Preemption, Wachovia, and Global Warming in the Lower Courts

Because industry litigants rely heavily upon preemption arguments in challenging state and local efforts to combat global warming, we here at Warming Law were watching closely for guidance from the Supreme Court in yesterday’s ruling in Watters v. Wachovia Bank, No. 05-1342 (April 17, 2007), an important case in which Wachovia – a national bank -- challenged Michigan's regulation of one of its subsidiary companies. 

In particular, we were interested to see how the Court would address one of the central issues contested by the parties: the weight and deference, if any, a court must give to a federal agency's statement in a regulatory document that states laws are preempted.  As Justice Stevens put it in dissent, the Office of the Comptroller of the Currency (OCC) had issued regulations that “reflect an Agency’s effort to transform the preemption question from a judicial inquiry into an administrative fait accompli.”  This issue is important in the global warming context because the National Highway Traffic Safety Administration (NHTSA) has similarly asserted that the federal Energy Policy and Conservation Act of 1975 (EPCA) preempts State and local officials from regulating greenhouse gas emissions from motor vehicles. 

Unfortunately, the Court’s opinion raises far more questions about preemption law than it answers.

The majority opinion, written by Justice Ginsburg and joined by Justices Kennedy, Alito, Souter, and Breyer, finds preemption, but specifically disavows any reliance on the OCC statement about preemption.  In fn 13 of her opinion, Justice Ginsburg says the following:  "Because we hold that the NBA [National Banking Act] itself - independent of OCC's regulation - preempts the application of the pertinent Michigan laws to national bank operating subsidiaries, we need not consider the dissent's lengthy discourse on the dangers of vesting preemptive authority in administrative agencies."  This clear refusal of the Court to rely at all on the OCC’s assertion of preemption could indicate that there is broad opposition on the Court to relying to heavily on such statements by administrative agencies – which would be good news for supporters of state and local global warming measures.

On the other hand, the Court’s assertion that the “NBA itself” preempts state regulation of subsidiaries of national banks is puzzling, particularly given its author.   Justice Ginsburg has joined recent dissents in cases such as Grier v. American Honda and American Insurance Ass’n v. Garamendi, which call for restricting preemption to cases where Congress provides a clear and manifest statement of its intent to preempt state law.  As the dissent explains, Congress’ intent with respect for subsidiaries was far from clear in the NBA, suggesting that Justice Ginsburg is departing from preemption principles she endorsed in other recent cases.

The dissent, written by Justice Stevens and joined by Chief Justice Roberts and Justice Scalia, is also notable for two reasons.  First, notwithstanding the majority’s assertion to the contrary, Justice Stevens argues that “this is a case about an administrative Agency’s power to preempt state laws.”  Given the majority’s express refutation of this assertion, it is hard to know what to make of Stevens’ point here, but it is helpful to have the three dissenting justices on record for the proposition that Agency statements about the preemptive effect of federal laws should be given little weight.

The Chief Justice’s vote against preemption is also notable here because he replaced Chief Justice Rehnquist, one of the most reliable pro-preemption votes on the Court.  This may indicate that advocates of state and local experimentation will have more luck in future preemption cases before the Court. 

But in general, advocates for state and local measures that combat global warming should not look to Watters for much clarity on federal preemption law.  Luckily, in the passage below, the Court in Mass. v. EPA does provide a helpful indication that state regulation of global warming pollutants should not be preempted by EPCA:

EPA finally argues that it cannot regulate carbon dioxide emissions from motor vehicles because doing so would require it to tighten mileage standards, a job (according to EPA) that Congress has assigned to DOT. But that DOT sets mileage standards in no way licenses EPA to shirk its environmental responsibilities. EPA has been charged with protecting the public’s health and welfare, a statutory obligation wholly independent of DOT’s mandate to promote energy efficiency. The two obligations may overlap, but there is no reason to think the two agencies cannot both administer their obligations and yet avoid inconsistency.