Getting Railroaded by the Capitalist State

The Norfolk Southern disaster in East Palestine has raised numerous issues of corporate malfeasance, and how it is enabled by corporate collusion with the state. Some of that, as we saw in December, is the federal government’s protection of the railroad industry from labor action against its intolerable work hours and lack of sick leave, understaffing, and the resulting danger to the public. Those trains kept running under the same unsafe conditions, and we now see the result.

But this collusion also takes the form of regulatory preemption of tort law. Norfolk Southern, not surprisingly, was the defendant in another case involving a toxic chemical spill — the release of chlorine gas in Graniteville, SC — back in 2005. As The Intercept reports, the railroad’s lawyers argued:

Plaintiffs emotional evocations of ‘deadly chemicals,’ ‘mangled metal,’ or ‘deadly liquid chlorine’ forming a gas that ‘crept through Graniteville’ and ‘killed those who could not outrun it’ can have no use other than to divert this court from the issue at hand – whether certain of plaintiffs claims are preempted by federal law.

Despite the best efforts of one of the plaintiffs (the textile company Avondale Mills, which had suffered major losses from business interruption), Norfolk Southern’s law firm Hollingsworth LLP succeeded (as it boasted on its website) in removing the case to federal court.

Based on the experience after the 2005 derailment, Wall Street analysts predict Norfolk Southern stock will suffer little if any drop in value as a result of its latest act of criminal negligence.

Federal regulatory preemption of state common and statute law — including the common law of tort liability — doesn’t get nearly the amount of media attention as do more straightforward forms of corporate welfare, but it’s played a major role in the history of American capitalism. Essentially, it boils down to the fact that federal regulations are viewed as having preempted the field and defined the standards of safety and quality that economic actors must meet, and thereby created a safe harbor against liability for damages — or against more stringent state regulations — so long as they meet those minimum standards set by the federal government. 

This is not always the case, depending on whether a Congressional statute includes an explicit preemption clause, or federal courts hold state law to directly interfere with the operation of the federal regulation. Sometimes state regulatory standards that exceed those of the federal government are permitted, as in the case of California’s automobile emissions standards. But it’s not uncommon for federal regulation to be treated as absolving from liability a corporation that has met the federal standard.

Even if Congress does not include an express preemption clause, judges routinely hold that Congress has “implied” that a state law should be preempted. One form of this is “field preemption,” where Congress has so pervasively regulated on the subject that a court may safely infer that it intended to preclude any state legislative activity on that subject. 

This form of preemption, traditionally, referred primarily to existing state regulations which were more or less strict than a new federal regulation. In recent years, however, the federal government has increasingly tended to treat federal regulations as setting a maximum standard that rules out even tort liability for any corporate malfeasance that doesn’t directly violate the federal rules. But even in such cases, the standard practice was for courts to judge the federal intent to preempt by the language of the Congressional statute authorizing regulation.

Preemption creep continued to intensify under the Bush administration. The federal government began expanding preemptive action by drafting regulations to preempt state tort law even when the authorizing legislation stated no such intent. And federal regulatory preemption expanded from nullifying primarily state regulations viewed as in conflict with the federal standard, to preempting even tort liability for misfeasance in cases where the bad actor was in compliance with federal requirements. “Preemption of state tort law,” according to a fact sheet from the Center for Justice & Democracy, “is completely different from preemption of state regulations; the organized push by Big Business to expand preemption in the tort area, leaving individuals with no recourse at all, is unprecedented in our history.”  

The Bush administration also played an active role in this unprecedented shift toward nullifying state tort law. David Vladeck noted in a brief for the American Constitution Society that 

the Administration does not seek to change tort law through transparent means, like the enactment of a federal law or the adoption of regulations. Instead, it has resorted to simply including statements in lengthy and obscure preambles in Federal Register notices that regulatory action taken by an array of federal agencies — the Food and Drug Administration, the National Highway Traffic Safety Administration, the Consumer Product Safety Administration, to name a few — broadly preempts state law. One commentator has aptly dubbed this campaign “preemption by preamble.”

The administration even attempted to treat voluntary adherence to standards in excess of federal requirements as implied product disparagement. The USDA in 2007 announced its intention to stop a meatpacker, Creekstone Farms Premium Beef, from voluntarily testing all its cows for mad cow disease on the grounds that it would be harmful to the industry. Leading firms in the industry urged the administration to take action because of fears that Creekstone’s voluntary larger-scale testing would put them under public pressure to do the same.

Monsanto and other major dairy firms attempted to prevent voluntary labeling of recombinant bovine growth hormone on the grounds that it disparaged their own products by suggesting there was something wrong with rBGH, despite it having been approved by the USDA. Monsanto has a long history of such attempts, with uneven success.

In any case state tort law itself, even when not preempted by federal regulations, isn’t that stringent in the first place. According to Morton Horwitz, in The Transformation of American Law, state courts significantly revised the common law of tort liability in the early and mid-19th century to make it more business friendly. For example, the original common law simply held businesses liable for whatever damages their actions inflicted on others, regardless of intent or negligence. State courts created modern standards of negligence in order to absolve economic actors from liability for harm they caused, so long as they met artificially constructed commercial standards of “reasonable care.” So if the practices of a particular industry involved a high risk of inflicting death or dismemberment on the surrounding population, or poisoning their air and water, regardless of care, a business owner could be found not to be negligent despite causing such harm.

Oh — and don’t forget that, just three months ago, the Biden administration prevented railroad workers from striking over some of the very same safety issues that caused the East Palestine disaster.

So in the end, federal regulations, more often than not, protect corporations from competition and liability rather than restrict them. Just goes to show you, as George Carlin said, that it’s a big club — and you ain’t in it.

The Center for a Stateless Society (www.c4ss.org) is a media center working to build awareness of the market anarchist alternative