Posted by: Patricia Salkin | September 18, 2008

11th Circuit Finds Formula Based Retail Regulations Violate Dormant Commerce Clause

Most formula business ordinances include detailed purposes such as promoting a diverse business community, maintaining historic or unique community character, supporting the local economy by enhancing tourism attractions and improving the general quality of life. These purposes are important because, as in the case of retail size caps, formula business restrictions that are enacted to protect local businesses from competition may be susceptible to Dormant Commerce Clause challenges. Although the District Court for the Southern District of Florida (475 F. Supp. 2d 1281), agreed that “preserving a small town community is a legitimate purpose,” it found that Islamorada had not shown that its purpose in enacting a formula business ordinance was to maintain its distinctive community character. Rather, the Court said, “the ordinance appears tailored to serve local business interests by preventing competition from national chains.” Finding that the ordinance’s true purpose and effect was economic protectionism—“the very sort of protection against out of state competition that the Commerce Clause was designed to prohibit”—the court struck the regulation down.

 

 The Eleventh Circuit Court of Appeals upheld the District Court’s holding, finding that while “the ordinance’s stated local purposes include the preservation of “unique

and natural” “small town” community characteristics, encouragement of “small

scale uses, water-oriented uses, [and] a nationally significant natural environment,” and avoidance of increased “traffic congestion . . . [and] litter, garbage and rubbish offsite,” the reality is that Islamorada already has a number of formula retail businesses, it has no historic district nor any historic buildings in the vicinity of the property at issue. The Court further noted that, “The district court correctly found that Islamorada “[did] not explain why the ordinance singles out retail stores and restaurants with standardized features,” and that the stated purposes of reducing traffic and garbage are undermined by the parties’ stipulations that Islamorada has existing “land development regulations, other than the Ordinance, that govern and control traffic generation of retail uses,” and “that limit the dimensions, location, and use of  buildings and signs.”

 

In agreeing with the District Court that the regulations violate the Dormant Commerce Clause, the Court noted that “the stipulated facts indicate that the formula retail provision’s disproportionate burden on interstate commerce, such as the effective exclusion of interstate formula retailers, clearly outweighs any legitimate local benefits.”

 

Island Silver & Spice, Inc. v. Islamorada, 2008 WL  4118104 (11th Cir. 9/8/2008).  

 

The opinion can be accessed at: http://www.ca11.uscourts.gov/opinions/ops/200711418.pdf

 

Special thanks to Michael Wm. Morell, Esq. of Lake Worth, FL for bringing this case to my attention.

 

Check out the posting about this case on the Georgia Zoning blog at: http://georgiazoningblog.wordpress.com/2008/09/15/11th-circuit-strikes-down-formula-retail-prohibition-as-a-violation-of-the-dormant-commerce-clause


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