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Don't tread on me: states resist federal preemption.

Congress, federal agencies and even the Supreme Court are constantly encroaching on state jurisdiction, but states can and do fight back.

Rose Cipollone began smoking in 1942 and died of lung cancer in 1984. Her family sued three tobacco companies under New Jersey tort law. In their defense, the cigarette manufacturers claimed that federal statutes enacted in 1965 and 1969, which require a health warning on all packages of cigarettes, preempted the family's state law claim. The federal district court granted the Cipollones' motion to strike the preemption defense, but the court of appeals reversed, accepting the cigarette manufacturers' argument that preemption was implied.

The Cipollone case eventually reached the U.S. Supreme Court, which in 1992 reversed the appeals court decision in part. The high court's decision was important not simply because of the hot political issue of cigarette company liability for lung cancer deaths, but more fundamentally because of what the Court had to say about the federalism issues raised by the cigarette manufacturers' defense.

The federalism concerns of states relate not to the outcome of the liability issues in the case, but rather to issues of process - to questions about who decides. In this circumstance, if it is unfair for cigarette manufacturers to be sued and held liable for lung cancer deaths when the victim was arguably warned and assumed the risk of her behavior, then the state legislature, not a federal court, is the appropriate body to make the decision to restrict such claims (especially when Congress has not directly addressed the question of liability in federal legislation).

The Cipollone case is more high profile than most such cases, but it is not unusual. Every year (and 1994 is no exception) the U.S. Supreme Court considers several important preemption cases. And every year, Congress considers bills, federal agencies consider rules, and international agencies consider decisions that would supplant state statutory or common law. Adverse decisions may result not only in nullifying state legislative acts or state court decisions, but also in narrowing the range of issues that legislatures may address. The threat is the steady, incremental, year-by-year erosion of the jurisdiction of state legislatures.

Interest groups of every stripe that are unsuccessful in pursuing their agendas at the state level increasingly are tempted to "forum shop" and come to Washington, D.C., seeking reversal of state legislative or court action. Federal moves frequently result in undoing the work of sponsors of state legislation who may have labored for months or years to pass a bill. But perhaps the most insidious consequence of preemption from the state perspective is its impact in the future. Unless a federal statute can be amended or a court decision reversed in new federal legislation, state jurisdiction over large areas of public policy is ceded for the indefinite future to the federal government. This is particularly harmful when federal action results in "field" preemption, which ma bar future state legislative action even when there is no direct conflict with federal law. This may happen when state standards are simply more stringent than or supplementary to federal standards or even when state law touches tangentially on the same subject as federal legislation.

Preemption by Legislation

Before Congress this session are proposals related to intrastate telecommunications, interstate banking and branching, product liability, and credit reporting. All would undermine state law, and all have a chance of passing.

States are opposing congressional proposals to strip them of substantial authority to regulate intrastate telecommunications, and it's an uphill battle.

In January, the Clinton administration presented its "Communications Act Reforms," intended to encourage investment in the national information infrastructure (NII), the so-called "information superhighway." The administration's NII white paper, which contemplates a new and largely federal regulatory framework for advanced communications and information services, builds upon legislative proposals offered by Congressman Edward Markey of Massachusetts.

Senator Carol Fukunaga of Hawaii, chair of NCSL's Communications Committee, objects to proposals that would inappropriately override state laws. Although agreeing with the goals of promoting competition and encouraging investment in information infrastructure, Fukunaga has told Congress that the Markey bill "would jeopardize the federal-state partnership in developing telecommunications policy by preempting states and shifting authority to the Federal Communications Commission." California Assemblywoman Gwen Moore, in testimony before an administrative hearing, expressed similar concerns about the House and administration plans. "If enacted, these proposals effectively eviscerate state regulatory authority."

States are also battling proposals to usurp their authority over interstate and branch banking.

The federal government, says Kansas Senator Alicia Salisbury, "should not mandate the form of interstate banking and branching regulation." States are particularly concerned about retaining authority to regulate interstate branching, to tax banks and to coordinate banking and economic development policy. At the very least, she says, states should be able to "opt out" of the federal regulatory scheme.

State regulation of credit reporting agencies is also under challenge in the current Congress. Many states have passed legislation responding to constituent complaints that they lost money, were denied credit or lost a job because of erroneous credit reports. Now Congress is considering similar legislation. Lobbyists for the credit reporting and banking industries, however, have been demanding preemption of stricter state laws as their price for accepting additional federal regulation.

Congress has considered proposals for federal product liability legislation for the past 13 years. This session, the Senate Commerce Committee has updated a bill, S 687, that would selectively override state tort law on product injuries. Representative Mike Box of Alabama objects to the bill, saying that "my convictions on the need for tort reform in this country are held in check by my greater concern for protecting principles of constitutional federalism as well as by practical considerations." A federal law, he says, would create confusion in state courts.

Preemption by Regulation

States also need to be concerned about preemption by federal agency regulation. A classic example arises from the U.S. Supreme Court's 1993 decision in CSX Transportation vs. Easterwood. The case, which involved issues of liability at railway grade crossings, is significant. States have traditionally retained nearly exclusive authority over tort liability issues as well as overall responsibility for highway safety. The state need to retain legislative jurisdiction is clear, given an annual average of 5,885 accidents and 628 fatalities at rail crossings between 1985 and 1990.

A train operated by CSX collided with a truck and killed Thomas Easterwood on Feb. 24, 1988. His widow, Lizzie, sued CSX under Georgia law, alleging that the railroad failed to maintain an adequate warning device at the crossing and that the train was traveling at excessive speed. The railroad argued that the Federal Railway Safety Act supersedes Georgia law and therefore nullifies the claims of Lizzie Easterwood.

The U.S. Supreme Court, in an opinion by Justice Byron White, held that the federal rail safety statute preempted Easterwood's claim that the train was traveling at excessive speed. The Court, however, found no objection to Lizzie Easterwood's claim based on Georgia law related to safety and warning devices, given that no federal funds had been expended at the grade crossing where her husband was killed. Justice White concluded that under the Federal Railway Safety Act, the scope of state law preemption depends on the scope of agency regulation. The federal act permits states "to adopt or continue in force any law, rule, regulation, order or standard relating to railroad safety until such time as the secretary has adopted a regulation covering the subject matter of such state requirement." According to Justice White the issue was simply "whether the secretary of transportation has issued regulations covering the same subject matter as Georgia negligence law pertaining to the maintenance of and the operation of trains at grade crossings."

The U.S. secretary of transportation in 1971 promulgated regulations for the rail safety act, setting maximum speeds for trains on different categories of track, thus preempting, in White's view, a claim based on a determination of excessive speed under state law. On the other hand, while the secretary had issued regulations applicable to projects where federal funds are employed in the installation of warning devices, no federal money had been spent at the site of the Easterwood accident. Therefore, White found that no federal regulations covered the same subject matter" as Georgia negligence law regarding safety devices.

So Easterwood was a partial but still significant victory for the states. The Supreme Court, however, was only the first "preemption battlefield." In Easterwood, as in most such cases, states were concerned about issues of process and jurisdiction within the federal system. While the Court can be responsive to federalism issues, the Congress and federal agencies often are more concerned about results. The states' argument is that if it is alleged that current state law unfairly imposes tort liability, then state legislatures are the appropriate bodies to consider the issue and if necessary correct the injustice. Such arguments are not always persuasive with some members of Congress and federal administrators who are in effect being asked, as a matter of good government, not to exercise their full power and authority.

The U.S. Senate Commerce Committee marked up S 839, the high-speed rail bill, on Nov. 9, 1993, and amended it to include a provision that could reverse in part CSX vs. Easterwood. That provision simply required the U.S. Department of Transportation to issue regulations covering all rail grade crossings within a specified period of time. However, because the scope of preemption follows the scope of agency regulation under Easterwood and the federal Railway Safety Act, the superficially innocuous provision in S 839 could supersede the state laws preserved in Easterwood. Although the high speed bill stalled in late 1993, attempts to legislatively reverse Easterwood may be taken up again later this year.

Another current threat is that the U.S. Department of Transportation may issue regulations that "cover" the Easterwood situation and thereby preempt the states, even without the spur of congressional action. In this, as in so many cases, appointed federal administrators have enormous latent power, and states are asking them to voluntarily abstain from exercising that power.

Preemption by Court Decision

Easterwood was only one of many similar cases recently considered by the U.S. Supreme Court. A report by the appellate judges' conference observes that the number of preemption cases considered by the U.S. Supreme Court "has increased by a factor of four" over the last 20 years. According to the report, only 10 preemption cases, or 2 percent of the Court's docket, were heard during the 1962, |63 and |64 terms. Twenty-one years later, the numbers jumped to 39 cases - 9 percent of the total docket for the 1985, |86 and |87 terms.

For more than 10 years, the states, acting through the D.C.-based State and Local Legal Center, have been seeking through friend of the court (amicus) briefs to persuade the Court to read federal statutes narrowly and to defer to the judgment of elected state legislators. The Legal Center has had considerable success in this effort, not only winning many preemption cases but also encouraging the Court to develop a so-called "clear statement" doctrine that requires Congress to be explicit about its intent to preempt state law before the courts will act to nullify state action.

One of the Legal Center's most significant Supreme Court victories in a preemption case was the 1991 decision in Gregory vs. Ashcroft. The issues were first whether a provision of the Missouri Constitution requiring judges to retire at age 70 violated the federal Age Discrimination in Employment Act (ADEA) and second whether the provision violated the Equal Protection Clause of the U.S. Constitution. In its brief, the Legal Center urged the Court to interpret the ADEA in a way that recognizes the states' "unique sovereignty and right of self governance."

In her opinion upholding Missouri law, Justice Sandra Day O'Connor, a former state legislator, articulated a "clear statement" rule that provides considerable protection for state statutes. "If Congress intends to alter the vital constitutional balance between the states and the federal government," she wrote, "it must make its intention to do so unmistakably clear in the language of the statute." Her opinion is one of the most broad-ranging and forceful recent defenses of federalism and the role of the states in the American constitutional system.

"This plain statement rule," O'Connor explains, "is nothing more than an acknowledgment that the states retain substantial sovereign powers under our constitutional scheme."

Among the preemption cases in which the Legal Center filed briefs in 1993 were the usual grab-bag of substantive issues: preserving a state law related to priority of claims in insurance company insolvencies, defending a state law related to foreclosure sales and protecting state tax laws as applied to rail-way way property.

In U.S. Department of Treasury vs. Fabe, the Supreme Court agreed with the Legal Center brief and held that a federal bankruptcy statute does not preempt an Ohio law that establishes priority of claims when an insurance company is liquidated. This allows states to better protect policyholders of failed insurance companies. The Court's decision in Fabe comes at a time when a strong effort to subvert the traditional state role of regulating insurance companies for solvency is being made in Congress. Senator Howard Metzenbaum and Congressman John Dingell are pushing for legislation that would supplant state law related to insolvent insurance companies.

In the pending case of BFP vs. Resolution Trust Corporation, the issue is whether a state law regulating foreclosure sales will be preempted by the federal bankruptcy code. The Legal Center brief argues that Congress has not stated clearly, in its drafting of the Federal Bankruptcy Code, an intent to preempt state laws. Again, the hope is that the Court will reinforce a "clear statement" doctrine that will limit the potential for preemption in later cases and in lower courts.

"While there may be those who disagree with the balance that some states have struck in their foreclosure laws," the brief argues, "those disagreements should be resolved though the state lawmaking process, rather than through a constitutionally improper reading of the federal bankruptcy statute."

Oregon vs. ACF Industries was another important case decided in 1993. The Supreme Court agreed with the Legal Center brief that Oregon tax law, which provides exemptions to certain classes of nonrailroad property as a matter of economic development policy, is not inconsistent with the Federal Railroad Revitalization and Regulatory Reform Act. (The 4R Act preempts state tax laws that "discriminate" against railroads.) States could have lost an estimated $100 million had the Court ruled otherwise.

In his opinion for the Court in ACF, Justice Anthony Kennedy emphasized that "principles of federalism" compelled the Court's ruling in favor of Oregon. The 4R Act, he explained, "sets the limits on the taxation authority of state government, an authority we have recognized as central to state sovereignty When determining the breadth of a federal statute that impinges upon or preempts the state's traditional powers, we are hesitant to extend the statute beyond its evident scope."

Preemption by International Panels

While the Supreme Court has recently been sympathetic to the states, it is an open question whether international tribunals will appreciate the uniquely American characteristics of our system of federalism as they render decisions in trade cases. With the recent signing of the North American Free Trade Agreement and a new General Agreement on Tariffs and Trade (GATT), state laws may be subject to challenge as barriers to free trade. Statutes adopted in Sacramento or Richmond may now be subject to preemption as a result of decisions made in Geneva as well as in Washington, D.C.

For example, a GATT panel found that certain state taxes, distribution requirements and licensing fees discriminate against Canadian beer and wine imports. The GATT ruling, which affects 40 states, seeks to require states to change existing laws. States that give preferential tax treatment to their in-state beer and wine producers, for example, are being asked to grant the same treatment to all foreign brewers or remove the preferences.

But more disturbing, the GATT ruling also seeks to change state laws, such as Minnesota's tax law encouraging microbrewers, that treat out-of-state and instate firms even-handedly. The new GATT may impose a much stricter test of what constitutes discrimination against foreign commerce than that imposed by the commerce and foreign commerce clauses of the U.S. Constitution.

Although the 21st Amendment gives states extraordinary power, vis-a-vis the federal government, to regulate the production and sale of beer, wine and spirits, even this area may not be immune to federal preemption when treaties are involved. While states are being asked to voluntarily bring their laws into conformity with the GATT ruling, the federal government may, at some point, choose to act directly under its constitutional "treaty power" to supersede state law.

What Can States Do?

So what remedies are there for the steady corrosive effect of federal preemption by legislation, regulation, court decision and international treaty?

First, states may seek to retain concurrent jurisdiction in a policy area, even when federal legislation has been enacted. Federal civil rights statutes, the Fair Labor Standards Act, and most consumer protection laws, for example, incorporate carefully crafted clauses that clearly reserve to states the authority to enact stricter or more comprehensive standards than those in federal law. The most serious problems have resulted from federal statutes like ERISA, regulating private pension plans, that broadly exclude the states from a field of regulation and may be construed by courts to preempt state laws in a wide range of circumstances that were totally unanticipated by Congress or the states. The preemption clause of every proposed federal statute should be narrowly drawn and should reserve explicitly the power of state legislatures to act concurrently.

Second, the Supreme Court should be urged to reinforce the doctrine that preemption of state law is not to be presumed and that a clear statement of congressional intent to preempt will be required before courts strike down a state statute. The State and Local Legal Center and state attorneys general should continue to drive home this message to the Court.

Third, Congress should pass legislation limiting the scope of preemption. The states have called for legislation that would instruct federal agencies and courts that there should be a clear statement of congressional intent before state law is overridden and that the scope of any preemption should extend only as far as specifically described. In addition, states have called for rules that require a preemption note, allowing a member of Congress to raise a point of order if a bill is brought to consideration without a detailing of the specific state laws that might be affected. One of the biggest problems today is the way in which preemptive language is slipped into legislation without public hearing and due consideration of the impact on states.

Fourth, states should pay much closer attention to the potential impact of international treaties and work with U.S. negotiators to protect state interests as the agreements are being crafted and later as they are being implemented.

Fifth, action must be taken by federal executive order and if necessary by legislation to curb preemptive action by federal agencies. Agency bureaucrats in Washington, D.C., can be far more insensitive to and insulated from state concerns than members of Congress or federal judges.

Sixth, and most important of all, state lawmakers must be alert to the issue and contest bills, regulations, treaty provisions and court cases that threaten to pre-empt the institutional authority of legislatures. Moreover, the states should not only play defense, but where appropriate they should demand that existing preemptive statutes be rolled back or narrowed. For instance, efforts are now under way to enact bills that would narrow ERISA preemption of state labor and health care reform laws. States are also seeking amendments to the Age Discrimination in Employment Act to preserve laws mandating retirement ages for public safety personnel.

By pursuing this six-point program, states would not be simply defending their turf. The defense of state jurisdiction is a defense also of what the late Justice Hugo Black referred to as "the dreams and ideals of Our Federalism."

The ideals at stake here were articulated by Justice O'Connor in Gregory vs. Ashcroft. They include a decentralized government that responds to a "heterogeneous society," increased opportunity for democratic participation, a greater capacity for "innovation and experimentation in government" and most important of all "a check on abuses of governmental power."

"In the tension between federal and state power lies the promise of liberty," says Justice O'Connor.

The Legal Center Defends the States

State statutes may be invalidated not only as a result of preemption, but also by being declared unconstitutional.

A good example is presented by Wisconsin vs. Mitchell, a case that posed the question of whether a state legislature may authorize tougher punishment for a criminal who targets a victim on the basis of the victim's race, religion or other protected characteristics. The Wisconsin Supreme Court struck down the statute on First Amendment grounds, regarding the increased penalty as separate punishment of the perpetrator's thoughts. The case then went to the U.S. Supreme Court.

That's when a unique institution, the State and Local Legal Center, stepped in. Established by NCSL and other state and local government associations, the D.C.-based Legal Center is the final line of defense for state statutes in the nation's high court.

As it does in many other state and local government cases, the Legal Center filed an amicus brief to defend the state statute in Wisconsin vs. Mitchell. The brief argued that an enhanced penalty for hate crimes is justified because "under the Constitution, state legislatures are given wide latitude to find solutions to the problems facing their communities, as long as those solutions do not offend constitutionally protected rights." And the high court traditionally has "recognized the need for deference to legislative judgments concerning the length of sentences."

An enhanced penalty is further justified, according to the brief, because hate crimes subject victims to a "profound and pervasive sense of vulnerability." Such crimes also are more damaging to communities and can trigger a wave of incidents as "illustrated by the racially motivated Howard Beach and Bensonhurst crimes in New York City."

Nor, argued the Legal Center, does the First Amendment bar an enhanced sentence for a hate crime, which after all, addresses not thought, speech or even expressive conduct but rather criminal conduct. In other words, "aggravated battery is not protected speech."

The Supreme Court agreed. An opinion written by Chief Justice William Rehnquist upheld the constitutionality of the Wisconsin hate crime statute. While mere abstract beliefs cannot be taken into account in sentencing, Rehnquist explained, beliefs that form the motive for a crime appropriately may be considered.

Since its founding in 1983, the Legal Center has become an important resource for state and local governments in Supreme Court litigation. It has filed over 168 briefs amicus curiae or approximately 15 to 20 briefs every year. In addition, the center conducts, every Supreme Court term, numerous moot courts. This sharpens the oral advocacy skills of state and local attorneys who argue before the Court. A review by former Supreme Court clerks concluded that Legal Center briefs were among the best submitted, comparable in scholarship to those filed by the solicitor general, a testament to the skill of Legal Center lawyers and the distinguished pro bono attorneys who are recruited by the center to write many of its briefs.

The Legal Center files in four major types of civil cases involving important questions of constitutional law. As in Wisconsin vs. Mitchell, the center frequently defends state and local legislation from First Amendment and similar challenges that a state has violated an individual's constitutional rights. Cases that contest state taxing or regulatory authority under the Commerce Clause are a second category. Hundreds of millions or even billions of dollars may be at stake when state tax cases are accepted by the Supreme Court. Cases related to the liability of state and local governments, which frequently arise under Sections 1983 and 1988 of the Federal Civil Rights Act, are a third category. Perhaps most important, the Legal Center argues for the restoration of constitutional protections of federalism in cases involving the 10th Amendment, the 11th Amendment and similar basic constitutional provisions protecting the rights of citizens to local self-government. The center also files briefs in preemption cases and in cases involving the interpretation of federal statutes that have a significant impact on states and local governments, such as environmental law and fair labor standards.

GATT Preemption of

State Beer and Wine Laws

The question of preemption is increasingly likely to arise from international trade treaties. As an example, witness the General Agreement on Tariffs and Trade panel ruling that state laws and regulations in 14 categories in 40 states discriminate against Canadian beer and wine imports. Listed below are the laws and the states affected.

1. State beer and wine tax rates based on annual production.

New York, Oregon, Rhode Island, Puerto Rico

2. State tax credit for small breweries based on production.

Kentucky, Minnesota, Ohio, Wisconsin

3. State taxes on wine based on origin of product.

Alabama, Georgia, Nebraska, New Mexico

4. State excise tax at wholesale level for imported wine.


5. Tax treatment of wine based on local ingredients.

Michigan, Ohio, Rhode Island

6. Tax on wine made from a specified variety of grape.


7. Excise tax credit on beer for equipment purchases.


8. Three-tier exemption system.

Alaska, California, Connecticut, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Montana, New Hampshire, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin

9. State requirements to use common carriers.

Arizona, California, Maine, Mississippi, South Carolina

10. State licensing fees for imported beer and wine.

Alaska (beer and wine), Vermont (beer only)

11. Exemption of in-state wine from prohibition of sales of alcoholic beverages in certain areas of the state.


12. Requirements of "price affirmation" (imported products may not be offered below the price of these products in neighboring states).

Massachusetts, Rhode Island

13. State laws that allow liquor control boards to require listing (posting the notice of state sale of state products) and delisting (removing other products from the list).

Idaho, Mississippi, New Hampshire, Pennsylvania, Vermont, Virginia

14. Wholesaler distribution requirements.

Connecticut, Florida, Maryland, Massachusets, Missouri, Oregon, Texas, Utah.
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Title Annotation:includes related articles
Author:Waren, William T.
Publication:State Legislatures
Date:May 1, 1994
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