United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 02-2366

___________

South Dakota Farm Bureau, Inc.; *

South Dakota Sheep Growers *

Association, Inc.; Haverhals Feedlot, *

Inc.; Sjovall Feedyard, Inc.; Frank D. *

Brost; Donald Tesch; William A. *

Aeschlimann; Spear H. Ranch, Inc.; *

Marston Holben; Marston and Marian *

Holben Family Trust; Montana-Dakota * Appeals from the United States

Utilities Company; Northwestern * District Court for the

Public Service; Otter Tail Power * District of South Dakota.

Company, *

*

Plaintiffs - Appellees, *

*

v. *

*

Joyce Hazeltine, in her official *

capacity as Secretary of State of South *

Dakota; Mark W. Barnett, in his *

official capacity as Attorney General *

of South Dakota, *

*

Defendants - Appellants, *

*

Dakota Rural Action; South Dakota *

Resources Coalition, *

*

Intervenors Defendants, *

*

------------------------- *

*
-2-

State of Nebraska; Everett Holstein; *

Rudy Meduna; Dan Hodges, *

*

Amicus on Behalf of Appellants, *

*

The American Farm Bureau Federation; *

Alabama Farm Bureau Federation; *

Arkansas Farm Bureau Federation; *

Kansas Farm Bureau Federation; *

Kentucky Farm Bureau Federation; *

Minnesota Farm Bureau Federation; *

North Dakota Farm Bureau Federation; *

Utah Farm Bureau Federation, *

*

Amicus on Behalf of Appellees. *

___________

No. 02-2588

___________

South Dakota Farm Bureau, Inc.; *

South Dakota Sheep Growers *

Association, Inc.; Haverhals Feedlot, *

Inc.; Sjovall Feedyard, Inc.; Frank D. *

Brost; Donald Tesch; William A. *

Aeschlimann; Spear H. Ranch, Inc.; *

Marston Holben; Marston and Marian *

Holben Family Trust; Montana-Dakota *

Utilities Company; Northwestern *

Public Service; Otter Tail Power *

Company, *

*

Plaintiffs - Appellees, *

*

v. *

*
-3-

Joyce Hazeltine, in her official capacity *

as Secretary of State of South Dakota; *

Mark W. Barnett, in his official *

capacity as Attorney General of *

South Dakota, *

*

Defendants, *

*

Dakota Rural Action; South Dakota *

Resources Coalition, *

*

 Intervenors Defendants - Appellants, *

*

----------------------------- *

*

Everett Holstein; Rudy Meduna; *

Dan Hodges, *

*

Amicus on Behalf of Appellants. *

___________

No. 02-2644

___________

South Dakota Farm Bureau, Inc.; South *

Dakota Sheep Growers Association, *

Inc.; Haverhals Feedlot, Inc.; Sjovall *

Feedyard, Inc.; Frank D. Brost; Donald *

Tesch; William A. Aeschlimann, *

*

Plaintiffs, *

*

Spear H. Ranch, Inc.; Marston Holben; *

Marston and Marian Holben Family *

Trust, *

*
-4-

Plaintiffs - Appellants, *

*

Montana-Dakota Utilities Company; *

Northwestern Public Service; Otter *

Tail Power Company, *

*

Plaintiffs, *

*

v. *

*

Joyce Hazeltine, in her official *

capacity as Secretary of State of South *

Dakota; Mark W. Barnett, in his *

official capacity as Attorney General *

of South Dakota, *

*

Defendants - Appellees, *

*

Dakota Rural Action; South Dakota *

Resources Coalition, *

*

 Intervenors Defendants - Appellees. *

___________

No. 02-2646

___________

South Dakota Farm Bureau, Inc.; South *

Dakota Sheep Growers Association, *

Inc.; Haverhals Feedlot, Inc.; Sjovall *

Feedyard, Inc.; Frank D. Brost; Donald *

Tesch; William A. Aeschlimann, *

*

Plaintiffs - Appellants, *

*

Spear H. Ranch, Inc.; Marston Holben; *
-5-

Marston and Marian Holben Family *

Trust; Montana-Dakota Utilities *

Company; Northwestern Public *

Service; Otter Tail Power Company, *

*

Plaintiffs, *

*

v. *

*

Joyce Hazeltine, in her official *

capacity as Secretary of State of South *

Dakota; Mark W. Barnett, in his *

official capacity as Attorney General *

of South Dakota, *

*

Defendants - Appellees, *

*

Dakota Rural Action; South Dakota *

Resources Coalition, *

*

 Intervenors Defendants - Appellees. *

___________

Submitted: February 10, 2003

Filed: August 19, 2003

___________

Before BOWMAN, FAGG, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

___________

BOWMAN, Circuit Judge.

The South Dakota Constitution prohibits corporations and syndicates, subject

to certain exemptions, from acquiring or obtaining an interest in land used for farming

and from otherwise engaging in farming in South Dakota. This restriction, known as
-6-

Amendment E, was added to the South Dakota Constitution as the result of a 1998

referendum. The thirteen Plaintiffs in this case allege that Amendment E violates the

dormant Commerce Clause of the United States Constitution, and a smaller group of

these Plaintiffs also claims that it violates the Americans with Disabilities Act (ADA).

Prior to trial, the District Court dismissed the ADA claim, and the Plaintiffs

amended their complaint to delete that claim. After a bench trial, but prior to issuing

its opinion, the District Court sent a memorandum to all parties stating that it erred

in dismissing the ADA claim before trial. In its opinion, the District Court concluded

that Amendment E violates both the ADA and the dormant Commerce Clause, and

it enjoined Defendants Joyce Hazeltine, the South Dakota secretary of state, and Mark

Barnett, the State's attorney general, from enforcing Amendment E. S.D. Farm

Bureau, Inc. v. Hazeltine, 202 F. Supp. 2d 1020 (D.S.D. 2002). Hazeltine and Barnett

appeal, as do two parties that intervened on the side of the Defendants, Dakota Rural

Action and South Dakota Resources Council.

We conclude that the District Court improperly considered the ADA claim, but

we affirm its judgment by concluding that Amendment E contravenes the dormant

Commerce Clause.

I.

Amendment E was codified as four sections of Article XVII of the South

Dakota Constitution. Section 21, the prohibitory provision, states that "[n]o

corporation or syndicate may acquire, or otherwise obtain an interest, whether legal,

beneficial, or otherwise, in any real estate used for farming in this state, or engage in

farming." S.D. Const. art. XVII, § 21. A corporation or syndicate can avoid the

prohibition of § 21 if it fits within one of fifteen exempted categories listed in § 22,

five of which are relevant to the issues raised on appeal. 
1

In full, the exemption applies to:

[a]gricultural land acquired or leased, or livestock kept, fed or owned,

by a cooperative organized under the laws of any state, if a majority of

the shares or other interests of ownership in the cooperative are held by

members in the cooperative who are natural persons actively engaged in

the day-to-day labor and management of a farm, or family farm

corporations or syndicates, and who either acquire from the cooperative,

through purchase or otherwise, such livestock, or crops produced on

such land, or deliver to the cooperative, through sale or otherwise, crops

to be used in the keeping or feeding of such livestock.

-7-

The first of these relevant exemptions is for a "family farm corporation or

syndicate," which is defined as

a corporation or syndicate engaged in farming or the ownership of

agricultural land, in which a majority of the partnership interests, shares,

stock, or other ownership interests are held by members of a family or

a trust created for the benefit of a member of that family. The term,

family, means natural persons related to one another within the fourth

degree of kinship according to civil law, or their spouses. At least one

of the family members in a family farm corporation or syndicate shall

reside on or be actively engaged in the day-to-day labor and

management of the farm. Day-to-day labor and management shall

require both daily or routine substantial physical exertion and

administration.

Id. § 22, cl. 1. The ADA claim in this case is based on the inability of physically

disabled farmers and ranchers to qualify for this exemption.

The second relevant exemption in § 22 applies to land and livestock in which

a cooperative has a legal interest, so long as the cooperative fulfills certain

prerequisites related to family ownership.1

 Id. cl. 2. As the District Court noted, this
S.D. Const. art. XVII, § 22, cl. 2.

-8-

is a curious exemption because § 21, by its own terms, applies only to "corporations

and syndicates" and not specifically to cooperatives.

Amendment E also contains an exemption known as a "grandfather clause"

that applies to interests in agricultural land owned by corporations and syndicates as

of the effective date of Amendment E. Id. cl. 4. Section 22 has a similar provision

for livestock that corporations and syndicates owned as of the effective date of

Amendment E. Id. cl. 5. The final exemption of note is for corporations or

syndicates that acquire or lease agricultural land for immediate or potential nonfarming purposes. Id. cl. 10. 

II.

Thirteen parties, to whom we will refer collectively as "the Plaintiffs,"

challenge the legality of Amendment E. Two of the Plaintiffs are South Dakota

corporations: Haverhals Feedlot, Inc. (HFI), and Sjovall Feedyard, Inc. (SFI). Each

owns a custom cattle feedlot, which means that they raise cattle owned by third

parties. The third parties deliver cattle to the feedlots but retain ownership of the

cattle. The feedlots then raise the cattle in preparation for slaughter. HFI and SFI

claim that § 21 prohibits corporations who own cattle from contracting with South

Dakota feedlots because the corporations would be engaging in farming in South

Dakota. In short, these two Plaintiffs claim that Amendment E—if enforced—would

put them out of business because they earn their revenue from feeding cattle owned

by non-exempt entities. 

Plaintiffs Donald Tesch and William Aeschlimann engage in unincorporated

livestock feeding businesses in South Dakota. Tesch is in the seventh year of a tenyear contract to raise hogs for Harvest States Cooperative, which is based in
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Minnesota. Although the hogs Tesch is raising under this contract are exempted by

Amendment E's grandfather clause for livestock, Tesch claims that § 21 bars Harvest

States from engaging in farming in South Dakota and, therefore, from entering into

a subsequent contract with him. As for Aeschlimann, he feeds lambs owned by third

parties, many of whom are non-exempt corporations pursuant to Amendment E. He

thus claims that Amendment E will drastically reduce his income because it prohibits

the non-exempt entities from contracting with him.

Spear H Ranch (Spear H), another corporate Plaintiff, is an Arizona corporation

that does business in South Dakota, operating a cattle ranch. Its sole shareholder is

the Marston and Marian Holben Family Trust, which is also a Plaintiff, as is Marston

Holben individually. Spear H, the Holben Trust, and Holben claim that

Amendment E prohibits Spear H from acquiring additional land in South Dakota and

farming it because, aside from the grandfather clause, Spear H does not fit into any

of § 22's exemptions. Specifically, the family farm exemption of § 22(1) cannot

apply because the Holbens do not reside or work on the ranch.

Plaintiff Frank Brost is the majority or sole stakeholder in three entities, none

of which are Plaintiffs, that own ranch land and livestock in South Dakota. The

grandfather clause of Amendment E permits these entities to continue using the land

they owned as of Amendment E's effective date, but Brost reads § 21 to prohibit them

from owning additional land and from engaging in additional farming. Because Brost

does not live on the ranch land, nor do any of his family members, he believes that

the family farm corporation exemption of § 22(1) would not apply to his three

businesses. In addition, Brost individually owns ranch land, and he claims that

Amendment E has diminished the value of the land because its most likely purchasers

are corporations that cannot acquire the land under Amendment E.

Two interest groups, on behalf of their members, have also joined as Plaintiffs.

The first is the South Dakota Farm Bureau (SDFB), which represents the interests of
2

 The State Officials and the Intervenors filed separate briefs and had separate

counsel at trial and on appeal.

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farm, ranch, and rural families in South Dakota. It claims that Amendment E has

damaged its members by prohibiting their limited liability entities from farming in

South Dakota and by effectively preventing them from contracting with corporations

and syndicates. The South Dakota Sheep Growers' Association similarly claims that

many of its members cannot farm in corporate form or contract with certain entities.

The final three Plaintiffs are utility companies that claim Amendment E applies

to, and increases the cost of, easements they must acquire for a power plant. 

On the other side, two not-for-profit groups—Dakota Rural Action (DRA),

which represents the interests of family farmers, and South Dakota Resources Council

(SDRC), which advocates protection of the environment—intervened permissively,

joining the South Dakota secretary of state and attorney general as Defendants. DRA

and SDRC were both heavily involved in drafting Amendment E and promoting it

during the campaign leading up to the referendum. We will refer to Hazeltine and

Barnett as "the State Officials," to DRA and SDRC as "the Intervenors," and to all

four parties collectively as "the Defendants."2

III.

We first consider the ADA claim initially advanced only by SDFB, but later

joined by Plaintiffs Brost and Holben. The family farm corporation exemption in

§ 22(1) requires a family member to reside on a farm or engage in "both daily or

routine substantial physical exertion and administration." S.D. Const. art. XVII, § 22,

cl. 1. The rationale supporting the ADA claim is that Amendment E discriminates

against disabled farmers, such as Brost and Holben, whose corporations cannot
3

Grey was not the first case in which we permitted a plaintiff to seek injunctive

relief for an ADA violation from a state official in his or her official capacity. See

Gibson v. Ark. Dep't of Corr., 265 F.3d 718, 722 (8th Cir. 2001).

-11-

qualify for this exemption because their owners are physically unable to participate

in the daily labor and management of the land.

Eleven months before trial, the Defendants successfully moved to dismiss the

ADA claim on the basis that a plaintiff cannot seek prospective injunctive relief for

ADA claims from state officials in their official capacities. Hr'g Tr. at 5–6 (Jan. 18,

2000). The Plaintiffs then amended their complaint to remove the ADA claim. There

was no mention of the ADA claim during the pre-trial conference or during the trial,

which took place from December 3–7, 2001. On December 12, before the District

Court issued its opinion, the District Court sent a memorandum to the parties

explaining that, at the time of trial, it "was somewhat behind in [its] reading" of

Eighth Circuit case law. Dist. Ct. Mem. to Counsel (Dec. 12, 2001). The District

Court wrote that, on November 6, 2001, we concluded in Grey v. Wilburn, 270 F.3d

607, 609 (8th Cir. 2001), that a plaintiff can indeed request prospective injunctive

relief for ADA violations from state officials in their official capacities.3

 The District

Court wrote in its December 12 memorandum that its decision to dismiss the ADA

claim was incorrect pursuant to Grey, and it directed the parties to "keep this in mind

as you submit further arguments." Dist. Ct. Mem. to Counsel (Dec. 12, 2001). 

On the basis of Grey, the District Court reconsidered the ADA claim and

concluded that Amendment E violated the ADA. The Court explained its decision

to rule on the ADA claim as proper because Brost and Holben submitted ADA claims

as offers of proof at trial: they testified that they are unable to engage in strenuous

ranching activities. Trial Tr. at 66, 255. The Defendants argue that the District Court

abused its discretion by reinstating the ADA claim, while the Plaintiffs defend the

District Court's sua sponte revival of the claim as a proper decision to conform the
-12-

pleadings to the evidence at trial. See Fed. R. Civ. P. 15(b). The pleadings may only

be amended when issues not in the pleadings are tried by the parties' "express or

implied consent." Id. In order to consent to the trial of an unpleaded issue, a party

must have notice of that issue and must have been given adequate opportunity to cure

any surprise caused by the amendment to the pleadings. Kim v. Nash Finch Co., 123

F.3d 1046, 1063 (8th Cir. 1997). We review a district court's decision to conform the

pleadings to the evidence for an abuse of discretion. Clark v. Martinez, 295 F.3d 809,

815 (8th Cir. 2002).

The record contains no evidence that the Defendants expressly consented to the

trial of the ADA claim, and we do not believe there is enough evidence to satisfy the

demanding standard for implied consent. See Triad Elec. & Controls, Inc. v. Power

Sys. Eng'g, Inc., 117 F.3d 180, 193 (5th Cir. 1997) (stating that "trial of unpled issues

by implied consent is not lightly to be inferred under Rule 15(b)" (citation to quoted

case omitted)). The offers of proof concerning the respective states of health of Brost

and Holben cannot be considered notice to the Defendants that the ADA claim was

being tried; the purpose of the offers of proof was never stated, and there is simply

no basis for us to conclude that the Defendants impliedly consented to the trial of the

ADA claim. It is significant to us that the District Court had dismissed the ADA

claim and that the Plaintiffs deleted the ADA claim from their complaint; if the

Defendants had any notice of the ADA claim, their notice was that the District Court

would not permit the claim to be heard and that the Plaintiffs had no intent to try it.

Moreover, the ADA was never discussed during trial. Without notice, the Defendants

lacked an adequate opportunity to cure the surprise caused by the District Court's

constructive amendment to the pleadings: they could not present evidence or crossexamine witnesses concerning any issue, factual or legal, related to the claim. 

The Plaintiffs argue that the Defendants had an opportunity to cure the surprise

because the District Court instructed the parties to address a potential ADA claim in

their post-trial briefs. The purpose of Rule 15(b), however, is to ensure that the
4

The District Court also justified its reconsideration of the ADA claim on the

ground that SDFB had associational standing to bring the ADA claim. S.D. Farm

Bureau, Inc. v. Hazeltine, 202 F. Supp. 2d 1020, 1039 (D.S.D. 2002). The issue of

SDFB's standing, however, is irrelevant to Rule 15(b) analysis. The question is not

whether one of the Plaintiffs was constitutionally and prudentially entitled to raise the

ADA claim at trial, but rather whether the claim was in fact raised and actually tried.

-13-

pleadings do not obstruct a court's ability to address the issues that were presented

and defended at trial. In this case, the ADA claim was never presented or defended

at trial, so it is immaterial that the Defendants could defend the ADA claim in their

post-trial briefs. We conclude that the District Court abused its discretion in

constructively amending the pleadings to include the ADA claim. The judgment

cannot stand insofar as it is based on that claim.4

IV.

Before we turn to the dormant Commerce Clause claim, we must first address

the State Officials' argument that the Plaintiffs lack standing to raise this claim. We

"are under an independent obligation to examine [our] own jurisdiction, and standing

'is perhaps the most important of [the jurisdictional] doctrines.'" FW/PBS, Inc. v.

City of Dallas, 493 U.S. 215, 231 (1990) (quoting Allen v. Wright, 468 U.S. 737, 750

(1984)) (first alteration by this Court). If a plaintiff lacks standing, a court is without

subject matter jurisdiction. Faibisch v. Univ. of Minn., 304 F.3d 797, 801 (8th Cir.

2002). Whether a court has subject matter jurisdiction is an issue that any party or the

court may raise at any time. Fromm v. Comm'n of Veterans Affairs, 220 F.3d 887,

890 (8th Cir. 2000).

To establish standing, a plaintiff must show three things. "First, the plaintiff

must have suffered an injury in fact, meaning that the injury is (a) concrete and

particularized and (b) actual or imminent, not conjectural or hypothetical." Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560 (1992) (internal quotation marks and
-14-

citations to quoted cases omitted). Second, the injury must be traceable to the

defendant's challenged action. Id. Third, it must be "likely" rather than "speculative"

that a favorable decision will redress the injury. Id. at 561. The standing challenge

in this case concerns the first element: whether any of the Plaintiffs have suffered an

injury in fact.

The Defendants insist that HFI, SFI, Tesch, and Aeschlimann lack standing

because the prohibitions of § 21 apply only to their contracting partners. A third

party does not have standing to assert "the rights or legal interests of others in order

to obtain relief from injury to themselves." Ben Oehrleins & Sons & Daughter, Inc.

v. Hennepin County, 115 F.3d 1372, 1379 (8th Cir.) (quoting Warth v. Seldin, 422

U.S. 490, 509 (1975)), cert. denied, 522 U.S. 1029, 1036 (1997). But "[i]n Commerce

Clause jurisprudence, cognizable injury is not restricted to those members of the

affected class against whom states or their political subdivisions ultimately

discriminate." Houlton Citizens' Coalition v. Town of Houlton, 175 F.3d 178, 183

(1st Cir. 1999). For example, in General Motors Corp. v. Tracy, 519 U.S. 278 (1997),

an Ohio statute charged out-of-state natural gas vendors at a higher sales tax rate than

certain in-state vendors. Although General Motors was not an out-of-state natural gas

vendor, it had standing to challenge the statute's constitutionality because it was

financially injured; its Ohio manufacturing facility purchased virtually all of its

natural gas from out-of-state suppliers, which had passed on the cost of the higher

Ohio tax rate to its customers. Id. at 286. HFI, SFI, Tesch, and Aeschlimann are

similarly situated: they do substantial business with out-of-state corporations affected

by the challenged law. Their imminent loss of that business as a result of

Amendment E's enforcement satisfies the injury-in-fact requirement of standing. See

Clinton v. City of New York, 524 U.S. 417, 431 (1998) (concluding party had shown

sufficient injury because defendant's action had a negative effect on party's

"borrowing power, financial strength, and fiscal planning"); Lujan, 504 U.S. at 560

(stating that injury may be actual or imminent to satisfy standing); Ben Oehrleins, 115

F.3d at 1379 (finding sufficient injury-in-fact in suit against county where county
5

We note that the Defendants also argued that Tesch cannot show an injury

because they do not read Amendment E to bar Harvest States from engaging in

farming in South Dakota. Were we to apply the canon of expresio unius est exclusio

alterius, we could interpret § 21 not to apply to cooperatives because § 21 does not

list cooperatives. Section 22(2), however, exempts certain types of cooperatives from

the restrictions of § 21. This exemption would be meaningless unless cooperatives

were subject to § 21. Therefore, in order to avoid construing § 22(2) as being mere

surplusage, we interpret § 21 to restrict cooperatives in the same way that it does

corporations and syndicates. See United States v. Gomez-Hernandez, 300 F.3d 974,

979 (8th Cir. 2002), cert. denied, 123 S. Ct 929, 931 (2003).

-15-

ordinance prohibited plaintiffs from gaining access to market); Lepelletier v. FDIC,

164 F.3d 37, 42 (D.C. Cir. 1999) (noting court had previously held that denial of

business opportunity can satisfy injury requirement).5

Because we conclude that HFI, SFI, Tesch, and Aeschlimann have standing,

we need not verify the independent standing of the other Plaintiffs, for they all raise

similar arguments for affirmance. See Clinton, 524 U.S. at 432 n.19; Houlton, 175

F.3d at 183. 

V.

The District Court held that Amendment E violates the dormant Commerce

Clause. We review this conclusion of law de novo. See R & M Oil & Supply, Inc.

v. Saunders, 307 F.3d 731, 734 (8th Cir. 2002).

A.

The Plaintiffs contend that Amendment E violates the so-called dormant

Commerce Clause of the United States Constitution. The Commerce Clause, of

course, grants Congress the authority to regulate interstate commerce. U.S. Const.

art. I, § 8, cl. 3. The dormant Commerce Clause is the negative implication of the
-16-

Commerce Clause: states may not enact laws that discriminate against or unduly

burden interstate commerce. Quill Corp. v. North Dakota, 504 U.S. 298, 312 (1992).

The recognition of the dormant Commerce Clause carries out "the Framers' purpose

to 'preven[t] a State from retreating into economic isolation or jeopardizing the

welfare of the Nation as a whole, as it would do if it were free to place burdens on the

flow of commerce across its borders that commerce wholly within those borders

would not bear.'" Fulton Corp. v. Faulkner, 516 U.S. 325, 330–31 (1996) (quoting

Okla. Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 180 (1995)) (alteration in

Fulton Corp.). The vision of the Framers was that "every farmer . . . shall be

encouraged to produce by the certainty that he will have free access to every market

in the Nation." H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525, 539 (1949). 

A state law that is challenged on dormant Commerce Clause grounds is subject

to a two-tiered analysis. First, the court considers whether the challenged law

discriminates against interstate commerce. Or. Waste Sys., Inc. v. Dep't of Envtl.

Quality, 511 U.S. 93, 99 (1994). Discrimination in this context refers to "differential

treatment of in-state and out-of-state economic interests that benefits the former and

burdens the latter." Id. If Amendment E is indeed discriminatory, it is "per se

invalid" unless the Defendants "can demonstrate, under rigorous scrutiny, that [they

have] no other means to advance a legitimate local interest." C & A Carbone, Inc. v.

Town of Clarkstown, N.Y., 511 U.S. 383, 392 (1994). If the law is not

discriminatory, the second analytical tier provides that the law will be struck down

only if the burden it imposes on interstate commerce "is clearly excessive in relation

to its putative local benefits." Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).

The Plaintiffs argue that Amendment E cannot survive scrutiny under either test; that

is, they argue that Amendment E impermissibly discriminates against interstate

commerce and also fails the Pike balancing test.

In the first tier of analysis, the Supreme Court has recognized three indicators

of discrimination against out-of-state interests. First, discrimination can be discerned
-17-

where the evidence in the record demonstrates that the law has a discriminatory

purpose. Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 270 (1984). Alternatively, a

law could facially discriminate against out-of-state interests. See, e.g., Chem. Waste

Mgmt. v. Hunt, 504 U.S. 334, 342 (1992). Third, even if a state law responds to

legitimate local concerns and is not discriminatory either in its purpose or on its face,

the law could discriminate arbitrarily against interstate commerce, that is, it could

have a discriminatory effect. Maine v. Taylor, 477 U.S. 131, 148 n.19 (1986). The

Plaintiffs assert that Amendment E satisfies all three discrimination tests, but we rest

our conclusion on the evidence in the record of a discriminatory purpose underlying

Amendment E. As a result, we do not consider the other two tests, or the second tier

analysis, the Pike balancing test.

The Plaintiffs have the burden of proving discriminatory purpose, see Hughes

v. Oklahoma, 441 U.S. 322, 336 (1979), and can look to several sources to meet that

burden. The most obvious would be direct evidence that the drafters of

Amendment E or the South Dakota populace that voted for Amendment E intended

to discriminate against out-of-state businesses. See SDDS, Inc. v. South Dakota, 47

F.3d 263, 268 (8th Cir. 1995). The record contains a substantial amount of such

evidence as regards the drafters, the most compelling of which is the "pro" statement

on a "pro-con" statement compiled by Secretary of State Hazeltine and disseminated

to South Dakota voters prior to the referendum. See Constitutional Amendment E:

Attorney General Explanation. Submitted by Charlie Johnson and Dennis

Wiese—co-chairmen of the organization responsible for Amendment E's promotion

(Wiese was a drafter of Amendment E)—the "pro" statement informed voters that,

without the passage of Amendment E, "[d]esperately needed profits will be skimmed

out of local economies and into the pockets of distant corporations." Id. Further

language from the "pro" statement explains that "Amendment E gives South Dakota

the opportunity to decide whether control of our state's agriculture should remain in

the hands of family farmers and ranchers or fall into the grasp of a few, large
-18-

corporations." Id. We interpret the "pro" statement to be "brimming with

protectionist rhetoric." See SDDS, 47 F.3d at 268.

Notes from the Amendment E drafting meetings provide additional direct

evidence of the drafters' intent to discriminate against out-of-state businesses. Nancy

Thompson, who was involved in the drafting, testified that Murphy Family Farms and

Tyson Foods, two out-of-state corporations, were proposing to build hog farming

facilities in South Dakota and that Amendment E's supporters wanted "to get a law

in place to stop them." Trial Tr. at 244. At a meeting on March 14, 1997, discussions

were held concerning the best way to combat Tyson, Murphy, and others. Draft Hog

Meeting Minutes (Mar. 14, 1997). A memorandum from April 28, 1997, from John

Bixler, director of DRA, to participants from an April 21 meeting stated, in reference

to a discussion at the April 21 meeting, that "[m]any have commented that just as they

do not want Murphys and Tysons walking all over them, they don't want Farmland

or Minnesota Corn Producers walking over them . . . either." Memorandum from

John Z. Bixler at 4 (Apr. 28, 1997). These comments concern the drafters' desire to

prohibit out-of-state cooperatives, in addition to corporations, from farming in South

Dakota. We also note that the planning meetings that led to Amendment E were

known as the "hog meetings." Trial Tr. at 370; see also Draft Hog Meeting Minutes

(Mar. 14, 1997). Again, this is a specific reference to the out-of-state corporations

who enter into contracts with South Dakota farmers to raise hogs. Even more blatant

was the remark at trial by Wiese that Amendment E was at least motivated in part by

"the Murphy hog farm unit [in North Carolina] and what its [sic] done to the

environment." Trial Tr. at 659.

As for indirect evidence of discriminatory purpose, irregularities in the drafting

process can hint at such a purpose. See SDDS, 47 F.3d at 269. Our concern in this

case about the drafting process is the information used by the drafters. In this case,

the record leaves a strong impression that the drafters and supporters of

Amendment E had no evidence that a ban on corporate farming would effectively
6

The Defendants do not, of course, bear the burden of disproving a

discriminatory purpose, but they almost certainly would have introduced any

evidence used by the drafting committee that compared the potential impact that

Amendment E would have on the environment with enhanced enforcement of current

environmental regulations; such evidence is highly relevant to the "per se" invalidity

test of the first tier of dormant Commerce Clause analysis as well as to measuring

Amendment E's benefit for the purposes of the Pike balancing test of the second tier.

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preserve family farms or protect the environment, and there is scant evidence in the

record to suggest that the drafters made an effort to find such information. 

The testimony of Mary Luanne Napton, executive director of SDRC and

secretary of the Amendment E drafting committee, illuminates this point. Napton, a

"registered environmental professional," Trial Tr. at 348, testified that she was

unfamiliar with all of South Dakota's environmental regulations at the time

Amendment E was drafted. Id. at 386. She nevertheless believed that Amendment E

would be necessary even if the State's current environmental regulations were

enforced. Id. at 387. Her rationale was that "personal responsibility" was the best

way to ensure regulatory compliance, suggesting that family-owned farms would

accept responsibility where corporate-owed farms would not. Id. We recognize the

argument that an individual farmer could have greater incentive than a limited

liability entity to avoid wrongdoing, but we believe that if the drafters were seriously

concerned with long-term environmental hazards, as Napton claimed she was, they

would have made it a point to learn of the effects of current regulations. It is

especially disconcerting that Napton—who has also spent ten years lobbying the

legislature for new environmental regulations—could not explain the present and

future effects of the current environmental laws. If she lacked this information, we

can presume that the entire committee did, too.6

The record contains even less evidence that the drafters considered how

Amendment E would affect the economic viability of family farmers. The drafters
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relied on studies that correlated industrialized farming with higher levels of poverty.

There is no evidence in the record, however, that they utilized or commissioned any

economic forecasts as to the effect of wholly shutting out corporate entities from

farming in South Dakota. Even when an expert contacted by a member of the

drafting committee inquired whether it was a good idea to create such "complete"

barriers to capital flow into the state, Comments on YSD Proposed Constitutional

Amendment ¶ 7, the committee charged forward without hesitation, see Trial Tr. at

420. Our point here is not to adopt one economic theory or another, but rather to

emphasize that no study or forecast was commissioned to evaluate any theories. We

believe that this lack of information serves as indirect evidence of the drafters' intent

to create a law specifically targeting out-of-state businesses, which the drafters

viewed as the sole cause of the perils facing family farmers and a leading potential

cause of environmental damage. Another source of evidence from the drafting

process supports this inference: a member of the drafting committee admitted that the

committee completed the drafting process quickly because its members wanted to

prevent Tyson Foods and Murphy Family Farms from building facilities in South

Dakota. Trial Tr. at 244–45.

Whether Amendment E would protect family farmers and the environment is

unknown. It would be reasonable to surmise that the less information concerning the

potential impact of Amendment E that the drafters had, the less likely that

Amendment E would actually be an effective remedy for the problems it was

purportedly designed to address. A low probability of effectiveness can be indirect

evidence of discriminatory purpose. SDDS, 47 F.3d at 268–69; see also Pete's

Brewing Co. v. Whitehead, 19 F. Supp. 2d 1004, 1016 (W.D. Mo. 1998) (resting

discriminatory intent conclusion partially on determination that statute at issue did

little to advance its purported purpose). But more importantly, we believe, the

evidence in the record demonstrates that the drafters made little effort to measure the

probable effects of Amendment E and of less drastic alternatives. We are thus left,

like the South Dakota populace that voted on Amendment E, without any evidence
7

See also Donald H. Regan, The Supreme Court and State Protectionism:

Making Sense of the Dormant Commerce Clause, 84 Mich. L Rev. 1091, 1206–1233

(1986) (presenting and defending thesis that Supreme Court's dormant Commerce

Clause analysis is driven by desire to prevent purposeful protectionism).

-21-

as to the law's potential effectiveness. That the drafting committee and the voters

were without such evidence supports the conclusion compelled by the direct

evidence: the intent behind Amendment E was to restrict in-state farming by out-ofstate corporations and syndicates in order to protect perceived local interests. Such

an intent bespeaks of "the economic protectionism that the Commerce Clause

prohibits." See W. Lynn Creamery v. Healy, 512 U.S. 186, 205 (1994).

In concluding that Amendment E was motivated by a discriminatory purpose,

we are cognizant of the argument that discerning the purpose of a constitutional

provision is an impossible exercise. In the view of the District Court, "It would be

impossible . . . to ascertain the intentions of the thousands of citizens of South Dakota

who voted for Amendment E. We do not have here a factual scenario of elected

delegates to a constitutional convention where a record is kept of all proceedings."

S.D. Farm Bureau, 202 F. Supp. 2d at 1028. We do, however, have evidence of the

intent of individuals who drafted the amendment that went before the voters. It is

clear that those individuals had a discriminatory purpose. See SDDS, 47 F.3d at 267.

Discriminatory purpose is at the heart of dormant Commerce Clause analysis and is

often incorporated into both first-tier analysis and second-tier Pike balancing analysis.

See, e.g., Fulton Corp., 516 U.S. at 330 (explaining dormant Commerce Clause as a

prohibition on state regulations designed with the purpose of benefitting in-state

interests by burdening out-of-state interests); W. Lynn Creamery, 512 U.S. at 196

(noting purpose of state's unconstitutional pricing scheme although resting decision

on statute's discriminatory effect); Taylor, 477 U.S. at 148 (equating purposeful

economic protectionism with per se invalidity).7

 Although the Supreme Court has not
8

See, e.g., Julian Cyril Zebot, Note, Awakening a Sleeping Dog: An

Examination of the Confusion in Ascertaining Purposeful Discrimination Against

Interstate Commerce, 86 Minn. L. Rev. 1063, 1077–84 (2002) (cataloging and

critiquing non-uniform discriminatory purpose analyses by federal courts of appeal).

-22-

laid out a specific test for determining discriminatory purpose,8

 we are guided by

precedent in selecting the types of evidence on which we have relied to reach our

conclusion. See Waste Mgmt. Holdings, Inc. v. Gilmore, 252 F.3d 316, 336 (4th Cir.

2001) (analyzing "historical background of and specific sequence of events leading

up to" challenged state action to find discriminatory purpose), cert. denied, 535 U.S.

904 (2002); SDDS, 47 F.3d at 268 (relying in part on referendum pamphlet to find

discriminatory purpose); cf. Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730,

743–46 (1989) (analyzing statements by drafters of statute in determining proper

reading—i.e., purpose—of copyright statute). The evidence in this case leads to a

single conclusion: Amendment E was motivated by a discriminatory purpose.

B.

Because we conclude that Amendment E was motivated by a discriminatory

purpose, we must strike it down as unconstitutional unless the Defendants can

demonstrate that they have no other method by which to advance their legitimate

local interests. See C & A Carbone, 511 U.S. at 392. The Supreme Court has

referred to this test as one of the "strictest scrutiny." Or. Waste Sys., 511 U.S. at 101.

The Defendants emphasize the legitimacy of their interests, which we can generally

state to be the promotion of family farms and the protection of the environment. We

have previously concluded that promoting family farms is a legitimate state interest,

see MSM Farms, Inc. v. Spire, 927 F.2d 330, 333 (8th Cir.) (finding purpose

legitimate in Equal Protection Clause analysis), cert. denied, 502 U.S. 814 (1991),

and the purpose of environmental protection is equally legitimate. The focus of this

test of the "strictest scrutiny," however, does not concern the strength of the interests

advanced by the challenged law. Rather, the question is whether reasonable non-
-23-

discriminatory alternatives exist to advance the interests. The Defendants bear the

burden of demonstrating there is no such alternative. Or. Waste Sys., 511 U.S. at

100–01. 

We cannot say with certainty that any alternative will ultimately succeed in

meeting the goals of Amendment E because we are "institutionally unsuited to gather

the facts upon which economic predictions can be made, and professionally untrained

to make them." See Tracy, 519 U.S. at 308. Our inability to make these

determinations explains why the Defendants, who should have the capability to

provide economic and environmental forecasts, have the burden of proving that no

non-discriminatory alternative exists. Although the record contains evidence linking

industrial farming with poverty and environmental problems, it contains no evidence

that suggests, evaluates, or critiques alternative solutions. 

While we are loath to propose alternatives, we believe several could be found

in a 1998 report introduced by the Defendants called "A Time to Act," a report

commissioned by the federal government and addressed to the United States

Department of Agriculture that lays out the case for regulations that favor family

farms. See A Time to Act: A Report of the USDA National Comm'n on Small Farms

(1998). Although the recommendations in the Report relate to federal policy and

legislation, in many cases those recommendations are applicable to the states, as well.

For example, the State could implement an initiative to optimize the labor and

resources of small farm operators. See id. at 10. Second, the State could create an

oversight process to regulate contracts between corporations and syndicates and

South Dakota farmers. See id. at 62–63. In addition, to the extent environmental

waste from hog farms is a concern, the State could introduce stricter environmental

regulations or could more aggressively enforce its current environmental laws. See

Trial Tr. at 659–60. Finally, in an effort to decrease the concentration of livestock in

feed lots and the like, the State could set limits on the number of livestock that could
9

As we decide this case based upon the first tier of dormant Commerce Clause

analysis, we need not discuss the Pike balancing test.

-24-

be fed in a particular area by a farmer regardless of how the farmer organizes his or

her business. 

Regardless of the potential effects of any of these alternatives, the Defendants

have failed to meet the high burden of demonstrating their ineffectiveness. Because

Amendment E has a discriminatory purpose, and because the Defendants have not

satisfied their burden of showing that non-discriminatory alternatives would not

advance Amendment E's interests, we must conclude that Amendment E violates the

dormant Commerce Clause.9

VI.

Amendment E violates the dormant Commerce Clause. Accordingly, we affirm

the order of the District Court enjoining its enforcement.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.