Tag: Commerce Clause

Shooting for State Sovereignty

On October 1, 2009, Montana passed the Montana Firearms Freedom Act, the purpose of which was to regulate guns manufactured and kept within Montana state lines under a less restrictive regulatory regime than federal law provides. That same day, to ensure that Montanans could enjoy the benefits of this less restrictive state regulation, the Montana Shooting Sports Association filed a declaratory judgment claim in federal court.

The lawsuit’s importance is not limited to Montana, as seven other states have passed laws similar to the MFFA and 20 states have introduced such legislation. The goal here is to reinforce state regulatory authority over commerce that is by definition intrastate, to take back some of the ground occupied by modern Commerce Clause jurisprudence.

The district court granted the government’s motion to dismiss, however, and MSSA appealed to the Ninth Circuit. Now on appeal, Cato has joined the Goldwater Institute to file an amicus brief supporting the MSSA and arguing that federal power does not preempt Montana’s ability to exercise its sovereign police powers to facilitate the exercise of individual rights protected by the Second and Ninth Amendments. More specifically, for federal law to trump the MFFA, the government must claim that the Commerce and Necessary and Proper Clauses give it the power to regulate wholly intrastate manufacture, sale, and possession of guns, which MSSA argues is a state-specific market distinct from any related national one.

Our brief argues that federal preemption would violate the “letter and spirit of the Constitution” and that heightened judicial scrutiny is required whenever the federal government invokes an implied power to override state sovereignty. The MFFA should not be preempted because: (1) principles of state sovereignty limit federal power; (2) preemption would violate the federalism framework established in National League of Cities v. Usery; and (3) preemption would not allow state sovereignty to serve its role as a proper check of federal power. The Supreme Court has made clear that Congress is not the sole venue for states and individuals to seek protection from federal overreach and so this case is fundamentally a dispute over federalism—which should allow for state regulation of local matters to flourish in concert with federal power over “truly national” concerns.

Allowing preemption here would have the perverse effect of allowing the federal government to regulate “states as states” while impairing states’ ability to operate in areas of traditional governmental functions. The Ninth Circuit should thus find that district court committed reversible error in dismissing the lawsuit and, as a result, MSSA should be allowed to pursue its case beyond the pleadings stage.

The Ninth Circuit will hear the case of Montana Sports Shooting Association v. Holder in late summer or early fall.

My First Year Battling Obamacare

Most people are by now familiar with the broad strokes of the lawsuits challenging Obamacare: more than 30 cases around the country allege, among other claims, that the federal government lacks the constitutional authority to require people to buy a product (the individual health insurance mandate)—and the only way to avoid the mandate is to become poor.  After decisions going both ways in the district courts, we are now at the appellate stage in five of those suits, including Virginia’s and the Florida-led 26-state effort.

Those who follow developments in constitutional law are also familiar with the broad legal arguments being made: that the power to regulate interstate commerce, even when read in the context of the power to make laws that are necessary and proper to executing that specified commerce power, does not include the power to force someone to engage in economic activity—to create, in effect, the commerce being regulated.  Not even during the height of the New Deal did the government require this, and there are no parallels in the Civil Rights Era or since.  (And also that Congress can’t do this under the taxing power for various reasons that I won’t go into here; even those courts ruling for the government have rejected the taxing power assertion.)

Finally, those who follow Cato are probably aware that I’ve been spending a good part of my time since Obamacare’s enactment in March 2010 in this area: filing briefs, writing articles, debating around the country, appearing in the media.  And I’m not alone; our entire Center for Constitutional Studies has been involved in various capacities.  Indeed, Cato Chairman Bob Levy himself produced a very useful Primer for Nonlawyers about what is the clearly the central constitutional and public policy debate of our generation.

Well, if anyone cares to peek beyond the curtain of how Cato’s legal efforts against Obamacare have evolved, I have an article on that forthcoming in the Florida International University Law Review.  Here’s the abstract:

This article chronicles the (first) year I spent opposing the constitutionality of Obamacare: Between debates, briefs, op-eds, blogging, testimony, and media, I have spent well over half of my time since the legislation’s enactment on attacking Congress’s breathtaking assertion of federal power in this context. Braving transportation snafus, snowstorms, and Eliot Spitzer, it’s been an interesting ride. And so, weaving legal arguments into first-person narrative, I hope to add a unique perspective to an important debate that goes to the heart of this nation’s founding principles. The individual mandate is Obamacare’s highest-profile and perhaps most egregious constitutional violation because the Supreme Court has never allowed – Congress has never claimed – the power to require people to engage in economic activity. If it is allowed to stand, then no principled limits on federal power remain. But it doesn’t have to be this way; as the various cases wend their way to an eventual date at the Supreme Court, I will be with them, keeping the government honest in court and the debate alive in the public eye.

Read the whole thing, titled “A Long Strange Trip: My First Year Challenging the Constitutionality of Obamacare.”

Cato’s Latest Obamacare Brief

As I noted yesterday, Obamacare is moving towards its inevitable date with the Supreme Court.  Although the pace may be aggravating, attorneys on both sides are strengthening their arguments and clarifying the issues presented.

Cato’s latest brief, filed today in the Eleventh Circuit in support of 26 states and the National Federation of Independent Business, sharpens the position we already expressed in briefs filed in the Fourth Circuit and the Sixth Circuit.  Our focus remains the question of whether the Constitution authorizes Congress to mandate that individuals purchase health insurance or suffer a fine.

The government has subtly shifted its thinking at this stage, however, to argue that the individual mandate does not so much compel “inactive” citizens to act but merely regulates when and how health care is purchased. Everyone will eventually purchase health care, the argument goes, and the mandate requires that people pre-pay for that care so they don’t shift the costs onto others.

We point out how this argument is a spurious misdirection, an attempt to recharacterize the individual mandate in terms that are directly contrary to the purpose and function of the overall statute.  Obamacare explicitly regulates the status of being uninsured—and not just those who seek to shift health care costs to the future or slough them onto taxpayers (indeed, the politically uncomfortable truth is that those most likely to incur health care expenses they cannot pay, the poor, are exempt from the mandate).

We argue that, regardless of the spin that the government places on it, the individual mandate “regulates” inactivity, something that not even modern constitutional doctrine allows.  The status of being uninsured cannot be transformed into economic activity via semantic prestidigitation; no matter how artfully articulated, a decision not to purchase insurance, or to do nothing, or to self-insure, is not a federally regulable action.  The outermost bounds of Congress’s power under the Commerce Clause, as exercised via the Necessary and Proper Clause, reach certain classes of intrastate economic activity that substantially affects interstate commerce.  But Congress cannot reach inactivity even if it purports to act pursuant to a broader regulatory scheme.

Allowing Congress to conscript citizens into economic transactions would not only be unprecedented—as government-friendly the precedent is—but would fundamentally alter the relationship between the sovereign people and their supposed “public servants.”  The individual mandate “commandeers the people” into the federal government’s brave new health care world.

The Eleventh Circuit will hear Florida v. U.S. Dep’t of Health & Human Services in Atlanta on June 8.

Drinking Away Your Constitutional Problems

Santa Clara law professor Brad Joondeph, who runs the very helpful – as a primary document aggregator for all the Obamacare cases –  ACA Litigation Blog, thinks he’s stumbled onto something :

So after reading my roughly 500th ACA-litigation-related brief, motion, or filing of some sort, I think I have gotten a little punchy. But it occurs to me that a a great new drinking game for those ACA litigation buffs who sit around on Friday nights drinking beers – a huge cohort, I am sure – would be to read aloud briefs filed by the challengers, and take turns drinking when the word “unprecedented” is used.

Indeed, the argument that there is no Supreme Court precedent sanctioning the assertion of power the government claims  – that the individual mandate is, quite literally, unprecedented – goes back to the earliest articulated constitutional arguments against Obamacare, particularly by the “intellectual godfather” of the legal challenges.  I can tell you that Cato’s latest Obamacare brief, which we’ll be filing in the Eleventh Circuit – the Florida-led 26-state case – next week, uses the word three times.  (We also use “novel.”)

The drinking game that Joondeph proposes, however, is not, um, unprecedented.  Josh Blackman has been talking about it incessantly at least since our time writing about the Privileges or Immunities Clause.  He even blogged about it last August! 

I would suggest that Brad and Josh play the “unprecedented” drinking game to settle the score once and for all, but alas Josh doesn’t drink.  Maybe I should step in for him; if I can bet Yale law professor Akhil Amar $100 on the outcome of the litigation, I can certainly do this.

For other connections between booze and the Commerce Clause, see my recent post on the (unfortunately not unprecedented) Care Act.

The CARE Act Doesn’t Care About Consumers

Last month, I described an unfortunate court ruling that let stand a Texas law designed to protect that state’s in-state liquor retailers from out-of-state competition, a holding that disregarded recent high-court precedent.  This built on a podcast I had recorded about a year ago about the relationship between state alcohol regulation under the Twenty-First Amendment (which ended Prohibition) and the Commerce Clause.

As the Wall Street Journal describes today:

The federal government and states have been in a tug-of-war over alcohol regulation since the 21st Amendment passed in 1933. That amendment gave states the right to decide whether to go wet or stay dry. But the Supreme Court in 2005 came down decisively in favor of the feds in Granholm v. Heald. The Court struck down laws in New York and Michigan allowing in-state wineries to ship directly to consumers while forbidding out-of-state wineries from doing the same. The Court ruled that while the 21st amendment gives states the authority to regulate alcohol within their borders, the Constitution’s Commerce Clause bars them from erecting such protectionist barriers.

Still, many states have tried to circumvent Granholm, and the Texas law I previously wrote about is one example.  Just like countries erect trade barriers to “help” domestic industries – at the expense of consumers and the economy as a whole – states engage in similar tactices.  While the World Trade Organization doesn’t have any authority to police such internal matters, the U.S. Constitution sets out a perfectly good institution for dealing with these blatant Commerce Clause violations: the federal judiciary.  And indeed, with some exceptions, courts since Granholm have “corked” protectionist state legislation.

But because Congress can’t leave well enough alone, and at the behest of liquor wholesalers (whose no-value-added middleman profits are obviously threatened by eliminating interstate trade barriers), we now have pending federal legislation called the Community Alcohol Regulatory Effectiveness (CARE) Act.  This cutely titled bill purports to give more local control over alcohol regulation – to protect Baptists and bootleggers community values, children’s health, etc. – its actual purpose is to prevent out-of-state producers from selling directly to consumers around the country.

The CARE Act would eliminate the ability for alcohol producers and related businesses to challenge Commerce Clause violations in federal court.  That’s not a good thing, as we’ve noticed in every other industry, such as insurance, where Congress has abdicated its constitutional authority to maintain the channels of interstate commerce clear of state interference.  As the Journal again puts it:

You can bet your favorite case of California cabernet that Care will reduce choices and raise prices for consumers, just as McCarran-Ferguson has done in the insurance market. From what we’ve gathered through the grape vine, the main groups backing this bill are alcohol wholesalers. They serve as the middlemen in over 90% of transactions between wineries and retailers, and they account for up to 25% of the price of every bottle of wine. Wholesalers have convinced 57 Members of Congress, including 28 Republicans, to co-sponsor Care. Last year 153 Members, including 94 Democrats and 59 Republicans, co-sponsored a similar bill.

The trick here is that the wholesalers lobby is trying to play the “state sovereignty” clause, explaining that they’re just federalists trying to fight a one-size-fits-all national regulatory Leviathan.  A clever maneuver in the Tea Party era, to be sure, but one that forgets that one of the main purposes of the Constitution – the very reason James Madison called the Constitutional Convention – was to eliminate interstate barriers to commerce; how else could the fledgling republic’s economy grow? 

Congress would never give states the power to stop Apple or J. Crew or any other retailer from shipping its products directly to consumers.  It should be no different with alcohol.

Cato’s Latest Obamacare Brief: Congress Cannot ‘Commandeer the People’

A recent poll showed that 22% of Americans believe Obamacare has been repealed and 26% aren’t sure.  Yet here at Cato, we’re all too aware that the massive, unconstitutional, and fundamentally unworkable overhaul of our health care system still looms on the horizon.

While two lower courts have struck down Obamacare in whole or in part, three others have ruled it constitutional, including a D.C. District Court opinion that claimed for the federal government the right to regulate the “mental activity” of decision-making.  As litigation progresses to the appellate level, this latter decision has proven to be more a hindrance to Obamacare’s supporters than a help, its Orwellian pronouncement being hard to ignore while the government downplays the significance of the power Congress is asserting.  Nevertheless, Obamacare’s constitutionality—with a focus on the individual health insurance mandate—remains an open question until ruled upon by the Supreme Court. 

Cato’s latest amicus brief is in the Fourth Circuit, in the case brought by Virginia Attorney General Ken Cuccinelli.  In this case, unlike in the Sixth Circuit (in which we also filed a brief), it is the federal government that appealed an adverse district court decision that struck down the individual mandate.  In our brief, joined by the Competitive Enterprise Institute and Prof. Randy Barnett (the intellectual godfather of the Obamacare legal challenges, and also a Cato senior fellow), we argue that the outermost bounds of existing Commerce Clause jurisprudence prevent Congress from reaching intrastate non-economic activity regardless of whether it substantially affects interstate commerce.  Nor under existing law can Congress reach inactivity even if it purports to act pursuant to a broader regulatory scheme.  

Allowing Congress to conscript citizens into economic transactions is not only contrary to existing Commerce and Necessary and Proper Clause doctrine—as broad as that doctrine is—but it would fundamentally alter the relationship between the sovereign people and their supposed “public servants.”  The individual mandate “commandeers the people” into Congress’s brave new health care world.  If Obamacare is allowed to stand, the only limit on federal power will be Congress’s own discretion.

The case will be argued before the Fourth Circuit in Richmond on May 10.  Read more from Prof. Barnett on Obamacare here and check out the half-day event we recently held on the legal and economic problems with the law.  Finally, though his name isn’t on our brief because he hasn’t yet become a member of the bar, many thanks to legal associate Trevor Burrus for his work on it.

On the Interstate Shipment of Green Beer

Today being St. Patrick’s Day, it seems appropriate to revisit the unlikely juxtaposition of two of my favorite legal policy topics: alcohol and the Commerce Clause.  (Listen to my podcast on the subject or read its transcript.)  The point of all this is that alcohol is no different from any other commodity in that states cannot erect arbitrary regulations that privilege in-state interests (be they retailers, wholesalers, or producers) ahead of their out-of-state counterparts.

But St. Paddy’s Day is not the only reason the issue is topical.  Last week, the Supreme Court declined to review the Fifth Circuit’s indefensible decision in Wine Country Gift Baskets.com v. Steen. It did so despite the Fifth Circuit’s upholding of a Texas law designed to protect Texas’s in-state liquor retailers from out-of-state competition, a holding that disregarded recent high-court precedent.

In Granholm v. Heald (2005), decided together with the Institute for Justice’s Swedenberg v. Kelly, the Supreme Court struck down a similar protectionist law. Both cases challenged laws that permitted in-state wine producers to sell directly to consumers while prohibiting similar sales from out-of-state producers. The Court held that, notwithstanding a provision in the 21st Amendment (which repealed prohibition) that allows states to regulate their own liquor industries, the Commerce Clause prohibits states from disrupting free trade by discriminating against out-of-state businesses in favor of in-state businesses. This interpretation of the Commerce Clause grew out of the common-sense understanding that, if left unchecked, state governments have strong incentives to protect in-state businesses (who are voters) at the expense of their (non-voting) out-of-state competitors. Without constitutional checks, such laws could eviscerate Congress’s constitutionally enumerated power to “regulate [make regular] commerce … among the several States.”  

Nevertheless, the Fifth Circuit decided to limit Granholm to wine producers. As is evident by the name, however, the Wine Country Gift Baskets.com case concerns a wine retailer. Yet Granholm explicitly said that states “may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.” It is dismaying that the Supreme Court didn’t care about the Fifth Circuit’s neglect of this language.

Granholm was an important blow against the heavily protectionist and cartelized liquor industry. As was documented in a pre-Granholm article in Cato’s Regulation magazine, the prohibition on direct shipment has been used to strangle small wineries as they struggle to access larger markets without having to go through the state-controlled distribution networks. Despite an explosion of wine-drinking and -making in this country in the last 30 years – with consumption increasing by nearly 50% between 1991-2001 and wineries quadrupling between 1974-2002 – the small winery still fights against an old-boy network of producers and distributors. In 2003, the top 30 wine companies still provided 90% of U.S. wine although they were less than 1% of the producers.

This is, of course, exactly how the top 30 wine companies want it.

Granholm dismantled some of this network. Unfortunately, Wine Country Gift Baskets.com will allow this unconstitutional infringement of the right to earn an honest living (see Timothy Sandefur’s excellent book of the same name) to persist in some states.

But Americans, like most of the world, appreciate their booze. During prohibition, Americans endured Tommy-guns, corruption, gangsters, and speakeasies just for a drink. If the government made it illegal to drink responsibly, many Americans were willing to thwart the law and drink irresponsibly.

The negative effects of prohibition were too visible to deny and, after 13 years of waging war on a non-compliant population, prohibition ended. In its wake, however, prohibition left another war, an 80-year “on-going, low-level trade war” (in the words of Granholm) between states and their three-tiered monopolies over the production, distribution, and sale of alcohol. And so, 21st Amendment or not, prohibition lives on – though the  colorful characters in spats carrying Tommy-guns have been replaced by iPad-wielding lobbyists and politicians who do their bidding.

Thanks to Trevor Burrus for his help with this blog post.