Jun. 30, 2008 – Clashing over interstate commerce

By Steve Bauer
Managing Editor
What figures to be a decisive issue in a potentially far-reaching dealer-manufacturer civil complaint has been at the center of some of the fiercest legal fights in U.S. history, and to this day is debated in courtrooms across the country and on the floors of Congress.
The issue is interstate commerce, a clause in the Constitution that refers to the purchase, sale or exchange of commodities, money or goods between different states.
The clause is at the heart of a civil complaint that is pending between Yamaha Motor Corp. USA and Team Bozeman Motorsports and Tingley’s LLC in Montana.
Yamaha is challenging a 2007 Montana state law, called the Motorsports Vehicle Manufacturer Unfair Trade Practices, which requires all motorsports vehicle manufacturers and distributors to offer the same price on every unit sold to every Montana motorsports dealer. Yamaha states in its complaint that any law passed by a state that protects itself economically at the expense of other states discriminates against and burdens the interstate commerce clause.
Similar legislation to Montana’s has been introduced in states such as California and Wisconsin, with several more states closely watching the developments of the complaint.
Interstate commerce can be regulated by the federal government when it might impact interstate movement of goods and services. The federal government also can strike down state actions that are barriers to such movement. This aspect of the clause, which is commonly intertwined with the term “states’ rights,” has private businesses not only fighting with the U.S. government, but also with themselves over such issues as whether a company that conducts business on a national level can favor one state over another in terms of quantity and quality, time of delivery or special rebates or discounts, for example.

Interstate commerce’s long history
Among the powers granted to Congress in the Constitution is the power to regulate interstate commerce. Since the clause’s inception in the 1700s, however, legislators, lawyers, politicians and business people have argued over just what the commerce power means.
“For instance, it may be clear that the commerce power would give Congress the ability to make laws regarding transportation networks, such as train lines and highways, that cross state lines,” said Roger Karles, a California-based lawyer who has been involved with commerce law for more than 20 years. “The biggest questions that have been raised are whether the federal government has the right to establish regulations on the production of goods and services that will eventually cross state lines, and what rights states have to protect themselves against unfair sales practices?”
Karles says these questions have been answered and then reversed numerous times by the U.S. Supreme Court since the 1800s, meaning the question of what the commerce clause entitles Congress to do and legislate on is still a very open question.
“Since the mid-1930s, Congress and the Supreme Court have tended to view the commerce power rather expansively,” Karles said. “In other words, the commerce power is used to justify a wide range of powers and legislation, some of which have only a marginal link to interstate commerce.”
During the decades following the 1930s, however, those powers came into question from several states that filed lawsuits claiming the federal government was abusing its power and hindering the state’s right to allow its private sector to conduct business.
“There has been a constant battle between federal and state governments ever since a famous Supreme Court decision in 1933 was handed down in favor of the U.S. government stating that no state can create laws that would give itself an economic advantage in business matters over other states,” said Curtis Mayfield, a professor at the University of Minnesota School of Law.
Mayfield says it’s a complicated issue because states are allowed to do things such as change their tax bases or discount land to attract businesses, but cannot create laws that would require all manufacturers doing business in the state to provide local business with special discounts, faster delivery, etc.
“Since that Supreme Court case in the 1930s, however, there have literally been hundreds of cases fighting that law,” Mayfield said, “and over the course of 70 years, decisions have been overturned and reversed so many times that this area of commerce law is full of gray areas. The Commerce Clause has been used to fight civil rights, illegal trafficking of immigrants and tollway rights on interstate highways. You name it, it’s probably been thrown under the Commerce Clause umbrella.”

Power to Congress or the courts?
A series of cases decided in recent years has brought into question whether the U.S. judicial system should even have a say in who has the ultimate control over interstate commerce.
Karles points to a case he was involved in two years ago where federal attorneys argued successfully that the Commerce Clause justifies a federal court in nullifying any state legislation it concludes imposes an “undue burden” on interstate commerce. The case is now in appeals court, and Karles believes it will eventually be heard by the Supreme Court.
“I think that whether state legislation imposes an undue burden on interstate commerce raises pure questions of policy, which the Constitution intended should be resolved by the Congress,” Karles said. “The Commerce Clause of the Constitution states clearly that Congress shall have power to regulate commerce among the states, and I believe that this provision means that Congress can regulate commerce, and that the courts cannot. Regardless of which side of the coin you’re on, this is going to have large ramifications.”
Mayfield agrees that although the ruling in that case will be very important, it’s not a new game to those who know the history of the Commerce Clause.
Recently in two separate cases, the Supreme Court reasserted its power to invalidate state laws on the grounds that such legislation put an undue burden on commerce, he says. “The court basically assumed the role of a ‘super-legislature’ in determining matters of governmental policy.”
But Mayfield says the Supreme Court has a history of changing its interpretation of the Commerce Clause, specifically when there are more conservatives appointed to the bench than liberals.
“As the country becomes more entangled with global corporations and other entities, the courts are going to find it more and more difficult to side with local businesses or state legislation,” he said. “It does make a difference who is sitting on that bench, but at some point I believe the courts will have to bow to the Constitution’s literal interpretation of the Commerce Clause, which is there to help prevent corruption between states and private entities.”