Next question in the series "Things You Should Know According to Your Neighborhood Lawyer - Constitution Edition"
Question 3: “Can the federal government regulate the business of a manufacturer that produces musical instruments only in California?”
“Probably, since the materials used to produce the instruments and the finished products most likely cross state lines. The ‘commerce clause’ of Article I, Section 8, gives Congress the right to regulate commerce between states. Over time, federal legislation has dealt with many matters that the states previously managed. In passing these laws, Congress has relied on the commerce clause because so much business today, in both manufacturing and distribution, crosses state lines.” (The U.S. Constitution Knowledge Cards ®)
The Commerce Clause is arguably one of the most powerful clauses in the U.S. Constitution.
In the 1824 U.S. Supreme Court, Gibbons v. Ogden, Justice Marshall and the court concluded that the Commerce Clause grants the federal government the power to regulate interstate navigation. Like many other early Supreme Court cases argued before 1900, Gibbons v. Ogden (1824) “stemmed from state legislation” and pertained to the “meaning of commerce while paying less attention to the meaning of regulations.” Since “the Constitution does not explicitly define the word “commerce,” it has become the responsibility of the Court to define what actions qualify as interstate commerce. Over the years, the Commerce Clause has resulted in various court cases and controversies, primarily “regarding the balance of power between the federal government and the states.”
In recent years, the Commerce Clause has been a point of contention due to the legalization of cannabis in some states. As an attorney in Nebraska, I have seen the influx of cannabis-related cases stemming from I-80 and other roads leading to and from Colorado, where it is legal. Differing state-level cannabis law leads to an inherent conflict concerning the Commerce Clause since “states are purposefully and regularly imposing restrictions on interstate commerce, which is tolerated (at least for now) given the federal illegality of cannabis.” Cannabis legislation is just one of the many examples of how contradiction can arise from different individual state laws and overarching federal law.
Another recent example stems from United States v. Lopez (1995). This case asked the question: “Is the 1990 Gun-Free School Zones Act, forbidding individuals from knowingly carrying a gun in a school zone, unconstitutional because it exceeds the power of Congress to legislate under the Commerce Clause?” In a 5-4 decision, the Supreme Court decided that yes, the act was unconstitutional on the grounds that the possession of a gun in a local school zone is not an economic activity that might, through repetition elsewhere, have a substantial effect on interstate commerce.” So, once again, we are presented with the question – what is commerce?
The definition of commerce and the perimeters of regulation are something that will always be up to debate in the courts. In the age of the internet and high-speed transportation, the states are more connected than ever. Our intertwining economic practices and conflicting laws will only exacerbate the question of the Commerce Clause.
If your business is contemplating entering into a contract with a company in a different state or foreign country, and you would like to maintain your home jurisdiction for any possible disputes, please contact me to discuss a forum selection clause to use in your contracts.
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