1

United States Court of Appeals,

Fifth Circuit.

No. 97-20508

Summary Calendar.

DEER PARK INDEPENDENT SCHOOL DISTRICT; Galena Park Independent

School District; Sheldon Independent School District,

Plaintiffs-Appellants,

v.

HARRIS COUNTY APPRAISAL DISTRICT; et al., Defendants,

Harris County Appraisal District; Shell Chemical Corporation;

Shell Oil Company; Marubeni Tubulars Incorporated; Mitsui Tubular

Products Incorporated; Lyondell-Citgo Refining Company Limited;

Crown Central Petroleum Corporation; Vinson Supply Company; Siderca

Corporation, Defendants-Appellees.

GALENA PARK INDEPENDENT SCHOOL DISTRICT, Plaintiff-Appellant,

v.

Harris County Appraisal District; et al., Defendants,

HARRIS COUNTY APPRAISAL DISTRICT; Marubeni Tubulars Incorporated;

Mitsui Tubular Products Incorporated; Lyondell-Citgo Refining

Company Limited; Crown Central Petroleum, Defendants-Appellees.

SHELDON INDEPENDENT SCHOOL DISTRICT, Plaintiff-Appellant,

v.

HARRIS COUNTY APPRAISAL DISTRICT (Central); et al., Defendants,

Harris County Appraisal District (Central); Vinson Supply

Company; Siderca Corporation, Defendants-Appellees.

Jan. 22, 1998.

Appeal from the United States District Court for the Southern

District of Texas.

Before REYNALDO G. GARZA, SMITH and BENAVIDES, Circuit Judges.

PER CURIAM:

This case comes from a final summary declaratory judgment of
 

1The School Districts are: The Deer Park Independent School

District, the Galena Park Independent School District, and the

Sheldon Independent School District. The Companies asked that the

appeal of the Sheldon Independent School District be dismissed for

want of jurisdiction. We do not pass on that point at this time,

because it is moot, given the outcome of this case. 

 

2The Companies are: the Lyondell-Citgo Refining Company,

Ltd., the Crown Central Petroleum Corporation, the Shell Oil

Company, the Shell Chemical Corporation, the Siderca Corporation,

the Vinson Supply Company, Mitsui Tubular Products, Inc., and

Marubeni Tubulars, Inc. The Harris County Appraisal District was

included as a defendant in this suit because of its role as tax

assessor. 

2

the United States District Court for the Southern District of

Texas, Judge Lynn Hughes, presiding. This case was decided on

cross-motions for summary judgment. The district court granted

summary judgment in favor of the Defendants-Appellees, the Harris

County Appraisal District, et al. (the "Companies"). The

Plaintiffs-Appellants, the Deer Park Independent School District,

et al. (the "School Districts") timely appealed, and the matter now

lies before this panel.

Background

The School Districts1 filed suit in the district court on

September 30, 1996, seeking a declaratory judgment stating that 19

U.S.C. § 81o(e) is unconstitutional. This statute grants

exemptions from state and local ad valorem taxes on property to

businesses located inside of Foreign Trade Zones ("FTZs").

Specifically, the School Districts alleged that these exemptions

unconstitutionally deprived them of tax revenue.

The Companies2 are various corporations with operations in the

FTZs. Both sides have stipulated that the property involved in
3

this dispute is either (i) tangible personal property imported from

outside the United States and held in an activated FTZ for the

purpose of storage, sale, exhibition, repackaging, assembly,

distribution, sorting, grading, cleaning, mixing, display,

manufacturing, or processing, or (ii) tangible personal property

produced in the United States and held in an activated FTZ for

exportation, either in the above form or as altered by the above

processes. But for the operation of § 810(e), all or a significant

part of the property would be taxable by the School Districts.

Several related cases were consolidated into this one, and the

parties stipulated to the relevant facts. Both sides submitted

motions for summary judgment, and on May 16, 1997, the district

court made its ruling. The district court granted summary judgment

in favor of the Companies, and denied the School Districts' motion

for summary judgment.

The School Districts timely appealed, claiming that the

district court erred in granting summary judgment in favor of the

Companies. They argue that § 81o(e) is an unconstitutional

exercise of Congress' power under the Commerce Clause, and violates

the Tenth Amendment and the Guarantee Clause of the Constitution.

Upon review of the pleadings, briefs, and record on file, we find

no reversible error and affirm the decision of the district court.

Standard of Review

Summary judgment is appropriate if the record discloses that

"there is no genuine issue as to any material fact and that the

moving party is entitled to judgment as a matter of law."
4

Fed.R.Civ.Proc. 56(c); Sims v. Monumental General Ins. Co., 960

F.2d 478, 479 (5th Cir.1992). The pleadings, depositions,

admissions, and answers to interrogatories, together with

affidavits, must demonstrate that no genuine issue of material fact

remains. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548,

91 L.Ed.2d 265 (1986). We review the facts drawing all inferences

in favor of the party opposing the motion. Reid v. State Farm

Mutual Auto. Ins. Co., 784 F.2d 577, 578 (5th Cir.1986).

In addition to the aforementioned general procedural matters,

we review challenges to the validity of a Congressional exercise of

power under the Commerce Clause using the following standards. The

burden for the challenger in cases such as this is high. This

Court must determine only (1) whether a rational basis exists for

finding that the regulated activity affects interstate commerce,

and (2) whether the means chosen by Congress were "reasonably

adapted to the end permitted by the Constitution." Hodel v.

Virginia Surface Mining & Reclamation Ass'n, 452 U.S. 264, 276, 101

S.Ct. 2352, 2360, 69 L.Ed.2d 1 (1981). The Commerce Clause power

is complete in itself and is only limited by those limits

prescribed in the Constitution. Id.

 Congress' regulatory power under the Commerce Clause may be

used to regulate the use of the channels of interstate commerce,

Congress may protect and regulate the instrumentalities of

interstate commerce (including people or things in interstate

commerce), and Congress may regulate those activities having a

substantial relation to interstate commerce. U.S. v. Lopez, 514
5

U.S. 549, 556, 115 S.Ct. 1624, 1629, 131 L.Ed.2d 626 (1995). While

the states do retain broad powers under the Constitution, they

"only do so to the extent that the Constitution has not divested

them of their original powers and transferred these powers to the

Federal Government." Garcia v. San Antonio Metropolitan Transit

Authority, 469 U.S. 528, 549-550, 105 S.Ct. 1005, 1016-17, 83

L.Ed.2d 1016 (1985). The right to regulate foreign and interstate

commerce is one of powers expressly granted to the federal

government by Art. I, § 8, cl. 3 of the Constitution.

Analysis

 While all the claims are related, the primary contention of

the School Districts is that Congress did not have power under the

Commerce Clause to enact and enforce § 81o(e), and as a result, the

statute should be declared unconstitutional. We have already

stated the broad extent of Congress' powers under the Commerce

Clause, as well as the fact that the standard of review is whether

there was a rational basis for Congress' actions and whether the

means chosen were reasonably adapted to the ends. Hodel, 452 U.S.

at 276, 101 S.Ct. at 2360.

Congress' actions in this case were rational and pass muster.

First of all, there can be no doubt that the activities in the FTZs

constitute foreign, and by extension, interstate commerce, so they

are within the purview of the Congress. Next, it is completely

rational to believe that the imposition of ad valorem taxes on the

property in the FTZs would affect interstate and foreign commerce,

and that forbidding such taxes would provide uniform treatment of
6

FTZs throughout the country. Such uniformity in foreign commerce

is a well-recognized federal interest. Japan Line, Ld. v. County

of Los Angeles, 441 U.S. 434, 448-449, 99 S.Ct. 1813, 1821-1822, 60

L.Ed.2d 336 (1979). Further, in enacting § 81o(e), Congress

explicitly found that the aims of the original act of Congress

which created FTZs were being frustrated by non-uniform local and

state ad valorem taxes. Congress believed, rationally, that this

negatively affected interstate and foreign commerce, and fashioned

a reasonable response.

Also this law is of importance to Texas because the Texas

Constitution specifically lists the permissible exemptions from ad

valorem taxation, and property within FTZs is not on the list. For

this reason, Texas Senators Lloyd Bentsen and John Tower, in

conjunction with Texas Congressmen Jim Wright and Jack Brooks,

sponsored this law. This law was passed to help Texas, by

encouraging industry, and is not a type of oppression or

"dragooning" of the state, as the School Districts contend.

Further, the plenary power granted to Congress under the

Commerce Clause includes the power to protect interstate and

foreign commerce from taxation. State Bd. of Insurance v. Todd

Shipyards Corp., 370 U.S. 451, 456, 82 S.Ct. 1380, 1383, 8 L.Ed.2d

620 (1962). This power to grant or withhold protection from

regulation or taxation "is so complete that its ideas of policy

should prevail." Id. Congress' actions were well within its power

under the Commerce Clause, and pass muster under the standards

listed.
 

3National League of Cities was overruled by Garcia, 469 U.S.

at 557, 105 S.Ct. at 1020. 

7

The School Districts also claim that § 81o(e) violates the

Tenth Amendment. As stated previously, the Tenth Amendment's

reservation to the states of power not conferred on the federal

government in no way inhibits the activities of the federal

government in situations in which a power has been so conferred.

See Garcia, 469 U.S. at 549-550, 105 S.Ct. at 1016-1017. The

explicit granting of power to the Congress, in regard to its right

to regulate foreign and interstate commerce, in conjunction with

the Supremacy Clause, clearly gives Congress power over this

situation. See e.g., Seniors Civil Liberties Ass'n, v. Kemp, 965

F.2d 1030, 1034 (11th Cir.1992).

Further, historically, Congressional prohibitions on state

taxation have been upheld over Tenth Amendment challenges. For

example, even when National League of Cities v. Usery, 426 U.S.

833, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976) was the lead Supreme

Court case on these matters,3 the Supreme Court upheld a federal

law which preempted a state tax that discriminated against the sale

of electricity outside the state. Arizona Public Service Co. v.

Snead, 441 U.S. 141, 99 S.Ct. 1629, 60 L.Ed.2d 106 (1979). The

Supreme Court rejected the argument that Congress lacked authority

under the Commerce Clause to regulate state taxation, stating that

Congress had broad power in this sphere, had a rational basis for

finding that the tax interfered with interstate commerce, and the

means selected were reasonable to achieve Congress' ends. Id. at
8

150, 99 S.Ct. at 1634. More recent cases have given support to

this proposition as well. For example, in New Jersey v.

Consolidated Railroad Corp., 690 F.Supp. 1061 (Reg'l Rail

Reorg.Ct.1988), the court held that Congress could exempt Conrail

(a privately owned railroad) from taxation, rejecting the state's

Tenth Amendment claim.

Congress acted well within its powers under the Commerce

Clause in this case, its belief that this affected interstate

commerce was rational, and the means it used to achieve its goals

were reasonable and appropriate. Therefore, the School Districts'

Tenth Amendment claims fail.

As a final argument on this point, the School Districts claim

that cases such as New York v. United States, 505 U.S. 144, 112

S.Ct. 2408, 120 L.Ed.2d 120 (1992) and Printz, et al. v. United

States, --- U.S. ----, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997),

somehow support their Tenth Amendment claim. This assertion is

incorrect. Those cases involve an act of Congress which

essentially hijacked the administrative apparatus of state and

local government to help achieve Congress' ends. This case is not

an example of such a Congressional overreach, so this argument

fails as well.

The School Districts also claim that § 81o(e) violates the

Guarantee Clause of the Constitution in that it deprives the states

of a republican form of government. This claim is not only

incorrect, it is absurd. First of all, the Supreme Court has held

that challenges to Congressional action under the Guarantee Clause
9

are not justiciable. See Baker v. Carr, 369 U.S. 186, 224, 82

S.Ct. 691, 713, 7 L.Ed.2d 663 (1962); O'Hair v. White, 675 F.2d

680, 684 n. 5 (5th Cir.1982). Also, the School Districts do not

explain the merits of their claim, silence which warrants

rejection. Further, at least as of today, Texas is governed by a

freely elected legislature and executive, not a monarchy, military

dictatorship, or any other type of government which would offend

the Guarantee Clause of the Constitution. Unless and until that

fact changes, this claim is an absolute dead letter.

Conclusion

Based on the foregoing, we find no reversible error in the

decision of the district court, which granted summary judgment in

favor of the Defendants-Appellees, and held that § 81o(e) is

constitutional. Therefore, we AFFIRM the decision of the district

court.

AFFIRMED.