Could North Carolina successfully challenge the federal open-container law in court, on the theory that Congress overstepped its spending power by conditioning federal highway funds on states adopting that specific drunk-driving rule?

Plain-English summary

In 1998, Congress passed the Transportation Equity Act for the 21st Century and added a new section to the federal highway statutes. The new Section 154 said: states must enact and enforce a law that prohibits possession of open alcoholic beverage containers and consumption of alcoholic beverages in the passenger area of vehicles on public highways, or else lose part of their federal highway funding. The penalty was 1.5% of federal highway funds in fiscal years 2001 and 2002, and 3% in fiscal year 2003 and after, transferred from highway construction to drunk-driving enforcement.

The General Assembly conformed North Carolina's existing open container law, N.C. Gen. Stat. § 20-138.7, to the federal requirements effective September 1, 2000. But the legislature was not happy about being told what its drunk-driving laws had to look like. Section 19 of the conforming legislation (Session Law 2000-155) directed the Attorney General to look into a constitutional challenge to the federal mandate, arguing that Congress had overstepped its proper authority by intruding into traditional state police-power territory.

The AG looked carefully and answered no, a challenge would not succeed. The key Supreme Court precedent was South Dakota v. Dole, decided in 1987. In Dole, Congress had conditioned 5% of federal highway funds on states adopting a uniform 21-year-old minimum drinking age. South Dakota, which still allowed 19-year-olds to buy 3.2% beer, sued. The Supreme Court upheld the conditional spending under the federal Spending Clause in Article I, Section 8. Chief Justice Rehnquist's opinion (joined by seven Justices) laid out the framework: Congress can attach conditions to federal funds when (1) the spending serves the general welfare, (2) the condition is clearly stated, (3) the condition is related to the federal interest in the program, and (4) the condition does not violate any independent constitutional bar.

The Dole majority found the 5% penalty for non-conforming drinking-age laws met all four conditions. Drinking-age uniformity serves the general welfare by reducing interstate drunk-driving fatalities. The condition was clearly stated in the statute. The condition was directly related to the highway-funds purpose because uniform drinking ages help with safe interstate travel. And the loss of 5% of federal highway funds was a small enough financial inducement that it did not amount to "compulsion."

The open container scheme had even better Spending Clause credentials than Dole did. The maximum penalty (3% in fiscal year 2003 and after) was lower than Dole's 5%. The redirected funds did not even leave the state, they just moved within the state's federal funds from highway construction to drunk-driving enforcement, so the "coercion" argument was weaker. And drunk-driving prevention has at least as strong a connection to highway safety as drinking-age uniformity does. Even Justice O'Connor, who had dissented in Dole on the ground that drinking-age regulation was reserved to the states by the Twenty-first Amendment, would probably find the open container condition acceptable because it regulates vehicle conduct rather than liquor sales.

The opinion also surveyed post-Dole developments. The Supreme Court had curtailed Congress's commerce power in United States v. Lopez (1995) and United States v. Morrison (2000), and its Fourteenth Amendment Section 5 power in cases like City of Boerne v. Flores. But none of those cases had displaced or modified Dole. Most directly on point, Kansas had sued the federal government over conditional spending under the Personal Responsibility and Work Opportunity Reconciliation Act (TANF/Title IV-D) and lost in the Tenth Circuit, even though Kansas stood to lose over $130 million. The Supreme Court denied certiorari in December 2000. So Dole remained the controlling precedent.

The AG also reported on a multi-state survey: no other state was challenging § 154 or contemplating a challenge. North Carolina would have been pioneering a doomed case. The opinion's conclusion was direct: the open container requirements were a valid exercise of Congress's spending power, and a constitutional challenge would not likely succeed.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The Supreme Court significantly narrowed the spending-power doctrine in NFIB v. Sebelius (2012) by holding that the Medicaid expansion's conditional withholding of all Medicaid funds was unconstitutionally coercive. The "compulsion line" that Dole called more rhetoric than fact is now a real constitutional limit. The open container percentage transfer in 23 U.S.C. § 154 (3% maximum) is well below the NFIB-coercive threshold, so the AG's conclusion that the requirements are constitutional remains correct. But the broader spending-power doctrine has evolved. Anyone analyzing a new conditional-spending federal statute should account for the post-NFIB landscape.

Background and statutory framework

The Spending Clause and conditional federal spending. Article I, Section 8, Clause 1 gives Congress the power to "lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States." From early in U.S. constitutional history, courts have read this to allow Congress to attach conditions to federal spending. South Dakota v. Dole articulated the modern four-part test: general welfare, clear condition, relatedness to federal interest, no independent constitutional bar.

The Dole majority and the dissents. Chief Justice Rehnquist's Dole majority opinion was joined by seven Justices: White, Marshall, Blackmun, Powell, Stevens, and Scalia. The dissents were authored by Justices Brennan and O'Connor on different grounds. Brennan argued that the Twenty-first Amendment reserves complete state control over liquor regulation, making the federal drinking-age condition unconstitutional regardless of the spending power. O'Connor agreed with the Twenty-first Amendment point and also argued that the drinking-age condition was insufficiently related to the highway-funding purpose to satisfy the relatedness prong. Despite the dissents, the seven-Justice majority made Dole a clear precedent.

The open container distinction. Open container laws regulate possession and consumption of alcohol in motor vehicles. This is closer to the core of "highway safety" than drinking-age uniformity is. Even Justice O'Connor's narrower view of the relatedness prong would likely accept this connection. The open container law does not directly regulate liquor sales or possession outside the motor vehicle context, so the Twenty-first Amendment concern that animated the Dole dissents does not apply with the same force.

The 3% maximum and the coercion analysis. The Dole Court accepted a 5% federal highway funds penalty as non-coercive. The open container scheme caps the penalty at 3% in fiscal year 2003 and after (and only 1.5% in the initial years). That is well below Dole's threshold. Additionally, the open container "penalty" is not really a loss of funds; the funds are transferred within the state from highway construction to drunk-driving enforcement. Both purposes are highway-safety related. So the state ends up with the same total funding, just redirected. The financial coercion argument was even weaker than in Dole.

The post-Dole Supreme Court trajectory. Through the 1990s and 2000s, the Supreme Court limited federal power in some ways while leaving Dole intact. Lopez (1995) and Morrison (2000) limited Congress's commerce power by requiring that the regulated activity have a substantial effect on interstate commerce, and that the regulation reach economic activity. Printz v. United States (1997) limited Congress's anti-commandeering doctrine. City of Boerne v. Flores (1997) limited Section 5 of the Fourteenth Amendment. But none of those cases touched conditional spending. Dole remained good law in 2001 and was relied on by lower federal courts in cases like the Kansas TANF litigation.

The Kansas TANF challenge as comparable failed attempt. Kansas sued the federal government over the Personal Responsibility and Work Opportunity Reconciliation Act, arguing that the Act's TANF and Title IV-D conditions exceeded Congress's spending power. Kansas stood to lose over $130 million in TANF funds for non-compliance, which is dramatically larger than the Dole 5% or the open container 3%. The federal district court dismissed the case based on Dole, the Tenth Circuit affirmed, and the Supreme Court denied certiorari in December 2000. The denial of certiorari was a strong signal that the Court was not interested in reconsidering Dole.

The multi-state survey as practical evidence. The AG opinion's report that no other state was challenging or considering a challenge to § 154 was practical evidence that the constitutional path was closed. State AG offices routinely coordinate on questions like this, and the absence of any pending challenge suggested that the conventional legal wisdom across states was that a challenge would not succeed. This is the kind of background that a state legislature considering a costly constitutional challenge needs to know.

Why the General Assembly asked anyway. Even when a constitutional challenge has low odds, state legislatures sometimes want to register political objection to federal preemption-by-conditional-spending. Section 19 of S.L. 2000-155 was that kind of registration. By directing the Attorney General to investigate a possible challenge, the General Assembly signaled to constituents and to Congress that it was complying under protest. The AG's opinion respected that political signal by providing a thorough analytical answer, while ultimately reaching the conclusion that a litigation challenge was unlikely to succeed.

The post-2012 doctrinal update. NFIB v. Sebelius (2012) revisited the spending power in the context of the Affordable Care Act's Medicaid expansion. The Court held that conditioning a state's continued receipt of all Medicaid funds on the state expanding Medicaid coverage to a new population was unconstitutionally coercive. The Medicaid funds at stake were so large that the "choice" to expand was illusory. This established a real coercion limit on conditional spending, contrary to Dole's suggestion that the line between pressure and compulsion was theoretical. But NFIB explicitly retained Dole's framework for cases like the open container scheme where the conditional funds are a smaller percentage of state revenue.

Common questions

Q: Why does the federal government get to tell states what their drunk-driving laws should look like?
A: Through the Spending Clause. Congress can attach conditions to federal money, including federal highway funds. States are not required to accept federal money, but practically every state does because the money is too important. Once accepted, the conditions attach. Congress used this leverage to encourage uniform drinking ages in the 1980s and uniform open container laws starting in 1998.

Q: Could North Carolina just refuse the federal highway money and ignore the open container requirement?
A: Yes, legally. The Dole Court was clear that the choice belongs to the state. But the practical cost is enormous: federal highway funds are a significant portion of state transportation budgets. Most states accept the money and comply with the condition.

Q: What does the open container law actually prohibit?
A: The federal requirement, mirrored in N.C. Gen. Stat. § 20-138.7, prohibits the possession of any open alcoholic beverage container, or the consumption of any alcoholic beverage, in the passenger area of a motor vehicle (including by the driver) on a public highway or its right-of-way. The "passenger area" typically excludes the trunk and locked storage compartments. State law details (definition of "passenger area," penalty levels, exceptions for limos and buses) vary somewhat among states.

Q: Has the constitutional landscape for conditional spending changed since 2001?
A: Yes, somewhat. NFIB v. Sebelius (2012) established a real coercion limit, striking down the Medicaid expansion's "all or nothing" choice as unconstitutionally coercive because the funds at stake were too large. But NFIB explicitly preserved Dole's framework for less coercive conditions. Open container's 3% penalty is well below the NFIB coercion threshold, so the AG's 2001 conclusion remains correct.

Q: Are there other federal highway conditions like this?
A: Yes. The Highway Trust Fund mechanism has been used to push states toward many highway-safety priorities: uniform drinking age (Dole), open container laws (§ 154), repeat offender laws (§ 164), seat belt laws, motorcycle helmet rules (now mostly repealed at the federal level), and others. The 0.08 BAC limit was adopted by every state in the early 2000s under similar conditional-spending pressure.

Q: Does the Twenty-first Amendment protect state liquor laws from federal regulation?
A: It protects them from direct federal preemption that targets liquor sales and possession. Justices Brennan and O'Connor argued in Dole that the Twenty-first Amendment also limits Congress's ability to use the spending power to influence state liquor laws. The Dole majority disagreed. The open container law avoids the Twenty-first Amendment concern by regulating motor vehicle conduct rather than liquor sales.

Q: What happens to states that have not complied with § 154?
A: They lose 3% of their federal highway construction funds, which get transferred to drunk-driving enforcement or alcohol-impaired driving countermeasures within the same state. So the funds stay in the state; they just shift between transportation accounts. All 50 states ultimately conformed their open container laws to § 154.

Citations

Federal Constitution and statutes
- U.S. Const. art. I, § 8, cl. 1 (Spending Clause).
- U.S. Const. amend. XXI (Twenty-first Amendment, returning liquor regulation to the states).
- 23 U.S.C. § 154 (federal open container requirements; transfer of highway funds for non-compliance).
- 23 U.S.C. § 158 (federal minimum drinking age requirement, upheld in Dole).
- 42 U.S.C. § 666 (Uniform Interstate Family Support Act provisions, conditional on TANF funding).
- Section 1405 of the Transportation Equity Act for the 21st Century (1998 enactment of § 154).
- Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), Pub. L. No. 104-193, 110 Stat. 2105 (1996).

North Carolina statutes
- N.C. Gen. Stat. § 20-138.7 (NC open container law, conformed to federal requirements effective September 1, 2000).
- Session Law 2000-155 (NC conforming legislation; Section 19 directed AG to consider constitutional challenge).

Cases
- South Dakota v. Dole, 483 U.S. 203, 107 S. Ct. 2793, 97 L. Ed. 2d 171 (1987) — Supreme Court four-part test for valid conditional federal spending; upheld 5% highway-funds penalty for non-conforming state drinking ages.
- Steward Machine Co. v. Davis, 301 U.S. 548, 57 S. Ct. 883, 81 L. Ed. 1279 (1937) — earlier Supreme Court precedent on the line between federal "pressure" and "compulsion" on states, quoted in Dole.
- United States v. Lopez, 514 U.S. 549, 115 S. Ct. 1624, 131 L. Ed. 2d 626 (1995) — Supreme Court limit on the Commerce Clause; cited by Kansas in TANF challenge.
- United States v. Morrison, 529 U.S. 598, 120 S. Ct. 1740, 146 L. Ed. 2d 658 (2000) — further Commerce Clause limit; also cited by Kansas.
- Kansas v. United States, 24 F. Supp. 2d 1192 (D. Kan. 1998) — federal district court dismissed Kansas's spending-power challenge to TANF/Title IV-D.
- Kansas v. United States, 214 F.3d 1196 (10th Cir. 2000) — Tenth Circuit affirmed, finding Dole controlling.
- Kansas v. United States, No. 00-329, 2000 U.S. Lexis 8135 (U.S. Dec. 4, 2000) — Supreme Court denied certiorari.

Source

• Landing page: https://ncdoj.gov/opinions/congress-power-to-require-states-to-enact-open-container-restrictions/

Original opinion text

Telephone: (919) 716-6900
Fax: (919) 716-6763

January 2, 2001

Honorable President Pro Tempore of the Senate Marc Basnight
Honorable Speaker of the House of Representatives James Black
16 West Jones Street
Raleigh, North Carolina 27601-1096

Re: Advisory Opinion; Congress' Power to Require States to Enact "Open Container" Restrictions; 23 U.S.C. § 154; S.L. 2000-155

Dear Senator Basnight and Speaker Black:

In the 1999 Session of the General Assembly, House Bill 1499 was enacted as Session Law 2000-155 to implement the recommendations of the Governor's DWI Task Force, to provide for a challenge to the transfer of federal funds, and to clarify the effective date for commercial motor vehicle insurance provisions of Session Law 330 of the 1999 General Assembly. Section 19 of this act requested the Attorney General "to initiate litigation to challenge the constitutionality of the federal government's intrusion into the State's authority to enact and enforce its own laws regarding motor vehicles and traffic safety, particularly Section 154 of Title 23 of the United States Code." This request is being interpreted initially as a request for our opinion on the constitutionality of the "open container" requirements in 23 U.S.C § 154, and hence the likelihood of a successful challenge to that provision in court.

In 1998, Congress enacted Section 1405 of the Transportation Equity Act for the 21st Century and amended Title 23 of the United States Code by adding a new Section 154. The new section provides for the transfer of a percentage of a State's allocation of federal highway construction funds to State and local law enforcement agencies for the enforcement of drunk driving laws or to fund alcohol-impaired driving countermeasures if a State has not enacted or is not enforcing a conforming open container law. To avoid the transfer of funds, a State must enact and enforce a law that "prohibits the possession of any open alcoholic beverage container, or the consumption of any alcoholic beverage, in the passenger area of any motor vehicle (including possession or consumption by the driver of the vehicle) located on a public highway, or the right-of-way of a public highway, in the State." 23 U.S.C. § 154(b)(1). Failure to enact or enforce a conforming law would result in a 1.5% transfer of funds in fiscal years 2001 and 2002; for fiscal year 2003 and thereafter the transfer would be 3% of the funds. Effective September 1, 2000, the General Assembly conformed the State's existing open container law, N.C. GEN STAT. § 20-138.7, to the federal requirements.

The open container requirements are an exercise of Congress' power under the Federal Constitution's spending clause. (Art. I, 8, cl 1). Whether this is a valid exercise of the spending power has previously been addressed by the United States Supreme Court under analogous circumstances in South Dakota v. Dole, 483 U.S. 203, 107 S. Ct. 2793, 97 L. Ed. 2d 171 (1987). In Dole, Congress directed the Secretary of Transportation to withhold 5% of otherwise allocated federal highway funds from States in which the purchase or public possession of any alcoholic beverage by a person who is less than 21 years of age is lawful. 23 U.S.C. § 158. The Court's opinion was delivered by Rehnquist, C. J., in which White, Marshall, Blackmun, Powell, Stevens and Scalia, J. J., joined. Justices Brennan and O'Connor filed dissenting opinions.

In its opinion, the Court reaffirmed that incident to its spending power Congress may attach conditions on the receipt of federal funds, and may employ the power to "further broad policy objectives by conditioning receipt of federal money upon compliance by the recipient with federal statutory and administrative directives." Dole, 483 U.S. at 206, 107 S. Ct. at 2796, 97 L. Ed. 2d at 178 (citations omitted). In affirming Congress' spending power to encourage uniformity in States' drinking ages, the Dole Court found that the age provision was designed to serve the general welfare and that the condition imposed was directly related to one of the main purposes for which highway funds are expended — safe interstate travel. 483 U.S. at 208, 107 S. Ct. at 2796-97, 97 L. Ed. 2d at 179. While acknowledging that in some circumstances the financial inducement offered by Congress might be "so coercive as to pass the point at which 'pressure turns into compulsion,'" 483 U.S. at 211, 107 S. Ct. at 2798, 97 L. Ed. 2d at 181 (quoting Steward Machine Co. v. Davis, 301 U.S. 548, 590, 57 S. Ct. 883, 892, 81 L. Ed. 1279, 1293 (1937)), the Court concluded that the 5% South Dakota would lose if she adhered to her chosen minimum drinking age was a "relatively small percentage" of funds otherwise obtainable under federal highway grant programs and that the coercion argument was "more rhetoric than fact." Id.

The dissents authored by Justices O'Connor and Brennan in Dole expressed their views that the regulation of the minimum age of purchasers of liquor falls within those powers reserved to the States by the Twenty-first Amendment. Furthermore, in light of the Twenty-first Amendment's return of control of the liquor trade to the States, Justice O'Connor deemed the establishment of a minimum drinking age of 21 not to be sufficiently related to interstate highway construction to justify so conditioning funds appropriated for that purpose.

Decisions by the United States Supreme Court since Dole have curtailed Congress' exercise of its Article I commerce clause power and its Section 5 powers under the Fourteenth Amendment against the States. These decisions, however, have not displaced Dole and based on Dole it appears highly unlikely that the open container requirements would be struck down as an invalid exercise of Congress' spending power. With respect to coercion, the percentage transferred for failing to enact and enforce a conforming law reaches only a maximum of 3%, compared to the 5% loss in Dole. Furthermore, the States do not lose the funds entirely; they are simply transferred to enhance the States' drunk driving enforcement efforts or other alcohol-impaired driving countermeasures. The open container provision appears to meet the requirement of serving the general welfare and, like the drinking age restriction in Dole, appears to be directly related to interstate highway safety. The measure falls well short of attempting to regulate the sale of liquor in contravention of the Twenty-first amendment and so may not be objectionable even under Justice O'Connor's analysis. Indeed, the distinguishing features of the minimum drinking age enactment at issue in Dole (28 U.S.C. § 158) and the more recent open container enactment (28 U.S.C. § 154), buttress rather than diminish the vitality of the Dole opinion as controlling authority supporting the constitutionality of the open container requirements.

The unlikely prospect of a successful challenge to the provision through litigation seeking reconsideration or a significant narrowing of the Dole opinion is illustrated by another recent and unsuccessful spending clause challenge. The State of Kansas sued the United States challenging new federal requirements imposed on states receiving federal funds for Temporary Assistance to Needy Families ("TANF") and Title IV-D programs by the enactment of the Personal Responsibility and Work Opportunity Reconciliation Act ("PRWORA"), Pub. L. No. 104-193, 110 Stat. 2105 (1996). Kansas brought a spending clause challenge because it stood to lose more than $130 million unless it complied with numerous new federal requirements, including adoption of the Uniform Interstate Family Support Act, 42 U.S.C. § 666.

Relying on Dole the district court dismissed Kansas' suit. Kansas v. United States, 24 F. Supp. 2d 1192 (D. Kan. 1998). The Tenth Circuit affirmed the district court's analysis, finding that the TANF and Title IV-D programs were sufficiently related to the general welfare so that Congress could constitutionally threaten Kansas with the loss of over $100 million in TANF funds for failure to comply with Title IV-D requirements. Kansas v. United States, et al., 214 F. 3d 1196, 1198 (10th Cir. 2000). In addition, the Circuit Court rejected Kansas' coercion argument, even though the loss of federal funds in Dole was "trivial" in comparison to the amount Kansas risked losing under PRWORA. Id. at 1202. Relying on the United States Supreme Court's recent decisions imposing new limits on Congress' commerce power, see United States v. Lopez, 514 U.S. 549, 115 S. Ct. 1624, 131 L. Ed. 2d 626 (1995) and United States v. Morrison, 529 U.S. 598, 120 S. Ct. 1740, 146 L. Ed. 2d 658 (2000), Kansas petitioned the United States Supreme Court for writ of certiorari seeking reconsideration of Dole and adoption of a higher level of scrutiny in spending clause cases. That petition was denied. Kansas v. United States, No. 00-329, 2000 U.S. Lexis 8135 (U.S. Dec. 4, 2000).

You should also know that we have surveyed the other states to determine if any challenge to the open container requirements is pending or contemplated. To our best knowledge, no such challenge is pending or contemplated at this time.

In sum, it is our conclusion that the open container requirements likely constitute a valid exercise of Congress' spending power and that a constitutional challenge to the open container requirements would not likely succeed.

Very truly yours,

Grayson G. Kelley
Senior Deputy Attorney General

Tiare B. Smiley
Special Deputy Attorney General