South-Central Timber Development, Inc. v. Wunnicke

No. 82-1608 (U.S. May 22, 1984)

ELR Digest

The Court holds that Alaska's requirement that certain timber taken from state lands be partially processed in Alaska is invalid under the Commerce Clause, since it was not authorized by Congress and imposes a substantial burden on interstate commerce. Alaska had offered for sale 49 million board feet of timber with the condition that the successful bidder would have to partially process the timber before shipping it out of Alaska. The state charges a significantly lower price for timber when it imposes this requirement than it would otherwise charge and does not impose any such requirement on trading in timber not owned by the state. Upon learning of the processing condition on this sale, petitioner, a corporation that customarily cuts timber and sells the unprocessed logs to Japan, filed suit in federal district court seeking an injunction. The district court granted the injunction on the ground that the negative implications of the Commerce Clause had been violated, but the Ninth Circuit reversed without reaching the pure Commerce Clause issue because it found that Congress had impliedly authorized a processing requirement.

The Court holds that the existence of "parallel" federal law, which imposes a similar requirement on timber taken from federal lands in Alaska, does not authorize the state law, even though the state law appears consistent with, and even seems to further, the federal policy. The Commerce Clause limits the power of the states to impose substantial burdens on interstate commerce. Although Congress may permit a state to effect otherwise impermissible regulations, such congressional permission must be express.

Four of the eight participating Justices further agree that Alaska's action is not protected by the market participation doctrine, first laid out in Hughes v. Alexandria Scrap Corp. The plurality distinguishes preferential treatment for residents in market transactions in which the state is a participant from "downstream" regulation of the disposition of goods after the conclusion of the transaction between the state and the citizen. Alaska is not a participant in the timber processing market; its downstream regulation is impermissible. That Alaska could achieve the same end — subsidy of its timber mills — through permissible means is not persuasive.

The plurality further holds that when the restriction is viewed as a "naked restraint" on export, without benefit of congressional authorization or the market participation doctrine, it is clearly an impermissible burden on interstate commerce. The facts that foreign commerce is burdened and Congress has given particular attention to the export of unprocessed logs makes the restrictions particularly inappropriate.

Justice Brennan concurs in full on the ground that Alaska's policy was not authorized by Congress, but points out that he believes the market participation doctrine to be inherently weak.

Justice Powell, joined by Chief Justice Burger, concurs with Justice White's congressional authorization analysis. However, Justice Powell and Chief Justice Burger would have the court of appeals consider on remand whether Alaska was a market participant and whether the challenged requirement substantially burdened interstate commerce under Pike v. Bruce Church.

Justice Rehnquist, joined by Justice O'Connor, dissents, arguing that Alaska was a market participant and not a market regulator for Commerce Clause purposes. Especially given that the state could have achieved the same result by other means, the two Justices find the line drawn by the plurality between market participant and market regulator artificial and unconvincing.

The decision of the Ninth Circuit is reversed and remanded.

The full text of this opinion is available from ELR (25 pp. $3.75, ELR Order No. C-1325).

Counsel for Petitioner
Leroy E. DeVeaux, Richard L. Crabtree, Michael G. Karnavas
Wanamaker, DeVeaux & Crabtree
Suite 140, 909 W. 9th St., Anchorage AK 99501
(907) 279-6591

Donald I. Baker, Karen L. Grimm
Sutherland, Asbill & Brennan
1666 K St. NW, Washington DC 20006
(202) 872-7800

Erwin N. Griswold, Richard S. Myers
Jones, Day, Reavis & Pogue
1735 I St. NW, Washington DC 20006
(202) 861-3939

Counsel for Respondents
Ronald W. Lorensen, Deputy Attorney General; Michael J. Frank, Michele D. Brown
Department of Law, Pouch K, Juneau AK 99811
(907) 465-3600

Counsel for Amicus Curiae
Kathryn A. Oberly, Louis F. Claiborne; Rex E. Lee, Solicitor General
Department of Justice, Washington DC 20530
(202) 633-4063

Dirk D. Snel, Blake A. Watson; F. Henry Habicht II, Ass't Attorney General
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 633-4400

White, J.

[OPINION OMITTED BY PUBLISHER IN ORIGINAL SOURCE]