Amicus Curiae Brief — Hillside Dairy Inc. v. Lyons

Nos. 01-950 and O1-1018

In the Supreme Court of the United States

HILLSIDE DAIRY INc., A&A DAIRY,

L&S DAIRY, AND MILKY WAY FARMS, PETITIONERS

.

WILLIAM J. LYONS, JR., SECRETARY,

CALIFORNIA DEPARTMENT OF FOOD AND

AGRICULTURE, ET AL.

PONDEROSA DAIRY, PAHRUMP DAIRY,

ROCKVIEW DAIRIES, ING., AND D. KUIPER DAIRY,

PETITIONERS

*

WILLIAMJ. LYONS, IR., SECRETARY,

CALIFORNIA DEPARTMENT OF FOOD AND

AGRICULTURE, ET AL.

ON WRITS OF CERTIORARI

TOTHE UNITED STATES COURT OF APPLALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURLAE SUPPORTING PETITIONERS

THEODORE B. OLSON

Solicitor General

Counsel of Record

ROBERT D. MCCALLUM. JR.

Assistant Attorney General

KDWINS. KNEEDLER

Deputy Solicitor General

BARBARA MCDOWELL

Assistant lo thre No/ cifor

General

Marth B. STERN

ARAB. GERSHENGORN

Attorneys

Th partment of Justices

Wershington, Le " W520-000]

(22; 31-2217

QUESTIONS PRESENTED

1. Whether 7 U.S.C. 7254 exempts California’s milk

pricing and pooling regulations from scrutiny under the

Commerce Clause, U.S. Const. Art. I, § 8, Cl. 3.

2. Whether the individual petitioners’ claim under the

Privileges and Immunities Clause, U.S. Const. Art. IV, § 2,

is foreclosed because California’s milk pricing and pooling

regulations do not discriminate on their face based on state

citizenship or residence.

TABLE OF CONTENTS

Page

Interest of the United States 1

Statement 2

Summary of argument i)

Argument:

I. Congress has not exempted all of California’s

milk pricing and pooling regulations from

scrutiny under the Commerce Clause 10

A. Section 7254 contains no “unmistakably

clear” expression of congressional intent to

immunize any state law from the Commerce

Clause 11

B. Section 7254 does not encompass California’s

regulations governing the princing and

pooling of raw milk 14

II. The California regulations are subject to scrutiny

under the Privileges and Immunities Clause even

though they do not facially discriminate on the

basis of state citizenship or residency 20

Conclusion 30

TABLE OF AUTHORITIES

Cases:

Austin v. New Hampshire, 420 U.S. 656 (1975) 21, 23

Block v. Community Nutrition Inst., 467 U.S. 340

(1984) 3

Bray v. Alexandria Women’s Health Clinic, 506

U.S. 263 (1993) 27

Chalker v. Birmingham & N.W. Ry., 249 U.S. 522

(1919) 9, 20, 23, 24, 25

(III

IV

Cases—Continued: Page

City of Boerne v. Flores, 521 U.S. 507 (1997 13

Healy v. Beer Inst., 491 U.S. 324 (1989 25

Hicklin v. Orbeck, 437 U.S. 518 (1978) 21,23

Lunding v. New York Tax Appeals Tribunal, 522

U.S. 287 (1998) 21, 22, 29

Maine v. Taylor, 477 U.S. 131 (1986) — 10,11

Marbury v. Madison, 5 US. (1 Cranch) 137

(1803) 13

Metropolitan Life Ins. Co. v. Ward, 470 U.S. 869

a 13, 27

New England Power Co. v. New Hampshire, 455

U.S. 331 (1982) 18

Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1868) 21, 25, 26

Prudential Ins. Co. v. Benjamin, 328 U.S. 408

(1946) 12

Quill Corp. v. North Dakota, 504 U.S. 298 (1992) ........... 26

Saenz v. Roe, 526 U.S. 489 (1999) 13, 26

Shaffer v. Carter, 252 U.S. 37 (1920 E 22

Shamrock Farms Co. v. Veneman, 146 F.3d 1177

(9th Cir. 1998), cert. denied, 525 U.S. 1105 (1999) 8, 15,

16, 17, 18, 19

South-Cent. Timber Dev., Inc. v. Wunnicke,

467 U.S. 82 (1984) 11,19

Supreme Court of N.H. v. Piper, 470 U.S. 274

(1985) 21, 22, 23

Supreme Court of Va. v. Friedman, 487 US.

59 (1988) 22

Toomer v. Witsell, 334 U.S. 385 (1948) 21, 22-23, 25

Travellers’ Ins. Co. v. Connecticut, 185 U.S. 364

(1902) 22, 27, 29

United Bldg. & Constr. Trades Council v. Mayor of

Camden, 465 U.S. 208 (1984) 22, 23, 26

United States v. Armstrong, 517 U.S. 456 (1996) 25

Village of Arlington Heights v. Metropolitan Hous.

Dev. Corp., 429 U.S. 252 (1977) 25

— —-„-ꝛ᷑ — —

*

Cases Continued: Page

Washington v. Davis, 426 U.S. 229 (1976) 25, 26, 27

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

(1994) 3

Western & S. Life Ins. Co. v. State Bd of Equaliza-

tion, 451 U.S. 648 (1981) 21

White v. Massachusetts Council of Constr. Em-

ployers, Inc., 460 U.S. 204 (1983) 27

Wyoming v. Oklahoma, 502 U.S. 437 (1992) 11

Zuber v. Allen, 396 U.S. 168 (1969) 2

U.S. Const. :

Art. I, § 8, Cl. 3 (Commerce Clause) passim

Art. III, §2 12

Art. IV, §2 (Privileges and Immunities Clause passim

Art. VI 12

Amend. XIV (Equal Protection Clause) . I0, 13, 25, 26

Agricultural Adjustment Act, ch. 25, 48 Stat. 31 2

Agricultural Marketing Agreement Act of 1937, 7 U.S.C.

601 et seq.:

7 U.S.C. 602(1) 3

7 U.S.C. 607 et seq. 2

Federal Agriculture Improvement and Reform Act

of 1996, Pub. L. No. 104-127, 110 Stat. 888 7

McCarran-Ferguson Act, 15 U.S.C. 1011 12

Nutrition Labeling and Education Act of 1990, Pub.

L. No. 101-533, 104 Stat. 2362 16

7 U.S.C. 7253 7

7 U.S.C. 7253(a)(2) 7, 15

7 U.S. C. 7254 passim

7 U.S. C. 7254(1) 14

7 U.S.C. 7254(2) 15

18 U.S.C. 241 12

18 U.S.C. 242 12

21 U.S.C. 343-1(a) 17

26 U.S.C. 3305(a) 12

VI

Statutes and regulations—Continued:

28 U.S.C. 453

28 U.S.C. 1331

28 U.S.C. 2241(cX3) .......

33 U.S.C. 1518(a)(1)

42 U.S.C. 1983

43 U.S.C. 1331(a)(1)

Cal. Food & Agric. Code (West 2001):

§ 35784

§§ 61932-61935

§§ 62061 et seq.

§§ 62700 et seq.

§ 62707

7 C. F. R. Pts. 1000-1199

Miscellaneous:

George F. Carpinello, Stute Protective Legislation

and Nonresident Corporations: The Privileges and

Immunities Clause as a Treaty of Nondiscrimina-

tion, 73 lowa L. Rev. 351 (1988)

CDFA:

Milk Pooling Branch, Pooling Plan for Market

Milk As Amended (Sept. 1, 2001) <http://www.

edfa. ca. gov.

Welcome to California Dairy Programs (visited

Sept. 16, 2002) <http://www.cdfa.ca.gov/dairy> ........

Formulation of the 1995 Farm Bill (Dairy Title):

Hearings Before the Subcomm. on Dairy, Livestock,

and Poultry of the House Comm. on Agric., 104th

Cong., Ist Sess. (1995)

H.R. Conf. Rep. No. 494, 104th Cong., 2d Sess.

(1996)

25-26

In the Supreme Court of the United States

No. 01-950

HILLSIDE DAIRY INC., AGA DAIRY,

L&S DAIRY, AND MILKY WAY FARMS, PETITIONERS

V.

WILLIAM J. LYONS, JR., SECRETARY,

CALIFORNIA DEPARTMENT OF FOOD AND

AGRICULTURE, ET AL.

No. 01-1018

PONDEROSA DAIRY, PAHRUMP DAIRY,

ROCKVIEW DAIRIES, INC., AND D. KUIPER DAIRY,

PETITIONERS

*

WILLIAM J. LYONS, IR., SECRETARY,

CALIFORNIA DEPARTMENT OF FOOD AND

AGRICULTURE, ET AL.

ON WRITS OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONERS

INTEREST OF THE UNITED STATES

These consolidated cases concern the construction of a

provision of an Act of Congress, 7 U.S.C. 7254, that the court

of appeals held to exempt California’s regulations governing

the pricing and pooling of raw milk from scrutiny under the

Commerce Clause. The United States has a significant in-

terest in assuring that such provisions are not construed

more expansively than was intended by Congress, and in a

manner that could burden interstate commerce. At the

(1)

2

Court’s invitation, the Solicitor General filed an amicus brief

on behalf of the United States at the petition stage of the

cases.

STATEMENT

This case concerns whether 7 U.S.C. 7254, which saves

from preemption certain California laws regarding the com-

position and labeling of “fluid” (i.e., processed) milk, exempts

the State’s entire program regulating the market in “raw”

(le., unprocessed) milk from Commerce Clause scrutiny.

The case also concerns whether California’s milk regulations,

even if exempt from scrutiny under the Commerce Clause,

nonetheless violate the Privileges and Immunities Clause in

Article IV of the Constitution. Those questions arise against

the backdrop of a complex regulatory regime.

1. The United States, like the State of California, regu-

lates the marketing of raw milk in order to stabilize prices

and assure adequate supply. The need to regulate milk mar-

keting derives from two distinct phenomena: (1) a pricing

structure thet permits different returns for raw milk of the

same quality depending upon its end use (e.g., as fluid milk,

as powdered milk, or as an ingredient in products such as

butter and cheese), and (2) a cyclical production process with

fairly stable demand, which requires farmers to maintain

sufficiently large herds to meet the demand for fluid milk

even in periods of lean production. See Zuber v. Allen, 396

U.S. 168, 172-173 (1969). Those two features led to “utter

chaos” when the market wag unregulated. Id. at 174. In an

effort to “restore order to the market and boost the pur-

chasing power of farmers,” ibid., Congress enacted the Agri-

cultural Adjustment Act, ch. 25, 48 Stat. 31, which later

formed the basis for the Agricultural Marketing Agreement

Act of 1937 (AMAA), 7 U.S.C. 607 et seg.

The AMAA authorizes the Secretary of Agriculture to

“establish and maintain such orderly marketing conditions

* * * as will establish, as the price to farmers, parity

3

prices.” 7 U.S.C. 602(1). It accordingly empowers the Secre-

tary to issue “marketing orders” that regulate minimum

prices that dairy farmers may receive in a defined geo-

graphic area. The orders classify milk according to its end

use, establish a minimum price for each class of milk, and re-

quire regulated distributors to account to a regional pool for

each class of milk that they purchase. The regional pools as-

sure dairy farms a uniform “blend price” for each unit of milk

sold based on a weighted average value of all milk sold with-

in the marketing area. See West Lynn Creamery, Inc. v.

Healy, 512 U.S. 186, 189 n.1 (1994); Block v. Community

Nutrition Inst., 467 U.S. 340, 342-343 (1984).

2. Not every geographic area in the United States is

covered by a federal marketing order. See 7 C.F.R. Pts.

1000-1199; Block, 467 U.S. at 342. The California dairy in-

dustry has never participated in such an order. Instead, the

State has adopted its own regulatory program to stabilize

the market for raw milk. California dairy farms are guaran-

teed a uniform minimum return for their raw milk, regard-

less of the end use to which the raw milk is to be put by a

processor (handler). At the same time, California handlers

are required to make different total outlays for raw milk de-

pending upon its end use, which reflects the higher value of

raw milk used to produce fluid milk over raw milk used to

produce other products. A pooling mechanism reconciles the

varying minimum amounts that handlers are required to pay

for raw milk with the uniform minimum amounts that

California dairy farms are guaranteed to receive for raw

milk.

a. To accomplish those regulatory goals, California as-

signs raw milk to one of five classes depending upon its end

use. Cal. Food & Agric. Code §§ 61932-61935 (West 2001).

Class 1, which consists of raw milk used to produce fluid milk

products, typically demands the highest price. Other classes,

such as raw milk used to produce butter (Class 4a) and

4

cheese (Class 4b), typically demand lower prices. The Cali-

fornia Department of Food and Agriculture (CDF A) estab-

lishes a minimum price for each component of raw milk (but-

terfat, solids-not-fat, and fluid carrier) depending on the

class of product into which the raw milk is to be processed.

A handler that purchases raw milk for processing into fluid

milk is obligated to pay at least the Class 1 price, while a

handler that purchases raw milk for processing into cheese is

obligated to pay at least the Class 4b price.

The price that a handler pays for raw milk—which, as ex-

plained above, is based on its end us. does not necessarily

equal the price that a dairy farm receives for raw milk. All

California dairy farms are guaranteed a uniform minimum

price for their raw milk regardless of how the milk is used by

the handler that buys it. Otherwise, because handlers that

produce fluid milk can pay higher prices for raw milk than

can handlers that produce other milk products (because fluid

milk commands higher retail prices than other milk pro-

ducts), dairy farms would have an incentive to compete to

sell their raw milk to handlers that produce fluid milk. Such

competition was thought to result in the inefficient move-

ment of milk around the State. Pet. App. A3, Al4 n.3 in

Hillside Dairy Inc. v. Lyons (No. 01-950) (Pet. App.).

The uniform minimum price guaranteed to California

dairy farms is a blend price, which CDF A computes based on

a weighted average of all raw milk purchases in the State. It

thus falls somewhere between the Class 1 price and the

Class 4 price. See Pet. App. A3. In fact, CDFA computes

two such blend prices—the “quota” price and the “overbase”

price. See CDFA, Milk Pooling Branch, Pooling Plan

for Market Milk As Amended §§ 902-904 (Sept. 1, 2001)

<http://www.cdfa.ca.gov> (Pooling Plan). The quota price,

which is the higher of the two, is paid for an amount of

production that was originally determined for California

dairy farms based on their respective shares in the 1960s of

— — —

5

the market for raw milk used to produce fluid milk and that

has been subjeet to certain adjustments in subsequent years.

See Cal. Food & Agric. Code § 62707 (West 2001); Pet. App.

A3-A4. The “overbase” price is paid for a California dairy

farm’s milk in excess of any quota.

The pooling mechanism among handlers, which results in a

transfer of funds from handlers of raw milk for higher-priced

uses (e.g., fluid milk) to handiers of raw milk for lower-priced

uses (e.g., butter and cheese), reconciles the uniform price

guaranteed to California dairy farms with the different

prices paid by handlers depending upon the uses that they

make of raw milk. In order to determine each handler’s obli-

gation to the pool, CDFA calculates an “in-plant blend price”

for each handler, which is based on the particular use or uses

that the handler makes of the raw milk that it purchases.

See Pooling Plan Art. 9. (The in-plant blend price must be

distinguished from the “quota” and “overbase” blend prices,

which are uniform prices paid to California dairy farms and

are based on usage of raw milk by all handlers, rather than

by a single handler.) The handler’s in-plant blend price is

then multiplied by the total amount of raw milk that the

handler has purchased to determine the handler’s “gross

pool obligation.” The handler must account to the pool based

on that amount, subject to certain adjustments. If the total

amount of a handler’s payments to dairy farms is less than

its pool obligation (as is typically the case for handlers that

primarily produce Class 1 fluid milk because their in-plant

blend price ordinarily exceeds the “quota” and “overbase”

prices guaranteed to dairy farms), the handler pays the dif-

ference into the pool. Id. § 1003. If the total amount of a

California dairy farms may buy and sell quota. See Pet. App. A4.

Out-of-state dairy farms are not permitted to own quota because quota is

available only to a Aplroducer,“ which is defined as “any person that

produces market milk in the State of California from five or more cows.”

Pooling Plan § 104 (Pet. App. A79).

6

handler’s payments to dairy farms exceeds its pool obligation

(as is typically the case for handlers that primarily produce

butter or cheese because their in-plant blend price ordinarily

is lower than the “quota” and “overbase” prices),

the handler draws on the pool to recover the difference. Id.

§ 1004; see Pet. App. A3-A5.

b. Before the 1997 amendments to the California plan, if

a handler bought milk from an out-of-state dairy farm, the

handler received a credit against its pool obligation based on

its in-plant blend price. Pet. App. Al7. As a consequence,

although a handler that principally produced fluid milk had

to pay money into the pool for its raw milk purchases from

California dairy farms, it did not have to pay money into the

pool for its purchases from out-of-state farms.

In 1997, the California plan was amended so that the

credit that a handler receives for out-of-state milk purchases

is equal to the lower of the handler’s in-plant blend price or

the quota price. See Pooling Plan § 900(d); Pet. App. A4-

A5. As noted, for a handler that principally produces fluid

milk, the quota price is ordinarily lower than its in-plant

blend price. As a result, a handler that purchases raw milk

from an out-of-state dairy farm to be processed into fluid

milk typically must contribute some additional amount to the

pool for those purchases. The 1997 amendment thus reduced

an incentive that previously existed for handlers that pro-

duce fluid milk to purchase raw milk from dairy farms out-

side California. At the same time, however, out-of-state

dairy farms, unlike California dairy farms, are not guaran-

teed any minimum price (much less the quota price) for their

raw milk.

e. California also sets compositional standards for fluid

milk sold in the State. Those standards, which exceed the

standards set by the federal Food and Drug Administration,

establish minimum levels of solids-not-fat and butterfat. See

Cal. Food & Agric. Code § 35784 (West 2001). California

—

7

handlers standardize their fluid milk by adding a fortifying

agent, and they are provided with a fortification allowance

that reduces the cost of doing so. Pooling Plan § 803(k).

Out-of-state handlers are not eligible to receive that fortifi-

cation allowance. See Pet. App. A25-A26.

3. In the Federal Agriculture Improvement and Reform

Act of 1996 (FAIR Act), Pub. L. No. 104-127, 110 Stat. 888,

Congress required the consolidation and reformation of fed-

eral milk marketing orders. See 7 U.S.C. 7253. Congress

authorized the Secretary of Agriculture, ſulpon the petition

and approval of California dairy producers,” to “designate

the State of California as a separate Federal milk marketing

order.” 7 U.S.C. 7253(a)(2).

In addition, Congress included in the FAIR Act the pro-

vision at issue in this case, 7 U.S.C. 7254, which states:

Nothing in this Act or any other provision of law shall be

construed to preempt, prohibit, or otherwise limit the

authority of the State of California, directly or indirectly,

to establish or continue to effect any law, regulation, or

requirement regarding—

(1) the percentage of milk solids or solids not fat in

fluid milk products sold at retail or marketed in the State

of California; or

(2) the labeling of such fluid milk products with re-

gard to milk solids or solids not fat.

4. a. In consolidated actions, petitioners, which operate

dairy farms in Nevada and Arizona, challenged the constitu-

tionality of the 1997 amendments to the California milk

pricing and pooling plan. They contended, among other

things, that the amended plan discriminates against out-of-

state dairy farms in violation of the Commerce Clause and

the Privileges and Immunities Clause.

a. The district court rejected those claims. Pet. App.

A13, Al6-A22. The court granted summary judgment for

8

the State on the Commerce Clause claim. The court relied

on Shamrock Farms Co. v. Veneman, 146 F.3d 1177 (9th Cir.

1998), cert. denied, 525 U.S. 1105 (1999), which the court un-

derstood to have held that 7 U.S.C. 7254 “immunized Cali-

fornia’s milk pricing and pooling laws from Commerce

Clause challenge.“ Pet. App. Al9. The court dismissed peti-

tioners’ claim under the Privileges and Immunities Clause on

the ground that the pooling plan does not discriminate based

on out-of-state residency or citizenship. Id. at A13.

b. The United States Court of Appeals for the Ninth Cir-

cuit affirmed. Pet. App. Al-A15.

The court of appeals, like the district court, held that

Shamrock controlled the Commerce Clause claim. Pet. App.

A6-A6. Although Shamrock had addressed California’s for-

tification requirement for fluid milk and its fortification al-

lowance for in-state handlers, not its pricing and pooling re-

quirements for raw milk, the court held that “Shamrock

broadly refers to the pricing and pooling laws and finds them

to be closely related to California’s composition require-

ments and protected from Commerce Clause challenges.”

Id. at A7-A8. The court also viewed the legislative history of

7 U.S.C. 7254 as “demonstrat[ing] that California’s pricing

and pooling laws were considered to be an important ele-

ment of California’s milk regulatory scheme and necessary to

maintain the ‘standards of content and purity’ for milk.” Pet.

App. A8 (quoting Shamrock, 146 F.3d at 1182). On this ba-

sis, the court held that California’s raw-milk and fluid-milk

regulations are “closely related” and that it “follows that the

1997 amendments which directly affect raw milk, indirectly

affect fluid milk.” Jd. at A10.

The court of appeals also affirmed the district court’s dis-

missal of petitioners’ claim under the Privileges and Immu-

nities Clause. The court noted that the corporate petitioners

could not state such a claim, because the Privileges and

Immunities Clause does not protect corporations. Pet. App.

9

Al3. The court then held that the individual petitioners’

claim failed because “the classifications the pooling plan

amendments create are based on the location where milk is

produced,” not on “any individual's residency or citizenship.”

Id. at Al4.

SUMMARY OF ARGUMENT

I. Congress did not, in 7 U.S.C. 7254, exempt all of Cali-

fornia’s milk pricing and pooling regulations from the limita-

tions imposed by the Commerce Clause. This Court has re-

peatedly instructed that such exemptions must be unmis-

takably clear. There is no indication in the text or legislative

history of Section 7254 that Congress intended to immunize

any of California’s milk regulations from challenge under the

Commerce Clause. Moreover, even if Section 7254’s refer-

ence to “any other provision of law” were understood to en-

compass the Commerce Clause, Section 7254 would provide

an immunity only for the State’s regulations governing the

composition and labeling of processed fluid milk sold at re-

tail, not for its separate regulations governing the pricing

and pooling of raw milk. The lower courts, having errone-

ously disposed of the Commerce Clause claim based on Sec-

tion 7254, did not consider the merits of that claim. Accord-

ingly, the Court should remand the case so that the lower

courts may consider, in the first instance, whether the

California regulations impermissibly discriminate against

interstate commerce.

II. California’s milk pricing and pooling regulations, un-

like most of the state laws that this Court has considered

under the Privileges and Immunities Clause, do not discri-

minate on their face based on state citizenship or residency.

The Clause does not, as the court of appeals may have pre-

sumed, prohibit only such facially discriminatory laws. The

Court in Chalker v. Birmingham & N. W. Ry., 249 U.S. 522

(1919), invalidated a state law that did not on its face dis-

criminate based on state citizenship or residency, but drew

10

distinctions ti at effectively served as a proxy for state citi-

zenship or residency. The Court’s recent decisions have not

addressed whether a state law, in order to violate the

Clause, must have the purpose, as well as the effect, of dis-

criminating because of state citizenship or residency. That

analysis might be informed by the Court’s analysis of state

laws challenged under the Equal Protection Clause, which

also protects individuals against discriminatory action by

state governments, and which is violated only when such ac-

tion is discriminatory in both purpose and effect.

The Court could appropriately avoid addressing any un-

settled questions presented by the privileges and immunities

claim in this case. If the Court holds that Section 7254 does

not provide a Commerce Clause immunity for the regula-

tions at issue here, the lower courts will have to consider the

merits of petitioners’ Commerce Clause challenge to those

regulations, because only the individual petitioners are also

asserting a challenge under the Privileges and Immunities

Clause. And, if petitioners ultimately prevail under the

Commerce Clause, it may be unnecessary ever to reach their

claim under the Privileges and Immunities Clause.

ARGUMENT

I. CONGRESS HAS NOT EXEMPTED ALL OF CALI-

FORNIA’S MILK PRICING AND POOLING REGU-

LATIONS FROM SCRUTINY UNDER THE COM-

MERCE CLAUSE

Although the Commerce Clause “limits the power of the

States to erect barriers against interstate trade,” “Congress

may authorize the States to engage in regulation that the

Commerce Clause would otherwise forbid.” Maine v. Tay-

lor, 477 U.S. 131, 137, 188 (1986). The Court has held, how-

ever, that Congress must make any such authorization “un-

mistakably clear” so as to assure that “all segments of the

country are represented” in a decision to allow one State to

11

affect persons or operations in other States. South-Cent.

Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 91, 92 (1984).

A] rule requiring a clear expression of approval by Con-

gress ensures that there is, in fact, such a collective decision

and reduces significantly the risk that unrepresented inter-

ests will be adversely affected by restraints on commerce.”

Id. at 92; accord, e.g., Wyoming v. Oklahoma, 502 U.S. 437,

458 (1992) (“Congress must manifest its unambiguous intent

before a federal statute will be read to permit or to approve

* * * a violation of the Commerce Clause.”); Taylor, 477

U.S. at 139 (“An unambiguous indication of congressional

intent is required before a federal statute will be read to

authorize otherwise invalid state legislation.”).

Section 7254 does not contain any indication at all, much

less an “unmistakably clear” one, that Congress intended to

immunize the regulations at issue here from Commerce

Clause scrutiny. The statutory text does not include any ref-

erence either to the Commerce Clause or to California’s

pricing and pooling laws for raw milk. Nor does the legisla-

tive history provide any indication that Congress intended

Section 7254 to immunize those laws from scrutiny under the

Commerce Clause.

A. Section 7254 Contains No “Unmistakably Clear”

Expression Of Congressional Intent To Immunize

Any State Law From The Commerce Clause

Section 7254 states that In lothing in this Act or any other

provision of law shall be construed to preempt, prohibit, or

otherwise limit the authority of the State of California” to

enact or enforce certain of its own laws. That statutory text

does not unambiguously express an intent by Congress to

exempt any of California’s laws from the Commerce Clause.

Section 7254 does not even refer to the Commerce Clause

specifically, or to the Constitution more generally.

Congress has elsewhere spoken with considerably greater

clarity in expressing its intent to immunize state laws from

12

the implied limitations of the Commerce Clause. More gen-

erally, when Congress has sought to refer to the Constitu-

tion as well as to other sources of law, Congress has often

(although not always) made specific reference to the Consti-

tution.”

2 See, e.g., 26 U.S.C. 3305(a) (“No person required under a State law to

make payments to an unemployment fund shall be relieved from

compliance therewith on the ground that he is engaged in interstate or

foreign commerce, or that the State law does not distinguish between

employees engaged in interstate or foreign commerce and those engaged

in intrastate commerce.) 15 U.S.C. 1011 (MeCarran-Ferguson Act)

(“[S]ilence on the part of the Congress shall not be construed to impose

any barrier to the regulation or taxation of [the] business [of insurance] by

the several States.”); Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 427

(1946) (describing McCarran-Ferguson as “expressly stat[ing]” Congress’s

intent to permit certain state regulation and taxation of insurance that the

Commerce Clause would otherwise prohibit).

3 See, eg, 18 U.S.C. 241 (prohibiting conspiracy to interfere with

rights under “the Constitution or laws of the United States”); 18 U.S.C.

242 (prohibiting action under color of law ir deprivation of rights pro-

tected by “the Constitution or laws of the United States”); 28 U.S.C. 453

(judicial oath to perform faithfully and impartially all duties “under the

Constitution and laws of the United States”); 28 U.S.C. 1331 (district court

jurisdiction over “all civil actions arising under the Constitution, laws, or

treaties of the United States”); 28 U.S.C. 2241(c)(3) (authority to grant

writ of habeas corpus to persons “in custody in violation of the Consti-

tution or laws or treaties of the United States”); 33 U.S.C. 1518(a)(1)

(applying It he Constitution, laws, and treaties of the United States” to

licensed deepwater ports); 42 U.S.C. 1983 (providing civil cause of action

for deprivation of rights “secured by the Constitution and laws”); 43

U.S.C. 1333(a)(1) (extending It he Constitution and laws” of the United

States to areas of the outer Continental Shelf). Cf. U.S. Const. Art. III.

§ 2 (“The judicial Power shall extend to all Cases, in Law and Equity,

arising under this Constitution, the Laws of the United States, and

Treaties made, or which shall be made, under their Authority.”), id. Art.

VI (“This Constitution, and the Laws of the United States which shall be

made in Pursuance thereof; and all Treaties made, or which shall be made,

under the Authority of the United States, shall be the supreme Law of the

Land.”).

13

Moreover, Congress’s directive in Section 7254 that no

provision of law “shall be construed” in a particular manner

is more naturally read as referring only to non-constitutional

sources of federal law, i.e., Acts of Congress or agency regu-

lations implementing them. Congress is not ordinarily as-

sumed to have intended to constrain the Judiciary’s author-

ity to construe the Constitution. Cf. City of Boerne v. Flo-

res, 521 U.S. 507, 535-536 (1997) (“[T]he Constitution is pre-

served best when each part of the Government respects both

the Constitution and the proper actions and determinations

of the other branches. When the Court has interpreted the

Constitution, it has acted within the province of the Judicial

Branch, which embraces the duty to say what the law is.”)

(citing Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177

(1803)). Thus, if Congress sought to exercise its power un-

der the Commerce Clause to authorize state laws that would

otherwise be invalid under that Clause, Congress could rea-

sonably be expected to do so in a straightforward manner by

declaring the state laws valid, not to presume to instruct the

courts (including this Court) to alter their construction of the

Constitution.

Furthermore, if the reference in Section 7254 to “any

other provision of law” were read to include the Constitu-

tion, it would presumably include provisions of the Constitu-

tion beyond the Commerce Clause—such as the Privileges

and Immunities Clause of Article IV and the Equal Protec-

tion Clause of the Fourteenth Amendment, both of which

petitioners also invoked in this case. Congress would have

been aware, however, that it cannot, when exercising its

authority under the Commerce Clause, immunize state laws

from scrutiny under other provisions of the Constitution.

See, e.g., Saenz v. Roe, 526 U.S. 489, 507 & n.21 (1999); Met-

ropolitan Life Ins. Co. v. Ward, 470 U.S. 869, (1985).

Thus, if Congress had intended to provide the California

regulations with immunity under the Commerce Clause,

14

Congress could be expected to have referred more specifi-

cally to that Clause.

Nor is there any reason to suppose that Congress in-

tended to authorize California, and only California, to erect

barriers to interstate commerce that would otherwise be

forbidden by the Commerce Clause. Section 7254 reaches

not only California laws in existence at the time of its enact-

ment, but also California laws that might come into existence

at some later time. It is particularly unlikely that Congress

would have created so open-ended an immunity from the

Commerce Clause for whatever laws California might choose

to adopt in the future to regulate the marketing of raw or

processed milk.

In sum, Section 7254 does not establish, with the requisite

degree of clarity, any Commerce Clause immunity for any

California law. Rather, Section 7254 is properly understood

as protecting certain California laws against preemption only

by “this Act” (be., the FAIR Act) and other provisions of

federal statutory or regulatory law.

B. Section 7254 Does Not Encompass California's

Regulations Governing The Pricing And Pooling Of

Raw Milk

Section 7254, even if construed to provide a Commerce

Clause immunity for some state laws does not reach the

laws at issue here. Neither the text of Section 7254 nor the

context in which it was enacted provides any manifestation

of congressional intent to protect California’s milk pricing

and pooling regulations.

1. Section 7254, by its terms, applies only to laws regard-

ing “the percentage of milk solids or solids not fat in fluid

milk products sold at retail or marketed in the State of Cali-

fornia” and “the labeling of such fluid milk products with re-

gard to milk solids or solids not fat.” 7 U.S.C. 7254(1) and

(2). The pricing and pooling laws do not regulate, directly or

indirectly, fluid-milk content or fluid-milk labeling. They are

R SO AGO GO es 8

— ——

15

thus outside the scope of whatever Commerce Clause ex-

emption Section 7254 even arguably provides.“

Congress’s decision to confine Section 7254 to a subset of

California’s milk marketing laws appears to have been quite

deliberate. Other provisions of the FAIR Act, of which Sec-

tion 7254 was a part, demonstrate that, when Congress

wanted to refer to California’s milk pricing and pooling laws,

Congress did so more specifically. In the immediately pre-

ceding section of the FAIR Act, Congress authorized the

Secretary of Agriculture, “[u]pon the petition and approval

of California dairy producers,” to “designate the State of

California as a separate Federal milk marketing order.” 7

U.S.C. 7253(a)(2). Congress further provided that any such

“order covering California shall have the right to reblend

and distribute order receipts to recognize quota value,” ibid.,

thus referring specifically to the aspect of California’s pric-

ing and pooling laws that guarantees state dairy farms with

“quota” a higher blend price for their raw milk. See pp. 4-5,

supra. Presumably, if Congress had wanted Section 7254 to

encompass California’s pricing and pooling laws, Congress

would have referred to those laws with similar specificity.

The court of appeals acknowledged in its predecessor

Shamrock decision that Section 7254 “does not specifically

refer to these [pricing and pooling] laws, as it does to the

milk composition standards.” 146 F.3d at 1182 (Pet. App.

A34). In both this case and Shamrock, however, the court

concluded that Section 7254 encompasses the pricing and

pooling laws as well, reasoning that those laws and the com-

* As noted above (at 3-4), CDFA establishes minimum prices that

handlers must pay for various components of raw milk—butterfat, solids-

not-fat, and fluid carrier. Even if a regulation that provides for setting a

price for the “milk solids” or “solids-not-fat” component of milk could be

viewed as a regulation regarding the percentage of milk solids or

solids not fat” in milk, Section 7254 refers to the percentage of those

components in “fluid milk,” not raw milk.

16

position and labeling laws are “interrelated and mutually

interdependent.” Pet. App. A7 (quoting Shamrock, 146 F.3d

at 1182). The court was mistaken. Even if Congress’s ex-

press exemption of one state law from the Commerce Clause

were understood to extend to “interrelated and mutually

interdependent” state laws, no such relationship exists be-

tween the fluid-milk composition and labeling laws expressly

referred to in Section 7254 and the raw-milk pricing and

pooling laws at issue here.

The pricing and pooling laws are not part of the same

regulatory program as the composition and labeling laws.

The programs are authorized under different divisions of the

California Food and Agriculture Code. Compare Cal. Food

& Agric. Code § 35784 (West 2001) (composition standards),

with id. §§ 62061 et seg. (minimum prices) and id. §§ 62700 et

seq. (equal ation pools). The programs were implemented

at different times. And they are administered by dif-

ferent components of the CDFA. See CDFA, Welcome

to California Dairy Programs (visited Sept. 16, 2002)

<http://www.cdfa.ca.gov/dairy> (noting that the milk com-

position laws are administered by the Milk and Dairy Foods

Control Branch, while the milk pricing and pooling laws are

administered by the Dairy Marketing Branch and the Milk

Pooling Branch). It would be particularly unwarranted in

such circumstances to construe Congress’s express reference

to California’s composition and labeling laws for fluid milk as

also encompassing California’s pricing and pooling laws for

raw milk.

2. The context in which Section 7254 was enacted sup-

ports the conclusion that it was intended solely to protect

California’s fluid-milk composition and labeling laws against

preemption by federal statutes and regulations. In 1990,

Congress enacted the Nutrition Labeling and Education Act

of 1990 (NLEA), Pub. L. No. 101-533, 104 Stat. 2362, which

prohibits States from setting standards of identity for a food

17

that are different from the standards set by the FDA. See

21 U.S.C. 343-1(a). In response, out-of-state dairy farms,

which had previously complied with the California compos-

ition and labeling standards when marketing milk in the

State, sought a judicial determination that the NLEA pre-

empted those California standards. The State, in turn, peti-

tioned the FDA for an exemption from the NLEA for its

milk composition and labeling standards. See Shamrock, 146

F.3d at 1180 (Pet. App. A28).

At the congressional hearings on what was to become the

FAIR Act, witnesses asked Congress specifically to exempt

the California milk composition and labeling standards from

preemption by the NLEA or other federal statutes. For ex-

ample, Representative Bill Thomas, the only Member of

Congress to testify concerning California’s milk regulations,

urged that those standards be protected against preemption

by “national nutritional labeling requirements.” Formula-

tion of the 1995 Farm Bill (Dairy Title): Hearings Before

the Subcomm. on Dairy, Livestock, and Poultry of the House

Comm. on Agric., 104th Cong., Ist Sess. 435 (1995) (House

Hearings). He did not urge that any of California’s other

milk regulations, including those governing the pricing and

pooling of raw milk, be protected against federal statutory or

constitutional challenge. Other witnesses similarly focused

on the need to assure that California could continue to en-

force its fluid-milk composition standards.

The Conference Report on the FAIR Act confirms that

Section 7254 was directed only at the particular problem

identified at the congressional hearings. See H.R. Conf.

Rep. No. 494, 104th Cong., 2d Sess. 338 (1996). The Confer-

ence Report explains that Section 7254 “provides the State

5 See, eg, House Hearings 517-518 (prepared statement of A.J. Yates,

Deputy Secretary, CDF A); id. at 547-548 (prepared statement of James E.

Tillison, Alliance of Western Milk Producers); id. at 568 (prepared

statement of Craig S. Alexander, Dairy Institute of California).

18

of California an exemption from the preemption provisions of

any Federal law respecting standards of identity and label-

ing for fluid milk,” so that California may “fully enforce and

apply its fluid milk standards and their attendant labeling

requirements to all fluid milk sold at reti or marketed in

the State.” Jd. at 338-339. The Conference Report further

states that, for these purposes, “fluid milk” means “milk in

final packaged form for beverage use.” Id. at 339. This spe-

cific focus refutes the notion that Congress intended to grant

a broad Commerce Clause immunity for California laws gov-

erning the pricing and pooling of raw milk.

The court of appeals, in adopting its more expansive in-

terpretation of Section 7254, did not discuss the Conference

Report, which is usually the most authoritative legislative

history of an Act of Congress. The court nonetheless pur-

ported to find “ample support” in the legislative his-

tory—specifically, the testimony of two witnesses at the

congressional hearings—for the proposition that “Congress

intended that the milk pricing and pooling scheme be in-

cluded in the exemption.” Shamrock, 146 F.3d at 1182 (Pet.

App. A34); accord Pet. App. A8. Ordinarily, the testimony of

two witnesses, only one of whom was a Member of Congress,

is an uncertain indication of what Congress as a whole in-

tended. See New England Power Co. v. New Hampshire,

455 U.S. 331, 342 (1982) (noting, when a State sought to sus-

tain its claim of a Commerce Clause exemption based on a

single statement on the House floor, that “[rJeliance on such

isolated fragments of legislative history in divining the in-

tent of Congress is an exercise fraught with hazards”).

Here, moreover, the witnesses’ testimony offers no support

for the court’s interpretation of Section 7254.

For example, Representative Thomas did not, as the court

of appeals perceived, “explain{] that the success of Cali-

fornia’s milk standards is attributable to the state’s pricing

system.” Shamrock, 146 F.3d at 1182 (Pet. App. A34). In-

— r NN ö

——ä—— —

19

stead, Representative Thomas stated that the success of the

California dairy industry was attributable both to the State’s

“standards for fluid milk products which ensure a high

quality product” and to the State’s “pricing system for dairy

products.” House Hearings 435. He did not suggest that the

composition regulations and the pricing regulations were

dependent on each other for their effectiveness. Moreover,

even if Representative Thomas had made the statement that

the court attributed to him, the statement still would say

nothing about any Commerce Clause exemption for the

pricing and pooling laws.“

In sum, Section 7254 provides no indication that Congress

intended to exempt California’s pricing and pooling regula-

tions from the Commerce Clause, much less the “unmis-

takably clear” expression of congressional intent that this

Court’s decisions require. South-Cent. Timber, 467 U.S. at

91. The court of appeals erred in concluding otherwise.

Because both the court of appeals and the district court held

Section 7254 foreclosed petitioners’ Commerce Clause chal-

lenge, those courts did not address the underlying merits of

that challenge. Nor do petitioners ask this Court to do so in

the first instance. In these circumstances, the Court should

reverse the court of appeals’ judgment insofar as it holds

that Section 7254 bars petitioners’ Commerce Clause claim

and remand the case for consideration of that claim on the

merits.

6 Similarly, Craig S. Alexander of the Dairy Institute of California,

whose testimony was also cited by the court of appeals (see Shamrock, 146

F.3d at 1182), discussed the State’s milk composition regulations sepa-

rately from other aspects of its milk marketing program. See House

Hearings 480-482. He urged “[flederal legislation * * to preserve

California’s standards” for the composition of fluid milk products, id. at

482, but did not urge legislation to protect the pricing and pooling laws

against a federal nstitutional or statutory challenge.

20

Il. THE CALIFORNIA REGULATIONS ARE SUB-

JECT TO SCRUTINY UNDER THE PRIVILEGES

AND IMMUNITIES CLAUSE EVEN THOUGH

THEY DO NOT FACIALLY DISCRIMINATE ON

THE BASIS OF STATE CITIZENSHIP OR RESI-

DENCY

Petitioners argued below that the 1997 amendments to

California’s milk pricing and pooling plan also violate the

Privileges and Immunities Clause in Article IV of the Con-

stitution. As relevant here, the court of appeals rejected

that claim on the ground that “the classifications the pooling

plan amendments create are based on the location where

milk is produced,” and “do not, on their face, create classifi-

cations based on any individual’s residency or citizenship.”

Pet. App. Al4. To the extent that the court of appeals’ rul-

ing rested on the fact that the California regulations do not

facially discriminate against citizens or residents of other

States, that ruling is incorrect. Under this Court’s decision

in Chalker v. Birmingham & N. W. Ry., 249 U.S. 522, 526-527

(1919), a state law is not exempt from the restrictions im-

posed by the Privileges and Immunities Clause merely

because it does not create distinctions explicitly based on

state citizenship or residency. Accordingly, the Court should

reverse or vacate the judgment of the court of appeals with

respect to the Privileges and Immunities Clause claim and

remand for further consideration of that claim to the extent

warranted in light of the disposition of petitioners’ Com-

merce Clause claim.

1. The Privileges and Immunities Clause of Article IV

provides that It he Citizens of each State shall be entitled to

all Privileges and Immunities of Citizens in the several

States.” U.S. Const. Art. IV, § 2. The Clause thereby

“place[s] the citizens of each State upon the same footing

with citizens of other States, so far as the advantages re-

sulting from citizenship in those States are concerned.”

21

Lunding v. New York Tax Appeals Tribunal, 522 U.S. 287,

296 (1998) (quoting Paul v. Virginia, 75 U.S. (8 Wall.) 168,

180 (1868)). The Clause applies only to natural persons. See

Western & S. Life Ins. Co. v. State Bd. of Equalization, 451

U.S. 648, 656 (1981). Accordingly, as the court of appeals

recognized (Pet. App. A13), only the individual petitioners

may assert a claim under the Clause. Petitioners do not con-

tend otherwise.

One of the privileges which the [Privileges and Immuni-

ties] Clause guarantees to citizens of State A is that of doing

business in State B on terms of substantial equality with the

citizens of that State.” Supreme Court of N.H. v. Piper, 470

U.S. 274, 280 (1985) (quoting Toomer v. Witsell, 334 U.S. 385,

396 (1948)). The Clause thus is among the provisions of the

Constitution “intended to create a national economic union.”

Piper, 470 U.S. at 280. The Clause, like the Commerce

Clause (and certain other constitutional provisions), derived

from Article IV of the Articles of Confederation, which

stated:

The better to secure and perpetuate mutual friendship

and intercourse among the people of the different States

in this Union, the free inhabitants of each of these States

* * * shall be entitled to all privileges and immunities of

free citizens in the several States; and the people of each

State shall have free ingress and regress to and from any

other State, and shall enjoy therein all the privileges of

trade and commerce, subject to the same duties, imposi-

tions and restrictions as the inhabitants thereof respec-

tively.

Austin v. New Hampshire, 420 U.S. 656, 660 (1975); see

Hicklin v. Orbeck, 437 U.S. 518, 531-532 (1978) (noting “the

mutually reinforcing relationship between the Privileges and

Immunities Clause of Art. IV, § 2, and the Commerce

Clause—a relationship that stems from their common origin

in the Fourth Article of the Articles of Confederation and

22

their shared vision of federalism”). As this Court has recog-

nized, however, the Privileges and Immunities Clause and

the Commerce Clause, while addressing closely related con-

cerns, “have different aims and set different standards for

state conduct.” United Bldg. & Constr. Trades Council v.

Mayor of Camden, 465 U.S. 208, 220 (1984).

The Court has held that, even with respect to state laws

that explicitly distinguish between a State’s own citizens and

citizens of other States, “the privileges and immunities

clause is not an absolute.” Toomer, 334 U.S. at 396. For ex-

ample, no violation will be found if a State’s program of

regulation or taxation, considered as a whole, provides a

“reasonably fair distribution of burdens” between citizens

and non-citizens of the State, at least where “no intentional

discrimination has been made against non-residents,” Truv-

ellers’ Ins. Co. v. Connecticut, 185 U.S. 364, 371 (1902), or

where there is “substantial equality of treatment” for citi-

zens and non-citizens, Lunding, 522 U.S. at 297. See Shaffer

v. Carter, 252 U.S. 37, 55 (1920). Moreover, “when con-

fronted with a challenge under the Privileges and Immuni-

ties Clause to a law distinguishing between residents and

nonresidents, a State may defend its position by demon-

strating that (i) there is a substantial reason for the differ-

ence in treatment; and (ii) the discrimination practiced

against nonresidents bears a substantial relationship to the

State’s objective.’” Lunding, 522 U.S. at 298 (quoting Piper,

470 U.S. at 284). . .

2. All of the state laws that the Court has invalidated

under the Privileges and Immunities Clause in its recent de-

cisions discriminated on their face based on state citizenship

or residency. See, e. g., Lunding, 522 U.S. at 291-292 (state

tax law governing treatment of nonresidents’ alimony pay-

ments); Supreme Court of Va. v. Friedman, 487 U.S. 59, 62

(1988) (state rule that only state residents could be admitted

to state bar without examination); Piper, 470 U.S. at 277 n.1

23

(state rule that only state residents could be admitted to

state bar); Hicklin, 437 U.S. at 521 (employment preference

for state residents); Austin, 420 U.S. at 658 n.1 (state tax on

“every taxable nonresident” on “New Hampshire derived

income”); Toomer, 334 U.S. at 389-397 (state law imposing

higher fishing license fee on out-of-state residents); ef.

Mayor of Camden, 465 U.S. at 211 (city ordinance requiring

that at least 40% of jobs on city construction projects be re-

served for city residents, thereby discriminating not only

against residents of other States, but also against residents

of the same State who resided outside the city).

The California raw-milk pricing and pooling regulations, in

contrast, do not draw any distinction on their face between

citizens (or residents) of California and citizens (or residents)

of other States. The regulations instead treat milk differ-

ently depending upon whether the dairy farm from which it

originates is located inside or outside California. See Pet.

App. Al4.

A state law is not exempt from scrutiny under the Privi-

leges and Immunities Clause, as the court of appeals may

have believed, simply because the law does not distinguish,

in so many words, between a State’s own citizens or resi-

dents and those of other States. In Chalker, the Court held

that the Privileges and Immunities Clause was violated by a

state tax statute that on its face drew distinctions based not

on citizenship or residency, but on whether persons main-

tained the “chief office” of their business inside or outside

the State. See 249 U.S. at 526-527. The Court accepted the

state supreme court’s construction of the statute as imposing

the higher tax on all persons, including the State’s own citi-

zens, who maintained their chief office outside the State.

The Court reasoned, however, that because “the chief office

of an individual is commonly in the State of which he is a citi-

zen,” the statute, as a “practical[{]” matter, “would produce

discrimination against citizens of other States.” Jd. at 527.

24

The Court then concluded that there was no adequate basis

for taxing individuals based on the location of their chief of-

fice; indeed, the Court viewed the classification as “arbitrary

and unreasonable.” Ibid. Having found no sufficient

justification for the statutory distinction between citizens

and non-citizens, the Court invalidated the statute under the

Privileges and Immunities Clause. Ibid.

3. It does not follow from Chalker that every state law

that might have a disparate impact on individuals who are

not citizens or residents of the State implicates the Privi-

leges and Immunities Clause, as petitioners at times appear

to suggest. See 01-1018 Pet. 20, 22 (arguing that the rele-

vant consideration is “discriminatory effect”). In Chalker

itself, for example, the state statute on its face did draw an

in-state/out-of-state distinction—albeit in terms of the loca-

tion of a person’s chief office, rather than citizenship or

residency. The Court, in effect, concluded that the location

of the chief office served as a proxy for state citizenship

because there was a high correlation between the two. The

analysis in Chalker would not necessarily apply when the

state law in question is neutral on its face, containing no

provision that operates as a proxy for state citizenship or

residency, but nonetheless having a disparate impact on

citizens or residents of other States. In this case, however,

the California regulations do draw a distinction based on

whether the dairy farm where the milk originates is located

inside or outside the State. The regulations consequently

bear some resemblance in this respect to the statute in

Chalker, and petitioners note (01-1018 Pet. 18) the high

correlation between the location of a dairy farm and the

residence of its individual owner or operator.

It nonetheless is not entirely clear what the inquiry under

the Privileges and Immunities Clause should be when a state

law does not, on its face, draw distinctions based on state

citizenship or residency. In Chalker itself, the Court sug-

25

gested that the Clause reaches laws that “in their practical

operation materially abridge or impair the equality of com-

mercial privileges secured by the Federal Constitution to

citizens of the several States.” 249 U.S. at 556-557 (emphasis

added). In the decades since Chalker, however, the Court

has made clear that the Equal Protection Clause of the

Fourteenth Amendment reaches only those state laws that

have a discriminatory purpose as well as a discriminatory

effect. See, e.g., United States v. Armstrong, 517 U.S. 456,

465 (1996); Village of Arlington Heights v. Metropolitan

Hous. Dev. Corp., 429 U.S. 252, 265 (1977); Washington v.

Davis, 426 U.S. 229, 242 (1976). Under the Commerce

Clause, in contrast, the Court has continued to recognize

that in some circumstances a state law may be invalid based

on its “practical effect” alone. Healy v. Beer Inst., 491 U.S.

324, 336 (1989).

The Court has not had the occasion to consider whether,

or to what extent, intervening developments in the Court’s

approach to evaluating state laws challenged as discrimina-

tory under the Equal Protection Clause should inform its

analysis of state laws challenged as discriminatory under the

Privileges and Immunities Clause of Article IV. The two

Clauses are similar in structure and purpose. Both Clauses

explicitly constrain state authority in order to protect per-

sons against discrimination. See, e.g., Toomer, 334 U.S. at

395 (characterizing the Privileges and Immunities Clause as

a “protection of * * * equality”); Paul, 75 U.S. (8 Wall.) at

180 (observing that the Privileges and Immunities Clause,

int. alia, “inhibits discriminating legislation against [the

citizens of each State] by other States,” “insures to them in

other States the same freedom possessed by the citizens of

those States,” and “secures to them in other States the equal

protection of their laws”); George F. Carpinello, State Pro-

tective Legislation and Nonresident Corporations: The

Privileges and Immunities Clause as a Treaty of Nondiscri-

26

mination, 73 Iowa L. Rev. 351, 378 (1988) (describing the

Privileges and Immunities Clause as “the first ‘equal pro-

tection’ clause in the Constitution,” which, “[iJn essence,

* * * made distinctions based upon state citizenship inher-

ently suspect”). Indeed, the Equal Protection Clause is cou-

pled in the Fourteenth Amendment with a second Privileges

and Immunities Clause, which was modeled after the Clause

in Article IV. See Sac 526 U.S. at 502 n.15.

The Commerce Clause, in contrast, is a structural provi-

sion of the Constitution, which is expressly addressed to the

powers of Congress, and which only by implication con-

strains the powers of States. It was not principally designed

to protect individual rights, privileges, or immunities. See

Quill Corp. v. North Dakota, 504 U.S. 298, 305, 309, 312

(1992); but ef. Dennis v. Higgins, 498 U.S. 439, 447 (1991)

(persons may bring suit under 42 U.S.C. 1983 to enforce the

Commerce Clause). See generally Mayor of Camden, 465

U.S. at 220-221 (contrasting Commerce Clause and Privi-

leges and Immunities Clause).

A standard that considered whether a state law has the

purpose, as well as the effect, of discriminating based on

state citizenship or residency might serve to confine the

Privileges and Immunities Clause to its intended function: to

remove “from the citizens of each State the disabilities of

alienage in the other States,” Paul, 75 U.S. (8 Wall.) at 180

(emphasis added), not all burdens that may incidentally fall

more heavily on citizens of other States. Such a focus would

also avoid the “far reaching” consequences of a standard that

“would raise serious questions about, and perhaps invalidate,

a whole range of * * * statutes,” Davis, 426 U.S. at 248,

that do not draw distinctions on their face based on state

citizenship or residency, that were not intended to discrimi-

nate against citizens or residents of other States, and that

would withstand scrutiny under other constitutional provi-

sions (or that have been authorized by Congress under the

27

Commerce Clause). Cf. Metropolitan Life Ins., 470 U.S. at

899 (O’Connor, J., dissenting) (suggesting, with respect to

state economic regulations, that the Court should be reluc-

tant to apply other provisions of the Constitution in a man-

ner that would “foil{] Congress’s decision under its com-

merce powers to ‘affirmatively permit [some measure of]

parochial favoritism’”) (quoting White v. Massachusetts

Council of Constr. Employers, Inc., 460 U.S. 204, 213

(1983)).”

It may be particularly appropriate to inquire into the exis-

tence of a discriminatory purpose when, unlike here, a state

law does not on its face contain any in-state/out-of-state

classification that might operate as a proxy for a state citi-

zenship or residency classification. Even where, however, a

state law, like the California regulations here, does contain

an in-state/out-of-state class ‘fication, whether the law was

adopted for the purpose of disadvantaging citizens or resi-

dents of other States may still be a relevant consideration.

Cf. Travellers’ Ins. Co., 185 U.S. at 371.°

7 The state law in Chalker might well have been found invalid under a

As the Court has since explained in the equal protection context, “[s]ome

activities may be such an irrational object of disfavor that, if they are

targeted, and if they also happen to be engaged in exclusively or

predominantly by a particular class of people, an intent to disfavor that

class can readily be presumed.” Bray v. Alexandria Women’s Health

Clinic, 506 U.S. 263, 270 (1993) (offering as an example that “[a] tax on

wearing yarmulkes” could be equated with “a tax on Jews”); see Davis,

426 U.S. at 242 (observing that discriminatory purpose may be inferred

from discriminatory impact in circumstances where such impact “is very

difficult to explain on nonracial grounds”). The classification created by

the statute in Chalker, which based tax burdens on the location of a

person's chief office, might have been regarded as sufficiently suggestive

of a purpose to discriminate against citizens of other States.

8 It is far from clear that petitioners could ultimately establish that a

motivating purpose of the California regulations was to place the State’s

own citizens at an advantage over citizens of other States. Nothing in

28

4. There is no need at this stage of the case for the Court

to resolve these and other unsettled questions that may arise

concerning the application of the Privileges and Immunities

Clause to California’s milk pricing and pooling regulations.

In this Court, the individual petitioners have focused their

arguments, at least at the petition stage, on whether the

Clause may be violated by a law that does not facially dis-

criminate based on state citizenship or residency. See

01-1018 Pet. i, 17-23. It therefore appears that they do not

seek to have the Court resolve the merits of their privileges

and immunities claim at this time, but instead seek to have

the Court make clear that facial discrimination against citi-

zens or residents of other States is not required and remand

the claim for further consideration on the merits by the

lower courts. That, in the view of the United States, would

be an appropriate disposition.

If the Court adopts the construction of 7 U.S.C. 7254 that

the United States urges in Point I of this brief, the lower

courts will have to consider the merits of the Commerce

Clause claim on remand, whatever might be the proper dis-

those regulations or any other provision of California law prohibits

citizens of other States from owning dairy farms in California. And, when

citizens of other States do own dairy farms in California, the milk

produced at those dairy farms is treated identically to milk produced at

California dairy farms owned by California citizens. For example, all such

dairy farms, regardless of the citizenship of their owners, are equally

entitled to receive guaranteed minimum prices for their raw milk from

California handlers. And all such dairy farms are equally eligible to

acquire “quota.” By the same token, all raw milk produced at dairy farms

outside California is treated identically, whether the dairy farm is owned

by citizens of California or citizens of other States. Indeed, the petitioners

in this case include a California corporation and two California partner-

ships (with some or all California partners), which complain about the

impact of the California regulations on raw milk produced at the dairy

farms that they operate in Nevada. See Amended Complaint 2-3, Pon-

derosa Dairy v. Veneman, No. CV-S-97-1185 GEB IFM (Appellants’ C. A.

E.R. Tab 5); Br. in Opp. 17-18.

29

position of the Privileges and Immunities Clause claim. That

is so because many of the petitioners, as artificial persons

outside the reach of Privileges and Immunities Clause, are

no longer pressing a claim under that Clause, and thus would

not benefit from any ruling on that claim in favor of those

petitioners who are natural persons. If the lower courts on

remand conclude that the challenged regulations violate the

Commerce Clause, then there may be no need to resolve the

application of the Privileges and Immunities Clause. And, in

any event, the court of appeals’ analysis under the Com-

merce Clause of whether any differing treatment of raw milk

produced outside California is sufficiently justified to be

sustained under that Clause, as respondents have suggested

(see Br. in Opp. 6-8, 11-12), might inform the analysis under

the Privileges and Immunities Clause with respect to such

questions as (1) whether the milk pricing and pooling plan,

considered as a whole, provides a “reasonably fair distribu-

tion of burdens,” Travellers’ Ins. Co., 185 U.S. at 371, and

results in “substantial equality” between citizens and non-

citizens of the State, Lunding, 522 U.S. at 297, and (2)

whether any difference in treatment is justified by a “sub-

stantial reason” and “bears a substantial relationship to the

State’s objective,” id. at 298. Any further consideration of

the individual petitioners’ privileges and immunities claim

therefore would most appropriately be left to the lower

courts in the first instance.

30

CONCLUSION

The judgment of the court of appeals holding petitioners’

claim under the Commerce Clause to be foreclosed by 7

U.S.C. 7254 should be reversed and that claim should be re-

manded for consideration on the merits. The judgment of

the court of appeals with respect to the individual petition-

ers’ claim under the Privileges and Immunities Clause

should be reversed or vacated and remanded for further con-

sideration to the extent appropriate.

Respectfully submitted.

THEODORE B. OLSON

Solicitor General

ROBERT D. MCCALLUM. JR.

Assistant Attorney

EDWIN S. KNEEDLER

Deputy Solicitor General

BARBARA MCDOWELL

Assistant to the Solicitor

General

MARK B. STERN

ARA B. GERSHENGORN

Attorneys

FEBRUARY 2003