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2001 Term, Number 8 / January 22, 2002

Today the Supreme Court granted certiorari in four cases of potential interest to the business community, two of which have been consolidated. Amicus briefs in support of the petitioners are due on Friday, March 8, 2002 and amicus briefs in support of the respondents are due on Monday, April 8, 2002. Any questions about these cases should be directed to Eileen Penner (202-263-3242) or Miriam Nemetz (202-263-3253) in our Washington office.

1. Federal Preemption—Products Liability. The Federal Boat Safety Act of 1971 ("FBSA"), 46 U.S.C. § 4301 et seq., preempts state laws and regulations not identical to regulations prescribed under the Act. 46 U.S.C. § 4306. The FBSA also contains a savings clause, which provides that compliance with regulations prescribed under the Act does not relieve a person from liability at common law or under state law. The Supreme Court granted certiorari in Sprietsma v. Mercury Marine, No. 01-706, to determine whether the FBSA preempts state-law products liability and wrongful death actions based on a theory that a boat without a propeller guard is defectively designed.

Jeannie Sprietsma fell from a motorboat while on vacation in Tennessee and was struck and killed by the motor's propeller blades. Her husband, Rex Sprietsma, filed a wrongful death action against, among others, Mercury Marine, the manufacturer of the boat's engine, alleging that the motorboat was defectively designed due to its failure to include a propeller guard. Mercury Marine moved to dismiss on the grounds that Sprietsma's claims were both expressly and impliedly preempted by the FBSA. The circuit court granted the motion, finding implied preemption. The appellate court affirmed on express preemption grounds.

The Illinois Supreme Court affirmed on the grounds that the FBSA impliedly preempted state claims based on failure to install a propeller guard. 757 N.E.2d 75 (2001). The court first inquired whether the traditional presumption against preemption should govern its analysis. Id. at 79-80. Though recognizing that Sprietsma's claims related to health and safety matters traditionally fall within the jurisdiction of the states, the court reasoned that the federal interest in regulation of maritime activity, also implicated by Sprietsma's claims, prevented application of the presumption.

The court next considered express preemption. Id. at 81-82. Guided by the Supreme Court's recent decision in Geier v. American Honda Motor Co., 529 U.S. 861, 868 (2000), it reasoned that the inclusion of a savings clause prohibited a finding of express preemption, because the clause implied that some significant number of common law claims existed to be saved.

The court then turned to implied preemption, asking whether Sprietsma's state law claims would present an obstacle to the accomplishment of federal objectives. 757 N.E.2d at 82-87. The court noted that the Coast Guard had expressly considered whether to require manufacturers to install propeller guards, and, after determining that propeller guards could create certain safety risks, had chosen not to do so. The court concluded that the Coast Guard's lack of action, after thorough study, mounted to a decision that a propeller guard requirement was not appropriate. Thus, allowing state law to impose such a requirement by awarding damages for failure to install propeller guards would present an obstacle to the accomplishment of federal purposes.

The Fifth, Eleventh, and Eighth Circuits have likewise held that claims based on the absence of propeller guards are preempted. See Lady v. Neal Glaser Marine, Inc., 228 F.3d 598 (5th Cir. 2000) [link 2]; Lewis v. Brunswick Corp., 107 F.3d 1494 (11th Cir. 1997); Carstensen v. Brunswick Corp., 49 F.3d 430 (8th Cir. 1995). (The Supreme Court granted certiorari in Lewis, but the case settled after oral argument.) In contrast, pre-Geier decisions from the Texas Supreme Court and a Missouri appellate court held that such claims are not preempted. See Moore v. Brunswick Bowling & Billiards Corp., 889 S.W.2d 246 (Tex. 1994); Ard v. Jensen, 996 S.W.2d 594 (Mo. App. 1999).

This case is highly significant to all businesses whose activities are subject to industry-specific federal regulation, as it is likely to clarify the scope of the implied-preemption doctrine. Mayer, Brown & Platt will be representing the respondent in this case.

2. Intermodal Surface Transportation Efficiency Act—Validity of State Registration Fees for Motor Carriers Based in Other States. The Intermodal Surface Transportation Efficiency Act ("ISTEA") prohibits any state from imposing a registration fee on interstate motor carriers that is higher than the registration fee the state "collected or charged" as of November 15, 1991. See 49 U.S.C. § 11506(c)(2)(B)(iv)(III). Before that date, many states had entered into reciprocity agreements or other arrangements under which they agreed not to collect registration fees (or to collect a lower fee) from motor carriers based in certain other states if the other states provided a reciprocal benefit. The Court granted certiorari in Yellow Freight System, Inc. v. Michigan, No. 01-270, to decide whether state registration fees are limited to the state's generic fee as of November 15, 1991 or the (lower or non-existent) fee that the state was actually collecting at that time under a reciprocity arrangement. 

After Congress passed the ISTEA in 1991, the Interstate Commerce Commission ("ICC") amended its standards for state registration of motor carriers operating in interstate commerce to comply with the Act. See Single State Insurance Regulation, 9 ICC 2d 610 (1993). As part of those regulations, the ICC determined that, for purposes of the fee-freezing provision of the ISTEA, the states are bound by the fees they actually were collecting or charging under any reciprocity arrangements as of November 15, 1991. Several states challenged the ICC's conclusions regarding reciprocity arrangements, but a unanimous panel of the D.C. Circuit sustained the ICC's interpretation of the statute. See National Ass'n of Reg. Util. Comm'rs v. ICC, 41 F.3d 721 (D.C. Cir. 1994) ("NARUC").

Beginning in February 1992, the State of Michigan changed the manner in which it implemented its reciprocity arrangements with other states. As a result of that change, in 1992, Michigan began to charge Yellow Freight a registration fee of $10 for each of its vehicles based in Illinois. Yellow Freight paid the fees and filed suit for recovery in the Michigan Court of Claims, which awarded Yellow Freight the fees by deferring to the ICC's interpretation of the ISTEA. On appeal, the Michigan Court of Appeals affirmed, also deferring to the ICC's interpretation. See 585 N.W.2d 762 (Mich. App. 1998) [link 2].

The Michigan Supreme Court reversed. See 627 N.W.2d 236 (Mich. 2001). Because in its opinion "the statute is not ambiguous," the court declined to defer to the ICC's interpretation of the ISTEA. Id. at 241. As the Michigan Supreme Court interpreted the statute, the phrase "collected or charged" should be construed by reference to a state's "generic fee" (i.e., the fee it would charge without taking into account any reciprocity arrangement). See id. at 241-242. Two justices of the court wrote dissenting opinions, expressing the view that the court should have deferred to the ICC's reasonable interpretation of the statute. See id. at 243-247.

This case is of great importance to the interstate motor carrier industry. Under the Michigan Supreme Court's construction of the ISTEA, states would be free to rescind any reciprocity arrangements that existed as of November 15, 1991, and to begin collecting registration fees for vehicles that had been exempt from such fees because of such arrangements. Mayer, Brown & Platt filed an amicus brief on behalf of the American Trucking Associations and two of its members in support of the petition in this case.

3. Coal Industry Retiree Health Benefit Act of 1992—Assignment of Beneficiaries to Signatory Operators. The Coal Industry Retiree Health Benefit Act of 1992 ("the Act"), 26 U.S.C. § 9701 et seq., established a fund ("the Fund") to ensure the continued provision of health-care benefits to retired miners and their dependents who worked under collective bargaining agreements that promised lifetime health-care benefits. The Fund is financed principally by premiums paid by the surviving "signatory operators" (or related companies) that formerly employed the retired miners. For purpose of calculating these premiums, the Act provides that the Commissioner of Social Security ("the Commissioner") "shall, before October 1, 1993," assign eligible beneficiaries of the Fund to particular signatory operators. 26 U.S.C. § 9706(a). Principally because Congress did not immediately appropriate funds for this purpose, the Commissioner did not complete the process of assigning beneficiaries to operators until well after October 1, 1993. The Supreme Court granted certiorari in Barnhart v. Peabody Coal Company and Holland v. Bellaire Corp, Nos. 01-705 and 01-715, to determine whether assignments made by the Commissioner after October 1, 1993 are valid.

The respondents in Peabody Coal and Bellaire are operators who were assigned beneficiaries on or after October 1, 1993. They challenged the assignments in federal court, contending that the Commissioner lacked authority to make such assignments after the statutory deadline. In unpublished decisions, the district courts in both Peabody Coal and Bellaire ruled in favor of the operators and declared the assignments null and void. 

The Sixth Circuit affirmed both decisions in unpublished, per curiam opinions. In each case, the court of appeals relied on its prior decision in Dixie Fuel v. Commissioner of Social Security, 171 F.3d 1052 (6th Cir. 1999). There, the court declared that "[t]he October 1, 1993 date is a deadline," and that the Act "does not permit the SSA to make such assignments after that date." Id. at 1064. The only other circuit to consider this issue has reached the "opposite conclusion," namely, that the Act "clearly allows the SSA to exercise its assignment authority, including the authority to make new assignments, after October 1, 1993." Holland v. Pardee Coal Co., No. 00-1770, 2001 WL 1244840, at *4 (4th Cir. Oct. 18, 2001). 

This case is significant to all companies that were assigned beneficiaries under the Act on or after October 1, 1993.

This Mayer, Brown, Rowe & Maw Supreme Court Docket Report provides information and comments on legal issues and developments of interest to our clients and friends. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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