The penalty and bounty provisions, however, did not remove another impediment to the smooth functioning of the scrap cycle that was legal rather than economic in origin. This was the possibility of suits for conversion against a processor by owners who might claim that they had not abandoned their vehicles. To meet this problem the statute specified several documents with which a processor could prove clear title to a vehicle, and required that a processor obtain one of these documents from its supplier and submit it to the State as a condition of receiving the bounty. One of the documents, called a "Wrecker's Certificate," can be given only by a wrecker licensed under the statute. It is essentially a clear title that the wrecker secures by following statutory notice procedures at the time it first obtains a vehicle. Suppliers other than licensed wreckers must provide some other document either a properly endorsed certificate of title, a certificate from a police department vesting title in the supplier after statutory notices, or a bill of sale from a police auction."

These documentation requirements, although vital for the protection of processors, are themselves some slight encumbrance upon the free transfer of abandoned vehicles to processors. Apparently in recognition of this fact, and the reduced potential for owners' claims in the case of ancient automobiles, the statute placed vehicles over eight years old and inoperable ("hulks") into a special category. Section 11–1002.2 (f) (5) of the stat

expensive machinery efficiently, to "rebate" most of the bounty. Appellee, for example, regularly pays $14 of the current $16 bounty to its unlicensed suppliers.

6

• Md. Ann. Code, Art. 662, § 5-203 (b), (c) (1970 ed. and Supp. 1975).

'Md. Ann. Code, Art. 662, §§ 5-203.1, 11-1002.2 (f) (1–4), 11– 1002.2 (a-d) (1970 ed. and Supp. 1975).

794

Opinion of the Court

ute, as originally enacted, provided in substance that anyone in possession of a hulk could transfer it to a scrap processor, and the processor could claim a bounty for its destruction, without delivery to the processor or subsequent submission to the State of any documentation of title.R

A

The statute extends its burdens of fines, and its benefits in the form of a share in bounties, only to wreckers that maintain junkyards located in Maryland, and requires a license only of those wreckers. There is no similar residency requirement for scrap processors that wish to obtain a license and participate in the bounty program," and in fact seven of the 16 scrap processors that have participated are located in either Pennsylvania or Virginia. Appellee, a Virginia corporation with a processing plant near the Potomac River in Alexandria, was an original licensee under the Maryland statute. Presumably because of its proximity to the southern Maryland

Maryland Ann. Code, Art. 662, § 11-1002.2 (f) (5) (1970), as originally enacted, read as follows:

"Notwithstanding any other provisions of this section, any person, firm, corporation, or unit of government upon whose property or in whose possession any abandoned motor vehicle is found, or any person being the owner of a motor vehicle whose title certificate is faulty, or destroyed, may dispose of the motor vehicle to a wrecker or scrap processor without the title and without notification procedures of subsection (c) [subsections (a) and (b)] of this section, if the motor vehicle is over eight years old and has no engine or is otherwise totally inoperable." (Emphasis supplied.)

A participating processor must meet statutory requirements relating to its storage area for vehicles, its records and books of account, and its processing equipment. Md. Ann. Code, Art. 662, § 5-202 (Supp. 1975). An administrative regulation promulgated pursuant to the statute requires that a licensed non-Maryland processor maintain an "office" within the State approved by the State Motor Vehicle Administration. Md. A. R. R. § 11.02.05.45.

and Washington, D. C., areas, appellee attracted enough Maryland-titled vehicles to its plant to rank third among licensed processors in receipt of bounties through the summer of 1974.

As is apparently the case with most of the licensed processors, virtually all (96%) of the bounty-eligible vehicles processed by appellee during that period were hulks, upon which appellee did not have to demand title documentation from its suppliers in order later to receive the bounty. In the summer of 1974, however, Maryland changed significantly the treatment of hulks by amending § 11-1002.2 (f) (5).10 Under the law as amended it is no longer possible for a licensed scrap processor to receive a bounty on a hulk without submitting title documentation to the State. But the documentation required of a processor whose plant is in Maryland differs from that required of a processor, like appellee, whose plant

10 1974 Md. Laws, c. 465. The amendment did not change the wording of the original section, n. 8, supra, but added the following language:

"In those cases only, a scrap processor whose plant is physically located and operating in this State shall execute an indemnity agreement that shall be filed with the Motor Vehicle Administration. The indemnity agreement shall contain the name, address and signature of the person delivering the vehicle. The indemnity agreement and the manufacturer's serial or identification number shall be satisfactory proof that the vehicle has been destroyed and shall be acceptable for payment of the full bounty authorized by section 5-205 if the vehicle identified in the indemnity agreement was titled in this State. Otherwise, for the purpose of administering the provisions of this section, the provisions of section 5-205 shall not apply."

Section 5-205, mentioned in the amendment, is the only statutory provision authorizing bounty payments. See supra, at 797. Without the benefit of § 11-1002.2 (f) (5) following the 1974 amendment, out-of-state processors must depend upon other sections that authorize a § 5-205 bounty only upon more elaborate title documentation. See supra, at 798.

794

Opinion of the Court

is not in Maryland. The former need only submit a simple document in which the person who delivered the hulk certified his own right to it and agreed to indemnify the processor for any third-party claims arising from its destruction. Hulk processors long had required such "indemnity agreements" from their hulk suppliers as a matter of industry practice. The effect of the 1974 amendment is to give these agreements legal recognition and to require one when a Maryland processor applies for a bounty on a hulk. The non-Maryland processor, however, cannot submit a simple indemnity agreement. For it, receipt of a bounty on a hulk now depends upon the same documentation specified for abandoned vehicles in general: a certificate of title, a police certificate vesting title, a bill of sale from a police auction, or in the case of licensed wreckers only-a Wrecker's Certificate.

B

The complaint in this case was filed shortly after the effective date of the amendment to § 11-1002.2 (f)(5). Papers submitted to the three-judge District Court on summary judgment indicated that enactment of the amendment had been followed by a precipitate decline in the number of bounty-eligible hulks supplied to appellee's plant from Maryland sources." Appellee attributed the decline primarily to the effect of the amendment upon the decision of unlicensed suppliers as to where to

11 Appellee submitted an affidavit of its general manager containing statistics that showed the decline. During the six-month period immediately preceding the effective date of the amendment, appellee received 14,253 hulks from Maryland sources. In the six months immediately thereafter, the total was 9,723. This marked a decline of 31.8% in the number of bounty-eligible hulks, at a time when appellee's figures showed an increase of 11.9% in the number of vehicles supplied from non-Maryland sources.

dispose of their hulks." It is easier for an unlicensed supplier to sign an indemnity agreement upon delivering a hulk to a processor than it is for it to secure some form of title documentation. Because only a Maryland processor can use an indemnity agreement to obtain a bounty, the amendment gave Maryland processors an advantage over appellee and other non-Maryland processors in the competition for bounty-eligible hulks from unlicensed suppliers. Such hulks therefore now tend to remain in State instead of moving to licensed processors outside Maryland.

Appellee contended below that the 1974 amendment to § 11-1002.2 (f) (5) violated the Commerce Clause by interfering with, or "burdening," the flow of bountyeligible hulks across state lines, and denied appellee equal protection of the laws by discriminating arbitrarily between it and licensed processors located in Maryland as to the right to claim bounties on hulks by submitting indemnity agreements. The District Court granted summary judgment to appellee on both claims, and enjoined the State of Maryland from giving further effect to that part of the 1974 amendment which restricts the right to obtain bounties based on indemnity agreements to Maryland processors only. 391 F. Supp. 46. The State appealed, and we noted probable jurisdiction. 423 U. S. 819.

II

In this Court appellee relies on the Commerce Clause

12 Appellee's figures showed that the number of hulks delivered by licensed wreckers, which before and after the amendment tended to use Wrecker's Certificates almost exclusively, more than doubled in the six months following the amendment (from 1,934 vehicles in the preceding six months to a total of 4,161 vehicles). The number of hulks delivered by unlicensed suppliers, however, plummeted by 54.9%, from 12,319 during the six months before the amendment to 5,561 in the comparable period thereafter.