Reeves, Inc. v. Stake
447 U.S. 429 (1980)

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U.S. Supreme Court

Reeves, Inc. v. Stake, 447 U.S. 429 (1980)

Reeves, Inc. v. Stake

No. 79-677

Argued April 16, 1980

Decided June 19, 1980

447 U.S. 429

Syllabus

For more than 50 years, South Dakota has operated a cement plant that produced cement for both state residents and out-of-state buyers. In 1978, because of a cement shortage, the State Cement Commission announced a policy to confine the sale of cement by the state plant to residents of the State. This policy forced petitioner ready-mix concrete distributor, one of the out-of-state buyers, to cut its production severely. Petitioner then brought suit in Federal District Court, challenging the policy. The court granted injunctive relief on the ground that the policy violated the Commerce Clause. The Court of Appeals reversed on the ground that the State had simply acted in a proprietary capacity.

Held: South Dakota's resident-preference program for the sale of cement does not violate the Commerce Clause. Pp. 447 U. S. 434-447.

(a) "Nothing in the purposes animating the Commerce Clause prohibits a State, in the absence of congressional action, from participating in the market and exercising the right to favor its own citizens over others." Hughes v. Alexandria Scrap Corp., 426 U. S. 794, 426 U. S. 810. Pp. 447 U. S. 434-436.

(b) The Commerce Clause responds principally to state taxes and regulatory measures impeding free private trade in the national marketplace, and there is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market. Restraint in this area is also counseled by considerations of state sovereignty, each State's role as guardian and trustee for its people, and the recognized right of a trader to exercise discretion as to the parties with whom he will deal. Moreover, state proprietary activities often are burdened with the same restrictions as private market participants. And, as this case illustrates, the competing considerations in cases involving state proprietary action often will be subtle, complex, politically charged, and difficult to assess under traditional Commerce Clause analysis. Given these factors, the adjustment of interests in this context is, as a rule, better suited for Congress than this Court. Pp. 447 U. S. 436-439.

(c) The arguments for invalidating South Dakota's resident-preference program -- that the State, having long exploited the interstate market for cement, should not be permitted to withdraw from it when a shortage

Page 447 U. S. 430

arises; that the program responds solely to the nongovernmental objective of protectionism; that hoarding may have undesirable consequences; that the program places South Dakota suppliers of ready-mix concrete at a competitive advantage in the out-of-state market; and that, if South Dakota had not acted, free market forces would have generated an appropriate level of supply at free market prices for all buyers in the region -- are weak, at best. Whatever residual force inheres in them is more than offset by countervailing considerations of policy and fairness. To invalidate the program would discourage similar state projects and rob South Dakota of the intended benefit of its foresight, risk, and industry. Pp. 447 U. S. 440-447.

603 F.2d 736, affirmed.

BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J. . and STEWART, MARSHALL, and REHNQUIST, JJ., joined. POWELL, J., filed dissenting opinion, in which BRENNAN, WHITE, and STEVENS, JJ., joined, post, p. 447 U. S. 447.

Primary Holding
Unless Congress takes action, a state can be a market participant as well as a regulator and favor its own citizens over non-residents in that role.
Facts
A plant that South Dakota had built to produce cement was sending 40 percent of its output to distributors outside the state by the 1970s. One of these distributors was Reeves, which bought almost all of its cement from the South Dakota plant. During a national cement shortage in 1978, the South Dakota agency controlling the plant decided that it would provide cement to all South Dakota customers first and only then distribute the remainder among customers from outside the state on a first-come, first-served basis. Reeves argued that this policy was unconstitutional under the Dormant Commerce Clause doctrine, and it prevailed in the lower court. The intermediate appellate court reversed because it ruled that Hughes v. Alexandria (1976) allowed a state to favor its citizens over others when it was a market participant rather than a mere regulator.

Opinions

Majority

  • Harry Andrew Blackmun (Author)
  • Warren Earl Burger
  • Potter Stewart
  • Thurgood Marshall
  • William Hubbs Rehnquist

The Commerce Clause is designed to prevent states from imposing tariffs and other restrictions that undermine private interstate commerce. Its prohibitions do not extend to prevent a state from operating on its own in the free market.

Dissent

  • Lewis Franklin Powell, Jr. (Author)
  • William Joseph Brennan, Jr.
  • Byron Raymond White
  • John Paul Stevens

This behavior is economic protectionism that falls within the boundaries of the Commerce Clause. Even if states are market participants and are producing goods for public needs, they cannot impose burdens on interstate commerce.

Case Commentary

It was logical to consider South Dakota a market participant in this situation because it was selling cement. This is one of the exceptions to the dormant Commerce Clause doctrine, and a state can favor its own businesses in that situation even if interstate commerce is hindered.

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