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The AEI Federalism Project conducts and sponsors original research on American federalism, with particular emphasis on federal and state business regulation, legal developments and the role of the courts, and the prospects for rehabilitating a constitutional federalism that puts states in competition for productive citizens and businesses. Through its AG Watch, the Federalism Project monitors and comments on the increasingly active role of state attorneys general.

The AEI Federalism Project disseminates its research results and opinions through frequent conferences and other public events; through the Federalism Outlook, a newsletter written by the Project’s Director, Michael S Greve; through its website; and through books and publications in scholarly journals.

Supreme Court Update

May 2, 2007

Waste Not

posted by Michael Greve @ 9:50 am

United Haulers Association v. Oneida-Herkimer Solid Waste Management Authority, decided April 30, is the Supreme Court’s latest pronouncement on state and local waste management. Two New York Counties created a governmental waste management authority. Partly because the Authority provided eco-baubles from composting to recycling, tipping fees at its facilities were much higher than those at out-of-state facilities. To prevent private citizens and haulers from disposing waste out-of-state at lower cost, the counties enacted a “flow control” ordinance, providing that private haulers must deliver all solid waste generated in the counties to the Authority’s sites. C&A Carbone, Inc. v. Clarkstown, 511 U.S. 383 (1994), had held that flow control measures violate the dormant Commerce Clause when the local facility is municipal but, technically speaking, privately owned. United Haulers holds that such measures do not violate the Constitution when the local facility is public. States and local governments may not benefit local businesses by discriminating against interstate commerce, but they may benefit themselves. Let’s hear it for local monopoly! A different ruling, Chief Justice Roberts wrote for the majority, would be like Lochner (slip op. at 15-16).

Justice Scalia concurred for the most part, reiterating his long held view that the non-existent dormant Commerce Clause should be enforced only to the extent absolutely required by stare decisis. Justice Thomas also concurred, arguing that the dormant Commerce Clause should be ditched in toto. Justice Alito submitted a terrific dissent, joined by Justices Kennedy and Stevens.

April 25, 2007

Blowing Smoke

posted by Michael Greve @ 10:48 am

Cigarette maker Philip Morris is a party in two Supreme Court cases this Term, both with interesting federalism implications. The company prevailed, sort of, in Philip Morris USA v. Williams, where the Court, per Justice Breyer, held that state juries may not punish defendants, by means of punitive damages, for conduct that took place in other states. They may, however, take that conduct into account in assessing punitive damages. This subtle distinction is said to flow from the due process clause and is to be enforced by means of jury instructions. Justices Stevens, Ginsburg, Thomas, and Scalia dissented.

Watson v. Philip Morris Co., the last case to be argued this Term (on April 25) , addresses the question of whether the company is a federal officer. Whence this far-fetched notion? The company’s products and advertising practices are heavily and, one would think, preemptively regulated by the federal government. Philip Morris has found, though, that preemption defenses aren’t worth a whole lot in state court cases, where creative plaintiffs’ lawyers argue that cigarette makers federally mandated warning labels and product claims nonetheless violate state consumer protection laws. So the first order of business is to remove those cases to federal courts—but how? Enter the “federal officer removal statute,” 28 USC 1442(a)(1), enacted eons ago to protect federal customs and revenue offers from vexatious state litigation. In recent decades, some federal circuits have allowed not only federal officials but also federal contractors to invoke the removal provision. In Watson, Philip Morris persuaded the Eight Circuit that the protection should be further extended to heavily regulated industries, especially tobacco.

Good try, but not even close. There ought to be a way of protecting corporations from ruinous state litigation, but turning them into instruments of the federal government isn’t it.

For what it’s worth: this very same company, in the notorious 1998 tobacco settlement with attorneys general, effectively turned itself into an excise tax collector for the states, in exchange for antitrust immunity, a monopoly status, and attendant profits. Having made its bed as a state-protected public utility, it should lie in it.

February 12, 2007

Kentucky Bond Taxation

posted by Harriet McConnell @ 3:48 pm

This week the Supreme Court will decide whether to grant cert in the case of Kentucky v. Davis. Basically the question is whether the state of Kentucky can tax the state and municipal bonds of other states without taxing its own. The Kentucky Court of Appeals says no, that violates the dormant Commerce Clause. Will the Supreme Court decide to weigh in?

Check out the cert petition and cert response.

Still no word as of April 25.

November 27, 2006

Preemption and the Court

posted by Will Wilson @ 8:58 am

On Tuesday, November 28, AEI Liability Project will host a panel discussion of the upcoming case Watters v. Wachovia Bank. Registration is open.

The preemptive scope of the National Bank Act is at issue in the case. But the case may suggest the tone of, if not set precedent for, the Roberts Court approach to the question of how much authority federal regulatory agencies have to decide to preempt state law.

November 2, 2006

The Roberts Court Is Now In Session

posted by Will Wilson @ 5:23 pm

Oyez! Oyez! Oyez! This term, several Federalism Project persons have some business before the Honorable, the Supreme Court of the United States.

AEI president Christopher DeMuth and AEI scholar emeritus Richard Epstein have joined the Economists’ amici brief in support of respondents in the pending case Watters v. Wachovia Bank, N.A.

The Federalism Project itself will hold a Massachusetts v. Environmental Protection Agency panel event on November 21. Jonathan H. Adler, Lisa Heinzerling, Barry Rabe, and Edward Warren will discuss the case and implications. Michael Greve will moderate. You, loyal reader, are encouraged to register and attend.

Now grab some popcorn, pull up a chair, and settle in for Roberts and Alito-The First Full Term.

June 21, 2006

H2O Squared

posted by Will Wilson @ 1:16 pm

We’ve been puzzling out the various tie-breakers all week and here is what we’ve got: if the USA beats Ghana, and the adjacent tribuatary over the berm loses to or ties the navigable-in-fact water, then the Roberts concurrence faces the Corps of Engineers in a winner-take-all penalty kickoff. Otherwise, the Scalia plurality holds. Sometimes. Sometimes, we’ll use the Stevens or Breyer dissent just for kicks. Not always. The Court has decided that we aren’t sure yet and might not be sure for some time.

So let’s forget water, and focus on this week’s much more important SCOTUS development: Watters! That is, Watters v. Wachovia, which received a cert grant Monday.

The question presented in Watters, “Whether federal banking law bars states from regulating the activities of state-chartered subsidiaries of national banks,” has been answered in the affirmative by the 6th Circuit in Watters, by the the 2nd Circuit in Wachovia Bank v. Burke, 414 F.3d 305 (2d Cir. 2005), and even by the oft-erratic 9th Circuit in Wells Fargo Bank v. Boutris, 419 F.3d 949 (9th Cir. 2005).

We’ll find out next term about the preemption status of the National Bank Act. We can only hope that the Watters won’t get muddied. (You had to see that pun coming. You had to.)

May 15, 2006

Cuno Fizzles

posted by Will Wilson @ 12:38 pm

The Court issued its much anticipated ruling in DaimlerChrysler Corp. v. Cuno. As many expected, the Cuno plaintiffs’ claim flopped because the plaintiffs had no standing to challenge Ohio’s franchise tax credit. Chief Justice Roberts wrote the opinion, to which all but Justice Ginsburg joined. Justice Ginsburg wrote a separate opinion concurring in part and in the judgment.

Chief Justice Roberts also issued an opinion for a unanimous court, ruling in favor of Mid Atlantic’s equitable relief claim in Sereboff v. Mid Atlantic Medical Services.

Finally, Justice Souter wrote for a nearly unanimous Court in S.D Warren v Maine Board of Environmental Protection. All Justices joined the opinion, but Justice Scalia did not joined as to Part III-C. The ruling held that state approval is needed for a dam, as “a dam does raise a potential for discharge.”

May 1, 2006

Rejection of Feds and States

posted by Will Wilson @ 3:27 pm

In a rare rejection of a state petitioner with a federal amicus, the Court ruled unanimously that Arkansas may not put a lien on non-medical liability awards to a Medicaid recipient. Perhaps the outcome in ARKANSAS DEPARTMENT OF HEALTH AND HUMAN SERVICES ET AL. v. AHLBORN is most noteworthy for the fact of the Court’s denial of the leagued state and federal government arguments. The Court usually accepts the argument when the two sovereigns align. Justice Stevens wrote.

Justice Alito also wrote today (in another case), which returns the Court to its full complement of nine writing members. The opinions should come in bunches from now until the end of the term. Stay tuned.

March 21, 2006

Buys, Sells, and Holds

posted by Will Wilson @ 2:57 pm

According to Justice Stevens and the rest of an 8-0 Court, the Securities Litigation Uniform Standards Act of 1998 applies to purchases, sales, and holds. The unanimous opinion in Merrill Lynch v. Dabit relied heavily on Judge Easterbrook’s 7th Circuit opinion in Kircher v. Putnam Funds Trust.

The Court seized the pithe of real federalism, rejecting a system of “parallel class actions proceeding in state and federal court, with different standards governing claims asserted on identical facts.” Justice Stevens articulated the guiding principle of the decision, “The magnitude of the federal interest in protecting the integrity and efficient operation of the market for nationally traded securities cannot be overstated.”

March 7, 2006

Clawback and the Court

posted by Will Wilson @ 10:34 am

Five states have filed a complaint directly to the Supreme Court against the Department of Health and Human Services regarding the “clawback” payment in the Medicare “Part D” program, which requires states to pay a portion of Medicare costs and includes a penalty if the states do not pay. The complaint for Texas, Kentucky, Maine, Missouri, and New Jersey presents three questions:

    1. Is the “clawback,” an unconstitutional tax against the States in their sovereign capacities?
    2. Does the clawback impermissibly commandeer state legislatures to fund the federal Medicare program?
    3. Does the clawback violate the Constitution’s Guarantee Clause by improperly usurping control of essential functions of state government?

Ten states have filed an amici brief.