United States District Court
District of Massachusetts

National Foreign Trade Council,
Plaintiff,

v.         Civil Action No. 97 12042 (JLT)

Charles D. Baker,
in his official capacity as
Secretary of Administration and Finance
of the Commonwealth of Massachussetts,

and

Philmore Anderson, III,
in his official capacity as
State Purchasing Agent for the
Commonwealth of Massachussetts,

Defendants.

 

ORDER

November 4, 1998

TAURO, Ch. J.,

The court hereby orders as follows:

1. Plaintiff's Motion for Summary Judgment is allowed;

2. Defendant's Cross Motion for Summary Judgment is DENIED; and

3. Plaintiff's Motion to Amend the Complaint is ALLOWED.

IT IS SO ORDERED.

 

[Full text follows]

 

 

United States District Court
District of Massachusetts

National Foreign Trade Council,
Plaintiff,

v.         Civil Action No. 97 12142 (JLT)

Charles D. Baker,
in his official capacity as
Secretary of Administration and Finance
of the Commonwealth of Massachussetts,

and

Philmore Anderson, III,
in his official capacity as
State Purchasing Agent for the
Commonwealth of Massachussetts,

Defendants.

 

MEMORANDUM

November 4, 1998

TAURO, Ch. J.,

Plaintiff National Foreign Trade Council ("NFTC") brings this action against two officials of the Commonwealth seeking a declaratory judgment that the so-called "Masschussetts Burma Law" is unconstitutional.

The Massachussetts Burma Law is a procurement statute that prohibits the Commonwealth and its agents from purchasing goods or services from anyone doing business with the Union of Myanmar (formerly known as the Nation of Burma). The statute authorizes the Operational Services Division (OSD), an agency within the Executive Office of Administration and Finance, to establish a "restricted purchase list " of companies "doing business with Burma" as defined by the statute. Once OSD makes a preliminary finding that a company does business with Myanmar, the company can submit a sworn affidavit to refute the finding. OSD then makes a final decision whether to place a company on the "restricted purchase list."

The Commonwealth is allowed to procure from a "restricted purchase list" company only when: (1) the procurement is essential and the restriction would eliminate the only bid or offer, or would result in inadequate competition, M.G.L.A. ch. 7, section 22H(b); (2) the Commonwealth is purchasing certain medical supplies, section 22I; or (3) there is no "comparable low bid or offer" by an unrestricted bidder, section 22H(d).

Plaintiff claims that the Burma Law is invalid because it (1) intrudes on the federal government's exclusive power to regulate foreign affairs; (2) descrimintaes against and burdens international trade in violation of the Foreign Commerce Clause; and (3) is preempted by a federal statute and an executive order imposing sanctions on Myanmar.

Before the court are the parties' cross motions for summary judgment. For reasons stated below, the court finds that the Massachussetts Burma Law impermissibly infringes on the federal government's power to regulate foreign affairs.

I. ANALYSIS

A. Standing

Defendants argue that Plaintiff lacks standing to sue because its members have not been injured by the Burma Law. The Supreme Court's test for organizational standing provides that an association may sue on behalf its members if: "(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit." Hunt v. Washington Apple Adver. Comm. 432 U.S. 333, 343 (1977).

Plaintiff NFTC satisfies the first prong of the Hunt test. As shown by the parties' Joint Stipulation, NFTC members on the "restricted purchase list" cannot bid on Massachussetts contracts on an equal basis. These members could, therefore, sue on an individual basis. See Clinton v. City of New York 11B S. Ct. 2091, 2100 (1998) (holding that "probable economic injury resulting from [governmental actions] that alter competitive conditions" satisfy the 'injury-in-fact' requirement of Article III and, therefore, anyone who is "likely to suffer economic injury as a result of [governmental action] that changes market conditions satisfies this part of the standing test") (quoting B.K. Davis & R. Pierce, Administrative Law Treatise 13-14 (3d ed. 1994)). See also Northeastern Florida Chapter of the Associated General Contractors of America v. City of Jacksonville, 508 U.S. 656, 666 (1993) (holding that the plaintiff had standing because it was "able and ready to bid on contracts and that a discriminatory policy prevent[ed] it from doing so on an equal basis").

Plaintiff also satisfies the second prong of Hunt. The Joint Stipulation states, "Founded in 1914, the NFTC has historically represented its members' interests in the area of foreign trade," Joint Stipulation P. 2. See also Declaration of Frank D. Kittredge P. 5. The NFTC is "organized and authorized to represent the interests of its members in free international trade and commerce." The NFTC Resolution of April 21, 1998, Exhibit 2 of the Joint Stipulation. Challenging statutes like Massachussetts' Burma Law, which acts as a barrier to free trade, is "germane" to the organization's purpose.

Plaintiff seeks declaratory judgment prohibiting enforcement of the Burma Law. Neither the claims nor the relief requested in Plaintiff's Complaint requires participation by individual members. Plaintiff, therefore, satisfies the third prong of the Hunt test, and has standing to bring this action on behalf of its members.

B. Constitutionality of the Massachussetts Burma Law

1. The Constitution Grants Federal Government Exclusive Authority Over Foreign Affairs

Under our constitutional framework, the federal government has exclusive authority to conduct foreign affairs. Numerous constitutional provisions evidence the Framers' intent to vest plenary power over foreign affairs in the federal government. Article I, section B, cla. 1 & 3 give Congress sole authority to provide for the common defense, and to regulate commerce with foreign nations. Article II, section 2, cla. 2 authorizes the President to make treaties and appoint ambassadors. Article I, section 10, cla. 1-3 prohibit the states from making treaties, entering into agreements with other countries, or imposing duties on imports and exports. These provisions demonstrate that "one of the main objects of the Constitution [was] to make us, as far as regarded our foreign relations, one people, and one nation." Holmes v. Jennison 39 U.S. 540, 575 (1840).

The Supreme Court has consistently recognized the exclusive role assigned to the federal government in the area of foreign affairs. The Court has admonished, "power over external affairs is not shared by the States; it is vested in the national government exclusively." United States v. Pink 315 U.S. 203, 233 (1942), see also United States v. Belmont 301 U.S. 324, 331 (1937) ("Complete power over international affairs is in the national government and is not and cannot be subject to any curtailment or interference on the part of the several states.").

The Supreme Court, in Zachernig v. Miller 389 U.S. 429, 434-35 (1968), declared invalid state laws with more than "some incidental or indirect effect in foreign countries," or that have "great potential for disruption or embarrassment" of United States foreign policy. Zachernig involveda probate law that conditioned the right of a nonresidetn alien to inherit property from an Oregon resident on reciprocal treatment by the beneficiary's country of origin. Even though probate matters are within the traditional jurisdiction of the states, and even though the Oregon statutewas facially neutral, the Supreme Court struck it down under the foreign affairs doctrine, because of its possible effect on foreign nations. Id. Zachernig teaches that states and municipalities must yield to the federal government when their actions affect significant issues of foreign policy.

2. Massachussetts Burma Law Impermissibly Burdens U.S. Foreign Relations

The Massachussetts Burma Law has more than an "indirect or incidental effect in foreign countries," and a "great potential for disruption or embarrassment." Zachernig 389 U.S. at 434-35. It, therefore, unconstitutionally impinges on the federal government's exclusive authority to regulate foreign affairs.

The Commonwealth concedes that the statute was enacted solely to sanction Myanmar for human rights vioaltions and to change Myanmar's domestic policies. Indeed, its legislative history makes this intent clear. Representative Rushing of the Massachussetts House of Representatives stated that "if you're going to enagge in foreign policy, you have to be able to identify a goal that you will know when it is realized...[T]he identifiable goal is, free democratic elections in Burma." MA House Debate on HR833: July 19, 1995, transcript at 4-5. State Senator Hicks criticized the bill as an improper attempt to make foregin policy: "This particualr body has no particular responsibility to make a statement on this ...international matter. [T]he appropriate forum...would be the U.S. Congress." MA Senate Debate on HR833: April 10, 1996, transcript at 10.

The amicus briefs here as well as the Joint Stipulation further demonstrate the Burma Law's disruptive impact on foreign relations. The European Union (EU), as an amicus, observes that the massachussetts Burma Law: (1) interferes with the normal conduct of EU-U.S. relations; (2) raises questions about the ability of the U.S. to honor international commitments it has entered in the framework of the World Trade Organization (WTO); and (3) poses a great risk to the proliferation of similar state sanctions laws, which in turn would aggravate international tensions. See EU Brief, p. 2; see also Joint Stipulation & Ambassador Hugo Paeman's Letter to then-Governor Weld of Massachussetts (stating that the Burma Law is a breach of the WTO agreements, and would have a "damaging effect on bilateral EU-U.S. relations"). Japan and the Association of the South East Asian Nations (ASEAN) also filed complaints against the statute with the U.S. government. See Joint Stipulation, P. 42. Both EU and ASEAN formally noted their oppositions to the Burma Law at the WTO in June and July of 1997. See Joint Stipulation, P. 41-42.

Defendants argue that the Burma Law does not intrude on the federal government's foreign affairs power because: (1) the Constitution permits certain state actions that indirectly affect foreign affairs; (2) the Burma Law does not establish a direct contact between the state and the nation of Myanmar; (3) important state interests embodied in the First and Tenth Amendments justify the statute; and (4) as the foreign affairs doctrine is itself "vague," the court should leave to the legislative branch the issue of whether to invalidate the Massachussetts Burma Law and similar state procurement statutes.

Defendants first challenge the scope of the foreign affairs power, and argue that the Burma Law does not infringe on what they view as a more limited fedral government power. In an attempt to confine the federal government's foreign relations power, Defendants cite the following federal and state court decisions upholding selective purchasing and divestment statutes; Trojan Tech, Inc. v. Pennsylvania 742 F. Supp. 900, 903 (M.D. Pa. 1990), aff'd, 916 F. 2d 903, 913-14 (3d Cir. 1990) (upholding a Pennsylvania statute that required U.S.-made steel in all state construction projects); Board of Trustees v. Mayor and City Council of Baltimore 562 A.2d. 720, 744 (Md. 1989) (upholding a Baltimore statute that withdrew city's investments from South Africa); and K.S.B. Technical Sales Corp. v. New Jersey Dist. Water Supply Comm'n 381 A.2d. 774, 782-84 (N.J. 1977) (upholding a New Jersey "Buy American" statute).

None of these cases is persuasive precedent with respect to the circumstances at issue here. Trojan and K.S.B. Technical Sales involved "Buy American" statutes, whose purpose and effect were to create jobs and promote economic development at home. Although these statutes benefitted Americans economically, they did not single out a particular foreign country for particualr treatment, as does the Massachussetts Burma Law. The Third Circuit specifically distinguished the statute in Trojan from the one in Zachernig on this basis. See 916 F.2d. at 913 (holding that the Pennsylvania statute applied to "steel from any foreign sources, regardless of whether the source country might be considered friend or foe," and therefore, unlike the Oregon statute struck down in Zachernig, did not involve the state in the conduct of foreign affairs). Furthermore, at least one court has held that even Buy American statutes may violate the foreign affairs doctrine. See Bethlehem Steel Corp. v. Board of Comm'n 276 Cal. App. 2d. 221, 224-26 (1969) (holding unconstitutional a California "Buy American Law" that awarded state construction contracts only to companies that agreed to use American-made products).

The Baltimore statute in Board of Trustees required the City to withdraw its investments in South Africa. See 562 A.2d.720, unlike the Massachussetts Burma Law, the Baltimore statute only modified the City's own conduct, and did not seek to influence individuals or companies in their private commercial activities. Id.

Several lower federal and state court decisions support the conclusion that the Burma Law unconstitutionally burdens the federal foreign affairs power. In Springfield Rare Coin Galleries Inc. v. Johnson 503 N.E.2d. 300, 305 (Ill. 1986), the Illinois Supreme Court held unconstitutional a provision that exempted sales tax on all rare coins except for South African krugerrands. In New York Times Co. v. City of New York Comm'n on Human Rights, the New York Court of Appeals reversed New York City Commission on Human Rights' ruling and upheld New York Times' practice of accepting employment advertisements from South African employers. See 361 N.E. 2d. 963, 968 (N.Y. 1977) ("Even longstanding State regulation of traditional fields of law, such as the rules governing the descent and distribution of estates, must fall by the wayside if enforcement of Stets regulations would 'impair the effective exercise of the Nation's foreign policy.'") (quoting Zachernig 389 U.S. at 440). In Tayyari v. New Mexico State University 495 F. Supp. 1365, 1376 (D.N.M. 1980); the U.S. District Court for the District of New Mexico invalidated a motion passed by the Regents of the State University that denied Iranian students admissions and readmissions until the return of American hostages. the District Court held that the Regents' true purpose was "to make a political statement." Id. at 1376. These holdings are consistent with the Supreme Court's decision in Zachernig, and bolster the conclusion that the Massachussetts Burma Law is an unconstitutional infringement on the federal government's power over foreign affairs.

In another effort to avoid the sweep of the foreign affairs doctrine, Defendants argue that the Burma Law does not establish direct contact between Myanmar and the Commonwealth. This is true, but irrelevant under the Zachernig test. Zachernig examines the substantive impact a state statute has on foreign relations. See 389 U.S. at 434-35. The Massachussetts Burma Law was designed with the purpose of changing Burma's domestic policy. This is an unconstitutional infringement on the foreign affairs powers of the federal government. State interests, no matter how noble, do not trump the federal government's exclusive foreign affairs power. C.f. U.S. v. Pink, 315 U.S. 203, 233 (1942), U.S. v. Belmont, 301 U.S. 324, 331 (1937).

Plaintiff also argues that the statute is invalid because (1) federal law preempts the Massachussetts Burma Law; and (2) the Massachussetts Burma Law violates the Foreign Commerce Clause. Because neither argument is dispositive in this case, this opinion does not address them in detail, but offers the following observations.

Plaintiff argues that "actual conflict" between the Omnibus Consolidated Appropriations Act of 1997 and the Massachussetts Burma Law inpliedly preempts the Burma Law.

To establish preemption, Plaintiff must show that Congress intended to exercise its authority to set aside a state law. See Philip Morris Inc. v. Harshbarger 122 F.3d. 58, 67 (1st Cir. 1997). Plaintiff's burden is particularly heavy because Plaintiff argues implied rather than express preemption. Id. Plaintiff has failed to carry this burden.

The alleged main conflict between the statutes was the federal government's intent to utilize mulitlateral sanctions with other nations and the Burma Law's unliteral approach. This argument is not persuasive, because the federal statute actually provides for unilteral sanctions against Myanmar. The evidence does not establish sufficient actual conflict for this court to find implied preemption. See Exxon Corp. v. Governor of Maryland 437 U.S. 117, 131 (1978) (courts will not infer preemption based on speculation: conflict must be real).

Plaintiff offers the Foreign Commerce Clause as another ground for invalidating the Massachussetts Burma Law. See U.S. Const. art. I section 8, cl. 3; Japan Line Ltd. v. County of Los Angeles 441 U.S. 434, 449 (1979) (holding that state regulations that discriminate against foreign commerce or impede the federal government's ability to "speak with one voice when regulating commercial relations with foreign governments" are unconstitutional). Defendant raises as a defense the market-participant exception to the dormant Commerce Clause. See White v. Massachussetts Council of Constr. Employers inc. 460 U.S. 204, 208 (1983). Although the Third Circuit has extended this exception to foreign commerce, neither the Supreme Court nor the First Circuit has addressed the issue. See Trojan Tech Inc. v. Pennsylvania (holding that "Buy American" statutes which affect foreign commerce are not subject to review under the Foreign Commerce Clause).

This court need not decide whether or how the market-participant exception applies to foreign commerce, as the Massachussetts Burma Law is an unconstitutional infringement of federal government's power over foreign affairs.

Massachussetts' concern for the welfare of the people Myanmar as manifested by this legislative enactment may well be regarded as admirable. But, under the exclusive foreign affairs doctrine, the proper forum to raise such concerns is the United States Congress.

C. Motion to Amend the Complaint

Plaintiff seeks to amend its Complaint to allege a 42 U.S.C. section 1983 violation by the state officials, which would entitle the Plaintiff to attorney's fees under section 1988. As this motion is unopposed and would not prejudice Defendants, it is allowed.

II. CONCLUSION

For the foregoing reasons, the Plaintiff's Motion for Summary Judgment and its unopposed Motion to Amend the Complaint are ALLOWED. Defendant's Cross Motion to Amend the Complaint is DENIED.

AN ORDER WILL ISSUE.

 

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