SUPREME COURT OF THE UNITED STATES

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No. 93-141

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WEST LYNN CREAMERY, INC., et al., PETITIONERS v. JONATHAN HEALY, COMMISSIONER OF MASSACHUSETTS DEPARTMENT OF FOOD AND AGRICULTURE

on writ of certiorari to the supreme judicial court of massachusetts

[June 17, 1994]

Chief Justice Rehnquist , with whom Justice The Court is less than just in its description of the

reasons which lay behind the Massachusetts law which it strikes down. The law undoubtedly sought to aid struggling Massachusetts dairy farmers, beset by steady or declining prices and escalating costs. This situation is apparently not unique to Massachusetts; New Jersey has filed an amicus brief in support of respondent because New Jersey has enacted a similar law. Both States lie in the northeastern metropolitan corridor, which is the most urbanized area in the United States, and has every prospect of becoming more so. The value of agricultural land located near metropolitan areas is driven up by the demand for housing and similar urban uses; distressed farmers eventually sell out to developers. Not merely farm produce is lost, as is the milk production in this case, but, as the Massachusetts Special Commission whose report was the basis for the order in question here found:

"Without the continued existence of dairy farmers, the Commonwealth will lose its supply of locally produced fresh milk, together with the open landsthat are used as wildlife refuges, for recreation, hunting, fishing, tourism, and education." App. 13.

Massachusetts has dealt with this problem by providing a subsidy to aid its beleaguered dairy farmers. In case after case, we have approved the validity under the Commerce Clause of such enactments. "No one disputes that a State may enact laws pursuant to its police powers that have the purpose and effect of encouraging domestic industry." Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 271 (1984). "Direct subsidization of domestic industry does not ordinarily run afoul of the [dormant Commerce Clause]; discriminatory taxation of out of state manufacturers does." New Energy Co. of Indiana v. Limbach, 486 U.S. 269, 278 (1988). But today the Court relegates these well established principles to a footnote and, at the same time, gratuitously casts doubt on the validity of state subsidies, observing that "[w]e have never squarely confronted" their constitutionality. Ante, at 12, n. 15.

But in Milk Control Bd. v. Eisenberg Farm Products, 306 U.S. 346 (1939), the Court upheld a Pennsylvania statute establishing minimum prices to be paid to Pennsylvania dairy farmers against a Commerce Clause challenge by a Pennsylvania milk dealer which shipped all of its milk purchased in Pennsylvania to New York to be sold there. The Court observed that "[t]he purpose of the statute . . . is to reach a domestic situation in the interest of the welfare of the producers and consumers of milk in Pennsylvania." Id., at 352. It went on to say:

"One of the commonest forms of state action is the exercise of police power directed to the control of local conditions and exerted in the interest of the welfare of the state's citizens. Every state police statute necessarily will affect interstate commerce in some degree, but such a statute does not runcounter to the grant of Congressional power merely because it incidentally or indirectly involves or burdens interstate commerce. . . . These principles have guided judicial decision for more than a century." Id., at 351-352.

The Massachusetts subsidy under consideration is similar in many respects to the Pennsylvania statute described in Eisenberg, supra. Massachusetts taxes all dealers of milk within its borders. The tax is even handed on its face, i. e., it affects all dealers regardless of the point of origin of the milk. Ante, at 8 ("the tax also applies to milk produced in Massachusetts . . . "); ante, at 13 (" . . . the evenhanded tax at issue here . . ."). The State has not acted to strong arm sister States as in Limbach; rather, its motives are purely local. As the Supreme Judicial Court of Massachusetts aptly described it: "[T]he premiums represent one of the costs of doing business in the Commonwealth, a cost all milk dealers must pay." West Lynn Creamery, Inc. v. Commissioner of Dept. of Food and Agriculture, 415 Mass. 8, 19, 611 N. E. 2d 239, 245 (1993).

Consistent with precedent, the Court observes: "A pure subsidy funded out of general revenue ordinarily imposes no burden on interstate commerce, but merely assists local business." Ante, at 13. And the Court correctly recognizes that "[n]ondiscriminatory measures, like the evenhanded tax at issue here, are generally upheld" due to the deference normally accorded to a State's political process in passing legislation in light of various competing interest groups. Ante, at 13-14, citing Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 473, n. 17 (1981), and Raymond Motor Transportation Inc. v. Rice, 434 U.S. 429, 444, n. 18 (1978). But the Court strikes down this method of state subsidization because the non discriminatory tax levied against all milk dealers is coupled with a subsidy to milk producers. Ante, at 14-15. The Court does this because of its view that themethod of imposing the tax and subsidy distorts the State's political process: the dairy farmers, who would otherwise lobby against the tax, have been mollified by the subsidy. Ante, at 13-14. But as the Court itself points out, there are still at least two strong interest groups opposed to the milk order--consumers and milk dealers. More importantly, nothing in the dormant Commerce Clause suggests that the fate of state regulation should turn upon the particular lawful manner in which the state subsidy is enacted or promulgated. Analysis of interest group participation in the political process may serve many useful purposes, but serving as a basis for interpreting the dormant Commerce Clause is not one of them.

The Court concludes that the combined effect of the milk order "simultaneously burdens interstate commerce and discriminates in favor of local producers." Ante, at 15. In support of this conclusion, the Court cites Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511 (1935), and Bacchus Imports, Ltd. v. Dias, supra, as two examples in which constitutional means were held to have unconstitutional effects on interstate commerce. But both Baldwin and Bacchus are a far cry from this case.

In Baldwin, supra, in order to sell bottled milk in New York, milk dealers were required to pay a minimum price for milk, even though they could have purchased milk from Vermont farmers at a lower price. This scheme was found to be an effort to prevent Vermont milk producers from selling to New York dealers at their lower market price. As Justice Cardozo explained, under the New York statute, "the importer . . . may keep his milk or drink it, but sell it he may not." 294 U. S., at 521. Such a scheme clearly made it less attractive for New York dealers to purchase milk from Vermont farmers, for the disputed law negated any economic advantage in so doing. Under the Massachusetts milk order, there is no such adverse effect. Milk dealers have the same incentives to purchase lower priced milk from out of state farmers; dealers of all milk are taxed equally. To borrow Justice Cardozo's description, milk dealers in Massachusetts are free to keep their milk, drink their milk, and sell it--on equal terms as local milk.

In Bacchus, the State of Hawaii combined its undisputed power to tax and grant exemptions in a manner that the Court found violative of the Commerce Clause. There, the State exempted a local wine from the burdens of an excise tax levied on all other liquor sales. Despite the Court's strained attempt to compare the scheme in Bacchus to the milk order in this case, ante, at 10-11, it is clear that the milk order does not produce the same effect on interstate commerce as the tax exemption in Bacchus. I agree with the Court's statement that Bacchus can be distinguished "by noting that the rebate in this case goes not to the entity which pays the tax (milk dealers) but to the dairy farmers themselves." Ante, at 11, n. 14. This is not only a distinction, but a significant difference. No decided case supports the Court's conclusion that the negative Commerce Clause prohibits the State from using money that it has lawfully obtained through a neutral tax on milk dealers and distributing it as a subsidy to dairy farmers. Indeed, the case which comes closest to supporting the result the Court reaches is the ill starred opinion in United States v. Butler, 297 U.S. 1 (1936), in which the Court held unconstitutional what would have been an otherwise valid tax on the processing of agricultural products because of the use to which the revenue raised by the tax was put.

More than half a century ago, Justice Brandeis said in his dissenting opinion in New State Ice Co. v. Liebmann, 285 U.S. 262, 311 (1932):

"To stay experimentation in things social and economic is a grave responsibility. Denial of the right to experiment may be frought with serious consequences to the Nation. It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country."

Justice Brandeis' statement has been cited more than