Petitioner
Reeves, Inc., a Wyoming concrete distributor
Respondent
Stake, et al., members of the South Dakota Cement Commission
Petitioner's Claim
That South Dakota's refusal to sell cement to an out-of-state buyer, due to a"cement shortage" which compelled it to prefer purchasers from within the state, constituted "hoarding" and was a preferential system forbidden by the Commerce Clause of the Constitution.
Chief Lawyer for Respondent
William J. Janklow
Chief Lawyer for Petitioner
Dennis M. Kirven
Justices for the Court
Harry A. Blackmun (writing for the Court), Warren E. Burger, Thurgood Marshall, William H. Rehnquist, Potter Stewart
Justices Dissenting
William J. Brennan, Jr., Lewis F. Powell, Jr., John Paul Stevens, Byron R. White
Place
Washington, D.C.
Date of Decision
19 June 1980
Decision
In a ruling that relied heavily on the Court's earlier decision in Hughesv. Alexandria Scrap Corporation (1976), the Court held that South Dakotawas acting as a "participant," rather than as a "regulator," in the interstate market. Hence, its withdrawal of its product for sale to out-of-state purchasers did not constitute a violation of the Commerce Clause.
Significance
Reeves, Inc. v. Stake developed the "participant-regulator" distinction which first appeared in Hughes v. Alexandria Scrap Corporation fouryears earlier. It helped solidify the understanding that a state, when it operated as a "participant" in interstate commerce, could undertake actions that, were it operating as a "regulator," would constitute protectionist practices forbidden under the Commerce Clause.
Cementing Commerce Between South Dakota and Wyoming
In the early 1900s, according to a report by the South Dakota State Cement Commission, South Dakota had only one cement plant. That one plant, which "hadbeen operating successfully for years," was "bought by the so-called trust [amonopoly] and closed down." At the recommendation of the commission, South Dakota established its own state-run cement plant. This was in line with the sentiments of the Progressive Era, symbolized first by President Theodore Roosevelt and later by Wisconsin's Governor Robert La Follette. In reaction to the abuses of big business during the late nineteenth and early twentieth centuries, the Progressives increasingly came to rely on government rather than private enterprise to meet the needs of the people. Hence, the Cement Commission noted in its recommendation that "capitalists" would not consider it to their "advantage to build a new plant within the state." Therefore, South Dakotaneeded its own plant.
The need for cement was particularly great because of a regional shortage inthat product, a shortage which "interfered with and delayed both public and private enterprise." This was not, however, because cement was a natural resource that had to be retrieved from the environment--a key point in Reeves,Inc. v. Stake. Rather, as the Supreme Court would later note in a commentdrawn from a 1978 report by the Portland Cement Association,
The state began building a plant in Rapid City in 1919, and the plant soon began producing more cement than builders in South Dakota could use. Eventually, its clientele spread to nine nearby states, many of which were (like SouthDakota) sparsely populated and lacking in the abundant commercial facilitiesto which most residents of the East and West Coasts were accustomed. During the period from 1970 to 1977, some forty percent of the plant's output was sold to buyers outside the state of South Dakota, one of whom was Reeves, Inc. The latter, a ready-mix concrete distributor based in the even more sparsely populated state of Wyoming, had begun operations in 1958, and had facilities in the Wyoming towns of Buffalo, Gillette, and Sheridan. As the supplier of more than half of the ready-mix concrete for three northwestern Wyoming counties, Reeves brought a great deal of business to the South Dakota plant. Over the course of a twenty-year relationship, Reeves's purchases from the commission grew to $1,172,000 in 1977, and by 1978, it was buying 95 percent of its cement from that one source.
This dependency proved unfortunate when the plant's production slowed down in1978 due to difficulties at the Rapid City facility. Such problems were compounded when a sudden building boom in the region and the nation resulted in a"serious cement shortage" of the type that had influenced the establishmentof the plant nearly 60 years before. In response to this situation, the commission "reaffirmed" its policy of supplying South Dakota customers first, thenof honoring any contracts with outside buyers on a first-come, first-servedbasis. Reeves, however, lacked even a supply contract, and since it was definitely an out-of-state buyer, it "was hit hard and quickly by this development," in the words of the Supreme Court. On 30 June 1978, the plant sent word toReeves that it could not continue filling the company's orders. Less than aweek later, on 5 July, it turned away a Reeves truck that had arrived to pickup an order. Faced with a crisis, Reeves suddenly had to cut production by astaggering 76 percent in mid-July--the height of the building season.
On 19 July 1978, Reeves brought a suit against the commission in district court, challenging the plant's policy of giving preference to South Dakotans, and seeking injunctive relief. The district court ruled that the "hoarding" ofcement practiced by South Dakota went against the spirit of the Constitution's Commerce Clause. The U.S. Court of Appeals for the Eight Circuit, however,reversed this decision. Citing Hughes v. Alexandria Scrap Corporation,it held that South Dakota had "simply acted in a proprietary capacity," thepermissibility of which had been established in that case.
States As Participators: "Good Sense and Sound Law"
The Supreme Court held, 5-4, that "South Dakota's resident-preference programfor the sale of cement does not violate the Commerce Clause." Writing for the majority, Justice Blackmun held that there was nothing in the clause to stop any state--assuming Congress did not expressly prohibit it--"from participating in the market and exercising the right to favor its own citizens over others." The Commerce Clause, according to the Court, was established primarilyto respond to issues relating to state taxes and "regulatory measures impeding free private trade in the national market-place," and the Court found no evidence that South Dakota had attempted to impose such impediments to interstate trade. Given the touchy matter of state sovereignty, the Court held thatany minor adjustments necessary in this area should be left up to Congress rather than the judicial branch. As for Reeves's arguments for invalidating South Dakota's program of preferring state residents, the Court found them "weakat best."
Much of the Court's ruling in Reeves went back to its opinion in Alexandria Scrap, and Blackmun began his reasoning with a brief review of the earlier case. The state of Maryland had a program in place to encourage the removal of abandoned automobiles from its roadways and junkyards by offering a financial incentive for each wrecked car turned recovered. The original legislation, passed in 1969, provided that anyone presenting a wrecked car should be able to provide documentation proving ownership. That stipulation didnot apply to "hulks," or inoperable cars more than eight years old. In 1974,however, the state legislature amended the statute to require documentation for hulks as well, and specifically required "more exacting documentation" (inthe Court's words) from out-of-state persons presenting such vehicles. According to the suit filed by Alexandria Scrap, a Virginia processor of hulks, "the practical effect was substantially the same" as if Maryland had simply stopped paying any money for hulks brought by unlicensed suppliers to licensed non-Maryland processors such as Alexandria Scrap.
The district court struck down Maryland's legislation, but the Supreme Courtreversed on the grounds that the statute questioned in Alexandria Scrap was not "the kind of action with which the Commerce Clause is concerned." Maryland, the Court reasoned, had not "sought to prohibit the flow of hulks, or to regulate the conditions under which it may occur. Instead, it [had] entered into the market itself to bid up their price." Thus, it characterized thestate of Maryland as a market participant rather than a market regulator. Addressing the case before the Court in Reeves, Justice Blackmun wrote that "the basic distinction drawn in Alexandria Scrap between States asmarket participants and States as market regulators makes good sense and sound law."
Just as the Court in Alexandria Scrap had written that "nothing in thepurposes animating the Commerce Clause prohibits a state, in the absence ofcongressional action, from participating in the market and exercising the right to favor its own citizens over others," so Justice Blackmun wrote now thatthere was "no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market." The issue of statesovereignty further counseled judicial restraint in an area which the Courtjudged to be the province of Congress.
As for the question of whether South Dakota had operated as a regulator or aparticipant, the Court held it to be the latter. In making the claim that South Dakota had "exploited" the interstate market, Blackmun wrote, the petitioner had used "self-serving" language: "An equally fair characterization is that neighboring States long have benefited from South Dakota's foresight and industry."
The remainder of the Court's opinion was devoted to addressing four specificarguments offered by Reeves's council. First, the petitioner had charged thatSouth Dakota was practicing economic "protectionism" by favoring its own citizens over others. The Court "[found] the label `protectionism' of little help in this context." Usually the term refers to a national policy of placing heavy duties on imports to encourage the sale of goods produced at home, but here it was used to describe a state policy of "[limiting] benefits generatedby a state program to those who fund the state treasury and whom the State was created to serve." Second was the petitioner's charge of "hoarding." In theCourt's view, that term only made sense when describing a policy of preventing the interstate flow of natural resources such as coal, timber, or wild game, not something like cement. Cement is "the end product of a complex processwhereby a costly physical plant and human labor act on raw materials." Third, Reeves's counsel had charged that the commission program impeded commerce by creating a situation in which South Dakota suppliers of ready-mix concretehad a competitive advantage in the out-of-state market. This argument the Court found without merit, because it seemed to imply that South Dakota should be barred from selling its cement elsewhere--"even a greater measure of protectionism and stifling of interstate commerce than the present system allows."Finally, the petitioner argued that South Dakota, having replaced free-marketor private suppliers, should be forced to operate as a free-market supplier--i.e., supplying goods entirely on a first-come, first-served basis, withoutstate preference. The Court held this argument "simplistic and speculative,"since there was no guarantee that a free-market supplier would even be operating in South Dakota at that point if the commission had not established its plant six decades earlier. "Indeed," Justice Blackmun wrote, "it is quite possible that petitioner would never have existed--far less operated successfullyfor 20 years--had it not been for South Dakota cement."
A Warning Against "Balkanization"
Justice Powell, in a dissenting opinion joined by Justices Brennan, White, and Stevens, wrote that in fact the South Dakota policy "represents precisely the kind of economic protectionism that the Commerce Clause was intended to prevent." Justice Powell agreed with the Court. He said, that South Dakota could sell cement without violating the clause--but it could not "withhold its cement from interstate commerce in order to benefit private citizens and businesses within the State" and still remain within the scope of the Commerce Clause.
After a brief review of the meaning of interstate commerce, both in the Constitution and in the Court's interpretation, Justice Powell made what he held was a key distinction. If a public entity undertook an enterprise integral tothe functioning of traditional government--e.g., police or fire protection--then, as the Court had ruled in National League of Cities v. Usery (1976), the Clause should not apply to it. But if the state entered the private market in order to operate a commercial enterprise that benefited its own citizens, it was within the scope of the clause, which had been placed in the Constitution to prevent "economic Balkanization." His implication was that without the proper flow of interstate commerce as governed by the clause, the states of the Union would become fragmented like the nations of Europe's Balkan Peninsula, which at that time--more than a decade before the conflicts in Bosnia, Croatia, and elsewhere--were already known for their many ethnic, cultural, and national divisions.
Justice Powell then addressed what he saw as the differences between the present case and Alexandria Scrap, and thus arrived at a different answerto the question of whether South Dakota had acted as a participant or a regulator. Whereas Maryland's policy had done nothing to cut off interstate trade,South Dakota's clearly had. Thus, though he "share[d] the Court's desire topreserve state sovereignty," Powell wrote that he had to stand by the Commerce Clause "as a limitation on that sovereignty." In its decision, "the Court today approves protectionist policies," and its decision could not be reconciled with the purpose of a free national economy.
Impact
Reeves solidified the "participant-regulator" distinction first established in Alexandria Scrap. Three years later, with White v. Massachusetts Council of Construction Employers, Inc. (1983), the Court reinforced its holding in the two earlier cases by upholding a mayor's executive order that set aside a fixed number of jobs on city projects for local residents.
Related Cases
Hughes v. Alexandria Scrap Corporation
The Supreme Court's Reeves, Inc. v. Stake opinion relied heavily on its judgment in Hughes v. Alexandria Scrap Corporation, (1976). The earlier case involved a Maryland statute whereby the state paid a bounty to scrapprocessors who presented an inoperable automobile more than eight years oldto the state. In 1974, Maryland amended its provisions regarding these junk cars, or "hulks," establishing a requirement that out-of-state scrap processors must present a certificate of title or police documentation to show that the hulk was obtained legally. Alexandria Scrap Corp., a Virginia company, brought a lawsuit charging that the statute was a violation of the Constitution'sCommerce Clause, infringing on the company's right to equal protection underthe law. After a district court granted a summary judgement in favor of thecompany, the case was appealed to the Supreme Court, which reversed the ruling by a 6-3 majority, holding that Maryland was acting as a participant in thescrap-metal market, not a regulator. Thus, its laws did not interfere with the flow of interstate commerce.
Reeves, Inc., a Wyoming concrete distributor
Respondent
Stake, et al., members of the South Dakota Cement Commission
Petitioner's Claim
That South Dakota's refusal to sell cement to an out-of-state buyer, due to a"cement shortage" which compelled it to prefer purchasers from within the state, constituted "hoarding" and was a preferential system forbidden by the Commerce Clause of the Constitution.
Chief Lawyer for Respondent
William J. Janklow
Chief Lawyer for Petitioner
Dennis M. Kirven
Justices for the Court
Harry A. Blackmun (writing for the Court), Warren E. Burger, Thurgood Marshall, William H. Rehnquist, Potter Stewart
Justices Dissenting
William J. Brennan, Jr., Lewis F. Powell, Jr., John Paul Stevens, Byron R. White
Place
Washington, D.C.
Date of Decision
19 June 1980
Decision
In a ruling that relied heavily on the Court's earlier decision in Hughesv. Alexandria Scrap Corporation (1976), the Court held that South Dakotawas acting as a "participant," rather than as a "regulator," in the interstate market. Hence, its withdrawal of its product for sale to out-of-state purchasers did not constitute a violation of the Commerce Clause.
Significance
Reeves, Inc. v. Stake developed the "participant-regulator" distinction which first appeared in Hughes v. Alexandria Scrap Corporation fouryears earlier. It helped solidify the understanding that a state, when it operated as a "participant" in interstate commerce, could undertake actions that, were it operating as a "regulator," would constitute protectionist practices forbidden under the Commerce Clause.
Cementing Commerce Between South Dakota and Wyoming
In the early 1900s, according to a report by the South Dakota State Cement Commission, South Dakota had only one cement plant. That one plant, which "hadbeen operating successfully for years," was "bought by the so-called trust [amonopoly] and closed down." At the recommendation of the commission, South Dakota established its own state-run cement plant. This was in line with the sentiments of the Progressive Era, symbolized first by President Theodore Roosevelt and later by Wisconsin's Governor Robert La Follette. In reaction to the abuses of big business during the late nineteenth and early twentieth centuries, the Progressives increasingly came to rely on government rather than private enterprise to meet the needs of the people. Hence, the Cement Commission noted in its recommendation that "capitalists" would not consider it to their "advantage to build a new plant within the state." Therefore, South Dakotaneeded its own plant.
The need for cement was particularly great because of a regional shortage inthat product, a shortage which "interfered with and delayed both public and private enterprise." This was not, however, because cement was a natural resource that had to be retrieved from the environment--a key point in Reeves,Inc. v. Stake. Rather, as the Supreme Court would later note in a commentdrawn from a 1978 report by the Portland Cement Association,
[C]ement is a finely ground manufactured mineral product, usually gray in color.It is mixed with water and sand, gravel, crushed stone, or other aggregatesto form concrete, the rock-like substance that is the most widely used construction material in the world.With the cement shortage "threatening the people of this state," in the words of the Cement Commission (which the Court simply referred to as "the Commission"), "there would be a ready market for the entire output of the plant within the state."
The state began building a plant in Rapid City in 1919, and the plant soon began producing more cement than builders in South Dakota could use. Eventually, its clientele spread to nine nearby states, many of which were (like SouthDakota) sparsely populated and lacking in the abundant commercial facilitiesto which most residents of the East and West Coasts were accustomed. During the period from 1970 to 1977, some forty percent of the plant's output was sold to buyers outside the state of South Dakota, one of whom was Reeves, Inc. The latter, a ready-mix concrete distributor based in the even more sparsely populated state of Wyoming, had begun operations in 1958, and had facilities in the Wyoming towns of Buffalo, Gillette, and Sheridan. As the supplier of more than half of the ready-mix concrete for three northwestern Wyoming counties, Reeves brought a great deal of business to the South Dakota plant. Over the course of a twenty-year relationship, Reeves's purchases from the commission grew to $1,172,000 in 1977, and by 1978, it was buying 95 percent of its cement from that one source.
This dependency proved unfortunate when the plant's production slowed down in1978 due to difficulties at the Rapid City facility. Such problems were compounded when a sudden building boom in the region and the nation resulted in a"serious cement shortage" of the type that had influenced the establishmentof the plant nearly 60 years before. In response to this situation, the commission "reaffirmed" its policy of supplying South Dakota customers first, thenof honoring any contracts with outside buyers on a first-come, first-servedbasis. Reeves, however, lacked even a supply contract, and since it was definitely an out-of-state buyer, it "was hit hard and quickly by this development," in the words of the Supreme Court. On 30 June 1978, the plant sent word toReeves that it could not continue filling the company's orders. Less than aweek later, on 5 July, it turned away a Reeves truck that had arrived to pickup an order. Faced with a crisis, Reeves suddenly had to cut production by astaggering 76 percent in mid-July--the height of the building season.
On 19 July 1978, Reeves brought a suit against the commission in district court, challenging the plant's policy of giving preference to South Dakotans, and seeking injunctive relief. The district court ruled that the "hoarding" ofcement practiced by South Dakota went against the spirit of the Constitution's Commerce Clause. The U.S. Court of Appeals for the Eight Circuit, however,reversed this decision. Citing Hughes v. Alexandria Scrap Corporation,it held that South Dakota had "simply acted in a proprietary capacity," thepermissibility of which had been established in that case.
States As Participators: "Good Sense and Sound Law"
The Supreme Court held, 5-4, that "South Dakota's resident-preference programfor the sale of cement does not violate the Commerce Clause." Writing for the majority, Justice Blackmun held that there was nothing in the clause to stop any state--assuming Congress did not expressly prohibit it--"from participating in the market and exercising the right to favor its own citizens over others." The Commerce Clause, according to the Court, was established primarilyto respond to issues relating to state taxes and "regulatory measures impeding free private trade in the national market-place," and the Court found no evidence that South Dakota had attempted to impose such impediments to interstate trade. Given the touchy matter of state sovereignty, the Court held thatany minor adjustments necessary in this area should be left up to Congress rather than the judicial branch. As for Reeves's arguments for invalidating South Dakota's program of preferring state residents, the Court found them "weakat best."
Much of the Court's ruling in Reeves went back to its opinion in Alexandria Scrap, and Blackmun began his reasoning with a brief review of the earlier case. The state of Maryland had a program in place to encourage the removal of abandoned automobiles from its roadways and junkyards by offering a financial incentive for each wrecked car turned recovered. The original legislation, passed in 1969, provided that anyone presenting a wrecked car should be able to provide documentation proving ownership. That stipulation didnot apply to "hulks," or inoperable cars more than eight years old. In 1974,however, the state legislature amended the statute to require documentation for hulks as well, and specifically required "more exacting documentation" (inthe Court's words) from out-of-state persons presenting such vehicles. According to the suit filed by Alexandria Scrap, a Virginia processor of hulks, "the practical effect was substantially the same" as if Maryland had simply stopped paying any money for hulks brought by unlicensed suppliers to licensed non-Maryland processors such as Alexandria Scrap.
The district court struck down Maryland's legislation, but the Supreme Courtreversed on the grounds that the statute questioned in Alexandria Scrap was not "the kind of action with which the Commerce Clause is concerned." Maryland, the Court reasoned, had not "sought to prohibit the flow of hulks, or to regulate the conditions under which it may occur. Instead, it [had] entered into the market itself to bid up their price." Thus, it characterized thestate of Maryland as a market participant rather than a market regulator. Addressing the case before the Court in Reeves, Justice Blackmun wrote that "the basic distinction drawn in Alexandria Scrap between States asmarket participants and States as market regulators makes good sense and sound law."
Just as the Court in Alexandria Scrap had written that "nothing in thepurposes animating the Commerce Clause prohibits a state, in the absence ofcongressional action, from participating in the market and exercising the right to favor its own citizens over others," so Justice Blackmun wrote now thatthere was "no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market." The issue of statesovereignty further counseled judicial restraint in an area which the Courtjudged to be the province of Congress.
As for the question of whether South Dakota had operated as a regulator or aparticipant, the Court held it to be the latter. In making the claim that South Dakota had "exploited" the interstate market, Blackmun wrote, the petitioner had used "self-serving" language: "An equally fair characterization is that neighboring States long have benefited from South Dakota's foresight and industry."
The remainder of the Court's opinion was devoted to addressing four specificarguments offered by Reeves's council. First, the petitioner had charged thatSouth Dakota was practicing economic "protectionism" by favoring its own citizens over others. The Court "[found] the label `protectionism' of little help in this context." Usually the term refers to a national policy of placing heavy duties on imports to encourage the sale of goods produced at home, but here it was used to describe a state policy of "[limiting] benefits generatedby a state program to those who fund the state treasury and whom the State was created to serve." Second was the petitioner's charge of "hoarding." In theCourt's view, that term only made sense when describing a policy of preventing the interstate flow of natural resources such as coal, timber, or wild game, not something like cement. Cement is "the end product of a complex processwhereby a costly physical plant and human labor act on raw materials." Third, Reeves's counsel had charged that the commission program impeded commerce by creating a situation in which South Dakota suppliers of ready-mix concretehad a competitive advantage in the out-of-state market. This argument the Court found without merit, because it seemed to imply that South Dakota should be barred from selling its cement elsewhere--"even a greater measure of protectionism and stifling of interstate commerce than the present system allows."Finally, the petitioner argued that South Dakota, having replaced free-marketor private suppliers, should be forced to operate as a free-market supplier--i.e., supplying goods entirely on a first-come, first-served basis, withoutstate preference. The Court held this argument "simplistic and speculative,"since there was no guarantee that a free-market supplier would even be operating in South Dakota at that point if the commission had not established its plant six decades earlier. "Indeed," Justice Blackmun wrote, "it is quite possible that petitioner would never have existed--far less operated successfullyfor 20 years--had it not been for South Dakota cement."
A Warning Against "Balkanization"
Justice Powell, in a dissenting opinion joined by Justices Brennan, White, and Stevens, wrote that in fact the South Dakota policy "represents precisely the kind of economic protectionism that the Commerce Clause was intended to prevent." Justice Powell agreed with the Court. He said, that South Dakota could sell cement without violating the clause--but it could not "withhold its cement from interstate commerce in order to benefit private citizens and businesses within the State" and still remain within the scope of the Commerce Clause.
After a brief review of the meaning of interstate commerce, both in the Constitution and in the Court's interpretation, Justice Powell made what he held was a key distinction. If a public entity undertook an enterprise integral tothe functioning of traditional government--e.g., police or fire protection--then, as the Court had ruled in National League of Cities v. Usery (1976), the Clause should not apply to it. But if the state entered the private market in order to operate a commercial enterprise that benefited its own citizens, it was within the scope of the clause, which had been placed in the Constitution to prevent "economic Balkanization." His implication was that without the proper flow of interstate commerce as governed by the clause, the states of the Union would become fragmented like the nations of Europe's Balkan Peninsula, which at that time--more than a decade before the conflicts in Bosnia, Croatia, and elsewhere--were already known for their many ethnic, cultural, and national divisions.
Justice Powell then addressed what he saw as the differences between the present case and Alexandria Scrap, and thus arrived at a different answerto the question of whether South Dakota had acted as a participant or a regulator. Whereas Maryland's policy had done nothing to cut off interstate trade,South Dakota's clearly had. Thus, though he "share[d] the Court's desire topreserve state sovereignty," Powell wrote that he had to stand by the Commerce Clause "as a limitation on that sovereignty." In its decision, "the Court today approves protectionist policies," and its decision could not be reconciled with the purpose of a free national economy.
Impact
Reeves solidified the "participant-regulator" distinction first established in Alexandria Scrap. Three years later, with White v. Massachusetts Council of Construction Employers, Inc. (1983), the Court reinforced its holding in the two earlier cases by upholding a mayor's executive order that set aside a fixed number of jobs on city projects for local residents.
Related Cases
- Hughes v. Alexandria Scrap Corporation, 426 U.S. 794 (1976).
- National League of Cities v. Usery, 426 U.S. 833 (1976).
- White v. Massachusetts Council of Construction Employers, 460 U.S.204 (1983).
Hughes v. Alexandria Scrap Corporation
The Supreme Court's Reeves, Inc. v. Stake opinion relied heavily on its judgment in Hughes v. Alexandria Scrap Corporation, (1976). The earlier case involved a Maryland statute whereby the state paid a bounty to scrapprocessors who presented an inoperable automobile more than eight years oldto the state. In 1974, Maryland amended its provisions regarding these junk cars, or "hulks," establishing a requirement that out-of-state scrap processors must present a certificate of title or police documentation to show that the hulk was obtained legally. Alexandria Scrap Corp., a Virginia company, brought a lawsuit charging that the statute was a violation of the Constitution'sCommerce Clause, infringing on the company's right to equal protection underthe law. After a district court granted a summary judgement in favor of thecompany, the case was appealed to the Supreme Court, which reversed the ruling by a 6-3 majority, holding that Maryland was acting as a participant in thescrap-metal market, not a regulator. Thus, its laws did not interfere with the flow of interstate commerce.
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