This case grew out of an Act of the legislature of the State of Ohio to amend the state’s dealer licensing laws. In the spring of 1996, the Ohio Bureau of Motor Vehicles (“OBMV”) told dealers of reman-ufactured vehicles they had to comply with certain requirements for licensing by March 31, 1996, failing which their dealer licenses would not be renewed upon their expiration that day. The OBMV backtracked later that year when state Senate Bill 182 amended and expanded the relevant laws, effective December 3, 1996. In pertinent part, the amended statute reads as follows:
Section 4617.02(E) No remanufacturer shall engage in the business of selling at retail any new motor vehicle without having written authority from the manufacturer or distributor of the vehicle to sell new motor vehicles and to perform repairs under the terms of the manufacturer’s or distributor’s new motor vehicle warranty, unless, at the time of the sale of the vehicle, each customer is furnished with a binding agreement ensuring that the customer has the right to have the vehicle serviced or repaired by a new motor vehicle dealer who is franchised to sell and service vehicles of the same line-make as the chassis of the remanufactured vehicle purchased by the customer and whose service or repair facility is located within either twenty miles of the remanufacturer’s location and place of business or twenty miles of the customer’s residence or place of business. If there is no such new motor vehicle dealer located within twenty miles of the remanufacturer’s location and place of business or the customer’s residence or place of .business, the binding agreement furnished to the customer may be with the new motor vehicle dealer who is franchised to sell and service vehicles of the same line-make as the chassis of the remanufac-tured vehicle purchased by the customer and whose service or repair facility is located nearest to the remanufacturer’s location and place of business or the customer’s residence or place of business. Additionally, at the time of sale of any vehicle, each customer of the reman-ufacturer shall be furnished with a warranty issued by the remanufacturer for a term of at least one year....
Section 4517.12(A) The registrar of motor vehicles shall deny the application of any person for a license as a motor vehicle dealer, motor vehicle leasing dealer, manufactured home broker, or motor vehicle auction owner and refuse to issue the license if the registrar finds that the applicant:
.... (4) Is engaged or will engage in the business of selling at retail any new motor vehicles without having written authority from the manufacturer or distributor thereof to sell new motor vehicles and to perform repairs under the terms of the manufacturer’s or distributor’s new motor vehicle warranty, except as provided in division (C) of this section and except that a person who assembles or installs special equipment or accessories for handicapped persons, as defined in section 4503.44 of the Revised Code, upon a motor vehicle chassis supplied by a manufacturer or distributor shall not be denied a license pursuant to division (A)(4) of this section....
Section 4517.12(C) Notwithstanding division (A)(4) of this section, the registrar shall not deny the application of any person and refuse to issue a license if the registrar finds that the applicant is engaged or will engage in the business of selling at retail any new motor vehicles and demonstrates all of the following in the form prescribed by the registrar:
(1) That the applicant has posted a bond, surety, or certificate of deposit with the registrar in an amount not less than one hundred thousand dollars for the protection and benefit of the applicant’s customers except that a new mo*435 tor vehicle dealer who is not exclusively-engaged in the business of selling re-manufactured vehicles shall not be required to post the bond, surety, or certificate of deposit otherwise required by division (C)(1) of this section;
(2) That, at the time of the sale of the vehicle, each customer of the applicant will be furnished with a binding agreement ensuring that the customer has the right to have the vehicle serviced or repaired by a new motor vehicle dealer who is licensed to sell and service vehicles of the same line-make as the chassis of the remanufactured vehicle purchased by the customer and whose service or repair facility is located within either twenty miles of the applicant’s location and place of business or twenty miles of the customer’s residence or place of business. If there is no such new motor vehicle dealer located within twenty miles of the applicant’s location and place of business or the customer’s residence or place of business, the binding agreement furnished to the customer may be with the new motor vehicle dealer who is franchised to sell and service vehicles of the same line-make as the chassis of the remanufactured vehicle purchased by the customer and whose service or repair facility is located nearest to the remanufacturer’s location and place of business or the customer’s residence or place of business.
(3) That, at the time of the sale of the vehicle, each customer of the applicant will be furnished with a warranty issued by the remanufacturer for a term of at least one year;
(4) That the applicant provides and maintains at the applicant’s location and place of business a permanent facility with all of the following:
(a) A showroom with space, under roof, for the display of at least one new motor vehicle;
(b) A service and parts facility for re-manufactured vehicles;
(c)Full-time service and parts personnel with the proper training and technical expertise to service the remanufac-tured vehicles sold by the applicant.
Ohio Rev.Code Ann. §§ 4517.02(E), 4517.12(A), and 4517.12(C) (Banks-Baldwin 1997).
The McNeilus Truck and Manufacturing Company and related entities (“McNeilus”) challenge the constitutionality of these provisions on their face and as applied to McNeilus. The company filed its initial complaint in the United States District Court for the Southern District of Ohio on November 4, 1996, alleging that Ohio’s requirements for licensing of vehicle reman-ufacturers are unconstitutional. McNei-lus, which is in the business of buying truck chassis from various manufacturers, installing concrete transit mixers or refuse packer bodies on them, and reselling the complete units directly to customers, claims that the statutory provisions effectively prohibit the company from engaging in the sale of these remanufactured trucks in Ohio, and subject it to possible criminal prosecution there.
This court affirmed the district court’s denial of McNeilus’s prior motion for a preliminary injunction in a February 28, 1998 order. See McNeilus Truck and Mfg., Inc. v. State of Ohio,
I
When OBMV sent notice to dealers of remanufactured vehicles that they had to comply with the law at issue here, McNei-lus sought interpretive guidance. OBMV interpreted the statute to require McNei-lus to enter into “binding agreements” with franchised dealers, for each brand of chassis sold by McNeilus, located within 20 miles of McNeilus’s Gahanna, Ohio branch office (or, somewhat unpractically, with such dealers within 20 miles of every one of its customers) to remain licensed. In an effort to comply, McNeilus contacted chassis dealers throughout Ohio seeking the mandated “binding agreements” to service truck chassis on the vehicles it sold, but the vast majority of dealers — including all of those within 20 miles of the Gahanna office — refused. One even returned McNeilus’s certified letter requesting a binding agreement with the inscription “Go to Hell.”
McNeilus nonetheless purports to be in compliance. McNeilus’s remanufactured vehicle customers receive a warranty for the chassis from the truck chassis manufacturer, a warranty for the add-on component from McNeilus, and, frequently, an additional warranty for the engine from its manufacturer. McNeilus is not authorized to service the chassis, and doing so could void the warranty. Hence, McNeilus’s customers must obtain chassis service as needed from Ohio chassis dealers, whose franchise agreements with the chassis manufacturers require them to provide such service, and which Ohio law already mandates. See Ohio Rev.Code § 1345.72. McNeilus asserts that the warranties it gives customers create service obligations that combine with the contracts between chassis - manufacturers and dealers, also creating service obligations, and state laws requiring franchisees to service any chassis of the kind they sell, to constitute “binding agreements” that satisfy the statute.
OBMV appears to interpret the statute to require binding agreements between McNeilus and chassis dealers, though it hedges before this court on whether it would enforce the statute in such a manner and notes that it has renewed McNeilus’s license throughout the course of this litigation. McNeilus complains that OBMV’s interpretation allows Ohio chassis dealers (with whom it competes for business by importing chassis from out of state) to boycott McNeilus and prevent it from doing business in Ohio. In contrast, in-state truck remanufacturers generally buy their chassis from dealers in the state and are thus able to secure the necessary binding agreements. The state responds that the statute does not discriminate against out-of-state companies so much as against companies (of which McNeilus is apparently the sole example) with McNeilus’s particular business model, and argues that the statute merely ensures that Ohio consumers will not end up with vehicles that cannot be serviced conveniently in the state. McNeilus replies that its customers can already have their vehicles serviced conveniently, and suggests that the redundant statutory scheme was passed with an impermissible protectionist intent to disadvantage out-of-state remanufacturers or force them (or their customers) to purchase chassis made in Ohio. Either way, McNeilus alleges that this anti-competitive state of affairs violates the Constitution and federal antitrust law.
McNeilus asserts that the disputed provisions of the statute violate the Constitution in a number of ways. First, McNeilus argues that the statute violates procedural due process under the Fourteenth Amendment, because the OBMV failed to comply with state-mandated rulemaking procedures in crafting its interpretation of the statute. Second, McNeilus argues that the, statute is void for vagueness, for providing inadequate notice of its requirements, and
Because we agree that Ohio Rev.Code §§ 4517.02(E), 4517.12(A)(4), and 4517.12(C) discriminatorily affect interstate commerce in violation of the dormant Commerce Clause, we will reverse the judgment below on those grounds and remand the case to the district court with instructions to grant a permanent injunction against the offending portions of the statute.
II
The case below was decided in part on summary judgment and in part after a trial. For that part of the case decided on summary judgment, this court reviews the judgment de novo, but it reviews the district court’s findings of fact at trial for clear error. See Grand Traverse Band of Ottawa and Chippewa Indians v. Director, Mich. Dep’t of Natural Resources,
Ill
Before we analyze the substance of McNeilus’s claims, a few preliminary procedural issues must be addressed. Specifically, we must decide whether the district court erred in dismissing Ohio’s Attorney General and certain county prosecutors from the case pursuant to the Ex parte Young doctrine. We believe it did. An action seeking to enjoin enforcement of an allegedly unconstitutional statute through a suit against state officials charged with its enforcement is not barred by the Eleventh Amendment. See Ex parte Young,
The prosecutors in counties where McNeilus has never sold a vehicle seek to have their dismissal upheld, be
A second preliminary question we must decide is whether the district court erred in refusing to consider McNeilus’s state law claims, holding that they were barred from adjudication in federal court by the Eleventh Amendment. McNeilus complains that the OBMV did not, as it must, “execute authority reasonably and in a manner consistent with the objectives and standards that governing statutes impose.” State ex rel. Hoover Co. v. Mihm,
IV
We now turn to the merits of McNeilus’s constitutional arguments, the first of which is that Ohio’s statute violates constitutional due process, because the OBMV failed to follow proper rulemaking procedures in issuing its interpretation of binding agreements under the statute. OBMV concedes that it issued interpretive rules without engaging in state-mandated rulemaking procedures; however, McNeilus cannot resurrect its state law claims, for which pendent jurisdiction is barred by the rule of Pennhurst, merely by casting its argument in constitutional terms. When the OBMV informed McNeilus that it would be denying its application for renewal of license, it did so on the grounds that McNeilus was not in compliance with a rule interpretation that the OBMV had not issued through proper rulemaking procedures. McNeilus asserts that it violates the Fourteenth Amendment for a state not to follow its own rulemaking procedures. However, whether state officers have violated state law in failing to follow administrative procedures is a state law question in the first instance, and this court still lacks supplemental jurisdiction to consider the claim. Cf. Levine v. Torvik,
McNeilus also argues that the statute is void for vagueness, lack of notice, and for enabling official arbitrariness. We disagree. The challenged statute is very specific in its requirements and puts those affected on adequate notice. Indeed, the OBMV contacted McNeilus to inform it of the requirements it would have to fulfill. Nor does the record evince any arbitrary enforcement aside from the differential impact on out-of-state interests already covered by other claims. McNeilus contends that Ohio’s statute further violates the Due Process Clause by interfering with the company’s right to pursue a lawful business, because the license does not protect customers or any public interest not already otherwise adequately protected. McNeilus neither explains how such interference violates due process, nor distinguishes this regulation from the kind upheld in the Slaughter-House Cases,
What McNeilus calls a due process argument looks like a complaint that Ohio runs afoul of the Privileges and Immunities Clause by denying an out-of-state company the right to run a business that is lawful for an in-state company to run. See U.S. Const, art. IV, § % cl. 1; See also Toomer v. Witsell,
V
Next, McNeilus argues that Ohio’s statute violates the Equal Protection Clause by curtailing, without a legitimate purpose, the company’s ability to operate in the state. In holding otherwise, according to McNeilus, the district court unjustifiably assumed a proper public purpose for the license requirements in pro-
We then ask whether the stated purposes are legitimate public purposes; we do not assume it. This explains why McNeilus’s reliance on Metropolitan Life Insurance Co. v. Ward,
VI
McNeilus next suggests that the statute violates the Sherman Antitrust Act in a variety of ways, and claims that Act preempts the state statute’s “binding agreement” requirement. McNeilus correctly states the precondition for a state statute to violate federal antitrust law:
[A] state statute, when considered in the abstract, may be condemned under the antitrust laws only if it mandates or authorizes conduct that necessarily constitutes a violation of the antitrust laws in all cases, or if it places irresistible pressure on a private party to violate the antitrust laws in order to comply with the statute.
Rice v. Norman Williams Co.,
First, McNeilus suggests that the antitrust laws bar any statute that allows one competitor veto power over another, citing United States v. Topco Associates, Inc.,
McNeilus next contends that the statute offends the Act by authorizing a boycott against McNeilus by in-state dealers. Group boycotts by traders against other traders are per se illegal under the Sherman Antitrust Act. See Com-Tel, Inc. v. DuKane Corp.,
Similarly, McNeilus’s arguments about “state action” immunity are misplaced. McNeilus argues that a state law cannot be the basis for antitrust immunity. See Northern Secs. Co. v. United States,
McNeilus’s arguments might have merit if brought against the Ohio dealers, but they make no sense at all in a suit against the State of Ohio. As the district court held, Ohio’s statute does not “mandate conduct that necessarily constitutes a violation of the Sherman Act in all cases, and there is no pressure on any party to violate the Sherman Act in order to comply with [the] statutes.” In short, Ohio’s statute may well have anticompetitive effects. It no doubt facilitates either coordinated action, if such there be, or else uncoordinated (though perhaps conscious) parallel action by dealers in refusing to enter binding agreements, but the statute neither authorizes nor requires that dealers engage in behavior proscribed by the federal antitrust laws. Thus, it is the behavior of the dealers or the dealer association, and not of the state, that McNeilus must attack if it is to proceed under the antitrust laws.
VII
Finally, McNeilus asserts that Ohio’s statute is void because it impermis-sibly regulates interstate commerce. Without ever quite saying so, McNeilus invokes the dormant Commerce Clause in challenging the statute’s constitutionality. “This ‘negative’ aspect of the Commerce Clause prohibits economic protectionism— that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.” Wyoming v. Oklahoma,
When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor instate economic interests over out-of-state interests, [the Supreme Court has] generally struck down the statute without further inquiry. See, e.g., Philadelphia v. New Jersey,437 U.S. 617 ,98 S.Ct. 2531 ,57 L.Ed.2d 475 (1978); Shafer v. Farmers['] Grain Co.,268 U.S. 189 ,45 S.Ct. 481 ,69 L.Ed. 909 (1925); Edgar v. MITE Corp.,457 U.S. 624 , 640-43,102 S.Ct. 2629 ,73 L.Ed.2d 269 (1982) (plurality opinion). When, however, a statute has only indirect effects on interstate commerce and regulates evenhandedly, [the Supreme Court has] 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 , 142,90 S.Ct. 844 ,25 L.Ed.2d 174 (1970). 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 , 440-41,98 S.Ct. 787 ,54 L.Ed.2d 664 (1978).
Ferndale Labs., Inc. v. Cavendish,
A
We must first ask whether Ohio’s statute is a protectionist measure. If Ohio’s statute directly discriminates against interstate commerce in favor of Ohio business, it is “per se invalid, save in a narrow class of cases in which the [state] can demonstrate, under rigorous scrutiny, that it has no other means to advance a legitimate local interest.” C & A Carbone, Inc. v. Town of Clarkstown,
On its face, Ohio’s statute is neutral in application. Whether a remanufacturer is located within the state of Ohio or outside of it, it must comply with the statute’s requirements to obtain a license. Looked at more closely, however, the statute has a discriminatory effect. As McNeilus urges, the binding agreements that the statute requires it to obtain from local dealers are much harder for an out-of-state remanu-facturer to obtain. As the statute’s drafters surely recognized, in-state truck chassis dealers stand to gain nothing from signing binding agreements with companies like McNeilus, because such companies do not buy their chassis from Ohio dealers. In contrast, in-state remanufac-turers who do buy their chassis from those dealers will have no problem satisfying the license requirements. In-state remanufac-turers might want to purchase chassis that are manufactured outside the state, but there is little likelihood that they will want to acquire chassis from out-of-state dealers. McNeilus, on the other hand, must either start purchasing chassis from instate dealers, or else stop doing business in Ohio. Either way, the in-state dealers and remanufacturers benefit under the statute to the exclusion of out-of-state re-manufacturers and to the detriment of interstate commerce.
The statute at issue here definitely threatens to slow the flow of out-of-state remanufactured vehicles into Ohio, an effect that distinguishes the statute from others that have been upheld under dormant-Commerce-Clause analysis. See, e.g., Exxon Corp. v. Governor of Maryland,
Statutes can be negated under the dormant Commerce Clause even where their effect is produced indirectly; however, the denial of a license in this case directly burdens the interstate market. Cf. Buck v. Kuykendall,
There is also evidence that Ohio’s statute was passed with a discriminatory purpose, which could also invalidate the law. See, e.g., Pete’s Brewing Co. v. Whitehead,
B
Because Ohio’s statute is protectionist, we must next ask whether the- law falls within that narrow group of such laws that the state might show to be justified by factors unrelated to protectionism. “When discrimination against commerce ... 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.” Hunt,
Given the presence of reasonable nondiscriminatory alternatives adequate to serve the legitimate local interests at issue here, the statute is indefensible. There is not, for instance, a unique and overriding environmental benefit from the law that could justify its protectionist effects. See Maine v. Taylor, 477 U.S. 131, 141,
C
Even were Ohio’s statute not so obviously discriminatory as to subject it to strict scrutiny review under the dormant Commerce Clause, the lack of any significant local benefit that does not already exist means that the State of Ohio could not demonstrate that the benefits of the statute outweigh even an incidental burden on interstate commerce posed by the state’s licensing requirements. Thus, even were we to conclude that this statute only has an incidental effect on interstate commerce, we would still find that the burden it imposes is “clearly excessive in relation to the putative local benefits.” Pike,
VIII
Although most(pf McNeilus’s claims do not provide a basis for overturning the ruling below, Ohio’s statute discriminatorily affects interstate commerce and is thus a per se violation of the dormant Commerce Clause. Therefore, McNeilus’s motion for a permanent injunction should be GRANTED against the portion of the statute that offends the dormant Commerce Clause. The district court’s judgment is AFFIRMED in part, REVERSED in part, and the case is REMANDED for the entry of a permanent injunction and any further proceedings necessary under this opinion.
Notes
. This suit provides a concrete example of why the rule of Pennhurst is flawed. Here there is a matter arising from a "common nucleus of operative facts” that could be adjudicated with little difficulty in this forum on state law grounds. Prior to Pennhurst, similar cases were decided in such a way. See Bank of United States v. Planters’ Bank,