Pelican Chptr v. Edwards ( 1997 )

  •                                        REVISED
                           UNITED STATES COURT OF APPEALS
                                 For the Fifth Circuit
                                         No. 95-31239
               Appeal from the United States District Court
                   For the Middle District of Louisiana
                                      November 25, 1997
    Before KING, JOLLY and DENNIS, Circuit Judges.
    DENNIS, Circuit Judge:
          The Louisiana State Board of Commerce and Industry (Board) is
    authorized by the state constitution to “enter into contracts for
    the   exemption   from       ad    valorem   taxes     of   a   new   manufacturing
    establishment     or    an        addition   to   an    existing      manufacturing
    establishment, on such terms and conditions as the board, with the
    approval of the governor, deems in the best interest of the state.”
    La. Const. 1974, Art. 7, §21(F); See also La. Const. 1921, Art. 10,
    § 4(10)(substantially identical predecessor provision).         Pursuant
    thereto, the Board incorporates in each such tax exemption its Rule
    One (Rule One), which requires that, inter alia, the manufacturer
    and its contractors in acquiring goods and services for the new or
    additional   construction   must   give   preference   and   priority   to
    Louisiana manufacturers, suppliers, contractors and labor “except
    where not reasonably possible to do so without added expense or
    substantial inconvenience or sacrifice in operating efficiency.”
    In an action   brought by the Pelican Chapter, Associated Builders
    and Contractors, Inc., (Pelican Chapter), and three of its members,
    the federal district court prospectively invalidated Rule One and
          Rule One provides:
              The Board of Commerce and Industry requires
              manufactures [sic] and their contractors to
              give preference and priority to Louisiana
              manufactures [sic] and, in the absence of
              Louisiana     manufacturers,    to    Louisiana
              suppliers, contractors and labor, except where
              not reasonably possible to do so without added
              expense   or    substantial  inconvenience   or
              sacrifice in operating efficiency.           In
              considering applications for tax exemption,
              special attention will be given to those
              applicants agreeing to use, purchase and
              contract for machinery, supplies and equipment
              manufactured in Louisiana, or in the absence
              of Louisiana manufacturers, sold by Louisiana
              residents, and to the use of Louisiana
              contractors and labor in the construction and
              operation    of    the  proposed   tax   exempt
              facilities.       It is a legal and moral
              obligation of the manufacturers receiving
              exemptions to favor Louisiana manufacturers,
              suppliers, contractors and labor, all other
              factors being equal.
    enjoined the Chairman of the Board, the Governor, and the Secretary
    of the state Department of Economic Development from using it as a
    requirement of any future state ad valorem tax exemption.
          The specific questions presented on appeal are (a) whether the
    Pelican Chapter and its members had standing to bring this action;
    and (b) whether the Board’s challenged Rule One constitutes an
    unconstitutional burden on interstate commerce.
          Plaintiffs-appellees are Pelican Chapter, an association of
    construction     contractors,   and    three   of   its   members,   Harmony
    Corporation,     Cajun    Contractors,     Incorporated,       and    Austin
    Industrial, Incorporated.2      The member contractors are engaged in
    the   business   of   constructing    industrial    plants   in   interstate
    commerce. The defendants-appellants are the Chairman of the Board,
    the Governor, and the Secretary of the state Department of Economic
          Prior to trial, the parties entered the following stipulation
    of established facts:
               1.    Rule One of the Louisiana Board of
               Commerce and Industry (“the Board”) has long
               required favoring employment of Louisiana
               residents by contractors and subcontractors on
               industrial   construction    and   improvement
               projects affected by the Industrial Tax
               Exemption Program administered by the Board.
         Pelican Chapter, Harmony Corporation, and Cajun Contractors,
    Incorporated are Louisiana corporations.      Austin Industrial,
    Incorporated is a Texas corporation licensed to do business in
    2.    In 1983, the Board, without adopting a
    formal rule, implemented a [sic] 80% policy
    relative to employment of Louisiana law
    [sic][labor]. The 80% Policy has been used as
    a benchmark or a “trigger” whereby if the
    Board    or   the   Department   of   Economic
    Development      conducted     a    background
    investigation and there was 80% or more labor
    from Louisiana, the Board would generally
    assume that the company did the best job it
    could in hiring Louisiana workers. If it was
    below 80%, the Board asks the company to
    explain what efforts were made to hire
    Louisiana workers.
    3.   The Associated Builders and Contractors
    and several of its members challenged Rule
    One,   particularly   its   residency   hiring
    restrictions in a rule making hearing and
    later before the entire Board.      The Board
    refused to alter its policies regarding either
    Rule One or any part of its residency hiring
    4.   The   80%  benchmark residency hiring
    restrictions of Rule One was a policy adopted
    by the Board in 1983.     It has never been
    formally adopted as a rule pursuant to
    Louisiana Administrative Procedures Act and
    the rule making powers of the Board or the
    Department of Economic Development.
    5.   From the standpoint of the Board and the
    Department of Economic Development, there is
    no practical difference from the way it
    applies a policy as opposed to a formal rule.
    6.   Rule One contains restrictions for the
    hiring of Louisiana labor, as well as use of
    Louisiana contractors and engineers and other
    Louisiana resources as well.     If Louisiana
    resources are available at the best price, all
    other factors being equal, then Rule One
    requires that recipients of the tax exemption
    use the Louisiana contractor, engineer, labor
    or other resources and that the recipient
    contractors do the same.
    7.   The residency hiring restrictions of Rule
    One have been used in the past to limit or
    restrict   the   industrial    tax   exemption
    otherwise available.
    8.   Typically, complaints concerning Rule One
    involving the failure to use Louisiana labor
    are received and investigated after most of
    the construction on the subject project has
    9.   There has never been a study or analysis
    of the benefits to the State of Louisiana of
    the administration and enforcement of Rule One
    or of its residency hiring restrictions.
    10. There has never been a study or an
    analysis which has shown that by having and
    enforcing Rule One and its residency hiring
    restrictions, there is less unemployment in
    11. There is no empirical data whatsoever to
    show that the imposition, administration and
    enforcement of Rule One and its residency
    hiring restrictions have served to increase
    employment   and  decrease   unemployment   in
    Louisiana among Louisiana workers or Louisiana
    12. There    exist   [sic]   no  evidence   or
    empirical data to show that more Louisiana
    workers are hired by the imposition or the
    residency hiring restrictions of Rule One or
    that the unemployment rate has in any way been
    effected [sic] positively or negatively by the
    administration   and    enforcement   of   the
    residency hiring restrictions of Rule One.
    13. Rule One has been applied by the
    Department of Economic Development and the
    Board in a manner so as to require applicants
    to prefer or show preference to Louisiana
    suppliers, Louisiana contractors and Louisiana
    labor over non-residents [sic] suppliers,
    contractors and laborers.
    14. No where [sic] in the documentation
    provided to any applicant for industrial tax
    exemption is the applicant informed that there
    is an 80% benchmark or trigger for residency
    hiring. It is not until and unless an
    investigation is commenced or inquiry is made
    that an applicant would learn that it was its
    obligation to ensure that at least 80% of the
    labor working on its construction project were
    [sic] from Louisiana.
    15. In the investigations conducted by the
    Louisiana Department of Economic Development
    pursuant to Rule One and its residency hiring
    restriction, investigators inquire as to
    whether the recipient or their contractors are
    making a reasonable effort to hire Louisiana
    16. If the Board concludes that an applicant
    for an industrial tax exemption has not made
    a reasonable effort to retain Louisiana
    contractors or that it or its contractors have
    not made a reasonable effort to hire Louisiana
    labor, then the Board will consider a
    restriction or limitation of all or a portion
    of the industrial tax exemption applied for.
    17. It is the policy of the Department of
    Economic Development and the Board that it is
    the responsibility of the applicant seeking
    the industrial tax exemption to abide by Rule
    One and that such applicants should pass the
    word down through their contractors and
    through their subcontractors that the Board
    and the Department of Economic Development
    expects [sic] Louisiana resources to be given
    an opportunity either to bid or to work.
    18. According to the Board and the Department
    of   Economic   Development,   it    is   the
    responsibility of the applicant seeking the
    exemption to abide by Rule One and, in most
    cases, the applicant advises contractors,
    subcontractors, etc., to do likewise because
    obviously, it could cost them money if they
    19. The Board and the Department of Economic
    Development consider the residency hiring
    restrictions of Rule One an obligation of the
    contractor of the recipient and not just an
    obligation of the recipient.
    20. If a contractor of a recipient of an
    industrial tax exemption is found to be in
    violation of the residency hiring restrictions
    of Rule One because that contractor is
    perceived to have not made a reasonable effort
    to use Louisiana labor, such would be
    reflected in the exemption or the limitation
    of exemption for the applicant.
                  21. Because Rule One requires manufacturers
                  “and their contractors” to give preference to
                  Louisiana contractors and labor, it is the
                  policy of the Board that Rule One also applies
                  to contractors of the applicants. Thus, if a
                  contractor violates Rule One, then it is going
                  to reflect on the applicant’s status and
                  whether or not the applicant receives the full
                  tax exemption or has such limited.
                  22. The Board and the Department of Economic
                  Development have continued to investigate
                  complaints alleging violation of the residency
                  hiring restrictions of Rule One for the
                  purpose of reporting any perceived violations
                  to the Board.
           At trial, Pelican Chapter and its members presented evidence
    of the burdens and costs that compliance with Rule One imposes upon
    them    and    other   contractors          in   connection    with     industrial
    construction in Louisiana.           They introduced numerous exhibits, the
    testimony of three representatives of construction contractors, and
    the testimony of the Director of the Financial Division of the
    Office of Commerce and Industry.
           The representatives of the construction contractors testified
    that, in order to avoid the drastic consequences of being found in
    violation of Rule One by the Board,               their firms will not hire a
    person for a Louisiana project without absolute proof of his or her
    Louisiana      residency.      They     said     this   policy,   common      among
    construction     firms,     causes    the    employer   to    avoid    the   use   of
    experienced, long-term non-resident employees and highly qualified
    and    efficient   non-resident        subcontractors.         Also,    additional
    administrative costs result from the employer’s efforts to exhaust
    all available Louisiana resources before using products or services
    of another state. More intensive recordkeeping is required in case
    it becomes necessary to justify the use of a particular product or
    employee.      Consequently, they testified, projects located near
    state borders involve even heavier burdens and expenses because the
    local    labor   supply    consists       partly      of    non-residents.        The
    plaintiffs’ witnesses explained that Rule One’s lack of specificity
    as to acceptable margins of error and the complexity of proof of
    residency in many instances further aggravated compliance costs.
    Exhibits illustrating and corroborating the witnesses’ testimony
    regarding the additional administrative                   costs and recordkeeping
    associated with Rule One compliance were also introduced by the
           The   defendants    presented          no   evidence      controverting    the
    testimony of the plaintiff’s witnesses or their exhibits.                          In
    fact, the defendants presented very little evidence at trial.
    Exhibits introduced by the defendants indicate that from 1936 to
    1993    the Rule One related industrial tax program resulted in over
    15,000 exemptions to various applicants in the amount of four
    billion dollars on construction projects costing over 44 billion
           After the trial, the district court granted the requested
    relief. At the outset, the district court held that the plaintiffs
    had standing      to   challenge    the       Board’s     Rule   One    because   they
    suffered injury due to its enforcement despite the fact that they
    had     no   contractual   relationship            with    the   state.      Because
    manufacturers     customarily      require         contractors     to   secure    them
    against loss due to any noncompliance with Rule One, the court
    reasoned the contractors are burdened by the additional costs                       of
    self insuring against the risk of noncompliance, investigation and
    record keeping pertaining to residences of laborers and suppliers,
    and loss of efficiency and flexibility in acquiring materials and
    work force management.
         Proceeding to the merits, the district court found that Rule
    One is not neutral on its face and actually discriminates against
    the use of out of state workers and suppliers in favor of their
    local counterparts.        Rule One discourages use of out of state
    workers or suppliers by effectively assigning contractors the
    potential burden of showing after the fact, often long after
    project completion, that any such use was cheaper, more convenient
    or more efficient than granting local preferences.                          The court
    therefore   held   that    Rule      One    unconstitutionally        discriminated
    against   commerce   and       enjoined         its   application.     See    Pelican
    Chapter, Associated Builders and Contractors, Inc. v. Edwards, 
    901 F. Supp. 1125
     (M.D. La. 1995).              This appeal followed.
         In this Court, the defendants-appellants renew their argument
    contesting the standing of Pelican Chapter and its members to
    prosecute   this   action.          The    irreducible      minimum    of    standing
    contains three elements.           Lujan v. Defenders of Wildlife, 
    504 U.S. 555
     (1992).   “First, the plaintiff must have suffered an injury in
    fact---an   invasion      of   a    legally       protected   interest      which   is
    []concrete and particularized,” id., at 560; Allen v. Wright, 
    468 U.S. 737
    , 756 (1984); Warth v. Seldin, 
    422 U.S. 490
    , 508 (1975);
    Sierra Club v. Morton, 
    405 U.S. 727
    , 740-741, n.16 (1972); and
    ‘actual or imminent, not “conjectural” or “hypothetical”’, Lujan,
    504 U.S. at 560; Whitmore v. Arkansas, 
    495 U.S. 149
    , 155 (1990);
    Los Angeles v. Lyons, 
    461 U.S. 95
    , 102 (1983).              “Second, there must
    be    a    causal   connection   between    the    injury    and   the   conduct
    complained of---the injury has to be fairly traceable to the
    challenged action of the defendant, and not the result of the
    independent action of some third party not before the court.”
    Lujan, 504 U.S. at 560; Simon v. Eastern Ky. Welfare Rights Org’n.,
    426 U.S. 26
    , 41-42 (1976).        “Third, it must be likely, as opposed
    to merely ‘speculative,’ that the injury will be ‘redressed by a
    favorable decision.’” Lujan, 504 U.S. at 561; Simon, 426 U.S. at
              “The party invoking federal jurisdiction bears the burden of
    establishing these elements.” Lujan, 504 U.S. at 561; FW/PBS, Inc.
    v. Dallas, 
    493 U.S. 215
    , 231 (1990); Warth, 422 U.S. at 508.
    “Since they are not mere pleading requirements but rather an
    indispensable part of the plaintiff’s case, each element must be
    supported in the same way as any other matter on which the
    plaintiff bears the        burden of proof, i.e., with the manner and
    degree of       evidence   required   at   the    successive    stages   of   the
    litigation.” Lujan, id.
              We agree with the district court’s finding that the plaintiffs
    satisfactorily proved the requisite elements of injury, causal
    connection, and redressability.          The plaintiffs established, with
    little or no resistance by the defendants, that the existence of
    Rule One presents them with a Hobson’s choice, viz., they must
    either (a) forego bidding on tax exemption applicants’ projects,
    which represent a substantial percentage of the market and their
    own businesses, or (b) undertake the extra burdens and costs of
    complying   with   Rule   One,   which    tend   to   deprive   them   of   the
    competitive and economic advantages they otherwise would be able to
    earn through more flexible, effective and efficient purchasing,
    administrative, and employment techniques and methodology.
         As the Supreme Court in Lujan, 504 U.S. at 561             observed:
                     When the suit is one challenging the
                legality of government action or inaction, the
                nature and extent of facts that must be . . .
                proved . . . in order to establish standing
                depends   considerably    upon   whether   the
                plaintiff is himself an object of the action
                (or foregone action) at issue.      If he is,
                there is ordinarily little question that the
                action or inaction has caused him injury, and
                that a judgment preventing or requiring the
                action will redress it.
         There is little or no question that the contractor plaintiffs
    in this case, as are other contractors that engage in industrial
    construction for tax exemption applicants, are the objects of the
    State’s action through Rule One to prevent them from dealing freely
    in interstate commerce for products and services of other states,
    that the Board knowingly and effectively encourages tax exemption
    applicants to require contractors to indemnify them against any
    loss due to non-compliance with Rule One, that the increased costs
    of doing business imposed on contractors by Rule One cause them
    injury, and that the contractors’ injury would be redressed if Rule
    One were to be declared invalid and its enforcement enjoined.3
           The Commerce Clause of the United States Constitution grants
    Congress the power “[t]o regulate Commerce with foreign Nations,
    and among the several States, and with the Indian Tribes.” Art I,
    § 8, cl. 3.      “‘Although the Clause thus speaks in terms of powers
    bestowed upon Congress, the Court long has recognized that it also
    limits the power of the States to erect barriers against interstate
    trade.’” Maine v. Taylor, 
    477 U.S. 131
    , 137 (1986) (quoting Lewis
    v. BT Investment Managers, Inc., 
    447 U.S. 27
    , 35 (1980)).                     “The
    bounds of these restraints appear nowhere in the words of the
    Commerce Clause, but have emerged gradually in the decisions of
    [the    Supreme]    Court     giving   effect    to    its   basic     purpose.”
    Philadelphia v. New Jersey, 
    437 U.S. 617
    , 623 (1978).                  The basic
    principle that our economic unit is the Nation, which alone has the
    gamut of powers necessary to control the economy, “including the
    vital    power     of    erecting    customs    barriers     against    foreign
    competition,”      has   as   its   corollary   that   the   states     are   not
              Pelican Chapter has standing under the principle of
    “associational standing” as enunciated in Hunt v. Washington State
    Apple Advertising Comm’n, 
    432 U.S. 333
    , 342 (1977) and Warth v.
    422 U.S. 490
    , 511 (1975).
    separable economic units. H.P.Hood & Sons, Inc. v. Du Mond, 
    336 U.S. 525
    , 537-538 (1949).         “[W]hat is ultimate is the principle
    that one state in its dealings with another may not place itself in
    economic isolation.” Baldwin v. G.A.F. Seelig, Inc., 
    294 U.S. 511
    527 (1935).
           The opinions of the Supreme Court reflect an “alertness to the
    evils of ‘economic isolation’ and ‘protectionism,’ while at the
    same   time    recognizing    that   incidental    burdens     on    interstate
    commerce may be unavoidable when a State legislates to safeguard
    the health and safety of its people.”          Philadelphia v. New Jersey,
    437 U.S. at 623-624. “Thus, where simple economic protectionism is
    effected      by   state   legislation,    a   virtually    per     se   rule   of
    invalidity has been erected.” Id. at 624 (citing H.P. Hood & Sons,
    supra, Toomer v. Witsell, 
    334 U.S. 385
    , 403-406 (1948); Baldwin,
    supra; Buck v. Kuykendall, 
    267 U.S. 307
    , 315-316 (1925)).                       As
    Justice    Cardozo     stated,   “Restrictions      so     contrived     are    an
    unreasonable clog upon the nobility of commerce.             They set up what
    is equivalent to a rampart of customs duties designed to neutralize
    advantages belonging to the place of origin.” Baldwin, 294 U.S. at
           Rule One, in effect, conditions the exemption of new or added
    manufacturing establishments from state property taxes upon the
    preferential use of Louisiana construction products and labor when
    they are on parity with those produced by another state.                 Because
    Rule One serves to further no end other than the economic welfare
    of Louisiana and discriminates against articles and services in
    interstate commerce solely because of they are produced by another
    state,   it   is   a   simple     measure     of   economic     isolationism      or
    protectionism that the United States Constitution forbids.
         Although the Supreme Court has used a variety of formulations
    for the Commerce Clause limitation upon the states, the Court has
    “consistently distinguished between outright protectionism and more
    indirect   burdens     on   the   free    flow     of   trade.”     Lewis    v.   BT
    Investment Managers, Inc., 447 U.S. at 36.                 In     recent years, a
    comprehensive approach to determining when a state law violates the
    Commerce Clause has evolved.              A state law that affirmatively
    discriminates, either facially or in practical effect, against
    interstate commerce is constitutionally valid only if the state
    shows that the law actually furthers a “legitimate local purpose”
    and that this purpose could not be served as well by available
    nondiscriminatory means. Oregon Waste Systems, Inc. v. Dept. of
    Envtl. Quality, 
    511 U.S. 93
    , 99-101 (1994), Maine v. Taylor, 477
    U.S. at 138, Hughes v. Oklahoma, 
    441 U.S. 322
    , 336 (1979).                  A state
    law affirmatively discriminates against interstate commerce if it
    disadvantages interstate commerce relative to intrastate commerce.
    Oregon Waste Systems, Inc., 511 U.S. at 99.               To be legitimate, the
    local purpose must be unrelated to economic protectionism. Wyoming
    v. Oklahoma, 
    502 U.S. 437
    , 454 (1992), New Energy Co. of Indiana v.
    486 U.S. 269
    , 274 (1988).
         In contrast, state laws that regulate evenhandedly with only
    incidental effects on interstate commerce are invalid only if the
    burden imposed on interstate commerce is “clearly excessive in
    relation to the putative local benefits.” Oregon Waste Systems,
    Inc., 511 U.S. at 99 (quoting Pike v. Bruce Church, Inc., 
    397 U.S. 137
    , 142 (1970)).        A state law regulates evenhandedly when it is
    both       facially   neutral   and   treats   interstate   and   intrastate
    interests equally. CTS Corp. v. Dynamics Corp. of America, 
    481 U.S. 69
    , 87 (1987), Hunt v. Washington State Apple Advertising Comm’n,
    432 U.S. 333
    , 350-53 (1977).
           Applying these precepts to the present case, we conclude that
    Rule One discriminates against interstate commerce both on its face
    and in practical effect.          It is facially discriminatory, as tax
    exemption recipients and their contractors must give Louisiana
    products and labor preferential treatment “all other factors being
    equal.”4      The overall effect of Rule One is discriminatory as it
    inhibits the ability of contractors to offer employment to out-of-
    state workers and to utilize supplies and other resources produced
    by other states.        Furthermore, compliance with Rule One imposes
    additional adminstrative and operating costs on contractors who
    choose to take advantage of resources with out-of-state sources
    relative to the costs incurred by contractors utilizing only local
    labor, contractors, and supplies.
           Because Rule One discriminates against interstate commerce,
            Rule One, supra, note 1.
    the burden is shifted to the defendants to show that Rule One
    serves a legitimate local purpose which could not be served as well
    by available nondiscriminatory means.               This they have not done.
    The   asserted      purpose   of     Rule    One,   reducing    unemployment      in
    Louisiana,       cannot save this rule.             Reducing unemployment by
    discouraging the use of out-of-state labor and products constitutes
    the patent economic protectionism that the Commerce Clause forbids.
    “Neither the power to tax nor the police power may be used by the
    state of destination with the aim and effect of establishing an
    economic barrier against competition with the products of another
    state or the labor of its residents.” Baldwin, 294 U.S. at 527.                   In
    addition,    even    if    reducing    unemployment     in     Louisiana   were    a
    legitimate    local       purpose,    the    defendants-appellants     have    not
    produced any evidence to demonstrate that Rule One has actually
    served this purpose or that it could not be served as well by
    available nondiscriminatory means.
          Finally, we are not persuaded by the defendants-appellants’
    argument that Rule One’s discriminatory tax exemption requirement
    falls within the narrow exception to the dormant Commerce Clause
    for states in their role as “market participants.”                  “[The market
    participant]‘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 negative Commerce Clause.’” Camps
    Newfound/Owatonna       v.    Town    of    Harrison,     
    117 S. Ct. 1590
    ,   1606
    (1997)(quoting New Energy Co. of Indiana v. Limbach, 486 U.S. at
    277    (1988)).   See    White       v.    Massachusetts    Council     of   Constr.
    Employers, Inc., 
    460 U.S. 204
    , 208 (1983)(Boston participated in
    the construction industry by funding certain projects); Reeves,
    Inc.    v.   Stake,     
    447 U.S. 429
    ,    436-437   (1980)(South     Dakota
    participated in the market for cement as a seller of the output of
    the cement plant that it owned and operated); Hughes v. Alexandria
    Scrap Corp., 
    426 U.S. 794
    , 806 (1976)(Maryland, in effect, entered
    the market for abandoned auto hulks as purchaser by providing
    bounties for their removal from streets and junkyards).                          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.’” Camps Newfound/Owatonna v.
    Harrison, 117 S.Ct. at 1606 (quoting Alexandria Scrap, 426 U.S. at
           Rule One’s tax exemption prerequisite cannot be characterized
    as a proprietary activity falling within the market participant
    exception.     The tax program of which Rule One is a part has the
    effect of subsidizing         the initiation, relocation or expansion of
    industry, as do many dispositions of the tax laws. See New Energy
    Co., 486 U.S. at 277.         “‘That,’” the Supreme Court has explained,
    “‘does not transform it into a form of state participation in the
    free market.’” Camps Newfound/Owatonna, 117 S.Ct. at 1607 (quoting
    New Energy Co., 486 U.S. at 277).                The function of Rule One and the
    state tax program of which it is an element is neither the purchase
    nor the    sale    of    construction     materials      or   services,    but   the
    “‘assessment and computation of taxes--a primeval governmental
    activity.’” Id.      “A tax exemption is not the sort of direct state
    involvement    in       the    market    that    falls    within     the   market-
    participation doctrine.”           Id.
         As was true in Camps Newfound/Owatanna and Bacchus Imports,
    Ltd. v. Dias, 
    468 U.S. 263
     (1984), the facts of this particular
    case, viewed in isolation do not appear to pose any threat to the
    health of the national economy.                 Nevertheless, the history of
    Commerce Clause jurisprudence has shown that even the smallest
    scale discrimination can interfere with the project of our federal
    union.        As    Justice        Cardozo      recognized,     to    countenance
    discrimination of the sort that Rule One represents would invite
    significant inroads on our “national solidarity”:
              The Constitution was framed under the dominion
              of a political philosophy less parochial in
              range. It was framed upon the theory that the
              peoples of the several states must sink or
              swim together, and that in the long run
              prosperity and salvation are in union and not
              in division.
    Baldwin, 294 U.S. at 523.
         The    judgment          of   the   district     court,     insofar     as it
    prospectively invalidates and enjoins the enforcement of Rule One,
    is AFFIRMED.