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SEIU, LOCAL 82 v. DISTRICT OF COLUMBIA GOVT.

May 10, 1985

SERVICE EMPLOYEES INTERNATIONAL UNION, LOCAL 82, Plaintiff,
v.
DISTRICT OF COLUMBIA GOVERNMENT, et al., Defendants



The opinion of the court was delivered by: FLANNERY

 This matter comes before the court on cross-motions for summary judgment on plaintiff's challenge to the constitutionality of certain regulations enacted by defendants to restrict the operations of street vendors in the District of Columbia. A motion for leave to file a brief amicus curiae in support of defendants has also been filed by four business groups. *fn1" Plaintiff, a labor union which represents approximately 5,000 workers, including sidewalk vendors, in Washington, D.C., challenges the regulations on the grounds that they impose an unconstitutional burden on interstate commerce in violation of the commerce clause of the United States Constitution, and deprive members of their rights to equal protection and due process secured by the fifth and fourteenth amendments to the Constitution. The regulations are scheduled to go into effect on May 14, 1985.

 I. Background

 Plaintiff challenges ten regulations. They are: 24 D.C.M.R. § 502.11, which bars operation in a zone not designated on the vendor's license; § 508.01, which mandates that records of sales and receipts of purchases and expenses be made available for inspection by "any authorized representative of the District of Columbia Government"; § 508.3, which penalizes failure to make such records available by allowing "immediate seizure, without notice, of the vendor's license"; §§ 510.3 and 510.4, which restrict sidewalk vending to sidewalks which are at least eighteen feet wide and provide criteria for measuring sidewalks; § 511.1, which bars operation before 5 a.m. and after 10 p.m. Sunday through Thursday or after 1 a.m. on Saturday and Sunday mornings, and which also bans overnight storage of equipment or merchandise; § 512.2, which requires compliance with design standards for sidewalk carts; § 515.18(g), which restricts the types of merchandise which may be sold by street vendors; and §§ 524.1 and 524.2, which require payment of a bond in the amount of $500 for D.C. residents and $1,500 for nonresidents. *fn2"

 Plaintiff's commerce clause challenge is directed to six of the regulations: §§ 502.11, 511.1, 512.2, 515.18(g), 524.1, and 524.2. Sections 508.01, 510.3, and 510.4 are challenged as vague and ambiguous in violation of the due process clause. Plaintiff contends that §§ 502.11, 511.1, 512.2, 515.18(g), 524.1, and 524.2 deprive its members of equal protection and due process of law. Finally, plaintiff argues that § 508.3 deprives its members of due process by allowing seizure of licenses without a pretermination hearing.

 II. Discussion

 A. Commerce Clause

 1. Sections 502.11, 511.1, 512.2, and 515.18(g)

 First, plaintiff has made no showing whatever of the burden, if any, imposed by these regulations on interstate commerce. Cases in which local regulations or state laws have been struck down as violative of the commerce clause typically involve protectionist measures designed to insulate local industries against competition from outside the state, or discriminate against out-of-state dealers by, for example, refusing to license them for in-state operations. See, e.g., Breard v. City of Alexandria, La., 341 U.S. 622, 636-37, 71 S. Ct. 920, 929-30, 95 L. Ed. 1233 (1951); Dean Milk Co. v. City of Madison, 340 U.S. 349, 354-55, 71 S. Ct. 295, 297-98, 95 L. Ed. 329 (1951); Hood & Sons v. DuMond, 336 U.S. 525, 537-40, 69 S. Ct. 657, 664-66, 93 L. Ed. 865 (1949); Electrolert Corp. v. Barry, 237 U.S. App. D.C. 328, 737 F.2d 110, 112-13 (D.C. Cir. 1984). Here, in contrast, plaintiff has made no showing that these regulations will have any effect on out-of-state vendors different in any way from the effect on local vendors. "Regulation that leaves out-of-state sellers on the same basis as local sellers cannot be invalid" so long as interstate commerce is neither prohibited nor discriminated against. See Breard, 341 U.S. at 638, 71 S. Ct. at 930; see also Electrolert Corp., 737 F.2d at 113 (ban on sale or possession of radar detectors held not to violate commerce clause because neither overtly protectionist nor favoring in-state commerce); Commonwealth v. Gulden, 369 Mass. 965, 341 N.E.2d 262, 263 (1976) (city ordinance barring sales by "hawkers or peddlers" of any goods or merchandise within 500 feet of any city playground between 9 a.m. and 9 p.m. to protect children in or near city playgrounds did not violate commerce clause). *fn3"

 Even if plaintiff could show that nonresident vendors bore the brunt of the burden of these regulations, plaintiff's challenge would have to be rejected. Breard is almost directly on point. There, the Supreme Court upheld a city ordinance banning door-to-door solicitation against a challenge by a representative of an out-of-state corporation which was in the business of going from city to city soliciting magazine subscriptions. 341 U.S. at 624, 71 S. Ct. at 923. Despite the effect on interstate solicitors like plaintiff, the Court rejected the challenge, holding that "the usual methods of seeking business are left open by the ordinance. That such methods do not produce as much business as house-to-house canvassing is, constitutionally, immaterial and a matter for adjustment at the local level in the absence of federal legislation." 341 U.S. at 638, 71 S. Ct. at 930.

 2. Sections 524.1 and 524.2

 Plaintiff's commerce clause challenge to the bonding requirements under sections 524.1 and 524.2 is, however, more substantial. Under section 524, nonresident vendors are required to post a bond $1,000 higher than the $500 bond required of resident vendors. Defendants contended in their briefs and at oral argument that the sole purpose of the bond requirement is to ensure the payment of sales taxes by street vendors. The distinction between the bond paid by resident and nonresident vendors, they contend, is justified by the District's inability to distrain the goods of nonresident vendors in the event that they fail to pay or underpay the sales taxes on merchandise they sell in the District, and thus is justified solely as a means of ensuring collection and payment of the District's sales taxes. Although amici point out that the distinction between resident and nonresident vendors disappears for any vendor who establishes a "track record" of dependability under §§ 524.6 and 524.8, counsel for defendant stated at oral argument that under section 524.8 it would take a minimum of five years to establish such a "track record." In addition, the initial requirement of posting the extra $1,000 bond could well prevent many nonresident street vendors from ever obtaining a license in the first instance, precluding them from ever establishing such a "track record."

 Plaintiff has cited one case in which a bond required only of nonresident solicitors was struck down as violative of the commerce clause. In Moyant v. Borough of Paramus, 30 N.J. 528, 154 A.2d 9 (N.J. 1959), the New Jersey Supreme Court struck down a city ordinance which required a $1,000 bond "to be furnished only by non-residents of the borough or residents representing a firm whose principal place of business is located outside the State." 154 A.2d at 14. Although the court conceded that the bond was "obviously designed to assure a source of financial redress to the purchaser in case of fraud" by a nonresident solicitor, it concluded that

 
the sum fixed bears no rational relation to the amount of business done, and is required of every single solicitor, even where, as here, several are employed by the same company. . . . The bond requirement . . . is unduly oppressive and so unreasonable as to the local police power. . . . Furthermore, the provision exempts borough residents unless they represent a firm whose principal place of business is outside the state. Extension of the requirement to residents soliciting for out-of-state businesses points to discrimination against those engaged in business across state lines.

 154 A.2d at 20. The court further noted that the "cumulative effect" that such ordinances would have on nonresident solicitors in the event that they were enacted by many New Jersey communities provided an "added reason" to hold the provisions unconstitutional. 154 A.2d at 21.

 There is the possibility, of course, that Moyant could be distinguished from the case at bar on several grounds. First, a bond of $1,500 may bear some relation to the amount of business done by a street vendor over a given period. Vendors who are District residents might be allowed to put up a smaller bond based on the city's determination that the remedies available to it against residents for nonpayment of sales taxes render a bond of greater than $500 unnecessary. Additionally, because street vendors probably do not operate in more than one jurisdiction like magazine solicitors are likely to do, there is arguably little danger of any "cumulative effect" of such a bond requirement.

 The District has not, however, either attempted to distinguish Moyant or, more importantly, offered any evidence that the treble bond for nonresidents is justified for purposes of sales tax collection. Although the city may need to establish only a "rational relation" between a higher bond and the District's problems with enforcing the sales tax requirements against nonresident vendors to survive an equal protection challenge to section 524, it is equally well-established that an ordinance which discriminates on its face on the basis of residency must more nearly "fit" the purposes for which it was enacted when challenged as a violation of the commerce clause or the privileges and immunities clause of article IV, *fn4" particularly when the challenged regulation interferes with the nonresident's livelihood. See, e.g., Hicklin v. Orbeck, 437 U.S. 518, 524, 98 S. Ct. 2482, 2487, 57 L. Ed. 2d 397 (1978); Baldwin v. Fish & Game Commission of Montana, 436 U.S. 371, 383, 387, 98 S. Ct. 1852, 1860, 1862, 56 L. Ed. 2d 354 (1978); Toomer v. Witsell, 334 U.S. 385, 396, 68 S. Ct. 1156, 1162, 92 L. Ed. 1460 (1948). When a local regulation overtly discriminates against an out-of-state business interest, the burden falls on the state to justify the discrimination "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." See Hunt v. Washington Apple Advertising Commission, 432 U.S. 333, 353, 97 S. Ct. 2434, 2446, 53 L. Ed. 2d 383 (1977); Dean Milk v. City of Madison, 340 U.S. 349, 354, 71 S. Ct. 295, 297-98, 95 L. Ed. 329 (1951). Although neither the commerce clause nor the privileges and immunities clause precludes disparity of treatment when there are valid, independent reasons for it, see, e.g., Toomer, 334 U.S. at 396, 68 S. Ct. at 1162, the Constitution mandates that the court examine closely statutes or regulations which practice overt discrimination against citizens of other states. The "fit" required of such provisions must be measured both in terms of their under- or over-inclusiveness and by the presence or absence of any nondiscriminatory alternatives open to the District. See Hunt, supra.

 In this case, the court holds that defendants have failed to carry their burden of justifying section 524's discrimination against nonresident vendors. This conclusion is unavoidable for several reasons. First, defendants have submitted no evidence whatsoever of the relation of the size of the bond to the amount at stake in the event that a nonresident vendor fails to pay the sales taxes due the District. At a sales tax rate of six percent, a vendor would have to sell $25,000 worth of goods before he would generate $1,500 in sales taxes. Assuming that, as plaintiff submits, sidewalk vendors are required to file a monthly sales tax return and to pay sales taxes on a monthly basis, it seems unlikely that very many vendors -- if any -- would generate sales sufficient to collect $1,500 in sales taxes without the District becoming aware of their noncompliance with the District's tax laws.

 But more importantly, it appears that the District's interest in sales tax collection is already more than adequately protected by another provision of the new regulations. Under § 503.5, nonresident vendors may not obtain a certificate of registration, which is required before an applicant may obtain a vendor's license under § 503.4, until they have filed a bond "in an amount not exceeding double the amount of the applicant's estimated annual sales and use tax liability for a period not exceeding one (1) year." *fn5" Counsel for defendants conceded at oral argument that nonresident vendors would be subject to both the "double annual sales tax" bond required under § 503.5, and the treble bond required under § 524.2(b). Assuming that a typical vendor generates $1,500 in sales taxes per year (an amount which could arguably justify the $1,500 bond required of nonresidents under § 524), a nonresident vendor could be ...


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