Amicus Curiae Brief — Crosby v. National Foreign Trade Council

Supreme Court brief2000

Ask Donna

What actually matters in this document.

Text

Jon '2 000 FIDED

No. 99-474 JAN

IN THE OFFICE OF THE CLER!

SUPPORTING PETITIONERS

ROBERT BRAUNEIS RICHARD RUDA *

720 20th Street, N.W. Chief Counsel

Washington, D.C. 20052 JAMES I. CROWLEY

(202) 994-6138 STATE AND LOCAL LEGAL CENTER

444 North Capitol Street, N.W.

Suite 345

Supreme Court of the United States

AnpreEw S. NaTsi0s, SECRETARY OF ADMINISTRATION

AND FINANCE OF THE COMMONWEALTH OF

MASSACHUSETTS, AND PHILMORE ANDERSON, III,

STATE PURCHASING AGENT,

y Petitioners,

NATIONAL FOREIGN TRADE COUNCIL,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the First Circuit

BRIEF OF THE COUNCIL OF STATE GOVERNMENTS,

NATIONAL GOVERNORS’ ASSOCIATION,

NATIONAL CONFERENCE OF STATE LEGISLATURES,

NATIONAL LEAGUE OF CITIES,

NATIONAL ASSOCIATION OF COUNTIES,

INTERNATIONAL CITY/COUNTY MANAGEMENT

ASSOCIATION, INTERNATIONAL MUNICIPAL

LAWYERS ASSOCIATION, AND U.S. CONFERENCE

OF MAYORS AS AMICI CURIAE

Washington, D.C. 20001

(202) 434-4850

* Counsel of Record for the

Amici Curiae

(1) Euprems Court, Us

WILSON-EpPes Printinc Co., Inc. - (202) 789-0096 - WASHINGTON, D.C. 20001

au . “ae 0"

QUESTION PRESENTED

Amici will address the following question:

Whether the Massachusetts Burma Law violates the

Foreign Commerce Clause.

(i)

II.

SUMMARY OF ARGUMENT

CONCLUSION ..................-.-...

TABLE OF CONTENTS

QUESTION PRESENTED _ ..................c-csscscsorssesseessnensees

y TABLE OF AUTHORITIES ..........

Pi INTEREST OF THE AMICI CURIAE ...............---0-0-0-«

GET ccssnsscssssccesecssssscnscsenenssnentamencengscasemsuccssnessamnetes

I. THE MASSACHUSETTS BURMA LAW DOES

NOT VIOLATE THE FOREIGN COMMERCE

CLAUSE BECAUSE IT ADDRESSES THE

COMMONWEALTH’S ACTIVITIES AS A

MARKET PARTICIPANT ................--..ceceecesee-eees

A. The Market Participant Doctrine Applies

To The Massachusetts Burma Law’s Condi-

tions On Public Procurement .........................

B. The Rationales Underlying The Market Par-

ticipant Doctrine Make It Fully Applicable

To Foreign Commerce Clause Analysis........

THE MASSACHUSETTS BURMA LAW DOES

NOT VIOLATE THE FOREIGN COMMERCE

CLAUSE BECAUSE IT ADVANCES A

LEGITIMATE STATE PURPOSE THAT

CANNOT BE ADEQUATELY SERVED BY

REASONABLE NONDISCRIMINATORY AL-

eG GD cccnscnnisnmnnsnienssesssemnteancenenecemenseaseneainanes

(iii)

Cases

TABLE OF AUTHORITIES

Page

Atkin v. Kansas, 191 U.S. 207 (1908) ......000...00..... 8

Barclays Bank PLC v. Franchise Tax Bd., 512

OE ae eee 19

BMW of North America, Inc. v. Gore, 517 U.S.

ae SE SS oe ee 21

Board of Trustees of the Employees’ Retirement

System v. Baltimore, 562 A.2d 720 (Md. 1989).. 23-24

Brown-Forman Distillers Corp. v. New York State

Liquor Authority, 47€ U.S. 573 (1986) ............ 20

Cooley v. Board of Wardens, 53 U.S. (12 How.)

ff ete 16

Edgar v. MITE Corp., 457 U.S. 624 (1982).......... 21, 22

Geer v. Connecticut, 161 U.S. 519 (1896) ............ 7

Graham v. Connor, 490 U.S. 386 (1989) ......0...... 4

Heim v. McCall, 239 U.S. 175 (1915) ......000.. &

Hicklin v. Orbeck, 437 U.S. 518 (1978) 2000000000... 10

Hughes v. Alexandria Scrap Corp., 426 U.S. 794

Se ccscrernteninccstcintitatialiialadtaiadelinnaiildanadactibatshinteinimeitninieae 6, 8,9

Hughes v. Oklahoma, 441 U.S. 322 (1979) ............. 6, 7,19

Japan Line, Ltd., v. County of Los Angeles, 441

RIESE a SRR Se 15

Maine v. Taylor, 477 U.S. 131 (1986) 000000. 20

Michelin Tire Corp. v. Wages, 423 U.S. 276

EE CaS ae et SE a 15

Minnesota v. Clover Leaf Creamery Co., 449 U.S.

RRR Ree Sr ee 8

New Energy Co. v. Limbach, 486 U.S. 269 (1988) ..passim

New York v. United States, 505 U.S. 144 (1992).. 25

Perkins v. Lukens Steel Co., 310 U.S. 113 (1940).. 8

Pike v. Bruce Church, Inc., 397 U.S. 137 (1970)... 10

Printz v. United States, 521 U.S. 898 (1997) ........ 25

Reeves, Inc. v. Stake, 447 U.S. 429 (1980) ...... 6, 7-8, 8, 19

South Carolina State Highway Dept. v. Barnwell

SU OF eee 8

South-Central Timber Development, Inc. v. Wun-

es Ce ee I itteiritnittienees 10, 12

Southern Pacific Co. v. Arizona ez rel. Sullivan,

ee ee Se CD cethttictetieteniettstaicennteniel 6, 16, 21

TABLE OF AUTHORITIES—Continued

Page

United Building and Construction Trades Council

v. Camden, 465 U.S. 208 (1984) —.......................... 18

West Lynn Creamery, Inc. v. Healy, 512 U.S. 186

EE ee eae 8,9

White v. Massachusetts Council of “Construction

Employers, Inc., 460 U.S. 204 (1983) ................. 8, 10,12

Willson v. Black-Bird Creek Marsh Co., 27 U.S.

(2 Pet.) 245 (1829) 16

Zschernig v. Miller, 389 U.S. 429 (1968) ................. 1,4

Federal Constitution

U.S. Const. art. I, § 8, cl. 3 (Commerce Clause) ... 1,4

U.S. Const. art. IV, §2 (Privileges and Immuni-

ff 18

State Statutes

An Act Regulating State Contracts with Com-

panies Doing Business with or in Burma (My-

anmar), ch. 130, 1996 Mass. Acts 239 (codified

at Mass. Gen. Laws ch. 7, §§ 22G-22M) ............. 1

Other Authorities

Earl H. Fry, “The US States and foreign eco-

nomic policy: federalism in the ‘new world

order,’” in Foreign Relations and Federal

States (Brian Hocking, ed. 1993) _....................... 17

M. Farrand, Records of the Federal Convention

ff eee 5

Social Investment Forum, 1999 Report on So-

cially Responsible Investing Trends in the

United States (1999), http://www.socialinvest.

org/areas/research/trends/1999-Trends.htm...... 14

INTEREST OF THE AMICI CURIAE

Amici, organizations whose members include state,

county, and municipal governments and officials through-

out the United States, have a strong interest in legal issues

that concern state and local governments, including issues

of the allocation of state and federal powers that affect

foreign relations and foreign commerce.’ This case, in-

volving a challenge to a Massachusetts law entitled “An

Act Regulating State Contracts with Companies Doing

Business with or in Burma (Myanmar),” ch. 130, 1996

Mass. Acts 239 (codified at Mass. Gen. Laws ch. 7,

§§ 22G-22M) (the “Massachusetts Burma Law,” presents

three related issues in that area: whether federal law pre-

empts the Massachusetts law; whether the law violates the

Foreign Commerce Clause, U.S. Const. art. I, § 8, cl. 3;

and whether the law runs afoul of the federal foreign

affairs power. See Zschernig v. Miller, 389 U.S. 429

(1968) (recognizing such a power). For reasons stated

at the beginning of the Argument section below, this brief

will address only the Foreign Commerce Clause issue.

The question whether the Massachusetts Burma Law is

unconstitutional is of fundamental importance to amici.

See Pet. App. 10a (noting that municipal governments

have enacted similar purchasing laws). The public pro-

curement activities governed by the Burma Law are tradi-

tional exercises of the power of state and local govern-

ments to spend their lawfully gathered resources in accord-

ance with the wishes of their citizens. Amici respectfully

submit that the Constitution permits States and munici-

1 Pursuant to Rule 37.3 of the Rules of this Court, the parties

have consented to the filing of this brief amicus curiae. Their

letters of consent have been filed with the Clerk of the Court.

Pursuant to Rule 37.6, amici state that this brief was not au-

thored in whole or in part by counsel for a party, and no person

or entity, other than amici or their members, made a monetary

contribution to the preparation or submission of this brief.

palities to refrain from using public funds in ways that

they believe support persistent, egregious, and well-docu-

mented human rights violations by foreign governments.

Because of the importance of the issues presented to

amici and their members, amici submit this brief to assist

the Court in its resolution of this case.

SUMMARY OF ARGUMENT

The Massachusetts Burma Law does not run afoul of

this Court’s dormant Foreign Commerce Clause doctrine.

It does not offend either of the policies that are common

to this Court’s analysis under the Domestic and Foreign

Commerce Clauses: it is neither in purpose nor effect

economically protectionist, and it is not an attempt to

regulate extraterritorial conduct. Neither does it conflict

with the policy particular to the dormant Foreign Com-

merce Clause, the preservation of the federal government's

ability to “speak with one voice” on foreign commercial

relations.

Central to the constitutionality of the Massachusetts

Burma Law is the fact that it concerns an exercise of the

proprietary, noncoercive power to determine the disposition

of public funds rather than an exercise of the States’

coercive governmental powers of regulation or taxation.

This feature of the Burma Law renders it constitutional

under two independent components of dormant Commerce

Clause analysis.

1. As an exercise of the power to direct the uses of the

public fisc without an economically protectionist motive

or effect, the Burma Law fits within the Court’s “market

participant” doctrine. Because the Burma Law neither

links an exercise of the spending power to a targeted tax

in a manner likely to endanger Commerce Clause values,

nor leverages the State’s spending power in the service of

economic protectionism, it does not fall into either of the

exceptions to the market participant doctrine recognized

by this Court. Contrary to the reasoning of the court of

appeals, the protection of the market participant doctrine

cannot be limited to proprietary actions motivated by eco-

nomic self-interest, but rather must extend to actions based

on ethical concerns. The rationales underlying the market

participant doctrine—the self-limiting character of state

proprietary actions, their importance to state sovereignty,

and their lack of interference with federal regulation of

private interstate and foreign commerce, which constitutes

the great bulk of that commerce—make it fully applicable

to Foreign Commerce Clause analysis.

2. Although the Massachusetts Burma Law facially

discriminates against foreign commerce, its discrimination

“is demonstrably justified by a valid factor unrelated to

economic protectionism.” New Energy Co. v. Limbach,

486 U.S. 269, 274 (1988). The law therefore does not

violate the Commerce Clause regardless of its qualifica-

tion under the market participant doctrine. The clearest

“valid factor” or “legitimate local purpose,” New Enérgy

Co., 486 U.S. at 278, is the State’s interest in ensuring

that public funds are not used to support morally offensive

practices of the Burmese government, whether or not

withholding those funds leads to reform or communicates

disapproval to the relevant Burmese officials. That legiti-

mate interest in the use of state funds is not related to

economic protectionism, and “cannot be adequately served

by reasonable nondiscriminatory alternatives,” id., because

any attempt to avoid supporting morally offensive prac-

tices perpetrated by a foreign regime must identify that

regime.

ARGUMENT

I. THE MASSACHUSETTS BURMA LAW DOES NOT

VIOLATE THE FOREIGN COMMERCE CLAUSE

BECAUSE IT ADDRESSES THE COMMON-

a ACTIVITIES AS A MARKET PARTICI-

Amici agree with petitioners that federal law clearly

does not preempt the Massachusetts Burma Law, so that

the Court will have to address the constitutional issues

presented in this case. Amici also believe that this Court’s

analysis of state law that affects foreign commercial rela-

tions should and will be conducted under the Commerce

Clause, which explicitly grants Congress the power “{t]o

regulate Commerce with foreign Nations.” U.S. Const.

art. I, § 8, cl. 3. Whatever may be the scope of the non-

textual “foreign affairs power” in areas of foreign relations

outside of the commercial realm, see Zschernig v. Miller,

389 U.S. 429 (1968), there is no reason to give it any

scope at all when addressing foreign commercial rela-

tions, because the powers of federal and state governments

in that area are governed by an express constitutional

provision. Cf. Graham v. Connor, 490 U.S. 386, 395

(1989). Since the Massachusetts Burma Law is concerned

exclusively with Massachusetts’ commercial relations with

companies doing business with or in Burma, it falls within

that category of state law subject to analysis under the

Commerce Clause. This brief will therefore address only

the question whether the Massachusetts Burma Law is

invalid under this Court’s dormant Foreign Commerce

Clause doctrine.

The Massachusetts Burma Law does not violate the

Foreign Commerce Clause because it addresses a pro-

prietary activity—the State’s determination of how it will

spend its own lawfully collected funds. As this Court has

articulated in its “market participant” doctrine, such activ-

ity is generally not subject to dormant Commerce Clause

scrutiny, and the Burma Law does not fall within either

of the two exceptions to that rule. The rationales under-

lying the market participant doctrine make the doctrine

fully applicable in the Foreign Commerce Clause context.

A. The Market Participant Doctrine Applies To The

Massachusetts Burma Law’s Conditions On Public

Procurement

The Massachusetts Burma Law sets guidelines for the

Commonwealth and its agencies to follow while they are

exercising their noncoercive spending power. The guide-

lines do not create any identified risk of protectionism.

Together, those features qualify the Burma Law for pro-

tection under this Court’s market participant doctrine.

That doctrine recognizes that Congress’s Commerce Clause

power does not need prophylactic protection from a State’s

choices about how to exercise its noncoercive power to

distribute its lawfully gathered resources, as long as those

choices do not present a particular, identified risk of

protectionism.

1. At the core of the powers granted Congress by the

Commerce Clause is the power to invalidate or negate

state laws that, in Congress’s judgment, unduly hinder

interstate or foreign commerce. This is the original mean-

ing of the “negative” Commerce Clause. See, e.g., 3 M.

Farrand, Records of the Federal Convention of 1787,

478 (1911) (Letter of James Madison) (the Commerce

Clause “was intended as a negative and preventive provi-

sion against injustice among the States themselves, rather

than as a power to be used for the positive purposes of

the Federal Government”). Over the past one-and-a-half

centuries, this Court has developed its own prophylactic

“negative” or “dormant” Commerce Clause doctrine, under

which the Court itself invalidates some of the most serious

state-law challenges to the free market values that the

Commerce Clause granted Congress the power to pro-

mote, while leaving Congress the power explicitly to sanc-

tion such laws. See, e.g., Southern Pacific Co. v. Arizona

ex rel. Sullivan, 325 U.S. 761, 769 (1945) (recognizing

that, while the Commerce Clause limits state power even

absent Congressional legislation, Congress has “undoubted”

power to “permit the states to regulate the commerce in

a manner which would otherwise not be permissible”).

This Court has decided scores of dormant Commerce

Clause cases over the last 150 years. But until 1976 it

was not asked to decide whether an exercise of a State’s

proprietary functions—its power to spend state funds or

dispose of state property—ran afoul of dormant Com-

merce Clause doctrine, even though over that period

States routinely discriminated against interstate and for-

eign commerce while spending and disposing of property

in ways that would have violated core dormant Com-

merce Clause doctrine had that discrimination accom-

panied exercises of state powers to tax or regulate. See

Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 808

(1976); id. at 817 (Stevens, J., concurring) (“{T]here

must have been countless situations during the past two

centuries in which the several States have experimented

with differing methods of encouraging local enterprise

without providing like encouragement to out-of-state com-

petitors.”); Reeves, Inc. v. Stake, 447 U.S. 429, 437 n. 9

(1980) (citing numerous state court decisions from 1898

onwards holding that state proprietary functions were not

subject to dormant Commerce Clause scrutiny).

The explanation for the tacit agreement that spending

power exercises do not ordinarily raise dormant Com-

merce Clause concerns rests on the distinction between a

State’s coercive sovereign powers and its noncoercive pro-

prietary powers, and on the full applicability of the dor-

mant Commerce Clause to its coercive powers. When

States decide how to spend state funds and dispose of

State property, they are not exercising any distinctive

sovereign powers, but rather are exercising the same prop-

erty rights as they recognize in private individuals and

businesses.2, To be sure, States usually acquire property

through the coercive sovereign power of taxation, which

distinguishes them from private parties. That power of

taxation, however, is fully subject to dormant Commerce

Clause strictures. Thus, the funds over which a State has

proprietary discretion have been gathered through taxes

that do not discriminate against interstate or foreign com-

merce, and the bulk of those funds are ordinarily gathered

from the same state residents who, through their legis-

lators, decide how to use those funds.

Once it is determined that state funds have been

gathered in an evenhanded manner falling largely on par-

ticipants in the state political process, dormant Commerce

Clause concerns have usually been satisfied. Absent spe-

cial, limited circumstances, a State, “‘[l]ike private in-

dividuals and businesses, . . . enjoys the unrestricted

2 This distinction was muddied by the 19th-century legal fiction,

since discarded, that States “owned” all natural resources within

their jurisdictions. See Hughes v. Oklahoma, 441 U.S. 322, 335

(1979) (holding that state regulation of wild animals should be

governed by ordinary Commerce Clause analysis, and overruling

Geer v. Connecticut, 161 U.S. 519 (1896)). The Massachusetts

Burma Law does not concern natural resources, however, but funds

to which the State has title in the same way that a private Massa-

chusetts resident would.

Of course, property rights are themselves enforced by coercive

sovereign powers, but the powers of disposal granted proprietors

under state property law normally include a realm of discretion

that does not draw any distinction between domestic and foreign

jurisdictions. Needless to say, state property law that discrimi-

nates without justification against interstate or foreign commerce

is fully subject to invalidation under dormant Commerce Clause

doctrine.

power to produce its own supplies, to determine those

with whom it will deal, and to fix the terms and conditions

upon which it will make needed purchases.’” Reeves,

447 US. at 439 n. 12 (1980) (quoting Perkins v. Lukens

Steel Co., 310 U.S. 113, 127 (1940)) (emphasis deleted).

The policy grounds underlying the recognition of this “un-

restricted power” include both respect for the role of

each State “‘ “as guardian and trustee of its people,”’”

Reeves, 447 U.S. at 438 (quoting Heim v. McCall, 239

U.S. 175, 191 (1915) (quoting Atkin v. Kansas, 191

U.S. 207, 222-223 (1903))), and acknowledgment that

spending power discrimination is self-limiting, because it

relies on the legislature’s ability and willingness to assess

taxes on participants in the state political process. See

West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 200

(1994) (noting that evenhanded taxes are generally up-

held in part because “ ‘[t]he existence of major in-state

interests adversely affected . . . is a powerful safeguard

against legislative abuse’”) (quoting Minnesota v. Clover

Leaf Creamery Co., 449 U.S. 456, 473 n. 17 (1981));

South Carolina State Highway Dept. v. Barnwell Bros.,

303 U.S. 177, 184 n. 2, 187 (1938).

Since 1976, this Court has articulated the longstanding

tacit approval of discriminatory spending power exercises

as the “market participant” doctrine. See Hughes, 426

U.S. at 810; Reeves, 447 U.S. at 436; White v. Massa-

chusetts Council of Construction Employers, Inc., 460

U.S. 204, 215 (1983). This doctrine covers a wide variety

of exercises of the power to spend funds and dispose of

property, including purchasing goods and services, see

White, 460 U.S. at 205-06 (financing public construction

projects on the condition that 50% of construction work-

ers be city residents), selling state-owned property, see

Reeves, 447 U.S. at 431-32 (preferring state residents in

selling a limited supply of cement from a state-owned

plant), and subsidizing local businesses, see Hughes, 426

U.S. at 801 (providing “bounties” for the delivery of

inoperable automobiles to scrap processors on easier terms

to in-state than out-of-state processors).

The public procurement activities governed by the

Massachusetts Burma Law fall squarely within the scope

of the market participant doctrine. They are traditional

exercises of a State’s power to determine how to spend its

lawfully gathered resources.

2. In the last fifteen years, this Court has also for the

first time struck down spending power exercises on Com-

merce Clause grounds. It did so in two narrow circum-

stances in which those exercises presented an acute risk of

undermining core Commerce Clause values because they

were not self-limiting as spending power exercises usually

are. The Massachusetts Burma Law does not create any

such condition.

In West Lynn Creamery, Inc. v. Healy, 512 U.S. 186

(1994), this Court held that a Massachusetts subsidy to

Massachusetts dairy farmers violated dormant Commerce

Clause doctrine because the subsidy was directly linked to

and funded by a tax on all milk sold in Massachusetts.

The Court noted that such a subsidy “funded out of

general revenue ordinarily imposes no burden on inter-

state commerce.” Jd. at 199. The linkage of subsidy and

targeted tax, however, insulated the tax from the normal

political processes that would keep it in check, and thus

created a concentrated threat to Commerce Clause values:

“when a nondiscriminatory tax is coupled with a subsidy

to one of the groups hurt by the tax, a State’s political

processes can no longer be relied upon to prevent legis-

lative abuse, because one of the in-state interests which

would otherwise lobby against the tax has been mollified

by the subsidy.” Jd. at 200.

Second, in South-Central Timber Development, Inc. v.

Wunnicke, 467 U.S. 82 (1984), the Court held that a

sale of state-owned timber conditioned on the purchaser

processing the timber before shipping it out of the State

violated the Commerce Clause because the State was

using its power to dispose of public property to favor

intrastate commerce in a manner that risked circumvent-

ing the self-limiting quality of that power. The South-

Central Timber plurality concluded that Alaska was at-

tempting to leverage its ownership of timber by “govern-

[ing] the private, separate economic relationships of its

trading partners,” id. at 99 (plurality opinion), in order

to encourage “ ‘business operations to be performed in the

home State that [might] more efficiently be performed

elsewhere.’” Jd. at 100 (quoting Pike v. Bruce Church,

Inc., 397 U.S. 137, 145 (1970)).

This was, the plurality reasoned, a type of burden on

commerce that the Court has “ ‘declared to be virtually

per se illegal.’” Jd. (quoting Pike, 397 U.S. at 145).

The Court had previously questioned a similar leveraging

technique in dictum in White when it noted that the

residency requirement in that case “does not represent the

sort of ‘attempt to force virtually all businesses that bene-

fit in some way from the economic ripple effect’ of the

city’s decision to enter into contracts for construction

projects ‘to bias their employment practices in favor of

the [city’s] residents.’” White, 460 U.S. at 211 (quoting

Hicklin v. Orbeck, 437 U.S. 518, 531 (1978)). Here,

the presumed vice of Alaska’s law was that through lever-

aging it created a protectionist effect greater than a simple

subsidy would, and thus did not limit the quantum of

economic favoritism to that for which local taxpayers

were willing to pay.’

3 Amici do not necessarily agree that the law in South-Central

Timber actually had such a disproportionate effect, or that South-

The Massachusetts Burma Law does not present either

of these two kinds of threats. The Burma Law obviously

does not create a tax/subsidy linkage of the type the

Court struck down in West Lynn Creamery.

The court of appeals’ heavy reliance on the South-

Central Timber plurality and the dictum in White, see

Pet. App. 43a-45a, is also misplaced. Not only does the

Burma Law not produce leveraged economic favoritism

of the type the Court disapproved of in South-Central

Timber, it does not produce any economic favoritism at

all. There is no identifiable group of Massachusetts politi-

cal participants that is economically benefited by the

Massachusetts Burma Law. If Massachusetts rejects a

low bid from a company with Burmese connections due

to Burma Law procurement restrictions, Massachusetts

taxpayers suffer because they must pay more for the

goods or services at issue; Massachusetts beneficiaries of

public projects suffer because the projects are more likely

to be eliminated or scaled down due to higher costs; and

Massachusetts businesses suffer because they, like out-of-

State businesses, must choose between doing business with

Burma and doing business with the Commonwealth of

Massachusetts.* In other words, as developed more fully

Central Timber was correctly decided, but assume that it was cor-

rectly decided for purposes of this argument.

#There are apparently more foreign companies than United

States companies on Massachusetts’s “restricted purchase list” of

all firms engaged in business with Burma. See Pet. App. 10a (at

the time respondent filed its complaint, forty-four of 346 com-

panies on the restricted purchase list were United States com-

panies). This fact, however, does not demonstrate that Massa-

chusetts businesses are favored by the Burma Law. Many of the

foreign companies engaged in business with Burma undoubtedly

have operations limited to southeast Asia or other parts of the

world outside the United States and have never desired to engage

in business with the Commonwealth of Massachusetts: to amici’s

knowledge, there is no evidence in the record concerning the num-

below, the Massachusetts Burma Law is simply not an

economically protectionist law, which cleanly distinguishes

it from the law struck down in South-Central Timber.

The unduly formalistic language in the South-Central

Timber plurality opinion that influences some of the court

of appeals’ reasoning about the “regulatory” character of

the Massachusetts Burma Law, see Pet. App. 43a-44a, is,

if read literally, simply mistaken. In one passage, the

South-Central Timber plurality seems to suggest that,

while Alaska acted as a proprietor exercising its non-

coercive power to dispose of its property as long as it

imposed only contractual conditions relating directly to

the transaction in which it was disposing of the property,

it became a government exercising its distinctive coercive

power of regulation the moment it imposed unrelated

conditions on such a disposition. See South-Central Tim-

ber, 467 U.S. at 97-99 (plurality opinion) (distinguish-

ing between Alaska’s roles as “market regulator” and

“market participant”).

This makes no sense. A private owner disposing of

property does not suddenly exercise sovereign powers

when he imposes unrelated conditions on that disposition.®

ber of foreign and domestic companies that have actually sub-

mitted or desired to submit bids on Massachusetts projects, either

before or after the passage of the Burma Law. Of course, there

has never been the slightest suggestion that the Massachussetts

Burma Law was motivated in any part by a desire to favor Massa-

chussetts companies.

5 The South-Central Timber plurality cites as a major inspira-

tion for its decision to invalidate economically protectionist lever-

aging the antitrust law limitation on vertical restraints. See

South-Central Timber, 467 U.S. at 98 (plurality opinion); see also

White, 460 U.S. at 219 n.4 (Blackmun, J., concurring in part and

dissenting in part) (similarly referring to the antitrust vertical-

restraint limitation). Antitrust law, however, does not limit vertical

restraints because they are invalid attempts by private parties to

He is still acting as a proprietor, and so was the State of

Alaska in South-Central Timber when it conditioned a

sale of state-owned timber on in-state processing but did

not attempt to force in-state processing of privately owned

timber. The South-Central Timber plurality’s use of the

terms “market regulator” and “market participant” only

make sense as shorthand for types of proprietary actions

that do and do not create a special danger to Commerce

Clause values. Because the Massachusetts Burma Law

creates no special danger to those values, there is no rea-

son for this Court to invalidate it as “market regulation.”

Finally, the court of appeals erred on two levels when

it reasoned that Massachusetts’s refusal to do business

with companies involved in Burma could not be classified

as market participation because “ordinary” private market

participants would not so act. The court stated:

Even if certain companies ceased purchasing goods

from companies that maintain investments in Burma,

such a fact would not be sufficient to lead us to

consider the Massachusetts Burma Law to be market

participation. The proper inquiry is whether Massa-

chusetts is acting as an ordinary market participant

would act, not whether any participant has acted in

such a fashion.

Pet. App. 48a. Surely, however, the proper inquiry is

whether a private market participant could act as Massa-

chusetts has, not whether statistics would show that the

average private market participant has or has not so

acted. A freedom that is exercised infrequently may be

nonetheless an important freedom, precisely because it

exercise a coercive sovereign power of regulation; it limits vertical

restraints because they endanger the values and policies underlying

antitrust law. In the same way, the only intelligible ground of the

ban on economically protectionist leveraging is the danger it poses

to Commerce Clause values.

becomes crucial only in egregious cases that are them-

selves rare.

Moreover, it is simply incorrect to assert, as the court

of appeals did, that the “ordinary market participant”

rarely if ever breaks off ties with a company due to

ethical objections to that company’s dealings. For ex-

ample, investors are quintessential ordinary market par-

ticipants, yet in 1999 American investors had over $2.16

trillion in “socially responsible” investment funds that

used some guideline other than raw profit to limit their

investments in companies. See Social Investment Forum,

1999 Report on Socially Responsible Investing Trends in

the United States (1999), http: //www.socialinvest.org /

areas/research/trends/1999-Trends.htm. That figure rep-

resents over one-eighth of the total $16.3 trillion in in-

vestment assets under management in the United States.

See id. Thus, the court of appeals’ assumption that sensi-

ble private market participants virtually never take ethical

considerations into account is simply wrong, further un-

dermining the notion that the market participant doctrine

should protect actions motivated by pure greed but not

actions stemming from moral concerns. The Massachu-

setts Burma Law falls squarely into the realm of spending

power discretion recognized by this Court under the

market participant doctrine, and should for that reason

pass dormant Commerce Clause scrutiny.

B. The Rationales Underlying The Market Participant

Doctrine Make It Fully Applicable To Foreign

Commerce Clause Analysis

This Court has at times suggested that Foreign Com-

merce Clause scrutiny is more rigorous than Domestic

Commerce Clause scrutiny. It has stated that it will con-

sider an additional factor under the Foreign Commerce

Clause, namely whether the law “prevents the Federal

Government from ‘speaking with one voice when regulat-

ing commercial relations with foreign governments.’ ” ®

Japan Line, Ltd. v. County of Los Angeles, 441 US.

434, 451 (1979) (quoting Michelin Tire Corp. v. Wages,

423 U.S. 276, 285 (1976)); see also South-Central Tim-

ber, 467 U.S. at 100 (plurality opinion) (same). It has

also stated that it will generally look more closely at state

laws touching on foreign commerce. See, e.g., id. at 96

(plurality opinion). Citing these statements, the court

of appeals expressed its skepticism “of whether the market

participation exception applies at all . . . to the Foreign

Commerce Clause.” Pet. App. 48a.

The court of appeals’ skepticism is unwarranted. The

rationales underlying the market participant doctrine are

equally applicable in domestic and foreign contexts, and

the doctrine should be given full effect in Foreign Com-

merce Clause analysis. The “one voice” language used in

Japan Line and South-Central Timber employs a striking

metaphor, but applied as a test within dormant Foreign

Commerce Clause analysis, it is misleading and largely

unhelpful, because it ultimately rests on a categorical

understanding of the dormant Commerce Clause that this

Court long ago rejected.

Under one literal interpretation of the “one voice”

language, the test is so permissive as to be utterly in-

effectual. There is not a single state law that actually

prevents the federal government from “speaking with

one voice” when regulating foreign commerce. The For-

eign Commerce Clause fully empowers Congress both ~

pass positive regulations of foreign commerce that wi

6 n Line states that where a state tax is at issue, a court

<a on inquire “whether the tax, notwithstanding apportion-

ment, creates a substantial risk of international multiple —_

tion.” 441 U.S. at 451. This factor is obviously particular to sta

taxation, and cannot be applied to state regulation or spending.

preempt any inconsistent state laws, and to negate or

invalidate state laws affecting foreign commerce that in

its judgment do not advance the foreign policy interests

of the United States.

Under the other plausible interpretation of the “one

voice” language, the test is impossibly strict. Dormant

Foreign Commerce Clause doctrine cannot possibly lead

to the invalidation of every state law that could poten-

tially conflict with Congress’s judgment about the proper

conduct of foreign commercial relations, with the goal of

preserving for Congress a pristine slate on which to write

foreign commercial policy. The early nineteenth-century

view that Congress and the States possessed exclusive,

non-overlapping powers over, respectively, interstate and

local commerce soon fell to the reality of economic in-

tegration, which left littlke room for “exclusively local”

or “exclusively interstate” commerce. As this Court noted

in Southern Pacific Co. v. Arizona ex rel. Sullivan, 325

U.S. 761 (1945), “[e]ver since Willson v. Black-Bird

Creek Marsh Co., [27 U.S.] 2 Pet. 245 (1829), and

Cooley v. Board of Wardens, [53 U.S.] 12 How. 299

[(1851)], it has been recognized that, in the absence of

conflicting legislation by Congress, there is a residuum

of power in the State to make laws governing matters of

local concern which nevertheless in some measure affect

interstate commerce or even, to some extent. regulate it.”

Southern Pacific Co., 325 U.S. at 766-67. In today’s

global economy, it is equally impossible to maintain a

categorical distinction between local and foreign com-

merce. Indeed, the Massachusetts Burma Law would

have no application unless there were companies that

wished to do business in both Boston and Rangoon. cities

that are on opposite sides of the earth.

Thus. dormant Foreign Commerce Clause doctrire. like

dormant Domestic Commerce Clause doctrine, must rest

‘17

on this Court’s pragmatic judgment about which type of

state actions deeply and persistently conflict with national

interests, while having little connection to traditional legit-

imate state interests. The ordinary exercises of a State’s

powers to spend and dispose of property that fall under

this Court’s market participant doctrine are among the

least likely to so challenge national interests.

First, as argued above, spending power exercises are

ordinarily self-limiting, because they depend upon state

residents’ willingness to tax themselves. For example, to

date the most widespread movement of state and local

governments to refrain from financial participation in

morally offensive practices of a foreign government was

undoubtedly that associated with protests against South

African apartheid. Yet although at that movement's

height some 140 state and local governments had some

policy restricting the use of public funds relating to

South Africa, see Earl H. Fry, “The US States and

foreign economic policy: federalism in the ‘new world

order,” in Foreign Relations and Federal States 122,

134 (Brian Hocking, ed. 1993), they were a fraction

of the 83,000 state and local governments then exist-

ing in the United States. Jd. at 123-24. The measures

were enacted only in those jurisdictions in which constit-

uents cared enough about the issue to accept the risk of

increased costs or lower returns on investment.

At the same time, as more fully developed below, a

State’s power to determine the use of its public resources

is at the core of state sovereignty. This is particularly

true when, as in the case of the Massachusetts Burma

Law, the state funds at issue are presumably being used

to provide ordinary, traditional state services, and the

global nature of commerce forces the State to decide

whether in providing these services it should be support-

ing morally offensive practices in foreign jurisdictions.

Of course, foreign governments that do not understand

American federalism may occasionally misattribute pro-

prietary actions of a state or local government to the

federal government, and conclude that such actions are

a reflection of official United States policy. These mis-

attributions, however, should hardly lead this Court to

prohibit the state actions. After all, foreign governments

that do not understand the freedoms enjoyed by American

citizens may also misattribute the actions of private indi-

viduals to the federal government, yet such misattribution

would not provide sufficient grounds for curtailing First

Amendment protections of freedom of speech.

Finally, since a State’s decisions about how to use its

own resources do not regulate private activity, there is

no chance that those decisions will conflict with federal

regulations governing private foreign commerce, which

constitutes the bulk of foreign commerce. In other words,

as this Court noted in United Building and Construction

Trades Council v. Camden, 465 U.S. 208 (1984), “[w]hen

the State acts solely as a market participant, no conflict

between state regulation and federal regulatory authority

can arise.” 7d. at 220 (emphasis deleted). The Camden

Court went on to hold that the market participant doc-

trine did not apply to the Privileges and Immunities

Clause, U.S. Const. Art. TV, § 2, because that clause,

unlike the Commerce Clause, “imposes a direct restraint

on state action in the interests of interstate harmony.”

Id. Its remarks about the market participant doctrine in

the Commerce Clause context, however, apply equally to

the Foreign and Domestic Commerce Clauses, and there-

fore support the full recognition of the doctrine in the

Foreign Commerce Clause context.

In sum, the market participant doctrine is as essential in

the context of dormant Foreign Commerce Clause analy-

sis as in dormant Domestic Commerce Clause analysis,

“

——_— a ee

and there is no reason for this Court categorically to

distinguish between the two. It is not clear what is to

be gained by applying some indeterminately “more rigor-

ous” scrutiny in Foreign Commerce Clause analysis than

in Domestic Commerce Clause analysis.’ See Reeves,

447 US. at 437 n.9 (suggesting that scrutiny of state

proprietary activities may “well be more rigorous when

a restraint on foreign commerce is alleged”). If, how-

ever, this increase in rigor means that spending power

exercises on the edges of the “linked tax/subsidy” and

“leveraged economic favoritism” exceptions to market

participant doctrine are more likely to be invalidated

under those exceptions, then the closer scrutiny will not

affect the Massachusetts Burma Law, because it falls

nowhere near those exceptions.

II. THE MASSACHUSETTS BURMA LAW DOES NOT

VIOLATE THE FOREIGN COMMERCE CLAUSE

BECAUSE IT ADVANCES A LEGITIMATE STATE

PURPOSE THAT CANNOT BE ADEQUATELY

SERVED BY REASONABLE NONDISCRIMINA-

TORY ALTERNATIVES

Because the Massachusetts Burma Law restricts state

purchases from companies that maintain certain specified

7The Framers may well have envisioned that Congress would

exercise its foreign commerce power to serve a more complex set

of ends. The maintenance of a free international market may not

be the sole dominating inspiration for the foreign commerce power

in the same way that the maintenance of a free national market

was the central inspiration of the interstate commerce power. See,

e.g., Hughes v. Oklahoma, 441 U.S. 322, 325 (1979) (stating that

the interstate commerce power was designed “to avoid the ten-

dencies toward economic Balkanization that had plagued relations

among the Colonies and later among the States under the Articles

of Confederation”). Yet in one sense that complexity counsels

against a strong dormant Foreign Commerce Clause doctrine, be-

cause it is not as easy for courts to determine what mix of values

should be served in the absence of Congressional action. See

Barclays Bank PLC v. Franchise Tax Bd., 512 U.S. 298, 328 (1994).

connections with a named foreign country, the law facially

discriminates against foreign commerce. Even absent the

market participant doctrine, however, facial discrimination

will not be fatal under dormant Commerce Clause analy-

sis if the “discrimination is demonstrably justified by a

valid factor unrelated to economic protectionism.” New

Energy Co. v. Limbach, 486 U.S. 269, 274 (1988), or,

in an alternative formulation, if the law “advances a

legitimate local purpose that cannot be adequately served

by reasonable nondiscriminatory alternatives.” /d. at 278.

See, e.g., Maine v. Tavlor, 477 U.S. 131 (1986) (up-

holding absolute ban on the importation of baitfish into

Maine on grounds of disease prevention).

1. In this case, the law is completely unrelated to

economic protectionism, as it confers no advantage on

either local consumers or local merchants. Cf. Brown-

Forman Distillers Corp. v. New York State Liquor Au-

thority, 476 U.S. 573, 580 (1986) (dormant Commerce

Clause doctrine concerned with both producer and con-

sumer favoritism). The law imparts no economic benefit

to the Commonwealth or its taxpayers. On the contrary,

it forces the Commonwealth of Massachusetts to pay

more for goods and services.

Nor does it impart any discernible economic benefit to

Massachusetts producers. The law’s restrictions apply to

all companies that are “doing business with Burma.” and

thus apply equally to Massachusetts and non-Massachusetts

companies maintaining a specified connection to Burma.

And, of course, there is no evidence that any Massachu-

setts legislator believed that the law would favor Massa-

chusetts businesses or sunnorted the law for that reason.

Thus, the law is not a “ ‘discriminatory’ provision in the

constitutionally prohibited sense—that is. a protectionist

enactment.” New Enerey Co., 486 U.S. at 278. To be

sure, “the standards for . . . justification [of a facially

discriminatory enactment] are high.” Jd. Here, however,

the complete lack of protectionist purpose or effect asso-

ciated with the Massachusetts Burma Law renders it

capable of meeting even those high standards.

2. In spite of the Massachusetts Burma Law’s demon-

strable lack of protectionist purpose or effect, the court

below mistakenly held that it ran afoul of the Commerce

Clause because it advanced no “local” purpose at all, and

therefore advanced no “ ‘legitimate local purpose that

cannot be adequately served by reasonable nondiscrim-

inatory alternatives.’” See Pet. App. 57a-58a (quoting

New Energy Co., 486 U.S. at 274, 278). This conclu-

sion is mistaken for two reasons.

First, this Court has distinguished between local and

non-local purposes only when reviewing exercises of a

State’s coercive powers of taxation and regulation. For

good reason, it has not extended the requirement of a

specifically local purpose to exercises of a State’s power

to spend and dispose of property.

The local purpose requirement is closely tied to the

Commerce Clause doctrine prohibiting state regulation

where its “ ‘practical effect . . . is to control [conduct]

beyond the boundaries of the state.”” Edgar v. MITE

Corp., 457 U.S. 624, 643 (1982) (quoting Southern

Pacific Co. v. Arizona, 325 U.S. 761, 775 (1945)). The

prohibition on wholly extraterritorial regulation stems

from the need to protect the sovereignty of other States,

which would otherwise be hampered in their ability to

enforce their regulatory choices about conduct in their

own jurisdictions. See id.; BMW of North America, Inc.

v. Gore. 517 U.S. 559, 572 (1996) (“{I]t follows from

... principles of state sovereignty and comity that a State

may not impose economic sanctions on violators of its

laws with the intent of changing . . . lawful conduct in

other States.”). A regulation that aims to protect parties

to wholly extraterritorial transactions does not have a

“legitimate local purpose” because it encroaches on the

regulatory prerogatives of other sovereign States. See,

e.g., Edgar, 457 U.S. at 642, 644 (striking down an

Illinois securities regulation that “could be applied to a

tender offer which would not affect a single Illinois share-

holder” while noting that “the State has no legitimate

interest in protecting nonresident shareholders”).

The exercise of a State’s spending power, however, does

not encroach on the prerogatives of other sovereigns in

the way that an exercise of taxing or regulatory powers

does. For example, an appropriation of state funds for

disaster relief in another State or a foreign country that

has suffered a natural calamity would seem to lack a

“legitimate local purpose,” in this Court’s use of that

phrase in regulatory contexts. Such funds would be put to

wholly extraterritorial use, and would not directly benefit

any resident of the donor State. Yet it seems unthinkable

that such an appropriation would violate the federal

constitution on the grounds that the negative Commerce

Clause prohibits States from taking any interest in events

beyond their borders. Rather, it becomes clear that the

prohibition on extraterritorial purposes logically extends

only to the use of a State’s coercive powers.

Second, even if the “legitimate local purpose” require-

ment extends to exercises of a State’s spending power, in

this case there is a perfectly legitimate local purpose

“that cannot be adequately served by reasonable nondis-

criminatory alternatives.” New Energy Co., 486 US. at

278. As the First Circuit recognized, the Massachusetts

Burma Law was motivated by “Massachusetts’s desire to

eliminate moral taint that it claims it suffers from dealirg

with firms that do business in Burma.” Pet. App. 47a.

This goal—to ensure that funds collected from Massa-

chusetts residents are not used to support the “deplorable”

human rights conditions in Burma. Pet. App. Sa—must

be carefully distinguished from two other potentially re-

lated but distinct goals. Once that distinction is made,

it becomes clear that the legislation passes the test articu-

lated in New Energy Co.

To begin with, the goal of refraining from supporting

practices judged to be morally offensive is distinct from

the goal of changing those practices. A refusal to do busi-

ness with companies that are connected with Burma might

also be justified on those latter “reform” grounds, as an

attempt to induce Burma to change its morally offensive

practices. Indeed, the legislative history of the Massa-

chusetts Burma Law identifies this as one of the motiva-

tions cited by its supporters. See, e.g., Pet. App. 9a (quot-

ing statement by the bill’s sponsor, Rep. Byron Rushing,

that “the ‘identifiable goal’ of the law was ‘free demo-

cratic elections in Burma’”). Yet, as Governor Weld

noted, the Massachusetts Burma Law was unlikely to

change the situation in Burma: “[{o]ne law passed by one

state will not end the suffering and oppression of the

people of Burma.” 7d.

Nevertheless, regardless of the chances of inducing

reform, Massachusetts did not want to act in a way that

its legislators perceived as participating in wrongdoing.

This is an utterly common, normal moral judgment.

Moreover, it is a judgment that other state and local

governments, in other situations, have made with regard

to public funds. The Maryland Court of Appeals, for

example, found that the “legitimate, local public interests”

supporting the City of Baltimore’s decision to withdraw

city pension funds from investments in companies doing

business in South Africa included “the local interest in. . .

ensuring that pension funds are invested in a socially

responsible manner {and the desire of] the City and its

citizens to distance themselves from the moral taint of

coventuring in firms that, in the view of many, help to

maintain South Africa’s system of racial discrimination.”

Board of Trustees of the Employees’ Retirement System v.

Baltimore, 562 A.2d 720, 755 (Md. 1989).

The goal of refraining from supporting morally offen-

sive practices is also distinct from that of expressing dis-

approval of such practices. Massachusetts might want to

express disapproval of Burmese practices whether or not

any of its budget could potentially be paid to companies

doing business with Burma, and it could do so by means

of resolutions or other official communications. Con-

versely, Massachusetts might want to refrain from using

public funds in a way it believed would support Burma

whether or not Burmese government officials ever learned

of or paid any attention to its action, because it simply

did not want to have state funds used in that manner.

In this case, the record discloses both communicative and

non-participation purposes underlying the Massachusetts

Burma Law. See Pet. App. 9a (noting that Massachu-

setts’s district court brief contended that one of the law’s

goals was to “express[] the Commonwealth’s own dis-

approval of the violations of human rights committed by

the Burmese government”). These purposes, however,

are independent of each other.

The interest in avoiding use of public funds to support

morally offensive practices, distinct from both reformist

and communicative interests, is the clearest legitimate

local interest that cannot be adequately served by any

reasonable nondiscriminatory alternative. Although amici

believe that the goal of encouraging reform of Burmese

practices is perfectly legitimate so long as it is pursued

through the spending power iather than the coercive

powers of regulation and taxation, a broad reading of

this Court’s extraterritorial regulation cases may cast some

doubt on the legitimacy of an interest in changing condi-

tions in other States and countries. And although amici

believe that no reasonable nondiscriminatory alternative

would adequately serve the communicative purpose of

expressing Massachusetts’s strong disapproval of Burmese

policy—a simple resolution, unaccompanied by any will-

ingness to forego the economic advantages of accepting a

lowest bid from a Burma-connected company, could not

be taken as seriously—it might be argued that resolutions

and other official pronouncements “adequately,” if not

perfectly, serve the interest of communicating disapproval.

The interest in refraining from supporting offensive

practices in Burma suffers from neither of these arguable

defects. Massachusetts has an undeniably legitimate in-

terest in ensuring that its public funds are not used in

support of practices that its residents find to be morally

offensive. Indeed, Massachusetts presented a strong argu-

ment in the court of appeals that, in light of the respect

accorded state sovereignty under the federal constitu-

tional scheme, as reflected in the Tenth Amendment, the

Foreign Commerce Clause does not even empower Con-

gress to override the wishes of state residents to refrain

from spending state funds in support of morally offensive

practices. See Pet. App. 39a (citing Printz v. United

States, 521 U.S. 898, 933-35 (1997) and New York v.

United States, 505 U.S. 144, 178-80 (1992)). Whether

or not Congress could pass affirmative legislation to this

effect, there is no reason for this Court, in elaborating

the more limited dormant Commerce Clause doctrine, to

leap to the other extreme and require Congressional

approval of States’ attempts to set morally responsible

spending policy.

The interest in ensuring that public funds not be used

to support the current Burmese regime is also, in particu-

lar, a “legitimate local purpose.” It must be presumed

that the public funds subject to the Burma Law are being

used for quite ordinary, traditional state functions such as

law enforcement, road building, education, welfare, pub-

lic services, and so on, all quintessentially legitimate local

activities. Due to the global nature of trade and business

activities at the turn of the twenty-first century, when

Massachusetts engages in public procurement to carry out

these traditional state functions, it is forced to consider

whether or not to do business with companies that its

citizenry perceives as supporting regimes engaged in mor-

ally offensive practices. That choice is essentially a local

choice in that it is made about funds collected locally and

dispensed locally, while pursuing local interests, without

any attempt to project the coercive powers of the State

outside its boundaries.

3. There is no reasonable nondiscriminatory alterna-

tive to the Massachusetts Burma Law that would ade-

quately serve Massachusetts’s legitimate interest in ensur-

ing that its public funds not be used to support the current

regime in Burma. Hortatory resolutions alone utterly fail

to serve this interest; it can only be furthered by a pur-

chasing policy, and that policy must make some distinction

between payments that would in the legislators’ judgment

be too directly connected to the Burmese government,

and those that would have little or no connection. Massa-

chusetts has chosen to draw this line to include companies

that have a presence in Burma or do business with Burma.

This line is not the only one that could be drawn, but

it embodies a legislative judgment that is entitled to

deference.

To be sure, viewed from one perspective, Massachu-

setts is “attempting to impose on companies with which

it does business conditions that apply to activities not

even remotely connected to such companies’ interactions

with Massachusetts.” Pet. App. 45a. This attempt, so

described, led the court of appeals to conclude that the

Burma Law was not protected by the market participant

doctrine. Yet while a company’s activities in Massachu-

setts and Burma may be operationally unconnected—the

company may be supplying paper clips to one and radar

equipment to the other, from two entirely different divi-

sions—the Massachusetts Burma Law rationally assumes

that the activities are financially connected. Profits and

losses from the activities flow to the same entity, and

revenues from the profitable supply of paper clips to

Massachusetts might turn out to offset losses from radar

equipment sales to Burma. This is precisely the connec-

tion that Massachusetts is attempting to avoid, and avoid-

ing that connection cannot be accomplished by any

reasonable nondiscriminatory alternative to the Massachu-

setts Burma Law. Thus, even absent the market partici-

pant doctrine, the Massachusetts Burma Law survives

Commerce Clause scrutiny because “it advances a legiti-

mate local purpose that cannot be adequately served by

reasonable nondiscriminatory alternatives.” New Energy

Co., 486 U.S. at 278.

CONCLUSION

The judgment of the court of appeals should be

reversed.

Respectfully submitted,