National Foreign Trade Council v. Natsios

• Decision Date: 04 May 1999
• Docket Number: No. 98-2304,98-2304
• Citation: 181 F.3d 38
• Parties: (1st Cir. 1999) NATIONAL FOREIGN TRADE COUNCIL, Plaintiff, Appellee, v. ANDREW S. NATSIOS, 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, Appellants. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 38

181 F.3d 38 (1st Cir. 1999)

NATIONAL FOREIGN TRADE COUNCIL, Plaintiff, Appellee, v. ANDREW S. NATSIOS, 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, Appellants.

No. 98-2304

United States Court of Appeals For the First Circuit

Heard May 4, 1999

Decided June 22, 1999

[Copyrighted Material Omitted]

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[Copyrighted Material Omitted] Thomas A. Barnico, Assistant Attorney General, with whom Thomas F. Reilly, Attorney General, and James A. Sweeney, Assistant Attorney General, were on brief, for appellants.

Timothy B. Dyk, with whom Gregory A. Castanias, Jones, Day, Reavis & Pogue, Michael A. Collora, and Dwyer & Collora were on brief, for appellee.

Jonathan P. Hiatt and Deborah Greenfield on brief for amicus curiae American Federation of Labor and Congress of Industrial Organizations.

Loretta M. Smith, Cynthia L. Amara, and New England Legal Foundation on brief for amici curiae Associated Industries of Massachusetts and Retailers Association of Massachusetts.

Zach Cowan, Acting City Attorney, and Christopher Alonzi, Deputy City Attorney, on brief for amicus curiae City of Berkeley, California.

Martin S. Kaufman, Edwin L. Lewis, III, and Atlantic Legal Foundation, Inc. on brief for amici curiae William E. Brock, Sam M. Gibbons, Alexander M. Haig, Jr., Lee H. Hamilton, Carla A. Hills, George P. Shultz, and Clayton Yeutter.

Deborah E. Anker, Peter Rosenblum, Anusha Rasalingam, and Harvard Law School Immigration and Refugee Clinic on brief for amici curiae Center for Constitutional Rights, Citizens for Participation in Political Action, The International Labor Rights Fund, The New England Burma Roundtable, and The Unitarian Universalist Service Committee.

Daniel M. Price, Powell, Goldstein, Frazer & Murphy LLP, Robin S. Conrad, National Chamber Litigation Center, Inc., Jan Amundson, and Quentin Riegel on brief for amici curiae Chamber of Commerce of the United States of America, Organization for International Investment, National Association of Manufacturers, United States Council for International Business, American Insurance Association, American Petroleum Institute, and American Farm Bureau Federation.

Sara C. Kay, Associate General Counsel, Office of the Comptroller of the City of New York, on brief for amici curiae the Comptroller of the City of New York, the Cities of Los Angeles, California, Philadelphia, Pennsylvania, Oakland, California, Boulder, Colorado, Santa Cruz, California, and Newton, Massachusetts, the Towns of Amherst, Massachusetts and Carrboro, North Carolina, the City and County of San Francisco, California, and the County of Alameda, California.

George A. Hall, Jr. and Anderson & Kreiger LLP on brief for amici curiae Consumer's Choice Council, American Lands Alliance, Preamble Center, Institute for Agriculture and Trade Policy, Friends of the Earth, Humane Society of the United States, Defenders of Wildlife, and Rainforest Relief.

Richard L. Herz and Steven B. Herz on brief for amicus curiae Earth Rights International.

Richard L.A. Weiner, David G. Leitch, Gil A. Abramson, and Hogan & Hartson L.L.P. on brief for amici curiae The European Communities and Their Member States.

Robert Stumberg, Matthew Porterfield, and Harrison Institute for Public Law, Georgetown University Law Center on brief for amici curiae Members of Congress Sen. Edward Kennedy, Rep. David Bonior, Rep. Sherrod Brown, Rep. Michael Capuano, Rep. Peter DeFazio, Rep. William Delahunt, Rep. Lane Evans, Rep. Barney Frank, Rep. Marcy Kaptur, Rep. Dennis Kucinich, Rep. Edward Markey, Rep. James McGovern, Rep. Martin Meehan, Rep. Joseph Moakley, Rep. George Miller, Rep. Richard Neal, Rep. Robert Ney, Rep. John Olver, Rep. Ileana Ros-Lehtinen, Rep. Bernard Sanders, Rep. Janice Schakowsky, Rep. Christopher Smith, Rep. Ted Strickland, Rep. John Tierney, Rep. James Traficant, and Rep. Henry Waxman.

Charles Clark, W. Thomas McCraney, III, and Watkins & Eager, PLLC on brief for amici curiae Members of Congress Sen. Richard G. Lugar, Sen. Rod Grams, Sen. Craig Thomas, Sen. Pat Roberts, Rep. Calvin Dooley, Rep. Donald Manzullo, Rep. Amory Houghton, Rep. Michael G. Oxley, Rep. Doug Bereuter, and Rep. David Dreier.

Heidi Heitkamp, Attorney General of North Dakota, Bill Lockyer, Attorney General of California, J. Joseph Curran, Jr., Attorney General of Maryland, Philip T. McLaughlin, Attorney General of New Hampshire, Patricia A. Madrid, Attorney General of New Mexico, Eliot Spitzer, Attorney General of New York, John Cornyn, Attorney General of Texas, Hardy Myers, Attorney General of Oregon, and William H. Sorrell, Attorney General of Vermont, on brief for amici curiae States of North Dakota, California, New York, Texas, Oregon, New Mexico, New Hampshire, Vermont, and Maryland.

Daniel J. Popeo, R. Shawn Gunnarson, Evan Slavitt, and Gadsby & Hannah LLP on brief for amici curiae The Washington Legal Foundation, American Legislative Exchange Council, Rep. George N. Katsakiores, Rep. Howard L. Fargo, and New York State Assemblyman Clifford W. Crouch.

Before Lynch, Circuit Judge, Coffin and Cyr, Senior Circuit Judges.

LYNCH, Circuit Judge.

The Commonwealth of Massachusetts appeals from an injunction restraining enforcement of the Massachusetts Burma Law, which restricts the ability of Massachusetts and its agencies to purchase goods or services from companies that do business with Burma.¹ We affirm the district court's finding that the law interferes with the foreign affairs power of the federal government and is thus unconstitutional. We also find that the Massachusetts Burma Law violates the Foreign Commerce Clause. We further find that the Massachusetts Burma Law violates the Supremacy Clause because it is preempted by federal sanctions against Burma. We affirm the injunction issued by the district court.

There is one matter on which the parties are agreed: human rights conditions in Burma are deplorable. This case requires no inquiry into these conditions.

I

1. The Massachusetts Burma Law

In 1996, Massachusetts enacted "An Act Regulating State Contracts with Companies Doing Business with or in Burma (Myanmar)," ch. 130, 1996 Mass. Acts 239 (codified at Mass. Gen. Laws ch. 7, §§ 22G-22M, 40F (West Supp. 1998)) ("Massachusetts Burma Law"). The law restricts the ability of Massachusetts and its agencies and authorities² to purchase goods or services from individuals or companies that engage in business with Burma. The law requires the Secretary of Administration and Finance to maintain a "restricted purchase list" of all firms engaged in business with Burma. Mass. Gen. Laws ch. 7, § 22J. As the district court explained, companies may challenge inclusion on the list by submitting an affidavit stating that they do no business with Burma, but final determination as to whether a company is in fact "doing business" as defined by the law is made by the Executive Office's Operational Services Division. See National Foreign Trade Council v. Baker, 26 F. Supp. 2d 287, 289 (D. Mass. 1998).

Under the law, Massachusetts and its agencies and authorities may not contract with companies on the restricted purchase list except in three situations: when procurement of the bid is essential and there is no other bid or offer, when the Commonwealth is purchasing certain medical supplies, or when there is no "comparable low bid or offer." Mass. Gen. Laws ch. 7, § 22H. The law defines a "[c]omparable low bid or offer" as an offer equal to or less than ten percent above a low bid from a company on the restricted purchase list. Id. § 22G. In practice, the law means that in most cases a company on the restricted purchase list can sell to Massachusetts only if the company's bid is for all practical purposes ten percent lower than all bids by companies not on the restricted purchase list. Before a company can bid on a Massachusetts contract, the law requires it to provide a sworn declaration disclosing any business it is doing with Burma. See id. § 22H.

The law defines "doing business with Burma" to include:

(a) having a principal place of business, place of incorporation or . . . 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 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).

Id. § 22G.

The law allows exceptions for entities "with operations in Burma (Myanmar) for the sole purpose of reporting the news, or solely for the purpose of providing goods or services for the provision of international telecommunications." Id. § 22H(e). The law also exempts firms whose business in Myanmar "is providing only medical supplies." Id. § 22I. The law does not impose any explicit limits on the ability of private parties to engage in business in Burma, or on the ability of private parties or local governments to purchase products from firms engaged in business in Burma. It does, however, effectively force businesses to choose between doing business in Burma or with Massachusetts. Massachusetts annually purchases more than $2 billion in goods and services.

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