Hughes v. Alexandria Scrap Corporation

• Citation: 96 S.Ct. 2488,49 L.Ed.2d 220,426 U.S. 794
• Decision Date: 24 June 1976
• Docket Number: No. 74-1607,74-1607
• Parties: Harry R. HUGHES, etc., et al., Appellants, v. ALEXANDRIA SCRAP CORPORATION
• Court: United States Supreme Court

426 U.S. 794

96 S.Ct. 2488

49 L.Ed.2d 220

Harry R. HUGHES, etc., et al., Appellants,

v ALEXANDRIA SCRAP CORPORATION.

No. 74-1607.

Argued Jan. 21, 1976.

Decided June 24, 1976.

Syllabus

As part of a complex plan for ridding the State of abandoned automobiles, a Maryland statute provided that anyone in possession of an inoperable automobile over eight years old ("hulk") could transfer it to a licensed scrap processor, who then could claim a "bounty" from the State for its destruction, without delivery to the processor or subsequent submission to the State of any documentation of title. In 1974 the statute was amended to require a processor to submit title documentation in order to receive a bounty. But the documentation requirements differ as between a processor with a plant in Maryland and an out-of-state processor. The former need only submit an "indemnity agreement" in which an unlicensed hulk supplier certifies his own right to the hulk and agrees to indemnify the processor for any third-party claims arising from its destruction; the non-Maryland processor must submit either a certificate of title, a police certificate vesting title, or a bill of sale from a police auction. Appellee is a Virginia processor participating in the Maryland plan whose supply of bounty-eligible hulks received from Maryland sources declined after enactment of the 1974 amendment. Appellee brought suit claiming that the amendment violated the Commerce Clause and denied appellee equal protection of the laws. A three-judge District Court granted summary judgment for appellee, and enjoined Maryland from giving further effect to the part of the 1974 amendment that restricts the right to obtain bounties based on indemnity agreements to Maryland processors only. Held:

1. The amendment does not constitute an impermissible burden on interstate commerce in violation of the Commerce Clause. Pp. 802-810.

(a) Maryland's amendment of its statute was not the kind of action with which the Commerce Clause is concerned. Maryland has not sought to prohibit the interstate flow of hulks or to regulate the conditions under which the flow may occur, but rather has entered into the market itself by offering bounties to bid up the price of hulks; an impact on interstate commerce has occurred only because the amendment made it more lucrative for unlicensed suppliers to dispose of their hulks in Maryland instead of taking them out of the State. Pp. 804-806.

(b) Nothing in the purposes of the Commerce Clause forbids a State's entry into the market as purchaser of potential articles of interstate commerce where the State restricts its trade to its own citizens. Although the practical effect of the 1974 amendment was to channel the benefits of the bounties to domestic processors, no trade barrier of the type forbidden by the Commerce Clause impedes movement of hulks out of the State. Pp. 807-810.

2. Nor does the 1974 amendment deny appellee equal protection of the laws. The amendment's distinction between domestic and foreign scrap processors, complemented by the reasonable assumptions that hulks delivered to Maryland processors are likely to have been abandoned in Maryland, and those delivered to non-Maryland processors are likely to have been abandoned outside Maryland, bears a rational relationship to the basic statutory purpose of using state funds to clear Maryland's landscape of abandoned automobiles. That is all the Constitution requires in the case of economic legislation. That Maryland might have furthered its underlying purpose more artfully, more directly, or more completely does not warrant a conclusion that the method it chose is unconstitutional. Pp. 810-814.

391 F.Supp. 46, reversed.

Henry R. Lord, Baltimore, Md., for appellants.

Norman P. Ramsey, Baltimore, Md., for appellee.

Mr. Justice POWELL delivered the opinion of the Court.

This case involves a two-pronged constitutional attack on a recent amendment to one part of a complex Maryland plan for ridding that State of abandoned automobiles. The three-judge District Court agreed with appellee, a Virginia scrap processor that participates in the plan, that the amendment violated the Commerce Clause and denied appellee equal protection of the laws. We disagree on both points.

I

The 1967 session of the Maryland Legislature commissioned a study to suggest some way to deal with the growing aesthetic problem of abandoned automobiles. The study concluded that the root of the problem was the existence of bottlenecks in the "scrap cycle," the course that a vehicle follows from abandonment to processing into scrap metal for ultimate re-use by steel mills. At its 1969 session, the legislature responded by enacting a comprehensive statute designed to speed up the scrap cycle by using state money both as a carrot and as a stick.¹ The statute is intricate, but its provisions relevant to this case may be sketched briefly.

The legislative study had found that one of the bottlenecks occurred in the junkyards of wrecking companies, which tended to accumulate vehicles for the resale value of their spare parts. The statute's stick designed to clear this bottleneck is a requirement that a Maryland wrecker desiring to keep abandoned vehicles on its premises must obtain a license and pay a recurring fine for any vehicle of a specified age retained for more than a year.² The study had identified as another cause of sluggishness in the scrap cycle the low profits earned by wreckers and others for delivering vehicles to scrap processors. The carrot written into the statute to remedy this problem is a "bounty" paid by the State for the destruction, by a processor licensed under the statute, of any vehicle formerly titled in Maryland.³ When a wrecker licensed under the statute to stockpile vehicles delivers one of them for scrapping its shares the bounty equally with the processor. The processor receives the entire bounty when it destroys a vehicle supplied by someone other than a licensed wrecker. ⁴

These penalty and bounty provisions work with elementary laws of economics to speed up the scrap cycle. The penalty for retention of vehicles, plus the prospect of sharing the bounty, work in tandem to encourage licensed wreckers to move vehicles to processors. The bounties to processors on vehicles from unlicensed suppliers also encourage those suppliers to deliver to the processors, because the processors are able to pay higher than normal market prices by sharing the bounties with them.⁵ The Penalty and bounty provisions, however, did not remove another impediment to the smooth functioning of the scrap cycle that was legal rather than economic in origin. This was the possibility of suits for conversion against a processor by owners who might claim that they had not abandoned their vehicles. To meet this problem the statute specified several documents with which a processor could prove clear title to a vehicle, and required that a processor obtain one of these documents from its supplier and submit it to the State as a condition of receiving the bounty. One of the documents, called a "Wrecker's Certificate," can be given only by a wrecker licensed under the statute.⁶ It is essentially a clear title that the wrecker secures by following statutory notice procedures at the time it first obtains a vehicle. Suppliers other than licensed wreckers must provide some other document either a properly endorsed certificate of title, a certificate from a police department vesting title in the supplier after statutory notices, or a bill of sale from a police auction. ⁷

These documentation requirements, although vital for the protection of processors, are themselves some slight encumbrance upon the free transfer of abandoned vehicles to processors. Apparently in recognition of this fact, and the reduced potential for owners' claims in the case of ancient automobiles, the statute placed vehicles over eight years old and inoperable ("hulks") into a special category. Section 11-1002.2(f)(5) of the stat- ute, as enacted, provided in substance that anyone in possession of a hulk could transfer it to a scrap processor, and the processor could claim a bounty for its destruction, without delivery to the processor or subsequent submission to the State of any documentation of title.⁸

A

The statute extends its burdens of fines, and its benefits in the form of a share in bounties, only to wreckers that maintain junkyards located in Maryland, and requires a license only of those wreckers. There is no similar residency requirement for scrap processors that wish to obtain a license and participate in the bounty program,⁹ and in fact seven of the 16 scrap processors that have participated are located in either Pennsylvania or Virginia. Appellee, a Virginia corporation with a processing plant near the Potomac River in Alexandria, was an original licensee under the Maryland statute. Presumably because of its proximity to the southern Maryland and Washington, D. C., areas, appellee attracted enough Maryland-titled vehicles to its plant to rank third among licensed processors in receipt of bounties through the summer of 1974.

As is apparently the case with most of the licensed processors, virtually all (96%) of the bounty-eligible vehicles processed by appellee during that period were hulks, upon which appellee did not have to demand title documentation from its suppliers in order later to receive the bounty. In the summer of 1974, however, Maryland changed significantly the treatment of hulks by amending § 11-1002.2(f)(5).¹⁰ Under the law as amended it is no longer possible for a licensed scrap processor to receive a bounty on a hulk without submitting title documentation to the State. But the documentation required of a processor whose plant is in Maryland differs from that required of a processor, like appellee, whose plant is not in Maryland. The former need only submit a simple document in which the person who delivered the hulk...