Also known as: preemption · preempt · preempts · preempted · preempting · preemptive · federal preemption
Written by attorneys — see sources below.
3 senses
A constitutional doctrine under which federal law supersedes conflicting state law pursuant to the Supremacy Clause. The doctrine applies when Congress intends to occupy a field or when state law stands as an obstacle to federal objectives. It also encompasses limits such as the anti-commandeering principle that prevents Congress from directly ordering state legislatures or officials.
A constitutional doctrine under which federal law supersedes conflicting state law pursuant to the Supremacy Clause. The doctrine applies when Congress intends to occupy a field or when state law stands as an obstacle to federal objectives. It also encompasses limits such as the anti-commandeering principle that prevents Congress from directly ordering state legislatures or officials.
A shareholder right to acquire a proportional share of a corporation's unissued shares when the board decides to issue them. The right exists only to the extent the articles of incorporation expressly provide for it. Absent such a provision, the board may issue shares to new investors without first offering them to existing shareholders.
A federal statute whose requirements for a security interest to obtain priority over lien creditors displace the UCC's ordinary filing rules for perfection. When such a federal statute governs the collateral, compliance with its certificate-of-title or other system satisfies perfection without a financing statement under Article 9.
A shareholder right to acquire a proportional share of a corporation's unissued shares when the board decides to issue them. The right exists only to the extent the articles of incorporation expressly provide for it. Absent such a provision, the board may issue shares to new investors without first offering them to existing shareholders.
A federal statute whose requirements for a security interest to obtain priority over lien creditors displace the UCC's ordinary filing rules for perfection. When such a federal statute governs the collateral, compliance with its certificate-of-title or other system satisfies perfection without a financing statement under Article 9.
Each sense below has its own examples, sources, and questions.
State legislators in State X enact a statute authorizing licensed sports betting at casinos. A federal law prohibits states from authorizing such schemes. The federal prohibition is held invalid because it directly commands state legislatures rather than regulating private conduct. State X may therefore proceed with its licensing program without federal preemption.
New Jersey enacts a statute barring importation of solid waste from other states for disposal in its landfills. Out-of-state generators challenge the ban as an unconstitutional burden on interstate commerce. The Court holds that the statute discriminates against interstate commerce on its face and is therefore invalid under the dormant Commerce Clause regardless of any asserted health or environmental justification.
In 1973 the New Jersey Legislature enacted chapter 363 of the 1973 N.J. Laws. The law took effect in early 1974. It provided that no person shall bring into the state any solid or liquid waste which originated or was collected outside the territorial limits of the state. The statute excepted garbage to be fed to swine and other limited categories later permitted by the Commissioner of the Department of Environmental Protection. The Commissioner promulgated regulations permitting four categories of waste to enter the state while barring all others. The statute immediately affected operators of private landfills in New Jersey that had agreements with cities in other states for waste disposal. Several landfill operators and out-of-state cities brought suit in New Jersey state court against the State of New Jersey and its Department of Environmental Protection. They attacked the statute and regulations on multiple state and federal grounds. The trial court granted the plaintiffs' motion for summary judgment in an oral opinion declaring the law unconstitutional because it discriminated against interstate commerce. The New Jersey Supreme Court consolidated the case with a similar action and reversed. The plaintiffs appealed to the United States Supreme Court. The Court noted probable jurisdiction, heard argument, and then remanded for reconsideration of the preemption claim in light of the Resource Conservation and Recovery Act of 1976. On remand the New Jersey Supreme Court again found no federal preemption. The United States Supreme Court noted probable jurisdiction a second time. The New Jersey Supreme Court found that existing landfill sites in the state would be exhausted within a few years. Continued use or development of new sites would impose heavy environmental costs from pollution and loss of open lands. New disposal techniques were under development but would require time. Excluding out-of-state waste could extend the lifespan of existing landfills and thereby help avoid devoting additional virgin wetlands to landfill purposes.
View caseAllstate refuses to pay no-fault benefits to Shady Grove Orthopedic Associates after an automobile accident. Shady Grove files a class action in federal court under diversity jurisdiction. A New York statute prohibits class actions to recover statutory penalties. The Supreme Court holds that Federal Rule of Civil Procedure 23 governs the availability of class actions in federal court and therefore preempts the conflicting state procedural limitation.
Shady Grove Orthopedic Associates, P.A., provided medical care to Sonia E. Galvez for injuries she suffered in an automobile accident. As partial payment for that care, Galvez assigned to Shady Grove her rights to insurance benefits under a policy issued in New York by Allstate Insurance Co. Shady Grove tendered a claim for the assigned benefits to Allstate, which under New York law had 30 days to pay the claim or deny it. Allstate apparently paid, but not on time, and it refused to pay the statutory interest that accrued on the overdue benefits at two percent per month. Shady Grove filed this diversity suit in the Eastern District of New York to recover the unpaid statutory interest. Alleging that Allstate routinely refuses to pay interest on overdue benefits, Shady Grove sought relief on behalf of itself and a class of all others to whom Allstate owes interest. The individual claim was worth roughly $500, which fell far short of the amount-in-controversy requirement for individual suits under 28 U.S.C. § 1332(a). The District Court dismissed the suit for lack of jurisdiction. It reasoned that N.Y. Civ. Prac. Law Ann. § 901(b), which precludes a suit to recover a penalty from proceeding as a class action, applies in diversity suits in federal court despite Federal Rule of Civil Procedure 23. Concluding that statutory interest is a penalty under New York law, it held that § 901(b) prohibited the proposed class action.
MITE Corporation launches a tender offer for shares of an Illinois corporation with shareholders nationwide. Illinois applies its takeover statute to the offer even though the target is incorporated elsewhere. The statute imposes a waiting period and hearing requirements that apply to offers directed at any resident shareholder. The Supreme Court holds that the statute's extraterritorial reach unduly burdens interstate commerce and conflicts with the federal Williams Act, rendering it preempted.
MITE Corp. and its wholly owned subsidiary MITE Holdings, Inc., both Delaware corporations with principal executive offices in Connecticut, initiated a cash tender offer for all outstanding shares of Chicago Rivet & Machine Co., a publicly held Illinois corporation, on January 19, 1979, by filing a Schedule 14D-1 with the Securities and Exchange Commission. MITE offered $28 per share, approximately $4 above the prevailing market price, but did not register the offer under the Illinois Business Take-Over Act. On the same day MITE filed suit in the United States District Court for the Northern District of Illinois against Illinois Secretary of State James Edgar, seeking a declaratory judgment that the Illinois Act was preempted by the Williams Act and violated the Commerce Clause, together with temporary, preliminary, and permanent injunctive relief. Chicago Rivet responded three days later by suing in Pennsylvania to enjoin the offer under that state's takeover disclosure law, but its efforts there proved unsuccessful. On February 1, 1979, the Illinois Secretary of State notified MITE of his intent to issue a cease-and-desist order. The following day Chicago Rivet informed MITE it would file suit in Illinois state court, and the district court issued a preliminary injunction prohibiting the Secretary from enforcing the Illinois Act against MITE's tender offer. MITE published its nationwide tender offer in the February 5, 1979, edition of the Wall Street Journal. Chicago Rivet simultaneously offered to purchase approximately 40 percent of its own shares at $30 per share. On February 9 the district court entered final judgment declaring the Illinois Act preempted by the Williams Act and violative of the Commerce Clause, and permanently enjoined its enforcement. The parties then entered an agreement withdrawing both offers and granting MITE thirty days to examine Chicago Rivet's books and records. On March 2, 1979, MITE announced it would not proceed with any tender offer. The United States Court of Appeals for the Seventh Circuit affirmed the district court's judgment. The Supreme Court noted probable jurisdiction.
2 common questions
Yes. The doctrine prohibits Congress from issuing direct orders to state legislatures dictating what they may or may not do. A federal statute that targets state legislative action rather than regulating private conduct is invalid under the anti-commandeering principle.
Supporting sources
Congress may expressly authorize states to discriminate against interstate commerce in specified ways. When such authorization exists, the state measure does not violate the dormant Commerce Clause.
Supporting sources
Perry Pratt owns common shares in Platinum Partners. The board votes to issue new common shares at a discount to an outside investor. The articles of incorporation contain no provision granting preemptive rights. Pratt therefore has no right to purchase a proportional block of the new shares and cannot prevent dilution of his ownership percentage.
1 common questions
No. Under modern corporate statutes, preemptive rights exist only if the articles of incorporation expressly grant them. When the articles are silent, the board may issue new shares to outside investors without first offering them pro rata to existing shareholders.
Supporting sources
Pedro Pacheco buys a small plane on credit from Prime Logistics. Prime claims a security interest but never files a financing statement under Article 9. A federal aviation statute requires notation of the interest on the FAA certificate of title to gain priority over lien creditors. Because the federal statute preempts the UCC filing requirement, Prime's interest is perfected without an Article 9 filing statement.
1 common questions
A federal statute, regulation, or treaty preempts the UCC filing requirement when it supplies its own rules for a security interest to obtain priority over lien creditors. In that situation, compliance with the federal system perfects the interest without an Article 9 financing statement.
Supporting sources
…535 U. S. 391, 411 (2002) (O’Connor, J., concurring). Therefore, although I adhere to my views on purposes-and-objectives pre-emption, see Wyeth v. Levine , 555 U. S. 555, (2009) (opinion concurring in judgment), I reluctantly join the Court’s opinion. I The FAA generally requires courts to enforce arbitration…