The Corporate Quest for Preemption of State Laws: Impact on Public Health

For the most part, big corporations and their conservative supporters oppose federal involvement in their business. They see “big government” as the problem, not the solution and prefer free market to regulatory solutions to almost every problem. If government does need to be involved, big business would usually rather interact with state governments, which are sometimes seen as more malleable or subject to competition with other states. For example, licensing of corporations is a state function and in order to attract business, states compete to set the most attractive rules.

Recently, however, tobacco, gun, automobile, pharmaceutical and other companies have sought to move legal cases against them from state to federal court or to overturn state laws that hold them to a higher standard than do federal laws. Philip Morris, for example, tried unsuccessfully to move a tobacco lawsuit filed in Arkansas state court to federal court and the gun industry has long fought to move its battles to federal rather than state courts and legislatures.

 

Federal preemption is a constitutional principle by which federal law supersedes state law when the two conflict or, more rarely, when a federal law is so comprehensive that there’s no room for the state to act.(1) Proponents of preemption argue that when a federal agency regulates a product, only federal courts can hear liability claims against the manufacturer, even if the product has harmed citizens of a specific state.

Why corporations prefer federal courts

Why do corporations now prefer federal to state courts or regulation? One compelling argument is that in theory federal review is more rational, setting a single national standard that can be reviewed using the same body of (federal) law. If, for example, each state set different standards for automobile safety, car manufacturers might need to produce different models for each state and face contradictory mandates from state courts. In fact, several states, including California and New York, have set higher pollution control standards than the federal rules, leading to a federal court challenge by the auto industry and a National Highway Safety Administration proposal that would preclude states from adopting stricter fuel emissions standards for SUVs.(2) But efficiency is only one argument in favor of federal preemption. More practically, corporations prefer federal courts because they expect more favorable decisions. Federal courts generally award lower damages than state courts and corporate lawyers find it easier to master a single code of law rather than 50 separate ones. And with an increasingly conservative federal judiciary, corporate lawyers are more likely to find federal than state judges who share their free market values. Conversely, according to Edward Sveda, senior attorney for the Tobacco Products Liability Project at Northeastern University, plaintiffs in state cases forced to go to federal court are at a disadvantage because federal judges are less familiar with state statutes and starting in federal court reduces avenues for later appeal.(3)

Arguments against preemption

Critics of preemption of state tort law argue that such preemption is bad law and bad public policy. “Immunizing the makers of products that cause injury simply because, for instance, these products have been approved for marketing by a federal agency harms both the injured people and society generally”, claims Brian Wolfman, the Director of the Public Citizen Litigation Group in Washington, D.C..(1) Wolfman distinguishes between preemption of state “positive law,” direct state regulatory action in an arena also covered by federal regulations, and preemption of state “common law,” the laws set by previous state legal decisions. The latter, he argues, should not be preempted because it provides consumers with an important additional tool for deterring harmful corporate behavior. Another reason to oppose preemption of state action is the somewhat frequent failure of federal regulatory agencies to fulfill their mandate. For example, a 2006 survey of FDA employees by the Union of Concerned Scientists found that 61 percent of the respondents knew of cases where “Department of Health and Human Services or FDA political appointees have inappropriately injected themselves into FDA determinations or actions.”(4) Reports that the FDA approved Vioxx, the pain killer made by Merck, and Avandia, a diabetes medication made by GlaxoSmithKline, despite evidence of dangerous side effects illustrate the shortcomings of federal oversight. State tort liability may serve as a more effective deterrent against corporate promotion of dangerous products.

Under the Bush Administration, preemption has also found support within federal agencies. In 2006, the Food and Drug Administration approved new rules on drug labeling that pre-empted state laws, making it easier for drug companies to defeat consumer lawsuits. The National Highway Traffic Safety Administration proposed rules that would preempt state laws on safety standards for car roofs. In addition, last year, at the White House’s behest, the House approved food safety standards that would preempt states from setting higher standards than those set by the FDA.(5) Professor Thomas O. McGarity, a tort law expert at the University of Texas School of Law told the New York Times, “It’s very troubling. There is a certain hubris on the part of regulatory agencies to make the assumption they are doing their job perfectly and should not be second-guessed, especially in light of repeated histories of agencies being misled by industries.”

Supreme Court Rejects Philip Morris Plea for Federal preemption

On June 11, 2007, opponents of federal preemption won an important victory in the US Supreme Court. In a unanimous opinion, the Supremes rejected Philip Morris’s contention that since it was following federal FTC regulations in its cigarette testing and marketing program, it was acting as an agent of the federal government and was therefore exempt from Arkansas law. The Supreme Court disagreed, sending the case back to state court for resolution. As Matthew Myers, President of the Campaign for Tobacco-Free Kids, noted, “only a tobacco company would have the gall to argue that its deceptive practices are government-sanctioned acts.”(6) The plaintiffs, two young smokers, claimed that the company was violating Arkansas’s Deceptive Trade Practices Act in its promotion of Marlboro Light cigarettes. Sweda of the Northeastern Tobacco Project called the decision “a major setback for the industry.” (7) Smokers have filed similar suits in 20 states.

Industry uses diverse strategies to limit liability

While the recent Supreme Court decision slows the preemption bandwagon and may open new opportunities for public health advocates to make their cases in state courts, corporate interests do not depend on a single strategy to achieve their broader goals. In their efforts to shield themselves from liability or more vigorous regulation, corporations have used several different approaches, including legal challenges to state laws that impose stricter controls than the federal government, attempts to transfer court cases from state to federal judges, and blanket federal legislation that bans most liability laws against an entire industry. Two examples of the last approach are the Protection of Lawful Commerce in Arms Act, signed by President Bush in 2005, providing the gun industry with protection from both federal and state civil suits including retroactive dismissal of pending state and federal cases and the so-called Cheeseburger Bill, passed by the US House in 2004 and 2005 but not acted on by the Senate. The Cheeseburger Bill, supported by the Food Products Association, the National Council of Chain Restaurants, the National Restaurant Association and the U.S. Chamber of Commerce would have protected the food industry against obesity-related lawsuits brought by both individual plaintiffs and also federal agencies such as the Federal Trade Commission or the FDA.(8)

Each of these approaches entails some legal and political risks for the industry and as we have seen, industry wins some and loses some of its fights to avoid regulation and preempt state laws. What can public health advocates learn from a review of these experiences and how can those working in tobacco, food, pharmaceuticals and guns learn from each other’ successes and failures?

Lessons for Public Health Advocates

One obvious lesson is that advocates are best served by developing the capacity to contest industry in several different arenas: state and federal courts; local, state and federal legislatures and, of course, in the media. If corporate leaders and their allies know that they can usually win in a specific setting (e.g., the federal courts), they will always seek to engage their opponents on that front and to modify the rules to increase their chances of gaining the home court advantage. Tobacco control groups, the most experienced of the public health advocates seeking to change corporate behavior, have demonstrated their ability to work in multiple settings and liability lawyers engaged in challenging the drug industry are also gaining the experiences and resources needed to win in a variety of legal settings.

A second lesson may be the importance of integrating legal, legislative and electoral strategies. The 2008 election offers public health advocates an opportunity to encourage their constituents to select a Senate, House and President that will be more willing to protect public health and less willing to safeguard corporate interests. That election will also have a major influence on the shape of the federal judiciary in coming decades.

A third lesson is the value of opening new fronts that may increase the pressure for corporations to make healthier decisions. For example, in recent years, foreign governments including Brazil, Nigeria and the European Union have brought legal action in US and foreign courts against US tobacco companies to recover medical costs attributed to their products.(9,10,11) Whether such actions will prevail or lead to change in the global behavior of the tobacco industry remains to be seen However, too often legal or regulatory victories in the United States have led tobacco, drug, food or other companies to increase marketing of unhealthy products in other nations, especially developing nations with weaker public health laws. These practices exacerbate existing global inequalities in health. If corporate leaders know that unhealthy products and practices can be successfully challenged around the world, they may be more willing to adopt international standards that would can their liability and protect their reputations not only in the developed world but globally.

 

References

1. Wolfman B. Why preemption proponents are wrong. Trial.2007; 43:3. 
2. National Environmental Trust. California auto standards and state efforts to curb global warming pollution from cars and light trucks. No date. Accessed on July 27, 2007 at http://www.net.org/warming/docs/pavley/net_pavley_fact_sheetfinal.pdf 
3. Lynch J. U.S. justices return cigarette suit to state court. Arkansas Democrat-Gazette(Little Rock), June 12, 2007, p.1. 
4. Union of Concerned Scientists. FDA Scientists Pressured to Exclude, Alter Findings; Scientists Fear Retaliation for Voicing Safety Concerns. July 2006. Accessed on July 27, 2007 at http://www.ucsusa.org/news/press_release/fda-scientists-pressured.html
5. Labaton S. “Silent tort reform is overriding states” powers. New York Times, March 10, 2006, p.C5. 
6. Myers, M. Supreme Court Ruling is Victory for Consumers Deceived by Tobacco Company Light Cigarettes. Campaign for Tobacco-Free Kids, June 11, 2007. 
7. Stohr. G. Philip Morris Loses US High Court Case on Suit Site. Bloomberg News, June 11, 2007. Accessed July 27, 2007 at www.bloomberg.com/apps/news?pid=newsarchive&sid=arvBsOuQ.nN8 
8. Burnett D. Fast-Food Lawsuits and the Cheeseburger Bill: Critiquing Congress’s Response to the Obesity Epidemic Virginia Journal of Social Policy and the Law 2007; 14(3): 357-414. 
9. No author. Foreign governments are not entitled to recover tobacco-related medical expenses. Health Law Week, March 23, 2007. 
10. Haruna G. Tobacco control battle shifts to courts. Accra Mail, May 8, 2007. 
11. No author. European Court of Justice rules that decision of EC Commission to file civil actions against US tobacco companies in US federal court did not alter legal rights of companies European Union, 13(1), January 2007.