OPINION
Thе Tennessee Scrap Reeyclers Association and its co-plaintiffs, two scrap metal dealers in Memphis, Tennessee (collectively “the scrap dealers”), appeal the district court’s denial of their motion for a preliminary injunction to enjoin enforcement of a Memphis ordinance requiring scrap metal dealers to “tag and hold” the scrap metal they acquire for a period of ten days. The scrap dealers also appeal the district court’s denial of their motion for partial summary judgment on the constitutionality of the law.
The scrap dealers argue that the “tag and hold” ordinance is unconstitutional in four ways: first, they argue that it violates the dormant commerce clause, either as a direct regulation of interstate commerce or an undue burden upon it; second, they argue that it takes property without just compensation; third, they argue that it takes property without procedural due process; and fourth, they argue that it violates federal law by restricting the use of legal tender and infringing upon the federal power to coin money.
Because we find that none of the scrap dealers’ arguments is likely to succeed on the merits, and that they have not shown they are entitled to partial summary judgment, we AFFIRM.
I.
Scrap metal recycling is big business in Tennessee. Tennessee scrap metal dealers annually ship 120 million pounds of scrap metal, 95% of which is eventually sold out of state. The value of this metal exceeds $1.7 billion. Plaintiff Metal Management Memphis alone annually ships 38 million pounds of scrap metal; plaintiff H. Iskiwitz & Co. annually ships 8.3 million pounds.
The scrap metal industry is composed of dealers of various sizes, and it operates in a pyramid structure, with small dealers purchasing scrap metal and reselling it to larger dealers up the chain of distribution, where the scrap metal is eventually baled and shipped to be “processed” (i.e. melted down). To resell scrap metal, individual dealers first sort the different metals in their inventory into piles, then they bundle the individual piles together for resale in unprocessed form. To reduce their risk from volatile metal prices, scrap metal dealers prefer to bundle and resell purchased scrap as quickly as possible.
A regrettable corollary of the scrap metal market is metal theft. Much like pawn shops, used jewelry stores, and other purchasers in secondary markets, scrap metal dealers can serve as fences for individuals seeking to sell stolen goods. As a result, many cities and states regulate scrap metal dealers to deter metal theft and aid law enforcement in prosecuting metal theft. Both the City of Memphis and the State of Tennessee have scrap dealer laws. The Tennessee law has been on the books since 1968; however, it was substantially revised in 2008 and the provisions that were the
Local scrap dealers strongly objected to the ordinance, particularly the ten-day “tag and hold” provisions, which the dealers claimed would put them out of business. The dealers argued they would have to acquire more land or reduce inventory to comply with “tag and hold,” and that the holding period would impair their ability to buy and sell scrap metal, increase their business risk, and impair their access to credit.
When Memphis made it clear that it intended to enforce “tag and hold,” the Tennessee Scrap Dealers Association, Metal Management Memphis, and H. Iskiwitz & Co. filed suit to enjoin enforcement. The district court denied the scrap dealers’ motion for a preliminary injunction, holding that while the scrap dealers had shown a likelihood of irreparable harm, they had not shown a sufficient likelihood of success on the merits on any of their claims. The district court denied the scrap dealers’ motion for partial summary judgment “for the same reasons.” The scrap dealers now appeal.
II.
A preliminary injunction is an extraordinary remedy designed to preserve the relative positions of the parties until a trial on the merits can be held. Whether to grant a preliminary injunction is a matter within the discretion of the district court and is thus reviewed for abuse of discretion.
Certified Restoration Dry Cleaning Network, L.L. C. v. Tenke Corp.,
Whether to grant a motion for summary judgment is a question of law; thus, the district court’s ruling on a motion for summary judgment is reviewed de novo.
Hunt v. Sycamore Community School District,
III.
The primary question in this appeal is whether the district court erred in ruling that the scrap dealers were not likely to succeed on the merits of any of their claims. As we proceed to explain in detail, we agree with the district court’s assessment of the scrap dealers’ constitutional challenges.
A. The Dormant Commerce Clause
Under the Articles of Confederation, the National Government lacked power to regulate commerce among the states, and “[bjecause each State was free to adopt measures fostering its own local interests without regard to possible prejudice to nonresidents, ... a ‘conflict of commercial regulations, destructive to the harmony of the States’ ensued.”
Camps Newfound/Owatonna v. Town of Harrison,
[t]he few simple words of the Commerce Clause ... reflect[ ] a central concern of the Framers that was an immediate reason for calling the Constitutional Convention: the conviction that in order to succeed, the new Union would have to avoid the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among the States under the Articles of Confederаtion. Hughes v. Oklahoma,441 U.S. 322 , 325,99 S.Ct. 1727 ,60 L.Ed.2d 250 (1979) (citations omitted). Consistent with this, “[t]he Commerce Clause has accordingly been interpreted ... not only as an authorization for congressional action, but also, even in the absence of a conflicting federal statute, as a restriction on permissible state regulation.” Id. at 325,99 S.Ct. 1727 .
The scrap dealers offer two theories of why the “tag and hold” law violates the dormant commerce clause. First, they argue that it is a “direct” local regulation of interstate commerce that is
per se
invalid under the dormant commerce clause. Second, they argue that under the balancing test of
Pike v. Bruce Church,
1. The “Direct Regulation” Theory
The scrap dealers’ “direct regulation” theory relies upon
Lemke v. Farmers’ Grain Co.,
What counts as a “direct” burden on interstate commerce has long been a matter of difficulty for courts, and, presumably due to its questionable value as an analyt
As the Supreme Court observed in
Pike,
the “direct/incidental” distinction was simply an early effort at balancing the law’s effect on interstate commerce against its local benefits: “Occasionally the Court has candidly undertaken a balancing approach in resolving these issues, but more frequently it has spoken in terms of ‘direct’ and ‘indirect’ effects and burdens.”
In its more recent cases, the Supreme Court has clarified how competing state and national interests are to be evaluated under the dormant commerce clause. The Court employs a two-tiered analysis. The first prong targets the core concern of the dormant commercе clause, protectionism — that is, “differential treatment of instate and out-of-state economic interests that benefits the former and burdens the latter.”
Or. Waste Sys. v. Dep’t of Envtl. Quality,
The scrap dealers have failed to advance any theory of how “tag and hold” discriminates against out-of-state interests, and it is difficult to see how they could. This is local legislation that does not regulate parties outside of Memphis. And it is plainly directed at the local problem of metal theft and resale in Memphis; there is no evidence to suggest it has any other purpose. Further, if this law has any out-of-state effect at all, that effect is
beneficial
to out-of-state scrap dealers, as this ordinance burdens their competitors in Memphis. Indeed, unlike the typical dormant commerce clause case, this ordinance is challenged by
instate
parties because it disadvantages
them.
This is not the sort of protectionist local legislation that is virtually
per se
invalid under the dormant commerce clause.
Cf. Commonwealth Edison Co. v. Montana,
To the extent that the scrap dealers contend that
Lemke
and
Shafer
are controlling because they are factually indistinguishable, we disagree. As the district court noted, those cases involved “comprehensive scheme[s] to regulate interstate commerce.”
Tenn. Scrap Dealers Ass’n, et al. v. Bredesen, et al,
No. 2:08-cv-2073 slip op. at 11 (W.D. Tenn. June 3, 2008) (order denying preliminary injunction) (citing
Lemke,
For the foregoing reasons, we reject the scrap dealers’ contention that Memphis’s “tag and hold” law is invalid as a “direct regulation” of interstate commercе and affirm the district court’s ruling that the scrap dealers are unlikely to succeed on the merits of this claim.
2. The “Undue Burden” Theory
Because Memphis’s “tag and hold” ordinance is not protectionist and has a legitimate local purpose, we move to consider it under the second prong of the modern test, the
Pike
balancing test. Under the deferential
Pike
test, we will uphold the “tag and hold” law unless the burden it imposes upon interstate commerce is “clearly excessive in relation to the putative local benefits.”
C & A Carbone,
a. The Extent to which “Tag and Hold” Burdens Interstate Commerce
As explained above, the “tag and hold” ordinance is a local law with local
Here, the scrap dealers have not shown that Memphis’s regulation burdens the national scrap metal market: firms in Memphis make up a small fraction of that market, and there is no evidence here that “tag and hold” will stem the flow of scrap metal into Tennessee or out of it. Even if the “tag and hold” law injures the scrap metal market in Memphis, as the scrap dealers claim, dealers outside of Memphis are likely to expand their recycling businesses to fill the resulting void and negate any potential ill effect of the law on the national scrap metal market.
Recognizing these difficulties, the scrap dealers argue that we should consider the effect on interstate commerce if “tag and hold” laws were adopted across the country. But they have failed to explain why the potential effect of similar laws on the scrap metal industry is relevant to whether this law violates the dormant commerce clause, and it makes little sense to undertake such an inquiry here. 2
b. The Putative Local Benefits of “Tag and Hold”
The scrap dealers next argue that the “tag and hold” law has no local benefits. They first argue that stolen metal generally cannot be reattached, so the only goal served by “tag and hold” is aiding prosecution. The scrap dealers then argue that only marked metal has law enforcement benefits because metаl is fungible, so unmarked metal has little forensic use. This
We disagree that “tag and hold” has no local benefits. As Memphis points out, unmarked metal is not wholly fungible: an individual piece of stolen unmarked metal could be identified based upon any distinctive feature, such as metal type, size, shape, color, age, or from any recognizable dents, scratches, or rough edges from how it was removed. Machine parts, such as air conditioning coils from HVAC systеms, are even easier to identify, as they vary with the make and model of the machine they are taken from. Thus, contrary to the scrap dealers’ assertion, unmarked scrap metal has legitimate forensic value, and if scrap dealers were allowed to sort, pile, bale, and resell scrap metal immediately upon purchase this value would quickly be lost. Further, while the alternative regulatory schemes suggested by the scrap dealers seem to have many virtues, they do not preserve evidence for the inspection of law enforcement and those aggrieved by metal theft. Thus, “tag and hold” has demonstrable independent value as a law enforcement device. And this value extends beyond the individual prosecutions that “tag and hold” enables: the mere existence of “tag and hold” deters metal theft because of the increased possibility of prosecution that metal thieves face.
c. Balancing of the Pike Factors
Because we find that Memphis’s “tag and hold” law will not burden interstate commerce, and that it has value as a law enforcement mechanism, the burden it imposes on interstate commerce is not “clearly excessive in relation to its putative local benefits.” Indeed, whatever burdensome effect “tag and hold” might have on the scrap dealers is far afield from the concerns animating the dormant commerce clause. As noted above, the only conceivable out-of-state effect of this law
benefits
out-of-state parties and thus will not have any “tendene[y] toward [the] economic Balkanization that had plagued relations ... among the States under the Articles of Confederation.”
Hughes,
For the foregoing reasons, the scrap dealers are unlikely to succeed on the merits of their dormant commerce clause claim.
B. Taking Without Just Compensation
The scrap dealers’ second claim is that the “tag and hold” law takes their property without just compensation in violation of the Fifth Amendment, either as a physical taking or a regulatory taking.
1. Physical Taking
The scrap dealers contend the law physically takes their property in two ways. First, they argue that the ten-day holding period is a temporary physical taking. Second, they argue that the require
A physical taking requiring just compensation “is a direct government appropriation or physical invasion of private property,”
Lingle v. Chevron U.S.A., Inc.,
a. The Tern-Day Holding Period
The holding period does not constitute a “direct governmental approрriation or physical invasion” of the scrap dealers’ property protected by the Fifth Amendment. Neither the government nor a third party authorized by the government,
see Loretto v. Teleprompter Manhattan CATV Corp.,
b. The Requirement that the Tagged Metal be Open for Inspection
The inspection requirement does not physically take the scrap dealers’ property either. The scrap dealers analogize the inspection requirement to the Supreme Court’s decisions in
Loretto
and
Nollan v. Cal. Coastal Comm’n,
For example, in
Loretto,
the Supreme Court held that a New York law that permitted cable companies to run cable lines on buildings authorized a physical taking because a permanent physical occupation such as this deprives the owner of all incidents of property ownership — that is, the ability to “possess, use, and dispose of it.”
where governmental action results in [a] permanent physical occupation of the property, by the government itself or by others, our cases uniformly have found a taking to the extent of the occupation .... We think a permanent physical occupation has occurred, for purposes of that rule, where individuals are given a permanent and continuous right to рass to and fro, so that the real property may continuously be traversed.
Here, the inspection provision in Memphis’s “tag and hold” law does not authorize a “classic right-of-way easement,”
Nollan,
Further, while the scrap dealers contend that the statute authorizes literally “anyone” to inspect their premises, we do not believe that their interpretation stands as the best reading of the statute. The phrase “anyone desiring to inspect” must be read in the context of the “tag and hold” provision as a whole. Manifestly, this is intended to allow law enforcement and those aggrieved by metal theft access to scrap metal “in order that identification” of stolen scrap metal “may be easy.”
Id.
Individuals who have not been aggrieved by metal theft cannot identify any stolen scrap metal and thus they have no legitimate interest in inspecting the scrap dealers’ inventory to begin with. For this reason, wе decline to read this ordinance as authorizing literally “anyone” to enter the scrap dealers premises to inspect their inventory. In doing so, we note that this reading is in accord with purpose of the law, the Tennessee Supreme Court’s interpretation of a very similar statute,
see State v. Legora,
In sum, the physical invasion authorized by this statute is easily distinguishable from the permanent physical invasions of property that the Supreme Court has held to be physical takings. It authorizes a small class of individuals to temporarily enter the scrap dealers’ premises during normal business hours for a single enumerated purpose. This is fundamentally unlike the permanent physical invasions at issue in
Nollan
and
Loretto. Cf. Boise Cascade Corp. v. United States,
2. Regulatory Taking
The scrap dealers also аrgue that the “tag and hold” law is a regulatory taking—a regulation that “goes too far” in restricting a property owner’s use of their property.
Penn. Coal Co. v. Mahon,
a. Regulatory Taking under Lucas
The “tag and hold” ordinance does not render the scrap dealers’ property “a total loss,”
id.,
and is thus not a taking under
Lucas,
because the metal can be sold during the holding period and has resale value when the holding period ends.
See Peterman v. Coleman,
b. Regulatory Taking under Penn Central
In
Penn Central,
the Supreme Court explained that while “[t]he question of what constitutes a ‘taking’ for purposes of the Fifth Amendment has proved to be a problem of considerable difficulty,”
The first prong of the
Penn Central
test is the economic impact of the regulation. As noted above, the scrap dealers have failed to show that the holding period will decrease the value of their scrap metal. To the extent they argue that “tag and hold” will harm their business as a whole, two points must be made. First, it is not clear that “tag and hold” will have the severe economic impact the scrap dealers suggest. The ten-day holding period appears likely to raise their business risks, but the impact of this is speculative given the existing time it takes to resell metal purchases and the relative unpredictability of the scrap metal market.
5
Second, diminution in the value of property or other financial injury because of regulatory action by itself does not generally constitute a taking.
Concrete Pipe and Prod. of Cal., Inc. v. Const. Laborers’ Pension Trust,
The second, closely related, prong of the
Penn Central
test is the law’s degree of interference with distinct investment-backed expectations. As an initial matter, we reiterate that it is not clear that the Memphis ordinance will cause the scrap dealers economic harm approaching a level sufficient to establish a taking. Consistent with this, their investment-backed expectations claims are generalized and vague, involving the general health of their business rather than specific property, development plans, or figures as to their property’s likely diminution of value. As the Supreme Court has explained, unilateral expectations and abstract needs are not sufficient to raise
The third prong of the
Penn Central
test is the nature of the governmental action. As discussed above, the “tag and hold” law imposes regulatory burden on the scrap dealers’ property rights rather than a physical one. Further, the burden imposed is temporary, and it does not deny the scrap dealers all incidents of ownership during the ten-day holding period — it restricts the use of the scrap during that time, but it does not interfere with possession or transfer of title. Third, it was passed for a legitimate public purpose, the prevention of metal theft. For these reasons, the nature of the law weighs against the scrap dealers’ takings claim as well.
See Peterman,
As the Supreme Court recently emphasized in
Lingle,
the aim of its takings tests is “to identify regulatory actions that are functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain.”
C. Procedural Due Process
The scrap dealers also argue that the Memphis ordinance deprives them of
D. Legal Tender
The scrap dealers’ final challenge is to the law’s requirement that dealers pay for air conditioning coils (a common target for thieves) with a check or money order mailed to a licensed HVAC contractor after a three-day wait, and that other purchases of scrap metal must be made with a payment voucher redeemable after three days. Memphis, Tenn., Code of ORDINANCES § 6-40-13(1) (2008). They argue that these provisions infringe upon federal authority to coin money under Art. I, § 8, and on the status of U.S. currency as legal tender for all debts in violation of 31 U.S.C. § 5103. We disagree.
Neither provision restricts (or indeed regulates) what counts as legal tender for the ultimate payment of debts — checks, money orders, and vouchers are
promises to pay legal tender for the discharge of debt,
they are not legal tender themselves. Likewise, the restriction here is not on the substance of payment but on its form.
See Genesee Scrap & Tin Baling Co. v. City of Rochester, 558
F.Supp.2d 432, 436 (W.D.N.Y.2008) (“[T]he Ordinance does not, by its terms or effects, alter the legal-tender status of cash. It simply provides that junk and scrap dealers, rathеr than paying cash outright for junk, must pay in the form of a check, which the seller of the junk can then convert into legal tender, i.e., cash.”);
Metal Mgmt. Miss., Inc. v. Barbour,
IV.
Having found that the scrap dealers were unlikely to succeed on the merits of their claim, the district court proceeded to weigh the remaining factors for deciding whether to grant a preliminary injunction. It found.that the scrap metal dealers were likely to suffer irreparable harm if “tag and hold” was enforced, that the City of Memphis would suffer substantial harm if an injunction was issued, and that an injunction was likely to harm the public interest. After balancing all four factors, the district court concluded that they weighed in favor of Memphis and denied the scrap dealers’ motion for a preliminary injunction.
We agree with the district court that the scrap dealers are unlikely to succeed on the merits of any of their claims and see no basis to overturn its other findings. Thus, we hold that the district court did not abuse its discretion in denying the scrap dealers’ motion for a preliminary injunction. Likewise, because we find that the scrap dealers have not shown they are entitled to partial summary judgment on any of their claims, we also affirm the
V.
AFFIRMED.
Notes
. The district court did not decide the merits of the claims against the state and neither party argues that they are at issue in this appeal.
. The Supreme Court’s decisions reveal that other laws are only relevant to the dormant commerce clause inquiry to the extent they demonstrate the burdensome effect
of the law at issue.
The Court has looked to other laws in cases only where a state law has the practical effect of regulating commerce wholly outside the state,
see, e.g., Healy v. Beer Inst.,
. This interpretation of the inspection provision аlso distinguishes
Ruckelshaus v. Monsanto,
. Consistent with this, the Supreme Court has held that the
Lucas
rule is inapplicable to temporary deprivations of property.
Tahoe-Sierra,
. Several federal courts have persuasively rejected similar arguments.
See, e.g., Peterman v. Coleman,
. In support of this, the Court cites
Village of Euclid v. Ambler Realty Co.,
. The weight of authority supports this conclusion: similar holding periods have been widely upheld in state courts,
see