Preemption and choice-of-law coordination.

Author:O'Connor, Erin O'Hara
Position:Introduction through III. A Choice-of-Law Coordination Approach to Preemption C. Reexamining Preemption Presumptions, p. 647-683

The doctrine treating federal preemption of state law has been plagued by uncertainty and confusion. Part of the problem is that courts purport to interpret congressional intent when often Congress has never considered the particular preemption question at issue. This Article suggests that courts deciding preemption cases should take seriously a commonly articulated rationale for the federalization of law: the need to coordinate applicable legal standards in order to facilitate a national market or to otherwise provide clear guidance to parties regarding the laws that apply to their conduct, b7 situations where federal law can serve a coordinating function but congressional intent regarding preemption is unclear, we propose that courts consider whether the states have effectively allocated sovereign authority among themselves through choice-of-law rules. Where states have achieved such "horizontal coordination," Congress often has little need to usurp the states' role as laboratories for experimenting with potentially diverse substantive laws. Our approach would help to promote a "healthy federalism" by encouraging courts to preserve the benefits of local and state sovereignty while simultaneously enabling federal statutes to coordinate U.S. law where necessary. To show how our approach might improve preemption decisions, we apply it to several areas in which the courts have struggled. Although our approach provides a conceptually obvious, and therefore elegant, solution to many preemption problems, to date it has been entirely unexplored.

TABLE OF CONTENTS INTRODUCTION I. PROBLEMS WITH PREEMPTION DOCTRINE II. COORDINATION IN A FEDERAL SYSTEM A. Benefits of Multiple Laws B. The Problems of State Sovereignty C. State Horizontal Coordination D. Federal Vertical Coordination 1. Federal Choice-of-Law Rules 2. Federal Enforcement of Choice-of-Law and Choice-of Court Clauses E. Resolving Preemption Questions 1. Carve-Out and Savings Clauses 2. Administrative Agencies III. A CHOICE-OF-LAW COORDINATION APPROACH TO PREEMPTION A. Preemption's Coordinating Role B. Regulatory Coordination and Preemption Theories 1. Political Theories of Preemption 2. Preemption to Promote Uniformity C. Reexamining Preemption Presumptions D. Implementing the Approach IV. SPECIFIC APPLICATIONS A. Formal Coordination 1. Corporate and Securities Law 2. Real Property 3. Contractual Choice of Law B. Formal Noncoordination 1. Products Liability 2. Arbitration C. Functional Noncoordination 1. Environmental Law 2. Product Regulation D. Agency Preemption E. The Limits of Horizontal Coordination CONCLUSION INTRODUCTION

Preemption doctrine is plagued by both indeterminacy and incoherence. (1) These problems likely reflect the inevitable tension in a federal system between the appeal of having one clearly applicable federal policy and a commitment to preserving state and local sovereign authority. Unfortunately, the Supreme Court has not yet found a sensible way to balance these competing values. The Court's preemption decisions sometimes stress the benefits of state sovereignty and diversity while, at other times, the Court asserts a need to protect federal policy from the vagaries of different state policies. (2) The justices' rhetoric seems to vacillate between these two pillars of federalism depending on the individual circumstances of the case. (3) Rather than utilizing a nuanced view of the circumstances under which federal policy displaces state law, the Court's preemption cases seem preoccupied with presumptions and rules that emphasize gross dichotomies. (4)

Courts ostensibly attempt to glean congressional intent regarding the degree to which a federal law preempts state law. (5) Although the Supremacy Clause of the U.S. Constitution (6) enables Congress to displace state law in order to advance federal policy goals, (7) Congress cannot foresee all possible preemption scenarios or perfectly articulate the effect of its laws in all situations. (8) Moreover, silence regarding a preemption question can be the unfortunate product of political compromise (9) with strong political forces often preventing Congress from explicitly addressing the question of state sovereignty. When Congress fails to clarify the extent to which overlapping state laws are displaced, the courts attempt to discern both Congress's policy goals and the extent to which Congress would tolerate state laws that have the potential to conflict with federal policy. The former determination is notoriously difficult for courts to make, given that congressional bills are often multifaceted and the votes of more than 500 members of Congress can reflect a variety of very different policy goals. (10) Congress's willingness to accommodate overlapping state law requires an even more nuanced analysis and is therefore even harder to determine with confidence. (11)

On the surface, the Supreme Court has resisted efforts to fill voids in legislative intent with the justices' own views on the relative normative desirability of federal and state substantive policies. In this sense, the Court seems wary of usurping congressional prerogatives. Instead, the Court has turned to a set of generally applicable doctrines that enable courts (if they so choose) to avoid a detailed analysis of the merits of the substantive legal rules at issue.

Specifically, the Court has developed a set of presumptions to resolve cases where congressional intent is unclear. (12) For example, the Court often presumes that Congress has not displaced state laws when it legislates in an area traditionally regulated by the states. Conversely, the court tends to presume that Congress intended to preempt state laws when Congress acts in an area that it has pervasively regulated or when state laws could conflict with congressional objectives. These presumptions frequently conflict, however, and the justices often offer splintered opinions, with a majority emphasizing the applicability of one presumption and dissenting justices emphasizing another. (13) In the end, it is difficult to avoid the suspicion that the decisions are based on unarticulated policy judgments that are operating offstage. (14) Preemption decisions thus lack transparency, may turn on poor policy reasoning that is deprived of robust discussion and debate, and fail to provide useful guidance for future cases.

Legal scholars often advocate that the Court promote clarity by consistently applying a single presumption when congressional intent is unclear. (15) Some argue that the courts should consistently presume preemptive intent in order to promote legal uniformity or the development of a national market, or to force Congress to deal with preemption issues. (16) Others argue, to the contrary, that the courts should presume against preemptive intent in order to preserve state sovereignty or force Congress to act explicitly when it intends to displace state laws. (17) Regardless of the approaches they propose, virtually all preemption scholars seem focused on the proper allocation between state and federal power, a concern that we label "vertical coordination." While this is clearly the central issue embedded in the Supremacy Clause, in many cases a vertical coordination approach, standing alone, provides inadequate guidance for drawing the line between federal and state regulatory authority.

This Article proposes a horizontal coordination approach to preemption. Unlike other approaches that uniformly promote either more federal law or more state law, our approach is designed to help produce a healthy balance between enhancing the goals of federal law while preserving the authority of states to resolve legal problems in diverse ways. In many preemption cases, our approach would provide helpful guidance to courts.

One important function of federalizing laws is to coordinate the governing law for parties. (18) However, clarity regarding governing laws sometimes can be produced by means short of eliminating state law and its benefits. We argue that in preemption cases courts should take into account "horizontal coordination," or the degree to which the states have effectively allocated sovereign authority among themselves. (19) Specifically, court preemption decisions should consider whether the states have voluntarily adopted a choice-of-law rule for the substantive legal question at issue clarifying which state has sovereign authority to regulate the matter. If so, a court should further consider whether that allocation serves functionally to contain the effects of each state's laws. If the states have coalesced around such a choice-of-law rule for a given subject matter, this coordination indicates that each state is willing to have other states experiment with the content of laws and that the effects of such laws are not spilling over in harmful ways to people and activities located in other states. (20) In these circumstances, Congress may have little need to usurp the states' role as laboratories for experimenting with potentially diverse substantive laws.

States' coalescence around a single choice-of-law approach is a necessary but not sufficient condition for concluding that the states have effectively coordinated sovereign authority. Sometimes, choice of law is coordinated as a formal matter but one state's exercise of authority ends up functionally displacing the authority of the other states. Often this happens when a choice-of-law rule that sensibly allocates state sovereign authority with regard to some matters proves inadequate to coordinate sovereign authority in other situations to which the rule applies. This can happen when legal rules applicable in one state influence activities in other states. Consider, for example, state laws that attempt to regulate employee training and safety equipment aboard oil tankers. Even if each state coordinated around a choice-of-law rule that limited state sovereign authority to oil tankers operating...

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