and attempt to obtain a variance before challenging the constitutionality of a zoning ordinance. The court reasoned that "[a] local planning board's consideration of an application for a variance in these circumstances would have no bearing on the issues raised by the plaintiffs' claim that the ordinance is unconstitutional." Riggs, 101 N.J. at 525-26. The facts and logic of Riggs are applicable to this case. It would make no more sense to require Old Coach to seek an exemption from the Interstate Act where that act itself is challenged as unconstitutional, than for the plaintiffs in Riggs to have been forced to obtain a variance from a zoning ordinance whose constitutionality was challenged.
The transactions regulated by the Interstate Act are protected by the Commerce Clause of the U.S. Constitution. "All objects of interstate trade merit Commerce Clause protection; none is excluded by definition at the outset." City of Philadelphia v. New Jersey, 437 U.S. 617, 622, 57 L. Ed. 2d 475, 98 S. Ct. 2531 (1978) (holding, inter alia, that waste moved or attempted to be moved between states falls under the Commerce Clause). It is of no moment that the lands regulated by the Interstate Act do not cross state lines. If a New Jersey restriction has an economic impact outside of its borders, "the Commerce Clause is implicated." See Cranberry Hill Corp. v. Shaffer, 629 F. Supp. 628, 631 (N.D.N.Y. 1986) and cases cited. Because the extra burdens imposed on sellers of out-of-state land by the Interstate Act could restrict their access to New Jersey residents, the Interstate Act must satisfy Commerce Clause scrutiny.
Article I, section 8, clause 3 of the U.S. Constitution states that Congress shall have power "to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." From this clause there have developed two Commerce Clause doctrines. The first doctrine enables Congress to regulate an activity so long as that activity would have a substantial economic effect upon interstate commerce, either by an individual act or by cumulative effect. See Wickard v. Filburn, 317 U.S. 111, 87 L. Ed. 122, 63 S. Ct. 82 (1942); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 81 L. Ed. 893, 57 S. Ct. 615 (1937). It is the enabling Commerce Clause which is the constitutional basis for the Federal Act in this case.
The second Commerce Clause doctrine, commonly known as the "dormant" or "negative" Commerce Clause, "limits the power of the States to erect barriers against interstate trade," unless the state legislature regulates a matter of a legitimate local concern. A state's ultimate purpose in enacting legislation "may not be accomplished by discriminating against articles of commerce coming from outside the State unless there is some reason, apart from their origin, to treat them differently." Lewis v. BT Inv. Managers, Inc., 447 U.S. 27, 35-36, 64 L. Ed. 2d 702, 100 S. Ct. 2009 (1980); Philadelphia, 437 U.S. at 626-27.
Since the Federal Act explicitly authorizes states to enact protective legislation "with regard to the sale of land . . . not in conflict with this [act]," 15 U.S.C. § 1708(e), and the Federal Act does not cover intrastate land transactions, 15 U.S.C. § 1702(b)(7)(A), the Intrastate Act is not challenged and is clearly constitutional under both Commerce Clause doctrines as a matter of legitimate local concern to New Jersey residents. Old Coach challenges the Interstate Act as violative of the "dormant" Commerce Clause doctrine, however. The two issues that are dispositive of the Interstate Act's constitutionality are: (1) which Commerce Clause doctrine would provide the basis for its constitutionality; and (2) what standard must be met to uphold its constitutionality under the applicable Commerce Clause doctrine.
The Commission seems to argue that the Interstate Act is supported by both Commerce Clause doctrines. Their reasoning as to the enabling Commerce Clause doctrine can be summarized as follows: (1) The Federal Act regulates interstate land sales; (2) The Federal Act grants authority to the states to enact legislation not in conflict with the Federal Act; and thus (3) "The clear import of the above sections is that Congress contemplated that individual states were free to offer consumers more protection in the area of interstate land sales." (emphasis added) Defendants' Brief at 9. The Commission's argument is incomplete. When a federal statute authorizes state legislatures to draft and enforce legislation not inconsistent with federal legislation, if a state chooses to offer its citizens more protection with respect to intrastate transactions, pursuant to the dormant Commerce Clause. See Cranberry Hill Corp. v. Shaffer, 629 F. Supp. 628, 633 (N.D.N.Y. 1986) ("In the absence of federal preemption, the state may legislate in areas of local concern, such as consumer protection, if the state's legislation does not contravene the Commerce Clause's purpose.").
Thus, the court's analysis must focus on whether the Interstate Act conflicts with the dormant Commerce Clause. The Supreme Court has set forth a two-tiered test for determining the proper standard to be met by a state legislature:
This Court has adopted what amounts to a two-tiered approach to analyzing state economic regulation under the Commerce Clause. When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, we have generally struck down the statute without further inquiry. See, e.g., Philadelphia v. New Jersey, 437 U.S. 617, 57 L. Ed. 2d 475, 98 S. Ct. 2531 (1978); Shafer v. Farmers Grain Co., 268 U.S. 189, 69 L. Ed. 909, 45 S. Ct. 481 (1925); Edgar v. MITE Corp., 457 U.S. 624, 640-643, 73 L. Ed. 2d 269, 102 S. Ct. 2629 (1982) (plurality opinion). When, however, a statute has only indirect effects on interstate commerce and regulates evenhandedly, we have examined whether the State's interest is legitimate and whether the burden on interstate commerce clearly exceeds the local benefits. Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 25 L. Ed. 2d 174, 90 S. Ct. 844 (1970). We have also recognized that there is no clear line separating the category of state regulation that is virtually per se invalid under the Commerce Clause, and the category subject to the Pike v. Bruce Church balancing approach. In either situation the critical consideration is the overall effect of the statute on both local and interstate activity. See Raymond Motor Transportation, Inc. v. Rice, 434 U.S. 429, 440-441, 54 L. Ed. 2d 664, 98 S. Ct. 787 (1978).
Brown-Forman Distillers v. N.Y. Liquor Authority, 476 U.S. 573, 578-79, 90 L. Ed. 2d 552, 106 S. Ct. 2080 (1986).
Old Coach contends that the Interstate Act should be struck down "without further inquiry." The Commission recognizes the two-tiered approach but contends that when there is facial discrimination "at minimum, this discrimination mandates strict scrutiny of a state law, and the state must demonstrate that the statute serves a legitimate local purpose and that this purpose could not be served as well by nondiscriminatory means." Defendants' Brief at 23 (citing Hughes v. Oklahoma, 441 U.S. 322, 337, 60 L. Ed. 2d 250, 99 S. Ct. 1727 (1979)). The Commission argues that the power of New Jersey to protect its citizens against fraud and deception by out-of-state sellers of land justifies the differences between the Interstate and Intrastate Acts.
By the very wording of the two-tiered approach enunciated in Brown-Forman Distillers, the first tier clearly applies to this case. Under the statutory scheme currently employed in New Jersey, there is one set of statutes applicable to dispositions of land outside of New Jersey, and another set of statutes applicable to dispositions inside New Jersey. As the court has noted supra, there are costs imposed upon sellers of out-of-state land that are not imposed upon sellers of in-state land. Thus, "the overall effect of the statute on both local and interstate activity," Brown-Forman Distillers, supra, is discriminatory.
In holding that the Interstate Act unconstitutionally discriminates against sellers of out-of-state land, this court need not reach the conclusion that the intent of the New Jersey legislature was discriminatory. It is enough that the effect of the Intrastate/Interstate dichotomy is discriminatory. In Hunt v. Washington Apple Commission, 432 U.S. 333, 53 L. Ed. 2d 383, 97 S. Ct. 2434 (1977), the Supreme Court struck down a North Carolina statute requiring that all closed containers of apples sold in, offered for sale, or shipped into North Carolina display only the applicable U.S. grade or standard, or a designation that the apples are not graded. The statute prevented producers of Washington State apples from obtaining the benefit of indicating to North Carolina consumers that their apples were of superior Washington state quality, and imposed upon them the cost of removing the Washington grades from their containers. The Court avoided the debate over the statute's intent by focusing on the effect of the statute:
We need not ascribe an economic protection motive to the North Carolina Legislature to resolve this case; we conclude that the challenged statute cannot stand insofar as it prohibits the display of Washington State grades even if enacted for the declared purpose of protecting consumers from deception and fraud in the marketplace.
When discrimination against commerce of the type we have found is demonstrated, the burden falls on the State to justify it both in terms of the local benefits flowing from the statute and the unavailability of nondiscriminatory alternatives adequate to preserve the local interests at stake. (citations omitted) North Carolina has failed to sustain that burden on both scores. . . .