March 27, 2011

Revisiting limits (or the lack thereof) to the federal government's Commerce Clause authority in light of the Ninth Circuit's delta smelt decision

By Revisiting limits (or the lack thereof) to the federal government's Commerce Clause authority in light of the Ninth Circuit's delta smelt decision

Author: Brandon Middleton

Friday's decision from the Ninth Circuit to uphold the federal government's delta smelt water cutbacks against PLF's Commerce Clause challenge was based on a 2005 Supreme Court case, Gonzales v. Raich, 545 U.S. 1 (2005).  In Raich, the Court held that federal regulation of noncommercial, intrastate production and possession of marijuana was valid under the Commerce Clause, because the regulation was tied to the Controlled Substances Act, "a statute that regulates the production, distribution, and consumption of commodities for which there is an established, and lucrative, interstate market."  Raich, 545 U.S. at 26.  According to the Court in Raich, "Congress can regulate purely intrastate activity that is not itself 'commercial,' in that it is not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity."  Raich, 545 U.S. at 18.

After the Supreme Court issued the Raich decision in 2005, many wondered if any limits remained to the federal government's Commerce Clause power. As Prof. Ilya Somin argued in this paper, Raich "place[d] nearly insurmountable obstacles in the path of efforts to ensure meaningful judicial review of congressional exercise of the Commerce Clause power."

Of course, the Supreme Court in Raich did not say that Congress' power is unlimited, and in fact confirmed its prior decisions in United States v. Lopez, 514 U.S. 549 (1995), and United States v. Morrison, 529 U.S. 598 (2000), which struck down statutes as unconstitutional under the Commerce Clause.

But reviewing the Ninth Circuit's decision in the delta smelt case, it is difficult to discern what limits (if any) the Ninth Circuit believes there are to Congress' Commerce Clause authority.

PLF argued that the Endangered Species Act is not a market regulatory scheme, as was the Controlled Substances Act in Raich, and that the government was accordingly required to demonstrate that the take of a delta smelt substantially affects interstate commerce under a four factor test set out by the Supreme Court in Lopez and Morrison.

But the Ninth Circuit did not get to the Lopez and Morrison factors, as it had little trouble concluding that the Endangered Species Act is a Raich-type statute that allows for the regulation of noncommercial, intrastate species like the delta smelt.  After highlighting examples of how the Endangered Species Act "implicates economic concerns," the court offered the following analysis:

[T]he ESA, including sections 7 and 9, "bears a substantial relation to commerce." See Raich, 545 U.S. at 17. Thus, even though the ESA might "ensnare some purely intrastate activity, . . . we refuse to excise individual components of that larger scheme."

The Growers [PLF's clients], on the other hand, argue that, under Raich, the ESA does not have a "substantial effect" on interstate commerce. They reason that the ESA, unlike the Controlled Substance Act (which was upheld in Raich), is not a "comprehensive economic regulatory scheme." The Growers misconstrue Raich. The Supreme Court has never required that a statute be a "comprehensive economic regulatory scheme" or a "comprehensive regulatory scheme for economic activity" in order to pass muster under the Commerce Clause. Indeed, it has never used those terms. The only requirement—which was expressly detailed in Raich—is that the "comprehensive regulatory scheme" have a "substantial relation to commerce." See Raich, 545 U.S. 17. The statute need not be a purely economic or commercial statute, as the Growers would have us believe.

We conclude that the ESA is "substantially related" to interstate commerce and, thus, the Growers' as-applied challenge to ESA §§ 7 and 9 fails.

A couple of thoughts on this analysis.  First, although the Supreme Court in Raich did not use the precise terms "comprehensive economic regulatory scheme," case law demonstrates that the comprehensive regulatory scheme rationale for Commerce Clause regulation requires that the regulatory scheme be economic in nature.  For example, the Supreme Court in Lopez explained that Congress has the power regulate noncommercial, intrastate activity as "part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated."  Lopez, 514 U.S. at 561 (emphasis added).  Raich confirmed further that only statutes regulating "quintessentially economic" activities fit within the comprehensive regulatory scheme rationale.  See Raich, 545 U.S. at 25 ("Unlike those at issue in Lopez and Morrison, the activities regulated by the CSA are quintessentially economic.").

Note also that the Ninth Circuit's disfavor with a standard requiring a "comprehensive economic regulatory scheme" is in conflict with the Tenth Circuit, which has correctly observed that the Supreme Court in Raich "distinguished Lopez and Morrison on the ground that the challenged provisions in those cases were not part of a comprehensive regulation of economic activity," and has limited Raich to allowing regulation of noncommercial, intrastate activity only under "comprehensive legislation to regulate the interstate market in a fungible commodity."  See United States v. Patton, 451 F.3d 615 (10th Cir. 2006).  The Ninth Circuit's analysis is also in conflict with the Eleventh Circuit, which has summarized Raich as holding that "where Congress comprehensively regulates economic activity, it may constitutionally regulate intrastate activity, whether economic or not, so long as the inability to do so would undermine Congress’s ability to implement effectively the overlying economic regulatory scheme."  United States v. Maxwell, 446 F.3d 1210, 1215 (11th Cir. 2006) (emphasis added).

Second, PLF never argued that "the ESA does not have a 'substantial effect' on interstate commerce," and it is difficult to understand how anyone could make such an argument with a straight face.  Just ask those who bear the burden of ESA regulation, or farmers on the west side of the San Joaquin Valley, who certainly know that the ESA has affected interstate commerce, albeit in a harmful manner.

Which leads to my third point–if the application of a statute is valid under the Commerce Clause simply because it has a substantial effect on interstate commerce, then concerns about whether there remain meaningful limits to the government's Commerce Clause power after Raich are highly justified.  I suppose the government was successful in convincing the court of this incorrect standard, but neither the government nor the Ninth Circuit in its delta smelt decision addressed concerns with this approach, which I raised in PLF's opening brief on appeal (pp. 55-56):

[T]o qualify as an economic regulatory scheme under Raich, the statute must "directly regulate[] economic, commercial activity." Raich, 545 U.S. at 26. This is evidenced by the regulation of a market in commodities, not a statute’s mere relation to interstate commerce. See McCalla, 545 F.3d at 755. Moreover, under Raich, a statute’s commercial impact on interstate commerce is irrelevant. Cf. Tombigbee, 477 F.3d at 1273. If the application of a statute can be sustained simply because it impacts or relates to interstate commerce, then the limiting purpose of the Commerce Clause is "effectually obliterate[d]." Jones & Laughlin Steel, 301 U.S. at 37.

Thus, regardless of a statute’s effect on interstate commerce, it is the nature of the regulated activity that counts, contrary to the Eleventh Circuit's emphasis on the ESA’s impact. See Raich, 545 U.S. at 25-26.  This is so because the Supreme Court "emphasized [in Raich] that ‘unlike those at issue in Lopez and Morrison, the activities regulated by the CSA are quintessentially economic.'" McCalla, 545 F.3d at 754 (quoting Raich, 545 U.S. at 25).

But the Ninth Circuit in its delta smelt decision suggests that, under Raich, the application of a statute is valid under the Commerce Clause as long as the statute is comprehensive and has a "substantial relation" to commerce.  In other words, the Ninth Circuit's message is the bigger the statute, the better–in order to pass muster under the Commerce Clause, the more activities that are regulated by the statute, the greater the effect on commerce, and the more likely its application will be immune from a Commerce Clause challenge, no matter the circumstances.

Importantly, the Supreme Court has never accepted such logic.  As Chief Justice Roberts remarked when he was a circuit judge on the D.C. Circuit, "ask[ing] whether the challenged regulation substantially affects interstate commerce, rather than whether the activity being regulated does so . . . seems inconsistent with the Supreme Court's holdings in [Lopez] and [Morrison]," which require that activities themselves substantially affect commerce in order to come under the purview of the Commerce Clause–the effect of regulating such activities is irrelevant.  See Rancho Viejo, LLC v. Norton, 334 F.3d 1158 (D.C. Cir. 2003) (Roberts, J., dissenting from denial of petition for rehearing en banc).  Moreover, if the application of a statute is valid under the Commerce Clause as long as the effect of the statute's application on commerce is substantial, then federal authority under the Commerce Clause "would be defined solely by the political branches [and] the scope of legislative power limited only by public opinion and the legislature's self-restraint."  Morrison, 529 U.S. at 616 n.7.

But the Ninth Circuit does not appear to grasp the importance of judicially enforced limits to the federal government's Commerce Clause power, and its delta smelt decision effectively gives Congress the green light to regulate almost anything as long as the effect of doing so is substantial.  There is accordingly good reason to be concerned with the Ninth Circuit's conclusion that the delta smelt water cutbacks are constitutional.

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