The State-Self-Promotion Exception to the Dormant Commerce Clause Rule , 95 Iowa L
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Digital Commons @ Georgia Law Scholarly Works Faculty Scholarship 2-1-2010 Where United Haulers Might Take Us: The tS ate- Self-Promotion Exception to the Dormant Commerce Clause Rule Dan T. Coenen UGA School of Law, [email protected] Repository Citation Dan T. Coenen, Where United Haulers Might Take Us: The State-Self-Promotion Exception to the Dormant Commerce Clause Rule , 95 Iowa L. Rev. 541 (2010), Available at: https://digitalcommons.law.uga.edu/fac_artchop/935 This Article is brought to you for free and open access by the Faculty Scholarship at Digital Commons @ Georgia Law. It has been accepted for inclusion in Scholarly Works by an authorized administrator of Digital Commons @ Georgia Law. Please share how you have benefited from this access For more information, please contact [email protected]. Where United Haulers Might Take Us: The Future of the State-Self-Promotion Exception to the Dormant Commerce Clause Rule Dan T. Coenen* ABSTRACT: Fourteen years ago, in C & A Carbone, Inc. v. Town of Clarkstown, the U.S. Supreme Court held that a local government had unconstitutionally discriminated against interstate commerce when it forced its citizens to purchase all waste-transfer services from a single local private supplier. In a recent decision, United Haulers Ass'n v. Oneida- Herkimer Solid Waste Management Authority, the Court refused to extend the principle of Carbone to a law that required citizens to purchase these same services from a local government-operated facility. The Court thereby engrafted on the dormant Commerce Clause a new state-self- promotion exception, which receives its first extended treatment in this Article. I begin by identifying the many contexts in which this exception may take hold, touching in the process on subjects as diverse as public/private joint ventures, utility regulation, the fixing of userfees, and state tax rules that are tied to government operations. I then explore the often subtle ways in which the state-self-promotion exception will interact with existing features of dormant Commerce Clause law and propose guiding principles for deciding difficult questions that the exception presents. Finally, I examine the spillover effects that this innovation may have on current debates over both the legitimacy and scope of the dormant Commerce Clause and the proper reach of Congress'spower to regulate commercial matters. My analysis reveals that the state-self-promotion exception is not a constitutionalsideshow. Rather, it is a major new doctrinal initiative that is destined to have a far-reaching-thoughnow greatly underappreciated- impact. * University Professor and Harmon W. Caldwell Chair in Constitutional Law, University of Georgia School of Law. The author thanks Walter Hellerstein, James C. Smith, Brannon Denning, and Michael Coenen for commenting on earlier versions of this Article. He also thanks Benn Wilson for helpful research assistance and Melissa Connelly for excellent word- processing and proofreading work. 95 IOWA LA WREVIEW [2010] I. INTRO DU CTIO N ....................................................................................... 543 II. T H E C ASES .............................................................................................. 546 A . C ARBO N E ......................................................................................... 546 B. U NITED H AULERS ............................................................................ 548 C . D AVIS ............................................................................................... 5 59 III. THE CONTOURS OF THE STATE-SELF-PROMOTION DOCTRINE ............... 562 A. LOCAL-PROCESSING REQUIREMENTS AMD GoVLERME'r" SERVICE PROVIDERS ........................................................................................ 563 1. Government Discharge of Traditional Public Functions ..... 563 2. Public/Private Joint Arrangements in Discharging Traditional Government Functions ....................................... 570 B. THE STA TE-SELF-PROMOTIONDOCTRINE AND UTILITY REGULA TION ... 577 1. Government-Owned Utilities ................................................. 578 2. Privately O wned U tilities ........................................................ 581 C. FORCED-USERULES AND NONTRADITIONAL PUBLIC FUNCTIONS........... 589 D. DISCRIMINA TORY TAX-BASED FAVORITISM OF STATE OPERA TIONS ....... 596 1. Tax Advantages That Benefit the Government's Own O peration s ............................................................................... 596 2. Davis and Private-Activity Bonds ............................................ 603 E. LEVERAGING THE STATE-SELF-PROMO7IONEXCEPtION....................... 609 1. United Haulers and Cradle-to-Grave Waste-Handling P rogram s .................................................................................. 609 2. Forced-Use Rules and Exorbitant User Fees ......................... 614 IV. THE STATE-SELF-PROMOTION DOCTRINE AND PRINCIPLES OF JUDICIAL D ECISIONMAKING ..................................................................... 618 A. COMPLEXITY AD CONTEXT .............................................................. 618 B. POLICY-DRIVEN ANALYSIS .................................................................. 622 V. STATE SELF-PROMOTION, THE ROBERTS COURT, AND THE FUTURE OF THE COMMERCE CLAUSE .................................................................... 624 V I. C O N CLU SIO N .......................................................................................... 629 WHERE UNITED HAULERS MIGHT TAKE US I. INTRODUCTION The so-called "dormant Commerce Clause" l prohibits state action that "discriminates against or unduly burdens interstate commerce." 2 By forging a "federal free trade unit,"3 this constitutional restriction has bred a level of "material success" that ranks as "the most impressive in the history of commerce."4 It also has brought "solidarity, '5 if not "salvation," 6 to fifty 7 diverse and potentially antagonistic states. The dormancy doctrine has spawned many controversies, 8 and one 9 modern conundrum surfaced in C & A Carbone, Inc. v. Town of Clarkstown. In that case, the Court detected unlawful discrimination against interstate commerce in an ordinance that mandated citizens to deliver all local trash to a single, in-state, privately owned waste-transfer station. 10 The difficulty with the law, according to the Court, was that it operated solely "for the benefit of the preferred processing facility,"11 thereby "depriv[ing] out-of- state businesses of access to a local market."12 In its 2007 ruling in United Haulers Ass'n v. Oneida-HerkimerSolid Waste Management Authority,13 the Court turned its attention to a closely related question-whether the principle of 1. Dep't of Revenue v. Davis, 128 S. Ct. 1801, 1802 (2008). 2. Gen. Motors Corp. v. Tracy, 519 U.S. 278, 287 (1997). 3. H. P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 538 (1949). 4. Id. 5. Id. at 535. 6. Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511, 523 (1935). 7. See Panhandle E. Pipe Line Co. v. Mich. Pub. Serv. Comm'n, 341 U.S. 329, 340 (1951) (Frankfurter, J., dissenting) (noting that the dormant Commerce Clause has been beneficial). Justice Frankfurter stated: It is easy to mock or minimize the significance of "free trade among the states," which is the significance given to the Commerce Clause by a century and a half of adjudication in this Court. With all doubts as to what lessons history teaches, few seem clearer than the beneficial consequences which have flowed from this conception of the Commerce Clause. Id. (citation omitted). For a treatment that emphasizes the dormant Commerce Clause's nation- unifying role, see 1 LAURENCE H. TRIBE, AMERICAN CONSTITUTIONAL LAW § 6-5, at 1057 (3d ed. 2000). 8. See generally DAN T. COENEN, CONSTITUTIONAL LAW: THE COMMERCE CLAUSE 209-46 (2004) (canvassing the Supreme Court's treatment of the dormant Commerce Clause over nearly two centuries); TRIBE, supra note 7, §§ 6-3 to -23 (same). 9. C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (1994). 10. The waste-transfer station received bulk solid waste and separated recyclable from nonrecyclable items. The waste-transfer station then baled recyclable waste for shipment to a processing facility and sent nonrecyclable waste to landfills or incinerators for disposal. Id. at 387. 11. Id. at 392. 12. Id. at 389. 13. United Haulers Ass'n v. Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330 (2007). 95 IOWA LAWREVIEW [2010] Carbone applies when a local-processing requirement favors a public, rather than a private, waste-handling facility. 14 Effectively creating a new state-self- promotion exception to the antidiscrimination rule, the Court in United 15 Haulers concluded that Carbonedid not control. In Department of Revenue v. Davis,16 the Court reaffirmed the principle of United Haulers and again upheld state action that impeded free interstate trade. The issue in Davis was whether Kentucky could enhance the salability of its own bonds by exempting interest earned on them from its income tax, even while fully taxing interest paid on all other bonds, including bonds issued by sister states. 17 In upholding Kentucky's action, the Court looked past the state's stark discrimination between intrastate and interstate commerce, reasoning that the "tax scheme parallels the ordinance upheld in United Haulers"'8 because it "'benefit[s] a clearly public [issuer] ....while treating all private [issuers] exactly the same."' 19 At least as a general rule, the Court proclaimed,