June 2007
Federal Preemption: States' Powers, National Interests
When does federal law trump state law? Federal preemption has become the stuff of public debate and of major news stories. Consumer advocates, plaintiffs attorneys, and state officials argue that broad federal preemption claims interfere with the states' historic police power to protect their citizens against corporate misconduct. Corporations and federal agencies insist that preemption offers a vital safeguard against unwarranted and inconsistent state interferences with the national economy.
A year ago, Richard A. Epstein and Michael S. Greve, two leading scholars in this field, assembled a group of prominent legal scholars and practicing attorneys for a probing analysis and spirited discussion of these difficult issues. The ensuing debate has been published in a new collection of essays entitled Federal Preemption: States' Powers, National Interests (AEI Press, May 2007). At this event, Epstein and Greve--the editors of the book--presented their conclusions, followed by commentary from Judge Stephen F. Williams of the United States Court of Appeals for the District of Columbia Circuit and Charles Cooper of Cooper and Kirk LLP. AEI's Peter J. Wallison moderated.
Michael S. Greve
AEI
There are three reasons why the issue of preemption is generating so much interest right now. First, the New Deal constitutional revolution created a system of concurrent jurisdiction with a strong bias toward more regulation. The federal regulations create a floor below which states that prefer less regulation cannot go, but at the same time, the lack of preemption allows the states that prefer more regulation to pile on top of the floor so that the strictest regulator always wins. Second, in creating this framework, the New Deal-era Supreme Court demolished all other defenses against extreme regulation except the dormant Commerce Clause. Preemption must now replace all the now defunct pro-competition legal barriers--a heavy weight to bear. Third, many people believe that preemption should not be construed in a manner which conflicts with the general tenor of the legal structure. Chemerinsky, for example, argues that the basic principle of the Constitution is the empowerment of the states and that preemption should honor that principle. Instead of empowering the states to enact more and more regulations, preemption should be interpreted using much of the same framework as the dormant Commerce Clause--not the framework derived from the rest of the New Deal.
The New Deal assumption that regulation is always good is long dead. Presidents Jimmy Carter, Ronald Reagan, and Bill Clinton all engaged in deregulation. Should we stick to a preemption regime that encourages the states to undo these hard-won gains?
Richard A. Epstein
University of Chicago Law School
The Constitution is fundamentally a classical liberal document, although not a libertarian one. It contains a presumption in favor of liberty, except in two areas: torts, when one party harms another, and network coordination, when inconsistent state laws impose severe costs on the economy. Thus, if you read the classical era decisions with this framework in mind, it is clear that they follow these intuitions.
Under the New Deal, liberty or regulation became a political choice rather than a constitutional principle, and progressives did not choose liberty. There were no pro-competitive elements in the progressive platform. The dormant Commerce Clause was an offense against this anticompetitive attitude, and it is difficult to see how it survived except that the New Dealers still believed in the federal government.
There are two principles which should be applied to these questions. The first principle is that deference does no good. Courts have to decide that statutory interpretation is their job, instead of relying on the assertions of administrative bureaucracies. The second principle, like so many sensible principles, can be found in the Lex Aquila. It is an anti-evasion doctrine that allows courts to interpret laws to strike down close substitutes. This anti-evasion doctrine was part of English common law and was understood by the Founders when they wrote the Constitution.
Charles Cooper
Cooper and Kirk LLP
Federalism has few true friends and few true enemies. Conservatives are more divided on federalism than on any other issue. On one side are the states' rights federalists, and on the other are the federalists of corporate America. Reagan was a states' rights federalist, and his executive order included a strong presumption against preemption. Federalism, Reagan believed, protects the citizens of each state to enact their own principles.
The Lochner Court limited federal powers but fiercely preempted any state law which came near federal law. The New Deal reversed this. It expanded federal power but relaxed preemption. This showed that the New Deal court had some faint pulse of conscience and protected the states a little. The New Deal court conveyed the states' authority to Congress with only one small condition--that Congress express itself clearly when usurping stealing traditional state powers.
The authors argue that this regime creates a federal floor for state regulation. They attack the boundless Commerce Clause, but creating a bottomless state regulatory floor would only help until the first state decided to regulate. There is still regulatory competition above the floor, and respect for state autonomy suggests allowing states to regulate over the federal floor, not banning state regulation altogether.
The Honorable Stephen F. Williams
U.S. Court of Appeals, D.C. Circuit
Everyone accepts the proposition that the issue at stake is Congressional intent. Thus, the fundamental question becomes what to do when Congress is unclear. The presumption wielded by the court should depend on what collective action problem Congress is trying to solve. These problems come in four varieties: three sound and one unsound.
The first case is the direct physical externality: for example, pollution from one state's firms into a river which then flows into other states. Imagine that instead of the environmental regulations we have, the federal government created a scheme which only regulated interstate pollution. If the state then wished to regulate in-state pollution, there should obviously be no presumption of preemption.
Alternatively there may by a regulation of in-state behavior which imposes significant out-of-state costs. If Congress intervenes here there should be no presumption against preemption. Imagine instead that this regulation is economically efficient, producing more benefits than costs, but that it will cease to be efficient if each state imposes a different set of requirements. If Congress's intent is to coordinate these regulations, then there should be a presumption in favor of preemption.
The final case is the "race to the bottom" scenario. This is a false threat. When firms choose their location, they are not just looking for the loosest environmental policies they can find. Their employees will need to live there too, and the quality of life the state provides is a genuine business concern. If Congress passes a law meant to prevent this spurious collective action problem, however, the court still needs to honor its intent and use the presumption against preemption. Preemption law will not improve until people come to understand that competition between the states is not a race to the bottom.
AEI research assistant Harriet McConnell prepared this summary.
