President Obama recently directed heads of executive departments and agencies to limit any efforts to give preemptive effect to new regulations and to review regulations issued over the last ten years and modify those regulations, if necessary, to conform to the new requirements.
The President’s directive, together with the Supreme Court’s decision in March in Wyeth v. Levine, in which a majority of the Court was harshly dismissive of a preemption proclamation by the FDA in the most high-profile preemption case in recent years, might be read to signal that preemption is unlikely to play a significant role in future administrative and regulatory developments.
We disagree. Given the nature of the federal regulatory machinery and the ongoing vitality of the Supremacy Clause, preemption will continue to be a significant doctrine that business interests can use to their advantage in a number of circumstances, if they position themselves properly.
The President's Directive
On May 20, 2009, the President issued a memorandum to the heads of executive departments and agencies in which he emphasized the federal nature of the U.S. system and the vital role of state law in that system. The memorandum noted, for example, that “State and local governments have frequently protected health, safety and the environment more aggressively than has the national Government.” It lamented the fact that “in recent years [read, “during the Bush Administration”] 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.”
In contrast to this recent practice, the memorandum stated that “executive departments and agencies should be mindful that in our Federal system, the citizens of the several States have distinctive circumstances and values, and that in many instances it is appropriate for them to apply to themselves rules and principles that reflect these circumstances and values” and specifically directed that departments and agencies:
- Should not include statements asserting a preemptive intent in regulatory preambles except where preemption provisions are included in the codified regulation;
- Should not include preemptive provisions in the codified regulations except where such provisions “would be justified under legal principles governing preemption;” and
- Should review regulations issued within the past ten years to determine whether such regulations meet these current standards and, if not, should take steps to “initiate appropriate action, which may include amendment of the relevant regulation.”
The “legal principles governing preemption” in Item No. 2 above obviously include case law, but also specifically include and re-emphasize Executive Order 13132, issued in 1999. That Executive Order attempted to significantly constrain instances of federal preemption. It provided, among other things, that agencies should construe a federal statute to preempt state law only where the statute contains an express preemption provision or there is “other clear evidence” of a congressional preemptive intent or where there is a conflict between the exercise of state authority and federal authority under the federal statute. Similarly, the Order provided that agencies should construe statutory authorizations for the issuance of regulations as authorizing preemption only in instances where the exercise of state authority “directly conflicts” with the exercise of federal authority under the federal statute or there is “clear evidence” that “Congress intended the agency to have the authority to preempt State law.”
Executive Order 13132 has been in effect since 1999. It was largely ignored (if not affirmatively violated) by many agencies during the Bush Administration. The new presidential directive is widely perceived as a rebuke to expansive preemption efforts during that time period and as an effort to again restrain agency and regulatory action.
Indeed, the presidential directive follows by only two months the Supreme Court’s decision in Wyeth v. Levine, No. 06-1249, March 4, 2009, which considered one of the most noteworthy of the Bush era efforts at expansive preemption. In that case, as a defense to a “failure to warn” state law claim, the Court considered a preamble to a 2006 FDA regulation concerning the content and format of prescription drug labels. The preamble asserted that FDA’s approval of labeling “preempts conflicting or contrary State law” and that state law failure to warn claims “threaten FDA’s statutorily prescribed role as the expert Federal agency responsible for evaluating and regulating drugs.” Slip op. at 19. The Court did not agree, with a majority finding instead that the agency’s preamble “does not merit deference” because of the FDA’s failure to consider preemption issues and effects during the course of the regulatory proceeding and because of a lack of evidence of any congressional intent to preempt such common law actions. Slip op. at 20-23.
The Outlook for Preemption
Following the Supreme Court’s decision in Levine and the President’s new directive, will preemption continue to play a significant role in federal administrative law? The answer clearly seems to be “yes.”
In the first place, an agency’s statements about preemption, or about the agency’s preemptive intent, are not a determinative factor in any event. As the Court highlighted in Levine, in cases where regulations are claimed to preempt conflicting state law requirements, “the Court has performed its own conflict determination, relying on the substance of state and federal law and not on agency proclamations of pre-emption.” Slip op. at 19. Thus, the significant issue is not what an agency says about preemption, but the real world effect of a regulation and the practical ability of state law obligations to coexist with that regulation.
This leads to a more fundamental point. Regardless of abstract statements of principle or intent, it is the nature of administrative and regulatory bodies to provide directives and to set standards. Indeed, in many instances, it is a statutory obligation for such bodies to provide such directives and to set such standards. In concrete circumstances, regulations may well have a preemptive effect, whether intended or not and whether self-proclaimed or not, due to the conflicting obligations created or the scope and content of the regulatory scheme. Private parties remain free to argue the consequences of such regulatory schemes. These arguments will continue to be proper so long as the Supremacy Clause remains the law of the land, as the Supreme Court reminded us in a somewhat different context recently. See Haywood v. Drown, No. 07-10374, May 26, 2009 (Supremacy Clause requires state courts to enforce federal claims regardless of contrary state law).
How then should business interests and other private parties best position themselves in future situations to take advantage of preemption protections? Again, the Levine case itself hints at an answer in its contrasting views of the FDA’s “procedural failure” in the proceeding leading to its 2006 labeling regulations and the situation in Geier v. American Honda Motor Co., 529 U.S. 861 (2000). In Geier, the Department of Transportation conducted a formal rulemaking and adopted a planned phase-in for a mix of passive restraint devices in automobiles. DOT identified the factors that it considered, the weight that it gave them and the balance that it struck. Levine, slip op. at 24. Thus, it appears that business interests should endeavor to make sure that future regulatory proceedings consider the broadest range of possible options, weigh the impact and effect of the various options, and make reasoned determinations of record as to the ultimate regulatory outcome. This will best position a potential future litigant to claim that the federal regulatory scheme is comprehensive and necessarily precludes enforcement of state law standards.
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Follow-up on Fox -- Wiley Rein’s first Ad Law Bulletin concerned FCC v. Fox Television Stations, Inc., 129 S. Ct. 1800 (2009), and the new, particularly lenient standard of review announced therein by the Supreme Court for situations in which administrative agencies change prior regulatory policies. On May 26, 2009, the Court of Appeals for the District of Columbia Circuit provided an illustration of how the combination of Chevron deference and the new Fox standard create tremendous latitude for agencies to modify prior positions.
National Cable & Telecommunications Assoc. v. FCC, No. 08-1016 (D.C. Cir. 5/26/09), involved “exclusivity contracts” between cable television providers and owners of apartment buildings and other multi-unit dwellings, under which the providers agreed to wire such buildings in return for exclusive access to the buildings. The FCC had declined to regulate in this area in an earlier proceeding, but in 2007 revisited the issue and promulgated regulations prohibiting cable providers from entering into exclusivity contracts and from enforcing exclusivity contracts already in place. In response to the contention that the FCC “failed to explain its change of heart and thus acted arbitrarily and capriciously” (slip op. at 13), the D.C. Circuit cited Fox in explaining its “deferential standard of review” and stating that “the existence of contrary agency precedent gives us no more power than usual to question the Commission’s substantive determinations. We still ask only whether the Commission has adequately explained the reasons for its current action and whether those reasons themselves reflect a ‘clear error of judgment.’” Slip op. at 17.