What are the constitutional or other limits on Congressional authority to limit lawsuits that seek to hold businesses liable for COVID-19 exposure or other COVID-19-related claims? What identifiable federal interests are at stake? How do these interests interact with state police powers? These and other questions will be discussed on our Teleforum.
Mr. Michael A. Carvin, Partner, Jones Day
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Dean Reuter: Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at fedsoc.org.
Dean Reuter: Welcome to The Federalist Society's Practice Group Teleforum conference call as today, May 26, 2020, we discuss “Federal Liability Limitations for COVID Exposure Claims.” I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society
As always, please note that all expressions of opinion are those of the expert on today's call. Also, this call is being recorded for use as a podcast in the future and will likely be transcribed.
We’re very pleased to welcome a return guest to our Teleforum series, Michael A. Carvin. He’s a Partner at Jones Day right here in Washington D.C. He’s written a blog post for The Federalist Society on this same topic that’s available on The Federalist Society blog. Take a look at it if you will. He’ll be drawing from that in his opening remarks.
We’re going to hear opening remarks of about 20 minutes or so, but, as always, we’ll be looking to you for questions. So have those in mind for when we get to that portion of the program. With that, Mike Carvin, the floor is yours.
Michael A. Carvin: Thank you, Dean. Yes, I would like to discuss today the topic of a blog post that Dean just referenced, which that Congress in its next phase of dealing with the COVID-19 crisis, there’s various proposals and legislation which would limit tort liability to circumstances involving only gross negligence or willful misconduct but preclude state tort suits related to COVID-19 exposure or other issues or negligence grab. So it would only be in circumstances of really bad behavior that businesses or hospitals would face any kind of tort liability.
As a policy matter, I don't think there’s any reasonable dispute among conservatives about why this is necessary legislation. It’s essential to the recovery. Obviously, there’s been massive harm to the economy, Congress has sought to protect and allow businesses to recover through a variety of measures, including hundreds of billions of dollars of subsidies in various ways to employees and small businesses. And then I think it’s relatively obvious that the tort bar could have a significant turn effect on that recovery. Already many suits have been filed in a wide variety of context, from employers to healthcare providers and the like. And if they were allowed to pursue negligence suits, this would be a wide open forum in which to hold businesses liable.
Negligence is a very manipulable concept in many circumstances, and particularly in this environment where there’s no consensus view on what the right thing to do is, what a safe practice is. And so any tort lawyer could hypothesize doing something in addition what the employer or the hospital did and involve the companies in very expensive litigation and potentially catastrophic damages. If those lawsuits, which have already started to proliferate, as I say, in a wide variety of context -- that would have a very deleterious effect on the economy. Businesses would be afraid to reopen, or they’d be hampered in their reopening because of damage to the supply chain, or they would, just the basic point, that they would be diverting money from their businesses to trial bar in litigation and damages. And, of course, plaintiffs in these circumstances can always choose a friendly forum like St. Louis or some place to really ride roughshod over businesses.
I think the debate among Republicans and conservatives of potential concern is not so much with whether this legislation makes good policy sense, but whether it’s within the constitutional power of Congress. I think conservatives have rightly been skeptical about the abuses and the expansive nature of the power that’s been given to Congress under the Commerce Clause where it seems like they can deal with all sorts of issues that are more akin to the police power than anything to do with regulating interstate commerce. The most infamous case in this circumstance was the Wickard case from the 1930s, where they said that growing your own wheat on your own land somehow was interstate commerce that could be regulated by Congress.
But having said that, and having acknowledged the abuses in prior cases, I think this is a pretty straightforward application of the Commerce Clause that is readily defensible. It’s certainly defensible from a precedent perspective. Of course, it obviously has a substantial effect on interstate commerce far, far more than anything involved in, for example, the Wickard case. But more importantly, I think it’s the right answer from an originalist perspective.
And I think the reasoning goes as follows, which is that the original core purpose of the Commerce Clause, one of the failures of the Articles of Confederation, was that states were enabled to impose their own parochial restrictions on interstate commerce through a variety of laws that were domestic but interrupted the interstate flow of goods. So one of the principle, core purposes, original purposes of the Commerce Clause was to enable Congress to override barriers to commerce that were enacted by state legislatures for their own benefit but to the harm of the interstate economy. The most infamous example of those, of course, would be state tariffs or restrictions on highways and things like that.
But it was also clear that the Commerce Clause could attack the economic barriers raised by states. Anti-business regulations in one state can impede the flow of goods from all states. And in particularly today when the interstate market is so connected and global, a New York business can have a tremendous effect -- or a New York regulation of a business can have a tremendous effect on the national economy.
So I think it’s well established that congressional efforts to limit economic barriers to free trade is perfectly within the Commerce Clause. All the antitrust laws, for example, are based on preciously that rationale that anti-competitive behavior in one state can have an interstate effect. There’s precedent dealing with these precise kinds of issues where Congress was able to regulate intrastate businesses like stockyards. And these are cases from the height of the Lockner era, like this Stafford decision in 1922 said that inflated prices in one stockyard can have an effect on the interstate market so Congress can attack it.
In tort liability in particular, Congress passed laws striking down efforts to impose tort liability on railroads and the like. And those were upheld by conservative jurists as a proper implementation of the Commerce Clause. And, again, I certainly agree with all those. I think in today’s terms, Justice Thomas is obviously a faithful adherent to the originalist view of the Commerce Clause, and he’s had no problem with eliminating obstructions in the tort context, allowing Congress to get at it. He wrote an unanimous opinion in the Pierce County case where Congress had said, “You can’t use evidence of hazardous road conditions that they were compiling through this federal program in any kind of tort suit.” And so they were actually limiting the evidence you could introduce in a tort suit on the theory that that would deter, or complicate, state and local governments’ efforts to collect this data about hazardous conditions on interstate highways.
And that really -- obviously introducing that kind of evidence would have less of an effect on the economy, the interstate economy, than the dramatic threat posed by negligence lawsuits related to the virus.
The other argument that I think’s been made is mainly by the plaintiff’s bar, which, conveniently, remembers its federalism principles whenever it’s to their advantage. And the argument is, “Well, it’s one thing to go after a legislative enactment. But, after all, this is a tort suit, and this is court, and this is a core police power. So that—for some reason—should be off limits from congressional interference.” I don't think that makes a lot of sense as a logical or originalist matter. If you're going to defer to any state laws, it would be those enacted by democratically enacted legislatures who have the legislative powers, not the judge-made law in tort suits. So I would think, if anything, you would give more preference to legislative enactment than to general theories of negligence.
In the preemption context, for example, the Court has made it clear that Congress can preempt tort theories just as well as legislative enactments, so there’s no difference. Again, that’s what Thomas was dealing with in that Pierce County case.
And there are just a host of examples where Congress has legislated in the past to shield various activities from tort liability. They did it with respect to guns. They’ve done it with respect to rental cars. In the medicine or pandemic area, they’ve done it a number of times under this so-called Prep Act. They shielded you from any liability if you took HHS-approved countermeasures in the fact of a pandemic. And that’s directly analogous to this law. And they’ve given similar protections to the distribution of medical devices, vaccines, Swine Flu and all of those. And all of those were either routinely upheld by the courts or weren’t even challenged because the tort part tends to preach federalism when these laws are being considered. They never really follow up in lawsuits because, in my view, they don’t have a sustainable basis. And again, particularly given the easiest of proving a negligence case, this would be a particularly dramatic effect on interstate commerce.
Then there’s the traditional question, “Well, what if this just applies to a purely intrastate transaction – going to a hair salon in one locale by a citizen of the same state?” My basic answer to that is this legislation that we’re talking about is not regulating transactions. It’s regulating lawsuits. It’s regulating -- the obstacles to interstate commerce are not the transaction involving the hair salon. It’s this suit against the hair salon that creates the obstacles to interstate commerce by imposing all these additional costs on businesses. So what you're really regulating is costs on businesses.
And the basic point there, I think, it’s just as deleterious to have a massive lawsuit against company A for transactions that were intrastate in character as it would be if they were interstate. They're going to have the same kind of damages award, the same kind of litigation problems, regardless of whether the genesis of the lawsuit is an intrastate or interstate transaction.
So this would all act as a way of hurting the interstate market in a way that would drain resources away from reopening businesses in a way that would be beneficial to the interstate market. It would also have very obvious effects on the supply chain. If you sue somebody in one state for masks or whatever, or if a meat poultry plant was sued in one state, then their ability to distribute those interstate goods would be very difficult. So at the end of the day, it really doesn’t matter whether or not the genesis of the lawsuit is because of an intrastate or interstate transaction.
And the other way to look at this is they’ve upheld these kinds of laws under the Commerce Clause under three different theories really. The first is does something have a substantial effect on interstate commerce, in which case it could be regulated? And I readily admit that that principle has been abused again in the Wickard case where there’s really no kind of substantial effect on interstate commerce. But you don’t need to engage in the extended chain of causation hip on thigh bone kind of analysis that Wickard engaged in to see that this really does have a tangible effect on interstate commerce.
The other line of cases is that if you're dealing with a class of problems—in this case tort suits that involved COVID-19—there’s no requirement that you have some exemption in the legislation to exclude out intrastate lawsuits that arise from intrastate transactions. And even Justice Thomas in the Raich decision, he dissented from that theory in that case but he accepted the principle. It was only the application that he disagreed with. Specifically in Raich, Justice Scalia, in a concurring opinion, said, “Listen, the way you get intrastate transactions is under the Necessary and Proper Clause. And if it would complicate your federal effort and enforcement to exempt intrastate transactions, then under the Necessary and Proper Clause, you can go and get at those intrastate transactions.” In that circumstance, he was saying that it would be difficult to exempt intrastate marijuana transactions from intrastate marijuana transactions; therefore, the government has the ability to -- the federal government has the ability to go after intrastate transactions because creating the exemption would disable or pose obstacles to the federal effort.
Justice Thomas agreed with that basic principle in his dissent in Raich, but he disagreed with its application because he thought you could easily distinguish between intrastate marijuana and interstate marijuana.
So here the application would be pretty obvious. Under the Necessary and Proper Clause, Congress needs to protect all of its legislation that it’s recently enacted to revive the economy in the wake of the virus, including billions and billions of dollars that they’ve spent to support businesses through unemployment, tax breaks, SBA loans, and the like. And the other kinds of regulatory measures they’ve taken to allow businesses to flourish. All of those would be greatly jeopardized by serious damages efforts by the tort bar. And Congress of course could make finding to that effect, which would also upheld -- give courts an easier way to uphold this kind of law.
And it’s sort of intuitively obvious, too, here, right, because the scope of this effect is so massive. The virus really effects every aspect of American society and American business. So allowing an avalanche of lawsuits would have a serious deleterious effect. So that’s why I think it’s okay.
There’s a couple of, I think, fake arguments that are out there that I’ll briefly address, and then I’ll shut up. The one is that people intend to invoke the Supreme Court’s excellent decisions in Lopez and Morrison and say that these somehow cast doubt on an effort under the Commerce Clause to regulate the kind of lawsuits we’re talking about. But the key to both of those cases involving guns in your schools and violence against women was what Congress was regulating under the Commerce Clause was non-economic activity – beating up women and having guns in your schools is not economic activity. Where in this case, it’s purely focused on economic consequences, and therefore is, again, right within the heart of the Commerce Clause.
The final point that I think’s been made in passing is invoking the Supreme Court’s decisions that you can’t -- the federal government can’t commandeer states to do something. But this legislation wouldn’t require any state official or state judge to take any kind of affirmative action or to enforce a federal law or to pass a law or anything like that. It simply eliminates the advocacy of a particular state tort suit, which is done literally every day under the preemption prong of the Supremacy Clause, where all the time the federal government passes laws that thereby disable tort suits that are inconsistent with that law.
So I don't really think that there’s serious objections in terms of the public debate thus far. And again, I think from a strictly originalist perspective, eliminating these kind of obstacles to interstate commerce is what was at the very heart of the Commerce Clause, so I think that these proposed legislative enactments are not only good policy but are well within the traditional role of the federal government under the Commerce Clause.
With that, Dean, I’ll shut up, and obviously, happy to chat with you or anybody else if they have any additional questions.
Dean Reuter: Let’s check in with our first caller.
Teresa Collett: Thank you. This is Teresa Collett in Minnesota, and my question regards preemption in this area. Because we know that, for example, medical malpractice has been dealt with as far as exemptions, waivers, etc. through a complex thing of states. Independent of the constitutionality of federal action, would you anticipate that they would preempt state, either denial of freedom from liability or state statutes providing freedom from liability?
Michael A. Carvin: Yeah, if I understand the question correctly, this would be a circumstance where they're seeking to impose liability either on a healthcare provider or a business. And the preemption analogy is a good one, right? Basically, what Congress is saying is the federal standard is you can hold people liable but only if they’ve engaged in grossly negligent or intentional misconduct. We’re not going to allow you to second guess their judgments through negligent lawsuits.
And as you point you, these kinds of federal preemption occupying the fields sorts of standards are hardly unusual. People say, well, tort suits are at the heart of the state’s police power, which is true. But really, everything that the Commerce Clause preempts is at the heart of the police power – taxes, tariffs, regulation of businesses and those kinds of things. All of those are at the heart of what the state is doing. And the federal government from the FCC on will override defamation lawsuits and those kinds of things if they’ve got a comprehensive uniform system. And I think that’s really what these proposed legislation is getting at.
Dean Reuter: Let’s check in with another caller.
Caller 2: Yeah, this is [inaudible 00:20:08] from Oklahoma. I suppose maybe in defense of the states I’ll give one observation followed by a question, which is that raising the standard from negligence to gross negligence may not solve the problem because it still creates a large amount of uncertainty as to the standard of reasonableness. So one might think the better course is to create safe harbors where if a business complies with certain regulations, that they can be immune from liability. But if that’s the course that you're going to take, it’s states that are determining when businesses and how businesses can reopen. It’s state courts that negligent suits are generally brought in. And our federalist system allows experimentation in the laboratories of democracy with different liability rules rather than a national one-size-fits-all rule.
So assuming that states are better positioned to enact liability protections than the federal government, would there be constitutional problems with Spending Clause legislation given the context in which this arises where the federal government conditions funding to the states, at least partially on their enactment liability protections that allow states some flexibility in enacting those liability protections, assuming that the funding condition is not so coercive as to violate the commandeering provision?
Michael A. Carvin: Yeah, you raise a commandeering provision in the Spending Clause, and of course that’s what came up in the NFIB case, that sometimes it can be so enormous that the states don’t really have an opportunity. I don't think anybody’s really ever applied it outside the NFIB context. So I would think conditioning federal funds on states enacting that kind of liability protection would make some sense.
I’m not entirely sure that having 50 different safe harbors would be as efficacious as having a federally articulated safe harbor. Mike Luttig and David Rivkin—two very smart lawyers. Mike Luttig, obviously, used to be at the Justice Department and Boeing. And David Rivkin suggested that what they would do instead was suspend all tort suits until the federal government had developed its own comprehensive kind of safe harbor and prescribed practices. Whether that’s more realistic than the proposed legislation, I think reasonable people can disagree about, for example, as you pointed out, I think, a minute ago, it’s not entirely clear that what’s good in South Dakota is going to be good in New York. So coming up with one-size-fits-all’s may be more counterproductive than its worth.
The other argument is that you’d have to at least establish a floor for what states need to do under the scenario that you articulated where they conditional federal funding on it. But in either event, I just have a practical concern that trying to figure out what best practices is, in this ever-changing, very volatile environment where we’re getting new information every day about how people can catch the virus, the harm of the virus, what age groups are effected, nursing homes and all of that, I think you might establish a situation where today’s safe harbor is either not good enough or overly restrictive. And you’d put everybody in a position of ever-changing standards as new information is gathered or hopefully vaccines and the like are developed over time.
So I think it’s asking a lot either in legislation or in federal regulatory action to come up with something that says, “This is what you should do. We’ve achieved the absolute balance between risk to your health and ability to operate a business and say that that’s going to work.” So I’m a little skeptical of the notion that the federal government, or individual states, can come up with a perfect safe harbor that’s going to endure over a certain amount of time.
Dean Reuter: While we’re waiting to see if somebody else rings in, I’ll ask a question. Mike, you seem to be predicating your case on the idea that there’s sort of an emergency situation here, a sui generis situation that gives rise to the need to change the standard nationwide. Who decides when this is over? How do we know when it’s over? When do these provisions stop being effective? In some of this legislation, is there a sunsetting provision? Has that been discussed?
Michael A. Carvin: I don't know is the short answer, Dean, about whether or not there’s sunsetting provisions for the reasons I just articulated. I think it’d be really tough to come up with a sunset provision. It might be smart to say we’re going to revisit the whole situation in a year and a half.
I will say that if the crisis is so-called “passed” in a year and a half, remember people could sue for activity that’s occurred in 2020 even if they brought the lawsuit in 2022. So you have to structure it in a way that during this period, we didn’t want the lawsuits. Plus, if the crisis has passed, it’s hard to think of why there’s this dramatic need for tort lawsuits and stuff. In other words, normal negligence is not going to expose people to a deadly virus because the hypothesis is that we’ve gotten past all that. So I think you might -- nature might give you a sunset provision that you don’t necessarily need to put into the legislation itself.
Dean Reuter: Got it. We might have had our last question. Oh, here we go. Area code 703.
Caller 3: I was wondering, what are the problems here? It seems clear to me the danger from the tort lawsuits is enormous. I’m not sure that the arguments differ a whole lot from a lot of the other preemption arguments which are always, I think, to many people who actually take federalism seriously, it can often be very shaky. Do you have any further on that, Mike, because I think it’s clearly -- it’s obviously needs thought about a lot.
Michael A. Carvin: Right. Well, okay. Nobody’s going to disagree with the notion that sometimes the federal government gets involved in areas and, therefore, preempts state laws that are not really any of their business. That typically doesn’t arise in the circumstances where there’s such a stark threat to interstate commerce. I think I just have to return to the original point I made, which is really the whole rationale behind the Commerce Clause and the need for Congress to have this power after the Articles of Confederation was because it became blazingly obvious that if states were allowed to regulate their intrastate economies, it could have an extraordinarily deleterious effect on interstate markets.
And one of the principle examples of that is erecting obstacles to people who are in the interstate supply chain and do a lot of business interstate. And I would think that, again, it’s tough -- I would think this would be the paradigmatic example of something that poses such an obstacle. You're not going to reopen. You're not going to be able to pay your employees. You're not going to be able to serve your customers if every time you do so, you’ve got a lawsuit hanging over your head and somebody’s bringing you to court, and you’ve got to spend a lot of money on that. I just think even if you just look -- first of all, there’s the deterred effect. But even if you just looked at the purely financial costs of these lawsuits on businesses that are struggling in this horrible environment, there’s just no question but that this could really retard any efforts, baby steps, we’re making towards something seeming like a normal economy.
So while reasonable people can certainly disagree about whether Congress in the past has been overintrusive in terms of what it preempts, I would think, again, this would be sort of the kind of example you’d want to think about is “I want widgets to travel from New York to Virginia, and if they get sued, the company in New York sending that gets sued and that distracts them from making as many widgets as they can. That’s going to have an enormous effect on the economy. And they're particularly justified in this circumstance, again, because the federal government has invested just hundreds of billions of dollars in the recovery and has established all kinds of regulatory schemes, which they need to protect against state interference with.
Dean Reuter: Mike Carvin, that might have been our final question. Let me give you a minute or two to wrap up and see if you have a final thought.
Michael A. Carvin: Yeah, again, I think this conversation reveals that conservatives’ normal skepticism about an overarching federal government and the abuses under the Commerce Clause, which has gotten Congress into all kinds of area that can’t be fairly described as regulating either interstate transactions or obstacles to interstate commerce shouldn’t deflect us from the fact that this is the kind of threat that the Commerce Clause was designed to get at as an original matter. And the inability to do so could have very serious effects on the interstate market. So whatever our skepticism is about prior precedent, this seems to me to be not only very wise policy, but well within the constitutional prerogatives of Congress.
Dean Reuter: Very good. Well, my thanks -- this is Dean. Mike, thank you so much for joining us today. We appreciate your comments and your thoughtfulness on this. Again, to the audience, this is explained a little more deeply in the blog post on The Federalist Society website of Mike Carvin that you can find on The Federalist Society blog post. I want to thank the audience as well for dialing in and for your questions. A reminder to check The Federalist Society’s website for upcoming Teleforum conference calls. Monitor your emails. I do happen to know that our next scheduled Teleforum conference call begins in just an hour at this same number. We’ll be talking about a Supreme Court case. But until that next call, we are adjourned. Thank you very much, everyone.
Dean Reuter: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.