Alexander Foxx, Associate Member, University of Cincinnati Law Review
Introduction
Current news focuses on economic protectionism between the United States and other nations. For example, the United States recently imposed a protectionist tariff on washing machines.[1] However, economic protectionism is not limited between the United States and other nations; it is well established in the economies of individual states.[2] Such state protectionism is often manifested in state laws insulating specific industries from competition.[3] The constitutionality of this protectionism is the subject of disagreement between the Federal Circuit Courts of the United States.[4]
This article maintains that intrastate economic protectionism, implemented for the sole purpose of economic protectionism, can be ruled unconstitutional under the Fourteenth Amendment. The article first provides necessary constitutional background for understanding the economic protectionism debate. It then examines the different holdings of three Circuit Courts; the holdings of the Fifth and Sixth Circuits, against intrastate protectionism, and the holding of the Tenth Circuit, supporting intrastate protectionism. After examining the Circuit Court holdings, this article will frame the decisions against a holding by the Supreme Court. Finally, the article will analyze the presented case law and conclude that laws passed solely for intrastate economic protectionism should be held unconstitutional because they violate the Fourteenth Amendment’s equal protection clause under a rational basis review.
Constitutional Background
The cases discussed concern caskets. Namely, state laws passed protecting licensed funeral directors from unlicensed casket makers.[5] However, the Commerce Clause of the Constitution prevents states from restricting interstate commerce.[6] Therefore, the challenged laws all regulate the sale of caskets in the state of seller.[7] For example, the challenged law would not prevent an Ohio casket-maker from selling a casket in Kentucky. It would prevent an unlicensed casket-maker in Ohio to sell that casket in Ohio.
Given the intrastate nature of the challenged laws, the test used to evaluate the law is the rational basis test because laws drawn to form economic classifications do not create a protected class that requires a higher level of court scrutiny.[8] The rational basis test is used to evaluate a law under the due process and equal protection clauses of the Fourteenth Amendment. The test maintains a law that creates classifications of individuals (e.g. licensed casket sellers and unlicensed casket sellers) must bear “some rational relationship to a legitimate, governmental purpose.”[9] This is traditionally considered a less stringent test under the Fourteenth Amendment, in comparison to the strict scrutiny (used for certain protected classes, like race) and intermediate scrutiny (used for other protected classes ,like gender) standards. Even if a classification of individuals creates a disparate impact, it is still constitutional if the challenged law has at least a minimal connection to the governmental interest.[10] For example, a law harming employment chances of methadone users is constitutional, even if it has an uneven racial impact.[11]Powers v. Harris
In the case of Powers v. Harris the Tenth Circuit held economic protectionism, without a further purpose, was constitutional.[12] In this case, Oklahoma maintained a law that prevented the intrastate sale of caskets by individuals who were not licensed funeral directors.[13] Obtaining a license was not a nominal task—it required substantial education and training.[14] The plaintiffs were an Oklahoma corporation who sold caskets online.[15] The Plaintiffs were licensed in other states, but not Oklahoma, and sought a declaratory judgment[16] stating that their sale of caskets in Oklahoma would be legal.[17]
The plaintiffs maintained there was no rational connection between the licensing requirements and the sale of caskets and therefore the law was unconstitutional under the rational basis test and violated the Fourteenth Amendment.[18] To establish a lack of rationality, the plaintiffs indicate the education requirements of licensure do not correlate to the sale of caskets and such education requirements are not necessary for consumer protection.[19] The court seemed to concede this lack of correlation by noting that the “licensure requirements do not perfectly match its asserted consumer-protection goal.”[20]
However, even without a strong nexus between the licensure and the goal of consumer protections, the court noted “the Tenth Circuit has held that state legislation granting special benefits to an intrastate industry…does not run afoul of the Equal Protection Clause.”[21] The court relied on an application of the rational basis test, which rendered the test nearly toothless.[22] The court expanded the nexus between the governmental interest and purpose of the law to “every conceivable” basis, .[23] Further, the court maintained that given the extreme difficulty in invalidating any law under the rational basis test, placing a nearly insurmountable burden on the challengers of the law.[24] This legal interpretation created an weak rational basis test, even by rational basis test standards.
Under the Tenth Circuit’s application of the rational basis, the test places a on the plaintiffs to prove the absurdity of the Oklahoma law. Intrastate protectionism was determined to be a legitimate governmental interest furthered by the Oklahoma law and not a violation of the Fourteenth Amendment’s Equal Protection Clause.[25]
Craigmiles v. Giles
In contrast to the Tenth Circuit, the Sixth Circuit struck down a state law based solely on economic protectionism in Craigmiles v. Giles.[26] Unlike Powers, the plaintiffs in Craigmiles were not seeking a declaratory judgment—they had been actively served with a cease and desist letter relating to their unlicensed intrastate sale of caskets.[27]
The Sixth Circuit held “protecting a discrete interest group from economic competition is not a legitimate governmental purpose.”[28] The defendant argued the law preventing the unlicensed sale of caskets was meant to protect consumer health and safety and consumer protection.[29] The Court disapproved of these arguments as excuses for protecting illicit economic protectionism noting the “only difference between the caskets is that those sold by licensed funeral directors were systematically more expensive” and therefore there was no rational relationship between the restriction on casket sellers and the alleged governmental interest.[30]
The Sixth Circuit applied a version of the rational basis test that “while deferential, [was] not toothless.”[31] The court noted the law did not protect consumers, but only served to harm consumer finances and protect a discrete trade of funeral directors.[32] The court remarked while invalidation of economic legislation by courts is rare, it is not inappropriate where the goal of such legislation bears no relationship to its purported purpose, save to promote a barrier to trade.[33] The court ruled intrastate economic protectionism violated the Fourteenth Amendment.[34]
St. Joseph Abbey v. Castille
Craigmiles and Harris occurred in 2002 and 2004, respectively. Castille was decided more recently in 2013 by the Fifth Circuit and it followed the market competition holding of Craigmiles.[35] This case provided a more contemporary view of intrastate economic protectionism.
The plaintiffs in Castille are markedly differ from both those in Craigmiles and Powers. Namely, the plaintiffs in Castille are a non-profit Abbey[36] that makes caskets and sells them to support the Abbey and its monks.[37] The restricting law in Castille also appears to be broader than the law in Powers and Craigmiles. Specifically, the law in Castille requires that casket sellers also be a licensed funeral home, which requires “a layout parlor for thirty people, a display room for six caskets, an arrangement room, and embalming facilities.”[38] These varied facts may indicate why the Court was hostile to a law based on intrastate economic protectionism.
Following a line of analysis extremely similar to Craigmiles the Fifth Circuit noted that there was not a rational relationship between the casket regulation and public safety or consumer protection.[39] While recognizimg the “great deference” demand by a rational basis review, the Court, departing from Powers, says that “judicial blindness” cannot be employed in reviewing a challenged rule.[40] In its closing thoughts the Court also noted the protection of consumers and the market from blatant economic protectionism, which has no other discernible purpose, is a valid judicial exercise.[41]
Williamson v. Lee Optical
Lurking behind the circuit split is the landmark Supreme Court case of Williamson v. Lee Optical. In this case, the Supreme Court held a law requiring an optician to require a vision prescription from an ophthalmologist before selling lenses to a consumer, was valid under the rational basis standard.[42]
However, Williamson can be distinguished substantially. First, the regulation of prescription lenses strikes much closer to protecting public health than the purported protections offered by casket regulation.[43] Eyeglasses are a medically needed product that treat living humans—caskets are not. Williamson seemed to serve other legislative policies than economic protectionism. Referencing Williamson the Castille court noted, however, “a naked transfer of wealth” through economic protectionism cannot be upheld without a further governmental interest.[44]
Cragmiles and Castille Should Govern
The judiciary consistently defers to the legislature for reasons of separation of powers and for public policy reasons in supporting the more democratic nature of the legislature. Deference, however, does not implicate a complete abdication of review of state law as suggested by Powers. A critical role of courts is to strike down laws that run afoul of the Constitution. Laws that are drawn solely to protect economic interests serve no purpose save for the select few industry members that are protected by the law—they harm consumers and economic growth. If the logic of such laws were carried to their logical extreme, a single individual, perhaps a governor, could be granted exclusive right to sell a good intrastate. Such blatant favoritism runs afoul of due process under the rational basis test–a further purpose for protectionism is needed beyond industry interest.
The rational basis test is not a difficult burden to satisfy. Economic protectionism of a few at the expensive of the many is not a legitimate economic interest. It violates the spirit of the Constitution’s Commerce Clause and the national public policy of allowing for free markets.[45] Caskets are a common good. Protectionism for its own sake is legally indefensible; it does not promote a legitimate governmental interest. It only promotes a legitimate industry interest and industries do not govern states—governments do.
An argument can be made that naked economic protectionism is a legitimate governmental interest; Powers and Williamson support this proposition. This argument can be addressed with an examination of the Commerce Clause, which is meant to prevent interstate economic protectionism. At some point, intrastate restriction bleeds interstate restriction, as seen in the above cases. Individuals living on the borders of certain states cannot participate in the economy of one state due to restrictive laws—interstate commerce has essentially been restricted due to the legal fiction of state boundaries. This violates, not only the Fourteenth Amendment under the rational basis test, but also the Commerce Clause.
There is dedicated support of competitive markets in the United States. Free markets are deemed to provide favorable prices, products, and services. So strong is our support of free markets that an entire area of law is dedicated to protecting it—antitrust law. Intrastate economic protectionism runs afoul of this support of free markets. Intrastate economic protectionism violates the Fourteenth Amendment.
Conclusion
These economic regulations do not bear a rational relationship to a legitimate governmental interest. The laws purported interest of public safety or consumer protection are not related to the restriction of the sale of caskets—an unlicensed casket seller does sells caskets that are neither unsafe nor predatory to consumers. The unlicensed caskets are only cheaper. Such an irrationally drawn law serves no legitimate governmental purpose and is unconstitutional.
[1] See, Reuters, U.S. Washer Tariffs Put Samsung, LG Supply Chains Through the Wringer, The New York Times (2018), https://www.nytimes.com/reuters/2018/01/30/business/30reuters-usa-trade-samsung.html (last visited Jan 30, 2018).
[2] Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 484, 75 S. Ct. 461, 463 (1955).
[3] Craigmiles v. Giles, 312 F.3d 220, 222 (6th Cir. 2002).
[4] St. Joseph Abbey v. Castille, 712 F.3d 215, 222 (5th Cir. 2013).
[5] E.g., Powers v. Harris, 379 F.3d 1208, 1211 (10th Cir. 2004).
[6] USCS Const. Art. I, § 8, Cl 3
[7] Powers at 1211.
[8] E.g., Powers at 1217.
[9] United States Dep’t of Agric. v. Moreno, 413 U.S. 528, 540, 93 S. Ct. 2821, 2829 (1973) (citing Weber v. Aetna Cas. & Sur. Co., 406 U.S. 164, 92 S. Ct. 1400 (1972)).
[10] N.Y.C. Transit Auth. v. Beazer, 440 U.S. 568, 606, 99 S. Ct. 1355, 1376 (1979).
[11] Id.
[12] Powers at 1227.
[13] Id. at 1212.
[14] Id.
[15] Id. at 1213.
[16] Declaratory Judgment: a judgment that merely decides the rights of parties in a given transaction, situation, or dispute but does not order any action or award damages. (dictionary.com, declaratory judgment, http://www.dictionary.com/browse/declaratory-judgment?s=t (last accessed February 12, 2018)).
[17] Powers at 1213.
[18] Id. at 1215.
[19] Id. at 1215, 1216.
[20] Id. at 1216.
[21] Id. at 1221
[22] See Powers at 1219.
[23] Id.
[24] Id at 1217 (citing Starlight Sugar, Inc. v. Soto, 253 F.3d 137 (1st Cir. 2001).
[25] Id. at 1221.
[26] Craigmiles v. Giles, 312 F.3d 220, 229 (6th Cir. 2002)
[27] Id. at 223.
[28] Id. at 224.
[29] See id. at 225.
[30] Id. at 226.
[31] Craigmiles at 229 (citing Peoples Rights Org. v. City of Columbus, 152 F.3d 522 (6th Cir. 1998)).
[32] Id.
[33] Id.
[34] Id.
[35] St. Joseph Abbey v. Castille, 712 F.3d 215, 227 (5th Cir. 2013).
[36] Abbey: the group of buildings comprising such a monastery or convent. (dictionary.com, http://www.dictionary.com/browse/abbey?s=t, (last visited February 6, 2018).
[37] Castille at 217.
[38] Id. at 218.
[39] Id. at 223 and 226.
[40] Castille at 226.
[41] Id.
[42] Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 490.
[43] Id. at 486.
[44] See Castille at 223.
[45] See Powers at 1219 (citing court cases that examine legislation based on the Commerce Clause); See ARTICLE:THE ILLUSION OF LAW: THE LEGITIMATING SCHEMAS OF MODERN POLICY AND CORPORATE LAW, 103 Mich. L. Rev. 1, footnote 56 (referencing the Cato Institute).
