Rowe v. NH Motor Transport

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Authorship: Rachel Lee

Contents

[edit] Briefs and Documents

Docket: 06-457

Argument Transcript

AFFIRMED in an opinion by Justice Breyer

Merits briefs'

Amicus briefs

[edit] Argument Preview

Does the Federal Aviation Administration Authorization Act of 1994 preempt state regulation of carriers that deliver shipments of tobacco and other products? Can a state require shippers of tobacco products to use a carrier that will obtain a signature and verify the age of the person receiving the shipment, in order to keep dangerous items out of the hands of minors? The Supreme Court will hear argument on these questions on November 28, 2007, in Rowe v. New Hampshire Motor Transport Association, No. 06-457. This clash between federal preemption and the public health police powers of states will determine whether states can use delivery regulations to block Internet sales of tobacco to teens.

[edit] Background

With the Federal Aviation Administration Authorization Act of 1994 (FAAAA), Congress prohibited the states from enacting or enforcing any law or regulations having the effect of a law “related to a rate, route, or service” of an air carrier, air/ground carrier, or motor carrier. By preempting state control, the FAAAA was intended to standardize the regulation of cargo carriers, thus improving the efficiency of national carriers and reducing shipping rates.

In 2003, concerned about the public health consequences of Internet tobacco sales and teen smoking, the state of Maine enacted the Tobacco Delivery Law to deter the sale and delivery of tobacco products to minors. The statute requires carriers to identify packages containing tobacco and verify that they are being shipped by a distributor or retailer licensed by the state. Knowledge of the contents of a tobacco shipment will be imputed to the carrier (and the carrier will thus be easier for the state to prosecute) if the package is marked as containing tobacco or the shipper is on a state list of unlicensed tobacco retailers. A licensed retailer must use a delivery service that will only deliver directly to the purchaser, rather than possibly leaving the package with another individual at the address, as is the custom in the industry. The delivery service must also obtain the purchaser’s signature at the time of delivery and verify his or her age with a government-issued photo ID.

The New Hampshire Motor Transport Association filed suit, claiming that Maine’s Tobacco Delivery Law was a law relating to a service of carriers, and was therefore preempted by the FAAAA. The district court agreed that the law would require specific changes in the standard procedures currently used by carriers such as UPS and Fed Ex, and concluded that Maine’s law was preempted. On appeal, the First Circuit affirmed, citing Morales v. Trans World Airlines, 504 U.S. 374 (1992), for its conclusion that “relating to” language in the Airline Deregulation Act “express[ed] a broad pre-emptive purpose.” (The Airline Deregulation Act was the model for the FAAAA; thus the preemption provision of the Airline Deregulation Act is significant when interpreting the parallel provision in the FAAAA.) The court held that the Tobacco Delivery Law’s economic effect brought it within the scope of FAAAA preemption despite its public health purpose.

[edit] Petition for Certiorari

The Attorney General of Maine, G. Steven Rowe, filed a petition for certiorari, which was granted on June 25, 2007.In his petition, Rowe argued that the First Circuit had construed the “related to” language in the FAAAA too broadly, because Congress had intended to preempt only economic regulations by states. Because the Maine law is not intended to be an economic regulation of carriers, it is not covered by the FAAAA. Preemption of state police powers by a “boundless reading” of the FAAAA will “as a practical matter . . . eliminate” state efforts to control tobacco delivery, a public health policy which Congress endorsed in the 1992 Synar Amendment. Not only did the First Circuit decide this case incorrectly, but it created a conflict with the Second and Ninth Circuits, which had previously held that state laws were not preempted by the FAAAA.

The respondents’ brief in opposition argued that the First Circuit had correctly interpreted and applied the FAAAA. The text of the FAAAA is broadly worded and contains specific exemptions from preemption; the categorical health exemption claimed by Rowe is not among these exemptions. Allowing Maine’s law to stand would have significant effects on carriers and would undermine the uniformity desired by Congress. Even though the FAAAA preempts this particular state law, Maine is free to take other actions to prevent unlawful sales of tobacco to children. In addition, the First Circuit’s decision does not conflict with the holding of any other court of appeals; the Ninth and Second Circuit cases involved wage and towing laws, respectively, rather than laws regulating a carrier’s delivery of goods. Finally, this case would be a poor vehicle for the Supreme Court, since the record below does not demonstrate whether Maine’s law is effective at preventing access to tobacco by minors, and because even under an ERISA-influenced narrow construction of “related to,” the Maine law would still be preempted.

In response to an invitation from the Court, the Solicitor General filed an amicus brief in which it recommended that cert. be denied because the First Circuit decision was correct. The United States agreed with the First Circuit that the FAAAA preempts Maine’s law because compliance with the state law would require carriers to modify their procedures. The FAAAA’s preemption provision is broadly worded, and the legislative history indicates that Congress intended the language to be interpreted expansively in accordance with the Morales decision. The result of preempting Maine’s tobacco control law is consistent with federal policy to prevent tobacco sales to minors (articulated in the Synar Amendment), because the state can employ other enforcement tools to deter such sales. The United States also argued that there is no circuit split on FAAAA preemption because the Second Circuit had been interpreting an express exemption from preemption, and the Ninth Circuit had found that a state wage law would not have a significant effect on carrier operations.

[edit] Merits Briefing

In his brief on the merits, Rowe urges the Court to adopt the analysis of “related to” used in the Court’s post-Morales ERISA cases by looking to the objectives of the FAAAA. The legislative history of the FAAAA indicates that Congress intended only to preempt state economic regulation; it did not intend to interfere with state regulation of the shipment of dangerous substances and contraband. (Although Maine had laws regulating the delivery of (among other things) alcohol, animals, and fireworks when the FAAAA was enacted, the Conference Report listed Maine as a state that did not regulate “prices, routes and services,” thereby implying that Congress did not intend the FAAAA to address such public health delivery laws.) Moreover, the express exemptions from preemption in the FAAAA were not intended to be exclusive, as the Conference Report specifically indicated that some other matters would also remain within the sphere of state police powers. Maine’s statute should be one such law because its public health purpose is congruent with the federal Synar Amendment, which encouraged states to regulate how tobacco is sold and distributed.

As to the law’s effects, Rowe argues that the Tobacco Delivery Law does not affect carriers directly. Instead, it merely requires licensed retailers to ship through carriers providing certain services. If carriers do not wish to participate in the lawful tobacco delivery market, they need not do so. Even the provision imputing knowledge of the contents of a package to the carrier if it is marked as containing tobacco does not impose a substantial burden on carriers, as the record demonstrates that visual inspection of a package costs less than a cent. Neither provision would have an economic effect sufficient to trigger preemption.

In their brief, the respondents counter that the text of the FAAAA, adopted with approval of the Court’s broad construction of similar language in Morales, expresses Congressional intent to preempt both economic and non-economic regulation. (The brief also notes that Maine’s law was an economic regulation of sorts; in addition to the public health motives, it was also intended to bolster tax revenues from licensed tobacco retailers.) Looking to the purpose of the FAAAA merely confirms this conclusion of broad preemption, as a patchwork of state delivery regulations would be contrary to the goal of national uniformity. Respondents stress the disruptive effects that complying with Maine’s law would have on a national carrier like UPS. Thus, the Maine law has the “forbidden significant effect” warned against in Morales, even if it achieves that effect indirectly by controlling the retailer’s choice of carriers.

The United States filed an amicus brief at the merits stage supporting the respondents. First, the government argues that “related to” should be interpreted broadly. Applying ERISA preemption analysis to the FAAAA is inapposite because the purpose of the FAAAA, according to the Conference Report, is to remove government regulation, whereas ERISA created a “pervasive federal regulatory scheme” that preempts the field. Even under an ERISA standard, however, a state law is preempted if it affects a plan’s ability to operate uniformly across the country in more than a tenuous, remote, or peripheral way. Maine’s law specifies delivery procedures and requires carriers to inspect packages to avoid liability for delivery of tobacco from an unlicensed retailer. No carrier currently offers the services prescribed by the FAAAA, and thus the law would have a significant effect on services. Finally, the public health purpose of Maine’s law is irrelevant to FAAAA preemption, because the FAAAA’s text is not limited to economic regulation, the legislative history shows that Congress intended to preempt non-economic regulation, and the effects of Maine’s law make it, in any case, an economic regulation. Upholding the Tobacco Delivery Act would open the door to a patchwork of state “public health” regulations that would frustrate the purpose of the FAAAA.

Amicus briefs were filed in support of the Attorney General of Maine by the Tobacco Control Legal Consortium and other public health groups; by the National Conference of State Legislatures and other state and local government organizations; and by thirty-nine states and the District of Columbia.

Amicus briefs were filed in support of the New Hampshire Motor Transport Association by Federal Express and the Air Transport Association of America, Inc.; by the American Trucking Associations, Inc., and the Chamber of Commerce.

The Wine and Spirits Wholesalers of America filed an amicus brief in support of neither party, which argues that the Court should not decide in this case whether the FAAAA preempts state laws on the transport and delivery of alcohol because the Twenty-First Amendment grants the states plenary authority over alcohol.

[edit] Oral Argument

Oral argument in the case is set for November 28, 2007.

[edit] Oral Argument Recap

The opening moments of the oral argument for petitioner covered familiar ground from the briefs—the argument that one section of the Maine law regulates only retailers, and is thus only indirectly related to carrier services; congressional intent with regard to Morales and broad preemption; the significance of the lack of economic motivation for a regulation versus the regulation’s economic effects; and the Synar Amendment.

The discussion then turned to shipping options available through the U.S. Postal Service, which – for less than five dollars – already offers an addressee-verification service similar to that prescribed by the Maine law. The Post Office does not provide an age verification option (although UPS does). Petitioner’s counsel conceded that the state’s inability to enforce the statute against the Postal Service thus creates a loophole for illegal tobacco shipment that can be closed only by congressional action.

In response to a question from Justice Alito about the patchwork effect of state regulations, petitioner’s counsel responded that respondents concede that complete uniformity is impossible, because states do have the authority to ban the knowing delivery of tobacco to minors.

Counsel briefly discussed the fact that under the terms of a New York settlement, carriers nationwide have already agreed not to ship cigarettes to consumers. The settlement does not cover other tobacco products, and could not be enforced by the state of Maine.

Justice Scalia noted that respondents are challenging a provision of the Maine law that would impute to the carrier knowledge of the illicit nature of a tobacco shipment if the shipper is on a list of unlicensed tobacco retailers. Petitioner’s counsel argued that imputing such knowledge is the only effective way to enforce a ban on deliveries from unlicensed retailers. Justice Breyer responded that Congress could take action, but “if every State does it differently, it’s going to be a nightmare.” He proposed a series of hypothetical regulations, which Petitioner’s counsel distinguished from the Maine law by arguing that a ban on the sale of tobacco without age verification was on the books in Maine prior to the FAAAA and there is no evidence that Congress intended to preempt it.

Justice Stevens asked about Maine’s regulations concerning other items, such as firearms, poisonous substances, and alcohol. Petitioner’s counsel said that Maine does not regulate the shipment of some of these, although it does regulate the shipment of game. Petitioner’s counsel argued that the federal government regulates some dangerous items, like fireworks, with a uniform scheme, but leaves others to the states. He closed by arguing that it would be an absurd result to construe the FAAAA so as to create a “regulatory void” in which the states cannot control tobacco shipments to minors.

Launching her argument on behalf of respondents, counsel immediately established her theme: the burden of a patchwork of non-uniform state regulations would frustrate the purpose of the FAAAA. Justice Ginsburg asked about the burdens imposed by state regulation of alcohol shipments, which is permitted by the Twenty-First Amendment, because carriers are successfully complying with those. Respondents’ counsel argued that Congress intended the FAAAA to foster services responsive to market forces, not to state dictates. In this case, the Maine law would require a new service—a particular form of combined addressee and age verification—that is not already present in the marketplace. In response to a question from Justice Stevens about the hypothetical entrance of a new carrier offering the service, counsel contended that this would be driven by regulation, not pure market competition.

Respondents’ counsel returned to the burden of the Maine law, claiming that reengineering systems to handle the necessary information would take a year and a half. Moreover, every one of 16 million packages delivered in Maine each year would need to be examined for the shipper identification, to avoid delivering tobacco products from an unlicensed retailer. Counsel claimed that this costs $2 per package.

Justice Kennedy questioned respondents’ concession that Maine could prohibit knowing delivery of tobacco from unlicensed retailers. Why was forbidding delivery with actual knowledge not also preempted under respondents’ theory? Counsel answered that such a prohibition would not require any change in services, whereas the imputation of knowledge would force significant changes in the carrier’s procedures for processing packages, since loaders do not currently look for the identity of the shipper when handling boxes.

Justice Scalia was also concerned with why Maine is not preempted from prohibiting knowing delivery of tobacco, since there is the potential for significant non-uniformity under that approach as well. Respondents’ counsel noted that the court below had held that this provision was not preempted, and petitioner had not asked the Supreme Court to review that decision.

Respondents’ counsel closed with a recap of several points from their brief—that there is no health and safety exemption in the FAAAA; that Congress had endorsed the broad preemption of Morales; and that regulating carriers indirectly through regulating retailers falls within the scope of the FAAAA.

The Assistant SG began by arguing that Congress had rejected an alternate version of the FAAAA that had only preempted economic regulation, indicating that Congress intended to broadly preempt even health and safety regulation by the states.

Justice Alito asked if a carrier could “un-preempt” the law by deciding to offer the service on its own. The Assistant SG answered that if a service is widely available, the analysis of the Maine law would be different because Morales asks if the law has a “significant effect.” However, if the service were widely available only in response to the law, that would not count.

Justice Kennedy then raised the New York settlement. Chief Justice Roberts pressed the Assistant SG for an opinion on whether the underlying New York law is also preempted. The Assistant SG suggested that it was not, because it is a law of general applicability which does not require any change in the carrier’s practices. He contrasted this with the imputed knowledge provision of the Maine law, which forces the carriers to pay attention to the identity of the shipper. Justice Ginsburg noted that carriers already have to look for labeling of hazardous substances, but he countered that the handlers are trained to scan for that uniform symbol. Because the carriers ship packages originally submitted through third-party stores such as Staples, the carriers do not currently process information regarding the identity of every shipper.

Rebuttal began with petitioner’s counsel reminding the Court that UPS has a powerful computer system which can keep track of a multitude of things. He also corrected the claim by respondents’ counsel that screening packages for unlicensed tobacco shipments cost $2 for every package delivered in Maine, arguing that this was the cost only for handling those packages which had actually been intercepted and there had only been 33 such packages. Instead, he explained, the cost per package for screening is actually only one cent. Justice Scalia interjected that it would be 50 cents, if each state required different screening, but counsel countered that the screening would only be done once per package.

In response to a question from Justice Souter, petitioner’s counsel said that the screening consists of a human being reading the address label and recognizing a name containing a word such as “tobacco” or “smokes.” Justice Souter pointed out that if an unlicensed retailer did not have an obvious name, the company could only protect itself from liability by having an automated process to compare the name of a shipper against the state list.

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