Preemption Monitor

Volume I, Issue 3
August 1, 2005

An information service of the NCSL Law & Criminal Justice Committee

Introduction

The volume of federal legislation that preempts state authority continues to mount. Pressure continues to be placed on Congress and the White House to support federal usurpation of state authority in a variety of areas such as education, tort reform, land use planning, health insurance regulation, elections, and the environment. Federal preemptions adopted through regulation, legislative enactments, or adverse judicial determinations have far-reaching consequences. They impose liabilities on states. They curtail state creativity and state authority. They often seek uniformity when uniformity is not necessarily the most effective means for resolving issues. This Monitor provides an update and analysis of pending federal preemption proposals. It discusses how these proposals might affect the states.

Despite sometimes daunting odds, it is possible for states to defeat efforts to attack traditional and historic state authority. In recent years, NCSL worked hard to defeat federal bills that: (1) sought to require state legislators to file duplicative and onerous campaign finance reports with the IRS; (2) would have circumvented state administrative and court processes in 5^th Amendment Takings cases; and (3) would have forced state and local police to enforce federal civil immigration laws. However, states have recently witnessed enactment of several major pieces of federal preemptive legislation that erode traditional state authority. These include the No Child Left Behind Act, the Help America Vote Act, the Class Action Fairness Act, and the REAL ID Act.

The Preemption Monitor reviews federal legislation that preempts state authority, describes pending legislation that would preempt state authority if enacted, and examines U.S. Supreme Court cases that have implications for state authority. Subsequent editions of NCSL’s Preemption Monitor will track the status of federal preemption activities in Congress, the executive branch, the Supreme Court, and the international arena.

Recent Federal Legislation

Land Use and Eminent Domain

Garrett Amendment to HR 3058, the Transportation, Treasury, Housing and Urban Development, the Judiciary, The District of Columbia, and Independent Agencies Appropriations Act of 2006. HR 3135, the “Private Property Rights Protection Act of 2005.” HR 3315. HR 3405, the “Strengthening the Ownership of Private Property Act of 2005.” S. 1313, the “Protection of Homes, Small Businesses, and Private Property Act of 2005.”

This legislation has been introduced in reaction to the recent Supreme Court ruling in the case of Kelo v. New London. In Kelo, the Supreme Court held that the “public use” provision of the “Takings Clause” of the 5th Amendment to the U.S. Constitution permits the use of eminent domain for economic development purposes that provide a public benefit. Therefore, because the taking of the homes at issue in Kelo was part of the city of New London’s redevelopment plan to create jobs and increase tax revenue, the city was justified in its use of eminent domain authority. It is very important to note that the power to zone and use eminent domain has always been a core function of state and local governments. These bills seek to preempt a fundamental function of state and local governments. The Garrett Amendment (Scott Garrett, R-NJ) preempts state eminent domain authority by prohibiting any federal transportation funding that goes to the states from being used to enforce the judgment of the U.S. Supreme Court in Kelo v. New London.

HR 3135 preempts state eminent domain authority by prohibiting states and localities from exercising the power of eminent domain for the purpose of economic development. It further restricts the use of any federal funds to states which would in any way support a state or local project that came about due to the use of eminent domain for economic development purposes, makes states ineligible to receive federal funding that might be used for this purpose, and directs the federal agency to withhold such funding.

HR 3315 would amend title I of the Housing and Community Development Act of 1974 to withhold community development block grant funds from states and communities that do not prohibit the use of eminent domain involving the taking of property from private persons for commercial or economic development purposes and transfer of that property to other private persons.

HR 3405 prohibits the provision of federal economic development assistance for any state or locality that uses the power of eminent domain power to obtain property for private commercial development or that fails to pay relocation costs to persons displaced by use of the power of eminent domain for economic development purposes.

S. 1313 preempts state eminent domain authority by only permitting it to be used for a “public use,” and clarifies that “public use” shall not be construed to include economic development. S. 1313 also applies to all exercises of state and local eminent domain power that involve federal funding.

Status: The Garrett Amendment passed the House as part of the Transportation/Treasury Appropriations Bill on June 30, 2005. HR 3135 was referred to the House Judiciary Committee on June 30, 2005. S. 1313 was referred to the Senate Judiciary Committee on June 27, 2005. Other bills of interest are HR 3083 (Rep. Dennis Rehberg R-MT), HR 3087 (Rep. Phil Gingrey R-GA), HR 3268 (Rep. Phil Gingrey R-GA), HR 2980 (Rep. Tom Tancredo, R-CO).

Health

HR 2355 and S. 1015, the “Healthcare Choice Act of 2005.”

This legislation is promulgated on the premise that the application of numerous and significant variations in state law impacts the ability of insurers to offer, and individuals to obtain, affordable individual health insurance coverage, thereby impeding commerce in individual health insurance coverage. The bills amend the Public Health Service Act to provide that the laws of a health insurer’s primary state of licensure apply to individual health insurance coverage offered by that issuer both in the primary state and in any secondary state if the coverage and issuer comply with this act. This means that a health insurer doing business in more than one state is only bound by laws of the state designated as the “primary” state. The bills further establish base federal standards which a state must meet in order for an insurer to designate them as a primary state. These federal standards require:

The state insurance commissioner must use a risk-based capital formula for determination of the insurers fiscal solvency.
The state must enact legislation or regulations establishing an independent review process for the individual insurance market, unless the state has an independent review mechanism functionally equivalent to the prescribed in the “Health Carrier External Review Model Act” of the National Association of Insurance Commissioners (NAIC).

The legislation also prohibits the insurer from taking action upon renewal of policy against the insured based on health status related factors, including increasing premiums, and prohibits a health insurer from offering a plan of coverage in a secondary state that isn’t offered in the primary state.

Status: HR 2355 was voted out of the House Committee on Energy and Commerce on July 20, 2005. S. 1015 was referred to the Senate Committee on Health, Education, Labor, and Pensions on May 12, 2005.

Housing Finance

HR 1461, the “Federal Housing Finance Reform Act of 2005.”

HR 1461 would establish a single regulator – the Federal Housing Finance Agency (FHFA) – for government-sponsored enterprises (GSEs) involved in the home mortgage market. GSEs are privately owned, congressionally chartered financial institutions created to enhance the availability of credit in the economy. The GSEs to be regulated by FHFA include Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (FHLBs). These GSEs were created to increase the availability of credit specifically for home mortgages. Several provisions of HR 1461 would preempt state laws by allowing FHFA to act outside the authority of state law in some circumstances and would preempt state statutes of limitation and contract law. Those preemptions would primarily occur in the event that FHFA serves as the receiver or conservator of a regulated entity.

Status: Referred to the House Judiciary Committee on July 15, 2005.

Civil Justice

S. 397 and HR 800, the “Protection of Lawful Commerce in Arms Act of 2005.”

This legislation would effectively ban civil lawsuits against gun manufacturers when the guns they make are not used for legitimate self-defense, recreational, or sporting purposes. The bill preempts state laws by prohibiting qualified civil liability actions in state courts against firearm or ammunition manufacturers, distributors, dealers, or importers when their products are unlawfully or criminally used.

Status: S. 397 passed the Senate on July 29, 2005 with a vote of 65-31. HR 800 passed out of the House Judiciary Committee on June 14, 2005 and is awaiting floor action.

Civil Justice

S. 1125, the “Expanding Charitable and Volunteer Opportunities Act.”

This legislation would shield businesses that provide equipment or facilities for use by charitable nonprofit organizations from state civil liability. The bill also shields physicians and other duly licensed health care providers from civil liability under state laws if they are providing charitable services. A number of states have enacted provisions of this type within the broader context of medical liability reform.

Status: Referred to the Senate Judiciary Committee on May 25, 2005.

Telecommunications

S. 1294, the “Community Broadband Act of 2005” and S. 1350, the “Wireless 411 Privacy Act.”

S. 1294 seeks to preempt state laws that regulate a public provider of broadband services. The bill would prohibit a public provider of broadband services from refusing advanced telecommunications capability or any service utilizing such capability within its capacity to any person or any private or public entity.

S. 1350 seeks to protect the privacy of mobile phone users by prohibiting the inclusion and dissemination of wireless telephone number information to wireless directory assistance service databases, provided the consumer opts out of such inclusion. The bill preempts state laws that impose requirements on providers of commercial mobile services, or any direct or indirect affiliate or agent of such providers that are inconsistent with federal requirements.

Status: S. 1294 was referred to the Senate Committee on Commerce, Science, and Transportation on June 23, 2005. S. 1350 was referred to the Senate Committee on Commerce, Science, and Transportation on June 30, 2005.

Technology

Security/Data Breach Legislation, HR 1069, S. 115, S. 751, S. 768.

Congress has held hearings in the last few months on breaches of security involving customers’ personal and financial data at Bank of America, Wachovia Corp., and ChoicePoint Inc. Additional reports of lost or stolen customer data have occurred involving CitiFinancial and MasterCard International. Legislation, primarily concerning customer notification of such breaches, has been introduced in both the U.S. House and U.S. Senate with varying levels of federal preemption of state authority. The Comprehensive Identity Theft Prevention Act (S. 768)—outlining consumer notification procedures, establishing a new Office of Identify Theft within the FTC, and regulating the transfer of sensitive personal information—would preempt any provision of state law that is inconsistent with the provisions of the Act. A provision of state law would not be inconsistent if it provides greater protection than that provided under the federal Act.

HR 1069 and S. 115 would supersede state or local law relating to the notification of any breach of security of an electronic database containing personal information as defined by the Act, except as provided under California's Notice of Security Breach law (1798.29 and 1798.82 of California’s Civil Code).

S. 751, also covering notice requirements, would supersede any inconsistent provisions of state or local law with respect to the conduct required by the specific provisions of the Act.

As of June 20, 2005, legislation relating to these types of breaches and any associated notification requirements has been introduced in at least 35 states. Legislation has been enacted in at least 13 states in 2005: Arkansas, Connecticut, Florida, Georgia, Illinois, Indiana, Maine, Minnesota, Montana, Nevada, North Dakota, Texas and Washington. Additional bills have been sent to the governor in Nevada and Tennessee.

Status: All four bills have been referred to committee but have received no action this year thus far.

Elections

HR 3094, the “Secure America’s Vote Act of 2005”

This legislation amends the Help America Vote Act (HAVA) and establishes uniform standards for the counting of provisional ballots cast at incorrect polling places. HAVA permits the states to create their own laws regarding the counting of provisional ballots. This bill would preempt those laws. The bill also establishes security standards for voting systems used in federal elections and requires states to make election laws “public” by publishing them in hard copy and on the internet by January 1 of any election year.

Status: Referred to the House Committee on House Administration on June 28, 2005.

Privacy Notification

S. 751 and S. 1326, the “Notification of Risk to Personal Data Act,” S. 1332, the “Personal Data Privacy and Security Act of 2005,” S. 768, the “Comprehensive ID and Theft Protection Act,” S. 1408, the “Identity Theft Protection Act,” HR 1069, the “Notification of Risk to Personal Data Act”

These bills address how and when the federal government, businesses, and in some cases states must notify individuals when there has been a data security breach which has resulted in, or in which there is a significant risk of harm to individuals. All of these bills define what personal information is “protected,” e.g. social security numbers, drivers license numbers, bank account or other account information, etc. All of these bills either expressly preempt state notification laws entirely or preempt state laws to the extent that they are inconsistent with federal law. There are currently 17 states that have laws governing notification in this instance.

Status: All of these bills have been referred to Committee. S. 1408 passed out of the Senate Committee on Commerce, Science, and Transportation on July 28, 2005.

Criminal Justice

HR 3084, the “Drug Free Sports Act”

HR 3084 would require the public disclosure of the name of any athlete having a positive drug test that results in suspension. Such a requirement would preempt numerous state privacy laws.

Status: Passed the House Energy and Commerce Committee on June 28, 2005 and has been referred to the House Education and Workforce Committee.

Preemption Watch List

Issue	Bill Number	Sponsor	Explanation	Bill Status
Tort Reform – Medical Malpractice	HR 5, HR 534, HR 2657, HR 3154, HR 3378, S. 354	Rep. Phil Gingrey (R-GA), Rep. Chris Cox (R-CA), Rep. Brian Baird (D-WA), Rep. Barbara Cubin (R-WY), Sen. John Ensign (R-NV)	All proposed bills preempt state laws regulating medical malpractice civil lawsuits within state courts, specifically in the areas of noneconomic and punitive damages caps, attorneys fees, statutes of limitations, joint and several liability, collateral source rules, and periodic payments. HR 5 exempts drug or medical device manufacturers and distributors from civil liability if a specific product has received Food and Drug Administration clearance.	HR 5 passed the House on July 28, 2005. Senate Majority Leader Bill Frist (R-TN) plans to take up the measure after the August recess.
Immigration	H.AMDT 163 to HR 1817	Rep. Charlie Norwood (R-GA)	Makes states responsible for enforcing federal civil immigration laws by “clarifying” that such authority rests with the states. Attached to the FY2006 authorizations for the Department of Homeland Security.	Passed the House on May 18, 2005. Has not moved in the Senate.
Campaign Finance – Section 527 Organizations	S. 271, S. 1053, HR 513, HR 1316	Sen. John McCain (R-AZ), Sen. Russ Feingold (D-WI), Rep. Chris Shays, (R-CT), Rep. Mike Pence (R-IN)	Defines what constitutes a Section 527 organization and requires these organizations to file with the Federal Election Commission. The bill was amended in committee and now contains language that removes state candidates and officeholders from the restrictive provisions of the bill.	S. 271 was voted out of the Senate Rules Committee on April 27, 2005 and placed on the Senate Floor Calendar on May 17, 2005. HR 513 was voted out of Committee on June 29, 2005. HR 1316 was voted out of Committee on June 22, 2005.
Civil Justice – the “Lawsuit Abuse Reduction Act”	HR 420	Rep. Lamar Smith (R-TX)	Preempts state civil procedure laws by requiring states to be subject to Rule 11 of the Federal Rules of Civil Procedure in purely state legal proceedings. Requires state judges to apply the sanctions provisions of Rule 11 when a determination was made that a state civil lawsuit was frivolous and affected interstate commerce.	Passed the House Judiciary Committee on May 25, 2005.
Criminal Justice – the “Innocent Life Protection Act of 2005”	HR 379	Rep. Chaka Fattah (D-PA)	Preempts state capital punishment laws by enacting a mandatory minimum 10-year death penalty moratorium in any state which had sentenced a person to death, and that person had been determined by subsequent judicial process to be innocent. Establishes federally-monitored procedures with which a state must comply to reinstate its death penalty.	Referred to the House Subcommittee on Crime, Terrorism, and Homeland Security on March 2, 2005.
Elections – the “Federal Election Integrity Act of 2005”	HR 834, S. 391	Rep. Ted Strickland (R-OH), Sen. Frank Lautenberg (D-NJ)	Imposes restrictions on the political activities of chief state election administration officials for state elections involving federal officers and preempts longstanding state public policy in this area. It would be unlawful for a chief state election administration official to take an “active part” in the political management of a political campaign with respect to any election for federal office over which such official has supervisory authority.	Referred to the House Committee on House Administration and to the Senate Rules Committee in February, 2005.
Energy – the “Energy Policy Act of 2005”	HR 6	Rep. Joe Barton (R-TX), Sen. Pete Dominici (R-NM)	As of release of the Preemption Monitor, NCSL staff are reviewing this legislation in reference to preemption issues. Some preemptions in the House and Senate versions of the bill were not in the Conference report. Preemptions of state authority in the Conference report include the siting of electric transmission facilities and the siting of liquefied natural gas (LNG) terminals. Further information will be released at a later date.	House accepted Conference report on June 28, 2005. Senate accepted Conference report on June 29, 2005. President Bush is expected to sign.
Environment – RRPI, a proposed Title under the FY 2005 Department of Defense Authorization bills, HR 1815 and S. 1042	HR 1815, S. 1042		The RRPI exempts the Department of Defense (DOD) from compliance with select provisions of the federal Clean Air Act, the Comprehensive Environmental Response and Liability Act (Superfund) and the Resource Recovery and Conservation Act (Solid Waste). The exemptions preempt state laws and regulations that complement and supplement the three federal environmental laws. Proposes to move all cases brought under the Clean Air Act, Superfund and the Safe Drinking Water Act from state courts to federal courts.	Dead as to attaching it to the DoD Authorization bills. Could reappear on a DoD spending bill.
Driver’s Licenses – the “REAL ID Act of 2005”	HR 418	Rep. James Sensenbrenner (R-WI)	Imposes rigid, prescriptive federal mandates for state-issued driver’s licenses. Requires states to verify lawful presence before issuing a driver’s license, establishes security standards for state offices where driver’s licenses and related documents are produced and stored, regulates personnel training and security clearances, sets federal data storage requirements, and prohibits financial assistance to a state unless it joins an interstate compact.	Passed the House and the Senate. Became P.L. 109-13 on May 11, 2005.
Insurance – the “SMART Act of 2005”	Not yet introduced. Draft bill circulated in late 2004.	N/A	Establishes federal requirements for insurance regulatory reform. States would have to adopt federal provisions or face preemptions and sanctions. States would be required to enact model laws developed by the National Association of Insurance Commissioners (NAIC), or essentially accept the model laws if state action were deemed inconsistent with them by a federal insurance panel. Deregulates property-casualty rates for most insurance lines, primarily automobile, homeowner’s and worker’s compensation insurance.	Not yet introduced.
International Trade – WTO Appeals Panel and State Gaming Laws in Violation of GATS	N/A	N/A	A World Trade Organization (WTO) appellate panel is poised to rule on whether U.S. federal and state laws restricting Internet gambling violate commitments the United States has made under the WTO General Agreement on Trade in Services (GATS).	WTO ruled that the U.S. had to make a change to the federal law on horsetrack betting but that Antigua did not make strong enough arguments against state laws. The question of the disparity between state laws has not yet been decided.
Health – the “Small Business Health Fairness Act of 2005”	HR 525, S. 406	Rep. Sam Johnson (R-TX), Sen. Olympia Snowe (R-ME)	Seeks to “streamline” regulations for small businesses that pool their money together to buy health insurance through groups called association health plans (AHPs). Preempts state laws providing critical protections to consumers and fails to replace them with adequate federal protections.	House bill reported out of Committee on April 13, 2005. Senate Committee on Health, Education, Labor, and Pensions has held hearings.
Health – the “Combat Meth Act of 2005”	S. 103	Sen. Jim Talent (R-MO)	Preempts state laws regulating the sale of pseudoephedrine, the main ingredient of methamphetamine, by requiring that all substances containing pseudoephedrine be sold behind the pharmacy counter. Purchasers must produce a photo ID showing date of birth and sign a written log or receipt. No person shall acquire more than 9 grams of pseudoephedrine within any 30-day period. 40 states currently have laws regulating the sale of pseudoephedrine in various ways. Fewer than ten states regulate pseudoephedrine in the manner that the federal bill contemplates.	Referred to the Senate Judiciary Committee in January, 2005.
Health – the “Patient Safety and Quality Improvement Act of 2005”	S. 544	Sen. James Jeffords (I-VT)	Preempts state freedom of information laws (FOIAs) or any other state laws that govern civil or administrative procedures requiring the disclosure of information provided by a health care provider to a certified patient safety organization.	Passed the Senate on July 21, 2005. Passed the House on July 27, 2005.
Technology	HR 29, HR 744, S. 687, S. 1004	Rep. Mary Bono (R-CA), Rep. Bob Goodlatte (R-VA), Sen. Conrad Burns (R-MT),Sen. George Allen (R-VA)	HR 29 contains an intergovernmental mandate identified under UMRA preempting state law in areas ranging from the regulating and implementation of penalties against outside users from using protected computers in a deceptive manner to the use of authorized information collection programs, and the use of web-accessed computer software displaying online advertising. S. 687 prohibits states from enacting statutes limiting or restricting the use of software that collects information about the user of a computer, the user’s use of the computer, the user’s browsing behavior, or cause advertisements to be delivered to the user. SPY BLOCK also supersedes state law regarding notification of software installation. HR 744 contains an intergovernmental mandate identified under UMRA prohibiting a state from creating civil penalties that specifically reference federal statute regarding computer fraud. S. 1004 preempts state law relating to installation of software through deceptive acts in favor of FTC authority.	HR 29 and HR 744 passed the House on May 23, 2005. S. 687 and S. 1004 have been referred to the Senate Commerce Committee.

Supreme Court Cases

Medical marijuana – Gonzales v. Raich (June 6, 2005)

The Supreme Court held that Congress's Commerce Clause authority warranted regulation and prohibition of local cultivation and personal use of marijuana, even when in compliance with state law. Without disputing the constitutionality of the Controlled Substance Act (CSA: part of the Comprehensive Drug Abuse Prevention and Control Act), respondents argued that the CSA's "categorical prohibition of the manufacture and possession of marijuana as applied to the intrastate manufacture and possession of marijuana for medical purposes pursuant to California law" was outside of Congress's authority as defined by the Commerce Clause. Respondent's qualm with specifically this section of the CSA was deemed irrelevant, as it is outside the scope of the Court to excise individual components from larger policy schemes.

In addressing the constitutionality of the entire scheme, the Court upheld case law firmly supporting the right of Congress to regulate local activities that were part of an economic "class" of "activities that substantially affect interstate commerce" NLRB v. Jones & Laughlin Steel Corp., (301 U.S. 1, 37 [1937]). Essentially, when Congress determines that a "total incidence" of a particular practice threatens the government's ability to regulate the entire interstate market, it has the right to regulate that entire class of activity. Strongest of the Court's precedential grounds was Wickard, which established that "Congress can regulate intrastate activity that is not itself ‘commercial'…if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity." A further concern was the leakage of sanctioned cannabis into the illicit interstate marijuana market.

In summation, the Court declared the powers of Congress under the Commerce Clause comprehensive enough to allow regulation of intrastate, local activities when needed to regulate broader interstate markets with efficacy. Proper avenues for legalization of marijuana lie with Congress and the drug's demotion from Schedule-One status.

Ten Commandments display for religious purpose – McCreary County v. ACLU (June 27, 2005)

In this case, the Supreme Court found that Ten Commandment displays in a Kentucky Courthouse contravene the First Amendment's Establishment Clause. Following the precedent of Lemon v. Kurtzman (403 U.S. 602 [1971]), the Court found that the displays lacked a primary secular purpose since the Commandments convey a distinct Judeo-Christian message. (Lemon requires the secular purpose to be of the most genuine nature and not one that stands secondary to the "ostensible and predominant purpose of advancing religion.")

The attempted revision supported by the counties was also ruled unconstitutional even though the counties included a secular codicil to the Commandments, noting the profound effect that the Commandments have had on the development of "Western legal action and thought." The Court still included this attempted revision within the initial injunction, stating that the underlying factor is the unconstitutional endorsement of a message suffused with a religious motif.

Writing for the majority, Justice Souter pointed to the precedent of Wallace v. Jaffree (472 U.S. 38, 75 [1985]), which requires that government neutrality always remain intact when a religious message appears on public property. Pointing to Stone v. Graham, in which even though the appearance of the Ten Commandments within a public school classroom was ruled unconstitutional, Souter noted that the Court does not hold "that a sacred text can never be integrated constitutionally into a government display on law or history"; rather, such a display must be part of a greater secular display that does not imply government support or endorsement of a specific religion.