Court Opinion

ID: 9425868
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:16:02.288964+00
Date Added: 2024-06-11T17:22:58.089119
License: Public Domain

Me. Justice Rehnquist,
dissenting.
The question in this case is whether Mississippi may require appellant, a Tennessee corporation, to qualify as a foreign corporation under Mississippi law before it may sue in the courts of Mississippi to enforce a contract. The Supreme Court of Mississippi summarized the facts of the transaction, which it stated were “without substantial dispute,” as follows:
“It is apparent that these transactions of Allenberg in each case, including that with Pittman, took place wholly in Mississippi. The contract was negotiated in Mississippi, executed in Mississippi, the cotton was produced in Mississippi, delivered to Allenberg at the warehouse in Mississippi, and payment was made to the producer in Mississippi. All interest of the producer in the cotton terminated finally upon delivery to Allenberg at the warehouse in Marks. The fact that afterward Allenberg might or might not sell the cotton in interstate commerce is irrelevant to the issue here, as the Mississippi transaction had been completed and the cotton then belonged exclusively to Allenberg . . . .” 276 So. 2d 678, 681 (1973).
The Supreme Court of Mississippi might have added that through an exclusive agent, who was a Mississippi *35resident, Allenberg entered into over 20 similar contracts in 1971 with farmers in Quitman County alone, contracts covering coiton production from over 9,000 acres in this one county. Allenberg’s total 1971 purchases of cotton grown in Mississippi under substantially identical contracts exceeded 25,000 bales. When cotton grown under these contracts arrived at Mississippi warehouses designated by Allenberg the cotton was compressed and sorted by warehousemen acting at Allenberg’s direction. It was then stored at the warehouse as a part of a perpetual revolving inventory of cotton, maintained by Allenberg at cotton concentration points throughout Mississippi to await future shipping orders.1
For reasons which are not entirely clear to me, the Court holds that Mississippi may not require Allenberg to qualify as a foreign corporation as a condition of using Mississippi courts to enforce its contract with appellee Pittman.2
The Court says that “ [d] elivery of the cotton to a warehouse, taken in isolation, is an intrastate transaction. But that delivery is also essential for the completion of the interstate transaction, for sorting and classification in the warehouse are essential before the precise interstate destination of the cotton, whether in this country or abroad, is determined.” Ante, at 30. Yet in Parker v. Brown, 317 U. S. 341, 361 (1943), this Court stated *36that “no case has gone so far as to hold that a state could not license or otherwise regulate the sale of articles within the state because the buyer, after processing and packing them, will, in the normal course of business, sell and ship them in interstate commerce.” But putting aside such uncertainties engendered by the Court’s language, its holding seems to me quite inconsistent with our previous cases applying the Commerce Clause to this kind of factual situation.
The most recent ease from this Court dealing with this question is Eli Lilly & Co. v. Sav-On-Drugs, 366 U. S. 276 (1961), where the Court said:
“[I]f Lilly is engaged in intrastate as well as interstate aspects of the New Jersey drug business, the State can require it to get a certificate of authority to do business. In such a situation, Lilly could not escape state regulation merely because it is also engaged in interstate commerce.” Id., at 279 (footnote omitted).
In Lilly, the facts supporting a “corporate presence” in New Jersey were probably stronger than the facts supporting a conclusion that Allenberg was “doing business” ■in Mississippi in this case. But it is of some importance to note that the intrastate contacts between Lilly and New Jersey had no apparent connection with the suit which Lilly sought to bring against Sav-On-Drugs; the Court held that there were sufficient intrastate activities of Lilly so that it could be required generally to qualify to do business in New Jersey, rather than that Lilly’s business with Sav-On was intrastate. Here the very dealings of Allenberg which are concededly intrastate are the dealings between it and Pittman revolving around the contract upon which it seeks to sue in the Mississippi courts.
But even if I were able to agree with the Court that *37Allenberg’s activities in Mississippi were purely “interstate,” I do not believe that our cases, properly understood, prevent Mississippi from exacting qualification from a foreign corporation as a condition for use of the Mississippi courts.
It has been settled since Mr. Chief Justice Taney’s opinion for the Court in Bank of Augusta v. Earle, 13 Pet. 519 (1839), that a corporation organized in one State which seeks to do business in another State may be required by the latter to qualify under its laws before doing such business. An exception to this general rule was established in cases such as Crutcher v. Kentucky, 141 U. S. 47 (1891), in which the Court held that such a license might not be required of an express company engaged only in interstate commerce. Id., at 56-57. That exception was subsequently applied in International Textbook Co. v. Pigg, 217 U. S. 91 (1910), and expanded in Dahnke-Walker Milling Co. v. Bondurant, 257 U. S. 282 (1921), and Shafer v. Farmers Grain Co., 268 U. S. 189 (1925).
The Court today excerpts a paragraph from Shafer dealing with wheat, and cites it for the apparent proposition that trading in agricultural commodities, whether wheat or cotton, is a form of interstate commerce which may not be regulated by the States. But Shafer invalidated, not a statute requiring a foreign corporation to qualify to do business before using the courts, but instead a comprehensive statutory scheme regulating the method by which grain might be sold. The Court in its opinion in Shafer was careful to distinguish other situations in which state regulation of trade in agricultural commodities which concededly went across state lines had been upheld. Id., at 201-202.
Dahnke-Walker Milling Co., supra, did deal with a statute requiring foreign corporations to qualify, and the *38Court held the state statute could not be applied consistently with the Commerce Clause, but its reasoning in reaching this conclusion in no way supports the result the Court reaches today.
“This contract was made in continuance of that practice, the plaintiff intending to forward the grain to its mill as soon as the delivery was made. In keeping with that purpose the delivery was to be on board the cars of a public carrier. Applying to these facts the principles before stated, we think the transaction was in interstate commerce. The state court, stressing the fact that the contract was made in Kentucky and was to be performed there, put aside the further facts that the delivery was to be on board the cars and that the plaintiff, in continuance of its prior practice, was purchasing the grain for shipment to its mill in Tennessee. We think the facts so neglected had a material bearing and should have been considered. They show that what otherwise seemed an intrastate transaction was a part of interstate commerce.’’ 257 U. S., at 292. (Emphasis added.)
Here, unlike the situation which the Dahnke-Walker Court regarded as critical there, Allenberg chose to store cotton owned by it in Mississippi warehouses for varying lengths of time in order that it might have a perpetual revolving inventory of cotton available for future shipment orders. Here, too, Allenberg had contracted with Mississippi farmers, including Pittman, to grow the cotton from seed.
Cases such as Shafer, supra, and Dahnke-Walker, supra, were decided during a period of this Court’s history when the approved judicial technique “was to decide whether a subject was or was not interstate commerce; if it was, Congress alone could regulate it, and *39if not, only the states could.”3 This doctrine of mutual exclusivity was largely dispelled in later cases beginning with South Carolina Highway Dept. v. Barnwell Bros., 303 U. S. 177 (1938), and followed in a long line of succeeding cases.4 The rule stated by the Court in Pike v. Bruce Church, Inc., 397 U. S. 137, 142 (1970), is quite different from that found in cases such as Shafer and Dahnke-Walker:
“Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.”
In Union Brokerage Co. v. Jensen, 322 U. S. 202 (1944),5 this Court upheld Minnesota’s denial of access to its courts to a North Dakota customhouse broker, whose sole business in Minnesota was interstate commerce, where the *40broker had failed to qualify as required of such foreign corporations:
“[T]he Commerce Clause does not cut the States off from all legislative relation to foreign and interstate commerce. South Carolina Highway Dept. v. Barnwell Bros., 303 U. S. 177 .... The incidence of the particular state enactment must determine whether it has transgressed the power left to the States to protect their special state interests although it is related to a phase of a more extensive commercial process.” Id., at 209-210.
See Parker v. Brown, 317 U. S. 341, 361 (1942).
Mississippi's qualification statute is concededly not discriminatory. Domestic corporations organized under her laws must submit themselves to her taxing jurisdiction, to service of process within the State6 and to a number of other incidents of corporate existence which state law may impose. Union Brokerage recognized that qualification statutes were important in the collection of state taxes by identifying foreign corporations operating within the State® and in the protection of citizens *41within the State' through insuring ready susceptibility of the corporation to service of process.7 The qualification statute also serves an important informational function making available to citizens of the State who may deal with the foreign corporation details of its financing and control.8 Although the result of Allenberg’s failure to comply with the qualification statute is a drastic one,9 our *42decisions hold that the burden imposed on interstate commerce by such statutes is to be judged with reference to the measures required to comply with such legislation, and not to the sanctions imposed for violation of it. Eli Lilly, 366 U. S., at 282-283; Railway Express Co. v. Virginia, 282 U. S. 440, 444 (1931). The steps necessary in order to comply with this statute are not unreasonably burdensome.10
I would not expand the holdings of Shafer and Dahnke-Walker in the face of so substantial a body of subsequent case law which leaves their reasoning, if not their holdings, suspect. I would affirm the judgment of the- Supreme Court of Mississippi.

 App. 92; Brief for Appellant 11. The record does not disclose the turnover time of the inventory but this is not material in light of Allenberg’s admission that it maintains perpetual inventories in Mississippi.

 In its concluding paragraph the Court states: “We hold only that Mississippi’s refusal to honor and enforce contracts made for interstate or foreign commerce is repugnant to the Commerce Clause.” The Court offers no definition or analysis as to why this particular contract was “made for interstate or foreign commerce,” and the language is traceable to none of our previous cases dealing with the Commerce Clause.

 Stern, The Commerce Clause and the National Economy, 1933-1946, 59 Harv. L. Rev. 645, 648 (1946). See also P. Benson, The Supreme Court and the Commerce Clause, 1937-1970 (1970).

 In addition to Shafer v. Farmers Grain Co., 268 U. S. 189 (1925), and Dahnke-Walker Milling Co. v. Bondurant, 257 U. S. 282 (1921), the Court today relies on Swift & Co. v. United States, 196 U. S. 375 (1905); Stafford v. Wallace, 258 U. S. 495 (1922); and Chicago Board of Trade v. Olsen, 262 U. S. 1 (1923). These cases upheld federal regulatory legislation applied to commodities exchanges as justified by the commerce power. Unless the Court today takes a giant step backwards, these are not relevant to the question of the constitutionality of Mississippi’s statute. See, e. g., Di Santo v. Pennsylvania, 273 U. S. 34, 37 (1927) (Brandeis, J., joined by Holmes, J., dissenting), a case later overruled in California v. Thompson, 313 U. S. 109, 116 (1941).

 The Court distinguishes Union Brokerage on the ground that the activities of the broker there were “localized” interstate commerce, but a comparison of the facts of that case with the facts here suggests that Allenberg’s activities in Mississippi were every bit as “localized” as those of Union Brokerage in Minnesota.

 Most commentators studying qualification statutes have concluded that a major purpose of such statutes is facilitation of the assessment and collection of state ad valorem and franchise taxes. See, e. g., Comment, Foreign Corporations-State Boundaries for National Business, 59 Yale L. J. 737, 746 (1950). Cases such as Chassaniol v. Greenwood, 291 U. S. 584 (1934); Federal Compress Co. v. McLean, 291 U. S. 17 (1934): and Kosydar v. National Cash Register Co., 417 U. S. 62 (1974), make it clear that the cotton stored in Mississippi is subject to state taxation. Mississippi Code Ann. § 27-13-7 (1972) imposes a franchise tax on foreign corporations operating within the State measured by the amount of capital located in Mississippi. A portion of the information required to be filed with the Mississippi Secretary of State in order to qualify within the State is an estimate of capital located within Mississippi. The information is essential to the identification of foreign corporations subject to the tax. The Court today leaves the tax standing but illogically deprives Mississippi of its sole means of enforcement of the tax.

 Although it may be possible to assert jurisdiction over an unqualified foreign corporation doing business in the State under a long-arm statute since minimum contacts with the State will normally exist, the absence of a registered agent in the State creates substantial problems for any potential plaintiff since he will be required to prove the existence of such minimum contacts — often in the absence of any subpoena power over the foreign corporation. See, e. g., Note, The Supreme Court, 1960 Term, 75 Harv. L. Rev. 40,138,140 (1961). In this area such qualification statutes provide a rough form of reciprocity (a guarantee of susceptibility of suit in exchange for the right to bring suit) and operate as security for performance of the foreign corporation’s obligations owed to citizens of the State. Cf. Paul v. Virginia, 8 Wall. 168, 181 (1869). See, e. g., Comment, supra, n. 6, 59 Yale L. J., at 742-745.

 See, e. g., Comment, The Lilly Case: Dictum, Holding, and Finding, 57 Nw. U. L. Rev. 306, 321 (1962). While state and federal securities laws may on occasion provide parallel disclosures, they will often not. For example, in the immediate case, there is no indication that Allenberg was subject to any disclosure requirements other than those provided by the qualification statute. Mississippi requires such foreign corporations to update information in their certificates through annual reports. Miss. Code Ann. § 79-3-249 (1972). This information is available to all citizens of the State through payment of a nominal fee to the Secretary of State’s office. § 79-3-257. Information such as the financial structure and control of the foreign corporation is obviously highly relevant to any citizen of Mississippi who is considering doing business with the corporation.

 The large variety of possible sanctions imposed by the States was discussed at length in Note, Sanctions for Failure to Comply with Corporate Qualification Statutes: An Evaluation, 63 Col. L. Rev. 117, 122-123 (1963). "Because of the difficulties involved in discovery and enforcement by state officials, denial of access to state *42courts is an essential element of a statutory scheme designed to encourage compliance with qualification requirements.” Id., at 129-130 (footnote omitted). The denial-of-a-forum sanction utilized by Mississippi is also used by five other States. Ala. Code, Tit. 10, § 21 (89) (1973 Cum. Supp.); Ariz. Rev. Stat. Ann. § 10-482 (1956); Ark. Stat. Ann. §64-1202 (1966); Yt. Stat. Ann., Tit. 11, §2120 (1973). The rule is applied in Montana by case law. Note, Right of a Foreign Corporation to Sue upon Contracts in Montana Courts — Doing Business — Failure to Qualify — Subsequent Qualification, 26 Mont. L. Rev. 218 (1965). There may certainly be a dispute as to the wisdom of Mississippi’s choice of this sanction but unless substantive due process now clothed in Commerce Clause garb once more elevates the Court into an arbiter of legislative wisdom, this consideration is irrelevant to our disposition of the case.

 The principal requirements are the filing of certain information with the Mississippi Secretary of State and the payment of a fee ranging between $20 and $500 depending on the amount of stated capital of the foreign corporation. Miss. Code Ann. §§ 79-3-219 and 79-3-255 (q) (1972). When the required information is provided and the fee is paid, the Secretary of State issues the requested certificate. § 79-3-221. The burden of qualifying appears small, particularly when compared to Allenberg’s activities in the State. See Union Brokerage Co. v. Jensen, 322 U. S. 202, 210 (1944).