By Diane Kindermann and Kristen Kortick
United States v. California, 2020 U.S. Dist. LEXIS 43422 (CA E.D. Ct., March 12, 2020)
In October 2019, the United States government sought declaratory and injunctive relief against California, Quebec and WCI, Inc. for violations of the Treaty Clause, Compact Clause, and Foreign Commerce Clause of the U.S. Constitution resulting from the partnership between each entity to trade Cap-and-Trade credits between each entity. Plaintiff and defendants filed cross summary judgment motions for the Treaty and Compact Clause claims.
Treaty Clause Claim:
The United States’ claim involving violations of the Treaty Clause related to the agreement between California and Quebec, specifically arguing California entered into a treaty, which would violate the Treaty Clause of the U.S. Constitution. The Treaty Clause states, “no state shall enter into any Treaty, Alliance, or Confederation.” (U.S. Constitution, Article 1, §10, cl. 1.) The Court noted, the Constitution does not define the word “treaty” nor are there records from the Constitutional Convention defining “treaty,” but that past case law held that not all agreements are treaties “violative of the Constitution.” The United States argued that the “emissions treaty” violated the Treaty Clause because it is binding two government jurisdictions to commercial activity.” Defendants responded that the agreement between the parties did not constitute a treaty and merely expressed the parties’ good faith agreement to follow similar communications and collaborative protocols between their two separate programs. Defendants further contended that the agreement did not preclude each actor from making changes to their regulatory structures or withdrawing altogether.
The Court held that because there is no firm case law or statutory authority specifying whether or not the agreement between the parties is in fact a treaty, the Court would grant summary judgment for Defendants on the Treaty Clause claim. The Court noted that it was clear that California and Quebec made their own protocols for their Cap-and-Trade programs and agreed in good faith to make their programs complimentary to one another. But it reasoned that although the parties benefitted from the agreement, it was not a “general commercial” privilege prohibited by the Treaty Clause. Thus, the Court found that the United States failed to meet its burden proving there was an issue of material fact over whether or not the Treaty Clause was violated by Defendants and granted summary judgement for Defendants on this claim.
The Compact Clause:
The United States argued that the parties violated the Compact Clause, because as stated in the Constitution, “no State shall, without the Consent of Congress enter into any Agreement or Compact with another State, or with a foreign Power.” (U.S. Constitution, Art. 1, § 10.) The Supreme Court limited the application of the Compact Clause to agreements that encroach on federal sovereignty. The Court found that the agreement does not conflict with federal sovereignty, because it does not conflict with any existing statutes or regulations. It further held that there is no regional limitation for Defendants to engage other federal programs. Lastly, the Court reasoned that because California retains the power to modify or withdraw from the agreement, the parties were insufficiently bound by an agreement that conflicts with the Compact Clause of the U.S. Constitution. Thus, in light of the flexibility of the Agreement and California’s ability to modify it to comport with federal regulations and statutes, there was no conflict with the Compact Clause, the Court granted summary judgment to Defendants on the Compact Clause claim.
The Court granted summary judgment to Defendants on the first and second causes of action of the United States’ complaint and will move forward with the remainder of the causes of action: violations of the Foreign Commerce Clause and the Foreign Affairs Doctrine.
Diane Kindermann is a shareholder at Abbott and Kindermann, Inc. Kristen Kortick is a Law Clerk at Abbott & Kindermann, Inc. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.