Inside agency preemption.

Author:Sharkey, Catherine M.
 
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A subtle shift has taken place in the mechanics of preemption, the doctrine that determines when federal law displaces state law. In the past, Congress was the leading actor, and courts and commentators focused almost exclusively on the precise wording of its statutory directives as a clue to its intent to displace state law. Federal agencies were, if not ignored, certainly no more than supporting players. But the twenty-first century has witnessed a role reversal. Federal agencies now play the dominant role in statutory interpretation. The U.S. Supreme Court has recognized the ascendancy of federal agencies in preemption disputes--an ascendancy unchecked by the change in presidential administrations.

This Article confronts the profound implications for the administrative rulemaking process caused by the ascendancy of federal agencies in the preemption realm. Stakeholders with vested interests in preemption disputes, such as state governmental organizations, state attorneys general, consumer- and business-oriented organizations, and private litigants, can continue to ignore the preemptive rulemaking processes within federal agencies only at their peril As this Article further shows, those processes are, in and of themselves, rich areas for investigation. Taking a unique perspective "inside" the preemptive rulemaking processes within five major federal agencies that regulate in areas as diverse as health and safety, banking, and the environment, this Article presents the first look at agencies' responses to President Obama's Memorandum on Preemption and their efforts to ensure compliance with the relevant provisions of Federalism Executive Order 13132, which governs preemptive rulemaking.

With this empirical grounding in agency practice, the Article addresses possibilities for reform, including a novel attorney general preemption notification provision and a blueprint for external review of newly proposed internal oversight procedures. The specific reform measures are guided by the overarching goals of (1) creating a "home" within agencies for consideration of the federalism values at stake in preemptive rulemaking and ensuring participation in the rulemaking process by suitable representatives of state regulatory interests; and (2) establishing a system of internal agency policing of the empirical and factual predicates to arguments for preemption, coupled with external oversight.

This journey inside agency preemption charts preemption's future path.

TABLE OF CONTENTS INTRODUCTION I. EXECUTIVE DIRECTIVES ON PREEMPTION AND FEDERALISM A. May 2009 Presidential Memorandum on Preemption B. Federalism Executive Order 13132 1. Consultation Process 2. Federalism Impact Statements 3. Enforcement II. AGENCY PRACTICE: RULEMAKING AND LITIGATION A. National Highway Traffic Safety Administration 1. Response to May 2009 Presidential Memorandum on Preemption 2. Rulemaking 3. Litigation B. Food and Drug Administration 1. Response to May 2009 Presidential Memorandum on Preemption 2. Rulemaking 3. Litigation C. Office of the Comptroller of the Currency 1. Congressional Response: Dodd-Frank Wall Street Reform and Consumer Protection Act 2. Response to May 2009 Presidential Memorandum on Preemption 3. Rulemaking D. Consumer Product Safety Commission 1. Congressional Response: Consumer Product Safety Improvement Act of 2008 2. Response to May 2009 Presidential Memorandum on Preemption 3. Rulemaking 4. Litigation E. Environmental Protection Agency 1. Response to May 2009 Presidential Memorandum on Preemption 2. Uniqueness of the Environmental Protection Agency Agency and States as Coregulators III. AGENCY REFORM A. Agencies 1. Internal Guidelines for Implementing the Preemption Provisions of Federalism Executive Order 13132 and Evaluating Evidence in Support of Preemption 2. Consultation with the States B. Office of Information and Regulatory Affairs/Office of Management and Budget 1. Direct Agencies to Publish Reports of Agency Compliance with May 2009 Presidential Memorandum on Preemption 2. Update the Office of Management and Budget Guidance Document 3. Include a More Thorough Review of Preemption in the Regulatory Review Process CONCLUSION INTRODUCTION

A subtle shift has taken place in the mechanics of preemption, the doctrine that determines when federal law displaces state law. In the past, Congress was the leading actor, and courts and commentators focused almost exclusively on the precise wording of its statutory directives as a clue to its intent to displace state law. Federal agencies were, if not ignored, certainly no more than supporting players. But the twenty-first century has witnessed a role reversal. Federal agencies now play the dominant role in statutory interpretation. While Congress, with the stroke of a pen, could definitively resolve preemption questions by specifying the impact of its legislation on state law, in reality it often does not, but rather leaves open a wide interpretive space for courts to fill. (1) And while courts reiterate that congressional intent is the touchstone of preemption analysis, they increasingly rely on the views propounded by federal agencies either in regulations or else in preambles or litigation briefs.

At a superficial level, this shift might be attributable to mere politics--namely, the efforts of a conservative administration (under George W. Bush) to accomplish indirectly, via federal agencies, such tort reform goals as eliminating common law tort liability that could not be achieved directly via Congress. (2) Thus, with the change in administration (from George W. Bush to Barack Obama), the story goes, we should expect a reversal, a power shift away from agencies and back to Congress. But this political story obscures more than it reveals about emerging jurisprudential trends.

The U.S. Supreme Court has recognized the ascendancy of federal agencies in preemption disputes--an ascendancy unchecked by the change in presidential administrations. And the ever-growing role of agencies gives scholars the coherent analytical framework for the Court's preemption jurisprudence--often characterized as a "muddle" (3)--that they have long sought. (4) The Court's pronouncement on preemption in Williamson v. Mazda Motor of America, Inc. (5) provides the clearest illustration to date. There, the majority's holding that a federal safety regulation did not preempt a state tort lawsuit rested fundamentally on "the promulgating agency's contemporaneous explanation of its objectives, and the agency's current views of the regulation's pre-emptive effect." (6) That seven justices signed on to an opinion relying principally on the regulatory agency's current and past view of whether the federal regulation should operate as a floor (compatible with more stringent state law standards) or a ceiling (in conflict with additional state law requirements) is momentous. (7) Justice Clarence Thomas stood alone in his objection to this agency-centric approach, chastising the Court for "wad[ing] into a sea of agency musings and Government litigating positions and fish[ing] for what the agency may have been thinking 20 years ago when it drafted the relevant provision." (8)

Justice Stephen Breyer (author of the Williamson majority opinion) tipped his hand during oral argument, asking rhetorically:

Who is most likely to know what 40,000 pages of agency record actually mean and say? People in the agency. And the second most likely is the [Solicitor General's] office, because they will have to go tell them.... So if the government continuously says, this is what the agency means and the agency is telling them, yes, this is what it means, the chances are they will come to a better, correct conclusion than I will with my law clerks.... (9) Justice Breyer characterized this agency-centric view as the triumph of the "practical" over the "theoretical" perspective on preemption. (10)

The Court's embrace of this practical, agency-centric approach to preemption comes against a backdrop of considerable concern over controversial agency interpretations of preemption. In 2009, the U.S. Supreme Court decided Wyeth v. Levine, which held that a state tort lawsuit brought by a woman injured by a drug approved by the Food and Drug Administration ("FDA") was not impliedly preempted by the Food Drug and Cosmetic Act or FDA regulations. (11) In Levine, the Court looked with particular disdain on the procedural irregularities that accompanied FDA's inclusion of its preemptive intent statement in the preamble to the drug labeling rule:

When the FDA issued its notice of proposed rulemaking in December 2000, it explained that the rule would "not contain policies that have federalism implications or that preempt State law." In 2006, the agency finalized the rule and, without offering States or other interested parties notice or opportunity for comment, articulated a sweeping position on the FDCA's pre-emptive effect in the regulatory preamble. The agency's views on state law are inherently suspect in light of this procedural failure. (12) FDA's approach to "preemption by preamble" did not comply with the notice-and-comment rulemaking process or the state consultation mandates of Federalism Executive Order 13132 ("E.O. 13132" or "the Federalism Executive Order"); (13) accordingly, the Court did not accord deference to FDA's propreemption position. The disregard shown by FDA (and other federal agencies) toward procedural and consultative requirements for preemption determinations highlights the risks of agency interpretation supplanting congressional intent.

Scholars have, to some degree, taken note of the pros and cons of the ascendancy of federal agencies in the preemption realm, prompting a robust, emergent debate of the comparative institutional competencies among Congress, courts, and agencies in resolving the statutory interpretation, federalism, and regulatory policy issues that are embedded in preemption disputes...

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