May 22, 2009
President Directs Agencies on Preemption
President Obama this week issued a memorandum for agency heads that restores the federalism and preemption principles in Executive Order 13132 (August 10, 1999, "Federalism," Sec. 4, "Special Requirements for Preemption") and directs agencies to include statements of preemption in regulations "only when such statements have a suffiicent legal basis" and to review existing regs to ensure they meet these standards.
The memorandum marks a significant shift from the Bush administration attempts to preempt through the back door--adding preemption provisions into regulatory preambles and attempting to preempt without clear congressional intent or direct conflicts with federal law. These attempts were most recently highlighted in Wyeth v. Levine, in which the Court ruled that FDA regulations did not preempt a state tort verdict. (Recall that the Bush administration slipped a preemption clause into the preamble of the FDA regs, but this clause ultimately did not play a role in the case at the Supreme Court. Instead, the Bush administration claimed that the state tort verdict conflicted with FDA regs and that FDA regulatory preemption reflected congressional intent.)
Preemption claims--but somewhat more modest claims--will be highlighted again, when the Court rules on Cuomo v. Clearing House Ass'n, the case argued on April 28, dealing with whether regulations of the Office of the Comptroller of the Currency, which interpret the National Bank Act to preempt state enforcement of state law against national banks, preempted New York's then AG Elliot Spitzer's investigation into lending practices of certain banks. (The National Bank Act provides that "[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice of such as shall be, or have been exercised or directed by Congress or by either House thereof." OCC regs interpreted this to preempt state enforcement of state laws regulating national banks.)
Taking on some of the Bush administration backdoor preemption practices and broad preemption claims (as in Wyeth v. Levine), the memo lists two restrictions and an instruction for agencies:
1. Heads of departments and agencies should not include in regulatory preambles statements that the department or agency intends to preempt State law through the regulation except where preemption provisions are also included in the codified regulation.
2. Heads of departments and agencies should not include preemption provisions in codified regulations except where such provisions would be justified under legal principles governing preemption, including the principles outlined in Executive Order 13132.
3. Heads of departments and agencies should review regulations issued within the past 10 years that contain statements in regulatory preambles or codified provisions intended by the department or agency to preempt State law, in order to decide whether such statements or provisions are justified under applicable legal principles governing preemption. Where the head of a department or agency determines that a regulatory statement of preemption or codified regulatory provision cannot be so justified, the head of that department or agency should initiate appropriate action, which may include amendment of the relevant regulation.
How has the Obama administration done on this?
The administration defended the pro-preemption position in Cuomo based upon Chevron deference to OCC's interpretation of the "text, structure, and purposes" of the National Bank Act. Its argument is much closer to the principles in EO 13132 than the Bush administration's practices and its arguments in Wyeth v. Levine. EO 13132 states, in relevant part (Sec. 4):
(a) Agencies shall construe, in regulations and otherwise, a Federal statute to preempt State law only where the statute contains an express preemption provision or there is some other clear evidence that the Congress intended preemption of State law, or where the exercise of State authority conflicts with the exercise of Federal authority under the Federal statute.
(b) Where a Federal statute does not preempt State law . . . agencies shall construe any authorization in the statute for the issuance of regulations as authorizing preemption of State law by rulemaking only when the exercise of State authority directly conflicts with the exercise of Federal authority under the Federal statute or there is clear evidence to conclude that the Congress intended the agency to have the authority to preempt State law.
The dispute in Cuomo turns in part on what Congress meant by "visitorial powers"--whether this phrase and other sections show "clear evidence to conclude that the Congress intended the agency to have the authority to preempt State law"--and not whether an agency can preempt by slipping a preemption clause into a regulatory preamble. Still, while the "clear evidence" standard in (b) is closer in Cuomo v. Clearing House Ass'n than in Wyeth v. Levine, the evidence of congressional intent in Cuomo certainly isn't clear to everyone.
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