Wendover City v. WEST WENDOVER CITY

404 F. Supp. 2d 1324, 2005 U.S. Dist. LEXIS 36642, 2005 WL 3411775
CourtDistrict Court, D. Utah
DecidedDecember 13, 2005
Docket2:03 CV 523 TS
StatusPublished
Cited by1 cases

This text of 404 F. Supp. 2d 1324 (Wendover City v. WEST WENDOVER CITY) is published on Counsel Stack Legal Research, covering District Court, D. Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wendover City v. WEST WENDOVER CITY, 404 F. Supp. 2d 1324, 2005 U.S. Dist. LEXIS 36642, 2005 WL 3411775 (D. Utah 2005).

Opinion

MEMORANDUM DECISION AND ORDER DENYING DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT ON PLAINTIFF’S COMMERCE CLAUSE CLAIM FOR RELIEF; GRANTING PLAINTIFF’S CROSS MOTION FOR PARTIAL SUMMARY JUDGMENT ON FIFTH CLAIM FOR RELIEF; GRANTING DEFENDANTS’ MOTION TO DISMISS PUNITIVE DAMAGE CLAIMS; AND GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT ON PLAINTIFF’S SECOND, THIRD AND FOURTH CLAIMS FOR RELIEF

STEWART, District Judge.

This matter came before the Court on a motion hearing on December 9, 2005. At *1327 that hearing, the Court heard argument on four motions: (1) Defendants’ Motion for Partial Summary Judgment on Plaintiffs Commerce Clause Claim for Relief; (2) Plaintiffs Cross Motion for Partial Summary Judgment on Fifth Claim for Relief, Interference with Commerce; (3) Defendants’ Motion to Dismiss Punitive Damage Claims; and (4) Defendants’ Motion for Partial Summary Judgment on Plaintiffs Second, Third, and Fourth Claims for Relief. After considering the written material and oral arguments submitted by the parties, and being otherwise fully informed, the Court makes the following ruling.

I. FACTUAL BACKGROUND

Plaintiff Wendover, Utah had been providing water to the State Line Hotel and Casino (“State Line”) for more than seventy years. In 1992, Defendant West Wend-over, Nevada passed Ordinance 6-2-5 (the “Ordinance”). Ordinance 6-2-5(A) states that “[i]t shall be mandatory for the owner of all houses, buildings, or other properties used for human occupancy, employment, recreation, commercial, industrial or other like purposes situated within the City to use the City water system to the exclusion of all othersThe Ordinance contained a grandfather clause which allowed owners who were on other water systems prior to the effective date of the Ordinance to remain on the other water system. The State Line was the only such user and opted to remain on Plaintiffs water system.

In 2002, ownership of the State Line changed. After this change in ownership, the State Line, now operating as the Wendover Nugget, 1 switched to Defendant West Wendover, Nevada’s water system. Plaintiff argues that the State Line was forced to switch water suppliers as a result of threats from West Wendover city officials that they might deny/revoke the State Line’s liquor and business licenses if the State Line did not change water suppliers. Defendants argue that the State Line switched its water supplier of its own volition. Plaintiff brings this suit seeking damages for the substantial revenue it lost as a result of losing its largest water customer.

II. SUMMARY JUDGMENT ON THE COMMERCE CLAUSE ISSUE

The Dormant Commerce Clause is the key issue in Defendants’ Motion for Partial Summary Judgment on Plaintiffs Commerce Clause Claim for Relief and Plaintiffs Cross Motion for Partial Summary Judgment on Fifth Claim for Relief, Interference with Commerce. These two motions will be discussed together.

A. SUMMARY JUDGMENT STANDARD

Summary judgment is proper if the moving party can demonstrate that there is no genuine issue of material fact and it is entitled to judgment as a matter of law. 2 In considering whether genuine issues of material fact exist, the Court determines whether a reasonable jury could return a verdict for the nonmoving party in the face of all the evidence presented. 3 The Court is required to construe all facts and reasonable inferences in the light most favorable to the nonmoving party. 4

*1328 B. ANALYSIS

Article I, Section 8 of the U.S. Constitution gives Congress the power “[t]o regulate Commerce ... among the several States. 5 While this provision is generally considered “a grant of regulatory power to Congress, the Clause has long been understood to have a ‘negative’ aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce.” 6 To determine whether an activity violates the dormant Commerce Clause a two-step analysis is used. 7 First, it is determined whether the government is acting as a market regulator or a market participant. 8 Next, if the state is acting as a market regulator, it must be determined whether the government action violates the Commerce Clause. 9

“[I]f a State is acting as a market participant, rather than as a market regulator, the dormant Commerce Clause places no limitations on its activities.” 10 The distinction between a market participant and a market regulator is not often clear. However, the Supreme Court has stated that the market participation doctrine “ ‘differentiates between a State’s acting in its distinctive governmental capacity, and a State’s acting in the more general capacity of a market participant; only the former is subject to the limitations of the Commerce Clause.’ ” 11 The Court has further stated that its market participation cases “stand for the proposition that, for purposes of analysis under the dormant Commerce Clause, a State acting in its proprietary capacity as a purchaser or seller may ‘favor its own citizens over others.’ ” 12

The Second Circuit has stated that where a private actor could not engage in the activity in question, the government is acting as a market regulator, rather than a market participant. 13 That court has also stated that “when the state avails itself of the unique powers or special leverage it enjoys by virtue of its status as sovereign, it is ‘engaging in market regulation.’ ” 14

Defendants originally argued that they were market participants and, therefore, were not subject to the dormant Commerce Clause. Defendants later abandoned this argument, however. The Court finds that as a result of their abandonment of this theory, Defendants have stipulated to the fact that they are market regulators. Even if they have not stipulated to this, the Court finds that Defendants are engaged in market regulation. Here, Defendant West Wendover, Nevada *1329 is engaging in activity in which a private actor could not. Defendant West Wend-over is acting in its distinctive governmental capacity. Therefore, Ordinance 6-2-5 is subject to the dormant Commerce Clause.

When the Commerce Clause is implicated, there are two different tests which may be applied, depending on the nature of the regulation. “If a restriction on commerce is discriminatory, it is virtually per se

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Bluebook (online)
404 F. Supp. 2d 1324, 2005 U.S. Dist. LEXIS 36642, 2005 WL 3411775, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wendover-city-v-west-wendover-city-utd-2005.