Can States Leverage Their Local Market to Force Out-Of-State Regulations?

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Emily Manning:  Hello everyone, and welcome to this Federalist Society virtual event. My name is Emily Manning, and I'm an Associate Director of Practice Groups with The Federalist Society. Today, we're excited to co-host a discussion titled "Can States Leverage Their Local Market to Force Out-Of-State Regulations?"

         We're joined today by Jack Fitzhenry; Professor Barry Friedman; Professor Michael Greve, who is currently troubleshooting some technical difficulties; and our moderator today is Elizabeth Slattery, a senior Legal Fellow at Pacific Legal Foundation. If you'd like to learn more about today's speakers, their full bios can be viewed on our website, fedsoc.org.

         After our speakers give their opening remarks, we will turn to you, the audience, for questions. If you have a question, please enter into the Q&A function at the bottom of your Zoom window, and we will do our best to answer as many as we can. Finally, I'll note, as always, all expressions of opinion today are those of our guest speakers, not The Federalist Society. With that, thank you for joining us today, and Elizabeth, the floor is yours.

Elizabeth Slattery:  Thank you, Emily, and thank you to The Federalist Society for organizing this teleforum. Under the Articles of Confederation, our central government lacked power to tackle trade problems. And throughout the 1780s, the states engaged in trade wars, and there was nothing the central government could do.

         Ahead of the Constitutional Convention of 1787, James Madison wrote in Vices of the Political System of the United States that states were acting adverse to the spirit of the Union and tending to beget retaliatory regulations that were destructive of the general harmony. Alexander Hamilton observed in Federalist 22 that, if these unfavorably regulations were not restrained by a national control, they would only multiply.

         The Constitutions Commerce Clause grants Congress the power to regulate commerce among the several states. Does this language encompass a limit on states' ability to regulate commerce? Proponents of the Dormant or Negative Commerce Clause maintain that it does. The theory that the Commerce Clause restricts state protectionism has deep roots, going back as far as Chief Justice John Marshall's 1824 decision in Gibbons v. Ogden, but in recent years, some members of the Supreme Court have shown an interest in re-examining the foundation of what they call a judge-made doctrine and unjustified judicial intervention.

         So is the Dormant Commerce Clause made up, or does it have originalist foundations? And what did the Supreme Court's most recent decision to wrestle with it have to say? Our distinguished panel will explore these and many other questions.

         Joining us today, we have Jack Fitzhenry. He's a Legal Fellow in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation. Barry Friedman, who is a professor at NYU School of Law where he teaches constitutional law, federal courts, and criminal procedure, and he's written extensively about constitutional law in theory. And hopefully, if he gets logged on soon, Michael Greve, our final speaker, is a professor at the Antonin Scalia Law School, and he's written several books, including The Upside-Down Constitution.

         So with that, let's get into our discussion, and I'll hand it over to Jack. He's going to start us off with an overview of National Pork Producers v. Ross and the battle lines on the Supreme Court over the Dormant Commerce Clause.

Jack Fitzhenry:  Great. Well, thank you, Elizabeth. Thank you to The Federalist Society for inviting me today. All expressions of opinion are my own. So at the Center of the National Pork Producers case is a 2018 California law known as Prop 12. Its proponents will tell you it was adopted to protect California's markets from unethically sourced animal products. It covered different categories, not just pork, but as it related to pork. It said that pork products could not be derived from animals who are confined in a cruel manner, meaning they couldn't stand up, lay down, or turn around.

         It was adopted in California with 63 percent of the vote. After it was adopted, it was subject to a legal challenge by two industry groups, National Pork Producers and the American Farm Bureau. They filed a lawsuit saying that it violated the Dormant Commerce Clause. Now, why do they have to begin with Dormant Commerce Clause? Well, because, despite some lobbying from the pork industry, Congress has yet to enact legislation that provided comprehensive uniform regulation for the industry.

         So to the Dormant Commerce Clause we go. It appears first in the district court where the Court dismisses the complaint stating that it failed to state a claim. That holding is affirmed by the Ninth Circuit with Judge Ikuta writing for a three-judge panel. Petition for certiorari is granted, and in front of the Supreme Court, the petitioners, the industry representatives, make effectively two arguments.

         One is that, implicit in the Court's Dormant Commerce Clause jurisprudence, there's a rule against extraterritorial effects, these being efforts by one state to control the behavior of market participants in other states. Failing that, they argued that, under the more traditional Pike Balancing test, that California's law imposed substantial burdens on interstate commerce that were out of all proportion to any putative in-state benefits.

         So how did this fare before the Supreme Court? Well, just in terms of results, we got a 5-4 vote in California's favor. Justice Gorsuch authored the primary opinion, portions of which command just enough votes for that outcome, but the reasoning is very splintered. So what I'm going to start us off with here is just a little walking tour through some of the opinions in this case.

         So the votes that Justice Gorsuch got were Thomas, seemingly for all parts of the opinion. My panelists can inform me if I'm wrong about that, but Thomas seems to join Gorsuch in all parts of the opinion. And then he gets Kagan, Sotomayor, and Barrett's votes for portions of that. The opinion starts on a unified note.

         Even the dissenting justices agree that we can reject the sort of extraterritorial effects test that petitioners had proffered. Apparent agreement may be a little misleading. I think if we delve into the Chief Justice's, partial dissent, we may see that there's not so much agreement on extraterritorial effects.

         But the basic consensus was that existing case law didn't support quite the rule that petitioners were offering. It would have called into question a whole host of long-extant state rules, including those on income tax, environmental protection, libel, law, securities, regulation, etc.

         Justice Gorsuch begins his opinion by nodding at some of the past criticism of the Dormant Commerce Clause, what we might, broadly speaking, call the positivist critique or originalist critique, depending on your view. It's a view popularly associated with Justices Scalia and Thomas, although it has roots that go back much further than those two justices.

         He nods at those criticisms, but said there's no need to go that route here. No one's asking the Court in this case to overrule the Dormant Commerce Clause. Still, we'll see elements of the traditional criticism incorporated into Gorsuch's opinion. He starts by saying that Pike Balancing is really about detecting hidden discrimination. Maybe no discrimination on the face of the statute, but it's a way of detecting hidden discrimination.

         And it's worth noting here that the petitioners conceded that, on its face, California's law doesn't discriminate against out-of-state pork producers or pork processors. They even, according to Justice Gorsuch, do not allege discriminatory effects, despite the fact that a considerable majority of all pork production and processing occurs outside of California.

         From there, we get the justices breaking off into the wind. Part B of the opinion says there's no freewheeling authority for the Court to strike down state laws on consumer goods, those being based on the Court's assessment of the relative costs and benefits. This is because Courts are not suited to this inquiry; it's an inquiry better left to legislatures or to the electorates.

         Justice Gorsuch maintains the competing goods presented by a law like California's are incommensurable with the effects on commerce. You have a moral argument about ethical treatment of animals and about safe products for consumer consumption versus the needs for efficiency in interstate commerce. He says these are incommensurable. Judges cannot effectively weigh them.

         He points out that there's a long history of states being empowered to ban unethical goods. Even in the 19th century, as the Dormant Commerce Clause doctrine began to take shape, decisions recognize the validity of the state power. Justice Gorsuch points, of course, to examples like goods made by child labor, although there are other examples.

         And this is the section where he takes the time to point out that it's easier for litigants or for business interests like the pork producers to collect the necessary majority of judges than it is for them to collect the necessary majority of legislatures to pass national laws. That part of the opinion garnered only Thomas's vote and Barrett's.

         Part C had to do with pleading standard here. Justice Gorsuch managed to get the votes of Thomas, Kagan, and Sotomayor. The general consensus was that there was a failure to allege substantial burdens on interstate commerce. Note that Justice Barrett does not join this part of the opinion. This is based primarily on past precedent, Exxon v. Maryland. The Dormant Commerce Clause protects interstate market from prohibitive burdensome regulations. It doesn't necessarily protect particular structures or methods of operation.

         He also pointed out petitioners are not without options. They can adjust the way that they produce and process pork in ways that would allow them to come into compliance with California's requirements, at least this is Justice Gorsuch's view.

         He goes on to criticize the Chiefs opinion at some length. He says this is a rule that doesn't really respect federalism. It would require any consumer good to be allowed into states, regardless of what kind of objections the populace of that state might have. Here, he points to products like horsemeat, fireworks, single-use plastic bags, which are subject to state restrictions, and noting that the Chief Justice's role, or the Chief Justice's approach, would not honor these types of restrictions.

         So there's a short concurrence authored by Sotomayor joined by Kagan. She leaves the door open, or both justices leave the door open for what we would call, not core Pike Balancing claims, ones where there is no facial discrimination, maybe not even any discriminatory effects, but a substantial enough burden on markets. It's really the last category that seems to be splitting the justices in this case. So they join as to the inadequacy of the petitioners' pleadings.

         Barrett does not join Part C. She says there is a substantial burden on interstate commerce. Nevertheless, she agrees that the benefits and burdens of the law here are incommensurable, and they are not things that the justices are equipped to weigh. She is very much picking up criticism that her former boss, Justice Scalia, was known to level against the Dormant Commerce Clause.

         Roberts concurs in parts. Again, he's punitively rejecting the Effects test, but dissents in part. He says sometimes there's no way to avoid the need to balance seemingly incommensurable values. He notes that the Court does it -- The Supreme Court is able to do it in other types of cases. There isn't a per se reason why it can't do it here.

         He says the Ninth Circuit was largely mistaken in its interpretation and application of existing Dormant Commerce Clause jurisprudence. He would like to remand the case back for them to have a closer look at not just the costs, which he says they incorrectly wrote off as compliance costs; he would like them to take into account some of the greater market effects and see if those actually add up in some sense against the putative in-state benefits for California.

         Justice Kavanaugh also writes separately to point out that, while this is a Dormant Commerce Clause case, other parts of the Constitution might be implicated here. He points to privileges and immunities. He points to, I think, the impose clause. And then there's a third, but I'm blanking on it. He's looking at other parts of the Constitution that he's saying arguably cover some of the same issues the Dormant Commerce Clause is supposed to work out.

         So that's, I hope, a quick overview, but I'm going to stop talking now and let other people get a word in.

Elizabeth Slattery:  Thank you. Barry, we'll hear from you next.

Prof. Barry Friedman:  Thank you. I'm very happy to be here, though I confess that, when I first heard we were talking about pork, I thought we were going to be discussing congressional spending, but I'm happy to talk about the Dormant Commerce Clause as well. And I have to say that either the weather is not as nice where everybody else is as it is where I am, or people have a very perverse interest in talking about the Dormant Commerce Clause, but I'm happy to accommodate.

         So I want to thank Jack for that wonderful discussion in the case and Elizabeth for moderating and Emily for hosting us here. And I'm going to pepper Michael with questions later. So I really just want to make a couple of points on a first pass, and then everybody's agreed to let me have a second pass just to ask a couple of idiosyncratic questions.

         You know, I think the really important thing to note first is that pretty much all the Dormant Commerce Clause jurisprudence survives and, B, at least some of that's a good thing, even if you're an originalist, and I want to defend an originalist view of the Dormant Commerce Clause, though Elizabeth stole some of that glory.

         So, to begin with, to paraphrase—Jack really took us through this, but I just want to summarize it—the Dormant Commerce Clause has for, most of my legal career, had two prongs to it: an antidiscrimination clause and Pike Balancing. And the goal of it is to keep open a common market in the United States.

         And after we come out of the Pork Producers case, not only do we not have any support for this idea of extraterritorial regulation, a ban on extraterritorial regulation, though I agree with Jack that I think the Chief Justice's opinion raises some questions there, but the fact is that we have full-throated support for the antidiscrimination rule. It seems like everybody on the Court is pro-antidiscrimination in commerce, and so that's great.

         And then when it comes to Pike Balancing test, Justice Kavanaugh tells us that the Court is 6-3, but—and I consulted with Jack before and I think we're in agreement—I count 7-2 because it's a little unclear where Justice Barrett stands, but it looks to me, by the end of her separate opinion, that she's saying, "Were the values not incommensurate here, I'd be willing to balance under Pike."

         And so we leave this area with the law pretty much untouched. The only thing I will say is that there's maybe more of a hunger or willingness to think about balancing even when there isn't discrimination that we see in the Chief Justice's opinion, and that may be worth talking about.

         The other thing I really want to say is that, at least insofar as the antidiscrimination part of the Dormant Commerce Clause is at stake—and I'm going to focus there—it's a good thing. And it's not only a good thing, but there's a really strong originalist argument that it's the right thing. So it's hard to imagine the country doing well as a commercial entity if states could discriminate against out-of-state actors in the market.

         And the framers of the Constitution understand that perfectly well. As Elizabeth told us, there were trade wars that were leading up to the adoption of the Constitution. And the Constitutional Convention thought about what to do about this, and Madison, in the Virginia Plan, suggested that there was an easy answer, which is Congress should have a negative, should be able to just strike down any state laws that were problematic under the Constitution. And despite his zeal for the negative, he lost. And there were a number of reasons that he lost, one of which was that everybody thought Congress couldn't keep up.

         And so the alternative was the Supremacy Clause and the idea that Courts would, in fact, be the ones to step in when it was that states were violating the Constitution with state laws. And that strikes me is just about as good an originalist argument as you can get.

         Now, Justice Scalia and Justice Thomas and now, perhaps, Justice Gorsuch have issues with that. I want to point out that there's two different kinds of issues you could have, by the way. So Justice Scalia has never been a fan of incommensurable interest balancing. And I don't think that preference actually undercuts an originalist view because, if you limit the Dormant Commerce Clause to the antidiscrimination test into one small set of cases about instrumentalities of interstate commerce, things like mud flaps on trucks or the length of trains, there's not really much incommensurable balancing to go on at all.

         And I think we'd be perfectly fine in a world in which we didn't have Pike Balancing; in fact, I think we've very had very little Pike Balancing in recent memory, and no one on the Court seems to be able to cite any case that goes beyond antidiscrimination and instrumentalities of commerce beyond Edgar v. MITE, which I'm not even going to begin to try to describe to you. So other than that, there seems to be no imperative.

         The other reason that you could be against an originalist understanding of the Dormant Commerce Clause as prohibiting antidiscrimination findings by the Courts as well is because you think that, in fact, the framers didn't intend it. But how do you think that? Because it seems to me that, again, the story that I've told you is the correct one.

         Now, Justice Thomas's answer to that is that it would be absurd because it would basically be saying that the power to regulate commerce among the several States is exclusive in Congress, and states can't do it. And as we all know, states pass laws all the time that regulate interstate commerce. But I think the problem is that that has sort of a blind eye to part of history because, at the outset of the Constitution, everybody did think that Congress had an exclusive authority over interstate commerce.

         Now, that didn't mean that the states couldn't regulate; they could, but that was their police power. And Courts struggled to define the distinction between what was properly the state's under the police power and what was properly Congress under its exclusive power to regulate interstate commerce.

         Now, over time, that view erodes somewhat, and we start to get a bunch of tests that I'm sure many people have heard about, whether effects are indirect or direct, or what's properly the states' versus Congress, because they're struggling with the fact that, in an increasingly integrated interstate market, it's hard to imagine the states not having power to regulate that market or have passed laws that have an effect on the market. But still, it's the case that, at the very beginning, it was thought that Congress's power was, in fact, just to regulate interstate commerce exclusively.

         So that's my argument why we're in good shape with the law as it is. I don't know if we need Pike Balancing. And I think there's a good originalist case, and I have always thought that was to be the case, so I'm glad the Court is where it is. And I'm going to stop now so we can hear from the indomitable Michael Greve, and then I'm going to get a little round to just ask a couple of questions.

Elizabeth Slattery:  Thank you, Barry. Over to you, Michael.

Prof. Michael Greve:  Yeah, thanks. Apologies for being a little late. I'm a computer idiot. I may also be a constitutional idiot. We'll find out. I want to do one thing, which is put this case, this decision, next to a case of decision decided the same term. It's called Mallory v. Norfolk Southern Railroad. And the cases have a great deal in common, and they have sort of a unifying theme, which I will spend a few minutes on.

         So what that case is about, Mallory v. Norfolk Southern, is whether a company's mere registration in the state confers general jurisdiction on those states' Courts, even if neither the event nor either party has a presence in the state, or at least the case is not predicated on the domicile of the parties.

         And it's 5-4. And the Court says, "Yeah, sure, no problem." So what this means is that, any state where a company has to register, meaning every state, is now subject to the general jurisdiction, no matter what happens in the rest of the country. Like the Pork Producers case, that decision is very badly splintered. Like the Pork Producers, the opinion is written by Justice Gorsuch with no peep-off caveats or caution by Justice Thomas, and stakes out a very aggressive position.

         Both decisions are extremely bad for actors in interstate commerce, right? Because, under the National Pork Producers, you're subject to regulation in any state that wants to regulate you. On the Mallory's, you're subject to general jurisdiction over anything in every state in the country. And under both decisions, the most aggressive state sets the terms of the debate. And both cases effectively say that claims that rests on extraterritoriality are basically out.

         Justice Alito, in the Mallory case, tries to salvage a little bit of that and says, "Look, I don't believe the notion that these extraterritorial exercises of state court jurisdiction have to do with a due process case so long as the parties consent to the jurisdiction, but I do believe that there's a very serious Dormant Commerce Clause problem, and that is where we should park extraterritoriality concerns."

         And then you read the Pork Producers case that says, extraterritoriality? That argument "falters out of the gate." So that's where you basically are, and that's the last thing these cases have in common, embezzlement refusal in particular on the part of the originalist justices  -- I mean, the self-conscious originalists, Justice Gorsuch, Justice Thomas, to make any sense of federalism's horizontal structure.

         And so what that might look like -- I want to take a step back and see how one gets to a theory of extraterritoriality or constitutional injunctions against the extraterritorial exercise of state power without breaking a leg. You start with the premise which you get from the Constitution, which is that states are equal, states are territorial, and they have a certain measure of political integrity; we don't mess with their internal political structure, right?

         From that, it follows that they can regulate and tax their own citizens, but not the citizens of the other states. You know, they have their internal affairs, but they should stick to their own knitting. And then you have to work through that. What exactly does that mean? And you have to have a theory of that.

         One piece of the theory is that, as Barry noted, there is, in fact, an exclusive Commerce Clause over some range, and then you have to figure out what that range is, and you can have various opinions on that. And you have to figure out exactly what does it mean. What is the state's jurisdiction? They cannot act beyond their own jurisdiction, but what is that? And there again, you need the theory.

         That theory cannot be purely based on practical effects because anything the state does has upstream and downstream effects, and so that would mean they can't do anything at all if it affects somebody else elsewhere, and that can't be right. I believe you cannot go to ad hoc balancing, whether commensurate or not. I think you ought to strive for some rules.

         I had actually hoped that they put the balancing stuff, the Pike issues, aside, with one exception that I would be happy to talk about. So what are the rules going to be? One set of rules you can get from the Constitution, right? And it's nondiscrimination. The Privileges and Immunities Clause is a nondiscrimination clause. The Import-Export Clause is a nondiscrimination clause, and the Dormant Commerce Clause, as it stands, as Barry and Jack have explained, that's also a nondiscrimination rule. Okay.

         That gets you part of the way in circumscribing state jurisdictions because what you're effectively saying is that, if the state wants to do bad things to actors in interstate commerce, it has to do the same bad things to its own citizens and that disciplines states to some extent. You can try to operate with some distinction between the police powers and direct regulations of interstate commerce. The Court has, at times, done that, and that works over some range.

         The horror of this decision to my mind, National Pork Producers, is that, here, you can actually think of a rule that's relatively straightforward and easy and that works over a wide range. It's okay for a state to regulate the quality of a product that comes into its jurisdiction. That's the plastic bags. That's the horse meat. That's all kinds of things. Quarantine laws are okay. Inspection laws are okay. Nobody has the slightest doubt about that.

         It's a completely different matter to regulate the conditions under which some product is produced in other states, and that's what they're regulating here. And so that's as sensible a line as I can come up with because you can say, "Well, that's beyond the police power," or you could say, "Well, the State of California has no legitimate interest in regulating the condition of pigs in other states. If it wants to do it to its own producers, that's perfectly fine." You can say they're exporting regulation while they're importing goods. That's a perfectly sensible way of phrasing the issue.

         One way or the other, I think the line between the product itself and the conditions under which it's produced holds. And the reason why it will hold and has been a traditional instrument of international trade law is that it's the only arrangement that keeps peace among states because this opens the door to mutual aggression. And that's the thrust of Justice Kavanaugh's opinion, as I understand it.

         So no, we won't import any product that comes from a state that permits abortion or from a state that prohibits abortion. What's to stop them? And that kind of cultural political mutual aggression is every bit as destructive of the union as our trade barriers, which are the focus of nondiscrimination rules.

         Again, these theories were underarticulated by the parties for reasons that I'm happy to explain. It's understandable, but it's, to my mind, also very unfortunate because these cases open the doors to an awful lot of mischief.

Elizabeth Slattery:  All right. Barry, I know you had a few burning questions to pose to our fellow panelists.

Prof. Barry Friedman:  Yeah. They're just really fire starters to talk about, I think, some interesting things about the case, Elizabeth, and thank you. And they're related. So the first has to do with what it means to discriminate against interstate commerce, and it arises from the following observation, which is that everybody seems to agree that the law in California does not discriminate in the sense that it treats in-state and out-of-state producers the same way.

         And if it treated in-state and out-of-state producers differently, then we'd be in a really serious situation, and I think the Court would unanimously strike it down. The curious fact is, for all intents and purposes, California doesn't really have in-state pork producers. They may have some, but it's a very tiny amount of the market.

         And so, because I'm interested in political process theories of the Dormant Commerce Clause, the question is, why, in a sense, isn't this discrimination? The state is adopting a regulation that says that all these out-of-state people have to change their practices, and it doesn't affect in-state folks.

         Now, the answer, both formally being that, if there were in-state producers, they'd be treated the same way, or, as Michael Greve reminded me when we discussed this earlier, you'd run into some trouble with an old case of the Court's, Exxon v. Maryland. And it's worth just looking quickly at Exxon because I think I want to ask Michael if it's exactly the same.

         So in Exxon, what happens is that, after the gas shortages of the 1970s, which some of us can remember and some of us were new drivers who were lucky enough to then get to stand in the gas lines with our cars since we could drive, Maryland found out that what was happening was that refiners that owned service stations were giving preference to their service stations. And Maryland said, "Well, we're going to put a stop to that. If you're a refiner, you can't own service stations."

         So all the refiners that had their own service stations had to divest, or stop being a refiner in Maryland. And it was challenged under the Dormant Commerce Clause, and the Court said, "There's no discrimination here because there are no refiners in Maryland, and so all refiners are treated the same way. It just so happens that all the refiners are out of state. And by the way, there's no discrimination between in- and out-of-state service stations because, even if these refiners divest, there's going to be some other out-of-state service stations that can swoop in and grab that part of the market."

         So that's fine, but it does make me wonder whether that's really this case because that's a case of pure economic discrimination that the Court finds doesn't exist. Here, there's something different going on, which is that, California isn't disadvantaging out-of-state producers—and who cares, because it doesn't have in-state producers—but it's all an economic argument. This is a situation in which the argument is really about California's moral values about the production of pork as against out-of-state producers.

         Now, that leads to my second question, which is really the one Michael was hinting at and Justice Kavanaugh has some things to say about, which is, what's really fascinating as the undercurrent of this case is the question about moral or ethical obligation. And that gets framed by Justice Kavanaugh in terms of, are you going to ban goods that were produced by firms that pay for or don't pay for abortion services or that do or don't employ immigrants?

         But we are already seeing the signs in this country of things like shield laws and states seeking to impose their extraterritorial regulation over people, for example, going out of state to get abortions. And Justice Gorsuch says states can't prosecute people criminally for things that happen out of state unless it has an effect in the state, but that doesn't answer the question because you have to define what's an effect in the state.

         And I will just note one thing and then I'll stop, which is, it is interesting that, when some of the justices talk about balancing incommensurables, I can't help but wonder whether this isn't on their mind. So Justices Gorsuch, Thomas and Barrett do not believe in balancing incommensurables, and the rest of them, I think, do. And that's exactly what's going to be at stake should we get to these kinds of moral regulations with out-of-state effects.

         And I will just finally, because I am at heart a person who cares a lot about criminal procedure and runs a project called the Policing Project that has to do with police reform, which is that the justices balance incommensurables all the time in criminal procedure. They spend all their time balancing those incommensurables. So part of me reads this entire decision, scratches my head, and wonders what the heck they're talking about. But I will stop.

Prof. Michael Greve:  I'll take a whack at it. Eons ago, our common friend, Richard Epstein, and I wrote a piece about the Dormant Commerce Clause, including the Exxon case, and we concluded we have no really good answer here and don't know how to think about this. That must be the only time that Richard Epstein has consented to writing a sentence like that on paper.

         And the problem is generic because, as I said antidiscrimination rules are second-best rules, right? You hold the in-state parties hostage, and when there are no hostages, then you have a problem and you have no ready answer. Part of the answer maybe -- and I'm saying this is all circumspection because I'm not confident of what comes now. Maybe that's the point of these balancing tests, these tests that go to excessive burdens on interstate commerce because their way of smoking out what is really discrimination, right?

         And I think Barry and maybe Jack sort of agreed with the balancing, with that version of some sort of balancing. The problem is not commensurates versus incommensurates. The problem is that balancing tests happen in some way, and so long as you link it to smoking out discrimination, it doesn't go off the rails in a way that the critics of the Dormant Commerce Clause always say it has gone and will go off the rails.

         Having said all that, I agree also with Barry that this case is different from the Exxon case in the way he describes and for the reasons he describes. And one way of putting it is that, look, at least in Exxon, there is a discernible economic interest that the state has, which is to produce its in-state market participants from being owned by out-of-state refineries.

         That may be protectionist, and it may be stupid in all kinds of ways, but at least it's something where I can sort of see the rationale at least in terms of political theory. Here, I can't see the domestic interest at all other than we want to feel better about ourselves. Because, internally, the market structure doesn't change because they don't have any pork producers or a handful only.

         It changes the market structure outside the state in a very, very major way, but that doesn't count under Exxon. And because pork is pork, no matter how it was produced, this is not a health safety measure in any way, shape, or form, so the only interest is we want to feel better about ourselves because we've now told farmers in Nebraska how to raise their pigs. And that strikes me as somewhat weird and a step beyond Exxon. I don't know whether Barry or Jack agree with that tirade.

Jack Fitzhenry:  I'll say that when -- I'm making no particular defense of the California law, but when its proponents tried to defend it, in addition to the ethical concerns about the treatment of animals, they did argue, whether plausibly or not, that the confinement of swine in this way, basically confining them with their own filth, would make a less clean, less healthy product. I have no idea if that was well-founded or not.

         They did take a stab at a more practical justification that put them maybe closer to production concerns than just the ethical argument. I think that points out the difficulty, which is that clever legislators, much like clever litigators, can typically tie in a concern that's near to the heartland of permissible state powers and perhaps screen a motive that is not going to pass judicial muster.

         I think, as it relates to the protectionist rationale that the Court seems generally okay with, the late Justice Scalia seemed to think that a certain part of Dormant Commerce Clause could withstand even his own withering critique of it, and that seemed to be the protectionist core. He seemed to think there wasn't enough in the way of reliance interests in any broader kind of Dormant Commerce Clause analysis precisely because it was so shifting, so unreliable, and something neither the regulated nor regulators could anticipate in such a way that they could order their conduct around it.

         And that strikes me as compelling in some sense, right? Part of the reason that some of the justices are uncomfortable with balancing putatively incommensurable values is because it seems far afield from the judicial function as they think of it, right? To them, much of Dormant Commerce Clause sounds like trying to rationalize economic analysis and then, when you add in the difficulty of these moral considerations, the task seems to get even further away from the kind of stuff you'd learned in law school or on the bench.

         But a core part of the judicial function is, of course, providing stability and protecting stable expectations. And so I think that part of the reason you get a kind of coalescing around the anti-protectionist rationales -- because that has pretty firm roots in the founding. And maybe this is or isn't the method the founders envisioned using to protect that value, but it's close enough.

         It strikes me almost more as a substantive due process, like a conservative version of substantive due process. When I read Alito's concurrence in Mallory and he acknowledges, yes, there are trenchant criticisms of Dormant Commerce Clause, many of them coming from the originalist sphere, but this is longstanding in our jurisprudence. It would be strange if the Constitution didn't protect it. Maybe these other clauses, the Full Faith and Credit Clause—which is what I couldn't think of earlier, among others—maybe these protect the same types of interests, maybe a narrower band, but similar types of interests.

         And so this is really where the caseload takes us. That's not so far afield from what he did in Dobbs last term, at least methodologically. I think there are originalist criticisms of substantive due processes of doctrine, but he is willing to take a combination of founding era concerns, mix it with history, and provide a restraint on judicial innovation in that way. I might be quite off bae about that, but it was an analogy that had occurred to me as I was trying to make sense of the current Court's view on Dormant Commerce.

Prof. Barry Friedman:  So I'm going to just --

Elizabeth Slattery:  Go ahead.

Prof. Barry Friedman:  Sorry. Did you want me to stop? I'm happy to stop.

Elizabeth Slattery:  No, no, no. Please go ahead.

Prof. Barry Friedman:  Just a couple of side points about the Dormant Commerce Clause before I slide back into the moral challenge, which is, I don't think that -- I have to confess, I had a hard time understanding the Chief Justice's dissent in terms of the difference between compliance costs and other costs. They all looked like similar costs to me, and so I'm a little bewildered there.

         Turning to the moral, I guess I have a grave note, and then I guess I have a more optimistic note. So when Congress is concerned, I don't find this complicated at all, and I think the reason that it seems like most of us here agree is that, I am untroubled at some level by lopping off the free-ranging balancing of the Dormant Commerce Clause because Congress can always step in. And, in fact, I am of the school that believes we would benefit as a country from forcing Congress to step in more than it does and to figure some things out, which it's not very good at doing right now. So I'm happy to give those to Congress.

         The more grave note, with regard to the moral-ethical regulation -- which, by the way, Justice Gorsuch points out that states have a long history of banning things like horse meat or whatnot, and that seems to be the same motivation. But I think back to fights about slavery, frankly, and very similar claims about -- and child labor and claims about what it was that in-state citizens were allowed to express their views about that would affect the out-of-state market, and some of that didn't work out so very well for us as a nation.

         It's because they're deeply problematic to resolve these questions, and Congress itself had serious trouble resolving this question. So I'm not optimistic here, I really have a sense of dread about what's ahead for us as we get into these moral battles among states, so I'll just leave you the sense of dread. I don't have anything better than that.

Elizabeth Slattery:  On that uplifting note, let's turn to some audience questions, and I would encourage others to please drop a question with the Q&A feature if you have one. So one question is about, if we let the most extreme state dictate policy that affects the whole country, how do Americans have the ability to vote with their feet? Do they all need to move to California?

Prof. Michael Greve:  Well, the short answer is no, they don't have that option. And this goes not just for the consumers; this goes for the producers as well. That's the dilemma here and the problem. Over this entire project hangs a giant no exit sign, right? Under these arrangements that set extraterritoriality aside and say, "Never mind; any state can regulate to the ends of the earth," or at least the ends of the country.

         You know, once that's true, it's no exit for anybody. How that plays out in any individual context depends on how big is the state, what's the market power of the participants, how easily can they evade these restrictions, on and on and on, but that's the general pattern of uncertainty.

Prof. Barry Friedman:  And that's the congressional -- I mean, that's the Congress point, which is that, turns out there is an entity in the United States of America that has the power to preempt these state laws and actually exercises that power quite frequently. So it then just becomes a fight. You know, it's an interest group fight that just moves up a level.

Prof. Michael Greve:  Yeah, with one caveat, Barry. I'm pretty sure we agree on this. The usual congressional response is to put the states out of business by means of preemption and say, "No, sorry, guys. Supremacy. Shut up. It's now ours," right? What Congress has done only very, very rarely is to ensure free trade or free commerce and free interaction among and across states.

         I think it has, for example, legislated under the Full Faith and Credit Clause, even though it has the authority to legislate pursuant to that clause, maybe three times, four times in our history. One time they tried that, that was the DOMA provision. That was struck down. It's unconstitutional of all things.

         Another example is the original Full Faith and Credit Act, which basically replicates the constitutional provision Congress has. When it acts with an eye towards interstate relations, I think it has much more frequently affirmatively permitted states to discriminate, right? So the McCarran-Ferguson Act with respect to insurance is one example. There are other examples like that.

         With that one caveat. I agree, and it's an important point, and an important point that distinguishes these due process cases from Dormant Commerce Clause cases, right? Once you say it's due process, substantive due process, stop it. No state can do anything at all, whereas the Dormant Commerce Clause is this sort of form of constitutional common law, by which I mean that Congress can replace it.

         It's not clear to me that the originalists believe it, that there is such a thing as constitutional common law. That is part of what explains Justice Gorsuch's and Justice Thomas's position here, right? But if you take that position, anything that smacks like constitutional common law in the sense that Congress can displace it, it's just a default rule.

         I mean, my, do you have your work cut out, right? Because it turns out the second holding of McCulloch v. Maryland is wrong. I'm perfectly happy to have that debate, but one ought to be candid about, if that's the project, then by all means, let us know.

Jack Fitzhenry:  I think the common-law approach here that seems to have characterized the Dormant Commerce Clause jurisprudence since its inception -- One, of course, we know there's no written Dormant Commerce Clause. And the written Commerce Clause itself, assuming it provides the kind of negative that the Court has long assumed, it doesn't offer the Court standards than to employ.

         So, yes, what it has to do is, is a type of common law -- You know, it sometimes it looks like balancing, for lack of a better word. And as Barry pointed out, it's something the Court does frequently in a variety of contexts. And the Chief points this out in his partial dissent. There are lots of times that the Court has to balance incommensurable values.

         I may be mistaken about this. I'm reasonably sure, though, that in one of the Scalia dissents or concurrences on the Dormant Commerce Clause—I think it was Bendix—he tries to take on the kind of common-law criticism and says something to the effect of, "Well, when the Court is busy protecting federal right, this is just part of the judicial task is having to balance state authority versus the rights and liberties of individuals."

         With Dormant Commerce Clause, at least in his view, it was a little less straightforward, and it may be that industry participants enjoy kind of a derivative right to operate free from some kind of unlawful interference, be that state or federal. But ultimately, what the Court is faced with is a kind of balancing between defending residual state sovereignty on the one hand, and defending the needs and demands of an open and free marketplace against one another.

         And the notion that what's being defended here is not so much individual rights, but a market interest seems to find expression in the fact that, as the Chief points out again in his partial dissent, the pork producers are talking about upstream effects; not just the compliance costs that they personally have to endure to bring their facilities into compliance with California's law, but just the kinds of ways in which California's law discourages producers from sending their goods into all sorts of marketplaces.

         Anyway, the Scalia answer, to the extent he ever answered the criticism, seems to be that common law in the federal sense may be appropriate in certain areas, maybe not in others. Dormant Commerce Clause may be less constitutionally susceptible of common-law approach, even though as a practical matter, it seems to demand it.

Elizabeth Slattery:  So one question for the group. Are there any issues that are being litigated in lower courts right now that have implications for the Dormant Commerce Clause, and should we keep an eye on them?

Prof. Michael Greve:  I think the big issue here—and their case is rattling around left, right, and center on this—is climate regulation by states. And you can see how that raises the concerns that Barry alluded to and that Justice Kavanaugh conjures up. States that respond to authentic environmental demands at home, we want to do our part to stop or arrest or reduce climate change.

         Can't do very much -- I mean, they're at a competitive disadvantage with states that are a little more pro-carbon energy. And they can't do anything about that except to raise the price of producing energy in those states, and there are various ways of doing that.

         And here, as in many other contexts, California has led the way. It's gotten away with that in a bunch of cases, 15 years of litigation, Rocky Mountain Farmers Union v. Corey. You start looking up on Westlaw, that's an endless list of cases because it's spent a lot of time in the Courts.

         There are many, many similar cases from around the nation, and considering how intense the litigation in the carbon wars has already been, I would expect more of that. And it remains to be seen how much of a role the Dormant Commerce Clause plays in that context because it's the same set of problems about importing goods, in that case, energy and exporting regulation that goes along with it.

Elizabeth Slattery:  Barry, Jack, any other issues we should keep an eye on?

Jack Fitzhenry:  I'll chime in quickly just to steal the case that Professor Greve talked about in his opening remarks, which is Mallory v. Norfolk Southern. For those of you who didn't follow the case closely, part of the reason that Alito wrote this concurrence about Dormant Commerce, even though dormant Commerce did not end up getting litigated this time around, is he thinks it's the central issue on remand.

         And that's precisely what happened to the case. It's being remanded. It came out of state court, so it's going back to the Pennsylvania state court system where they will have an opportunity to address Dormant Commerce. The Pennsylvania Supreme Court seems sufficiently skeptical of Mr. Mallory's claim.

         The first go-round, I think they will take Justice Alito up on his invitation to overrule the Pennsylvania statute or call it unconstitutional on Dormant Commerce Clause grounds. No guarantee that the Supreme Court then takes a cert petition from there. But the counsel for Mallory—which is Keller Postman—Ashley Keller was on a FedSoc podcast not too long ago with Judge Katsas saying, "I fully intend to argue the Dormant Commerce Clause is unconstitutional." So his briefing should provide for some light reading for people interested in the originalist case on this.

Prof. Barry Friedman:  I'll just take one second, because I can see we're just about to be out of time, to say one of the questions was asked about cannabis and rules about—shouldn't get off a call without talking about cannabis—whether the state can favor in-state sellers of cannabis.

         And under Tennessee Wine, which is a case I actually discussed with Elizabeth's partner in the Dissed podcast, Anastasia Boden, those kinds of residency requirements are unconstitutional, at least unless the state can show some kind of compelling interest, which would be tough to do.

Elizabeth Slattery:  Well, thank you for that plug for my podcast, Dissed. Check it out. But we've come to the end of our hour, so I want to thank our panelists and thank everyone for joining us.

Emily Manning:  Thank you all. On behalf of The Federalist Society. I want to thank our panelists and our moderator for the benefit of their time and expertise today. Thank you also to our audience for joining us. We greatly appreciate your participation. Check out our website, fedsoc.org, or follow us on all major social media platforms @fedsoc to stay up to date with announcements and upcoming webinars. Thank you once more for tuning in, and we are adjourned.

 

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