended up before the Sixth Circuit, which ruled against the trade association, concluding that the law's provisions are unenforceable as a violation of the Dormant Commerce Clause (DCC). The trade association sought and obtained review in the Supreme Court with respect to the first provision only: the two-year residency requirement for an initial license. In the Supreme Court, the state did not defend the residency requirement. The trade association of in-state retailers was opposed by respondents who were otherwise qualified to operate retail liquor stores but failed to satisfy the residency requirement.

The SCOTUS affirmed, 7-2, with Justice Alito writing for the majority and Justice Gorsuch, joined by Justice Thomas, dissenting. If the case had involved virtually any product other than alcohol, it would have been a no-brainer under the DCC, as the Tennessee residency requirement facially discriminates against interstate commerce. But cases involving state regulation of alcohol also implicate the 21st Amendment. Section 1 of that Amendment repealed the 18th Amendment--Prohibition. Section 2 provides: "The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." The question in the case was whether that provision supersedes the DCC.

The majority said no, relying on prior precedent, especially Granholm v. Heald (2005). Section 2 of the 21st Amendment, Justice Alito explained, does not immunize state laws regulating alcohol from all constitutional challenges. For example, a state law permitting white people but not people of other races, or Christians but not people of other faiths, to bring alcohol into the state would violate equal protection. Likewise here, the 21st Amendment confirms the states' authority to enforce import and other limits on alcohol that do not otherwise violate the DCC. And because the residency requirement had "at best a highly attenuated relationship to public health or safety," the majority said it could not be justified, even under a somewhat more forgiving standard of scrutiny for evaluating discriminatory state laws governing alcohol than the standard used to evaluate laws discriminating against interstate commerce in other products.

Justice Gorsuch argued in dissent that residency requirements for sellers of liquor long pre-dated both Prohibition and Prohibition's repeal. Accepting the majority's contention that Section 2 of the 21st Amendment restored the status quo ante Prohibition, the dissenters said that that status quo ante included the authority Tennessee claimed. The majority responded that there wasn't clear case law to back up that characterization and, in any event, there was no sound reason in principle to adopt a different rule for residency requirements than for other sorts of discrimination against interstate commerce.

There was also some disagreement about the benefits of the residency requirement, but those seemed to reflect the fact that Justice Gorsuch would have applied an extremely deferential approach to the state law. The majority was pretty clearly correct that the residency requirement does not substantially advance the state's health or safety interests.

But what about the DCC itself? Close followers of the Court's work will note that Justices Gorsuch and Thomas find the whole enterprise of the DCC peculiar and ultimately illegitimate. After all, they observe correctly, there is no "Dormant Commerce Clause" in the Constitution. Article I, Section 8 expressly empowers Congress to regulate interstate commerce, but it does not follow logically that, in the absence of an Act of Congress, the courts are empowered to invalidate protectionist legislation.

In a relatively brief Part IIA of his majority opinion, Justice Alito responds to the wholesale critique of the DCC. I agree with his conclusion: "the Commerce Clause by its own force restricts state protectionism." However, I want to challenge one of the reasons he gives for that bottom line.

Here are the key pieces of Justice Alito's argument:

(A) One of the chief aims of the Constitutional Convention of 1787 and the Constitution that was eventually ratified was to put an end to the interstate trade wars that had flared up under the Articles of Confederation.

(B) Plausible arguments could be made that two other constitutional texts -- the Import/Export Clause of Article I, Sec. 10, and the Privileges & Immunities Clause of Article IV -- empower courts to strike down state protectionist legislation. However, case law rules those out. The former was held to apply only to foreign imports and exports, while the latter was held not to protect corporations.

(C) From very early on and more or less continuously since, the courts have recognized a dormant component to the Commerce Clause, thus lending the idea of a DCC the authority of longstanding precedent.

(D) In light of (B), the only way to fulfill the expectations of the framers and ratifiers with respect to a core purpose of the entire Constitution is therefore to have the work done by the DCC.

I think there's a flaw in (D). Justice Alito writes that
it would grossly distort the Constitution to hold that it provides no protection against a broad swath of state protectionist measures. Even at the time of the adoption of the Constitution, it would have been asking a lot to require that Congress pass a law striking down every protectionist measure that a State or unit of local government chose to enact.
Wait, what? Why would Congress have to pass a new and separate law striking down every state or local protectionist measure? Surely Congress could act wholesale, by passing the following statute: "Except as otherwise provided by federal law, no state may make or enforce any law or common law rule that discriminates against or unduly burdens interstate commerce." Such a law would undoubtedly be a valid exercise of the affirmative power to regulate interstate commerce, and it would codify existing DCC doctrine. Moreover, it would fulfill the expectations of the framers and ratifiers of the original Constitution that state protectionist measures would be pre-empted.

So, you might ask, why am I not throwing in with Justices Thomas and Gorsuch in challenging the entire edifice of the DCC as illegitimate? The short answer is that, given Justice Alito's valid points (A), (B), and (C), the burden of overcoming legislative inertia should rest with those who wish to upset two centuries of jurisprudence. At no point since the recognition of a DCC doctrine relatively early in the Republic has Congress expressed dissatisfaction with the basic idea of a DCC. It's quite possible that if the wholesale skepticism of Justices Thomas and Gorsuch were to spread to a majority of the Court and the DCC were abandoned, Congress would then adopt my proposed statute. But there is no good reason to put the question to the test.