Opinion ID: 796834
Heading Depth: 2
Heading Rank: 2

Heading: Of the Dormant Commerce Clause Claims

Text: 26 The Commerce Clause provides that Congress shall have Power To . . . regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. U.S. CONST. ART. I, § 8, cl. 3. This express grant of power to Congress contains a further, negative command, known as the dormant Commerce Clause, Okla. Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 179, 115 S.Ct. 1331, 131 L.Ed.2d 261 (1995), which limits the power of local governments to enact laws affecting interstate commerce. Hughes v. Oklahoma, 441 U.S. 322, 326, 99 S.Ct. 1727, 60 L.Ed.2d 250 (1979). The fundamental objective of the dormant Commerce Clause is to `preserv[e] a national market for competition undisturbed by preferential advantages conferred by a State upon its residents or resident competitors.' Brown & Williamson Tobacco Corp. v. Pataki, 320 F.3d 200, 208 (2d Cir.2003) (quoting Gen. Motors Corp. v. Tracy, 519 U.S. 278, 299, 117 S.Ct. 811, 136 L.Ed.2d 761 (1997)). In analyzing a challenged local law under the dormant Commerce Clause, we first determine whether it clearly discriminates against interstate commerce in favor of intrastate commerce, or whether it regulates evenhandedly with only incidental effects on interstate commerce. See Freedom Holdings, Inc. v. Spitzer, 357 F.3d 205, 217-18 (2d Cir.2004). The term discrimination in this context means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter. Or. Waste Sys., Inc. v. Dep't of Envtl. Quality, 511 U.S. 93, 99, 114 S.Ct. 1345, 128 L.Ed.2d 13 (1994). 27 We then apply the appropriate level of scrutiny. A law that clearly discriminates against interstate commerce in favor of intrastate commerce is virtually invalid per se and will survive only if it is demonstrably justified by a valid factor unrelated to economic protectionism. Wyoming v. Oklahoma, 502 U.S. 437, 454, 112 S.Ct. 789, 117 L.Ed.2d 1 (1992). A law that only incidentally burdens interstate commerce is subject to the more permissive balancing test under Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), and will be struck down if the burden imposed on interstate commerce clearly exceeds the putative local gains. The party challenging a law as either clearly discriminatory or violative of Pike bears the threshold burden of demonstrating that it has a disparate impact on interstate commerce — [t]he fact that it may otherwise affect commerce is not sufficient. Automated Salvage Transp., Inc. v. Wheelabrator Envtl. Sys., Inc., 155 F.3d 59, 75 (2d Cir. 1998). 28 If discrimination is established, the burden shifts to the government to show that the local benefits of the law outweigh its discriminatory effects and that the government lacked a nondiscriminatory alternative by which it could protect the local interests. USA Recycling, Inc. v. Town of Babylon, 66 F.3d 1272, 1281-82 (1995), cert. denied, 517 U.S. 1150, 116 S.Ct. 1452, 134 L.Ed.2d 571 (1996). If the challenging party cannot show discrimination, however, it must demonstrate that the law places a burden on interstate commerce that is `clearly excessive in relation to the putative local benefits.' Id. at 1282 (quoting Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 471, 101 S.Ct. 715, 66 L.Ed.2d 659 (1981)). 29
30 A clearly discriminatory law may operate in three ways: (1) by discriminating against interstate commerce on its face, see, e.g., Granholm v. Heald, 544 U.S. 460, 466, 125 S.Ct. 1885, 161 L.Ed.2d 796 (2005) (striking down state laws restricting out-of-state wineries, but not instate ones, from selling wine directly to consumers in the state); Camps Newfound/Owatonna, Inc. v. Town of Harrison, Me., 520 U.S. 564, 568, 571, 117 S.Ct. 1590, 137 L.Ed.2d 852 (1997) (striking down statute that denied beneficial tax treatment to entities that were conducted or operated principally for the benefit of persons who are not residents of Maine); City of Philadelphia v. New Jersey, 437 U.S. 617, 618, 629, 98 S.Ct. 2531, 57 L.Ed.2d 475 (1978) (striking down statute prohibiting the importation of most waste which originated or was collected outside the territorial limits of the State); (2) by harboring a discriminatory purpose, see, e.g., Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 352-53, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977) (striking down facially neutral statute prohibiting state grading from appearing on apple boxes and noting evidence that it was intended to discriminate against Washington apples carrying state grades); Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 269, 104 S.Ct. 3049, 82 L.Ed.2d 200 (1984) (striking down facially neutral statute exempting certain locally-produced alcoholic beverages from the excise tax because legislative history showed it was intended to foster local industry); or (3) by discriminating in its effect, see, e.g., W. Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 194, 114 S.Ct. 2205, 129 L.Ed.2d 157 (1994) (striking down facially neutral law imposing assessment on all milk sold to Massachusetts retailers because its effect on in-state producers was entirely offset by the subsidy provided exclusively to in-state dairy farmers). In our view, the Ferry Law does not offend any of these categories. 31 Initially, the Ferry Law does not facially discriminate against interstate commerce because it is indifferent to the point of origin, destination, and ownership of the restricted types of ferries and applies equally to both in-state and out-of-state ferry operators. Nor is there evidence showing that the Ferry Law was enacted for the purpose of discriminating against out-of-state interests. The record more than supports the District Court's conclusion that the law was not motivated by a discriminatory animus but by the need to address a growing traffic problem in the Town. Town of E. Hampton, 406 F.Supp.2d at 239. As set forth in the law's Findings and Objectives section, [t]he revisions contained in this Local Law are intended to improve and strengthen the Town's zoning regulations as they pertain to ferries, and to thereby reduce the potential traffic and other impacts of such uses. The minutes of the Town Board's meetings and correspondence among Town officials confirm this conclusion since they do not evince an improper purpose and relate primarily to the stated salutary purposes of the law. 32 Cross Sound places great emphasis on the references in the law's Findings and Objectives section and internal Town memoranda to Connecticut casinos and the need to curb additional traffic flowing from them. These references, however, do not establish a discriminatory purpose behind the law when they are viewed in light of myriad studies, reports, and conferences indicating that the traffic problem has been increasing since at least 1966, before these casinos even existed, and attributing the problem to numerous other sources, including tourism and the presence of seasonal homes. Aside from simply reflecting the reality of the Town's traffic situation, the observation that congestion would result from new casino ferry service furnishes additional support for the Town's regulatory measure. Moreover, the Transportation Element raises substantially similar concerns about the potential traffic problem stemming from proposed ferry service from New York City to the Town, suggesting that in-state operators would be restricted by the Ferry Law for the same reasons as operators from Connecticut or anywhere else. 33 In addition, although the Ferry Law distinguishes between ferries and excursion boats, laws that draw distinctions between entities that are not competitors do not discriminate for purposes of the dormant Commerce Clause, because in the absence of actual or prospective competition between the supposedly favored and disfavored entities in a single market there can be no local preference. Gen. Motors Corp., 519 U.S. at 300, 117 S.Ct. 811. Since ferries and excursion boats service different industries, eliminating the distinction in their treatment would not necessarily serve the objective of preserving a national market undisturbed by preferential advantages. 34 Finally, the Ferry Law is not discriminatory in its effect. The law generally prohibits the operation of vehicular and high-speed ferries in the Town and requires any new ferry entering the Town to obtain a docking permit from the Board. Because these restrictions apply equally to all ferry operators, the Ferry Law lacks an important feature common to those regulations that previously have been found to violate the dormant Commerce Clause — it does not confer a competitive advantage upon local business vis-a-vis out-of-state competitors. See, e.g., C & A Carbone, Inc. v. Town of Clarkstown, N.Y., 511 U.S. 383, 392, 114 S.Ct. 1677, 128 L.Ed.2d 399 (1994) (finding unconstitutional local ordinance requiring that solid waste processed or handled within town be processed or handled at town's transfer station); South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 84, 104 S.Ct. 2237, 81 L.Ed.2d 71 (1984) (finding unconstitutional state law requiring all timber to be processed within the state before export); Dean Milk Co. v. City of Madison, 340 U.S. 349, 353, 71 S.Ct. 295, 95 L.Ed. 329 (1951) (finding unconstitutional city law requiring milk to be pasteurized within five miles of the city); Foster-Fountain Packing Co. v. Haydel, 278 U.S. 1, 13, 49 S.Ct. 1, 73 L.Ed. 147 (1928) (finding unconstitutional state law requiring that local processors remove shrimp heads and hulls before export); Minnesota v. Barber, 136 U.S. 313, 329-30, 10 S.Ct. 862, 34 L.Ed. 455 (1890) (finding unconstitutional state law requiring meat sold within state to be examined by state inspector). Unlike these and similar regulations, the Ferry Law does not give any advantage to local businesses at the expense of out-of-state competitors. That the Ferry Law does not discriminate on the basis of geography is amply demonstrated by the fact that even local businesses operating within the Town itself challenge the validity of this law. See Francarl Realty Corp. v. Town of E. Hampton, No. 05 Civ. 1792 (E.D.N.Y. Sept. 14, 2006). Accordingly, we discern no clear discrimination in this case.
35 Having determined that the Ferry Law does not patent[ly] discriminat[e] against interstate commerce, we next assess its validity under the Pike balancing test. 2 City of Philadelphia, 437 U.S. at 624, 98 S.Ct. 2531. Under Pike, a non-discriminatory regulation will be upheld if the burden it places on interstate commerce is outweighed by its local public benefits: 36 Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities. 37 397 U.S. at 142, 90 S.Ct. 844 (citation omitted). We have explained that the incidental burdens to which Pike refers are the burdens on interstate commerce that exceed the burdens on intrastate commerce. USA Recycling, 66 F.3d at 1287. Thus, at a minimum, the challenged regulation must impose a burden on interstate commerce that is qualitatively or quantitatively different from that imposed on intrastate commerce. Nat'l Elec. Mfrs. Ass'n v. Sorrell, 272 F.3d 104, 109 (2d Cir.2001). 38 We have recognized three circumstances in which an evenhanded regulation imposes an incidental burden on interstate commerce: (1) when the regulation has a disparate impact on any non-local commercial entity; (2) when the statute regulates commercial activity that takes place wholly beyond the state's borders; and (3) when the challenged statute imposes a regulatory requirement inconsistent with those of other states. United Haulers Ass'n, Inc. v. Oneida-Herkimer Solid Waste Mgmt. Auth., 438 F.3d 150, 156-57 (2d Cir.2006), cert. granted, ___ U.S. ___, 127 S.Ct. 35, 165 L.Ed.2d 1013 (Sept. 26, 2006); see Sal Tinnerello & Sons, Inc. v. Town of Stonington, 141 F.3d 46, 55 n. 9 (2d Cir.1998). Cross Sound does not contend that the Ferry Law operates extraterritorially by regulating commerce wholly beyond New York's borders. Nor does it argue that the law conflicts in any respect with the regulatory requirements imposed by other jurisdictions. Cross Sound's only argument is that the Ferry Law imposes a disparate impact on interstate travelers. As Cross Sound alleges in its Complaint: 39 The Ferry Law is protectionist legislation that, facially, in practical effect, and in its purpose, restricts the flow of commerce between New England and the South Fork of Long Island, and forces significant quantities of such commerce to take a more circuitous, more timely and more costly and burdensome route through Southold and Shelter Island. The Ferry Law creates burdens on interstate commerce that are clearly excessive in relation to any putative local benefits. . . . 40 The Ferry Law inflicts harm on Cross Sound Ferry's passengers and customers, including by increasing the time and cost of interstate commerce, causing direct competitive harm to businesses engaged in interstate commerce, . . . and decreasing the general health, welfare, and safety of Cross Sound Ferry's passengers and customers. . . . 41 The Ferry Law limits the vessel horsepower and capable speed of vessels carrying passengers in interstate commerce that can use any Passenger Ferry Terminal in East Hampton, thereby rendering commercial passenger water carrier service on the waters between New London, Connecticut and East Hampton unfeasible and impractical. 42 Although the Ferry Law does not clearly discriminate in favor of local interests, Cross Sound claims that it raises the cost of interstate transit because interstate travelers must take an alternate route that is longer and more expensive. The District Court therefore erred when it determined that Cross Sound has failed to even allege any . . . difference between the burdens on interstate and intrastate commerce. Town of E. Hampton, 406 F.Supp.2d at 240 (internal quotation marks omitted). The disparity alleged is that the Ferry Law shifts the burden or cost of traffic from Town drivers onto interstate travelers because intra-Town drivers benefit from reduced traffic volume on the local roads while interstate travelers are denied the most direct route to the Town. 43 Moreover, in support of its motion for summary judgment, Cross Sound submitted the affidavit of Ronald N. Hill, a traffic engineer, who analyzed the impact of the Ferry Law on interstate travel. Hill opined that the Ferry Law increases trip length for passengers traveling from points in New England to East Hampton and forces travelers and commerce to take a longer, circuitous, and thus more timely and costly route. The District Court therefore also erred in concluding that Cross Sound offered no evidence in support of . . . an allegation of disparate impact. Id. On the burden side of the Pike balancing equation, genuine issues of material fact exist with respect to the degree of the burden on interstate commerce. 44 Genuine issues of material fact also exist on the benefits side of the Pike equation. Cross Sound contends that any burden on interstate commerce is clearly excessive when compared to the local benefits and relies on Hill's affidavit to challenge the alleged benefits of the Ferry Law. Using data from Cross Sound's reservation database, Hill estimated that vehicular ferry service to the Town would result in an annual reduction of 190,188 vehicle miles traveled (VMT). Hill then detailed the resulting positive impacts of the ferry service, including better air quality from reduced VMT, a decrease in traffic at intersections in the western portions of the Town, and improved traffic conditions caused by a reduction of vehicles traveling in the peak direction of traffic flow. Hill opined that the reduction in VMT from the ferry service translates directly to a reduction in the amount of pollutants emitted by the vehicles on the roadways and that [a]ll of the other benefits resulting from that VMT reduction (i.e., reduction of noise and air pollution, lessening of congestion, shorter queuing lines on the Shelter island ferries, etc.) would also accrue. Hill also observed that ferry service between East Hampton and New England would have further beneficial impacts on traffic patterns, including the diversion of travelers off the already heavy queues, which create additional noise and air pollution when they are idling and waiting for the next ferry. 45 In addition, Hill's affidavit characterized the Transportation Element's findings as a flawed and inaccurate assessment of the impact of ferry service upon traffic in East Hampton. Hill disputed each of the scenarios used in the Transportation Element to support the enactment of the Ferry Law and criticized the study for failing to consider other measures to mitigate any traffic burden that might be imposed by the ferry service, such as turning lanes or other roadway improvements. To rebut Hill's affidavit, the Town presented the affidavit of Raymond G. Di Biase, also a traffic engineer, who disagreed with Hill's VMT analysis and supported the conclusions in the Transportation Element. 46 In applying the Pike balancing test, the District Court did not refer to the conflicts in these expert affidavits or engage in any meaningful examination of the claimed local benefits conferred by the Ferry Law. The court simply rejected Cross Sound's claim on the basis that the law was clearly enacted to further a legitimate local purpose: the promotion of the health and safety of East Hampton's residents. Id. While it is true that `the judiciary may not sit as a superlegislature to judge the wisdom . . . of legislative policy determinations,' N.Y. State Trawlers Ass'n v. Jorling, 16 F.3d 1303, 1308 (2d Cir.1994) (quoting City of New Orleans v. Dukes, 427 U.S. 297, 303, 96 S.Ct. 2513, 49 L.Ed.2d 511, (1976)), courts also must be wary of granting summary judgment when conflicting expert reports are presented, Harris v. Provident Life & Accident Ins. Co., 310 F.3d 73, 79 (2d Cir.2002). We have remanded for further discovery or trial where a party has offered a credible expert affidavit alleging a burden on interstate commerce and challenging the proposed benefits of the law. See Ass'n of Int'l Auto. Mfrs., Inc. v. Abrams, 84 F.3d 602, 612-13 (2d Cir.1996) (holding that affidavit of plaintiff's expert challenging the validity of the legislative assumptions that a stronger bumper will mean less damage and lower insurance premiums precluded summary judgment since alleged local benefits of the New York bumper law were disputed). Even the Town appears to recognize that Cross Sound's critique of the Transportation Element does raise a dispute of fact about the precise extent and manner in which the Ferry Law affects traffic congestion. Defendant-Appellee's Br. at 39-40. 47 In light of the foregoing, a reasonable fact finder could conclude that the Ferry Law does not actually produce any of its intended benefits so as to justify the potential burden on interstate commerce. Mindful that the District Court may have overlooked some of the evidence before it in part because Cross Sound relied almost exclusively on its clearly discriminatory analysis, we will not undertake the Pike balancing test in the first instance and, instead, remand the case for adequate discovery and further argument by the parties, which will undoubtedly assist the district court in this fact-intensive determination. United Haulers Ass'n, Inc. v. Oneida-Herkimer Solid Waste Mgmt., 261 F.3d 245, 263-64 (2d Cir.2001), cert. denied, 534 U.S. 1082, 122 S.Ct. 815, 151 L.Ed.2d 699 (2002).