Did Maine's Informed Growth Act (which limits new big-box retail unless an economic-impact study finds no 'undue adverse impact') violate the dormant Commerce Clause or federal antitrust laws?

Subject

Whether Maine's Informed Growth Act, which conditions land-use permits for large-scale retail development on a finding of no "undue adverse impact" supported by an economic impact study, violates the dormant Commerce Clause or federal antitrust laws.

Currency note

This opinion was issued in 2009. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Plain-English summary

The Joint Standing Committee on State and Local Government was holding a hearing on LD 242, a bill related to the Informed Growth Act. An attorney testified that the existing Act (which had been on the books since 2007) was unconstitutional under the dormant Commerce Clause and federal antitrust laws. The Committee asked AG Janet Mills for a legal view.

The Informed Growth Act, 30-A M.R.S.A. § 4365 et seq., applies to retail establishments of at least 75,000 square feet. It does not prohibit them. It requires the local planning board to issue a land-use permit only if it finds no "undue adverse impact," based on an economic impact study covering effects on existing retail, employment, wages, municipal revenues and capital costs, water and sewer capacity, and other factors listed in § 4367(4).

On dormant Commerce Clause grounds, the AG concluded the Act would survive challenge:

• It does not facially discriminate based on the geographic origin of the retailer.
• It does not have a discriminatory practical effect, because it does not effectively prohibit out-of-state chains. The case where such an ordinance failed (Island Silver & Spice against an Islamorada formula-store ordinance with a 50-foot frontage / 2,000-square-foot floor cap) involved a much more restrictive scheme that effectively blocked national chains entirely.
• The closest analogues that survived dormant Commerce Clause challenge (Loesel upholding a Frankenmuth 65,000-square-foot floor cap; Wal-Mart Stores v. Turlock upholding a discount-superstore restriction) all involved more restrictive measures than the Informed Growth Act, which only conditions permits on study-based findings.
• Under Pike v. Bruce Church, even a non-discriminatory law gets balanced burden-versus-benefit. The challenger has the burden to show interstate burdens "clearly excessive" relative to local benefits, and the AG concluded the Act would survive.
• Carbone (the New York flow-control ordinance struck down by the Supreme Court) was distinguishable: that ordinance directly required goods to flow through a designated processor.

On antitrust grounds, the AG relied on the Parker v. Brown state action immunity doctrine as elaborated in City of Columbia v. Omni Outdoor Advertising, 499 U.S. 365 (1991). Municipal restraints on competition are immune from antitrust liability when authorized by state policy. The First Circuit in Fischelli v. Methuen, 956 F.2d 12 (1st Cir. 1992), applied the same rule to a municipal economic-development decision. Because the Informed Growth Act expressly authorizes municipalities to make permitting decisions that may restrict large-scale retail competition, those decisions fall within state action immunity.

Common questions

Q: What is the dormant Commerce Clause?

A judicial doctrine reading the constitutional grant of commerce power to Congress as also implying a negative restriction on states: states cannot pass laws that discriminate against, or unduly burden, interstate commerce. Strict scrutiny applies if the state law directly discriminates; otherwise the Pike balancing test asks whether burdens are clearly excessive.

Q: What does "undue adverse impact" mean under the Informed Growth Act?

Under § 4366(10), it means the negative effects on the factors listed in § 4367(4) outweigh the positive effects, with at least two specific factors showing net negatives. The factors include effects on existing retail, retail wages and benefits, public subsidies including TIF, and infrastructure capacity.

Q: Does state action immunity protect a municipality from any antitrust suit?

Not unconditionally. The municipality's restraint must be authorized by a state policy that displaces competition. Omni Outdoor held the standard is whether the State has granted the local government authority to take actions of that sort, not whether the State affirmatively contemplated each anti-competitive effect.

Q: What happened to the Informed Growth Act after 2009?

The opinion does not say. The Act has been the subject of subsequent legislative activity in Maine. Anyone evaluating a current question should check the current text of 30-A M.R.S.A. § 4365 et seq. and any subsequent court decisions, AG opinions, or amendments.

Background and statutory framework

The Informed Growth Act, codified at 30-A M.R.S.A. § 4365 et seq., applies to "large-scale retail development" defined as retail business establishments of at least 75,000 square feet. It does not prohibit such development; it conditions the local planning-board permit on a study and a finding of no "undue adverse impact."

The dormant Commerce Clause framework asks whether a state law facially or in practical effect discriminates against out-of-state interests. If yes, strict scrutiny under cases like Carbone. If no, Pike balancing applies and the challenger bears the burden.

State action immunity from antitrust law derives from Parker v. Brown, 317 U.S. 341 (1943), as applied to municipalities by the Omni Outdoor line. Municipal action authorized by a state policy displacing competition is immune even if the local actors had improper motives.

Citations

• 30-A M.R.S.A. §§ 4365 et seq. (Informed Growth Act)
• Pike v. Bruce Church, Inc., 397 U.S. 137 (1970)
• C&A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (1994)
• City of Columbia v. Omni Outdoor Advertising, 499 U.S. 365 (1991)
• Fischelli v. Methuen, 956 F.2d 12 (1st Cir. 1992)
• Loesel v. City of Frankenmuth, 2009 U.S. Dist. Lexis 25956 (E.D. Mich. 2009)
• Wal-Mart Stores, Inc. v. City of Turlock, 483 F. Supp. 2d 987 (E.D. Cal. 2006)
• Island Silver & Spice, Inc. v. Islamorada, 542 F.3d 844 (11th Cir. 2008)

Source

• Landing page: https://www.maine.gov/legis/lawlib/lldl/agops/agops.htm
• Original PDF: https://lldc.mainelegislature.org/Open/AG/Opinions/2009/ag_20090430.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

MAINE STATE LEGISLATURE

    The following document is provided by the
   LAW AND LEGISLATIVE DIGITAL LIBRARY

at the Maine State Law and Legislative Reference Library
http://legislature.maine.gov/lawlib

Reproduced from scanned originals with text recognition applied
(searchable text may contain some errors and/or omissions)
 2009-04
REGIONAL OFFICES:
84 HARLOW ST, 2ND FLOOR
BANGOR, MAINE,04401
TEL: (207) 941-3070
FAX: (207) 941-3075
]ANETT. MILLS
ATTORNEY GENERAL 44 0AK'S"TREET, 4TH FLOOR
PORTLAND, MAINE,04101-3014
TEL: (207) 822-0260
FAX: (207) 822-0259
TDD: (877) 428-8800
STATE OF MAINE
TEL: (207) 626-(?800 OFFICE OF THE ATTORNEY GENERAL 14 ACCESS HJGHWAY,. STE. l
TTY: 1-888-577-6690 CARIBOU, MAINE,04736
6 STATE HOUSE STATION TEL: (207) 496-3792
AUGUSTA, MAINE 04333,0006 FAx, (207) 496-3291

                                                        April 30, 2009


 The Honorable Deborah L. Simpson, Senate Chair
 The Honorable Stephen R. Beaudette, House Chair
 Joint Standing Committee on State and Local Government
 100 State House Station
 Augusta, ME 04333-100

 Dear Senator Simpson, Representative Beaudette, and Members of the Committee:

        By letter dated April 16, 2009, you asked for legal advice in response to testimony
presented by Curtis Webber, Esq., at the public hearing on L.D. 242 suggesting that the Informed
Growth Act violates the dormant Commerce Clause as well as antitrust laws. Specifically,
Mr. Webber takes the position that these violations result from a provision in existing law
requiring the developer of a new big box store to demonstrate that it will not have a negative
impact on existing businesses and jobs.

        For the reasons that follow, we believe that the Informed Growth Act can be defended
against these challenges.

                                     The Informed Growth Act

         The Informed Growth Act (the "Act"), 30-A M.R.S.A. § 4365, et seq., imposes certain
restrictions on large-scale retail development in Maine (i.e., retail business establishments with at
least 75,000 square feet of floor area). The Act does not prohibit such development, but does
provide that the local planning board or other municipal reviewing authority may issue a land use
permit for large-scale retail development only if it determines that there is likely to be no "undue
adverse impact," which is defined as follows:

         "Undue adverse impact" means that, within the comprehensive economic
         impact area, the estimated overall negative effects on the factors listed for
         consideration in section 4367, subsection 4 outweigh the estimated overall
         positive effects on those factors and that the estimated negative effects of
         at least 2 of the factors listed in section 4367, subsection 4, paragraph A
         outweigh the positive effects on those factors.

30-A M.R.S.A. § 4366(10).

The referenced language in§ 4367(4) provides:

    4. Comprehensive economic impact study. The comprehensive economic impact
    study must be completed within 4 months of the filing of the application and must
    be made available to the municipal reviewing authority, the applicant and the
    public. It must estimate the effects of the large-scale retail development as set out
    in this subsection.

    A. The comprehensive economic impact study, using existing studies and data
    and through the collection and analysis of new data, must identify the economic
    effects of the large-scale retail development on existing retail operations; supply
    and demand for retail space; number and location of existing retail establishments
    where there is overlap of goods and services offered; employment, including
    projected net job creation and loss; retail wages and benefits; captured share of
    existing retail sales; sales revenue retained and reinvested in the comprehensive
    economic impact area; municipal revenues generated; municipal capital, service
    and maintenance costs caused by the development's construction and operation,
    including costs of roads and police, fire, rescue and sewer services; the amount of
    public subsidies, including tax increment financing; and public water utility,
    sewage disposal and solid waste disposal capacity.

    B. The comprehensive economic impact study must identify, to the extent that
    there are available for reference, existir'lg studies and data, the general
    environmental effects on those factors enumerated in section 4404, regardless of
    whether the project is a subdivision, and in Title 38, sections 480-D and 484,
    regardless of the acreage of the project site.

                          The Dormant Commerce Clause Issue

    The Commerce Clause expressly grants Congress the power to enact legislation that

affects interstate commerce. The dormant Commerce Clause is a judicially created doctrine
holding that this grant of power implies a restriction prohibiting a state from passing legislation
that improperly burdens or discriminates against interstate commerce.

    In a dormant Commerce Clause challenge, a court first asks whether the law "directly"

burdens interstate commerce or "directly" discriminates against out-of-state interests. A law that
has a discriminatory effect, for Commerce Clause purposes, is one that favors in-state economic
interests while burdening out-of-state interests. A statute may directly discriminate against out-
of-state interests on its face or in practical effect.

    If the law directly burdens or discriminates against interstate commerce, the comis have

applied a strict level of scrutiny. But if the law does not directly burden or discriminate, then the
courts have applied a lower level of scrutiny and asked whether the burdens on interstate
commerce are clearly excessive in relation to the local benefits. This lower level of scrutiny is
known as the Pike balancing test. See Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). The

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person challenging the law has the burden of proving that any burdens on interstate commerce
outweigh the benefits to intrastate commerce.

    The federal comts recently have addressed dormant Conm1erce Clause challenges to state

laws imposing restrictions on the development of large-scale retail operations. In two recent
cases, the laws - which differed from the Maine Act and from each other in various respects --
were upheld. Loesel v. City of Frankenmuth, 2009 U.S. Dist. Lexis 25956 (E.D. Mich. 2009)
(ordinance imposed a floor space limit of 65,000 square feet for ce1iain development); vVal-lvfart
Stores, Inc. v. City of Turlock, 483 F. Supp. 2d 987 (E.D. Cal. 2006) (among other aspects, law
prohibited development of discount superstores that had more than 100,000 square feet of floor
space and that devoted more than 5% of sales floor area to grocery items). In a third case, the
court held that the ordinance at issue violated the dormant Co1runerce Clause. Island Silver &
Spice, Inc. v. lslamorada, Village of Islands, 475 F. Supp. 2d 1281 (S.D. Fla. 2007), ajf'd, 542
F.3d 844 (11 th Cir. 2008) (ordinance effectively prohibited formula stores with more than 50 feet
of frontage or 2,000 square feet of floor area).

   In Loesel v City of Frankenmuth, the trial court held there was no dormant Commerce

Clause violation as to an ordinance that imposed a 65,000 square-foot floor space limit on ce1tain
development. The ~omt reasoned as follows with respect to the threshold issue as to whether the
law's purpose or practical effect was to harm out-of-state interests:

    Even if Defendant's purpose was to discriminate against Wal-Mart and "large
    scale uses," such a purpose cannot be characterized as a purpose to discriminate
    against all interstate retailers. Thus, Plaintiff cam1ot show that the ordinance
   has a discriminatory purpose. Plaintiff also argues that the ordinance has a
    discriminatory effect because it discriminates against out-of-state commerce in
    favor of in-state interests (i.e., Bronner's and the Kroger store) as a result of the
  · 65,000 square foot size cap. However, according to a report, the size cap would
    still allow at least sixteen of fifty-six national retailers to build a typical store on
    Plaintiffs' prope1ty .... Thus, Plaintiff has not canied the burden of showing
   that the law directly burdens interstate commei-ce facially, purposefully, or in
   practical effect.

2009 U.S. Dist. Lexis 25956, at ** 59-60. The comt in Loesel upheld the law under Pike
balancing, as well.

    By comparison, in Island Silver & Spice, one of the cases cited by Mr. Webber, the comt

held that the practical effect of the ordinance (which limited "formula" retail stores to no more
than 50 feet of frontage and 2,000 square feet of floor area) was to:

   ... discriminate between local and national business. Even though on its face the
   statute allows formula retail stores, in actuality, the ordinance eliminates national
   retail chain stores because they cannot operate within the strict size constraints
   imposed by the ordinance.

475 F. Supp. 2d at 1291.
 The other case cited by Mr. Webber involved a New York law (a so-called flow control
ordinance) that required all non-recyclable solid waste generated in a municipality to be
processed at a designated transfer station before leaving the municipality. C&A Carbone, Inc. v.
Town of Clarkstown, New York, 511 U.S. 383 (1994). The Supreme Court held that the flow
control ordinance discriminated against interstate commerce in violation of the dormant
Commerce Clause. We believe that such an ordinance can be readily distinguished from the
Maine Act.

     The Maine Act does not prohibit development of large retail stores, as did the Michigan

ordinance upheld by the court in Loesel, but rather provides that the local planning board or other
municipal reviewing authority may not issue a land use permit for large-scale retail development
unless it determines that there is likely to be no "undue adverse impact" from the project. Based
on the decisions from Michigan and California cited above, in which more restrictive laws were
upheld against dormant Commerce Clause challenges, we believe that the Act can be defended
against a dormant Commerce Clause challenge. Although a person challenging the Act might
seek to rely on the Island Silver & Spice decision, we believe not only that the ordinance at issue
in that case can be distinguished from the Act, but also that the Michigan and California courts
provided the sounder analysis under the dormant Commerce Clause.

                             Application of Antitrust Laws

     Antitrust laws do not apply to actions taken by a municipality if the municipality's

restriction of competition is an authorized implementation of state policy. City of Columbia v.
Omni Outdoor Advertising, Inc., 499 U.S. 365 (1991). State law authorizes a municipal action
for antitrust purposes so long as it provides the municipality with a grant of authority to take
actions of the sort in question. Id.

       In Columbia the plaintiff alleged that the City promulgated bill board zoning

restrictions solely to help one private competitor hurt another. The court held the city immune
from antitrust liability, pointing out that the "very purpose of zoning regulation is to displace
unfettered business freedom in a manner that regularly has the effect of preventing normal acts
of competition." Id. at 373.

      The court also explained that the purpose of this immunity was to prevent antitrust

courts from becoming the reviewer of state and local activity whenever it is alleged that the
governmental body, though possessing the power to engage in the challenged conduct, has
actually exercised its power in a manner not authorized by state law.

      The First Circuit applied the test set forth in Columbia in Fischelli v. Methuen, 956 F.

2d 12 (1992). Plaintiffs wanted to build a mall in Methuen and applied for special tax free
development bonds. The City Council voted not to give the developers bonds allegedly because
one city councilor owned a drug store and the developers were going to include a CVS in the
mall which would hurt his business. The First Circuit said that decisions increasing or restricting
competition are the logical and necessary outcome of the authority to grant industrial revenue
bonds and found the city immune from antitrust liability.

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In sum, municipalities applying the Informed Growth Act would be immune from
antitrust liability to the extent that they take action under the authority of a state law.

   I hope this information is helpful.

                                                 Sincerely,

                                                a~-7~
                                             ?iANET T. MILLS
                                                Attorney General

cc: The Honorable Elizabeth H. Mitchell, President of the Senate
The Honorable Hannah Pingree, Speaker of the House
Curtis Webber, Esq.

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