• The Labor Department and Liberty Mutual v. Gobeille

    Justice Breyer dominated the conversation in last month’s oral argument in Liberty Mutual v. Gobeille (previous coverage here). Again and again, he harped on a point pressed by none of the parties: that the Court couldn’t uphold Vermont’s reporting requirement because the Department of Labor hadn’t issued a formal rule insulating such rules from federal preemption. For all his efforts, Breyer didn’t seem to garner much support from his colleagues. Justice Scalia tartly noted that “[i]t isn’t clear that a Federal agency can eliminate preemption by simply saying, okay, you can go ahead and do it.”

    Who’s right, Breyer or Scalia? Neither of them, actually.

    In principle, ERISA should preempt only those state laws that thwart ERISA’s goal of creating nationally uniform rules for the administration of employee-benefit plans. But lots of state laws will frustrate that goal to some extent, even if they do so only minimally. The question is one of degree: how much frustration is too much?

    Judges are miserable at answering that question. They don’t have the expertise, the knowledge, or the time to dig into how a law will affect employers on the ground. Take Vermont’s reporting requirement, for example. The justices spent a big chunk of oral argument trying to get a handle on how disruptive it would for employers to comply with it. That devolved into an arcane discussion over the extent to which HIPAA rules governing electronic health transactions make it cheap and easy for third-party administrators to submit price information to the state. What the hell do the justices know about that?

    Far better, as Breyer sees it, to enlist the help of a federal agency that actually knows what it’s talking about. The Department of Labor has been tasked with administering ERISA and with crafting “such regulations as [it] finds necessary or appropriate to carry out [its] provisions.” Why doesn’t the Labor Department exercise that authority, he wondered, to decide whether state laws like Vermont’s interfere with the smooth administration of ERISA?

    Scalia wasn’t sure whether the Labor Department had the power to weigh in on preemption. But the Supreme Court’s own cases suggest that it does. As Breyer rightly noted in his 1996 opinion in Medtronic Inc. v. Lohr, the Court has repeatedly “suggested that, in the absence of a clear congressional command as to pre-emption, courts may infer that the relevant administrative agency possesses a degree of leeway to determine” whether a state statute clashes with the federal scheme. (At oral argument, Breyer adverted to his opinion in a case called MetroMedia. I think that was a mistake; my hunch is he meant Medtronic.)

    No one thinks ERISA has supplied a “clear instruction” about preemption. As the Court has ruefully explained, ERISA preemption cases “occup[y] a substantial share of this Court’s time” because “the congressional language seems simultaneously to preempt everything and hardly anything.” The Labor Department’s views about the meaning of that frustrating language should therefore matter.

    The Court has been squirrelly, though, about just how much they should matter. Concerned that federal agencies may be too quick to preempt state laws, the Court has never given full-fledged Chevron deference to an agency’s interpretation of the preemptive scope of a federal statute. Instead, it’s just said that the agencies’ views should get “some weight,” particularly when “the subject matter is technical” and “the relevant history and background are complex and extensive.”

    Whatever the official standard, however, the federal courts almost always defer to agency views about federal preemption. Nailing down precisely why is a little tricky—you can see my thoughts on that question in this unpublished piece. But the important point is that the government wins pretty much all the time, as Cathy Sharkey documented here. That’s true both where the government says that a state statute is preempted and when it says it isn’t.

    What that means is that Breyer is right that the Labor Department should have a say in whether Vermont’s law is preempted. And it means, too, that Scalia’s concerns about the Labor Department’s authority are misplaced.

    But here’s where Breyer seemed to go astray. We already know what the Labor Department thinks about Vermont’s law. We know because the United States filed an amicus brief with the Supreme Court on behalf of the Labor Department, signed by the Solicitor of Labor herself. And the Labor Department’s considered view is that ERISA doesn’t preempt the Vermont statute.

    Breyer seemed to assume that the Labor Department had to articulate that view in a formal rule. But why? In the past, the Court has deferred to agency positions about preemption, even when those positions were staked out in amicus briefs. Lower courts have done the same. If the Court cares what the Labor Department thinks, it should pay close attention to what the Labor Department says—not the format in which it says it.

    Equally puzzling is Breyer’s apparent belief that, unless and until the Labor Department issues a formal rule, Vermont should lose. In other words, the default for Breyer rule is preemption, subject to the elimination of preemption by the Labor Department. But that gets it precisely backward. The traditional default is that “the historic police powers of the States [a]re not to be superseded by [a] Federal Act unless that was the clear and manifest purpose of Congress.”

    In other words, there’s a presumption against preemption, not in favor. If the Supreme Court harbors doubts about whether the Vermont statute should give way, the right thing to do is to uphold the law—at least until the Labor Department reconsiders its view that the law is perfectly consistent with ERISA.

    @nicholas_bagley

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