Opinion ID: 213396
Heading Depth: 3
Heading Rank: 2

Heading: The Dormant Commerce Clause And General Maritime Law Preemption

Text: The Commerce Clause of the United States Constitution gives Congress the power [t]o regulate Commerce with foreign Nations, and among the several States. U.S. Const. Art. I, § 8, cl. 3. The vital role of the Commerce Clause to our federal system of government is undisputed. It was designed in the first place to avoid the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among the States under the Articles of Confederation. Hughes v. Oklahoma, 441 U.S. 322, 325, 99 S.Ct. 1727, 60 L.Ed.2d 250 (1979) (citation omitted). Under the dormant Commerce Clause doctrine, state legislation may be unconstitutional because of its effect on national or foreign commerce even in the absence of Congressional action. See, e.g., Barclays Bank PLC v. Franchise Tax Bd., 512 U.S. 298, 310, 114 S.Ct. 2268, 129 L.Ed.2d 244 (1994). The Commerce Clause power, nevertheless, still belongs to Congress, not the courts, and the whole objective of the dormant Commerce Clause doctrine is to protect Congress's latent authority from state encroachment. Fednav, Ltd., 547 F.3d at 624. In Barber, we observed that the Supreme Court has generally outlined a two-tiered approach to the dormant Commerce Clause: [T]he first step in analyzing any law subject to judicial scrutiny under the negative Commerce Clause is to determine whether it `regulates even-handedly with only incidental effects on interstate commerce, or discriminates against interstate commerce.' As we use the term here, `discrimination' simply means differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter. If a restriction on commerce is discriminatory, it is virtually per se invalid. By contrast, nondiscriminatory regulations that have only incidental effects on interstate commerce are valid unless `the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.' 42 F.3d at 1194(quoting 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)). In other words, there are two broad categories of state regulations burdening interstate commerce: (1) those that directly burden interstate commerce or otherwise discriminate against out-of-state interests; and (2) those that incidentally burden commerce. See, e.g., Kleenwell Biohazard Waste & Gen. Ecology Consultants, Inc. v. Nelson, 48 F.3d 391, 395 (9th Cir.1995). Regulations falling under the first category are generally struck down, while those in the second group are reviewed under a balancing test. See, e.g., id. Under this balancing test, regulations may violate the Commerce Clause if the burdens they impose so outweigh the putative benefits so as to render the regulations unreasonable or irrational. See, e.g., UFO Chuting of Haw., Inc. v. Smith, 508 F.3d 1189, 1196 (9th Cir.2007). In turn, this Court previously explained that [i]t is clear, however, that the Supreme Court used the term `direct' to refer to regulations whose central purpose is to regulate commerce, usually in order to benefit local interests. Nelson, 48 F.3d at 396. The Commerce Clause imposes certain specific restrictions with respect to the extraterritorial reach of state law. These limitations reflect the Constitution's special concern both with the maintenance of a national economic union unfettered by state-imposed limitations on interstate commerce and with the autonomy of the individual States within their respective spheres. Healy v. Beer Inst., 491 U.S. 324, 335-36, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989) (footnotes omitted). Accordingly, the Commerce Clause prohibits state legislation regulating commerce that takes place wholly outside of the state's borders, regardless of whether the commerce has effects within the state. See, e.g., id. at 336, 109 S.Ct. 2491; Edgar v. MITE Corp., 457 U.S. 624, 642-43, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982). Among other things, the court must consider the practical effects of the regulatory scheme, taking into account the possibility that other states may adopt similar extraterritorial schemes and thereby impose inconsistent obligations. See, e.g., Healy, 491 U.S. at 336-37, 109 S.Ct. 2491. Nevertheless, in applying these standards, a court must not overlook the fact that the critical consideration in determining whether the extraterritorial reach of a statute violates the Commerce Clause is the overall effect of the statute on both local and interstate commerce. Id. at 337 n. 14, 109 S.Ct. 2491 (citing Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986)). The foreign commerce context places further constraints on state power because of `the special need for federal uniformity.' Barclays Bank PLC, 512 U.S. at 311, 114 S.Ct. 2268(quoting Wardair Canada Inc. v. Fla. Dep't of Revenue, 477 U.S. 1, 8, 106 S.Ct. 2369, 91 L.Ed.2d 1 (1986)). Accordingly, a court must also take into account the federal government's capacity to `speak with one voice when regulating commercial relations with foreign governments.' Id. (quoting Japan Line, Ltd. v. Cnty. of Los Angeles, 441 U.S. 434, 448, 99 S.Ct. 1813, 60 L.Ed.2d 336 (1979)). This appeal further implicates the doctrine of general admiralty or maritime law preemption, which resembles the dormant Commerce Clause doctrine. The Constitution provides that the judicial power of the United States shall extend to all Cases of admiralty and maritime Jurisdiction. U.S. Const. Art. III, § 2, cl. 1. In Southern Pacific Co. v. Jensen, 244 U.S. 205, 37 S.Ct. 524, 61 L.Ed. 1086 (1917), the Supreme Court held that no state regulation is valid if it contravenes the essential purpose expressed by an act of Congress, or works material prejudice to the characteristic features of the general maritime law, or interferes with the proper harmony and uniformity of that law in its international and interstate relations, id. at 216, 37 S.Ct. 524. In Aubry, we observed that [o]ur review of relevant case authority leads us to conclude that the general rule on preemption in admiralty is that states may supplement federal admiralty law as applied to matters of local concern, so long as state law does not actually conflict with federal law or interfere with the uniform working of the maritime legal system. Aubry, 918 F.2d at 1422 (footnote omitted). To determine whether there is any interference, we must yet again apply a balancing test, weighing the state and federal interests on a case-by-case basis. See, e.g., In re Exxon Valdez, 484 F.3d 1098, 1101 (9th Cir.2007). Although generally framed in dormant Commerce Clause terms, PMSA advances a number of arguments in support of its challenge to the Vessel Fuel Rules. In addition to prior case law, it relies, inter alia, on Annex VI of MARPOL and the ECA program, the Clean Air Act, and two Presidential Proclamations purportedly extending the territorial sea or contiguous zone of the United States. [7] At their most fundamental level, these contentions appear to rest on the fundamental role of uniformity and the need for this country to speak with only one voice in its dealings with other countries without undue embarrassment arising from disparate state regulatory schemes. After considering PMSA's various arguments, we must ultimately reject the Commerce Clause and general maritime law preemption claims at this time. Simply put, the fact that the Vessel Fuel Rules require ocean-going vessels to switch to cleaner fuels 24 miles from California's coast, and not 3 miles from the coast, does not conflict with either the dormant Commerce Clause or the fundamental principles of general maritime law. Initially, the regulatory scheme at issue here clearly does not fall under the direct category of state regulations because the central purpose of the Vessel Fuel Rules is to protect the health and well-being of the state's residents from the harmful effects of the fuel used by ocean-going vessels. The otherwise even-handed and generally applicable Vessel Fuel Rules also do not appear to discriminate against any out-of-state interests. We therefore are not presented with an example of state economic protectionism or favoritism. We are instead faced with an environmental regulatory scheme having only an incidental or indirect effect on commerce. We further note that the Supreme Court in Ray v. Atlantic Richfield Co., 435 U.S. 151, 98 S.Ct. 988, 55 L.Ed.2d 179 (1978), actually found that a state tug requirement was not barred by the Commerce Clause because, inter alia, the cost of a tug escort for a 120,000-ton tanker is less than one cent per barrel of oil and there was no evidence that the requirement would impede the free and efficient flow of commerce, id. at 179, 98 S.Ct. 988. As discussed in Section III.A.2., supra, the regulations at issue here also appear to impose a relatively light burden on navigation and commerce. The Vessel Fuel Rules also do not apply to commercial activities occurring wholly outside of the territorial limits of California. They instead continue to govern the fuel use of ocean-going vessels traveling to and from California's ports while they are within the state's own territorial waters. We further note that PMSA evidently does not claim that the Vessel Fuel Rules contravene any act of Congress (with the major exception of the SLA) or prejudice any characteristic feature of federal maritime law. The Court therefore must turn to a balancing test with respect to both the dormant Commerce Clause and general maritime law preemption claims. We recognize the importance of uniformity as well as the unique role of the federal government in matters of foreign relations and international trade. In fact, the federal government, foreign countries, and international bodies have continued to take steps to control the critical problem of air pollution originating from ocean-going vessels, most significantly in the recently adopted ECA. We further observe that we have emphasized that the notion of uniformity takes on special importance with respect to environmental regulation on the high seas. In Hammond, we rejected the claim that Alaska's prohibition against oil tankers discharging ballast from their oil tanks into the state's territorial waters was preempted by the PWSA and PTSA. Hammond, 726 F.2d at 484-501. In a footnote, we expressly distinguished between coastal environmental regulation and regulation in deep waters: Of course, as to environmental regulation of deep ocean waters, the federal interest in uniformity is paramount. Such regulation in most cases needs to be exclusive because the only hope of achieving protection of the environment beyond our nation's jurisdiction is through international cooperation. Id. at 492 n. 12. The Aubry Court likewise referenced this footnote in its discussion of whether California's overtime laws were preempted by federal admiralty or maritime law. Aubry, 918 F.2d at 1426 n. 24. In a footnote, we explained that our concern [in Hammond ] was clearly with regulation of international oil transport and international environmental protection efforts and that the federal interest in uniformity is not as great, because the employees involved in [ Aubry ] are not engaged in foreign, intercoastal, or coastwise voyages. Id. Nevertheless, we conclude that the interests weighing in favor of striking down the Vessel Fuel Rules are rather attenuated in the present circumstances. Among other things, the District Court appropriately noted that the federal statute implementing Annex VI of MARPOL contains an express savings clause. See 33 U.S.C. § 1911 (Authorities, requirements, and remedies of this chapter supplement and neither amend nor repeal any other authorities, requirements, or remedies conferred by any other provision of law. Nothing in this chapter shall limit, deny, amend, modify, or repeal any other authority, requirement, or remedy available to the United States, or any person, except as expressly provided in this chapter.). The Vessel Fuel Rules also contain a sunset clause, and it is reasonable to predict that, once the heightened standards established by the ECA go into effect, the Vessel Fuel Rules will be terminated. In the end, no federal (or international) environmental regime specifically prohibits the state regulations at issue here. See, e.g., Goldstene, 517 F.3d at 1115 (noting that Clean Air Act permits state in-use requirements). With respect to the Hammond (and Aubry ) dicta, the District Court reasonably noted that the language regarding the federal interest in uniformity does not apply here . . . inasmuch as the United States has established a 24-mile contiguous zone for purposes of exercising territorial control and [t]he area at issue in this case falls within that twenty-four mile zone and does not extend to international deep waters falling outside that boundary. (ER35 n. 4 (citing Presidential Proclamation No. 7219).) Accordingly, we are not currently confronted with a state attempting to regulate conduct in either another state of the Union (such as in PMSA's example of a hypothetical California regulatory scheme requiring automobiles driving from Arizona to switch to certain kinds of fuel 24 miles from the California border), in the territory or waters of a foreign nation (such as, in another example provided by PMSA, a regulation governing fuel use in Shanghai harbor), or in the open ocean waters hundreds or even thousands of miles from the state's coast. In contrast, the state of California clearly has an especially powerful interest in controlling the harmful effects of air pollution resulting from the fuel used by ocean-going vessels while they are within 24 miles of the state's coast. In Section III. A.2., supra, we discussed in some detail the undisputed evidence regarding the highly damaging and even life-threatening effects of this air pollution on the people of California as well as the clear benefits resulting from the regulations adopted by CARB. The protection of our environment has repeatedly been recognized as a legitimate and important state interest. See, e.g., Huron Portland Cement Co., 362 U.S. at 442, 445-46, 448, 80 S.Ct. 813; Nelson, 48 F.3d at 398, 400-01; Aubry, 918 F.2d at 1426. Based on the record before us, the exceptionally powerful state interest at issue here far outweighs any countervailing federal interests. [8] Therefore, we must reject PMSA's dormant Commerce Clause and general maritime law theories at this juncture. Our result is consistent with the overwhelming weight of the case law. We note that the Supreme Court in Huron Portland Cement Co. rejected a Commerce Clause challenge to the prosecution of a ship owner for violating a municipal smoke abatement provision when its vessels were docked at the city's port even though [s]tructural alterations would be required in order to insure compliance. 362 U.S. at 441, 80 S.Ct. 813. Emphasizing that the local ordinance represented a generally applicable rule designed to promote the health and welfare of the community, the Court went on to reject the challenger's argument that other local governments might impose differing requirements as to air pollution as unsupported by the record. Id. at 448, 80 S.Ct. 813. Likewise, it appears that no other state in the Union has adopted, or is likely to adopt before the full implementation of the ECA, any competing or conflicting fuel use requirements. Id. In Aubry, we likewise rejected the claim that the doctrine of general maritime or admiralty law preemption precluded the application of California's overtime pay laws to California residents working on the high seas off the California coast to protect the state's coastal environment. Aubry, 918 F.2d at 1419-27. The Florida Supreme Court in Stepansky also expressly determined that a state court conviction for crimes committed on a cruise ship on the high seas pursuant to Florida's special maritime criminal jurisdiction statute did not violate the general maritime law preemption doctrine. 761 So.2d at 1033-34. Similarly, the Alaska Supreme Court rejected a dormant Commerce Clause challenge to Alaska's expansive and extraterritorial restrictions on crabbing. Bundrant, 546 P.2d at 537-41. While we again acknowledge that these various decisions may be distinguishable on a variety of grounds, we believe that they provide further support for upholding the California regulations. In the end, we acknowledge the unusual characteristics and circumstances of the Vessel Fuel Rules. We are clearly dealing with an expansive and even possibly unprecedented state regulatory scheme. However, the severe environmental problems confronting California (especially Southern California) are themselves unusual and even unprecedented. Under the circumstances, we do not believe that the Commerce Clause or general maritime law should be used to bar a state from exercising its own police powers in order to combat these severe problems.