SW Legal studies in Business

State Law Regulating Dealers That Participate in Interstate Sales Can Be Unconstitutional

Appeals court upheld the constitutionality of a Tennessee law designed to regulate the business practices of scrap metal dealers to help limit sale of stolen metal. The law does not violate the Commerce Clause as it did not favor in-state firms. The law did not impose an uncompensated taking; it was a regulation evenly applied to all businesses.

Topic Constitutional Law
Key Words

Commerce Clause; Regulatory Taking; Scrap Metal

C A S E   S U M M A R Y

Scrap metal dealers in Tennessee ship most metal out of state. Total sales some years have exceeded $1.7 billion. The state was concerned about the theft of metal that was being sold to scrap metal dealers. The state imposed new rules for scrap metal dealers that included screening of metal sellers, record-keeping requirements, delays on cash payment for frequently-stolen metals, and a ten-day waiting period between the time of purchase of scrap metal and when it could be resold by a dealer. That period would give law enforcement time to search the dealers’ lots for stolen metal. The dealers sued, contending the regulation was unconstitutional. They claimed it violated the Commerce Clause by interfering in interstate sales of metals, and it violated the Fifth Amendment because the costs imposed by the rules amounted to an uncompensated regulatory taking. The district court held for the state; the dealers appealed.


Affirmed. The regulation was directed at a local crime problem, not at interfering with interstate commerce. The cost imposed on the dealers was minimal and did not prevent them from engaging in interstate commerce. The regulation was not “protectionist” in that it gave special privilege to Tennessee dealers. Since the law has value as a law enforcement mechanism, and it does not impose an undue burden on interstate commerce, the dealers’ claim is invalid. Further, there is no regulatory taking claim that requires the government to compensate the dealers for the cost of complying with the regulation. The government did not take possession of any property; it only regulated the method in which the business is lawfully transacted.


Tennessee Scrap Recyclers Assn. v. Bredesen, 556 F.3d 442 (6th Cir., 2009)

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