EVENTS

Date:	Thursday, April 27, 2006 - Friday, April 28, 2006
Location:	Wohlstetter Conference Center, Twelfth Floor, AEI 1150 Seventeenth Street, N.W., Washington, D.C. 20036

April 2006

Federal Preemption: Law, Economics, and Politics

Panel I: Constitutional Foundations

Viet Dinh
Georgetown University Law Center

Since the word “preemption” did not enter into the Constitutional lexicon until a dissenting opinion by Justice Louis Brandeis in 1917, I will examine the nineteenth century Court’s interpretations of circumstances in which federal law superseded state law. Contrary to what we see today--a very narrow scope of exclusive state authority--the situation was very different in the nineteenth century, wherein the Court’s jurisprudence aimed to protect state authority in terms of police power but also to discern the limited level of constitutional authority granted to the federal government. Ultimately, the Court deliberated on the question “What small area of federal exclusive authority does the Congress have under the Constitution?”

Analytically speaking, the nineteenth century Court’s approach contrasts with the modern day Court’s preemption analysis, which starts and often ends with an effort to discern Congressional intent and Congressional purpose. The nineteenth century Court focused almost exclusively on Constitutional structure.

Michael S. Greve
AEI

At the Constitutional Convention, or for that matter, before the convention, James Madison insisted that state autonomy over a separate sphere spells political instability both for the Union and within the states. He argued for a “negative,” a federal right of preapproval of all state legislation. To Madison’s dismay, the convention rejected the negative and instead adopted the Supremacy Clause as the principal means of ensuring federal supremacy.

The crucial difference between the negative and the Supremacy Clause lies in the institutional default settings. According to the negative, state law remains inoperative until Congress acts. Under the Supremacy Clause, state law remains operative until and unless Congress or court rejects it. Under the negative, institutional obstacles or sheer inertia may keep Congress from approving harmless or beneficial state legislation. In contrast, the Supremacy Clause introduces errors in the opposite direction.

Impediments to rushed federal legislation are worth having in the general course of events but become a liability when the case at hand demands prompt and forceful intervention. From Madison’s perspective, the menace of faction-driven state legislation demands prompt and forceful intervention.

Interestingly, the convention did, in fact, adopt Madison’s negative for certain classes of state laws, listed in Article I, Section 10 of the Constitution. States may not do a number of things, and some state actions are subject to Congressional approval--that is to say, a Madisonian negative. The prohibited actions pose manifest external threats to sister states, whereas purely internal depredations are left to the operation of the Supremacy Clause. To the extent that the federal government’s enumerated powers do not reach that far, the internal depredations in the states are left completely unremedied. “The partial provision made,” Madison said, “supposes the disposition on the part of the states which will evade it.”

Madison’s perspective is a useful alternative view that is worth pondering. The Supremacy Clause is the bare minimum necessary to run a country dominated by faction within states.

Panel II: The Progressives, the Lochner Court, and the New Deal

Stephen Gardbaum
UCLA School of Law

The Lochner Court’s treatment of preemption and the Dormant Commerce Clause casts serious doubt on the traditional view of the Lochner Court as antiregulation and pro-states’ rights. A comparison of the Lochner Court’s preemption and Dormant Commerce Clause interpretations with those of previous and subsequent courts shows that the Lochner Court was strongly in favor of economic nationalism. The Lochner Court favored uniform federal regulation in order to maintain the United States as a single national market unencumbered by diverse state regulations.

The Lochner Court’s view on preemption contrasts with the modern conception of preemption as a discretionary Congressional power requiring manifest Congressional intent for its exercise. Moreover, today’s Court allows for genuinely concurrent state authority, while the Lochner era court gave the federal government exclusive authority. The Lochner Court had no equivalent of the modern presumption against preemption. Thus, the Lochner Court held somewhat opposite views on the two aspects of the Commerce Clause, its breadth, and its depth. The Lochner Court allowed Congress a narrower scope of Commerce Clause authority and vigorous exclusivity in those areas where that authority applied.

This connection between breadth and depth was exactly reversed by the New Deal court, which allowed a wider range for the commerce power, but scaled back the clause’s depth at the same time by replacing automatic preemption of state law with genuine concurrency and the presumption against preemption. The Lochner era court described the nature of the commerce power as paramount and plenary; automatic preemption followed from that conception of the commerce clause. We simply do not see, since the New Deal, any reference to automatic preemption.

Samuel Issacharoff
New York University Law School

Catherine Sharkey
Columbia University Law School

In “conflict preemption” cases, Congress has acted--but has not foreclosed--all state regulation. In order to highlight the difficulty of conflict preemption, we want to focus on the area of product liability. Product liability is an application of tort law, a traditional area of common law regulation left to the states. Product liability is also necessarily about interstate commercial goods. Obviously, this fosters a mismatch between state-level regulation and goods that operate at the level of the national market.

Conflict preemption situations arise because Congress expresses the national agenda at setting liability standards pursuant to its Commerce Clause powers, but they also forgo a remedial scheme for people who are injured. For remedial issues, Congress tends to work through a savings clause, which explicitly leaves state tort law in force. This theory of dual liability and remedy systems is bound to be a failed enterprise, because the tort system and liability system both affect primary conduct.

Courts use a functional analysis to determine the scope of preemptive authority of the federal liability standard over the state law remedial standard. This functional analysis has two guiding concerns. The first is that economic nationalism requires a solution of a coordination problem; if the court is persuaded that the federal government is trying to solve a coordination problem among the states--even in traditional areas of state competence--that leads to a more expansive reading of the federal interest. The second is a predation model in which states act opportunistically against other states. The courts defer to the federal interest when the federal statute aims to stop the states from harming each other.

Panel III: Modern Preemption Regimes: Financial and Network Industries

Randy Picker
University of Chicago Law School

Market entry is in some sense the most important event in the economy. But should we look to municipalities, states, or federal government for control of market entry, especially with regard to technology sectors? For instance, both the municipal wireless broadband movement and the video-over-IP movement complicate market entry jurisdiction questions. These are national technologies--the satellite footprint is the entire continental United States--but much of the policy is driven by local concerns. International treaties handle the satellite orbit slots. But most of the regulations are local in nature. For instance, “carry one, carry all” stipulates that a company carrying one local station has to carry all local stations. The policy aims precisely at preserving the local competition among these terrestrial broadcasters.

For the sake of efficiency, it would make sense to regulate at the national level, rather than forcing technology industries to negotiate city-by-city, state-by-state. Still, much of the regulation could be handled at the local level, and certainly each locale could bring particular local competition concerns to the table. However, we have competing concerns about local monopolies in which local governments favor insiders over outsiders.
As these technologies and others develop and expand, we will be forced to address these questions regarding the proper governmental level at which to regulate them.

Richard Epstein
University of Chicago Law School

Preemption is treated as a conflict between state law and federal law, but it is often a question of state and federal government cooperation. The cooperative approach, in effect, allows for greater power at both levels than either would have as a single regulator. Two regulators with overlapping jurisdictions play tag-team jurisprudence in which first one regulator blocks a private initiative, and then becomes thoroughly reasonable while the other regulator begins to block the private initiative. The initiative gets blocked, but no single actor is responsible--and no regulator has fully exceeded its Constitutional limitations, at least not in such a way that its action can be challenged.

A preemption doctrine that prevented this cooperative approach would probably not achieve complete reversibility back to spheres of exclusive jurisdiction. The state or federal presence in a certain situation might change, but it is likely that dual levels would remain. Agency reform or a change in the preemption doctrine will not revert the situation to pre-1937 jurisdictional boundaries. Federal institutional structures may change the way federal presence performs in certain situation, but the federal presence will remain.

In comparison, reversibility is much more likely in situations in which state or local intrudes in areas that were previously the exclusive problems of the FCC. These situations do not require a legislative fix to eliminate embedded bureaucracy. There is no institutional impediment blocking a return to the status quo ante.

Panel IV: Modern Preemption Regimes: Environment, Health, and Safety

Coleen Klasmeier
Sidley Austin

The FDA participated as a non-party in a handful of preemption cases in the past half-dozen or so years. In each of these cases, prior to litigation, FDA scientific staff carefully considered the relevant scientific issue. Plaintiffs sought to second guess under state law the carefully calibrated and well-publicized decisions that the FDA had reached with respect to pharmaceutical warning labels.

The warnings sought by plaintiffs would have had dramatic public health consequences. As a general matter, the FDA’s concern with warnings is that too many of them can distract clinicians from the really important ones, and in some cases, too many warnings or overly strong warnings discourage patients from taking--and doctors from prescribing--therapies that could have real clinical utility. In other words, FDA-sanctioned warning labels constitute a floor and a ceiling.

The current liability environment affects the price of drugs, the availability of drugs, and long-term research and development allocations of pharmaceutical companies. The areas most affected are usually the areas with the most delicate, and therefore most needful, health complexities. Aspirin and Viagra remain, but the market undersupplies drugs for, say, pregnancy-specific symptoms.

The most recent development in the area of preemption is the physician labeling rule. In the course of developing the regulation, the FDA felt it necessary to address preemption because of concerns about the product liability environment. The preamble statement essentially reiterates the positions that the Department of Justice took on behalf of the FDA in previous cases. Six categories of liability claims are preempted, and the preamble also expressly rejects the premise that FDA regulation establishes a floor for warnings and not a ceiling.

Thomas Merrill
Columbia University Law School

The nation has shifted from a system of exclusive spheres of regulation, national and local, to one of concurrent jurisdiction by which virtually every political body in the country has some claim to regulate most issues. That creates a prospect of impending interest-group chaos wherein all policy debates cycle endlessly from one political body to another, as the interest groups try to trump the decision of the previous forum.

We need a better way to allocate functions between the national government and state and local governments. Problematically, the Supreme Court’s preemption doctrine is entirely formal in the sense that it has a set number of categories into which it pigeonholes individual statutory provisions, attempting to resolve a critical federalism issue without making any reference to federalism variables.

On the other hand, the propositions of the federalism theory are too abstract to gain traction in individual circumstances. The application of these concepts is quite disputable in most cases and no consensus exists as to which abstract theoretical value is the most relevant in any particular context.

I propose a series of default rules for statutory interpretation in order to resolve ambiguities in Congressional intent over preemption. These default rules can be derived from express preemption clauses in the environmental area. The clauses reflect a kind of antibalkanization principle: Congress desires that certain products that are sold and distributed in interstate markets be regulated nationally rather than chopping up the regulation at the state or local subdivision level. Such subdivisions of the markets would be at a suboptimally small level with regard to economies of scale and scope. Congress, at least in some contexts, seems to be concerned with balkanization of the marketplace, so a balkanization default principle might apply in these contexts. The antibalkanization rule would help answer preemption questions in certain cases.

Panel V: Federalism, Politics, and Preemption

Robert Gasaway
Kirkland & Ellis

Ashley Parrish
Kirkland & Ellis

The elements of legal form in order can help create a meaningful doctrine of implied preemption. Three particular elements of legal form shape this analysis: the proscriptive versus the prescriptive nature of the legal requirement, whether the legal form is cast as a rule or a standard, and the choices for framing standards. The proscriptive versus prescriptive nature of the standard is critical. A prescriptive standard is optimal and it does not make sense for local juries to undermine a federal golden mean.

The enforcement element of the Congressional form also gives good guidance. A pure standard has deterrent effects, but it also potentially has very severe retroactive effects. A pure equitable standard allows an injunction that is specifically framed in the forms of a rule in concrete terms. The last form is the licensing standard. Licensing standards and equitable standards offer more thorough provisions to mitigate retroactive effects of standard violation. Preemption doctrine should block private law lawsuits if Congress has specifically chosen to mitigate the retroactive effects of a particular standard as a matter of public law.

Ernest Young
University of Texas Law School

Preemption is a question of federalism, and federalism is a question of Constitutional principle. Federalism is about power. It is not about efficiency.

History suggests that self-enforcement should animate the federalism doctrine. The key to the states’ ability to protect themselves is their regulatory autonomy. A proper preemption doctrine would ensure that the states would be enabled to compete for the loyalty of the citizen by implementing a diverse brand of policies that reflect their own citizen’s preference.

The presumption against preemption should be applied. In situations of ambiguity, the normative canons of statutory construction should be designed to reflect underenforced Constitutional values rather than Congressional intent. We should also limit deference to the preemptive authority of federal administrative agencies when they interpret federal law as preemptive.

Anne van Aaken
Max Planck Institute for Research on Collective Goods

The horizontal and vertical levels of government are very much intertwined in the European Union (EU), whereas the United States has more areas of exclusive jurisdiction. The European subsidiarity clause, by which issue areas should be regulated by the lowest level of government that can regulate the issue, insufficiently blocks the European Court’s integrationist tendencies. The European Court usually defers to the judgment of the European institutions. A European measure has never been invalidated on the grounds of subsidiarity.

Throughout the European governmental structure, cooperative harmonization is stressed, and when the rules of parallel competencies conflict, the principle of supremacy applies. Furthermore, the flexibility clause says that the community may act if action by the community should prove necessary to attain one of the objectives of the community even if there is no competence provision. However, secondary laws have been struck down by the ECJ because the European institutions did not have the competence listed.

All in all, the EU situation is as complex as the U.S. situation, though there is more emphasis on harmonization in the EU and the reference to legislative intent is stronger in the United States.

AEI research assistant Will Wilson prepared this summary.