Can Tennessee add a 'free enterprise' clause to its constitution without violating state or federal law?

Plain-English summary

Speaker Emeritus Naifeh and Representative Curtiss asked the AG whether House Joint Resolution 722 was constitutional. HJR 722 would amend Article I of the Tennessee Constitution to add a new section: "It is the policy of this state that a free enterprise system shall govern trade and commerce in this state to promote the dispersion of economic and political power and the general welfare of all the people."

The resolution's sponsor, Representative Lynn, explained at a House Industrial Impact Subcommittee meeting that the amendment was an affirmation of free enterprise as Tennessee's economic system. She had searched and found only one other state (Utah) with a similar provision in its constitution. Lynn was clear that the amendment was not intended to bar all business regulation. Where a business commits a crime or violates someone's rights, regulation is permissible and necessary.

AG Cooper concluded the amendment is facially constitutional. It does not on its face conflict with any provision of either the Tennessee or the U.S. Constitution. To the contrary, both constitutions already protect rights essential to free enterprise: contract impairment (Tenn. Const. art. I, § 20; U.S. Const. art. I, § 10) and just compensation for takings (Tenn. Const. art. I, § 21; U.S. Const. amend. V). Adding a free-enterprise policy declaration is consistent with that existing structure.

Two questions the opinion expressly does NOT answer:

1. How would the new clause limit the legislature's regulatory authority? That depends entirely on how courts interpret it in later litigation. A businessperson challenging a Tennessee regulation as violating the new clause might try to use it to win cases that today would lose under federal due process or rational-basis review. Whether courts would treat the clause as creating any judicially enforceable rights, and how far they would go, cannot be predicted from the text alone.

2. How would the clause interact with federal law under the Supremacy Clause? A future plaintiff might argue that a Tennessee enforcement action against a federally regulated business violates the new clause. A federal regulator might respond that the federal regulation preempts state law. Those questions are fact-specific and would have to be litigated.

In other words, the AG's answer is that the General Assembly has constitutional authority to put the question to the voters, but the practical legal effect of the amendment will not be settled until courts interpret it in real disputes. Constitutional declarations of policy are common in state constitutions; their practical bite varies widely. Some are treated as judicially enforceable rights with teeth. Others are treated as aspirational statements that do not provide an independent basis to strike down legislation.

The procedural path of the resolution is governed by Article XI, Section 3 of the Tennessee Constitution, which requires a constitutional amendment to pass two consecutive General Assemblies (a majority of all members of each house in the first General Assembly and a two-thirds majority in the second), then be referred to the voters at the next gubernatorial election, and be approved by a majority of those voting in that election that equals or exceeds a majority of the total votes cast for governor. HJR 722 was the first-General-Assembly step.

Currency note

This opinion was issued in 2010. 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.

The Tennessee Constitution has been amended several times since 2010. Anyone working on a current Tennessee constitutional question should look at the actual current text of the Tennessee Constitution, not the 2010 version. Whether HJR 722 was eventually adopted requires checking the General Assembly's records and Tennessee Secretary of State election records.

Common questions

Q: How does Tennessee amend its constitution?
A: Article XI, Section 3 sets out a slow, deliberate process. The General Assembly must propose the amendment by a majority vote of all members of each house. The amendment is then referred to the next General Assembly, which must approve it by a two-thirds vote of all members of each house. Then the amendment is submitted to the voters at the next gubernatorial election. To pass, the amendment must receive a majority of the votes cast on the amendment, AND that majority must equal or exceed a majority of the total votes cast for governor in that election.

Q: What does "free enterprise" mean as a legal concept?
A: It is not a precisely defined legal term. It generally refers to an economic system in which businesses operate in competitive markets with limited government intervention, in which prices are set by supply and demand rather than regulation, and in which property rights are protected. The phrase has both an economic-policy meaning and a constitutional meaning that varies by state. Some states' constitutional free-enterprise clauses have been read to provide judicial protection for individual economic rights; others have been treated as aspirational.

Q: How is Utah's free-enterprise clause structured?
A: The Utah Constitution, Article XII, Section 20, declares: "It is the policy of the state of Utah that a free market system shall govern trade and commerce in this state to promote the dispersion of economic and political power and the general welfare of all the people. Each contract, combination, or conspiracy in restraint of trade or commerce is prohibited." Utah's clause goes further than the Tennessee proposal because it explicitly prohibits anti-competitive contracts (a state-constitutional version of the Sherman Act). The Tennessee proposal in HJR 722 stopped at the policy declaration.

Q: Could a court strike down a Tennessee statute under the new free-enterprise clause?
A: Possibly, depending on how courts interpret it. The AG opinion expressly leaves this open. A court could read the clause to provide independent constitutional protection that overrides specific statutes (for example, a regulation viewed as unduly anti-competitive). Or a court could read it as a hortatory statement that does not displace the General Assembly's policy choices. The text alone does not resolve this.

Q: Does the Supremacy Clause matter here?
A: Yes, in the sense that any state-constitutional clause has to coexist with federal law. If the Tennessee clause were read to bar a state enforcement action against a business engaged in conduct expressly required by federal law, the clause would yield to federal law. But the Supremacy Clause does not invalidate the state-constitutional amendment itself; it just constrains how the amendment can be applied in particular cases.

Q: Why does the AG say "facially constitutional" but not "valid in all applications"?
A: Because constitutional analysis distinguishes between facial challenges (the law cannot constitutionally apply to anyone) and as-applied challenges (the law cannot constitutionally apply to this particular plaintiff). A facial challenge to the amendment would fail because it does not on its face conflict with anything. As-applied challenges (or applications by litigants seeking to use the amendment to invalidate other laws) would be evaluated case by case.

Background and statutory framework

Tennessee constitutional amendment proposals follow a multi-year, multi-stage process under Article XI, Section 3 of the Tennessee Constitution. HJR 722 in the 106th General Assembly was the first step. If passed by majority vote of both houses, it would be referred to the 107th General Assembly, which would need a two-thirds vote in each house. Then the amendment would be referred to the voters at the next gubernatorial election (which would have been November 2014).

The text of the proposed amendment is short:

"It is the policy of this state that a free enterprise system shall govern trade and commerce in this state to promote the dispersion of economic and political power and the general welfare of all the people."

The closest analog the AG could identify is Article XII, Section 20 of the Utah Constitution. The Tennessee proposal mirrors the Utah clause's first sentence almost verbatim but omits Utah's second sentence ("Each contract, combination, or conspiracy in restraint of trade or commerce is prohibited"). The Tennessee proposal is therefore narrower than Utah's, omitting the antitrust-style prohibition.

Both the Tennessee Constitution and the U.S. Constitution already include provisions that anchor a free-enterprise system:

• Contract impairment: Article I, § 20 of the Tennessee Constitution and Article I, § 10 of the U.S. Constitution prohibit laws impairing the obligation of contracts.
• Just compensation: Article I, § 21 of the Tennessee Constitution and the Fifth Amendment to the U.S. Constitution prohibit takings of private property for public use without just compensation.

These existing provisions protect property rights and contract enforcement, the foundational legal pillars of a market economy. The proposed free-enterprise clause adds a general policy declaration on top of these specific protections.

The AG's brief facial-validity analysis turns on the simple observation that nothing in the proposed clause conflicts with any other provision of the Tennessee Constitution or the U.S. Constitution. Constitutions can have policy declarations; the Tennessee Constitution itself contains a number of policy clauses scattered through Article I (the Declaration of Rights). Adding another such clause is structurally unproblematic.

The harder question (what the clause would do in practice) is left for future courts. The opinion does not predict whether courts would treat the clause as judicially enforceable, what standard of review they would apply to challenged regulations, or what kinds of laws would be vulnerable. Those questions are inherent in any new constitutional text.

The Supremacy Clause caveat is also a generic constitutional point. A state-constitutional provision cannot defeat a controlling federal law (Article VI, Clause 2). If a future plaintiff used the new clause to attack a state action that was actually compelled by federal law, the federal law would prevail. But that is true of any state law, not unique to this amendment.

Citations and references

Constitutional provisions:

• Tenn. Const. art. I, § 20 (contract impairment)
• Tenn. Const. art. I, § 21 (just compensation for takings)
• Tenn. Const. art. XI, § 3 (constitutional amendment process)
• U.S. Const. art. I, § 10 (contract impairment)
• U.S. Const. art. VI, cl. 2 (Supremacy Clause)
• U.S. Const. amend. V (just compensation)

Other states:

• Utah Const. art. XII, § 20 (free market clause)

Legislative materials:

• House Joint Resolution 722, 106th General Assembly
• Remarks of Rep. Lynn, House Industrial Impact Subcommittee meeting (March 24, 2010)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2010/op10-042.pdf

Original opinion text

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

April 6, 2010

Opinion No. 10-42

Constitutionality of Constitutional Amendment Endorsing Free Enterprise

QUESTION

House Joint Resolution 722 would amend Article I of the Tennessee Constitution to add the following section:

It is the policy of this state that a free enterprise system shall govern trade and commerce in this state to promote the dispersion of economic and political power and the general welfare of all the people.

Is this amendment consistent with the Tennessee and the United States Constitutions?

OPINION

The amendment on its face would not violate any provision of either of these constitutions. The extent to which this provision, if it becomes part of the Tennessee Constitution, might limit the legislature's authority to regulate business activity would likely be determined by subsequent litigation. Similarly, the extent to which this provision might conflict with the Supremacy Clause of the United States Constitution would depend on the facts and circumstances of the case in which the issue arose and would likely be decided by the courts.

ANALYSIS

This opinion concerns House Joint Resolution 722. The resolution provides:

BE IT RESOLVED BY THE HOUSE OF REPRESENTATIVES OF THE ONE HUNDRED SIXTH GENERAL ASSEMBLY OF THE STATE OF TENNESSEE, THE SENATE CONCURRING, that a majority of all the members of each house concurring, as shown by the yeas and nays entered on their journals, that it is proposed:

That Article I of the Constitution of the State of Tennessee be amended by adding the following as a new, appropriately designated section:

It is the policy of this state that a free enterprise system shall govern trade and commerce in this state to promote the dispersion of economic and political power and the general welfare of all the people.

BE IT FURTHER RESOLVED, that the foregoing be referred to the One Hundred Seventh General Assembly and that this resolution proposing such amendment be published in accordance with Article XI, Section 3 of the Constitution of the State of Tennessee.

BE IT FURTHER RESOLVED, that the Chief Clerk of the House of Representatives is directed to deliver a copy of this resolution to the Secretary of State.

Representative Lynn is sponsoring this resolution in the House. At the House Industrial Impact Subcommittee meeting on March 24, 2010, Rep. Lynn explained the purpose of the resolution as follows:

HJR 722 is a constitutional amendment for Tennessee. We all grew up understanding that free enterprise is the economic system of the land of the United States and I got to thinking about it, and I noticed it's not in our constitution, in fact it's not in any of our documents anywhere. I did a search, and I found one state in the country, Utah, that actually has this provision in their constitution to say that they operate under free enterprise. So what this is is an affirmation, expressing support for free enterprise so that those in the future will know what is important to us. When we had this legislation at a meeting that we had in December, some folks said, Well does this mean there can be no regulation of business? I said no, this is in support of free enterprise. We all know that if a business offends someone, that means they're violating their constitutional rights or they're committing a crime, that is something we can regulate and we need to regulate that because we need to protect and secure the rights of individuals. That's not what this is saying. This is saying that we are proud of our free enterprise system, we know it gives the best opportunity to people to rise from poverty to a life in the middle class or the upper class, we know it's the best opportunity, and that's what this would be doing, adding to our constitution, just adding that affirmation that we support free enterprise.

http://wapp.capitol.tn.gov/apps/BillInfo/Default.aspx?BillNumber=HJR0722 (Remarks of Rep. Lynn, Meeting of House Industrial Impact Subcommittee, March 24, 2010).

The request asks whether this provision, if adopted as a constitutional amendment, would violate any provision of the Tennessee or the United States Constitutions. The amendment would not violate any provision of either of these constitutions. In fact, both the Tennessee and the United States Constitutions guarantee basic rights essential to free enterprise. Both constitutions, for example, prohibit laws impairing contract obligations. Tenn. Const. Art. I, § 20; U.S. Const. Art. I, § 10. Both also provide that private property may not be taken for public use without just compensation. Tenn. Const. Art. I, § 21; U.S. Const. Amend. 5.

The extent to which the provision proposed in House Joint Resolution 722, if it becomes part of the Tennessee Constitution, might limit the legislature's authority to regulate business activity would likely be determined by subsequent litigation. Similarly, the extent to which this provision might conflict with the Supremacy Clause of the United States Constitution would depend on the facts and circumstances of the case in which the issue arose and would likely be decided by the courts.

ROBERT E. COOPER, JR.
Attorney General and Reporter

MICHAEL E. MOORE
Solicitor General

ANN LOUISE VIX
Senior Counsel

Requested by:

Honorable Jimmy Naifeh
Speaker Emeritus
Suite G19A War Memorial Building
Nashville, Tennessee 37243

Honorable Charles Curtiss
State Representative
Suite 34, Legislative Plaza
Nashville, Tennessee 37243