President Obama Sets New Criteria for Preemption in Federal Agency Rules and Orders Sweeping Review of Existing Rules

By JP Ellison –

In a Memorandum to the heads of Executive Departments and Agencies dated May 20, 2009, with the Subject Line “Preemption” (the “May 20, 2009 Memorandum”), President Obama stated that “executive departments and agencies have sometimes announced that their regulations preempt State law, including State common law, without explicit preemption by the Congress or an otherwise sufficient basis under applicable legal principles.”

The May 20, 2009 Memorandum cross-references Executive Order (“EO”) 13132, which President Clinton issued on August 4, 1999, and the May 20, 2009 Memorandum includes as one of its criteria that an agency or department can only make a preemption statement in regulations when it is consistent with EO 13132 to do so. 

Significantly, the May 20, 2009 Memorandum seems to go beyond EO 13132.  For one thing, unlike EO 13132, the May 20, 2009 Memorandum specifically calls out “state common law” for preemption protection.  EO 13132, which was negotiated with state and local government organizations, did not specifically address common law preemption. 

In addition to compliance with EO 13132, the May 20, 2009 Memorandum also requires that any new regulations must contain preemption provisions in the codified regulations if there are preemptions statements in the preamble.

The May 20, 2009 Memorandum further requires heads of departments and agencies to look back 10 years to determine whether regulations issued in that time frame, “contain statements in regulatory preambles or codified provisions intended by the department or agency to preempt state law.”  Once any such regulations are identified, the departments and agencies are required to “decide whether such statements or provisions are justified under applicable legal provisions governing preemption.”  Other than EO 13132, the May 20, 2009 Memorandum does not identify any guidance for this review.  Finally, the May 20, 2009 instructs heads of departments and agencies to take “appropriate action” if they conclude that existing preemption provisions cannot be justified, “which may include amendment of the relevant regulation.”

It is difficult to predict how may regulations may be affected by the review ordered by the May 20, 2009 Memorandum.  That being said, FDA’s changes being effected (“CBE”) regulation, which was finalized in August 2008 and contains preamble preemption statements, is certainly on the FDA/HHS list of regulations to be reviewed. 

Unlike the FDA regulation at issue in Wyeth v. Levine, the preemptive effect of the CBE regulation was subject to notice and comment rule-making.  While the absence of notice and comment rulemaking seemed to matter to the Supreme Court in Wyeth, the presence of notice and comment rulemaking has not been given much weight by several courts that have considered the preemptive effect of the CBE regulation in connection with private tort suits against drug manufacturers.

It will be interesting to watch how the regulation review process unfolds across departments and agencies and in the courts.  It certainly seems like a significant undertaking.  Moreover, as the Supreme Court recently noted in FCC v. Fox Television Stations, Inc.:

To be sure, the requirement that an agency provide reasoned explanation for its action would ordinarily demand that it display awareness that it is changing position. An agency may not, for example, depart from a prior policy sub silentio or simply disregard rules that are still on the books. See United States v. Nixon, 418 U. S. 683, 696 (1974). And of course the agency must show that there are good reasons for the new policy.

Thus, even when the agencies have completed the process outlined in the May 20, 2009 Memorandum – which could take years – one can imagine court challenges and litigation that could go on even longer.

In the interim, it will also be interesting to see whether the plaintiff’s bar can make use of the President’s statement that there are unspecified federal regulations containing preemption provisions that  lack “sufficient basis under applicable legal principles.”  While the Memorandum states that it “is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person” (emphasis added), it would be surprising if a citation to this Memorandum did not appear in a preemption brief soon.