Petition for Writ of Certiorari — Trojan Technologies, Inc. v. Pennsylvania
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&? Supreme Court, UM «
90-1189, FILE BD
JAN 22
No.
In The bene =
Supreme Court of the United States
-—
October Term, 1990
TROJAN TECHNOLOGIES, INC. AND KAPPE
ASSOCIATES, INC.,
Petitioners,
Ay
COMMONWEALTH OF PENNSYLVANIA and LEROY S.
ZIMMERMAN, ATTORNEY GENERAL,
COMMONWEALTH OF PENNSYLVANIA,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
PAUL A. LOGAN
Counsel of Record
MICHAEL G. TRACHTMAN
ETHAN N. HALBERSTADT
Attorneys for Petitioners
367 South Gulph Road
King of Prussia, Pennsylvania 19406
(215) 354-9700
11617
tz *NJ (201) 257-6850¢(800) 3 APPEAL *NY (212) 840-4640*MA (617) 542-1114
ee DC (202) 783-7288*PA (215) 925-6500°USA (800) 5 APPEAL
STATEMENT OF QUESTIONS PRESENTED FOR REVIEW
1. Whether state buy-American legislation that prohibits
locally-funded political subdivisions within the state from
purchasing foreign steel products violates the commerce clause
by rendering the state a market regulator, as to which the Courts
of Appeals are in conflict? :
2. Whether state buy-American legislation that affirmatively
discriminates against foreign commerce violates the commerce
clause or is permissible under the market participant doctrine?
3. Whether state buy-American legislation serves a legitimate
State interest in protecting United States industry from foreign
competition or, as economic protectionism, violates the equal
protection clause?
li
RULE 29.1 LIST
Neither Trojan Technologies, Inc. nor Kappe Associates, Inc.
has parent companies, subsidiaries, or affiliates to list pursuant
to Rule 29.1.
it
TABLE OF CONTENTS
ne a Cheek Eka EE eR ERTS
a ee oe ee ec a kee Oak ees
TN A a a vba ekd be E RRS
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Il.
The Third Circuit’s decision that the market
participant doctrine permits states to regulate the
procurement policies of their political subdivisions
is in express conflict with the Seventh Circuit’s
interpretation of the market participant doctrine and
extends the market participant doctrine beyond the
limits set forth by previous decisions of this Court.
This Court has expressly reserved the question of
whether state buy-American statutes that affect
foreign commerce are saved from commerce clause
scrutiny by the market participant doctrine ......
Page
to
iv
Contents
Page
ill. The Third Circuit’s decision that economic
protectionist legislation does not violate equal
protection is in direct conflict with decisions of this
Court holding that economic protectionism is not a
legitimate state purpose under the equal protection
SPS. CCh SG LAK Dew AA SNA Sd TCE ENS 18
OE RET LIE A ere Oa ENR a PPO PN 22
TABLE OF CITATIONS
Cases Cited:
Bacchus imports, Ltd. v. Dias, 468 U.S. 263 (1984) ....... 19
Bowman v. Chicago & N.R. Co., 125 U.S. 465 (1988)
Se yee ee a ere ts Re arte Te Pras iy pager: Pes Arey 14
Brown v. Maryland, 25 U.S. 419 (1827) ............... 13
Buttfield v. Stranahan, 192 U.S. 470 (1904) ............ 13
Chy Lung v. Freeman, 92 U.S. 275 (1876) ............. 13
Garcia v. San Antonio Metropolitan Transportation
Authority, 469 U.S. 528 (1984) .......5........... 10
Henderson v. Mayor of New York, 92 U.S. 259 (1876)
LEP PPA EF OE aR we OE ERA ONO 14
Contents
Page
Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434
di FE ee ee eT ee ns passim
Metropolitan Life Insurance Co., v. Ward, 470 U.S. 869
L, - SPPr Sedinh ley Gy hoe 7, 19, 20, 21
Michelin Tire Corp. v. Wages, 423 U.S. 276 (1976) ..... 13
National League of Cities v. Usery, 426 U.S. 833 (1976)
shaw ekdeasiceo nee s ce beens Cee 10
New England Power Co. v. New Hampshire, 455 U.S. 331
COTE xo 85.60 Vonks an teen e eee ee eee 16
Northeast Bancorp, Inc. v. Board of Governors of the Federal
Reserve System, 472 U.S. 159 (1985) ............. 19, 20
Reeves, Inc. v. Stake, 447 U.S. 429 (1980) ....... 6, 9, 10, 12
South-Central Timber Development, Inc. v. Wunnicke, 467
UD. We MOE s 5 buss cskanaeen eae ae 9, 12, 13, 16, 18
Sporhase v. Nebraska ex rel. Douglas, 458 U.S. 941 (1982)
sb is & be laa mee a cacao ee a 16
Swin Resource Systems, Inc. v. Lycoming County, 883 F.2d
245 (3d Cir. 1989), cert. denied, ___-—~ U.S. ____, 110
S$.Ce. 1127, 167 Le. 2b ORS CGRP... ce cs ce cuss 10
Trojan Technologies, Inc. v. Commonwealth of
Pennsylvania, 916 F.2d 903 (3d Cir. 1990)........ passim
vi
Contents
Page
Trojan Technologies, Inc. v. Commonwealth of Pennsylvania,
142 ©. Sapp. FSB CGD. Pu. TOUR ik cs cv ccncccucss 2
W.C.M. Window Co. v. Bernardi, 730 F.2d 486 (7th Cir.
FOU sku ckcuutastcx acento eee 6, 8, 9, 11
Western & Southern Life Ins. Co. v. State Board of
Equalization of California, 451 U.S. 648 (1981)... .20, 21
White v. Massachusetts Council of Construction Employers,
Je tk ol, Sree rae es 9, 10, 11
Zschernig v. Miller, 389 U.S. 429 (1968) ........00..... 21
United States Constitution Cited:
J.>. Come. Amt. 6. 6 6 Oe on cc iui ceacasceeee 2
J.B. Come. Ane. Be. OF. Svcd euccscaecsee ee 3
Federal Statutes and Treaties Cited:
Steel Import Stabilization Act, P.L. 98-573, Title VIII
§§ 801-808, 98 Stat. 3043-47, codified at 19 U.S.C.S.
§ 2253 note (Law. Co-op. Supp. 1990) ........... 17, 18
Trade Agreements Act of 197%, Pub.L. 96-39, 93 Stat. 144,
19 U.S.C.S. § 2501-2581 (Law. Co-op. 1983 & Supp.
NOWUD onsicssinevendend Seno Ocean 17, 18
-
United States-Canada Free Trade Agreement, January 2,
SE, BY Wales GOO occa nadine ccheunxeeeateenee 17, 18
vil
Contents
Fage
State Statutes Cited:
Ala.Coae § 39-3-4 - § 39-3-5 (Supp. 1990) ............. 12
Ill.Rev.State. ch. 48, para. 1801-1807 (1986)............ 12
Ind.Code Ann. § 5-16-1 - § 5-16-8-2 (West 1984) ....... 12
Mass.Gen.Laws Ann. ch. 7 § 22 (1986 & Supp. 1990)
Md.State Fin. & Proc.Code Ann. § 12-401 - § 12-405(1985) 12
N.J.Stat.Ann. § 40A:11-18 (West Supp. 1990).......... 12
hm 9, 2° 2. f . SeeeerrrrerT reer ee 12
Ohio Rev.Code Ann. § 153.01.1 (1990) ................ 12
Pa. Stat. Ann. tit. 16 § 1770 (Purdon Supp. 1990)...... 4
Pa. Stat. Ann. tit. 24 § 6-602 (Purdon 1962)........... 4
Pa. Stat. Ann. tit. 53 § 306 (Purdon 1974 & Supp. 1990)
eee keene UNEEA KE RENSSEEU CAN CASEI ROR AS CENERS 4
Pa. Stat. Ann. tit. 53 § 46302 (Purdon 1966 & Supp. 1990)
PPO ree ee re rere eee eT eT er ret Pere cee 4
Pa. Stat. Ann. tit. 53 § 23104 (Purdon 1957)........... 4
Pa. Stat. Ann. tit. 73 § 1881-1887 (Purdon Supp. 1978)
OO PC re ere Teer TS eT eee ee ee passim
vill
Contents
Page
R.I.Gen.Laws § 37-2.1-1 - § 37-2.1-5 (1990) ........... 12
W.Va. Code § 5-19-1 - § 5-19-4 (1990) ................ 12
APPENDIX
Appendix A — Opinion of Court of Appeals ............. la
Appendix B — Opinion and Order of District Court .... 30a
Appendix C — Steel Products Procurement Act ........ dla
Appendix D — Stipulation of Fact .............0.0.0... 46a
No.
In The
Supreme Court of the United States
October Term, 1990
TROJAN TECHNOLOGIES, INC. AND KAPPE
ASSOCIATES, INC.,
Petitioners,
vs.
COMMONWEALTH OF PEI.NSYLVANIA and LEROY S.
ZIMMERMAN, ATTORNEY GENERAL,
COMMONWEALTH OF PENNSYLVANIA
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE UNITED
STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
The petitioners, Trojan Technologies, Inc. and Kappe
Associates, Inc., respectfully pray that a writ of certiorari issue
to review the judgment and opinion of the United States Court
of Appeals for the Third Circuit, entered in the above-entitled
proceedings on October 24, 1990.
OPINIONS BELOW
The opinion of the Court of Appeals for the Third Circuit
(Pollak, J.) is reported at 916 F.2d 903 (3d Cir. 1990), and is
reprinted in the appendix hereto, p. la, in/ra.
The opinion of the United States District Court for the Middle
District of Pennsylvania (Caldwell, J.) is reported at 742 F. Supp.
900 (M.D. Pa. 1990), and is reprinted in the appendix hereto,
p. 30a, infra.
x JURISDICTION
The petitioners brought this suit in the Eastern District of
Pennsylvania, invoking federal jurisdiction under 28 U.S.C.
§ 1331. On the respondents’ motion the case was transferred to
the Middle District of Pennsylvania.
On January 5, 1990, after the parties filed cross-motions for
summary judgment, the Middle District issued an opinion and
order denying the petitioners’ request for declaratory and
injunctive relief.
On appeal pursuant to 28 U.S.C. § 1291, the Third Circuit
issued an opinion and order on October 24, 1990, affirming the
decision of the district court.
The jurisdiction of this Court to review the judgment of the
Third Circuit is invoked pursuant to 28 U.S.C. § 1254(1).
CONSTITUTIONAL PROVISIONS INVOLVED
Article I, Section 8 of the Constitution of the United States:
The Congress shall have the Power .
io regulate Commerce with foreign Nations, and among the
several States, and with the Indian Tribes;
Amendment IV, Section | of the Constitution of the United
States:
No State shall .. . deny any person within its jurisdiction
the equal protection of the laws.
STATUTE INVOLVED
The Steel Products Procurement Act, Act of March 3, 1978,
P.L. 6, No. 3, Pa. Stat. Ann. tit. 73 §§ 1881-87 is reproduced
in the appendix hereto at page 4la, infra, due to its length.
STATEMENT OF THE CASE
In 1978 the Pennsylvania General Assembly passed the Steel
Products Procurement Act (hereinafter ‘Steel Act’’), Act of March
3, 1978, P.L. 6, No. 3, Pa. Stat. Ann. tit. 73 §§ 1881-87. The
Steel Act requires all public agencies within the Commonwealth
to use American-made ‘‘steel products’’ in all public works
projects. The Steel Act applies not only to state agencies, but
also to all local governmental entities, including counties, cities,
boroughs, townships, school districts, municipalities and
authorities. 73 P.S. § 1886. In addition, the Steel Act applies
to ‘‘all other public bodies, authorities, officers, agencies or
instrumentalities, whether exercising a governmental or proprietary
function.’’ 73 P.S. § 1886.' The stated purpose of the Steel Act
1. The local governmental entities governed by the Steel Act are substantially
autonomous. For instance, counties, cities, boroughs, school districts, and
municipalities all have the authority to generate their own revenues and establish
(Cont'd)
is to ‘‘aid and promote the development of the steel industry of
the United States in order to stimulate and improve the economic
well-being of the Commonwealth and its people.’’ 73 P.S. § 1883.
To this end the General Assembly declared that
[t]he economy and general welfare of the
Commonwealth and its people, as well as the
economy, general welfare and national security of
the United States, are inseparably related to the
preservation and development of the steel industry
in the Commonwealth and in the other states of
the United States.
73 P.S. § 1883.
Petitioners are Trojan Technologies, Inc. (‘‘Trojan’’) and
Kappe Associates, Inc. (‘‘Kappe’’).’? Trojan is a Canadian
corporation that manufactures a patented ultraviolet light water
cisinfecticn system known as the ‘‘UV 2000”’ (Stipulation of Fact,
paras. 1, 3). Kappe is Trojan’s exclusive distributor in
Pennsylvania. (/d., para. 2).
The UV 2000 is designed for use in potable water plants,
(Cont'd)
governing bodies to administer such funds. See Pa. Stat. Ann. tit. 16 § 1770
(Purdon Supp. 1990); Pa. Stat. Ann. tit. $3 § 23104 (Purdon 1957); Pa. Stat.
Ann. tit. 53 § 46302 (Purdon 1966 & Supp. 1990); Pa. Stat. Ann. tit. 24 § 6-602
(Purdon 1962); Pa. Stat. Ann. tit. 53 § 306 (Purdon 1974 & Supp. 1990).
Municipal authorities, in particular, have substantial contracting authority and
finance the construction, maintenance, and operation of sewage treatment
facilities through local assessments. Pa. Stat. Ann. tit. 53 § 306.
2. This case came before the District Court fer the Middle District of
Pennsylvania upon a joint Stipulation of Fact. The Stipulation of Fact is reprinted
in the appendix hereto, p. 46a, infra.
and has been purchased by several Pennsylvania municipalities
and authorities for use in waste water and sewage treatment
facilities. (/d., paras. 4-5). The primary components of the UV
2000 are ultraviolet lamps which kill bacteria and microorganisms
in the effluent which is discharged from the waste water and sewage
treatment facilities. (/d., para. 7). The system also contains a small
amount of steel component parts which constitute less than 15%
of the UV 2000’s total cost. (/d., paras. 8-11).
On July 8, 1988, the Pennsylvania Attorney General’s Office
sent letters to several municipal authorities requesting information
concerning petitioners’ compliance with the Steel Act. Three days
later a letter was sent directly to Trojan, requesting documentation
confirming that the UV 2000 complies with the Steel Act. (/d.,
para. 20).
On August 8, 1988, Petitioners filed suit against the
Commonwealth and the Commonwealth’s Attorney General in
the Eastern District of Pennsylvania, seeking a declaration of the
unconstitutionality of the Steel Act and an injunction against its
enforcement. On defendants’ motion the case was transferred to
the Middle District of Pennsylvania. The parties thereafter filed
cross motions for summary judgment.
On January 5, 1990, the District Court (Caldwell, J.) issued
an opinion and order denying petitioners’ request for declaratory
and injunctive relief. The petitioners appealed to the Third Circuit,
which affirmed the decision of the District Court on October 24,
1990. The Third Circuit agreed with the District Court’s general
finding that the Steel Act fell within the market participant
exception to the dormant commerce clause.
Unlike the District Court, however, the Third Circuit
addressed the issue raised by the fact that the Steel Act applies
not only to projects undertaken by state agencies, but also to those
undertaken by local governmental entities, such as municipal
authorities, where the state is not a direct market participant.
However, the Third Circuit did not understand this distinction
to affect its commerce clause analysis. It reasoned that the
Commonwealth of Pennsylvania could restrict the contracting
authority of such local entities, not because such entities are
themselves market participants, but solely because they derive their
authority from the state.
In so reasoning, the Third Circuit expressly disagreed with
the Seventh Circuit’s interpretation of the market participant
doctrine in W.C.M. Window Co. v. Bernardi, 730 F.2d 486 (7th
Cir. 1984). See Trojan, 916 F.2d at 911. Consequently, the
parameters of the market participant doctrine in the public
contracting realm remain unclear.
The Third Circuit also reasoned that its conclusion should
not change because the Steel Act discriminated against foreign
commerce. This issue was expressly reserved by this Court in
Reeves, Inc. v. Stake, 447 U.S. 429 (1980), wherein this Cceurt
commented:
We have no occasion to explore the limits imposed
on State proprietary actions by the ‘‘foreign
commerce’’ Clause or the constitutionality of
‘*Buy-American’’ legislation. We note, however,
that Commerce Clause scrutiny may well be more
rigorous when a restraint on foreign commerce is
alleged.
Re ves, 447 U.S. at 438 n.9 (citations omitted). Nonetheless, the
Third Circuit concluded that the Steel Act survived ‘‘even the
most searching review’’ as the concerns animating the foreign
commerce clause were not implicated by the Steel Act. /d. at 912.
The court reasoned that state procurement practices do not raise
conflicts in policy among multiple national sovereigns. Moreover,
the court observed that Congress was aware of state activity to
restrict procurement of foreign goods, and yet had not imposed
a policy of national uniformity. /d.
Finally, the Third Circuit summarily rejected petitioners’ claim
that the Steel Act violated the Equal Protection Clause of the
United States Constitution.’ The court reasoned that this Court’s
decision in Metropolitan Life Insurance Co. v. Ward, 470 U.S.
689 (1985), was inapposite to the case sub judice as that case
involved taxation, a concern not implicated by the Steel Act.
According to the court, the Steel Act did not violate equal
protection because it distinguished between groups that were
legitimately different. Trojan, 916 F.2d at 915.
3. The Third Circuit also rejected petitioners’ claims that the Steel Act
was preempted by federal statutes and executive agreements, interfered with
the federal government’s exercise of the foreign relations power, and was
unconstitutionally vague.
REASONS FOR GRANTING THE WRIT
I.
THE THIRD: CIRCUIT’S DECISION THAT THE
MARKET PARTICIPANT DOCTRINE PERMITS STATES TO
REGULATE THE PROCUREMENT POLICIES OF THEIR
POLITICAL SUBDIVISIONS IS IN EXPRESS CONFLICT
WITH THE SEVENTH CIRCUIT'S INTERPRETATION OF
THE MARKET PARTICIPANT DOCTRINE AND EXTENDS
THE MARKET PARTICIPANT DOCTRINE BEYOND THE
LIMITS SET FORTH BY PREVIOUS DECISIONS OF THIS
COURT.
The Third Circuit’s decision permitting the Commonwealth
of Pennsylvania to regulate the activities of local municipal
authorities under the guise of market participation threatens the
principles of free trade on which the negative commerce clause
is based. Under the Third Circuit’s reasoning, the mere grant of
authority from a state to a local public entity renders the state
a market participant in all activities undertaken by the local public
entity. The Third Circuit’s analysis expressly rejected the Seventh
Circuit’s interpretation of the market participant doctrine set forth
in W.C.M. Window Co. v. Bernardi, 730 F.2d 486 (7th Cir. 1984)
(Posner, J.). See Trojan, 916 F.2d at 911.
In Window, the Seventh Circuit struck down an Illinois
preference law which required public works contractors, including
those who contracted with local political subdivisions, to hire only
Illinois laborers. The Seventh Circuit rejected Illinois’ claim—
the same claim asserted in the case sub judice by Pennsylvania—
that the statute was saved from commerce clause scrutiny by the
market participant doctrine. The Seventh Circuit reasoned that
the crucial distinction between Illinois’ preference plan, and those
schemes approved by this Court under the market participant
doctrine, was that Illinois applied its preference law not only to
itself, but also to local entities. Consequently, the Window court
held, Illinois acted as ‘‘a regulator, telling thousands of local
government units that they must not give construction contracts
to employers of non-residents.’’ Window, 730 F.2d at 495.
The Third Circuit’s disagreement with Window could be no
more direct or complete. 7rojan, 916 F.2d at 911. The Third
Circuit held that local entities are to be fictionalized for commerce
clause purposes, and treated as if one and the same with the state,
solely because they were created by state legislation.
The Third Circuit’s decision extends the market participant
doctrine well beyond the narrow contours established by this Court
in Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976), Reeves,
Inc. v. Stake, 447 U.S. 429 (1980), White v. Massachusetts Council
of Construction Employers, Inc., 460 U.S. 204 (1983), and South-
Central Timber Development, Inc. v. Wunnicke, 467 U.S. 82
(1984). As these decisions make plain, this Court has never
Suggested that a state’s creation of local public entities renders
the state a market participant in all activities undertaken at the
local level. To the contrary, this Court has required ‘‘direct state
participation in the market’’ in order for the state to gain market
participant status. Reeves, 447 U.S. at 436 n. 7 (emphasis added):
see also White, 460 U.S. at 211 n.7 (the market participant doctrine
Only permits a state to influence ‘‘a discrete, identifiable class
of economic activity in which [it] is a major participant.’’)
Based on this Court’s decisions in Alexandria Scrap and
White, supra, the most readily identifiable form of direct, major
participation is financial. In Alexandria Scrap, the Court held
that the State of Maryland could expend state funds to encourage
the removal of automobile hulks from Maryland streets and
junkyards. In White, the Court concluded that the City of Boston
could require all construction projects funded in whole or in par’
10
by the City to be performed by a work force of at least 50%
city residents, reasoning that since ‘‘the city expended only its
own funds in entering into construction contracts for public
projects, it was a market participant and entitled to be treated
as such.”’ White, 460 U.S. at 214-215 (emphasis added). The
rationale of these holdings is *‘the long recognized right of a trader
or manufacturer, engaged in an entirely private business, freely
to exercise his own independent discretion as to parties with whom
he will deal.’’ Reeves, 447 U.S. at 438-439.* There is no lawful
justification to extend these hoidings, as does the Steel Act, to
a State’s attempt to hamstring the conduct of separate entities,
controlled by separate decision-makers, using separate funds.
The Third Circuit found that the restraints imposed by the
Steel Act do not offend the commerce clause because the affected
local entities can informally be thought to be ‘‘supplying for the
State.’’ Trojan, 916 F.2d at 911. This informal analogy flies in
4. Considerations of state sovereignty also have been cited as supporting
the market participant doctrine. In Reeves, 447 U.S. at 438 n. 10, for instance,
this Court stated that ‘‘{[c]onsiderations of sovereignty dictate that marketplace
actions involving ‘integral operations in areas of such traditional governmental
functions’—such as the employment of certain state workers—may not be subject
even to congressional regulation pursuant to the commerce power. It follows
easily that the intrinsic limits of the Commerce Clause do not prohibit state
marketplace conduct that falls within this sphere.’’ In support of the foregoing,
National League of Cities v. Usery, 426 U.S. 833, 852 (1976) was cited. Since
this Court’s last foray into the arena of market participation, National League
of Cities was overruled by Garcia v. San Antonio Metropolitan Transportation
Authority, 469 U.S. 528 (1984). Thus, the foundation upon which the market
participant doctrine is built has been substantially weakened, if not totally
eradicated. See Swin Resource Systems, Inc. v. Lycoming County, 883 F.2d
245, 260 (3d Cir. 1990), cert. denied, ___ U.S. ___., 110 S.Ct. 1127, 107 L.Ed.
2d 1033 (1990) (Gibbons, J., dissenting) (the market participant ‘‘line of cases
rests upon substantially the same notoriously flawed analytic framework of the
state-federal relationship made infamous in National League of Cities, the
companion case to Alexandria Scrap’’).
11
the face of this Court’s admonition that ‘‘there are some limits
on a state or local government’s ability to impose restrictions that
reach beyond the immediate parties with whom the government
transacts business.’’ White, 460 U.S. at 211 n.7. While the Court
in White found that private contractors were, ‘‘in a substantial
if informal sense, ‘working for the city’, ’’ White, 460 U.S. at
211.7, the executive order in White and the Steel Act are breeds
apart. In White, the city had a substantial connection to the work
being performed. The city entered into contracts for the projects
at issue, and provided full financial support. In the case sub judice,
on the other hand, there is no substantial relationship between
the Commonwealth and the ‘‘discrete, identifiable class of
economic activity’’ taking place on the local level. The private
suppliers of local entities are not ‘‘supplying for the State’’. Rather,
the private suppliers are supplying for the local entities which
pay them.
The upshot is that while local public entities may be considered
to be a part of the state for many purposes, it is equaily as clear
that local public entities cannot be considered a part of the state
for all purposes. See Window, 730 F.2d at 495.
The Third Circuit’s decision affirming the authority of the
States to thrust economic protectionist legislation upon local public
entities expands market participation wel! beyond any previous
decision of this Court and is directly at odds with the Seventh
Circuit’s decision in Window, supra. The issue is of paramount
importance given the tremendous amount of contracting done at
the local level across the nation. See Window, 730 F.2d at 496.
A decision of such far-reaching impact merits review by this Court.
12
THIS COURT HAS EXPRESSLY RESERVED THE
QUESTION OF WHETHER STATE BUY-AMERICAN
STATUTES THAT. AFFECT FOREIGN COMMERCE ARE
SAVED FROM COMMERCE CLAUSE SCRUTINY BY THE
MARKET PARTICIPANT DOCTRINE.
In Reeves, supra, this Court expressly reserved the question
of whether state buy-American legislation is safeguarded from
commerce clause scrutiny by the market participant doctrine.
Reeves, 447 U.S. at 438 n.9. At the same time, the Reeves Court.
observed, and this Court has long held, that restraints on foreign
commerce are subject to even greater scrutiny than those on
interstate commerce, because of the impact such restraints may
have upon the nation as a whole. /d.; see, e.g., Wunnicke, supra;
Japan Line, Lid. v. County of Los Angeles, 441 U.S. 434 (1979)
(and cases cited therein, infra n. 6). Given the formidable burdens
on foreign commerce created by the wide-spread enactment of
state buy-American legislation,’ review of the case sub judice is
merited.
This Court has repeatedly stressed the danger inherent in state
forays into foreign affairs. In Wunnicke, for instance, a plurality
of the Court relied upon heightened foreign commerce clause
scrutiny in striking down an Alaska law which required that timber
S. At least eleven states have buy-American preference statutes in one form
or another that restrict the importation of foreign steel. See Ala.Code
S$ 39-3-4—§ 39-3-5 (Supp. 1990); Il. Rev.State. ch. 48, para. 1801-1807 (1986);
ind.Code Ann. § 5-16-8-1—§ 5-16-8-2 (West 1984); Mass.Gen.Laws Ann. ch.
7 § 22 (1986 & Supp. 1990); Md.State Fin. & Proc.Code Ann. § 12-401 § 12-405
(1985); N.J.Stat.Ann. § 40A:11-18 (West Supp. 1990); N.Y. State Fin.Law § 146
(1989); Ohio Rev.Code Ann. § 153.01.1 (1990); Pa. Stat. Ann. tit. 73
$ 1881-1887 (Purdon Supp. 1978); R.1.Gen.Laws § 37-2.1-1—§ 37-2.1 8 (1990);
W.Va. Code § §-19-1 § 5-19-4 (1990).
13
taken from state lands be processed in state prior to export. The
Court explained:
It is a well-accepted rule that State restrictions
burdening foreign commerce are subjected to a
more rigorous and searching scrutiny. It is crucial °
to the efficient execution of the Nation’s foreign
policy that ‘the Federal Government . . . speak
with one voice when regulating commercial
relauions with foreign governments.’
Wunnicke, 467 U.S. at 101 (citing Michelin Tire Corp. v. Wages,
423 U.S. 276 (1976); Japan Line, supra).
Similarly, in Japan Line, supra, the Court struck down a
California ad valorem property tax, as applied to Japanese
shipping companies’ cargo containers which were used exclusively
in foreign commerce. The Court found that the tax could frustrate
the achievement of federal uniformity in several ways. For
instance, the Court noted that if a novel state tax created an
asymmetry in the international tax structure, foreign nations
disadvantaged by the levy could retaliate against American-owned
instrumentalities generally, ‘‘so that the Nation as a whole would
suffer.’’ Jd. at 450; see Brown v. Maryland, 25 U.S. 419, 446-448
(1827); Chy Lung v. Freeman, 92 U.S. 275, 279 (1876). Moreover,
if other States followed California’s exampie, various
instrumentalities of commerce could be subjected to varying
degrees of multiple taxation, a result that would plainly prevent
the Nation from ‘‘speaking with one voice, in regulating foreign
commerce. /d.°
6. The Court cited numerous cases stressing the need for uniformity in
dealing with foreign nations. See, e.g., Buttfield v. Stranahan, 192 U.S. 470,
492-493 (1904) (‘‘exclusive and absolute’’ power of Congress over foreign
(Cont'd)
14
Despite this precedent, the Third Circuit quickly dismissed
the impact of buy-American legislation upon foreign commerce.
The central concern, according to the Third Circuit, was whether
the Steei Act impaired federal uniformity in an area where federal
uniformity was essential.” Reasoning that Congress is aware of
State activity to restrict the procurement of foreign goods, yet
has not imposed a policy of national uniformity, the Third Circuit
concluded that state procurement policy was not an area in which
tederal uniformity was essential. Trojan, 916 F.2d at 912.
The Third Circuit’s conclusion cries out for review. It confuses
dormant commerce clause analysis, and it ignores the important
considerations this Court has stressed as being applicable to the
review of state legislation impacting foreign commerce.
First, contrary to the position asserted by the Third Circuit,
federal approval of state buy-American legislation cannot be
inferred from Congressional silence. Implicitly, the Third Circuit
reasoned that if Congress was disturbed by state buy-American
policies, it could address and eliminate the problem. Having not
(Cont'd)
commerce); Bowman v. Chicago & N.R. Co., 125 U.S. 465, 482 (1888) (‘It
may be argued [that] the inference to be drawn from the absence of legislation
by Congress on the subject excludes state legislation affecting commerce with
foreign nations more strongly than that affecting commerce among the States.
Laws which concern the exterior relations of the United States with other nations
and governments are general in nature, and should proceed exclusively from
the legislative authority of the nation’'); Henderson v. Mayor of New York,
92 U.S. 259, 273 (1876) (regulation “‘must of necessity be national in its
character’’ when it affects ‘ta subject which concerns our international relations,
in regard to which foreign nations ought to be considered and their rights
respected’’).
7. The Third Circuit identitied multiple taxation as another concern
underlying the foreign commerce clause. However, the court summarily dismissed
this concern as the Steel Act does not involve taxation.
15
done so, Congress somehow voiced its approval of state buy-
American legislation.
This reasoning stands dormant commerce clause analysis on
its head, and is based upon a premise previously rejected by this
Court. In Japan Line, supra, appellees contended that any
problems created by California’s tax could be cured by
congressional action or by international agreement. In finding
‘*no merit in this contention’’ this Court explained:
The premise of appellees’ argument is that a State
is free to impose demonstrable burdens on
commerce, so long as Congress has not preempted
the field by affirmative regulation. But it has long
been ‘accepted constitutional doctrine that the
commerce clause, without the aid of Congressional
legislation . . . affords some protection from state
legislation inimical to the national commerce, and
that in such cases, where Congress has not acted,
this Court, and not the state legislature, is under
the commerce clause the final arbiter of the
competing demands of state and national interests.’
Japan Line, 441 U.S. at 454. The Court further observed that
appellees’ argument defeated, rather than supported, the cause
it aimed to promote:
For to say that California has created a problem
susceptible only of Congressional—indeed, only
of international—solution is to concede that the
taxation of foreign-owned containers is an area
where uniform federal rule is essential. California
may not tell this Nation or Japan how to run their
foreign policies.
16
Id. at 455.
Thus, the absence of a uniform federal policy with respect
to state buy-American legislation proves nothing; Congressional
silence is not tantamount to Congressional approval.
Second, rather than endorsing silence as approval, this Court
has held that express Congressional approval is required before
the states are permitted to impose burdens upon interstate or
foreign commerce. Wunnicke, supra; see Sporhase v. Nebraska
ex rel. Douglas, 458 U.S. 941, 960 (1982) (where this Court declined
to find Congressional authorization for state-imposed burdens
on interstate commerce in ground water despite 37 federal statutes
and a number of interstate compacts that demonstrated Congress’
deference to state water laws); New England Power Co. v. New
Hampshire, 455 U.S. 331 (1982).
Thus, in Wunnicke, supra, a plurality of this Court struck
down Alaska’s in-state processing requirement despite the existence
of ‘‘parallel’’ federal legislation which approved such restrictions
on federal owned lands. The Court rejected the argument that
the Alaska policy was authorized by the federal policy, because
such authorization was not expressly stated. The Court reasoned:
A rule requiring a clear expression of approval by
Congress ensures that there is, in fact, such a
collective decision and reduces significantly the risk
that unrepresented interests will be adversely
affected by restraints on commerce.
Wunnicke, 467 U.S. at 93. The Court found this need for
affirmative approval ‘‘heightened by the fact that Alaska’s policy
has substantial ramifications beyond the Nation’s borders. The
need for a consistent and coherent fureign policy, which is the
exclusive responsibility of the Federal Government, enhances the
17
necessity that Congressional authorization not be lightly implied.’’
Id. at 93 n. 7.
Third, even assuming, arguendo, that Congressional silence
manifests federal approval of state regulation’ Congress has
articulated the need for a uniform federal policy with respect to
the importation of foreign steel. The Steel Import Stabilization
Act (‘Stabilization Act’’), supra, evinces the clear intent by
Congress to place control of steel import policy firmly within the
hands of the Executive. In enacting the Stabilization Act, Congress
found that a ‘‘national policy’’ was necessary for the steel industry
to compact the effects of unfair trade practices. Sec. 802(a)(4).
Congress reasoned that the ‘‘full and effective implementation
of the national policy for the steel industry’’ would ‘‘substantially
improve the economy and employment in both the steel and iron
ore producing sectors.’’ Sec. 802(a)(6).
Thus, although the Pennsylvania General Assembly believes
that the promotion of the ‘‘development of the steel! industry of
the United States’’ will be accomplished through such protectionist
legislation as the Steel Act, Congress has itself perceived the threat
of steel imports to be a national concern and has empowered the
President—not the individual states—to deal with the problem.’
°8. The Third Circuit expressly found that the United States-Canada Free
Trade Agreement, January 2, 1988, 27 1.L.M. 281, the Trade Agreements Act
of 1979, Pub.L. 96-39, 93 Stat. 144, 19 U.S.C.S. § 2501-2581 (Law. Co-op.
1983 & Supp. 1990), the Agreement on Government Procurement (implemented
pursuant to the Trade Agreements Act of 1979), and the Steel Import Stabilization
Act, P.L. 98-573, Title VIII §§ 801-808, 98 Stat. 3043-47, codified at 19 U.S.C.S.
§ 2253 note (Law. Co-op. Supp. 1990), collectively did not contain a clear
statement of acquiescence in state buy-American statutes. Trojan, 916 F.2d at
909-910 n. 10.
9. In addition to the Stabilization Act, Congress has directed a substantial
amount of attention to areas implicated by the Steel Act. See United States-
(Cont'd)
18
Finally, the Third Circuit completely failed to address one
of the major concerns underpinning the foreign commerce clause,
stressed in Japan Line, supra: the danger of retaliation by foreign
nations which, by necessity, would be directed against the Nation
as a whole. This threat of retaliation is plainly implicated by state
procurement policies. Foreign nations who are unable to do
business with Pennsylvania public entities may retaliate, not only
against Pennsylvania, but against the Nation as a whole. This
threat of economic retaliation is made all the more real by the
proliferation of state buy-American legislation. See supra, n.5.
This significant threat, and the national impact of discriminatory
state restraints on foreign commerce, justify a review of the Third
Circuit’s decision by this Court.
THE THIRD CIRCUIT’S DECISION THAT STATE BUY-
AMERICAN LEGISLATION DOES NOT VIOLATE EQUAL
PROTECTION IS IN DIRECT CONFLICT WITH DECISIONS
OF THIS COURT HOLDING THAT ECONOMIC
PROTECTIONISM IS NOT A LEGITIMATE STATE
PURPOSE UNDER THE EQUAL PROTECTION CLAUSE.
The Steel Act strives to promote the United States steel
industry by barring foreign made steel products from every public
works project in the Commonwealth. Such blatant attempts at
economic protectionism have uniformly been struck down by this
(Cont'd)
Canada Free Trade Agreement; the Agreement on Government Procurement;
the Stabilization Act, and the Trade Agreements Act of 1979. Compare
Wunnicke, 467 U.S. at 101, where this Court found Alaska’s in state processing
requirement particularly inappropriate as it implicated an area in which Congress
had directed substantial attention. Interestingly, this *‘substantial attention”’
came in the form of federal legislation which, Alaska argued, authorized Alaska’s
scheme.
19
Court under both commerce clause and equal protection analysis.
See Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984);
Metropolitan Life Insurance Company v. Ward, 470 U.S. 869
(1985). The Third Circuit’s decision legitimizes the very sort of
parochial and discriminatory state policies that the equa! protection
clause was intended to prevent.
In Metropolitan Life,'® this Court held that under the equal
protection clause the ‘*‘promotion of domestic business within a
State, by discriminating against foreign corporations that wish
to compete by doing business there, is not a legitimate state
purpose.”’ /d. at 880. The Third Circuit justified its refusal to
apply this holding to the case sub judice by reasoning that
Metropolitan Life was limited to the type of discriminatory tax
scheme presented in that case. Trojan, 916 F.2d at 915 [citing
Northeast Bancorp, Inc. v. Board of Governors of the Federal
Reserve System, 472 U.S. 159 (1985)]. Moreover, the court stated
that ‘‘the Equal Protection Clause permits economic regulation
that distinguishes between groups that are legitimately different’’.
Trojan, 916 F.2d at 915 [quoting National Bancorp, 472 U.S.
at 180 (O’Connor, J., concurring)}.
This reasoning is erroneous, and directly contravenes this
10. In Metropolitan Life this Court struck down an Alabama statute which
imposed a substantially lower tax rate on domestic insurance companies than
on out of state insurance companies. The Alabama statute could not be attacked
under the Commerce Clause because Congress had expressly authorized state
regulation of the insurance industry. Nonetheless, this Court concluded that
‘‘fe]qual protection restraints are applicable even though the effecr of the
discrimination . . . is similar to the type of burden with which the Commerce
Clause would also be concerned.’’ /d., 470 U.S. at 881. Similarly, a state’s
status as a market participant does not immunize it from equal protection attack.
See Alexandria Scrap, supra (upholding Maryland’s market participant scheme
because it bore a rational relationship to Maryland’s legitimate purpose to clean
up its Own environment).
20
Court’s decisions in Metropolitan Life and Northeast Bancorp.
First, in Northeast Bancorp, this Court distinguished
Metropolitan Life in upholding under equal protection attack state
statutes that excluded bank holding companies from some states
while admitting others. In so doing, this Court focused on the
fact that ‘‘banking and related financial activities are of profound
local concern.’’ Northeast Bancorp, 472 U.S. at 177. These
‘‘profound local concerns’’ provided the legitimacy for the state
statutes.
The rationale supporting Northeast Bancorp has little
relevance in the case sub judice. First, the Steel Act does not
address a matter of ‘‘profound local concern’’. The purpose of
the Steel Act is to promote the United States steel industry. The
promotion of the steel industry is a matter of national and not
local concern, as evidenced by Congress’ enactment of the Steel
Import Stabilization Act, supra.
Second, in Northeast Bancorp ‘‘the states in question...
[were] not favoring local corporations at the expense of out-of-
state corporations’. Northeast Bancorp, 472 U.S. at 177. This
is not true of the Steel Act. The stated purpose of the Steel Act
is to promote the United States steel industry by barring from
all public works projects any entity which deals with foreign steel
manufacturers. The Steel Act thus attempts to promote a national
industry at the expense of a foreign industry.
Finally, the fact that the Steel Act does not implicate the
taxing power misses the point. The Metropolitan Life decision
was based in large measure upon Western & Southern Life Ins.
Co. v. State Board of Equalization of California, 451 U.S. 648,
21
667-668 (1981)'', where this Court held:
We consider it now established that, whatever the
extent of a State’s authority to exclude foreign
corporations from doing business within its
boundaries, that authority does not justify
imposition of more onerous taxes or other burdens
on foreign corporations than those imposed on
domestic corporations .
(emphasis added).
Thus, this Court has never held that on/y discriminatory tax
schemes, like those presented in Metropolitan Life, violate equal
protection. To the contrary, when a state statute imposes burdens
on foreign businesses that are more onerous than those on domestic
businesses, and the imposition of such burdens do not further
legitimate state interests, the statute violates equal protection.
The burdens imposed by the Steel Act on foreign industries
are intentional, direct, and, for a company that manufactures
products for use by municipal authorities, virtually complete.
Review of the Third Circuit’s decision is required by this Court
11. In Western & Southern Life Ins. Co., this Court upheld a California
Statute which imposed a retaliatory tax upon on foreign insurers when the
insurer’s state of incorporation imposed higher taxes on California insurers doing
business in that state. This Court observed that the principal purpose of
retaliatory tax laws is to promote the interstate business of domestic insurers
by deterring other States from enacting discriminatory taxes. /d. at 668.
According to this Court, this was a legitimate state purpose. /d. at 671. While
such retaliatory state measures may be legitimate in the context of interstate
commerce, they clearly have no place in foreign commerce. In fact, this concern
over foreign retaliation is one of the factors motivating heightened foreign
commerce clause scrutiny. See Japan Line, 441 U.S. at 450. Moreover, as applied
to foreign commerce, such laws would impermissibly cast courts of law as arbiters
ot toreign policy. See Zschernig v. Miller, 389 U.S. 429 (1968).
22
to clarify the extent of state authority to promote domestic
industries through such economic protectionist legislation.
CONCLUSION
For the foregoing reasons, this petition for certiorari should
be granted.
Respectfully submiited,
POWELL, TRACHTMAN,
LOGAN & CARRLE
s/Paul A. Logan
Paul A. Logan
367 South Gulph Road
King of Prussia, Pennsylvania
19406
(215) 354-9700
Counsel for Petitioners
January 21, 1991
la
APPENDIX A — OPINION OF THE COURT OF APPEALS
Filed October 24, 1990
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 90-5057
TROJAN TECHNOLOGIES, INC. and KAPPE
ASSOCIATES, INC.,
Appellants,
v.
COMMONWEALTH OF PENNSYLVANIA and
LEROY S. ZIMMERMAN, ATTORNEY GENERAL,
COMMONWEALTH OF PENNSYLVANIA,
Appellees
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(M.D. Pa. No. 89-0364)
Argued August 10, 1990
BEFORE: STAPLETON and GREENBERG,
Circuit Judges and
POLLAK"*, District Judge
(Filed October 24, 1990)
Paul A. Logan (Argued)
Powell, Trachtman, Logan & Carrle
367 South Gulph Road
King of Prussia, Pennsylvania 19406
Attorney For Appellants,
* The Honorable Louis H. Pollak, United States District
Judge for the Eastern District of Pennsylvania, sitting by
designation.
2a
Ermest D. Preate, Jr.
Attorney General
Thomas B. York (Argued)
Deputy Attorney General
Calvin R. Koons
Senior Deputy Attorney General
John G. Knorr, III
Chief Deputy Attorney General
Chief, Litigation Section
Office of the Attorney General
15th Floor, Strawberry Square
Harrisburg, PA 17120
Attorneys for Appellees,
Stuart Gerson
Assistant Attorney General
Patricia M. Bryan
Deputy Assistant Attorney General
Robert V. Zener
Attorney, Appellate Staff, Civil Division
Department of Justice
Washington, D.C. 20530-0001
Attorneys for Amicus Curtae United States
of America
OPINION OF THE COURT
POLLAK, District Judge.
This case presents the question whether the
Pennsylvania Steel Products Procurement Act
(“Steel Act"), Act of March 3, 1978, P.L. 6, No. 3,
Pa. Stat. Ann. tit. 73, §§ 1881-87, is
unconstitutional. The grounds of challenging the
Steel Act are several: it is contended that the Steel
Act (1) is preempted by various federal statutes
3a
and executive agreements regulating foreign
commerce; (2) unconstitutionally burdens foreign
commerce; (3) interferes with the federal
government's exercise of the foreign relations
power; (4) is unconstitutionally vague; and (5)
violates the equal protection clause.
I. Background
The essential facts are not in dispute. The Steel
Act requires suppliers contracting with a public
agency in connection with a public works project
to provide products whose steel is American-made.
Pa. Stat. Ann. tit. 73, § 1884. “Public agency” is
defined broadly to include not only state agencies
but all local governmental entities including “all
municipal . . . authorities . . . created or
organized by any county, city, borough [or|
township.” Pa. Stat. Ann. tit. 73, § 1886.' The
range of steel products affected is similarly
exhaustive, covering “products rolled, formed,
shaped, drawn, extruded, forged, cast fabricated or
1. The full definition of “public agency” ts
(1) the Commonwealth and its departments, boards,
commissions and agencies;
(2) counties, cities, boroughs, townships, school
districts, and any other governmental unit or district:
(3) the State Public School Building Authority, the
State Highway and Bridge Authority, and any other
authority now in existence or hereafter created or
organized by the Commonwealth;
(4) all municipal or school or other authorities now
in existence or hereafter created or organized by any
county, city, borough. township or school district or
combination thereof; and
(5) any and all other public bodies, authorities.
officers. agencies or instrumentalities, whether
exercising a governmental or proprietary function.
Pa. Stat. Ann. tit. 73. § 1886
4a
otherwise similarly processed . .. by the open
hearth, basic oxygen, electric furnace, Bessemer or
other steel making process.” Id. at § 1884.
Payments made in violation of the Act are
“recoverable directly from the _ contractor,
subcontractor, manufacturer or supplier who did
not comply with” the Act. Id. at § 1885(a). Willful
violators of the Act are prohibited from bidding on
public agency contracts for five years. id. at
§ 1885(b).
Appellant Trojan is a Canadian corporation that
manufactures a “UV-2000" ultraviolet light
water-disinfection system. Stipulation of Fact, 7 1.
Appellant Kappe is Trojan's exclusive distributor in
Pennsylvania. Id., { 2. The basic UV-2000 contains
from four to eight ultraviolet lamps, located in a
“UV Module.” The UV Module, in turn, is housed
in a stainless steel frame. Steel is also found in a
stainless steel control box that houses many of the
devices for monitoring the UV-2000's operation.
The steel components constitute less than 15% of
the UV-2000's total cost. Id., { 7-11.
The UV-2000 has applications in industry,
potable water plants and residential use. Several
Pennsylvania municipalities and authorities have
purchased the UV-2000 and installed it at
waste-water and sewage-treatment facilities. Id., 1
4-5. On July 8, 1988, the Pennsylvania Attorney
General's Office sent letters to several municipal
authorities requesting information concerning
compliance with the Act. On July 11, 1988, the
Attorney General's Office sent a letter directly to
Trojan, requesting documentation confirming that
its ultraviolet disinfection system complies with the
Act. Trojan has not supplied any such
documentation. While the Attorney General sought
such information in order to ensure compliance
Sa
with the Steel Act, there has been no final
determination that the Act has been violated, nor
have any sanctions been imposed. Id., 7 20.
On August 8, 1988, Trojan and Kappe filed this
suit against the Commonwealth and_ the
Commonwealth's Attorney General in the District
Court for the Eastern District of Pennsylvania,
seeking a declaration of the unconstitutionality of
the Steel Act and an injunction against its
enforcement. On defendants’ motion the case was
transferred to the Middle District of Pennsylvania.
The parties filed cross motions for summary
judgment. On January 5, 1990, Judge Caldwell
issued a memorandum and order denying Trojan's
request for declaratory and injunctive relief.
Appellants took this appeal. At the invitation of
this court the United States has submitted a brief
as amicus curiae.? We affirm.
II. The Preemption Challenge
In accordance with the principle that statutory
questions should be considered first in order to
avoid possibly needless constitutional inquiry, we
turn initially to appellants’ claim that the Steel Act
is preempted by a variety of federal statutes and
trade agreements.
Federal law may preempt state law in any of
three ways. Kentucky West Virginia Gas Co. v.
Pennsylvania Public Utility Commission, 837 F.2d
600, 605 (3d Cir.) cert. denied 109 S. Ct. 365
2. The amicus brief supports the district court's decision on
the preemption. commerce clause, and foreign affairs power
issues; the brief takes no position on the vagueness and equal
protection challenges. on the theory that the federal
government has no institutional interest or expertise relevant
to those claims.
6a
(1988). First, Congress may explicitly occupy a
regulatory fleld. Id. at 606. Second, preemption
may occur when Congress completely, although
not explicitly, occupies an entire field of regulation,
leaving no room for the states to supplement
federal law. Id.; Schneidwind v. ANR Pipeline Co.,
485 U.S. 293, 299 (1988). Finally, federal law
preempts its state counterpart when simultaneous
compliance with both state and federal law is
“Impossible or when state law stands as an
obstacle to accomplishment and execution of the
full purposes and objectives of Congress.”
Kentucky West Virginia Gas, 837 F.2d at 606
(citations omitted). Because of federalism concerns,
it is presumed that Congress ordinarily does not
intend to displace existing state authority. See
Tafflin v. Levitt, 110 S. Ct. 792, 795 (1990).
Further, “[wjhere . . . the fleld which Congress is
said to have preempted has been traditionally
occupied by the States,” Congressional intent to
preempt must be “clear and manifest.” Jones uv.
Rath Packing Co., 430 U.S. 519, 525 (1977). State
procurement policy would appear to be such a
field.
Appellants contend that the United
States-Canacda Free Trade Agreement, the
Agreement on Government Procurement, the Steel
Import Stabilization Act of 1984, the Trade Act of
1984 and the Trade Agreements Act of 1979
require an inference of Congressional intent to
preempt state-level “buy-American”™ statutes such
as Pennsylvania's. Appellants argue both that each
individual federal enactment justifies an inference
of preemption, and that the cited acts and
agreements in toto reveal an attempt to develop a
comprehensive scheme that leaves no room for
supplementary state activity.
7a
A. International Agreements
1. United States-Canada Free Trade Agreement
The United States-Canada Free Trade
Agreement, 27 I.L.M. 281, — an_ executive
agreement both negotiated and implemented
pursuant to statutory directives — became effective
January 1, 1989.° Chapter 13 of that agreement
deals specifically with the issue of government
procurement in areas of trade between the two
nations. The chapter commits the parties to
“actively strive to achieve, as quickly as possible,
multilateral liberalization of international
government procurement policies.” Article 1301,
Free Trade Agreement. The Agreement's
implementing legislation’ provides that [t]he
provisions of the [Free Trade] Agreement prevail
over — (A) any conflicting State law .. . [and] any
conflicting application of any State law to any
person or circumstance. . .~ Implementation of the
United States-Canada Free-Trade Agreement, Title
I, Section 102. Appellants contend that the Steel
Act rums counter to the Agreement’s stated
purpose of liberalizing government procurement
policies and thus is preempted.
We are unpersuaded. The major difficulty with
appellants’ position is that the language chiefly
relied on —- “strive to achieve . .. multilateral
liberalization” —- is_ hortatory rather’ than
mandatory. Cf. Wardair Canada, Inc. v. Florida
3. The Agreement was negotiated by the President under
authority of 19 U.S.C. § 2112(b). The Agreement was entered
into on January 2, 1988 and the United States-Canada Free
Trade Agreement Implementation Act was approved by
Congress on September 28, 1988, Pub. L. 100-449, 102 Stat.
1851, as amended by Pub. L. 101-207, § 1(b), 101 Stat. 1833,
reprinted at 19 U.S.C. § 2112 [statutory notes].
8a
Dept. of Revenue, 477 U.S. 1, 10 (1986)
(distinguishing “International aspiration” and “the
law as it presently stands,” refusing to enforce the
“aspiration” to strike a state tax) (emphasis in the
original). Indeed, rather than explicitly preempting
state buy-American statutes, the Agreement seems
tacitly to acknowledge and permit them. Article
1304 provides that “[t]he obligations of this
Chapter shall apply only to procurements specified
in Code Annex I.” The Annex then specifies
fifty-four federal agencies for coverage. Implicit in
this specific designation. omitting the states is
Congress’ acquiescence in, if not endorsement of,
state buy-American statutes. Cf. Wardair, 477 U.S.
at 12. The legislative history makes this point
clear, noting that “[aJlthough discussions in the
current version of the agreement were not
successful in addressing barriers below the level
of the Federal Government in either country, it is
the Committee's understanding that the two
governments will return to this subject at a later
point.” S. Rep. No. 100-509, 100th Cong., 2d
Sess., at 65 (report of the Senate Committee on
Government Affairs). Appellants provide no
evidence that any subsequent negotiations have
revisited and resolved questions about
sub-national barriers. In the meantime, it is
untenable to suggest that an agreement
unsuccessful in addressing sub-national trade
barriers has preempted a state buy-American
statute.
4. Canadian commentators agree, see ¢.g., J. Johnson & J.
Schachter, The Free Trade Agreement, A Comprehensive Guide,
§ 4.2(3) (1988) (United States-Canada Free Trade Agreement
Chapter on Government Procurement “is based on the [GATT]
Procurement Code,” discussed infra, from which “all
provincial, state and local government procurement is
excluded’).
9a
Appellants’ position also overlooks Congress’
substantial concern with fair trade, as distinct
from free trade. Article 1301, on which appellants
also rely, speaks of achieving “mutually beneficial
trade opportunities in government procurement
based on the principles of non-discrimination and
fair and open competition.” (emphasis added).* The
legislative history notes Congress’ concern “about
the negative effect that provincial procurement
barriers can have on the ability of U.S. exporters
to compete for government procurement contracts
in Canada.” S. Rep. No. 100-509, 100th Cong., 2d
Sess., at 65 (report of the Senate Committee on
Government Affairs).° Given Congress’ evident
5. See also, the Trade Agreements Act of 1974, among the
purposes of which is “to harmonize, reduce, and eliminate
barriers to trade on a basis which assures substantially
equivalent competitive opportunities for the commerce of the
United States,” 19 U.S.C. § 2102(2) and the Trade Agreements
Act of 1979, where one “objective [is to] encourage countries
to become parties to the [GATT Government Procurement
Code] and provide appropriate reciprocal competitive
government procurement opportunities to United States
products... .” 19 U.S.C. § 2512(b).
6. It is also to be observed that achieving United
States-Canadian reciprocity in sub-national government
procurement may require more than national legislation. While
it is clear that, on the United States’ side, Congress would
have authority to act preemptively in this area as an exercise
of its power over foreign commerce, it is not at all clear that
the Canadian Parliament has cognate authority. In Canada
the allocation of authority between federal and provincial
institutions, including the treaty power, is governed by §§ 91
(federal powers), 92 (provincial powers) and 132 (treaty power)
of the Canadian Constitution, British North America Act,
1867, 30 & 31 Victoria c. 3 (consolidated with amendments),
substantially amended by the Constitution Act, 1982, Can.
Rev. Stat. 1985, Apendix II, No. 44. Under the allocation of
authority established by these sections, it may be that a
10a
concern with achieving reciprocal trade barrier
reduction it would be anomalous to draw the
inference that the executive and legislative
branches intended to require the unilateral
elimination of state trade barriers. The United
States-Canada Free Trade Agreement does not
constitute such a mandate.
2. Agreement on Government Procurement
The Agreement on Government Procurement was
entered into in 1979 pursuant to the Tokyo Round
of GATT negotiations. It was implemented by the
President in 1982, pursuant to his authority under
the Trade Agreements Act of 1979, 19 U.S.C.
§§ 2511-18 and under 3 U.S.C. § 301. The
Agreement contains detailed rules on the way in
which government procurement contracts are to be
awarded, including that governments will provide
foreign nationals “treatment no less favorable than
that accorded to domestic products and
suppliers.” Agreement on Government
Procurement, Art. II.
Like the United States-Canada Free Trade
Agreement, however, the Government Procurement
federal undertaking to impose constraints on provincial
purchasing policies would require approval of the individual
provinces. See, Attorney-General of Canada v. Attorney-General
of Ontarto (the Labour Conwentions case}, [1937] A.C. 326,
{1937} 1 D.L.R. 673 (Atkins, L.). See also, P. Hogg,
Constitutional Law of Canada, 249-54 (2d ed. 1985).
It also appears that Canadian provinces may enjoy
rights similar to those accorded states under the market
participant doctrine. See Smylie v. The Queen (1900) 31 O.R.
202, 222-23 (Ont. C.A.)} (province has the power under § 92
to dictate the terms under which it disposes of its own
property, thus permitting province to prohibit the harvest of
timber from provincial lands unless harvester pledges to have
timber processed in Canada before export). See also, P. Hogg,
supra, at 570-74.
lla
Agreement only purports to cover fifty-four federal
agencies. Furthermore, the Government
Procurement Agreement contains express language
suggesting that national governments will attempt
to persuade local governments of the benefits of
free trade.’ If anything, then, the President and
Congress have disavowed any intent to supersede
such state legislation. The Agreement’s legislative
history confirms this view. See Statement of
Administrative Action, printed in H.R. Doc. No.
96-153, 96th Cong., lst Sess. 388, 466, reprinted
in 1979 U.S. Code Cong. & Admin. News, 665,
726-27 (“The Agreement does not cover... all
purchases by States and local governments,
including purchases by States and _ local
authorities with federal funds”) (emphasis in the
original); cf. id. at 479, reprinted in 1979 U.S. Code
Cong. & Admin. News at 737-38 (“[plurchases by
state and local governments are not covered since
the Agreement applies only to federal agencies
specifically listed . . . [t]he Agreement obligates
the U.S. government only to inform regional and
local governments of the principles and rules of
the Agreement”). In short, the Agreement on
Government Procurement demonstrates no intent
to preempt state buy-American statutes.
7. Article I, { 2 provides, “The Parties shall inform their
entities not covered by this Agreement and the regional and
local governments and authorities within their territories of
the objectives, principles and rules of this Agreement, in
particular the rules on national treatment = and
non-discrimination, and draw their attention to the overall
benefits of liberalization of government procurement.”
12a
B. Statutes
Appellants’ preemption arguments also invoke
the Steei Import Stabilization Act, P.L. 98-573,
Title VIII, §§ 801-808, 98 Stat. 3043-47, codified
at 19 U.S.C.A. § 2253 (Supp. 1990), the Trade Act
of 1974, Pub. L. 93-618, 88 Stat. 1978, (codified
as amended in scattered sections of 5 U.S.C., 19
U.S.C. and 31 U.S.C.), and the Trade Agreements
Act of 1979, Pub. L. 96-39, 93 Stat. 144 (codified
as amended primarily in scattered sections of 19
U.S.C.). But these arguments, too, are wide of the
mark. Much of the statutory language is either
aspirational or so general as to be insufficient to
justify a finding of preemption. See, e.g., Steel
Import Stabilization Act, Sec. 802(a)(4) (describing
a “national policy” for the steel industry); Trade
Act of 1974, 19 U.S.C. § 2102(1), (2) (Supp. 1990)
(Act's purpose is to promote “open and
nondiscriminatory world trade” and “to harmonize,
reduce, and eliminate barriers to trade”); Trade
Agreements Act of 1979, 19 U.S.C. § 2502(2) (Act's
purpose is to promote “an open world trading
system’).
Those statutory provisions that are relatively
specific fall short of establishing a comprehensive
federal scheme or of revealing a direct conflict with
the Steel Act. The Steel Import Stabilization Act,
for example, establishes a mechanism for imposing
quantitative limits on United States’ steel imports.
It does not, however, include regulations of price,
quality or other terms of trade that if present
would indicate comprehensive regulation.
Similarly, the Trade Agreements Act, in making
reference to the effects of state policy on
international trade, goes only so far as to
announce the “sense of Congress” that state
l3a
agencies should not use standards-related activity®
to create “unnecessary obstacles” to foreign trade.
§ 403, codified at 19 U.S.C. § 2533. We think it
unlikely that a “sense of Congress” is sufficient to
preempt a_ state statute establishing a
standards-related barrier;? it certainly is
insufficient to preempt other types of trade
restrictions. Indeed, the cited provision suggests
that Congress is aware of state activities affecting
foreign trade and has decided to confine itself to
persuasive appeals rather than mandatory
preemption.
Such an approach is unsurprising given the
Congress’ previously mentioned concern that any
reductions in barriers to trade be accomplished on
a reciprocal basis. That concern has_ been
expressed during the adoption of the agreements
discussed above and during the adoption of the
three trade acts relied on by appellants. See, e.g.,
Steel Import Stabilization Act, Sec. 802(a)(4)
(“vigorous efforts . . . needed to eliminate...
unfair trade practices"); Trade Act of 1974, § 2,
codified at 19 U.S.C. § 2102(2), (3) (goal is “to
assure({] substantially equivaient competitive
opportunities for the commerce of the United
States” and “establish fairness and equity in
international trading relations’). Absent
assurances of a reciprocal commitment by our
trading partners, it appears that the Congress is
8. “Standards-related activity” is a buyer's activity
establishing perfc..mance and other technical criteria for goods
that it will purchase, and for testing those goods to insure
that they meet the standards established. See 19 U.S.C.
§ 2532.
9. See L. Trive, American Constitutional Law, § 6-26, at 489
(2d ed. 1988) (“broad and abstract federal goals [are] given
scant preemptive effect*).
l4a
as yet unwilling to preempt state buy-American
legislation.
In sum, federal policy as reflected in the two
international agreements and three statutes has
left unadulterated a state’s authority to enact
buy-American legislation. These agreements and
statutes do not constitute a comprehensive scheme
sO pervasive that it must exclude all state action
with respect to foreign steel nor are they otherwise
sufficient to support an inference of Congressional
intent to preempt state buy-American legislation.
The federal policy appears to have been the result
of an explicit negotiating strategy, a strategy that
permits such sub-national legislation pending
sufficient trade concessions or assurances of
mutuality on the part of our international trading
partners. We offer no comment on the wisdom of
that strategy except to say that courts should leave
such matters to the responsible arbiters, Congress
and the Executive. If Congress and the Executive
conclude that a state statute such as the Steel Act
is antithetic to the national interest, they have full
authority to foreclose its continuing operation. But
no such authority has yet been exercised.
II. Commerce Clause Challenge
Article I, § 8 of the United States Constitution
provides that “(t]he Congress shall have Power...
To regulate Commerce with foreign Nations, and
among the several States.” It is well established
that this affirmative grant may sometimes prohibit
state regulatory activity, even absent preemptive
federal legislation. Swin Resource Systems, Inc. v.
Lycoming County, 883 F.2d 245, 248 (3d Cir. 1989)
(citing Cooley v. Brd. of Wardens, 53 U.S. (12
How.) 299, 319 (1852)). In particular, the “negative
commerce clause,” or “dormant commerce clause”
as this residual constraint is often called, prohibits
lSa
many discriminatory state regulations designed to
promote local enterprise at the expense of that
from other states or from foreign countries. The
general rationale underlying the negative
commerce clause is that it prevents the economic
balkanization of the United States into fifty
separate and impenetrable markets. Hughes v.
Oklahoma, 441 U.S. 322, 326 (1979).'°
However, the Supreme Court has also made
clear that “a state or state subdivision that acts
as a market participant, rather than a market
regulator ‘is not subject to the restraints of the
Commerce Clause.” Swin Resources, supra, at 249
(quoting White v. Massachusetts Council of Constr.
Employers, Inc., 460 U.S. 204, 208 (1983)). Put
roughly, the market participant doctrine protects
states when they are acting as parties to a
commercial transaction rather than (as, for
example, when adopting a tax scheme) they are
acting as market regulators. See Reeves, Inc. v.
Stake, 447 U.S. 429, 437 (1980). Appellees, in
arguing that the commerce clause does not
invalidate the Steel Act, claim the protection of the
“market participant doctrine.” However, the
Supreme Court has_ expressly reserved the
10. It is also well established that state enactments that
might otherwise be barred by the dormant commerce clause
are permissible if sanctioned by Congress. See, e.g. Prudential
Ins. Co. v. Benjamin, 328 U.S. 408, 434 (1945). The
agreements and statutes discussed in Part I of this opinion
seem to us to come exceedingly close to providing such
approval. If such were the case, there would be no dormant
commerce clause issue to be decided as the state legislation
would have received a Congressional imprimatur. Cf. Wardair
Canada v. Florida Dept. of Revenue, 477 U.S. 1, 9-13 (1986).
However, since these agreements and statutes do not contain
a clear statement of acquiescence in state buy-American
statutes, we will go on to consider the commerce clause
challenge.
l6a
question of whether state buy-American statutes
that affect foreign commerce violate the commerce
clause, or are permissible under the market
participant doctrine or on other grounds. Id. at
437, n. 9."
To analyze appellants’ commerce clause
challenge, the first question we face is whether the
state, in enacting and enforcing the Steel Act, is
a market regulator or a market participant. We are
satisfied that if Pennsyivania is only a participant,
the inquiry is at an end, White, 460 U.S. at 210;
for the reasons developed below, we are convinced
that with respect to state buy-American statutes
there can be no commerce clause intrusion even
in a foreign commerce context where there is no
attempt to regulate.'?
Appellants argue that market participant status
is umavailable to Pennsylvania because the
Commonwealth is not a buyer of appellants’
disinfection system. Instead, appellants stress that
their customers are local governmental units
distinct from the Commonwealth. Appellants
contend that in controlling the purchases of these
local entities, the Commonwealth is regulating
11. Two state courts have come to competing conclusions on
this issue. Compare Bethlehem Steel Corp. v. Board of
Commisstoners, 276 Cal. App. 2d 221 (1969) with K.S.B.
Technical Sales Corp. v. North Jersey Dist. Water Supply
Comm'n, 381 A.2d 774 (1977), appeal dismissed 435 U.S. 982
(1978).
12. A determination that Pennsylvania is acting as a
regulator would not, standing alone, be sufficient to invalidate
Pennsylvania's statute. Instead it would bring us only to the
next step of commerce clause inquiry, i.e. determining
whether the statute serves a legitimate state purpose that
cannot be equally well served by non-discriminatory means.
Maine v. Taylor, 477 U.S. 131, 140 (1986).
17a
actors other than itself, thereby forfeiting market
participant status.
Appellants rely heavily on W.C.M. Window Co. v.
Berardi, 730 F.2d 486 (7th Cir. 1984). In Window
the Seventh Circuit struck down an Illinois statute
that required public works contractors, including
those who contracted’ with local political
subdivisions, to hire only Illinois laborers. Id. at -
489. Defending its statute, Illinois contended that
local subdivisions were part of the state, and that,
in controlling local transactions, it was doing
nothing more than directing with whom the state
itself would do business, a privilege available
under the market participant doctrine.
The Seventh Circuit, however, held that, for
purposes of the market participant doctrine, local
political subdivisions are not part of a state. The
court acknowledged that for many purposes such
local subdivisions are part of state government.
However, the court concluded that there was an
“analytical and qualitative” difference between a
State requiring state agencies to hire state
residents on public works projects and a state
requiring local governmental units to do the same.
The analytical difference lay in the lack of state
involvement that results when neither state
supervision nor state funds are included in a
project. Id. at 496. The quantitative difference
resulted from the breadth of local public works
projects. Proceeding on the assumption that local
municipalities do much more public contracting
than state central governments, the Window court
thought that extending market participant
protection to such regulatory schemes “could do
great damage to the principles of free trade on
which the negative commerce clause is based.” Id.
The court thus held that such a scheme does not
qualify for protection under the market participant
18a
doctrine and hence violates the commerce clause.
Id. at 495, 496."°
Respectfully, we disagree. We find no compelling
analytical difference between a local govermment
unit and central state agencies. Both exist only
through affirmative acts of the state. A
municipality derives its authority from the state.
United Building and Trades Council of Camden
County v. Mayor and Council of the City of
Camden, 465 U.S. 208, 215 (1984).'* Under
Pennsylvania law it is clear that the local bodies
covered by the statute exist only by grace of state
authority and with such powers as the. state
affirmatively provides.'* We see no reason why,
attendant on making such affirmative grants of
power, the Commonwealth may not also restrict
the contracting authority of such local bodies.
Imposing such _ restrictions on central state
agencies certainly would be permitted and we do
13. The Seventh Circuit also held that the statute was
unconstitutional under the privileges and immunities clause
of Article IV.
14. See City of Trenton v. State of New Jersey, 262 U.S. 182,
187 (1923) (a state “may withhold, grant or withdraw powers
and privileges as it sees fit. However great or small [the
municipality's] sphere of action, it remains the creature of the
state exercising and holding powers and privileges subject to
the sovereign will.*).
15. See, e.g., Department of Public Weifare v. Adams County,
373 A2d 143, 145 n. 4 (Pa. Commw. Ct. 1977}
(Commonwealth “exercise[s} absolute control over counties’)
rev'd on other grounds, 392 A.2d 692 (1978); Plum Twp.
Annexation Case, 116 A.2d 260 (Pa. Super Ct. 1955) (‘all
municipalities are agents of the state); Darby v. Sharon Hill,
4 A. 722 (1886) (borough is “merely an agency instituted by
the sovereign”) and Simon Appeal, 184 A.2d 695 (1962)
(municipal authority is “an independent agency of the
Commonwealth’).
19a
not believe restrictions on local bodies stand in
any different light.
It may be true that local municipalities and
authorities are responsible for the great bulk of
sub-national public procurement. However, we find
no suggestion in the Supreme Court's previous
forays into this area that the quantum of market
purchases should affect a public entity's
qualification for market participant status. Indeed,
to accept the argument would suggest the curious
result that identical legislation adopted by small
and large states might suffer - different
constitutional fates.
We believe the Court's decision in White further
Supports our conclusion. There, the Supreme
Court upheld an order by the Boston mayor
requiring that all city and federally funded
construction projects be performed by a work force
of at least half Boston residents. The Court
rejected a claim that the order violated the
commerce clause because it effectively regulated
employment contracts between private contractors
and their employees, contracts to which the city
was not a party. The Court reasoned that “the
Commerce Clause does not require the city to stop
at the boundary of formal privity of contract .. .
[e]veryone affected by the order is, in a substantial
if informal sense, “working for the city.” White,
460 U.S. at 211 n. 7. If employees of a private
contractor can be thought to be in relationship
with the city, we think it equally clear that
suppliers of a local public entity can be thought
to be “swpplying for the state.” As the ultimately
controlling public purchaser, the Commonwealth
enjoys the same right to specify to its suppliers
the source of steel to be used in any supplies
provided as is enjoyed by similarly situated private
purchasers.
20a
Nor do we find that the commerce clause's
underlying purposes require a broad prohibition
against state regulation of local municipal
purchases. As noted in Reeves, “the Commerce
Clause responds principally to state taxes and
regulatory measures impeding free private trade in
the national marketplace .. . [t]here is no
indication of a constitutional plan to limit the
ability of the States themselves to operate freely
in the free market.” 447 U.S. at 436-37 (emphasis
added). Nor, we take it, is there any indication of
an intent to limit the market operations of local
public entities. Given that local entities can
presumably decide for themselves to contract only
for American steel, cf. White, 460 U.S. at 215, we
think it clear that the Commonwealth, from which
local municipalities derive their power, can impose
similar limits.
We also are not persuaded that the fact that the
products being excluded are of foreign origin
countenances a different result. It is true that the
Supreme Court has suggested that statutes
affecting foreign commerce are subject to a more
searching review. Reeves, 447 U.S. at 437 n. 9.'°
In striking Alaska’s requirement that timber taken
from state lands be processed in-state, the
Wunnicke plurality stated
[wje are buttressed in our conclusion that the
restriction is invalid by the fact that foreign
commerce is burdened by the restriction. It is a
well-accepted rule that State _ restrictions
burdening foreign commerce are subjected to a
more rigorous and searching scrutiny. It is
16. The Court stated that “Commerce Clause scrutiny may
well be more rigorous when a restraint on foreign commeice
is alleged” (citing Japan Line Ltd. v. County of Los Angeles,
441 U.S. 434 (1979)).
2la
crucial to the efficient execution of the Nation's
foreign policy that “the Federal Government...
speak with one voice when regulating commercial
relations with foreign governments.”
Wunnicke, 467 U.S. at 100.
We hold, however, that the Pennsylvania statute
survives even the most searching review. In Japan
Line, Ltd. v. County of Los Angeles, 441 U.S. 434
(1979), the Court identified two concerns that
underlie the application of a more probing analysis
to state statutes that affect foreign commerce.
First, there is the Ganger of multiple taxation. Id.
at 446. That concern is not implicated by the Steel
Act. Second, state enactments may “impair federal
uniformity in an area where federal uniformity is
essential.” Id. at 448. We do not believe state
procurement policy to be such an area. State
procurement practices present no problems of
reconciling conflicting policy among multiple
national sovereigns. Compare id at 450.
Furthermore, the record in this case shows that
Congress is aware of state activity'’ to restrict
procurement of foreign goods, see supra, Part I,
and yet has not imposed a policy of national
uniformity. Thus, state procurement policy fits
comfortably within the Supreme Court's
observation that nothing in “the Foreign Commerce
Clause insists that the Federal Government speak
with any particular voice.” Wardair Canada uv.
17. Pennsylvania is one of at least eleven states that have
some form of buy-American legislation. See Ala. Code § 39-3-4
et seq. (1987 Supp.), 48 Ill. Rev. Stat. ch. 48, para. 1801 et
seq. (1986), Ind. Code Ann. § 5-16-8-2 et seq. (West 1984),
Mass. Gen. Laws Ann. ch. 7 § 22 (1969), Md. State Fin. &
Proc. Code Ann. § 12-401 et seq. (1985), N.Y. State Fin. Law
§ 146 (1988), W. Va. Code § 5-19-1 et seq. (1987), R.I. Gen.
Laws § 37-2.1 et seq. (1984), Ohio Rev. Code Ann. § 152.011
(1987), N.J. Stat. Ann. § 40A:11-18 (West 1973).
22a
Florida Dept. of Revenue, 477 U.S. 1, 13 (1985).'®
To the degree that Pennsylvania's _ statute
implicates foreign policy in areas other than
commercial trade, appellants’ objections are best
focused on the federal government's power to
control foreign affairs rather than the commerce
clause. It is to that aspect of appellants’ claims
that we now turn.
III. The Foreign Affairs Power Challenge
The formulation and administration of foreign
affairs is vested exclusively in the federal
government. Consequently, any state law that
involves the state in the actual conduct of foreign
affairs is unconstitutional. United State v. Pink,
315 U.S. 203, 233 (1942). See also, L. Tribe,
American Constitutional Law, § 4-6, at 230 (2d ed.
1988) (“state action, whether or not consistent
with current federal foreign policy, that distorts
the allocation of responsibility to the national
government for the conduct of American diplomacy
is void"). In contrast, any action that has only
“some incidental or indirect effect in foreign
countries” does not intrude on the foreign
relations power. Zschernig v. Miller, 389 U.S. 429,
432 (1968) (citation omitted).
On only one occasion has the Supreme Court
struck down a state statute as violative of the
foreign relations power. In Zschernig the Court
held unconstitutional an Oregon statute which
provided that a nonresident alien could not inherit
18. In Wardair the Court upheld a Florida aviation fuel tax
as applied to a Canadian air carrier engaged in international
traffic. The tax was upheld despite the United States being a
party to more than seventy bilateral and multilateral aviation
agreements, many of which contain provisions governing fuel
taxes. 477 U.S. 9-13.
1
23a
from an Oregon decedent unless three conditions
were met: (1) the alien’s government must accord
Americans the right to inherit on equal terms; (2)
the alien's government must give Americans the
right to receive payment in the United States of
funds from foreign estates; and (3) foreign heirs
inheriting from Oregon estates must be abkle to do-
so without confiscation by their government.
In considering the application of the Oregon
statute, the Court noted that Oregon courts, and
other state courts enforcing similar statutes, had
routinely launched inquiries into the type of
government that obtained in the _ inheritor’s
country, inquiries that radiated cold war attitudes
regarding the democratic or Marxist characteristic
of various regimes. Id at 434-35. The Court
concluded that the “real desiderata” of Oregon
court decisions were the foreign policy attitudes of
local probate courts, attitudes that moved with the
wax and wane of the cold war. Id. at 437. Applied
in this way, the Court thought that the Oregon
Statute “held great potential for disruption or
embarrassment.” Id. at 435. The Court concluded
that the statute had a direct impact upon foreign
relations and had potential to affect adversely the
power of the central government to deal with such
" problems. As such it was invalid. Id. at 441.
The Pennsylvania statute exhibits none of the
dangers attendant on the statute reviewed in
Zschernig, for Pennsylvania's statute provides no
opportunity for state administrative officials or
judges to comment on, let alone key their decisions
to, the nature of foreign regimes. On its face the
statute applies to steel from any foreign source,
without respect to whether the source country
might be considered friend or foe. Nor is there any
indication from the record that the statute has
24a
been selectively applied according to the foreign
policy attitudes of Commonwealth courts or the
Commonwealth's ‘Attorney General.'? And while it
is possible that sub-national government
procurement restrictions may become a topic of
intense international scrutiny, and a target in
international trade negotiations, that possibility
alone cannot justify this court’s invalidation of the
Commonwealth's statute. This is especially true
when Congress has recently directed its attention
to such restrictions and has taken no steps to
preempt them through federal legislation. Indeed,
in light of Congress’ evident concern with
achieving freer trade on a reciprocal basis, to
strike Pennsylvania's statute would amount to a
judicial redirection of established foreign trade
policy —- a quite inappropriate exercise of the
juidcial power.
IV. The Vagueness Challenge
Appellants and appellees agree that controlling
vagueness doctrine is set out in Grayned v. City
of Rockford, 408 U.S. 104 (1972). In Grayned the
Court explained
Vague laws offend several important values.
First, because we assume that man is free to
steer between lawful and unlawful conduct, we
insist that laws give the person of ordinary
19. Appellants do suggest that Pennsylvania's enforcement
inquiries were made only at the request of a Trojan
competitor. The suggestion is dehors the record, as the facts
stipulated by the parties make no mention of how Trojan’s
potentiai violation originally came to the Attorney General's
attention. Even if true, appellants’ allegation does not
establish —- indeed, it does not even suggest —- that the
statute is being selectively enforced against suppliers from
only a particular nation or group of nations, according to
foreign policy attitudes held by Pennsylvania officials.
25a
intelligence a reasonable opportunity to know
what is prohibited, so that he may act
accordingly. Vague laws may trap the innocent
by not providing fair warning. Second, if arbitrary
and discriminatory enforcement is to _ be
prevented, laws must provide explicit standards
for those who apply them. A vague law
impermissibly delegates basic policy matters to
policemen, judges, and juries for resolution on
an ad hoc subjective basis, with the attendant
dangers of arbitrary and _ discriminatory
applications.
Id. at 108-09. Thus, a statute should be struck as
vague if (1) it fails to give a person of ordinary
intelligence a reasonable opportunity to know what
is prohibited, or (2) it fails to provide explicit
standards to the enforcing officer, in this case
Pennsylvania's Attorney General.
The Court also has declared that
economic regulation is subject to a less strict
vagueness test because its subject matter is often
more narrow, and because businesses, which
face economic demands to plan _ behavior
carefully, can be expected to consult relevant
legislation in advance of action. Indeed, the
regulated enterprise wiay have the ability to
clarify the meaning of the regulation by its own
inquiry, or by resort to an administrative
process. The Court has also expressed greater
tolerance of enactments with civil rather than
criminal penalties because the consequences of
imprecision are qualitatively less severe.
26a
Village of Hoffman Estate v. Flipside, Hoffman
Estate, Inc., 455 U.S. 489, 498-99 (1982).?°
Hoffman Estates added that “[a] plaintiff who
engages in some conduct that is clearly proscribed
cannot complain of the vagueness of the law as
applied to the conduct of others.” Id. at 495.
Appellants first contend that the Steel Act
should be subject to a relatively strict vagueness
review, as the’ sanctions it imposes —
characterized by defendant as civil penalties but
“commercially devastating,” Appellants’ Brief, at 42
— are severe. We disagree. It is not clear to us
that barring a supplier from public contracting
within the Commonwealth for five years is severe.
Such a supplier remains free to participate in the
private Pennsylvania market and to supply
purchasers in other states. In any case, for
purposes of testing the penal severity of a given
statute, Hoffman Estates focused on the distinction
between criminal and civil sanctions, i.e. between
incarceration and financial penalties. We know of
no case in which a civil statute has been subjected
to strict vagueness review. Thus, Pennsylvania's
statute will be measured against the more
deferential standard usually attendant on
commercial regulation.
Appellants contend that the statute is vague in
several respects. First, appellants argue that the
definition of “steel products,” Pa. Stat. Ann. tit. 73,
§ 1886, is inadequate because (1) it fails to
20. We note that this suit effectively presents a facial
challenge to the statute, i.e. there is nothing in the record to
indicate how the statute has been interpreted by the
Pennsylvania courts and the Pennsylvania Attorney General.
nor is there any indication of what, if any, administrative
mechanisms may be available to clarify the statute's coverage.
27a
identify how much steel must be fabricated into
otherwise non-steel products to convert that
product into a “steel product,” Appellants’ Brief, at
43-45, and (2) it fails to provide standards for
determining when steel is “United Siates steel,”
Appellants’ Brief, at 45-47.
To demonstrate the first of these points, -
appellants set out a parade of horribles, e.g. is a
wooden chair with nails a steel product? But
rhetorical questions of this sort, though intriguing,
are not to the point. As noted in Hoffman Estates,
appellants’ burden is to show that the statute is
vague with respect to their activity. The statutory
definition of steel products expressly incorporates
the United States Commerce Department Standard
Industrial Classification 35. Classification 35
specifically includes “sewage purification
equipment.” The UV-2000 undoubtedly falls within
such a class, giving appellants ample warning that
their product is within the Steel Act’s ambit.!
Appellants also claim that “steel products” is
vague because it provides no standards for
determining when “articles, materials, and
supplies” have been “mined, produced, or
21. Appellants contend that such a listing alone is
insufficient to ameliorate the statute's vagueness, pointing out
that the same classifications incorporated by the Pennsylvania
statute also list “wooden chairs.” They similarly object that
the statute is unconstitutionally vague because it leaves
unclear whether suppliers must certify that United States
steel is used in “nuts and bolts holding the system together,”
Appellants’ Brief, at 47. Again, however, by these objections
appellants seek the benefits of a vagueness challenge as it
might be raised by other parties. Whatever the case with
respect to “wooden chairs” and “nuts and bolts,” we have no
doubt that a manufacturer of “sewage purification equipment”
whose product contains several steel components has had
sufficient warning that his product 1s covered by the statute.
28a
manufactured” or “melted and manufactured” in
the United States. Appellants note specifically that
much steel is reprocessed, resulting in the final
product becoming the combination of foreign and
domestic steel. Under such circumstances,
appellants, claim that “United States steel” is
inherently vague.
However, the difficulty facing appellants is not
that the definition of United States steel is vague
but that as a matter of commercial practice it may
not always be easy to find steel that satisfies the
requirement. Inability to satisfy a clear but
demanding standard is different from inability in
the first instance to determine what the standard
is. We see no reason that Pennsylvania may not
err on the side of caution in requiring clear
affirmative evidence that steel being used is
entirely of United States origin rather than, as
appellants would have it, giving the benefit of the
doubt to much of the steel! that is in commercial
use. If appellants wish to sell to public agencies
in Pennsylvania, their remedy is to use virgin
United States steel or to find some other means
of tracing the steel’s source.
V. The Equal Protection Clause Challenge
Finally, we find no merit in appellants’ claim
that the Steel Act violates the equal protection
clause. Relying exclusively on Metropolitan Life
Insurance Co. v. Ward, 470 U.S. 689 (1985),
appellants contend that “the Steel Act
unconstitutionally attempts to protect the United
States steel industry by discriminating against
foreign competition.” Appellants’ Brief, at 18. Such
a purpose, argue appellants, is illegitimate under
the equal protection clause. In Metropolitan Life
the Supreme Court struck down an Alabama
29a
statute that imposed a higher tax rate on
nonresident insurance companies than on resident
companies. Later in the same term, however,
Metropolitan Life was sharply limited to its facts
in Northeast Bancorp, Inc. v. Board of Governors,
472 U.S. 159, 176 (1985). As the present case does
not involve .the taxing power and “the Equal
Protection Clause permits economic regulation that
distinguishes between groups that are legitimately
different — as local institutions so often are,” {d.
at 180 (O'Connor, J. concurring), we find no basis
for concluding that the Steel Act contravenes the
equal protection clause.
VI. Conclusion
For the foregoing reasons, the judgment of the
District Court will be affirmed.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
30a
APPENDIX B — OPINION AND ORDER OF THE DISTRICT
COURT
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CIVIL ACTION NO. 89-0364
TROJAN TECHNOLOGIES, INC., KAPPE ASSOCIATES,
ee
Plaintiffs,
COMMONWEALTH OF PENNSYLVANIA, LEROY
ZIMMERMAN, Atty. Gen. of PA.,
Defendants.
MEMORANDUM
The parties to this declaratory judgment litigation have each
filed a motion for summary judgment. At issue~is_ the
constitutionality of the Steel Products Procurement Act (73 P.S.
§ 1881 et seq.), enacted by the Commonwealth of Pennsylvania
in 1978 (the Act). The Act requires public agencies, when
undertaking the construction of public works, to include a
provision in their contracts that the steel used in all projects be
produced in the United States.
Plaintiff Trojan Technologies, Inc. is a Canadian corporation
engaged in the manufacturing of equipment used in waste
water/sewage treatment facilities. Kappe Associates, Inc. is
Trojan’s representative in Pennsylvania. In March 1988, the
es
3la
Appendix B
Attorney General of Pennsylvania received a request to investigate
whether certain equipment manufactured by Trojan and suitable
for use in public work projects, was in compliance with the Act.
On June 29, 1988, the Attorney General determined that Trojan’s
equipment was covered by the Act.' He requested that Trojan
submit documentation showing that the steel in its product was
made in the United States. The Attorney General also requested
information from seven municipal authorities concerning their
possible purchase of Trojan’s UV-2000 systems, which could be
in violation of the Act. The Attorney General intends to enforce
the Act against Trojan, and although no proceedings have been
instituted it is not disputed that the Act would preclude the use
of the Trojan product in public work projects in Pennsylvania.
This suit was filed on August 8, 1988 in the Eastern District Court
of Pennsylvania and transferred to this District on February 2,
1989.
Plaintiffs’ position that the Act is unconstitutional or invalid
is based on the following:
1) The Act violates the Commerce Clause of
the United States Constitution.
2) The Act is an intrusion into foreign affairs
of the United States, an area reserved to the federal
government.
3) The Act is preempted by federal statutes
and foreign trade agreements between the United
States and Canada.
1. The equipment is an ultraviolet light disinfection system, known as
UV-2000.
32a
Appendix B
4) The Act is void for vagueness.
The Commerce Clause Challenge
Plaintiffs contend that the effect of the Act is to regulate
the importing or sale in Pennsylvania of steel made outside the
United States. Plaintiffs submit that the regulation of commerce
with foreign nations is a subject that is within the exclusive control
of the federal government under the commerce clause of the United
States Constitution. Citation of authority is not required to affirm
this basic principle, and if the Act does, in fact, regulate commerce
with foreign countries it is invalid. A state law may violate the
commerce clause if its purpose or effect is to discriminate against
foreign competition. Examples of such illegal laws are Bacchus
Imports Ltd. v. Dias, 468 U.S. 263, 82 L.Ed.2d 200, 104 S.Ct.
3049 (1984), where the state of Hawaii imposed a tax on the sale
of liquor at wholesale but exempted certain locaily produced
beverages, and Hunt v. Washington Apple Adv. Comm., 432 U.S.
333, 53 L.Ed.2d 383, 97 S.Ct. 2434 (1977), where a North Carolina
Statute attempted to limit the ‘‘grading’’ information that could
be used on closed containers of apples shipped to North Carolina.
In both instances the state laws discriminated against foreign
products in favor of locally produced goods.
In opposing plaintiffs’ motion for summary judgment, and
in support of its cross motion, the defendants dispute that the
Steel Products Procurement Act regulates commerce or otherwise
intrudes in areas reserved to the federal government. The
defendants contend that public agencies of the Commonwealth
are ‘‘market participants’’, and that the Act does no more than
limit the products that may be purchased or used in constructing
public projects. Rather than ‘‘regulating’’ or attempting to regulate
the sale in Pennsylvania of foreign made steel, the state contends
33a
Appendix B
it is legitimately supporting an important local and national
industry by restricting steel purchases of public agencies to
doinestically produced steel.
The rationale for the ‘‘market participant’’ exception is
illustrated in Hughes v. Alexandria Scrap Corporation, 426 U.S.
794, 49 L.Ed.2d 220, 96 S.Ct. 2488 (1976). Maryland enacted
a complex statute aired at reducing the volume of inoperable
or junk vehicles in Maryland by offering an incentive to scrap
processors. The law provided, among other things, for the payment
of a ‘“‘bounty’’ to scrap processors who destroyed and processed
junk vehicles formerly titled in Maryland. Processors located in
Maryland were provided an easy means of proving the origin of
such vehicles, while non-Maryland scrap processors were held to
a more demanding measure of proof in order to claim the bounty.
Plaintiff, a Virginia scrap processor, challenged the statute as
violative of the commerce clause. The Maryland District Court
agreed, finding that the law imposed ‘‘substantial burdens upon
the free flow of interstate commerce’’ and discouraged wreckers
from taking vehicles out of Maryland for processing. The Supreme
Court, however, reversed and held that the commerce clause does
not require independent justification when a state enters the market
as a purchaser:
Nothing in the purposes animating the Commerce
Clause forbids a State, in the absence of
congressional action, from participation in the
market and exercising the right to favor its own
citizens over others.
The Supreme Court acknowledged that the effect of the
statute may tend to keep junk vehicles from flowing to out of
state processors, but noted that ‘‘no trade barrier of the type
34a
Appendix B
forbidden by the Commerce Clause. . . impedes their movement
out of state.’’ (49 L.Ed.2d at 231).
We find defendants’ argument persuasive and conclude that
public agencies applying the Act are no more than market
participants in complying with the Act and specifying the use of
domestically produced steel in public work projects. The legislation
at issue here does not attempt to control or limit the free flow,
or the sale, of foreign steel products in Pennsylvania. The
legislature simply announced that public agencies in Pennsylvania
must support and foster the well being of an important state and
national industry by restricting its purchases of steel or steel
products to those made in this country. Although this action may
reduce the volume of foreign steel actually sold in Pennsylvania,
it does not create a barrier to its free flow into Pennsylvania.
Just as with a private entity, the state may exercise a choice as
to what it will purchase, but it does not thereby ‘‘regulate’’
commerce in the constitutional sense.
The Intrusion of the Act into Foreign Affairs
Plaintiffs contend that the Act intrudes into foreign policy
or international affairs, which is an area within the exclusive
control of the federal government. Although the Constitution
makes no express grant, the exclusive control of foreign affairs
by the federal government is well established and beyond debate.
Plaintiffs refer to several cases where state laws have been held
to interfere in foreign matters. In Hines v. Davidowitz, 312 U.S.
52, 61 S.Ct. 399, 85 L.Ed. 581, (1941), the Supreme Court struck
down a Pennsylvania law that required aliens to register annually
with the state Department of Labor and Industry. The Court ruled
that a similar federal law was intended by Congress as a
comprehensive and uniform scheme for the regulation of all aliens,
35a
Appendix B
and rendered the state law unenforceable. In Zschering v. Miller,
389 U.S. 429, 88 S.Ct. 664, 19 L.Ed.2d 683 (1968), the Supreme
Court voided an Oregon law that placed conditions on the rights
of nonresident aliens to inherit property owned by Oregon
decedents, holding that the law impaired the effective exercise
of the nation’s foreign policy. These laws each had a direct
relationship to overriding national concerns, but we find no
support in such holdings for concluding that the Act in question
intrudes in foreign affairs. The Steel Products Procurement Act
does not bring Pennsylvania into contact with a foreign
government or with foreign affairs, and the only impact of the
Act on other countries is incidental - i.e., a possible decrease in
the total sales of foreign steel in Pennsylvania because public
agencies will not buy it. This result, however, is traceable to
participation in the market place and not to any effort to control
or regulate commerce with foreign countries.
Preemption by Federal Laws
Plaintiffs also argue that legislation such as the Act is
preempted by various federal agreements or legislation, including
the United States - Canada Free Trade Agreement. However, we
doubt that Congress intended the trade agreement to preempt states
from being ‘‘market participants,’’ and there is no clear intent
of congress to forbid states from taking action to limit to the
source of their purchase of commodities. In Kentucky West
Virginia Gas v. P.U.C., 837 F.2d 600 (3d Cir. 1988) the court
outlined the three tests for determining if preemption has occurred:
1) when enacting federal laws, Congress
explicitly announces its intent to preempt state law;
2) in the absence of express preemptive
36a
language, Congress indicates an intent to occupy
an entire field of regulation, and leaves no room
for states to supplement the federal law;
3) when compliance with state and federal law
is impossible, or when state law is an obstacle to
realizing Congressional objections.
We agree with defendants that preemption is not
demonstrated. In none of the laws cited by plaintiffs has Congress
prohibited states from being market participants, and the trade
statutes Or agreements in question are limited to the
importation/purchase of foreign products by the federal
government.’ The Steel Products Procurement Act does not close
Pennsylvania to the free flow of foreign steel products, and the
court is not persuaded that the incidental result of reducing the
quantities of foreign steel sold in Pennsylvania comes into conflict
with trade policies, etc. of the United States. If a ‘‘buy-America’”’
goal of a state intrudes into foreign affairs, or conflicts with federal
trade efforts, Congress could easily occupy the field with express
legislation to prohibit the practice by state governments.
Vagueness of the Act
The Act requires that only ‘‘steel products,’’ as defined in
Section 1886, be used in all public agency projects. Plaintiffs
contend the Act should be voided because of its imprecise
definition of ‘‘steel products.’’ Generally speaking ‘‘steel products’’
is defined as those produced from steel made in the United States.
Plaintiffs argue that under the terms of the Act it cannot be
2. In addition to the United States-Canada Free Trade Agreement, plaintiffs
also refer to the Agreement on Government Procurement, etc. of 1979; the
Steel Import Stabilization Act of 1974; the Trade Act of 1974; and the Trade
Agreement Act of 1979.
37a
Appendix B
ascertained where the line is drawn in deciding whether a public
agency is dealing with an item covered by the broad definition
in the Act. Plaintiffs pose their dilemma by asking whether a
written report on a public project, held together by a steel Staple,
is a **steel product’’; or are chairs supplied to a public agency
that are held together by a few steel nails included within the
definition; or is a calculator, held together with steel screws, a
‘*steel product’’? The steel in the product involved in this case
constitutes about 15% of its total cost, but what if it were only
5% or 2%? Where is the threshold and how much steel is enough?
Where both foreign and domestic steel are used in a product it
is considered a ‘‘steel product’’, and acceptable, if 75% of the
cost of the ‘‘articles, materials and supplies’’ have been ‘mined,
produced or manufactured’’ in the United States, but how does
one determine the meaning of the quoted language?
We agree with plaintiffs that many situations can be posed
where the applicability of the Act would be difficult, if not
impossible, to ascertain. But the legal test for vagueness is not
based upon one’s ability to conjure up a factual setting where
the application of a particular law is uncertain. The Supreme Court
has announced that to void a vagueness challenge the law must
““give the person of ordinary intelligence a reasonable opportunity
to know what is prohibited, so that he may act accordingly.”’
Graymead v. City of Rockford, 408 U.S. 104, 33 L.Ed.2d 222,
92 S.Ct. 2294 (1922). Moreover, when considering whether a law
is void for vagueness the nature of the enactment must be
considered. In Village of Hoffman Estates, Inc. v. Flipside,
Hoffman Estates, Inc., 455 U.S. 489, 71 L.Ed.2d 362, 371-372,
102 S.Ct. 1186 (1982) the Court said:
Thus, economic regulations is subject to a less strict
vagueness test because its subject matter is often
38a
Appendix B
more narrow, and because businesses, which face
economic demands to plan behavior carefully, can
be expected to consult relevant legislation in
advance of action. Indeed, the regulated enterprise
may have the ability to clarify the meaning of the
regulation by its own inquiry, or by resort to an
administrative process. The Court has also
expressed greater tolerance of enactments with civil
rather than criminal penalties because the
consequences of imprecision are qualitatively less
severe.
In concluding that the ordinance at issue in Hoffman Estates
did not implicate consitutionally protected conduct, the Supreme
Court noted that, ‘‘a plaintiff who engaged in some conduct that
is clearly proscribed cannot complain of the vagueness of the law
as applied to the conduct of others’’ (p. 369). Thus, the fact that
the definition of ‘‘steel products’’ may be vague under other
circumstances is unavailing to plaintiffs here. The parties have
stipulated that the steel components of the UV-2000 system,
constitute ‘‘less than 15%’’ of the cost of the system, but we find
this to be a significant part of the product. Additionally, ‘‘sewage
purification equipment’’ is a classification listed in category #35
of the United States Department of Commerce’s classification
of machinery, which is incorporated by reference in the definition
of ‘‘steel products.’’ If the steel in the UV-2000 system was not
made in the United States it is not a ‘‘steel product’’ defined in
the Act, and thus public agencies would be prohibited from
including it in public works projects in Pennsylvania. _
39a
Appendix B
An appropriate order will be entered.
s/William W. Caldwell
William W. Caldwell
United States District Judge
Date: January 5, 1990
40a
Appendix B
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CIVIL ACTION NO 89-0364
TROJAN TECHNOLOGIES, INC., KAPPE ASSOCIATES,
Te.
Plaintiffs,
COMMONWEALTH OF PENNSYLVANIA, LEROY
ZIMMERMAN, Atty. Gen. of PA,
Defendants.
ORDER
AND NOW, this 5th day of January, 1990, plaintiffs’ request
for declaratory and injunctive relief is denied. The Clerk of Court
is directed to close this file.
s/William W. Caldwell
William W. Caldwell
United States District Judge
Filed: January 5, 1990
ia ai Ni
4la
APPENDIX C — THE STEEL PRODUCTS PROCUREMENT
rr) ACT
CHAPTER 25. STEFL PRODUCTS PROCUREMENT ACT
Section Section
1881. Short title. payments: prohibitions for vio
1882. Police power. lations; procedure
vo9y — a a IRRG. Definitions.
; equired contract provisions. RR7 > 5 . 2 : :
1885. Payments under contracts; ac- 1867. Purpose of act; liberal construc
/ : tien.
tion to recover unauthorized ”
Promsions constituting Chapter 25, the Steel Products Procurement
Act, consisting of §§ 1881 to 1887, were enacted by Act 1978, March 3, PLL.
6, No. 3, §§ 1 to 9. generally effective in 60 days.
§ 1881. Short title
This act shall be known and may be cited as the “Steel Products Procurement
Act.”
1978, March 3, P.L. 6, No. 3, § 1, effective in 60 days.
Historical and Statutory Notes
Section 8 of Act 1978, March 3, P.L. 6. No. 3 is
general repealer.
Section 9 of Act 1978. March 3, PL. 6, No. 3
provides that the act shall take effect in 60 davs
but shall not apply to any contract awarded pur-
suant to an invitation for bids issued on or before
the effective date of said act.
Title of Act:
An Act to promote the general welfare and
stimulate the economy of the Commonwealth by
requiring that all public bodies, inchiding the
Commonwealth, its political subdivisions, and all
authorities, include in all contracts for construc-
tion, reconstruction, alteration, repair, improve-
4 ment or maintenance of improvements of a perma-
nent or temporary nature, a provision that if any
steel products are to be used in the performance of
the contract only steel products produced in the
United States shall be used. and imposing liability
for violation of this act. 1978, March 3, P.L. 6,
No. 3.
First class townships, application of act, sce $3
PS. § 56802
Incorporated towns, application of act, see 53
PS. § $3202
Joint municipal activities. application of act, 53
P.S. § 487.1
Municipal contracts generally, application of
act, see 53 P.S. § 1003
Municipal flood control contracts. application
of act- see $3 PS. § 2863
Municipalities, joint purchase contracts, appli-
cation of act. see 53 PS. § 5432.
Parking authonities, application of act, see $3
PS § 351
Pennsylvania transportation assistance authori-
ty, application of act, see 66 P.S. § 1912.
Port authorities, application of act, see 55 P.S.
§ 559.1.
Public auditorium authorities, application of
act, see 53 PS. § 23851.
Public School Building Authority. application
of act, see 24 PS. § 791.10
Public television network commission, applica-
42a
tron of act, see 71 P.S § 1188.4.
Cross References Purchases by public agencies, preference for
Borough contracts, application of act, see 53 domestic aluminum and steel products, see 71 P S.
PS. § 46402. § 773.10! et seq.
Counties of third to eighth classes, application School contracts, application of law. see 24 1° S.
of act, see 16 PS. § 1802. § 7-751.
Second class cites, application of act, see 53 PS. Third class cities, application of act, see 53 P.S.
§ 23308 | § 36901.
Second class townships, application of act, see Water and power resources board, application
53 ¥5.§ GOs of act, see 32 PS. § 662.
State highway and bridge authority, application
of act, see 36 P.S. § 4613.
§ 1882. Police power
This act shall be Geemed to be an exercise of the police powers of the Common-
wealth for the protection of the health, safety and general welfare of the people of
the Commonwealth.
1978, March 3, P.L. 6, No. 3, § 2, effective in 60 days.
Historical and Statutory Notes
For effective date and application of act, see
note under § 1881 of this title.
§ 1883. Public policy
It is hereby determined by the General Assembly of Pennsylvania and declared as
a matter of legislative findings that:
(1) The Commonwealth of Pennsylvania is one of the leading states in the United
States in the production of steel.
(2) The production of steel products constitutes a major industry of the Common-
wealth and, as such, provides the jobs and family incomes of hundreds of thousands
of the people of this Commonwealth and, in turn, millions of persons in the United
States.
(3) The taxes paid to the Commonwealth and its political subdivisions by employ-
ers and employees engaged in the production and sale of steel products are one of
the largest single sources of public revenues in this Commonwealth.
|
43a
(4) It has, for many years, been the policy of the Commonwealth to aid and
support the development and expansion of industry in this Commonwealth in order
et to foster the economic well-being of the Commonwealth and its people.
(5) The economy and general welfare of the Commonwealth and its people, as well
as the economy, general welfare and national security of the United States, are
inseparably related to the preservation and development of the steel industry in the
Commonwealth and in the other states of the United States.
The Pennsylvania General Assembly therefore declares it to be the policy of the
Commonwealth of Pennsylvania that all public officers and agencies should, at all
times, aid and promote the development of the steel industry of the United States in
order to stimulate and improve the economic well-being of the Commonwealth and its
people.
1978, March 3, P.L. 6, No. 3, § 3, effective in 60 days.
Historical and Statutory Notes
F effective date and application of act, see
note under § 1881 of this title.
§ 1884. Required contract provisions
(a) Every public agency shall require that every contract document for the
construction, reconstruction, alteration, repair, improvement or maintenance of pub-
lic works contain a4 provision that, if any steel products are to be used or supplied in
the performance of the contract, only steel products as herein defined shall be used
or supplied in the performance of the contract or any subcontracts thereunder.
(b) This section shall not apply in any case where the head of the public agency, in
writing, determines that steel products as herein defined are not produced in the
United States in sufficient quantities to meet the requirements of the contract.
1978, March 3, P.L. 6, No. 3, § 4, effective in 60 days.
Historical and Statutory Notes
For effective date and application of act, see
note under § 1881 of this title
§ 1885. Payments under contracts; action to recover unauthorized payments:
prohibitions for violations: procedure
A (a) No public agency shall authorize, provide for or make any payinents to any
person under any contract containing the provision required by section 4! unless,
when unidentified steel products are supplied under a contract, such person has
provided documentation including, but not limited to, invoices, bills of lading, and
mill certification that the steel was melted and manufactured in the United States,
which establish that such person has fully complied with such provision. If a steel
product is identifiable from its face, such person must submit certification which
satisfies the public agency that such person has fully complied with the provision
required by section 4. Any such payments made to any person by any public agency
which should not have been made as a result of this section shall be recoverable
directly from the contractor, subcontractor, manufacturer or supplier whe did not
comply with section 4 by either such public agency or the Attorney General of
Pennsylvania.
44a
(b) In addition to the withholding of payments, any person who willfully violates
any of the provisions of this act shall be prohibited from submitting any bids to any
public agency for any contract for a period of five years from the date of the
determination that a violation has occurred. In the event the person who violates
the provisions of section 4(a) is a subcontractor, manufacturer or supplier, such
person shall be prohibited from performing any work or supplying any materials toa
public agency for a period of five years from the date of the determination that a
violation has oecurred.
(c) Title 2 of the Pennsvivania Consolidated Statutes (relating: ta administrative
law and procedure) applies to decisions by public agencies that a person has vielated
section (Ma).
1978, March 3. PLL. 6. No. 3. § 5, effective in 60 days
693, No. 142, § 202, effective in 60 days
144, § 1. effective in 60 days.
Section IRR4 of this title
As affected 1980, Oet 5. PLL.
As amended 1984, July 9, PLL. 674. No.
Repealed in Part *
This section ts repealed by Act 1980, Oct. 15, P.L. 950. No. 164, & 504 (71
PS. § 732-504), insofar as it 1s inconsistent with provisions of said act.
fied’, added second sentence of subsec. (a). and,
in third sentence. inserted “manufacturer or sup-
plier’. and, made editorial changes
Section 3 of Act 1984, July 9, P-L 4674, No
Historical and Statutory Notes
For effective date and application of act, see
note under § [881 of this title
1984 Amendment: Dev.cnated existing text as
subsec. (a) and added subsecs (b) and (c); in first
eentence of subsec (a). substituted “when uniden-
tified steel products * * * in the United States,
which establish” for “the public agency ts satis-
§ 1886. Definitions
144. provides as follows:
This act shall not apply to any contract award-
ed pursuant to an invitation for hids issued on or
hefore the effective date of this act”
The following words and phrases when used in this act shall have, unless the
context clearly indicates otherwise, the meanings given to them in this section:
“Person.” Natural persons as well as corporations, partnerships, business units
and associations.
“Public agency.”
(1) the Commonwealth and its departments, boards, commissions and agencies:
(2) connties, cities, boroughs, townships, school districts, and any other govern
mental unit or district:
(3) the State Public School Building Authority, the State Highway and Bridge
Authority, and any other authority now in existence or hereafter created or orga-
nized hy the Commonwealth:
(4) all municipal or school or other authorities now in existence or hereafter
created or organized by any county, city, borough, township or school district or
combination thereof; and
4Sa
(5) any and all other public bodies, authorities, officers, agencies or instrumentali-
ties, whether exercising a governmental or proprietary function.
“Public works.” Any structure, building, highway, waterway, street, bridge,
transit system, airport or other betterment, work or improvement whether of a
permanent or temporary nature and whether for governmental or proprietary use.
The term includes, but is not limited to, any railway, street railway, subway,
elevated and monorail passenger or passenger and rail rolling stock, self-propelled
ears, gallery cars, locomotives, passenger buses, wires, poles and equipment for
electrification of a transit system, rails, tracks, roadbeds. guideways, elevated
structures, buildings, stations, terminals, docks, shelters and repairs to any of the
foregoing.
“Steel products.” Products rolled, formed, shaped, drawn, extruded, forged, cast,
fabricated or otherwise similariy processed, or processed by a combination of two or
more of such operations, from steel made in the United States by the open hearth,
basic oxygen, electric furnace, Bessemer or other steel making process and shall
include cast iron products and shall include machinery and equipment listed in United
States Department of Commerce Standard Industrial Classification 25 (furniture and
fixture), 35 (machinery, except electrical) and 37 (transportation equipment} and
made of, fabricated from, or containing steel components. If a product contains
both foreign and United Stages steel, such product shall be determined to be a United
States steel product only if at least 75% of the cost of the articles, materials and
supplies have been mined, produced or manufactured, as the case may be, in the
United States. Transportation equipment shall be determined to he a United States
steel product if it complies with section 165 of Public Law 97-424 (96 Stat. 2136).!
“United States.” The United States of America and includes all territory, conti-
nental or insular, subject to the jurisdiction of the United States.
1978, March 3, PLL. 6, No. 3, § 6, effective in 60 days. As amended 1982, June 18,
PLL. 558, No. 161, § 1, effective in 60 days; 1984, July 9, P.L. 674, No. 144, § 2,
effective in 60 days
1223 USCA. § 101 note
Historical and Statutory Notes invitation for bids issued on or befOre the effective
For effective date and application of act, see date of this act.
note under § 1881 of this title. 1984 Amendment: Added second sentence in
definition of “public works” and, in definition of
1982 Amendment: Act end of definition of — “steel products”, added “and shall include ma-
“steel products” added “and shall include cast chinery and equipment * * ° with section 165 of
iron products” Public Law 97-424 (96 Stat. 2136)".
Section 2 of Act 1982, June 18, P.L. 556, No. Section 3 of Act 1904, July 9, P.L. 674, No.
144, provides as follows:
. id -
aO8. SERNEEEE Gh Sees “This act shall not apply to any contract award-
“This act shall take effect in 60 days but shall — ed pursuant to an invitation for bids issued on or
not apply to any contract awarded pursuant to an before the effective date of this act.”
§ 1887. Purpose of act; liberal construction
This act is intended as remedial legislation designed to promote the general
welfare and stimulate the economy of the Commonwealth and its people and each
and every provision hereof is intended to receive a liberal construction such as will
hest effectuate that purpose and no provision is intended to receive a strict or limited
construction.
1978, Mareh 2. PLL. 6, No. 3, § 7, effective in 60 days.
46a
APPENDIX D — THE STIPULATION OF FACT
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CIVIL ACTION NO 89-0364
(Judge Caldwell)
TROJAN TECHNOLOGIES, INC. and KAPPE ASSOCIATES,
INC.,
Plaintiffs,
¥.
COMMONWEALTH OF PENNSYLVANIA and LEROY S.
ZIMMERMAN, ATTORNEY GENERAL,
COMMONWEALTH PENNSYLVANIA
Defendants.
STIPULATION OF FACT
The following facts are stipulated to by and between counsel
for plaintiffs and defendants:
1. Trojan Technologies, Inc. (hereinafter ‘‘Trojan’’) is a
Canadian corporation with its offices and principal place of
business in London, Ontario, Canada. Kappe Associates, Inc.
(‘‘Kappe’’) is a Maryland corporation, registered to do business
in the Commonwealth of Pennsylvania, with its principal offices
located in Rockville, Maryland.
2. Trojan manufactures ultraviolet light water disinfection
systems. Kappe is Trojan’s exclusive manufacturer representative
47a
Appendix D
in the Commonwealth of Pennsylvania.
3. The Trojan System UV-2000 (‘‘UV-2000’’) is a patented
ultraviolet light disinfection system designed to kill harmful
bacteria and other micro-organisfns in water. A copy of the
brochure describing the UV-2000 is attached as Exhibit ‘‘A’’.
4. The UV-2000 has applications in industry , potable water
plants, and residential use.
5. The UV-2000 has been purchased by a number of
municipalities and authorities in the Commonwealth of
Pennsylvania and has been installed at discharge points in inter
alia, waste water/sewage treatment facilities.
6. The UV-2000 is designed to disinfect water only. The
UV-2000 is not designed to disinfect or purify sewage influent
and cannot disinfect or purify sewage influent. It can be used
to disinfect waste water or effluent which is to be discharged by
sewage treatment facilities.
7. The basic UV-2000 contains a rack of four to eight
ultraviolet lamps that are located in the ‘‘UV Module.’’ The
ultraviolet light from these lamps kills the bacteria and
microorganisms as they pass through the UV modules.
3)
8. The UV-2000 has a Power/Control (P/C) Module, which
provides electricity to the UV Modules. The P/C Module contains
electronic circuitry that monitors the current drawn by the
ultraviolet lamps, water levels and operatuin of the UV-2000. The
P/C Module is usually sited outdoors and therefore is housed
in a stainless steel control box.
48a
Appendix D
9. The UV-Modules are held in place by a stainless steel frame
called the UV Module Rack.
10. Most of the steel in the UV-2000 is found in the UV
Module Rack or the P/C Module control box.
11. The steel components of the UV-2000 constitute less than
15% ot the cost of the entire UV-2000 system, the steel components
are not sold as separate items but rather are component parts
of the UV-2000.
12. Steel may be made by, inter alia, the use of the open
hearth, basic oxygen, electric furnace, Bessemer or other steel
making processes.
13. Once steel is made it may be rolled, formed, shaped,
drawn, extruded, cast, melted, fabricated or otherwise processed.
14. Steel that is rolled, formed, shaped, drawn, extruded,
cast, or fabricated may be rerolled, reformed, reshaped,
reextruded, recast, remelted, and refabricated many times over.
15. Steel products that are produced in the United States
often contain foreign made steel that has been reprocessed in the
United States to form steel products.
16. Steel products that are produced in foreign countries often
contain United States made steel that has been reprocessed in the
foreign country to form steel products.
17. Once a steel product has outlived its usefulness, the steel
product is often reprocessed to create another steel product.
ee
49a
Appendix D
18. Due to the reforming of steel and steel products, it may
be on some occasions virtually impossible to determine the place
in which the steel in the steel product was originally made.
19. Prior to the time that Trojan found itself the subject
of inquiry regarding the UV-2000, the Steel Products Procurement
Act, Act of March 3, 978, P.L. 6, No. 3, 73 Pa.C.S.A. Sections
1881-1887 had not been previously enforced by the Office of the
Attorney General concerning ultraviolet disinfection systems.
20. The Office of the Attorney General has sought to enforce
the Act against Trojan but has not yet made any final
determination that Trojan has violated the Act and Trojan has
not been subjected to any sanctions under the Act.
POWELL, TRACHTMAN,
LOGAN & LIDDLE
s/Paul A. Logan
Paul A. Logan
For Plaintiffs Trojan
Technologies, inc. and Kappe
Associates, Inc.
OFFICE OF THE ATTORNEY
GENERAL
s/Thomas B. York
Thomas B. York
For Defendants Commonwealth of
Pennsylvania and Leroy S.
Zimmerman, Attorney General
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.