Reeves, Inc v. William Stake

Brief Fact Summary. South Dakota built a state-owned cement plant, which for many years sold to private buyers, but later gave preferences to in-state buyers. The Plaintiff, Reeves Inc., (Plaintiff) a long time buyer sued under the United State Constitution’s (Constitution) Commerce Clause.

Synopsis of Rule of Law. States that are “market participants” in the buying and selling of goods, as opposed to “market regulator”, are not bound by the Constitution’s Commerce Clause and can favor their in-state businesses.

Facts. South Dakota built and operated a cement plant, which sold to both in and out-of-state buyers for 50 years. Later, South Dakota implemented a policy that gave preference to in state buyers. The Plaintiff was a long time out-of-state buyer and sued South Dakota for violated the Constitution’s Commerce Clause.

Issue. May a State give preference to in-state buyers?

Held. Yes, a State acting as a “market participant” may favor their in-state buyers. There is no indication of a constitutional plan to limit the ability of the state itself to operate freely in the market.

Dissent. Justice Lewis Powell (J. Powell) dissents because he thinks this is exactly the type of economic protectionism that the Constitution’s Commerce Clause was intended to prevent.

Discussion. When a state becomes a “market participant”, as is the case here because they are selling cement, their commercial activities are not bound by the Commerce Constitution’s Clause and may favor in-state interests. The Constitution’s Commerce Clause is applicable to State taxes and other regulatory measures that impede interstate commerce.