Oral Transcript Analysis of Chamber of Commerce v. Brown

Today, the U.S. Supreme Court heard oral arguments in the NLRA preemption case of Chamber of Commerce v. Brown.  We have previously posted about this case (here, here, and here), but Ross Runkel provides a nice summary of the background:

California Gov't Code Section 16645.2 bars a private employer who is a "recipient of a grant of state funds" from using the funds "to assist, promote, or deter union organizing." Similarly, Section 16645.7 bars "a private employer receiving state funds in excess of [$10,000] in any calendar year on account of its participation in a state program" from using such funds "to assist, promote, or deter union organizing."

Sitting en banc, the 9th Circuit held that these two sections are not preempted by the National Labor Relations Act under either Machinists preemption (Lodge 76, International Ass'n of Machinists v. Wisconsin Employment Relations Commission, 427 US 132 (1976)) or Garmon preemption (San Diego Building Trades Council v. Garmon, 359 US 236 (1959)). The US Supreme Court is reviewing the 9th Circuit judgment. The question presented in the certiorari petition: "Is the State of California’s regulation of noncoercive employer speech about union organizing, California Assembly Bill 1889, Cal. Gov’t Code §§ 16645.2, 16645.7, preempted by federal labor law?"

In an increasingly hostile environment for unions in the federal context, unions are increasingly looking for assistance from states in their battles to have a fair chance to organize employees into unions.  Although I have not written directly on this topic, it also may have an impact on Worker Freedom legislation, outlawing employer captive audience speeches, which many states have considered recently (I must point out though that I argue strongly that even an adverse decision in Brown should not doom Worker Freedom legislation.)

On to the oral transcript. Some thoughts and impressions from the transcript:

1.    Even before the Court began its inquiries, I wondered how the Justices would do with a very complex statutory scheme which none of them have an over familiarity with (traditional labor cases are few and far between at the Court these days).  On the other hand, this is essentially a preemption case, and this Court can't seem to get enough of these and rule in favor of preemption of state efforts.  Query: how does the Court's rulings in the preemption area square with its recent notions concerning federalism and the strong role of state rights in that system?

2.  Two people I know are arguing this case for the various sides. Willis Goldsmith, who I've met through the NYU Center for Labor and Employment Law, at the Retaliation and Whistleblowers conference last year. And Mike Gottesman, my former professor of contracts, torts, and constitutional law at Georgetown Law Center and one of my favorite professors. In my paper on Workplace Captive Audience speech, Mike is mentioned throughout based on his ground-breaking paper in the early 1990s about how to reform NLRA preemption doctrine. No one better could argue this case for Brown. And Mike has his share of successes at the Supreme Court (including a previous preemption case I saw him argue in person at the Supreme Court back on a bitterly cold day in 1995).

3. Justice Scalia will be voting for the Chamber of Commerce here (surprised?). He stated that he did not believe that the state financial accountability was neutral on unionization: "I think the reason you're not paying for this activity is because you don't like this activity." Glad to see Scalia mellowing with age. Chief Justice Roberts agreed and noted that "precious few" employers take the side of union. What I find fascinating about their arguments is that these staunch formalists are making a "practically speaking" argument here, but only when it allows them to oppose unions and support business interests. More evidence of conservative judicial activism?

4. Equally unsurprising is Justice Breyer's support of California's law: "Say: Go ahead, speak, speak, just not on our nickel."  Justice Ginsburg concurred and added that if the federal government can restrict use of its money, why can't states? Counsel for the Chamber, Willis Goldsmith, argued that the same rules do not apply to the federal and state governments: "The state has no business making labor policy. This statute is anything but neutral." He continues, and this is the overarching point of the Chamber, "[the California statute] statute interferes dramatically with NLRA protected rights," though I'm not sure if it is a Garmon or Machinists argument he is attempting. The Government, arguing with the Chamber, agrees: "State laws that restrict speech regarding unionization frustrate that fundamental national policy and are therefore pre-empted, as this Court held in Linn." Chief Justice Roberts leads the Government through why this a regulatory program and not a proprietary program a la Boston Harbor.

5. Goldsmith also said: "I think all labor lawyers would agree, and that is that, under the National Labor Relations Act, all parties to a union election or any issue between a union and an employer have the right to speak in a noncoercive way." Well, I'm a labor lawyer, and although Section 8(c) basically guarantees the right of employers to speak in a non-coercive way, it does not require states to have to pay for that speech.  In other words, I see this case like Locke v. Davey in the Establishment Clause context: states are permitted to fund constitutional rights, but do not have to. Gottesman makes this point in an exchange with Roberts:

MR. GOTTESMAN: That is not the State's policy, and the preamble to the statute does not say: the State disapproves of employers spending money. What it says --

CHIEF JUSTICE ROBERTS: No, but the policy -- the policy is they don't want employers to talk about unionization.

MR. GOTTESMAN: No. They don't want them to spend them the employer's money -- the State's money to talk about unionization.

Gottesman 1, Roberts 0.

6. Another issue is whether the statute is saved by the Boston Harbor proprietor exception to NLRA exemption, when the state acts as a market participant in passing laws for fiscal concerns. Goldsmith says Boston Harbor is inapplicable because California was attempting to set up labor policy here, not save money. Here is the heart of the Government's argument: "if [California]'s denying benefits for the purpose of advancing labor policy in an area where Congress has said there is to be no regulation, that's pre-empted, and that's doubly pre-empted here where the labor policy that the State is advancing is directly contrary to the Federal labor policy that Congress and the Board have enunciated." So they are arguing Machinists preemption on one hand and Garmon on the other.

7. At the outset, Justice Souter challenges Gottesman: "I'm not sure why you characterize California as financing one side of a debate, because -- and this I think is sort of the nub of the disagreement between the two sides here -- their argument is that a State can determine what it wants to buy with its money, but what California is doing is telling its contractor what it can do with the money after the State has got what it paid for." In other words, this is not a case like Rust v. Sullivan, a government speech doctrine case, but something else. Gottesman disagrees vehemently: "what the court of appeals pointed out is that the Petitioners did not move for summary judgment on the ground that you're forbidding us from using our money. They moved for summary judgment solely on the ground that it was the obligation of the State to give them money that they could use for these purposes . . . . It said that when we give you grant money, don't use that money for this purpose. Now, the State gives them the money up front, before they have provided the services. And that's true universally."

8. Scalia, with Gottesman's help, gets to the issue: "The issue here is whether the policy that California is trying to implement --namely, we do not want the employer to -- in its view --disrupt the -- the labor management relations by -- by opposing union -- unionization."  Response:

MR. GOTTESMAN: Because there is no Federal labor policy that requires States to use State treasury money to finance a party who is engaged in this debate. That's why this is just like Rust.  . . . . [Much later in the transcript]: It would be very odd to believe -- and this is, after all, implied pre-emption -- that it was Congress's intent without mentioning it to say that it is the obligation of States to provide funding to employers to do this.

And further conversation with Justice Stevens on this topic:

JUSTICE STEVENS: It does require that this -- it arguably requires that this area of combat between labor and management be unregulated.

MR. GOTTESMAN: Right. And this is not regulation, for the very reasons that this Court in Regan and Rust and in a whole line of cases had said that it is not regulation to simply say, we the government are not going to pay for this activity. That's all that California is saying in this case: we are not going to pay for it. It's the policy of the State not to interfere in these union organizing drives; therefore -- and this is the precise words of the preamble -- "for this reason, the State should not subsidize."

9. And because this might be heading to a 4-4 split which Kennedy might decide (for a change), the all important reading of Kennedy's first remarks on page 42 and then these remarks on page 54 (of a 70 page transcript):

JUSTICE KENNEDY: But on that point you're in disagreement with the Ninth Circuit, and --

MR. GOTTESMAN: Yes, we are. The Ninth Circuit misunderstood Boston Harbor. It thought Boston Harbor created two boxes that represented the whole world. You're either a market participant or you're a regulator. That's not what Boston Harbor said, if you go back and look at it. What Boston Harbor said, if you regulate you are vulnerable to pre-emption arguments; if you are not regulating, then you are free of pre-emption concerns.

JUSTICE KENNEDY: So the principal rationale for the Ninth Circuit's opinion is incorrect in your view?

MR. GOTTESMAN: Well, it's not -- no. The Ninth Circuit also talked about the First Amendment and got it right. It said when it talked about the dissent had said what this State is doing is violating the First Amendment, and the Ninth Circuit's response is no, that's not right. All this is is withholding a subsidy, and the First Amendment cases are clear: that's not regulation of a speech.

10. Finally and FWIW, I think all Justices (except for Justice Thomas who didn't speak) spent too much time on how the California law will be administered. This is a question for remand and not before the Court. The sole issue is: Does a state have the obligation to fund a federal statutory right of an employer or its agents. Answer: No.

This is a tough one to predict because Kennedy gave no sense where he is leaning. Also, Justice Souter seemed unusually skeptical of California's argument. No guts, no glory: 6-3 finding (incorrectly) the California law is preempted. Scalia writes the majority opinion and Breyer (for Ginsburg and Stevens) writes the dissent.  I think Gottesman did a masterful job with the cards that he was dealt.

PS