On May 20, 2009, President Obama released a major announcement relating to his Administration’s policy on preemption, which may affect pending agency proceedings and litigation of critical importance to the communications industry. In his Memorandum for the Heads of Executive Departments and Agencies, the President explained that "[i]n recent years, … executive departments and agencies have sometimes announced that their regulations preempt State law, including State common law, without explicit preemption by the Congress or an otherwise sufficient basis under applicable legal principles." To ensure that State law is preempted only where there is "a sufficient legal basis," the Memorandum sets forth a "general policy … that preemption of State law by executive departments and agencies should be undertaken only with full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption."

This Memorandum is directed at, and is binding only upon, the heads of executive branch agencies and departments. However, the President’s Memorandum no doubt sends a message to independent agencies such as the Federal Communications Commission (FCC), and likely signals the approach that these agencies will take under this Administration.

The Memorandum makes clear that regulatory preemption is disfavored. It specifically instructs agencies and departments to limit their statements regarding any intent to preempt State law and to use regulation to preempt State law only where such preemption is justified under the principles outlined in Executive Order 13132, issued by President Clinton in 1999. Among other things, that Executive Order requires consultation with State and local officials on questions of preemption, and directs agencies and departments to preempt State law only to "the minimum level necessary to achieve the objectives of the statute pursuant to which the regulations are promulgated." The President’s May 20 Memorandum further encourages agencies and departments to review regulations issued within the past 10 years that contain statements of preemption in order to decide whether such statements or provisions are justified.

While the specific motivation for this Memorandum appears to be the Food and Drug Administration’s actions that were at issue in the Wyeth case, the Memorandum sets a tone that may discourage the robust use of preemption to vindicate federal policy interests and promote a vibrant national market for communications services. In particular, the Memorandum’s specific reference to what the President characterizes as the unsupported previous preemption of State common law may reflect a heightened concern about preempting class action lawsuits based on State common law.

The communications industry has numerous issues pending at the FCC and in courts around the country that seek or relate to federal preemption, any or all of which could be affected by this policy. Examples of such proceedings include disputes over early termination fees, truth-in-billing obligations, radio frequency emissions, the imposition of technology preferences such as Distributed Antenna Systems, and rights-of-way regulation. While the impact of the President’s Memorandum on each proceeding’s unique legal and policy questions requires further analysis, as a general matter this policy statement may impact the willingness of the FCC to preempt State law and may impact the positions taken by the United States, through the FCC and the Department of Justice, in litigation raising critical preemption questions.