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Preemption WatchJune 15, 2005 In this issue: Herbicides and Texas’ Consumer Protection Act Local government fleet emissions standards (California) Public telecommunications utilities, part I Local rules on sewage as fertilizer (North Carolina) Local anti-predatory lending laws (California) Wisconsin’s minimum wage saga continues Public telecommunications utilities, part II (Nebraska)
FEDERAL PREEMPTION The U.S. Supreme Court decision in the case of Bates v. Dow AgroSciences will make it harder for pesticide manufacturers to avoid lawsuits by arguing that the Federal Insecticide, Fungicide and Rodenticide Act preempts state laws. Texas peanut farmers whose crops were damaged by Dow’s StrongArm insecticide charged that Dow was negligent in failing to warn them that the product should not be used on acidic soils. Their case was brought under Texas’ Deceptive Trade Practices-Consumer Protection Act. Dow argued that the farmers’ claim hinged on faulty labeling, and thus could not be brought under state laws because FIFRA explicitly preempts state labeling laws. The Court found that there was a breach of implied warranty that falls under common law rules for labeling and packaging. "Thus, a state law labeling requirement is not preempted...if it is equivalent to, and fully consistent with, FIFRA misbranding provisions." More information:
A federal judge ruled that the South Coast Air Quality Initiative is acting as a market participant through the purchasing decisions of local governments, and thus its fleet rules are exempt from federal preemption under the Clean Air Act. The South Coast Air Quality Management District (AQMD) adopted clean fleet rules in 2000. The Engine Manufacturer’s Association immediately filed suit, charging that the Clean Air Act expressly prohibits state and local governments from adopting emissions control regulations. AQMD maintained that its rules did not set emissions standards, but rather required fleet operators to purchase the cleanest vehicles commercially available. The judge upheld the fleet rules as valid procurement requirements. More information: South Coast Air Quality Management District
The already lengthy list of federal preemptions of state banking laws is growing. (For some background on the issue, see Dr. Dave’s answer to the question, Don’t states have the right to regulate banks?) The Federal Deposit Insurance Corporation held hearings in late May on a petition to preempt state banking laws and allow state-chartered banks to operate nationally under the laws of their home states. The Financial Services Roundtable says the change is necessary if state banks are to compete with national banks. State attorneys general say it would allow a “race to the bottom” in credit practices, as has already been seen with national banks locating in states that allow banks to charge high interest rates and penalties (including South Dakota and Delaware). Seven attorneys general sent a letter to the FDIC, charging that it lacks the authority to preempt states’ authority to “police their borders and protect their citizens.” In January, a federal court struck down Massachusetts’ restrictions on the sale of insurance in banks. The Massachusetts law prohibited bank employees from referring loan customers to a bank’s insurance company, and also from receiving a fee for such a referral. Banks were not allowed to discuss insurance with loan applicants until after the loan had been approved, and were required to keep loan and deposit activities separate from insurance activities. It was the last state law on the matter in existence since the 1996 U.S. Supreme Court decision in Barnett Bank v. Florida Insurance Commissioner, in which the Court said the National Bank Act preempts state laws prohibiting banks from selling insurance. In April, a federal judge issued the most recent in a long string of rulings that have barred states from regulating national banks (National City Bank of Indiana v. Turnbough). Maryland was blocked from enforcing a state law that restricts prepayment fees imposed by mortgage lenders against a national bank. "In the end, the commissioner essentially advances a policy reason for why his office should be able to regulate operating subsidiaries and impose the Maryland prepayment restriction on them: in order to better protect Maryland consumers," wrote Judge Catherine C. Blake. "While the commissioner's concerns may be legitimate, they do not overcome the fact that the National Bank Act and the regulations promulgated by the OCC thereunder preempt his efforts to regulate National City Bank's subsidiaries." The 11th Circuit Court of Appeals handed down a small victory for state banking laws in June (Bankwest v. Baker). In upholding a Georgia anti-predatory lending law, Judge Frank Hull, writing for the majority, said federal law acknowledges "that the host state's consumer and fraud laws still apply" to the out-of-state banks that do payday loan business in Georgia. Georgia’s law, however, imposes penalties only on payday lenders who charge rates in excess of 300 percent. A bill currently under consideration in the house would preempt all state anti-predatory lending laws. If passed, the Nay-Kanjorski bill would provide a minimal level of consumer protection against predatory lending. But it would ban more stringent state legislation, including state laws that are already in effect. The Miller-Watt-Frank bill, on the other hand, would set minimum standards and allow states to enforce more stringent standards. It would also continue state authority over enforcement of anti-abusive lending laws. More information: Center for Responsible Lending Acorn Predatory Lending Campaign – Acorn analyzes the Miller-Watt-Frank bill (HR 1182) and the Nay-Kanjorski bill (HR 1295) side by side.
The House energy bill preempts state and local government authority on energy conservation, and siting of transmission lines, liquefied natural gas terminals, and hydropower plants. First, it includes an unusual provision that would set federal standards for ceiling fans. It is unusual because, in the past, manufacturing and conservation groups have used state-drafted rules as the basis for negotiating a national standard, which Congress then adopts. Standards for approximately two-dozen appliances have been negotiated in this way since states began regulating energy efficiency in the 1970s, and 15 standards in the current energy bill were negotiated in this way. In this case, manufacturing and conservation groups were negotiating rules that would increase efficiency of fans by about one-third. Home Depot left the process and drafted its own rules, which require controls that are already in use in most fans and would not increase efficiency. Rep. Nathan Deal (R-Georgia) offered the provision as an amendment, and it passed the committee on a vote of 27-19. More information: Appliance Standards Awareness Project The bill would give the federal Department of Energy authority to override state decisions on transmission line siting. It would deny states the right to appeal Federal Energy Regulatory Commission decisions on environmental protection measures related to hydropower dams. And, as mentioned in the April Preemption Watch, it would allow FERC to override state decisions on siting of liquefied natural gas facilities. Finally, the bill includes a liability waiver for MTBE (methyl tertiary butyl ether) manufacturers. The toxic, petroleum-based gasoline additive seeps easily into groundwater. Clean up is difficult and expensive. State and local governments have filed more than 140 lawsuits to require oil and chemical companies to take responsibility for the cost of removing MTBE from groundwater resources. The liability waiver would effectively end these lawsuits. More information: National Association of State PIRGs, House Energy Bill Usurps States’ Rights (PDF)
In Gonzales v. Raich (formerly Ashcroft v. Raich), U.S. Supreme Court held that Congress’ claim to exclusive regulatory authority over drugs falls within its power to regulate interstate commerce. The Court did not strike down California’s Compassionate Use Act, but it did say that the federal government can enforce the Controlled Substances Act against Californians. Of the nine states that have passed medical marijuana legislation, all but one did so through direct citizen votes. But the Court declined to validate the voters’ choice to decriminalize individual use of marijuana for medical purposes. Justice John Paul Stevens, on behalf of the 6-3 majority, wrote that “perhaps even more important than these legal avenues is the democratic process, in which the voices of voters allied with these respondents may one day be heard in the halls of Congress. Justice Sandra Day O’Connor, in a dissent joined by Chief Justice William Rehnquist, recalled Justice Louis Brandeis’, writing, “the federalism principles that have driven our Commerce Clause cases require that room for experiment be protected in this case." More information: The Sainted Clause, by David Morris American Civil Liberties Union
Representative Pete Sessions (R-Texas) recently introduced HR 2726, which would ban municipal broadband networks. The bill states, in part, “neither any State or local government, nor any entity affiliated with such a government, shall provide any telecommunications, telecommunications service, information service, or cable service in any geographic area ...in which a corporation or other private entity...is offering a substantially similar service.” This attempt at federal preemption is a new twist in the telecommunications companies’ ongoing efforts to ban municipal broadband at the state level (see below). Sessions is a former employee of SBC, one of the country’s largest telecommunications companies. More information:
STATE PREEMPTION The North Carolina Court of Appeals upheld a ruling that state laws regulating application of sludge to farmland as fertilizer preempt any local government regulation of the activity. (Granville Farms Inc. v. County of Granville, No. COA04-234, North Carolina Court of Appeals May 3, 2005.) In October 2003, Granville County adopted an ordinance on sludge applications that is more stringent than state laws. The Court concluded that while the statute does not expressly preempt local regulation, “the statute, coupled with the permit requirements set forth in the applicable regulations, are so comprehensive in scope that they were intended to comprise a ‘complete and integrated regulatory scheme’ on a statewide basis, thus leaving no room for further local regulation.” More information: Clean Water for North Carolina
The California Supreme Court found that while the state’s anti-predatory lending law does not contain an express preemption clause, preemption of local ordinances is implied because: 1) state laws are "so extensive in their scope that they clearly show[ed] an intention by the Legislature to adopt a general scheme" for regulation of predatory lending; 2) effective regulation requires uniform enforcement throughout the state; and 3) regulation of lenders has been exclusively at the state level for all of the state’s history. Based on these conclusions, the Court nullified Oakland’s anti-predatory lending ordinance. The Court also rejected the city’s argument that it required additional local regulations because it has a particularly high rate of sub-prime lending. More information:
Madison Alderman Austin King requested an investigation into the agreement in which Wisconsin Governor Jim Doyle signed a local minimum wage ordinance preemption bill in exchange for the legislature’s approval of a statewide minimum wage increase. Ald. King and the Wisconsin Green Party allege the deal violates Wisconsin Statute 13.06, which classifies logrolling as a felony. The anti-logrolling statute was passed in 1911. More information: Alder King’s letter to the Wisconsin Attorney General
On June 3, the Nebraska Legislature voted 37 to 8 in favor of LB 645, which permanently prohibits municipalities from offering new wholesale or retail broadband Internet, telecommunications and video services. Public power companies are also prohibited from offering retail services, but will be allowed to provide wholesale services beginning in 2008. More information: Nebraska Unicameral Update Online
The New Rules Project - http://www.newrules.org/ |
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