State and Local Regulatory and Enforcement Powers Under the McCain Committee Bill (S.1415rs)

By Peter D. Enrich and Patricia A. Davidson

In a number of respects, the McCain Committee bill reflects a greater sensitivity to the protection of state and local autonomy in the regulation of tobacco products then did prior legislative proposals or the original proposed settlement agreement. However, at a number of key points, S.1415 continues to pose serious threats to state and local regulatory and enforcement authority, and at a number of other points the statutory drafting raises problematic questions concerning its purpose and effect. In the following sections, we review the impacts of several key elements of the McCain Committee bill.

1. Findings and Purpose Sections

The Findings section of the McCain Committee bill (sec. 2) could be greatly improved by including additional references to the roles of states and localities in tobacco control. For example, paragraphs (7) and (8), which contain the only express references to state authority, do not mention local authority. A number of other subsections, such as those referring to the need to curtail youth sales and the importance of marketing and advertising restrictions, should expressly embrace state and local authority as well as federal action. (See, e.g., subparagraphs (15), (28), (29), (31)).

The Purpose section of the McCain Committee bill (sec. 3), which is an improvement over its predecessors, expressly refers to state and/or local authority in a number of subsections. (See, e.g., paragraphs (2), (3), (4), (11), (14)). However, some of these provisions, such as subsection (4), refer only to state authority, raising questions about the scope of local authority recognized by the bill. Paragraph 18's silence about the roles of state and local governments in ensuring that tobacco products "are not sold or accessible to underage purchasers" is also troubling, although the general non-preemption language of section 5(a) should help quell any doubts about state and local authority.

However, the exclusive reference to national standards and federal authority over the manufacturing of tobacco products and over the identification and public disclosure of ingredients in paragraph (6) may buttress preemption arguments regarding manufacturing standards, ingredients reporting and disclosure and advertising. (See discussion of section 914, in section 3, infra).

2. General Non-Preemption Provision

Section 5 of the McCain Committee bill contains a general non-preemption provision, an approach we have called for in our previous working papers. However, while the March 29th draft closely tracked the non-preemption language we recommended in a working paper analyzing S. 1530,¹ the current version omits several provisions. First, paragraph (a) dropped the remaining reference to the Food and Drug Administration Modernization Act of 1997, as amended. Second, the reference, to "or rules promulgated under such Acts", which would have expressly protected state and local laws "that further restrict or prohibit tobacco product sale to, use by, and accessibility to persons under the legal age of purchase" from preemption by rules or regulations under the Federal Food, Drug, and Cosmetic Act and the Modernization Act, was also omitted. While arguably, the reference to the Modernization Act could be dropped as surplus (since it amended FDCA), this rationale does not explain the omission of paragraph (a)'s express reference to rules and regulations, particularly since paragraph (b)'s non-preemption provisions include an express reference to rules promulgated under both the McCain bill ("this Act") and FDCA.

Third, language in the March 29th version of the McCain Committee bill providing that "[s]ection 521 of the Federal Food, Drug and Cosmetic Act (21 U.S.C. 360k) and subchapter F of chapter VII of that Act (21 U.S.C. 751 et seq.) shall not apply to any law, rule, regulation or other measure enacted, adopted, promulgated, or enforced by a State or its political subdivisions or the government of an Indian tribe with respect tobacco products" was dropped. This omission could undermine the preemption protection afforded under section 5 because, unlike the more general language of paragraph (b), the protection provided by the deleted sentence was unqualified.

The basic preemption provision of section 5(b), on the other hand, builds in an exception:

"(b) Additional Measures.- Except as otherwise expressly provided in this Act, nothing in the Act, the Federal Food, Drug and Cosmetic Act (21 U.S.C. 301 et seq.), or rules promulgated under such Acts, ..." is preemptive. (Section 5(b), emphasis added).

If the intention of the drafters was to completely shield state and local initiatives from the preemptive effect of the statutory provisions referred to in the deleted language then the language should be reinstated.²

3. Food Drug Administration (FDA) Authority

The March 29th draft of the McCain Committee bill set forth a puzzling maze of potentially contradictory directives in section 914.³ The version of the bill released on May 1, 1998 clarified some of our earlier concerns. Although the May 1st version provides stronger preemption protection than its predecessors, there is still room for considerable improvement if the goal of the drafters is to limit preemption to a narrowly defined set of issues. Section 914's preemption provisions are described below.

First, section 914(a)(1) sets forth the following anti-preemption provision.

"In general. Except as provided in paragraph (2), nothing in this Act shall be construed as prohibiting a State or political subdivision thereof from adopting or enforcing a requirement applicable to a tobacco product that is in addition to, or more stringent than, requirements established under this chapter."

Although this language is relatively straightforward,⁴ the breadth of the exception is problematic.

Second, subparagraph (A) of paragraph (2) prohibits states and localities from adopting or continuing in effect "with respect to a tobacco product any requirement which is different from, or in addition to, any requirement applicable under the provisions of this chapter relating to performance standards, premarket approval, adulteration, misbranding, registration, reporting, good manufacturing standards, or reduced-risk products." These eight categories cut a very wide preemption swath.⁵ For example, under section 914 the numerous misbranding requirements of section 903 are preemptive. Although an analysis of the substantive provisions of section 903 is beyond the scope of this working paper, one question which arises is whether the sections cross-referenced in 903, such as sections 904, 907, 908, 909 and 912 are also thereby rendered preemptive.⁶ This type of cross-referencing in other preemptive sections (see, e.g., section 902, which covers adulterated tobacco products) also raises broader preemption concerns.

The ill-defined scope of preemption of reporting requirements under section 914 is particularly troubling. Several states, dissatisfied with the federal reporting system, have recently adopted their own more stringent ingredients reporting and disclosure laws.⁷ It appears that these laws would be negated under section 914 (unless a state applied for and was granted an exemption). In addition to dismantling existing state laws, preemption of reporting requirements will undoubtedly also have a chilling effect on the development of more stringent requirements in other states.

Third, on the positive side, the May 1st version of the McCain Committee bill clarified that preemption (under subparagraph (A)) "does not apply to requirements relating to the sale, use or distribution of a tobacco product including requirements related to the access to, and advertising and promotion of, a tobacco product." (Section 914(a)(2)(B), emphasis added). The addition of language clarifying that requirements related to access and advertising and promotion⁸ are not preempted is a major step forward, particularly in the area of advertising and promotion. Nonetheless, this language could help to mitigate the negative effect of preemption language under the Federal Cigarette Labeling and Advertising Act (FCLAA) and the Comprehensive Smokeless Tobacco Health Education Act (CSTHEA) on state and local initiatives to limit tobacco product advertising and promotion. Repeal of FCLAA (as it pertains to cigarettes) and CSTHEA, which appeared in the original McCain bill, would be consistent with this approach. (See section 4 below).

Fourth, while section 914(c) provides for waivers of state or local measures that are otherwise preempted by subparagraph (a), both the cumbersome nature of the waiver process and lack of clarity about the scope of areas preempted under section 914 suggest that relying on a waiver mechanism will not be adequate to protect state and local authority in this ill-defined area.

Finally, however, the rule of construction set forth in subparagraph (b) of section 914 appears to be a satisfactory protection of the viability of state product liability law.

In short, while the language of section 914 is, on balance, an improvement over its predecessor (by limiting preemption to eight categories and clarifying that state and local requirements related to access to and advertising and promotion of tobacco products are not preempted), it nonetheless raises troubling questions. First, the eight preemptive categories are quite broad. Second, in at least some areas, such as reporting, preemption will negate existing state efforts to hold the tobacco industry to more stringent product ingredient reporting and disclosure requirements. The general non-preemption principles espoused in section 5 could be undermined by the apparently wide scope of section 914 preemption.

4. Federal Cigarette Labeling and Advertising Act (FCLAA) and Comprehensive Smokeless Tobacco Health Education Act (CSTHEA) Preemption

A provision which appeared in a previous version of the McCain bill (S. 1414)⁹ repealing both FCLAA and CSTHEA appears to have been dropped from the committee bill. Despite recent inroads,¹⁰ the preemption provisions of FCLAA and CSTHEA have historically been a serious obstacle to state and local regulation of advertising. An express repeal of the preemptive provisions of FCLAA and CSTHEA would be consistent with the non-preemption approach of section 5 as well as new language appearing in section 914(a)(2)(B), and it should be restored.

5. Environmental Tobacco Smoke (ETS)

The non-preemption provision applicable to the ETS title of the McCain committee bill provides straightforward protection:

"Nothing in this title shall preempt or otherwise affect any other Federal, State, or local law which provides greater protection from health hazards from environmental tobacco smoke" (Section 504).

However, the ETS title also includes a state choice provision allowing states to opt out by enacting a law declaring that the ETS title does not apply in their jurisdiction. (Section 507). Unlike the preemption language, which applies only to laws providing greater protection, it appears that under section 507 states may choose to provide less protection from ETS hazards than the McCain Committee bill. The language on its face would appear to permit a state to provide no protection from ETS, provided it passed a law declaring that the federal ETS title does not apply. This interpretation is supported by paragraph (11) of the Purpose section of the bill. (See section 3).

The state choice provision of the McCain Committee bill, allowing states to simply opt out of ETS requirements, is a step backward from both a preemption and substantive law perspective and it should be removed.

6. Enforcement Actions and the Civil Liability Limitations

The apparent intent of Title VII of the McCain Committee bill is to limit the liabilities of tobacco companies from civil suits concerning the health effects of tobacco products, including the suits brought by the states. However, the language of this Title raises serious concerns that it could also interfere significantly with the ability of state and local governments to use the courts to seek civil penalties or injunctive relief against tobacco companies or tobacco retailers who violate state or local laws regulating the sale or use of tobacco products.

In particular, section 704(a), with limited exceptions, forbids state and local governments from filing or maintaining "any civil action involving a tobacco claim." If this provision merely bars state and local suits seeking compensatory damages for health care costs occasioned by tobacco products, then it is consistent with the generally understood thrust of Title VII. But the bill's definition of "tobacco claim" to include any "claim directly or indirectly arising out of, based on, or related to the health-related effects of tobacco products" (sec. 701(12)) raises the spectre of a far broader application.

In particular, any action brought to enforce a state or local tobacco regulation would arguably fit within this definition, on the ground that the underlying regulation was "based on, or related to the health-related effects of tobacco products."¹¹ If this reading of the definition is right, then, for example, a state attorney general's consumer protection suit to enjoin improper tobacco marketing practices or a city's suit to recover fines from a local establishment for violations of an ordinance governing sales to minors would be barred by Title VII.¹²

While it might be argued that the language of sections 704(a) and 701(12) is not intended to sweep this broadly, several other provisions of Title VII appear consistent with a broad reading of the prohibitions contained in these sections. First, section 703(c) declares that nothing in Title VII limits the criminal liability of tobacco companies or retailers, a limitation that would hardly seem necessary if the Title's restrictions were not intended to apply more broadly than to compensatory claims for health care costs. Moreover, section 704(b) introduces an exception to 704(a)'s prohibition, which permits states to maintain civil actions to enforce consent decrees or the master settlement agreement contemplated by Title VII. Again, such an exception would scarcely appear necessary unless section 704(a) were meant to otherwise bar state and local enforcement actions.

In any case, the language of sections 704(a) and 701(12) is open-ended enough that it will surely invite tobacco producers and retailers to raise challenges to state and local enforcement actions, thereby creating an additional impediment to state and local efforts to engage in the types of independent regulatory strategies that section 5 of the bill appears intended to protect. If Congress does not wish the liability limitations of Title VII to also constrain state and local enforcement efforts, then the language of Title VII must be more narrowly crafted.

7. Enforcement Actions and the Consent Decrees

As we have observed in earlier working papers,¹³ one of the problematic ways that prior proposals for comprehensive tobacco legislation have constrained state and local enforcement efforts was by limiting such efforts to actions brought to enforce the consent decrees entered into between the states and the tobacco companies in furtherance of the settlement legislation. This problematic approach reappears in section 704(b) of the McCain Committee bill.

Unlike some of its predecessors, which spelled out in great detail the matters to be covered by the consent decrees, and by the Protocol to be subscribed to by the tobacco companies, the McCain Committee bill says very little about the scope or content of these documents, leaving that subject to be addressed outside of the legislation.¹⁴ The McCain Committee bill likewise delineates far less than did the original settlement proposal or S.1530 about the mechanics and functions of these various types of "voluntary" agreements. Thus, it is difficult to determine the extent to which the concerns raised in our prior working papers relating to the preemptive effects of these devices may recur under the Committee bill. It is noteworthy, however, that the Protocol under S.1415 appears not to implicate the states as parties, as did the version in S.1530, thus avoiding some of the impacts on state autonomy that were threatened by S.1530.

Section 704(b), however, does retain some of the significant preemptive problems of its predecessors. Section 704(b) authorizes the states to enter into consent decrees or a master settlement agreement with the tobacco manufacturers in resolution of the pending state tobacco lawsuits. And it authorizes the states, notwithstanding section 704(a)'s broad prohibition on state civil actions involving tobacco claims, to use civil actions "to enforce the terms of the Master Settlement Agreement or a consent decree." But at the same time, section 704(b) stipulates that a state which has entered into a consent decree can "maintain a civil action involving a tobacco claim only to the extent necessary to permit continuing court jurisdiction over the consent decree."

This is the only language in Title VII which purports to allow states to bring civil actions involving tobacco claims and to avoid the prohibition on such actions in section 704(a). Thus, as discussed above, it may afford the sole remaining avenue for judicial enforcement actions in furtherance of state and local regulatory policies. But section 704(b) suffers two significant shortcomings in playing this role. First, like its predecessor in Title IIIB of the original settlement proposal, this provision restricts state enforcement actions to the terms of the consent decrees and does not allow for enforcement of any more extensive or restrictive provisions of state or local law.¹⁵ Second, section 704(b)'s authorizations apply only to states, and thus offer no help to municipalities and other local entities which have historically played significant roles in tobacco control enforcement efforts.¹⁶ Thus, section 704(b) provides only a very limited grant of state enforcement authority, and one which falls far short of the needs of effective state and local capacity to further the independent state and local regulatory regimes that the McCain Committee bill purports to support.

Professor Peter D. Enrich, Northeastern University School of Law
penrich@nunet.neu.edu

Patricia A. Davidson, Staff Attorney Tobacco Control Resource Center
pdavidso@lynx.neu.edu

REFERENCES

1 See Peter Enrich and Patricia Davidson, "Impact of S. 1530 on State and Local Regulatory and Enforcement Authority," Working Paper #7 in a Series on Legal Issues in the Proposed Tobacco Settlement, Tobacco Control Resource Center, p.25 (April 6, 1998)(hereinafter "Working Paper #7"). Section 5 of S. 1415, however, has omitted, in both drafts, a recommended explicit reference to the Food and Drug Administration Modernization Act of 1997.

2 Section 5(c) of the current version of the McCain Committee bill includes a new provision that appears to be intended to protect state authority to expend funding provided under the McCain Committee bill. Since a timely analysis of the funding provisions of the bill is beyond the scope of this working paper we do not comment on paragraph (c) at this time.

3 Section 914, entitled "Preservation of State and Local Authority," is part of a new chapter of the Food, Drug and Cosmetic Act (FDCA) regulating tobacco products to be added to FDCA by the McCain Committee bill. (See Title I, Subtitle A, sec. 101(b) of the McCain Committee bill.) Thus, references to "this Act" in section 914 apparently refer to FDCA.

4 We note that language in the previous version of the McCain Committee bill expressly providing that state and local requirements that are more stringent than those established under chapter IX trump the federal requirements has been dropped. Perhaps the drafters viewed the language as surplusage.

5 The exception language has been greatly improved, however, by the omission of startlingly broad "catch-all" categories which appeared in the March 29th version of the McCain Committee bill.

6 See section 903(a)(9). Some of these sections are expressly preempted by section 914 (see e.g., section 907). Others are arguably not included (see, e.g., sections 908, 912).

7 See, e.g., Mass. G.L. Ch. 94, sec. 307B; Minn. Stat. sec. 461.17. The tobacco industry has challenged each of these statutes. See also Peter D. Enrich and Patricia A. Davidson, "Local and State Powers Under the Proposed Tobacco Settlement," Working Paper # 1 in a Series on Legal Issues in the Proposed Tobacco Settlement, pp. 11-13 (July 31, 1997); Working Paper # 7, pp. 19-20.

8 However, since the general anti-preemption provision of section 914 amends FDCA and does not expressly apply to provisions of the McCain Committee bill itself, this language apparently only to FDCA provisions.-

9 Section 118 of S. 1414 would have repealed FCLAA and CSTHEA. Senate 1530, which we analyzed in Working Paper #7, also proposes repealing CSTHEA and the cigarette portions of FCLAA. See S. 1530, Title IV, sections 402(a) and 402(b).

10 Penn Advertising of Baltimore, Inc. v. Mayor and City Council of Baltimore, 862 F. Supp. 1402 )Md. D. Ct. 1994); aff'd, 63 F.3d 1318 (4th Cir. 1995); cert. granted and judgment vacated by Penn Advertising v. Schmoke, 116 S.Ct. 2575 (1996); aff'd on remand, 101 F.3d 332 (4th Cir. 1996); cert. denied, 117 S.Ct. 1569 (1997).

11 Actions brought by a state (although apparently not by a locality) to enforce provisions of S.1415 itself are expressly exempted from section 704(a)'s prohibition. See sec. 702(b)(5).

12 Section 704(a) allows an exception for states who choose, pursuant to the provisions of section 702(c), to opt out of the provisions of Title VII. But this exception appears only to authorize opting-out states to continue their existing civil actions against the tobacco companies, and does not appear to provide a way to preserve the authority to bring new civil enforcement actions. In any case, the price of opting out is the loss of all state payments from the Tobacco Settlement Trust Fund, a cost no state is likely to incur for the sake of preserving its civil enforcement powers.

13 See Working Paper #1 at 18 (discussing original settlement proposal); Working Paper #7 at 10-11 (discussing S.1530).

14 See secs. 6(5) (defining "consent decree"); 6(21) (defining "master settlement agreement"); 6(24) (defining "protocol"). See also secs. 121-123 (placing the bill's advertising restrictions in the Protocol).

15 Section 704(b) appears to avoid another of the significant problems of its predecessors, in that it does not stipulate that a state must first obtain an injunction ordering compliance with the consent decree before seeking penalties for non-compliance with such an injunction. Thus, the McCain Committee bill appears to avoid the guarantee of two bites at the apple before penalties can be imposed for consent decree violations.

16 Unlike prior proposed legislation to implement the tobacco settlement, which defined "State" to include political subdivisions of a state, S.1415 restricts the definition of "State" to include only the states themselves (along with the District of Columbia and various U.S. territories and possessions). See sec. 6(18).