They’re Not the Main Culprit

State attorneys general aren’t ruining federalism. It was already ruined, as Michael Greve’s 2012 classic The Upside Down Constitution chronicles.

It is tempting to blame them, given how badly many state attorneys general behave. Some use their office to enrich themselves or their lawyer pals, or to pursue vendettas against adversaries. The attorney general of Pennsylvania, Kathleen Kane, was recently convicted of perjury, obstruction of justice, and abusing her office in her efforts to retaliate against a political opponent. In earlier times, Texas’s Dan Morales was jailed for mail fraud and tax evasion related to Texas’ multibillion dollar 1998 tobacco settlement. Alabama’s Richmond Flowers was sentenced to eight years for conspiring to extort payments from companies, while Missouri’s William Webster was sentenced to two years for giving lawyers who donated to his campaign bigger settlements.

Moreover, it is true that multi-state attorney general settlements have encroached on Congress’ domain in a few areas, such as cigarettes and pharmaceuticals. By far the most egregious example is the 1998 tobacco Master Settlement Agreement, which trampled on federalism. It regulates an entire national industry—even in the four states that did not join it, which contravenes basic principles of federalism and also Dormant Commerce Clause rules forbidding such extraterritorial regulation. In exchange for state AGs dropping their lawsuits against the four major tobacco companies, these companies agreed to pay the states more than $240 billion (in proportion to the companies’ future market share) and restrict their advertising and marketing. In addition, trial lawyers hired by the states received over $15 billion by 2007.

To receive their share of that money, states had to pass laws protecting the four biggest tobacco companies against competition from smaller and newer firms that had never been sued and never lied about the dangers of smoking (by imposing costs tied to these rivals’ market share). That enabled the big tobacco companies to raise prices in unison and pass the increase on to smokers (the very people the state attorneys general claimed were victimized by the big tobacco companies).

On the other hand, some of the rare legal victories for federalism in the Supreme Court have come from state attorneys general. The damage done to federalism by the state AGs is dwarfed by the devastation wrought by the federal judiciary’s refusal to enforce constitutional limits on federal regulatory power over intrastate activities. Then, too, even before state AGs regulated in an extraterritorial fashion, trial lawyers were already doing so with the help of state judiciaries, which have rewritten choice-of-law rules, market-share liability concepts, and other legal rules to let trial lawyers loot out-of-state businesses.

To the extent that state AGs pose a risk to federalism, I would say the greatest risk is not in what they do collectively or nationally, but from their individually increasing refusal to defend their own state laws against federal challenges brought by the U.S. Justice Department and allied special interest groups (challenges to measures like redistricting, voter ID laws, and state preemption of municipal employment and contracting regulations).

State attorneys general have been less pivotal in expanding federal regulation than Professor Nolette suggests in his Liberty Forum essay. He criticizes the suits they bring against federal agencies to force these agencies “to expand regulation,” with the classic example being liberal state AGs’ “efforts to force the Bush administration’s EPA to regulate greenhouse gases” in Massachusetts v. EPA (2007). He says “it set the stage for virtually the entirety of the Obama administration’s climate program.”

Even in the absence of state lawsuits against the Bush administration, the Obama administration would have regulated greenhouse gases after taking office. It did not need to be forced to do so. The White House shared the ideology of the liberal state attorneys general who sued the EPA to make it regulate greenhouse gases. Indeed, the 2008 Democratic platform promised to “dramatically reduce our greenhouse gas emissions” through an “economy-wide cap and trade program” and curbs on “polluters.” Thus, it would have reached the same conclusion the Supreme Court reached in Massachusetts v. EPA: that greenhouse gases are an “air pollutant” the EPA can regulate under the Clean Air Act.

Conversely, a Republican successor to Bush might have been able to avoid regulating carbon dioxide emissions even after the Supreme Court’s ruling by relying on the practical difficulties of regulating greenhouse gases, difficulties that were conceded in the Obama EPA’s own tailoring rule. Law professors like Jonathan Adler had hoped that the impracticality of regulating most stationary sources that emit greenhouse gases would

force the Court [in UARG v. EPA (2014)] to reconsider the assumption made by Justice Stevens in Mass v. EPA that application of the Clean Air Act to GHGs would not produce absurd results. As we’ve since learned, applying the CAA to GHGs does produce such results . . . [since] portions of the Act expressly require the EPA . . . to regulate more facilities than it could ever hope to have the resources to regulate.

Nolette notes that state attorneys general have had “mixed success” in challenging federal overreach and are “unsteady allies in the cause of limited government.” But mixed success is better than meager or no success, and an unsteady ally is better than an impotent one. Victories for federalism are so rare that any success is noteworthy, and states are in a better position to bring a successful challenge.

The Supreme Court is more sympathetic to states than to private litigants. Margaret H. Lemos and Kevin M. Quinn wrote in the New York University Law Review last year that “on the merits, ‘states are more successful than any other litigator save the United States,’” and states have a five-times higher rate of obtaining Supreme Court review of an adverse lower court ruling than private litigants do.

The Supreme Court is more sympathetic to federalism arguments aimed at protecting states than those aimed at protecting individuals. Thus its ruling in NFIB v. Sebelius (2012) simultaneously upheld Obamacare’s mandate that individuals buy health insurance, even as it struck down, by a vote of 7 to 2, Medicaid expansion rules imposed on states. Neither of these results was preordained by existing precedent. As a Forbes commentary noted: “Prior to the judgment, the conventional wisdom was that the [individual] mandate would not be upheld on a taxing power basis,” and to reach this conclusion, the Court had to rule, quite counterintuitively, that “although the mandate was not a tax for [statutory] purposes . . . it was a valid tax under the Constitution.” (emphasis in original)

The Court’s Medicaid holding was also widely “unexpected,” as the Wall Street Journal noted. In cases involving individuals, the Supreme Court has struck down federal regulation of intrastate, non-economic activities under the Interstate Commerce Clause only twice over the last 80 years—even though that Clause’s text only gives Congress the power to “regulate commerce” “among the several states,” not within a state, meaning that most federal regulations logically exceed federal authority. (See United States v. Morrison, 529 U.S. 598 [2000] and United States v. Lopez, 514 U.S. 549 [1995]).

By contrast, the Court has repeatedly ruled in favor of states in federalism cases, based on principles merely implicit in Tenth Amendment (like the anti-commandeering principle the Court has plausibly read into the Tenth Amendment, as for example in the 1997 decision in Printz v. United States and the 1992 decision in New York v. United States), and found hidden in the penumbra of the Eleventh Amendment. (The Supreme Court has broadly applied the Eleventh Amendment to bar lawsuits and even administrative complaints by citizens against their own states, even though the Amendment’s text only restricts lawsuits brought “by citizens of another state,” not a state’s own citizens. See for example Seminole Tribe v. Florida [1996]; Alden v. Maine [1999]; FMC v. South Carolina [2002]; and Kimel v. Florida Bd. Of Regents [2000].)

This better track record is not due to the superior quality of state lawyering, for as Lemos and Quinn point out, “state and local government lawyers earned dismal scores from federal judges in a 1978 study of the caliber of advocacy in the federal courts.” Justice Powell once noted that “Some of the weakest briefs and arguments come from” the 50 states.

Nolette says there are “numerous cases in which Republican AGs have taken positions conflicting with the ‘states’ rights’ position. It was the Republican AGs who intervened in United States v. Windsor (2013) to support the Defense of Marriage Act (DOMA), despite its representing federal encroachment on the traditionally state-defined institution of marriage.”

But he overestimates that conflict with states’ rights. The logic of the Windsor decision—that there was “no legitimate purpose” for Congress to limit recognition of marriage to heterosexual unions— also doomed the states’ own marriage laws limiting marriage to heterosexuals. That almost immediately became clear in Obergefell v. Hodges (2015), where the Supreme Court, building on its decision in Windsor, struck down all state laws forbidding gay marriage, characterizing them as “illogical.” Moreover, DOMA was not purely an encroachment on federalism: although it encroached on federalism in section 3 (by refusing to federally recognize gay marriages approved by the spouse’s own state), it arguably protected federalism in section 2 (which authorized states to not recognize out-of-state gay marriages).

While some Republican AGs have taken positions at odds with federalism, far more Democratic AGs have done so. Consider Texas v. Inclusive Communities Project (2015), where a divided Supreme Court gave federal housing regulators a far-reaching power to meddle in state land-use decisions and landlord-tenant relations by reading into the Fair Housing Act a ban on colorblind policies that have a racially “disparate impact.” Fully 15 of the 17 attorneys general backing federal regulators in that case were Democrats. (The ruling ignored federalism canons found in the Supreme Court’s Bass and NAMUDNO decisions.)

Briefs put forth by state attorneys general in support of federal power are particularly dangerous to federalism, because some Supreme Court justices view them as a signal that whatever assertion of federal authority is at issue must be unproblematic. From 1953-1986, the Supreme Court “ruled against state power in every case in which at least one state filed a brief supporting the ‘national power’ outcome,” write Lemos and Quinn.

On the other hand, the Court may now be less inclined to respond that way. Its most significant recent federalism decision was United States v. Morrison (2000), in which it invalidated part of the Violence Against Women Act as beyond Congress’ power under both the Commerce Clause and the Fourteenth Amendment. The Court so ruled even though a dissent noted that when the law was “challenged in court, the States came to its defense. Thirty-six of them . . . have filed an amicus brief in support of petitioners in these cases, and only one State has taken respondents’ side.”

Nolette may be overly optimistic about Governors and state legislators. He suggests that their concern about their states’ economies makes them value “competitive federalism” more than state AGs do, in a way that transcends partisan considerations. But if they really had much interest in competitive federalism, they would likely already have clipped the wings of state attorneys general who attack it. State AGs employ armies of lawyers—positions funded by state legislators and Governors. As then-California attorney general Jerry Brown, whom I rated the country’s worst state attorney general in 2010, boasted: “I’ve got 1,100 lawyers standing by and they’re looking for someone to sue.” If legislators really cared about overreaching by state AGs, the latter would be less likely to commit such abuses in the first place, given how reliant they are on state appropriations to fund their offices.

To get around the limited state funds they have been appropriated (and to enrich their cronies), state AGs also rely on outside contingency-fee lawyers to bring lawsuits against out-of-state businesses (even though awarding such contingency fees violates many state constitutions). State legislators and executive branch officials could curb such practices if they were united in opposing them, by passing (and enforcing) laws against them. For example, Mississippi Attorney General Jim Hood had a history of hiring law firms to file lawsuits against businesses, lawsuits that led to big payouts— for the lawyers bringing them. In 2012, after Republicans took control of the state legislature and the Governor’s mansion, the state passed a law restricting such practices. Moreover, in two lawsuits that predated that law, the state auditor objected to Hood’s allowing lawyers he hired to keep portions of state settlements with Microsoft and MCI, rather than paying such funds into the state treasury. Mississippi’s Supreme Court ruled against Hood in these cases, declaring that the outside counsel he hired could only be paid from funds appropriated by the legislature.

Professor Nolette seems concerned about AGs’ “partisan” motive for bringing federalism challenges. But there is little reason to be worried about such motives, since they may provide the political incentive needed to mount a meritorious legal challenge. As Jessica Bulman-Pozen noted in “Partisan Federalism,” an article she published in the Harvard Law Review in 2014, “our contemporary federal system generates a check on the federal government” precisely because of “partisan conflict.”

Federalism was at its lowest ebb in the late 20th century. Recall the 1987 case of South Dakota v. Dole, which rejected a spending-clause challenge to the federal regulation of state drinking age, and Perez v. United States (1971), which rejected a challenge to congressional regulation of intra-state crime under the Commerce Clause. That was an era of bipartisanship among attorneys general, when (as Lemos and Quinn note) they typically filed briefs with the Supreme Court on the same side, and “multistate briefs represented bipartisan, not partisan, coalitions of AGs.” It was only when bipartisanship began to fray at the end of the 20th century—resulting in more partisan splits among judges and state attorneys general—that courts began to take federalism seriously, striking down laws as in excess of Congress’ enumerated powers.

Private challengers don’t act out of altruism, either. Private litigants raising meritorious federalism arguments have included a woman who poisoned her husband and athletes accused of sexual assault. Our constitutional system of checks and balances is designed to operate based on “personal motives,” not lofty principles, as James Madison explained in Federalist 51.

However negative it may be, state attorney generals’ impact on the marketplace is less unique than Nolette suggests. Nolette correctly notes that “the AGs’ regulatory strategies resemble a regulatory ratchet moving only in one direction: toward more regulation. The terms of regulatory settlements only add to, and they never subtract from, whatever corporate obligations already exist under federal law.” But that is true of state regulations in general, which always add to, and never subtract from, federal mandates.

Under the Constitution’s Supremacy Clause, states cannot override federal obligations. Concurrent state and federal regulation of commerce has been a fixture of American life since the New Deal, when the Supreme Court virtually obliterated limits on Congress’ power to regulate the economy. In the early 19th century, the Supreme Court suggested that commerce is regulable either by the federal government or by the states, but not by both at the same time. That notion long ago disappeared from Commerce Clause jurisprudence, so an assertion of state regulatory authority cannot oust federal regulators.

Hans Bader

Hans Bader is a senior attorney at the Competitive Enterprise Institute. Before coming to CEI in 2003, his prior practice included lawsuits involving the First Amendment, federalism, and civil rights issues.

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Comments

  1. R Richard Schweitzer says

    While this comment should be expanded to deal with the needed constraints on the motivations of the particular class of public officers, let us once again hammer on a specific theme:

    The extensive examples observed in this particular experience demonstrates uses of the legal systems as means to ends, involving circumstances in which there was the availability for obfuscation of the actual motivations in the selection of the ends and the determinations of the means.

    For the provision of a non-arbitrary legal system, those having prosecutorial authority and its related requisite powers of discretion, must either exercise, or be subject to, sufficient constraints of arbitrary motivations.

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