Reeves, Inc. v. Stake

1980-06-19

Headline: States can favor in‑state buyers when selling goods from state‑owned plants during shortages; Court upholds South Dakota’s residents‑first cement policy and limits relief for out‑of‑state businesses cut off from supply.

Holding: The Court held that when a State acts like a private buyer or seller, it may favor its own residents, and therefore affirmed the appeals court upholding South Dakota’s residents‑first cement sales policy during shortages.

Real World Impact:

Allows states operating businesses to favor in‑state buyers during shortages.
Leaves out‑of‑state companies with limited judicial relief when cut off from state supplies.
Makes congressional action the likeliest check on protectionist state policies.

Topics: state‑owned businesses, interstate commerce, state protectionism, supply shortages, business competition

Summary

Background

A Wyoming ready‑mix concrete company, Reeves, bought most of its cement for 20 years from a South Dakota state‑owned cement plant. In 1978 the plant faced a serious shortage and the South Dakota Cement Commission adopted a policy to supply South Dakota customers first, turning away out‑of‑state orders. Reeves sued and a District Court enjoined the policy, but the Eighth Circuit reversed and the case reached the Supreme Court.

Reasoning

The Court applied the rule from an earlier case that treats a State differently when it participates in the market itself rather than when it regulates private parties. The majority concluded that South Dakota was acting like a buyer and seller in the market and therefore could favor its own residents. The Supreme Court affirmed the appeals court and upheld the State’s residents‑first sales policy during shortages.

Real world impact

The decision lets States that operate businesses or sell goods give priority to their residents when they act in the marketplace. Out‑of‑state firms that lose access to state‑produced supplies will have limited constitutional relief under the Commerce Clause. The Court noted Congress remains the principal actor to address any broader national problems caused by such state policies.

Dissents or concurrances

A four‑Justice dissent argued the policy is economic protectionism the Commerce Clause was designed to prevent, warning the ruling could permit many States to withhold commercially important goods from other States.