Dangerous Corporate Lawsuit Could Result in Chilling Effect on State Legislatures


A federal court case arising out of Vermont could have dramatic implications for state sovereignty and the ability of legislatures to regulate corporate activities within their borders. Nine states and the National Conference of State Legislatures (NCSL) are standing in support of the State of Vermont in the U.S. Court of Appeals, 2nd Circuit. Vermont is appealing a controversial lower court ruling that, if upheld, would overturn decades of case law defining how courts determine legislatures’ “intent” and whether their actions are preempted by federal authority. Should Vermont lose, NCSL predicts a chilling effect in legislatures across the country and a move toward limiting public debate and open government.

At issue in the case  Entergy Nuclear Vermont Yankee et al v. Vermont Governor Peter Shumlin et al (Entergy v. Vermont) — are laws Vermont enacted in 2005 and 2006 regulating operations at the Vermont Yankee nuclear power plant (Acts 74 and 160). Under federal law and Supreme Court precedent, the authority to regulate “nuclear safety” is reserved to the federal government, though states retain the authority to regulate other activities and impacts of nuclear power plants. For instance, over a dozen states (including California, Kentucky, and Minnesota) have long since enacted bans on the construction of new nuclear power plants over concerns about the economic consequences to the state of highly radioactive waste that must be stored at reactor sites indefinitely, since the federal government has failed to develop a viable solution for the waste.

This division line between state and federal authority itself is not the central question in the case  rather, the issue is how the court decides whether a state law has crossed the dividing line between state and federal authority. The courts have a long-established practice of looking at two primary criteria for deciding whether a state law is preempted:

  • Whether the law has the practical impact of infringing on powers reserved to the federal government.
  • Whether the language of the state’s law expressly strays into such territory.

What individual legislators or expert witnesses say about the legislation in testimony or debate has long been considered immaterial by the courts, given that the language of the law itself is what the legislature as a whole has endorsed. This long-established doctrine has protected legislatures from frivolous or malicious lawsuits attacking their decisions and preserved the legislative branch’s vital role in a democracy as a forum for wide-ranging, unfettered public debate.

Whether Vermont’s laws complied with these standards is not even the subject of dispute. Instead, the plaintiff, Entergy, based its case on alleging that lawmakers essentially conspired to speak “in code” when writing Acts 74 and 160, with the intent of skirting preemption to regulate nuclear safety by couching the laws in non-preempted terms. The company excerpted statements made by individual legislators and expert witnesses over the course of five years of legislative debate, arguing that the legislature’s “true intent” was different from that expressed in the laws themselves. Entergy also argued that the state, by rejecting a contract offer by Entergy to sell electricity to the state’s utility customers at a higher rate than the state was willing to accept, violated the Commerce Clause of the Constitution.

In January, the district court ruled in favor of Entergy and blocked Vermont from enforcing its laws, and the state appealed in March. Should Vermont lose the case, this new precedent would leave legislatures open to the possibility of retaliatory litigation by corporations seeking to defeat state laws and regulations. At the very least, the ruling could undermine legislators from fully examining issues they are called upon to address, as NCSL argued in its brief supporting Vermont:

Left uncorrected, this type of misguided judicial inquiry will inevitably chill state legislatures’ willingness to debate policy issues robustly and to solicit a variety of viewpoints about proposed legislation openly.

In fact, NCSL points out that the court’s rationale alarmingly grants “individual legislators a remarkable (and extra-constitutional) power over the legislature as a whole,” by using “the words of a few to ascribe to the Vermont Legislature, as a matter of law, an intent that the legislature as a body did not desire or adopt, and one that is contradicted by the statements of purpose that the legislature did formally adopt.”

In a brief submitted by New York Attorney General Eric Schneiderman, nine states are also supporting Vermont’s appeal: Connecticut, Iowa, Maryland, Massachusetts, Mississippi, Missouri, New Hampshire, New York, and Utah. In addition to arguing against the court’s grounds for determining legislative intent, they argue that the case could have significant financial implications for states: “States must be alert to the significant costs associated with decommissioning a nuclear power facility,” a major economic consideration for states when such jobs can easily cost over $1 billion for a single nuclear reactor.

The prospect of states losing the authority to protect their residents from billions in environmental liabilities is concerning, but the undermining of legislative authority and open government is an even greater concern. The Second Circuit Court is expected to hear the case later this year, and to render a decision as soon as spring 2013. On the issue of whether the nuclear plant shuts down, the state Public Service Board is now reviewing the case and is also expected to rule in early 2013.

Full Resources from this Article

Dangerous Corporate Lawsuit Could Result in Chilling Effect on State Legislatures

NCSL – Amicus Brief in Entergy v. Vermont
Vermont Attorney General – Vermont Yankee Litigation
Vermont Citizens Action Network – The Power of Act 160