1. American Constitutional Law LAW-210
State Powers
and the Constitution

2. Unit Objectives
At the completion of this unit, students should be able to:
Describe the principles used by the Supreme Court in evaluating the constitutionality of a state law.
Explain the terms express preemption, field preemption, and conflict preemption.
Define dormant commerce clause.
Explain hoe the Interstate Commerce Clause limits the right of states to enact laws.
Define the term market participant and explain how this concept affects the right of states to discriminate against out-of-state businesses.

3. Unit Objectives (Continued)
Describe the criteria use by the Court to determine if a state law violates the dormant commerce clause.
Explain why states may have constitutional problems when they tax out-of-state businesses.
List the criteria used by the Court to determine the constitutionality of a tax on an out-of-state business.
Identify the provisions of the U.S. Constitution that limit the powers of the state to enact laws or impose taxes.
Explain how the Equal Protection Clause and the Due Process Clause affect the constitutionality of laws dealing with interstate commerce.

4. State Powers and the Constitution
States have general police power to enact laws and impose taxes that promote the general welfare, subject to Constitutional limitations.
A state law is unconstitutional if the law relates to an area preempted by federal legislation, if the law is inconsistent with the dormant commerce clause, or if the law violates some other provision of the Constitution.

5. Federal Preemption Three types of federal preemption can occur:
Express preemption is the principle that a state law is unconstitutional because a federal law expressly supersedes it.
Field preemption is the principle that a state law is unconstitutional because Congress impliedly usurped total control over the subject matter by enacting federal legislation.
Conflict preemption is the principle that a state law is unconstitutional because it conflicts with federal law.

6. Federal Preemption Types of Federal Preemption
State Law Is Unconstitutional If…
Express preemption
The federal law contains a provision superceding all state laws.
Field preemption
It can be implied from various factors, such as the scope of the federal law, that Congress intended to preempt the field.
Conflict preemption
The federal and state laws actually conflict.

7. Hillsborough County v. Automated Medical Laboratories 471 U. S
Facts:
County ordinances governing blood plasma centers within the county required tests for hepatitis and alcohol, and that donations may be made at one center only.
The ordinances exceeded minimum standards for blood plasma centers established by the FDA.
Issue:
Whether the existence of FDA standards preempt the right of state and local authorities to regulate this activity.
Holding:
No – absent strong evidence to find a threat to the federal goal of ensuring sufficient plasma, there is no interference with federal interests and the ordinances are not preempted and are not unconstitutional.

8. Geier v. American Honda Motor Co. 529 U.S. 861 (2000)
Casenotes
Illustrates how the Supreme Court analyzes the concept of conflict preemption along with field and express preemption.
Common criteria for resolution of conflict preemption are:
Is compliance with both federal and state regulations a physical impossibility?
Does state law stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress?

9. Dormant Commerce Clause
State laws affecting interstate commerce are unconstitutional even though not preempted if:
The state laws discriminate against out-of-state interests, or
They place an excessive burden on interstate commerce and do not serve any great local need.

10. Dormant Commerce Clause (Continued)
The Dormant Commerce Clause seeks to achieve two purposes:
It seeks to create a national economic market by preventing states from imposing barriers to trade, and
It seeks to foster political cohesion by inhibiting states from imposing reciprocal barriers.
Addresses the situation in which Congress has not regulated some area which is within the Commerce power.

11. Dormant Commerce Clause (Continued)
Not really a separate clause in the Constitution – it simply refers to a body of constitutional jurisprudence which sets parameters for state regulation when Congress has not regulated an area within the Commerce power.
Some form of Dormant Commerce Clause has existed for most of American history.
The Dormant Commerce Clause is somewhat controversial and constitutional arguments can be invoked to oppose or defend it.
Example: Cooley v. Board of Wardens

12. Cooley v. Board of Wardens 53 U.S. 299 (1851)
Casenotes
Upheld as constitutional a Pennsylvania statute requiring vessels to use a local pilot.
Took an intermediate course between those who argued that the Commerce Clause precluded any state action within its bounds (e.g., Gibbons v. Ogden) and those who argued that absent congressional action, states could regulate without restraint within areas covered by the Commerce power.
Held that states could not regulate matters needing a uniform national approach but could regulate local matters.

13. Discriminatory State Laws
Strict scrutiny is applied where the state seeks simply to protect the economic interests of its citizens at the expense of outsiders.
When the Court detects such economic protectionism, the state statute is deemed per se invalid.
States generally do not articulate such a protectionist purpose on the face of a statute or in legislative history.
Where, however, a state cannot point to a legitimate state purpose for the statute or cannot show the absence of a nondiscriminatory alternative way to achieve its purpose, the Court infers that the true purpose was protectionist.

14. Discriminatory State Laws (Continued)
Although the impact of state legislation on in-staters and out-of-staters may be relevant to the analysis, it is not dispositive.
The fact that there are out-of-state losers or in-state beneficiaries does not mean the state statute necessarily fails.

15. Discriminatory State Laws (Continued)
The Dormant Commerce Clause serves to protect the interstate market, not particular entrepreneurs.
Example: Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978)
A statute prohibited oil producers or refiners from operating retail service stations within the state and required them to extend all temporary price reductions uniformly to all stations they supply.
The Supreme Court held that there was no discrimination because the law applied to all oil producers and refiners, and that it was not too great a burden on interstate commerce because it did not impede the flow of products among states.

16. Market Participant Exception
When the state acts as a market participant, i.e. a buyer or seller of goods or services, rather than as a market regulator, the Dormant Commerce Clause does not apply.
In other words, the state, as a market participant, may choose to favor its own citizens.
Example: Reeves, Inc. v. Stake, 447 U.S. 429 (1980)
A state operated a cement plant selling to both in-state and out-of-state buyers for many years. Because of a cement shortage, sales were confined to residents of the state.
The Supreme Court held that the state was a market participant and thus discrimination against out-of-state interests was permissible.

17. Market Participant Exception (Continued)
The rationales for this exception include:
The fact that the Commerce Clause addresses regulation of, not participation in, markets,
The argument that when the state acts as a proprietor it should be treated like other proprietors, and
The argument that where states decide to favor their own as buyers or sellers, they are in effect deciding to subsidize some part of their population at the expense of the general state treasury - a decision that arguably should be within the power of people of a state.

18. Burden on Interstate Commerce v. Local Benefit
Like Cooley, the Court has continued to adopt an intermediate approach which sometimes allows and sometimes prohibits state regulation.
In general, if a state statute discriminates against commerce on its face, purpose or effect, it is subjected to strict scrutiny and is found unconstitutional unless the state can justify it as serving a compelling state purpose in the least restrictive way.
If the state statute does not discriminate, it is measured against a more lenient balancing test which asks whether the state’s health or safety interest is clearly outweighed by the burden on commerce.
Example: Southern Pacific Co. v. Arizona

19. Southern Pacific Co. v. Arizona 325 U.S. 761 (1945)
Casenotes
Struck down as unconstitutional a state law that limited the length of trains that could pass through the state.
Applied a balancing test to determine whether state safety legislation violated the Dormant Commerce Clause.
Held that although there was no discrimination, the free flow of commerce greatly outweighed any local concern.

20. State Tax Laws and Commerce
A state tax on an out-of-state business cannot violate the Commerce Clause.
Two important policies:
The right of businesses to engage in interstate commerce without unfair state interference, and
The right of states to make businesses pay a fair share of services they use (e.g., fire, police, etc.).
Earlier cases focused on the name given to the tax (e.g., income tax, sales tax, real property tax, use tax, excise tax)
Direct taxes on commerce were held unconstitutional.
Income taxes and sale taxes were often upheld.
The modern approach applies four criteria to determine validity of the tax.
Example: Complete Auto Body Transit, Inc. v. Brady

21. Complete Auto Transit, Inc. v. Brady 430 U.S. 274 (1977)
Casenotes
Held that a tax is valid when four criteria are met:
Nexus requirement – the state is taxing an activity that takes place in the state – e.g., the sale of goods and services in the state.
Fair apportionment requirement – the state is taxing only the activity within the state, so that there is no double tax with another state because another state would not have the right to tax the same thing. Thus the tax is fairly apportioned.
There is no discrimination against interstate commerce– i.e., nothing to indicate that local businesses paid any different taxes.
There is a reasonable relationship between the activity and the normal services provided by the state.

22. Other Constitutional Challenges to State Laws
Article I, §10 prohibitions:
Entering into treaties or alliances
Coining money
Passing a bill of attainder, ex post facto law, etc.
Granting a title of nobility
Laying imposts or duties on imports and exports
Laying a duty of tonnage, etc.
Article IV requirements:
Give full faith and credit to laws of other states
Extend privileges and immunities to citizens of other states
Extradite criminals wanted in another state
Requirements of various Amendments, e.g.:
Fourteenth Amendment due process and equal protection
Fifteenth, Nineteenth and Twenty-sixth Amendment voting rights