ROWE v. NEW HAMPSHIRE MOTOR TRANSPORT ASSOCIATION
In an effort to address the problem of tobacco use by minors, the Maine legislature passed the Tobacco Delivery Law, which imposes requirements on air and motor carriers that transport tobacco products. One provision of the law requires tobacco retailers to only use carriers that verify the age of each tobacco purchaser, and another provision requires that carriers ensure that no tobacco is shipped to unlicensed retailers. The New Hampshire Motor Transport Association sued, arguing that the state law was preempted by a federal law, the Federal Aviation Administration Authorization Act of 1994 (FAAAA). The preemption provision of the FAAAA prohibits state from enacting laws "related to" the prices, routes, or services of air and motor carriers. The Association argued that the Tobacco Delivery Law placed such a burden on the delivery procedures of carriers that significantly affected their prices and services. The state countered that the FAAAA was only meant to preempt traditional economic regulation by states, and therefore laws enacted pursuant to the state's police power - the power of a state to regulate for the health, safety, and welfare of its citizens - were permissible. The U.S. District Court ruled that the law was preempted by the FAAAA.
The U.S. Court of Appeals for the First Circuit affirmed the lower court. The First Circuit held that a police power exception to the general rule of preemption would be far too broad and was not intended by Congress. Maine could validly ban all unlicensed tobacco products within its borders, but the FAAAA prohibited the state from implementing this goal by imposing requirements on carriers that significantly alter their delivery procedures.
Does the Federal Aviation Administration Authorization Act of 1994 preempt a state law that uses the state's police power to require that air and motor carriers take steps to ensure that tobacco is not sold to minors?
Legal provision: 49 U.S.C. 14501
The Court affirmed both lower courts, holding that the FAAAA preempted the state laws. In a unanimous decision written by Justice Stephen Breyer, the Court asserted that the state laws were directly connected with motor carrier services and therefore had a significant and adverse impact on the congressional goal of precluding state regulation in lieu of competitive market forces. The Court further stated that the FAAAA did not allow any exceptions for police powers or public health concerns of the State.
Argument of Paul Stern
Chief Justice Roberts: We'll hear argument this morning in case 06-457, Rowe v. New Hampshire Motor Transport Association.
Mr. Stern: Chief Justice, and may it please the Court: Congress has left to the States and encouraged them to deal with the significant public health problem of youth access to tobacco.
The question presented is whether the FAAA Act nonetheless preempts the two State laws before the Court and those laws that ensure that tobacco shipped into the State of Maine does not end up in the hands of our children.
It is not contested that Maine can and, in fact, has banned the retail sale of tobacco unless the seller verifies the age of the buyer.
Section 1555-C(3)(C) regulates the seller and not a carrier.
It requires that a... in the context of a delivery sale, a seller cannot engage in that sale in the State of Maine unless the seller ensures that the person delivering the tobacco actually verifies the age of the buyer.
This law does not relate to the services of the carrier, but rather relates to a dangerous substance that Congress has asked the States and left to the States and encouraged the States to deal with.
Chief Justice Roberts: Well, certainly that may be true, but it certainly relates to the service of a carrier.
I understood your argument to be that we can't read that language literally.
Mr. Stern: Exactly--
Chief Justice Roberts: It talks about what carriers have to do, so... in connection with delivery, so it relates to the service of the motor carrier.
Mr. Stern: --Well, Your Honor, section 1555-C (3)(C) does not dictate at all what a carrier has to do.
It is an incentive that permits a carrier, if the carrier wishes to compete on a level playing field for the legal tobacco delivery market--
Chief Justice Roberts: It doesn't dictate what they have to do.
They can get out of the business.
Mr. Stern: --They can get out of the business or compete for the business, Your Honor.
But the point is that the law regulates the retailer and not the carrier and, in doing so, similar to the situation in Travelers, allows for a market to be created.
In particular, however, with respect to this particular situation, Congress has spoken directly to it and this Court has considered in the context of its ERISA cases how Congress has dealt specifically with the problem before the Court.
Chief Justice Roberts: Well, we also considered it in Morales, and I thought this law was enacted in the immediate wake of Morales, which adopted a much broader reading of ERISA cases.
Mr. Stern: We don't agree that it adopted such a broad view because in Morales the Court was very careful in the opinion to make clear that it was not drawing a line which would bring potentially such laws dealing with gambling or prostitution within the preemptive ambit of the ADA.
Similarly, in... with respect to the FAA Act, particularly looking at the legislative history, there is no indication that Congress intended in any way to deal with the State's controlling and regulating dangerous substances such as tobacco.
Justice Souter: But isn't that answering the wrong question?
I'll be candid with you.
I'm not sure that whatever Morales-Travelers distinction there is really counts here, because the issue here is different from the issue in some of the... in most of the preemption cases, because the issue here starts with the, I think, the agreed assumption that Congress wanted to end a certain category of regulation.
And the question is would Congress have wanted, in effect, to permit a degree of State regulation when it was for a particular purpose?
And the question then is not whether Congress intended or had as an object when it passed this statute an interference with the State's regulation of juvenile contraband.
The question is whether it intended to permit any regulation with respect to delivery services to survive; and isn't that the tough question that you've got to face?
Mr. Stern: Your Honor, looking at the objectives of Congress as explained by Congress in the legislative record, it's very clear that Congress was concerned, the committee was concerned with, the proponents such as the Federal Department of Transportation, were concerned with the effects of the particular category of regulation, State economic regulation.
The committee mentioned that nine times.
The United States--
Justice Souter: That's because most regulation, you know, has an economic purpose involved.
But the ultimate object, it seems to me, was to end the economic effects of State patchwork transportation regulation.
And therefore I think the question you've got to address is why would they have allowed a certain category of regulation that clearly affects the way these companies perform their services to survive solely on the ground that the regulation was entailed at the State level by the State's choice to go against youthful tobacco use?
Mr. Stern: --Well, Your Honor, we suggest that the Court looks at the FAA Act and its legislative history, as well as what immediately preceded it, which was the Synar Amendment.
The Synar Amendment encouraged the States to deal with this problem.
The Federal Government--
Justice Souter: But the Synar... I don't have it in front of me, but the Synar Amendment refers to... to a number of objects of State legislation that would be required, but it doesn't say anything about regulating transportation.
Mr. Stern: --It states quite clearly that the intent is to encourage the States to prohibit... or to enforce/enact laws that prohibit retailers and distributors from getting tobacco to children.
Justice Souter: Right.
And we don't normally think of a delivery service as a distributor of goods.
I mean, we... in the sense, I think, that the statute meant.
I... I read the Synar Amendment reference to distributors as being wholesalers, people within the industry who get the cigarettes from, you know, the manufacturing point to the corner store, as opposed simply to a delivery service that delivers all kinds of goods.
Mr. Stern: Well, a sale consists of several components, Your Honor: Order, payment, and delivery.
Handing it over, handing the tobacco over physically to the buyer, from the standpoint of the buyer's standpoint and from the standpoint of public health perspective, is the most important aspect of the transaction.
It is the seller who has the responsibility to comply with the law with respect to each one of those steps.
Justice Ginsburg: Mr. Stern, at the time that the motor carrier deregulation came into effect, were there any products where Maine told the retailer, if you want to sell not face-to-face, you must choose a carrier that will provide X, Y, and Z services?
Was there any... is tobacco alone or were there other commodities?
Mr. Stern: Interestingly, there... Maine being a hunting State, there was a law on the books which required the common carrier... it specifically referred to the common carrier... to verify that the person shipping it was the hunter with the appropriate license, required the common carrier to affix identification tags to the hunting... the hunting reward, so to speak, and also to make a return or provide notice to the Commissioner of Inland Fisheries and Wildlife.
So Maine had a variety of those sorts of laws on the books that required carriers to actually do something with respect to a particular type of commodity.
Justice Ginsburg: Does the Postal Service adhere to... or I don't know if the Postal Service is used to ship cigarettes, tobacco products.
But if it is, does the Postal Service adhere to Maine's requirement?
Mr. Stern: Two points, Your Honor.
First, the Postal Service has immunity from Maine laws.
And second, the Postal Service, interestingly, does have an addressee verification service for $4.10.
Justice Scalia: Why does the Post Office have immunity from Maine laws?
Mr. Stern: I believe there--
Justice Scalia: You could kill people and all sorts of stuff.
Mr. Stern: --I hope not, Your Honor.
But with respect to a variety of civil regulatory matters, I believe the courts have concluded that the United States Postal Service has immunity from Maine... from Maine and other State laws.
Justice Ginsburg: But it does... you say the Postal Service provides something that conforms, that they have the... you must deliver it to the person, to the addressee herself?
Mr. Stern: Yes, Your Honor.
It is not exactly conforming because... it's sort of interesting.
Different carrier services or the Postal Service have different sort of options that seem to make clear that this is not a real problem to provide.
The U.S. Postal Service provides an addressee verification service, but not an age verification service.
UPS provides an age verification service, but not an addressee verification service.
Since one costs $2.75 and the other one costs $4.10, this does not seem to be an acute problem to... for a carrier, if it wishes to compete for the market, to actually compete for it and price it appropriately.
Justice Scalia: But why aren't you just driving all this business to the Postal Service?
I mean, you know, what have you accomplished?
You'd drive FedEx out of business if they choose not to incur the additional expense.
And so, you know, all these people just ship it through the Postal Service.
Mr. Stern: There have been efforts to deal with the Postal Service loophole, Your Honor, and--
Justice Scalia: You can't do it.
I mean, they're exempt from Maine laws.
Didn't you know that?
Mr. Stern: --I think I heard somebody mention that, Your Honor.
Certainly, in another branch of government, that... there's an effort to deal with that problem.
But, with respect to the suggestion we've driven FedEx out of business, there's no suggestion... well, first of all, we have no evidence with respect to what this effect has had on FedEx.
With respect to UPS, UPS continues to ship tobacco to licensees and has not shown in the record that they lost any business with any of their customers, obtained licenses from the State of Maine, and therefore it could actually ship into the State of Maine.
Justice Alito: But what if every... what if every State enacted a slightly different law relating to this and a slightly different law relating to every other product that they might want to restrict for health or safety reasons?
Would you... would you agree then with the Respondent that there would be just the kind of patchwork of regulation at the State level that this statute was intended to stop?
Mr. Stern: Well, Your Honor, the Respondent's arguments do not guarantee uniform regulation.
In fact, they guarantee exactly the opposite.
They don't dispute that Maine and other States can ban the transport and delivery of what we can call unlicensed tobacco, tobacco from unlicensed retailers, to unlicensed entities.
Different States can have different licensing requirements and certainly different licensees.
So a patchwork is created.
In addition, Respondents agree that States can outright ban the furnishing of a variety of commodities or contraband, including in particular tobacco or alcohol--
Justice Ginsburg: I thought that wasn't clear from their brief.
I thought they had a footnote that said they weren't arguing the point in this case, but I thought they didn't concede the total ban.
Mr. Stern: --I believe if one looks at... it's either page 24 or 44 of the brief... they concede that Maine and other States can ban the furnishing of tobacco.
Justice Scalia: Well, they--
Justice Souter: They concede that they can do it beyond the requirement, beyond the force of the statute that precludes the knowing distribution.
In other words, they... they're not appealing the one provision of subsection D that makes it a crime knowingly to get the tobacco into the hands of minors and so on, but do they concede anything beyond that?
Mr. Stern: I believe they do, Your Honor.
I believe... I think it's at page 44... they concede that Maine can ban the furnishing of tobacco by anyone, including a carrier.
Justice Scalia: --Yes, but I think that the reason they make that concession is that they say you must prove knowledge, and they're... they're not concerned about the... about intentionally transgressing Maine's law.
What they're concerned about is the additional steps that you require them to go through to make sure that there is no tobacco.
So they're not really worried about it so long as you have a knowledge requirement.
Mr. Stern: Well, there is a knowledge requirement in the first part of section 1555-D.
And Your Honor's question gets right to the nub of the problem with respect to the lower court's decision on 1555-D, which is: How does Maine or any other State go about proving knowing delivery of an unlicensed product such as this?
Justice Souter: Well, you prove it without a presumption to start with.
That's what the... that's way the issue was left by the district court.
Justice Scalia: And that's why they're not worried about it, because it's hard to prove.
Mr. Stern: Without the evidentiary assumption, it's very difficult, if not impossible, to prove, which essentially makes the first part of the court's decision with respect to 1555--
Justice Breyer: The answer to that is it may be a very good idea, so convince Congress to pass a law.
It's just that if every State does it differently it's going to be a nightmare.
And I don't know what the answer to that point is.
And I don't know what the answer to the point is about banning things.
I'm amazed if that's what you mean.
I'm not sure what you mean.
I mean, North Carolina could pass a statute that says the following: Everybody in North Carolina over the age 16, say, or maybe everybody including small children... I don't know what they want to pass... can smoke to their heart's delight, can buy as many cigarettes as they like, but you can't ship in a single cigarette from out of State.
You think that wouldn't cause... raise a Commerce Clause problem?
Mr. Stern: --A Commerce Clause problem?
Justice Breyer: Yes.
Mr. Stern: It depends upon how the statute is written.
If it banned--
Justice Breyer: Well, that's why I'm just not certain about bans that forbid people to ship things inside from outside the State, while allowing people to buy those things produced by people inside the State.
That's why I'm uncertain about the concession you're talking about.
Mr. Stern: --Well--
Justice Breyer: I mean, what is this New York law that does this?
Mr. Stern: --The New York law banned the delivery and sale of tobacco... delivery and sales of cigarettes to B(2)--
Justice Ginsburg: But isn't that the result of a settlement?
Mr. Stern: --The... the law was... existed before the settlement, and the settlement which we have referred to is a situation where UPS and a number of other carriers have agreed to conform with it, Your Honor.
Justice Ginsburg: And nationwide, not just in New York; isn't that so?
Mr. Stern: Yes, Your Honor.
And it... it reveals, we think, that the... that the nature of the laws here are not so burdensome as to run afoul of this Court's concerns--
Justice Ginsburg: So, then, practically, you don't have a problem with cigarettes because the New York settlement takes care of it.
You're just talking about other tobacco products?
Mr. Stern: --Well, there are other tobacco products, but in the New York settlement... we can't enforce the New York settlement, Your Honor.
We have our own separate law, particularly section--
Justice Ginsburg: But I thought, as a result of the New York settlement, carriers are no longer shipping directly to consumers anyplace cigarettes.
Mr. Stern: --That is the intent of that, Your Honor.
I'm not sure how effective it has been.
But by doing that, they have agreed and put in place a system where tobacco products can only be shipped from a licensee.
Justice Breyer: But the thing I'm concerned about is... is assume it's perfectly legal to do what you said.
I guess it still wouldn't be legal for Maine or New York to say the following: We really want to discourage people from smoking, a noble goal.
And, therefore, whenever an interstate shipper ships tobacco into the State, he has to charge double the price, just double the shipment price or ten times the shipment price.
Could they say that?
Mr. Stern: That would seem to clearly run afoul of the--
Justice Breyer: All right.
Mr. Stern: --Commerce Clause.
Justice Breyer: All right.
But could they say you have to carry it in special packages which the sticker... which maybe you should do, but which the sticker puts skull and crossbones on each of the packages?
Could they say that?
Mr. Stern: I don't think--
Justice Breyer: No.
Mr. Stern: --they necessarily could, Your Honor.
Justice Breyer: If they cannot say either of those things because of the statute, why can they say: What you have to do is you have to ship it in a way that makes certain that the person who receives it, the addressee, is the person who bought it?
Mr. Stern: The reason, Your Honor, is the difference between the hypothetical you proposed at the beginning of your question and what's going on in Maine with respect to 1555-C(3)(C), which is a mouthful.
At the time the FAAA Act was enacted, it was illegal for anyone to... an unlicensed retailer, to sell tobacco in the State of Maine, and it was illegal to sell tobacco without verifying the age of the buyer.
That's the generally applicable law that was... a judicial sort of law that was on the books in 1994.
The skull and crossbones requirement is not a judicial type of law, and what this Court has done in the ERISA cases is look to see the... the purpose and type of law that is before it to determine whether it was a type of law that was in existence and whether there was any positive indication that... that that sort of law was supposed to be pre-empted or not.
Here these sorts of age verification laws were on the books.
We have identified the problem and everybody understands the problem with respect to delivery and sales.
It would be absurd for an over-the-counter clerk to take money from someone--
Justice Stevens: Mr. Stern, can I ask you this question: To what extent are we dealing with a tobacco problem or a broader problem?
Do you have other products that are contraband such as... or have special restrictions on who can ship wild animals, prescription drugs, firearms; or are there other products that you regulate in the same way?
Mr. Stern: --There are no... I'm not aware of any that we... we regulate in the same way.
Justice Stevens: You allow shippers to ship firearms and poisonous substances without having this kind of restriction on it, do you?
Mr. Stern: --There are not exactly the same restrictions.
But, with respect to alcohol, we have a law on the books which prohibits the knowing sale or transfer of alcohol to somebody who is underage.
Because of the... the unique situation we found with respect to delivery and sales of tobacco, we've put this in place to make it clear how a seller goes about conforming with Maine's generally applicable law.
Justice Stevens: But I don't really see why the States have... have a different interest in regulating shipment of tobacco to minors than they would a variety of other substances that could be harmful to minors or contraband in general.
And you don't try to regulate any of those?
Mr. Stern: Well, Your Honor, we do try to regulate those.
I misunderstood your question.
Justice Stevens: By... by regulating how they may be shipped, I mean.
Mr. Stern: There is no law exactly like this one with respect to the other types of... of dangerous substances.
Justice Ginsburg: Mr. Stern, you told me in... in response to my question earlier, you mentioned only, I think, game; and you said that those prohibitions were directly on the carrier--
Mr. Stern: --That's correct.
Justice Ginsburg: --that is, prohibitions and instructions for how you can ship game.
And I don't know if that... if there are other food products.
You mentioned only that one.
And is it not the case that explosives... that that's Federal regulation?
Mr. Stern: The Federal Government has a role with respect to the shipment of explosives, but it has no role with respect to the shipment of tobacco.
Justice Ginsburg: But is there... in addition to the Federal regulation, which I take it would cover various dangerous substances, does Maine add to what the Federal regulation is, say, for sending fireworks, firearms?
Mr. Stern: With respect to fireworks, Maine in its discretion has adopted the Federal role... the Federal view, which, I think, emphasizes and... and highlights the different situation we have here.
When the Federal Government believed there should be some sort of uniform regulation of a particular dangerous item, be it fireworks, for example, or hazardous material, it does so.
Otherwise, it leaves it to the States.
And this is a situation where if the State doesn't act to deal with the problem of delivery and sales, we have a regulatory void and nobody deals with this problem.
Justice Scalia: Well, maybe because Congress wanted the regulatory void.
Maybe Congress didn't want these things to be enforced by regulating the transporter, as opposed to regulating the shipper and the receiver.
As far as the game regulation is concerned, isn't it the case that UPS won't carry any game now because of the... because of your game regulations?
Mr. Stern: In their policies, they have indicated that they do not carry game, Your Honor.
Justice Scalia: It's too onerous.
Mr. Stern: Well--
Justice Scalia: So you've sort of driven them out of the business.
Mr. Stern: --No.
Your Honor, UPS has a variety of options such as a cash-on-delivery option which requires them to run around and find somebody with a check, money order, or credit card.
So they can price these.
It's just a matter of whether they want to compete for them.
And, again, with respect to C(3)(C), which I'd like to focus on for a moment, it would be absurd, we think, to have a situation where a clerk in an over-the-counter sale could accept money from a buyer, verify the age of the buyer, and then turn to a third person and hand the tobacco to that person without the buyer being present.
That is exactly the situation that Respondents ask this Court to embrace as the intent of Congress.
And with respect to Your Honor's--
Justice Scalia: Well, as long as the buyer is not an interstate carrier, there is really no... no problem of conflicting with Federal law.
Mr. Stern: --Well, there is no conflict with Federal law under our reading of the FAAA Act and the Synar Amendment because the... the intent of Congress has to be one which does not end up in an absurd result.
And we suggest that having this gaping conduit of tobacco to children is just such an absurd result.
If the Court has no further questions now, I'd like to reserve my time.
Argument of Beth S. Brinkmann
Chief Justice Roberts: Thank you, Mr. Stern.
Mr. Brinkmann: Mr. Chief Justice, and may it please the Court: If Maine's tobacco delivery law is not preempted, Congress's core purpose for the FAAAA will be defeated.
There will be different delivery laws in States across the country, and that patchwork will eliminate the efficiency and the cost savings that was Congress's intent in the FAAAA when it enacted it to deregulate the industry.
If I could, I'd like to try and quantify for you the enormous impact and effect that these two provisions have on carrier services.
Justice Ginsburg: Before you do that, Ms. Brinkmann, would you tell us how alcohol is handled, because that is, as I understand it, that's by virtue of the 24th Amendment State regulation.
Does UPS carry alcohol packages from one State to another?
Mr. Brinkmann: Yes, alcohol is, of course, governed by a different legal regime because of the 21st Amendment.
And yes, they do provide services for wine and beer only, and that service has to be pursuant to a contract.
It is a special contract with the shipper, and the shipper has to be licensed.
And UPS and the other carriers have uniform procedures for doing that, so they are not subject to a patchwork of regulation, unless there are laws in the States that are allowed because of the 21st Amendment.
Justice Ginsburg: But I asked the question only in response to your impossibility argument that you couldn't cope with such State regulations with respect to tobacco, when it seems you are with respect to alcohol.
Mr. Brinkmann: I think it would be useful to give the quantification, I think, about the impact of these provisions.
I would first point out that the services that are provided right now are in response to the market and market competition, which was Congress's intent.
And these, of course, would be services that were created in response to a State dictate, which is at the core of the problem.
But just to give you an idea about the C(3)(C), which is the delivery confirmation--
Justice Stevens: Before you leave the alcohol point, I don't quite understand the relevance of the 21st Amendment.
It seems to me if you can pre-empt... if Federal law can pre-empt State laws that are authorized by the 21st Amendment, I don't understand how that has anything to do with the preemption issue.
Mr. Brinkmann: --I think it involves much more complicated constitutional issues that reach the 21st Amendment.
I think even in light of this Court's opinion in Granholm v. Heald, there would be more complex issues to analyze--
Justice Stevens: Why isn't it still a State regulation of shipping, even if it's a law that's authorized by the 21st Amendment?
I don't see the difference.
Mr. Brinkmann: --Well, it may be not be, Your Honor.
The problem has been taken care of by this uniform service, and I have to say that is at the age of 21.
That is an adult confirmation.
And that is not an addressee-specific requirement.
Here under C(3)(C), it would be a new service that required the actual addressee to sign for it.
And I should comment, my understanding of U.S. Postal Service is it doesn't have to be the addressee who signs.
They can designate someone else to sign for it, and there is no age verification.
But here it has to be the addressee, and there has to be photo government ID for anyone between 18 and 27.
And if I could just for--
Justice Stevens: What if a new carrier said, well, I'd like to get into the business of shipping tobacco products, none of the other companies want to do it, I want to form... I'll form my own company.
It will meet all these requirements.
Would it... would it then be pre-empted?
Mr. Brinkmann: --If the State was dictating a service that made--
Justice Stevens: Well, they're saying the retailer must use a service that fulfills these qualifications.
And if there are services out there, why would the law be pre-empted?
Mr. Brinkmann: --It would depend on the effect on the carriers.
And if I could--
Justice Scalia: I assume that the purpose of the Federal law was not to enable services which would not otherwise be provided at all, but rather to enable services to be provided more economically, to reduce the cost, the cost of interstate transportation.
Mr. Brinkmann: --Driven by market competition, Your Honor.
Justice Scalia: Sure.
Somebody would come in to occupy the void, but he would charge a heck of a lot more.
Mr. Brinkmann: --Your Honor, in this case the evidence demonstrates... in the court of appeals appendix there's the deposition by Ms. Meisel, which explains on pages 163 and 189 that it's not flipping a switch to create a new service like this.
Many systems would have to be completely reengineered to take in new data about age and addressee.
There would have to be a new system for the alert.
There would have to be a new system for reading the alert.
That takes one and-a-half years, 18 months, for that modification to occur.
That's an enormous effect.
And I would also like just to look at--
Justice Stevens: But that's the effect on UPS; is that not right?
Mr. Brinkmann: --On the carrier services.
Justice Stevens: Does that foreclose the possibility that somebody else might just specialize in delivering tobacco products, for example?
Mr. Brinkmann: Your Honor, if there were a requirement or Maine law, for example, for a widely already established adult signature requirement, that may have a different preemption analysis.
There certainly would not be the problems of uniformity.
But I don't think it could be something that's dictated.
And if a--
Justice Scalia: Why wouldn't there would be a problem?
I don't understand that.
There would still be a problem with uniformity from State to State.
Mr. Brinkmann: --Yes, Your Honor--
Justice Scalia: Do you think if Maine did it for all products it would be okay?
It's only they're doing it for tobacco that makes it bad?
Mr. Brinkmann: --No, Your Honor.
Justice Scalia: I didn't think so.
Mr. Brinkmann: That cost that I just described has to be multiplied for 50 States and many commodities.
And also, if you look at the 1555-D, the prohibition on unlicensed tobacco retailers sending to a consume and the imputed knowledge, the law that has strict liability on the carrier, if there is a box that has a shipper's name from the attorney general's list, that imputed knowledge would require that every one of the 65,000 or 16 million packages going to Maine every year be examined for the shipper identification.
And in the record, there is... the State has admitted at J-96 that that kind of research to look into... in this case it was looking at the sender, but it would be the same for the shipper... I mean, it was looking for the addressee; this would be for the shipper... is two dollars per package.
Justice Ginsburg: How did they deal with under the New York settlement?
I take it this would be a problem under that settlement, because it doesn't touch selling from a duly licensed dealer.
And so, under the New York settlement, which operates nationwide, what does the carrier do to make sure that the recipient is a licensed dealer?
Mr. Brinkmann: Under the New York settlement there's a very complex structure that the carriers have agreed to, first of all forbidding all delivery of cigarettes to consumers.
Justice Scalia: Where does that appear in the materials?
Do you remember where it is?
Mr. Brinkmann: There is a citation to it in the Petitioner's brief, Your Honor.
Justice Scalia: But there's no text, though?
Mr. Brinkmann: It's available, I believe, on the attorney general of New York's web site.
There's a very... for example, in the UPS assurance of discontinuance, there's a three-tier disciplinary scheme against shippers that are found to violate that.
And the carriers entered into these agreements under threat of criminal sanctions.
The New York statute made one offense a misdemeanor and a second offense a felony.
And the carriers, who had been trying to abide by those laws, were faced with subpoenas and the threat of prosecution.
And so their solution was a uniform nationwide policy, no cigarettes to consumers.
But of course--
Justice Kennedy: Ms. Brinkmann, I'm interested in two things.
Number one, I want to make sure you completed the quantification point that you made, and you pointed us to someplace in the record, because the Petitioner said, oh, it just costs a penny a package or something like that.
And then the second point, I think probably not related, is the question of knowledge.
I take it you're not contesting if there's actual knowledge that it's a minor that there can be a prosecution.
I'm not sure how that works if the company... because of the imputed knowledge.
Suppose an officer of the company or some shipping clerk knows it.
Wouldn't the company be liable if the company were subject to... those are two different questions.
Mr. Brinkmann: --To your first question, just to complete it, Your Honor, at JA-96 there's an admission that it's a two-dollar cost to research a package.
There it's for the addressee, but it would be the same for the shipper.
And if you had to do that for the 16 million packages going to Maine a year just through UPS, it would be $32 million a year.
Turning to your knowledge point, I think this is a very important point that the Court was discussing earlier and, Justice Scalia, I think you were discussing about the general ban.
Justice Ginsburg, you mentioned our footnote.
You have to know that the details of the ban are to figure out whether or not it is pre-empted.
In this case, the First Circuit at Pet. App. 29 explains why its construction of the first sentence of 1555-D, which prohibits any person from knowingly transporting contraband tobacco, is now pre-empted.
But it makes very clear that the State law is pre-empted, Pet. App. 29, to the extent that Maine's tobacco delivery law requires or has the effect of requiring carriers to implement State-mandated procedures in the processing or delivery of packages as pre-empted by the FAAAA.
So to the extent there is a general ban against knowing transportation that does not require... that does not impose a strict liability requirement... it's a strict liability that says it's not just knowing, you have to look at every shipper's name.
You have to look at every side of that box.
And then you have to decide who the recipient is.
Justice Scalia: Ms. Brinkmann, I'm fascinated by this New York settlement.
You... you say that... that Maine can't do this.
But you say if a bunch of States do it, and they twist the carriers' arms hard enough by threatening criminal penalties, so that the carriers say, okay, I give up; and then they agree to limit their transport, that's okay?
Mr. Brinkmann: No, Your Honor.
I'm sorry if I gave that impression.
That was a--
Justice Scalia: Well, I mean you're speaking about the New York settlement as though that's hunky-dory.
Mr. Brinkmann: --No, it isn't.
Justice Scalia: I'm not sure that if this... if this Federal act means what it says, that that kind of settlement isn't the kind of thing the act did not want to happen.
Mr. Brinkmann: --Well, it's a voluntary agreement in which--
Justice Scalia: Voluntary under threat of criminal penalty.
Mr. Brinkmann: --in which the carriers adopted a uniform approach.
Justice Scalia: Well, that's... that's nice.
But what about the consumer?
The act was not just for the convenience of the carriers.
It was meant to... to serve the convenience and the economic benefit of the consumer.
I... I expect a consumer might be able to challenge that... that New York settlement.
I'm surprised you accepted it as, well, you know, so long as the carrier coughs it up, it's okay.
Mr. Brinkmann: No, the assurances of discontinuance... specifically, I know that Federal Express and UPS have reserved the right and do not concede that the New York law is not preempted under FAAAA.
There is no concession there, Your Honor.
I want to make that abundantly clear.
I also wanted to address the--
Justice Kennedy: Just on the knowledge point, I'm still not sure.
I don't want to ask you if you concede that knowing delivery would make you liable.
That's what the First Circuit said.
I suppose that's not before us, so I have to take that as a premise, as a given.
Mr. Brinkmann: --I think, though, if I could--
Justice Kennedy: It's a little bit hard to write the opinion your way with that, with that concession.
That's my problem.
Or with that premise.
Mr. Brinkmann: --I think if you understand what the First Circuit was saying, this is a total ban on knowing delivery.
It doesn't require the carrier to change their services.
So we... the carriers don't have to go out and in the hundreds of countries that they operate change the intake procedure for shipments to be able to have all the data and all the--
Justice Stevens: No, but they are presumed to have read the label, the stamp on the label; isn't that correct?
Mr. Brinkmann: --You go to the end of the system, is where the knowledge would come into place.
In reality, under the current operating services that are provided--
Justice Stevens: Would you answer my question?
May they presume that if the package is labeled cigarettes, that the delivery... the delivery person knows that?
Mr. Brinkmann: --I wouldn't necessarily say a presumption, Your Honor.
It is evidence that can be used.
That... we recognize that.
I think some of the amici suggest that we say it cannot.
It can be used.
It's not a presumption.
It is not something that deems knowledge.
I can just give you some examples of practicality.
The two employees who actually see the box, loaders and sorters, it's going by so fast, they don't... aren't reading anything.
The preloader who puts it into the truck--
Justice Stevens: When they pick up the package, they don't look at the labels?
Mr. Brinkmann: --and the driver.
But what you have to understand is sometimes they're packed four high.
Some deliveries are ten to one business and each side of each box is not viewed.
Oftentimes the scan on the bar code is done from a distance.
They don't... what the loaders look at is the ZIP-code, and actually with increased automation... and Mr. Butler's deposition, which was filed on... back in June of 2004, he talked about even greater automation where they won't even be reading the ZIP-code.
Justice Kennedy: Well, but the way... I'm telling you I assume the way it works is that the UPS truck goes out to the tobacco warehouse and picks up 4,000 boxes, all registered tobacco.
He certainly knows it's tobacco at that point.
Mr. Brinkmann: That's not my understanding.
That's not the evidence in this case.
There are many ways in which the system comes in; and I certainly think that could be a different question of knowing and that would be a question of proof.
And it can be evidence.
But I'll tell you, if there was a driver who for the past month had found three boxes of tobacco and turned them in and said, you know, these can't be delivered, and one day one box got through and he didn't see it written, or it was written in light marker or it had, you know, bled, because they used the wrong thing... there's no uniformity of size or anything... no, I think that would be a question for a jury to decide about knowledge, and it can't be a presumption and it can't be deemed.
It is a question of knowledge.
Justice Breyer: May I ask you this question, which is where I'm having a little trouble on your side.
I think I would agree and you would agree that if the State were to say, to protect the consumers in our State, anyone who ships in goods must do so in special padded cars... use whatever shipper you want, but you have to have special... that would be illegal.
Mr. Brinkmann: Yes.
Justice Breyer: Can California say, anybody who ships lettuces into our State has to use refrigerated equipment?
One product, not all products, and a good public health reason?
Mr. Brinkmann: Your Honor, that would be for Congress, and it would have--
Justice Breyer: So you'd say that would also be preempted?
Mr. Brinkmann: --I think you have to look at the specific statute.
And we went through and really looked at the statutes that the State cited, and you can see in our brief we set out, a third of them have knowledge requirements.
Another group... for example Maine's fireworks, when you trace it down, it looks like a local commissioner does it, and then they adopt these standards for an association.
And what is it?
It's a Federal standard.
So I think you really have to bore into that.
Justice Kennedy: Why is it that knowledge requirements have a different preemption analysis?
That's what I'm finding that difficult to understand.
Mr. Brinkmann: Because the way in which the First Circuit construed the first sentence is just to be a ban on knowing transportation delivery, and said it can't require... on pages 26 and 27, it says it different ways... that if a liability standard of a State is preempted, if, for example, it required modification of the delivery methods, other than declining the package; if in the normal course of the services that are already provided, if there is knowledge that is evidence--
Justice Kennedy: Then that's clear preemption in Justice Breyer's example.
If California says you must ship certain products in refrigerated containers, that is definitely preempted under your analysis.
Mr. Brinkmann: --If there is no Federal regulatory... yes.
Justice Stevens: That statute is definitely preemptive.
A State cannot insist on that.
Could they insist on firearms being slipped only in labeled packages?
Mr. Brinkmann: There are many Federal regulations about the transportation--
Justice Stevens: Could the State do it beyond the Federal requirement?
Mr. Brinkmann: --No, Your Honor, it would have to be uniform, and I think that's a great example.
The... the Federal scheme for hazardous materials are extensive, and that is what carriers are focused on, on uniformity, on the best way in which to provide these services.
If I could, I just wanted to discuss for a moment why we really would urge that there is no health and safety exception or that this can be read to be limited to economics.
First of all--
Justice Scalia: Before you get into that, do we have to hold... assuming we agree with you... do we have to hold that the knowing requirement of the first sentence is okay?
Mr. Brinkmann: --No, I don't--
Justice Scalia: --even though the other provisions are not okay?
Mr. Brinkmann: --We did not--
Justice Scalia: : Okay.
I have a lot of trouble with the knowing requirement.
Mr. Brinkmann: --We do not cross-petition on that--
Justice Scalia: Fifty different States having a knowing requirement for a hundred different products... I don't know that that complies with the Federal law.
Mr. Brinkmann: --What we are responding to is the cert petition from the State here.
I would point out that... an example that the Court itself gave is under their health and safety exemption, that means that the State could come and just put a surcharge, whether it would be on tobacco or junk food.
There is no line to draw between the position they take here and that kind of situation.
We point to the text of the statute, of course, and the findings about the burdens on interstate commerce of the interstate regulation.
The structure... there is a facie exemption for motor vehicles and even that has a Department of Transportation Federal backdrop against it.
And in the Morales opinion from this Court, they pointed to the Airline Deregulation Act, which is very important here because that statute is construed just as this is.
And in the Morales the Court pointed out that an earlier bill had had the kind of economic regulation that the State here seeks and it was rejected.
Then of course in this very case, the Congress... conference report embraced the Morales standard and in fact described it as a broad preemptive standard they intended apply here.
So we believe that that is the standard that should really apply, but in light of the effect that this has on the carrier services, we suggest it means any standard of or are related to.
There's certainly an immediate connection with... and there are express references in these provisions that we suggest means any preemption standard.
If there's... one other thing I would say, up the C(3)(C), the provision which the State suggests does not directly dictate services, first of all the Solicitor General reads the statute anew and suggests that there may be direct enforcement against the carriers, which certainly would changes our view of that, because there is an instruction requirement that the shipper give to the carrier and say, State law mandates this.
Moreover, we would like to point out, for example, in the Wolens case, the frequent flyers program that was at issue there was not a mandatory aspect of the services, and also in the Court's own recent Clean Air Act case, where there's also the "relating to" language used.
Engine manufacturers realize this, that you can't regulate the seller through the purchaser.
Thank you, Your Honor.
Argument of Douglas Hallward-Driemeier
Chief Justice Roberts: Thank you, Ms. Brinkmann.
Mr. Hallward-Driemeier: Thank you, Mr. Chief Justice and may it please the Court: I think there's no question that the State of Maine could not require carriers to obtain a license to deliver tobacco products and condition that upon the carrier's service complying with the mandates of State law, that that would be a law that relates to the carrier's service.
Now, Maine maintains that its law is saved from preemption because of two distinctions: One, it that is adopted with a health rather than economic purpose, and because it operates directly on the shipper rather than the carrier.
And we don't think that either of those arguments is consistent with the text, structure, or legislative history of the Act.
But I would want to point--
Chief Justice Roberts: You're talking about the Federal act or the Maine act?
Mr. Hallward-Driemeier: --The Federal act.
But it's worth noting that those arguments, in any event, only go to the provision in C(3)(C).
The provision that is under dispute in section D does not have either of those characteristics.
It operates directly on the carrier, and it is not adopted for the health concern but rather to support the State's licensing and tax purposes.
But if I could go back to the reasons why their argument is inconsistent with the text, structure, and history of the Federal act, as Respondents' counsel noted, Congress did consider an alternative version of this bill, one that was limited to economic regulation, and the Congress rejected the Senate version and adopted instead the House version that much more broadly pre-empted State regulation related to carrier services.
It added the provision of services and adopted the "related to" standard rather than regulation.
And so it has rejected this limitation that Petitioners urge.
Moreover, the argument that there is a general health exception to the pre-emptive force of the FAAAA is inconsistent with the structure of the Act.
There are specific exceptions in the Act related, for example, to motor carrier safety, but those exceptions correspond to other grants of authority to the Secretary of Transportation to adopt regulations and to pre-empt State regulations that would interfere with interstate commerce or impose too much of a burden on interstate commerce.
There is no similar back top, if the court reads into the FAAAA a textual general exception for any act adopted with a health purpose by the States.
Justice Alito: If one of the big carriers decides for its own business purposes to offer a service that complied with the Maine law, would that have the effect of "un-pre-empting" the Maine law?
Mr. Hallward-Driemeier: Well, what Congress... what Congress had in mind in the Act was that carriers would respond to the marketplace, not State regulation.
And where a service is widely available in response to the marketplace, for a State to dictate to shippers that they should use one service as opposed to another, we think would have... it would be a different analysis under Morales.
The Court in Morales said that the test was whether there was a significant effect on the carriers.
And where, as here, we have the three major carriers all providing, for example, an adult-signature-required service, for the... for a State to say, well, when you ship alcohol, you have to use that available service, that would not have much of an effect at all on the carriers.
Justice Alito: Even if the law--
Mr. Hallward-Driemeier: In fact, the Federal law--
Justice Alito: --Even if they all now decided they wanted to go into this business, that would have no effect because they would have done that to comply with the Maine law rather than as... in response to the marketplace?
Mr. Hallward-Driemeier: --That's right.
We don't think the State can adopt a law and in a sense force the carriers to conform their services to the State law and then say, oh, but now they have it.
We don't think that would be conducive--
Justice Kennedy: It seems to me rather odd that major carriers can determine the scope of pre-emption.
Suppose there are smaller carriers that say we don't want to do this.
Take the New York settlement example.
If the New York settlement example, in effect, opens up a new kind of service, all other carriers have to follow that?
That's a... there's no authority in our cases for that kind of pre-emption analysis, is there?
Mr. Hallward-Driemeier: --I think with respect to this particular example about the adult signature required, the Court probably would need to go no farther than the fact that the Federal government has itself recognized the existence of that service and required it in a law that relates to the shipping of wine when one is prohibited by safety regulations from taking it on the airplane with them.
So the existence in the marketplace of this service has already recognized in Federal law.
Chief Justice Roberts: Could I follow up on Justice Kennedy's question, though, and specifically, do you think the New York settlement, if the carriers did not agree to it, that they would nonetheless prevail because the terms of it are pre-emptive?
Mr. Hallward-Driemeier: I have not studied the New York statute sufficiently to speak to that, and I don't think the government has a position about that.
We do believe... the settlement agreement, though, is distinct from the Maine law in some very significant respects.
And the most important of those is that under the settlement agreement, the carriers agree to use reasonable best efforts; whereas the Maine provision... this is the second sentence of D... deems the carrier to have knowledge--
Chief Justice Roberts: Well, see, you are... you are pretty familiar with the New York settlement then.
Mr. Hallward-Driemeier: --I have some familiarity with it.
Chief Justice Roberts: Well, then I think you ought to be able to tell me whether you think it's pre-empted by the Federal law under your theory or not.
Mr. Hallward-Driemeier: Well, I... Your Honor, we have not taken a position on whether the settlement is and, with respect... although I have familiarity with the settlement, I have less familiarity with the underlying New York statute that it was agreed to, in response to--
Chief Justice Roberts: Well, you have familiarity with the knowing delivery requirement here.
Mr. Hallward-Driemeier: --Yes.
Chief Justice Roberts: Is that pre-emptive under your view?
Mr. Hallward-Driemeier: In our view, where, as construed by the First Circuit... and we sort of accept that view... the First Circuit, on page 26 of the Pet. App., construed the first sentence of D as requiring that carriers do not act as knowing accomplices in the illegal sale of tobacco products.
So construed, we don't believe that that provision is pre-emptive.
It is akin to the general prohibition on furnishing tobacco to minors in 1555-B(2), and we don't think that that provision is pre-emptive.
Justice Stevens: You mean it's akin to the health exception.
Mr. Hallward-Driemeier: Excuse me.
Justice Stevens: You say it's akin to a health exception.
Mr. Hallward-Driemeier: No.
I... I say that it is a law of general applicability, and it does not require any change in the carriers' practices.
What... what the imputation of knowledge does, however, is require the carriers to change their practices so that they will get the knowledge when they can.
For example, take another example.
If Maine said that it would impute knowledge to the carriers of the tobacco contents if an X-ray scan would reveal the cigarette contents, it would in effect be requiring the carriers to install X-ray machines and pass every package that they get through those X-ray machines.
That's how an imputation of knowledge can be used to direct the conduct of the carrier, and that's what is so problematic about the second sentence of D.
They impute knowledge based upon whether the name of the shipper appears on a confidential list that the attorney general has provided.
In other words, even though, in their normal practices, they don't pay attention whatsoever to the shipper's name, they have to incorporate that into their practices in order to avoid the imputation of knowledge.
Justice Ginsburg: But the first condition, and the package is clearly labeled, aren't there some commodities where UPS does have to pay attention to the label?
Mr. Hallward-Driemeier: Well, yes, Your Honor.
A Federal law... there is Federal law with respect to shipment of hazardous substances.
There are uniform requirements with respect to how one must label hazardous substances, but--
Justice Ginsburg: It can't be... Ms. Brinkmann told us that they've got these... so many packages and it's going to cost millions.
But they do have to do it for a package that's labeled hazardous.
Mr. Hallward-Driemeier: --Well, as I understand it, the... the uniformity of the symbol for hazardous substance is something that the handlers are trained to scan for.
Justice Alito: But won't the name of the shipper be in their computer program?
I mean, the shipper has to pay, right?
Well, they know the name of the shipper--
Mr. Hallward-Driemeier: Well--
Justice Alito: # and they have a supercomputer so I don't understand why not necessarily--
Mr. Hallward-Driemeier: --Not necessarily, as I understand the service.
Some of... many, many of the packages are delivered to a company with which UPS has a contract, such as a Staples or some other kind of store.
And it becomes... the Staples store becomes the shipper.
They are the ones with the contract with UPS, not whoever it was that brought to it Staples.
So it is not necessarily part of their practice that they would have that information at all.
Rebuttal of Paul Stern
Chief Justice Roberts: Thank you, Mr. Hallward-Driemeier.
Mr. Stern, you have five minutes left.
Mr. Stern: Thank you, Your Honor.
Beginning with the last series of questions, if the Court looks at pages 100 to 102 of the joint appendix, the Court will see that UPS has a computer dial-up system which allows it to keep track of, and provide alerts for, shippers' addresses and consignees, as well as they can keep track of what is called an SIC code which is with respect to commodities.
And they can keep track of tobacco commodities.
There seems to be a misconception here, and I apologize for that.
Maine's law is not a criminal law.
It provides for civil violations between $50 and, I think, $1500.
Regarding quantification, the only hard evidence in the record is that it costs UPS less than one cents a... one cent a package to look at the label to determine whether a... a particular name is problematic or not.
Justice Scalia: Times 50.
Mr. Stern: Excuse me.
Justice Scalia: Times 50, because 49 other States would have different requirements, and all those requirements might... might cost only a penny to comply with.
But you add them all up, and it is half a buck.
Mr. Stern: No, it is not, Your Honor.
Because, as Ms. Brinkmann explained, the... the looking at the label is done usually in UPS's situation by a preloader.
And the preloader is in the particular State.
So it still would be less than one cent a State for each State it happened to be in.
The $2 a package is for the actual intercepted packages.
In a five-month period, there were a total of 33 intercepted packages, and the citation to the record is at page 106.
By no stretch of the imagination is there any proof in this record that it costs $32 million a year to comply with Maine's law.
Justice Souter: Mr. Stern, when you say that it takes one second to... I forget whether you said scan or... or examine a label, do you... are you describing simply the physical act of a human being looking at the label?
Mr. Stern: According to the testimony of Mr. Butler, who provided a document on this, it is looking at the label and determining whether it appears to be from a tobacco retailer.
Justice Souter: You can't tell unless you have an extraordinary memory for all the names on the Attorney General's list.
You can't do that simply by looking at the label.
And I... I thought maybe what you meant by the one second was that the list was... was in a computer, and you had a mechanical device that scanned the... the name on the label and... and it either matched something in the computer, or it didn't.
But I take it you are talking about physical, visual inspection.
Mr. Stern: Yes.
Your Honor's question raises two points.
First, with respect to the names, if one goes and looks at the list of unlicensed tobacco retailers, virtually all of them have something like "tobacco" or "smokes" or something in it, because their goal is to be picked up by a Google search for somebody who is looking for cheap cigarettes and cheap tobacco.
With respect to the computer system... and the record is full of citations to it, for example, at pages 92 and 95... they have done a study of their computer system.
They have not attempted in any way to research whether any of the companies on the list of unlicensed retailers is actually in their system so they can be picked up by the system.
Justice Souter: No, I... I just wanted to know what you meant by the "one second".
I take it what you mean is there is a physical, visual inspection of the label.
And in that one second, in practical terms, the person looking can tell whether the name is on the Attorney General's list, because there will be some tipoff in the... in the name of the company that... that will alert him?
Mr. Stern: Yes.
And if it is, it is put aside.
And those are the 33 packages that were intercepted in a five-month period that cost--
Justice Souter: Okay.
Mr. Stern: --UPS $2 a package.
Justice Souter: --If someone on the unapproved list wants to... for whatever reason, wants to avoid a tipoff term like incorporating the term "tobacco" on to their label, then the person making the one-second inspection is not going to pick it up.
And the only way the company is going to be able to protect itself against the imputed knowledge is either by a visual inspection of the Attorney General's list to see whether it matches what the person is looking at or by some computer scan, right?
Mr. Stern: The short answer is yes.
If I can explain?
Chief Justice Roberts: Sure.
Mr. Stern: The... the way UPS goes about dealing with this law was to put together a system which Ms. Brinkmann and I have described.
They did not study in any way, shape, or form how their computer system could streamline this and make it effective.
Justice Scalia: Mr. Stern, I'd be interested in whether you have any response to the Government's point that, at least as far as 1555-D is concerned, that is a direct regulation of... of the... the shipper... not the shipper, of the transporter.
So that... so that your point that this is not a regulation of... of transport is simply... is simply wrong as far as 1555-D is concerned.
Do you acknowledge that?
Mr. Stern: Yes.
We made that point with respect to 1555-C (3)(C).
Justice Scalia: Okay.
Mr. Stern: With respect to 1555-D, it is a direct regulation of the carrier services or any other delivery service which we believe is called for and permissible under the Synar Amendment, Your Honor.
Chief Justice Roberts: Thank you, Mr. Stern.
The case is submitted.