Alliant Energy Corp v. Bie, Avie M. , 336 F.3d 545 ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-2618
ALLIANT ENERGY CORPORATION and
WISCONSIN POWER AND LIGHT COMPANY,
Plaintiffs-Appellants,
v.
AVE. M. BIE, BURNEATTA BRIDGE and ROBERT M.
GARVIN, in their official capacities as Commissioners
of the Wisconsin Public Service Commission,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 00 C 0611—John C. Shabaz, Judge.
____________
ON PETITION FOR REHEARING EN BANC
____________
DECIDED—JULY 14, 2003
____________
Before FLAUM, Chief Judge, and COFFEY and WILLIAMS,
Circuit Judges.
FLAUM, Chief Judge. On June 12, 2003, plaintiffs-appel-
lants, Alliant Energy Corporation and Wisconsin Power
and Light Company, filed a petition for rehearing en banc.
No judge in active service has requested a vote thereon
and the petition is denied.
2 No. 02-2618
Nonetheless, the petition raises arguments not fully
developed in appellants’ original briefs,1 and while these
arguments do not change the outcome of this case they
do warrant some further comment. Appellants’ primary
argument is that the panel’s opinion does not address
prior case law of this circuit and of the Supreme Court.
Appellants claim that such precedent mandates the per se
invalidation of every state regulation that has any extra-
territorial effect whatsoever. This principle is not estab-
lished by the cases they cite and is contradicted by other
authority.
Before addressing the specifics, it will be useful to re-
state the general principle set forth in our initial opinion.
Under interstate commerce analysis we apply a two-tiered
test. If the statute in question facially or directly discrimi-
nates against or regulates interstate commerce, it is “vir-
tually per se” invalid—such a statute can only be saved
by passing the strictest of scrutiny. On the other hand if
the statute’s effects on interstate commerce are only in-
cidental or indirect and apply evenhandedly, we apply
the balancing test established in Pike v. Bruce Church,
Inc. 397 U.S. 137, 142 (1970). This is a somewhat general
overview and we noted in our original opinion that there
is no clear line separating the statute’s that will be
per se invalid and those that will be subject to the Pike
balancing test. Alliant Energy Corp. v. Bie, No. 02-2618,
slip op. at 10 (citing Brown-Forman Distillers Corp. v.
New York State Liquor Auth., 476 U.S. 573, 579 (1986)). We
also noted that under either tier of the test “the critical
1
In this context we urge future litigants to present fully and
clearly in their original briefs all arguments they wish the court
to consider. This advice is especially pertinent when a party
is asking the court to take the momentous step of invalidating
as unconstitutional duly enacted legislation.
No. 02-2618 3
consideration is the overall effect of the statute on both
local and interstate activity.” Id.But what about extraterritorial regulation? Appellants
suggest that a different standard should be applied. They
suggest that regardless of the beneficial effects a statute
has on local activity it should be declared invalid if it
has any extraterritorial effects. Thus, what we have
called “the critical consideration” for our general inter-
state commerce inquiry is, in the view of the appellants,
irrelevant here. This position is not sustainable. It is not
clear why the inquiry would be any different. Appellants
have sought to invalidate the statute as violating the
interstate commerce clause, and have failed to explain,
other than citation to the supposedly supporting author-
ity, why we shouldn’t apply the traditional approach ap-
plied to all claims under the interstate commerce clause.
And contrary to appellants’ contentions the cases cited
stand only for the unsurprising principle that a direct or
facial regulation of wholly extraterritorial transactions
is per se invalid, which is an unremarkable application
of the traditional two-tiered approach.
Of course, the corollary to the principle that direct or
facial regulation of wholly extraterritorial transactions
is per se invalid under the two-tiered approach is the
principle that incidental or indirect effects on extrater-
ritorial transactions are subject to the Pike balancing
test. This approach follows as extraterritorial regulation
presents the same threats as regulation of interstate
commerce, and there is no logical reason to treat the two
differently. It is hard to explain why the validity of reg-
ulation of transactions between two states would turn
on the identity of those two states.2
2
Obviously, it will likely be harder in most cases for a state to
come up with a local justification for statutes with extraterrito-
(continued...)
4 No. 02-2618
As we explained in our prior opinion, the regulations in
question here have indirect and evenhanded incidental
effects on interstate commerce and extraterritorial trans-
actions. We therefore applied the Pike test and found the
regulations to be justified.
Appellants question this reasoning. They argue that
we erred in not applying the reasoning of Justice White’s
opinion in Edgar v. MITE Corp., 457 U.S. 624 (1982). That
reasoning, they argue, suggests that all extraterritorial
regulation should be declared per se invalid. We noted
that part V-A of Justice White’s opinion, the part relied
upon by appellants, did not garner support from a ma-
jority of the Court, whereas part V-B, applying the Pike
balancing test, did. Appellants now contend that the
reasoning of part V-A has been adopted by the Supreme
Court in Brown-Forman Distillers, and this court in Dean
Foods Co. v. Brancel, 187 F.3d 609 (7th Cir. 1999). Appel-
lants note that Brown-Forman Distillers cites approvingly
to part V-A of Edgar v. MITE. While this is true, the
citation is for the proposition that direct regulation of
interstate commerce is virtually per se unconstitutional.
Brown-Forman Distillers, 476 U.S. at 579 and 582. But
that much is well established and not at issue here. In fact,
the citation in Brown-Forman implies that as the Brown-
Forman court viewed Justice White’s opinion in MITE,
Justice White was saying that the statute in question
was a per-se-invalid direct regulation under the tradi-
tional two-tier test (part V-A), and alternatively it was
an indirect regulation that failed the Pike test (part V-B).
The first proposition gained the support of a plurality,
the second received the support of a majority. Thus, a
majority of justices agreed that the two-tiered test was
2
(...continued)
rial effects, but that fact is accounted for in the two-tiered
approach and the balancing test.
No. 02-2618 5
the appropriate approach, however they didn’t agree on
how the case before them fit that test. Read in this light,
the opinion suggests that extraterritorial regulations are
subject to the traditional interstate commerce analysis,
which is the exact approach we followed in our opinion—
we only reached a different result because the facts of our
case are clearly distinguishable. Of course, appellants
are not arguing that Justice White was saying that at
all; they interpret his opinion as saying that in all cases
extraterritorial effects will invalidate a statute regard-
less of the local benefit. Inasmuch as this interpretation
was the view of the plurality in MITE, that view has not
been adopted by subsequent decisions and is not control-
ling. Cf. CTS Corp. v. Dynamics Corp., 481 U.S. 69, 81
(1987) (noting, in the context of a different section of the
plurality opinion in MITE, that “[a]s the plurality opinion
in MITE did not represent the views of a majority of
the Court, we are not bound by its reasoning”) (footnote
omitted). We rejected that view in our original opinion,
adhering instead to the majority’s application of the Pike
balancing test, and we reiterate that rejection here.
Appellants further advance that our opinion directly
contradicts the opinion from this court in Dean Foods, 187
F.3d 609. The language appellants cite from that opinion
is neither controlling nor contradictory. First, the cited
passage is dicta and so, even assuming arguendo that
the language in Dean Foods suggests tension with our
opinion, it is not controlling. The parties in that case
conceded that if the statute regulated extraterritorially
it was invalid. Id. at 613. The panel’s opinion held them
to this concession, noting that the only issue before it
was the factual question of whether the statute regulated
extraterritorially. Id. at 616. Relatedly but more impor-
tantly, in our discussion in Dean Foods we never decided
the issue. Recognizing that there was a significant legal
issue involved, the panel discussed the contours of the
6 No. 02-2618
question of whether extraterritorial regulations were
per se invalid. We discussed the MITE plurality and the
language appellants want us to adopt, but immediately
followed that with a discussion of the contrary Supreme
Court holding in CTS. Dean Foods, 187 F.3d at 615. We
then noted and discussed cases supporting the notion
that direct and facial regulation of extraterritorial trans-
actions is absolutely banned. But in the end we explained
that the issue need not be decided. Id. at 616.
Finally, the Dean Foods case is distinguishable from
our case, and the reach of the language should be con-
fined to the type of facts in that case. The Wisconsin stat-
ute at issue there was being applied to dictate the price
of milk sold in Illinois. Thus, we were dealing with a
direct regulation of extraterritorial commerce. The fact
that Dean Foods uses general language and does not
address the distinctions of the two-tiered test is not sur-
prising since the issue was not in contention and the
statute before the court was a direct and therefore
per se invalid regulation. As we have stated there is no
question that such a regulation is per se invalid, but this
tells us nothing about indirect effects on extraterritorial
commerce—and since Dean Foods was not faced with that
question, it is inappropriate to apply its analysis to this
case.
Appellants also cite Healy v. Beer Institute, 491 U.S. 324(1989), and National Solid Waste Mgmt. Ass’n v. Meyer, 63
F.3d 652 (7th Cir. 1995), as being contradictory to our
position. Once again these are cases distinguishable on
their facts because they deal with direct extraterritorial
interference. In Myers the statute attempted to dictate
the waste management and recycling standards in other
states. 63 F.3d at 658. We applied the two-tiered ap-
proach and found that the statute was a direct regulation
of interstate commerce and therefore per se invalid. Id. at
657-61. Likewise, Healy deals with direct extraterritorial
No. 02-2618 7
price regulation, which unquestionably is per se invalid.
Healy, 491 U.S. at 335-40. Additionally, Healy also dealt
with facial discrimination against out-of-state products. Id.
at 340.
It would be a mistake to import the language from those
cases when CTS is more clearly on point. CTS says that
when a state regulates internal matters and the regula-
tions have external effects, the regulations are not per se
invalid. CTS dealt with an Indiana statute that regulated
the acquisition of control shares in Indiana corporations
owned in part by a significant number of Indiana resi-
dents. The statute had the possible effect of regulating
transactions in which non-Indiana purchasers sought to
acquire shares from non-Indiana shareholders. The Court
nonetheless rejected the notion of per se invalidity:
Dynamics argues in any event that the State has “ ‘no
legitimate interest in protecting the nonresident share-
holders.’ ” Dynamics relies heavily on the statement
by the MITE Court that “insofar as the . . . law bur-
dens out-of-state transactions, there is nothing to
be weighed in the balance to sustain the law.” But
that comment was made in reference to an Illinois
Law that applied as well to out-of-state corporations
as to in-state corporations. We agree that Indiana has
no interest in protecting nonresident shareholders of
nonresident corporations. But this Act applies only to
corporations incorporated in Indiana. We reject the
contention that Indiana has no interest in providing
for the shareholders of its corporations the voting
autonomy granted by the Act. Indiana has a substan-
tial interest in preventing the corporate form from
becoming a shield for unfair business dealing. More-
over, unlike the Illinois statute invalidated in MITE,
the Indiana Act applies only to corporations that have
a substantial number of shareholders in Indiana. Thus,
every application of the Indiana Act will affect a sub-
8 No. 02-2618
stantial number of Indiana residents, whom Indiana
indisputably has an interest in protecting.
481 U.S. at 93 (citations omitted). The first thing that
is obvious from this excerpt is that the Court did not find
the regulation per se invalid just because it burdened out-
of-state transactions. Instead, the Court discussed the in-
terests served by the regulations in question. Second, the
Court ruled that a major factor in balancing interests is
the fact that the regulation serves to protect a vital inter-
est of local residents, and that it does so in every applica-
tion. The same is true here. To use the similar phrasing
of that case: Every application of the Wisconsin Act will
affect a substantial number of Wisconsin residents [rate-
payers], whom Wisconsin indisputably has an interest
in protecting. The key factor is that CTS and the instant
case are distinguishable from MITE because the regula-
tions in MITE in some instances regulated extraterritorial
transactions for no reason while providing no protection
for any legitimate state interest, whereas the statutes in
CTS and here never affect extraterritorial transactions
without providing a corresponding and significant pro-
tection for a legitimate interest of local residents. See also
Amanda Acquisition Corp. v. Universal Foods Corp., 877
F.2d 496 (7th Cir. 1989) (applying the reasoning of CTS
to uphold a statute that regulated tender offers of locally
incorporated businesses). The reasoning of CTS is ap-
plicable to the case before us and rebuts appellants’ claims
that our opinion is foreclosed by the cases they have cited.
For the reasons set forth in this order and in the orig-
inal panel opinion, the petition for rehearing is DENIED.
No. 02-2618 9
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—7-14-03