Federalism under the Influence
Dope, Booze, and the Commerce Clause
About This Event

In important cases that will be argued before the end of the year, the U.S. Supreme Court will address central questions of federalism and interstate commerce. Ashcroft v. Raich presents the question of whether the Commerce Clause authorizes Congress to criminalize the mere possession of marijuana, even where state laws specifically permit the use and possession of the substance for medical purposes. Granholm v. Heald and Swedenburg v. Kelly ask whether state governments may prohibit the direct shipment of wine from out-of-state wineries to in-state consumers, even where in-state wineries may conduct such sales.

Behind the difficult legal questions posed by these cases lies contemporary federalism’s twofold affliction: federal meddling in local affairs and state meddling in interstate commerce and the national economy. Do the upcoming cases provide an opportunity to re-draw sensible lines between national or local matters, or will they merely deepen the federalism muddle?

Agenda
2:45 p.m.

Registration

3:00 Introduction: Michael S. Greve, AEI
3:15 Uncorking the Dormant Commerce Clause
Panelists: Brannon Denning, Cumberland School of Law
Todd Zywicki, Georgetown University Law Center
Moderator: R. Hewitt Pate, U.S. Department of Justice
4:15 Break
4:30 The Dope on the Commerce Clause
Panelists: Viet Dinh, Georgetown University Law Center
John Eastman, Chapman University School of Law
Moderator: Edward Warren, Kirkland & Ellis
5:30 Break
5:45 Putting the Commerce Clause in Its Proper Place: Is the Supreme Court Up to It?
Speaker: Richard A. Epstein, University of Chicago Law School
6:30

Reception

Event Summary

November 2004

Federalism under the Influence: Dope, Booze, and the Commerce Clause

In important cases that will be argued before the end of the year, the U.S. Supreme Court will address central questions of federalism and interstate commerce. Ashcroft v. Raich presents the question of whether the Commerce Clause authorizes Congress to criminalize the mere possession of marijuana, even where state laws specifically permit the use and possession of the substance for medical purposes. Granholm v. Heald and Swedenburg v. Kelly ask whether state governments may prohibit the direct shipment of wine from out-of-state wineries to in-state consumers, even where in-state wineries may conduct such sales.

Behind the difficult legal questions posed by these cases lies contemporary federalism's twofold affliction: federal meddling in local affairs and state meddling in interstate commerce and the national economy. At a November 10 AEI conference, legal experts considered whether upcoming cases provide an opportunity to re-draw sensible lines between national or local matters, or if they will merely deepen the federalism muddle.

Michael S. Greve
AEI

Ashcroft v. Raich, Granholm v. Heald, and Swedenburg v. Kelly highlight two distinct problems of American federalism, which turn out to be two sides of the same problem. The first is federal meddling in local affairs, clearly involved in Raich. This case is about grossly misplaced priorities. Last one looked, this country is fighting an actual war, and in the midst of that, the federal government is trolling after casual or medical drug users. Hamilton's logic in the Federalist Papers suggests that economies of scale would be the ultimate safeguard against the wholesale displacement of state authority; there would be no advantage to the federal government meddling in those kinds of things. Obviously, that logic is no longer operative.

The second problem (Heald and Swedenburg) is state interference with interstate commerce, and any number of examples come regularly to mind. Trial lawyers and attorneys general say that is what federalism is about, but it seems obvious to me that is not what federalism is about. The Founders were obsessed with protecting commercial relations from state meddling, and they erected a whole edifice to guard against it. Maybe the dormant Commerce Clause is indeed an invention, but the prohibitions of Article I, Section 10, the non-discrimination provisions of Article IV, and federal diversity jurisdiction are actually in the text.

To my mind, the central point is this: any federal regime presupposes some distinction between national affairs and local affairs and some way to protect that equilibrium. But what we have instead is concurrent state and local and federal authority over the full range of private transactions. A political system that routinely generates this bilateral overreach needs constitutional limitations, but it may also be the system that is least able to enforce them. If the Supreme Court can take only what the political branches will give it, and if that is not much, what is that entire enterprise really worth? What prompted this loss of a federalist equilibrium in the first place?

Panel I: Uncorking the Dormant Commerce Clause

R. Hewitt Pate
U.S. Department of Justice

To summarize briefly, in Michigan, in-state wineries, under the state statutory system, are allowed to ship directly to consumers, but out-of-state sellers are required to use the traditional three-tier wholesale and resale regulated alcohol distribution network. In New York, both in- and out-of-state wineries are able to ship to consumers, but must do so in the capacity of a New York licensee while maintaining a physical presence in New York.

The disputes over whether discriminatory wine importation laws are valid have produced opinions from the Second, Fourth, Sixth, Seventh, and Eleventh Circuits. In the Seventh Circuit, this dispute happened to reach the desk of Judge Easterbrook, who observed in his opinion that this case pits the Twenty-First Amendment, which appears in the Constitution, against the dormant Commerce Clause, which does not.

Todd Zywicki
Georgetown University Law Center

Prior to the Wilson Act in 1890, states could not regulate liquor as it hit their borders; it was considered to remain in interstate commerce until it reached its destination. The Wilson Act extended state authority by permitting the exercise of police power to begin the moment alcohol crossed the state line. Still, even that authority did not extend to the control of personal consumption, a loophole closed by the Webb-Kenyon Act in 1913. Just six years later, in 1919, the Eighteenth Amendment became law, implementing a federal ban in all states on the production, sale, transportation, and purchase of alcoholic beverages for consumption. That put the federal government squarely in the arena of police power, and in 1933, the Twenty-First Amendment was passed to reverse the handover of authority that had taken place.

What the Twenty-First Amendment did not do was create a novel enforcement power. Section 2--the wording at issue--was lifted from the Webb-Kenyon Act providing that "the transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." Under Webb-Kenyon, states could regulate liquor, even for private consumption within their states, but they could not discriminate between in-state and out-of-state sellers. One rule had to fit all, and under a plain text reading of the Twenty-First Amendment, that should still be the case. Obviously, this legislative history has been turned on its head to create the mess in which we now find ourselves.

This reversal has two major implications for federalism: First, what we had under the old regime was a clear division of responsibility between state and local police power and federal interstate commerce authority. That clarity has been lost, even though it was far preferable to what we have now. Second, we have found new ambiguity in the Commerce Clause itself, manifested in the Pike balancing test, which purports to weigh the benefit of local laws against their negative impact on interstate commerce. That faulty test is the result of fifty years of confusion about the lines between legitimate federal and state action.

Brannon Denning
Cumberland Law School

The strongest arguments that the states will be able to present in these cases are the text of the Twenty-First Amendment; the case law, particularly the early case law interpreting and applying that amendment; and the congressional statutes on which the amendment was closely modeled.

The purpose of the Twenty-First Amendment was both to repeal the Eighteenth Amendment and to constitutionalize the statutory reversal of various Supreme Court decisions applying the dormant Commerce Clause doctrines against states trying to regulate alcohol coming into their territories. My research leads me to believe that Congress did this with the full knowledge that the power given could be used to impose protectionist regimes. The case law in the 1930s, identified primarily with State Board of Equalization v. Young's Market (1936), supports that conclusion. In that case, a state statute imposed a tax on the importation of out-of-state liquor only, and importers argued that the Twenty-First Amendment required equal treatment. Justice Brandeis, writing for a unanimous court, rejected that argument, calling it "not a construction of the amendment, but a rewriting of it." Later cases that supposedly repudiated Young's Market involved situations that actually fell outside of the "import for delivery or use" language at the heart of the Twenty-First Amendment.

On the statutory side, the dormant Commerce Clause is a default rule; in the absence of congressional action, the Court has inferred restrictions on state regulation from the grant to Congress of power over interstate commerce. Congress, however, has the power to re-delegate powers to the states, including even the power to discriminate without the restriction of the dormant Commerce Clause. (See Western & Southern Life Insurance Co. v. State Board of Equalization of California (1981).) The Wilson Act of 1890 had language requiring equal treatment between in-state and out-of-state sellers, but in the Webb-Kenyon Act, similar language was proposed and eliminated. The Twenty-First Amendment then constitutionalized the Webb-Kenyon Act without adding a non-discrimination provision.

If the Supreme Court decides against the states in these cases, it would not be a disaster. It would, however, ignore a plain grant of power, undermine the amendment process, and grant courts oversight over the dismantling of seventy years of policy and regulatory apparatus. That would appear to be exactly the kind of judicial activism against which conservatives regularly inveigh.

Panel II: The Dope on the Commerce Clause

Edward Warren
Kirkland & Ellis

California's Compassionate Use Act "ensure[s] that patients and their primary caregivers who obtain and use marijuana for medical purposes upon the recommendation of a physician are not subject to criminal prosecution." Under the federal Controlled Substances Act (CSA), the DEA nevertheless seized six marijuana plants belonging to California residents who were using the drug for medicinal purposes, and gave us Ashcroft v. Raich. The feds argue that possession of controlled substances swells the interstate market and that effective control of the interstate market demands intrastate control as well.

Viet Dinh
Georgetown University Law Center

The primary federal argument in this case relies heavily, if not exclusively, on Wickard v. Filburn (1942), in which the Supreme Court found federal authority to regulate intrastate wheat grown for private use. The simple rejoinder is that in Wickard, Congress set out to regulate an interstate market, which does not exist for marijuana because of government regulation. In fact, this case may be much simpler than Wickard, if only because an outright ban is easier to defend than a government's attempt to prevent a gray market that would diminish its regulation of the primary market.

I think, however, that the argument is more refined than it appears, and, in fact, it is the same argument that the government has made in the child pornography context regarding the production of purely digital images. The idea is that a legitimate ban on a fungible product would be impossible to enforce if the government were not able to cut off the supply in its entirety. In the drug context, the argument is stronger because it is unhampered by First Amendment concerns, and stands as a straightforward exposition of congressional enforcement power under the Necessary and Proper Clause (Article I, Section 8). That is the best argument, but it is not necessarily an analytically clean argument because it begs the question: why not make everything a movement in interstate commerce? If driver information, wheat, cereal, and any other product are "things" in interstate commerce, it would seem that anything could be.

In terms of the case details, there is a bit of a question of distribution, given that two of the plaintiffs are people who grow marijuana in order to give it to the sick plaintiff who actually needs it for medical purposes. That at least raises the specter of a commercial transaction, with the only justification being medical necessity. But where would that exception to ordinary Commerce Clause analysis come from? That may well give the Court an easy way out.

John Eastman
Chapman University School of Law

In the Ninth Circuit decision, both Judge Pregerson in the majority and Judge Beam in dissent are correct. Deciding in favor of Raich, Judge Pregerson goes through a thoughtful and analytically accurate application of the four factors in U.S. v. Lopez, in which the Court struck down the Gun Free Schools Zone Act as an overextension of the Commerce Clause power. He finds that the activity at issue is not economic, that the CSA lacks a jurisdictional hook, that the statute and its legislative history lack specific findings on this subject, and that the link between the regulated activity and a substantial effect on interstate commerce is attenuated. On that basis, Judge Pregerson strikes down the CSA--more, I fear, to water down the remains of Lopez and U.S. v. Morrison than to bury Wickard v. Filburn.

Judge Beam, in dissent, accurately points out that Pregerson's opinion conflicts with Wickard--the problem being that Wickard and Lopez conflict with each other, and that a Commerce Clause with any limits at all is hard to reconcile with the Wickard decision. We now live in a world where nobody in Congress takes seriously their constitutional obligation before voting on a statute, where the executive signs laws with the postscript "I believe this to be unconstitutional," and where the Court defers to the first two so frequently that one doubts whether anyone in the process is engaging in constitutional inquiry. How can constitutional limitations be imposed in such a system? And what is the fate of a case such as Lopez, which did not exactly herald the return to textual constraints that many hoped for? I would suggest that the Department of Justice file two-tiered briefs, visiting first the position under current precedent, and then the legitimacy of that precedent itself. Simply having a precedent on hand should not mean that you have carte blanche.

It is clear that the real end of the CSA is a police power purpose, and not a commerce power one, and if the end is constitutionally improper, the government may not use the Commerce Clause or the Necessary and Proper Clause to achieve it. The one articulated purpose that may fall under the commerce umbrella is contrary to the argument in Wickard itself, that by growing his own wheat, Roscoe Filburn depressed the interstate market in wheat. In Raich, the government's position is that by growing their own marijuana, the respondents are swelling the interstate market in marijuana. It is not possible to have it both ways, and the obviously pre-textual nature of the argument reveals it to be nothing but an attempt to exercise a police power not granted in the Constitution.

Putting the Commerce Clause in Its Proper Place: Is the Supreme Court Up to It?

Richard A. Epstein
University of Chicago School of Law

The wine cases actually offer a tremendous insight into what has happened to the meaning of "commerce" in our jurisprudence. As described by Justice Marshall in Gibbons v. Ogden (1824), commerce, in the sense of something that the federal government could regulate, was limited to transportation or communication that goes across states lines. Manufacture and intrastate sale were simply not understood to be within the federal purview, and this provided a clear distinction between that which was within Congress's range of regulation and that which was not. In 1895, U.S. v. E.C. Knight reaffirmed that logic. The first real attack on it is visible in the text of the Eighteenth Amendment itself:

...[T]he manufacture, sale, or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is hereby prohibited. (Emphasis added.)

The words "manufacture" and "sale" make their first appearance here in the U.S. Constitution, illuminating the conscious willingness of the amenders to run roughshod over federalism as it was then understood.

By 1933, the federal government was giving authority back to the states, and in so doing, that Congress explained to us how it understood the lines between state and federal authority to be drawn.

Sec. 2. The transportation or importation into any state, territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

There was not a word about either manufacture or sale because the federal government had no authority over those areas to give back. In 1933, when cooler heads prevailed, it was clear from amendment's wording that E.C Knight was still in fact good law.

A short four years later, the Supreme Court changed everything with National Labor Relations Board v. Jones & Laughlin Steel Co. (1937), in which all traditional limits on the definition of interstate commerce were thrown out the window. Sale, manufacture, and the firing of employees all became the province of Congress, and the result is a bizarre situation in which, following current jurisprudence to its logical end, the federal government may not regulate interstate shipment of liquor, but it could pass a statute prohibiting the manufacture or sale of liquor within a state. Change the scope of the Commerce Clause, and the Twenty-First Amendment ceases to make sense. The most we can hope in these cases is that the dormant Commerce Clause--the one manifest improvement over original constitutional design--manages to survive.

The medical marijuana case brings to mind questions of strategy in light of the above situation. Clearly, arguing that the Controlled Substances Act is unconstitutional is unlikely to be a winning strategy--multiple cases have held otherwise. It seems to me that the best hope is to offer the Court a way to balance the need for enforcement with respect to international markets and our treaty obligations with the local autonomy issues under state powers. Take away the fungibility argument by crafting a restricted distribution system, and you might have a shot. But in the larger scheme of things, it is impossible to avoid the question of attacking Wickard directly, and that would require holding Justice Rehnquist to his Lopez return to "first principles."

What this all boils down to is the interesting fact that an examination of the case law with respect to federal commerce power reveals a startling consistency: that every expansion of government power has been designed to foster growth in government-sponsored monopoly. I hope that the Court realizes the shameful purposes to which this extensive power has been put in most cases, but I will not hold my breath.

AEI research assistant Kate Rick prepared this summary.

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