UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS NATIONAL FOREIGN TRADE COUNCIL, Plaintiff, v. CIVIL ACTION NO. 98-CV-10757-JLT CHARLES D. BAKER, in his official capacity as Secretary of Administration and Finance of the Commonwealth of Massachusetts, and PHILMORE ANDERSON, III, in his official capacity as State Purchasing Agent for the Commonwealth of Massachusetts, Defendants. DEFENDANTS' MEMORANDUM IN SUPPORT OF THEIR MOTION FOR SUMMARY JUDGMENT CHARLES D. BAKER PHILMORE ANDERSON By their attorneys, SCOTT HARSHBARGER ATTORNEY GENERAL Thomas A. Barnico Assistant Attorney General Office of the Attorney General Government Bureau One Ashburton Place, Room 2019 Boston, MA 02108-1698 (617) 727-2200, ext. 2086 July 27, 1998 TABLE OF CONTENTS TABLE OF CONTENTS i TABLE OF AUTHORITIES iii STATEMENT OF THE CASE 1 Introduction and Summary of Argument 1 Conditions in Burma 3 The Massachusetts Burma Law 5 Implementation of the Burma Law 7 Federal Legislation Concerning Burma 8 Federal Executive Action Concerning Burma 10 Sanctions Imposed on Burma by Other Countries 11 ARGUMENT 12 I. THE NFTC MAY NOT MAINTAIN THIS ACTION ON BEHALF OF ITS MEMBERS BECAUSE IT HAS NOT SHOWN THAT PARTICULAR MEMBERS HAVE SUFFERED LEGAL HARM FROM THE APPLICATION OF THE BURMA LAW 12 II. NEITHER CONGRESS NOR THE PRESIDENT HAS PREEMPTED THE STATES FROM IMPOSING A PRICE PREFERENCE IN THEIR PROCUREMENT OF GOODS AND SERVICES FROM COMPANIES DOING BUSINESS WITH BURMA 17 III. THE BURMA LAW DOES NOT VIOLATE THE FOREIGN COMMERCE CLAUSE BECAUSE STATE PROCUREMENT IS "MARKET PARTICIPATION," NOT "REGULATION," AND, IN ANY EVENT, THE LAW DOES NOT DISCRIMINATE AGAINST OR CONFLICT WITH FEDERAL REGULATION OF FOREIGN COMMERCE 28 A. A State's Decision to Prefer Certain Companies in Its Procurement of Goods and Services is Not Subject to Review under the Foreign Commerce Clause 29 B. The Burma Law On its Face Applies Equally to United States and Foreign Companies and Does Not Otherwise Discriminate Against Foreign Commerce 38 C. The Burma Law Does Not Prevent the Federal Government from "Speaking with One Voice" in Its Regulation of Foreign Commerce; Indeed, the Chorus of Federal, State, and Local Voices Now Raised In Support of Human Rights in Burma Show that Congress has Accepted a State and Local Role 40 IV. THE BURMA LAW DOES NOT INTERFERE WITH THE POWER OF THE FEDERAL GOVERNMENT TO CONDUCT FOREIGN RELATIONS 44 A. Federal and State Courts and the Department of Justice have Correctly Distinguished Selective Purchasing Laws from the State Law Struck Down in Zschernig v. Miller 46 B. The Burma Law Does Not Interfere with the Conduct of American Foreign Relations Toward Burma and Any Effects of the Law on Foreign Affairs Are Indirect 49 C. Any Impact on Foreign Affairs Is Justified By the Important State Interests Promoted By the Law -- Interests Embodied in the First and Tenth Amendments 52 D. The Vagueness of the Dormant Foreign Affairs Power Invoked by the NFTC Suggests That the Court Should (1) Leave the Nullification of State Procurement Laws to the Political Branches, or (2) Apply a "Market Participant" Exception to That Power 54 CONCLUSION 60 TABLE OF AUTHORITIES Cases
Animal Legal Defense Fund, Inc. v. Fisheries & Wildlife Board,
416 Mass. 63 5, 624 N.E.2d 556 (1993) 15 Associated Gen. Contractors of Mass., Inc. v. Altshule, 490 F.2d 9 (1 st Cir. 1973), cert, denied, 416 U.S. 957 (1974) 22 Barclays Bank v. Franchise Tax Board, 512 U.S. 298 (1994) 41, 43, 50, 57 Barnett Bank v. Nelson, 116 S. Ct. 1103 (1996) 18 Beal v. Doe, 432 U.S. 438 (1977) 20 Bethlehem Steel Corp. v. Board of Commissioners, 276 Cal. App.2d 221, 80 Cal. Reptr. 800 (1969) 51n Board of Trustees v. Mayor and City Council of Baltimore, 562 A.2d 720 (Md. 1989), cert. denied, 493 U.S. 1093 (1990) 19, 24n, 26, 28n, 30, 31, 32, 34, 35, 36, 39, 48, 49, 51n, 52n Building & Constr. Trades Council v. Associated Builders & Contractors, 507 U.S. 218 (1993) 36-37, 37 CTS Corp. v. Dynmics Corp. of America, 481 U.S. 69 (1987) 22 California State Board of Optometry v. Federal Trade Comm'n, 910 F.2d 976 (D.C. Cir. 1990) 19 Camps Newfound/Owatonna v. Town of Harrison,
117 S. Ct. 1590 (1997) 33, 40n Chamber of Commerce v. Reich, 74 F.3d 1322 (D.C. Cir. 1996) 37 Clark v. Allen, 331 U.S. 503 (1947) 48, 49 Container Corp. of America v. Franchise Tax Board, 463 U.S. 159 (1983) 42, 51n Cort v. Ash, 422 U.S. 66 (1975) 20 County of Suffolk v. Long Island Lighting Co., 710 F. Supp. 13 87 (E.D. N.Y. 1989), aff'd, 907 F.2d 1295 (2d Cir. 1990) 53n De Canas v. Bica, 424 U.S. 351 (1976) 27 Drinan v. Nixon, 364 F. Supp. 854 (D. Mass. 1973) 56n, 57 English v. General Electric Co., 496 U.S. 72 (1990) 25-26 Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978) 27, 39 FW/BS. Inc. v. City of Dallas, 493 U.S. 215 (1990) 12 First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978) 53n Florida Lime & Avocado Growers. Inc. v. Paul, 373 U.S. 132 (1963) 18 Foster v. Center Township of LaPorte County, 798 F.2d 237 (7th Cir. 1986) 16 Furtick v. Medford Housing Authority, 963 F. Supp. 64 (D. Mass. 1997) 20 Greater Boston Chamber of Commerce v. City of Boston, 772 F. Supp. 696 (D. Mass. 1991) 13n Him v. Davidowitz, 312 U.S. 52 (1941) 18 Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976) 29, 33, 34 Hunt v. Washington Apple Advertising Comm'n, 432 U.S. 333 (1977) 13 Japan Lines. Ltd. v. County of Los Angeles, 441 U.S. 434 (1979) 41 K.S.B. Technical Sales v. New Jersey District Water Supply Comm'n
381 A.2d 774 (N.J. 1977), app. dismissed, 435 U.S. 982 (1978) 30, 32, 34, 51n Kargman v. Sullivan, 552 F.2d 1 (1st Cir. 1977) 26 Kraft General Foods. Inc. v. Iowa Dep't of Revenue, 505 U.S. 71 (1992) 39 Arthur D. Little, Inc. v. Comm'r of Health & Hospitals of Cambridge, 395 Mass. 535, 481 N.E.2d 441 (1985) 50 Lujan v. National Wildlife Federation, 497 U.S. 871 (1990) 12 Philip Morris. Inc. v. Harshbager , 122 F.3d 58 (1st Cir. 1997) 17, 18, 19, 22, 23, 24, 26, 27 NAACP v. Claiborne Hardware Co.,
458 U.S. 886 (1982) 53 National Kerosene Heater Ass'n v. Commonwealth of Massachusetts
653 F. Supp. 1079 (D. Mass. 1986) 42 New York v. United States, 505 U.S. 144 (1992) 27n New York Times Co. v City of New York Comm'n on Human Rights, 41 N.Y. 2d 345, 361 N.E.2d 963 (1977) 52n Northeastem Florida Chapter of the Associated Gen. Contractors of America v. City of Jacksonville,
508 U.S. 656 (1993) 15, 16 Oregon Waste Systems v. Dept. of Environmental Quality, 511 U.S. 93 (1994) 28 Pacific Gas & Electric v. Energy Resources Comm'n, 461 U.S. 190 (1983) 27 Perkins v. Lukens Steel Co., 310 U.S. 113 (1940) 58 Red Lion Broadcasting v. FCC,
395 U.S. 367 (1969) 24n Reeves. Inc. v. Stake, 447 U.S. 429 (1980) 18, 29, 30, 31,33 & n, 34 Regan v. Wald, 468 U.S. 222 (1984) 57 Regents of Univ. of Cal. v. Bakke,
438 U.S. 265 (1978) 15, 16 Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947) 17 Shaw v. Delta Air Lines. Inc., 463 U.S. 85 (1983) 17 South-Central Timber Development Inc. v. Wunnicke,
467 U.S. 82 (1984) 32n, 34, 35 Southern Pacific Co. v. Arizona, 325 U.S. 761 (1945) 44n Springfield Rare Coin Galleries. Inc. v. Johnson
115 I11.2d 22 1, 503 N.E.2d 300 (1986) 52n Steel Company v. Citizens for a Better Environment,
118 S.Ct. 1012 (1998) 12 Stud;As Govemment Association v. Board of Trustees,
868 F.2d 473 (1st Cir. 1989) 53n Tayyari v. New Mexico State University, 495 F. Supp. 1365 (D.N.M. 1980) 51n Thompson v. Thompson, 484 U.S. 174 (1988) 18n Trqjan Technologies. Inc, v. Commonwealth of Pennsylvania, 742 F. Supp. 900 (M.D. Pa. 1990), aff'd, 916 F.2d 903 (3d Cir. 1990), cert. denied, 501 U.S. 1212 (1991) 30, 32 & n, 34, 42,43, 48, 49, 50,
59 United States v. Colgate & Co., 250 U.S. 300 (1919) 29-30 United States v. Students Challenging Regulatory
Agency Procedures (SCRAP, 412 U.S. 669 (1973) 13 Valley Forge College v. Americans United for
Separation of Church and State, 454 U.S. 464 (1982) 13 Wardair Cana& Inc. v. Florida Dept of Revenue
477 U.S. 1 (1986) 41, 42 Warth v. Seldin, 422 U.S. 490 (1975) 12-13, 15 Washington Legal Foundation v. Massachusetts Bar Foundation, 795 F. Supp. 50 (D. Mass. 1992),
aff'd, 993 F.2d 962 (1st Cir. 1993) 12
West Lynn Creamery v. Healy,
512 U.S. 186 (1994) 40n
White v. Massachusetts Council of
Construction Employers, Inc.,
460 U.S. 204 (1983) 29, 30, 35, 36
Wisconsin Dep'tt of Industry v. Gould,
475 U.S. 282 (1982) 27n, 28n, 35, 36,37,57
Wisconsin Public Intervenor v. Mortier,
501 U.S. 595 (1991) 24n, 26
Zschemig v. Miller,
389 U.S. 429 (1968) 17, 46, 47, 48, 49,50, 51n, 52, 54, 57
Federal Constitution. Statutes, and Regulations
U.S. Const. Art. I 46
U.S. Const. Art. I, 8,
the Commerce Clause and
Foreign Commerce Clause passim
U.S. Const. Art. I, 8, cl. 3 28
U.S. Const. Art. I, 10 46n
U.S. Const. Art. I, 10, cls. 1-3 46
U.S. Const. Art. II 46
U.S. Const. Art. II, 2 45
U.S. Const. Art. III 12,16
U.S. Const. Art. III, 2 46n
U.S. Const. Art. VI, cl. 2, Supremacy Clause 17
U.S. Const., 1st Amendment 3, 44, 52, 53 & n
U.S. Const., 10th Amendment 3, 18, 30, 44, 45, 52
Export Administration Act of 1979
50 U.S.C. 2407(c) 18
Comprehensive Anti-Apartheid Act (CAAA) of 1986,
P.L. 99-349, 100 Stat. 1086 18-19, 26
P.L. 99-349, 606 18, 19
Uruguay Round Agreement Act of 1994 (URRA),
P.L. 103-465, 102(b)(2), 108 Stat. 4809 21n
P.L. 103-465, 102(c)(1) 44n, 51
The Omnibus Consolidated Appropriations Act of 1997 (OCCA),
Pub. L. No. 104-208, 5 70, 110 Stat. 3009-166 8, 9
570(a) 9
570(a)(1) 9, 20
570(a)(2) 9, 20
570(b) 9, 10
570(c) 9, 21
570(d) 10
570(f)(2) 9
National Labor Relations Act (NLRA) 27n, 35, 36
61 Fed. Reg. 28,301 (1997) 10,20,21
61 Fed. Reg. 52233,1996 U.S.C.C.A.N. A83,
Presidential Proclamation No. 6925 (October 3, 1996) 10
62 Fed. Reg. 65005 (December 10, 1997) 5
63 Fed. Reg. 27659-27661 (May 19, 1998) 5
63 Fed Reg. 34255 (June 24, 1998) 5
Massachusetts Statutes
M.G.L.A. c. 7, 22(17)(West 1996 ed.) 58n
M.G.L.A. c. 7, 22C-22F (West 1996 ed.) 59n
M.G. L.A. c. 7, 22G-22M (West 1998 Supp.) 1, 6
M.G.L.A. c. 7, 22G (West 1998 Supp.) 6, 7
M.G.L.A. c. 7, 22H (West 1998 Supp.) 7
M.G.L.A. c. 7, 22H(a)(West 1998 Supp.) 6
M.G.L.A. c. 7, 22H(b)l (West 1998 Supp.) 6
M.G.L.A. c. 7, 22H(b)2 (West 1998 Supp.) 6
M.G.L.A. c. 7, 22H(d)(West 1998 Supp.) 2, 6
M.G.L.A. c. 7, 22H(e)(West 1998 Supp.) 7
M.G.L.A. c. 7, 221 (West 1998 Supp.) 6, 7
M.G.L.A. c. 7, 22J (West 1998 Supp.) 7
M.G.L.A. c. 7, 22J(b)(West 1998 Supp.) 7
M.G.L.A. c. 7, 22J(c)(West 1998 Supp.) 7
Ch. 130 of the Massachusetts Acts of 1996,
"An Act Regulating State Contracts with Companies
Doing Business with or in Burma (Myanmar) passim
Ch. 130 of the Acts of 1996, 3 7
Mass. Const. Pt. 1, art. I 2
Miscellaneous
Brenda S. Beerman,
"State Involvement in the Promotion of Export Trade,"
21 N.C.J. Int'l. L. & Com. Reg. 187 (1995) 55
Richard B. Bilder,
The Role of States and Cities in Foreign Relations,
83 Am. J. Int'l Law 821 (1989) 53, 55
The Federalist,
No. 22 (C. Rossiter ed. 1961) 58
Jack L. Goldsmith,
Federal Courts, Foreign Affairs, and Federalism,
83 Va. L. Rev. 1617 (1997) 57n
L. Henkin,
Foreign Affairs and the Constitution (1972 ed.) 45n
L. Henkin,
Foreign Affairs and the Constitution (1996 ed.) 45, 46, 48, 55
Andrea L. McCardle,
In Defense of State and Local Government
Anti-Apartheid Measures: Infusing Democratic
Values into Foreign Policymaking,
62 Temple L. Rev. 813 (1989) 53
10 Op. Office of Legal Counsel, Dept. of Justice, 65,
1986 WL 213238 33 & n, 36, 43, 49
Debora L. Spar,
The Spotlight and the Bottom Line -
How Multinationals Export Human Rights,
77 Foreign Affairs (March/April 1998) 37, 38
L. Tribe,
Constitutional Choices (1985) 34
L. Tribe,
Constitutional Law, 6-22, p. 469 (1988 ed.) 31
United States Department of Labor,
The Apparel Industry Codes of Conduct: A Solution
to the International Child Labor Problem? (1996) 37, 56
U.S. State Department Report to Congress
(June 13, 1997) 3
Wall Street Journal,
March 25, 1997 4
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
NATIONAL FOREIGN TRADE COUNCIL,
Plaintiff,
v. CIVIL ACTION
NO. 98-CV-10757-JLT
CHARLES D. BAKER, in his official capacity as
Secretary of Administration and Finance of the
Commonwealth of Massachusetts, and PHILMORE
ANDERSON, III, in his official capacity as State
Purchasing Agent for the Commonwealth of
Massachusetts,
Defendants.
DEFENDANTS' MEMORANDUM IN SUPPORT
OF THEIR MOTION FOR SUMMARY JUDGMENT
STATEMENT OF THE CASE
Introduction and Summary of Argument
Plaintiff National Foreign Trade Council (NFTC) challenges Mass. Gen. Laws Ann. Ch. 7, 22G-22M (West 1998 Supp.) (the "Burma Law"). The Burma Law restricts the authority of the Commonwealth to buy goods and services from companies that do business with Burma. According to the NFTC, the "reported human rights abuses that have plagued [Burma], and the regime's failure to recognize the results of the democratic election held [there] in 1990, are condemnable." Complaint 23. The Massachusetts Burma Law expresses the Commonwealth's own disapproval of the violations of human rights committed by the Burmese government. The Law contributes to the growing effort --joined by Congress and the President -- to apply indirect economic pressure against the Burma regime for reform. The Burma Law echoes the historic concerns of the citizens of Massachusetts who, for more than two hundred years, have supported the "natural, essential, and unalienable rights" of people around the world. See Mass. Const. Pt. 1, art. 1.
The Burma Law effectively requires state agencies to increase by 10% the price of offers to sell goods and services to the Commonwealth submitted by companies that do business with Burma. M.G.L.A. ch. 7, 22H (d). The Law applies equally to the Commonwealth's purchases of goods and services from companies domiciled in Massachusetts, other States, and foreign countries. The Burma Law does not prohibit or otherwise regulate purchases of goods or services by private persons or regulate contact between private persons and the Government of Burma. In these respects, the Burma Law closely resembles laws enacted in the 1980's concerning South Africa -- laws ruled constitutional by Maryland's highest Court and the United States Department of Justice.
Nothing in the Constitution denies to the States the right to apply a moral standard to the exercise of their spending powers. Nor does the Constitution deny to the States the right to use such a standard to -- address or even attempt to influence -- the conduct of foreign governments or firms. As explained below, the Burma Law does not violate the Supremacy Clause because (1) neither Congress nor the President has clearly stated an intent to preempt selective purchasing laws concerning Burma, and (2) the Burma Law is broadly consistent with federal sanctions against Burma. The Burma Law also does not violate the Foreign Commerce Clause because it represents the action of the Commonwealth as a "market participant" and does not prevent the federal government from "speaking with one voice" in federal regulation of commerce with Burma. Finally, the Burma Law does not interfere with the federal government's conduct of foreign policy because (1) the Constitution permits state actions that indirectly affect foreign affairs, even where the actions are intended to influence a foreign government; (2) the Burma Law does not establish contact between Massachusetts and the Government of Burma and the effects of the Law on foreign affairs are indirect; (3) any effect of the Burma Law on foreign affairs is justified by the importance of the interests promoted by the law -- interests embodied in the First and Tenth Amendments; and (4) the vagueness of the dormant foreign affairs power invoked by the NFTC suggests that the Court should leave the nullification of state procurement laws to the political branches, or apply a "market participation" exception to that power. In short, where Congress and the President have not expressly preempted the States from enacting their own selective purchasing laws, the Court should decline to hold that the Constitution implicitly nullifies the same laws. The fact that the Constitution may give the federal government the last word on foreign affairs does not mean that it has the only word.
Conditions in Burma
According to the United States Department of State, the "people of Burma continue to live under a highly authoritarian military regime that is widely condemned for its serious human rights abuses." U.S. State Department Report to Congress (June 13, 1997), Joint Stipulation (J.S.) Ex. 23 at 105. The military regime -- known as the State Law and Order Restoration Council (the SLORC) -- "continues to dominate the political, economic, and social life of the country in the same arbitrary, heavy-handed way that it has since seizing power in September 1988 after harshly suppressing massive pro-democracy demonstrations." Id.
The State Department has reported to Congress that "the SLORC's severe violations of human rights have continued." Id. at 106. "There continue to be credible reports, particularly from ethnic minority-dominated areas along the Thai border, that soldiers have committed serious human rights abuses, including extrajudicial killing and rape." Id. "Disappearances continue, and members of the security forces beat and otherwise abuse detainees. Arbitrary arrests and detentions continue for expression of dissenting political views. Several hundred, if not more, political prisoners remain in detention, including 29 Members of Parliament elected in 1990." Id.
The SLORC "sharply restricts basic rights to free speech, press, assembly and association." Id. at 106. Prior to the 1990 national parliamentary election reluctantly held by the SLORC, the SLORC arrested Daw Aun-San Suu Kyi, the leader of the most popular opposition party, the National League for Democracy (NLD). Wall Street Journal, March 25, 1997 at Al 8, J.S. Ex. 25. From July 1989 until July 1995, the SLORC detained Ms. Suu Kyi in her home and prohibited her from seeing her two young children or her husband for much of this six year period. Id. Despite Ms. Suu Kyi's imprisonment, her party (the NLD) received 81 % of the vote and won 392 of the 485 available parliamentary seats in the 1990 election. However, SLORC invalidated the election results and placed Ms. Suu Kyi under house arrest. Id.
Since 1990, the SLORC has repeatedly employed its military might to stifle the NLD. Id. at 104. Since its removal of the NLD, the SLORC has closed several of NLD's provincial offices. Id. To prevent the NLD from holding its national party congress, the SLORC placed barricades in front of the event site (Ms. Suu Kyi's residence) and arrested numerous party members on two separate occasions in 1996. Id.
The SLORC's assaults on ethnic minorities have been equally pervasive and destructive. SLORC has launched its most severe and prolonged attacks against the Karen and the Rohingya Muslims. Id. at 106. Beginning in 1994, SLORC utilized its army to attack the Karen and Mon enclaves located along the Thai border. Id. According to the State Department, "[i]n February [of 1997], the Burmese Army launched a full-scale assault on the forces of the Karen National Union," resulting in the relocation of approximately 12,000 Karen refugees in nearby Thailand. Id. Similarly, as a result of sustained army offensives dating back to 1991, about 24,000 Rohingya Muslims, who formerly inhabited the Arakan state in Burma, now live in camps in Bangladesh. Id. Because of these and other actions by the SLORC against minority groups, the U.S. State Department has estimated that as many as 100,000 Burmese have fled to nearby countries. Ld. Members of the targeted communities who were unable to escape were forcibly conscripted into the Burmese army. Id.
The most recent reports by the State Department and the President on Burma confirm the serious conditions there. See 62 Fed. Reg. 65005 (December 10, 1997); 63 Fed. Reg. 2765927661 (May 19, 1998); 63 Fed. Reg. 34255 (June 24, 1998). These conditions -- now borne by the people of Burma for many years -- prompted the actions of Massachusetts, the United States, and foreign countries described below.
The Massachusetts Burma Law
In July, 1996, the Massachusetts Legislature enacted Chapter 130 of the Acts of 1996, "An Act Regulating State Contracts with Companies Doing Business with or in Burma (Myanmar)," codified at M.G.L.A. c. 7, 22G-M. Subject to certain exceptions, the Burma Law provides that "a state agency, a state authority, the house of representatives or the state senate may not procure goods or services from any person listed on the restricted purchase list [described below] maintained by the secretary [of administration and finance], or who is determined through affidavit or other reliable methods to meet the criteria for so being listed." M.G.L.A. ch. 7, 22H(a). By its terms, the statute imposes "preference requirements" ( 22I) rather than an absolute prohibition on state contracting with companies doing business in Burma. Thus, exceptions are authorized when the procurement is "essential" and enforcement of the restriction would "eliminate the only bid or offer, or would result in inadequate competition[,]" 22H(b)(1) and (2); when the State is purchasing certain kinds of medical supplies, 22I; or when there is "no comparable low bid or offer" by a bidder who is not on the list. 22H(d). A "comparable low bid or offer" is defined as "a responsive and responsible bid or offer which is no more than ten percent greater than the lowest bid or offer submitted for goods or a service." Section 22G. In practice, the "comparable low bid or offer" provision is applied by adding 10% to offers made by persons on the restricted purchase list. J.S. 29.
Section 22J provides that the "secretary shall establish and maintain a restricted purchase list ... [which] shall contain the names of all persons currently doing business with Burma (Myanmar)." "Doing business with Burma" is defined by 22G as:
(a) having a principal place of business, place of incorporation or its corporate headquarters in Burma (Myanmar) or having any operations, leases, franchises, majority-owned subsidiaries, distribution agreements, or any other similar agreements in Burma (Myanmar), or being the majority owned subsidiary licensee or franchise[e] of such a person;
(b) providing financial services to the government of Burma (Myanmar), including providing direct loans, underwriting government securities, providing any consulting advice or assistance, providing brokerage services, acting as a trustee or escrow agent, or otherwise acting as an agent pursuant to a contractual agreement;
(c) promoting the importation or sale of gems, timber, oil, gas or other related products, commerce in which is largely controlled by the government of Burma (Myanmar), from Burma (Myanmar).
(d) providing any goods or services to the government of Burma (Myanmar).
Under Sections 22H(e) and 22I, persons with operations in Burma limited to the "reporting the news" or providing goods or services "for the provision of international telecommunications," or "providing only medical supplies" are exempt from the restrictions of the Act.
The Act directs the Secretary of Administration and Finance (the Secretary), "[i]n establishing the restricted purchase list," "to consult United Nations reports, resources of the Investor Responsibility Research Center and the Associates to Develop Democratic Burma, and other reliable sources." Section 22J(b). "The Secretary shall also place the name of any person who, in the statement [submitted to state agencies under Section 22H], declared that he meets the criteria for being so listed." Id. "The restricted purchase list shall be updated every three months." Section 22J(c). The Act applies to new contracts and renewals, but not contracts existing at its effective date in September, 1996. Chapter 130 of the Acts of 1996, 3.
Implementation of the Burma Law
The Operational Services Division (OSD) is the agency within the Executive Office of Administration and Finance that administers the Burma Law. See Affidavit of Harold Fisher (submitted herewith) 1. Defendant Anderson is the State Purchasing Agent and head of OSD. See Compl. 25. After its review of relevant information, OSD determines whether a company is doing business with Burma. See Fisher Aff. 3-6. If OSD preliminarily determines that a company is doing business in Burma, it sends a letter to the person informing him of that fact. See id. 7 & Ex. A. The letter states that the company may "submit" a "sworn affidavit" and other documents stating the "reasons" for its view that it is not doing business with Burma. Id. Companies informed of a preliminary determination by OSD have responded in writing and requested that they not be placed on the list. These responses have often included letters and affidavits. See id., Ex. B. In some cases, representatives of a company have met with OSD personnel to discuss their placement on the restricted purchase list. Id. 7.
In some cases, after receiving information from such a companies, OSD has determined not to include certain of the companies on the list. Id. 8 & Ex. C. In its compilation of the initial list in 1996, OSD excluded 20 companies that had received preliminary determinations and submitted evidence that they were not doing business with Burma within the meaning of the Burma Law. Id. 8. In other cases, OSD has maintained its initial determination that the company is doing business with Burma under the Burma Law. To date, no company has sought judicial review of a determination by OSD that it is doing business with Burma. Id. 9.
Federal Legislation Concerning Burma
Three months after Massachusetts enacted its Burma Law, Congress authorized federal sanctions against Burma. The Omnibus Consolidated Appropriations Act of 1997 (OCAA), Pub. L. No. 104-208, 570, 110 Stat. 3009-166 through 3009-167 (Section 570), approved September 30, 1996, imposed conditional sanctions on Burma "[u]ntil such time as the President determines and certifies to Congress that Burma has made measurable and substantial progress in improving human rights practices and implementing democratic government . . ." Section 570 (a). The sanctions include an end to most bilateral assistance ( 570 (a)(1)) and the opposition by the United States to most multilateral aid. Id. at 570 (a)(2).
Section 570 also authorizes and directs the President "to prohibit ... United States persons from new investment in Burma, if [he] determines and certifies to Congress that, after the date of th[e] Act, the Government of Burma has physically harmed, rearrested for political acts, or exiled Daw Aung San Suu Kyi or has committed large-scale repression of or violence against the Democratic opposition." Id. at 570 (b). "New investment" is defined by the Act to include "the economical development of resources located in Burma," but does "not include the entry into, performance of, or financing of a contract to sell or purchase goods, services or technology." Id. at 570 (f)(2).
The Act further directs the President to "seek to develop, in coordination with members of the Association of Southeast Asian Nations (ASEAN) and other countries having major trading and investment interests in Burma, a comprehensive, multilateral strategy to bring democracy to and improve human rights practices and the quality of life in Burma, including the development of a dialogue between the State Law and Order Restoration Council (SLORC) and democratic opposition groups within Burma." Id. at 570 (c).
Finally, the Act requires the President to submit reports every six months to certain Congressional committees on: "(1) progress toward democraticization in Burma; (2) progress on improving the quality of life of the Burmese people ... ; and (3) progress made in developing the [multilateral] strategy referred to in subsection (c)[ 'to bring democracy to and improve human rights practices ... in Burma']." Id. at 570(d).
Federal Executive Action Concerning Burma
On October 3, 1996, the President issued a proclamation entitled "Suspension of Entry as Immigrants and Nonimmigrants of Persons Who Formulate or Implement Policies That Are Impeding the Transition to Democracy in Burma or Who Benefit from Such Policies." Proclamation No. 6925 (October 3, 1996), 61 Fed. Reg. 52233, 1996 U.S.C.C.A.N. at A83. The President stated that the "current regime in Burma continues to detain a significant number of duly elected members of parliament, National League of Democracy activists, and other persons attempting to promote democratic change in Burma." Id. The President further stated that the "regime has failed to enter into serious dialogue with the democratic opposition and representatives of the country's ethnic minorities, . . . and has failed to meet internationally recognized standards of human rights." Id.
Seven months later, the President issued an Executive Order implementing Section 570. Exec. Ord. 13047, 62 Fed. Reg. 28,301 (1997). In the Order the President "determine[d] and certif[ied] that, for purposes of [Section 570(b)], the Government of Burma has committed largescale repression of the democratic opposition in Burma after September 30, 1996, and further determine[d] that the actions and policies of the Government of Burma constitute an unusual and extraordinary threat to the national security and foreign policy of the United States and declare[d] a national emergency to deal with that threat." Id. Accordingly, the President "prohibit[ed] new investment in Burma by United States persons subject to certain exceptions. Id.
Sanctions Imposed on Burma by Other Countries
Other countries have likewise imposed sanctions on Burma. According to the Massachusetts Congressional delegation, concerns about Burma's forced labor practices have prompted the European Commission (EC) to revoke Burma's tariff preferences. J.S. Ex. 26. In 1997 and 1998, the European Parliament passed resolutions concerning Burma. J.S. Ex. 26 and 27. The 1998 resolution expresses "deep concern[] at the continuing and extremely serious human rights abuses committed by the military authorities in Burma." J.S. Ex. 27. The 1998 resolution notes that the Communities "common position" has included a "ban on entry visas," an "embargo on sales of arms, munitions, and military equipment, and the suspension of non-humanitarian aid or development programmes." Id. The 1997 resolution urged the EC to refrain from pursuing a challenge to the Massachusetts Burma law with the World Trade Organization (WTO). J.S. Ex. 26; see generally Brief Amicus Curiae of European Communities (July 6, 1998), App. I (summarizing adverse actions of EU toward Burma).
Canada, Australia and Japan have joined the EU in enacting sanctions against Burma. Each has enacted an arms embargo and Japan has limited itself to humanitarian aid. J.S. Ex. 23 at 107.
ARGUMENT
I. THE NFTC MAY NOT MAINTAIN THIS ACTION ON BEHALF OF ITS MEMBERS BECAUSE IT HAS NOT SHOWN THAT PARTICULAR MEMBERS HAVE SUFFERED LEGAL HARM FROM THE APPLICATION OF THE BURMA LAW.
The Court should dismiss the complaint because the NFTC lacks standing to maintain this action. The NFTC may not maintain an action on behalf of its members because no member has shown that it has suffered legal injury from the operation of the Burma Law.
The question of standing is one of jurisdiction: if the plaintiff lacks standing the Court lacks a "case or controversy" necessary for jurisdiction under Article IH of the Constitution. Jurisdictional issues should be decided before the merits, and a court may not simply "assume" that it has jurisdiction in order to resolve a more easily decided claim on the merits. Steel Company v. Citizens for a Better Environment, 118 S.Ct. 1012-16 (1998). Thus, "before addressing the merits of a constitutional challenge, a court must decide whether the party has standing to assert the constitutional rights in question." Washington Legal Foundation v. Massachusetts Bar Foundation, 795 F. Supp. 50, 52 n.3 (D. Mass. 1992) (quotation omitted), aff'd, 993 F.2d 962 (1st Cir. 1993).
The requirement of standing is a legal question properly raised by the defendants' motion for summary judgment. See Lujan v. National Wildlife Federation, 497 U.S. 871, 884-85 (1990). Upon a motion for summary judgment, plaintiff s standing may not "be inferred argumentatively from averments in the pleadings,. . . but rather must affirmatively appear in the record." FW/BS. Inc. v. Cily of Dallas, 493 U.S. 215, 231 (1990)(quotation omitted). A plaintiff is required to furnish "particularized allegations of fact deemed supportive of its standing." Warth v. Seldin, 422 U.S. 490, 501 (1975) (emphasis added). Further, "the allegations must be true and capable of proof at trial." United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 689 (1973).
In a case challenging a state statute, a plaintiff must show more than an ideological interest in the case. "[S]tanding is not measured by the intensity of the litigant's interest or the fervency of his advocacy." Valley Forge College v. Americans United for Separation of Church and State, 454 U.S. 464,486 (1982). Thus, the NFTC may not establish standing simply by asserting that it "oppos[es] state and local restrictions upon foreign trade" (Kittredge Declar. at 5 (April 29, 1998) or resolving to challenge such restrictions in court. See id. Ex. A.
The complaint, affidavits, and Joint Stipulations demonstrate that the NFTC claims no legal injury to itself as an organization but only harm to unnamed member companies. An association may sue on behalf of its members if "(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the individual members to participate in the lawsuit." Hunt v. Washington Apple Advertising Comm'n, 432 U.S. 333, 343 (1977). The NFTC broadly claims that its "members ... would unquestionably have standing to bring the suit on their own behalf." NFTC Mem. in Supp. of Mot. for Prelim. Inj. (NFTC Mem.) (April 29, 1998) at 14. It alleges that the "consequences" of the Burma Law are that certain unnamed members are restricted from receiving certain contracts and must sign a sworn statement testifying to their activities in Burma. Kittredge Declar. 5-7. The NFTC claims that unnamed members appear on the current restricted purchase list and that others have suffered an "impact on business planning" and "business operations." Id. 9-10. The NFTC admits that it "is not able to quantify th[e] amount of economic loss" allegedly suffered by its members (NFTC Local Rule 26.1 Disclosure Statement filed July 2,1998). Most important, the NFTC has stipulated that no company while a member of the NFTC (1) attempted to bid on a contract in Massachusetts after September, 30, 1996 (the effective date of the Burma Law), or (2) was denied a contract because of the Burma Law. J.S. 33-34.
The parties have stipulated to certain other facts which bear on the issue of standing. For example, the parties have stipulated that (1) more than thirty members of the NFTC are on the restricted purchase list; (2) some members of the NFTC ceased doing business with Burma after enactment of the Burma Law; (3) one member of the NFTC has received Massachusetts contracts in the past, but has determined not to bid again; and (4) one non-member of the NFTC who bid on a contract and had its bid increased by 10% is now a member of the NFTC. See J. S. 30-34, 36, 38.
None of the stipulations of the parties establishes the standing of the NFTC. None shows that a company while a member of the NFTC has (1) attempted to bid on a contract in Massachusetts after the effective date of the act, (2) has had its offer increased by 10%, or (3) has been denied a contract because of the Burma Law. See J S. 33-34; Fisher Aff. 13 ("not aware of any situation in which the application of the Burma Law to any specific procurement has resulted in the denial of a contract award to a person on the restricted purchase list who would have otherwise won the award"). These crucial yet absent facts are necessary to establish that the plaintiff has suffered injury in fact from the operation of the challenged law. See Warth v. Seldin, 422 U.S. at 498-99, 504 (person challenging a zoning ordinance did not establish sufficient "facts from which it reasonably could be inferred that, absent the respondent's restrictive zoning practices, there is a substantial probability that they would have been able to purchase or lease" a home); Animal Legal Defense Fund. Inc., v. Fisheries & Wildlife Board, 416 Mass. 635, 638-640, 624 N.E.2d 556, 558-560 (1993) (members of association lacked standing to challenge qualifications for membership on state board, where members could be appointed to at least some seats on the Board).
Northeastern Florida Chater of the Associated Gen. Contractors of America v. City o Jacksonville, 508 U.S. 656 (1993), does not support the standing of the NFTC. In Jacksonville, the plaintiff association, composed primarily of non-minority contractors, challenged an ordinance requiring that 10% of municipal contracts be reserved for minority firms. The contractors did not allege that they had applied for contracts and been denied them pursuant to the ordinance. However, they did allege that they had applied for contracts from the city in the past and would bid for the contracts covered by the statutory set aside in the absence of the ordinance. The Supreme Court held that the plaintiffs had standing because they averred that they were "able and ready to bid on contracts" and that the challenged "discriminatory policy [prevented them] from [bidding on contracts] on an equal basis." Id. at 666. The Court explained that "[w]hen the government erects a barrier that makes it more difficult for members of one group to obtain a benefit than it is for members of another group, a member of the former group seeking to challenge the barrier need not allege that he would have otherwise obtained the benefit but for the barrier in order to establish standing. The 'injury in fact' in an equal protection case of this variety is the denial of equal treatment resulting from imposition of the barrier, not the ultimate inability to obtain the benefit." Id. The Court stated (Id. at 665) that its closest precedent was the Bakke case, where the "injury" to the white applicant was the decision of the school "not to permit Bakke to compete for all 100 places in the class, simply because of his race." Regents of Univ. of Cal. v. Bakke, 438 U.S. 265, 281 n.14 (1978).
Jacksonville is distinguishable from this case for two reasons. First, the set-aside challenged in Jacksonville was a complete prohibition. No non-minority contractor could receive certain contracts. By contrast, the Burma Law is not a complete prohibition but rather a 10% preference that members of NFTC may overcome in a particular bid process or avoid by qualifying under one of the exceptions to the Burma Law. These opportunities to avoid injury entirely -- without any relief from this Court - distinguish this case from Jacksonville and Bakke and show that the members of the NFTC have not suffered any harm, let alone sufficient legal harm to establish standing to maintain this case. See Foster v. Center Township of LaPorte County, 798 F.2d 237,242-44 (7th Cir. 1986) (plaintiff eligible for governmental benefits lacks standing to challenge guidelines for eligibility, even if she may "someday" be ineligible). Second, the NFTC makes no Equal Protection claim, or any other claim based on race. The lower bar for standing applied in Jacksonville must be limited to cases involving an immutable characteristic such as race. See Jacksonville, 508 U.S. at 658-659 (describing set-aside program and claims of plaintiffs). Absent such a limitation, anyone wishing to apply for a governmental benefit would have standing to challenge any criterion for eligibility. The Court should reject this rule as inconsistent with Article III and dismiss the complaint for lack of standing.
II. NEITHER CONGRESS NOR THE PRESIDENT HAS PREEMPTED THE STATES FROM IMPOSING A PRICE PREFERENCE IN THEIR PROCUREMENT OF GOODS AND SERVICES FROM COMPANIES DOING BUSINESS WITH BURMA.
The NFTC claims that the Burma Law is preempted because it "conflicts with the sanctions enacted by Congress and the President to implement a federal strategy for encouraging political change in Myanmar." NFTC Mem. at 36. The Court should decide this statute-based claim before deciding plaintiffs constitutional claims. See Zschernig v. Miller, 389 U.S. 429, 444-45 (1968) (Harlan, J., concurring). The Court should hold that the Burma Law is not preempted because it promotes the same goal as federal law -- human rights for the people of Burma -- and, far from posing an obstacle to the means chosen by the federal government to reach that goal, the Burma Law furthers the federal efforts.
State law can be preempted under the Supremacy Clause, U.S. Const. Art. VI, cl. 2, in three circumstances. First, Congress may expressly define the extent to which its enactments have preemptive effect. See, e.g., Shaw v. Delta Airlines. Inc., 463 U.S. 85, 95-96 (1983); Philip Morris. Inc. v. Harshbarger, 122 F.3d 58, 67, 69-78 (lst Cir. 1997). Second, in the absence of explicit preempting language, state law may be preempted where it operates in a "field" that Congress has intended to "occupy" exclusively. "Occupation" of a field may be inferred from a "scheme of federal regulation ... so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it," or where an Act of Congress "touch[es] a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). Third, state law may be preempted if it "actually conflicts" with federal law. Philip Morris, 122 F.2d at 68. Actual conflict occurs where compliance with both state and federal law "is a physical impossibility," Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 143 (1963), or where state 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).
In any preemption analysis, "[t]he purpose of Congress is the ultimate touchstone," and the "crucial inquiry [is]: Did Congress, in enacting the Federal Statute, intend to exercise its constitutionally delegated authority to set aside the laws of a State?" Philip Morris. Inc., 122 F.3d at 67 (quoting Barnett Bank v. Nelson, 116 S. Ct. 1103, 1107 (1996)). The burden assumed by one claiming preemption is "heavy in those cases that rely on implied preemption, which relies ... on inference." Id. at 79 (quotation omitted). The presumption against preemption applies fully in this case, involving as it does state procurement, which represents the fundamental power to expend public resources reserved to the States by the Tenth Amendment. See Reeves v. Stake, 447 U.S. 429, 441 (1980) ("market participant" exception to Commerce Clause rests on principles of federalism).
The NFTC makes a very narrow preemption argument in this case. The NFTC does not claim that either Congress or the President has expressly exercised federal authority to set aside laws of the States concerning Burma. Nor could the NFTC make such a claim. Congress knows how to preempt state action that affects foreign affairs. See Export Administration Act of 1979, 50 U.S.C. 2407(c) (stating expressly that Anti-Arab boycott provisions "preempt[ed] any law, rule or regulation that the several states or the District of Columbia, or any governmental subdivision thereof . . . ."). Similarly, in 1986, Congress enacted the Comprehensive Anti-Apartheid Act (CAAA) of 1986, P.L. 99-349, 100 Stat. 1086, which included a limited preemption provision addressing federally-funded contracts awarded by state and local governments. P.L. 99-349, 606. In 1989, the Maryland Court of Appeals held that the CAAA did not preempt a Baltimore ordinance that required city pension funds to divest their holdings in companies doing business in South Africa. See Board of Trustees v. Mayor and City Council of Baltimore, 562 A.2d 720, 740-744 (Md. 1989) (hereafter "Board of Trustees"), cert. denied, 493 U.S. 1093 (1990). Thus, Section 606 of the CAAA and its legislative history, as explained in Board of Trustees, rebut the NFTC's claim that there is "no evidence" that Congress in enacting the CAAA in 1986 "had even considered ... sanctions of the sort imposed by localities." See NFTC Mem. at 3 8 n. 18. Since Congress in 1996 was aware that Board of Trustees had found no preemption in the 1986 CAAA, it would have expressed its intent clearly in its 1996 law on Burma if it had intended to preempt state selective purchasing laws concerning Burma. Similarly, Congress knew in 1996 that the President may nullify state law by executive order only if Congress clearly authorizes him to do so. See California State Board of Optometry v. Federal Trade Comm'n, 910 F.2d 976, 982 (D.C. Cir. 1990). However, nothing in the OCAA authorizes the President to nullify state law on Burma by executive order. For all of these reasons, the NFTC understandably does not argue express preemption in this case.
Nor does the NFTC claim that Congress has occupied the relevant field. The mere existence of a federal scheme -- even one that is "in some respects comprehensive" - does not establish that "Congress left no room for the States to supplement it." Philip Morris. Inc., 122 F.3d at 86 (quotations omitted). Instead, the NFTC argues solely that the Massachusetts Burma Law "conflicts" with actions of Congress and the President, as follows.
First, the NFTC argues that the Massachusetts Burma Law conflicts with federal law because it includes a measure -- selective purchasing -- not imposed by the United States. NFTC Mem. at 37-38. According to the NFTC, the federal government's selection of sanctions represents its "judgment" about the proper scope of "continuing United States economic ties" with Burma and the Massachusetts law "contradicts and impedes" this judgment. Id. Second, the NFTC argues that "the Massachusetts Burma Law conflicts with "federal law because the federal law calls for a multilateral strategy to foster democracy[,]" while the state law is "unilateral." Id. at 38-39.
Both of these arguments rest solely on the 1996 federal law on Burma and its legislative history; the Executive Order on Burma; and later statements by State Department officials in testimony before the Maryland and California state legislatures. Nothing in these laws or statements supports an inference that Congress intended to preempt the Burma Law. The OCAA and the Executive Order set forth certain sanctions imposed by the United States in an effort to improve human rights in Burma. Each was enacted or issued after Massachusetts enacted its Burma Law in July, 1996, and the Court must therefore infer that Congress and the President were aware of the Massachusetts law when they imposed federal sanctions on Burma. See Beal v. Doe, 432 U.S. 438, 447 (1977). The federal sanctions include an end to most bilateral assistance (P.L. 104-208, 570 (a)(1)) and the objection by the United States to must multilateral assistance. Id. at 570 (a)(2). Pursuant to the OCAA, the President has "prohibit[ed] new investment in Burma by United States persons," subject to certain exceptions. 61 Fed. Reg. 28,301. The President has not prohibited "entry into, performance of, or financing of a contract to sell or purchase goods, services, or technology," except in certain limited circumstances. Id. Federal law does not establish conflict preemption in this case for two reasons. First, neither the OCAA nor the Executive Order creates a private right of action on behalf of affected companies. The members of the NFTC are not the "member[s] of the class for whose especial benefit the [federal laws were] enacted," and there is no "indication of legislative intent to create" a remedy for the protection of a right to do business with Burma. See Furtic v. Medford Housing Authority, 963 F. Supp. 64, 70 (D. Mass. 1997) (citing Cort v. Ash, 422 66, 78 (1975)). Indeed, the Executive Order provides that "[n]othing contained in [it] shall create any right or benefit, substantive or procedural, enforceable by any party against the United States, its agencies or instrumentalities, its officers or employees, or any other person." 62 Fed. Reg. at 28,302. Thus, the Court should reject the preemption claim here because the federal law on Burma and the Executive Order do not establish a private right of action.
Second, the Massachusetts Burma Law does not conflict with these federal measures because both state and federal laws promote the same goal - human rights for the people of Burma. Each of the federal sanctions is intended by Congress and the President "to bring democracy to and improve human rights practices and the quality of life in Burma, including the development of a dialogue between the State Law and Order Restoration Council (SLORC) and democratic opposition groups within Burma." P.L. 104-208, 570(c); see also J.S. Ex. 28 at NF082 (State Department official describes "shared goal" of federal and state action); J.S. Ex. 32 at 5 (Secretary of State opines that "it is only right that Burma is subject to international sanctions and consumer boycotts"). The Massachusetts Burma Law promotes several purposes,
each of which is broadly consistent with the purposes of federal law. The Burma Law discourages companies from doing business with Burma; encourages companies to lobby for
change in Burma; highlights the conditions in Burma and thereby invites action by Congress and other interested bodies; and expresses the disapproval of the people of Massachusetts of the
conditions in Burma. Where, as here, state and federal laws further the same purpose, a claim of "actual conflict" fails. See CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 82-83 (1987) (no preemption where state "furthers the federal policy"); Associated Gen. Contractors of Mass., Inc. v. Altshul, 490 F.2d 9,14-15 (1st Cir. 1973), cert. denied, 416 U.S. 957 (1974) (no preemption of state law by Executive Order where "broad purposes" of the two are "congruent") Nor does the Massachusetts law stand as an obstacle to the means chosen by the United States to reach the shared goal of human rights in Burma. Nothing in the Burma Law impedes enforcement of the federal ban on "new investment" by United States persons; the Burma Law does not, for example, authorize investments prohibited by federal law. Rather, United States companies may easily comply with both state and federal restrictions. Nor does the state law interfere with federal policy toward foreign companies, because the federal sanctions do not apply to foreign companies at all. See Philip Morris. Inc., 122 F.3d at 83 (no conflict because prohibitions in federal law apply only to federal officials). Indeed, while some people opposed federal sanctions on the ground that they would impose a relative disadvantage on the United States in both diplomacy and trade, the Massachusetts Burma Law applies equally to United States and foreign firms. The state law also generally permits United States firms to continue to conduct foreign trade in goods and services permitted by federal law, because the price preference imposed by the Burma Law applies only to procurement by state agencies in Massachusetts. Thus, nothing in the Massachusetts Burma Law even affects -- let alone impedes -- the implementation of the federal sanctions.
Nor may the NFTC establish a conflict by its claim that the federal actions embody a "judgment" about the proper balance between sanctions and economic ties. The NFTC argues, in effect, that Congress and the President -- without bothering even to mention the preemption of state law -- have struck a balance between sanctions and trade that is unconstitutionally disturbed by state and local procurement laws that differ from the federal sanctions.
The First Circuit recently rejected a similar argument in Philip Morris. Inc. v. Harshbarger, 122 F.3d at 78-85. There the tobacco industry argued that federal law embodied a congressional "judgment" about the proper balance between public health education and trade secrets in tobacco products, and that the Massachusetts Tobacco Disclosure Law -- which requires submission of information not required by federal law, and authorizes its release upon certain findings by the state public health agency and attorney general -- upset the balance struck by Congress.
The First Circuit noted that "[t]opics that warrant congressional legislation necessarily entail issues of national concern." Id. at 80. "That cannot mean, however, that every federal statute ousts every related state law." Id. "Moreover, the mere fact that a subject of federal legislation requires an intricate and complex response from the Congress does not necessarily indicate that Congress intended its response to be the exclusive means of addressing the issue." Id. (quotation marks and citations omitted). The court identified the central purpose of the federal law as not promoting trade in tobacco products but rather preempting nonuniform advertising regulations and increasing health education about tobacco ingredients. Even the federal statute's express statement of general concern "for protecting commerce and the national economy" did not preempt the state disclosure law, but merely "create[d] some general tension with a federal law's abstract objectives." Id. at 82 (citations omitted). The First Circuit stated that "even assuming that state law somehow alter[s a] purported balance, . . . the question is not whether a congressionally calibrated system is altered by state law, but if altered, whether the change obstructs the purpose of Congress." Philip Morris. Inc., 122 F.2d at 85 (emphasis in original; quotation omitted).
Here, the controlling purpose of the federal law is to promote human rights for the people of Burma. As the defendants show above, the Massachusetts Burma Law furthers this purpose. Conditions in Burma may improve if companies that withdraw from Burma decrease economic support for the current regime, or if companies that remain press the regime for reform. Any effects of the Massachusetts Burma Law on the purported federal "balance" between trade and sanctions would not frustrate the controlling purpose of the federal law, which is to promote the human rights of the people of Burma.
There likewise is no merit to the claim that the Burma Law "conflicts with federal law because federal law calls for a multilateral strategy to foster democracy" in Burma. NFTC Mem. at 38. According to the NFTC, the federal law on Burma and its legislative history show that Congress and the President "prefer" to act toward Burma with the "support and participation" of other countries. Id. at 38-39 & nn. 17-18. This point does not establish preemption for three reasons. First, the federal act and related State Department reports demonstrate that the United States has imposed unilateral sanctions on Burma. See 142 Cong. Rec. S8752-8753 (U.S. already "maintain[ed] a range of unilateral sanctions and d[id] not promote U.S. commercial investment ties with Burma"); J.S. Ex. 23 at 107 and n.1, supra (describing unilateral sanctions). Second, the NFTC's point is further undermined by its own statement that the federal law on Burma "does not make the new investment ban contingent on multilateral agreement." J.S. Ex.28 at NF 531. NFTC's affiliate, USA-Engage, has similarly cited the unilateral nature of recent United States foreign policy, stating that " [i]n just four years the United States has imposed 61 unilateral economic sanctions on 35 countries J.S. Ex. 28 at NF 320; see also J.S. Ex. 28 at NF 296, 298, 302, 303, 306 (describing specific United States policies toward countries including Burma as "unilateral sanctions"). These statements discredit the NFTC's more recent view that the federal Burma policy is exclusively multilateral. To the contrary, the most reasonable reading of the record is that the United States has chosen to use both unilateral and multilateral tools to achieve reform in Burma. Third, even if the federal policy might be properly termed "multilateral," the mere fact that a state law differs from a federal law, or even imposes additional requirements, does not by itself establish unconstitutional conflict, so long as the state law is broadly consistent with the goals of the federal law. See English v. General Electric Co., 496 U.S. 72, 89 (1990).
Nor may an actual conflict between state and federal policy be established on the thin reed of statements made by a deputy assistant secretary of state to state legislatures after enactment of the federal sanctions. See NFTC Mem. at 38-39. This testimony has no binding legal effect; it is less persuasive than event the hearing testimony discounted by the First Circuit in Philip Morris. Inc., 122 F.3d at 84 n. 39, and the Supreme Court in Wisconsin Public Intervenor, 501 U.S. at 614-15 (finding no actual conflict where frustration of purported federal purpose relied on "little more than snippets of legislative history and policy speculations"). Even if, as these officials suggest, the President "prefers" multilateral sanctions, that fact does not establish that he or Congress has codified such a preference by nullifying state and local laws. In similar circumstances, the Comprehensive Anti-Apartheid Act and Board of Trustees, 592 A.2d at 740-44, showed that even when Congress is aware of state and local restrictions, it does not view them as inconsistent with a multilateral strategy to improve human rights. In both 1980's and 1990's, the selective purchasing laws enacted by state governments show how multilateral action is often sparked by the courageous act of a single State which acts not knowing what course others may take.
Finally, even if the Burma Law had the potential to complicate the administration of federal policy toward Burma, the First Circuit has made clear that there is no preemption even if
the state law is a "perceivable source of irritation," or even where "the potential for serious differences" may "generally complicate unduly" a federal agency's "administration" of its "program." Kargman v. Sullivan , 552 F.2d 1, 10 (1st Cir. 1977). For the reasons stated above, the Massachusetts Burma Law neither irritates nor complicates, but rather complements, the efforts of the federal government. Nothing in the record of this case establishes the type of "hard evidence" of conflict necessary to support preemption. Id.; see Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 131 (1978) (courts will not infer preemption based on speculation; conflict must be real).
In summary, nothing in the text, structure, or history of federal law or executive action shows an intent to deny to States a freedom of choice of purchase that they have previously enjoyed and that private companies continue to enjoy. While the federal law may have balanced human rights and trade, there is no evidence that Congress intended to establish national uniformity of action toward companies that do business with Burma. "Had Congress desired [such] uniformity ... it plainly knew how to accomplish that end. The fact remains, however, that it did not." Philip Morris. Inc., 122 F.3d at 85. In the face of the federal silence and the complete absence of any evidence of actual conflict, "[t]he courts should not assume the role which our system assigns to Congress." Pacific Gas & Electric v. Energy Resources Comm'n, 461 U.S. 190, 223 (1983); see De Canas v. Bica, 424 U.S. 351, 363 (1976)(finding no preemption, even in the predominantly federal area of immigration regulation).
III. THE BURMA LAW DOES NOT VIOLATE THE FOREIGN COMMERCE CLAUSE BECAUSE STATE PROCUREMENT IS "MARKET PARTICIPATION," NOT "REGULATION," AND, IN ANY EVENT, THE LAW DOES NOT DISCRIMINATE AGAINST OR CONFLICT WITH FEDERAL REGULATION OF FOREIGN COMMERCE.
The NFTC also claims that even if federal law does not preempt the Burma Law, the Law is invalid under the Foreign Commerce Clause. NFTC Mem. at 27-36. The Foreign Commerce Clause provides that "[t]he Congress shall have Power [t]o regulate Commerce with foreign Nations." U. S. Const. Art. I, 8, cl. 3. Like the domestic Commerce Clause, "[t]hough phrased as a grant of regulatory power to Congress, the Clause has long been understood to have a 'negative' aspect that denies to the States the power unjustifiably to discriminate against or burden the [international] flow of articles of commerce." Oregon Waste Systems v. Dept. of Environmental Quality, 511 U.S. 93, 98 (1994).
In this case, the Court should enter judgment for the defendants on the NFTC's claim under the Foreign Commerce Clause, because: (1) state procurement of goods and services is "market participation" not subject to the limits on state regulatory action imposed by the Clause; and (2) the Burma Law does not discriminate against or conflict with federal regulation of foreign commerce, and (3) in any event, Congress has passively accepted state and local action such as the Burma Law.
A. State's Decision to Prefer Certain Companies in Its Procurement of Goods and Services is Not Subject to Review under the Foreign Commerce Clause.
The Supreme Court has held that "when a state or local government enters the market as a participant it is not subject to the restraints of the Commerce Clause." White v. Massachusetts Council of Construction Employers Inc., 460 U.S. 204, 208 (1983) (rejecting Commerce Clause challenge to City of Boston requirement that at least 50% of the private workforce on all
construction projects funded wholly by the city must be Boston residents); see Reeves, Inc. v. Stake, 447 U.S. at 436-37 (upholding state law restricting sale of state-produced cement to state residents); Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 810 (1976) (upholding state "bounties" for scrap cars where law favored state residents seeking bounties). The "market participant" doctrine stems from the fact that "[t]here is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market." Reeves, Inc. v. Stake, 447 U.S. at 437. Indeed, in light of the "long recognized right of trader or manufacturer, engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal,"' id. at 438-439 (quoting United States v. Colgate & Co., 250 U.S. 300, 307 (1919)), the Court has reasoned that "when acting as proprietors, States should similarly share existing freedoms from federal constraints, including the inherent limits of the Commerce Clause." Reeves, Inc. v. Stake, 447 U.S. at 439. The doctrine rests on a "healthy regard for federalism and good government" rooted in the powers reserved to the States by the 10th Amendment. Id. at 441. The market participation principle operates at the very threshold of a commerce clause challenge: if the principle applies, both the challenged law's impact on commerce and its justifications are irrelevant; the law is simply immune from judicial veto under the Commerce Clause. See White, 461 U.S. at 210.
Applying these principles, federal and state courts have determined that state and local selective purchasing laws that affect foreign commerce are not subject to review under the Foreign Commerce Clause. See Trojan Technologies. Inc. v. Commonwealth of Pennsylvania, 916 F.2d 903, 909-13 (3d Cir. 1990), cert. denied, 501 U.S. 1212 (1991); Board of Trustees, 562 A.2d at 752; K.S.B. Technical Sales Corp. v. New Jersey District Water Supply Comm'n., 381 A.2d 774, 784-89 (N.J. 1977), app. dismissed 435 U.S. 982 (1978). Professor Tribe has summarized the point as follows:
A distinction must be drawn between state regulations of foreign commerce, and state participation in foreign commerce. The former activity is tightly proscribed by the negative implications of what might be called the foreign commerce clause. Thus, a state or local government that opposed the regime of apartheid in the Union of South Africa could not, absent congressional authorization, enact a measure denying South African companies the privilege of doing business within its jurisdiction; nor could a state or locality forbid its citizens and resident corporations from investing or trading with multinational corporations which have affiliates or subsidiaries in South Africa. But under the Supreme Court's market participant exception to the Commerce Clause, a state would be free to pass laws forbidding investment of the state's pension funds in companies that do business with South Africa, or rules requiring that purchases of goods and services by and for the state government be made only from companies that have divested themselves of South African commercial involvement.
L. Tribe, Constitutional Law (1988 ed.) 6-22, p. 469 (emphasis added).
In imposing a price preference for firms that do not do business with Burma, the Commonwealth of Massachusetts is acting as a market participant. It is exercising the power and discretion that any private actor would enjoy as a matter of contract and property rights -- the power to decide "with whom it will deal." The Burma Law does not exercise the sovereign power that the Commonwealth uniquely enjoys to compel or prohibit private action under the threat of punishment. Under the Law, companies from both the United States and foreign countries remain free to do business with Burma, and citizens of Massachusetts remain free to buy goods and services from such firms. But the Commonwealth of Massachusetts -- in creating new markets for certain goods and services -- will only spend taxpayer dollars under a preference for companies that do no business with Burma. As the Maryland Court of Appeals noted, "just as a private merchant may elect not to deal with companies doing business in [a foreign country] ... [state and local governments] too may make the same choice unhindered by the constraints of the Commerce Clause." Board of Trustees, 562 A.2d at 750.
The NFTC's attempt to avoid the market participant doctrine relies on two points. First, the NFTC argues that the market participant doctrine applies only to claims under the domestic Commerce Clause, not the Foreign Commerce Clause. NFTC Mem. at 31-32. The Supreme Court has not decided this question. See Reeves v. Stake, 447 U.S. at 438 n.9 ("no occasion to explore the limits imposed on state proprietary actions by the foreign commerce Clause"). State and federal appellate courts have nonetheless applied the market participant doctrine to claims under the Foreign Commerce Clause. See Trojan Technologies. Inc., 916 F.2d at 910; Board of Trustees, 562 A.2d at 752 (citations omitted); K.S.B Technical Sales Corp., 381 A.2d at 788. Further, in 1991, in Trojan Technologies, Inc., the United States Department of Justice advised the Third Circuit that the doctrine "does apply to the Foreign Commerce Clause, as well as the Interstate Commerce Clause" because the "rationale for its application is identical -- there is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market." Brief for the United States as Amicus Curiae in No. 90-5057 at 17-18. The United States further stated that whatever the scope of review of the constitutional issue, the Pennsylvania "Buy American" statute was protected by the market participant doctrine. Id. These statements are consistent with the 1986 opinion of the United State Department of Justice, Office of Legal Counsel, which concluded that the market participant doctrine shielded state and local divestment laws concerning South Africa from claims that they violated the Foreign Commerce Clause and the foreign affairs power. See 10 Op. Office of Legal Counsel (O.L.C.) 65, 67-79, 1986 WL 21323 8 (citing opinion as 10 O.L.C 49). In light of these judicial decisions and prior statements of the United States, the Court should hold that the market participant doctrine applies to a claim under the Foreign Commerce Clause.
Second, the NFTC argues that even if the market participant doctrine applies to the
Foreign Commerce Clause, it does not save the Burma Law because "in the ... Law, the Commonwealth is acting to regulate, not simply to participate, in a market." NFTC Mem. at 31, 32-36 (citing Gould, 475 U.S. at 283, 289). The NFTC asserts that "while the law employs the Commonwealth's purchasing power to effectuate its ends, [it] is quite evidently an effort to regulate not only the relationship between Myanmar and certain companies, but also the domestic policies of Myanmar itself." NFTC Mem. at 32.
This argument is factually and legally incorrect, and the Court should reject it. The nature of the Burma Law -- a price preference applied to state procurement of goods and services -- demonstrates that it is the act of a market participant, not a market regulator. In its purchases of goods and services, the Commonwealth not only enters a market -- it creates one. Immunity for such purchases follows directly from the immunity granted by the Supreme Court to the state purchases of auto hulks in Hughes and the choice of state's choice of potential buyers of state cement in Reeves, in each case, the state government does not regulate private conduct but simply decides "with whom it will deal." Reeves, 447 U.S. at 438-39; cf. Camps Newfound/Owatonna v. Town of Harrison, 117 S. Ct. 1590,1607 (1997) (state tax exemption not immune from Commerce Clause review where there is no "direct state involvement in the market"; distinguishing state "purchase or sale" of goods).
Nor do the intended effects of a selective purchasing law on foreign commerce convert procurement from a proprietary function into a regulatory one. In the similar context of "the divestment of municipally administered pension funds, the City of Baltimore acted as a market participant even though its actions had consequences for foreign commerce.. . . [because the] Ordinances d[id] not attempt to interfere with private, commercial transactions between persons engaged in foreign commerce." Board of Trustees, 562 A.2d at 753. Likewise in K.S.A. Sales and Trojan Technologies, Inc. the "Buy American" laws included a preference for American goods that had the effect of reducing purchases in foreign commerce, but this effect did not convert the laws into "regulatory" measures. These decisions are consistent with decisions of the Supreme Court which have deemed state action to be proprietary even where the stated or obvious purpose of the law was to achieve goals unrelated to the State or local government's economic self-interest. See Hughes, 426 U.S. at 814 (environmental concerns). In Hughes and Reeves, "[the States] did not enter a presumably unmanipulable market with the profitmaximizing goals implied in the phrase 'market participation.' Instead, the States intended their entrances to affect the flow of commerce so as to enhance public values -- improvement of the environment or increased supply of a needed product at the expense of the state as a business." L. Tribe, Constitutional Choices (1985) at 144-46 (emphasis in original). Likewise, state purchases intended to achieve reform in Burma do not constitute "regulation" of the Burmese government or its contractors or other supporters.
Nothing in South-Central Timber Development, Inc. v. Wunnicke, 467 U.S. 82 (1984), suggests that the Burma Law is a regulatory measure. In Wunnicke, a plurality of the Court held that the market participant doctrine did not protect a discriminatory restriction imposed by Alaska, which required purchasers of state-owned timber to process the logs within the State. The plurality reasoned that this additional restriction on private activity reached beyond the immediate market in which the State was participating -- the sale of its timber -- and that for purposes of applying the market participant doctrine, the "market" must be "relatively narrowly defined." Id. at 97-98. However, the Court also emphasized that the State was attempting to impose an additional downstream restriction, going beyond what sellers, who in the ordinary course of commercial endeavor have no continuing interest in the product once it is sold, traditionally do. Id. at 98-99.
By contrast, the Commonwealth of Massachusetts is the ultimate purchaser of all goods and services covered by the Burma Law, and purchasers traditionally do "decide with whom they will deal," even if that affects secondary upstream markets. Indeed, given that White accepted an upstream restriction on whom private contractors can hire, a selective purchasing law could not possibly be invalid simply because it might affect secondary upstream markets. Like the Baltimore divestment ordinance and the "Buy American" laws, the Burma Law places no "restriction on private economic activity [which] takes place after the completion of the parties' direct commercial obligation." Board of Trustees,562 A.2d at 752 (quoting South Central Timber, 467 U.S. at 99). Like the restriction in White, the Burma Law imposes a condition precedent on companies who are competing for state contracts and thus "cover[s] a discrete, identifiable class of economic activity in which the State is a major participant." 460 U.S. at 211
n.7.
Nor do the cases decided under the National Labor Relations Act (NLRA) cited by the NFTC restrict the scope of the exemption from the Commerce Clause at issue here. See NFTC Mem. at 34-36. Each of these cases concerned the scope of the preemption of the NLRA, not the scope of the Commerce Clause. Thus, the Court in Gould held that "the market participant doctrine reflects the particular concerns underlying the Commerce Clause, not any general notion regarding the necessary extent of state power in areas where Congress has acted." 475 U.S. at 289 (emphasis added). Emphasizing that "what the Commerce Clause would permit States to do in the absence of the NLRA is thus an entirely different question from what the States may do with the Act in place," the Court held that in enacting the NLRA, Congress intended to prohibit the States from interfering in any way with the "interrelated federal scheme of law, remedy, and administration." Id. (citations omitted). The NFTC relies on a single sentence in Gould, which stated that "for all practical purposes, Wisconsin's debarment scheme is tantamount to regulation." Id. But this sentence merely shows that the Court viewed the Wisconsin statute as a "regulation" (under the NLRA) because it specifically linked the State's decisions to violations of the NLRA, and punished companies for past violations. The Burma Act does not depend for its operation on reference to a federal regulatory scheme -- indeed, the OCCA creates no such scheme. Moreover, unlike the Wisconsin scheme, the Burma Act does not disqualify companies from eligibility for state contracts on the basis of past actions, but rather makes continuing, unrestricted eligibility of the companies subject to certain conditions with which they can comply. Thus, the Burma Act does not operate like the statute in 000, but rather like the statute at issue in White. See Gould, 475 U.S. at 289 (reaffirming White); Board of Trustees, 562 A.2d at 751 (distinguishing Gould); 10 Dep't of Justice, Op. Office of Legal Counsel 65, 77-79 (same).
Likewise, nothing in the other NLRA cases cited by the NFTC establishes that the Supreme Court would consider the conditions on a contract imposed by the Burma Law to be regulation under the Commerce Clause. Building & Constr. Trades Council v. Associated Builders & Contractors, 507 U.S. 218 (1993), and Chamber of Commerce v. Reich, 74 F.3d 1322, 1336 (D.C. Cir. 1996), are distinguishable on the same ground articulated in Gould: the difference between the market participation doctrine and preemption analysis under the NLRA. Gould reaffirmed -- and nothing in Building & Constr. Trades Council and Chamber of Commerce undercut -- the principle that the Commerce Clause is not intended to "limit the ability of the States themselves to operate freely in the free market," and emphasized that the NLRA, in contrast, was intended "in large part to entrust the administration of the labor policy for the Nation to a centralized administrative agency." 475 U.S. at 289-90 (quotation omitted). Absent express action by Congress, selective purchasing laws -- even those with foreign resonances -- must be held to be "a task that Congress intended to leave to the States." Id. at 291. The "proprietary" functions of the States should be construed more broadly where, as here, Congress has not expressly preempted state action on the same subject; there is no actual conflict between state and federal law; and the question is solely whether the concerns that underlie the dormant Foreign Commerce Clause apply at all to a particular exercise of state power.
Finally, there is no merit to the claim that the Burma Law is "regulatory" because it is not "action that a private purchaser of services would take." NFTC Mem. at 35. This claim is flatly contradicted by the fact that private companies have repeatedly conducted their own "selective purchasing" in recent years. See United States Department of Labor, The Apparel Industry Codes of Conduct: A Solution to the International Child Labor Problem? (1996) at 124-207 (J.S. 61 and Ex. 29). Private companies "are beginning to accept responsibility for labor practices and human rights abuses of their foreign subcontractors." Debora L. Spar, The Spotlight and the Bottom Line -- How Multinationals Export Human Rights, 77 Foreign Affairs (March/April 1998) at 7. In 1995, the "Clinton Administration encouraged United States corporations and organizations to develop their own voluntary codes of conduct for their foreign operations." Dept. of Labor, supra, J.S. Ex. 29 at 13 n. 16. NFTC members Levi Strauss and Liz Claiborne have established codes of conduct that define decent and humane working conditions. See id. at 8, 155-157, 161-162. In fact, these two companies have withdrawn from Burma, citing human rights concerns. J.S. Ex. 30, 31. These voluntary codes of conduct and withdrawals from Burma -- which establish and apply human rights criteria for the selective purchase of goods and services -- show that private companies act on the same ethical grounds as States. The fact that the Burma Law rests in part on the same values that have spurred private companies to leave or criticize the Burmese government shows that the Commonwealth through the Law has within the free market and thus beyond the reach of the Foreign Commerce Clause.
B. The Burma Law On its Face Applies Equally to United States and Foreign Companies and Does Not Otherwise Discriminate Against Foreign Commerce.
Even if the Court holds that the Burma Law is subject to review under the Foreign Commerce Clause, it should reject the NFTC's claim that the Law discriminates against foreign commerce. See NFTC Mem. at 28-29. The Law applies equally to United States and foreign companies and does not otherwise discriminate.
The Burma Law does not place burdens on citizens of foreign states greater am those imposed on citizens of Massachusetts or other States of the United States. The Burma Law applies to Massachusetts firms doing business with Burma as well as foreign firms doing business there. Each firm -- domestic or foreign -- that wishes to supply goods and services to the Commonwealth is treated the same. The Burma Law is therefore distinguishable from laws that discriminate against all foreign commerce. See, Kraft General Foods, Inc. v. Iowa Dep't of Revenue, 505 U.S. 71, 75-77 (1992).
The NFTC argues that the Foreign Commerce Clause prohibits a state law that singles out for adverse treatment commerce with a single foreign nation. This is an ambitious argument where Congress and the President have repeatedly imposed sanctions on the same nation for its gross violations of human rights. There is no basis for such an argument where the Massachusetts Legislature "clearly did not intend to secure economic advantages for local businesses at the expense of businesses situated elsewhere." Board of Trustees, 562 A.2d at 754 (divestment ordinance concerning South Africa did not discriminate). As Maryland's highest court observed, even a state law that singles out a foreign country does not violate the Foreign Commerce Clause unless it discriminates "in favor of in-state interests." Id. at 754 n. 56 (citations omitted). This judgment is supported by the principle that the Commerce "Clause protects the interstate market, not particular interstate firms" and does not prohibit a state law that "causes some business to shift from one interstate supplier to another." Exxon Corp. v. Governor of Maryland, 437 U.S. 117,127 (1978). In Massachusetts, any domestic or foreign firm that does no business with Burma may bid to supply goods and services to the Commonwealth without regard to the Burma Law. Even if the Law causes some state business to shift from one international supplier to another, this effect would not show unconstitutional discrimination. See id. Since the Burma Law does not discriminate against foreign commerce and in favor of in-state or United States interests, it is distinguishable from the laws struck down in the cases cited by the NFTC, each of which favored in-state or United States interests. See NFTC Mem. at 29. For these reasons, the Burma Law does not discriminate in violation of the Foreign Commerce Clause.
C. The Burma Law Does Not Prevent the Federal Government from "Speaking with One Voice" in Its Regulation of Foreign Commerce; Indeed, the Chorus of Federal, State, and Local Voices Now Raised in Support of Human Rights in Burma Show that Congress has Accepted a State and Local Role.
The NFTC next argues that the Burma Law violates the Foreign Commerce Clause because it "significantly impairs the ability of the federal government to 'speak with one voice when regulating commercial relations with foreign governments.'" NFTC Mem. at 29-31 (quoting Japan Lines, Ltd. v. County of Los Angeles, 441 U.S. 434 (1979)). The Court should reject this claim because (1) Congress has passively indicated that laws such as the Burma Law do not impair federal uniformity in an area of foreign relations where uniformity is essential, and (2) the Burma Law has cued, not thwarted, the expression of federal policy, and the chorus of
state and local voices raised against the denial of human rights in Burma shows that Congress has accepted a state and local role.
The NFTC's "one voice" argument relies heavily on Japan Lines, which struck down California's ad valorem property tax on containers. The NFTC ignores, however, more recent cases upholding state laws that affected foreign commerce where Congress could have but did not act to preempt. In Barclays Bank v. Franchise Tax Board, 512 U.S. 298 (1994), the Court upheld the California "worldwide unitary" method of taxing multinational corporations, relying on Congressional failure to act to preempt. Id. at 324, 329. The Court noted that the Constitution allocated to Congress the power to establish uniformity -- to "speak with one voice" -- if it wished to do so. Id. at 324. Where Congress had declined to suppress state taxation, however, the Court would not protect uniformity, even where the Executive Branch had consistently urged Congress to preempt. Id. at 324-331. Nor was express Congressional approval of state law required for the Court to uphold the law: under the "one-voice" prong of review under the Foreign Commerce Clause, "Congress may more passively indicate that certain state practices do not 'impair federal uniformity in an area where federal uniformity is essential;' ... it need not convey its intent with the unmistakable clarity required to permit state regulation that discriminated against interstate commerce or otherwise falls short under Complete Auto inspection." Id. at 323; see Wardair Canada. Inc. v. Florida Dep't of Revenue, 477 U.S. 1, 12-13 (1986) (state law did not interfere with ability of federal government to speak with one voice, even where federal government had entered into international conventions related to subject matter); Container Corp. of America v. Franchise Tax Board, 463 U.S. 159 (1983) (fact that Congress had not preempted certain method of state taxation of multinational companies shows that State had not undermined any federal policy of uniform treatment of such companies); Trojan Technologies, 916 F.2d at 912 (where "Congress is aware of state activity to restrict procurement ... and yet has not yet imposed a policy of national uniformity ... state procurement policy fits comfortably within the Supreme Court's observation that nothing in the Foreign Commerce, Clause insists the Federal Government speak with any particular voice"); cf. National Kerosene Heater Ass'n v. Commonwealth of Massachusetts, 653 F. Supp. 1079, 109495 (D. Mass. 1986) (decision by relevant federal agency "not to regulate [a product] places beyond dispute the conclusion that the [State] statute does not impermissibly interfere with any required uniformity" under the Commerce Clause).
In this case, when Congress authorized sanctions three months after enactment of the Burma Law in 1996, it did not expressly preempt state laws. See Arg. I, above. See Wardair, 477 U.S. at 7-13 (where Congress acts and does not preempt, no further scrutiny under dormant Foreign Commerce Clause required; to require state to show more would turn application of dormant clause "upside down"). And when Europe and Japan complained about the Burma Law at the World Trade Organization, the unanimous congressional delegation from Massachusetts wrote to the Prime Minister of Japan, objecting to the Japanese complaint and defending the Law as the "internal affair[] of Massachusetts." J.S. Ex. 34.
The words and deeds of the Executive Branch further show that Congress has passively accepted state selective purchasing laws. Regarding Burma (1) the President has imposed unilateral federal sanctions against Burma; (2) the United States Trade Representative has pledged a strong defense of the Massachusetts Burma Law at the World Trade Organization, stating that the economic effect of the law on Europe is "nil" (J.S. Ex. 33); and (3) the United States has not exercised its right to sue Massachusetts and claim that the Burma Law violates the GATT. While some State Department officials have expressed reservations about the wisdom of state and local laws, these "Executive Branch actions ... [which] are merely precatory ... [and which] lack the force of law cannot render unconstitutional" an "otherwise valid, congressionally condoned," state law. Barclays, 512 U.S. at 329-330. Moreover, the legal effect of these comments must also be viewed in light of the 1986 Opinion of the Department of Justice Office of Legal Counsel and the brief filed in Trojan Technologies in 1991, upholding, respectively, state and local procurement laws on South Africa and American products. These federal actions likely reflect the fact that "[s]tate procurement practices" by their nature "present no problems of reconciling conflicting policy among multiple national sovereigns." Trojan Technologies, 916 F.2d at 912. In view of the federal statements on Burma and selective purchasing, the Court should conclude that, as in Barclays Bank, the federal government has passively exercised its sovereign authority to allow the States to exercise their concurrent power to affect foreign affairs and has determined that such state action does- not impair any essential federal uniformity in the area. If Congress believes that state or local action harms national policy, it may act to ensure that only one voice -- that of the federal government -- is heard. In the absence of express preemptive action, however, the Burma Law does not violate the Foreign Commerce Clause.
IV. THE BURMA LAW DOES NOT INTERFERE WITH THE POWER OF THE FEDERAL GOVERNMENT TO CONDUCT FOREIGN RELATIONS.
The NFTC also claims that the Burma Law is unconstitutional because it "impermissibly intrudes on the federal government's exclusive foreign affairs powers . . . . " NFTC Mem. at 15, 16-27. The Court should reject this claim because (1) the Constitution permits state actions that indirectly affect foreign affairs, even where such actions are intended to influence the conduct of a foreign government; (2) the Burma Law does not establish contact between Massachusetts and the Government of Burma and the effects of the Law on foreign affairs are indirect; (3) any effect of the Burma Law on foreign affairs is justified by the importance of the state interests promoted by the law -- interests embodied in the First and Tenth Amendments; and (4) the vagueness of the "dormant foreign affairs power" invoked by the NFTC shows that the Court should leave the nullification of state procurement laws to the political branches or apply a "market participation" exception to that power.
The NFTC labors to establish that the federal government has "exclusive authority" to "conduct foreign relations." NFTC Mem. at 15-19. This case, however, does not implicate the federal power to conduct foreign relations but rather state power to affect foreign affairs. "[D]espite careless, flat statements to the contrary, the foreign relations of the United States are not in fact wholly insulated from the states." L. Henkin, Foreign Affairs and the Constitution (1996 ed.) at 150. "In the governance of their affairs, states have variously and inevitably impinged on United States foreign relations." Id. at 162. "They regulate and tax commerce with foreign nations. They regulate the rights of foreign nationals resident or present in their territory." Id.
The exercise of these powers by the States reflects the allocation of powers made by the Framers. The Constitution does not expressly grant exclusive power to conduct foreign policy to the federal government or deny general power to affect foreign affairs to the States. Indeed, the Constitution does not even use the term "foreign relations," "foreign policy," or "foreign affairs." Instead, it grants certain powers to the federal government and denies certain powers to the States, reserving to the States in the 10th Amendment all those powers not granted or denied. For example, the Constitution makes the President Commander in Chief of the armed forces of the United States and authorizes him to enter into treaties and to appoint and receive ambassadors. U.S. Const. art. II, 2. Congress is given authority to regulate foreign commerce, to define offenses against the law of nations and to declare war. Art. I, 8. The States are denied specific powers, eg., to declare war, enter into treaties, violate treaties, or levy duties on imports or exports. Art. I, 10, cls. 1-3.
Other parts of the Constitution imply that the Framers expected that state governments would conduct or affect at least some aspects of relations with foreign governments. No provision of the Constitution expressly prohibits the use of state regulatory or proprietary power that merely affects foreign affairs or is intended to influence the conduct of foreign governments. The text of the Constitution therefore supports the view of the defendants that the Framers did not impliedly nullify any and all actions of the States that affect foreign affairs. Instead, the Framers authorized the federal government to exercise power under Articles I and II and made that power plenary through the Supremacy Clause. Where the federal government deems exclusivity essential, it may act to preempt state law. The fact that the Constitution may give the federal government the last word on foreign affairs, however, does not mean that it has the only word.
A. Federal and State Courts and the Department of Justice have Correctly Distinguished Selective Purchasing Laws from the State Law Struck Down in Zschernig v. Miller.
In the absence of express authority for an exclusive federal power, the NFTC invokes the broad federal power to conduct foreign affairs described in Zschernig v. Miller, 389 U.S. 429 (1968). Zschernig represents the only time that the Supreme Court has employed this general power to strike down an exercise of state police power that affected foreign affairs. The case remains "a unique statement and a sole application of constitutional doctrine." Henkin, supra, at 165. In this case, the Court should follow the lower federal and state courts that have distinguished selective purchasing laws from the Oregon inheritance statute involved in Zschernig.
In Zschernig, the Court struck down the Oregon statute even though, as the federal government itself admitted, the statute did not conflict with any federal treaty or statute. The Oregon statute provided that a nonresident alien could not inherit property from an Oregon decedent unless three conditions were satisfied: (1) the alien's government must accord Americans the right to inherit on equal terms with its citizens; (2) the alien's government must give Americans the right to receive payment in the United States of funds from foreign estates; and (3) the nonresident alien must be able to receive "the benefit, use or control" of the proceeds of the Oregon estate "without confiscation" by his government. The Court concluded that this type of probate law as enforced in the Oregon courts had "a direct impact on foreign relations and may well adversely affect the power of the central government to deal with those problems." Id. at 441. The Court stressed that the federal government's foreign policy prerogatives were offended because the state courts made persistent inquiries into the actual administration of foreign laws and in doing so questioned the credibility of foreign officials and made ad hoc decisions based on "foreign policy attitudes" toward particular governments. See 429 U.S. at 437 ("As one reads the Oregon decisions, it seems that foreign policy attitudes, the freezing or thawing of the 'cold war' and the like are the real desiderata.").
Zschernig establishes only that the Supreme Court will review state laws to identify those that have a "direct impact on foreign relations"; it does not establish that the Constitution proscribes any law that has some indirect impact on foreign affairs or that is intended to affect the behavior of foreign governments. Zschernig did not overrule Clark v. Allen, 331 U.S. 503 (1947), which upheld the facial validity of a California statute similar to the first two sections of the Oregon law. Although the California statute was clearly designed to influence foreign countries to change their laws to allow Americans to inherit, the Court dismissed the claim against the law as "farfetched." Id. at 517. Emphasizing that "rights of succession" were peculiarly a matter of local law, the Court agreed that "[w]hat California has done will have some incidental or indirect effect in foreign countries," but concluded "that is true of many state laws which none would claim cross the forbidden line." Id.
Read together, Zschernig and Clark suggest that the Court will measure state laws that affect foreign affairs under a balancing test which weighs the degree of such effects against the importance of the local function. In both Clark and Zschernig, states were performing a traditional state function in enacting rules of inheritance. What distinguished the cases was that the California statute in Clark had only an indirect influence on foreign affairs because the state legislature's judgment could be implemented simply through the "routine reading of foreign law." Zschernig, 389 U.S. at 433. The Oregon statute, on the other hand, by forcing state courts to assess the actual operation of foreign laws, allowed state courts to evaluate the credibility of foreign representatives and engage in persistent "judicial criticism" of foreign states - actions that are outside the state court's ordinary competence and which have a direct impact on foreign relations. See generally, Henkin, supra at 163-165. Federal and state courts and the Department of Justice have correctly distinguished Zschernig v. Miller on these grounds and upheld state and local procurement laws against similar constitutional claims. See Trojan Technologies, Inc., 916 F.2d at 913-914; Board of Trustees, 562 A.2d at 744-749; K.S.B. Technical Sales, 381 A.2d at 782-784; 10 Op. Office of Legal Counsel (O.L.C.) 65, 81-84; Brief for the United States as Amicus Curiae in Trojan Technologies, No. 90-5057 at 20-22. The Court should follow these precedents and uphold the Burma Law.
B. The Burma Law Does Not Interfere with the Conduct of American Foreign Relations Toward Burma and Any Effects of the Law on Foreign Affairs Are Indirect.
The Burma Law is constitutional under Zschernig and Clark because it does not interfere with the conduct of American foreign policy toward Burma and its impact on foreign affairs is indirect. The Burma Law does not, for example, establish any contact whatsoever between Massachusetts and the Government of Burma. It is broadly consistent with federal sanctions on Burma, which seek to improve the human rights of the people living there. Like the statute in Clark, and unlike the statute in Zschernig, the implementation of the Burma Law does not require repeated decisions by state officials about the operation of Burmese law or the credibility of Burmese officials. See Fisher Aff. 14; J.S. 21. While supporters of the Law (as well as the NFTC, Compl. 23) have deplored the human rights record of the Burmese government, these views do not render the Law unconstitutional. Zschernig does not foreclose all "actions involving substantive judgments about foreign nations": "a single general decision" about a nation is "beyond the scope of Zschernig." Board of Trustees, 562 A.2d at 745-746 (upholding such a decision where the divestment statute had few if any exceptions and required withdrawal from existing investments). Furthermore, even the alleged effects of the Burma Law (Compl. 20-22, 4046; NFTC Mem. at 8-10) fall directly on American and foreign companies and only indirectly on the Government of Burma. Indeed, the effects of such laws are so indirect that the NFTC has elsewhere maintained that so-called "unilateral sanctions" have had "no success" in any country and "only make a statement without any impact." J.S. Ex. 28 at NF 311, 318, 359. In light of these statements, the Court should reject the NFTC's current claim that the ten percent price preference imposed by the Burma Law interferes with the conduct of American foreign relations. Cf. Arthur D. Little. Inc. v. Comm'r of Health & Hospitals of Cambridge, 395 Mass. 535, 545-48, 481 N.E.2d 441, 448-49 (1985) (city regulation prohibiting testing, storage, and disposal of chemical warfare agents not ousted by federal war and defense powers).
Nor do (1) the recent statements by some federal executive officials or (2) complaints by other countries under GATT establish that the Burma Law interferes with the conduct of American foreign policy. See NFTC Mem. at 10- 12. First, the recent executive statements cited by the NFTC conflict with the legal positions taken by the United States in 1986 (by the Office of Legal Counsel) and 1991 (in Trojan Technologies) regarding selective purchasing laws. Second, the Court in Barclays Bank rejected a similar reliance on "Executive statements criticizing" state action and "object[ions]" by "[m]ost of the United States trading partners." 512 U.S. at 324 n.22 and 330 n.32 (majority opinion) and 337 (O'Connor, J., dissenting). Mere statements of executive officials and trading partners cannot- substitute for hard evidence of interference with the conduct of American foreign policy. See Zschernig, 389 U.S. at 443 (Stewart, J., concurring) ("[r]esolution of fundamental a constitutional issue cannot vary from day to day with the shifting winds at the State Department"); see J.S. Ex. 33 (USTR pledges strong defense of Burma Law at WTO).
Second, the fact that certain countries have complained that the Burma Law interferes with their foreign policies does not show that the Law is unconstitutional. As defendants show above (n. 11), Congress has through GATT purported to subject state laws to review by the World Trade Organization, and should thus be held to have accepted -- if not virtually ensured -- that foreign countries will complain about such laws and contact state officials in efforts to secure repeal. If more than "one voice" is heard in response to these complaints, that is merely the foreseeable consequence of the free trade laws supported by the NFTC, not interference with a federal foreign policy that has imposed sanctions on Burma. If the federal government wishes to end such contacts, it can bring an action against a State under P.L. 103465, 102 (b) (2). In such an action, any previous decision by the WTO against a State on the same state law would not be binding on this Court; a fortiori, mere allegations by foreign governments cannot establish a violation of the Constitution. For all of these reasons, even under the broadest reading of the "foreign affairs power" invoked by the NFTC, the Burma Law does not unconstitutionally interfere with the federal government's conduct of foreign policy.
. C. Any Impact on Foreign Affairs Is Justified By the
Important State Interests Promoted By the Law -
Interests Embodied in the First and Tenth
Amendments.
Whatever the impact of the Burma Law on foreign affairs, the Law satisfies even the
balancing test applied in Zschemig because it promotes important state interests embodied in the First and Tenth Amendments. First, the state procurement governed by the Burma Law lies at the core of state sovereignty. Procurement is a vital -- not an elective -- state function. While States do not need reciprocity clauses in their probate statutes, they do need to procure goods and services on some terms. The choice of contractual terms is one reserved to the States by the Tenth Amendment; the reservation of this important state power requires the Court to temper its application of the unenumerate "foreign affairs" power invoked by the NFTC.
Second, the Burma Law is a statement by the citizens of Massachusetts expressing their moral opposition to the conduct of the Burmese regime toward its people. Similar moral statements were made by citizens of the States in the 1980's regarding South Africa. Ultimately, twenty-three states, 14 countries, and 80 cities enacted divestment or procurement legislation directed at South Africa. See Richard B. Bilder, The Role of States and Cities in Foreign Relations, 83 Am. J. Int'l Law 821 (1989). These statements of the people acting collectively through their governments have been correctly described as embodying values protected by the First Amendment. See id. at 826-829; Andrea L. McCardle, In Defense of State and Local Government Anti-Apartheid Measures: Infusing Democratic Values into Foreign Policymaking, 62 Temple L. Rev. 813, 831-35 (1989). Whether or not a state or local government qua government actually has rights of speech enforceable under the First Amendment, the purpose and spirit of the First Amendment are embodied in selective purchasing laws (and corporate codes of conduct). See NAACP v. Claiborne Hardware Co., 458 U.S. 886, 907 (1982) (First Amendment protects consumer boycotts). The Massachusetts Burma Law -- like its 1980's predecessor for South Africa -- has cued a chorus of citizens speaking out for human rights through their state and local governments. The Law -- like its predecessor -- echoes the historical concerns of the citizens of Massachusetts for human rights. It was a son of Massachusetts who asked the people of all the States to "pay any price, bear any burden, [and] meet any hardship . . . to assure the survival and success of liberty." In this case, even the members of NFTC who wish to stay in Burma consider the actions of the regime "condemnable." Compl. 23. Through the Burma Law the people of Massachusetts have expressed their own desire to promote the cause of freedom in Burma. The constitutional values embodied in this moral statement outweigh any effect of the Law on foreign affairs.
D. The Vagueness of the Dormant Foreign Affairs Power Invoked by the NFTC Suggests That the Court Should (1) Leave the Nullification of State Procurement Laws to the Political Branches, or (2) Apply a "Market Participant" Exception to That Power.
The holding urged by the NFTC is remarkable for its vagueness. The NFTC variously argues that the Burma Law is unconstitutional because it "affect[s] foreign policy" (Mem. at 15); "affect[s] foreign affairs" (id.); and "intrudes on the ... exclusive foreign affairs power[]." Id.
Elsewhere the NFTC appears to invoke the language in Zschernig that disapproves laws that "have more than an 'indirect or incidental effect in foreign countries' or that have 'great potential for disruption or embarrassment . . . .'" NFTC Mem. at 19 (quoting Zschernig, 389 U.S. at 434-35). Nothing in the NFTC's memorandum, however, even attempts to explain how courts should draw the line between constitutionally permitted or prohibited state and local action. Nothing addresses whether a state or local government may, for example, pass a resolution condemning a foreign regime; pass a resolution urging its citizens to boycott companies that do business in a particular foreign country; enact a selective purchasing or divestment law that does not state an intention to influence a foreign government, but merely an intention to disassociate from it; or enact a selective purchasing law that determines whether a private company has complied with its own voluntary code of conduct for procurement of goods and services. Instead of explaining its vague balancing test, the NFTC simply employs the same "careless, flat statements" criticized by Professor Henkin. The confusion created by these smoky beacons suggests that the Court should leave the nullification of state laws to the political branches, where the federal foreign relations power is lodged.
The unworkability of the rule pressed by the NFTC is further shown by the numerous actions of state governments and private companies that "affect" foreign affairs. The terms "foreign affairs" and "foreign relations" now describe many more topics then at the end of the 18th century; improvements in communication and transportation have inevitably married the States with foreign nations, for better or worse. Countless state and local laws affect foreign business people, traders, investors, and tourists. The Commonwealth of Massachusetts maintains twenty-three "sister-state" and other bilateral agreements with sub-national foreign governments and trade promotion organizations. See Aff. of Kathleen Molony 4, filed herewith. Many other states have similar programs. Henkin, supra at 426-27 n.26; Bilder, supra at 822; Brenda S. Beerman, State Involvement in the Promotion of Export Trade, 21 N.C. J. Int'l. L. & Com. Reg. 187, 202 -220 (1995). The Commonwealth also routinely helps companies "increase their business in international markets" by maintaining overseas trade offices and introducing businesses to officials of foreign governments. Molony Aff. 2. Massachusetts has organized foreign trade missions attended by Digital Corp. and Gillette Co., two members of the Board of Directors of the NFTC. Id. 3; J.S. Ex. 3. These companies are pleased to benefit from actions by Massachusetts that "affect" or "seek to influence" foreign governments or commerce when the actions increase profits. However, when state action might decrease profits, the same companies through the NFTC want the judiciary to preempt the State even where Congress has not. These inconsistent positions shows that the Burma Law does not usurp federal power but rather applies a traditional state power -- procurement -- to a changing world in which the lines between national and state and foreign and domestic concerns are much less clear than in 1787.
The foreign activities of private companies underscore the same point. Members of the NFTC admit that they "directly encourage legal reforms" in foreign countries and "present" "positions ... to international organizations." J.S. 48, Ex. 28 at NF 006, 314. Members of NFTC conduct their own "selective purchasing" through voluntary codes of conduct that govern their purchases from contractors and sub-contractors in foreign countries. See Arg. III.A, above. Some of the codes specifically refer to laws imposed on employers by host countries, and punish suppliers who violate these laws. See Dept. of Labor, supra, J.S. Ex. 29 at iv, 35, 60, 128, 130, 131, 133, and 185. These punishments are private boycotts which present at least the same risk of "more than an indirect or incidental effect in foreign countries" as that presented by state and local laws. See NFTC Mem. at 19. While the Constitution may not proscribe these private boycotts, the actions of NFTC members around the world show that in the modern era the federal government has no monopoly on action with foreign resonances, and that Congress has tolerated a wide range of non-federal activities that generally affect foreign affairs or are intended specifically to end human rights abuses by foreign governments or firms.
The overbreadth of the rule urged by the NFTC suggests that the Court should leave the nullification of state laws to the political branches. See Regan v. Wald, 468 U.S. 222, 242 (1984) (noting "classical deference to the political branches in matters of foreign policy"); Drinan v. Nixon, 364 F. Supp. at 856. The political branches are well equipped to protect plenary federal power over foreign policy. Accordingly, the Court should limit itself to deciding whether a state law conflicts with a specific federal law or clause of the Constitution. In the absence of preemptive federal action, the judiciary should not balance federal and state interests in such sensitive areas. See Barclays, 512 U.S. at 328 ("The judiciary is not vested with power to decide how to balance a particular risk of retaliation [by foreign countries] against the sovereign right of the Untied States as a whole to let the States tax as they please.") (quotation omitted).
Finally, the unworkability of the general rule pressed by the NFTC suggests that the Court should apply the market participant doctrine to exempt proprietorial state action such as the Burma Law. As defendants explain in Arg. III.A, above, the doctrine applies to claims under the Foreign Commerce Clause. It should apply as well to similar claim made under the principle of Zschernig. Any constitutional principle invoked to preempt state exercise of proprietary power must be analyzed to determine whether the principle was specifically aimed at constraining proprietary power. Cf. Gould, 475 U.S. at 289-291 (market participant doctrine does not apply to preemption analysis under NLRA because comprehensive regulatory scheme reflects intent to prevent certain state action; Commerce Clause does not interfere in and of itself with power of the States to contract freely in the market). In the absence of any such intent, it is inappropriate to strike down a state's exercise of proprietary power unless Congress act to regulate the States as market participants in the same way that it regulates private participants.
The historical basis for plenary federal power over foreign relations does not imply the displacement of state proprietary power. The Framers were primarily concerned with congressional control over the exercise of state regulatory power affecting foreign affairs -particularly tariffs. See The Federalist No. 22, at 144 (C. Rossiter ed. 1961); id. No. 23 at 153. At the same time, they understood the power of any corporate entity, private or public, to deal with whomever it chooses. See Perkins v. Lukens Steel Co., 310 U.S. 113,127(1940). They knew the different effects on foreign affairs likely produced by regulatory and proprietary action -- the direct effects of, e.g., a prohibition on contact between a State's domestic corporations and a foreign country, and the indirect effects of a law such as the Burma Law, which leave the ultimate decision whether to continue to do business in the foreign country with the corporations themselves. In light of the nature of the foreign affairs power and state selective purchasing laws, the Court should apply the market participant doctrine to sustain the Massachusetts Burma Law in this case. See Trojan Technologies. Inc. v. Comm. of Pennsylvania, 742 F. Supp. 900, 903 (M.D. Pa. 1990), aff d, 916 F.2d 903 (3d Cir. 1990), cert. denied, 501 U.S. 1212 (199 1); 10 Op. Office of Legal Counsel, Dep't of Justice at 84-86.
CONCLUSION
For the reasons stated above, the Court should (1) dismiss the complaint for lack of standing, or (2) enter summary judgment for the defendants and declare that the Massachusetts Burma Law is constitutional.
CHARLES D. BAKER
PHILMORE ANDERSON
Respectfully submitted,
SCOTT HARSHBARGER
ATTORNEY GENERAL
_________________________
Thomas A. Barnico
Assistant Attorney General
Government Bureau
One Ashburton Place
Boston, MA 02108
Dated: July 27, 1998 (617) 727-2200, ext. 2086
CERTIFICATE OF SERVICE
I hereby certify that a true copy of the above
document was served upon the attorney of
record for each other party by mail (by hand) on 7/27/98
Chapter 130. AN ACT REGULATING STATE CONTRACTS WITH COMPANIES DOING BUSINESS WITH OR IN BURMA (MYANMAR).
Be it enacted. etc., as follows:
SECTION 1. Chapter 7 of the General Laws is hereby amended by inserting after section 22F. as appearing in the 1994 Official Edition, the following seven sections:-
Section 22G. For the purposes of sections twenty-two H to twenty-two M, inclusive, the following words shall, unless the context indicates otherwise, have the following meanings:-
"Comparable low bid or offer", a responsive and responsible bid or offer which is no more than ten percent greater than the lowest bid or offer submitted for goods or a service.
"Distribution agreement", an agreement to guarantee a contract for the supply of goods or a service.
Chap. 130
"Doing business with Bu