Amicus Curiae Brief — Crosby v. National Foreign Trade Council

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No. 99-474

IN THE

Supreme Court of the United States

ANDREW S. NATSIOS, SECRETARY OF ADMINISTRATION AND

FINANCE OF THE COMMONWEALTH OF MASSACHUSETTS, AND

PHILMORE ANDERSON, III, STATE PURCHASING AGENT,

Petitioners,

Vv.

NATIONAL FOREIGN TRADE COUNCIL,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the First Circuit

BRIEF AMICI CURIAE OF CHAMBER OF COMMERCE OF THE

UNITED STATES, ORGANIZATION FOR INTERNATIONAL

INVESTMENT, NATIONAL ASSOCIATION OF

MANUFACTURERS, UNITED STATES COUNCIL FOR

INTERNATIONAL BUSINESS, AMERICAN INSURANCE

ASSOCIATION, AMERICAN PETROLEUM

INSTITUTE , AMERICAN FARM BUREAU FEDERATION,

ASSOCIATED INDUSTRIES OF MASSACHUSETTS, AND

RETAILERS ASSOCIATION OF MASSACHUSETTS IN SUPPORT

OF RESPONDENT IN RESPONSE TO THE PETITION

Michael E. Fine

Counsel of Record

Daniel M. Price

Powell, Goldstein, Frazer

& Murphy LLP

1001 Pennsylvania Ave. NW

Washington, D.C. 20004

Tel: (202) 347-0066

(Additional Counsel Listed on Inside Cover)

_—

Of Counsel:

Robin S. Conrad QUESTION PRESENTED

National Chamber

Litigation Center, Inc. Whether the U.S. Court of Appeals for the First Circuit

1615 H Street NW correctly held that the Commonwealth of Massachusetts’s

Washington, DC 20062 selective purchasing law targeting commerce with Burma

Tel: (202) 463-5337 | unconstitutionally infringes upon the federal government's

exclusive authority over foreign affairs, violates the

Jan Amundson Constitution’s Foreign Commerce Clause, and is preempted

Quentin Riegel

National Ass'n of

Manufacturers

1331 Pennsylvania Ave. NW

Washington, D.C. 20004

Tel: (202) 637-3058

by federal Burma sanctions legislation?

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INTERESTS OF THE AMICI CURIAE ...............ccccccscceeeeeeeees

SUMMARY OF THE ARGUMENT ...............:cccccccseseeeeesenees

I. The District Court and the Court of Appeals

Correctly Decided the Case, Thereby Averting

Fragmentation of Both Foreign Policy and the

Flow of Interstate and Foreign Commerce .......................

II. Any Continued Controversy over the Viability of

Selective Purchasing Laws Would Be Detrimental

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TABLE OF AUTHORITIES

CASES

AIM v. Secretary, 413 Mass. 1 (1992) ........c.cccceecseereeeenenesenes 4

Houghton-Mifflin Co. v. Commissioner of Revenue, 423

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NFTC v. Natsios, 181 F.3d 38 (1st Cir. 1999) 000... ccceeeeeeeee 6

STATUTES

Alameda County (Cal.) Admin. Code ch. 4.36 (1997)............ 9

City of Los Angeles, Cal., Resolution No. 60 (1998).............. 9

Philadelphia (Pa.) Code § 17-104(D). ..........cccccccccceeseeereeeeneenees 9

OTHER AUTHORITIES

Statistical Abstract of the United States (1998).................0.00« 8

RULES

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BRIEF AMICI CURIAE

Pursuant to Supreme Court Rule 37.2(a) on written

consent of all parties, the Chamber of Commerce of the

United States, Organization For International Investment,

National Association of Manufacturers, United States

Council for International Business, American Insurance

Bureau Federation, Associated Industries of Massachusetts,

and the Retailers Association of Massachusetts, respectfully

submit this brief amici curiae in support of Respondent in

response to the petition for a writ of certiorari. '

INTERESTS OF THE AMICI CURIAE

Amici curiae are trade associations that have substantial

common interests: ensuring stable and predictable legal

regimes affecting international trade and investment, and

promoting policies that secure for their members and the

nation the benefits of free trade. All these organizations

participated as amici curiae on appeal before the U.S. Court

of Appeals for the First Circuit. In addition, the Chamber of

Commerce of the United States and the Organization For

International Investment participated as amici curiae in the

proceedings before the U.S. District Court for the District of

Massachusetts.

The Chamber of Commerce of the United States (the

“Chamber”) is the world’s largest business federation,

representing more than 2.5 million U.S. businesses and

' Pursuant to Rule 37.6, amici state that no person or entity

other than amici made a monetary contribution to the preparation

or submission of this brief. Further, no counsel for any Petitioner

or Respondent authored this brief in whole or in part.

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organizations with 140,000 direct members of every size,

sector, and region.* While most of the country’s largest

companies are Chamber members, 96% of its members are

small businesses with fewer than 100 employees. Chamber

members transact business in all or nearly all of the United

States, as well as in a large number of countries around the

world. Currently, 87 American Chambers of Commerce

abroad in 77 countries are affiliated with the Chamber. An

important function of the Chamber is to advocate its

members’ interests in matters of national concern before the

courts, the United States Congress, the Executive Branch,

and independent regulatory agencies of the federal

government.

The Organization For International Investment (“OFII")

is the largest business association in the United States

representing the interests of U.S. subsidiaries of international

companies. OFII’s member companies employ hundreds of

thousands of workers in thousands of plants and locations

throughout the United States. Members of OFII transact

business throughout the United States, as well as in many

foreign countries, and are affiliates of companies transacting

business in countries around the world.

The National Association of Manufacturers (“NAM”) is

the nation’s oldest and largest broad-based industrial trade

association. Its nearly 14,000 member companies and

subsidiaries, including 10,000 small manufacturers, employ

approximately 85% of all workers in the U.S. manufacturing

sector and produce more than 80% of the nation’s

manufactured goods. An additional 158,000 businesses are

? Some members of the amici are also members of

Respondent National Foreign Trade Council. Memberships may

also overlap among the amici.

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affiliated with the NAM through its Associations Council

and National Industrial Council.

The United States Council for International Business

(“USCIB”) advances the global interests of American

business both at home and abroad. As the U.S. affiliate of

the International Chamber of Commerce, the Business and

Industry Advisory Committee to the OECD, and the

International Organisation of Employers, USCIB officially

represents U.S. business positions both in intergovernmental

bodies — such as the WTO, ILO, OECD, and U.N. system -

and vis-a-vis foreign business communities and their

governments. The USCIB addresses a broad range of policy

issues with the objective of promoting an open system of

world trade, finance, and investment. The USCIB

membership consists of some 300 global corporations,

professional firms, and business associations.

The American Insurance Association (“AIA”) is a trade

association representing more than 300 companies writing

property and casualty insurance throughout the United States

and around the world. AIA member companies are affiliated

with more than 79,000 independent insurance agents in the

United States. The purposes of AIA are to promote the

economic, legislative, and public standing of its members, to

provide a forum for discussion of policy problems of

common concern to its members and the insurance industry,

and to serve the public interest by participating in litigation

that is of significance to the insurance industry.

The American Petroleum Institute (“APT’) is a non-

profit trade association representing over 400 members

involved in all aspects of the petroleum industry, including

exploration, production, refining, transportation, and

marketing. Many of API’s members conduct business in

foreign countries, and consequently have a direct interest in

assuring that access to foreign markets is not unduly

restricted by U.S. state and local regulations. In order to

ensure that the United States continues to have diverse and

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ample sources of energy supplies, energy companies must be

able to explore new frontiers, and to participate in

international trade and investment.

The American Farm Bureau Federation (“AFBF’”) is an

agricultural membership organization formed to represent the

business, economic, social, and educational interests of its

members which is comprised of Farm Bureaus in all fifty

states, Puerto Rico, and nearly 2,800 counties. With a

membership approaching five million families, the AFBF is

the nation’s largest farm organization. Founded in 1919,

AFBF’s primary activities include lobbying, public relations,

litigation, issue analysis and research, and personal and

professional development of member farmers attd ranchers.

America’s farmers have vital interests in the free flow of U.S.

agricultural products in foreign commerce.

Associated Industries of Massachusetts (“AIM”) is a

non-profit business organization with approximately 5,000

members, all of which do business in the Commonwealth of

Massachusetts. AIM regularly participates as a party or

amicus curiae in cases raising issues of general concern for

the business community. See, e.g, Houghton-Mifflin Co. v.

Commissioner of Revenue, 423 Mass. 42 (1996); AIM v.

Secretary, 413 Mass. 1 (1992). The Retailers Association of

Massachusetts (“RAM”) is a non-profit business association

with approximately 1,500 members, comprised of retail

companies of all types and sizes which do business in the

Commonwealth of Massachusetts. AIM’s and RAM’s

interest in this litigation stems from the importance of

exports to the health of the Massachusetts economy and to

the prosperity of Massachusetts businesses.

In aggregate, the organizations filing this brief represent

a substantial proportion of all entities doing business in the

United States and, indirectly, much of the U.S. workforce.

The amici are umbrella organizations charged with

representing the legal and policy interests of their business

members in matters of national import — such as this

Nee ee ee

5

litigation. Not only do the Massachusetts “Burma law” and

other similar state and local economic sanctions laws damage

the constitutional fabric, but they have had, and if the legal

principles confirmed by the First Circuit were not respected

would continue to have, a serious financial impact on many

of the companies and workers represented by the amici.

SUMMARY OF THE ARGUMENT

The Commonwealth of Massachusetts has petitioned for

a writ of certiorari to the U.S. Court of Appeals for the First

Circuit on the premise that that court’s decision in NFTC v.

Natsios, 181 F.3d 38 (1st Cir. 1999), was in error.

Amici curiae disagree with that premise. This Court has

long recognized that the power over foreign affairs and

foreign commerce properly rests with the federal

government. The First Circuit correctly held that states and

localities may not enact selective purchasing laws that

unconstitutionally infringe upon the federal government’s

authority over foreign affairs, that unconstitutionally

discriminate against foreign commerce, or that are preempted

by federal legislation. Amici also reject Petitioners’

suggestions that the First Circuit’s decision conflicts with

this Court’s precedents, or that any split of authority on these

fundamental principles exists among the Circuits.

Amici believe that the First Circuit’s definitive decision

was correct, and that it should lead to the invalidation of all

similarly defective state and local selective purchasing laws.

Amici nevertheless face some risk, however: over twenty

such laws are still on the books outside the First Circuit, and

more could perhaps emerge — an outcome presaged by

Petitioners’ arguments. See, e.g., Pet. at 16. Amici’s

members must make significant long-term international trade

and investment decisions. Those supplier relationships,

sourcing commitments, and capital transfers remain at risk if

states and municipalities, notwithstanding the First Circuit’s

decision, misguidedly follow Petitioners’ reasoning. While

amici firmly believe that such a development would be

illegitimate in the face of the First Circuit’s ruling (if this

Court were to deny the Petition), any possibility of continued

unpredictability for businesses is anathema to amici.

A en

7

Accordingly, while convinced that the decision below

was correct and that the Petition is substantively unfounded,

amici’s concern for predictability in the conduct of

international business leads them not to oppose the issuance

of a writ of certiorari in this case.

ARGUMENT

I. The District Court and the Court of Appeals

Correctly Decided the Case, Thereby Averting

Fragmentation of Both Foreign Policy and the

Flow of Interstate and Foreign Commerce

The Commonwealth of Massachusetts attempted to

wield the substantial economic power of its procurement

budget to implement its own foreign policy agenda.

Specifically, it created a blacklist of companies engaged,

however remotely, in commerce with Burma’ and refused to

do business with them in an explicit effort to influence that

foreign country’s domestic policies. Both the district court

and the court of appeals recognized that Massachusetts’s

“Burma law” impermissibly infringed the federal

government’s plenary power over foreign affairs. The court

of appeals also held that the selective purchasing measure

violated the U.S. Constitution’s Foreign Commerce Clause,

and that it was preempted by federal statutes concerning

Burma.

The courts below correctly applied this Court’s

precedents to uphold the principle that the pursuit of foreign

* In June 1989, the current government decreed that the

country’s name be changed from the Union of Burma to the Union

of Myanmar. For convenience, however, this brief refers to

“Burma” throughout.

8

policy objectives, and the impairment of foreign commerce

as a means to that end, are not among the prerogatives of the

several states. The Constitution entrusts diplomatic and

foreign economic policy to national authorities — that is, to

Congress and the President. Amici reject Petitioners’

suggestions that this Court’s precedents have left open the

possibility of any contrary result, or that the federal courts

are divided on these fundamental issues.

The First Circuit’s decision not only correctly applied

bedrock constitutional principles and rules of law, but also

averted substantial harm to U.S. commercial interests. As

amici explained in their submissions below, Massachusetts’ s

Burma law would have done grave damage to the free flow

of interstate and international commerce.

The Commonwealth’s law was only one of more than

twenty sub-federal Burma sanctions laws in effect, with more

believed to be waiting in the wings. Moreover, Burma is

only one of many countries — among them Switzerland,

China, Northern Ireland, Saudi Arabia, Egypt, and Turkey —

that have been targets of state and local economic sanctions.

And human rights abuses are surely not the only grounds a

state or locality could cite to support the imposition of

international trade barriers. Had the Massachusetts Burma

law been permitted to stand, more such laws in support of a

variety of foreign policy causes would surely have appeared

in the 39,000-plus sub-federal jurisdictions* that exist in

these United States.

Each individual measure can have a significant

economic impact — the Massachusetts Burma law alone

restricted bidding on some $2 billion in state purchases.* But

* See Table 496: Number of Governmental Units, by Type

(1997 data, excluding school and special districts), in Statistical

Abstract of the United States (1998).

* See Court of Appeals Appendix at 87.

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even where the impact of any single law might be limited, the

proliferation of selective purchasing measures and other

economic sanctions quickly imposes significant burdens on

international commerce. As companies are forced to choose

between doing business in Massachusetts or in Burma, in*Los

Angeles or in Switzerland,° in Philadelphia or in Northern

Ireland,’ and in Alameda County, California or in Nigeria,*

for example, interstate and foreign commerce is fragmented

and balkanized. Moreover, even the task of tracking such

legislation can be beyond the resources of many businesses.

The courts’ decisions below — like the constitutional

doctrines that they correctly applied — serve to avert this

serious economic harm. In holding the Commonwealth’s

Burma law unconstitutional, they not only reestablished the

proper balance between federal and state authority in foreign

affairs, but also forestalled the fragmentation of interstate and

foreign commerce.

Il. Any Continued Controversy over the Viability of

Selective Purchasing Laws Would Be Detrimental

to the Flow of Commerce

Amici believe that the First Circuit correctly decided the

appeal below by applying well-understood precedents of this

Court. They expect that the decision will properly lead to the

invalidation of state and local international economic

sanctions around the country. Should this Court deny the

Petition, amici believe that every state and locality having or

considering such a law would be obliged to acknowledge its

constitutional infirmity.

° See City of Los Angeles, Cal., Resolution No. 60 (1998).

” See Philadelphia (Pa.) Code § 17-104(b).

® See Alameda County (Cal.) Admin. Code ch. 4.36 (1997).

10

Nevertheless, some economic risk remains for amici’s

members. Over twenty sub-federal procurement restrictions

targeting foreign countries remain on the books in

jurisdictions beyond the First Circuit’s boundaries. Amici

believe that those measures are invalid and that they face the

same fate as the Massachusetts Burma law. But companies

must make long term investment decisions about doing

business abroad, and about doing business in states and

localities across the United States. They must enter into long

term supplier and distribution relationships abroad, while at

the same time considering carefully the opportunities for

sales to state and local entities. No matter how clearly invalid

a selective purchasing law is in light of the First Circuit’s

ruling, it can still affect companies’ business judgments by

exposing them to at least some risk of being denied access to

the government procurement market by a dissident local

government.

Such risks will only be compounded if state and local

legislators mistakenly believe Petitioners’ arguments alleging

the existence of doctrinal ambiguities to be valid. In that

circumstance, they might well proceed — in error and contrary

to law — to enact additional international economic sanctions

notwithstanding the First Circuit’s decision. The prospect

that some small number of states and municipalities might

continue to impose economic sanctions to achieve a

multitude of self-proclaimed — and possibly conflicting —

foreign policy goals heightens the risk of both conflict with

our trading partners and retaliatory actions against U.S.

businesses. Worse still, one can imagine the economic

turmoil that would result if businesses properly proceed on

the assumption that all such laws are indeed invalid, only to

encounter a contrary decision by this Court years from now

in another case.

Amici are quite concerned about the delay, confusion,

and commercial uncertainty that could confront their

members in the scenarios described above. Accordingly,

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even though they entertain no doubt whatsoever as to the

correctness and precedential clarity of the court of appeals’

decision, they would welcome the finality that a ruling from

this Court would provide. While amici do not consider that a

definitive statement from this Court is necessary to support

the nationwide invalidation of state and local international

economic sanctions, they of course appreciate that such a

holding would conclusively resolve the matter. Moreover,

taking a decision in this particular case (in which the facts are

undisputed, and the issues of law are clearly presented)

would secure these benefits with a minimum of delay.

CONCLUSION

Although amici are fully convinced that the case was

correctly decided by the U.S. Court of Appeals for the First

Circuit, and although they reject the bases for the

Commonwealth’s Petition, a ruling by this Court regarding

the invalidity of selective purchasing laws would secure

predictability and finality for U.S. and international business

activities. Accordingly, amici do not oppose the issuance of

a writ of certiorari in this case.

Respectfully submitted,

Michael E. Fine, Counsel of Record

Daniel M. Price

Powell, Goldstein, Frazer

& Murphy LLP

Of counsel: 1001 Pennsylvania Ave. NW

Robin S. Conrad Washington, D.C. 20004

National Chamber Tel: (202) 347-0066

Litigation Center, Inc.

1615 H St. NW October 27, 1999

Washington, DC 20062

Tel: (202)463-5337