Tuesday, November 24, 2015
The Indiana ACLU filed suit late yesterday in federal court seeking to force Indiana to take Syrian refugees. The lawsuit argues that Governor Mike Pence's action halting state aid to refugee resettlement efforts is preempted by federal law and violates equal protection and Title VI of the Civil Rights Act of 1964.
The case started when Indiana Governor Mike Pence said that his state would not accept Syrian refugees after the Paris attacks, and ordered state agencies not to provide assistance for resettlement efforts. Indiana then turned away a Syrian family (that was subsequently placed in Connecticut).
The ACLU sued on behalf of Exodus Refugee Immigration, Inc., a private non-profit that provides nuts-and-bolts assistance to refugee families in the state. Exodus claims it incurred costs in anticipation of the federal government accepting 10,000 Syrian refugees, some of whom would come to Indiana, but did not receive reimbursement from the state (as it usually would) after Governor Pence ordered state agencies to stop supporting Syrian refugee resettlement.
The complaint argues that the INA preempts Governor Pence's order. It recognizes that the INA requires the federal government to "take into account recommendations of the State," among other considerations and to the extent possible, but correctly says that "[t]he INA does not allow a State to veto placement of a refugee within the State . . . ." In short:
Defendants' suspension of the resettlement of Syrian refugees in Indiana is preempted by the Constitution and federal law for multiple reasons, including that it impinges on the exclusively federal authority to regulate immigration and to classify non-citizens; that federal law occupies the field of refugee admission and resettlement; and that it conflicts with the Immigration and Nationality Act and other federal statutes.
The plaintiffs also argue that Governor Pence's order violates equal protection and Title VI.
Indiana is one of 31 states that have "refused" to accept Syrian refugees after the Paris attacks. (The quotes are because states don't have this authority.) But this appears to be the first federal lawsuit against a governor's order to halt state support for resettlement.
Wednesday, November 4, 2015
The Sixth Circuit ruled yesterday that the federal Clean Air Act does not preempt state common law claims.
The ruling was hardly a surprise, given the plain language of the CAA. Still, the case is a victory for those who seek to enforce clean air requirements through the higher standards of state common law. (The court emphasized several times that the CAA permits states to adopt more stringent standards than the federal standards.) The ruling also allows the plaintiffs' state common law case to move forward.
The case arose when neighbors of Diageo Americas Supply, Inc., a whiskey distiller, complained that ethanol vapors from the facility combined with condensation to propagate "whiskey fungus" on their property. The neighbors filed suit in federal court, alleging state common law caused of action. Diageo moved to dismiss, arguing that the CAA preempted these claims.
The Sixth Circuit rejected that argument. The court looked to the plain text of the Act, congressional purposes, and Supreme Court precedent--all of which pointed against preemption. But the case can be resolved on the text alone, in particular, the savings clause. As the court explained:
The states' rights savings clause of the Clean Air Act expressly preserves the state common law standards on which plaintiffs sue. The clause saves from preemption "the right of any State or political subdivision thereof to adopt or enforce (1) any standard or limitation respecting emissions of air pollutants or (2) any requirement respecting control or abatement of air pollution," except that the "State or political subdivision may not adopt or enforce any emission standard or limitation" that is "less stringent" than a standard or limitation under an applicable implementation plan or specified federal statute.
The court went on to say that state courts are part of the "state," and that common law requirements are "requirement[s] respecting control or abatement or air pollution."
In addition to looking at text, purpose, and precedent, the court added a federalism point:
When Congress acts to preempt state law--especially in areas of longstanding state concern--it treads on the states' customary prerogatives in ways that risk upsetting the traditional federal-state balance of authority. This is why there is a strong presumption against federal preemption of state law, one that operates with special force in cases "in which Congress has legislated . . . in a field which the States have traditionally occupied." Environmental regulation is a field that the states have traditionally occupied. Accordingly, even if the express language of the states' rights savings clause here did not preserve state common law claims, principles of federalism and respect for states' rights would likely do so in the absence of a clear expression of such preemption.
Wednesday, April 22, 2015
The Supreme Court ruled this week in Oneok, Inc. v. Learjet, Inc. that the Natural Gas Act did not preempt retail gas purchasers' antitrust lawsuits against sellers (gas pipelines) for manipulating gas indexes used to set contract rates. Our argument review of the case is here.
The case arose when retail, intrastate purchasers of gas sued gas sellers for falsely reporting gas price data to industry journals that buyers and sellers used to set their contract price for gas purchases. The false reporting resulted in higher gas prices than the true market rate, so purchasers overpaid for their gas. Purchasers sued sellers under state antitrust laws. The sellers moved to dismiss, arguing that the state antitrust suits (by then removed to federal court) were preempted by the Natural Gas Act and FERC's authority under the Act.
Under the NGA, FERC has authority to regulate interstate, wholesale gas sales (sometimes called "jurisdictional" sales), but not intrastate, retail sales. Indeed, the NGA "was drawn with meticulous regard for the continued exercise of state power [over retail sales], not to handicap or dilute it in any way."
So the question was whether the price manipulation, which affected the buyers' intrastate purchases but also affected interstate, wholesale gas prices, was preempted by the NGA.
But there was a catch: the sellers (joined by the government, as amicus) only argued field preemption. Everyone agreed that the NGA contained no express preemption provision, and the sellers did not raise a conflict preemption argument.
The Court said that the answer lies in the "target at which the state law aims." In other words, because the state antitrust suits targeted sellers for manipulation of intrastate (non-jurisdictional) rates, it didn't matter that the manipulation also affected interstate, wholesale (jurisdictional) rates (over which FERC has authority). If the state law aims at intrastate sales, there's no field preemption by the NGA.
But the Court expressly withheld judgment on conflict preemption, leaving that question to the lower courts. It also expressly withheld judgment on the question whether FERC's determination that the NGA field preempts the buyers' claim holds any sway. The Court said that neither the sellers nor the government pointed to any FERC determination, so the Court wouldn't rule on it.
The case is a clear victory for gas purchasers who paid higher-than-market prices because of price manipulation by sellers. Those cases now go back to the lower courts to proceed on the merits.
But at the same time the case also suggests a strategy for sellers in the next round of antitrust litigation: Look for a way to argue conflict preemption (if there is such a way), and ask FERC to opine on the scope of NGA's field preemption.
Wednesday, April 1, 2015
The Supreme Court ruled this week that the Supremacy Clause does not confer a private right of action for injunctive relief against state officers who are allegedly violating the Medicaid Act. The sharply divided ruling (along conventional ideological lines, except for Justices Kennedy and Breyer) is a blow to the courts' equitable powers and access to justice, and, as Justice Sotomayor wrote in dissent, "threatens the vitality of our Ex Parte Young jurisprudence."
More immediately, the Court's ruling is a blow to underpaid Medicaid providers. They now cannot seek an injunction against an under-paying state in federal court; instead, they have to petition the federal government to withhold Medicaid funds from a state that violates the Medicaid Act--a much harder way to get relief.
The case, Armstrong v. Exceptional Child Care, Inc., arose when habilitation service providers sued Idaho for paying them too little under the federal Medicaid program. The providers based their claim on Section 30(A) of the Medicaid Act and the Supremacy Clause. Section 30(A) requires Idaho (and other states) to provide payment for services sufficient "to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan . . . ." The providers argued that this requirement preempted Idaho's low payment rate and sought injunctive relief against state officers who implement Idaho's Medicaid plan.
Justice Scalia wrote for the Court, joined by Chief Justice Roberts and Justices Thomas, Breyer, and Alito. He said that the Supremacy Clause does not confer a right of action for injunctive relief, because the Clause doesn't provide for it, and because to allow it would permit private parties to enforce congressional actions, "significantly curtailing [Congress's] ability to guide the implementation of federal law."
Justice Scalia also wrote that the Court lacked equitable power to enjoin Idaho's unlawful action under the Medicaid Act, because Section 30(A) demonstrates "Congress's 'intent to foreclose' equitable relief." He said that the "sole remedy" for a state's violation of the Medicaid Act is withholding of federal funds, and he said that Section 30(A) is couched in judicially unadministrable terms and standards.
Justice Breyer concurred in all but Part IV of Justice Scalia's majority opinion. (Part IV argued that the Medicaid Act itself didn't provide an express cause of action for the plaintiffs, third-party beneficiaries to Idaho's Medicaid agreement with the federal government.) He argued that administrative agencies are better suited to applying Section 30(A) than federal courts in an action like this.
Justice Sotomayor wrote the dissent, joined by Justices Kennedy, Ginsburg, and Kagan. Justice Sotomayor wrote that there's a long history of suits for equitable protection against a preempted state law, and that "we have characterized 'the availability of prospective relief of the sort awarded in Ex Parte Young' as giving 'life to the Supremacy Clause.'" Justice Sotomayor argued that there's only a single prior decision "in which we have ever discerned . . . congressional intent to foreclose equitable enforcement of a statutory mandate" (as the majority did here), and that was in Seminole Tribe, a case easily distinguished from this one. She wrote that "the Court . . . threatens the vitality our Ex Parte Young jurisprudence."
Tuesday, January 13, 2015
The Supreme Court heard oral arguments yesterday in Oneok v. Learjet, the case testing whether the federal Natural Gas Act preempts state antitrust claims arising from a conspiracy among natural gas companies to inflate retail natural gas prices.
The dispute arose when natural gas companies reported false natural gas sales prices to industry publications used to set gas prices in retail and wholesale contracts, artificially inflating those prices, and resulting in the Energy Crisis in 2000 to 2002. Retail gas purchasers brought state antitrust cases in several states. The gas companies moved to dismiss, arguing that the Natural Gas Act preempted those claims.
Indeed, the Gas Act grants FERC authority to regulate wholesale sales of natural gas (called "jurisdictional" sales) and any practice that "directly affect[s] jurisdictional rates." So the question in the case is this: Does that authority reach, and preempt state-law claims based upon, the gas companies' false reporting of gas prices to industry publications, thus affecting retail and wholesale gas prices?
The arguments didn't reveal any significant new points (that weren't briefed), and revealed only a little about the Court's likely direction in the case.
The parties agreed that the Gas Act field-preempts state-law claims for some field, but the predictably disagreed about the scope of that field. Oneok, represented by Neal Katyal, argued that the field includes practices like false reporting of gas prices that affect retail sales, because the false reporting also affected wholesale sales (or jurisdictional sales, within FERC's bailiwick). Learjet, represented by Jeffrey Fisher, argued that the Act doesn't sweep that far, and that FERC's authority does not field-preempt the state-law claims here.
Oneok also argued that the Gas Act could conflict-preempt state-law claims (an issue, it said, that would have to be decided on remand), because state-law claims could conflict with the Act and the nationwide uniformity in reporting that FERC encourages. Learjet said that the state-law antitrust claims were congruent with a federal antitrust claim (that everyone says was available to Learjet and the other plaintiffs), so there's no conflict between the state-law claims and federal law.
Questions from the bench revealed little. The progressives on the bench were by far the most active, pressing Katyal the hardest (and seemingly least persuaded by his points), but also probing Fisher (especially Justice Breyer). Conservatives were largely silent, except that Justice Scalia seemed inclined to accept Katyal's point about how price reporting affects wholesale rates (and therefore preempts state-law claims as to retail rates), and Chief Justice Roberts seemed skeptical of Fisher's argument that a ruling for the gas companies would allow them to manipulate and transform any non-jurisdictional practice into one that "directly affect[s] jurisdictional rates."
Justice Kennedy seemed to straddle, and maybe hinted at a result. He asked Katyal whether the Gas Act would preempt a state-law claim that was "exactly the same as the Sherman Act." Katyal responded:
And I think that is complementary authority, which, Justice Kennedy, your opinion in Arizona v. United States decried. Once we're in the field, once Congress has said to a federal agency, as it is here, FERC is regulating the very practice that they are seeking to regulate three different ways, then you can't tolerate states in the area. Why? Because states will have all sort --
Justice Kennedy then asked if Katyal had a back-up conflict-preemption argument, in case his field-preemption point didn't pan out. Katyal: Yes, but for remand.
The outcome will obviously be important to the parties and anyone else worried about accountability for the Energy Crisis in 2000-2002, but probably won't be too important to anyone else. That's because Congress increased FERC's authority in 2005--prompting the government to argue against cert. in the first place.
Thursday, January 8, 2015
Judge Stephen V. Wilson (C.D. Calif.) ruled that California's ban on foie gras is preempted by the federal Poultry Products Inspection Act and permanently enjoined the state from enforcing the ban.
Judge Wilson ruled that the PPIA expressly preempts California's ban. The PPIA preempts states from imposing
[m]arketing, labeling, packaging, or ingredient requirements (or storage or handling requirements . . . [that] unduly interfere with the free flow of poultry products in commerce) in addition to, or different than, those made under [the PPIA] with respect to articles prepared at any official establishment in accordance with the requirements of this chapter[.]
Judge Wilson held that California's ban regulates only the final sale of products containing certain types of foie gras products (foie gras from force-fed birds), and not the earlier method of manufacturing foie gras (which might have escaped preemption). He also held that it didn't matter whether foie gras from force-fed birds was a different product than foie gras from non-force-fed birds, because the PPIA covers both. "Thus, Plaintiffs' [force-fed] foie gras products may comply with all federal requirements but still violate [the California ban] because their products contain a particular constitute--force-fed bird's liver. Accordingly [the California ban] imposes an ingredient requirement in addition to or different than the federal laws and regulations."
Tuesday, January 6, 2015
Judge David G. Campbell (D. Ariz.) ruled that federal immigration law likely preempts Arizona's sweeping identity theft laws and temporarily enjoined the Arizona laws. The ruling means that Arizona is prohibited from enforcing its identity theft laws, which criminalize using fictitious personal information to get a job, pending the outcome of the suit. Arizona can appeal.
Arizona's identity theft laws do the usual things you'd expect an identity theft law to do, plus they outlaw using real or fictitious personal information to get a job. Arizona uses the laws to convict unauthorized immigrants who seek employment using false information. Some of these immigrants sued and sought a preliminary injunction against the law, arguing that it is preempted by federal immigration law and that it violates the Equal Protection Clause.
Judge Campbell agreed as to preemption and issued the injunction. Judge Campbell rejected Arizona's claim that the identity theft law wasn't an immigration law, and therefore couldn't be preempted. He wrote, "Considering the text, purpose, and effect of the identity theft laws, the Court finds that they are aimed at imposing criminal penalties on unauthorized aliens who seek or engage in unauthorized employment in the State of Arizona." He then concluded that the plaintiffs would likely succeed on the merits of their claim that the Arizona law was field preempted by federal law that criminalizes this same kind of behavior:
These provisions evince an intent to occupy the field of regulating fraud against the federal employment verification system. Congress has imposed every kind of penalty that can arise from an unauthorized alien's use of false documents to secure employment--criminal, civil, and immigration--and has expressly limited States' use of federal employment verification documents. The Court concludes that Congress has occupied the field of unauthorized-alien fraud in obtaining employment.
Judge Campbell also ruled that "[t]he overlapping penalties created by the Arizona identity theft statutes, which "layer additional penalties atop federal law," likely result in conflict preemption.
In the same ruling, Judge Campbell denied the state's motion to dismiss the plaintiffs' equal protection claim.
Thursday, December 18, 2014
Nebraska and Oklahoma have filed an original suit against Colorado in the United States Supreme Court over that state's Amendment 64, which legalizes marijuana. The plaintiffs argue that Colorado's Amendment 64 is preempted by the federal Controlled Substances Act.
Here's from the complaint:
22. Colorado state and local officials who are now required by Amendment 64 to support the establishment and maintenance of a commercialized marijuana industry in Colorado are violating the CSA. The scheme enacted by Colorado for retail marijuana is contrary and obstructive to the CSA and U.S. treaty obligations. The retail marijuana laws embed state and local government actors with private actors in a state-sanctioned and state-supervised industry which is intended to, and does, cultivate, package, and distribute marijuana for commercial and private possession and use in violation of the CSA (and therefore in direct contravention of clearly stated Congressional intent). It does so without the required oversight and control by the DOJ (and DEA) that is required by the CSA--and regulations adopted pursuant to the CSA--for the manufacture, distribution, labeling, monitoring, and use of drugs and drug-infused products which are listed on lesser Schedules.
The plaintiffs claim they've been harmed by Amendment 64, because they've had to deal "with a significant influx of Colorado-sourced marijuana."
Tuesday, September 2, 2014
A sharply divided three-judge panel of the Seventh Circuit today upheld Indiana's "right to work" law against federal preemption and other constitutional challenges. The ruling means that Indiana's law stays on the books--a serious blow to unions in the state. But the division invites en banc review and even Supreme Court review of this bitterly contested issue.
The case, Sweeney v. Pence, tested the constitutionality of Indiana's "right to work" law, enacted in February 2012. That law prohibits any person from requiring an individual to join a union as a condition of employment. As relevant here, it also prohibits any person from requiring an individual to "[p]ay dues, fees, assessments, or other charges of any kind or amount to a labor organization" as a condition of employment. In short, it prohibits mandatory "fair share" fees--those fees that non-union-members have to pay for the collective bargaining activities of a union (but not the union's political activities), in order to avoid free-riding.
The law deals a blow to unions, because it allows non-members to escape even representational fees (or "fair share" fees, those fees designed to cover only a union's collective bargaining and employee representational costs, but not political expenditures), even as federal law requires unions to provide "fair representation" to all employees, union or not. This encourages "free riders," non-member employees who take advantage of union activities but decline to pay for them.
The plaintiffs, members and officers of the International Union of Operating Engineers, Local 150, AFL-CIO, argued that the National Labor Relations Act preempted Indiana's law and that the law violated various constitutional individual-rights protections. The preemption argument turned on two provisions of the NLRA, Sections 8(a)(3) and 14(b). Section 8(a)(3) provides,
It shall be an unfair labor practice for an employer . . . by discrimination in regard to hire or tenure or employment or any term or condition of employment to encourage or discourage membership in any labor organization.
Provided, That nothing in this subchapter, or in any other statute of the United States, shall preclude an employer from making an agreement with a labor organization (not established, maintained, or assisted by any action defined in this subsection as an unfair labor practice) to require as a condition of employment membership therein . . . .
Section 14(b) says,
Nothing in this subchapter shall be construed as authorizing the execution or application of agreements requiring membership in a labor organization as a condition of employment in any State or Territory in which such execution or application is prohibited by State or Territorial law.
The Union argued that under this language a state may ban an agency-shop agreement (a requirement that all employees pay full union dues, whether or not they are members), but not a lesser union-security arrangement (like a fair share requirement).
The majority disagreed. The court said that Indiana had broad rights to restrict union-security agreements, including fair share. It first pointed to Supreme Court cases (Retail Clerks I and II) that held that Section 14(b) allowed a state to ban an agency-shop agreement. It then read the term "membership" in Section 14(b) quite narrowly, to include non-members who were required to pay fair share fees. (That's right: the court said that non-members were part of the "membership" under Section 14(b).) The court said that the final clause of Section 14(b) therefore leaves room for states to ban complete union-security agreements (like agency shops) and also lesser union-security agreements (like fair share). It said that some states had these laws on the books when Congress passed Section 14(b), and that some states have them on the books today. "The longevity of many of these statutes, coupled with the lack of disapproval expressed by the Supreme Court, suggests to us that Indiana's right-to-work law falls squarely within the realm of acceptable law."
The majority also rejected the plaintiffs' individual-rights arguments, under the Takings Clause, the Contracts Clause, the Ex Post Facto Clause, the Equal Protection Clause, and the Free Speech Clause.
Judge Wood dissented. She argued that under the majority's approach, Indiana's law amounted to an unconstitutional taking (because, along with the duty of fair representation, it required the union to do work for non-members without pay). She said the better approach (under constitutional avoidance principles)--and the one more consistent with the language of the NLRA and Retail Clerks I and II)--said that the NLRA preempted Indiana's law.
The sharp disagreement on the panel, the uncertain state of the law, and the contentiousness of the underlying issue all suggest that this case is ripe for en banc review and, ultimately, Supreme Court review. If so, this case could be the next in a recent line of anti-union rulings chipping away at fair share.
Monday, July 7, 2014
Ninth Circuit Finds DACA Plaintiffs Entitled to Preliminary Injunction to Receive Drivers' Licenses in Arizona
The Ninth Circuit's opinion in Arizona Dream Act Coalition v. Brewer reversed the denial of a preliminary injunction finding that the plaintiffs had a substantial likelihood of success on their equal protection claim.
The plaintiffs challenged an Executive Order by Arizona Governor Jan Brewer that prohibits recipients of the federal program called the “Deferred Action for Childhood Arrivals” (DACA) from obtaining driver’s licenses by using Employment Authorization Documents as proof of their authorized presence in the United States. The Ninth Circuit panel of judges - - - Harry Pregerson, Marsha S. Berzon, and Morgan Christen - - - in an opinion authored by Pregerson held that even under a rational basis standard of equal protection review, there was no legitimate state interest that was rationally related to defendants’ decision to treat DACA recipients disparately from other noncitizens who were permitted to use their Employment Authorization Documents as proof of their authorized presence in the United States when applying for driver’s licenses.
The major rationale proffered by Arizona for its disparate treatment between classes of noncitizens was that "it is rational to accept (c)(9) and (c)(10) Employment Authorization Documents as proof that the holder’s “presence . . . is authorized under federal law,” Ariz. Rev. Stat. Ann. § 28-3153(D), because persons with (c)(9) and (c)(10) documents “[are] on a path to lawful status,” while DACA recipients are not." The court was "unconvinced" that Arizona "defined 'a path to lawful status' in a meaningful wa," reasoning that "noncitizens’ applications for adjustment of status or cancellation of removal are often denied, so the supposed 'path' may lead to a dead end."
But even so, the court - - - in what could be considered a back door preemption argument - - - noted that states, including Arizona, “enjoy no power with respect to the classification of aliens,” citing Plyler v. Doe, "so their attempt to distinguish between these noncitizens on the basis of an immigration classification that has no basis in federal law is not likely to withstand equal protection scrutiny."
The court likewise rejected the other four rationales raised by Arizona:
- that issuing driver’s licenses to DACA recipients might expose the Arizona Department of Transportation to legal liability “for issuing driver’s licenses to 80,000 unauthorized immigrants;”
- that issuing driver’s licenses to DACA recipients might allow DACA recipients to access state and federal benefits to which they are not entitled;
- that the DACA program might be canceled, requiring Arizona to revoke DACA recipients’ driver’s licenses;
- that DACA recipients may have their authorized presence revoked at any time, and thereafter may be quickly removed from the United States, leaving those they may have injured in automobile accidents with no financial recourse.
The district judge had similarly found these rationales were not persuasive, but had denied the preliminary injunction for failure to show sufficient irreparable harm. The Ninth Circuit found there was such harm, faulting the district judge for seeking to "evaluate the severity of the harm to Plaintiffs, rather than simply determining whether the harm to Plaintiffs was irreparable."
The panel split on the viability of the plaintiffs' preemption claim, with Judge Christen concurring separately to contended that plaintiffs' also had a viable preemption claim.
This is an important case for state benefits including licenses that are being denied to DACA receipients, including licenses to practice law.
Tuesday, April 15, 2014
In a very brief order in Zogenix v. Patrick, federal district judge Rya Zobel enjoined the Massachusetts Emergency Order prohibiting prescriptions of "hydrocodone bitartrate product in hydrocodone only extended release formulation," i.e., the controversial opiate Zohydro ER.
Judge Zobel wrote:
The FDA endorsed Zohydro ER’s safety and effectiveness when it approved the drug. When the Commonwealth interposed its own conclusion about Zohydro ER’s safety and effectiveness by virtue of DPH’s emergency order, did it obstruct the FDA’s Congressionally-given charge?
I conclude that it did. The FDA has the authority to approve for sale to the public a range of safe and effective prescription drugs—here, opioid analgesics. If the Commonwealth were able to countermand the FDA’s determinations and substitute its own requirements, it would undermine the FDA’s ability to make drugs available to promote and protect the public health.
Thus, the judge found that it was preempted. Judge Zobel issued a preliminary injunction prohibiting the state from enforcing its emergency order, although it stayed its injunction until April 22, 2014.
Does this mean that no state can further regulate any FDA approved drug? Even in the contraception area?
Tuesday, April 1, 2014
In a divided opinion in Korab v. Fink, a Ninth Circuit panel upheld the constitutionality of Hawai'i's health benefits for a certain class of "nonimmigrant aliens" against an equal protection challenge. The court reversed the preliminary injunction entered by the district judge.
There are several layers of complexity in the case. There is the immigration scheme, including a particular one involving specific nations; the health benefits schemes of both the federal government and the state; and the equal protection doctrine applicable to immigrant status fluctuating depending upon whether the government regulation is federal or state.
Judge Margaret McKeown's relatively brief majority opinion does an excellent job of unweaving and weaving these various strands of complexities in 22 pages. As she explains, in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Congress classified "aliens" into three categories for the purpose of federal benefits, including Medicaid: eligible aliens, ineligible aliens, and a third category which allowed state option. The "aliens" at issue are citizens of the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau who, under the Compact of Free Association (“COFA”) with the United States, may enter the United States and establish residence as a “nonimmigrant. The "COFA aliens" are in the third category of state option. At one point, Hawai'i included coverage for the COFA "nonimmigrants," but with the advent of Basic Health Hawai'i, its 2010 program, the COFA "nonimmigrants" were excluded. It is the COFA "nonimmigrants" who challenge their exclusion from Basic Health Hawai'i on the basis of equal protection.
Given the federal and state interrelationships, the question of the level of scrutiny that should apply is pertinent. As Judge McKeown explains, "states must generally treat lawfully present aliens the same as citizens, and state classifications based on alienage are subject to strict scrutiny review." In contrast, she states, "federal statutes regulating alien classifications are subject to the easier-to-satisfy rational-basis review." What standard should apply to a "hybrid case" such as Basic Health Hawai‘i, in which a state is following a federal direction? Judge McKeown's majority concludes that rational-basis review applies to Basic Health Hawai'i "because Hawai‘i is merely following the federal direction set forth by Congress under the Welfare Reform Act."
Judge Bybee's concurring opinion, slightly longer than the majority opinion he joined, is an extended argument against equal protection doctrine's applicability in favor of a preemption doctrine.
Judge Richard Clifton, who was appointed to the bench from a private practice in Honolulu, argued that the higher level of scrutiny should be applied essentially because it is Hawai'i that is exercising its state power when in makes the choice.
I acknowledge there is something paradoxical and more than a little unfair in my conclusion that the State of Hawai‘i has discriminated against COFA Residents. The state responded to an option given to it by Congress, albeit an option that I don’t think Congress had the power to give. Hawai‘i provided full Medicaid benefits to COFA Residents for many years, entirely out of its own treasury, because the federal government declined to bear any part of that cost. Rather than terminate benefits completely in 2010, Hawai‘i offered the BHH program to COFA Residents, again from its own pocket. The right of COFA Residents to come to Hawai‘i in the first place derives from the Compacts of Free Association that were negotiated and entered into by the federal government. That a disproportionate share of COFA Residents, from Pacific island nations, come to Hawai‘i as compared to the other forty-nine states is hardly a surprise, given basic geography. The decision by the state not to keep paying the full expense of Medicaid benefits for those aliens is not really a surprise, either. In a larger sense, it is the federal government, not the State of Hawai‘i, that should be deemed responsible.
While Judge Clifton's remarks concluding his dissent focus on the paradox in his opinion, his observations also implicitly point to the paradox at the heart of the majority's decision given that the federal scheme gives the state choices - - - and it was the state that chose to exclude certain "nonimmigrants" from the South Pacific.
April 1, 2014 in Congressional Authority, Disability, Equal Protection, Federalism, Fourteenth Amendment, Interpretation, Medical Decisions, Opinion Analysis, Preemption, Spending Clause | Permalink | Comments (1) | TrackBack (0)
Monday, February 10, 2014
The Michigan Supreme Court last week unanimously upheld Michigan's medical marijuana law, and struck a Michigan town's ordinance that purported to apply the federal Controlled Substances Act against it, in a two-step, federal-state-local preemption ruling. The net result: Michigan's medical marijuana law stays on the books exactly as is, and the City of Wyoming's ordinance against it is struck. And of course: Michigan medical marijuana users could still be prosecuted by federal authorities under the Controlled Substances Act.
The case, Ter Beek v. City of Wyoming, involved a challenge to Wyoming's ordinance that was adopted to allow city authorities to enforce the federal Controlled Substances Act (the "CSA") against Michigan's medical marijuana law. Wyoming's ordinance read:
Uses not expressly permitted under this article are prohibited in all districts. Uses that are contrary to federal law, state law or local ordinance are prohibited.
That last sentence would ban marijuana that violates the CSA in the city.
But a city resident challenged it as preempted by the Michigan medical marijuana law under the Michigan Constitution. The city argued in reply that Michigan's medical marijuana law was itself preempted--by the CSA under the federal Constitution.
The court ruled first that the CSA did not preempt the Michigan medical marijuana law. The reason is simple: nothing in the Michigan law prohibits federal enforcement of the CSA. There's no conflict preemption and no obstacle preemption. Moreover, the CSA "explicitly contemplates a role for the States" in regulating medical marijuana.
The court held next that the Michigan medical marijuana law did preempt Wyoming's ordinance. Again, the reason is simple: the ordinance, by allowing enforcement of the terms of the CSA by local officials, conflicts with the Michigan law. The Michigan Constitution says that the City's "power to adopt resolutions and ordinances relating to its municipal concerns" is "subject to the constitution and the law." Art. 7, Sec. 22. That means that local laws can't conflict with state laws. And the court said that Wyoming's did.
Saturday, January 18, 2014
Julie Ebenstein of the ACLU writes on Jurist.org that the dual system of voter registration in Kansas unlawfully denies citizens the right to vote. Ebenstein outlines the Kansas case challenging the dual system under state constitutional provisions, filed last November and now pending in state court.
As we wrote, two states, Arizona and Kansas, adopted a dual system of voter registration in the wake of the Supreme Court's ruling last summer in Arizona v. Inter Tribal Council of Arizona. In that case, the Court held that the requirement under the National Voter Registration Act that states "accept and use" an approved and uniform federal form for registering voters preempted Arizona's requirement that voters present evidence of citizenship at registration. (The NVRA form requires applicants simply to attest to their citizenship, not to provide additional documentation.)
Arizona and Kansas then announced that they would require voters to register separately for state and federal elections. This created a dual system of voter registration: NVRA and state-form registrants before January 1, 2013, can vote in both state and federal elections; but NVRA registrants after January 1, 2013, can vote in only federal elections. (NVRA registrants after that date also can't sign petitions.) Now only state-form registrants who provide the additional proof of citizenship can vote in state elections. State-form registrants who fail to provide the additional proof of citizenship cannot vote at all.
The ACLU and ACLU of Kansas filed suit last November challenging the dual registration system. The complaint, filed in state court, alleges that the system violates state constitutional equal protection by distinguishing between classes of voters in the state, that state officials exceeded their state constitutional authority, and that the system wasn't properly promulgated as a rule or regulation under Kansas law.
January 18, 2014 in Cases and Case Materials, Comparative Constitutionalism, Congressional Authority, Elections and Voting, Equal Protection, Federalism, News, Preemption, State Constitutional Law | Permalink | Comments (0) | TrackBack (0)
Tuesday, December 3, 2013
The Supreme Court heard arguments today in Northwest, Inc. v. Ginsberg, the case testing whether the Airline Deregulation Act preempts a state-law claim for breach of implied covenant of good faith and fair dealing arising out of an airline's termination of a customer's membership in its frequent flyer program. Our argument preview is here.
Given that the Court has ruled in Wolens that the ADA does not preempt an ordinary breach-of-contract claim, arguments today turned on whether the claim for breach of implied covenant of good faith and fair dealing is simply an incorporated contract requirement or a rule of contract interpretation (so that it's actually part of the contract, and thus not preempted), or whether it's an additional state-imposed obligation on top of the plain terms of the contract (and thus preempted). This question is informed by the deregulatory purpose of the ADA. Justice Breyer framed the issue this way:
I absolutely agree wtih you that--that a free market in price is at the heart of the Deregulation Act. Given.
I also think frequent flyer programs are simply price discounts. Given.
I also think that if you don't have contracts, you can't have free markets. Given.
But I also think the State cannot, under the guise of contract law, regulate the prices of airlines. If you allow that, you're going to have worse than we ever had. It'll be 50 different systems, all right?
Justice Kagan framed it this way, suggesting a solution that would preserve the implied covenant claim:
I guess what I'm suggesting is that the implied covenant here, it's just an interpretive tool. It says that there are certain kinds of provisions that are written very broadly or very vaguely, and an implied covenant comes in to help us interpret those kinds of provisions. And viewed in that way, it's just a contractual device that in light of Wolens ought to be permitted.
Justice Sotomayor said it this way, and proposed a standard for distinguishing between ordinary breach-of-contract claims and implied covenant claims:
My simpler standard comes from quoting Hennepin: "Does the implied covenant claim extend to actions beyond the scope of the underlying contract, or can it override the express terms of the agreement? If the answer is no, it's not preempted."
The question is complicated by the fact that the frequent flyer program in this case gave Northwest the "sole discretion" to terminate. So: Is an implied covenant part of that contract, or is it an additional state-law requirement? And what's the standard for sorting that out?
As an initial matter, any standard may not answer the preemption question categorically. That's because different states interpret their implied covenant laws differently. This gave the Court another problem: Does it have to sort out the particular state law on implied covenants in order to determine whether a claim in a particular state is preempted? And might the answer change depending on the state, leading to inconsistent results and undermining the deregulatory purpose of the ADA? Justice Scalia put this point on it:
Wow, somebody's really been given a raw deal. You know, that's still going to be possible even if we rule for [Ginsberg] here. It depends on what State he's from, right?
Complicating things yet more, the answer may turn on the implied covenant's waivability. Justice Kagan made this point:
But if it can't be waived, it sure seems as though it is operating independently of the parties' reasonable expectations.
It may also turn on the fact that frequent flyer programs work for airline miles, but also for other goods and services--and thus state regulation of them may not amount to a regulation of airline price, in violation of the ADA. Justice Alito put it this way:
I don't want to take up your rebuttal time, but if the facts were that under a particular program 90 percent of the miles were earned by purchasing things other than flying and 90 percent of the miles were spent on things other than flying, wouldn't that be very different?
This could give the Court a way out of the problem, by ruling that state implied-covenant claims based on frequent flyer programs aren't preempted because they don't regulate the price of airline tickets. This seems unlikely, though: even if frequent flyer programs work for other goods and services, they still also work for airline tickets.
Finally, there's the presumption against preemption--and whether it has any bearing on this case. Chief Justice Roberts seemed to think so:
I do agree, it seems pretty inconsistent with the normal presumption against preemption that we apply out of respect for the State legal regimes to say we're going to adopt a broad prophylactic rule.
But Justice Scalia thought not:
But the whole purpose of the ADA was to preempt State laws. I mean, I can understand applying that presumption to other statutes which say nothing about preemption. The whole purpose of the ADA was to deregulate airlines, was to say there was going to be no Federal regulation. Let the free market handle it and there will be no State regulation.
On the one hand, a narrow ruling in this case--one that address Ginsberg's particular claim, under Minnesota law, recognizing that this particular program gave the airline "sole discretion" to terminate--seems both likely and appropriate, especially given the particularities of this case. But on the other hand, as at least some on the Court suggested, an overly narrow ruling, without a broader standard, leaves open the possibility (or even probability) that this very same issue, or one like it, could give the lower courts a headache in the 49 other states (where implied covenant claims might work differently).
If Ginsberg loses, and his claim is preempted, the U.S. Department of Transportation can still investigate Northwest's frequent flyer program. But that remedy doesn't do anything for Ginsberg.
The Supreme Court hears oral arguments today in Northwest, Inc. v. Ginsberg, the case testing wether the federal Airline Deregulation Act preempts a state-law claim for breach of implied covenant of good faith and fair dealing arising out of an airline's termination of a customer's membership in its frequent flyer program. Here's my preview of the oral argument from the ABA Preview of United States Supreme Court cases, with permission:
S. Binyomin Ginsberg was an active member of WorldPerks, the Northwest Airline’s frequent flyer program, since 1999. Ginsberg, an expert in education and administration, travelled frequently on Northwest to give lectures, conduct seminars and workshops, and advise other educators and administrators. In 2005, Ginsberg earned Platinum Elite Status in the WorkPerks program, the highest level of benefits available.
But in June 2008, Northwest revoked Ginsberg’s WorldPerks membership. A Northwest representative explained by phone that Northwest was revoking his membership because he had abused the program by complaining too many times and strategically booking himself on full flights in order to get bumped. A Northwest Customer Care Coordinator later sent Ginsberg an e-mail citing Paragraph 7 of the WorldPerks General Terms and Conditions and saying that “[a]buse of the WorldPerks program . . . may result in cancellation of the member’s account and future disqualification from program participation, forfeiture of all mileage accrued and cancellation of previously issued but unused awards.” The e-mail also said that Northwest may determine “in its sole judgment” whether a passenger has abused the program. The e-mail did not give any specific information about how Ginsberg had abused the program.
Ginsberg filed suit on January 8, 2009, asserting four causes of action: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) negligent misrepresentation; and (4) intentional misrepresentation. The district court dismissed the case, ruling that Ginsberg failed to show sufficient facts to support his breach-of-contract claim, and that the federal Airline Deregulation Act preempted Ginsberg’s other three claims.
Ginsberg appealed, but only as to his claim for breach of the implied covenant of good faith and fair dealing. The United States Court of Appeals for the Ninth Circuit reversed, and this appeal followed.
Congress enacted the Airline Deregulation Act (ADA) in 1978, concluding that “maximum reliance on competitive market forces” would best further “efficiency, innovation, and low prices” as well as “variety [and] quality . . . of air transportation services.” As part of the Act, and in order to ensure that states would not frustrate deregulation by enacting their own regulations, Congress included a preemption provision barring any state from “enact[ing] or enforce[ing] a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier.” At the same time, Congress retained the Act’s already-existing “savings clause,” which preserved common law and statutory remedies.
The Supreme Court addressed the ADA’s preemption clause in two important cases. In the first case, Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992), the Court ruled that the ADA preempted state regulation of airlines’ fare advertisements. The Court held that the preemption clause’s phrase “related to” was quite broad, and that the ADA sought to preempt any state enforcement actions “having a connection with or reference to airline ‘rates, routes, or services’ . . . .” The Court had little trouble concluding that state regulation of airlines’ fare advertisements fell comfortably within that definition.
In the second case, American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995), a case very similar to Ginsberg’s, the Court ruled that the ADA preempted state enforcement suits against an airline arising under state-imposed obligations (as in a state law regulating an airline), but not under an airline’s breach of its own, self-imposed obligations (as in the airline’s own contract with its customers). According to the Court, “[a] remedy confined to a contract’s terms simply holds parties to their agreement,” and does not impose additional obligations related to a price, route, or service. Wolens sued American Airlines for making retroactive changes to the terms and conditions of its frequent flyer program. The Court held that the ADA preempted Wolens’s claim under the state Consumer Fraud Act, but that it did not preempt Wolens’s claim for routine breach of contract.
Considering the broad reading of the preemption clause in Morales, the parties here argue whether Ginsberg’s claim for breach of the implied covenant of good faith and fair dealing looks like more a state-imposed obligation or whether it looks more like an airline-imposed obligation under Wolens.
Northwest argues first that the plain language of the ADA preempts Ginsberg’s claim. It says that Ginsberg’s suit, which seeks reinstatement of program membership and renewed access to the reduced prices and enhanced services that come with it, is plainly “related to” Northwest’s prices, routes, and services, especially given the Court’s broad approach to the ADA’s preemption provision. Moreover, Northwest contends that Ginsberg’s claim seeks to enlarge the program’s General Terms and Conditions, a voluntary agreement between the parties, by invoking state law that is external to the agreement. In other words, Northwest says that Ginsberg’s implied covenant of good faith and fair dealing claim is no ordinary breach-of-contract claim, designed simply to enforce the terms of the agreement between the parties. Instead, it says that Ginsberg’s claim goes above-and-beyond simple enforcement of the agreement and, if allowed, would enforce state policies outside the four corners of the agreement, external to the contract. Northwest argues that this violates the Court’s rule in Wolens.
Next, Northwest argues that preemption of Ginsberg’s claim is consistent with the policies underlying the ADA. Northwest contends that Ginsberg’s implied covenant claim is amorphous and subject to different interpretations, and, if enforced here and elsewhere, would lead to a patchwork of state regulations over agreements like this. (In contrast, Northwest says that simple breach-of-contract claims are uniform enough across jurisdictions to avoid a patchwork result.) Moreover, Northwest argues that Ginsberg’s claim, if recognized, would create a risk of state interference with competition and commercial activity in the airline industry by substituting state law for market forces. Northwest claims that the patchwork result and state interference are both inconsistent with the goals of the ADA, to further “efficiency, innovation, and low prices” in the airline industry through “maximum reliance on competitive market forces.” (Northwest also notes that the U.S. Department of Transportation (DOT) has authority to investigate unfair practices in frequent flyer programs, so that Ginsberg and others like him may seek federal administrative relief.)
The federal government weighed in to support Northwest. Like Northwest, the government argues that the ADA preempts Ginsberg’s claim, because Ginsberg’s claim is external to his contract with Northwest. The government contends that because the district court rejected Ginsberg’s breach-of-written-contract claim on the basis that it gave Northwest complete discretion to determine Ginsberg’s status in the program, and because Ginsberg did not appeal that portion of the ruling, Ginsberg’s implied-covenant claim necessarily seeks to impose an additional, non-contractual obligation on Northwest. The government says that under Wolens this claim is preempted. But unlike Northwest the government does not argue for a categorical rule that all implied-covenant claims are preempted by the ADA, because, it says, some implied-covenant claims may require only adjudication of routine breach-of-contract claims, consistent with Wolens. The government says that only those implied-covenant claims that seek to enforce policies outside the contract, like Ginsberg’s, are preempted.
Ginsberg argues first that his implied covenant of good faith claim is not preempted under Wolens. Ginsberg says that his claim does not look outside the contract; instead, it stays within the contract. According to Ginsberg, that’s because a contract includes both express and implied terms, and his claim simply seeks to put an implied-obligation-of-good-faith gloss on the contract language that gives Northwest “sole judgment” to determine whether he abused the program. Ginsberg claims that this gloss is no extra-contractual obligation; rather, it is part-and-parcel of the contract itself. He says that courts read in an implied covenant of good faith to a contract in order to protect the contract’s express terms, and not to add an additional or external obligation or policy. Moreover, Ginsburg contends that his decision not to appeal the dismissal of his claim for a breach of the written contract does not transform his implied covenant of good faith claim into one based on extra-contractual policies, as argued by the federal government. Again, he says that the contract includes both express and implied terms, and his implied claim simply seeks to enforce the contract itself. Ginsberg says that holding Northwest to implied terms furthers the aims of the ADA, because enforcement in good faith increases the stability of contracts and reduces the costs of entering into them. Ginsberg claims that DOT enforcement does not replace the role of the courts in resolving contract disputes, whether they involve express or implied terms of a contract.
Ginsberg argues next that his claim is not preempted because it does not seek to “enact or enforce a law, regulation, or other provision.” Ginsberg says that the Court unanimously held that a statutory provision in the Federal Boat Safety Act that preempts enforcement of “a law or regulation” does not preempt common-law claims. For the same reasons that that provision did not preempt, Ginsberg contends that the ADA should not preempt. He also says that the word “provision” does not extend to common-law duties. As a result, Ginsberg contends that the ADA’s preemption clause does not apply, even aside from his Wolens argument.
Finally, Ginsberg argues that his claim is not preempted because it does not relate to airline prices, routes, or services. He says that his claim, unlike the claim in Wolens, does not challenge access to flights and upgrades or the number of miles needed to obtain a ticket. Instead, Ginsberg argues that his claim goes only to the termination of his WorldPerks membership. He says that this claim does not reference, does not seek to regulate, and will not affect the price, route, or service of air transportation. (Ginsberg argues that the WorldPerks program is not a “service” within the meaning of the ADA.) Ginsberg underscores this point by noting that frequent flyer miles can be earned and spent on many things other than air transportation, and that consumers can participate in a frequent flyer program without buying a single airline ticket. Finally, Ginsberg says that the DOT advises consumers to “consider legal action through the appropriate civil court” if they are unhappy with the way a frequent flyer program is administered. He says that is exactly what he did here.
On one level, this case simply addresses a claim that falls between the cracks of the sharp distinction between contract-based claims and extra-contractual claims that the Court drew in Wolens. By this reckoning, the case is only another opportunity for the Court to round out its analysis of ADA preemption and to give guidance to lower courts and litigants for the next round of claims against the airlines. The case is significant, but only insofar as it deals with ADA preemption of a particular kind of claim. The parties do not argue that the Court should overturn Wolens, and they do not argue that the ADA does not preempt an ordinary breach-of-contract claim. Thus, whatever the Court likely rules in this case, Ginsberg and plaintiffs like him will continue to be able to assert an ordinary breach-of-contract claim against an airline, even if they cannot assert more. (The fact that Ginsberg appealed his implied covenant claim, but not his breach-of-contract claim, says that the implied covenant claim sweeps more broadly, and could be easier to prove, than the breach-of-contract claim. If so, a ruling favoring preemption could mean that plaintiffs would lose a broader class of claims (implied covenant claims), even if they would retain a basic breach-of-contract claim.)
On another level, the case, like many preemption cases, pits significant considerations of federal-state relations against an individual plaintiff’s ability to seek redress for injuries under state law against a corporation. In this way, the case is significant for how it balances federalism against state law remedies against corporations. To put a finer point on it, this case, like some other recent federalism cases, is likely to be seen in pro-corporation or pro-plaintiff terms, depending on the outcome.
These cases involving federalism and individual state-law remedies sometimes come down with surprising alliances among the justices. In Wolens, for example, Justice Ginsberg wrote the Court’s opinion; it was joined by Chief Justice Rehnquist and Justices Kennedy, Souter, and Breyer. But the composition of the Court has changed in critical ways since Wolens, making predictions here even more difficult than usual. Look to Chief Justice Roberts and Justice Kennedy as the likely pivotal votes.
Tuesday, October 8, 2013
But preemption was not the only constitutional attack on SB1070; and these challenges are slowly but surely making their way to the Ninth Circuit. In March, a panel of the Ninth Circuit rendered its opinion in Valle Del Sol v. Whiting and upheld District Judge Susan Bolton's preliminary injunction against enforcement of the day labor regulations of SB 1070 as violative of the First Amendment.
Today, the Ninth Circuit again rendered an opinion upholding Judge Bolton's preliminary injunction; and although the case is again styled Valle Del Sol v. Whiting, the provisions of SB 1070 at issue, codified as Arizona Revised Statutes §13-2929, are the ones that attempted to "criminalize the harboring and transporting of unauthorized aliens" within Arizona.
Authored for the panel by Judge Richard Paez, and joined by John T. Noonan, with a concurring opinion and minimal dissent by Judge Carlos Bea, the opinion devoted about 10 of its 45 pages to the issue of standing, concluding that there was both individual and organizational standing.
On the merits, the panel found a due process violation:
Section 13-2929 states that “[i]t is unlawful for a person who is in violation of a criminal offense” to knowingly or recklessly transport, conceal, harbor, or shield an unauthorized alien. We conclude that the phrase “in violation of a criminal offense” is unintelligible and therefore the statute is void for vagueness.
Interestingly, the footnote to this passage explains:
The plaintiffs did not originally raise this issue. But in order to address the plaintiffs’ preemption claim, we must first interpret the statute’s provisions. In attempting to do so, we are confronted with this incomprehensible element of § 13-2929. Thus, we resolve the vagueness issue because it is both “antecedent to . . . and ultimately dispositive of” the appeal before us.
The court stated that "Arizona makes no claim that 'in violation of a criminal offense' makes any sense as written." The panel rejected Arizona's arguments to "save" the statute's wording, stating that Arizona would have the court "replace a nonsensical statutory element with a different element" rather than engage in the more permissible approach of adopting a limiting construction.
The court then engaged with the preemption challenge, stating that even if it were to accept Arizona's proposed interpretation of the statute, the statute is also preempted by federal law, under the doctrines of field preemption and conflict preemption. It was from this analysis that Judge Bea dissented, saying that because the case is "resolved on other grounds, namely vagueness, I believe the court should not reach the preemption issue."
The mistake - - - carelessness? - - - in the drafting of this provision was a fatal flaw. While the legislature could redraft legislation, as the court notes, perhaps the political will in Arizona for bills such as SB1070 has diminished.
Tuesday, October 1, 2013
The First Circuit upheld bans in the City of Providence, Rhode Island, on accepting coupons or otherwise selling tobacco products at a discounted rate and on selling flavored tobacco products (other than cigarettes) against First Amendment and preemption challenges.
The City imposed the "Price Ordinance" and "Flavor Ordinance" in order to reduce youth tobacco use. Tobacco manufacturers and trade organizations sued, arguing that the Price Ordinance violated free speech and that both ordinances were preempted by federal and state law. The First Circuit rejected the challenges and upheld the ordinances in Nat'l Ass'n of Tobacco Outlets v. City of Providence.
The court ruled that the Price Ordinance didn't violate free speech, because the ordinance "'only precludes licensed tobacco retailers from offering what the Ordinance explicitly forbids them to do,' and that offers to engage in banned activity may be 'freely regulated by the government.'" Op. at 13-14 (quoting the district court).
The court also held that the Price Ordinance wasn't preempted by the Federal Cigarette Advertising and Labeling Act. The preemption provision of the Labeling Act says that "[n]o requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes[,] the packages of which are labeled in conformity with the provisions of this chapter." But Congress enacted an exception in 2009 (in response to the Supreme Court's ruling in Lorrilard) that says that a state or locality "may enact statutes and promulgate regulations, based on smoking and health . . . imposing specific bans or restrictions on the time, place, and manner, but not content, of the advertising or promotion of any cigarettes."
The court ruled that the Price Ordinance met the content-neutrality requirement in the exception, because "it merely regulates certain types of price discounting and offers to engage in such price discounting," not the content relating to health claims or warnings. Moreover, the court held that the Price Ordinance met the time, place, manner requirement. The court said that minimum price regulations met that standard (they were common when Congress enacted the exception, and the plaintiffs conceded that they met the standard), and that the Price Ordinance is wasn't materially different.
The court held that the Flavor Ordinance wasn't preempted by federal Family Smoking Prevention and Tobacco Control Act. The preemption clause of that Act prohibits states and localities from regulating "tobacco product standards" and "good manufacturing standards." The Act also includes a savings clause, however, which allows regulations "relating to" the sale of tobacco products. The court said that the Flavor Ordinance fell within the savings clause, because it's not a blanket prohibition (which, the plaintiffs claimed, was more than merely "relating to") but instead allows the sale of flavored tobacco products in smoking bars.
Finally, the court ruled that the Price Ordinance wasn't field-preempted by Rhode Island law, because Rhode Island hasn't occupied the field. The court also said that the ordinances didn't violate the state constitution, which prohibits local licensing measures, because the ordinances aren't licensing measures (and because the plaintiffs didn't challenge the City's licensing measure).
Tuesday, September 24, 2013
The en banc Sixth Circuit divided sharply today over whether Michigan workers could sue their employer, claims manager, and employer's doctor under federal civil RICO for engaging in a fraudulent scheme involving the mail to deny the workers state workers' compensation benefits.
The case, Jackson v. Sedgwick Claims Management Services, Inc., arose when employees of Coca-Cola applied for, and were denied, workers' compensation benefits under Michigan law. The employees sued Coca-Cola, Coke's claims management service, and a cooperating doctor under federal civil RICO for colluding to deny them their benefits. The defendants moved to dismiss, arguing that the claim wasn't cognizable.
The en banc Sixth Circuit agreed. The court held that the plaintiffs failed to allege that they were "injured in [their] business or property" as required by RICO for civil damages.
But then the court went on to say that this conclusion "is confirmed by" the clear-statement principle in Gregory v. Ashcroft. The majority said that under the clear-statement principle Congress must make clear when it intends federal law to displace state law in an area traditionally regulated by the states. Here, the majority held that RICO doesn't have a sufficiently clear statement of intent to displace state workers' compensation law, and so the clear-statement principle confirms the court's conclusion that the plaintiffs can't use federal civil RICO to attack the state workers' compensation scheme.
Judge Moore dissented, joined by four other judges. Judge Moore argued that "the majority makes the erroneous assumption that the clear-statement rule would even apply in this context." She argued that the majority's approach is inconsistent with the Supreme Court's clear instruction to read RICO broadly.
Wednesday, August 28, 2013
Judge Thomas Durkin (N.D. Ill.) ruled last week in Federal Housing Finance Agency v. City of Chicago that a Chicago ordinance that requires mortgagees of vacant buildings in the city to register with the city, pay a registration fee, and maintain the building under certain standards cannot apply to the FHFA or to Fannie Mae or Freddie Mac. The court held that the Chicago ordinance was preempted by federal law and constituted an impermissible tax against the federal government.
The ruling means that Chicago cannot apply its vacant-building requirements to the FHFA or Fannie Mae and Freddie Mac, but the city can still apply the ordinance to private mortgagees of vacant (that is, abandoned or foreclosed) properties.
The ruling is significant, because Fannie and Freddie together hold about 258,000 loans secured by properties in the city. The ruling means that the city cannot compel the FHFA to include Fannie- and Freddie-backed properties in its vacant-property registry, cannot collect a registration fee from the FHFA (or its servicers), and cannot fine the FHFA (or its servicers) for violation of the city's maintenance standards. On the other hand, Fannie and Freddie have their own standards for continuing maintenance of vacant properties. So for Fannie- and Freddie-backed properties, federal standards, not the city's, apply.
The ruling is also significant, because it telegraphs a federalism concern to the thousand or so local governments around the country that have adopted similar vacant-property ordinances. While the ruling doesn't directly touch ordinances outside the City of Chicago, other local governments will do well to revisit their ordinances in light of the ruling.
The FHFA challenged the city's ordinance as running up against the federal Housing and Economic Recovery Act of 2008, or HERA. HERA gives the FHFA authority to place Fannie and Freddie into conservatorship "for the purpose of reorganizing, rehabilitating, or winding up [their] affairs." It also empowers the FHFA to "preserve and conserve the assets and properties of [Fannie and Freddie]."
The FHFA directed Fannie and Freddie to implement consistent mortgage loan servicing and delinquency management requirements and authorized them to contract with servicers who perform activities related to loan defaults, consistent with those requirements. HERA includes a preemption clause that says that the FHFA "shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of [the FHFA]."
The FHFA sued the city, arguing that HERA preempted the city's vacant-property ordinance and seeking a declaration and injunction prohibiting the city from enforcing the ordinance against it, or Fannie or Freddie. The court agreed with the FHFA that HERA preempted the city's ordinance and awarded the requested relief.
The court held that Chicago's Ordinance was field- and conflict- preempted by federal law. As to field preemption, Judge Durkin ruled that HERA's charge to the director of the FHFA to take care of Fannie's and Freddie's assets occupies the field, even if HERA's express preemption provision doesn't mention municipal ordinances:
Here, in contrast, it is evident that the Ordinance encroaches on an area of regulation that Congress reserved exclusively for FHFA. As applied to FHFA as conservator and mortgagee, the Ordinance regulates how FHFA manages its collateral, including specifically how this collateral--which FHFA does not actually own--should be preserved. For instance, when FHFA issues guidelines and instructions to servicers regarding the nature and frequency of inspections of vacant and abandoned properties, it is taking those steps it believes necessary to preserve and conserve Fannie and Freddie's assets and property.
HERA expressly prohibits other federal agencies and states from interfering with actions taken by FHFA as conservator. Although HERA's preemption provision . . . does not expressly include laws enacted by municipalities . . . Congress enacted an extensive federal statutory scheme which specifically requires the Director of FHFA to "establish risk-based capital requirements for [Fannie and Freddie] to ensure that [they] operate in a safe and sound manner, maintaining sufficient capital and reserves to support the risks that arise in the operations and management of [Fannie and Freddie]." HERA sets forth various grounds for the Director of FHFA to exercise his discretion to appoint FHFA as conservator of Fannie and Freddie. Once placed in conservatorship, Congress intended for FHFA to be the sole entity responsible for operating Fannie and Freddie's nationwide business of purchasing and securitizing mortgages.
Op. at 24-25.
As to conflict preemption, Judge Durkin held that Chicago's Ordinance "obstructs Congress's intent to have one conservator take control of Fannie Mae and Freddie Mac, and take action as may be 'appropriate to carry on [their business] and preserve and conserve [their] assets and property' without being 'subject to the direction or supervision of any other agency of the United States or any States . . . ." Op. at 29.
Finally, Judge Durkin ruled that Chicago's registration fee was an impermissible tax on the federal government, in violation of McCulloch v. Maryland.