Supreme Court’s conservatives may empower California

The Supreme Court's conservative wing again appears poised to take power amassed by the courts and place it in the hands of the states. While their ideology may compel this broker, they may also unshackle a giant: California.

On Oct. 11, the Court will hear oral argument in National Pork Producers Council v. Ross. California has a regulation requiring all pork sold within its borders to come from pigs housed in a pen of particular measurements. Certain pork producers sued California over the pig-pen rule, arguing that it violates the extraterritoriality principle, a doctrine from the Supreme Court's dormant Commerce Clause precedent. As the Supreme Court explained in Healy v. Beer Institute, Inc., a State violates the extraterritoriality principle when it regulates behavior that "takes place wholly outside of the State's borders." As the pork producers argued, virtually all pork production takes place outside California, and thus California could not tell the pork producers what to do with their pens because the production was "outside of the State's borders."

The Ninth Circuit Court of Appeals sided with California. It cabined the broad language of the extraterritoriality principle as articulated in Healy by reasoning that because California regulated only what took place within its borders, the sale of pork, the extraterritoriality principle did not apply to California's regulation, regardless of where the pork producers housed their pigs.

When deciding the case, the Ninth Circuit made known its low opinion of the extraterritoriality principle in particular and the dormant Commerce Clause in general, concluding that while "the dormant Commerce Clause is not yet a dead letter, it is moving in that direction."

The Ninth Circuit spoke boldly when wishing for the demise of the dormant Commerce Clause, but its attitude towards the clause aligns with the views of several members of the Supreme Court's conservative wing. The Supreme Court has defined the dormant Commerce Clause as a sort of implied limit on state power derived from Congress' express power to "regulate Commerce ... among the several States," as found in Article I, Section 8 of the United States Constitution. The apparent lack of textual support in the Constitution for the dormant Commerce Clause has led some members of the Supreme Court to question its legitimacy. Indeed, the modern Supreme Court has tended to narrow or even abolish certain dormant Commerce Clause doctrines. A little over four years ago, in South Dakota v. Wayfair, Inc., the Supreme Court overturned two decades-old cases limiting state taxing power to residents and entities who had a physical presence in the state. In place of the physical presence rule, the Court inserted an economic nexus test, thus allowing states to tax and regulate parties who had some sort of economic connection with the state, even if they had no physical presence within its borders.

Ross brings the Court's conservatives to a crossroads. On one side, they face the traditional conservative notions of supporting business over government regulation, especially regulation coming from a left-leaning state like California. On the other, they have a chance to purify the Court's precedent from an atextual doctrine that some, including Justice Thomas and Justice Gorsuch, have seen as having "no basis in the text of the Constitution" and an "artifact of judicial precedent." Justices Thomas, Gorsuch, and Alito joined the majority in Wayfair, and would only need two more votes from either side of the ideological spectrum to affirm the Ninth Circuit and formally label the extraterritoriality principle a "dead letter." Once viewed as a "dead letter" or, as Justice Gorsuch once referred to the physical presence rule, a "precedential island," conditions for a complete abolishment of the extraterritoriality principle would appear ripe. Perhaps then the entire dormant Commerce Clause would face its demise.

But achieving the long-sought jurisprudential objective of eliminating the dormant Commerce Clause would enable California, with its progressive policies, to reach far beyond its border and into the lives of residents in other states in a way not seen before. For decades at least, the dormant Commerce Clause has operated in the background to limit the reach of the largest states on the citizens of the rest of the states. Wayfair ended the physical presence rule, thus allowing California to tax and regulate citizens of other states who had a "nexus" with California, including those outside its borders. Nonetheless, the extraterritoriality principle would still check California's ability to reach beyond its borders. A State still cannot regulate behavior that "takes place wholly outside of the State's borders." But combining the elimination of the physical presence rule with the Ninth Circuit's view of the extraterritoriality principle, where a State could avoid the principle as long as it regulated only the final product or service that wound up within its borders, would greatly reduce dormant Commerce Clause protection for a company located outside of California. The Wayfair and Ross combination would mean that merely selling a product that ended up in California could result in a non-California company being forced to follow the full gamut of California's body of regulations. And as the biggest of the bunch, California would have the most to say with its progressive tone. The conservatives may see an opportunity in Ross to dead letter, or even overturn, the extraterritoriality principle, but California would fill the vacuum left in the wake of their decision.