Court Opinion

ID: 13554
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:27:52+00
Date Added: 2024-06-11T15:04:07.849192
License: Public Domain

REVISED
                       UNITED STATES COURT OF APPEALS

                             For the Fifth Circuit

                                     No. 95-31239

PELICAN CHAPTER, ASSOCIATED BUILDERS & CONTRACTORS, INC., HARMONY
   CORP., CAJUN CONTRACTORS, INC., and AUSTIN INDUSTRIAL, INC.
                             Plaintiffs-appellees,

                                        VERSUS

  HONORABLE EDWIN W. EDWARDS, K. DON PILGREEN and KEVIN REILLY

                             Defendants-appellants.

           Appeal from the United States District Court
               For the Middle District of Louisiana
                                  November 25, 1997

Before KING, JOLLY and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

      The Louisiana State Board of Commerce and Industry (Board) is

authorized by the state constitution to “enter into contracts for

the   exemption   from       ad    valorem   taxes     of   a   new   manufacturing

establishment     or    an        addition   to   an    existing      manufacturing

establishment, on such terms and conditions as the board, with the

approval of the governor, deems in the best interest of the state.”
La. Const. 1974, Art. 7, §21(F); See also La. Const. 1921, Art. 10,

§ 4(10)(substantially identical predecessor provision).         Pursuant

thereto, the Board incorporates in each such tax exemption its Rule

One (Rule One), which requires that, inter alia, the manufacturer

and its contractors in acquiring goods and services for the new or

additional   construction   must   give   preference   and   priority   to

Louisiana manufacturers, suppliers, contractors and labor “except

where not reasonably possible to do so without added expense or
                                                                         1
substantial inconvenience or sacrifice in operating efficiency.”

In an action   brought by the Pelican Chapter, Associated Builders

and Contractors, Inc., (Pelican Chapter), and three of its members,

the federal district court prospectively invalidated Rule One and

     1
      Rule One provides:
          The Board of Commerce and Industry requires
          manufactures [sic] and their contractors to
          give preference and priority to Louisiana
          manufactures [sic] and, in the absence of
          Louisiana     manufacturers,    to    Louisiana
          suppliers, contractors and labor, except where
          not reasonably possible to do so without added
          expense   or    substantial  inconvenience   or
          sacrifice in operating efficiency.           In
          considering applications for tax exemption,
          special attention will be given to those
          applicants agreeing to use, purchase and
          contract for machinery, supplies and equipment
          manufactured in Louisiana, or in the absence
          of Louisiana manufacturers, sold by Louisiana
          residents, and to the use of Louisiana
          contractors and labor in the construction and
          operation    of    the  proposed   tax   exempt
          facilities.       It is a legal and moral
          obligation of the manufacturers receiving
          exemptions to favor Louisiana manufacturers,
          suppliers, contractors and labor, all other
          factors being equal.

                                   2
enjoined the Chairman of the Board, the Governor, and the Secretary

of the state Department of Economic Development from using it as a

requirement of any future state ad valorem tax exemption.

      The specific questions presented on appeal are (a) whether the

Pelican Chapter and its members had standing to bring this action;

and (b) whether the Board’s challenged Rule One constitutes an

unconstitutional burden on interstate commerce.

                                      I.

      Plaintiffs-appellees are Pelican Chapter, an association of

construction     contractors,   and    three   of   its   members,   Harmony

Corporation,     Cajun    Contractors,     Incorporated,       and    Austin

Industrial, Incorporated.2      The member contractors are engaged in

the   business   of   constructing    industrial    plants   in   interstate

commerce. The defendants-appellants are the Chairman of the Board,

the Governor, and the Secretary of the state Department of Economic

Development.

      Prior to trial, the parties entered the following stipulation

of established facts:

           1.    Rule One of the Louisiana Board of
           Commerce and Industry (“the Board”) has long
           required favoring employment of Louisiana
           residents by contractors and subcontractors on
           industrial   construction    and   improvement
           projects affected by the Industrial Tax
           Exemption Program administered by the Board.

      2
     Pelican Chapter, Harmony Corporation, and Cajun Contractors,
Incorporated are Louisiana corporations.      Austin Industrial,
Incorporated is a Texas corporation licensed to do business in
Louisiana.

                                      3
2.    In 1983, the Board, without adopting a
formal rule, implemented a [sic] 80% policy
relative to employment of Louisiana law
[sic][labor]. The 80% Policy has been used as
a benchmark or a “trigger” whereby if the
Board    or   the   Department   of   Economic
Development      conducted     a    background
investigation and there was 80% or more labor
from Louisiana, the Board would generally
assume that the company did the best job it
could in hiring Louisiana workers. If it was
below 80%, the Board asks the company to
explain what efforts were made to hire
Louisiana workers.

3.   The Associated Builders and Contractors
and several of its members challenged Rule
One,   particularly   its   residency   hiring
restrictions in a rule making hearing and
later before the entire Board.      The Board
refused to alter its policies regarding either
Rule One or any part of its residency hiring
restriction.

4.   The   80%  benchmark residency hiring
restrictions of Rule One was a policy adopted
by the Board in 1983.     It has never been
formally adopted as a rule pursuant to
Louisiana Administrative Procedures Act and
the rule making powers of the Board or the
Department of Economic Development.

5.   From the standpoint of the Board and the
Department of Economic Development, there is
no practical difference from the way it
applies a policy as opposed to a formal rule.

6.   Rule One contains restrictions for the
hiring of Louisiana labor, as well as use of
Louisiana contractors and engineers and other
Louisiana resources as well.     If Louisiana
resources are available at the best price, all
other factors being equal, then Rule One
requires that recipients of the tax exemption
use the Louisiana contractor, engineer, labor
or other resources and that the recipient
contractors do the same.

7.   The residency hiring restrictions of Rule
One have been used in the past to limit or
restrict   the   industrial    tax   exemption
otherwise available.

                      4
8.   Typically, complaints concerning Rule One
involving the failure to use Louisiana labor
are received and investigated after most of
the construction on the subject project has
concluded.

9.   There has never been a study or analysis
of the benefits to the State of Louisiana of
the administration and enforcement of Rule One
or of its residency hiring restrictions.

10. There has never been a study or an
analysis which has shown that by having and
enforcing Rule One and its residency hiring
restrictions, there is less unemployment in
Louisiana.

11. There is no empirical data whatsoever to
show that the imposition, administration and
enforcement of Rule One and its residency
hiring restrictions have served to increase
employment   and  decrease   unemployment   in
Louisiana among Louisiana workers or Louisiana
contractors.

12. There    exist   [sic]   no  evidence   or
empirical data to show that more Louisiana
workers are hired by the imposition or the
residency hiring restrictions of Rule One or
that the unemployment rate has in any way been
effected [sic] positively or negatively by the
administration   and    enforcement   of   the
residency hiring restrictions of Rule One.

13. Rule One has been applied by the
Department of Economic Development and the
Board in a manner so as to require applicants
to prefer or show preference to Louisiana
suppliers, Louisiana contractors and Louisiana
labor over non-residents [sic] suppliers,
contractors and laborers.

14. No where [sic] in the documentation
provided to any applicant for industrial tax
exemption is the applicant informed that there
is an 80% benchmark or trigger for residency
hiring. It is not until and unless an
investigation is commenced or inquiry is made
that an applicant would learn that it was its
obligation to ensure that at least 80% of the
labor working on its construction project were
[sic] from Louisiana.

                      5
15. In the investigations conducted by the
Louisiana Department of Economic Development
pursuant to Rule One and its residency hiring
restriction, investigators inquire as to
whether the recipient or their contractors are
making a reasonable effort to hire Louisiana
workers.

16. If the Board concludes that an applicant
for an industrial tax exemption has not made
a reasonable effort to retain Louisiana
contractors or that it or its contractors have
not made a reasonable effort to hire Louisiana
labor, then the Board will consider a
restriction or limitation of all or a portion
of the industrial tax exemption applied for.

17. It is the policy of the Department of
Economic Development and the Board that it is
the responsibility of the applicant seeking
the industrial tax exemption to abide by Rule
One and that such applicants should pass the
word down through their contractors and
through their subcontractors that the Board
and the Department of Economic Development
expects [sic] Louisiana resources to be given
an opportunity either to bid or to work.

18. According to the Board and the Department
of   Economic   Development,   it    is   the
responsibility of the applicant seeking the
exemption to abide by Rule One and, in most
cases, the applicant advises contractors,
subcontractors, etc., to do likewise because
obviously, it could cost them money if they
don’t.

19. The Board and the Department of Economic
Development consider the residency hiring
restrictions of Rule One an obligation of the
contractor of the recipient and not just an
obligation of the recipient.

20. If a contractor of a recipient of an
industrial tax exemption is found to be in
violation of the residency hiring restrictions
of Rule One because that contractor is
perceived to have not made a reasonable effort
to use Louisiana labor, such would be
reflected in the exemption or the limitation
of exemption for the applicant.

                      6
              21. Because Rule One requires manufacturers
              “and their contractors” to give preference to
              Louisiana contractors and labor, it is the
              policy of the Board that Rule One also applies
              to contractors of the applicants. Thus, if a
              contractor violates Rule One, then it is going
              to reflect on the applicant’s status and
              whether or not the applicant receives the full
              tax exemption or has such limited.

              22. The Board and the Department of Economic
              Development have continued to investigate
              complaints alleging violation of the residency
              hiring restrictions of Rule One for the
              purpose of reporting any perceived violations
              to the Board.

       At trial, Pelican Chapter and its members presented evidence

of the burdens and costs that compliance with Rule One imposes upon

them    and    other   contractors          in   connection    with     industrial

construction in Louisiana.           They introduced numerous exhibits, the

testimony of three representatives of construction contractors, and

the testimony of the Director of the Financial Division of the

Office of Commerce and Industry.

       The representatives of the construction contractors testified

that, in order to avoid the drastic consequences of being found in

violation of Rule One by the Board,               their firms will not hire a

person for a Louisiana project without absolute proof of his or her

Louisiana      residency.      They     said     this   policy,   common      among

construction     firms,     causes    the    employer   to    avoid    the   use   of

experienced, long-term non-resident employees and highly qualified

and    efficient   non-resident        subcontractors.         Also,    additional

administrative costs result from the employer’s efforts to exhaust

all available Louisiana resources before using products or services

                                         7
of another state. More intensive recordkeeping is required in case

it becomes necessary to justify the use of a particular product or

employee.      Consequently, they testified, projects located near

state borders involve even heavier burdens and expenses because the

local    labor   supply    consists       partly      of    non-residents.        The

plaintiffs’ witnesses explained that Rule One’s lack of specificity

as to acceptable margins of error and the complexity of proof of

residency in many instances further aggravated compliance costs.

Exhibits illustrating and corroborating the witnesses’ testimony

regarding the additional administrative                   costs and recordkeeping

associated with Rule One compliance were also introduced by the

plaintiffs.

       The   defendants    presented          no   evidence      controverting    the

testimony of the plaintiff’s witnesses or their exhibits.                          In

fact, the defendants presented very little evidence at trial.

Exhibits introduced by the defendants indicate that from 1936 to

1993    the Rule One related industrial tax program resulted in over

15,000 exemptions to various applicants in the amount of four

billion dollars on construction projects costing over 44 billion

dollars.

       After the trial, the district court granted the requested

relief. At the outset, the district court held that the plaintiffs

had standing      to   challenge    the       Board’s     Rule   One    because   they

suffered injury due to its enforcement despite the fact that they

had     no   contractual   relationship            with    the   state.      Because

manufacturers     customarily      require         contractors     to   secure    them

                                          8
against loss due to any noncompliance with Rule One, the court

reasoned the contractors are burdened by the additional costs                       of

self insuring against the risk of noncompliance, investigation and

record keeping pertaining to residences of laborers and suppliers,

and loss of efficiency and flexibility in acquiring materials and

work force management.

     Proceeding to the merits, the district court found that Rule

One is not neutral on its face and actually discriminates against

the use of out of state workers and suppliers in favor of their

local counterparts.        Rule One discourages use of out of state

workers or suppliers by effectively assigning contractors the

potential burden of showing after the fact, often long after

project completion, that any such use was cheaper, more convenient

or more efficient than granting local preferences.                          The court

therefore   held   that    Rule      One    unconstitutionally        discriminated

against   commerce   and       enjoined         its   application.     See    Pelican

Chapter, Associated Builders and Contractors, Inc. v. Edwards, 901
F. Supp. 1125 (M.D. La. 1995).              This appeal followed.

                                           II.

     In this Court, the defendants-appellants renew their argument

contesting the standing of Pelican Chapter and its members to

prosecute   this   action.          The    irreducible      minimum    of    standing

contains three elements.           Lujan v. Defenders of Wildlife, 504 U.S.
555 (1992).   “First, the plaintiff must have suffered an injury in

fact---an   invasion      of   a    legally       protected   interest      which   is

                                            9
[]concrete and particularized,” id., at 560; Allen v. Wright, 468
U.S. 737, 756 (1984); Warth v. Seldin, 422 U.S. 490, 508 (1975);

Sierra Club v. Morton, 405 U.S. 727, 740-741, n.16 (1972); and

‘actual or imminent, not “conjectural” or “hypothetical”’, Lujan,
504 U.S. at 560; Whitmore v. Arkansas, 495 U.S. 149, 155 (1990);

Los Angeles v. Lyons, 461 U.S. 95, 102 (1983).              “Second, there must

be    a    causal   connection   between    the    injury    and   the   conduct

complained of---the injury has to be fairly traceable to the

challenged action of the defendant, and not the result of the

independent action of some third party not before the court.”

Lujan, 504 U.S. at 560; Simon v. Eastern Ky. Welfare Rights Org’n.,

426 U.S. 26, 41-42 (1976).        “Third, it must be likely, as opposed

to merely ‘speculative,’ that the injury will be ‘redressed by a

favorable decision.’” Lujan, 504 U.S. at 561; Simon, 426 U.S. at

38.

          “The party invoking federal jurisdiction bears the burden of

establishing these elements.” Lujan, 504 U.S. at 561; FW/PBS, Inc.

v. Dallas, 493 U.S. 215, 231 (1990); Warth, 422 U.S. at 508.

“Since they are not mere pleading requirements but rather an

indispensable part of the plaintiff’s case, each element must be

supported in the same way as any other matter on which the

plaintiff bears the        burden of proof, i.e., with the manner and

degree of       evidence   required   at   the    successive    stages   of   the

litigation.” Lujan, id.

          We agree with the district court’s finding that the plaintiffs

satisfactorily proved the requisite elements of injury, causal

                                      10
connection, and redressability.          The plaintiffs established, with

little or no resistance by the defendants, that the existence of

Rule One presents them with a Hobson’s choice, viz., they must

either (a) forego bidding on tax exemption applicants’ projects,

which represent a substantial percentage of the market and their

own businesses, or (b) undertake the extra burdens and costs of

complying   with   Rule   One,   which    tend   to   deprive   them   of   the

competitive and economic advantages they otherwise would be able to

earn through more flexible, effective and efficient purchasing,

administrative, and employment techniques and methodology.

     As the Supreme Court in Lujan, 504 U.S. at 561             observed:

                 When the suit is one challenging the
            legality of government action or inaction, the
            nature and extent of facts that must be . . .
            proved . . . in order to establish standing
            depends   considerably    upon   whether   the
            plaintiff is himself an object of the action
            (or foregone action) at issue.      If he is,
            there is ordinarily little question that the
            action or inaction has caused him injury, and
            that a judgment preventing or requiring the
            action will redress it.

     There is little or no question that the contractor plaintiffs

in this case, as are other contractors that engage in industrial

construction for tax exemption applicants, are the objects of the

State’s action through Rule One to prevent them from dealing freely

in interstate commerce for products and services of other states,

that the Board knowingly and effectively encourages tax exemption

                                    11
applicants to require contractors to indemnify them against any

loss due to non-compliance with Rule One, that the increased costs

of doing business imposed on contractors by Rule One cause them

injury, and that the contractors’ injury would be redressed if Rule

One were to be declared invalid and its enforcement enjoined.3

                                       III.

       The Commerce Clause of the United States Constitution grants

Congress the power “[t]o regulate Commerce with foreign Nations,

and among the several States, and with the Indian Tribes.” Art I,

§ 8, cl. 3.      “‘Although the Clause thus speaks in terms of powers

bestowed upon Congress, the Court long has recognized that it also

limits the power of the States to erect barriers against interstate

trade.’” Maine v. Taylor, 477 U.S. 131, 137 (1986) (quoting Lewis

v. BT Investment Managers, Inc., 447 U.S. 27, 35 (1980)).                     “The

bounds of these restraints appear nowhere in the words of the

Commerce Clause, but have emerged gradually in the decisions of

[the    Supreme]    Court     giving   effect    to    its   basic     purpose.”

Philadelphia v. New Jersey, 437 U.S. 617, 623 (1978).                  The basic

principle that our economic unit is the Nation, which alone has the

gamut of powers necessary to control the economy, “including the

vital    power     of    erecting    customs    barriers     against    foreign

competition,”      has   as   its   corollary   that   the   states     are   not

         3
          Pelican Chapter has standing under the principle of
“associational standing” as enunciated in Hunt v. Washington State
Apple Advertising Comm’n, 432 U.S. 333, 342 (1977) and Warth v.
Selding, 422 U.S. 490, 511 (1975).

                                        12
separable economic units. H.P.Hood & Sons, Inc. v. Du Mond, 336
U.S. 525, 537-538 (1949).         “[W]hat is ultimate is the principle

that one state in its dealings with another may not place itself in

economic isolation.” Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511,

527 (1935).

       The opinions of the Supreme Court reflect an “alertness to the

evils of ‘economic isolation’ and ‘protectionism,’ while at the

same   time    recognizing    that   incidental    burdens     on    interstate

commerce may be unavoidable when a State legislates to safeguard

the health and safety of its people.”          Philadelphia v. New Jersey,
437 U.S. at 623-624. “Thus, where simple economic protectionism is

effected      by   state   legislation,    a   virtually    per     se   rule   of

invalidity has been erected.” Id. at 624 (citing H.P. Hood & Sons,

supra, Toomer v. Witsell, 334 U.S. 385, 403-406 (1948); Baldwin,

supra; Buck v. Kuykendall, 267 U.S. 307, 315-316 (1925)).                       As

Justice    Cardozo     stated,   “Restrictions      so     contrived     are    an

unreasonable clog upon the nobility of commerce.             They set up what

is equivalent to a rampart of customs duties designed to neutralize

advantages belonging to the place of origin.” Baldwin, 294 U.S. at

527.

       Rule One, in effect, conditions the exemption of new or added

manufacturing establishments from state property taxes upon the

preferential use of Louisiana construction products and labor when

they are on parity with those produced by another state.                 Because

Rule One serves to further no end other than the economic welfare

of Louisiana and discriminates against articles and services in

                                      13
interstate commerce solely because of they are produced by another

state,   it   is   a   simple     measure     of   economic     isolationism      or

protectionism that the United States Constitution forbids.

                                         A.

     Although the Supreme Court has used a variety of formulations

for the Commerce Clause limitation upon the states, the Court has

“consistently distinguished between outright protectionism and more

indirect   burdens     on   the   free    flow     of   trade.”     Lewis    v.   BT

Investment Managers, Inc., 447 U.S. at 36.                 In     recent years, a

comprehensive approach to determining when a state law violates the

Commerce Clause has evolved.              A state law that affirmatively

discriminates, either facially or in practical effect, against

interstate commerce is constitutionally valid only if the state

shows that the law actually furthers a “legitimate local purpose”

and that this purpose could not be served as well by available

nondiscriminatory means. Oregon Waste Systems, Inc. v. Dept. of

Envtl. Quality, 511 U.S. 93, 99-101 (1994), Maine v. Taylor, 477
U.S. at 138, Hughes v. Oklahoma, 441 U.S. 322, 336 (1979).                  A state

law affirmatively discriminates against interstate commerce if it

disadvantages interstate commerce relative to intrastate commerce.

Oregon Waste Systems, Inc., 511 U.S. at 99.               To be legitimate, the

local purpose must be unrelated to economic protectionism. Wyoming

v. Oklahoma, 502 U.S. 437, 454 (1992), New Energy Co. of Indiana v.

Limbach, 486 U.S. 269, 274 (1988).

     In contrast, state laws that regulate evenhandedly with only

                                         14
incidental effects on interstate commerce are invalid only if the

burden imposed on interstate commerce is “clearly excessive in

relation to the putative local benefits.” Oregon Waste Systems,

Inc., 511 U.S. at 99 (quoting Pike v. Bruce Church, Inc., 397 U.S.
137, 142 (1970)).        A state law regulates evenhandedly when it is

both       facially   neutral   and   treats   interstate   and   intrastate

interests equally. CTS Corp. v. Dynamics Corp. of America, 481 U.S.
69, 87 (1987), Hunt v. Washington State Apple Advertising Comm’n,

432 U.S. 333, 350-53 (1977).

                                       B.

       Applying these precepts to the present case, we conclude that

Rule One discriminates against interstate commerce both on its face

and in practical effect.          It is facially discriminatory, as tax

exemption recipients and their contractors must give Louisiana

products and labor preferential treatment “all other factors being

equal.”4      The overall effect of Rule One is discriminatory as it

inhibits the ability of contractors to offer employment to out-of-

state workers and to utilize supplies and other resources produced

by other states.        Furthermore, compliance with Rule One imposes

additional adminstrative and operating costs on contractors who

choose to take advantage of resources with out-of-state sources

relative to the costs incurred by contractors utilizing only local

labor, contractors, and supplies.

       Because Rule One discriminates against interstate commerce,

       4
        Rule One, supra, note 1.

                                       15
the burden is shifted to the defendants to show that Rule One

serves a legitimate local purpose which could not be served as well

by available nondiscriminatory means.               This they have not done.

The   asserted      purpose   of     Rule    One,   reducing    unemployment      in

Louisiana,       cannot save this rule.             Reducing unemployment by

discouraging the use of out-of-state labor and products constitutes

the patent economic protectionism that the Commerce Clause forbids.

“Neither the power to tax nor the police power may be used by the

state of destination with the aim and effect of establishing an

economic barrier against competition with the products of another

state or the labor of its residents.” Baldwin, 294 U.S. at 527.                   In

addition,    even    if    reducing    unemployment     in     Louisiana   were    a

legitimate    local       purpose,    the    defendants-appellants     have    not

produced any evidence to demonstrate that Rule One has actually

served this purpose or that it could not be served as well by

available nondiscriminatory means.

                                            C.

      Finally, we are not persuaded by the defendants-appellants’

argument that Rule One’s discriminatory tax exemption requirement

falls within the narrow exception to the dormant Commerce Clause

for states in their role as “market participants.”                  “[The market

participant]‘doctrine differentiates between a State’s acting in

its distinctive governmental capacity, and a State’s acting in the

more general capacity of a market participant; only the former is

subject to the limitations of the negative Commerce Clause.’” Camps

                                            16
Newfound/Owatonna       v.    Town    of    Harrison,     117 S. Ct. 1590,   1606

(1997)(quoting New Energy Co. of Indiana v. Limbach, 486 U.S. at

277    (1988)).   See    White       v.    Massachusetts    Council     of   Constr.

Employers, Inc., 460 U.S. 204, 208 (1983)(Boston participated in

the construction industry by funding certain projects); Reeves,

Inc.    v.   Stake,     447 U.S. 429,    436-437   (1980)(South     Dakota

participated in the market for cement as a seller of the output of

the cement plant that it owned and operated); Hughes v. Alexandria

Scrap Corp., 426 U.S. 794, 806 (1976)(Maryland, in effect, entered

the market for abandoned auto hulks as purchaser by providing

bounties for their removal from streets and junkyards).                          For

purposes of analysis under the dormant Commerce Clause, a state

acting in its proprietary capacity as a purchaser or seller may

“‘favor its own citizens over others.’” Camps Newfound/Owatonna v.

Harrison, 117 S. Ct. at 1606 (quoting Alexandria Scrap, 426 U.S. at

810).

       Rule One’s tax exemption prerequisite cannot be characterized

as a proprietary activity falling within the market participant

exception.     The tax program of which Rule One is a part has the

effect of subsidizing         the initiation, relocation or expansion of

industry, as do many dispositions of the tax laws. See New Energy

Co., 486 U.S. at 277.         “‘That,’” the Supreme Court has explained,

“‘does not transform it into a form of state participation in the

free market.’” Camps Newfound/Owatonna, 117 S. Ct. at 1607 (quoting

New Energy Co., 486 U.S. at 277).                The function of Rule One and the

state tax program of which it is an element is neither the purchase

                                            17
nor the    sale    of    construction     materials      or   services,    but   the

“‘assessment and computation of taxes--a primeval governmental

activity.’” Id.      “A tax exemption is not the sort of direct state

involvement    in       the    market    that    falls    within     the   market-

participation doctrine.”           Id.

                                    Conclusion

     As was true in Camps Newfound/Owatanna and Bacchus Imports,

Ltd. v. Dias, 468 U.S. 263 (1984), the facts of this particular

case, viewed in isolation do not appear to pose any threat to the

health of the national economy.                 Nevertheless, the history of

Commerce Clause jurisprudence has shown that even the smallest

scale discrimination can interfere with the project of our federal

union.        As    Justice        Cardozo      recognized,     to    countenance

discrimination of the sort that Rule One represents would invite

significant inroads on our “national solidarity”:

          The Constitution was framed under the dominion
          of a political philosophy less parochial in
          range. It was framed upon the theory that the
          peoples of the several states must sink or
          swim together, and that in the long run
          prosperity and salvation are in union and not
          in division.
Baldwin, 294 U.S. at 523.

     The    judgment          of   the   district     court,     insofar     as it

prospectively invalidates and enjoins the enforcement of Rule One,

is AFFIRMED.

                                         18