Tuesday, May 22, 2007

A Preemption Tangent (Watters v. Wachovia Bank)

We don't often post about National Bank Act cases. (We would do it more often if we were more confident of the spelling of the word "bank," but that's too far from our field of expertise.)

We're making an exception for the U.S. Supreme Court's recent decision in Watters v. Wachovia Bank, N.A., No. 05-1342, slip op. (Apr. 17, 2007). Here's a link to the "Recent Decisions" page of the Supreme Court website; you're on your own from there. (Hat tip to Rob Weiner for bringing the case to our attention.)

In Watters, the Supreme Court held that the National Bank Act preempts state regulation of the subsidiaries of national banks, in addition to the banks themselves. (Somewhere, we're sure, people are cheering and weeping over that result. Not us. We just barely understand it. We're reciting the holding only to give our readers one sentence of context before going on to what we perceive to be the good stuff.)

Fellow drug lawyers: Skip the majority opinion; that's for bank regulatory jocks. Look instead at footnote 24 of Justice Stevens' dissent.

The majority decision turned on statutory grounds. Justice Stevens disagreed with that interpretation and so had to interpret a regulation adopted by the Office of the Comptroller of the Currency: "State laws apply to national bank operating subsidiaries to the same extent that those laws apply to the parent national bank." 12 C.F.R. Sec. 7.4006. The dissent asserted that the sole purpose of this regulation was to preempt state law, which was improper. Although the OCC had the power to enact regulations that have the effect of preempting state law, the OCC did not have the power to declare activities or entities immune from regulation.

Justice Stevens explained that his conclusion "does not touch our cases holding that a properly promulgated agency regulation can have a preemptive effect should it conflict with state law. . . . My analysis is rather confined to agency regulations (like the one at issue here) that 'purpor[t] to settle the scope of federal preemption' and 'reflec[t] an agency's effort to transform the preemption question from a judicial inquiry into an administrative fait accompli." Dissent at 19 n.24.

Why do we care? We've posted before about preemption cases. Most of the recent cases discuss the preamble to the FDA's January 2006 labeling regulations; that preamble explains why FDA labeling regulations often preempt state law failure-to-warn claims. The question for defense counsel is how to present the issue. Is it that (1) the Preemption Preamble itself preempts state law or (2) preexisting FDA regulations preempt state law, with or without the preamble?

We've always preferred the latter approach, for three reasons.

First, we think it's right.

Second, it avoids any supposed "retroactivity" issue. We are not suggesting that a preamble dated January 2006 retroactively preempted claims relating to a package insert that had been approved in, say, 2004. Rather, the existing regulations as of 2004 preempted the 2004 claim.

The Preemption Preamble merely interprets the existing regulations and provides the FDA's view that those regulations have always preempted state law.

Third, presenting the argument this way doesn't give anything away. The FDA's interpretation of its own regulations is entitled to deference. Thus, courts should defer to the FDA's belief, expressed in the preamble, that state laws that conflict with FDA regulations interfere with the FDA's ability to do its job.

Sometimes, we think that this blog gives new meaning to the phrase "inside baseball." But we can't help it. Preemption really matters to our clients and our cases; we're obsessed with the issue.

1 comment:

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