WASHINGTON -- State and local governments suffered some significant setbacks in the Supreme Court's 1993-94 term, which ends today.
Most of the defeats came when the court sided with businesses that charged various state laws or regulations violated the Constitution's commerce clause.
In a major victory for states, however, the high court upheld California's worldwide unitary method of taxing foreign and domestic multinational companies. The case, Barclays Bank v. California, involved application of the commerce clause to foreign commerce.
The commerce clause prohibits states from erecting barriers to interstate trade unless they are specifically authorized to do so by Congress.
An attorney representing state and local interests said that, despite the setbacks in several rulings, the court recognized the importance of local governments in local taxation issues and land use planning, and it did not infringe on states' discretion to devise ways of complying with the court's ruling. In general, "it was a good term" for state and local governments, said Richard Ruda, general counsel for the State and Local Legal Center.
The center intervened in numerous cases on behalf of groups such as the National Governors' Association and the National League of Cities.
However, it did not participate in one major commerce clause case affecting the ability of states to subsidize local industry, West Lynn Creamery v. Healy, Mass., Commissioner of Food and Agriculture.
The court's ruling overturned a Massachusetts pricing program because it effectively taxed milk from out-of-state producers to provide a benefit for instate producers in violation of the commerce clause. Justice Antonin Scalia in a concurrence called the ruling "a broad expansion of current law" because he said the court holds that any state law that obstructs a national market violates the commerce clause.
There appears to be a growing number of challenges to state statutes and regulations that allegedly discriminate against businesses in other states, according to Joseph F. Zimmerman, a professor of political science at the State University of New York at Albany.
The Supreme Court has been using the so-called dormant commerce clause to strike down such state actions, he said. The clause is referred to as dormant when Congress has not specifically acted on an interstate commerce issue.
The apparent rise in commerce clause challenges partly reflects increasing pressure on state and local governments to comply with federal and state environmental mandates, said Zimmerman. For example, major challenges brought under the commerce clause in the court's 199394 term and other recent terms have involved the ability of state and local governments to manage solid waste disposal, he said.
Ruda said he did not see a dramatic increase in cases involving the commerce clause. But he agreed that state and local governments are under pressure to comply with environmental mandates. "The problem of disposing of waste is a difficult and costly one that will put pressure on state and local governments to come up with regulatory solutions," he said.
One of the most serious setbacks under the commerce clause for state and local governments occurred in C&A Carbone v. Clarkstown, N.Y., which struck down state and local flow control laws for waste.
Also, in Oregon Waste Management v. Environmental Quality Department, the court ruled that Oregon's practice of taxing out-of-state waste at a higher rate than instate waste violates the commerce clause.
The court in this term handed municipalities a third defeat on solid waste in Chicago v. Environmental Defense Fund, which held that ash from municipal incineration must be regulated as hazardous waste. This case did not involve a commerce clause challenge.
Another factor in an apparent trend of more commerce clause cases may be the economy, Zimmerman said. Legislatures seek to protect local manufacturers and merchants in hard economic times, he said. However, he said he has not specifically tracked cases to establish a relationship between commerce clause challenges and recession, and other legal experts said they could not establish a firm connection.
"State and local governments are always going to be under fiscal pressure and will think long and hard about fair and appropriate ways to raise revenue," Ruda said.
The court's decision to uphold California's method of taxing Barclays Bank and other multinational firms sends "a signal that state and local governments can chart new courses in this area" to raise revenue, Ruda said. Finding new ways of raising revenue naturally invites challenges, he said.
In one attorney's estimation, the court decided four domestic commerce clause cases in the 1993-94 term, compared with three such cases in the previous four years. Edward Bruce of the law firm Covington & Burling noted that two of the cases in the previous terms also involved state and local management of solid and hazardous waste.
Bruce spoke at a news briefing held Tuesday by the Washington Legal Foundation, a nonprofit law and policy center that favors free enterprise.
In every domestic commerce clause case, the court ruled against the state action, Bruce said. Among the dissenters in most of the cases was Justice Harry Blackmun, who is retiring, he noted.
Ruda did not see major doctrinal changes in the court's commerce clause cases, although he said he could not comment on the West Lynn Creamery case, in which Scalia suggested that current law had been expanded.
But Bruce, who represents business clients, said that in general the court clarified law under the commerce clause in favor of business. The court did so despite the presence of two strong advocates of states' rights, Chief Justice William Rehnquist and Justice Sandra Day O'Connor, he said. Bruce also noted Scalia's "grave doubts" about invalidation of state action under the commerce clause.
What the court has said is that the commerce clause "will stand as a very substantial obstacle" to any regulation that states would impose to favor their own local businesses at the expense of out-of-state businesses, Bruce said.
In addition to the Carbone and Oregon solid waste cases, Bruce cited the court's ruling in Associated Industries of Missouri v. Lohman, Director of Revenue, which struck down Missouri's tax on the use of out-of-state products to the extent the tax exceeds varying local sales taxes within the state.
Ruda pointed out that the decision examined the issue on a jurisdiction-by-jurisdiction basis within the state, and it upheld the discretion of local governments to impose local sales taxes within an overall scheme of sales and use taxes that does not violate the commerce clause.
But even though many rulings went against municipalities, "I don't think anyone thinks that they [the justices] have an attitude about cities as such," Bruce said. In the June 24 Dolan v. Tigard decision, the court struck down the Oregon city of Tigard's conditional approval of a business expansion permit. The court decision will make governments more accountable for the conditions that they set for granting permits, he said.
But the court effectively was saying it was giving some "dignity" to the Fifth Amendment's prohibition of government "taking" of private property without just compensation. The ruling does not mean the court intended to put cities on the "short end," Bruce said.
The Dolan case specifically recognized the important regulatory role of local governments in land use planning, Ruda said.