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COMPLAINT FOR DECLARATORY, INJUNCTIVE, AND OTHER RELIEF
INTRODUCTION
1. This is an action for declaratory, injunctive, and other relief brought by plaintiff National Foreign Trade Council ("NFTC") against Charles D. Baker, Secretary of Administration and Finance of the Commonwealth of Massachusetts, in his official capacity, and Philmore Anderson, III, State Purchasing Agent for the Commonwealth of Massachusetts, in his official capacity. Plaintiff seeks injunctive and declaratory relief barring the enforcement of the Act of June 25, 1996, chapter 130, § 1, 1996 Mass. Acts 210, codified at Mass. Gen. Laws, ch. 7, §§ 22G-22M (hereinafter, "the Massachusetts Burma Law"), and declaring it to be unlawful. The Massachusetts Burma Law forbids state agencies, state authorities, and other state actors from procuring goods or services from any person currently doing business with the Union of Myanmar (formerly known as the Nation of Burma).
2. This action is not intended as any demonstration of support for the current authoritarian regime in place in the Union of Myanmar, which has reportedly been guilty of extensive human rights abuses. The merits of that regime are not relevant to the serious legal issues presented here.
3. The Commonwealth of Massachusetts has no authority, under the Constitution or laws of the United States, to pass such laws regarding foreign affairs. In effectively prohibiting companies doing business with Massachusetts from also doing business in Myanmar, this state law impermissibly intrudes into the federal government's power to make foreign policy and to regulate commerce with foreign nations. These powers are vested exclusively in the federal government by the Constitution and laws of the United States.
4. The Massachusetts Burma Law is also preempted by federal law in light of the federal government's prohibitions on new investments in the Union of Myanmar, see Omnibus Consolidated Appropriations Act of 1997, Pub. L. No. 104-208, 110 Stat. 3009 and Executive Order 13,047, 62 Fed. Reg. 28,301 (1997), which reflect the considered judgment of the Congress and the President about the type and level of business-related sanctions to incorporate into an overall approach to United States relations with Myanmar.
JURISDICTION
5. This case arises under the Constitution and laws of the United States and thus presents a federal question within this Court's jurisdiction under Article III of the United States Constitution and under 28 U.S.C. § 1331.
6. This Court has authority to grant declaratory relief pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201.
VENUE
7. Venue is proper in this Court under 28 U.S.C. § 1391(b), which provides that "[a] civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as otherwise provided by law, be brought . . . in (1) a judicial district where any defendant resides, if all defendants reside in the same State, [or] (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred . . . ."
8. Venue lies in this judicial district because defendants reside within this judicial district, and because the events giving rise to the claims made in this suit occurred within this judicial district.
THE STATUTE
9. The Massachusetts Burma Law prohibits "a state agency, a state authority, the house of representatives [and] the state senate" from purchasing goods or services from any person "doing business with Burma." § 22H(a).
10. The statute defines "doing business with Burma" to include, inter alia, having any place of business in Burma; being the majority-owned subsidiary of any company that does business in Burma; providing any goods or services to the Burmese government; and promoting the importation or sale of any products whose commerce is controlled by the Burmese government. § 22G.
11. The statute requires defendant Baker to maintain a "Restricted Purchase List," updating it at least once every three months with the names of persons doing business with Burma and providing it to all state agencies and state authorities. § 22J. The most recent list was released in April 1998.
12. When any state agencies solicit or accept bids for contracts, the statute requires that they obtain from the person seeking to provide those goods or services a statement "under the pains and penalties of perjury" detailing the nature and extent of that person's business ties with Burma. § 22H(c).
13. An agency soliciting a contract can only award the contract to a company doing business in Burma if the agency certifies in writing that "the procurement is essential" and that "compliance . . . would eliminate the only bid or offer, or would result in inadequate competition." § 22H(b).
14. When award of a contract is based on bids or offers for that contract, the Massachusetts Burma Law forbids state entities from awarding the contract to a person on the restricted purchase list unless there is no other bid, or the only bid from a person not doing business with Burma is ten percent greater than the lowest bid submitted. § 22H(d). On information and belief, this provision is currently being implemented at least in part in the following manner: when a bid or offer is submitted by a company on the restricted purchase list, ten percent is automatically added to the offer price and the bid is considered to have been at the higher price.
15. Bidding on government contracts typically generates a narrow spread of bid prices. The addition of ten percent to the lowest bid is likely to be effectively disqualifying in most instances.
16. The Massachusetts Burma Law provides that "[a]ny contract entered into in violation" of the law "shall be void." § 22L.
17. The Massachusetts Burma Law is currently being enforced.
THE PARTIES
Plaintiff The National Foreign Trade Council
18. Plaintiff the National Foreign Trade Council ("NFTC") is a nonprofit corporation, organized and existing under the laws of the State of New York. The Council was founded in 1914 by a group of United States industrial companies engaged in international trade and investment. Since its founding, the NFTC has been a leading spokesman on behalf of the private sector for an open international trade and investment regime.
19. The NFTC's membership consists of approximately 580 United States manufacturing corporations, financial institutions, and other United States firms having substantial international operations or interests. NFTC members account for at least 70% of all U.S. non-agricultural exports and 70% of U.S. private foreign investment.
20. The NFTC is authorized by its members to represent their interests in international-trade-related matters before Congress, the Executive Branch, the regulatory agencies, and the courts.
21. The right to engage in foreign trade in the absence of foreign trade sanctions imposed by state and local governments is of vital concern to the NFTC's members. Reflecting this vital interest, the NFTC's Board of Directors has adopted a resolution that specifically opposes state and local governmental restrictions upon foreign trade, such as the Massachusetts Burma Law. This resolution provides that "these laws and ordinances adversely affect trade and commerce, and in particular, they interfere with the ability of the members of the [NFTC] to conduct international trade, and cause financial and other injury to" the NFTC's members. The resolution authorizes the NFTC, on behalf of its members, to bring suit to challenge these laws, as in the present case.
22. A number of NFTC members are directly affected by the Massachusetts Burma Law, and have altered their business operations in response to the law. A number of NFTC members have been placed on the "Restricted Burma Purchase List" required by the Massachusetts Burma Law. Indeed, the most recent version of that list, dated April 1998, contained more than 30 NFTC members. Other companies have been forced to sever business ties with Myanmar because of the Massachusetts Burma Law.
23. The NFTC and its members do not in any way support Myanmar's State Peace and Development Council. The reported human rights abuses that have plagued Myanmar, and the regime's failure to recognize the results of the democratic election held in 1990, are condemnable. Nonetheless, the NFTC and its members do not believe that regulation by states and local governments is a permissible or effective way to approach these serious issues.
Defendants Baker and Anderson
24. Defendant Charles D. Baker is Secretary of Administration and Finance of the Commonwealth of Massachusetts. On information and belief, he has held that position from November 1994 to the present. Pursuant to the Massachusetts Burma Law, Defendant Baker is responsible for establishing and maintaining the restricted purchase list. Defendant Baker is sued in his official capacity only.
25. Defendant Philmore Anderson, III, is the State Purchasing Agent for the Commonwealth of Massachusetts. Under Massachusetts law, "[a]ll goods, supplies, equipment and services, except for legislative or military purposes, needed by the various executive and administrative departments and for other activities of the commonwealth shall be purchased by or under the direction of the operational services division." Mass. Gen. Laws ch. 30, § 51. Defendant Anderson, as the State Purchasing Agent, heads the Operational Services Division, and is responsible - either directly or through delegation - for the bulk of the Commonwealth's purchasing activity. Defendant Anderson is being sued in his official capacity only.
THE PURPOSE OF THE STATUTE
26. The Massachusetts Burma Law, signed into law on June 25, 1996, was enacted for the exclusive purpose of regulating commerce with the Union of Myanmar and pressuring Myanmar to alter its domestic policies. It is not designed to offer and does not offer any economic benefit to the Commonwealth, its agencies or its citizens.
27. Massachusetts, in enacting this law, was not acting the way a private purchaser of goods and services would act. Rather, Massachusetts acted in a sovereign capacity and engaged in regulatory, not proprietary conduct.
28. The law is a "foreign policy" initiative. As the law's sponsor, Representative Byron Rushing, put it in floor debates on the measure, "[t]he goal is free, democratic elections in Burma."
29. Senator Marion Walsh, urging her colleagues to pass the Massachusetts Burma Law, urged that the Law sent "a clear message that the government of Massachusetts will not do business with businesses that exploit and do business with the military government in Burma . . . I offer, as one member of this body, that we recognize the responsibility and opportunity we have to send a very appropriate and simple message to be helpful for civil rights across the globe."
30. Upon signing the law, then-Governor William Weld again made clear the law's foreign-policy objective, observing that "[o]ne law passed by one state will not end the suffering and oppression of the people of Burma, but it is my hope that other states and the Congress will follow our example and make a stand for the cause of freedom and democracy around the world."
THE LAW'S IMPACT ON FOREIGN RELATIONS
31. Since the law's enactment, the Massachusetts Burma Law has caused considerable controversy between the United States and several of its international allies.
32. In early 1997, European Union ("EU") Ambassador Hugo Paeman wrote a letter to then-Governor Weld, warning that the Massachusetts Burma Law is "a breach of U.S. international obligations and as such could have a damaging effect on bilateral EU-US relations."
33. On June 20, 1997, after several unsuccessful efforts at informal negotiation with the United States Trade Representative, the EU formally noted its position that the Massachusetts Burma Law violated the World Trade Organization's ("WTO") "Government Procurement Agreement," to which the United States and Massachusetts are both signatories.
34. On July 18, 1997, Japan joined the EU in criticizing the Massachusetts Burma Law as a violation of the United States' international obligations and requested WTO consultation on the conflict.
35. The WTO proceedings cannot resolve the question of the validity of the Massachusetts Burma Law. If the WTO challenge were successful, the United States would be compelled to urge Massachusetts to amend its law, to offer compensation to the EU and Japan if the statute were not amended, or, failing either of these, to suffer retaliation. Further, even if Massachusetts were to amend the law to comply with WTO requirements, it would still be applicable to contracts under a certain dollar value; for contracts below the dollar amount, the constitutional problem would remain.
36. Members of the Association of South East Asian Nations ("ASEAN") have also raised questions about whether the Massachusetts Burma Law is appropriate as a United States foreign policy measure.
37. Representatives from the State Department have stated that the Massachusetts Burma Law and other similar local sanctions make it more difficult for the federal government to conduct its foreign policy.
38. Undersecretary of State Stuart Eizenstat has described "efforts by a variety of state and local officials around the United States . . . to impose various economic sanctions" as "inappropriate and counterproductive."
39. Deputy Assistant Secretary of State David Marchick has explained that "ad hoc and scattered actions at various levels of government, however well-intentioned, can do more harm than good in achieving the desired objective. They can impede the President's and Secretary of State's conduct of foreign policy."
THE MASSACHUSETTS BURMA LAW'S EFFECT ON FOREIGN COMMERCE
40. The aforementioned international controversies over the Massachusetts Burma Law, and their obvious impact on United States foreign relations and policy have been paralleled by foreign commercial repercussions.
41. When then-Governor Weld signed the Massachusetts Burma Law into law, he heralded it as "more than symbolic action," noting that "we expect this bill will affect millions of dollars in state business."
42. On information and belief, the Commonwealth and its agencies purchase more than $20 billion in goods and services each year.
43. This list of companies from whom Massachusetts agencies may not purchase goods and services under this law includes not only over 40 United States companies, but also several hundred foreign companies.
44. As a result of the Massachusetts Burma Law, at least 13 companies have severed all business and investment ties with Myanmar, according to the law's sponsor, Representative Rushing.
45. On information and belief, Foreign commerce in Myanmar generates over $29 billion each year. The country is a major international source of oil, gas, and timber.
46. By effectively refusing to do business with companies that engage in commerce in Myanmar, the Massachusetts law discriminates against foreign commerce.
47. There has been a proliferation of other similar laws in jurisdictions around the country. At least 18 cities and counties from California to New York have enacted restrictive purchasing laws aimed at companies doing business in Myanmar.
COUNT I - UNCONSTITUTIONAL STATE INTERFERENCE
WITH FEDERAL FOREIGN RELATIONS POWER
48. Paragraphs 1-47 are incorporated herein by reference.
49. Under the United States Constitution, the federal government is entrusted with full and exclusive responsibility for the conduct of foreign policy.
50. The Massachusetts Burma Law, on its face and as applied, is clearly designed to, and does, conduct foreign policy at the state government level by imposing penalties upon businesses that conduct business with Myanmar.
51. The Massachusetts Burma Law thus intrudes upon the federal government's exclusive foreign-relations powers, in violation of the United States Constitution, and is unenforceable.
COUNT II - VIOLATION OF FOREIGN COMMERCE CLAUSE
52. Paragraphs 1-47 are incorporated herein by reference.
53. Article I, section 8, clause 3 of the United States Constitution ("the Foreign Commerce Clause") provides that "The Congress shall have Power . . . To regulate Commerce with foreign Nations . . . ."
54. Under the Foreign Commerce Clause, state regulations that discriminate against foreign commerce, burden foreign commerce, or impede the federal government's ability to "speak with one voice when regulating commercial relations with foreign governments," are unconstitutional.
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55. The Massachusetts Burma Law, on its face and as applied, impermissibly burdens and discriminates against commerce with the Union of Myanmar by barring from state contracts those companies that trade with the Union of Myanmar.
56. The Massachusetts Burma Law, on its face and as applied, impedes the federal government from speaking with one voice with respect to its regulations of commerce with foreign governments.
57. The Massachusetts Burma Law thus violates the Foreign Commerce Clause of the United States Constitution, and is unenforceable.
COUNT III - VIOLATION OF SUPREMACY CLAUSE
58. Paragraphs 1-47 are incorporated herein by reference.
59. Under the Supremacy Clause of the United States Constitution, the Constitution, laws and treaties of the United States are "the supreme Law of the Land, . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding."
60. The federal Constitution, laws and treaties therefore preempt state and local enactments that conflict with federal authority, or purport to regulate in an area reserved exclusively to the federal government.
61. The federal government has enacted its own sanctions provision, which is directed, among other things, toward prohibiting United States companies from making certain kinds of new investments in Myanmar. See Omnibus Consolidated Appropriations Act of 1997, Pub. L. No. 104-208, 110 Stat. 3009, and the Executive Order implementing that statute's sanctions provisions, Executive Order 13047, 62 Fed. Reg. 28,301 (1997).
62. The prohibitions of the Massachusetts Burma Law are considerably more restrictive than the provisions of federal law.
63. The Massachusetts Burma Law, on its face and as applied, is preempted by these federal provisions, and is therefore unconstitutional and unenforceable.
NEED FOR PRELIMINARY RELIEF
64. Absent preliminary injunctive relief, the Massachusetts Burma Law will continue to be enforced.
65. The Massachusetts Burma Law has caused irreparable injury to members of the NFTC.
66. Due to its immunity from suit, the State of Massachusetts cannot be sued for damages resulting from continued enforcement of the Massachusetts Burma Law. Thus there is no adequate remedy at law for those injured by further enforcement of the restrictions.
67. Enjoining enforcement of the Massachusetts Burma Law would, on the other hand, impose no hardship on the Commonwealth.
68. The public interest favors enjoining continued enforcement of this plainly unconstitutional law.
RELIEF REQUESTED
WHEREFORE, plaintiff respectfully requests the following relief:
A. A declaratory judgment, pursuant to 28 U.S.C. § 2201, that the Massachusetts Burma Law violates the United States Constitution and is unenforceable;
B. A preliminary injunction pending this Court's decision on the merits and any appellate review of this decision, enjoining defendants from enforcing the Massachusetts Burma Law;
C. A permanent injunction enjoining defendants from enforcing the Massachusetts Burma Law;
D. Any other nonmonetary relief the Court should deem proper; and
E. An order granting costs to the plaintiff.
Dated: April 30, 1998
Respectfully submitted,
/s/ Michael A. Collora
Michael A. Collora
Dwyer & Collora
Federal Reserve Plaza
600 Atlantic Avenue
Boston, MA 02210-2211
(617) 371-1000
/s/ Timothy B. Dyk
Timothy B. Dyk
Robert H. Klonoff
Gregory A. Castanias
Melissa Hart*
JONES, DAY, REAVIS & POGUE
1450 G Street, N.W.
Washington, D.C. 20005-2088
(202) 879-3939
Attorneys for Plaintiff
National Foreign Trade Council
* Admitted in Maryland; not admitted in the District of Columbia
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