Court Deals Important Blow To Corporate Immunity

snapple_1The Chamber of Commerce, and the corporate interests it represents, is engaged in a wildly successful litigation strategy to immunize corporations from the law.  Indeed, as the Wonk Room has previously explained, the Supreme Court has embraced the health insurance industry’s claim that employer-provided health plans should be completely immune from accountability when their wrongful coverage decisions injure or kill a patient.  It has shielded dangerous medical device manufacturers from accountability when their defective products cause injury or death.  And it has even allowed the corporate sector to force consumers and employees into biased, privatized courts that overwhelmingly favor corporate parties.

One of the sharpest arrows in the corporate immunity campaign’s quiver has been a doctrine known as “preemption.”  Because the Constitution says that federal law is the “supreme Law of the Land,” Congress has the power to enact laws which “preempt” state laws that conflict with its intended goals.  A law preempted by Congress essentially ceases to function.

Although Congress’ power to preempt state laws is uncontroversial, corporate interests increasingly call on courts to misread federal laws to preempt progressive state statutes and tort law which they do not want to be bound by.  In the 1970s, for example, a contraceptive device known as the Dalkon Shield caused numerous infections and deaths, and Congress responded by requiring the FDA to approve new medical devices.  Even though Congress enacted this law to protect consumers from dangerous devices, the Supreme Court turned this intent on its head, providing almost-total lawsuit immunity to the medical device industry.

A decision handed down this Wednesday by the United States Court of Appeals for the Third Circuit, however, is a welcome sign that the judiciary’s willingness to immunize corporations from the law is not boundless.  In that case, Snapple was sued for labeling their beverages as “all natural,” despite the fact that the beverages contain high fructose corn syrup (Snapple, to its credit, discontinued its use of HFCS in late 2008).  Rather than defend its case on the merits–such as by arguing that HFCS is actually a “natural” ingredient–however, Snapple decided first to claim that it was completely immune from the suit because of preemption.

Essentially, Snapple claimed that, because federal law regulates food labels, it can’t possibly be the case that states also get to enact laws.  Like the medical device manufacturers who convinced the Supreme Court that the existence of the FDA precludes state laws governing similar matters, Snapple claimed that the FDA sets both a floor and a ceiling for regulation, and states lack authority to impose additional requirements on the beverage industry.

In rejecting this claim, the Third Circuit stood up for the important principle that federal law should presumptively be viewed only as a floor, and not as a ceiling to more progressive state regulation.  As Justice Louis Brandeis explained many decades ago, the purpose of the states is to function as a “laboratory” for new ideas which can be experimented with by one of fifty state governments and then applied more broadly if they turn out well for that state’s citizens.  Many of the laws progressives cherish, including the minimum wage and much of our federal environmental standards, were first conceived of by state legislatures.  If you take away the states’ power to enact new progressive reforms, you kill this process of experimentation in the cradle.

Corporate interests get this, which is why they have worked to hard to keep the states from enacting progressive reforms that can blossom and grow throughout the United States.  Hopefully, this week’s Snapple decision is an early sign that the courts are no longer interested in  preventing state innovation.