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Restoring State Authority: An Agenda to Restrict Preemption of State Laws

- How FDR and the New Deal Court Strengthened State Authority
- The Assault on the New Deal Preemption Standard
- What Obama and Congress Can Now Do to Reduce Preemption
- Conclusion: Principles for Collaborative Federalism and Preemption

 

Introduction

For years, states have increasingly seen their hands tied by a federal government declaring that preemption voids state consumer, environmental and labor rights laws.  The Bush administration in particular used its regulatory authority aggressively to block state law after state law.   

The results have been catastrophic.  Despite the myth that "no one saw the subprime meltdown coming," the reality is that thirty states enacted laws to rein in abuses by predatory lenders.  However, the Bush administration used its regulatory authority over banks to shut down most of those predatory lending laws in the courts. This is just the most dramatic example of how preemption allowed the federal government to enforce its own inaction on state governments at the behest of corporate interests.

Encouraging Initial Moves by Obama:  Just in his first weeks in office, Obama has indicated that his administration will have a very different relationship with the states and will encourage a more collaborative federalism. Obama asked the EPA to reconsider a Bush decision to block California from setting more stringent auto emissions and fuel efficiency standards.  And he signed the new SCHIP law, previously blocked by the Bush administration, that allows states more flexibility in deciding whether and how to extend coverage to the children of working families and immigrants.

A Permanent Progressive Legacy:  As we argued in November, strengthening state power should be a priority for President Obama and other progressive leaders in Washington, D.C.   As we continue to see the misuse of the filibuster to block and water down progressive proposals at the federal level, restoring the ability of states to take action during inevitable periods of federal inaction is all the more important.  Progressive leaders in D.C. often have only a few years to enact dramatic change, but removing the shackles of preemption would be a legacy that will lives on for years with states empowered to continue progressive action long after Obama has left office.

As this Dispatch outlines, restricting preemption was once a core value of progressive leaders beginning with the New Deal.  A wide range of public interest advocates have been urging a restoration of a collaborative federalism to reverse the restrictions on state authority imposed in recent years.    Advocates and state leaders have outlined a host of actions for Obama and the new Congress to take -- and we can only hope they follow through on the steps outlined below.

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How FDR and the New Deal Court Strengthened State Authority by Restricting Preemption

With many analysts comparing the challenges for Obama to those faced by Franklin Roosevelt, contemporary progressives should recognize that one key program of that era was expanding state authority to allow state and municipal leaders to better deal with the economic crisis locally.  

Contrary to the conservative myth that the New Deal centralized federal power at the expense of state governments' authority, the reverse was true.  Right-wing legal decisions preceding the New Deal had struck down a series of state laws in the name of federal supremacy, preempting any state law that came close to any area of presumed federal authority (whether Congress had created a law in that area or not), and more generally circumscribing state authority under a doctrine called "substantive due process."

Ending a Previous Era of Conservative Preemption:  This "Lochner Era" -- named for a 1905 case striking down a state overtime law -- was ended only with the New Deal and President Franklin Roosevelt's appointees to the Supreme Court.  With the new era, both through Congressional action and changes in court decisions, substantial regulatory authority over the economy and other issues was returned to the states, a key goal of progressive New Deal leaders often forgotten.  (See this law review article by Professor Stephen Gardbaum for more on this history). 

While the federal government did take a greater role in regulating the economy, it restored and strengthened state authority as well, the better to encourage additional local solutions.  In particular, a rigid doctrine of preemption was replaced by a presumption that federal law did not block concurrent state action unless Congress clearly indicated a purpose to preempt the states.  As the Supreme Court would argue in a 1947 case, Rice v. Santa Fe Elevator Corp.

We start with the assumption that the historic police powers of the States were not to be superseded...unless that was the clear and manifest purpose of Congress.

Others on the New Deal Court would have gone further and only allowed preemption of state laws where Congress enacted a provision specifically voiding such state laws, but the general view was to respect state laws except where there were obvious conflicts with federal laws on the same subject.   In a similar manner, Congress in the New Deal years often acted to reinforce state authority, as with the enactment of the Fair Labor Standards Act which went out of its way to explicitly allow state and local governments to apply higher minimum wage standards than enacted by the federal government.

This was the context where, for decades after the New Deal, states could continue as "laboratories for democracy," establishing higher minimum wage standards, more innovative consumer protections and pioneering environmental laws that often became the basis for federal legislation and regulations.

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The Assault on the New Deal Preemption Standard

Unfortunately, the corporate-backed rightwing movement has mobilized in recent decades to promote the preemption of state statues by using the courts to undermine the New Deal preemption doctrine.  More conservative judges, Congressional action to explicitly preempt state laws, and regulatory action by the Bush administration have all encouraged this trend.  The lax federal oversight that has also marked this period could therefore not be counterbalanced by state action.  The result has been a breakdown in corporate accountability ranging from the subprime mortgage disaster, to weakened protections for victims of corporate negligence, to more unsafe workplaces and homes.

Corporate Strategy for Undermining Preemption:  The whole erosion of the New Deal bias against preemption was part of a general campaign funded by corporations seeking to weaken or eliminate state economic regulations.   The U.S. Chamber of Commerce unambiguously argues for preempting state regulation in favor of "one set of rules" set by the federal government.

An intellectual center for this attack on preemption has been the Federalism Project at the corporate-funded American Enterprise Institute (AEI), which readily admits that corporations see federal preemption as their "safeguard against unwarranted state interference with the national economy" and use it to stop "aggressive trial lawyers and [state] attorneys general" from increasing regulation on corporations.  As the AEI argues, "billions of dollars hang on regulatory nuances" and corporate interests have aggressively supported the rightwing assault on state laws.  The corporate-backed AEI even has a project dedicated exclusively to criticizing state attorneys general for seeking to hold corporate lawbreakers accountable.

Rightwing Congress Voted to Preempt State Regulations:   One fruit of this corporate mobilization was that the conservative majority in Congress voted over 57 times between 2001 and 2006 to preempt state laws, including action to preempt state limits on air pollution, to preempt state regulation of contaminated food, and to block tougher state regulation of Internet "spam."  Some of these changes were enacted into law while others were defeated, but the trend by conservative lawmakers to undermine state regulation was clear, although new leadership in Congress, as discussed below, is beginning to reestablish respect for state authority.

The Bush Regulatory Assault on State Authority:  Bypassing Congress altogether, the Bush administration launched a direct regulatory assault on state authority across all its agencies, often without going through the tradional regulatory rulemaking process. As a brief by the American Constitution Society explains:

Agencies are making substantive preemption determinations in a way that is neither transparent nor democratic, and are doing so because the Administration has determined that insulating big business from tort litigation is right as a matter of federal policy.

This assault has ranged from the FDA announcing that its approval of a drug’s label immunizes the manufacturer from most failure-to-warn claims under state law, that federal road safety laws mean that car manufacturers can't be sued for defective roofs, and that consumers have lost their right to sue under state law where the Consumer Product Safety Commission (CPSC) has taken regulatory action.  An investigation by the Los Angeles Times revealed that National Highway Traffic Safety Administration (NHTSA) employees were forced to put preemption language into roof strength regulations by political employees at the behest of the auto industry, reflecting a broader reality of Bush adminstration regulations being dictated by corporate interests.   

These restrictions on state authority have extended to trade deals negotiated by the executive branch that threaten to further restrict state authority in a form of international preemption enforced by trade law.

Conservative Courts Ratify the Preemption Agenda:  With pro-corporate appointments to the courts, the Bush administration was able to get its agenda of gutting state authority ratified by most courts.  Courts have largely upheld its preemption of local predatory lending laws, attacks on pro-labor state laws to block public money from going to union busting companies, and radically reduced punitive damages against Exxon-Mobil approved under state law.  In fact, corporations won case after case against state laws during last year's Supreme Court session.  The most dramatic example was Riegel v. Medtronic which exempted medical device manufacturers from liability under state laws if the FDA approved the device, no matter how careless or politicized the federal decision.  

These are just a sample of the full-scale assault on state authority imposed in recent years, a reality that Obama and the Congress have an opportunity now to reverse.

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What Obama and Congress Can Now Do to Reduce Preemption

A number of progressive organizations have laid out a detailed agenda for the new administration in how best to restrict preemption and rebuilding a new commitment to collaborative federalism between the federal government and the states.

Principles for Restoring State Authority:  A white paper on preemption prepared by the Center for Progressive Reform promotes a number of the core principles that progressives should adopt, including:

  • "All government institutions can provide useful input to public policy debates" - federalism should encourage each level of government to contribute to solutions and help coordinate policymaking;
  • Government agencies and the courts should limit their attempt to imply preemption from ambiguous language in Congressional statutes;
  • Agencies and the courts should, absent explicit statutory preemption, generally treat federal laws and regulations as a minimum floor for consumer and worker protections, while protecting the ability of states to create or enforce more stringent or more protective regulation than weaker federal rules.

Take Executive Action:  As noted in the introduction, Obama has already taken a number of actions to reverse Bush era actions meant to restrict state authority on clean cars and labor rules, but there are a number of other immediate actions he can take through executive orders:

  • In the area of financial regulation, advocates have urged a complete break with the Bush administration in favor of allowing states a to hold financial institutions accountable.  Consumers Union on February 4th sent a letter to incoming Secretary of the Treasury Timothy Geithner asking that the Office of the Comptroller of the Currency rescind its pro-preemption regulations that had undermined state banking investigations and predatory lending laws.   The National Association Attorneys General (NAAG) similarly urged the administration allow states the "necessary regulatory authority to impose appropriate standards on lending institutions."
  • More broadly, a large coalition of organization -- including among others Public Citizen, the Alliance for Justice, the National Senior Citizens Law Center, and the Progressive States Network -- has sent letters to both President Obama and his key regulatory officials urging that a key executive orders on federalism signed by President Clinton in 1999 be revived and amended to emphasize that federal agencies refrain from promoting rules that undermine state tort law. 

Revise Federal Laws to Make Non-Preemption Explicit:  Given conservative court impositions of preemption, revising federal statutes will also be required to fully restore state authority.   

  • Passage of the new SCHIP law to give states greater flexibility in coverage decisions is an obvious example of a better direction for federal policy;
  • When the Congress approved a new mental health parity law last fall requiring mental health coverage to be treated similiarly to physical health coverage, the law explicitly protected stronger standards enacted in some states;
  • Congress has introduced a law, S. 3398, last year to reverse the Supreme Court's decision to eliminate the liability for medical device makers under state law;
  • And when Rep. John Dingell has introduced a bill. H.R. 759, the Food and Drug Administration Globalization Act of 2009, to give the FDA more money and authority over food safety in reaction to thesale of salmonella-contaminated peanut butter, he carefully included a provision to explicitly not limit corporate liability "under the law of any State;"

Create a Permanent Legislative Presumption of Non-Preemption:  Beyond individual laws, what is ultimately needed is a broadbased federal law to rein in both regulatory agencies and courts in the future from undermining state laws.  Back in 1999, a bipartisan bill, HR 2245, was introduced to promote greater respect for state authority.   While some provisions of the bill were rightly criticized, there is a core provision on preemption worth enacting which stated:

SEC. 9. RULES OF CONSTRUCTION RELATING TO PREEMPTION.
(a) STATUTES- No Federal statute enacted after the effective date of this Act shall preempt, in whole or in part, any State or local government law, ordinance, or regulation, unless the statute expressly states that such preemption is intended or unless there is a direct conflict between such statute and a State or local law, ordinance, or regulation so the two cannot be reconciled or consistently stand together.
(b) RULES- No Federal rule issued after the effective date of this Act under any provision of law enacted after that effective date shall preempt, in whole or in part, any State or local government law, ordinance, or regulation, unless the statute under which the rule is issued, or another statute, expressly states that such preemption is intended.
(c) FAVORABLE CONSTRUCTION- Any ambiguity in this Act, or in any other Federal rule issued or Federal statute enacted after the date of the enactment of this Act, shall be construed in favor of preserving the authority of State and local governments. 

Such an approach would require Congress to think carefully about whether each law should preempt similiar state laws.  Unless a state law directly contradicts the requirements of a federal law, it will be honored unless such an explicit preemption provision is included  in a federal law.   This will not only improve respect for state authority but eliminate much ambiguity and wasteful litigation, since the standards for preemption will be so much clearer.

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Conclusion: Principles for Collaborative Federalism and Preemption

The bottom-line is that the federal government has neither the resources nor, periodically in our history, the political will to fully protect the American public by itself.   State action is often a warning bell of needed action by other states and the federal government.  

Similarly, business lobbies may be able to gain influence in some federal agencies at various periods, but they rarely can dominate all fifty states, so protecting state authority from preemption is a key means to assure a diversity of authorities where at least some are able to enforce corporate accountability.

The encouraging recent moves by both President Obama and the Congress will hopefully translate into a new era of federal-state collaboration and a progressive federalism that protects the public and encourages policy innovation in statehouses across the country.

Resources

Restoring State Authority:  An Agenda to Restrict Preemption of State Laws

Center for Progressive Reform - Federal Preemption: Undercutting State Protections for Health, Safety and the Environment
Electronic Privacy Information Center - Privacy Preemption Watch
American Association for Justice - Complete Immunity Preemption
Constitutional Accountability Center - Redefining Federalism
Progressive States Network's Stateside Dispatch - Predatory Lending Bubble: How the Feds Preempted State Law
NCSL - Preemption Monitor
U.S PIRG - Tying the Hands of States: The Impact of Federal Preemption on State Problem-Solvers

How FDR and the New Deal Court Strengthened State Authority by Restricting Preemption

Progressive States Network - Strengthening Progressive State Power Should Be Priority for D.C. Leaders
Stephen Gardbau - "New Deal Constitutionalism and the Unshackling of the States," University of Chicago Law Review, 64 U. Chi. L. Rev. 483 (Spring 1998).
Rice v. Santa Fe Elevator Corp. -  331 U. S. 218 (1947)

The Assault on the New Deal Preemption Standard

Progressive States Network - Supreme Court and the States: Business Wins, Voting Rights Lose, and a Mixed Bag on Criminal Justice
SourceWatch - American Enterprise Institute
Center for Progressive Reform - The Truth about Torts: Using Agency Preemption to Undercut Consumer Health and Safety
American Constitution Society - The Emerging Threat of Regulatory Preemption
U.S. Senate Judiciary Committee - "Regulatory Preemption: Are Federal Agencies Usurping Congressional and State Authority."
OMB Watch - States Losing Ability to Protect Public Due to Federal Preemption
U.S. House - Minority Staff of Government Reform Committee - "Congressional Preemption of State Laws and Regulations
Public Citizen - Riegel v. Medtronic related materials and Preemption of Consumer Remedies and Related Topics

What Obama and Congress Can Now Do to Reduce Preemption

Consumers Union - Letter to incoming Secretary of the Treasury Timothy Geithner urging repeal of OCC state preemption
Coalition Letter on Revising Federalism Executive Order
Center for Progressive Reform - Limiting Federal Agency Preemption: Recommendations for a New Federalism Executive Order
NAAG - Interim Briefing Paper Prepared for President-Elect Obama Transition Team
Progressive States Network - Mental Health Parity included in Bailout Plan; Stronger State Laws Remain in Effect
Point of Law - Reversing preemption, one bill at a time