The relation of nation and states in a federal system - Federalism-based limits on state authority

Learning Outcomes

This article examines the key limitations placed on state authority by the structure of the U.S. federal system. It clarifies the doctrines of federal preemption under the Supremacy Clause, the constraints imposed by the Dormant Commerce Clause, and the protections afforded by the Privileges and Immunities Clause of Article IV. After reviewing this material, you will be equipped to identify when state laws are invalid due to federal preemption or impermissible interference with interstate commerce or the rights of out-of-state citizens, allowing you to tackle related MBE questions effectively.

MBE Syllabus

For the MBE, you are required to understand the principles defining the relationship between federal and state governments, particularly the limitations imposed on state power by the federal structure. You should be prepared to:

• Apply the Supremacy Clause and the doctrine of federal preemption (express and implied).
• Analyze state regulations under the Dormant Commerce Clause, distinguishing discriminatory laws from those imposing an undue burden.
• Identify exceptions to the Dormant Commerce Clause, including congressional authorization and the market participant doctrine.
• Evaluate state actions under the Privileges and Immunities Clause of Article IV, focusing on discrimination against out-of-state citizens regarding fundamental rights or important economic activities.
• Recognize the scope of intergovernmental immunities.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. A state enacts a law requiring all apples sold within the state to be certified as "Premium Grade" by a state agency, imposing a $50 inspection fee per bushel only on apples grown out-of-state. An out-of-state apple grower challenges the law. Which constitutional provision provides the strongest basis for the challenge?
   1. The Supremacy Clause
   2. The Dormant Commerce Clause
   3. The Privileges and Immunities Clause of Article IV
   4. The Equal Protection Clause
2. Congress passes a comprehensive federal statute regulating the labeling of all pesticides sold nationwide. The federal statute explicitly states it occupies the entire field of pesticide labeling. A state subsequently passes a law requiring additional warnings on pesticides sold within its borders. This state law is likely:
   1. Valid, as states retain police power to protect health and safety.
   2. Valid, if the state warnings provide greater protection than federal law.
   3. Invalid, due to express federal preemption.
   4. Invalid, under the Dormant Commerce Clause.
3. Which doctrine prevents states from discriminating against out-of-state citizens regarding fundamental rights, such as pursuing a livelihood?
   1. The Dormant Commerce Clause
   2. The Supremacy Clause
   3. The Privileges and Immunities Clause of Article IV
   4. The Full Faith and Credit Clause

Introduction

The U.S. Constitution establishes a system of federalism, dividing powers between the national government and the state governments. While states possess broad powers (often termed "police powers") to regulate for the health, safety, and welfare of their citizens, this power is not absolute. Several constitutional principles, derived from the structure of the federal system itself, limit state authority. These include the Supremacy Clause (leading to federal preemption), the negative implications of the Commerce Clause (the Dormant Commerce Clause), and the Privileges and Immunities Clause of Article IV. Understanding these limits is essential for analyzing the validity of state laws on the MBE.

Supremacy Clause and Preemption

The Supremacy Clause of Article VI provides that the Constitution, and laws and treaties made pursuant to it, are the supreme law of the land. State laws that conflict with valid federal law are invalid under this clause. This invalidation is known as preemption.

Key Term: Supremacy Clause Article VI provision establishing that the U.S. Constitution and valid federal laws and treaties are the supreme law of the land, taking precedence over conflicting state laws.

Federal law can preempt state law in several ways:

Express Preemption

Congress may explicitly state in a statute that federal law intends to preempt state law in a particular area. If a federal statute contains an express preemption clause, any state law falling within the scope of that clause is invalid.

Implied Preemption

Even without an express preemption clause, federal law may implicitly preempt state law. There are three main types of implied preemption:

1. Conflict Preemption: A state law is preempted if it is impossible to comply with both the state law and federal law simultaneously. Similarly, a state law is preempted if it stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.
2. Field Preemption: Federal law preempts state law if Congress intended federal law to occupy the entire regulatory field. Intent to occupy the field can be inferred from the comprehensiveness of the federal regulatory scheme or the creation of a federal agency to administer the field.
3. Impeding Federal Objectives: A state law may be preempted if it substantially interferes with the achievement of a federal objective, even if the state law does not directly conflict with federal requirements.

Key Term: Preemption The doctrine, based on the Supremacy Clause, under which a valid federal law invalidates (preempts) conflicting or interfering state or local laws.

Worked Example 1.1

Congress enacts the Federal Airline Safety Act (FASA), setting detailed safety standards for commercial aircraft maintenance nationwide. FASA includes a clause stating, "This Act is intended to occupy the field of aircraft maintenance safety standards." State X subsequently passes a law requiring airlines operating within the state to perform an additional, specific engine inspection not mandated by FASA. Is State X's law valid?

Answer: No. The state law is likely invalid due to express federal preemption. FASA explicitly states Congress's intent to occupy the entire field of aircraft maintenance safety standards. Because State X's law imposes requirements within this federally occupied field, it conflicts with the federal scheme and is preempted under the Supremacy Clause.

Dormant Commerce Clause

The Commerce Clause (Article I, Section 8) grants Congress the power to regulate commerce among the states. The Dormant Commerce Clause (DCC) refers to the negative implication of this grant: because Congress has this power, states generally cannot enact laws that unduly burden or discriminate against interstate commerce, even in the absence of conflicting federal legislation.

Key Term: Dormant Commerce Clause The principle derived from the Commerce Clause that limits states' ability to regulate interstate commerce, even when Congress has not acted on the specific subject matter.

The DCC analysis depends on whether the state law discriminates against out-of-state commerce or merely burdens it incidentally.

Discriminatory State Laws

State or local laws that discriminate against out-of-state economic interests to protect local interests are almost always invalid under the DCC. Discrimination can be facial (explicitly treating out-of-staters differently) or purposeful (enacted with a discriminatory purpose).

• Test: Such laws are subject to strict scrutiny and will be upheld only if they are necessary to achieve an important, noneconomic state interest, and there are no reasonable nondiscriminatory alternatives available. This test is rarely met.

• Examples of discriminatory laws:

  • Protecting local businesses from out-of-state competition (e.g., tariffs on out-of-state goods).
  • Requiring business operations to be performed in-state when they could be done more efficiently elsewhere.
  • Restricting access by out-of-staters to in-state resources (e.g., prohibiting export of local groundwater).
  • Prohibiting or surcharging the disposal of out-of-state waste.

Nondiscriminatory State Laws (Incidental Burdens)

If a state law is nondiscriminatory (treats in-state and out-of-state interests alike) but still burdens interstate commerce, it is subject to a balancing test.

• Test: The law will be upheld only if the legitimate local benefits produced by the regulation outweigh the incidental burden imposed on interstate commerce. Courts consider whether less restrictive alternatives are available. Laws rarely fail this test unless the burden is clearly excessive in relation to the local benefits.

Exceptions to the Dormant Commerce Clause

There are two main exceptions where state actions that would otherwise violate the DCC are permissible:

1. Congressional Approval: Congress may affirmatively authorize states to pass laws that would otherwise violate the DCC. If Congress permits state regulation of commerce in a certain area, the state law will not be struck down on DCC grounds (though it could still violate other constitutional provisions like Equal Protection).
2. Market Participant Exception: If the state acts not as a regulator, but as a participant in the market (e.g., as a buyer or seller of goods or services, or hiring labor), it may favor its own citizens or businesses.

Key Term: Market Participant Exception An exception to the Dormant Commerce Clause allowing a state to favor its own citizens or businesses when acting as a buyer or seller in the market, rather than as a regulator.

• Limitations: The market participant exception is narrow. It does not allow the state to impose conditions "downstream" in the stream of commerce after the state has sold its goods. It also does not protect against challenges under the Privileges and Immunities Clause of Article IV if the discrimination burdens fundamental rights of out-of-state citizens.

Worked Example 1.2

State Y, facing a severe drought, passes a law prohibiting any sale of water drawn from State Y wells to consumers or businesses located outside the state. The stated purpose is to conserve water for State Y residents. A water bottling company in neighboring State Z, which previously purchased large quantities of water from State Y suppliers, challenges the law. Is the law constitutional?

Answer: No. The law is likely unconstitutional under the Dormant Commerce Clause. It facially discriminates against out-of-state commerce by explicitly prohibiting sales to out-of-state entities while allowing sales to in-state entities. Such discrimination is subject to strict scrutiny. While water conservation is an important state interest, a complete ban on out-of-state sales is unlikely to be deemed necessary when less discriminatory alternatives (e.g., quotas, higher prices for all users) exist. The market participant exception does not apply because State Y is acting as a regulator of private water sales, not as a seller of state-owned water.

Privileges and Immunities Clause (Article IV)

Article IV, Section 2, provides that "The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States." This clause prohibits states from discriminating against citizens of other states regarding fundamental rights or important economic activities.

Key Term: Privileges and Immunities Clause (Article IV) The constitutional provision preventing a state from discriminating against citizens of other states concerning fundamental rights or important economic activities.

• Who is protected? Only U.S. citizens (natural persons). Corporations and aliens are not protected by this clause.
• What discrimination is prohibited? Only discrimination regarding fundamental rights (e.g., rights relating to important commercial activities like pursuing a livelihood, or civil liberties like access to courts) is barred. Discrimination regarding purely recreational activities (e.g., charging higher hunting license fees for nonresidents) is generally permissible.
• Test: A state law discriminating against out-of-state citizens based on these rights is invalid unless the state shows it is substantially related to achieving a substantial government interest, and there are no less restrictive means available.
• Key Distinction from DCC: The P&I Clause protects citizens (not corporations) from discrimination concerning fundamental rights/economic activities, while the DCC protects all out-of-state interests (including corporations) from discrimination or undue burdens concerning interstate commerce. The P&I Clause has no market participant exception.

Worked Example 1.3

State C requires all private construction companies working on projects within the state to hire at least 60% state residents for their workforce. A construction company based in State D, which regularly bids on and performs work in State C using its existing workforce (mostly State D residents), challenges the law. What is the company's strongest constitutional argument?

Answer: The Privileges and Immunities Clause of Article IV provides the strongest argument. The right to pursue a livelihood (employment) is a fundamental right protected by this clause. State C's law discriminates against citizens of other states (like the State D residents employed by the company) regarding this right. The state would need to show a substantial justification for the discrimination and that no less restrictive means exist, which is difficult. The Dormant Commerce Clause is a weaker argument because, although the law burdens interstate commerce (movement of labor), the P&I Clause specifically addresses discrimination against out-of-state citizens regarding employment. The company itself cannot assert P&I rights (as it's a corporation), but it likely has standing to assert the rights of its out-of-state employees.

Intergovernmental Immunities

Federalism also implies certain immunities between the state and federal governments.

• Federal Immunity: The federal government and its instrumentalities (agencies, property) are generally immune from state regulation or taxation that interferes with federal functions or discriminates against the federal government. States cannot impose taxes directly on the federal government but may impose nondiscriminatory, indirect taxes (e.g., state income tax on federal employees).
• State Immunity: States are generally not immune from direct federal regulation (e.g., federal environmental laws, labor laws), subject to the Tenth Amendment's limits on Congress "commandeering" state legislative or executive officials to enforce federal programs. (See New York v. United States; Printz v. United States).

Key Point Checklist

This article has covered the following key knowledge points:

• The Supremacy Clause makes federal law supreme over conflicting state law.
• Federal law can preempt state law expressly or impliedly (conflict, field, impeding objectives).
• The Dormant Commerce Clause limits state regulation of interstate commerce.
• Discriminatory state laws are subject to strict scrutiny under the DCC.
• Nondiscriminatory state laws are valid under the DCC unless the burden outweighs local benefits.
• Exceptions to the DCC include congressional approval and the market participant doctrine.
• The Privileges and Immunities Clause of Article IV prohibits discrimination against out-of-state citizens regarding fundamental rights/economic activities.
• The P&I Clause does not protect corporations or aliens and has no market participant exception.
• The federal government is generally immune from direct state taxation and regulation.
• States generally are not immune from federal regulation, subject to anti-commandeering principles.

Key Terms and Concepts

• Supremacy Clause
• Preemption
• Dormant Commerce Clause
• Privileges and Immunities Clause (Article IV)
• Market Participant Exception