No. 12-461

Supfame Court, U.SFILED

NOV 7 - 2012

OFFICE OF THE CLERK

3fa tlje gmprente Court of tije SUniteb States;

National Association of Optometrists& Opticians; LensCrafters, Inc.; Eye Care

Centers of America, Inc.,Petitioners,

v.

Kamala D. Harris, in her official capacity as AttorneyGeneral of the State of California; CHARLENE Zettei,

Director, Department ofConsumer Affairs,Respondents.

On Petition for Writ of Certiorari to theUnited States Court of Appeals for the Ninth Circuit

BRIEF AMICI CURIAE OF CONSTITUTIONALLAW PROFESSORS

IN SUPPORT OF PETITIONERS

Douglas R. Cole

Counsel ofRecordErik J. ClarkORGAN COLE + STOCK LLP1335 Dublin Rd., Suite 104DColumbus, Ohio 43215(614) 481-0900drcole@ocslawfirm.com

Counsel for Amid CuriaeConstitutional Law Professors

Becker Gallagher • Cincinnati, OH • Washington, D.C. • 800.890.5001

TABLE OF CONTENTS

Table of Authorities iii

I. INTRODUCTION AND STATEMENT OFAMICUS INTEREST 1

II. STATEMENT OF FACTS 4

III. SUMMARY OF ARGUMENT 9

IV. ARGUMENT 11

A. The decision below misreads the

Court's precedents in a way thatincreases the States' power to shieldlocal markets from interstate

competition 11

1. The dormant Commerce Clause

doctrine prohibits States fromshielding local markets frominterstate competition 11

2. The Court's jurisprudenceimplements this anti-protectionism mandate through atwo-step analysis 13

3. Entities are "similarly situated"for Commerce Clause purposes ifthey compete against each otherin the same market 15

11

4. The Ninth Circuit adopted aflawed understanding of"similarly situated" 19

5. The Ninth Circuit's decisioncontributes to confusion amongthe lower courts regarding thescope of permissiblediscrimination 23

6. Under the Ninth Circuit'sdefinition of "similarly situated,"States will have nearly unbridledpower to shield local markets frominterstate competition 26

V. CONCLUSION 27

Ill

TABLE OF AUTHORITIES

Cases

Alaska v. Arctic Maid,366 U.S. 199 (1961) 17, 18

American Trucking Associations, Inc. v.Michigan Public Service Comm'n,545 U.S. 429 (2005) 11

Bacchus Imports Ltd. v. Dias,468 U.S. 263 (1984) 16, 17

Baldwin v. G.A.F. Seelig, Inc.,294 U.S. 511 (1935) 11

C&A Carbone v. Town of Clarkston, N.Y.,511 U.S. 383 (1994) 14, 21

Cachia v. Islamorada,542 F.3d 839 (11th Cir. 2008) 24, 25

Camps Newfound/Owatonna, Inc. v. Town ofHarrison, Me.,520 U.S. 564 (1997) 11

Dean Milk Co. v. City of Madison, Wis.,340 U.S. 349 (1951) 21

Department of Revenue ofKy. v. Davis,553 U.S. 328 (2008) passim

IV

Exxon v. Maryland,437 U.S. 117 (1978) 20, 22, 23, 26

Ford Motor Co. v. Texas Departmentof Transportation,264 F.3d 493 (5th Cir. 2001) 25

General Motors Corp. v. Tracy,519 U.S. 278 (1997) passim

Granholm v. Heald,544 U.S. 460 (2005) 16

H.P. Hood & Sons, Inc. v. DuMond,336 U.S. 525 (1949) 16

Hughes v. Oklahoma,441 U.S. 322 (1979) 13

Hunt v. Washington State AppleAdver. Comm'n,432 U.S. 333 (1977) 14

LensCrafters v. Robinson,403 F.3d798(6th Cir. 2005) 25

National Revenue Corp. v. Violet,807 F.2d 285 (1st Cir. 1986) 23, 24, 25

New Energy Co. ofIndiana v. Limbach,486 U.S. 269 (1988) 12

V

Oklahoma Tax Comm'n v. Jefferson Lines, Inc.,514 U.S. 174 (1995) 11

Oregon Waste Sys., Inc. v. Dep't of Envtl. Qualityof State of Or.,511 U.S. 93 (1994) 13, 14

Pike v. Bruce Church, Inc.,397 U.S. 137 (1970) 14, 15

United Haulers Association v. Oneida-Herkimer

Solid Waste Management Authority,550 U.S. 330 (2007) 14, 16, 19

Williamson v. Lee Optical,348 U.S. 483 (1955) 8

W. Lynn Creamery, Inc. v. Healy,512 U.S. 186 (1994) 3, 13

Statutes and Regulations

Cal. Bus. & Prof. Code § 655 5

Cal. Bus. & Prof. Code § 2556 5, 7

Cal. Bus. & Prof. Code § 3103 5

1 Cal. Code of Regs., tit. 16, § 1399.251 5

1 Cal. Code of Regs., tit. 16, § 1514 5

VI

Other Authorities

Norman R. Williams &Brannon P. Denning, The"New Protectionism" and the American CommonMarket, 85 NOTRE DAME L. REV. 247 (2009) 19

I. INTRODUCTION AND STATEMENT OF

AMICUS INTEREST

The amici are twenty-five law professors fromacross the country, including leading CommerceClause and constitutional scholars.1 Their teachingand research interests give them substantialexpertise on the application of the Commerce Clauseto various forms of state and local regulation.Specifically, the amici are:

• William D. Araiza, Professor of Law, BrooklynLaw School2

• Mitchell Berman, Richard Dale EndowedChair in Law, University of Texas School ofLaw

• Erwin Chemerinsky, Founding Dean,University of California - Irvine School of Law

• Randall Coyne, Edna Asper Elkouri and FrankElkouri Professor of Law, University ofOklahoma

• David Dow, University DistinguishedProfessor, University of Houston Law Center

1 Counsel of record for all parties received notice at least 10days prior to the due date of amici's intention to file this brief,and they consented to the filing. Under the Court's Rule 37.6,amici certify that no counsel for any party authored this brief inwhole or in part, that no such counsel or party made a monetarycontribution intended to fund the preparation or submission ofthis brief, and that no person other than the individual amiciand their counsel made such monetary contribution to itspreparation or submission.

2 Institutional affiliations are listed for identification purposesonly.

• Richard Epstein, Laurence A. Tisch Professorof Law, New York University School of Law

• Stephen Gardbaum, MacArthur FoundationProfessor of International Justice and Human

Rights, UCLA School of Law

• James Huffman, Dean Emeritus, Lewis &Clark Law School

• D. Bruce La Pierre, Professor of Law,Washington University, St. Louis, Mo.

• Ethan Leib, Professor, Fordham Law School

• Tracey Maclin, Joseph Lipsitt FacultyResearch Scholar, Boston University School ofLaw

• Calvin Massey, Daniel Webster DistinguishedProfessor of Law, University of NewHampshire Law School

• Jason Mazzone, Professor, Lynn H. MurrayFaculty Scholar in Law, University of IllinoisCollege of Law

• Thomas McAffee, William S. Boyd Professor,Boyd School of Law, UNLV

• Lori Ringhand, J. Alton Hosch Professor ofLaw, University of Georgia College of Law

• Kermit Roosevelt, Professor, University ofPennsylvania Law School

• Theodore Ruger, Professor, University ofPennsylvania Law School

• Peter Shane, Jacob E. Davis and Jacob E.Davis II Chair in Law, The Ohio StateUniversity, Moritz College of Law

» Charles Shanor, Professor, Emory UniversitySchool of Law

• Allen Shoenberger, Professor, LoyolaUniversity Chicago School of Law

• Marcy Strauss, Professor, Loyola Law School

• Nelson Tebbe, Professor, Brooklyn Law School

• Carl Tobias, Williams Professor, University ofRichmond School of Law

• William Van Alstyne, Lee Professor of Law,William & Mary Law School

• Norman Williams, Ken and Claudia PetersonProfessor of Law, Willamette UniversityCollege of Law

The amici have no direct stake in this litigation,but do have an interest in seeing Commerce Clausejurisprudence develop in a rational manner. Failureto review and correct the decision below threatens

that development. In particular, Amici are concernedthat the Commerce Clause principles reflected belowcannot be squared with the Court's existing dormantCommerce Clause anti-discrimination framework,which eschews a form-over-substance approach, andinstead requires a careful, fact-based analysis ofwhether state rules discriminate against interstatecommerce. See W. Lynn Creamery, Inc. v. Healy, 512U.S. 186, 201 (1994) ("Our Commerce Clausejurisprudence is not so rigid as to be controlled by theform by which a State erects barriers to commerce.Rather our cases have eschewed formalism for a

sensitive, case-by-case analysis of purposes andeffects.").

4

The Ninth Circuit jettisoned that approach,adopting a formalistic understanding of"substantially similar" that broadly shelters state orlocal regulation from dormant Commerce Clausescrutiny so long as the State can identify some slightoperational difference between the benefitted in-stateand burdened interstate entities.

The Ninth Circuit's flawed analysis matters. Oneof the dormant Commerce Clause's core purposes isto prevent States from engaging in economicprotectionism—i.e., shielding local markets frominterstate competition. Yet, that is exactly whatCalifornia achieved here, sheltering its localoptometrists and ophthalmologists from competitionby interstate companies, such as petitioners, thatseek to offer California consumers the same service—

one-stop shopping for their eyeglass needs. Perhapsmost troubling, under the Ninth Circuit's analysis,the State need not even justify its differentialtreatment of these entities, all of whom compete inthe identical market. Should this decision stand,local legislators can be expected to exercise theirnewfound freedom to discriminate by extendingprotectionist regimes to other local markets, all atthe expense of the uniform national market that theCommerce Clause is designed to protect.

II. STATEMENT OF FACTS

The facts are largely undisputed. Two of thepetitioners are interstate companies that selleyeglasses throughout the United States. Theremaining petitioner is a trade association thatrepresents eyeglass sellers. Petitioners arechallenging California's Business & Professions Code

sections 655, 2556 and 3103, and two companionregulations, 1 Cal. Code of Regs, Title 16 sections1399.251 and 1514. Collectively, these laws prohibitopticians and optical companies, like petitioners,from offering prescription eyewear in the samelocation in which eye examinations are provided. Inother words, opticians and optical companies(collectively referred to herein as "optical companies")cannot contract with, lease space to, or otherwise co-locate with, licensed optometrists orophthalmologists to provide eye examinations atstores that the optical companies own and in whichthe optical companies sell eyewear. (App-74).

Optometrists and ophthalmologists who areunaffiliated with optical companies, by contrast, maysell prescription eyewear at facilities they own, andat which they provide eye examinations. (App-75).The record showed that "over 90 percent ofoptometrists in private practice [in California] selleyewear." (App-76). Moreover, the district courtfound that California optometrists deriveapproximately 50 percent of their revenue and 25percent of their profits from selling eyewear. (App-76-77).

The overwhelming majority of licensedoptometrists and ophthalmologists are Californiaresidents and work exclusively in California. Bycontrast, neither petitioner nor any other interstateoptical company is headquartered there. Petitionerand the vast majority of optical companies compete ina nationwide market, with locations in multipledifferent States.

California is an outlier among the States inbarring any form of co-location. Elsewhere, interstateoptical companies typically have on-site optometristsavailable to provide eye examinations andprescriptions. In those States, interstate opticalcompanies, like the local optometrists andophthalmologists here, can offer "one-stop shopping."

The record also reveals the competitive impactcreated by this differential treatment. The"uncontroverted evidence" showed that "the primaryfactor effecting competition in the retail eyewearmarkets is the overwhelming consumer preferencefor one-stop shopping." (App-79). That is, consumersstrongly prefer to purchase eyewear at the samefacility in which they received their eye examination.Such one-stop shopping "has become the dominantform or retailing eyewear." (Id.). As a result, "storesthat sell eyewear but do not offer one-stop shoppingare increasingly marginal competitors in themarket." (Id.). Respondents admitted that "offeringone-stop shopping provides a competitive advantagebecause it is easier to attract business, make salesand enjoy profits." (App-80).

The record also revealed reasons for thispreference. Consumers "find it more convenient toaddress any quality issues in one location, withoutconcern for determining whether it was the opticianof the optometrist that was responsible for the error."(Id.). As respondents' expert put it, consumers preferthe ability to return to one place to correct an error.(Id.). In short, California's regulations substantiallyimpede interstate optical companies in their efforts to

compete against local competitors for retail eyewearcustomers.

The record offered evidence that California's

legislature adopted this regulatory regime with thatprotectionist impact in mind. Respondents' expertconceded that section 2556, which "prohibits aninterstate optical company from furnishing theservices of an optometrist," "was enacted as part ofan effort to prevent out-of-state optical companiesfrom coming into California and undercuttingdispensing optometrists on price." (App-82).

The district court not surprisingly found that theCalifornia regulations violated the Commerce Clause.The court began by noting that "regulations which'prevent competition in local markets by out-of-statefirms' affect interstate commerce just as much aslaws regulating the free flow of goods." (App-86). Itthen held that the in-state (i.e., optometrists andophthalmologists) and interstate (i.e., opticalcompanies) competitors are "similarly situated" inthat they "compete for the same customers with thesame products in the same market," (App-99), andthat the regulations burdened the interstate entitiesand benefited the in-state entities in that

competition. The court then considered the reasonsthe State proffered to justify that discrimination—that "patient care and privacy are being compromisedwhen lay optical companies control optometrists."(App-104). The court concluded that "there is noevidence that the quality of eye care varies bypractice setting [i.e., optical companies vs.optometrists or ophthalmologists]", (App-114), or that"the practices that [the State] complain[s] of actually

8

harm the public health," (App-115). The court furtherfound the State had failed to show that it could notachieve those goals through non-discriminatoryalternatives. (App-113).

The Ninth Circuit reversed. In particular, itconcluded that the laws did not have adiscriminatory effect, as discrimination requires ashowing of differential treatment between similarly-situated entities. 3 According to the court,optometrists and ophthalmologists are not "similarlysituated" with optical companies. Althoughacknowledging that the entities compete in the samemarket, the court held that "competing in the samemarket is not sufficient to conclude that entities aresimilarly situated." (App-42). Rather, the court said,the similarly-situated inquiry turns on whether, andwhy, the State treats the entities differently. Here,the State had "offered evidence regarding the severalways in which it distinguishes between opticians,optometrists and ophthalmologists." (App-40). Mostimportantly, according to the court, the State treats

3While Williamson v. Lee Optical, 348 U.S.483 (1955), likewiseinvolved laws regulating vision care, the issues were fardifferent. That case involved a substantive due process andequal protection challenge by in-state opticians, who claimedthat the law unconstitutionally discriminated against them infavor of in-state ophthalmologists. Thus, the Court afforded thestatute the deferential review that the Court typically applies ineconomic substantive due process or equal protection cases. Theelement of discrimination against interstate competition that isthe focus here was lacking in that case. That element isprecisely what makes searching review of the state regulationsmore important and more appropriate here. Accordingly, theNinth Circuit did not discuss Williamson, nor do amici addressit.

9

optometrists and ophthalmologists as "health careproviders," and optical companies as "commercialinterests." While one might have thought that theState's differential treatment was a sign ofdiscrimination, the Ninth Circuit held the opposite:"[b]ecause they have different [state-created]responsibilities, different [state-created] purposes,and different business structures, opticians are notthe same as optometrists or ophthalmologists." Thus,the State, having itself created the distinctionbetween the two groups, was free to burden the(overwhelmingly interstate) optical companies in thecompanies' efforts to compete with the (in-state)optometrists and ophthalmologists, and the Statewas not required to justify that discrimination.4

III. SUMMARY OF ARGUMENT

The decision below5 threatens to upset settledunderstandings regarding the scope of permissible

4The court noted that the optical companies remained free tochallenge the laws under the Pike balancing test. On remand,the Petitioners did so. On appeal of that decision, however, theNinth Circuit ruled that the same State-created differences in

methods of operation that had prevented the companies frombeing "similarly situated" largely insulated the legislation fromattack under Pike. (App-18-19). The court reached this resultdespite assuming for purposes of the appeal that "thechallenged laws will result in an overall shift in the marketshare of eyewear sales and profits from optical stores owned byout-of-state corporations to entities that are entirely owned byCalifornians." (App-17, n.9).

5As noted above, see n.5, there are actually two decisions below.This brief is directly largely at the Ninth Circuit's analysis inthe first opinion, rather than its review of the district court'sapplication of Pike after remand.

10

state regulation under the dormant CommerceClause. Dormant Commerce Clause analysis issupposed to proceed according to a two-stepframework. First, a court must rigorously evaluatewhether the challenged state law has the purpose oreffect of discriminating against interstate commerce.Second, if so, the State must show that thediscrimination is justified. The decision belowadopted an understanding of "similarly situated"—aconcept used in the first step of the analysis—thatbroadly insulates state laws from dormant CommerceClause scrutiny at the first stage, thereby obviatingany analysis at the second stage. According to theNinth Circuit, so long as the State can cite someoperational difference—even if it is a State-imposedor State-created operational difference—between thebenefitted in-state parties and the burdened out-of-state parties, the statute isper se non-discriminatory,thereby relieving the State of any burden to justifythe differential treatment. This approach grantsStates broad new powers to shelter local marketsfrom interstate competition, a result at odds with thedoctrine's anti-protectionist roots, and contrary toconsumers', and the nation's, interests.

11

IV. ARGUMENT

A. The decision below misreads theCourt's precedents in a way thatincreases the States' power to shieldlocal markets from interstatecompetition.

1. The dormant Commerce Clausedoctrine prohibits States fromshielding local markets frominterstate competition.

The Court has long recognized, and oft repeated,that the Constitution "was framed upon the theorythat the peoples of the several states must sink orswim together, and that in the long run prosperityand salvation are in union and not division." Baldwinv. G.A.F. Seelig, Inc., 294 U.S. 511, 523 (1935). Seealso, e.g., American Trucking Associations, Inc. v.Michigan Public Service Comm'n, 545 U.S. 429, 433(2005) (quoting Baldwin). Thus, the Court "hasconsistently held that the Constitution's expressgrant to Congress of the power to 'regulateCommerce ... among the several States, Art. I, §8,cl.3, contains, 'a further, negative command, knownas the dormant Commerce Clause ....'" AmericanTrucking, 545 U.S. at 433 (quoting Oklahoma TaxComm'n v. Jefferson Lines, Inc., 514 U.S. 174 (1995)).

This "negative command" is principally groundedin concerns about "economic balkanization." CampsNewfound/Owatonna, Inc. v. Town of Harrison, Me.,520 U.S. 564, 577 (1997) ("Avoiding this sort ofeconomic balkanization and the retaliatory acts ofother State that may follow, is one of the central

12

purposes of our negative Commerce Clausejurisprudence.") (quotations omitted). Statedalternatively, "[t]he point [of the dormant CommerceClause doctrine] is to effectuate the Framers' purposeto prevent a State from retreating into the economicisolation that had plagued relations among theColonies and later among the States under theArticles of Confederation." Department of Revenue ofKy. v. Davis, 553 U.S. 328, 338 (2008).

Consistent with its focus on preventing economic"balkanization" and "isolation," the Court has heldthat the doctrine prohibits "economic protectionism."This prohibition is implemented through a stronganti-discrimination principle. States cannot seek totip the competitive scales by discriminating in favorof in-state entities by burdening their interstatecompetitors:

It has long been accepted that the CommerceClause not only grants Congress the authorityto regulate commerce among the States, butalso directly limits the power of the States todiscriminate against interstate commerce. The"negative" aspect of the Commerce Clauseprohibits economic protectionism—that is,regulatory measures designed to benefit instate economic interests by burdening out-of-state competitors.

New Energy Co. ofIndiana v. Limbach, 486 U.S. 269(1988). See also, e.g., Davis, 553 U.S. at 337-38(same).

So, for example, in Limbach, the Court struck astatute that provided fuel dealers a credit against theOhio motor vehicle fuel sales tax for sales of ethanol

13

that had been produced in-state, but lacked a similartax credit for ethanol produced out-of-state, creatinga competitive disadvantage for out-of-state ethanolproducers. Similarly, in West Lynn Creamery, Inc. v.Healy, 512 U.S. 186 (1994), the Court struck aMassachusetts statute whose "avowed purpose and... undisputed effect [were] to enable higher costsMassachusetts dairy farmers to compete with lowercost dairy farmers in other States," which the statuteaccomplished by effectively imposing a tax on out-of-state milk that did not apply to in-state milk. Id. at194-95. In both cases, the States violated theCommerce Clause by favoring in-state entities andburdening their interstate counterparts.

2. The Court's jurisprudenceimplements this anti-protectionism mandate through atwo-step analysis.

The dormant Commerce Clause's basic analyticalframework is well settled. The anti-discrimination

analysis (as opposed to the Pike balancing test)proceeds according to a two-step inquiry. The firststep asks whether the statute discriminates, eitherfacially, in purpose or in effect, against interstatecommerce. See, e.g., Oregon Waste Sys., Inc. v. Dep'tof Envtl. Quality of State of Or., 511 U.S. 93, 99(1994) ("[W]e have held that the first step inanalyzing any law subject to judicial scrutiny underthe negative Commerce Clause is to determinewhether it 'regulates evenhandedly with only'incidental' effects on interstate commerce, ordiscriminates against interstate commerce.'")(quoting Hughes v. Oklahoma, 441 U.S. 322, 336

14

(1979)). Ifit does, at the second stage, the state mustjustify that discrimination by showing thediscrimination is necessary to achieve a legitimatelocal purpose, and that there is no reasonable nondiscriminatory means for accomplishing the sameobjective.6 See, e.g., United Haulers Association v.Oneida-Herkimer Solid Waste ManagementAuthority, 550 U.S. 330, 338-39 (2007).

The two steps are necessarily separate inquiries.In determining whether discrimination exists, theState's purported need for the discrimination isirrelevant. Discrimination turns on the fact of thedifferential treatment or impact; while justification isthe State's explanation for why that differentialimpact is acceptable. Consistent with that, theCourt's cases look to the State's proffered reasonsonly after discrimination is established. See, e.g.,Hunt v. Washington State Apple Adver. Comm'n, 432U.S. 333, 353 (1977) (turning to justification after afinding of discrimination); C&A Carbone v. Town ofClarkston, NY., 511 U.S. 383, 392-94 (1994) (same).Cf. Oregon Waste, 511 U.S. at 100 ("As we reiteratedin Chemical Waste, the purpose of, or justification for,a law has no bearing on whether it is faciallydiscriminatory....").

6 If the state statute survives the two-step test, the challengercan still seek to invalidate the rule under the Pike balancingtest To succeed, the challenger must show that the burden thestatute imposes on interstate commerce is clearly excessivecompared to the local benefits that the State seeks to achieve.See Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). The Piketest is not demanding. As the Court has observed, "State lawsfrequently survive this Pike scrutiny." Davis, 553 U.S. at 339.

15

The Court has also made clear that not alldifferential treatment of in-state and interstateentities counts as "discrimination" for dormant

Commerce Clause purposes. Rather, the challengermust show differential treatment amongsubstantially similar entities: "Conceptually, ofcourse, any notion of discrimination assumes acomparison of substantially similar entities." GeneralMotors Corp. v. Tracy, 519 U.S. 278 (1997). If theentities are not "substantially similar," then thechallenge fails at the first step, and the State is notrequired to justify its differential treatment.7 Thedifferential treatment is simply not "discriminatory"for dormant Commerce Clause purposes. See, e.g.,Davis, 553 U.S. at 343.

It is the Ninth Circuit's formulation of "similarlysituated" in the first step of the analysis that drivesthe need for review here.

3. Entities are "similarly situated"for Commerce Clause purposes ifthey compete against each otherin the same market.

Given the focus in modern dormant CommerceClause jurisprudence on prohibiting economicprotectionism by preventing States from tipping thecompetitive scales in favor of local entities at theexpense of interstate competitors, the Court'streatment of "similarly situated" directlyincorporates notions of competition. In particular, asdifferential treatment is suspect when such

7As noted above, the challenger can still seek to show that thestatute fails under Pike.

16

treatment is directed at in-state and interstatecompetitors, the Court treats entities as similar ysituated" if the entities directly compete m a singlemarket for the same consumers.

The focus on in-state and interstate competitorsappears repeatedly throughout the Court's precedent.See Davis, 553 U.S. at 338 (doctrine directed at"regulatory measures designed to benefit in-stateeconomic interests by burdening out-of-statecompetitors') (emphasis added); United Haulers, 550US at 342 ("[W]hen a law favors in-state businessover out-of-state competition, rigorous scrutiny isappropriate ....") (same); Granholm v. Heald, 544US 460 493 (2005) (laws violate the dormantCommerce Clause if they "treatQ out-of-stateproducers less favorably than their localcompetitors') (same). As Justice Jackson described it:"[Elvery consumer may look to the free competitionfrom every producing area in the Nation to protecthim from exploitation by any. Such was the vision oithe Founders; such has been the doctrine of thisCourt which has given it reality." H.P. Hood &Sons,Inc. v. DuMond, 336 U.S. 525, 539 (1949).

Consistent with this emphasis on competition inBacchus Imports Ltd. v. Dias, 468 U.S. 263 (1984),the Court struck a tax exemption for a liquor distilledfrom a native Hawaiian plant because the exemptioncreated an advantage over competitors liquorsproduced elsewhere. In doing so, the Court rejectedHawaii's argument that the local liquor did notcompete with liquor coming from outside the State,concluding that even a small degree of competitionbetween favored and disfavored entities creates a

17

potential dormant Commerce Clause violation. Id at268-69.

Conversely, the Court has not hesitated to finddiscrimination lacking when the allegedly-benefittedand allegedly-burdened parties do not compete in thesame market. As the Court explained in Tracy, "inthe absence of actual or prospective competitionbetween the supposedly favored and disfavoredentities in a single market, there can be no localpreference, whether by express discriminationagainst interstate commerce or undue burden uponit, to which the dormant Commerce Clause mayapply." 519 U.S. at 300. "This is so for the simplereason that the difference in products may mean thatthe different entities serve different markets, andwould continue to do so even if the supposedlydiscriminatory burden were removed." Id. at 299.

In Alaska v. Arctic Maid, 366 U.S. 199 (1961), forexample, operators of freezer ships that transportedfrozen Alaskan salmon out-of-state for canningchallenged a tax that they were forced to pay, butthat those ship operators who froze salmon forcanning in Alaska did not pay. The Court rejected thechallenge, finding that the former did not competeagainst the latter, but rather against the in-statecanneries themselves. Thus, in assessing whetherthere was discrimination, the Court looked only towhether the allegedly favored and allegedlydisfavored entities under the statute werecompetitors:

The freezer ships do not compete with thosewho freeze fish for the retail market. Thefreezer ships take their catches south for

18

canning. Their competitors are the AlaskancannerS .... When we look at the tax laid onlocal canners and those laid on freezei shipsthere is no discrimination m favor oi theformer and against the latter.

Arctic Maid, 366 U.S. at 204 (emphasis added). Inother words, the groups the Court compared f0dormant Commerce Clause purposes we^notdefined by similarities in their methods of businessoperations (i.e., freezer ship operators who froze forK^canneries and freezer ^P — ^method of operation, was the key.

Similarly, in Tracy, where the market Plantsat issue competed in one market (the ^^market" for unbundled natural gas), but did notCompete in another (the "captive market of

Sdential users who purchased natural gas bundledwith delivery services), the Court began itsCommerce Clause analysis by determining which"predominated. "Should we accord controlhngsignificance to the noncaptive market in which Lthenstate and interstate entities] compete or tofcenoncompetitive, captive market » ^ ^jjr:rr:'S5r/tern::;development of the captive market and the localdevelopment ™arket the Court concludedutilities' role in that market, tne cautivetw it should give "greater weight to the captiveL ket' Id As^he two entities did not compete or"en seek to compete in that market, they were no"JXtantially similar" for dormant Commerce Clause

19

purposes. In short, the determination of "substantialsimilarity" between private entities8 for dormantCommerce Clause purposes turns on whether theentities are properly characterized as competing in asingle market.

4. The Ninth Circuit adopted aflawed understanding of"similarly situated."

The Ninth Circuit adopted a differentunderstanding of "similarly situated." Rather thanfocusing on competition between the entities, itlooked to whether the State treats the two entities

differently. This approach turns Commerce Clauseanalysis on its head. Ex ante, one would imagine thatdifferential treatment is a basis for finding unlawfuldiscrimination, not conclusive proof that suchdiscrimination has not occurred.

In its opinion, the Ninth Circuit directly consideredand rejected the principle that "similarly situated"should turn on whether the two entities compete inthe same market. According to the court, "competing

8 There is another strand of "substantial similarity" analysis incases involving public (i.e., State-owned or State-operated)entities and private entities. The Court has recognized thatState ownership of the public entity may be enough, in and ofitself, to prevent a finding of substantial similarity, withoutreference to whether the public and private entities compete inthe same market. See, e.g., Davis, 533 U.S. at 341; UnitedHaulers. 550 U.S. at 343-344. Cf. Norman R. Williams &

Brannon P. Denning, The "New Protectionism" and theAmerican Common Market, 85 NOTRE DAME L. Rev. 247 (2009)(arguing that sovereign protection exemption to dormantCommerce Clause doctrine should be narrowly construed).

20

in the same market is not sufficient to conclude thatentities are similarly situated." (App-42).

Rather, the court found, the proper focus is theState's treatment of the entities:

The State offered evidence regarding theseveral ways in which it distinguishesbetween opticians, optometrists andophthalmologists.

(App-40). For example, the State pointed to"educational requirements," testing requirements,"continuing education requirements," and "specialethical and professional responsibilities to whichoptometrists and ophthalmologists are subject, butoptical companies are not. In a similar vein, the courtnoted that "[u]nlike optometrists and ophthalmologists, opticians are not health care provides, donot diagnose or treat diseases of the eye, and may beowned and operated as commercial concerns." (Id.).The court concluded that, in light of the State'sdifferential treatment of the differing entities, theywere not "substantially similar" even though therecord showed that the vast majority of theirbusiness efforts were directed at selling exactly thesame service to exactly the same customers in exactlythe same market. (Id.). It reached this result eventhough none of the cited differences relate to theactivity of selling glasses, the sole activity at issuehere.

The Ninth Circuit claimed to find support for thisapproach to "substantially similar" in Tracy andExxon v. Maryland, 437 U.S. 117 (1978). (App-38-42).In fact, however, neither case provides such support.

21

According to the court below, Tracy stands for abroad proposition that courts entertaining dormantCommerce Clause challenges must "give somedeference to states' decisions regarding health andsafety. (App-39). That deference, coupled with theState-imposed difference between the two groups setforth above, convinced the court that the groups werenot similarly situated." (App-41-42).

That is reading too much into Tracy. To start, theCourts precedent rejects the notion that a State caninsulate its laws from Commerce Clause scrutiny bvthe mere artifice of invoking "health and safety"WCeTZ ?!' o'g"' Dem MUk °°- V- CUy ^Madison,Wis., 340 U.S. 349, 354 (1951) ("A different view, thaithe ordinance is valid simply because it professes tobe a health measure, would mean that the CommerceClause of itself imposes no limitations on state actionother than those laid down by the Due ProcessClause save for the rare instance where a stateartlessly discloses an avowed purpose to discriminateagainst interstate goods."); C&A Carbone, 511 US at393 (striking ordinance justified on health groundswhere nondiscriminatory alternatives existed)Moreover, references to "health and safety" areproperly considered as part of a State's justificationfor discrimination, not m the inquiry as to whetherdiscrimination exists.

Instead, Tracy is better understood as holding thatwhere the allegedly favored and allegedly disfavoredentities compete in some markets but not others andthe statute at issue is not limited in effect to the noncompetitive market, then the court must determinewhich market predominates for Commerce Clause

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purposes. Whatever the correct analytical frameworkfor that assessment, it is not relevant here. Thestatute at issue directly and solely impacts the singlemarket in which both the favored entities

(ophthalmologists and optometrists) and thedisfavored entities (optical companies) seek tocompete. Thus, unlike Tracy, there is no need todetermine which market predominates.

The Ninth Circuit similarly misread Exxon.According to the court below, Exxon creates a broadper se rule that allows States to rely on differences inbusiness structures between the favored and

disfavored entities to show that they are not"similarly situated": "[I]n Exxon, the Courtdistinguished between the entities based on theirbusiness structures, holding that a State mayprevent businesses with certain structures ormethods of operation from participating in a retailmarket without violating the dormant CommerceClause." (App-42). Again, though, a careful reading ofExxon shows that the court below extended that case

beyond its proper bounds. Exxon merely held that arule forbidding vertical integration (there refinersand service station operators) by anyone—whetheran in-state company or an interstate company—doesnot run afoul of the dormant Commerce Clause

merely because the oil refiners were out-of-stateentities. This case, by contrast does not involvevertical integration, but rather bundling (i.e., thecombination of eye examination services and eyeglasssales), so it is not clear that Exxon applies at all. And,even if it did, the statutes here are fundamentallydifferent in that they allow the favored in-stateentities (i.e., ophthalmologists and optometrists) to

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bundle (i.e., offer examination services in addition toglasses), while denying that opportunity to interstatecompetitors. Whatever the correct result here, Exxondoes not supply it. And the suggestion below thatExxon does can only serve to increase confusion in analready difficult area of the law.

5. The Ninth Circuit's decisioncontributes to confusion amongthe lower courts regarding thescope of permissiblediscrimination.

Not only is the decision below difficult to squarewith the Court's precedent, but it also reflects theincreasing confusion among courts as to whencompeting entities are "similarly situated" fordormant Commerce Clause purposes. The decisionalso contributes to confusion regarding theappropriate understanding of the method-of-operation analysis set forth in Exxon, and how thatanalysis intersects with the "similarly situated"framework.

Case law from the First and Eleventh Circuitsreflects an understanding of "similarly situated" thatcannot be reconciled with the decision below. InNational Revenue Corp. v. Violet, 807 F.2d 285 (1stCir. 1986), for example, the First Circuit struck aRhode Island statute that defined debt collection asthe practice of law, finding that the statute was animpermissible attempt to protect local law firms fromcompetition by interstate debt collection agencies. Inlanguage directly applicable here, the court held that"by defining all debt collection as the practice of law,and limiting this practice to members of the Rhode

24

Island bar, Rhode Island effectively bars out-of-staters from offering a commercial service within itsborders and confers the right to provide the service—and to reap the associated economic benefit—upon aclass largely composed of Rhode Island citizens." Id.at 290. Of course, it is beyond dispute that RhodeIsland lawyers (just like the Californiaophthalmologists here) are subject to differenteducational, professional licensing, continuingeducation, and ethical requirements than non-lawyerdebt collection companies. Thus, under the decisionbelow, the Ninth Circuit would have found that noimpermissible discrimination exists, and would noteven have put the State to the burden of justifyingthe statute, let alone struck it as the First Circuitdid.

Similarly, in Cachia v. Islamorada, 542 F.3d 839(11th Cir. 2008), the court struck a local zoningordinance banning chain restaurants from openinglocal franchises. In doing so, the court rejected thedefendant's argument that the ordinance merelyprohibited a certain method of operation. Rather, thecourt properly found that the town's "prohibition ofrestaurants operating under the same name,trademark, menu or style is not evenhanded in effect,and disproportionately targets restaurants operatingin interstate commerce." The same is true of theCalifornia law here. A law preventing opticalcompanies, but not ophthalmologists or opticians,from offering one-stop shopping for prescriptioneyewear is not evenhanded in effect, anddisproportionately targets interstate providers. Thus,under Cachia the California law presumably wouldnot have survived dormant Commerce Clause review,

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unless, of course, the State could make the showingnecessary to uphold discriminatory statutes. &

At least two other Circuits, by contrast havPrltted^r; flaW6d "^ 0f "-^arirSuated"reflected mthe decision below. In Ford Motor Co vlexas Department of Transportation, 264 F3d 493

hem:rtha°t01)'fe ™h "^^ Uph6ld aS~'scheme that made it unlawful to act as an automobilemaW Wfuht°Ut £ HCenSe' Whlle simultaneo^making automobile manufacturers ineligible toCW c\ n61186- £ reSP°nSe t0 F°rd'S Co™erceClause challenge the court concluded manufacturersare not similarly situated" to dealers asmanufacturers make cars. Likewise, mLensCraftersv. Robinson, 403 F.3d 798, 804 (6th Cir. 2005) thecourt, hke the court here, concluded that opticastores are not similarly situated to licensedoptometrists for dormant Commerce Clausepurposes, as optometrists are "healthcare providers "rath" tT"' ^ ** 0n 0pen*mal ^situated' i°mrtltl0n in asses^ng "similarlysituated, reflect a fundamentally differentunderstanding of the dormant Commerce Clause andSStthe Tlarly Sltuated" stand-d> '^National Revenue Corp. and Cachia. The Courtshould accept this case to explore which of theseirreconcilably divergent views is correct

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6. Under the Ninth Circuit's

definition of "similarly situated,"States will have nearly unbridledpower to shield local marketsfrom interstate competition.

The difference between the two approaches is notmerely academic. Under the Ninth Circuit's decisionhere, States have vastly greater power to protectlocal entities by burdening their interstatecompetitors. A state legislature need only create anarrowly-defined category that it is comprisedexclusively, or almost exclusively, of the localcompetitors, and then impose some differentialrequirement on that category of business entities—for example, a licensing requirement, or aneducational requirement. Under the decision below,the State is then free to directly burden the localentities' interstate competitors, secure in theknowledge that any dormant Commerce Clauseattack will founder on the inability to show"discrimination" under the first prong of the dormantCommerce Clause test. Relatedly, given the NinthCircuit's understanding of Exxon, the State can pointto virtually any operational difference, no matter howslight, and even if it is State-created, and refer tothat difference as the basis warranting differentialtreatment. Again, under the decision below, theState's easily constructed artifice would prohibitcourts from requiring States to justify the differentialtreatment.

As the facts here indicate, such concerns are all tooreal. State legislatures can be subject to strongentreaties from local businesses to provide protection

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from the rigors of interstate competition. Indeed, thedistrict court noted substantial evidence that thesestatutes were the direct result of lobbying efforts byin-state ophthalmologists and optometrists to avoidcompetition from interstate optical companies. (App-101-02). Amici cannot comment on whether thatassessment of the legislative history is correct, butamici do urge that the protections afforded by thedormant Commerce Clause should not be subject toeasy manipulation at the hands of State legislatures.

V. CONCLUSION

For the foregoing reasons, the amici urge the Courtto grant certiorari and reverse the decision below.

Respectfully submitted,

November 7, 2012 DOUGLAS R. COLECounsel of Record

Erik J. Clark

Organ Cole + Stock llp

1335 Dublin Road

Suite 104D

Columbus, Ohio 43215(614) 481-0900drcole@ocslawfirm.com

Counsel for Amici CuriaeConstitutional Law Professors