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The Commerce Clause Limitation on the Power to Condemn a Relocating BusinessAuthor(s): Edward P. LazarusSource: The Yale Law Journal, Vol. 96, No. 6 (May, 1987), pp. 1343-1362Published by: The Yale Law Journal Company, Inc.Stable URL: http://www.jstor.org/stable/796389

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The Commerce Clause Limitation on the

Power To Condemn a RelocatingBusiness

Edward P. Lazarus

In light of recent Supreme Court decisions expanding the constitutionaluse of the sovereign power of eminent domain, local authorities are nowconsidering the use of eminent domain in previously uncontemplated con?texts. Specifically, local governments are with increasing frequency threat?ening to condemn businesses that are on the verge of relocation. This Noteargues that such takings would violate the Constitution. Neither the pay?ment of just compensation nor any inherent attribute of the taking powercan insulate these condemnations from the commerce clause proscriptionagainst local actions that burden interstate commerce.

I. CONDEMNING A RELOCATING BUSINESSOn June 21, 1982, the Supreme Court of California sanctioned the use

of eminent domain power to condemn a relocating business.1 Reversing asummary judgment ruling against the City of Oakland in its attempt tocondemn the relocating Oakland Raiders football team, the CaliforniaCourt approved two emerging trends in the jurisprudence of eminent do?main: first, that intangible property such as contract rights, franchises,patents, goodwill, and other incorporeals are as susceptible to condemna-tion as tangible or real property;2 and second, that local legislatures enjoybroad discretion in determining what public interests are sufficient to meetthe U.S. Constitution's "public use" limitation on the taking of privateproperty.8

1. City of Oaklandv. OaklandRaiders,32 Cal. 3d 60, 646 P.2d 835, 183 Cal. Rptr. 673 (1982).2. Here the Court merely recognizedwhat the U.S. Supreme Court had already largely estab?lished.See, e.g., Kimball LaundryCo. v. United States, 338 U.S. 1 (1949) (upholdingtakingof traderoutes belonging to laundry service);West River Bridge Co. v. Dix, 47 U.S. (6 How.) 507 (1848)(holding that exercise of eminent domain over contractrights does not violate contractclause).3. Soon after Oakland Raiders, the United States Supreme Court articulated what had alreadybecome ts de factopolicytowardlegislativedeterminations f publicuse: " '[W]henthe legislaturehasspoken,the public interest has been declaredin termswell-nigh conclusive,'" Hawaii Hous. Auth. v.Midkiff, 467 U.S. 229, 239 (1984) (quoting Bermanv. Parker, 348 U.S. 26, 32 (1954)) (upholdingHawaii land reformstatute by which privateestates were divided up for benefitof non-landowningpublic); see also Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1014-16 (1984) (reaffirmingbroadlegislativediscretionto determinepublic use). Since heretofore he "publicuse" requirementwas theonly constitutional imit on the powerof eminent domain (except the compensationrequirement),the

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The Yale Law Journal Vol. 96: 1343, 1987

More specifically, the court rejected the Raiders' argument that thecity's power to condemn intangible property did not extend to the takingof a going concern.4 Moreover, the Court held that the continued presenceof a sports team perpetuated a variety of community values (includingcivic pride, community enjoyment, and local economic gain) sufficient toconstitute the legitimate public use required for the exercise of the takingpower.6

Midkiffcase, and its theoreticalforebears, ee, e.g., Berman, 348 U.S. 26, naturallyraise the questionof whether any meaningfullimits remain on a legislature'spower to appropriateprivate propertyinexchange for compensation.See, e.g., Note, Public Use in Eminent Domain: Are There LimitsAfterOakland Raiders and Poletown?,20 Cal. W.L. Rev. 82 (1983); Note, A Final Requiem or thePublic Use Limitation on Eminent Domain, 60 Notre Dame L. Rev. 388 (1985); see also R. Ep?stein, Takings: Private Property and the Power of Eminent Domain (1985) (arguingforstrict limits on legislativepower to appropriate property rights).In Midkiff, the SupremeCourt did not wholly abdicate the judicial responsibility o scrutinize thelegislative purposesbehindcondemnations:"To be sure . . . 'one person'spropertymay not be takenfor the benefitof anotherprivate personwithout a justifying public purpose,even though compensa?tion be paid.'" 467 U.S. at 241 (quoting Thompson v. Consolidated Gas Corp., 300 U.S. 55, 80(1930)). Protectionist condemnationsdo bear some resemblance to this prohibitedprivate eminentdomain. In most cases, governmentownership upon condemnationof a business would be merely atemporaryincident to ultimate private entrepreneurialor worker control. In addition,while in theordinaryeminentdomaincase the state takesprivate propertyand converts hat property o a new andpurportedlyhigher use, in the case of a relocatingbusiness, the state would simply take the propertyand turn it over to privateinterestsin preciselythe same formand for preciselythe same use as underthe originalowner. But see 2A Nichols' The Law of Eminent Domain ? 7.49[l][b] (J. Sackmanrev. 3d ed. 1981) [hereinafterNichoi?] (preservationof historicpropertyrepresentsvalid publicuse).In any event, protectionist akingswould almostcertainly pass the currentpublicuse test. Courtshavebeen strikingly reluctant to invalidatetakings, even those closely tied to private interests.See, e.g.,PoletownNeighborhoodCouncilv. City of Detroit, 410 Mich. 616, 304 N.W.2d 454 (1981). Thoughnot especially implicated n the business relocationcontext,the Poletown case (which not only arrayedGeneral Motors against the residentsof an impoverished mmigrantneighborhood,but also involvedthe Michigan "quick take" statuteunder which prospectivecondemneeshad little opportunityto or?ganize politically) suggeststhat courtsmight restore some limits on the takings power by giving moreexactingconsideration o the proceduralaspectsof condemnations.Cf Fullilove v. Klutznick,448 U.S.448, 551 (1980) (Stevens,J., dissenting) (judicialreview considers"proceduralcharacterof the deci?sion-making process");Sunstein,Naked Preferencesand the Constitution,84 Colum. L. Rev. 1689(1985) (reading public use limitation to require greater legislative justification than simplymajoritarianpreference).4. "Intangibleproperty,such as . . . patent rights, franchises,chartersor any other form of con?tractare within the scopeof [eminent domain]as fully as land or tangibleproperty,"Oakland Raid?ers, 32 Cal. 3d at 67, 646 P.2d at 839, 183 Cal. Rptr. at 677 (1982) (quoting 1 Nichols, supra note3, at 2.1[2]).5. The condemnationof going concerns,whethersportsteams or steel mills, sets in high relief thecentral analytic question of takings jurisprudence:Can courts developcoherentstandards for scruti-nizing the exercise of eminent domain power without dramaticallycurtailingthe legislature's abilityto promoteits vision of the public welfare? Put anotherway, although sanctioningthe condemnationof a sportsfranchisemay seem like a radical extension of takings urisprudence, he courts have yet tocreate a standardof review that would preservea state'spower to condemnslums for urban renewalyet would preventOaklandfrom takingthe Raiders.See, e.g., Dunham, Griggs v. Allegheny Countyin Perspective:Thirty Yearsof Supreme Court ExpropriationLaw, 1962 Sup. Ct. Rev. 63, 65-67(recountingdecline of public use doctrine);Comment,Res Non Protest Peccareff? The Decline andFall of the Public Use Limitation on Eminent Domain, 76 Dick. L. Rev. 266 (1972) (proposingpublic oversight and operation as test for public use). Not all commentatorswould mourn such aradical retrenchmentof governmentalauthority,see R. Epstein, supra note 3, but while this Noteseeks some check on state power to condemn property, it locates that check outside of the takingsclause itself preciselyto avoidfailingdown the slippery slope of publicusejurisprudence nto libertar-1344

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Condemning a Relocating Business

In sum, the Raiders case established a legal foundation for the condem?nation of business enterprises for no reason other than to prevent reloca?tion.6 The Oakland precedent has already prompted Baltimore to bringcondemnation proceedings against the Baltimore Colts football team afterthat team fled to Indianapolis in the middle of the night.7

By far the more economically significant application of the Oaklandruling, however, has occurred not in the sports world but in the industrialcontext, where states suffering industrial dislocation have begun to con?sider eminent domain as a way of keeping business at home and localeconomies alive. A national sample of 12,063 plants indicated that 12.1%relocated in the 1970*8, principally from the northeast to the sunbelt.8 Inresponse, New Bedford, Chicago, Youngstown, Pittsburgh, Boston, andsmaller municipalities throughout the northeast have threatened local in?dustries with condemnations rather than risk plant closings and reloca-

ian notions about the appropriaterelationshipbetweengovernmentand privateproperty.Justice Bird, in her concurringand dissentingopinion in Oakland Raiders, balked at the "creepingstatism" involved in the condemnationof a going concernsimply on account of the owner's intentionto relocate:"[I]f a rock concertimpressario,after some years producingconcertsin a municipalsta?dium, decides to move his productions o anothercity, may the city condemnhis business?"32 Cal. 3dat 77, 646 P.2d at 846, 183 Cal. Rptr. at 683-84 (1982). Similarly, could New York condemnDwight Gooden's employmentcontract if the Mets traded him? Despite these concerns, however,Justice Bird concludedthat, "in the absence of a legislativebar to [this] use of eminent domain . . .thereappearsto be no groundforjudicial intervention."d. In some sense,Justice Bird'sacquiescenceunderscores he difficultyof resolvingwithin the frameworkof takings urisprudence hejurisdictionaland liberty problemsassociated with the condemnationof intangiblepropertyor personalcontracts.See Note,Jurisdictional Limitations on Intangible Propertyin Eminent Domain: Focus on the Indi?anapolis Colts, 60 Ind. L. Rev. 389 (1984) (arguingforjurisdictionalrule locatingintangibleprop?erty at owner's domicile);see also infra note 86.6. After remand, the CaliforniaCourt of Appeals ruled that the taking of the Oakland Raidersviolatedthe commerceclause, 174 Cal. App. 3d 414, 220 Cal. Rptr. 153 (1985). In an opinionvirtu?ally devoidof analysis, the court held that the relocationof the Raidersfranchise,althoughintrastate,implicatedthe welfareof the entire National FootballLeague and consequentlyraised issues of inter?state commercial aw. The court'sresolutionof the commerceclause issue restedon two grounds,bothonly marginally applicable to the industrial plant relocationswith which this Note is principallyconcerned.First, the court foundthat the footballfranchisesystemrequires"uniformnationalregula?tion," making it especially susceptible to commerce clause scrutiny. Second, the court employed abalancingtest weighing the local interest involvedagainst the burden to commerce.Although sportsteams may provide considerablepsychic benefits to a city, condemnationsof industrialplants willgenerally involve far weightier local concerns than sports team relocations.7. Indianapolis Colts v. Mayor & City Council of Baltimore, 741 F.2d 954 (7th Cir. 1984).Although the Colts litigationwas settled beforetrial, Baltimore'sattemptedcondemnationpresentedpreciselythe issue addressed n this Note: Can a municipalitytake a businessrelocatingout-of-state?Before settlement,the Colts had raised a tricky jurisdictionalquestion underscoringhow easily thisparticularexercise of eminent domain power implicates out-of-state interests.Since the Colts hadabandonedtheir Baltimoreheadquartersand had hastily set up shop in Indiana prior to the actualtaking,a thresholdquestionarose as to where the franchise was legally located.Whetherundertheseunusual circumstancesBaltimorecould have condemnedproperty in some sense located in anotherstate remains unresolved.See 1 Nichols, supra note 3, at ? 2.12 ("There is one limitation on thepower of eminent domain which depends on no express constitutionalprovision.The powers of asovereignState,however vast in theircharacterand searching n theirextent, are inherentlylimitedtothe subjectswithin the jurisdictionof the state. . . . ").8. See Note, The Use of Eminent Domain To Prevent an Industrial Plant Shutdown:The NextStep in an Expanding Power? 49 Alb. L. Rev. 95, 97 n.ll (1984) [hereinafterThe Next Step].

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tions. No takings have occurred yet, but in New Bedford and Pittsburghthe threat of condemnation persuaded Morse Cutting Tools and Nabisco,respectively, not to close factories and relocate assets.9 In part to providetime for the third-party or subsidized worker buyouts that would followcondemnations, municipalities in over twenty states have enacted or areconsidering ordinances requiring industries to provide long advance noticeof planned closings and relocations.10

Using tax abatements, municipal bond offerings, low-interest loans, andother lures, the states are engaged in a fierce competition for business andindustry. Whether states can add protectionist condemnations to theircompetitive arsenals is a question of profound import for industrial pol?icy.11 To date, the courts have placed no constitutional limitations on the"carrots" with which states entice industries to relocate.12 But as this Notedemonstrates, unless the Supreme Court abandons its current reading of

9. The New Bedford case is the most celebrated to date. There, in the spring and summer of1984, a coalition of stateofficials,communityrepresentatives, nd threatenedworkersbandedtogetherin an attemptto keep the multinationalGulf & WesternCorporation rom closingdown and relocat?ing the assets of its subsidiary,the Morse CuttingTool Company,the nation's first twistdrill manu?facturer.After beingthreatenedwith condemnation,Gulf & Westernfirst extendedits original closingdate and then eventuallysold the plant to a community-approvedwner. N.Y. Times, June 5, 1985,at Al, col. 1.More recently, community organizersand workersat the Colonial ProvisionsCompanyin Bostonattemptedto stop the closing and relocationof a local meat-packingplant by convincingcity officialsto condemn t. The city councilultimatelydecidedagainst takingthe plant, sparkinga series of publicprotests?Privately,organizersof the proposedcondemnation laimed that if a plant closingnotificationlaw had been in effect, allowing for more and better lobbying, they would have succeeded.BostonGlobe, Mar. 9, 1986, at 40, col. 2.10. See Comment,National, State and Local Perspectiveson theRegulation of Business Disloca-tions: Smaller Mfrs. Council v. City of Pittsburgh,45 U. Pitt. L. Rev. 439 (1984) (discussinglegality of Pittsburgh's"Plant Closing and NotificationOrdinance").Indeed, pre-notification s thefocus of considerable tension between labor and managementin the so-called sunset industries. Seesupra note 9.11. Given the acute recessionof the early 1980's, the severedepression hat still plaguesthe coun-try's basic industries,and the shrinkingshare that American productscommand in world markets,economicanalysts agree that the nation'seconomyis in a stateof transition.A central issue for econo-mists of every political bent is the extent to which the governmentshould actively protecttroubledindustries (such as steel) from both internationalcompetitionand internal dislocation.Protectionistcondemnationsare locally imposedobstacles to the kind of fundamentalreorderingof the Americaneconomythat many commentators onsider mperative f the nation's standardof living is to be main?tained over the long term. See, e.g., R. Reich, The Next American Frontier (1983); L.Thurow, The Zero Sum Society (1980); Rohatyn,Timefor a Change,N.Y. Rev. Books,Aug. 18,1983, at 16, col. 2.12. For an excellent analysis of the difference betweenregulatoryincentives(such as tax abate-ments) and coerciveexploitations(such as embargoes),see Levmore,InterstateExploitationand Ju?dicial Intervention, 69 Va. L. Rev. 563 (1983). Accordingto Professor Levmore'sreading of thedormantcommerceclause, exploitations(definedas those regulationswhich threaten to diminish com?merce by creating monopolyor monopsonypower in the home state) generallyhave been and shouldbe struck down. Mere interferences regulationswhich pose no monopolythreat)generallyhave beenand should be upheld.Id. at 570-75. Under Levmore'sanalysis,protectionist ondemnationswould fitsquarely into the disfavoredcategoryof potentiallyexploitativestate action. Protectionistcondemna?tions pose the dangerthat "an aggressorstate [could]exploit a unique advantage t enjoysbecauseofits location,history or resources."Id. at 565.1346

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the commerce clause, the "stick" of protectionist condemnations cannotsurvive. The use of local eminent domain power to prevent industrial relo?cation violates the Constitution.

II. The Commerce Clause Limitation

Although the plain language of the commerce clause is simply an af?firmative grant of power to Congress,18 since the mid-nineteenth centurythe Court has interpreted it to include a "dormant" prohibition of stateregulation of interstate commerce.14 Recalling that economic warfare be?tween the states under the Articles of Confederation was a principal cata?lyst for the Constitutional Convention,16 the judiciary has resisted the "ec?onomic Balkanization" that naturally arises in difficult economic times.16Following a general rule that "a state may not promote its own economicadvantage by the curtailment or burdening of interstate commerce,,,17 theCourt has often used the dormant commerce clause to invalidate local pro?tectionist measures.18

The current rule for applying the dormant commerce clause derives

13. U.S. Const. art. I, ? 8, cl. 3 reads in part, "Congressshall have the Power . . . to regulateCommerce. . . among the several States."14. The dormantcommerceclause is one of "thegreatsilences of the Constitution."H.P. Hood &Sons v. Du Mond, 336 U.S. 525, 535 (1949). As early as Sturges v. Crowninshield, 17 U.S. (4Wheat.) 122, 143 (1819), the Courtrecognized hat in some cases the commerceclause deprivesstatesof any authorityto affect interstate commerce "as if they had been expressly forbiddento act."Since its original application,the Court has on numerousoccasions,and at times inconsistently,redefinedand restated the scope of the dormant commerceclause. In some cases, the Court has ana?lyzed state regulationaccording o whetherits effect on interstatecommercewas "direct"or "inciden?tal." See, e.g., Shafer v. Farmers Grain Co., 268 U.S. 189 (1925). In other cases, the Court hasfocused on whether the objectof regulationwas essentially "local" or "national" in character.See,e.g., Cooley v. Board of Wardens,53 U.S. (12 How.) 299 (1851) (upholdinga Pennsylvaniapilotagerequirement or ferries).These labels, however,proved largely conclusoryand have for the most partbeen abandoned.The Court'smodernapproachto settlingconflictsbetween legitimatelocal concernsand the proscriptionsof the commerce clause has been to apply a balancingformula entailing "aconsiderationof all the facts and circumstances, uch as the nature of the regulation, ts function,thecharacterof the businessinvolvedand the actual effect on the flow of commerce."DiSantov. Pennsyl?vania, 273 U.S. 34, 44 (1927) (Stone,J., dissenting).For a good historyof dormantcommerceclausejurisprudence,see Regulation, Federalism and Interstate Commerce 17-45 (A. Tarlock ed.1981).15. See Abel, The CommerceClause in the Constitutional Convention,25 Minn. L. Rev. 432(1941).16. See Hughes v. Oklahoma,441 U.S. 322, 325 (1979).17. H.P. Hood & Sons v. Du Mond, 336 U.S. 525, 532 (1949) (strikingdown New York milklicensingscheme);see also, e.g., Baldwin v. G.A.F. Seelig, Inc, 294 U.S. 511, 527 (1935) (The entireConstitution was "framedupon the theory that the people of the several states must sink or swimtogether,and that in the long run prosperity s in union and not division. . . . What is ultimateisthat one state in its dealing with anothermay not place itself in a positionof economicisolation.");South Pac. Co. v. Arizona, 325 U.S. 761 (1945) (striking down Arizona law limiting number offreight cars a train could pull).18. See, e.g., Hughes v. Oklahoma,441 U.S. 322 (1979); Hunt v. WashingtonStateApple Adver?tising Comm'n, 432 U.S. 333 (1977); Dean Milk Co. v. Madison, 340 U.S. 349 (1951).

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from Pike v. Bruce Church, Inc.:19 "Where a statute regulates evenhand-edly to effectuate a legitimate local public interest, and its effects on com?merce are only incidental, it will be upheld unless the burden imposed onsuch commerce is clearly excessive in relation to the putative localbenefits."20

Although not an exercise in absolutes,21 the Pike test incorporates athreshold test prohibiting state actions that discriminate against out-of-state interests (are not evenhanded) or which affect commerce directly (arenot incidental).22 In applying the Pike test, the Court has allowed statessome discretion when they legislate in furtherance of legitimate public in?terests such as local health and safety, and where the effect on commerceis secondary and unavoidable.23 But the Court has consistently invalidatedstate statutes which either in purpose or in primary effect are tantamountto economic regulation for the benefit of the home state at the expense ofout-of-state interests.24 In such cases, the Court has not reached the bal?ancing aspect of the Pike test by which the burden on commerce is mea-sured against the local interest. Rather, the Court has adopted a "virtuallyper se rule of invalidity."25

19. 397 U.S. 137 (1970) (strikingdown Arizona statuterequiringall cantaloupesgrown locallybe packagedin state).20. Id. at 142.21. It is difficult to discernexactly what the Court means when it claims to balance. In none ofthe cases does the Court attemptto quantify the local interest or the burden to commerce n order tocomparethem. As one commerceclause expert has summarized he principle underlyingthe Court'sactual balancing procedure, " 'The States may interfere with interstate commerce, but not verymuch.'" Black,Perspectiveson the American CommonMarket, in Regulation, Federalism andInterstate Commerce, supra note 14, at 62 (quotingThomas Reed Powell). In any case, protec?tionistcondemnationswould fall within the class of cases in which the Courthas specificallyescheweda balancingapproach.See infra notes 23-40 and accompanying ext.22. See, e.g., Edgarv. Mite Corp., 457 U.S. 624 (1982) (strikingdown Illinois takeoverstatute asdirectlyaffectingcommerce);City of Philadelphiav. New Jersey, 437 U.S. 617 (1978) (strikingdownNew Jersey waste importationregulationas discriminatory).As one commentatorhas nicely charac-terized it, the Pike formulation s "a contingentbalancingtest" underwhich everychallengedstatutemust pass a three-prongedthresholdscrutiny into the legitimacyof the local interest involved,thestatute'sevenhandedness,and the nature of its effect on interstatecommerce.Blasi, ConstitutionalLimitationson thePower of States To Regulate theMovementof Goods in InterstateCommerce,n 1Courts and Free Markets: Perspectives From the United States and Europe 176 (T.Sandalow & E. Stein eds. 1982).23. See, e.g., Minnesota v. Clover Leaf CreameryCo., 449 U.S. 456 (1981) (upholdingMinne?sota packaging aw); Exxon Corp. v. Governorof Md., 437 U.S. 117 (1978) (upholdingregulationofgasoline retailers);RaymondMotor Transp. v Rice, 434 U.S. 429 (1978) (strikingdown Wisconsintrucklengthlaw); Hunt v. WashingtonStateApple AdvertisingComm'n,432 U.S. 333 (1977) (strik?ing down North Carolinaapple labellinglaw); SouthernPac. Co. v. Arizona,325 U.S. at 761 (1945)(strikingdown Arizona train length limit).24. See, e.g., Hughes v. Oklahoma,441 U.S. 322 (1979); City of Philadelphiav. New Jersey, 437U.S. 617 (1978); Exxon Corp. v. Governor of Md., 437 U.S. 117 (1978); Huron PortlandCementCo. v. City of Detroit, 362 U.S. 440 (1960); see also L. Tribe, Constitutional Law ? 6.9 (1976).25. Pike v. BruceChurch,Inc, 397 U.S. at 145 (emphasisomitted);see O'Fallon, The CommerceClause: A TheoreticalComment,61 Ore. L. Rev. 395, 411 (1982) ("The Court actuallydisposesofmost cases on the groundsof discriminationor an illegitimatelocal interest. Rarely does the Courtbalance state against national interest." (citation omitted));Regan, The Supreme Court and State1348

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Although the Court has not addressed the problem of protectionist con?demnations, it has applied this per se rule in two analogous situations:first, to state capture statutes which pressure out-of-state industries torelocate within the regulating state;26 and second, to state embargo statuteswhich prevent the exportation of natural resources.27 Both of these strandsof commerce clause jurisprudence argue convincingly for a constitutionalproscription against protectionist condemnations.

A. Capture Statutes

In unbroken precedent, most recently affirmed in Pike, the Court hasstruck down state regulations that sought to capture out-of-state economicinterests. In Foster-Fountain Packing Co. v. Haydel,28 the Court invali?dated a Louisiana statute prohibiting the export of locally caught shrimpfrom which the heads and shells had not been removed, thus requiringthat out-of-state processing be performed in state. In Toomer v. Witsell,29the Court invalidated a similar South Carolina statute requiring shrimp tobe packaged and stamped in state.30 In Pike, the Court frustrated Ari-zona's attempt to have all locally grown cantaloupe packaged in state. TheCourt found an identical flaw in each of these regulating schemes. Eachran afoul of the Court's clear warning that it "views with particular sus?picion state statutes requiring business operations to be performed in thehome state that could more efficiently be performed elsewhere. . . . Thisparticular burden to commerce has been declared virtually per seillegal/531

Condemnations that quarantine industries within state borders are es?sentially the mirror image of the regulatory schemes struck down in Fos?ter-Fountain, Toomer, and Pike. The challenged regulations coerced in?dustry into a state; eminent domain prevents industry from leaving. Theircommon attempt to gain an economic advantage for the home state thatwould not otherwise exist makes both types of state action particularlysuspect under the commerce clause.32 This sort of direct economic manip-

Protectionism:Making Sense of the Dormant CommerceClause, 84 Mich. L. Rev. 1091, 1209-33(1986) (Court does not balance in "movement-of-goods ases, but rather searches for protectionistpurpose");see also infra notes 26-33 and accompanying ext.26. See, e.g., Pike v. Bruce Church, Inc, 397 U.S. 137 (1970).27. See, e.g., Foster-FountainPackingCo. v. Haydel, 278 U.S. 1 (1928).28. Id.29. 334 U.S. 385 (1947).30. In Dean Milk Co. v. Madison, 340 U.S. 349 (1951), the Court invalidateda local ordinancerequiringthat dairy productsbe pasteurizedand bottledwithin a five mile radius of Madison'sCapi-tol Square. In apparentdeferenceto the perishablenature of the commerce nvolved,beforestrikingdown the law as a classic capturestatute,the Court did consider whetherany reasonablealternativesexisted for protectinglocal health and safety. Id. at 354.31. Pike, 397 U.S. at 145 (emphasisomitted).32. See Levmore,supra note 12, at 591-92 (quarantinesmay createproblemof monopoly power).

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ulation strikes at the core of the commerce clause's prohibition of eco?nomic warfare among the states.33

B. Embargo StatutesA second line of commerce clause cases invalidating state embargoes on

the movement of commerce across state lines also demonstrates that pro?tectionist condemnations offend the commerce clause. The crux of theseembargo cases is the Court's resolve that individual states do not have thepower to protect economic advantages, natural or man-made, from slip-ping away to other states. "Each state," the Court recently reiterated, "ismade the greater by a division of its resources, natural and created, withevery other state."34 On this basis, the Court has, for example, struckdown state statutes prohibiting the interstate transportation of minnows orthe free flow of coal and natural gas beyond state borders.35

As with the capture statutes, in applying the Pike test to embargoes, theCourt has eschewed a balancing approach and instead has adopted the"virtually per se rule"36 of invalidity.37 As the Court emphasized in a

33. Although Justice Stewart invokesefficiencyas his rationale in Pike, neither privateownersnor states necessarilymakeefficientchoices of location.See infra SectionIV. As many of the Court'sother commerceclause decisions illustrate,the Constitutiondoes not mandateperfectlyefficient out?comes. States can, for example, establishpotentiallyinefficientsubsidyprograms,even ones that ad?versely affect out-of-stateinterests, if their actions fall within the market participant exception todormantcommerceclause scrutiny.See, e.g., Hughes v. AlexandriaScrap Corp., 426 U.S. 794 (1976);see also Levmore,supra note 12, at 577-89. A better vision of the dormantcommerceclause combinesnotions of market efficiency, political representation,and local competenceto legislate on mattersaffectingnationalinterests.See Sunstein,supra note 3, at 1705-08 (commerceclause protectsagainstnakedmajoritarianpreferences);Tushnet, Rethinkingthe Dormant CommerceClause, 1979 Wis. L.Rev. 125 (judicialreview appropriatewhen some affectedinterest not represented n political pro?cess);Dowling, Interstate Commerce nd State Power, 27 Va. L. Rev. 1, 20 (1940) ("Congressionalnegativewill be presumed . . against state action which . . . constitutes unreasonable nterferencewith national interests").See generally J. Ely, Democracy and Distrust (1980) (arguing forprocess-based ystem of constitutionalanalysis). States are not the properunit to be makingchoicesaffectingthe national market for businesslocation,especiallywhen proposedregulationswill have adiscriminatory ffecton out-of-state interests.The Constitution, hroughthe commerceclause,reservesthat role for Congress.34. See, e.g., City of Philadelphiav. New Jersey, 437 U.S. 617, 623 (1978) ("The opinionsof theCourtthroughthe years have reflectedan alertness to the evils of 'economic solation'. . . while at thesame time recognizingthat incidental burdenson interstate commercemay be unavoidablewhen astate legislates to safeguardthe health and safety of its people.").Even critics of the dormant commerceclause would strike down this type of discriminatory tateaction?although they would do so under a reinterpretation f other constitutionalprovisions,princi-pally the privilegesand immunitiesclause. See Eule, Laying the Dormant CommerceClause to Rest,91 Yale L.J. 425 (1982)35. City of Philadelphia, 437 U.S. at 627.36. Pike, 397 U.S. at 145 (emphasisomitted).37. See, e.g., Pennsylvaniav. West Virginia, 262 U.S. 553 (1923) (strikingdown legislationob-structing free flow of coal out-of-state);Oklahoma v. Kansas Natural Gas, 221 U.S. 229 (1911)(strikingdown limits on naturalgas exportation);City of Philadelphia, 437 U.S. at 627 ("A state iswithout power to prevent privatelyowned articles of trade frombeing shipped and sold in interstatecommerceon the groundthat they are requiredto satisfylocal demandsor becausethey are neededbythe people of the State."); Foster-Fountain,27'8 U.S. at 10 (same).

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recent embargo case, "the clearest example of [invalid] legislation is a lawthat overtly blocks the flow of commerce at a state's borders."38 Such pa?rochial legislation, in which "the State has overtly moved to slow or freezethe flow of commerce,"39 is impermissible under the commerce clause.States cannot isolate themselves from the national economy?whatever thelocal benefits involved.40

Industries not only produce articles of commerce, they are themselvesarticles of commerce. Much like the minnows in the streams or the natu?ral gas in the trucks and pipelines, industries and the jobs they create arebought, sold, and transported. The Constitution protects the free move?ment of all of these articles of commerce against state-imposed economi?cally motivated impediments.41

The commerce clause, the Court has written, forbids Pennsylvania tohoard its coal, the mining states their minerals, or the Northwest its tim?ber.42 States that seek to imprison their industry are engaged in essentiallythe same behavior as states trying to husband their resources. They sharean impermissible goal: to insulate a unique resource from the operation ofthe national market.

Indeed,the Court'shostilityto embargostatutes is so strongthat in the most recent case the Courtstruck down an Alaska statutecontrollingthe exportof timberdespite respondent'sargumentthat thechallenged regulations fell within the Court's "market participationexception" to the commerceclause. South-CentralTimber Dev. v. Wunnicke, 467 U.S. 82 (1984); see infra notes 76-81 andaccompanying ext.38. City of Philadelphia, 437 U.S. at 624. Here, the Court invalidateda New Jersey statuteprohibiting he importationof solid waste fromneighboringPennsylvaniadespiteNew Jersey's logicalclaim to be regulating public health. This result attests to the Court's firm conviction that embargostatutes are irreconcilablyopposedto the principlesof the commerceclause and should at a minimumbe subjectedto strict scrutiny.39. Id. at 628.40. Id. at 627. The impermissibilityof protectionismextends to means as well as ends.41. At one time, the Court exempted natural resourcesfrom commerce clause scrutiny on thetheory that states "owned"these resources.See Geer v. Connecticut,161 U.S. 519 (1896). But thisfiction of ownership suffered serious erosion not long after its original promulgation.See West v.Kansas Natural Gas, 221 U.S. 229 (1911); Pennsylvaniav. West Virginia, 262 U.S. 553 (1933). Itwas finally repudiated n Hughes v. Oklahoma,441 U.S. 322 (1978); see also Hicklin v. Orbeck,437U.S. 518 (1978) (strikingdown Alaska statute mandatingthat all Alaska oil and gas leases containclause giving state residents preferencein hiring). Although Hicklin was decided on privilegesandimmunities grounds, the Court explicitly drew support for its holding from commerce clause casesinvolvingnatural resources.As the Court emphasized,both the privilegesand immunities clause andthe commerceclause circumscribea state'sability to preferits own citizens.Together,the two clauseswere meant to give full expression to the decidedly national vision embodied in Article IV of theArticlesof Confederation:"The better to secure and perpetuatemutual friendshipand intercourseamong the people ofdifferent states of this union, the free inhabitantsof each of these states. . . shall have freeingress and regress to and from any other state, and shall enjoy therein all the privilegesoftrade and commerce,subjectto the same duties, impositions,and restrictionsas the inhabitantsthereof respectively;providedthat such restriction shall not extend so far as to prevent theremoval of property, imported into any state, to any other state in which the owner is aninhabitant."Hicklin, 437 U.S. at 532 n.16.42. Pennsylvania, 262 U.S. at 599-600; West, 221 U.S. at 255.

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Taken together, the capture and embargo cases reflect the Court's hos-tility towards state laws that in purpose or in primary effect ensnare orhoard economic benefits at the expense of out-of-state interests.43 A host ofother cases, such as those striking down regulations obstructing the inter?state movement of trucks44 or controlling the importation of produce orother food products,45 further highlight the strict scrutiny which the Courthas applied to state statutes that disproportionately affect out-of-state in?terests.46 When a protectionist purpose is coupled with discriminatorymeans, the Court's careful scrutiny rises to the level of uniform rejectionof the challenged statute.47

III. The Inadequacy of Just Compensation

Proponents of protectionist condemnations, in particular several com?mentators on Oakland Raiders,48 argue that since condemnees will re?ceive just compensation, this use of eminent domain either does not bur-

43. In Hunt v. Washington State Apple AdvertisingComm'n, 432 U.S. 333 (1977) (strikingdown a North Carolinaapple labelling law), the Court made plain that it would scrutinize the pri?mary effect of challenged legislation and not rely on the state's alleged intent. See also Hughes v.Oklahoma,441 U.S. 322, 336 (1978) (Court "not bound" to acceptstate'spurportedpurpose).Rareindeed would be the law that could not be rationalizedon some legitimateground.Cf. Craigv. Boren,429 U.S. 190 (1976) (inadequacyof rational relationequal protectionscrutiny).44. See, e.g., Raymond Motor Transp. v. Rice, 434 U.S. 429 (1978) (strikingdown Wisconsinlaw regulatingtrucktrailers).The Court tookparticularexceptionto the size limit thatdiscriminatedin favorof the local truckers.See also Kasselv. ConsolidatedFreightwaysCorp.,450 U.S. 662 (1981)(invalidatingIowa trucklength limits because local regulationsboredisproportionatelyn out-of-stateinterests);South CarolinaHighway Dep't v. Barnwell Bros., 303 U.S. 177, 185 n.2 (1938) ("Under?lying the stated rule has been the thought. . . that when the regulation s of such a character hat itsburden fails principally upon those without the state, legislativeaction is not likely to be subjected othose political constraints which are normallyexerted on legislationwhere it affectsadverselysomeinterests within the state.").45. Hunt v. WashingtonApple AdvertisingComm'n,432 U.S. 333 (1977).46. While the Courthas recognized hat "incidentalburdenson interstatecommercemay be una-voidable when a state legislatesto safeguardthe healthand safetyof its people,"Cityof Philadelphia,437 U.S. at 623-24, the Court has carefullycircumscribedwhat state interests ustify discriminatoryregulations.The Court has explicitly rejectedthe legitimacyof the local interests involved in protec?tionist condemnations.To allow economicregulationor the preservation f jobs as a necessaryprotec?tion of local health or safety "would be to eat up the rule under the guise of an exception.Economicwelfare is always related to health, for there can be no health if men are starving."Baldwin v. G.A.F.Seelig, 294 U.S. 511, 523 (1935).47. The Court'sefforts to reach some consensusaboutexactlywhat statebehavior s objectionableunder the commerceclause calls to mind the proverbialblind men examining the elephant. Someopinionsfocus on intent.See, e.g., Dean Milk Co. v. Madison, 340 U.S. 349 (1951). Others focus onmeans.See, e.g., City of Philadelphia, 437 U.S. at 617. Still others focus on effect.See, e.g., Pike, 397U.S. 137. But see Regan, supra note 25, at 1209-33 (purpose inquiry definitive in movement-of-goodscases). Regardless, he condemnation f relocatingbusinesseswould combineall of the parochialfeaturesthat, in one strand of cases or another,the Court has found to be fundamentally nconsistentwith the commerceclause.48. See, e.g., The Next Step, supra note 8 (supportingthe condemnationof industrialplants onthe verge of relocation); ee also Note, The Constitutionalityof Taking a Sports Franchise byEmi?nent Domain, 13 Fordham Urb. L.J. 553 (1985) (suggestingfederal legislationto regulate sportsrelocation).

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den interstate commerce or does so in a permissible fashion.49 They woulddistinguish condemnations from the regulations in Pike, Toomer, and Fos-ter-Fountain, because in those latter cases the challenged state action"prevented out-of-state labor from competing with local labor. . . . [T]hestatutes offered a simple choice between conducting a business activitywithin the state or being faced with a significant financial hardship. Sucha choice does not simply burden commerce it blocks it."50

Eminent domain, they assert, meets the Pike test because the paymentof just compensation, permitting the owner to continue operations out ofstate, "does no harm to out-of-state interests."51 Protectionist condemna?tions, they conclude, are thus evenhanded and their burden on commercenegligible or incidental.

Both empirically and as a theoretical matter, however, just compensa?tion does not transform the economic parochialism of protectionist con?demnations into a permissible hindrance on the operation of the nationalmarket. Although the underlying purpose of just compensation is to"make the person whole," just compensation is not full compensation.52As presently defined, just compensation is based on the fair market valueof the taken property. But, as the Court admits, the "relatively objectiveworking rule" of fair market value?"what a willing buyer would pay incash to a willing seller"?does not necessarily (or even usually) compen?sate for all values an owner may derive from a property.53

More specifically, in determining fair market value, the Court has

49. The Next Step, supra note 8, at 126.50. Id. at 125 (citations omitted)51. Much has been written not only about whether presentcompensationdoctrine is "just,"butalso about whether a just valuation is a theoreticalpossibility.See, e.g., Michelman,Property, Utility,and Fairness: Commentson the Ethical Foundations ofJust CompensationLaw, 80 Harv. L. Rev.1165 (1967); Sax, Takings, Private Propertyand Public Rights, 81 Yale L.J. 149 (1971). For arecentconsideration,see R. Epstein, supra note 3, at 182-86 (1985) ("The centraldifficultyof themarket formula . . . is that it denies any compensation or real but subjectivevalues.").One frequentlyproposed ustificationfor allowing what in effect is undercompensationo the con-demnee has as its centralpremisethe belief that the condemneereceivesa shareof the "publicgood"for which his propertywas taken. But this publicgoodsbenefit,makingup the differencebetween fairmarket value and the actual value to the owner, would not accrueto the owner of a relocatingbusi?ness. See Kimball LaundryCo. v. United States, 338 U.S. 1, 5 (1949) ("In view . . . of the liabilityof all propertyto condemnation or the commongood, loss to the owner of nontransferablevaluesderivingfrom his unique need for propertyor idiosyncraticattachment o it . . . is properlytreated aspart of the burden of commoncitizenship.").52. See United States v. 564.54 Acresof Land, 441 U.S. 506, 510-11 (1978) (Indemnity princi?ple, which would place the owner "in as good a position pecuniarilyas if his propertyhad not beentaken . . . has not been given its full and literal force.") (citationsomitted).53. Id.; see also United States v. Cors, 337 U.S. 325 (1949) (fair market value for condemnedtugboatreducedso that pricedid not reflect increasedwartimedemand).When no readymarketpriceexists, as may well be the case with protectionistcondemnations What is the fair market value of asteel mill?), most commentatorsagree that the courts consistentlyunderestimatethe value of con?demnedproperty.See, e.g., Note, Taking the Oakland Raiders: A TheoreticalReconsiderationoftheConcepts of Public Use and Just Compensation,32 Emory L.J. 857 (1983).

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found many of the property values and transaction costs which protection?ist condemnations would involve?including loss of business profits,54 lossof opportunity,55 litigation expenses,56 or the frustration of an owner'splans57?to be non-compensable.58 The Court has made no attempt to es?tablish, and, in fact, has explicitly rejected, a replacement cost compensa?tion standard.59

The special nature of the assets subject to condemnation and the type ofbusiness likely to be condemned, make the payment of compensation par?ticularly inadequate to remedy the constitutional defects of protectionistcondemnations. Contracts, franchise rights, and licenses, necessary ele?ments of protectionist takings, are unique commodities?not fungible withcash or replaceable at will.60 Stripped of these unique incorporeal rights,owners will be unable to replace their businesses or will be able to replacethem only after substantial delay.61 In these cases, monetary compensationto the condemnee will not make whole communities that were to be thesites of relocations or undo the effect on the geographic distribution ofAmerican business.62

Even if the uniqueness of the condemned assets did not hinder reloca?tion, in the high fixed-cost and limited demand industries most likely to bethe subjects of condemnation,68 the presence of an additional competitor(the now state-owned plant) will make reinvestment in a new plant riskierand more expensive. Rather than compete in a tighter market, some own-

54. See Omnia CommercialCo. v. United States,261 U.S. 502 (1923); Bothwell v. United States,254 U.S. 231 (1920).55. See United States v. Petty Motor Co., 327 U.S. 372 (1946); Mitchell v. United States, 267U.S. 341 (1925).56. See Note, Attorneys'Fees in CondemnationProceedings, 20 Hastings L.J. 694 (1969).57. United States v. Miller, 317 U.S. 369 (1943).58. United States v. 564.54 Acresof Land,441 U.S. 506, 511 (1978). Claims for consequentialorincidentaldamages have routinelybeen rejectedby the Court on the groundsthat the costs are toospeculativeor that they confuse the nature of the state'sobligation.At bottom,the Court has adopteda principle that the state must pay for what it receives,not for what the owner loses.59. Id. at 512.60. As the organizersof proposedcondemnationsadmit, the economicviabilityof the condemnedtangiblepropertydependson the ability to seize intangiblessuch as customercontracts.See B. Blue-stone & B. Harrison, The Deindustrialization of America (1982); see also KimballLaundryCo. v. United States, 338 U.S. 1, 16-17 (1949) (emphasizingdifficulty of replacingor appraisingcustomergoodwill); Boston Globe, Mar. 9, 1986, at 40, col. 2 (controlof marketing abel critical toproposed plant condemnation).61. Had Baltimore succeeded in its eminent domain action against the Colts, regardlessof thecompensationpaid, Indianapoliswould have been without an NFL franchise.62. Ironically, protectionistcondemnations ntendedto preserveAmerica's basic industriesmightactuallyprovidea disincentiveto prospectivecapital investment n industrialrevitalizationand devel?opment.Privateowners, fearingpublic takeovers,might be reluctant to make large investments,giventhe risk of receivinginadequatecompensationafter condemnation.63. Although in theory any business is subjectto condemnation, n practicecommunitieswouldcondemn businesses that are expensive and impractical to start up. As the existing record ofthreatenedcondemnationsndicates,the principal targetswill be firms that are large communityem?ployers with significantphysical plants. See infra notes 8-10 and accompanying ext.1354

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ers will not re-invest in new plants, thereby depriving out-of-state com?munities of employment and other benefits that would otherwise have ac?crued to them.

The payment of compensation to the owner, at least as currently de?fined, does not change the fact that the arrangement of American businesswould be very different in a world with protectionist condemnations thanin a world without them. Out-of-state plants that would otherwise havebeen built will cost too much to build. Employment opportunities thatwould have moved out of state will remain in state. Indeed, that is thevery purpose of these takings: to impede the free flow of business and jobs.To the extent that protectionist condemnations succeed, they are antitheti?cal to the commerce clause.

In sum, though current compensation schemes may reduce the burdencaused by these takings, the condemnation of relocating businesses willstill be animated by protectionist motives, will still affect the free move?ment of business to the exclusive detriment of out-of-state interests, andwill still serve to isolate individual states from the national economic com?munity. As the Court underscored in Pike, what makes a burden to com?merce impermissible is its nature, not its size.*4 Protectionist takings willremain direct manipulations of the economy subject to the Court's per serule against such burdening of interstate commerce.65

Admittedly, the Court could, as a theoretical matter, adjust its compen?sation doctrine to provide "full" compensation to the condemnee,66 butonly a compensation scheme that would leave unimpeded the free move?ment of business nationwide67 would satisfy the commerce clause interest

64. Pike, 397 U.S. at 142. See also Regan, supra note 25, at 1209-33 (protectionist purposetriggers invalidation).In any case, becauseof the unique assets involved in protectionistcondemna?tions, even a "small" burden to commercewould, as an establishedpractice,significantlyalter thegeographicdistributionof industryacross the country.65. The necessaryfiction that condemneesreceive ust compensationcannot be stretchedso far asto obscure the fact that these takingsunconstitutionallyburdencommerce.That some approximationof fair market value has been judicially determinedto satisfy the requirementsof the taking clausedoes not exempt condemnations rom scrutinyunder other constitutionalprovisions.For example, amunicipalitycould not establish a segregatedneighborhoodby condemningpropertyand paying com?pensationto minorityowners,presentand future.Cf Shelleyv. Kraemer,334 U.S. 1 (1948) (refusingto enforceracial covenants)."[I]twould appear beyond question that the power of the state to createand enforce property interests must be exercised within the boundaries defined by the FourteenthAmendment."Id. at 22 (citation omitted).Just compensationcannot cover a multitudeof constitu?tional sins.66. The Court might define full compensation n several ways, such as replacementcost in theoriginal home state or replacementcost in the stateof intendedrelocation,but these revisedstandardswould pose thorny, if not intractable,valuationproblems.Indeed,the currentcompensationdoctrine,adhering closely to fair marketvalue, in large part reflects thejudiciary's recognition hat it could notaccuratelyapply a full compensationstandard.See, e.g., United States v. 564.54 Acres of Land, 441U.S. 506, 511 (1978).67. This notion of free movementhas deep constitutionalroots not only in the commerceclause,but also in the privilegesand immunitiesclause and, more generallyin the very natureof federalism.Courts and commentatorsalike have recognizedthat the free transferof allegianceamong fifty com-1355

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in preventing economic balkanization. A compensation scheme in whichthe condemnee received the value of the condemned business in the loca?tion at which that business would be most highly valued, would pass con?stitutional muster. Such a scheme would simulate an auction among allinterested communities, each bidding to be the site of the condemned firm,or, in other words, would make the "stick" of condemnation essentiallyidentical to the constitutionally permissible "carrots"?subsidies and otherinducements?that states already employ.68

IV. The Commerce Clause and Local AuthorityThe most compelling argument for allowing protectionist condemna?

tions focuses on the community values that are jeopardized by industrialflight. Letting private owners determine business location often has disas-trous consequences for the communities that fall victim to industrial dislo-cation.69 Translating this appeal into legal and economic terms, the au?thors of the burgeoning literature championing community rights70 claim

peting jurisdictionsis a vital and consideredfeatureof our constitutionalsystem. See, e.g., Zobel v.Williams, 457 U.S. 55, 67-8 (1982) (Brennan,J., concurring)("A State clearly may undertaketoenhance the advantagesof industry,economy,and resources hat make it a desirableplace in which tolive. . . . That is a healthy form of rivalry:It inheres in the very idea of maintainingthe States asindependent sovereigns within an independent framework, and it is fully?indeed, necessa?rily?consistent with the Framers' further idea of joining these independentsovereigns nto a singleNation."); Regan, supra note 25, at 1114 ([P]rotectionism akes over a market share by force;it islike acquiring territoryby armedconquest.[Inducements] . . use[]no force;[they]encourage[]a freetransferof allegiance. It is like acquiring territory by plebesciteof the inhabitants."); ee also NewState Ice Co. v. Liebmann,285 U.S. 262, 311 (1932) (Brandeis,J., dissenting)(each state free to trynovel economicexperimentswithoutrisk to rest of country);J. Ely, supra note 33, at 178-79 (rightto travel critical to process-based onstitutionaltheory).68. If a state had to pay a condemnee the value of his business in the location where it wouldreceive the highest valuation,a state would invoke eminent domainonly in those cases in which thevalue of the businesswhen locatedin state plus the value to the state of havingthe business in stateexceeded the sum of those same valuesin everyother location. In other words,a statewould condemnonly on those occasionswhen, in any event, the state would have triumphedin a biddingwar. Giventhe high transactioncostsassociatedwith condemnationproceedings suchas valuation costs and attor?neys fees), bribingan owner to remainin state would be equally effectiveand probably ess expensivethan condemningthe business.One danger in allowing unrestrictedcompetitionfor business location is that private owners, atleast in theory, can appropriate he entire value of the positive externalitygeneratedby the presenceof a firm in a given locale.See infra note 91. That competitionamongstates for business locationmayproduce undesirable distributionalconsequencesdoes not, however, argue in favor of protectionistcondemnations.The national legislature retains the power to regulate this economic competi?tion?and, indeed, in a perverse way, the redistributional ffectsof the free competitionfor businesslocationmay makecongressionalaction more likely than it would be in a world in which states couldsoften the impactof the inevitable redistributionof domesticindustry.69. See The Next Step, supra note 8, at 97-100. The effectsof a plant closingon community ifecannotbe gainsaid. In addition to the obviousimpacton local employmentand revenue,the loss of amajor employeroften robs a communityof its social cohesion.70. See, e.g., B. Bluestone & B. Harrison, supra note 64, at 231-64. For a taste of thecommunityrights literature's reatmentof other legal questions,see Sandman& Leonard,GettingtoMaybe:Some CommunicationsAspectsofSiting Hazardous WasteFacilities, 9 Seton Hall Leg. J.437 (1986); Sax, Do CommunitiesHave Rights?The National Parks as a Laboratoryof New Ideas,1356

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that since private owners do not necessarily promote market efficiencywhen choosing business locations, municipal or state authorities shouldhave the power to take relocating businesses. Although this literature maybe attractive to a critic of American business practice, it fails to answer, oranswers incorrectly, the critical question: If business relocation should becontrolled, who should do the controlling?A. Federalism and the Commerce Clause

Proponents of protectionist condemnations borrow a significant part oftheir legal rationale from traditional federalism arguments in favor of ju?dicial deference to local decision makers.71 Their theory is simple: Emi?nent domain is a peculiarly local power, "an inherent attribute of sover?eignty,"72 and an area in which the courts have shown special deference tolocal legislative authority.73 The dormant commerce clause, one of the"great silences of the Constitution,"74 therefore, should not be readbroadly to trench upon this core element of local governance.75

In the context of interstate commerce, the argument for deference isunpersuasive. Although the Court has recognized that federalism concernsare sufficiently strong to create an exception to the commerce clause in thesingular instance when a state affects interstate commerce while acting asa market participant,76 the Court has frequently observed that the com-

45 U. Prrr. L. Rev. 499 (1984).71. See R. Epstein, supra note 3, at 161;City of Oakland v. OaklandRaiders,174 Cal. App. 3d414, 220 Cal. Rptr. 153 (1985).72. City of Oakland v. Oakland Raiders, 32 Cal. 3d 60, 64, 646 P.2d 835, 837, 183 Cal. Rptr673, 676 (1982) (quotingCounty of San Mateo v. Coburn, 130 Cal. 631, 634, 63 P. 78, 79 (1900)).73. See Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229, 241 (1984) ("Where the exercise of theeminent domainpower is rationallyrelatedto a conceivablepublic purpose,the Court has never helda compensated aking to be proscribedby the Public Use Clause.");see also PoletownNeighborhoodCouncilv. City of Detroit, 410 Mich. 616, 634, 304 N.W.2d 454, 458-59 (1981) (upholdingcondem?nation of neighborhood o providesite for new auto plant).74. H.P. Hood & Sons v. Du Mond, 336 U.S. 525, 535 (1949).75. As the City of Oaklandarguedin Oakland Raiders, no court(priorto the ruling in thatcase)had ever invalidatedan exercise of local eminent domain power on commerceclause grounds.Oak?land Raiders, 174 Cal. App. 3d at 419, 220 Cal. Rptr. at 156. This absence of precedent,however,does not reflectthe inapplicabilityof the commerceclause doctrine to local takings,but rather the factthat the commerceclause has only becomerelevant as a result of the recentrelaxationof other consti?tutional limits on the taking power.In at least one state case, a court upheld a local taking in the face of a commerceclause challenge.See ElbertonS. Ry. Co. v. State Highway Dep't, 211 Ga. 838, 89 S.E.2d 645 (1955) (upholdingstateuse of eminentdomainover railroadright-of-way).Elbertonis not controlling.It fits intothe inciden?tal burdeningallowance under the Pike balancing test and does not fail under the per se rule ofinvalidity.See infra notes 19-27 and accompanying ext.76. See Hughes v. Alexandria Scrap Co., 426 U.S. 794 (1976). Alexandria Scrap involved astatute that mandatedthe paymentof a bounty to companiesthat processedcar hulks in state. Themajority emphasized that, although the challenged statute discriminatedagainst out-of-state busi?nesses, the businessof destroyingold cars was in essencestate-created,and thereforeexempt from theusual commerceclause limits. The crux of the marketparticipationcases is the state'sassumptionof acompletely private proprietaryrole. It is precisely because the state is not exercising an exclusively

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merce clause explicitly allocates power to the federal government in dero-gation of the states.77 As the Court has noted, of all state powers surren-dered upon the adoption of the Constitution, the power over commercewas that most thoroughly surrendered.78

Despite the "states' rights" dicta in some of the market participationcases,79 nothing in the market participation doctrine reworks the heavyburden against state interests reflected in traditional dormant commerceclause jurisprudence.80 The market participation cases, though bottomedon federalism principles, create a narrow exception to normal commerceclause scrutiny for those cases in which a state, participating in the mar?ketplace, sheds its sovereign persona and adopts an essentially private per-sona?with all of the freedoms and limitations that adhere to private own?ers.81 Protectionist condemnations not only fail to qualify for the market

sovereign power that the state action is exempt from commerceclause scrutiny.See South-CentralTimber Dev. v. Wunnicke,467 U.S. 82 (1984) (limiting scopeof marketparticipationexception);seealso White v. MassachusettsCouncil of Constr. Employers,460 U.S. 204 (1983) (upholdingBostonmayoralorder that all city-fundedconstructionprojectsbe performedby work force consistingof atleast 50% city residents);Reeves Inc. v. Stake, 447 U.S. 429 (1980) (upholding policy of SouthDakota-owned and operatedcement plant requiringsupply of all in-state customers beforeany out-of-state customers). For a good analysis of the market participationcases, see Note, The MarketParticipant Test in Dormant CommerceClause Analysis?Protecting Protectionismt, 1985 DukeL.J. 697.77. See, e.g., Hughes v. Oklahoma,441 U.S. 322, 325-26 (1978).78. "No other federal power was so universallyassumedto be necessary" o the preservationofthe union. H.P. Hood & Sons v. Du Mond, 336 U.S. 525, 534 (1949).79. The market participationcases are laced with the language of federalism and judicial re?straint: "To stay experimentation n things social and economic is a grave responsibility. . . . It isone of the happy incidentsof the federal system that a single courageousState may, if its citizenschoose,serve as a laboratory; nd try novel social and economicexperimentswithoutriskto the restofthe country."ReevesInc, 447 U.S. at 441 (quoting New State Ice Co. v. Liebmann,285 U.S. 262,311 (1932) (Brandeis,J. dissenting)).It is no accident that the first marketparticipationcase, Alexandria Scrap, 426 U.S. at 794, wasdecidedimmediatelyprior to National League of Cities v. Usery, 426 U.S. 833 (1976), the first casesince the New Deal placing importantlimits on the affirmative federalpower to regulate interstatecommerce.The idea of core state functions("statesqua states") is a central force behind both casesand may be more forceful in the dormantcommerceclause context in which prohibitionson stateactionare derived from silence. In Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 (1985),the Court overruled National League of Cities. Whether the marketparticipationcases will provemuch more durable than National League of Cities is as yet unclear.80. The market participationexception exempts only state "proprietary"action from commerceclause scrutiny.In exercisingthe sovereign power of eminent domain over relocatingbusinesses, ocalauthoritieswill be deliberatelycircumventing he marketprocess,not participating n it. See OaklandRaiders, 174 Cal. App. 3d at 419, 220 Cal. Rptr. at 156.81. See Alexandria Scrap, 426 U.S. at 810 ("Nothing in the purposeanimatingthe CommerceClause prohibitsa State, in the absenceof Congressionalaction,from participating n the market andexercisingthe right to favorits own citizensover others.").Actually,the term "marketparticipant"ssomethingof a misnomer.The exceptionto commerceclause scrutinyalso applies to cases in which astate providessubsidies that disproportionatelyavor in-stateenterprises. d. (upholdingsubsidyfavor-ing in-state auto scrap companies).Subsidies are readilydistinguishable rom protectionist ondemna?tions. Althoughsubsidy programsmay disproportionately istributenewly state-createdeconomicop?portunitiesto local firms, they do not preventout-of-statebusinesses from participating n economicactivitythat the state itself has not generated.Moreover,to the extent that subsidiesmay create eco?nomic inefficiencies notably,the riskhere is overproduction,not underproduction),he adverseconse-1358

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participation exception, they draw little if any constitutional sustenancefrom the exception's existence.

Nor can eminent domain be immunized from commerce clause scrutinybecause it is an inherent aspect of state or local sovereignty.82 While itmay be that traditional uses of the eminent domain power, uses closelyassociated with land use regulation, are quintessentially local concerns,83the appropriation of contracts, franchise rights, and other commercial in-tangibles attached to relocating businesses are not peculiarly local. Theability to take these commercial properties into the stream of interstatecommerce makes them transient and removes them from the realm of ex?clusive local control.84

quencesof the subsidywill be borne by the subsidizingstate, not by unrepresented ut-of-stateinter?ests. See Levmore,supra note 12, at 570-75.82. The power of eminent domain does not derive from the Constitution;rather,it is baseduponthe principle,borrowed rom Europe,that absoluteownershipof propertyoriginatedat all times withthe state, and thus all personal rights to propertymay be extinguishedby the state at any time. 1Nichols, supra note 3, at ? 1.13.83. Even under the Court's broaddefinition of a constitutionallypermissible public use, the mostinnovativeuses of eminent domainhave, with few exceptions,been limitedto land use regulation.See,e.g., Berman v. Parker, 348 U.S. 26 (1954) (upholdinguse of eminent domain for urban renewal).Notably, the Court has not hesitated to apply rigorousdormant commerceclause analysis to mattersof special local concernor competence.Althoughin South CarolinaState Highway Dep't v. BarnwellBros., 303 U.S. 177, 187 (1937) (upholding local highway regulation), the Court noted that "[f]ewsubjectsof state regulationare so peculiarlyof local concern as is the use of state highways," theCourt has on severaloccasions invalidatedhighway regulationsthat disproportionately urdenedout-of-state interests.See, e.g., Kassel v. Consol. FreightwaysCorp., 450 U.S. 662 (1981) (strikingdownIowa limit on truck length); RaymondMotor Transp. v. Rice, 434 U.S. 429 (1978) (strikingdownWisconsin ban on trucks longer than 55 feet).84. The law of eminent domain makes no distinction between real and personalpropertyor be?tween tangibleand intangibleproperty.Althoughthe condemnationof intangiblesand other propertywithout fixed situs raises difficultjurisdictionalquestions,all types of propertyare subjectto condem?nation. But for the purposesof the commerceclause,a distinctionbetween movableand fixed propertymight be appropriate.Local competenceover many types of movablepropertyis problematic.Con?tracts,patents, franchises,and other commercial nterests are often not state created.Many commer?cial intangiblesare federally created and may not be subject to state regulation. Even the right toincorporatehas, according o the Court,"ceasedto be a privilegeto be dispensedby the stateas it seesfit . . . [but rathermust be] generallyavailableto all on equal terms."Western & Southern Life Ins.Co. v. State Bd. of Equalization,451 U.S. 648, 660 (1981).The notionthat the exercise of local authorityover land is qualitativelydifferent than local author?ity over transientproperty s a long standingprincipleof jurisdiction aw. See, e.g., Shafferv. Heitner,433 U.S. 186 (1977) (stock certificates ocated outside state insufficient "contact" or assumptionofjurisdiction).In Edgar v. Mite, 457 U.S. 624 (1982) (commerceclause case strikingdown Illinois'anti-takeoverstatute), the Court itself drew the parallel between the limits on state jurisdictionalpower over intangible property lacking sufficient contacts with the state and state power to enactsubstantive egislation involvingproperty ocated outsideof the state:"In eithercase,"the Courtheld," 'any attempt directly to assert extraterritorialurisdictionover persons or propertywould offendsister States and exceed the inherent limits on the State's power.'" Id. at 643 (quoting Shaffer v.Heitner, 433 U.S. 186, 197 (1977).The Colts case again illustrates the point. However the jurisdictionalquestion would ultimatelyhave been resolved n court, it seems apparentthat the condemnationof intangible property?propertythat defies territorial bounds?lies not at the core of state power, but somewhere near the outerboundary.

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B. Local CompetenceThose who argue that the commerce clause should not impinge on local

eminent domain power not only fail to recognize the national implicationsof local takings, they also overestimate the legal and practical competenceof local authorities to create or effect national industrial policy. Althoughadvocates of protectionist condemnations assert that local authorities willmake more efficient choices for plant location than will private owners, adiscussion of the externalities involved in business relocation belies theirreasoning.

Admittedly, in making a business decision, the relocating owner mightnot consider the cost to a community.85 Local authorities, however, also donot account for the full range of externalities. Just as the owner acts solelyin his own interest, the community acts in its interest. Although the com?munity may account for the owner's interest by paying compensation,neither owner nor community considers out-of-state or national inter?ests?the interests with which the framers of the Constitution werepreoccupied.86

This inherent parochialism in local regulation of economic activity is, asnoted above, the very evil at which dormant commerce clause jurispru?dence takes aim. But even the law of land use, the peculiar province oflocal authorities, recognizes, in at least one reknowned case, that the judi?ciary must prevent local governments from overreaching their competenceat the expense of unrepresented interests. As Justice Hall observed in thelandmark exclusionary zoning case Southern Burlington County NAACPv. Township of Mt Laurel:67

Frequently decisions in this state . . . have spoken only in terms ofthe interest of the enacting municipality, so that it has been thought,at least in some quarters, that such was the only welfare requiringconsideration .... [But] when regulation does have a substantialexternal impact, the welfare of the state's citizens beyond the bordersof the particular municipality cannot be disregarded and must berecognized and served."88

85. If communitiescompetefor businesslocation, however,privateowners, by movingto the loca?tion that offers them the best deal, will in fact account for communityvalues. See supra note 68 andaccompanyingtext.86. See generally C. Black, Structure and Relationship in Constitutional Law (1969)(suggestingstructuralreadingof constitutional ext). The paramountconceptof nationhooddoes nottakestrengthsolely fromthe commerceclause. See U.S. Const. preamble; d. art. VI, cl.2 (supremacyclause); id. art. IV, ? 2, cl.l (privilegesand immunitiesclause).87. South BurlingtonCountyNAACP v. Township of Mount Laurel,67 N.J. 151, 336 A.2d 713(1975) (strikingdown local exclusionary zoning plan).88. Id. at 177, 336 A.2d at 726.1360

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Local legislatures condemning businesses, no less than local zoningboards, simply are not competent and should not be allowed to wield localpower to the detriment of outside interests. In the context of eminent do?main, there is a limit on local authority implicit in the language of theConstitution. Takings must be for a "public use." That is their justifica?tion. But protectionist condemnations involve more than one public. Ifcondemnations are required to be in the public interest, surely that shouldmean in the interest of the entire affected public, not merely that portionof the public represented by the enacting local legislature.

The ability to represent all of the interests involved in business reloca?tion, not just those of communities that would insulate themselves fromeconomic and demographic change, lies solely with the national legisla?ture. Yet advocates of protectionist condemnations argue that Congresswill not enact meaningful legislation in the area of industrial policy.89 Inthe absence of congressional action, they assert, the courts should allowlocal communities to protect themselves from the consequences of indus?trial dislocation.

But that Congress has not created an explicit national industrial policyregarding business location,90 does not mean that state sponsored protec-tionism for local industries should be considered either good policy or con?stitutionally permissible. In the absence of congressional action, statesshould compete for business location.91

89. See, e.g., F. Rohatyn, The Twenty Year Century 15 (1983) (Americansystem lacksmechanism to articulate common purposes, mobilize majoritarianpower, and check special interestgroup pressure).90. Congressionalsilence does not necessarilydenote an absenceof policy.91. That free interstatecompetitionfor business is both desirable and preferableto a marketunderminedby protectionistcondemnationsappears nicely from a simple model in which Lmstandsfor the value to Massachusetts of having a business in-state, and Km stands for the value of thebusiness when locatedin Massachusetts.Lt and Kt stand for the same values with respectto Texas.In a world withoutstate competition or business,firmscan be expectedto locate whereverthe firmis worth the most. In other words, business location will dependon whether Km ^ Kt. This resulttakes no accountof social costs?the values representedby Lmand Lt.In contrast,in the efficientsituation,a business would settle wherever the value of the business tothe state plus the value of the business in that state is greatest. Symbolically,the efficient locationdependson whether:0)Km + Lm^.K, + L,.In a world in which protectionistcondemnationswere permitted,a state would have incentivestocondemna relocatingbusinessanytimethat keepingthe business would capturea positive externality.In other words, whenever(2) Km + Lm > Km,Massachusettswill have an incentive to condemn. Thus if protectionistcondemnationsare permitted,Massachusettswould never take account of the value of the businessto Texas or the greatervalue thebusiness might achieve if it moved(Lt and Kt).On the other hand, if the two statescompetefor the business,throughsubsidies such as tax abate-ments,each state will have incentivesto offer the privateowner an amountup to the totalvalueof thebusiness itself (Km + Lmor Kt + Lt). The result of this competitionwill accordpreciselywith thedefinition of efficiency. In a world in which states and localitiesact on incentives,business locationwill dependon whether:1361

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When local legislatures usurp Congress' power to shape the nationaleconomy, the courts should strike their actions down. Fairness to unrepre-sented interests dictates that it should be so and, more important, the Con?stitution requires it.

0) Km + Lm ^ K, + L,.

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