Say Goodbye to Bacon?
Professor Richard Epstein on California’s Challenge to the Dormant Commerce Clause
Hoover Senior Fellow and host of the Defining Ideas podcast, Professor Richard Epstein returns to the program to discuss a new case making its way to the Supreme Court:
This past week, the Supreme Court agreed to hear an appeal in an important case that could determine the structure of American interstate markets for years to come. National Pork Producers Council v. Ross involves a constitutional challenge to Proposition 12, a 2018 California referendum that requires all pork products sold in the state be prepared in facilities meeting California standards of animal health and safety, no matter where they are raised. As the plaintiffs explain in their brief, virtually all of the pork products (some 99.8 percent) sold in California come from out of state. On the flip-side, California represents 13 percent of the national consumer market for pork products.
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This past week, the Supreme Court agreed to hear an appeal in an important case that could determine the structure of…
In its unique and inverted version of federalism, California seems to always find a way to impose its own strict regulations on the rest of the country — using its economic might to foist “progressive values” on other states. Can California legislate outside its own borders? Well, it’s complicated.
As usual, when I’m faced with a complex hybrid legal/economic questions, I turn to the Libertarian himself. And as usual, we will try to pack a semester’s worth of economics into an hour of radio. Epstein holds positions as a law professor at NYU, a senior lecturer at the University of Chicago, and Senior fellowship at Stanford’s Hoover Institution.
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BOB: This is a very serious show. We, the residents of California, are about to say goodbye to real bacon. If you enjoy real bacon, you will not, in the state of California, enjoy it much longer — at least if the Supreme Court does what many observers believe they’re going to do.
California considers itself to be the most important state in terms of adjusting the lives of residents of the entire country — not just the state of California.
California was an early adopter of something called called CAFE standards for the amount of emissions which a car could spew out the exhaust. California said cars sold in the state of California have to be cleaner. Automobile manufacturers cared about making sales in California, so they had no choice but to make cars that conform to the California standards. They didn’t just manufacture cars for sale and use only in the state of California, they had to adjust all their cars, which meant the rest of the country was dragged along for the ride.
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So, California is accustomed to being in the forefront of setting policy around the country, and it once again has flexed its extra territorial muscle and has enacted legislation, which dictates the standards for the environment in which pigs can be raised for the purpose of providing pork. Pigs have to go to the gym twice a week, be fed three square meals, and they must have access to Netflix.
If the pig is not raised according to California’s standards, the pork who grew up in an unhappy environment cannot be sold in California.
Therefore, if a pork producer in South Carolina doesn’t raise pigs in that happy environment, the pork cannot be sold in California. Therefore, pig producers in the rest of the country are not going to sell their pork in California. Therefore we Californians have to get used to turkey bacon.
Does California have the power under the Constitution to pass laws that, in effect, reach well beyond California’s borders? One would think, “Well, of course not, that’s not California’s business. They cannot regulate that.” Is that regulating interstate commerce? If so, who cares? That issue will be before the Supreme Court, in a case entitled National Pork Producers Council v. Ross.
National Pork Producers Council v. Ross — SCOTUSblog
Issues: (1) Whether allegations that a state law has dramatic economic effects largely outside of the state and…
To help us sort through these kind of hard issues, I’m happy to welcome back to this show, Richard Epstein — a Hoover senior fellow and host of the podcast, The Libertarian, which I listen to within minutes of it becoming accessible.
Join the Hoover Institution’s community of supporters in advancing ideas defining a free society. Support Hoover A…
The Dormant Commerce Clause
BOB: Richard, these are complex, constitutional issues. What does the Constitution have much to say about this? Can California pass laws that affects how a hypothetical pork producer in South Carolina, who has never set foot in California, conducts his or her business?
RICHARD: Proposition 12 was a referendum that passed in 2018. Generally speaking, when you deal with legislation, you have compromises — a give and take — and one thing or another yields, and slowly you get a bill, which essentially is not a pure version. When you do something by referendum, there’s no compromise whatsoever, and since the turnout may be very low and the only people who vote are those who are interested in the particular issue, you could get a strong majority in favor of the referendum, even though a majority of the people inside the state oppose it. So this is not only about the interstate commerce issues, but to what extent is there support in California for the pigs outside the state?
When you start looking at the commerce powers of the United States, it turns out that this is a very difficult issue, which has been shrouded in controversy since the first Supreme Court case on the matter — Gibbons v. Ogden, decided around 1824.
Gibbons v. Ogden (1824)
EnlargeDownload Link Citation: Decree in Gibbons v. Ogden; 3/2/1824; Engrossed Minutes, 2/1790–6/7/1954; Records of…
What the constitution says, as usual, is the soul of brevity. The sole relevant provision in this case is the so-called commerce clause and it provides it in three parts: the Congress shall have the power to regulate commerce with 1) foreign nations, 2) among the several states, and 3) with the Indian tribes. Two things seem to become clear. It starts to talk about what Congress could do — it doesn’t seem to have any direct statement of what the states cannot do. It also suggests that you need a definition of commerce, which essentially works for the three relevant markets: for Indian tribes, for foreign nations, and of course, among the several states.
It certainly is not the case that you have a huge commerce power in terms of being able to regulate the internal affairs of Great Britain or France in the way in which they do their agriculture. It’s always been a question why you have this power in the United States when this should be left to the states. We have a very broad commerce power, and therefore the federal government could easily undo what happened in California — passing a federal statute that either prohibited the sale of pigs into California if they didn’t meet these standards, or required California to take them. Historically, the federal government very rarely if ever interferes in any activity that takes place when states start to put limitations on what can happen with respect to other states.
The earlier version of this was that the Congress would supervise the interaction. It never came to pass. So after Gibbons v. Ogden, there were intimations in Supreme Court opinions that even if it turned out that there was some degree of silence in the federal legislation, the mere force of the commerce clause itself would block certain activities that took place within the states. This was called the dormant commerce clause: the part of the clause that starts to sleep. It’s an extremely important provision, because without a dormant commerce clause situation, enforceable by the courts, you run the risk of a serious balkanization in the United States.
So you see the following contradictions. If you go back to the period between 1940 and 1950, the federal government’s power to consolidate the regulation of all farming in the United States is extremely strong. The United States used that power to set up agricultural cartels that raised prices and reduced outputs around the nations — I think a very unlaudable cause — and within five years, all of a sudden you see other cases under the dormant commerce clause arguing that the whole purpose of the dormant commerce clause is to make sure that competition between the states shall thrive. That meant, for example, you could not impose taxes on goods that came into the state that you did not impose on those goods that were made within the state. There’s a case called Dean Milk Co. v. City of Madison, which says, “You can’t tell people from Illinois that they have to pasteurize their milk in a certain way by only using Wisconsin facilities,” even if you say that Wisconsin farmers have to yield to it in the city of Madison and others do not.
What the dormant commerce clause usually did under these circumstances was prevent the states from engaging in activities, which would put them at a competitive disadvantage when products came into the state. In this particular case, it doesn’t quite work because California has no real pig market. So if you’re not worried about discrimination between in-state and out-of-state activities, are you still worried about the ability of California to impose rules — whether it’s on gasoline content or anything else, which would bind them? There was a case from about 1970 called Pike v. Bruce Church, Inc. in which the issue was whether or not the state of Arizona could require certain people who sold goods in Arizona to ship their goods interstate by using in-state facilities, when out-of-state facilities provided them cheaper and better access. Judge Stewart at the time said if the burden on interstate commerce is very great and the benefits to people inside the state are only incidental, you can’t do it. So the dormant commerce clause now apples even when there’s no discrimination.
Are Psychic Harms to Californians a Valid Argument?
RICHARD: We can imagine an easy case: suppose it could be shown that certain goods that were prepared — in the way in which farmers outside the state prepared them — were more likely to have some contamination within. It would be a closer case as to whether or not you could ban them, if you could show that the incidence of danger was high enough to make the cost of individual inspections very large.
In this particular case, many people in the brief said, “We think the way in which you’re raising these pigs is harmful,” but they never alleged that the pigs were a risk to public health. If it doesn’t pose a health hazard inside the state, then you can start to say, “Folks in the state of California are really enormously sensitive and they suffer deep psychic income losses if they know that the food does not meet this particular standard, and for that psychic loss of income, we’re entitled to ban it.”
The difficulty is that psychic disabilities could take place in all sorts of ways. Suppose there are people in North Carolina who liked the South Carolina stuff, and they say, “We have deep satisfaction with dissatisfaction,” so they require the standard devices for farming. You then get a deep contradiction in that you are required to use one form of preparation for California, another one for North Carolina… you’ve got 48 other states out there, each of which could start to impose different kinds of requirements. The strong argument, under these circumstances is, rather than having everybody mess this stuff up, to make it so none of them can start to tell people how they prepare the goods, unless the goods prepared show a risk of causing harm anywhere else.
The earlier cases in California, and to some extent sanctioned by the Supreme Court, seemed to think that the psychic interest may have weight. The reason why the Supreme Court took this particular case is that in a very exhaustive opinion, prepared by Judge Sandra Ikuta of California, she upheld the California restriction. She’s a Republican judge, so this is not necessarily a partisan issue. I think the case was taken by the Supreme Court because people started to realize that the extra-territorial issue was going to be a huge one, and that they had to deal with.
Somebody can say, “Look, if we allow pigs for pet in South Carolina their way to come inside our states, it has an extra territorial effect.” At that point, everybody can veto everything. The better way to think about this is essentially to worry about the conflict of interest and say, “Nobody can tell somebody else had to do things within its own state, unless the product that comes out is defective.”
Now, interestingly enough, there’s a second debate. The referendum says farmers must provide each sow with 24 feet of usable farm space, and largely prohibits the use of individuals stalls, even during the critical period between weaning and the confirmation of pregnancy, when sows recover from the stress of giving birth. Now it’s a huge battle as to whether the folks in California got it right. They’ve got a bunch of people who have all sorts of motives, not because they want to take care of the pigs, but they’re basically against the use of meat in any form. They are vegan-type individuals. Then it turns out you have to ask the question, “These farmers have been doing this for a long time. If what they wanted was the appropriate situation, they would have adopted it voluntarily, particularly on the way in which you keep pigs.”
Is it better to keep them alone or in groups? I’m not an expert on cows, but I tend to defer to people who do it for a living rather than for people who do not.
The danger is if you allow these things to be psychic public health measures, the people who would go through this referendum process actually don’t know what they’re talking about. We have no idea which way this thing is going to come out in the Supreme Court based upon past precedent, but my guess is that the simple fact that they took this particular case suggests that there are a number of people who were extremely worried about this.
If I had to hazard a guess, I would assume that the statute would actually be struck down, not affirmed. Interestingly enough, if you look at the tradition of dormant commerce clause cases, it turns out that the left and the right are closer on those than there are all sorts of cases where the federal government essentially dictates cartel practices, of a nationwide industry.
The Exceptions to Free Speech
BOB: The proposition itself, which is therefore the law in California, is not one that expresses any concern about the health and safety of any real serious concern about citizens. This is done to protect the pigs, not the humans.
RICHARD: Well, it’s done to protect the psychic concern of citizens in California about the state of the pig. It turns out if you allow psychic harms at the thought of things being done the way in which you don’t like it, then nobody’s allowed to do anything that anybody disagrees with. There was a first amendment component in this case. Everybody understands that there’s certain kinds of speech that you cannot do, not withstanding the fact that speech is protected. The two standard varieties are on the one hand fraud or misrepresentation — and those are libertarian vices because you say something false to somebody, you could get them to enter into various kinds of bargains or transactions which are against their interest, by misstating the relative value of what they receive and what they give up.
It’s also the case that defamation is a kind of speech, which is false. When I tell you, Bob, that David is a disappointing man and you should fire him forthwith, and if you believe what I have said, you’re going to have to get a new staff attendant. People who’ve been defamed have always been allowed to sue.
Those are good rules because they are designed to tamper down against contracts we don’t like. Many people say there’s a third category that we have to take into account and that’s taking offense. So, you burn your flag and I’m visibly disappointed in what you’ve done, or you engage in pagan religious rituals, and they offend me deeply. You decide to throw a benefit for Donald Trump or for Joe Biden, and other people take offense.
The last thing you want to do is to encourage people to get really angry with what somebody else does, so they can now claim a harm by way of offensive behavior, which allows them to shut down somebody else’s speech.
That risk never arises with fraud or defamation, but in this way, the madder you start to get the greater your entitlements, which means that everybody else should have fulsome tirades against the people whom they like the least. So, First Amendment doctrine says offense doesn’t carry. Well, if it doesn’t carry it under the first amendment, my view is that these kinds of issues really don’t carry it when it comes to dealing with conflicts between different states. I would never allow those kinds of things to start to take place. I just think it’s too risky under the circumstances.
And you can see, in fact, that if you just get enough people to be offended about inconsistent things, and the world comes to a halt.
What I propose is the following situation: if you wish to sell goods in California, and some people are offended, then you put a label on your packages that go to California, “Not made in accordance with the standards, set out in Proposition 12,” and that could only be done with respect to California. You don’t have to do it with anywhere else. People would say, “I think the standards are just fine,” can buy it. Everybody else doesn’t have to buy it. So you get a partition of the local market, and you don’t have to disrupt the production chain.
There are basically two grim alternatives: if you have to redo your entire assembly line to comply with the California standards, and there’s going to be a massive price increase and shortage nationwide. Or you have to forego the California market.
The labeling is a very low cost situation. It’s much more precise because it gets to only those Californians who really are upset about this, and lets everybody else buy it. If I were writing this opinion, I would say that’s how California can protect itself without disrupting the rest of the universe.
Do Trees (or Animals) Have Standing?
BOB: Richard, you explained that the proposition is defended by those who choose to defend it by saying it causes psychic loss of income. It found a harm to a California human. What if there was no even claimed harm to a human. Is that fatal to its constitutionality?
RICHARD: The world is becoming stranger. For a long time, the only way you could bring an action for harm was to prove that it was of harm to a human being. Since the beginning of the animal rights movement, and now the animist movement, there’ve been many cases in which people purport to be representatives not of themselves, because they own animals, but guardians ad litem, that is lawyers with respect to the litigation, and that the real principal is, in fact, the animal or the inanimate object itself. I regard those theories as slightly loony. I cannot say somebody is going to be a principal if, in fact, the only way they could work is through an agent, and if the agent can never communicate with them because they simply have no way to cognitively figure out what’s going on.
The correct way in which to bring those particular lawsuits is to say that you are a guardian with respect to the animals who is interested in compromise, and as their guardian you require that something be done. The state can, in fact, try to do that in some ways, but you then get various defenses against guardians, which would apply perhaps against the animals.
For example, suppose you have a farm in which there are lots of animals, and somebody wants to attack it. You could certainly sue them, because you’re protecting your property and that includes the animals. That’s the way you want to deal with these things. The other suits that go too far afield are where you’ve got a river that may be flooded if you take a dam and put it in place upstairs. So the river sues. But if you protect the river, you’re going to hurt a gully somewhere else, so now you’re going to have the river against the gully. You have two non-animate parties suing one another, and you’re trying to figure out what’s going on in this case. I am not a favor of that.
The original impulse for this was a thing by an impish friend of mine, Chris Stone, who wrote a book, Do Trees Have Standing?
Chris died recently, but we were colleagues together at the University of Southern California when he hatched up this whimsical idea, and just as fate would have it one of his prior students was going to clerk for Justice Douglas the next year. 99% of the attention given to a very eminent scholar and a wonderful human being was given for this one article, because if you really go off the wall, people love to talk about it. He always relished speaking about this particular problem because his whimsical nature was such that he thought it just presented a whole series of conundrum.
I’ve spent a fair bit of time working on animal rights cases, and some of them are extremely strange on both sides. I got a phone call from a reporter named William Glayberson of the New York Times back in 1999, before we had internet connections that were reliable. Glayberson said that there was a course being taught at Harvard by a man, Steven M.Wise, not on animal law, but on the rights of animals. He wanted to know what my opinion of this.
“Mr. Wise, who once listed a captive dolphin named Rainbow as the plaintiff in a suit against an aquarium, is one of a group of perhaps 30 lawyers across the country who spend most of their time on animal issues.”
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I said, “Well, I’m going to put on my Roman law hat, and let you know all the complexities associated with protecting Roman law. You could protect them from other people, whether you were liable for them if they damaged somebody else…”
I went through the details and said, “Look, animals in a prehistoric society were much more important than they are today, and they’re darn important today.” And then I made two remarks. One of them was, if we’re going to protect animals, are we going to protect bacteria?
If the animal rights movement were in effect in ancient Rome, you couldn’t use your oxen on your fields, and all human activity would stop. Glayberson takes these quotes and puts them in the article a couple of days later, and my name appears on the front page. I come back to my voicemail box and I have 19 voicemails. What’s going on? Everybody said, “You’re now an instant expert on animal rights will you appear on our show?”
I felt so guilty about being an expert — so called — that I actually learned something about the field and then did a number of shows on this issue.
I think the answer in every case is “guardianship is welcome, but independent rights are not.” You cannot make those two things square. You cannot have inconsistent protections for animals that are located within different states.
Extra-territoriality essentially has to be a rule that says the folks in the state are the ones who run things. It would be like saying, “We have a deep concern about animals in South Carolina. We’re not residents there, but even though we’re not residents in South Carolina, we want to have the right to vote because we’re affected by what takes place in that state.”
Everybody could vote in elections everywhere throughout the United States because we’re all affected by what everybody does everywhere else
Avoiding a Regime of Dual Sovereignty
BOB: Assuming, for one reason or another, the Supreme Court does not find that the California proposition violates the dormant commerce clause, therefore there will have to be a certification process I presume. California government employees would have to inspect and enforce the statute. What would the enforcement regime look like?
RICHARD: This is a nightmare, but first of all, it’s not at all clear that California has the right to enter the state absolute. They’re going to say, “It’s very simple. We won this case. You want your pigs to come into our state. You have to let us come and inspect them.”
This is not unheard of. Many pharmaceutical companies manufacture drugs for the American market overseas and the FDA insists on inspecting them at the point of manufacturer, and having power over the chain of control. Then the other state is going to say, “You want to come and inspect all this stuff. This is a very serious problem. How do we know that you are an honest agent? Suppose you have a zealot in your ranks, and you say that a certain client is non-compliant when in fact it is compliant? Do we have a chance to challenge that particular decision that you made or do we have a right to inspect you as you inspect them?”
In terms of the Endangered Species Act, there are sites which are thought to be endangered, and lots of people working for environmental groups want to come on the land, and the farmers has have absolute conniptions about this, because their argument is, “You’re going to come on this land and take a species that’s pretty rare and put it there, and then you’re going to say, ‘Hey, I found it there!’ and all of a sudden it becomes endangered.”
You can see how easily this can start to go wrong. You’re creating a regime of dual sovereignty. Add a third state that does the same thing and you can see how the problems become exponential.
“You’re creating a regime of dual sovereignty.”
International dormant commerce clause cases are often said to weigh a balancing of the interests, and if it turns out you put the inspection issue on the scale, that’s an argument which counts as “don’t do this at all,” because if you’re in for a dime, you’re in for a dollar, and we’re going to have all sorts of very large and systematic conflicts that we’re going to have to solve before this thing can be settled.
I would look for this to be a cause of chronic problems because there’s going to be mutual distrust on both sides.
BOB: Also, if you inspect the product before it comes in, how do you trace back the bacon unless every pig cell has a serial number?
RICHARD: It presents certain novel administrative challenges.
Historical Perspective on the Pig Case
BOB: Give us a bit of historical perspective on this — going back to the other California law that banned a particular food product on animal rights grounds.
RICHARD: I actually had a brief role in working on another dormant commerce clause case, but you’re not talking about the pig. You’re talking about foie gras, so the dislocations that are going to take place are in a tiny fraction of what’s going on. So it’s not the entire displacement of the industry. The argument was that you could not serve it in American restaurants in California because of the way in which was manufactured. This was in fact, actually a more concrete argument, which says that in order to make foie gras, you have to stuff pigs in a way, which is extremely uncomfortable.
BOB: I think they’re called geese. I wasn’t raised on a farm either. Richard.
RICHARD: Well, whatever the animal that makes it, you had to distend the livers and create some sort of physical damage. That kind of allegation is not made in these particular cases. They say, “We think these conditions are not humane,” but they didn’t make an allegation that they were force fed in any fashion. The California law was upheld when it was challenged again in the Ninth Circuit against the dormant commerce clause, but it petered out and people were very strongly offended that major restaurants could not supply this. Foie gras is a delicacy and pork products are dominant products today. My guess is there are at least as many pork products than there are beef products, so when you’re talking about as a massive disruption of the market [as this], people who didn’t vote on the referendum are going to be outraged. You’re going to start to see immediate pushback starting to take place within the state legislature to get rid of the referendum. Then you’re going to see major pushback from all the pork producers around the country, in the Congress to get federal protection.
The Supreme Court can end this by essentially striking down this particular referendum or it can sustain the referendum, at which point the battle will then shift to other kinds of fronts. My guess is that you will also see some change in industrial organization. There will be some companies which will come by and say, “Everybody else is exiting the California market. We’re going to be the California piggery. We’re going to start a new business. Everything that we’re going to do is being key to California. We’re not going to sell anywhere else, but the California market is large enough,” and it may well be that you would develop some kind of market segmentation between dual entrance and the existing companies. That will take a little bit of time because you’re going to have to start new plants. The evidence seems pretty clear that the only way you can change plants that are currently in existence to meet the California law is to make them financially utterly unacceptable with respect to the rest of the nation.
If we had a captive California market with no competition, you would have both the safety feature on the one hand, and oddly enough, a monopoly feature on the other hand. It would be an open question as to how much of that stuff that you could sell. As I said, I don’t think it’s going to come to that.
Voting Shortcuts on the Supreme Court Bench
BOB: There’s a phrase in political science called voting shortcuts. Ilya Somin, over at the Antonin Scalia School of Law, refers to that in his book, Democracy and Political Ignorance. When the Supreme Court takes this case, is this one that will be decided along predictable constitutional law orientation lines, typically conservative versus progressive? The voting public often relies upon voter pamphlets to help them understand issues through a certain prism. Can you identify the outcome based upon the political orientation, either of a voter if this was on the ballot, or in the Supreme Court?
RICHARD: Let’s just take the two issues. One of them is how people vote when they have rational limitations on the amount of time that they could spend on election. The other is how will the issue resonate in the Supreme Court, given a liberal/conservative divide on this first particular question. Rational ignorance has been well understood in the political science literature, which is you have one vote out of many, and it’s not likely to change the outcome of any election. You feel a kind of a duty and an entitlement as a citizen to think about this, but you are going to look for shortcuts figuring out, “Well, who’s endorsing this bill? Who’s opposed to this bill?”
It may well be that you rely on the shortcuts to determine the way in which you vote. My view is it’s a big enough issue that it will not suffer from voter ignorance. This is going to provoke a huge uproar and response.
If you’re trying to figure out how to amortize water bonds, you’re going to have this rational ignoramce stuff. But I think this is closer to issues like, “What do we do with a woke curriculum when we’re running a public school system?”
There was rational ignorance in the state of Virginia, but when the Republican won the election, this was the issue that drove it. So I think this can be a driving issue when it comes to the Supreme Court. The dormant commerce clause seems to have bipartisan support. The left is generally against monopolies that are imposed by the state, as is the right. The difference between the two parties is whether the federal government has the power to rule comprehensively or whether it’s going to be limited only to those particular cases that involve transportation in like activities. So I cannot imagine that this thing will produce that kind of situation.
The two most reluctant members of the Supreme Court in dealing with the dormant commerce clause were the late Justice Scalia and his often traveling companion, current Justice Thomas. Their objection to this is not because of the economics, they’re constitutionalists. Their attitude is that the ambiguity that there is only an affirmative power for Congress to pass legislation, and it has to be an implied power on the states to limit it. They are very skeptical of that. So they want to give the commerce clause in its dormant aspect a very narrow reading.
If you took somebody like Justice Kagan or Justice Breyer, who’s retiring, they do not have this very literalist, formalist interpretation of the Constitution. They’re much more freewheeling. So the formalist objections are not going to weigh very heavily with them. Then the question is, how many justices of the Supreme Court think that states should be able to impose parochial barriers on competition? That number is pretty small.
Even Justice Scalia was prepared to strike down tax schemes at the state level, which were particularly odious, such as, “Oh, we’re going to tax you and the foreign companies equally, but then we’re going to have a rebate to the domestic companies,” which is just a fraud. The guy who struck it down was Justice Scalia when he was on the Court. I see this as being a more bipartisan situation. I do not see anybody who is going to be strongly opposed to it. My guess is if there were going to be a dissenter, the most likely person would be Justice Thomas.
His argument would be that there was no real dormant commerce clause, and this case does not fall within the prohibition on discrimination. I’ve tried to explain why I think discrimination is an important category, easy to police, but that states are much more dangerous when they can impose restrictions on other states even though it turns out that they do not have any product of their own.
I assume it’s going to be held over to next year, given the fact that we’re already in late April. The drift of the lower court precedents have been in favor of things like the California statute, but I think on this issue, the Supreme Court is likely to be more interventionists than was the Ninth Circuit.
BOB: So what’s your handicap number prediction on the outcome?
RICHARD: I think it’s 75% will be struck down and the likely vote is probably going to be seven to eight.
BOB: States for many years have prevented the interstate transpor, through Amazon and the like, of wine from California into New York state, because it hurt New York state vineyards. When you were describing the dormant commerce clause, doesn’t that run foursquare against it?
RICHARD: They’ve been struck down in some cases. The difficulty with all of this stuff is that alcohol was subject to the 18th Amendment when the prohibition took place and then it was undone with the 21st Amendment. That gave states residual power to regulate exclusive power over the sale of wines within their own borders. So that, in effect, creates the constitutional authorization.
There’s a famous case called South Dakota v. Wayfair, involving the question as to whether or not local states can impose a use tax on goods that were shipped within their states, or whether this was blocked by the dormant commerce clause.
Justice Kennedy said, “Everybody’s entitled to do this because otherwise there’s a tax abuse.” Now, what has happened is everybody’s managed to impose taxes on just about everybody else and it’s going to hurt and has hurt the interstate market. If you think of the billions upon billions of dollars of stuff that goes back and forth across state lines every year, and you realize that there’s always a very complicated contest between the federal governments and the states on the way in which these things are regulated, you can see that this problem is not going to stand or fall no matter how the big case comes out in the Supreme Court. This has been a battle that has gone on since the beginning of time.
There was a great case called Champion v. Ames from 1903 or so, and the question was if lottery tickets are legal in the state of New York, where they’re made, and illegal in the state of Pennsylvania, where they are sold, can the federal government prevent their shipment in interstate commerce on the grounds that they are illegal when they’re sitting in a train? The Supreme Court said that they could impose those kinds of restrictions. Most of us, myself included, think it’s an incorrect distinction on this situation, but it shows that this is a problem, which was really important very early on.
You may not care much about lottery tickets, but within a couple of years, we passed the Food and Drug Administration, and now the question is what sort of power does the federal government have over the shipment of drugs made in one state and sold in another? What you apply to lottery tickets you now apply to drugs. So it turns out that you have a huge extension of federal jurisdiction in an area that really matters in a way that lottery tickets do not. You can do an epic on the dormant commerce clause. I have strong feelings about this particular case, but we should treat it not as a war, but one battle in a war that began long before the case came about, and will last long after the case is decided.
BOB: We are now going to have not gun runners, but bacon runners who will drive to the Nevada/California border somewhere around Truckee, and are going to be emptying the trunk of their car with bacon produced illegally in South Carolina, and people in trench coats will be paying cash to buy it. That’s what’s in store for the residents of California.
RICHARD: It’s the same thing with cigarette taxes. Bacon and tobacco at the same time, and you and I will be middlemen and take our piece.