American Insurance Ass'n v. Garamendi and executive preemption in foreign affairs.

Author:Denning, Brannon P.
 
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TABLE OF CONTENTS INTRODUCTION I. THE HOLOCAUST-ERA INSURANCE CLAIMS A. California and the Claims B. The United States and the Claims II. FOREIGN AFFAIRS FEDERALISM BEFORE GARAMENDI A. Article VI Preemption B. Constitutional Exclusions 1. Specific Exclusions 2. The Dormant Commerce Clause Doctrine and Exclusions by Implication 3. Zschernig v. Miller and Structural Exclusions C. Preemption by Executive Acts D. The HVIRA in the Lower Courts III. THE SUPREME COURT DECISION: REINVENTING FOREIGN AFFAIRS FEDERALISM A. Overview of the Garamendi Opinion B. Garamendi and Its Precedents 1. Crosby: The Irrelevant Precedent 2. Zschernig: The Misstated Precedent 3. Barclays and Breard: The Missing Precedents C. Congressional Authorization in Garamendi 1. The McCarran Act 2. The Holocaust Commission Act D. Garamendi and Constitutional Interpretation: An Aside IV. GARAMENDI AND SEPARATION OF POWERS A. Garamendi as a Case of Executive Preemption B. The Novelty of Executive Preemption C. The Importance of Executive Preemption to Separation of Powers D. The Constitutional Case Against Executive Preemption E. Garamendi, Executive Agreements, and the Treaty Power 1. The Case for (Some) Executive Agreements 2. The (Prior) Cautious Approach to Executive Agreements 3. Garamendi and Executive Agreements V. GARAMENDI AND FEDERALISM IN FOREIGN AFFAIRS A. Garamendi's Balancing Test B. Zschernig: Overruled or Broadened? C. The Balancing Test: Problems in Application D. Breard and Executive Preemption of Traditional State Functions E. Executive Preemption and the "Political Safeguards" of Federalism 1. Disabling the Structural Protections of the States 2. New Limitations on Congress's Ability to Protect the States? CONCLUSION: ADJUDICATION BY INTUITION? INTRODUCTION

In American Insurance Association v. Garamendi, (1) the U.S. Supreme Court invalidated California's Holocaust Victim Insurance Relief Act (HVIRA), which required insurance companies doing business in California to disclose all policies they or their affiliates sold in Europe between 1920 and 1945. (2) According to the Court, the state's law unconstitutionally interfered with the foreign affairs power of the national government. (3) The decision easily was overlooked in a Term of landmark cases addressing affirmative action and sexual privacy. (4) What coverage the case did receive emphasized its federalism aspects, and excited little reaction because the result seemed intuitively appropriate: the Court overturned a state law that, in the words of one account, "amounted to unconstitutional meddling in foreign affairs by a state." (5) We argue here that the decision demands substantially more attention, as a challenge to fundamental aspects of constitutional structure.

A central tenet of separation of powers is that the executive is not a lawmaker. A central tenet of federalism is that directives of the federal government displace otherwise constitutional state law through the Supremacy Clause of Article VI. One would hardly suppose, therefore, that the President could unilaterally overturn a state law the President, or the President's subordinates, thought simply to be bad policy, without the support of any legislative action and outside the scope of Supremacy Clause. If the President thinks, for example, that as a policy matter a state's criminal punishments are too harsh or its business regulations too onerous, the President cannot change them by proclamation. This is true even if the state is interfering with presidential policy initiatives--to foster a more humane criminal justice system or a more open market, for example. Displacement of state law is a matter for the lawmakers--generally Congress; in the case of treaties, the President and the Senate; and in some other cases, the courts. The President, acting alone, may exhort the states, but not command them.

Although the foregoing principles may be uncontroversial in domestic matters, perhaps things stand differently in foreign affairs. Courts and commentators, including one of the present authors, have identified independent presidential powers in foreign affairs that go beyond anything the President can claim in the domestic sphere. (6) Perhaps these independent powers include the independent ability to displace state law, without regard to the ordinary contours of separation of powers and federalism. But even if one might suppose this to be a viable abstract principle, it would have seemed contrary to two Supreme Court cases, Barclays Bank PLC v. Franchise Tax Board (7) and Breard v. Greene. (8) In each case, the Court rejected the proposition that the President might displace state laws with foreign affairs implications simply because the President thought the state law was bad policy. (9)

The Court's conclusions in Garamendi thus come as something of a surprise, for, as we will argue, the essence of the decision is that the President, at least in some circumstances, does have this preemptive power in foreign affairs. Much of the Court's opinion obscured rather than explained this result, and sought to make its decision flow routinely from prior foreign affairs cases. The final outcome, however, was that a state law fell, not because the law was in itself unconstitutional, but because the executive branch disagreed with it as a policy matter. As the Court itself said, the case was one of "preemption by executive conduct." (10)

It is, of course, uncontroversial that ordinarily state laws and policies must give way to the foreign affairs objectives of the national government. Establishing that proposition was one of the Constitution's principal advances over the Articles of Confederation. The critical question, though, is how these overriding federal goals are developed and identified. The Constitution's Article VI places the power of preemption in the legislative branch by making laws and treaties, but not executive decrees, the supreme law of the land. (11) In unusual cases, state laws might be displaced by the judiciary, (12) or by the President pursuant to executive agreements with foreign nations. (13) Giving mere executive policy preemptive effect, as the Court did in Garamendi, bypasses these constitutional processes and concentrates power in the executive branch.

That is particularly problematic in foreign affairs, where the President's substantial authority over the military and the organs of diplomacy already gives rise to broad independent power. The President's lack of lawmaking authority balances these other great executive powers, because without lawmaking authority, the President needs the support of other branches to fully effectuate foreign policy. This highlights an often overlooked way that federalism reinforces checks and balances at the national level. A robust foreign affairs federalism promotes a cooperative approach to foreign affairs, because the President will need the support of Congress to oust disruptive state laws; as a result, more foreign affairs decision making will be done by Congress (or the Senate). In contrast, allowing the President unilaterally to oust states from foreign affairs, as the Court did in Garamendi, means that more foreign affairs disputes may be decided only by the President, through a concentration of executive and lawmaking power that is contrary to the first principles of separation of powers.

As a result, one need not be a committed defender of state authority (14) to have grave reservations about the decision's implications for separation of powers, federalism, and constitutional theory. Specifically, we argue that the Garamendi decision has at least three separate and substantial ill-effects on our constitutional structure.

First, the Garamendi decision gives the President the power to decide which state laws affecting foreign affairs survive and which do not. This executive preemption concentrates foreign affairs power in the President in a way not countenanced by the Constitution's text nor contemplated by its Framers, who emphasized the importance of separating executive power from legislative power. Previously, if the executive branch wished to pursue a foreign policy with which a state law interfered, the President usually had to seek the support of Congress (or the Senate via a treaty) to override the competing state law through Article VI of the Constitution. This procedure assured that state laws would not stand as obstacles to federal foreign policy, as they had under the Articles of Confederation. (15) It also assured that federal foreign policy would be developed cooperatively, as the policy of the whole of the federal government, and not merely as the policy of the executive branch. Under the post-Garamendi system, the President has no incentive to pursue a cooperative approach to foreign policy, and Congress must assemble a veto-proof majority to intervene.

Second, the Court in Garamendi relied in part upon two executive agreements that seemed in tension with California's law, although the Court made clear that the preemption it found exceeded anything accomplished by the executive agreements alone. (16) The Court's opinion, nonetheless, contains broad and unreflective language endorsing executive agreements--although prior to the Garamendi decision, executive agreements always had been described in cautious and guarded language, reflecting their uncertain constitutional status. By abandoning the Court's earlier caution and apparently giving executive agreements unconstrained preemptive effect, Garamendi threatens the constitutional role of the Senate. So long as the constitutional status of executive agreements remained uncertain, the President was circumspect about their use. The Court's apparent unqualified endorsement of them may hasten the decline of the treaty.

Third, the decision's dilution of separation of powers in foreign affairs undermines structural protections the Constitution affords to the states. It centralizes...

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