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Reeves, Inc. v. Stake, 447 U.S. 429, 100 S.Ct. 2271, 65 L.Ed.2d 244

Facts

For over 50 years, South Dakota operated a cement plant that supplied both state residents and out-of-state buyers. In 1978, due to a cement shortage, the South Dakota Cement Commission implemented a policy to prioritize sales to state residents, which severely impacted Reeves, Inc., a Wyoming distributor that had relied on the South Dakota plant for the majority of its cement supply. After the policy was enforced, Reeves was forced to cut its production significantly and subsequently filed a lawsuit challenging the legality of the policy under the Commerce Clause.

For more than 50 years, South Dakota has operated a cement plant that produced cement for both state residents and out-of-state buyers. In 1978, because of a cement shortage, the State Cement Commission announced a policy to confine the sale of cement by the state plant to residents of the State.

Issue

Whether, consistent with the Commerce Clause, the State of South Dakota may confine the sale of the cement it produces solely to its residents during a time of shortage.

The issue in this case is whether, consistent with the Commerce Clause, U. S. Const., Art. I, § 8, cl. 3, the State of South Dakota, in a time of shortage, may confine the sale of the cement it produces solely to its residents.

Rule

The Commerce Clause does not prohibit a State from participating in the market and favoring its own citizens over others, as long as the state acts as a market participant rather than a market regulator.

Nothing in the purposes animating the Commerce Clause prohibits a State, in the absence of congressional action, from participating in the market and exercising the right to favor its own citizens over others.

Analysis

The Court applied the rule by recognizing that South Dakota's actions were those of a market participant, which allowed the state to prioritize its residents in the sale of cement. The Court noted that the Commerce Clause primarily addresses state regulations that impede free trade, and since South Dakota was acting in a proprietary capacity, the restrictions imposed did not constitute a violation of the Commerce Clause. The arguments against the policy were deemed weak and outweighed by the state's interests in serving its citizens.

The arguments for invalidating South Dakota's resident-preference program—that the State, having long exploited the interstate market for cement, should not be permitted to withdraw from it when a shortage arises; that the program responds solely to the nongovernmental objective of protectionism; that hoarding may have undesirable consequences; that the program places South Dakota suppliers of ready-mix concrete at a competitive advantage in the out-of-state market; and that if South Dakota had not acted, free market forces would have generated an appropriate level of supply at free market prices for all buyers in the region—are weak at best.

Conclusion

The Supreme Court affirmed the judgment of the Court of Appeals, concluding that South Dakota's resident-preference program for cement sales did not violate the Commerce Clause.

The judgment of the United States Court of Appeals is affirmed.

Who won?

South Dakota prevailed in the case because the Supreme Court found that the state's policy of prioritizing its residents in cement sales during a shortage was permissible under the Commerce Clause.

The Supreme Court, Mr. Justice Blackmun, held that: (1) fact that during pendency of litigation economic conditions permitted the state to discontinue enforcement of its resident-preference program did not moot the case.

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