Attack of the Commerce Clause

On the afternoon of Jan. 31, Richard A. Epstein was in his office at New York University Law School when a request came in from a conservative website called A federal district court judge in Florida had just struck down the Obama Administration's health-care overhaul, and the site wanted Epstein's reaction. Judge Roger Vinson had ruled that in passing the bill last year, Congress exceeded the authority granted it by the so-called Commerce Clause: Article I, Section 8, Clause 3 of the U.S. Constitution, which allows lawmakers "to regulate Commerce … among the several states." For Epstein, 67, a voluble and prolific scholar who for four decades has been arming conservatives with intellectual weaponry to attack regulation, it was an I-told-you-so moment. "The Commerce Clause challenge to Obamacare indeed has legs," he blogged. "The government played table stakes poker, and for the moment it has lost."

A central figure at the University of Chicago until he moved to NYU last year, Epstein has written over the years about a dizzying array of legal issues: zoning, banking, and job discrimination; product liability, patents, and pharmaceuticals; the environment, workers' comp, and taxation. Unifying his scholarship is a persistent theme: Government stifles capitalist ingenuity and generally screws things up. "It's amazingly consistent that way," he says amiably, ringed by a mountain range of papers in his Greenwich Village office.

The legal fight over health-care reform is likely to end up before the U.S. Supreme Court just in time for the 2012 Presidential race. (Federal appeals courts will have their say in coming months, making the issue a strong candidate for the justices' election-year docket.) Even with his cause riding high, though, Epstein isn't getting carried away with optimism. The high court lost its way on the topic of regulation back in the 1930s, he says. "We've been on the wrong track ever since."

For its first 150 years, the Supreme Court interpreted "among the several states" to mean that legislators could set rules only for trade that crossed state lines—via railroad, for example—and not for manufacturing, farming, or other business conducted exclusively within a state. In the face of the Great Depression's economic devastation and relentless political pressure from President Franklin D. Roosevelt, however, the court drastically shifted its understanding of the Commerce Clause (along with its view of a number of other parts of the Constitution). By 1942, in the landmark case of Wickard v. Filburn, the court upheld federal regulation of a farmer who grew wheat strictly for his own consumption. In a modern economy, the court reasoned, even subsistence crops affect demand in the national marketplace.

Does the logic of Wickard v. Filburn cover President Barack Obama's plan for health care, an industry responsible for 17 percent of the nation's gross domestic product? It's a dandy law school exam question. It's also the most important inquiry about the interplay of government and business percolating in the U.S. legal system. Two Republican-appointed federal judges—the one in Florida and another in Virginia—have answered "no," ruling that Congress exceeded its Commerce Clause authority when it imposed a requirement last year that all American adults obtain health insurance. Two Democratic judicial appointees—one in Michigan, another in Virginia—have disagreed, upholding the statute. When the battle reaches the high court, the fate of near-universal health care may hang on the swing vote of a single justice.

Take a step back, though, "and there's a much bigger fight here that goes way beyond health insurance," says Eric Lane, a liberal constitutional scholar at Hofstra Law School. It's a new assault on regulation being led by the ascendant Republican majority in the House of Representatives. Party leaders vow to use committee hearings and floor debates to make 2011 a year of misery for executive branch regulators. In Congress and the courts alike, skirmishes are under way over the Environmental Protection Agency's authority to limit greenhouse gas emissions and the legitimacy of last year's Wall Street reform legislation. And conservative legal tacticians who have rolled back government limits on campaign spending and gun ownership are seeking to extend those victories. Perhaps Professor Epstein should be in a more hopeful mood.

At the highest levels of the U.S. judiciary, there have always been jurists who sought to revisit America's long-settled understanding of the proper extent of congressional authority over economic affairs. The late Justice William H. Rehnquist kept the flame alive in a series of solo dissents in the 1970s and '80s, earning him the nickname "the Lone Ranger" before his elevation to Chief Justice in 1986 inclined him more toward cooperation. That year, President Ronald Reagan's Attorney General, Edwin Meese III, invited Epstein to make a presentation on the Commerce Clause at the Justice Dept. "The Reagan people knew me from Takings," Epstein explains, referring to a book he published in 1985 that laid out a controversial theory of the Fifth Amendment's Takings Clause. That clause states that private property can't be "taken for public use, without just compensation." Epstein maintains that any regulation reducing the value of private property—such as zoning—requires compensation of the owner.

Epstein's research on the Commerce Clause produced an article published in 1987 in the Virginia Law Review. "The idea that Congress can restrict pretty much any economic activity that has a 'substantial effect' on commerce—which the Supreme Court announced in 1942 in Wickard—was always wrong," Epstein says, summarizing his findings. "I'd say it was a giant fraud, and it has stifled economic liberty ever since."

He remains in a distinct minority on this point. Most constitutional scholars— and judges—see the expansion of federal power as a natural outgrowth of the vastly increased complexity of the American economy brought on by industrialization, modern transportation, and improvements in communication. "Congress's power to regulate 'interstate commerce' became, in effect, the power to regulate 'commerce' generally," David D. Cole, a liberal law professor at Georgetown University, wrote late last month in The New York Review of Books. "The court rejected as empty formalisms the distinctions it had previously drawn between local and interstate, between production and commerce, and between 'direct' and 'indirect' effects."

Despite a concerted program of issue-oriented litigation and conservative judicial appointments—one supported by the Federalist Society, a private network of right-leaning lawyers and scholars—the Reagan Administration had little success pushing Epstein's views in court. In 1995, Douglas H. Ginsburg, a Reagan appointee on the federal appeals court in Washington, publicly mourned what he called "the Constitution-in-exile": provisions such as the Commerce, Takings, and Contract Clauses, which he argued had been unwisely marginalized by the Supreme Court. "The memory of these ancient exiles, banished for standing in opposition to unlimited government," Ginsburg wrote in the journal Regulation, "is kept alive by a few scholars who labor on in the hope of a restoration, a second coming of the Constitution of liberty—even if perhaps not in their own lifetimes."

Although the second coming has not occurred, the debate continues. In 1995 the Supreme Court struck down an obscure federal law prohibiting possession of a gun near a school. Without disturbing any precedent, Rehnquist wrote in U.S. v. Lopez that, under any definition, the mere possession of a firearm in a local school did not affect interstate commerce. The decision had little practical consequence, since gun infractions near schools were still covered by state laws. Still, Lopez caused a stir in legal circles because it marked the first time since the New Deal that the high court said the Commerce Clause did not accommodate something Congress wanted to do.

Justice Clarence Thomas, who sided with the Lopez majority, identified himself as the inheritor of Rehnquist's Lone Ranger hat. In a separate concurrence that echoed Epstein's 1987 Virginia Law Review article, Thomas wrote that the Supreme Court erred when it departed in the 1930s from 19th century legal doctrines that strictly limited federal regulatory power. In an open-ended invitation to litigants, Thomas wrote: "In a future case, we ought to temper our Commerce Clause jurisprudence in a manner that both makes sense of our more recent case law and is more faithful to the original understanding of that clause."

"What Justice Thomas was getting at—more aggressively than anyone else—was that the actual words of the Constitution don't say Congress can do whatever it wants in regulating the economy," says John Yoo, a constitutional law professor at the University of California at Berkeley. As a newly minted lawyer, Yoo was clerking for Thomas when Lopez was decided. "If the court wanted to get back to what the founders had in mind about commerce," he adds, "the text and history of the Constitution would support a big change in the doctrine." Thomas's presence on the country's top tribunal makes it more plausible for business interests and conservatives to argue in lower courts that one or another regulation deserves to be struck down.

Cass R. Sunstein, a Harvard law professor on leave while he runs Obama's Office of Information and Regulatory Affairs, takes the Thomas invitation seriously. In 2004 he warned about the return of what he called "Herbert Hoover's Constitution"—a liberal's derisive spin on Ginsburg's Constitution-in-exile. Under the Hoover Constitution, Sunstein wrote in Washington Monthly, "the powers of the national government were sharply limited." He accurately predicted that if fortified by second-term appointments by President George W. Bush, the Supreme Court might read the Second Amendment expansively to curb federal and state gun control laws. Led by Bush-nominated Chief Justice John G. Roberts, the court in 2008, and again last year, struck down firearm restrictions in Washington, D.C., and Chicago, declaring clearly for the first time an individual right to keep a handgun. Sunstein was also prescient in saying that a conservative majority might curtail campaign-finance regulation, as it did in 2010 in a ruling strengthening the First Amendment speech rights of corporate interests. On yet another front, Sunstein envisaged an assault on environmental regulations. That offensive is well under way as Texas spearheads litigation intended to hobble the EPA's ability to regulate carbon emissions.

The Hoover Constitution isn't likely to be restored in full, Sunstein acknowledged. "But don't be surprised if you see significant movement in its direction." A spokesman for Sunstein declined to comment.

The Supreme Court's more recent Commerce Clause pronouncements leave the fate of the health insurance mandate an open question. In 2000 the court said Congress exceeded its authority when it passed a law giving victims of gender-motivated violence a basis for suing attackers in federal court. Regardless of good intentions, the statute did not concern commerce, the majority concluded. Leaning in the opposite direction, the court ruled in 2005 that Congress could criminalize homegrown marijuana, even for medicinal use. "If the majority is to be taken seriously," Thomas wrote in dissent, "the federal government may now regulate quilting bees, clothes drives, and potluck suppers throughout the 50 states."

Federal regulation of quilting bees isn't being litigated, but Obama's attempt to create a health insurance system covering all Americans surely is. David B. Rivkin Jr., a lawyer who served in the Reagan and George H.W. Bush administrations, has been bothered by the idea of mandated insurance for nearly two decades. In 1993 he took to the op-ed page of The Wall Street Journal to argue that Clinton Administration proposals for universal participation in a national health system would "draw the curtain on the Constitution of 1787," confirming "that there is nothing that Congress cannot do under the Commerce Clause." In the 1990s, as Rivkin noted, some Republicans in Congress also supported the idea of requiring everyone to participate in the health system, so that costs would be spread across the entire population. The issue became moot when Clinton-era health reform died on Capitol Hill.

When Obama revived the campaign for comprehensive health coverage in 2009, Rivkin returned to the ramparts, arguing its unconstitutionality in the Journal and venues sponsored by the Federalist Society. He also provided legal advice to GOP state officials skeptical of the Obama plan. The counseling grew into a paid post at Baker Hostetler, the corporate law firm in whose Washington office Rivkin is a partner. He and a team of colleagues represent a coalition of 26 states challenging the health-care bill in Florida.

Born in 1956 in a small village in the former Soviet Union, Rivkin brings an immigrant's patriotic zeal to defending his vision of the U.S. Constitution. A classical bust of George Washington greets a visitor to his office. With characteristic zest, he declares that "the Obama health reform law is the most profoundly unconstitutional statute in U.S. history." At the same time, he insists, he is not trying to alter Supreme Court jurisprudence. Instead, he says the justices have always assumed that the Commerce Clause authorizes regulation of economic "activity." The health insurance mandate, Rivkin contends, is unconstitutional because it regulates "inactivity"—namely, individuals' decision not to buy insurance. "Inactivity cannot be regulated under the Commerce Clause," he argued before U.S. District Judge Vinson in Pensacola, Fla., on Dec. 16. Vinson agreed, and the activity/inactivity distinction became central to his ruling.

The Obama Administration has called mandatory coverage the health plan's financial linchpin because without it, some people would refrain from acquiring insurance until they get sick, driving up costs. Ian H. Gershengorn, the senior Justice Dept. attorney defending health reform in the courts, told Judge Vinson in oral argument that those who don't buy health insurance are making an economic decision to pay later or shift the cost to others. Everyone, at some point, takes part in the health-care market. "The uninsured are not inactive," Gershengorn argued. Striking down the overhaul would amount to "a return to the 1930s," he said.

Judge Vinson didn't buy it. He said that he wasn't deciding on the wisdom of health reform, but on a more abstract principle. "If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be difficult to perceive any limitation on federal power," he wrote in his 78-page Jan. 31 ruling. "We would have a Constitution in name only."

Epstein has nothing but admiration for Vinson's bold move. Like some other Supreme Court watchers, he expects a 5-4 resolution, with the conservative but sometimes unpredictable Justice Anthony M. Kennedy casting the deciding vote. If pressed, Epstein forecasts that Kennedy will vote to uphold the legislation "on the ground that the mandate is but one part of a comprehensive health-care whole, so that the mandate has to be judged, to borrow from John Donne, not as an island, but as a piece of the main." On the other hand, he adds, maybe Kennedy will pleasantly surprise him and turn the court in Epstein's direction. Says the professor: "I have been wrong before."

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