Topic: Constitution, the Law, and the Courts

Judicial Sanity on Occupational Licensing and the First Amendment

States often impose costly licensing restrictions on professionals who want to engage in certain businesses. Mississippi, however, has taken this practice to an absurd level in an attempt to regulate not only a profession, but also the definition of a commonly used word. A Magnolia State statute prevents anyone from using the term “engineer” commercially unless licensed by the state as an engineer.

Express Oil Change and Tire Engineers, a business that provides tire repair, maintenance, and replacement services, has a long-standing trademark on the term “Tire Engineers.” Express has refused to change the term, arguing that the First Amendment protects its use. Much is at stake for Express: the penalties for violating the statute include severe punishments like imprisonment, all for “misusing” a phrase that it had trademarked. Mississippi sued Express and won in district court, before losing last week before the U.S. Court of Appeals for the Fifth Circuit. The case is Express Oil Change v. Mississippi Board of Licensure for Professional Engineers & Surveyors.

The First Amendment guarantees that speech—even when done for money—is constitutionally protected. But such speech is subject to government regulation, the contours of which were defined by the U.S. Supreme Court in Central Hudson Gas & Electric Corp. v. Public Service Commission (1980). First, the speech itself “must concern lawful activity and not be misleading” to receive protection. To justify regulating the speech, a court asks if “the asserted governmental interest is substantial.” Finally, a court must establish “whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.”

The Fifth Circuit correctly noted that the term “Tire Engineers” passes the Central Hudson test with flying colors. First, it is not, as Mississippi argues, “inherently misleading.” The word engineer means different things in different contexts. “Tire Engineers,” trademarked in 1948, is not the same as the Mississippi statute definition but, as the Fifth Circuit explains, that surely does not make it misleading. Next, the court upheld the district court’s finding that the state has a substantial interest in “ensuring the accuracy of commercial information in the marketplace,” an assertion unchallenged by both parties. Certainly, states can step in to ensure that consumers get what they pay for and know what they’re buying. But Mississippi’s statute took it too far; a total ban on a challenged term is a highly restrictive means of achieving the state’s goal. This is far from a narrowly tailored solution.

The Fifth Circuit has recognized when states go too far in similar contexts. For instance, in Byrum v. Landreth (2009), the court noted that it is unconstitutional for states to simply define and then ban common terms from being used in the market. A state could thus avoid constitutional challenge by “allowing only [interior] designers who satisfy its licensing qualifications to represent themselves as ‘licensed’ interior designers.” Such a solution would be far more narrowly tailored; all it asks is that unlicensed businesses not misrepresent themselves as licensed. Although state licensing schemes are often far too restrictive and present their own constitutional problems, this solution comports with the First Amendment.

When states try to establish only one definition for a common word, they create monopolies on language and severely encumber an individual’s ability to speak. Surely nobody believes that the act of repairing or changing a tire requires an advanced degree in mechanical engineering. The use of “tire engineer” in this context is thus neither misleading nor in need of regulation. Instead, the Mississippi statute serves as an example of states going too far in establishing protectionist licensing schemes and inhibiting commercial speech as a result.

In sum, a state does not get to corner the market on a word and crowd out all other possible uses. The Fifth Circuit acknowledged the speech-inhibiting nature of Mississippi’s statute and stood for the principle that speech – even for money – deserves First Amendment protection.

The Supreme Court is highly unlikely to take up this case even if the Mississippi Board deigns to appeal, so at least liberty is safe in this little corner of our world.

Unanimous Supreme Court Upholds Right to Be Free of Excessive Fines

It’s gratifying that the Supreme Court unanimously agreed that the Eighth Amendment’s Excessive Fines Clause applies to the states, meaning that states can’t fine you in a way that’s wholly disproportionate to the offense you commit. As one of the long-established natural rights in the Anglo-American legal tradition, there’s no reason it wouldn’t be and the debates over the Fourteenth Amendment’s ratification support this conclusion. (Here’s Cato’s brief in Timbs v. Indiana.)

At the same time, it’s disappointing that Justices Neil Gorsuch and Clarence Thomas were the only ones who explained, in separate concurrences, that the Fourteenth Amendment’s Privileges or Immunities Clause is the more constitutionally faithful way of extending rights as against state infringement. (Justice Ruth Bader Ginsburg’s majority opinion, joined by all but Justice Thomas, used the Due Process Clause.)

We’ll have to wait for some more difficult/less clear case to see if anyone else joins that originalist refrain. For practical purposes, it may not matter which clause of the Fourteenth Amendment provides the mechanism by which the Excessive Fines Clause is applied to the states. But it certainly matters for unenumerated rights (those not listed in the Bill of Rights), the jurisprudence regarding is confusing and controversial. If the Fourteenth Amendment ratification debates elucidate which such rights are covered under which clause, that would be important.

For that matter, it could matter in cases where the meaning of even an enumerated right was different in 1868 (at the Fourteenth Amendment’s ratification) than in 1791 (when Bill of Rights was ratified). Take the right to keep and bear arms, which the Supreme Court extended to the states in McDonald v. Chicago (2010). One of the key motivations behind the Second Amendment was the Founders’ concern about government tyranny. After the Civil War, however, the right to armed self-defense took on a different dimension as the Fourteenth Amendment’s enacters were quite concerned about the disarmament of freed slaves, as well as of other people who held unpopular opinions during Reconstruction. Justice Thomas – who provided the necessary fifth vote in McDonald – pointed this out in his solo concurrence.

Moreover, because using the Privileges or immunities Clause is more textually sound, the worst that could happen from moving away from “substantive due process” analysis is that there’s no change – but the upside is that only those rights supported by the original public meaning of constitutional text would be protected. That’s the dynamic that Josh Blackman and I described in the run-up to McDonald as “Keeping Pandora’s Box Sealed.” 

And now we have two justices for that view, as Josh and I predicted in an early draft of our forthcoming George Mason Law Review article “The Once and Future Privileges or Immunities Clause.” Before final publication, we’ll have to tweak some language regarding the “prediction” there now that the Court has ruled and we know what Gorsuch thinks, but you can see our  discussion at a Fourteenth Amendment conference hosted by Scalia Law School and the Institute for Justice last October. It’s unfortunate that Justice Brett Kavanaugh didn’t join either of his colleagues’ concurrences; he had no occasion to rule on the Fourteenth Amendment on the D.C. Circuit – nor do any of his scholarly writings touch on this area – so his vote today could indicate that he simply doesn’t want to revisit this area of law. Or, of course, it could mean that he didn’t want to rock the boat in a case where it doesn’t matter. 

In any event, with two justices and near-complete (and cross-ideological) agreement in the legal academy, there is real potential for movement on the Privileges or Immunities Clause – even if that potential hasn’t yet been realized.

That’s Not a Knife… This Is a Knife!

If a law is so vague that it makes it impossible to know whether what you’re doing is illegal or not, it cannot stand. Especially not when the vague law requires no criminal intent to render an action unlawful. The state of New York ignored this basic point of criminal law with its ban of “gravity knives”—pocket knives capable of being opened by the mere force of gravity or a slight flick of the wrist, as opposed to “switchblades,” which are spring loaded. The legislature both failed to define what a gravity knife is and eliminated any requirement that a person have criminal intent (mens rea) when it made simple possession of a pocket knife that could qualify as a “gravity knife” a crime.

The central problem here is that this law, which imposes strict liability on simple possession of a contraband knife, provides for discriminatory and unpredictable enforcement. The U.S. Court of Appeals for the Second Circuit acknowledged the law’s absence of a mens rea requirement but held that it makes no difference whether the defendant believed a knife was legal or not, whether he actually attempted a “wrist flick” to open the knife, or even if he received advice from a police officer that the knife was lawful. Ultimately, the court below suggested that challenges to such prosecutions could only be raised on an as-applied basis—meaning that when someone is prosecuted under this law for carrying a Swiss Army or other common folding knife, then he may be able to raise this defense. But forcing people who don’t and can’t know how to conform to a vague law to wait until they are prosecuted to challenge it is unreasonable.

John Copeland, who was arrested for possessing a common folding knife, now seeks Supreme Court review, hoping to have New York’s law overturned. Cato has joined a group of criminal-law professors on an amicus brief in which we provide a primer on criminal liability where weapon possession charges should be accompanied by a showing that a defendant has both knowledge of possessing an illegal object and of the object’s unlawful characteristics. Our argument parallels a Supreme Court ruling in an analogous drug case, McFadden v. United States (2015), regarding the defendant’s knowledge of substances he possessed.

When a law is vague in a substantial part of its application and provides people no means of knowing whether their conduct is legal, that law is unconstitutionally vague and must either be struck entirely or narrowed to eliminate the infirmity. It is fundamentally (and constitutionally) unfair to impose criminal liability on people who have no way of knowing their conduct is illegal and have no intent to commit a crime.

The Supreme Court will decide later this winter or spring whether to take up Copeland v. Vance.

Wall Emergency, Even If Legal Under Existing Law, Violates the Separation of Powers

Our Constitution divides federal power among three branches of government: the legislative, the executive, and the judicial. One of the powers given exclusively to the legislative branch (Congress) is to spend money, or to appropriate money for the executive branch to spend, in enforcing the law (which is the president’s power and indeed duty). Specifically, Article I, Section 9 (the Appropriations Clause) says that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” And of course, the purposes for which Congress can exercise this “power of the purse” are enumerated in Article I, Section 8, which is why we have legal battles over, for example, whether some federal law fits into the power to regulate interstate commerce (aka the Commerce Clause). So the idea that the executive branch can’t exercise legislative power means that it can neither spend money that hasn’t been appropriated nor create new programs. 

Now, congressional refusals to appropriate that money or create those federal programs don’t give the president more power, even if he thinks it’s really important. This is what got President Obama in trouble: DACA and DAPA, for example, which I generally support as a matter of policy, are new programs that create new immigration statuses—so these executive actions have no constitutional basis, no matter what kind of pen or phone he used to enact them. Stated another way, a presidential failure to get the deal he wants from Congress on a major policy priority doesn’t trigger new executive powers. 

But you know what does trigger certain executive powers? A national emergency. Various presidents have done things as emergency actions—Lincoln during the Civil War most notably, when Congress literally couldn’t be brought back in session—but the first official such declaration was made by Woodrow Wilson (not a promising start), and many presidents would go on to declare emergencies of various kinds, without limiting their scope or duration or citing any statutes. Presidential emergency actions were taken largely without congressional oversight or other checks, though one notable exception was the legal pushback on Harry Truman’s steel-mill seizures during the Korean War, culminating in the Supreme Court’s 1952 Youngstown Steel ruling, which to this day provides the rubric for evaluating executive action in the face of congressional acquiescence, silence, and disapproval. Until the Watergate era, when Congress passed and President Gerald Ford signed the National Emergencies Act. 

The NEA doesn’t actually give the president the power to declare national emergencies. Instead, it acknowledges that power and then restricts it, setting up rules for how it’s to be used. One of those provisions gave Congress power to reject an emergency declaration by a majority vote of both houses. But that sort of “legislative veto” (without which the NEA wouldn’t have passed) was ruled unconstitutional in the 1983 case of INS v. Chadha (which technically involved a one-house veto), so now Congress can override the president only with a vetoproof super-majority. 

But again, the NEA doesn’t give the president powers itself. Instead, it triggers hundreds of other statutes that “unlock” certain executive authorities upon an emergency declaration. The problem is that “emergency” isn’t typically defined in those relevant laws and presidents have declared emergencies in a range of situations that don’t necessarily match the common understanding of that word, which would be something like an immediate (“emergent”) threat requiring urgent attention. In other words, English speakers don’t typically think of “emergency” to be synonymous with “important issue” or “long-time serious problem.” (Think of a hospital ER, where you wouldn’t typically go to treat cancer.)

To wit, from the NEA’s enactment until today’s Wall Emergency, presidents declared 58 emergencies—most of them related to trade restrictions under the International Emergency Economic Powers Act—and 31 have been renewed annually. Did you know, for example, that we still live under Jimmy Carter’s national emergency declaration responding to the taking of hostages in Iran in 1979? Or under George W. Bush’s 2006 “national emergency with respect to blocking property of certain persons undermining democratic processes or institutions in Belarus,” which was declared after fraud allegations in the Belarusian presidential election? So Donald Trump is building on broad congressional delegations and past presidential actions. 

To be sure, President Trump undermines his own litigating position by suggesting that there isn’t a real emergency—“I didn’t need to do this,” he said during the announcement—and by taking this action only after months of negotiations and a government shutdown, and after signing legislation that gave him some but not all of what he wanted. He would have been on firmer ground in this respect had he done this when he first mentioned “the caravan,” or indeed on day 1 of his presidency. Still, I can’t see the Supreme Court either striking down or upholding today’s action because there is or is not a real “emergency.” Lower courts might do so, but I have a hard time imagining the justices ruling that a statutorily undefined term controls. 

Which takes us to the legal provisions on which the wall litigation will actually turn: the three funding statutes triggered by the emergency declaration and from which money will be shifted to wall construction. These are: (1) the Treasury Forfeiture Fund (31 USC 9703); (2) Department of Defense funds for “Support for Counterdrug Activities” (10 USC 284); and (3) Department of Defense military construction projects (10 USC 2808). I’m not going to parse the technicalities here because the focus of this post is executive power under the Constitution (and this post is already too long), but suffice it to say that there are colorable arguments on both sides. Legal rulings will ultimately turn on interpretation and application of relevant terms in this novel context. For example, if the forfeiture provision is interpreted to be usable for anything that “stops drug trafficking,” it’s certainly plausible—and good enough for a judge—that a wall is legitimately intended to do that. But if you read the statute to only authorize the funds to be used for domestic law enforcement purposes, then the wall funding is dubious. Similarly, the DoD provisions turn on whether the emergency project “requires use of the armed forces” or “may require” using them. I could argue it either way, depending on whether I define the purpose as “protecting the border” or “national security” versus “building a wall” or “supporting ICE.”

But even if this wall construction satisfies the legal niceties—a big but not implausible if—there’s something odd and wrong about what’s going on here. Because it looks an awful lot like the executive branch is engaged in legislative activity. So even if today’s action is technically legal under existing law, that law itself may be unconstitutional—at least if it’s read to allow building the wall in this manner. That is, the NEA or the provisions it triggers could be an improper delegation of legislative authority by Congress. Chief Justice John Roberts could do a lot with that in the name of “constitutional avoidance”—shying away from having to find something unconstitutional—but even if he thinks the wall can be justified under, say, the taxing power, that power properly belongs to Congress. (This will be a running theme of my commentary; stay tuned.) 

Even worse, today’s action sets a terrible precedent for future administrations, whose policy goals may be radically different. This action brings us one step closer to enacting major legislative goals—Medicare for all? Green New Deal? gun control?—through executive fiat. Nobody who takes the constitutional separation of powers seriously should support it. 

In Defense of Incrementalism: A Response to Prof. Greve’s Proposal for Administrative Courts

For “anti-administrativists” like myself, what’s the best way to reform the administrative state? In a provocative post at Law & Liberty, Professor Michael Greve rejects our ilk’s dominant approach, which is to focus on judicial deference doctrines—in particular, Chevron deference to an agency’s interpretations of its enabling statute. Chevron is a “great white whale,” Greve argues, because even if it were overturned, it would merely return in another guise. On this point, he borrows Adrian Vermeule’s thesis that courts inexorably will defer to agencies, due to the latters’ relative advantage in subject matter expertise.

In lieu of the mainstream approach to reform, Greve proposes to overhaul administrative law. His iconoclastic idea is to abolish the “appellate review model” system of administrative adjudication, by which he means the process where “agency adjudication comes first, followed by highly deferential, on-the-record judicial review.” According to Greve, “our hidden judiciary,” comprised of “12,000 plus administrative law judges and administrative judges,” is fundamentally broken because “the decisions of ALJ’s and AJ’s are virtually always subject to review and reversal by agency heads.” As a result, “the most one can expect from administrative adjudication is an appearance of impartiality.” Greve wants to raze the current system, and, in its stead, establish “administrative courts that are independent of administrative agencies—say, 100 courts with 1,000 or so judges, spread across the country.” As Greve explains it, “[c]ases brought in the administrative courts would not be appellate actions for ‘review.’” Rather, they would be original actions and the standard of review would be de novo.

Of course, his proposal is a non-starter. The politics will never be there. And, even if they were, it remains a very heavy lift to create a new system of justice from whole cloth. Greve knows this—he’s nobody’s fool. His actual aims are more modest. As aptly explained by R. St. Institute’s Philip Wallach, “[Greve] hopes, plausibly, that he can command that elite’s attention and make its members realize that an institution-building project is the best way to grapple with and discipline the administrative state at this juncture.” For this, Greve deserves praise. He’s trying to start a conversation about how best to reform the administrative state. It’s a conversation worth having.

But before such a conversation is possible, it is necessary to first come to some sort of understanding regarding background assumptions. To my eyes, Greve’s assumptions are significantly off, such that they threaten to lead the conversation astray.  While I agree with Greve that the status quo for administrative adjudication suffers some serious flaws, these issues are idiosyncratic rather than systemic. That is, he overstates the threat, which leads him to overstate the solution.

Greve implicitly concedes much of this point. At a panel on his proposal last week put on by the C. Borden Gray Center, Greve said that he would exempt immigration judges and public benefits regimes (like Social Security Administration) from his plan, for practicality purposes. In response to these concessions, panelist Prof. Jeffrey Lubbers pointed to data collected by the Administrative Conference of the U.S., which demonstrates that that these two types of cases account for at least 95 percent of all administrative adjudications.

Moreover, most of the remaining ~5% of administrative adjudications tend to be mundane. Has the State Department’s Foreign Service Grievance Board ever incited controversy? Does anyone fret over the Railroad Retirement Board’s Bureau of Hearings and Appeals? Or the Black Lung Review Board? It is doubtful that these relatively innocuous tribunals are implicated by Greve’s concerns.

Of the administrative adjudications that are left, many are performed by commissions that do not follow the “appellate review model” script. Indeed, these commissions were created in response to the same concerns being addressed by Greve, albeit almost a half century ago. During the 1950s and 1960s, scholars made identical arguments as does Greve now—i.e., that the concentration of rulemaking, prosecutorial, and adjudicative functions in agencies engenders impermissible bias against regulated parties. Congress responded to these concerns by creating “separate-function” adjudications, where the tribunal is located in a different agency than the rulemaking and prosecution functions. Examples of this legislative response include the Occupational Safety & Health Review Commission (est. 1970) and the Federal Mine Safety and Health Review Commission (est. 1977). In fact, “administrative courts” were the very model for these commissions.

In other regulatory contexts, Congress has bucked the appellate review model by establishing independent tribunals within agencies. Decisions by these tribunals are insulated from further review by the Secretary or commission. Examples include the Departmental Appeals Board at the Department of Health & Human Services and the Administrative Review Board within the Department of Labor.

After you strip away the benefits/immigration programs, the mundane regimes, and the tribunals that don’t follow the appellate review model, there isn’t much left. Basically, it’s the NLRB and a handful of agencies that employ administrative adjudications to impose significant civil monetary penalties (including primarily the SEC, CFTC, FERC, CFPB, OCC, and the DOT). With respect to this subset of agencies, Greve’s criticisms hit the bullseye. They’re all guilty of one or more of the abuses that he identifies, including “the imposition of civil fines by bureaucratic edict; sudden changes of agency policy, accomplished by means of adjudication and without fair warning to the parties; [and] the opportunistic shifting of enforcement proceedings from Article III courts to agency tribunals.”

After accounting for the proper scope of the problems, it is possible to calibrate a response from a menu of incrementalist options. Although Greve seems to set forth a binary choice of reforms—either repeal Chevron or overhaul the administrative state—there are many modest doctrinal and institutional measures that would mitigate his concerns.

First and easiest, Congress could simply amend enabling statutes to resolve the issues identified by Greve. It was only over the last three decades that Congress expanded use of the “appellate review model” for civil monetary penalties, at the goading of the Administrative Conference of the United States. Lawmakers could just as easily reverse course, and return to the model whereby agencies sought relief in an original action before an Article III court.

In a similar manner, Congress could amend enabling statutes to insulate the administrative tribunal from direct review by the agency or commission. As I explained above, this is known as the “separate-function” model, and it is how Congress responded to concerns identical to Greve’s almost a half century ago.

Turning from Congress to the judiciary, the Supreme Court could clarify several inchoate doctrines and thereby check the administrative state, in a manner perhaps exceeding the effect of overturning Chevron deference. Examples include the applicability of the Seventh Amendment to administrative adjudications, and also whether certain administrative adjudications impermissibly share “essential attributes” of the judicial Power.

I can think of other opportunities for doctrinal refinement that would mitigate the potential for abuses of power by the administrative state. For example, the Supreme Court has interpreted APA § 706 to call for courts to take a “hard look” at the reasonableness of agency decision making. To my eyes, it is plainly unreasonable for an agency like the NLRB to swing back and forth between policies, over and over again, due to alternating political parties occupying the White House. At some point, reasonableness requires a court to say: Enough! At which point it becomes Congress’s responsibility to amend the law.

Finally, there’s my preferred institutional reform, one that I think would make mitigate virtually all of the harms associated with the “appellate review model.” Here, I’m talking about building expertise in Article III courts. The Executive Branch has literally millions of employees. The Congress has about 20,000 staffers. The Supreme Court, by contrast, has about 40 clerks, most of whom are brilliant law school grads with no experience in administrative policymaking. This expertise gap is even greater in lower courts, and it goes a long way towards explaining the unfortunate deference dynamic identified by Greve:

[W]ithin the framework of the appellate review model, the case for judicial deference to the executive branch is overwhelming. When judges review policy decisions, they have no comparative advantage over agency administrators. The obvious question—why make the same decision twice?—naturally draws courts back towards deference.

If the reason that Chevron could never go away is the expertise imbalance between agencies and courts, then perhaps it’s time to think about making the courts more expert. Instead of 1,000 judges, maybe the better approach is 1,000 Article III staffers.

In sum, Greve’s grand ambitions may be misguided, but he has done a valuable service by drawing attention to what ills agency adjudications. Rather than tearing it down, a better alternative for reform is to advance the ball on a number of incremental measures.

An Exchange on Consent Decrees

Readers interested in federalism and legal policy may want to check out my recent exchange on federal consent decrees with Cato alumnus Radley Balko, famed for his writing on police misconduct. It started when I wrote a partial defense at National Review of former Attorney General Jeff Sessions’s signing of guidelines somewhat narrowing the Department of Justice’s discretion in arriving at future consent decrees with cities and states that it sues. My piece emphasized that discontent over consent decrees has been building for decades in policy areas like education, mental health, and welfare, even though policing may have been the subject of the most recent headlines. Balko wrote a detailed response at the Washington Post (“The Trump administration gave up on federal oversight of police agencies — just as it was starting to work”) and I followed up a week later with a rejoinder agreeing with many of his points but taking issue with a couple of others.  

Here is one bit of common ground I cited: “Neither I nor, so far as I can see, the Sessions memo argued that decrees are necessarily illegitimate as a legal or constitutional matter. To the contrary, we all assume that such decrees will often have a sound legal basis and will continue to be negotiated in the future.” As my colleague Roger Pilon has pointed out, the post-Civil War Fourteenth Amendment confers on the federal government “the power to negate state actions that deny their citizens the privileges and immunities of citizens of the United States.” It’s more than plausible that the practices of police departments like those in Chicago and Baltimore deny some citizens those rights. 

But moving from the case for consent decrees in principle to the way they should operate in practice quickly gets more complicated. I wrote about the Baltimore decree at the time as follows (more): 

The decree (documentsummary of high points) mingles some terms that rise to genuine constitutional significance with others that no court would have ordered, and yet others that appear not to be requirements of the law at all, but at most best practices. Many are virtually or entirely unenforceable (“professional and courteous” interaction with citizens). Whether or not the decree results in the less frequent violation of citizens’ rights, it is certain to result in large amounts of new spending and in the extension of the powers of lawyers working for various parties.

Meanwhile, the more systematic problems with consent decrees, and especially with their cumulative accretion over time, have been widely documented, as in the case of children’s services

13 years after Ross Sandler and David Schoenbrod’s groundbreaking book Democracy by Decree, small groups of litigators, experts, special masters and other insiders continue to run many government agencies … “the Illinois child-welfare system is burdened by 10 different consent decrees, including one that has lasted nearly 40 years.” … By design, it is made hard to get out from under a decree, which can leave the small controlling group in control indefinitely: Connecticut’s 25-year-old child-welfare consent decree “contains 22 outcome measures that all must be met and sustained for six months before exit,” which has never happened.

The issues of federalism, practicality, and unintended consequences will not always be easy to sort out, but I hope our exchange makes at least a start. 

States Can’t Engage in Protectionism by Labeling It Environmentalism

The Commerce Clause was designed not only to give Congress the authority to regulate interstate commerce, but also to ensure that states don’t disrupt the flow of goods and services over state lines. States cannot prefer in-state producers, sellers, or buyers over out-of-state ones, or regulate conduct outside the state. This is a fundamental principle of federalism that prevents states from gaining advantage over others when it comes to trade.

Despite that anti-protectionist mechanism, Oregon enacted its Low Carbon Fuel Standard, which caps emissions not just from the use of fuels, but also from their production and transportation. It uses a methodology called “life cycle analysis” to include these factors. But a life cycle analysis that includes transportation penalizes out-of-state producers—who often have to travel much further than in-state producers—forcing them to buy credits, while allowing Oregon producers to generate credits much more easily.

The U.S. Court of Appeals for the Ninth Circuit upheld an identical California law in Rocky Mountain Farmers Union v. Corey(2013). No doubt Oregon saw Rocky Mountain as a green light to enact its policy, and a Ninth Circuit panel here likewise upheld the Oregon law.

The Supreme Court has repeatedly held that states can discriminate against certain goods based on features of the goods themselves but cannot control out-of-state conduct or merely attempt to help in-state producers at the expense of others. Similarly, states cannot reach into other states to regulate things like greenhouse gas emissions. Life cycle analysis is a legal fiction that permits Oregon to benefit its citizens while penalizing outsiders, and control how other states produce fuel. Like interstate import duties and other trade restrictions, the Oregon law thus undermines constitutional structure.

The stakes here are dire: if states can use regulations to affect the national fuel supply chain, they will no longer be on an even footing with respect to the national economy and interstate commerce. If allowed to stand, this decision will essentially allow states like Oregon and California to start domestic trade wars, over fuel or anything else. 

Cato thus joins the Pacific Legal Foundation, Competitive Enterprise Institute, and five other policy organizations in filing an amicus brief supporting fuel manufacturers’ petition for Supreme Court review. We argue that the Oregon law violates the Commerce Clause, as well as Supreme Court precedent, and should be struck down. Federalism requires that no state can be superior to another, nor set the terms of trade for the entire country. 

The Supreme Court will decide this spring whether to take the case of American Fuel & Petroleum Manufacturers v. O’Keeffe.