Opinion ID: 1910997
Heading Depth: 1
Heading Rank: 8

Heading: Commerce Clause Analysis Under Pike v. Bruce Church, Inc

Text: Finally, applicants argue that even if the MFA applies, the director's order violates the Commerce Clause under the balancing test articulated in Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970). The general rule arising from Pike states that [w]here the statute regulates evenhandedly 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. [Citation omitted.] If a legitimate local purpose is found, then ... 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. Occasionally the Court has candidly undertaken a balancing approach in resolving these issues [citation omitted] but more frequently it has spoken in terms of direct and indirect effects and burdens. 397 U.S. at 142, 90 S.Ct. at 847. See, also, Heath Consultants v. Precision Instruments, 247 Neb. 267, 527 N.W.2d 596 (1995) (applying Pike balancing test). The U.S. Supreme Court applied its Pike analysis in Edgar v. MITE Corp., 457 U.S. 624, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982), finding that the Illinois Business Take-Over Act directly regulated transactions that take place wholly outside the State of Illinois. Because the statute prevented offerors from conducting interstate transactions with stockholders both within the State of Illinois and in foreign states bearing no relation to Illinois, the Court found that statute to be a direct restraint on interstate commerce with an impermissibly sweeping extraterritorial effect. Significantly, however, neither the Nebraska Act nor the director's order has by its terms such extraterritorial reach. The mere fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce. Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978). We find stronger authority for analysis of the Nebraska Act in the case CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 107 S.Ct. 1637, 95 L.Ed.2d 67 (1987). In CTS Corp., the U.S. Supreme Court upheld an Indiana takeover statute against a Commerce Clause challenge. The Indiana statute protected shareholders of Indiana corporations by placing certain obstacles in the path of any party making a hostile tender offer for those shares. The respondent alleged unconstitutional interference with interstate commerce. In rejecting this Commerce Clause attack, the CTS Corp. Court stated that the act did not prohibit any entity of any state from attempting to gain control of an Indiana corporation: It only provides regulatory procedures designed for the better protection of the corporations' shareholders. 481 U.S. at 93, 107 S.Ct. at 1652. The Nebraska Act does not have the reach of the invalidated statute of MITE Corp. The Act applies equally, regardless of whether the would-be acquiring party is a Nebraska resident. As such, the Act does not resemble the `principal objects of dormant Commerce Clause scrutiny,' which are statutes that discriminate against interstate commerce. See Hoylake Investments Ltd. v. Washburn, 723 F.Supp. 42, 47 (N.D.Ill.1989). The Act, further, poses no threat of inconsistent regulations, since it regulates only the internal affairs of insurers registered in Nebraska. See id. The local purpose of protecting Nebraska policyholders is legitimate and qualifies as a valid use of police power. See State ex rel. Neff v. Christian Brotherhood of America Burial Assn., 186 Neb. 525, 184 N.W.2d 643 (1971). Moreover, the order is not an outright prohibition of stock sales by applicants, but only a prior-approval requirement: the order impedes applicants from nothing except skating around department authority. The scales thus tip in favor of the legitimate local purpose when balanced against the incidental effects on commerce. In issuing the prior-notice restriction, the director of the department did not exceed the authority granted him under the Act. The director, furthermore, acted within the confines of the Commerce Clause, applying either the MFA analysis or the Pike balancing test. Applicants' second assignment of error fails.