Opinion ID: 3046278
Heading Depth: 3
Heading Rank: 3

Heading: Fulton Corp. (1996)

Text: Fulton Corp. v. Faulkner, 516 U.S. 325, 116 S. Ct. 848 (1996), shows that (1) an in-state plaintiff may properly challenge a state law on dormant Commerce Clause grounds, and (2) a state’s tax that is based on whether a business is in-state or out-of-state discriminates against interstate commerce. Plaintiff Fulton Corporation was a North Carolina company that owned stock in other corporations that did business exclusively out-of-state. Id. at 328, 116 S. Ct. at 852. North Carolina law imposed a state “intangibles tax” on corporate stock owned by North Carolina residents, such as Fulton. Id. at 327, 116 S. Ct. at 852. The tax was assessed according to the stock-issuing corporation’s exposure 33 Case: 11-10475 Date Filed: 12/28/2012 Page: 34 of 81 to North Carolina’s state income tax. The more North Carolina income tax the corporation paid, the less a North Carolina resident shareholder owed due to his ownership of that corporation’s stock. Id. at 328, 116 S. Ct. at 852. Several of the out-of-state corporations whose stock Fulton owned paid no North Carolina income tax, which meant Fulton, an in-state resident, paid a higher intangibles tax than other in-state residents who owned stock in corporations that paid North Carolina income tax. Id. at 329, 116 S. Ct. at 852. Fulton challenged the tax under the dormant Commerce Clause. The Supreme Court struck down the tax. First, the Supreme Court concluded, “[t]here is no doubt that the intangibles tax facially discriminates against interstate commerce” because “[a] regime that taxes stock only to the degree that its issuing corporation participates in interstate commerce favors domestic corporations.” Id. at 333, 116 S. Ct. at 855. Importantly, the Fulton Court considered the effect of the North Carolina law on non-party, out-of-state firms—and not just on the in-state plaintiff—in assessing the law’s interstate reach. The Supreme Court ruled that North Carolina could not justify the intangibles tax on grounds that it subjected interstate commerce to a burden already borne by intrastate commerce. The Supreme Court explained that North Carolina 34 Case: 11-10475 Date Filed: 12/28/2012 Page: 35 of 81 could not show that the intangibles tax approximated the amount of tax on intrastate commerce, the intangibles tax was not substantially equivalent to the state income tax, and North Carolina had no sovereign interest in taxing income earned out-of-state. Id. at 334–35, 116 S. Ct. at 855–56. B. Discrimination: Conditioning Market Participation on Local or In-State Processing of Goods 1. Dean Milk Co. (1951) Dean Milk Company v. City of Madison, 340 U.S. 349, 71 S. Ct. 295 (1951) illustrates the second way a state or local law can discriminate against interstate commerce: by requiring the local or in-state processing of goods. In Dean Milk, the City of Madison, Wisconsin, passed an ordinance requiring that all milk sold in Madison be pasteurized, processed and bottled at a City-approved plant within five miles of Madison. 340 U.S. at 350, 71 S. Ct. at 296. Only three milk processors that actually sold milk wholesale and retail in Madison were located within that five-mile radius. Id. at 352, 71 S. Ct. at 297. Plaintiff Dean Milk, an Illinois corporation, bought milk from hundreds of farms in Illinois and Wisconsin, pasteurized the milk in Illinois, more than five miles from Madison, and distributed the milk in both states. Id. Pursuant to the ordinance, Madison denied a milk-selling license to Dean Milk solely because 35 Case: 11-10475 Date Filed: 12/28/2012 Page: 36 of 81 Dean Milk pasteurized milk at plants more than five miles from Madison. Id. Dean Milk sued, claiming the City’s ordinance violated the dormant Commerce Clause. Id. at 350, 71 S. Ct. at 296. The Supreme Court agreed and struck down the ordinance. Id. at 353, 71 S. Ct. at 297. The Supreme Court concluded that the City ordinance discriminated against interstate commerce because the ordinance “in practical effect excludes from distribution in Madison wholesome milk produced and pasteurized in Illinois.” Id. at 354, 71 S. Ct. at 297–98. The Supreme Court concluded that the City had “erect[ed] an economic barrier protecting a major local industry against competition from without the State,” and therefore the City ordinance “plainly discriminates against interstate commerce.” Id. at 354, 71 S. Ct. at 298. The fact that the City ordinance applied equally to in-state milk distributors did not change the Supreme Court’s analysis, for “[i]t is immaterial that Wisconsin milk from outside the Madison[, Wisconsin] area is subjected to the same proscription as that moving in interstate commerce.” Id. at 354 n.4, 71 S. Ct. at 298 n.4. The Dean Milk Court recognized the City’s interest in the safety and health of its citizens and their milk supply. Id. at 353, 71 S. Ct. at 297. However, the Supreme Court determined that “reasonable and adequate alternatives” to the City ordinance were available. Id. at 354, 71 S. Ct. at 298. For example, the City could 36 Case: 11-10475 Date Filed: 12/28/2012 Page: 37 of 81 (1) charge out-of-town milk processors for the cost of inspecting milk brought to Madison from other areas, or (2) adopt a quality standard based on milk ratings established by the jurisdiction in which the milk is processed. Because the discriminatory measure was not “essential for the protection of local health interests,” the Supreme Court invalidated the ordinance. Id. at 356, 71 S. Ct. at 299. Dean Milk shows that local ordinances that isolate local markets from outsiders are discriminatory even when those ordinances apply equally to in-staters and out-of-staters. This early case illustrates that a law can be discriminatory even without explicitly distinguishing between in-staters and out-of-staters. 2. C & A Carbone, Inc. (1994) C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 114 S. Ct. 1677 (1994), is one of several cases in which the Supreme Court struck down a local ordinance requiring an item in commerce to be processed by local companies before being shipped out-of-state. And like Dean Milk, Carbone shows that even a facially neutral law can be discriminatory, so long as the purpose or effect of the law is to restrict outsiders’ access to local markets. Carbone also demonstrates that a local law applying only to a local resource may nonetheless violate the dormant Commerce Clause and that in considering such an issue, the law’s effect on out-of- 37 Case: 11-10475 Date Filed: 12/28/2012 Page: 38 of 81 state non-parties may properly be considered. In Carbone, the Town of Clarkstown, New York, replaced a landfill with a new transfer station that (1) received bulk solid waste, (2) separated recyclable from nonrecyclable items, and (3) shipped recyclable waste to a recycling facility and nonrecyclable waste to a landfill or incinerator. 511 U.S. at 387, 114 S. Ct. at 1680. To finance the new transfer station, the Town engaged a “local private contractor”31 to build and operate the transfer station and to charge a fee for waste the contractor processed at the station. Id. After five years, the contractor would sell the transfer station to the Town for $1. Id. To guarantee the local contractor steady business, the Town passed a “flow control” ordinance requiring all non-hazardous solid waste in the Town to be deposited first at this new, local transfer station before leaving the municipality.32 Id. Plaintiff C & A Carbone, Inc., already operated a recycling center in the Town where it “receive[d] bulk solid waste, sort[ed] and bail[ed] it, and then 31 The Supreme Court’s decision in Carbone does not state explicitly whether the company that built and operated the waste transfer station was located in the Town. However, the majority opinion describes the company as a “local private contractor.” Carbone, 511 U.S. at 387, 114 S. Ct. at 1680. 32 Noncompliance was punishable by fine and imprisonment. “The avowed purpose of the ordinance [was] to retain the processing fees charged at the transfer station to amortize the cost of the facility.” Id. at 386, 114 S. Ct. at 1680. 38 Case: 11-10475 Date Filed: 12/28/2012 Page: 39 of 81 ship[ped] it to other processing facilities—much as occur[red] at the [T]own’s new transfer station.”33 Id. at 387, 114 S. Ct. at 1681. Although Carbone could still receive solid waste, the ordinance required Carbone to bring the nonrecyclable residue from that waste to the Town’s new transfer station. It thus “forb[ade] Carbone to ship the nonrecyclable waste itself, and it require[d] Carbone to pay a tipping fee on trash that Carbone ha[d] already sorted.” Id. at 388, 114 S. Ct. at 1681. Carbone sued the Town, claiming the ordinance violated the dormant Commerce Clause. Carbone argued the ordinance excluded competitors (both instate and out-of-state firms) from accessing a local market and prevented Carbone from shipping the Town’s waste out of town and across state lines. Id. at 387–88, 114 S. Ct. at 1680–81. The Supreme Court agreed and struck down the ordinance. The Supreme Court reasoned that “[w]hile the immediate effect of the ordinance is to direct local transport of solid waste to a designated site within the local jurisdiction, its economic effects are interstate in reach.” Id. at 389, 114 S. Ct. at 1681. In other words, even though the ordinance was directing local waste from Carbone’s own facility located in the Town to the transfer station located in 33 The Supreme Court’s decision in Carbone does not state explicitly whether C & A Carbone was located in the Town. However, the company nonetheless operated a recycling center in the Town. 39 Case: 11-10475 Date Filed: 12/28/2012 Page: 40 of 81 the same Town, the effect of the local ordinance was interstate in reach. In fact, Carbone’s facility in the Town received and processed waste from places other than the Town, including from out of state. By requiring Carbone to send the nonrecyclable residue of that waste to the new local transfer station at an additional cost, the ordinance “[drove] up the cost for out-of-state interests to dispose of their solid waste.” Id. Thus, the Supreme Court looked at the effect on non-party, outof-state firms who contracted with Carbone to show the interstate reach of the Town’s ordinance. Even as to waste originating in the Town, the ordinance “prevent[ed] everyone except the favored local operator from performing the initial processing step” and “thus deprive[d] out-of-state businesses of access to a local market.” Id. Based on this analysis, the Carbone Court concluded that the ordinance discriminated against interstate commerce because “it allow[ed] only the favored operator to process waste that [was] within the limits of the town.” Id. at 391, 114 S. Ct. at 1682. The Supreme Court found that “[t]he ordinance is no less discriminatory because in-state or in-town processors are also covered by the prohibition.” Id. Likening the ordinance to invalid laws requiring the in-state processing of meat, milk and seafood, the Carbone Court explained that “[t]he 40 Case: 11-10475 Date Filed: 12/28/2012 Page: 41 of 81 essential vice in laws of this sort is that they bar the import of the processing service.” Id. at 392, 114 S. Ct. at 1683. “Put another way, the offending local laws hoard a local resource . . . for the benefit of local businesses that treat it.” Id. The Supreme Court stated that the Town’s ordinance “hoards solid waste, and the demand to get rid of it, for the benefit of the preferred processing facility.” Id. As a result, though the local ordinance did not regulate interstate commerce “in explicit terms,” it did so in “practical effect and design.” Id. at 394, 114 S. Ct. at 1684. Notably, the Carbone Court found that the ordinance’s favoring a single company—versus merely imposing an in-town processing requirement—only made “the protectionist effect of the ordinance more acute.” Id. at 392, 114 S. Ct. at 1683. An in-town processing requirement would allow a competitor to build a processing facility in Clarkstown, just as Madison’s milk-pasteurization ordinance would allow Dean Milk to build a pasteurization plant within five miles of Madison. Id. But by limiting processing to a single company, “the flow control ordinance at issue here squelches competition in the waste-processing service altogether, leaving no room for investment from outside.” Id. Finally, the Carbone Court rejected the Town’s proffered rationales for the 41 Case: 11-10475 Date Filed: 12/28/2012 Page: 42 of 81 discriminatory ordinance, including the Town’s need to ensure the safe handling and treatment of solid waste, especially given the diminished landfill space and escalating environmental-cleanup costs. Id. at 393, 114 S. Ct. at 1683. The Supreme Court pointed out that the Town had “any number of nondiscriminatory alternatives for addressing the health and environmental problems alleged to justify the ordinance in question,” including “uniform safety regulations.”34 Id. The Supreme Court concluded, “[s]tate and local governments may not use their regulatory power to favor local enterprise by prohibiting patronage of out-of-state competitors or their facilities.” Id. at 394, 114 S. Ct. at 1684. C. Non-Discrimination: Laws Affecting Only Some Out-of-State Companies or Effecting a Level Playing Field Although the laws impermissibly discriminated in H.P. Hood, Fort Gratiot, Fulton, Dean Milk, and Carbone, the Supreme Court held that the law in Exxon did not. 1. Exxon Corp. (1978) In Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 98 S. Ct. 2207 34 The Court also rejected the Town’s financing rationale and explained that “revenue generation is not a local interest that can justify discrimination against interstate commerce.” Carbone, 511 U.S. at 393, 114 S. Ct. at 1684. 42 Case: 11-10475 Date Filed: 12/28/2012 Page: 43 of 81 (1978), the Supreme Court found that a state statute that applied to only some outof-state companies, but not all of them, was not discriminatory and did not violate the dormant Commerce Clause. At the time, all gas sold in Maryland was produced or refined out-of-state. Id. at 123, 98 S. Ct. at 2212. Out-of-state producers and refiners owned five percent of Maryland’s gas stations. Id. The remaining gas stations in Maryland were owned by out-of-state gasoline dealers or independent Maryland gasoline dealers, none of which produced or refined gasoline. After the 1973 gasoline shortage, the State of Maryland investigated and found that gas stations in Maryland that were owned by refiners had unfair access to gasoline supplies during the shortage. In response, Maryland enacted a statute prohibiting gasoline refiners from operating retail gas stations in the state. Exxon, 437 U.S. at 119–21, 98 S. Ct. at 2211. The statute did not affect any owners of gas stations that were not also gasoline refiners. Id. at 126, 98 S. Ct. at 2214. As a result, the burden of divestiture fell entirely on out-of-state companies that both owned Maryland gas stations and produced or refined gas. Seven gasoline producers and refiners that owned Maryland gas stations (the “refiners”) challenged Maryland’s divestiture statute under the dormant Commerce 43 Case: 11-10475 Date Filed: 12/28/2012 Page: 44 of 81 Clause. The refiners argued that the statute was discriminatory because it protected independent Maryland gasoline dealers from out-of-state competition. Id. at 125, 98 S. Ct. at 2213–14.35 The Exxon Court upheld Maryland’s statute because it applied only to outof-state gasoline dealers that produced or refined gasoline and left other out-ofstate gasoline dealers unaffected. Id. at 125–26, 98 S. Ct. at 2214. The Exxon Court rejected the refiners’ argument that, since the burden of divestiture fell entirely on out-of-state companies, the statute created “a protected enclave for Maryland independent dealers” and discriminated against interstate commerce in the retail gasoline market. Id. at 125, 98 S. Ct. at 2213–14. The Supreme Court observed that the statute “create[d] no barriers whatsoever against interstate independent dealers” and therefore applied to only some out-of-state companies. Id. at 126, 98 S. Ct. at 2214. The statute thus gave “in-state independent dealers . . . no competitive advantage over out-of-state dealers.” Id. The Supreme Court noted that the Maryland statute did not “prohibit the flow of interstate goods, place 35 The refiners relied on the fact that the divestiture requirement affected only out-of-state companies. Exxon, 437 U.S. at 125, 98 S. Ct. at 2214. The refiners offered no evidence that the statute would change the total amount of petroleum products shipped into Maryland. Id. at 123, 98 S. Ct. at 2212. 44 Case: 11-10475 Date Filed: 12/28/2012 Page: 45 of 81 added costs upon them, or distinguish between in-state and out-of-state companies in the retail market.” Id. To the Exxon Court, the fact that the Maryland statute would have no effect on the proportion of in-state versus out-of-state gasoline sold in Maryland distinguished Exxon from Dean Milk. As noted above, all of the gas sold in Maryland came from out-of-state. Id. The Supreme Court reasoned that “[i]f the effect of a state regulation is to cause local goods to constitute a larger share, and goods with an out-of-state source to constitute a smaller share, of the total sales in the market—as in . . . Dean Milk—the regulation may have a discriminatory effect on interstate commerce.” Id. at 126 n.16, 98 S. Ct. at 2214 n.16 (citations omitted). The Maryland statute would have no such effect. Id. The Exxon Court held, “[t]he 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.” Id. at 126, 98 S. Ct. at 2214 (emphasis added). Next, the Exxon Court concluded that the withdrawal of out-of-state gasoline producers and refiners from the Maryland retail gasoline market was not an impermissible burden on interstate commerce because other out-of-state producers and refiners would replace the missing share of the gasoline supply. Id. 45 Case: 11-10475 Date Filed: 12/28/2012 Page: 46 of 81 The Commerce Clause does not protect “the particular structure or methods of operation in a retail market.” Id. at 127, 98 S. Ct. at 2215. “[I]nterstate commerce is not subjected to an impermissible burden simply because an otherwise valid regulation causes some business to shift from one interstate supplier to another.” Id. at 127, 98 S. Ct. at 2214. It is also helpful to review two of our own decisions concluding that a challenged local law, which either applied even-handedly or created a level playing field, was not discriminatory and did not violate the dormant Commerce Clause. 2. Southern Waste Systems (2005) In Southern Waste Systems v. City of Delray Beach, 420 F.3d 1288 (11th Cir. 2005), the City of Delray Beach, Florida, issued a request for proposals for a five-year contract to provide exclusive waste collection services in the City. Id. at 1289. Five companies submitted bids, and after a public hearing, the City granted the contract to BFI Waste Systems, the lowest bidder. BFI was an out-of-state corporation. Id. Pursuant to the contract, BFI would be the exclusive waste hauler in Delray Beach. The City would set waste collection rates, but BFI would bill and collect directly from City residents. BFI would pay the City a five percent franchise fee. 46 Case: 11-10475 Date Filed: 12/28/2012 Page: 47 of 81 Id. “The City codified the contract by municipal ordinance.” Id. Southern Waste Systems (“SWS”),36 which did not submit a bid for the contract, sought (1) a declaratory judgment that the contract award and the ordinance violated the dormant Commerce Clause and (2) an injunction against Delray Beach.37 SWS claimed that the contract and ordinance violated the dormant Commerce Clause by “award[ing] the exclusive right to collect waste in the City to one company, thereby excluding all other companies—both interstate and intrastate—from waste collection.” Id. at 1290. This Court upheld the ordinance and contract. We explained that due to the “fair and open bidding process” used by Delray Beach, “there is nothing inherently discriminatory in the award of an exclusive waste hauling contract” and “[t]here is nothing in the record to support the claim that the City’s actions constituted the sort of ‘local economic protectionism’ that the Commerce Clause forbids.” Id. at 1291 (quoting Carbone, 511 U.S. at 390, 114 S. Ct. at 1682). We stressed that “there is no cause for constitutional concern” when “in-state and out-of-state 36 The opinion does not specify whether SWS was an out-of-state or in-state company. The opinion states only that SWS conducted business in Florida. S. Waste Sys., 420 F.3d at 1289. 37 SWS appears to have had standing to challenge the award of the contract because a Delray Beach company that had contracted with SWS to remove construction and demolition debris was later cited for violating the ordinance. 47 Case: 11-10475 Date Filed: 12/28/2012 Page: 48 of 81 bidders are allowed to compete freely on a level playing [field].” Id. (internal quotation marks omitted). Rather, we explained that in dormant Commerce Clause cases, “the process by which the contractor is chosen assumes great importance in determining the plan’s constitutionality vel non.” Id. at 1292. We added that “instate interests are not unduly pampered, nor out-of-state competitors unduly burdened, when a municipality awards an exclusive contract to a low bidder (from whatever state or region) after a fair and open bidding process.” Id. 3. Leib (2009) The importance of an open and even-handed permit process that is not overt protectionism is also evident in our decision in Leib v. Hillsborough County Public Transportation Commission, 558 F.3d 1301 (11th Cir. 2009). Moshe Leib, the owner of a Tampa Bay, Florida, transportation service, sought a permit from the Hillsborough County, Florida, Public Transportation Commission (“HCPTC”) to operate a Toyota Prius as an “environmentallyfriendly” limousine. Id. at 1304. Concluding that a Toyota Prius was not a “luxury” vehicle, and thus did not meet HCPTC Taxi Rule 1.15’s definition of “limousine,” HCPTC denied Leib’s permit request.38 Id. Leib applied for a waiver 38 HCPTC Taxi Rule 1.15 stated: “Limousine” means any motor vehicle for hire not equipped with a taximeter, with the 48 Case: 11-10475 Date Filed: 12/28/2012 Page: 49 of 81 of the “luxury” requirement, and HCPTC denied the waiver request. Leib sued, alleging, inter alia, that HCPTC’s denial of his permit request violated the dormant Commerce Clause. The district court dismissed Leib’s complaint under Rule 12(b)(6) for failure to state a claim. Id. at 1305. Leib appealed. This Court concluded that Leib’s claim failed on the merits because, inter alia, the HCPTC Rule regulated even-handedly and was applied in an even-handed way. Id. at 1311. This Court explained that the dormant Commerce Clause “forbids a state or municipality from impeding the flow of goods and services across state borders, or from favoring in-state economic interests at the expense of out-of-state economic interests.” Id. (quoting S. Waste Sys., 420 F.3d at 1290). We instructed that “[t]he first step in assessing violations of the Commerce Clause is to consider whether the law or regulation in question represents an overt form of protectionism, in which case the measure is generally invalid per se.” Id. capacity for 15 passengers or less . . . . This definition consists of vehicles which are recognized by the industry as “luxury” vehicles, that are considered as high-end luxury vehicles by the manufacturer and vehicles that have been uniquely modified so as to provide “luxury” limousine service. The “luxury” quality of vehicles will be determined by assessing aesthetics of the interior and exterior of the vehicle, amenities provided to the passenger, spaciousness and comparison to current industry standards for vehicles performing limousine service in Hillsborough County. Leib, 558 F.3d at 1304. 49 Case: 11-10475 Date Filed: 12/28/2012 Page: 50 of 81 Applying these principles to Leib’s permit request, this Court concluded that HCPTC’s Taxi Rule 1.15 was not discriminatory because it “purports merely to regulate travel in the Tampa Bay area” and likely did not “place any special burden on interstate commerce at all.” Id. Leib stressed that the HCPTC Rule prohibited all passengers from utilizing his Toyota Prius limousine service, but we explained that Leib’s all-passenger argument “suggests that Rule 1.15 burdens in-state and out-of-state commerce equally.”39 Id. Importantly, this Court noted that the Rule did not leave passengers who desire “environmentally-friendly” transportation service with “no alternative options” because “an environmentally-friendly vehicle may qualify as a limousine so long as it meets Rule 1.15’s luxury and other requirements.” Id. at 1312. In other words, the Rule did not foreclose environmentally-friendly options to passengers. D. Undue Burden under Pike 39 In Leib, this Court did point out that “the Rule has not been challenged by an out-ofstate business” and that “Leib purports to challenge the Rule from within the state that is the supposed beneficiary of the putative burden on interstate commerce.” Leib, 558 F.3d at 1311. But importantly, this Court did not suggest that these facts undermined Leib’s standing to sue or rendered him an improper party to the case. Instead, the Leib Court merely noted that the lack of out-of-state plaintiffs and Leib’s in-state status undercut Leib’s argument that the HCPTC’s Taxi Rule 1.15 unduly burdened interstate commerce. In any event, FTS is not a Miami-Dade County stevedore, and thus does not challenge the Port Director’s application of the County stevedore permit ordinance from within the municipality that “is the supposed beneficiary of the putative burden on interstate commerce.” Id. 50 Case: 11-10475 Date Filed: 12/28/2012 Page: 51 of 81 Even if the law does not discriminate against interstate commerce, it may still violate the dormant Commerce Clause if it places an undue burden on interstate commerce that exceeds local benefits. Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S. Ct. 844 (1970). In Pike, Plaintiff Bruce Church, Inc., an in-state cantaloupe grower, challenged a state official’s application of an Arizona law which required that all cantaloupes grown in Arizona and offered for sale must be packed in regular compact arrangement in closed standard containers. Id. at 138, 90 S. Ct. at 845 (citing Ariz. Rev. Stat. Ann. § 3-503 (1969)). Invoking his authority under that law to approve the method of packing cantaloupes, the state official issued an order that prohibited Bruce Church from transporting cantaloupes from its Parker, Arizona, ranch to nearby Blythe, California, for packing and processing. Id. To comply with that order, Bruce Church would be required to expend $200,000 to construct a packing plant in Arizona. Id. at 140, 90 S. Ct. at 846. Bruce Church sued the state official, asking a three-judge district court to enjoin the order as unconstitutional under the dormant Commerce Clause. See id. at 138, 90 S. Ct. at 845. After first granting preliminary injunctive relief and permitting discovery, the district court issued a permanent injunction upon the 51 Case: 11-10475 Date Filed: 12/28/2012 Page: 52 of 81 basis that the challenged order constituted an unlawful burden upon interstate commerce. Id. at 140, 90 S. Ct. at 846. The Supreme Court affirmed.40 On appeal from the district court, the Supreme Court first rejected the state official’s argument that the challenged order did not affect interstate commerce because it impacted only intrastate packing of goods before those goods entered interstate commerce. The Court observed that laws which required certain kinds of processing be done in-state were consistently struck down under the Commerce Clause. Id. at 141-42, 90 S. Ct. at 847. Thus, the challenged order here imposed a burden on interstate commerce; the question was only whether it did so unconstitutionally. Id. at 142, 90 S. Ct. at 847. The Supreme Court stated as “the general rule” that “[w]here 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.” Id. Once a legitimate public interest is identified, “the question 40 Pursuant to 28 U.S.C. § 2281 (repealed 1976), a special three-judge court was convened to consider Bruce Church’s application for permanent injunctive relief restraining the execution of a state statute on grounds of unconstitutionality. See Pike v. Bruce Church, Inc., 397 U.S. 137, 138, 90 S. Ct. 844, 845 (1970). The state official directly appealed to the Supreme Court pursuant to 28 U.S.C. § 1253. See Pike, 397 U.S. at 138, 90 S. Ct. at 845. 52 Case: 11-10475 Date Filed: 12/28/2012 Page: 53 of 81 becomes one of degree.” Id. The extent of the burden on interstate commerce “that will be tolerated will 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.” Id. The state official attempted to justify the burden on interstate commerce here solely by asserting the state’s interest to “promote and preserve the reputation of Arizona growers by prohibiting deceptive packaging.” Id. at 143, 90 S. Ct. at 848. More specifically, Arizona wanted Bruce Church to package the cantaloupes instate so that the high-quality fruit could be advertised as grown in Arizona rather than California. Although recognizing the legitimacy of the state’s interest, the Court refused to accord the concern much weight: “The State’s tenuous interest in having the company’s cantaloupes identified as originating in Arizona cannot constitutionally justify the requirement that the company build and operate an unneeded $200,000 packing plant” in Arizona. Id. at 145, 90 S. Ct. at 849. Here, the nature of that burden was “constitutionally . . . more significant than its extent,” because it required business operations to be performed in-state when they could more efficiently be performed elsewhere—a burden typically found “per se illegal.” Id. The Court noted that “[s]uch an incidental consequence of a 53 Case: 11-10475 Date Filed: 12/28/2012 Page: 54 of 81 regulatory scheme could perhaps be tolerated if a more compelling state interest were involved,” but here the state’s interest was “minimal at best.” Id. at 146, 90 S. Ct. at 849. Accordingly, the Court held that the state official’s application of the law constituted an unlawful burden upon interstate commerce and thus violated the dormant Commerce Clause. With this background, we examine the parties’ claims on appeal.