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There is no disagreement among the parties as to the need for reform in Myanmar. The current authoritarian regime, the State Peace and Development Council, has reportedly committed egregious human-rights violations and has refused to recognize the results of the democratic election held in that country in 1990. The issue presented by this case, however, is not the merits of that current regime . The issue is whether the Commonwealth can regulate foreign affairs and foreign commerce, or adopt regulations that conflict with federal regulations.
Plaintiff recognizes that the issues presented by this case are both important and complex, and that adequate briefing and oral argument are essential before the Court addresses the preliminary injunction question. Accordingly, plaintiff has attached a proposed scheduling order to its Motion for a Preliminary Injunction (Attachment 5).
Alternatively, plaintiff requests, pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure, that this Court advance the trial on the merits and consolidate it with the hearing on the preliminary injunction. (A proposed order to this effect is Attachment 6 to plaintiff's Motion for a Preliminary Injunction.) This case primarily presents legal questions, and little factual development should be necessary. If the Court determines that consolidation is the appropriate alternative, plaintiff requests expedited consideration of the merits, and asks the Court to treat this brief as its opening brief on the merits.
STATEMENT OF FACTS
The plaintiff in this action is the NFTC. Founded in 1914, the NFTC has long represented the interests of its members in the area of foreign trade. Over 30 NFTC members appear on the Massachusetts restricted list. These companies are barred from doing business with the Commonwealth by the Massachusetts law. The NFTC also counts among its members companies who have already been forced to sever their business ties with Myanmar because of the Massachusetts Burma Law and their desire to do business with Massachusetts. See Declaration of Frank D. Kittredge ¸ 10 (hereinafter, "Kittredge Dec."). The severity of the problem the Massachusetts Burma Law poses for the NFTC and its members is increased by the growing number of states and localities around the nation that are enacting similar foreign policy measures; dozens of these laws have already been enacted, with at least 18 targeting Myanmar, and others directed at other countries. Organization for International Investment, State and Municipal Sanctions Report, Dec. 1, 1997, at 3. Given the law's impact on foreign trade generally, and on its members, the NFTC's Board of Directors has specifically authorized the NFTC to bring this suit on behalf of its members. See Kittredge Dec. ¸ 5 & Exh. A.
The defendants in this action are the officials responsible for enforcement of the Massachusetts law.2 Defendant Charles Baker, the Commonwealth's Secretary of Administration and Finance, is charged with maintaining and distributing a "restricted purchase list" that includes the names of companies doing business in Myanmar. He is sued as the principal executive responsible for enforcement of the law. Defendant Philmore Anderson, III, heads the Commonwealth's Operational Services Division, and is responsible -- directly or by delegation -- for procuring goods and services for the Commonwealth's administrative and executive departments. He is sued as the principal procurement official for the Commonwealth.
The Operation of the Massachusetts Law
The Massachusetts Burma Law restricts state agencies from purchasing goods or services from any company that does business in, or with, Burma (Myanmar). Mass. Gen. Laws, ch. 7 § 22H(a).3 To implement the restrictions, the statute requires development of a "restricted purchase list," updated at least once every three months with the names of persons doing business in Myanmar and provided to all state agencies. § 22J(a). The list is compiled with information from United Nations reports, the Investor Responsibility Research Center, the Associates to Develop Democratic Burma, and "other reliable sources." § 22J(b).
When a state agency negotiates a contract, the agency is required to obtain from the person seeking to provide goods or services a statement "under the pains and penalties of perjury" detailing the nature and extent of that person's business ties with Myanmar. § 22H(c). Unless the state agency certifies (i) that "the procurement is essential," and (ii) that "compliance . . . would eliminate the only bid or offer, or would result in inadequate competition," § 22H(b), then a company on the restricted purchase list (or any company that could be on the list, given its contacts with Myanmar) may not provide the goods or services. Further, when award of a contract is based on competitive bidding, the Massachusetts Burma Law forbids state agencies from awarding the contract to a person on the restricted purchase list. The only exceptions to this prohibition are (1) if there is no other bid, or (2) if the only bid from a person not doing business with Myanmar is ten percent greater than the lowest bid submitted. § 22H(d). As the law is currently being enforced, a ten-percent mark-up is automatically added to the offer price of any company on the restricted purchase list. According to the law's terms, "[a]ny contract entered into in violation" of the Massachusetts Burma Law "shall be void." § 22L.
As a practical matter, the law generally requires a company seeking to do business with Massachusetts to sever all ties with Myanmar or with companies based there. In general, if a company continues to do business with or in Myanmar, the best it can hope for is that a bid it submits for work with the Commonwealth will be increased by ten percent. This "exception" to the general rule set forth in the statute is of little consequence, given that a ten-percent increase in a bid price would, as a practical matter, be fatal to the chances of securing the contract in almost all instances. See Kittredge Dec. ¸ 7.
The Purpose Of The Massachusetts Law
The avowed purpose of the Massachusetts Burma Law is to affect the domestic policies of a foreign nation. The law has been described by its sponsor, state representative Byron Rushing, as a tool to "put pressure on the government of Burma until they allow the democratically elected government to take power or hold a free election." Yawu Miller, State Rep. is on Front Line of Burma Struggle, The Ethnic Newswatch, Oct. 9, 1997. When he first introduced the measure, Rep. Rushing explained that "[t]he Commonwealth has a history of assisting fledgling democratic movements throughout the world. . . . Continued pressure from Massachusetts is necessary to vigorously combat well-documented repression and intolerance in Burma." Letter from Rep. Byron Rushing to Rep. Christopher Hodgkins and Sen. Warren Tolman, Committee on State Administration, Feb. 28, 1995.
Throughout the legislative debates over the Massachusetts Burma Law, its supporters and detractors alike conceived of, and referred to, the measure as a "foreign policy" initiative. Indeed, the legislators debating the bill never once suggested that the law would produce any economic benefit for Massachusetts, its agencies or its citizens. The debates in both the House and the Senate focused on the making of foreign policy, whether Myanmar was the appropriate target of the Commonwealth's foreign-policy attention, and whether the Commonwealth's legislators could appropriately engage in foreign policy at all. See House and Senate Debates on H2833 (attached as Exhibit A to Declaration of Linda Bernis ("Bernis Dec.")) at 2; State House News Service.
Representative Rushing recognized in the debates that the legislature was "engag[ing] in foreign policy", and that "the identifiable goal is free democratic elections in Burma." Bernis Dec. Exh. A. at 5; see also State House News Service, July 19, 1995. And when Representative Edward Teague proposed an amendment to the bill that would have targeted a second country, he noted that "from time to time over the years [the Massachusetts legislature] has decided to engage in their own little version of foreign policy," and explained that "if we are to begin to engage in foreign policy restrictions and prohibitions," the Commonwealth ought not limit its focus to Myanmar. Bernis Dec. Exh. A, at 2.
The Senate debates on the measure also recognized it as a foreign-policy bill. On March 20, 1996, Senator Brian Lees asked the floor: "[W]hy isn't the Congress of the United States doing it? Why isn't the President of the United States saying Burma ought to be put into this? But no, we . . . the Massachusetts legislature tried to set up some foreign policy business guidelines." Bernis Dec. Exh. A, at 9; see also State House News Service, March 20, 1996. Echoing this sentiment, Senator Lucille Hicks queried, "[i]f this is so important . . . why hasn't our congressional delegation acted and come forth with something in the appropriate forum, which would be the U.S. Congress?" Bernis Dec. Exh. A, at 10. She urged her colleagues to "focus our efforts on creating jobs here at home and not try to dabble in foreign affairs." Id.; see also State House News Service, April 10, 1996. In support of the bill, Sen. Marion Walsh responded to her colleagues that "[t]his is a clear message from Massachusetts to countries that violate human rights . . . . I offer as one member that we recognize the responsibility we have to set a tone for civil rights across the globe." Bernis Dec. Exh. A, at 13; State House News Service, April 10, 1996.
Then-Governor William Weld likewise recognized that the Massachusetts Burma Law was a foreign-policy initiative when he signed the law on June 25, 1996. In his signing statement, the Governor declared 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." Commonwealth of Massachusetts, Executive Department Press Release (June 25, 1996). Again, no mention was made of any economic benefit to the Commonwealth, its agencies or its citizens.
Thus, it is plain that the exclusive purpose of the statute -- as described by the representative who drafted it, the legislators who debated it, and the governor who signed it, and as it in fact operates -- was to send a political message about the Commonwealth's opposition to the Union of Myanmar, by putting economic pressure on that government to alter its domestic policies. The Massachusetts law makes its stand against the current regime in Myanmar by effectively prohibiting the award of state contracts to companies that do business in or with that country. In taking this action, Massachusetts was not acting like a purchaser of goods and services (Kittredge Dec. ¸ 12); rather, the Commonwealth was seeking to announce and enforce its own foreign policy.
The Impact Of The Massachusetts Law On Business Operations
The impact of the Massachusetts law is substantial. When then-Governor Weld signed the law, he observed that it was "more than symbolic action" and that he expected it to "affect millions of dollars in state business." Commonwealth of Massachusetts, Executive Department Press Release (June 25, 1996). Each year the Commonwealth and its agencies purchase many billions of dollars worth of supplies and services (on information and belief, in the range of $20 to $40 billion dollars' worth), and all of these purchases are covered by the Massachusetts Burma Law. The Union of Myanmar, on the other hand, saw foreign commerce last year of nearly $29 billion (on information and belief), including trade in products such as timber, oil and gas. Not surprisingly, then, companies historically have done business with both Massachusetts and Myanmar.
The impact of the Massachusetts Burma Law is perhaps best measured by the broad scope of the restricted purchase list. Currently, 369 companies appear on the restricted purchase list. Forty-four of these are United States companies; 15 of the 44 are Fortune 500 companies, whose total combined revenue is over $246 billion. The total revenue of all of the publicly traded United States companies on the list is over $255 billion. Many foreign companies with U.S. subsidiaries and affiliates also appear on the restricted purchase list. Finally, according to the sponsor of the Massachusetts Burma Law, at least 13 companies have pulled out of Myanmar since passage of the Massachusetts Burma Law. Rep. Byron Rushing, Remarks at the Burma Seminar, Stockholm, Sweden (Sept. 25, 1997) (notes on file with Rep. Rushing).
The exception to the Massachusetts Burma Law's bar on contracts with companies doing business in Myanmar -- when the bid from a restricted company is more than ten percent lower than the next lowest bid -- in no way diminishes the impact of that law. As presently enforced, a ten-percent increase is imposed on bids from companies on the restricted list; this increase will effectively bar these companies from competing for Massachusetts contracts in most situations. As set forth in the Declaration of Frank Kittredge, bidding in government contracts does not typically generate a wide spread of bid prices. Instead, bid prices tend to be fairly close to one another -- a ten-percent add-on to a low bid is likely to disqualify that bidder from the contract award. Kittredge Dec. ¸ 7.
The impact of the Massachusetts Burma Law is not felt merely at the point that bids are considered. Companies doing business with Myanmar that wish to do business in Massachusetts (as well as companies doing business with Massachusetts that wish to do business with Myanmar) must, as a practical matter, plan their activities before actually expending their resources. Each year, companies must decide where to focus their economic activities in advance. The current impact of the Massachusetts law on business planning activities is thus substantial.4 Kittredge Dec. ¸ 8.
Finally, the Massachusetts Burma Law also impacts the conduct of foreign companies and governments and, thus, the United States companies with which they do business. Foreign companies and governments are discouraged from contracting with United States companies abroad because of the possibility that various United States' states and municipalities will, in the future, adopt sanctions legislation. Kittredge Dec. ¸ 11.
The Impact Of The Massachusetts Law On International Relations
The Massachusetts Burma Law has already had considerable impact on international relations and foreign commerce. Representatives from the State Department have recognized the intrusion that the Massachusetts Burma Law and other similar statutes make into the federal government's foreign policy. For example, Undersecretary of State Stuart Eizenstat has also described "efforts by a variety of state and local officials around the United States . . . to impose various economic sanctions" as "inappropriate and counterproductive." Nazi-Gold: Hearing Before the House Comm. on Banking and Financial Services, 105th Cong. (June 27, 1997). See also Testimony for Undersecretary Eizenstat before the Trade Subcommittee, House Committee on Ways and Means (Oct. 23, 1997) ("uncoordinated responses [by state and local governments] can put the US on the political defensive and shift attention away from the problem"). So too, Deputy Assistant Secretary of State David Marchick, testifying recently before the California State Assembly regarding proposed (but ultimately failed) California legislation targeting companies that do business in Myanmar, explained: "[T]he Department of State [is] concerned that state and local sanctions may impair the President's ability to send a clear and unified message to the rest of the world. As the world's only economic and military super power, the United States has the obligation to project a coherent and consistent message. . . . [A]d hoc and scattered actions at various levels of government, however well-intentioned, can do more harm than good in achieving the desired objective and impede the President's and Secretary of State's conduct of foreign policy. They also can create conflicts with our allies with whom we need to work to achieve our common goals." Testimony of Deputy Assistant Secretary David Marchick before the California State Assembly (October 28, 1997).5
The effective negotiation and implementation of United States foreign policy is always a delicate matter. It requires centralized authority -- which the Constitution places squarely and exclusively on the shoulders of the federal government -- because foreign nations must know that when the Secretary of State (or one of his or her deputies) speaks, he or she speaks for the United States, without any doubt or uncertainty.
Indeed, several foreign nations have expressed to the federal government their strong objections to the law. The Association of South East Asian Nations ("ASEAN") and Japan have expressed serious concerns to the federal government regarding the Massachusetts Burma Law. See Michael Grunwald, Trade Tiff Widens Over State ėBurma Law', Boston Globe, Feb. 1, 1997, at B1; Isagani de Castro, South-east Asia: Despite its Weight, ASEAN Carries Burma, Inter Press Service, July 28, 1997. Indeed, in 1997, the EU and Japan each lodged formal complaints with the World Trade Organization ("WTO"), condemning the law as a violation of the United States' international obligations. See United States -- Measure Affecting Government Procurement: Request to Join Consultations Communication from Japan, World Trade Organization (WT/D588/1), June 20, 1997; United States -- Measure Affecting Government Procurement: Request for Consultations by the European Commission, World Trade Organization (WT/D595/1), July 18, 1997.
To date, Massachusetts remains the only state to have enacted a restrictive purchasing law penalizing companies that do business in or with Myanmar. Nonetheless, the Commonwealth is presently joined by 18 municipal jurisdictions in imposing these restrictions. See Organization for International Investment, State and Municipal Sanctions Report, Dec. 1, 1997, at 3.6 As well, dozens of other local sanctions have either been considered or passed, targeting countries besides Myanmar. Id. at 1-2, 3.
Actions By The Federal Government
The Massachusetts sanctions differ significantly from the sanctions that have been imposed upon Myanmar by the federal government. Congress and the President have made the considered judgment that any such restrictions on trade with Myanmar should be limited. See Omnibus Consolidated Appropriations Act of 1997, Pub. L. No. 104-208, § 570, 110 Stat. 3009; Executive Order 13047, 62 Fed. Reg. 28,301 (1997). These federal sanctions are less extensive in scope than the Massachusetts Burma Law, and they reflect a fundamentally different foreign-policy approach. The federal Myanmar law passed by Congress calls for a multilateral strategy to promote political change in that country through cooperative measures with its neighbors and other major trading partners. Omnibus Consolidated Appropriations Act § 570(c). Similarly, President Clinton's Executive Order prohibits only new investment in "the economic development of resources located in Burma," and it applies only to United States companies and their foreign branches. The federal law explicitly permits continued trade with Myanmar in goods and services. Executive Order 13,047, § 3.
These Proceedings
Because the Massachusetts Burma Law intrudes into the federal government's exclusive authority to regulate foreign relations and foreign commerce, and because it is preempted by the federal sanctions provisions, the NFTC brought suit on behalf of its affected members. The decision to bring suit came only after the NFTC's concerted, but ultimately unsuccessful, efforts to obtain repeal of the Massachusetts Burma Law. See Kittredge Dec. ¸ 14.
The Complaint in this action was filed today. Plaintiff's Motion for a Preliminary Injunction is supported by Declarations from Frank Kittredge, President of the NFTC, and Linda Bernis, who transcribed the tapes of the Massachusetts legislative debates. A proposed scheduling order is also attached to the Motion.
ARGUMENT
I. THIS COURT SHOULD PRELIMINARILY ENJOIN DEFENDANTS FROM ENFORCING THE MASSACHUSETTS BURMA LAW PENDING FINAL RESOLUTION OF THIS DISPUTE
In determining whether to grant a preliminary injunction, trial courts must consider the well-settled standards for granting such preliminary relief: "(1) the likelihood of success on the merits; (2) the potential for irreparable harm if the injunction is denied; (3) the balance of relevant impositions, i.e., the hardship to the nonmovant if enjoined as contrasted with the hardship to the movant if no injunction issues; and (4) the effect (if any) of the court's ruling on the public interest." Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1st Cir. 1996). The first prong of this test -- whether plaintiffs are likely to succeed on the merits of their suit -- is "the ėsine qua non of [the preliminary injunction standard].'" Gately v. Commonwealth of Massachusetts, 2 F.3d 1221, 1225 (1st Cir. 1993) (quoting Weaver v. Henderson, 984 F.2d 11, 12 (1st Cir. 1993)), cert. denied, 511 U.S. 1082 (1994)..
Each of these four elements supports the grant of a preliminary injunction here.
A. Plaintiff Is Likely To Succeed On The Merits Of Its Claims
The Massachusetts Burma Law is unconstitutional for three separate reasons, discussed below: (1) the Massachusetts Law intrudes into the exclusive power of the federal government to make foreign policy; (2) the law impermissibly discriminates against foreign commerce and interferes with the federal government's exclusive control over foreign trade, in violation of the Foreign Commerce Clause; and (3) the state enactment is preempted by federal law restricting United States business contacts with Myanmar.
The NFTC has standing to assert these claims on behalf of its members. An association may bring a suit on behalf of its members when the subject matter of the suit is "germane to the organization's purpose," the organization's members would have standing to sue individually, and neither the claim nor the relief requested would require individual members to sue. International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America, et al. v. Brock, 477 U.S. 274, 281-82 (1986) (quoting Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 343 (1977)). The NFTC is an organization established for the purpose of representing its members' interests in free and full foreign commerce, and it has been specifically authorized by its members to bring this challenge. See Kittredge Dec. ¸ 5. Members of the NFTC would unquestionably have standing to bring the suit on their own behalf. And the declaratory and injunctive relief requested is precisely the type that an organization can best seek on its members' behalf. Warth v. Seldin, 422 U.S. 490, 515-16 (1975).
Further, the controversy presented here is ripe for review by this court. Certainly, the issues presented are fit for judicial decision, and if they are not resolved, plaintiff's members will suffer hardship. In Texas v. United States, 118 S. Ct. 1257 (1998), the Supreme Court recently explained that a controversy is ripe for adjudication if a "person's primary conduct is affected" by the challenged law or regulation. Id. at 1260. See also Abbott Laboratories v. Gardner, 387 U.S. 136, 152 (1967) (a challenge to a regulation is ripe where the regulation has a "direct effect on the day-to-day business" of the plaintiffs). As discussed above and detailed in the declaration of Frank Kittredge (Kittredge Dec. ¸ 10), the business operations of NFTC members are directly affected by the Massachusetts Burma Law.
The United States Constitution rests complete and exclusive responsibility for the conduct of foreign relations with the federal government. Thus, state and local "regulations must give way if they impair the effective exercise of the Nation's foreign policy." Zschernig v. Miller, 389 U.S. 429, 440 (1968). The Massachusetts Burma Law was plainly and explicitly designed to affect foreign policy -- indeed, it was specifically enacted to put pressure on the government of Myanmar. As discussed above, the legislative debates on the Massachusetts Burma Law -- as well as the Governor's signing statement -- focused exclusively on its merits as a foreign-policy initiative; no suggestion was made at any point in the debates that the law provided economic benefit to Massachusetts, its agencies or its citizens, or that it has any conceivable purpose other than to affect foreign affairs. See generally Bernis Dec. Exh. A. The Massachusetts Burma Law therefore impermissibly intrudes on the federal government's exclusive foreign affairs powers, and is invalid.
The full and exclusive authority of the federal government to regulate foreign affairs was one of the central innovations of the system of government established by the Constitution. In fact, the confused state of foreign affairs under the Articles of Confederation was a "major drive wheel in the movement for constitutional reform." F. Marks, Independence on Trial: Foreign Affairs and the Making of the Constitution 50 (1973). At least two major foreign-policy embarrassments presented impediments to the success of the newly independent American states, and prompted the move to a centralized approach to foreign relations. First, several of the states refused to comply with provisions of the British peace treaty. Second, when Britain refused to open the West Indies to American trade, retaliation -- which would have been the logical response -- was rendered impossible by the fact that each of the states would have had to enact its own identical restrictions. See Rakove, Making Foreign Policy -- The View From 1787, in Foreign Policy and the Constitution (Goldwin & Licht, eds., 1990). Not only did specific policy choices cause discord among the several states, but the multitude of international policy voices left foreign governments uncertain about who to negotiate with, and consequently those governments "regarded the United States as unreliable." Levy, Federalism and Collective Action, 45 U. Kan. L. Rev. 1241, 1254 (1997).7
The Constitution, by creating a national government, fundamentally altered the relationship among the states, placing central control for foreign relations with the newly established federal government. This change was not accidental. Quite the contrary: it was a self-conscious recognition that "[i]f we are to be one nation in any respect, it clearly ought to be in respect to other nations." Federalist Papers No. 42 (J. Madison).8 In fact, while there was considerable debate among the Framers about how best to implement many of the goals of the constitutional convention, "there was virtual unanimity" on one thing: that the responsibility for foreign relations had to be taken from the individual states and vested in the national government. See Marks, supra, at 143.
The federal government's exclusive control over foreign relations is reflected in several specific provisions of the Constitution. In Article I, Section 8, Congress is authorized "to pay the Debts and provide for the common Defence . . . of the United States," cl. 1, "[t]o regulate Commerce with foreign Nations," cl. 3, and "[t]o establish an uniform Rule of Naturalization," cl. 4. Article II grants authority to the President to make treaties and to appoint ambassadors. Art. II, § 2, cl. 2. In addition to specifically granting various foreign relations powers to the federal government, the Constitution explicitly prohibits the States from making treaties or entering into agreements with foreign nations, art. I, § 10, cls. 1 & 3, and from imposing duties on imports and exports, art. I, § 10, cl. 2. Under the Constitution, then, "[t]he United States is a single nation-state and it is the United States (not the States of the Union, singly or together) that has relations with other nations, and the United States Government that conducts these relations and makes foreign policy." L. Henkin, Foreign Affairs and the Constitution 15 (1972). Our constitutional government thus requires exclusive federal authority over even those aspects of foreign relations that are not directly included in the constitutional text. Thus, for well over 200 years, it has been understood that "[o]ur system of government is such that the interest of the cities, counties and states, no less than the interest of the people of the whole nation, imperatively requires that federal power in the field affecting foreign relations be left entirely free from local interference." Hines v. Davidowitz, 312 U.S. 52, 63 (1941).
The Supreme Court has repeatedly and unequivocally stated that "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." United States v. Belmont, 301 U.S. 324, 331 (1937). See also Hines, 312 U.S. at 63 ("The Federal Government . . . is entrusted with full and exclusive responsibility for the conduct of affairs with foreign sovereignties.") (emphasis added); United States v. Pink, 315 U.S. 203, 233 (1942) ("Power over external affairs is not shared by the States; it is vested in the national government exclusively.") (emphasis added); Board of Trustees v. United States, 289 U.S. 48, 59 (1933) ("In international relations and with respect to foreign intercourse and trade the people of the United States act through a single government with unified and adequate national power."); Chae Chan Ping v. United States (Chinese Exclusion Case), 130 U.S. 581, 606 (1889) ("For local interests the several States of the Union exist, but for national purposes, embracing our relations with foreign nations, we are but one people, one nation, one power."); Holmes v. Jennison, 39 U.S. (14 Pet.) 540, 575 (1840) ("It was one of the main objects of the Constitution to make us, so far as regarded our foreign relations, one people, and one nation.").
The practical reasons for this exclusive federal control are readily apparent. If each state were to enact its own foreign policy, then -- as was true under the Articles of Confederation -- all of the other states would be forced to live with the consequences. Some of these consequences would be economic: Fifty different foreign trade policies would create significantly higher barriers to trade generally, and could risk maneuvering by each of the states to gain a position more favorable than that held by its neighbors. The increased costs and uncertainty created by such a system would be felt by every state. There would be other consequences -- particularly military and security-related ones. Certainly, the ability of any single state to establish effective international security on its own behalf is much less significant than the ability of the federal government to provide security for the fifty states collectively. Further, as illustrated by the inability of the several states to launch effective retaliation against Britain prior to 1787, the potential for any individual state to have a beneficial impact on the policy decisions of other nations is significantly less than the ability of the United States as a whole.9 There is also the potential for conflicting state-sanctions legislation -- with one state favoring trade with a particular foreign country and other states opposing such trade. Finally, the problems would be exacerbated by potentially hundreds of municipalities adopting their own foreign policy initiatives.
One of the consequences of the exclusivity of federal authority for regulating foreign relations is that state or municipal laws that have more than an "indirect or incidental effect in foreign countries" or that have "great potential for disruption or embarrassment" of United States foreign policy cannot survive. Zschernig, 389 U.S. at 434-35. Zschernig involved a challenge to an Oregon probate law that conditioned the right of a nonresident alien to inherit property from an Oregon resident upon that alien's ability to demonstrate that his country of origin would grant reciprocal rights to a United States citizen and that his government would not confiscate any of the inherited property. Id. at 430-31. Although recognizing that this law might be neutral on its face, see Clark v. Allen, 331 U.S. 503 (1947), and might therefore not implicate foreign policy as written, the Court observed that judges applying the law were, in the process, searching "for the ėdemocracy quotient' of a foreign regime," and thus intruding impermissibly into "matters which the Constitution entrusts solely to the Federal Government." Zschernig, 389 U.S. at 435, 436.10 The Massachusetts Burma Law, both as written and as applied, requires the same sorts of impermissible state judgments about a foreign regime condemned by the Court in Zschernig.
The Massachusetts Burma Law is effectively an economic embargo of a foreign nation based on the Commonwealth's view of "the democracy quotient" of that nation. Indeed, this state enactment is exactly the kind of foreign policy activity that had plagued the states under the Articles of Confederation, and that the Framers sought to abolish with the Constitution. See Marks, supra, at 50. The law has much more than "an indirect or incidental effect" on Myanmar; by refusing companies who do business in Myanmar the right to compete for contracts with Massachusetts on an equal footing with their competitors, the law creates powerful disincentives to doing business in Myanmar. According to the law's sponsor, at least 13 companies have pulled out of Myanmar entirely because of the law. Rep. Byron Rushing, Remarks at the Burma Seminar, Stockholm, Sweden (Sept. 25, 1997) (notes on file with Rep. Rushing). Indeed, the Massachusetts Burma Law is a far more serious invasion of the federal government's foreign-relations powers that the Oregon probate law that was at issue in Zschernig: Unlike the Oregon statute, the Massachusetts Burma Law in fact has no other purpose than to impose an economic embargo on a foreign country in an attempt to alter its domestic policies.
Since its enactment, the Massachusetts Burma Law has caused significant controversy between the United States and several of its international allies. As noted above, Japan and the Association of South East Asian Nations ("ASEAN") have complained to the United States government that the Massachusetts Burma Law may violate the United States' international obligations. See A State's Foreign Policy: The Mass That Roared, The Economist, Feb. 8, 1997, at 32; Isagani de Castro, South-East Asia: Despite its Weight ASEAN Carries Burma, Inter Press Service, July 28, 1997. Likewise, on June 20, 1997, after several unsuccessful efforts at informal negotiation with the United States Trade Representative, the EU lodged a complaint with the World Trade Organization ("WTO"), formally noting its position in that forum that the Massachusetts Burma Law violated the WTO's "Government Procurement Agreement," to which the United States and Massachusetts are both signatories. See United States -- Measure Affecting Government Procurement: Request to Join Consultations Communication from Japan, World Trade Organization (WT/D588/1), June 20, 1997.11 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. See United States -- Measure Affecting Government Procurement: Request for Consultations by the European Commission, World Trade Organization (WT/D595/1), July 18, 1997.
Other concerns have been raised less formally. Rudolfo Severino, the Secretary General of the ASEAN, has said, "[w]e are kind of dismayed by this trend, because you cannot negotiate with states and provinces." Isagani de Castro, South-East Asia: Despite its Weight ASEAN Carries Burma, Inter Press Service, July 28, 1997. No matter what the resolution of these matters may be, they clearly indicate that the Massachusetts Burma Law "affects international relations in a persistent and subtle way." Zschernig, 389 U.S. at 440.
The fact that the current regime in Myanmar deserves international rebuke for its reported human-rights violations cannot be allowed to alter the constitutional analysis. As the Illinois Supreme Court observed in considering the constitutionality of a local law directed to criticism of South Africa's policy of apartheid, "[w]e must divorce the issue in this case from its emotionally charged surroundings." Springfield Rare Coin Galleries v. Johnson, 503 N.E.2d 300, 303 (Ill. 1986).
Indeed, one of the concerns articulated in Zschernig was that laws like the Massachusetts Burma Law, in attempting to use local means to achieve an essentially national end, "may well adversely affect the power of the central government to deal with those problems." Zschernig, 389 U.S. at 441. The federal government has not taken an official position on the constitutionality of the Massachusetts Burma Law, although several representatives of the United States foreign-policy community have indicated that the Massachusetts Burma Law and other similar laws targeted at Myanmar and at other nations are hindering federal efforts to develop effective foreign policy stances. For example, as detailed at pp. 10 - 11 above, both Undersecretary of State Stuart Eizenstat and Deputy Assistant Secretary of State David Marchick have repeatedly described these state and local sanctions as "inappropriate and counterproductive," as well as having the potential to "impede the President's and the Secretary of State's conduct of foreign policy [and] create conflicts with our allies with whom we need to work to achieve our common goals." These statements by federal officials that local laws do intrude into foreign policy are clearly significant in evaluating the Massachusetts Burma Law's effect on foreign affairs, although the Court in Zschernig noted that the opposite was not true -- the federal government's endorsement of local foreign-policy measures could not save those measures from constitutional infirmity. 389 U.S. at 437.
The very fact that the Massachusetts Burma Law has received considerable international attention and debate is itself strong evidence that it intrudes into foreign affairs. In Zschernig, the Supreme Court noted with concern that the Oregon statute at issue in that case had caused the Bulgarian government to lodge a complaint with the State Department. Id. at 437 n.7. As that decision recognized, the fact that a foreign government takes issue with local laws in the federal forum -- forcing the United States government to defend a state policy in the international arena -- is a clear indication of that local policy's interference with foreign relations. In the often-quoted words of Justice Felix Frankfurter: "In our dealings with the outside world, the United States speaks with one voice and acts as one, unembarrassed by the complications as to domestic issues which are inherent in the distribution of political power between the national government and the individual states." Pink, 315 U.S. at 242 (Frankfurter, J., concurring).12 The Massachusetts Burma Law unquestionably interferes with the federal government's ability to "speak with one voice."
The foreign relations implications of the Massachusetts Burma Law are much more than "incidental" in relation to any local impact the law might have. First, as noted above, the law does not actually have any local purpose -- the legislative history shows no suggestion that the statute would provide any economic benefit to the Commonwealth, its agencies or its citizens. The Massachusetts Burma Law's only purpose is to criticize, and to try to influence, Burma's current political regime. Second, even in areas of traditional state regulation, state laws must give way to the federal government's exclusive control over foreign relations. See, e.g., Zschernig, 389 U.S. at 440 (striking down a local inheritance law, normally a matter of local concern); Springfield Rare Coin Galleries, 503 N.E.2d at 305 (striking down a local tax provision); Tayyari v. New Mexico State University, 495 F. Supp. 1365, 1380 (D.N.M. 1980) (invalidating a New Mexico educational regulation); Pink, 315 U.S. at 216 (refusing to apply a New York property law). Cf. Hines, 312 U.S. at 66 ("[E]ven though they may be immediately associated with the accomplishment of a local purpose" the challenged laws "provoke questions in the field of international affairs.") Thus, the fact that the Massachusetts Burma Law regulates a matter generally left to the states -- the question of who will be awarded state contracts -- cannot save the law from constitutional infirmity.
The foreign-relations implications of the Massachusetts Burma Law are even stronger in light of the growing number of selective purchasing laws in other local jurisdictions. Each additional ordinance or statute incrementally diminishes the federal government's leadership in foreign affairs. Cf. Wisconsin Department of Industry, Labor and Human Relations, et al. v. Gould, Inc., 475 U.S. 282, 288-89 (1986). At present, eighteen local governments have selective purchasing laws aimed against Myanmar. Organization for International Investment, State and Municipal Sanctions Report, Dec. 1, 1997, at 3. Other state and local governments have enacted (or are considering) laws boycotting companies that do business in or with other countries. Id. at 1-2, 3. Again, the circumstances here are much like those in Zschernig, in which the Court noted that the foreign relations impact of the Oregon law was even greater given that similar laws were in force in other states. 389 U.S. at 434-35.
It has never been doubted that the federal government's control over foreign affairs is exclusive. Thus, the kinds of questions raised by the Massachusetts Burma Law have not been addressed by many lower courts. But in those cases where similar issues have been considered, courts have unanimously recognized the paramount importance of the federal government's exclusive control over foreign relations.13 For example, in Springfield Rare Coin Galleries, the Supreme Court of Illinois found that a state sales tax provision exempting from sales tax all rare coins except for South African Krugerrands interfered with the federal government's foreign-relations powers. The court noted that "[t]he undisputed purposes of the exclusion are to express disapproval toward South Africa and to discourage investment in its products." 503 N.E.2d at 305. But, the court concluded, when a local law is motivated by "disapproval of a nation's policies," it "creates a risk of conflict between nations, and possible retaliatory measures." Id. at 307. The Illinois court particularly noted that the law would impermissibly compromise the ability of the federal government "to choose between a range of policy options in developing its foreign policy." Id. Whatever the merits of the underlying issue motivating the local law, the court observed, "[n]o single State should put the nation as a whole to such a risk." Id.
Similarly, in Bethlehem Steel Corp. v. Board of Commissioners of Dep't of Water and Power, 276 Cal. App. 2d. 221, 225 (1969), the court struck down a "Buy American Act" which required the state government to award construction contracts only to companies agreeing to use products made in America. The court concluded that the law "effectively plac[ed] an embargo on foreign products," and was thus "a usurpation by this state of the power of the federal government to conduct foreign trade policy." Id. at 225. Indeed, even the two cases that have upheld "Buy American" laws have recognized that local laws targeting specific countries could not survive constitutional scrutiny. As the court explained in K.S.B. Technical Sales Corp. v. North Jersey District Water Supply Comm'n, 381 A.2d 774 (N.J. 1977), appeal dismissed, "[i]f refined inquiries into foreign ideologies entered into the decision to apply or not to apply the [contract] condition, there would, of course, be little difficulty in finding a constitutional infirmity." Id. at 784. And in Trojan Technologies, Inc. v. Pennsylvania, 916 F.2d 903 (3d Cir. 1990), cert. denied, 501 U.S. 1212 (1991), the court upheld a requirement that suppliers contracting with state government provide products made with American steel in part because its application did not depend on "the nature of foreign regimes." Id. at 913.
In Tayyari v. New Mexico State University, 495 F. Supp. 1365 (D.N.M. 1980), the court invalidated the University's policy excluding Iranian students until the return of American hostages, noting that it was "evident . . . that the Regents' true purpose in enacting the [regulation] was to make a political statement." Id. at 1376. The court emphasized that the federal government did not, of course, have any authority to "stifle private expressions of anger against foreigners or foreign nations," id. at 1378, but that the law at issue "is not such a private expression -- rather, it is an action cloaked with the officiality of an arm of the government of this State," id., and it "entered into the arenas of foreign affairs and immigration policy, interrelated matters entrusted exclusively to the federal government." Id. at 1376. And in New York Times Co. v. New York Comm'n on Human Rights, 393 N.Y.S.2d 312 (N.Y. 1977), the New York Court of Appeals concluded that efforts to apply local antidiscrimination laws to prohibit a newspaper from running ads for employment in South Africa "would `impair the effective exercise of the Nation's foreign policy.'" Id. at 317 (quoting Zschernig, 389 U.S., at 440). The court recognized that "[t]he true danger is that if New York City could do this in one instance, it could do so in many instances. Each locality in each State may not adopt its own foreign policy." Id. at 318.14
Given the long-standing and widespread recognition by courts and commentators that the federal government's authority in the foreign policy arena is exclusive, plaintiff is likely to prevail on its foreign relations claim.
2. Plaintiff Is Likely To Succeed On Its Foreign Commerce Clause Claim
Plaintiff is also likely to prevail on its claim that the Massachusetts Burma Law violates the Foreign Commerce Clause of the United States Constitution. U.S. Const., art. I, § 8, cl. 3. Under the Foreign Commerce Clause, 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. Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 449 (1979) (quoting Michelin Tire Corp. v. Wages, 423 U.S. 276, 285 (1976)). The Massachusetts Burma Law violates the Foreign Commerce Clause in two ways. First, the law unquestionably discriminates against foreign trade by imposing a significant penalty on companies doing business in Myanmar. Second, the Massachusetts Burma Law interferes with the ability of the United States government to "speak with one voice" on foreign commerce questions.
i. The Massachusetts Law Discriminates Against Foreign Commerce
The Massachusetts law plainly discriminates against foreign commerce by directing state agencies not to contract with companies that do business in a particular foreign nation. This discrimination is precisely what the Commerce Clause prohibits. In the Interstate Commerce Clause context, the Supreme Court has established that "[i]f a restriction on commerce is discriminatory, it is virtually per se invalid." Oregon Waste Systems, Inc. v. Department of Environmental Quality, 511 U.S. 93, 99 (1994); see also C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 392 (1994); Chemical Waste Management v. Hunt, 504 U.S. 334, 332 (1992); Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978). State laws that discriminate in this manner invoke "the strictest scrutiny of any purported legitimate local purpose and of the absence of nondiscriminatory alternatives." Hughes v. Oklahoma, 441 U.S. 322, 337 (1979).
The same anti-discrimination principle animates the Foreign Commerce Clause: States may not pass laws that discriminate against foreign commerce. See, e.g., Barclays Bank PLC v. Franchise Tax Board, 512 U.S. 298, 313-14 (1994); Kraft General Foods, Inc. v. Iowa Dept. of Revenue and Finance, 505 U.S. 71, 75-77 (1992). Indeed, when a law does discriminate against foreign commerce, it is subject to even more rigorous scrutiny, given that "the Founders intended the scope of the foreign commerce power to be greater" than that of the interstate commerce power. Japan Line, 441 U.S. at 448. See also Kraft General Foods, 505 U.S. at 79 ("[T]he constitutional prohibition against state taxation of foreign commerce is broader than the protection afforded to interstate commerce."); Chemical Waste Management, Inc. v. Templet, 770 F. Supp. 1142, 1152-53 (M.D. La. 1991), aff'd, 967 F.2d 1058 (5th Cir. 1992), cert. denied, 506 U.S. 1080 (1993) ("The Supreme Court has noted that a higher level of scrutiny is required when foreign commerce is restrained.").
Although the laws that the Court has confronted in its Commerce Clause jurisprudence typically have discriminated against all out-of-state or foreign commerce, the Court has made clear that discrimination that is aimed against commerce in a single other state, or in several specific states, is equally unconstitutional. See, e.g., New Energy Co. v. Limbach, 486 U.S. 269, 276 (1988) (striking down an Ohio law that targeted only a single ethanol producer, located in Indiana); Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 352-53 (1977) (invalidating a North Carolina provision that discriminated against apple distributors in seven states). Thus, the fact that a law discriminates against commerce with only one country does not make the discrimination any less unconstitutional. Indeed, over a century ago, the Supreme Court explained that "it was one main object of the Constitution" to prevent "discriminations favorable or adverse to commerce with particular foreign nations [that] might be created by State laws." Cooley v. Board of Wardens, 53 U.S. (12 How.) 299, 317 (1851) (emphasis added).
It is beyond dispute that the Massachusetts Burma Law discriminates against commerce with Myanmar. The law requires defendant Baker to maintain a list of all of the companies whose contacts with Myanmar prohibit state agencies from contracting with them and to distribute that list to all state agencies. Mass Gen. Laws, ch. 7, § 22J. Each of the companies on that list is then penalized specifically because of its contacts with Myanmar by being denied the right to compete on equal terms with companies that do not do business in Myanmar. This sort of patent discrimination is clearly prohibited by the Foreign Commerce Clause.
ii. The Law Inhibits the Federal Government's Ability to "Speak With One Voice"
In addition to imposing a discriminatory burden on foreign trade, the Massachusetts Burma Law significantly impairs the ability of the federal government to "speak with one voice when regulating commercial relations with foreign governments." Japan Line, 441 U.S. at 449 (citation omitted). The requirement that the federal government be able to "speak with one voice" regarding foreign commerce derives from the long-recognized fact that "[f]oreign commerce is preeminently a matter of federal concern." Id. at 448. Indeed, as discussed above, when the Framers met to design the Constitution, they were motivated in substantial part by a desire to nationalize foreign trade dealings. Drafted against the historical backdrop of economic balkanization under the Articles of Confederation, "the Foreign Commerce Clause recognizes that discriminatory treatment of foreign commerce may create problems, such as the potential for international retaliation, that concern the Nation as a whole." Kraft General Foods, 505 U.S. at 79. Thus, although a law will not run afoul of the Foreign Commerce Clause if it "merely has foreign resonances, but does not implicate foreign affairs," a law that "implicates foreign policy issues which must be left to the Federal Government" violates the Constitution. Container Corp. of America v. Franchise Tax Board, 463 U.S. 159, 194 (1983). The Massachusetts Burma Law plainly falls on the constitutionally impermissible side of this line.
In Container Corporation, the Court emphasized that "the threat [a law] might pose of offending our foreign trading partners" is an important aspect of the Foreign Commerce Clause analysis. Id. As discussed in Section 1, supra, this threat is not merely possible, but is very real. Indeed, the Massachusetts Burma Law has already caused considerable international tension. Several governmental bodies, including Japan and the ASEAN, have spoken against the law. And the EU and Japan -- both major United States trade allies -- have launched formal WTO proceedings against the federal government because of this state law.
Even if the Massachusetts Burma Law had not already provoked a strong negative reaction from nations all over the globe, the law would quite evidently fail scrutiny under the Foreign Commerce Clause. The law penalizes foreign and United States corporations explicitly and exclusively because those companies have contacts with a particular foreign nation. Both in purpose and in effect, this law "implicate[s] foreign affairs" directly. In so doing, the Massachusetts Burma Law "impair[s] federal uniformity in an area where federal uniformity is essential." Japan Line, 441 U.S. at 448.15
b. The Market-Participant Exception Would Not Apply
Plaintiffs' likelihood of success on their Foreign Commerce Clause challenge is not impeded by the so-called "market-participant exception" to the dormant Interstate Commerce Clause. See Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976); Reeves, Inc. v. Stake, 447 U.S. 429 (1980). This market-participant exception is not applicable to the Massachusetts Burma Law for two reasons: (1) the market-participant exception does not apply to Foreign Commerce Clause challenges; and (2) in the Massachusetts Burma Law, the Commonwealth is acting to regulate, not simply to participate, in a market.
As to the first point, the market-participant exception to the Interstate Commerce Clause is simply not applicable in the Foreign Commerce Clause context. While the Supreme Court has declined to decide that question directly, see Reeves, 447 U.S. at 437 n.9, the Court has made very clear that "the Founders intended the scope of the foreign commerce power to be greater" than that of the interstate commerce power. Japan Line, 441 U.S. at 448. As a result, "Commerce Clause scrutiny may well be more rigorous when a restraint on foreign commerce is alleged." Reeves, 447 U.S. at 437 n.9. See also South-Central Timber Development, Inc. v. Wunnicke, 467 U.S. 82, 92 n.7 (1984); Brief for the United States as Amicus Curiae at 21-22, South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82 (1984) (No. 82-1608) (arguing against extension of the market-participant exception to the foreign commerce context). Not only has the Supreme Court declined to extend the market-participant doctrine into the foreign commerce context, but strong policy concerns counsel against such an extension. The need for a uniform federal policy toward federal trade derives from the risk that a foreign nation will retaliate against all of the states because of the foreign policies of one state. Kraft General Foods, 505 U.S. at 79. This concern is in no way diminished when the offending state is arguably acting as a market participant.
In any event, even if the market-participant exception were applicable to the Foreign Commerce Clause, that exception could not possibly save the Massachusetts Burma Law because this law is not truly an instance of a state's market participation. Instead, while the law employs the Commonwealth's purchasing power to effectuate its ends, the Massachusetts Burma Law is quite evidently an effort to regulate not only the relationship between Myanmar and certain companies, but also the domestic policies of Myanmar itself.
The market-participant exception was first articulated in Hughes v. Alexandria Scrap Corp., in which the Court was confronted with a Maryland law that gave preference to Maryland scrap processors in awarding bounties for cars that had been abandoned on state highways. The Court held that the Commerce Clause would not stand in the way of a state "participating in the market and exercising the right to favor its own citizens over others." Hughes, 426 U.S. at 810. In that instance, by favoring its own citizens in the award of these bounties, Maryland was providing its citizens with a direct economic benefit. In Reeves, the Court was again confronted by a statute with which a state -- this time participating in the market as a seller of cement -- sought to give priority to the needs of its own citizens over those of other states, and thus produced a tangible economic benefit for its own citizens. The Court again upheld this form of local discrimination, emphasizing that the state had a right to prefer its own citizens when it was deciding with whom it would do business. Reeves, 447 U.S. at 442-43. And in White v. Massachusetts Council of Construction Employers, Inc., 460 U.S. 204 (1983), the Court upheld a mayoral executive order that required all construction projects funded in whole or in part by Boston city funds to employ at least half city residents. Recognizing that "there are some limits on a state or local government's ability to impose restrictions that reach beyond the immediate parties with which the government transacts business," the Court concluded that in that instance, "everyone affected by the order [was], in a substantial if informal sense, ėworking for the city.'" Id. at 211 n.7. Thus, as the Court explained in Camps Newfound/Owatonna v. Town of Harrison, 117 S. Ct. 1590, 1606 (1997), "[t]hese three cases stand for the proposition that, for purposes of analysis under the dormant Commerce Clause, a State acting in its proprietary capacity as a purchaser or seller may ėfavor its own citizens over others.'" (Quoting Hughes, 426 U.S. at 810.)
But in South-Central Timber, the Court made it clear that a state cannot avoid the restrictions of the Commerce Clause by incorporating what are essentially regulatory provisions into contract terms and then arguing that it is simply participating in a market. South-Central Timber involved an Alaska statute that required all timber sold from certain state-owned land to be processed inside the state. 467 U.S. at 84-85. With this provision, the Court observed, Alaska was not "merely choosing its own trading partners," but instead was "attempting to govern the private, separate economic relationships of its trading partners." Id. at 99. The Court invalidated the law, explaining that "[t]he [market-participant] doctrine is not carte blanche to impose any conditions that the State has the economic power to dictate, and does not validate any requirement merely because the State imposes it upon someone with whom it is in contractual privity." Id. at 97. Here, as in South-Central Timber, the state is impermissibly "attempting to govern the private, separate economic relationships of its trading partners."
Moreover, if the market-participant exception is to remain an "exception," courts must look beyond a state's own designation of its actions as "proprietary" rather than "regulatory" and examine the actual purpose and effect of the law. Otherwise, almost any regulatory goal could be achieved by contractual imposition. Indeed, the Court has made clear in other contexts that a state's designation of its own actions as proprietary must be overridden if the law at issue is in fact regulatory. In Wisconsin Department of Industry, Labor and Human Relations v. Gould, Inc., 475 U.S. 282, 283 (1986), the Court struck down a Wisconsin law forbidding government contracts with companies that had violated federal labor laws three or more times in a five-year period. That case involved the interaction between state law and the National Labor Relations Act, and the Court distinguished the Commerce Clause cases. Id. at 289. But, at the same time, the Court rejected Wisconsin's argument that it was simply acting as a private purchaser of services, noting that "Wisconsin's debarment scheme is tantamount to regulation." Id. at 289. In its most recent discussion of the market-participant exception, the Supreme Court employed the same proprietary/regulatory distinction used in Gould, explaining that actions "taken in the State's sovereign capacity" had to be distinguished from "proprietary decision[s]" even when the state action at issue is arguably framed as a purchasing provision. Camps Newfound, 117 S. Ct. at 1607.16
In Building & Constr. Trades Council v. Associated Builders & Contractors, 507 U.S. 218 (1993), the Court explained that "[a] private actor, for example, can participate in a boycott of a supplier on the basis of a labor policy concern rather than a profit motive. The private actor under such circumstances would be attempting to ėregulate' the suppliers and would not be acting as a typical proprietor." Id. at 229 (citation omitted). Of course, private actors are not barred by the federal Constitution from boycotting suppliers for policy reasons, and may therefore "ėregulate' as they please, as long as their conduct does not violate the law." Id. The same is simply not true for states, however: Whatever a state may be free to do when it "acts as a market participant with no interest in setting policy," at the moment that the state begins setting policy, these policy judgments become regulatory actions subject to constitutional scrutiny. Id.
In Chamber of Commerce v. Reich, 74 F.3d 1322, 1335-37 (D.C. Cir. 1996), the District of Columbia Circuit further elaborated on the distinction between market participants and market regulators, explaining that when a government actor makes an "economically rational" purchasing decision, it is acting as a "market participant." By contrast, a government is acting as a "market regulator" when its actions are not those that a private purchaser of services would take. In that circumstance, the government's "role as a buyer is . . . a sham designed to conceal an effort to regulate." Id. at 1336 (quoting Associated Builders & Contractors v. Massachusetts Water Resources Auth., 935 F.3d 345, 366 (1st Cir. 1991) (en banc) (Breyer, C.J., dissenting)).
Here, the Commonwealth has not acted anything like a private party making economically rational purchasing decisions, but instead is acting with an "interest in setting policy" by prohibiting state contracts with companies doing business in Myanmar. Although it is structured as a purchasing law, the statute is in fact an effort by the state to regulate the conduct of multinational corporations in their foreign-investment decisions. The legislative debates demonstrate this point beyond question: In all of the debates, there is no discussion of any economic benefit the law might provide to Massachusetts, its agencies or its citizens. Indeed, there is no rationale for the law other than the policy goal that its supporters have clearly articulated -- to change Myanmar's domestic policies. Massachusetts cannot escape the restrictions of the Foreign Commerce Clause simply by using the language of a state purchasing law to regulate foreign commerce.
In sum: Plaintiffs' Foreign Commerce Clause challenge to the Massachusetts Burma Law is likely to succeed.
3. Plaintiff Is Likely To Succeed On Its Federal Preemption Claim
Finally, plaintiff is also likely to succeed in showing that the Massachusetts Burma Law is preempted by federal law. Article VI of the United States Constitution provides that federal laws "shall be the supreme Law of the Land." Thus, federal law preempts state law if the two conflict. See, e.g., Hillsborough County v. Automated Medical Labs., Inc., 471 U.S. 707, 712-13 (1985); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 698-99 (1984).
The Massachusetts Burma Law conflicts with the sanctions enacted by Congress and the President to implement a federal strategy for encouraging political change in Myanmar. In the face of this conflict, the state law must give way to the federal provisions. The Massachusetts law conflicts with the federal provisions in two ways: First, the Massachusetts Burma Law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67 (1941). Second, to the extent that the state and federal governments actually have the same objective -- encouraging democratic reform in Myanmar -- the Massachusetts Burma Law embodies a fundamentally different strategy from that chosen by the federal government. When a state's approach to a problem differs fundamentally from that of the federal government, the state law must give way. See Wisconsin Dept. of Industry v. Gould, 475 U.S. at 286.
In 1996, Congress enacted legislation that imposed certain specific sanctions on Myanmar, and that authorized the President to impose further sanctions if he determined that they were warranted. See Omnibus Consolidated Appropriations Act of 1997, Pub. L. No. 104-208, § 570, 110 Stat. 3009-166, 3009-167 (1997). This legislation (i) prohibited all but humanitarian assistance to the government of Myanmar; (ii) directed the Executive Branch to vote against assistance to Myanmar in international financial institutions; and (iii) barred Myanmar officials from entering the United States. § 570(a). In addition, Congress directed the President to develop a multilateral strategy for putting pressure on the Myanmar government; such a strategy called for cooperation with Myanmar's neighbors and other major trading partners. § 570(c). Congress specifically authorized the President to restrict only "new investment" in "development of resources" in Myanmar, § 570 (b), (f)(2), and chose not to restrict contracts for goods, services, and technology. § 570 (f).
When President Clinton augmented the sanctions passed by Congress in May 1997, see Executive Order No. 13,047, 62 Fed. Reg. 28,301 (1997), he noted with approval that the Congress and the Executive endorsed the same approach to sanctions against Myanmar. See President's Message to Congress Transmitting Executive Order 13,047, at 2 (May 20, 1997). The Executive Order specifically provides that trade with Myanmar in goods and services is not encompassed by the federal prohibition, id. § 3, and it applies only to United States companies and their foreign branches, not to foreign companies or to their United States subsidiaries.
The Massachusetts Burma Law, by contrast, penalizes all companies -- foreign as well as domestic -- who contract for goods and services with Myanmar, or with companies located there. Mass. Gen. Laws, ch. 7, § 22G; see also Frank Phillips, State Was in Lead on Burma, Boston Globe, Apr. 23, 1997, at B1 (quoting Rep. Byron Rushing). This is totally inconsistent with the approach Congress and the President have chosen for foreign relations with Myanmar. Indeed, Congress considered but rejected, an amendment that would have prohibited all United States investment in Myanmar. S. 1092, 104th Cong. (1995). Instead, section 570 memorializes Congress' judgment that continuing United States economic ties to Burma best facilitates democracy.17 Because the Massachusetts Burma Law's approach contradicts and impedes Congress's foreign policy judgments, it is preempted.18
Second, the Massachusetts Burma Law conflicts with federal law because federal law calls for a multilateral strategy to foster democracy. Omnibus Consolidated Appropriations Act, § 570(c). Deputy Assistant Secretary of State David Marchick has explained that while the Federal Government is "prepared to use unilateral sanctions when important national interests are at stake," Congress and the President "prefer sanctions that have multilateral support and participation" because they are "more effective vis-a-vis the target, [and] they also show unity of international purpose, minimize damage to U.S. competitiveness, and distribute the sanctions burden across responsible countries." Testimony of Deputy Assistant Secretary David Marchick before the Maryland House of Delegates, Committee on Commerce and Government Matters (March 25, 1998), at 3; see also Testimony of Deputy Assistant Secretary David Marchick before the California State Assembly (October 28, 1997) (same). Thus, under current federal law, the President must work with other countries to promote democracy in Myanmar. Id. The Massachusetts Burma Law, however, is unilateral. Its basic approach is therefore an obstacle to the foreign-policy approach carefully selected by Congress. The Massachusetts law must give way to the federal sanctions.
For the above reasons, Plaintiffs have demonstrated a substantial likelihood of success in this litigation, which is "the sine qua non" of the preliminary injunction analysis, Weaver v. Henderson, 984 F.2d 11, 12 (1st Cir. 1993). Indeed, the Massachusetts Burma Law is so clearly unconstitutional that a preliminary injunction would be warranted even in the absence of showings on the other requirements for a preliminary injunction.
A Preliminary Injunction Is Necessary To Prevent Irreparable Harm To The Members Of The NFTC
Absent preliminary injunctive relief, the Massachusetts Burma Law will continue to be enforced. Enforcement of the statute is having significant consequences and has and will continue to cause permanent injury to plaintiff's members. As long as the Massachusetts Burma Law continues in force, no company doing business in Myanmar can participate on equal terms for government contracts in Massachusetts.
In this Circuit, when a plaintiff demonstrates "that its legal remedies are inadequate," such a showing will generally satisfy the irreparable harm prong of the preliminary injunction test. Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 18 (1st Cir. 1996). Due to its immunity from suit, the Commonwealth of Massachusetts cannot be sued for damages resulting from continued enforcement of the statute. Thus, there is no adequate remedy at law for those injured by further enforcement of the restrictions, and continued enforcement will accordingly cause irreparable injury. Particularly in view of plaintiff's strong case on the merits, this showing of irreparable injury is more than sufficient to warrant preliminary relief. See EEOC v. Astra USA, Inc., 94 F.3d 738, 743 (1st Cir. 1996) (explaining that less is required by way of evidence of irreparable harm when the likelihood of success on the merits is great).
C. There Would Be No Significant Hardship To The State In Imposing A Preliminary Injunction, Compared To The Hardship Faced By Plaintiffs Due To Its Enforcement
The balance of hardships in the instant case is weighted heavily toward granting the preliminary injunction. The state has no legitimate interest in continued enforcement of an unconstitutional law. Further, state agencies could cease their use of the restricted purchase list and any other enforcement mechanism pending disposition of this suit with relatively little effort or expense. In contrast, as outlined above, continued enforcement of the law will cause irreparable injury to affected companies. Indeed, the Massachusetts Burma Law likely requires the people of the Commonwealth to pay more for goods and services than they otherwise would, since the law almost always requires the Commonwealth to reject the lowest contract bid if the bidder does business in Myanmar. And, of course, Massachusetts taxpayers are paying for the costs of administering this plainly unconstitutional law.
In any event, the First Circuit has held that when a plaintiff's likelihood of success on the merits is significant, as it is here, "less weight is to be given to the defendant's prospective loss." Securities and Exchange Commission v. World Radio Mission, Inc., 544 F.2d 535, 541-42 (1st Cir. 1976). See also FDIC v. Elio, 39 F.3d 1239, 1247-48 (1st Cir. 1994).
D. The Public Interest Would Be Best Served By Increasing Legitimate Trade And Commerce And By Prohibiting Enforcement Of An Unconstitutional Law
The public interest would be best served by enjoining enforcement of the Massachusetts Burma Law. "It is hard to conceive of a situation where the public interest would be served by enforcement of an unconstitutional law or regulation." Condon v. Andino, 961 F. Supp. 323, 331 (D. Maine 1997).
II. AS AN ALTERNATIVE TO PRELIMINARY RELIEF, THIS COURT SHOULD ADVANCE THE TRIAL ON THE MERITS AND CONSOLIDATE IT WITH THE HEARING ON THE INJUNCTION
Under Federal Rule of Civil Procedure 65(a)(2), courts may advance the trial on the merits and consolidate it with the hearing for injunctive relief. Plaintiff alternatively requests that this Court consolidate the trial on the merits with the hearing on the injunction. If the Court does decide to consolidate the proceedings, it should do so on an expedited basis.
As an alternative to preliminary relief, consolidation would be appropriate in a case, like this one, that presents primarily legal issues. See Fed. R. Civ. P. 65 Advisory Committee Notes to 1966 Amendment; City of Rye v. Schuler, 355 F. Supp. 17, 19 (S.D.N.Y. 1973); Norwalk Core v. Norwalk Board of Education, 298 F. Supp. 203, 208 (D. Conn. 1968); Brass v. Hoberman, 295 F. Supp. 358, 364-65 (S.D.N.Y. 1968). Indeed, former Governor Weld himself framed the issue, as "a straight legal question" of whether the United States Constitution should take precedence over Massachusetts foreign policy enactments. Frank Phillips, State, US Officials Discuss Burma Sanctions Bill, Boston Globe, Apr. 16, 1997, at E6.
If the Court orders consolidation and expedited consideration of the merits, plaintiff requests that this memorandum be treated as its opening brief in those expedited proceedings.
CONCLUSION
For the foregoing reasons, the Court should enter a preliminary injunction enjoining defendants from enforcing the Massachusetts Burma Law pending final resolution of this dispute. In the alternative, the Court should advance the trial on the merits and consolidate it with a hearing on this motion for injunctive relief in an expedited proceeding.
Dated: April 30, 1998
Respectfully submitted,
/s/ Michael Collora
Michael 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
Footnotes:
1. The restrictions in the statue actually apply to any "state agency, a state authority, the house of representatives [and] the state senate." § 22H (a). For convenience, this memorandum will refer to these entities collectively as "state agencies."
2. The Commonwealth's immunity from suit in federal court does not, of course, prevent the NFTC from seeking and obtaining injunctive relief against Commonwealth officials in their official capacities. See Ex Parte Young, 209 U.S. 123 (1908).
3. The Massachusetts Burma Law has a very expansive definition of "doing business" with Myanmar, defining it to include:
(1) having any place of business, lease, franchise or distribution agreement in Myanmar; (2) being the majority-owned subsidiary, licensee or franchisee pf a company that has any such contacts with Myanmar; (3) providing any goods or services, including financial or consulting advice to the government of Myanmar; and (4) "promoting the importation or sales of gems, timber, oil, gas
or other related products, commerce in which is largely controlled by the government of Burma." § 22G.
4. In imposing federal sanctions on Myanmar, Congress specifically rejected the possibility of prohibiting trade in goods and services. Omnibus Consolidated Appropriations Act of 1997, Pub. L. No. 104-208, § 570 (f), 110 Stat. 3009-166,3009-167 (1997). The Massachusetts Burma Law thus imposes restrictions that go well beyond the federal requirements.
5. Deputy Assistant Secretary Marchick made much of the same point in his March 25, 1998, testimony before the Maryland House of Delegates' Committee on Commerce and Government Matters. Maryland was considering (but ultimately rejected) similar state sanctions against Nigeria. See also Letter from Alan P. Larson, Assistant Secretary, Bureau of Economic and Business Affiairs, U.S. Department of State to Los Angeles City Councilman Nate Holden, at 1 (April 20, 1998) (regarding proposed City of Los Angeles ordinance relative to Myanmar) (same).
6. Other jurisdictions with nearly identical laws aimed at Myanmar include Ann Arbor, MI; Alameda County, and the cities of Berkeley, Oakland, San Francisco, Santa Cruz, and Santa Monica, CA; Boulder, CO; Carrboro and Chapel Hill, NC; Madison, WI; New York, NY; and Takoma Park, MD. See Investor Responsibility Research Center, "County-Specific State and Local Selective Purchasing Laws As of September 1997."
7. See generally 4 R. Rotunda and J. Nowak, Treatise on Constitutional Law -- Substance and Procedure § 23.6, at 640-41 (2d ed. 1992); L. Henkin, Foreign Affairs and the Constitution 227 (1972) (it was "a principal purpose of the Constitutional Fathers" to eliminate the states' independent authority in foreign relations); Oldfield v. Marriott, 51 U.S. (10 How.) 146, 164, (1850).
8. The importance of complete federal control over foreign affairs was also developed by John Jay in Federalist Papers Nos. 3,4 and 5, and by Alexander Hamilton in Federalist Paper No. 80.
9. See also Schmahmann & Finch, The Unconstitutionality of State and Local Enactments in the United States Restricting Business Ties with Burma (Myanmar), 30 Vand. J. Transnat'l L. 175, 202-07 (1997) (discussing practical problems presented by parallel federal and state foreign policies).
10. In his concurring opinion in Zschernig, Justice Stewart observed that "[a]ny realistic attempt to apply [the law] would necessarily involve the Oregon courts in an evaluation, either expressed or implied, of the administration of foreign law, the credibility of foreign diplomatic statements, and the policies of foreign governments." Zschernig, 389 U.S. at 442 (Stewart, J. concurring). The same holds here: The Massachusetts Burma Law cannot realistically be described as anything but an express evaluation of the administration and policies of the Union of Myanmar.
11. An amendment has been introduced to address the WTO problems created by the Massachusetts Burma Law. See An Act Further Regulating State Contracts With Companies Doing Business in Burma (Myanmar) (filed April 16, 1998). But the law has not been changed.
12. "The reason for this rule is self-evident. Were it otherwise, foreign policy initiatives on the part of one State could embroil the nation as a whole in serious international disputes." Springfield Rare Coin Galleries, 503 N.E. 2d at 305.
13. Indeed, only one lower court has ever upheld a state law targeting a particular foreign country in the face of a foreign-relations-power challenge. In Board of Trustees of the Employees' Retirement System v. Mayor of Baltimore City, 562 A.2d 720 (Md. 1989), cert denied, 493 U.S. 1093 (1990), the Court of Appeals of Maryland concluded that Baltimore's City Ordinances requiring the city pension funds to divest any holdings in companies doing business in South Africa did not constitute an impermissible intrusion into the federal government's exclusive control over foreign relations. Id. at 745-49. Significantly, the court focused on several facts that distinguish the Baltimore Ordinances from the Massachusetts Burma Law: (1) the court found that divestment alone would not cause companies to pull out of South Africa; (2) the court noted that the ordinances provided for gradual divestment to ensure minimal impact; (3) the ordinances applied "only to investments in companies doing a significant amount of business in South Africa." Id. at 747. Thus, the impact of the Baltimore City Ordinances on the country they targeted, and consequently on foreign relations, was evidently less than that of the Massachusetts Burma Law.
14. The 1986 opinion of the Office of Legal Counsel, which concluded that local sanctions against South Africa were constitutional, 10 Op. O.L.C. 65 (1986), stands alone in suggesting that the federal government's foreign affairs power might be subject to a proprietary exception, such that the states could interfere in foreign affairs if they were not acting to regulate. This opinion suffers from three flaws. First, there is no authority for a proprietary exception to the federal government's exclusive foreign-affairs powers. Second, the Supreme Court has repeatedly and vehemently explained that the federal government's authority over foreign relations is exclusive. Third, as discussed below, even were such an exception recognized, the Supreme Court has recently rejected the notion that acts taken in a state's sovereign capacity can be proprietary. See Camps Newfound/Owatonna, Inc. v. Town of Harrison, 117 S. Ct. 1590, 1606-07 (1997).
15. Of course, even if the Massachusetts Burma Law is struck down, sanctions against Myanmar will remain -- i.e., the federal sanctions is imposed by Congress and the President.
16. The opinion of the Office of Legal Counsel on local sanctions against South Africa, 10 Op. O.L.C. 65 (1986), seems to accept at face value the designation of local restricted purchasing laws as "proprietary." To the extent that the Court's distinction between proprietary and regulatory, or sovereign, acts was unclear at that time, the recent decision in Camps Newfound, 117 S. Ct. at 1607, proves that error in the OLC analysis.
17. Then-Senator (now Secretary of Defense) Cohen, who authored the enacted version of § 570, opposed mandatory sanctions prohibiting all U.S. investment. He explained that such sanctions would "relinquish all of [the United States']...remaining leverage in Burma...[and] further bind the hands of this and any future administrations, taking away those tools of diplomacy -- incentives...which are crucial..." 142 Cong. Rec. S8746 (daily ed. July 25, 1996). Other Senators agreed: "The best way to do that [foster democracy] is to adopt a polich which gives the President some tools to influence the situation." Id. at S8747 (statement of Sen. Johnson). "United States presence, U.S. firms are the ones on the ground who can help spread American values." Id. at S8751 (statement of Sen. Bond).
18. The relationship between the federal sanctions law and local enactments is very different from that presented by the federal sanctions against South Africa. In that context, there was no evidence at all that the federal government had even considered -- much less explicitly rejected -- sanctions of the sort imposed by localities. Thus, the argument for direct conflict was substantially weaker. See 10 Op. O.L.C. 65 (1986).
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