Court Opinion

ID: 9594112
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:27:18.27711+00
Date Added: 2024-06-11T13:04:02.606262
License: Public Domain

De MUNIZ, J.,
concurring in part, dissenting in part.
For the reasons set forth below, I concur with the majority’s decision to affirm the trial court’s ruling that ORS 348.835(2)(c) violates the Commerce Clause of the United States Constitution. However, because I believe that the trial court also correctly severed the word “Oregon” from the statute, I respectfully dissent.
ORS 348.835 provides:
“(1) No school or other institution of learning shall confer or offer to confer any degree upon any person, in recognition of the attainment or proficiency of such person, in pursuing or graduating from any course conducted by it, without first having submitted the requirements for such degree to the Oregon Office of Educational Policy and Planning [OEPP] and having obtained the approval of the director.
“(2) ORS 348.830 to 348.885 shall not apply to:
“(a) Any school or institution of learning which has been established and conducted within this state, and has conferred degrees for a period of 15 years prior to March 4, 1935;
“(b) Any school conducted under the public educational system of the state;
“(c) Any Oregon[1] school which is a member in good standing of the Northwest Association of Schools and Colleges; or
*468“(d) Schools of theology operating on a post-baccalaureate degree level.” (Emphasis supplied.)
Although plaintiffs privately owned university is accredited in Washington by the Northwest Association of Schools and Colleges (NASC), its status as a non-Oregon school prevents it from meeting the exemption requirements of ORS 348.830(2)(c), above. As a result, it is required to obtain approval of its degree requirements by complying with OEPP rules that establish standards for, among other things, the school’s name, purpose, governance, organizational structure, administrators, teachers, curriculum, credits, admissions, student services, publications, advertisements, records, library facilities, finances, fees, refunds and evaluations. OAR 583-30-035.2
The questions on appeal are whether ORS 348.835(2)(e) on its face violates the Commerce Clause, and, if so, whether the trial court properly remedied the problem when it severed the word “Oregon” from the statute.3 For the following reasons, I would answer both questions in the affirmative.
Although the Commerce Clause refers only to the power of the United States Congress to regulate commerce *469among the states, see n 1, supra, it has been interpreted to limit the power of states to discriminate against interstate trade. Wyoming v. Oklahoma, 502 US _, 112 S Ct 789,117 L Ed 2d 1, 22 (1992); Lewis v. BT Investment Managers, Inc., 447 US 27, 35, 100 S Ct 2009, 64 L Ed 2d 702 (1980). The general rule is that, if a state law
“clearly discriminates against interstate commerce, it will be struck down * * * unless the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism[.]” Wyoming v. Oklahoma, supra, 502 US at _, 112 S Ct at 800, 117 L Ed 2d at 22.4
On the other hand, if a state law does not clearly discriminate, but instead
‘ ‘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.” Pike v. Bruce Church, Inc., 397 US 137, 142, 90 S Ct 844, 25 L Ed 2d 174 (1970). (Citation omitted; emphasis supplied.)
See Hass v. Oregon State Bar, 883 F2d 1453, 1462 (9th Cir 1989), cert den 494 US 1081 (1990) (stating both rules).
Plaintiffs activities clearly constitute “interstate commerce.” Its operation of the Oregon-based facility necessarily involves communication between Oregon and Washington. Also, information regarding registration, student financial aid, curriculum review, testing and measurement crosses the Oregon-Washington border. Students, faculty and administrators move back and forth between the two states, as does money.5 In sum, plaintiffs educational activities involve the flow of people, money and information between the two states. That is sufficient to establish that plaintiff is engaged in interstate commerce. See U.S. v. Underwriters Ass’n, 322 US 533, 549-50, 64 S Ct 1162, 88 L Ed 1440 (1944) (transactions may be commerce even though they do not concern “the flow of anything more tangible than *470electrons and information”); see also International Textbook Co. v. Pigg, 217 US 91, 30 S Ct 481, 54 L Ed 678 (1910) (correspondence courses offered through the mail are a type of commerce).
The next question is whether ORS 348.835(2)(c) discriminates against interstate commerce or whether it “regulates evenhandedly.” Pike v. Bruce Church, Inc., supra; Wyoming v. Oklahoma, supra. There can be no question that the statute is facially discriminatory. Until 1979, ORS 348.835(2)(c) exempted all NASC-accredited schools from the requirement of obtaining OEPP authorization for their degree programs. In 1979, the word “Oregon” was added to the statute. Or Laws 1979, ch 308, § 3. That amendment gave rise to the current situation in which only Oregon schools are allowed to avoid expending the effort required to secure continuous OEPP approval of their degree requirements. By placing on non-Oregon NASC-accredited schools the burden of meeting OEPP’s requirements,6 while exempting identically accredited Oregon schools from that requirement, out-of-state schools are disadvantaged and in-state schools are given favorable treatment. By definition, that is discrimination.
When, as here, a state law discriminates against interstate commerce
“ ‘either on its face or in practical effect,’ the burden falls on the State to demonstrate both that the statute ‘serves a legitimate local purpose,’ and that this purpose could not be served as well by available nondiscriminatory means.” Maine v. Taylor, 477 US 131, 138, 106 S Ct 2440, 91 L Ed 2d 110, (1986) (quoting Hughes v. Oklahoma, 441 US 322, 336, 99 S Ct 1727, 60 L Ed 2d 250 (1979)).
A statute does not serve a legitimate local purpose when it protects citizens against fraudulent or substandard out-of-state institutions, but allows them to be subjected to similarly substandard or fraudulent programs offered by in-state institutions.7 The statute’s incongruity, which lies in its implication that NASC accreditation is an adequate assurance of *471quality for Oregon schools, but is inadequate for ensuring the quality of non-Oregon schools, renders this case analogous to Lewis v. BT Investment Managers, Inc., supra, in which the court wrote:
“Appellant has demonstrated no basis for an inference that all out-of-state bank holding companies are likely to possess the evils of monopoly power, that they are more likely to do so than their homegrown counterparts, or that they are any more inclined to engage in sharp practices than bank holding companies that are locally based.” 447 US at 43.
As noted above, the test for facially discriminatory statutes has two parts. Even if the majority of this court chooses to hold that protecting students from some, but not all, of the relevant educational institutions “serves a legitimate local purpose,” the statute’s inherent double standard requires that we reject the state’s argument that the purpose of the statute “could not be served as well by available nondiscriminatory means.” Maine v. Taylor, supra, 477 US at 138. The history of the statute itself shows that the obvious and “available nondiscriminatory means” to achieve its purpose is to subject all schools to the same certification requirements, as the statute required prior to 1979.
In sum, I would hold that ORS 348.835(2)(c) impermissibly discriminates against interstate commerce, in violation of the Commerce Clause, for reasons beyond the one articulated by the majority.
The remaining question is whether the unconstitutional provision is severable. The trial court concluded that, by deleting “Oregon” from subsection (2)(c), the remainder of the subsection could stand. The effect of that deletion is to remove the distinction between Oregon and non-Oregon schools and to render all NASC-accredited schools exempt from OEPP regulation. In short, it returns the statute to its pre-amended form.
The state objects to that remedy and submits that, if found unconstitutional, ORS 348.835 (2) (c) should be invalidated in its entirety. Its primary argument is that exempting *472all NASC-accredited schools is contrary to the 1979 Legislature’s clear intent to, at the very least, regulate out-of-state schools that offer degree programs in Oregon.
Decisions regarding severability are governed by ORS 174.040, which provides:
“It shall be considered that it is the legislative intent, in the enactment of any statute, that if any part of the statute is held unconstitutional, the remaining parts shall remain in force unless:
“(1) The statute provides otherwise;
“(2) The remaining parts are so essentially and inseparably connected with and dependent upon the unconstitutional part that it is apparent that the remaining parts would not have been enacted without the unconstitutional part; or
“(3) The remaining parts, standing alone, are incomplete and incapable of being executed in accordance with the legislative intent.”
See Gilliam County v. Dept. of Environmental Quality, 316 Or 99, 108, 849 P2d 500, cert granted _ US _, 114 S Ct 38, 125 L Ed 2d 787 (1993). The question is what, if any, portion of ORS 348.835 is severable. Because of the constitutional constraints discussed above, in my view, the statute must exempt either all or none of the NASC-accredited schools that operate in Oregon and must not discriminate on the basis of a school’s geographical origin.
The statute does not contain a non-severability clause, and subsections (1), (2)(a), (2)(b) and (2)(d) are not “inseparably connected with and dependent upon” subsection (2)(c). Without (2)(c), the remainder of the statute can stand alone. Thus, one approach would be to sever the entire subsection. The other approach, taken by the trial court, was to delete only the word “Oregon” and to leave intact the remainder of (2)(c). The sentence would then be identical to former subsection (2)(c) as it stood before the 1979 Legislature added the word “Oregon.” That result also meets the criteria of ORS 174.040, because the remainder of the subsection can and did stand alone prior to 1979. In deciding whether to delete one word or to delete subsection (2)(c) in its entirety, a court is guided by the rule that statutory provisions should be severed only if the challenged portion can be *473removed “without doing violence to the intent of the legislature.” Pavlicek v. S.I.A.C., 235 Or 490, 494, 385 P2d 159 (1963).
The legislative history of Senate Bill 801, which added the word “Oregon” to ORS 348.835(2)(c), shows that the 1979 Legislature amended subsection (2)(c) because it was concerned about the state’s inability to regulate the quality of courses being offered by out-of-state institutions. The history suggests that the legislature sought to “expand” and “extend” the degree-approving authority of the Oregon Educational Coordinating Commission, which was the predecessor to OEPP, in order to remedy a situation in which there were “insufficient controls on out-of-state schools that offer courses and degrees in the State of Oregon.” Minutes, Senate Committee on Education (April 12, 1979 — SB 801, Exhibit A); Minutes, House Education Committee (May 18, 1979 —Staff Measure Analysis of SB 801). The amendment itself evinces the legislature’s intent to subject out-of-state NASC-accredited institutions to formal OEPP regulation. Deletion of the word “Oregon” would remove non-Oregon schools from OEPP regulation and, in so doing, would achieve a result that is contrary to the legislature’s interest in extending OEPP authority over out-of-state schools operating in Oregon.
On the other hand, deletion of the entire subsection, as urged by the state, also would fail to effectuate the legislature’s goal of exempting NASC-accredited Oregon schools from OEPP regulation. Severing (2)(c) in its entirety would have the effect of subjecting those schools to the requirement that they obtain OEPP approval before conferring degrees. The history of ORS 348.835(2)(c) shows that the legislature has continuously exempted NASC-accredited Oregon schools from regulation since 1935, when the statute was enacted. Or Laws 1935, ch 165, § 1. By adding the word “Oregon” in 1979, that exemption was expressly reaffirmed. Therefore, to sever the statute in the manner sought by the state would accomplish the legislature’s goal of regulating out-of-state schools, but would contradict its goal of retaining the exemption status that is provided to NASC-accredited Oregon schools.
In sum, the amended statute serves a dual purpose. Either form of severance — limited or wholesale — will give *474effect to one, but never both, purposes. That fact places us in the unenviable position of discerning what the legislature would have done if it had known that its goal of regulating non-Oregon schools could not be achieved in the manner utilized by its 1979 amendment to ORS 348.835(2)(c). Which purpose weighs heavier in the legislature’s mind: exempting Oregon schools or regulating non-Oregon schools?
The statute’s history reveals 58 uninterrupted years of exemption for Oregon schools. The legislature also allowed 44 years of exemption for non-Oregon schools, but, for the last 14 years, has required OEPP regulation of those schools. As noted above, retaining the exemption for Oregon schools is constitutionally permissible only if all NASC-approved schools, regardless of origin, are likewise exempted. That would be accomplished by deleting the word “Oregon” from ORS 348.835(2)(c). On the other hand, severing (2)(c) in its entirety — which would remove the exemption for Oregon schools and in that manner equalize the treatment accorded to NASC-approved schools — would for the first time subject Oregon schools to an intensive regulation process which heretofore they have been allowed to avoid.
Given the longstanding nature of the Oregon school exemption, and its express retention in 1979, I would conclude that the legislature would not have sacrificed that exemption for the sake of regulating all NASC-accredited schools. Moreover, to sever the statute in such a way as to eliminate the exemption for Oregon schools would be the equivalent of a judicial grant of authority to OEPP to regulate those schools. That is a wider scope of authority than the legislature itself has delegated to OEPP, and it is not within our province to so delegate. Accordingly, I would affirm the trial court’s decision to sever the word “Oregon” from subsection (2)(c) and return the statute to its pre-amended form in which both Oregon and non-Oregon NASC-accredited schools are exempt from OEPP regulation.
Rossman, Durham and Leeson, JJ., join in this dissent.

 An “Oregon school” is a school that has its principal executive offices in Oregon, provides instruction to more full-time-equivalent students in Oregon than in any other state, vests final authority over school matters in persons a majority of whom are permanent Oregon residents, and has authority to make governance decisions that are not subject to persons or organizations outside the state. OAR 583-30-015(5).

 In addition, OAR 583-30-035(23) provides:
“Notwithstanding the absence of a specific standard or prohibition in this rule, no school authorized to offer academic degrees or seeking to qualify for such authorization shall engage in any practice that the Office considers in its discretion to be fraudulent, dishonest, unethical, unsafe, exploitive, deceptive, transient, irresponsible, or inequitable, so as to be harmful or unfair to persons with whom it deals. A school that appears to be so engaged will be given opportunity to present evidence to the contrary.”

 The court wrote:
‘TORS 348.835(2)(c)l is clearly not a neutral statute. It is a discriminatory statute whose purpose is to affect educational institutions which have their main offices and branches out-of-state. Those things which this statute attempts to protect Oregon citizens from can just as easily be caused by existing in-state institutions. This statute puts an additional burden upon the plaintiff herein in continuing to have their isic] programs offered in the [Sítate of Oregon. Based upon the testimony offered, and this Court’s purview of the administrative rules, there is no doubt but that they are a substantial and additional burden to out-of-state schools which are not required of in-state institutions. This statute is not neutral and, therefore, this Court will, under the interstate commerce clause, rule it unconstitutional.
“Since this matter has been dealt with under the interstate commerce clause I will not go any further and deal with equal protection or freedom of speech.”

 See, e.g., New Energy Co. of Indiana v. Limbach, 486 US 269, 274, 108 S Ct 1803, 100 L Ed 2d 302 (1988); Maine v. Taylor, 477 US 131, 106 S Ct 2440, 91 L Ed 2d 110 (1986).

 City University alleges that, since 1982, it has spent more than $2.6 million in Oregon.

 The state contends that, although NASC-accredited Oregon schools are not subject to formal OEPP regulation, they are subject to informal “regulation” in the form of “moral suasion.” We reject the suggestion that the burden, if any, that is occasioned by moral suasion is comparable to legal compulsion.

 The trial court opined that the presence of poor quality programs is a problem *471that “can just as easily be caused by existing in-state institutions” as by out-of-state institutions.