Tag: Commerce Clause

A Startling Development on the ObamaCare Front

The U.S. Court of Appeals for the 5th Circuit — the court that would hear any appeal of the Texas v. Azar decision overturning the entire Patient Protection and Affordable Care Act (ACA) — has just issued a request that does not bode well for ObamaCare.

In NFIB v. Sebelius, Chief Justice John Roberts reasoned the Supreme Court could view the ACA’s otherwise-unconstitutional individual mandate as a constitutional use of the Taxing Power. See my criticisms of Roberts’ reasoning here. In Texas v. Azar, a district-court judge ruled that since Congress zeroed-out the individual-mandate penalty, the courts could no longer uphold the mandate as a use of the Taxing Power, ergo the ACA must fall.

I oppose the ACA but disagree strongly with Texas v. Azar. At the time, I wrote, “federal judge Reed O’Connor did exactly what Chief Justice John Roberts did at the high court: jettison the rule of law to achieve a politically desired outcome.”

In an interesting twist, President Trump decided not to defend the ACA but instead to embrace the district court’s ruling, thereby depriving the overturned statute of its most obviously legally cognizable appellant — the government. Fortunately for the ACA, several states and the House of Representatives appealed the lower-court ruling to the 5th Circuit. Which brings us to yesterday’s development.

Yesterday, the 5th Circuit asked the states and the House (1) to justify why they have standing to appeal the lower-court ruling, (2) to explain, if they do not, whether the court can even hear an appeal of that ruling, and if not (3) what they think should happen then. See the court’s language below.

The request could mean the ACA and its would-be intervenors could have a harder slog than anyone thought. It means at least one judge on the 5th Circuit panel is skeptical that the court can even hear this appeal in its current form.

I think a higher court should, and ultimately will, overturn the lower court’s ruling in Texas v. Azar. But there are rules. Courts need a legitimate case or controversy in order to act. Today, it became less certain that they will.

The probability that Texas v. Azar will stand may have only risen from 0.5 percent to 5 percent, but I never would have thought it would reach even that high.

For more, see Nick Bagley.

South Dakota v. Wayfair: A Taxing Decision

Today, the Supreme Court handed the states a victory in their battle to collect taxes on online sales, but, in doing so, dealt a heavy loss to the national market, small businesses, and the people at large. South Dakota v. Wayfair’s focus was on whether to overturn Quill Corp. v. North Dakota, which held that states could not impose tax collection obligations on businesses with no physical presence in the state. In a bizarrely split 5-4 decision–with Justice Kennedy writing the majority joined by Thomas, Ginsburg, Alito, and Gorsuch and Chief Justice Roberts writing the dissent joined by Breyer, Sotomayor, and Kagan–the Court held that states can charge sales taxes on completely out-of-state businesses.

As the dissent rightly points out, the majority decided Wayfair with “an inexplicable sense of urgency,” asserting that “the passage of time is only increasing the need to take the extraordinary step of overruling” longstanding precedent. While wrongly decided cases need to be dealt with, Quill was not one of those decisions. As the chief justice correctly observes in his dissent: “E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule. Any alteration to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress.” In fact, amicus briefs for various senators and members of Congress were submitted to the Court highlighting the ongoing efforts to fix the e-commerce sales-tax system, and three bills are currently pending. “By suddenly changing the ground rules,” the chief justice warns, “the Court may have waylaid Congress’s consideration of the issue. Armed with today’s decision, state officials can be expected to redirect their attention from working with Congress on a national solution, to securing new tax revenue from remote retailers.”

How Congress Can Remove Barriers to Affordable, Quality Telemedicine

Over at TimeCato adjunct scholar Shirley Svorny offers a proposal that GOP and Democratic presidential hopefuls would be wise to endorse:

Ted Cruz won Iowa’s Republican presidential caucus promising to repeal every word of Obamacare. When pressed for details, he said he would separate insurance from employment, expand the use of health savings accounts, and allow people to purchase insurance across state lines. These are good ideas, ones we’ve heard before. There are, however, a number of other policy initiatives worthy of attention, whether the Affordable Care Act is repealed or not. There’s one simple thing Congress could do that would expand access to high-quality care, especially for patients in rural areas, without costing taxpayers a dime.

Telemedicine providers [use] telecommunication to provide health care over distances [and] have made great strides in improving access to care for rural communities. Telemedicine allows quick access to specialists, as with stroke victims where time is of the essence. Video interactions are expected to replace a sizable chunk of face-to-face office visits.

But the current system of state licensing stands in the way of interstate practice. Physicians must maintain licenses in each state in which they treat patients. Congressional action to define the location of telemedicine services as the location of the physician would allow physicians to practice with a single license in multiple states. It would allow telemedicine to achieve its full potential.

Read the whole thing. Svorny explains this proposal at greater length in a forthcoming Cato policy analysis.

California Shouldn’t Be Able to Impose Regulations on Businesses Outside of California

One of the several failures of the Articles of Confederation was the incapacity of the central government to deal with trade disputes among the states. The Constitution resolved this problem by empowering the federal government to regulate interstate commerce. It has since become a basic principle of American federalism that a state may not regulate actions in other states or impede the interstate flow of goods based on out-of-state conduct (rather than on the features of the goods themselves).

That principle was axiomatic until the U.S. Court of Appeals for the Ninth Circuit upheld one particular extra-territorial California regulation. California recently established a Low Carbon Fuel Standard (“LCFS”) that attempts to rate the “carbon intensity” of liquid fuels, so that carbon emissions can be reduced in the Golden State. California considers not only the carbon emissions from the fuel itself being burnt, however, but also the entire “lifetime” of the fuel, including its manufacture and transportation.

This has led to complaints from Midwestern ethanol producers, whose product—which is in all other ways identical to California-produced ethanol—being severely disadvantaged in California’s liquid fuel markets, simply because it comes from further away. Groups representing farmers and fuel manufacturers sued, arguing that the LCFS constitutes a clear violation of the Commerce Clause (the Article I federal power to regulate interstate commerce) by discriminating against interstate commerce and allowing California to regulate conduct occurring wholly outside of its borders. The Ninth Circuit recently upheld the LCFS, finding the regulation permissible because its purpose was primarily environmental and not economic protectionism (although judges dissenting from the court’s denial of rehearing pointed out that this is the wrong standard to apply).

The farmers and fuel manufacturer groups have now submitted a petition to have their case heard by the Supreme Court. Cato has joined the Pacific Legal Foundation, National Federation of Independent Business, Reason Foundation, California Manufacturers & Technology Association, and the Energy & Environmental Legal Institute on an amicus brief supporting the petition.

We argue that the lower court’s ruling provides a template for other states to follow should they want to evade Supreme Court precedents barring obstruction of interstate commerce and extraterritorial regulation. As the Founders fully recognized, ensuring the free flow of commerce among the states is vital to the wellbeing of the nation, and California’s actions—and the Ninth Circuit’s endorsement of them—threaten to clog up that flow. Not only does the appellate ruling allow California to throw national fuel markets into disarray, it invites other states to destabilize interstate markets and incite domestic trade disputes—precisely the type of uncooperative behavior the Constitution was designed to prevent.

The Supreme Court will likely decide whether to take Rocky Mountain Farmers Union v. Corey before it recesses for the summer. For more on the case, see this blogpost by PLF’s Tony Francois.

This blogpost was co-authored by Cato legal associate Julio Colomba.

Justice Thomas Shows Again that the Federal Emperor Has No Constitutional Clothes

Yesterday’s unanimous Supreme Court opinion in American Trucking Associations v. City of Los Angeles is a run-of-the-mill federal preemption case, not inviting much attention. But the interesting bit isn’t Justice Kagan’s majority opinion. It’s Justice Thomas’s short concurrence. Thomas agrees that federal law trumps conflicting state/local law regarding certain regulations related to the Port of Los Angeles, but seizes on the plain language of the preempting statute to take a shot at the massive expansion of federal authority under a misreading of the Commerce Clause.

Justice Thomas focuses on a section of the relevant statute (the Federal Aviation Administration Authorization Act, or FAAAA–don’t ask why this covers ports) titled “Federal authority over intrastate transportation.” He denies that Congress possesses this authority: the Commerce Clause, part of Article I, section 8, only gives Congress the power to regulate commerce “among the several States.” Thomas can’t believe that Congress could have been granted power to legislate something so local as where trucks park once they leave the port (one of the regulations at issue in American Trucking):

Congress cannot pre-empt a state law merely by promulgating a conflicting statute–the preempting statute must also be constitutional, both on its face and as applied. As relevant here, if Congress lacks authority to enact a law regulating a particular intrastate activity, it follows that Congress also lacks authority to pre-empt state laws regulating that activity

The reason that Justice Thomas nevertheless concurs in the judgment here, however, is that Los Angeles waived any constitutional claims against the FAAAA, instead relying solely on statutory arguments (which correctly lost 9-0).

This isn’t the first time that Thomas upheld a federal law but noted federalism concerns that, as here, the plaintiffs didn’t raise (or didn’t preserve on appeal). In Gonzales v. Carhart, for example, Thomas concurred with a majority decision that sustained the federal Partial-Birth Abortion Ban Act against a challenge based on Roe v. Wade and Planned Parenthood v. Casey but noted that the issue of whether a federal abortion regulation “constitutes a permissible exercise of Congress’ power under the Commerce Clause is not before the Court. The parties did not raise or brief that issue; it is outside the question presented; and the lower courts did not address it.”

Justice Thomas’s opinions in these sorts of cases illustrate the misuse of the Commerce Clause given the Constitution’s careful enumeration of congressional powers. These brief, pointed concurrences show that our imperial government isn’t clothed in constitutional authority.

And they also have a direct use for legal practitioners. I wasn’t a “real” lawyer for that long before joining Cato, but here’s an easy practice tip: Don’t just assume that the federal government has the power to pass the law you don’t want applied to your client.

States Shouldn’t Discriminate Against Out-of-State Retailers

The National Association of Optometrists & Opticians represents eyewear manufacturers and distributors in California, where state officials have been myopic with respect to business regulation.

Under California’s Business and Professions Code, state-licensed optometrists and ophthalmologists are allowed to conduct eye exams and sell glasses at their place of business, while commercial retailers—such as the national eyewear chains represented by the NAOO—are barred from furnishing onsite optometry services. Since consumers have a strong preference for “one stop shopping”—buying their glasses at the same place where they have their eye exams—California’s law gives instate retailers a crucial competitive advantage. Businesses that cannot co-locate their services have quickly vanished from the market.

The NAOO thus sued California officials for discriminating against out-of-state retailers in violation of the “dormant” Commerce Clause, which prohibits states from imposing unjustifiable burdens on interstate commerce. The district court ruled in the group’s favor, concluding that the relevant statutes have a widespread and unjustified discriminatory effect that can’t be reconciled with Supreme Court precedent. The U.S. Court of Appeals for the Ninth Circuit reversed, however, holding that state-licensed optometrists and out-of-state retailers aren’t similarly situated competitors—even though they compete for the same customers in the same market.

On the case’s second round in the Ninth Circuit, the court scrutinized the California law under a more lenient balancing test and again upheld the ban on co-location by out-of-staters. Cato now joins the Opticians Association of America and five individual optometrists on an amicus brief urging the Supreme Court to take the case (supporting a petition for review filed by former solicitor general Paul Clement).

We argue that California’s laws are unconstitutional because their true purpose—as revealed through legislative history and the scheme’s hollow public health rationale—was merely to protect in-state business interests. California’s protectionist regime also has an adverse impact on poor and minority consumers, who confront increased costs and diminished access to eye care while also being disproportionately afflicted with visual impairments.

Not only does the Ninth Circuit’s ruling stifle competition, restrict consumer choice, and increase prices, it also encourages state and local governments to evade scrutiny of discriminatory regulations by relying on superficial distinctions between in- and out-of-state businesses that warp the meaning of “similarly situated competitors.”  The Supreme Court should intervene to prevent any further erosion of its dormant Commerce Clause jurisprudence and uphold the anti-protectionism principles envisioned by the Founders when they abandoned the Articles of Confederation in favor of the Constitution.

The Court will decide whether to take up National Association of Optometrists & Opticians v. Harris later this year or in early 2013.

(Alas) There’s No BBQ Clause in the Constitution

Surprisingly, President Obama’s first direct attack on Paul Ryan since the congressman’s selection as Mitt Romney VP nominee doesn’t involve the threat of grandma being pushed off a cliff. Instead, it involves the latest farm bill, which has too many subsidies and food-stamp increases for House Republicans’ tastes (good for them).

Now, I’m no expert in agriculture policy – for more on farm bills and related disasters, I recommend my colleague Sallie James’s work – but one provision in the disputed legislation caught my eye: Apparently the federal government plans to buy over $150 million of meat and fish. Sounds like a great cookout, but what gives the government the power to do that? Where exactly is the Constitution’s BBQ Clause?

If only President Obama could take a page from another embattled Democratic president facing a drought-stricken nation: In 1887, Grover Cleveland vetoed a bill appropriating $10,000 for seeds for suffering Texas farmers, saying, “I can find no warrant for such an appropriation in the Constitution.” (For more on that and other similar examples, see this report from 10 years ago this month.)

What a long way we’ve come.

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