Opinion ID: 2995911
Heading Depth: 2
Heading Rank: 2

Heading: The Scope of the Interstate Commerce Power

Text: During the early years of the infant Republic, Congress enacted little commercial legislation, and the Supreme Court reviewed few such enactments. Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824), marked the first major consideration of the scope of the Commerce Clause. In the majority opinion, Chief Justice John Marshall noted that Congress’ commerce power, “like all others [powers] vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than are prescribed by the Constitution.” Id. at 196. This theory underscored the Court’s Commerce Clause jurisprudence up until the late 1800s. In 1887 and 1890, Congress enacted two important statutes both broad in scope, regulating economic activity. The Interstate Commerce Act and the Sherman Anti- trust Act heralded a new intent by Congress to more thoroughly regulate interstate commerce. The Supreme Court responded by striking down several other acts, finding they reached activities beyond the clause’s scope. See, e.g., United States v. E.C. Knight Co., 156 U.S. 1, 12 (1895) (finding manufacturing precedes commerce). However, the Court also upheld statutes that regulated interstate and intrastate commerce when regulating the latter as incidental and required when regulating the former. See, e.g., Shreveport Rate Cases, 234 U.S. 342 (1914). As part of the New Deal, Congress enacted a series of sweeping economic regulations which sought to fix hours, control rates and wages, and govern various aspect of the economy in order to engineer a recovery. See, e.g., The National Industrial Recovery Act of 1933, 48 Stat. 195 (1933). The Court reacted by striking down the regulations because they exceeded Congress’ power under the Commerce Clause. See, e.g., R.R. Ret. Bd. v. Alton R.R. Co., 295 U.S. 330 (1935); A.L.A. Schechter 8 No. 02-1443 Poultry Corp. v. United States, 295 U.S. 495, 550 (1935); Carter v. Carter Coal Co., 298 U.S. 238, 304 (1936); see also United States v. Butler, 295 U.S. 495, 548 (1935) (striking down legislation enacted under the taxing and spending power as violating the Tenth Amendment). In 1936, President Franklin Delano Roosevelt won reelection by a large margin, and in 1937, he introduced his “Court Packing” plan. The measure—which would have led to the appointment of an additional justice for any justice who had served ten years and was over seventy—was met with stiff resistance in Congress and failed. The controversy subsided as the makeup of the Court changed by death and resignation, and the Court began upholding New Deal legislation. See, e.g., NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937); United States v. Darby, 312 U.S. 100 (1941); United States v. Wrightwood Dairy Co., 315 U.S. 110 (1942); Wickard v. Filburn, 317 U.S. 111 (1942). These decisions “ushered in an era of Commerce Clause jurisprudence that greatly expanded the previously defined authority of Congress under that Clause.” Lopez, 514 U.S. at 556. Not until 1995 did the Court again, in earnest, take up the issue of the limits of Congress’ authority under the Commerce Clause. In Lopez, the Supreme Court struck down the Gun-Free School Zones Act because it exceeded Congress’ authority under the Commerce Clause. Id. at 549, 561-67. Since then, criminals and other litigants have sought to challenge statutes that went unquestioned as constitutional prior to Lopez. See United States v. Watts, 256 F.3d 630, 631 (7th Cir. 2001) (noting the defendant pled guilty but “reserved the right to pursue on appeal a line of argument popular with criminal defendants these days: whether Congress exceeded its Commerce Clause power”) (emphasis added). And the subsequent cases of United States v. Morrison, 529 U.S. 598 (2000) and Jones No. 02-1443 9 v. United States, 529 U.S. 848 (2000), have added to the challenges. Turner challenges the statute at issue citing the Supreme Court’s decision in Lopez as primary support (although he also cites Morrison and Schechter Poultry).4 Turner’s argument ignores both the narrow applicability of Lopez’s facts to other cases and the careful legal analysis engaged in by the Court. Together, Lopez, Morrison, and Jones have defined the outermost reach of the commerce power, yet, those cases did not signal a turnabout, herald new restrictions on the power and did not overrule prior definitions of its scope. See Black, 125 F.3d at 460-62 (“Although the majority in Lopez intended to draw an outer limit to congressional authority, this does not mean that Lopez represents a retrenchment of already well-established Commerce Clause precedent.”); United States v. Spinello, 265 F.3d 150, 153-54 (3d Cir. 2001); United States v. Kenney, 91 F.3d 884, 887 (7th Cir. 1996) (“But Lopez must also be noted for what it did not do.”); see also United States v. Wall, 92 F.3d 1444, 144748 (6th Cir. 1996) (citing a number of cases upholding federal criminal statutes after Lopez and noting that “[m]ost courts have resisted urgings [by criminal defendants] to extend Lopez”). In Lopez, the Court analyzed the regulation at issue under the third category, “substantially affects interstate commerce”. The Court found that the Gun-Free School Zones Act did not regulate economic activity or 4 Morrison provides little support for Turner’s arguments as it dealt not with a criminal but a civil remedy. Moreover, the Court distinguished a similar criminal provision created under the same act, quoting a court of appeals case upholding the section as a valid exercise of the Commerce power. Morrison, 529 U.S. at 613 n.5 (quoting 18 U.S.C. § 2261(a)(1)). 10 No. 02-1443 commerce no matter how “broadly one might define those terms”. Lopez, 514 U.S. at 561, 567 (“The possession of a gun in a local school zone is in no sense an economic activity that might, through repetition elsewhere, substantially affect any sort of interstate commerce.”). At the same time, the Court went to great lengths to distinguish Wickard—a case the majority said was “perhaps the most far reaching example of Commerce Clause authority over intrastate activity”—from the possession of a gun in a school zone. Id. at 560. Also, the Court indicated that a similar regulation, properly enacted and circumscribed to reach interstate activity, might pass muster, but the Gun-Free School Zones Act failed because there was no indication and no requirement that either the person or the firearm “have any concrete tie” or have moved in interstate commerce. Id. at 567. What Lopez did not do was invalidate a federal criminal statute regulating criminal activity that was tied to and affected interstate commerce. See Morrison, 529 U.S. at 610-12 (“But a fair reading of Lopez shows that the noneconomic, criminal nature of the conduct at issue was central to our decision in that case.”). More importantly, the subsequent case of Jones v. United States, examining a criminal statute, provides ample support for the proposition that Congress’ commerce power has not suddenly contracted. 529 U.S. at 851. In Jones, the Court examined a federal arson statute that made it a federal crime to “damage or destroy, ‘by means of fire or an explosive, any . . . property used in interstate or foreign commerce or in any activity affecting interstate or foreign commerce.’ ” Id. at 850 (quoting 18 U.S.C. § 844(i)) (emphasis added). The question was whether a private residence fell within the definition of “used in” or “affecting” interstate commerce. Id. at 850-51. The Court focused on those terms, concluding that Congress intended only to reach those buildings which were No. 02-1443 11 “used in” or “affected” interstate commerce. Id. at 854-55. A building used as rental property was “used in” or “affected” interstate commerce; however, not a private, personal dwelling which had neither commercial purposes nor was used in any commercial undertaking such as a home office. Russell v. United States, 471 U.S. 858, 85962 (1985); Jones, 529 U.S. at 855-57. The salient, overriding inquiry in both Jones and Lopez was the search for a commercial activity that Congress could properly regulate. Jones, 529 U.S. at 858-59; Lopez, 514 U.S. at 561-67. If there is an interstate commercial activity which meets any of the three Lopez categories Congress may regulate that activity and the actions or activities which secondarily affect the primary commercial activity. Hence, Congress may regulate the arson or bombing of any commercial building because the destruction of the building indirectly affects interstate commerce by virtue of the fact that the building was used in interstate commerce. Russell, 471 U.S. at 862. The business of insurance does affect interstate commerce. Turner asserts that his activities did not directly affect interstate commerce, therefore, Congress’ prohibition of insurance embezzlement is ultra vires. Turner asks us to divide his actions from those engaged in by Allstate. However, we do not look solely at Turner’s crime, as he would have us do; rather, we look to the “class of activities” and determine their “total incidence” on interstate commerce. Perez, 402 U.S. at 153-54; Maryland v. Wirtz, 392 U.S. 183, 193 (1968); see also 18 U.S.C. §§ 1033(a)(1), (b)(1) (“the business of insurance whose activities affect interstate commerce.”). If embezzlement affects the business of insurance, positively or negatively, then Congress may also regulate that activity as incident to regulating the business of insurance. E.g., Perez, 402 U.S. at 150-55; Wickard, 317 U.S. at 125. Turner’s crime may be local and have only an indirect effect on commerce; 12 No. 02-1443 nevertheless, the activity may be reached by Congress by virtue of the fact that it affects Allstate’s business— which, in turn, affects interstate commerce—or in the aggregate, embezzlement may negatively effect and destabilize the entire insurance industry. Perez, 402 U.S. at 150-56; Wickard, 317 U.S. at 125; Black, 125 F.3d at 46061 (holding that “Congress can criminalize [the failure to pay child support] just as it has other impediments to interstate commerce.”). In fact, Congress enacted 18 U.S.C. § 1033 for the purpose of preventing the destructive aggregate effects of embezzlement by multiple employees, agents, and officers throughout the insurance industry, in order to preclude another crisis akin to the massive savings and loan failures of the 1980s. H.R. REP. NO. 103468. If Allstate is a channel of interstate commerce, it is proper to assume that the money Turner embezzled from the company moved in interstate commerce. Turner’s activity therefore impeded the channels of interstate commerce and the statute properly reached his conduct. The limiting principle is that the activity initially regulated must be a commercial enterprise; Congress may then regulate any activity which effects, positively or negatively, that commercial enterprise. Wickard, 317 U.S. at 125-28 (“[E]ven if appellee’s activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial effect on interstate commerce, and this irrespective of whether such effect is what might at some earlier time have been defined as ‘direct’ or ‘indirect.’ ”).