Obama’s Preemption Memo: Limiting Regulatory Preemption of State Common Law Claims

By Matt Melamed, Public Justice Kazan-Wallace Fellow
 
On May 20, 2009, President Obama reversed one of the most nefarious practices of the Bush administration by issuing a memorandum (Preemption Memo) aimed at curbing federal preemption by regulatory fiat.  (The memorandum is available at http://www.whitehouse.gov/the_press_office/Presidential-Memorandum-Regarding-Preemption/.)  With the Preemption Memo, the President made clear his intent to limit federal agencies’ efforts to preempt state law claims merely by declaring that they would conflict with federal regulatory purposes.  This position represents a radical shift from that taken by the Bush administration, which aggressively encouraged federal agencies to seek to preempt state tort law in precisely that fashion.  For the first time in a long time, consumer advocates have an ally in the executive branch. 
 
The Bush Administration’s Stealth Tort Reform Effort
The Preemption Memo is described more fully below.  But its importance can only be understood against the backdrop of the Bush administration’s attempt to utilize federal agencies to implement stealth tort reform.  Since 2005, seven federal agencies have issued over 60 proposed or final rules that were accompanied by introductory statements – commonly known as “preambles” – stating that the rule preempts state tort law on the ground that lawsuits involving the regulated matters would conflict with the agencies’ regulatory goals.  See, e.g., Press Release, American Association for Justice, FOIAs Reveal How Bush Administration Made Complete Immunity for Negligent Corporations a Top Priority (Oct. 15, 2008), available at http://www.justice.org/cps/rde/xchg/justice/hs.xsl/3672.htm. 
 
The most notorious example of this practice is the preamble to a 2006 United States Food and Drug Administration (FDA) labeling regulation, which states that the FDA’s approval of a prescription drug’s label “preempts conflicting or contrary State law,” including lawsuits seeking to hold drug manufacturers liable for failing adequately to warn of a drug’s dangers. 71 Fed. Reg. 3922, 3934-35 (2006).  This preemption preamble was particularly egregious because it represented a 180-degree reversal of the FDA’s prior views on the matter:  before the Bush administration took power, the FDA enthusiastically endorsed tort litigation as complementing the agency’s ability to ensure the safety of prescription drugs.  (As discussed below, in Wyeth v. Levine, 129 S. Ct. 1187 (2009),the U.S. Supreme Court held that the 2006 labeling regulation’s preemptive preamble was not entitled to any deference.)
 
The intention behind this and other Bush-era preemption preambles is clear:  by attempting to strip consumers of their rights to sue, the Bush administration was pandering to the business community, which seeks at all costs to immunize itself from tort liability.  Indeed, Bush administration officials had an unusually close relationship with the industries they regulated.  Again, the 2006 FDA labeling regulation is instructive.  As first proposed, the preamble to the labeling regulation specifically stated that the FDA did not intend to preempt state law failure-to-warn claims.  See Press Release, American Association for Justice, supra.  Less than six months before issuing the final regulation, FDA’s chief counsel met with legal representatives from the largest pharmaceutical companies.  Id.  After the meeting, the preamble was changed to state that FDA approval of a drug label preempted state common law failure-to-warn claims. 
 
The Bush administration’s aggressive practice of seeking to expand federal preemption of state tort law through regulation caused an uproar in the consumer rights community, which rightly viewed it as nothing less than an attempt to achieve tort reform by regulatory fiat. 
 
Wyeth Cracks The Edifice
In a case argued before the U.S. Supreme Court before the end of the Bush administration, its stealth tort reform efforts suffered a major blow.  In Wyeth v. Levine, the Court considered whether federal law preempts lawsuits against prescription drug manufacturers for failing to warn of their drug’s dangers.  In a stinging rebuke to the Bush administration, the Court held that the mere fact of FDA approval of a drug’s label does not absolve the manufacturer of its responsibility to add to or strengthen the label to warn the public of its risks.  Wyeth, 129 S. Ct. at 1204.
 
In so ruling, the Court refused to defer to the FDA’s 2006 regulatory preamble on the grounds that it “is at odds with what evidence we have of Congress’ purposes, and it reverses the FDA’s own longstanding position without providing a reasoned explanation, including any discussion of how state law has interfered with the FDA’s regulation of drug labeling during decades of coexistence.”  Id. at 1201.   The preamble, therefore, was entitled to “no weight.”  Id. at 1204.
 
Wyeth struck down the most notorious example of the Bush administration’s attempts to pursue tort reform by regulatory fiat.  But the Obama administration’s Preemption Memo goes even farther. 
 
The Preemption Memo’s Three Directives
The Preemption Memo contains three directives: 
“1.  Heads of departments and agencies should not include in regulatory preambles statements that the department or agency intends to preempt State law through the regulation except where preemption provisions are also included in the codified regulation.
 
“2.  Heads of departments should not include preemption provisions in codified regulations except where such provisions would be justified under legal principles governing preemption. . . .
 
“3.  Heads of departments and agencies should review regulations issued within the past 10 years that contain statements in regulatory preambles or codified provisions intended by the department or agency to preempt State law, in order to decide whether such statements or provisions are justified under applicable legal principles governing preemption.  Where the head of a department or agency determines that a regulatory statement of preemption or codified regulatory provision cannot be so justified, the head of that department or agency should initiate appropriate action, which may include amendment of the relevant regulation.”
 
Why The Directives Matter
(1)  The Obama Administration Will Not Issue Preemption Preambles
The Preemption Memo’s first directive reverses the Bush administration’s practice of inserting preemption language into regulatory preambles.  Given the Supreme Court’s holding in Wyeth, why is the Preemption Memo’s first directive necessary?  Because defendants may argue that Wyeth has no application outside the prescription drug context on the ground that the FDA’s preemption preamble was uniquely flawed.   As described above, the Supreme Court’s dismissal of the FDA’s preamble relied in part on the fact that it was a reversal of the FDA’s longstanding position that its labeling regulations did not preempt state tort law.  Wyeth arguably left open a window for defendants to argue that, absent a similar agency reversal, preemptive preambles should be afforded weight.
 
The first directive slams that window shut by clarifying that any attempt to wipe out state tort claims merely by tucking preemption language into regulatory preambles is prohibited.
 
(2)  The Obama Administration Will Only Issue Preemptive Regulations Where Absolutely Necessary And Justified Under Existing Law
 
The second directive requires departments and agencies to refrain from issuing preemption provisions even in the body of codified regulations “unless justified under legal principles governing preemption.”  What are the legal principles governing preemption?
 
Among other things, the Supreme Court has made clear that implied conflict preemption (which is the sort of preemption at issue in the regulatory context) may only be found in the event of a direct conflict between state law and federal regulatory purposes.  See, e.g.,Wyeth, 129 S. Ct. at 1200.  In addition, the Court has recognized a strong presumption against preemption, especially in matters involving state tort law.  See, e.g., id. at 1194-95.By incorporating these principles by reference, the second directive puts agencies on notice that the Obama administration does not intend to tolerate any attempts at regulatory preemption in the absence of a serious state/federal conflict. 
 
Again, this intention contrasts dramatically with the Bush administration’s practice of attempting to preempt state tort law through the creation of rules that stretched mightily to declare that state tort law “conflicted” with federal regulation.  One example of this a proposed rule issued by the National Highway Transportation Safety Administration (NHTSA), Standard 216, which governs minimal roof strength in automobiles.   As proposed under the Bush administration, NHTSA included language in the regulation that declared that any tort suit seeking to hold a manufacturer liable for failing to install a stronger roof than that required by Standard 216 would be preempted on the ground that, in the agency’s view, stronger roofs pose safety hazards because they increase the likelihood that a car will roll over.  See Roof Crush Resistance, 70 Fed. Reg. 49223, 49245 (proposed Aug. 23, 2005).  This reasoning was obviously fatuous, because the agency well knew that the majority of cars on the road already had stronger roofs than would have been required under the amended standard.  See id. at 49237 (“[W]e note that the manufacturers already produce heavier passenger cars that exceed the current requirements of the standard.”); see also Public Citizen, Comments on Notice of Proposed Rulemaking; Roof Crush Resistance (Nov. 21, 2005), available at http://69.63.136.213/documents/Comments%20--%20Final.pdf (noting that “70 percent of the current vehicle fleet does not need to make any improvement to meet the proposed standards”).  Under the reasoning of NHTSA's preemption language, all these cars would have been unsafe – a claim that even a Bush-controlled NHTSA could not have ever made stick.
 
The Preemption Memo indicates that the Obama Administration will not tolerate this sort of attempt to manufacture a conflict out of thin air.  Consistent with “existing legal principles,” only a clear and direct conflict will be deemed sufficient to outweigh the strong presumption in favor of federal preemption. 
 
(3)  The Obama Administration Will Reconsider Preemptive Regulations And Preambles Issued In The Past 10 Years 
  
While the first two directives are significant, it is the third directive that may have the broadest impact.  Whereas the first two directives limit the extent to which departments and agencies may issue preemptive preambles and regulations going forward, the third instructs them to review preemptive preambles and rules issued during the past ten years.  It further instructs that where the agency head cannot justify a preemption provision, she should “initiate appropriate action” – including possible amendment of the provision – to excise the preemptive language.  With this directive, the Obama administration signaled its intention to undo the Bush administration’s covert effort to usurp state law and undermine consumer and environmental protections.
 
Why We Care
To the extent the Obama administration is true to its word, the Preemption Memo is important for at least two reasons.
 
First and foremost, the Preemption Memo ends the Bush administration’s effort to expand the scope of federal preemption of state tort law via aggressive federal regulation.  By ending that effort, the Memo signals that the Obama administration will be far less interested in using federal regulation to protect corporate interests than to protect consumers.  The Memo suggests that this administration understands the crucial role state tort law plays in promoting consumer and public safety.  It will help to ensure that victims of faulty products will have their day in court and that companies are properly incentivized to manufacture safe products. 
 
Second, on a more abstract note, the Preemption Memo symbolizes a welcome return of executive branch respect for the two structural underpinnings of our system of government:  federalism and separation of powers.  The Memo explicitly recognizes the strong role preserved for state law by the federal constitution:  “Throughout our history, State and local governments have frequently protected health, safety, and the environment more aggressively than has the national Government.”  The Preemption Memo also indicates that the Obama administration has greater respect for the separation of powers than its predecessor, which, through executive departments and agencies, frequently sought to usurp the role preserved for the legislative branch by declaring conflicts with state law where none actually existed.  The Preemption Memo should curb – and possibly even stop – this practice, at least for the time being.
 
While it is too early to know exactly how department and agency heads will act on the Preemption Memo’s directives, it is clear that President Obama envisions a different relationship between federal regulation and preemption than did his predecessor.  More importantly, the Memo gives executive departments and agencies the go ahead to undo some of the considerable damage done by the Bush administration’s undercover tort-reform agenda.  

ABOUT the author

Matt Melamed is the Kazan-Wallace Fellow at Public Justice.  His work at Public Justice has included authoring a petition for a writ of mandamus in Picardi v. United Hyundai and several articles for Public Justice’s Mandatory Arbitration Abuse Prevention Project.