The Dormant Commerce Clause, Vegas-Style

Many Las Vegas tourists are surprised when they learn that prostitution is illegal in Clark County, Nevada. Law-biding johns who don’t want to risk jail avoid the illicit Vegas trade. They drive to neighboring Nye County to hire a duly licensed “professional.”

In Nye, the vice is legalized but it is heavily regulated. Nye County Code 9.20.090(A) requires a prospective brothel owner to provide evidence that he/she is “a bona fide resident of [Nevada] and has been so for six (6) months” prior to being licensed. Section 9.20.190 provides that “[a]ll licensees and their managers must be available to the board at all times, and cannot operate the premises from addresses located in other states.”

These requirements prevented Texas resident Bruce Kahn from applying to own a Nevada brothel. In TCR Holdings, LLC v. Nye County, he challenged the application residency requirements as violating the dormant Commerce Clause, the Privileges and Immunities Clause, and the Equal Protection Clause. The equal protection claim was a non-starter, but the district court ruled for the plaintiff on dormant Commerce Clause grounds. According to the district court, the dormant Commerce Clause requires that a Texan be able to apply to be a licensed owner of a brothel operating in Nevada on terms equal with a Nevadan.

I believe the district court’s ruling is incorrect, or at the very least may have some serious unintended consequences for plaintiff Kahn.

Consider what legal consequences follow from the district court’s view that Nye County is required to allow Texans and other non-residents to apply for brothel licensure on equal footing.

Pursuant to its power to regulate interstate commerce, Congress criminalized interstate prostitution with the federal Mann Act: “Whoever knowingly transports any individual in interstate or foreign commerce…with intent that such individual engage in prostitution…shall be fined under this title or imprisoned not more than 10 years, or both.” In Hoke v. United States, 227 U.S. 308 (1913), the Court upheld an earlier iteration of the statute on the theory that the Commerce Clause power had already been extended to reach illicit markets, i.e. the outlaws of commerce.

Under the Supremacy Clause, the Mann Act preempts contrary state law. Thus, it becomes necessary to ask whether the Mann Act would either expressly or impliedly preempt Nye County code provisions if, following the district court’s judgment, they permitted a Texan to apply for a license to operate a Nevada brothel.

The trick for Nye County has been to avoid authorizing conduct proscribed federally, as its local code provision is no shield to federal prosecution under the Mann Act. Consider United States v. Pelton, 578 F.2d 701, 712 (8th Cir. 1978), in which the Eight Circuit sustained the conviction of defendants who sent a woman to Nevada to start work as a prostitute. The court concluded that “the status of prostitution under Nevada law ha[d] no bearing on the illegality of this agreement under the Mann Act.” Nye County must walk a fine line. The Mann Act extinguishes the interstate market for prostitution by barring the transportation of prostitutes across state lines. A Nevada residency requirement for the prostitutes, then, helps assure that they have not crossed state lines for that purpose and keeps them intrastate.

But what about would-be brothel owners like Kahn? He sought, as a non-resident, to apply to become a licensed brothel owner. His non-resident license application would not expressly run afoul of the Mann Act. His licensure would not necessarily imply that individuals would be transported across Nevada state lines for prostitution in violation of the Mann Act. He might hire only Nevada residents to staff his brothel and he might refrain from recruiting non-Nevadans. The Mann Act would not expressly preempt a Nevada law that allowed him as a non-resident to apply to be a licensed brothel owner.

After the district court’s ruling, however, Nye County may not require in state residency status to apply for brothel ownership. But if Nye’s code were amended to comply with the court’s ruling, would that revised code provision then “stand[] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” in enacting the Mann Act?

The Mann Act is an aid to states that seek to prevent the vice of prostitution from crossing into their jurisdictions. In other words, it is federal legislation in aid of state autonomy. The Mann Act is very similar to the legislation that was at issue in the Lottery Case, a/k/a Champion v. Ames, 188 U.S. 321 (1903). The Lottery Case upheld federal legislation that prohibited interstate transportation of lottery tickets, thereby preserving the choice of coequal sovereigns to outlaw gambling and related vices in their own jurisdictions. The Mann Act is federal legislation in support of state regulatory autonomy. Even if legal in Nevada, out-of-state brothel ownership (or even application for it) could trigger criminal liability in other jurisdictions. Nevada alone in the Union has (limitedly) legalized prostitution, yet if Nye County were to entertain non-resident applications it would frustrate the Mann Act’s federal purpose by allowing Nevada’s legalization of a vice to spill over into other states.

Consider the situation of the would-be licensee plaintiff, who is a Dallas, Texas resident. Texas not only criminalizes prostitution itself, Penal Code § 43.02, but also prohibits knowingly “receiv[ing] money or other property pursuant to an agreement to participate in the proceeds of prostitution.” Penal Code § 43.03(a). Moreover, a Texas resident need not have completed the act of receiving proceeds of prostitution to violate Texas law. Texas has a criminal attempt statute that might possibly apply to an individual who took the substantial step of purchasing a property and applying for a license, assuming specific intent to commit the offense. Penal Code § 15.01(a).

Nye County knows it has a greater chance of satisfying the U.S. Attorney in Nevada and avoiding federal preemption if its code complements rather than frustrates the Mann Act. Nye County would argue that its provisions form a local-federal partnership, i.e. its code erects barriers to avoid what the Mann Act proscribes. Hoke impliedly allowed for prostitution’s legalization within a state. “There is unquestionably a control in the states over the morals of their citizens, and, it may be admitted, it extends to making prostitution a crime.” That control impliedly extends to not making it a crime. The Court, however, made clear that state control “can be exercised only within the jurisdiction of the states” and that “there is a domain which the states cannot reach and over which Congress alone has power….” To the extent that the district court’s order would allow a contrary result, federal law may now impliedly preempt Nye County law.

You may also like...

2 Responses

  1. Norman Williams says:

    Contrary to Tuan’s take, I think the district court got it right. The Nevada residence requirement is clearly discriminatory, and I don’t see any legitimate local interest that could not be served by a non-discriminatory alternative. Congress may authorize states to act in ways that otherwise run afoul of the dormant Commerce Clause, see Prudential Ins. v. Benjamin, but the Mann Act does not purport to authorize such state action. Nor does the Mann Act, which only bans the transportation of prostitutes, prohibit the ownership of brothels in other states. As a constitutional matter and for the reasons Tuan gives, Congress could undoubtedly prohibit the interstate receipt of funds from brothels, but it has not done so, and the Mann Act’s clear terms preclude construing it to reach such conduct. And so long as the non-resident brothel owner does not “repatriate” the income from Nevada to Texas, I’m not sure the Texas law could reach him without violating the extraterritoriality principle contained in due process and the dormant commerce clause alike.

  2. Tuan says:

    Norman is right that Congress could legislatively authorize discrimination that would otherwise run afoul of the Court’s dormant commerce clause jurisprudence, and that’s certainly the clearest route for Nye County to go – get Congress to authorize the discrimination. Perhaps it could amend the Mann Act, borrowing liberally from the similar authorization in the McCarran-Ferguson Act.

    Alternatively, as Norman suggests, Congress could always criminalize Nevada prostitution. I don’t imagine it’s a politically popular industry nationally. Nevada is the only state to have legalized it and not even the whole state allows it, just a few rural counties.

    I don’t disagree either that facially discriminatory state laws get rough treatment under the Court’s “virtually” per se unconstitutional approach.

    Yet, it strikes me as passing strange that judicially implied preemption of the code provision by the Commerce Clause could then (potentially) result in judicially implied obstacle preemption of the requisite revision to the code provision by the Mann Act. Implied obstacle preemption is more woolly than express preemption and congressional “purposes and objectives” in enacting the Mann Act may prove broader than its terms.

    I’d be curious to know what Texas thinks about this activity and whether it (and any of the other 48 states) would join as amici if/when this is appealed to the Ninth Circuit.