Note: The following piece about oral argument in Chamber of Commerce v. Brown was written by Micah Block, a student in the Stanford Law School Supreme Court Litigation Clinic. Earlier, we posted a recap/analysis from the pro-union perspective by Professor Paul Secunda, which can now be found here cross-linked at Workplace Prof Blog.

Arguing on behalf of the Chamber of Commerce, Jones Day’s Willis Goldsmith sought to distill the argument in favor of preemption to a basic syllogism establishing that AB 1889 is contrary to federal labor policy. He argued that (1) federal labor policy says that employer speech about unionization enhances employee free choice; (2) California seeks to discourage employer speech about unionization; and therefore (3) “California’s labor policy is designed to discourage exactly what the NLRA promotes.”

Goldsmith met immediate resistance from Justice Scalia to the notion that federal policy “promotes” employer speech about unionization, rather than just permitting it, and Justice Ginsburg chimed in on the same point with reference to federal statutes imposing similar restrictions with respect to certain federal grants. Goldsmith came close to a concession by saying that the federal statutes (using language that AB 1889 borrowed verbatim) did not evince a Congressional intent to inhibit employer speech, but distinguished the federal statutes from AB 1889 based on AB 1889’s administrative requirements and damages provisions.

After several further questions, Justice Breyer posed the hypothetical of a hot dog stand in a state park, completely funded by a state grant that did not allow for money to be spent on unionization activities, and asked if it was the Chamber’s position that the state would be required to add a special grant enabling the hot dog vendor to talk about unionization. Goldsmith used this opportunity to distinguish restrictions on specific grants, as in this hypo and in the federal statutes Justice Ginsburg had previously referred to, from AB 1889’s across-the-board restriction on state grant and program funds.

But Goldsmith ran into some trouble by implying that, because AB 1889 reaches so broadly, the state must show a fiscal purpose, which (he argued) it has failed to do. This prompted Justice Ginsburg to reenter the fray with a line of hostile questions, characterizing the Chamber’s suit as a facial challenge and therefore suggesting that the state need only make the “simple argument” that it chooses to pay for certain things, and wants to get what it pays for. Goldsmith sought to parry Ginsburg’s pointed question by pointing out that although such an argument might be advanced, in this case the court below “unanimously concluded that this was not anything that had anything to do with facial issues; it had solely to do with making labor policy.” Pressed on the accuracy of this assertion, Goldsmith reframed slightly to say that the Ninth Circuit had held that AB 1889 was enacted “solely for labor purposes.”

After several more questions from Justice Ginsburg, Justice Alito changed the focus, essentially offering Goldsmith a friendly invitation to discuss potential problems raised by the question of how or whether money that originates with the state can become purely private “profits” no longer subject to AB 1889’s restrictions. Goldsmith obliged, and used the confusion about profits as an entrée to a broader discussion of AB 1889’s administrative requirements, which Goldsmith sought to characterize as both burdensome and unfairly ambiguous.

Following Goldsmith was Thomas Hungar, Deputy Solicitor General, arguing on behalf of the United States as amicus curiae supporting the petitioners. After a brief opening, Chief Justice Roberts launched into a line of questions he would return to throughout the argument on what he called “the spending clause question.” In particular, the Chief Justice seemed interested in finding a way to distinguish in the abstract between state “regulation” on the one hand, which might be preempted by contrary federal regulation, and mere spending conditions attached to state funds on the other, which would likely be permitted. Hungar pointed to the factors that the Boston Harbor court used “to distinguish regulatory from proprietary conduct” but was unable to propose a distinguishing rule.

Justice Breyer sought to crystallize the colloquy between Hungar and the Chief Justice by removing the question of administrative burdens altogether and asking if a “magic administrative scheme” that had the same effect as AB 1889 but without any of its administrative problems would still be preempted. Hungar replied simply that that would be a different case, walking into Justice Breyer’s riposte observing that if the objections to AB 1889 turn on the administrative requirements and the penalties, then remand is appropriate to develop a record on these things. In response, Hungar referred back to the Boston Harbor factors and suggested that even without remand it would be easy to conclude that all of the factors that established the action in Boston Harbor as “proprietary” suggest by contrast that AB 1889 is “regulation.” Hungar followed up with what appeared to be a stronger argument, asserting that even without the administrative requirements and penalty provisions Justice Breyer’s hypothetical scheme would be preempted as impermissible regulation of labor relations by a state. Before concluding, however, he deftly refocused the court on the burdens imposed by AB 1889, pointing out that even if a hypothetical nonburdensome scheme could “achieve some of the effects of this statute in a nonpreempted way,” AB 1889 would still be facially preempted because it clearly expresses a regulatory purpose and includes the burdensome measures.

After several more questions from Justice Breyer, Justice Ginsburg again compared AB 1889 to similar federal statutes specifying that grant funds not be spent to “assist, promote or deter” unionization. Seeking to distinguish those statutes, Hungar pointed out that none of them contained the burdensome measures that AB 1889 contains, and argued that although “it’s not clear” why Congress passed those measures, at most these statutes create exceptions to the general policy with which AB 1889 conflicts and none of them evince a Congressional intent to change the general policy of leaving noncoercive employer speech about unionization unregulated.

As Hungar’s time ran out, Justice Scalia sought a concession that the similar federal statutes expressed “labor policy.” Hungar parried, explaining that at most those statutes expressed labor policy within specific programs, but that expression cannot be relevant to the preemption of AB 1889, which “applies to state spending across the board.”

As Georgetown University Law Center’s Michael Gottesman rose to argue for the State of California, he might have been heartened by the tough questions his opponents had faced from a wide array of Justices. But it soon became clear that the bench was at least as troubled by Gottesman’s side of the argument.

In his opening, Gottesman sought to frame AB 1889 as withdrawing a subsidy to rectify the “anomalous” state of affairs in which California was financing speech on one side of the labor relations debates but not the other. He immediately met resistance from the Chief Justice, who pointed out that the same might be said of anyone who hires any employer to do anything. Gottesman had to agree, but pointed out that a private entity would be just as entitled as the state to withdraw such a subsidy.

Justice Souter took this opportunity to focus Gottesman on the problem previously raised by Justice Alito regarding the distinction between state money, which is restricted by AB 1889, and unrestricted profits or private money. In particular, Justice Souter pressed Gottesman on the interaction between the State’s position with respect to what funds are restricted, and its claim that AB 1889 is nonregulatory. Gottesman responded generally that the bill does not reach profits, and in any case that it would be inappropriate to address that problem because it did not play into the summary judgment decision before the court. (During this colloquy, Gottesman faced a second testy exchange with the Chief Justice, who interrupted to accuse Gottesman of characterizing the summary judgment issue in a way that was “not accurate.” Gottesman backpedaled, agreeing with the Chief Justice and clarifying his earlier statement.)

Pressed by Justice Souter, Gottesman sought to distinguish between funds paid to employers in advance of the provision of goods and services, which would be restricted by AB 1889, and funds paid to employers to reimburse or compensate after goods or services had been rendered, which would not be restricted.

This enabled Souter to offer perhaps his most incisive question. Since Gottesman had been unable to point to a case in which the State did not get the goods or services it desired because its funds were diverted to unionization-related activities, and since AB 1889 concededly does not apply to state funds after the desired goods or services are delivered, Justice Souter wondered aloud, how AB 1889 could be anything other than a regulatory expression of California’s labor policy? In response, Gottesman argued that there was a fiscal policy, because prior to the enactment of AB 1889 unionization-related expenses were a permissible subset of the overhead expenses to which grant funds could be devoted, so AB 1889 actually addressed the problem of grant money being diverted from the state’s intended purpose, in parallel to Rust v. Sullivan.

Justice Scalia jumped on the Rust analogy, seeking to distinguish the permissible federal interest in that case (not supporting abortions) from California’s interest in this case, which Justice Scalia characterized as “not want[ing] the employer to … disrupt … labor management relations.” Gottesman disputed that characterization of California’s interest, asserting instead an interest in neutrality, but Justice Souter immediately jumped in, attempting to catch Gottesman in a contradiction. Justice Souter pointed out that previously Gottesman had said that California’s concern was that it would not get the vital services it was providing grants for in the first place, and now Gottesman was saying that California’s concern was in maintaining “neutrality,” effectively accusing Gottesman of trying to have it both ways. Gottesman finessed his response, essentially saying that California could have it both ways: a state has a fiscal interest in ensuring that state funds go to their intended uses, and declining to subsidize disfavored activity is a legitimate exercise of that fiscal interest. As hostile questions continued, it appeared unlikely that any of the Justices who participated in this exchange were satisfied with Gottesman’s resolution of the problem.

A wide-ranging series of questions followed from the Chief Justice and Justices Souter, Stevens, Scalia, Alito, Kennedy and Breyer. The questions mainly revisited inquiries about the difference between regulation and merely conditioning spending, about what would constitute “state funds” that are restricted by AB 1889. Gottesman was pressed especially hard by the Chief Justice and Justice Scalia on his assertion that AB 1889 is neutral to unions—both Justices made the practical point that even if AB 1889 is facially neutral it seems certain to have a pro-union effect.

Towards the end of the argument, the Chief Justice and Justice Kennedy returned Gottesman to the possibility of a remand. The Chief Justice suggested in a line of questions that the extent of the burdens imposed by AB 1889 does not matter at all to the question of preemption if the Court concludes that AB 1889 is regulation, because a state labor regulation of this kind would be preempted whether burdensome or not. Gottesman reiterated the State’s argument that AB 1889 is not regulation but he conceded that, “if this is regulation, then there is a serious prospect of its being preempted.” As the clock wound down, Justice Kennedy pointed out that the State’s position differed with the reasoning of the en banc decision below that AB 1889 was “regulation.” Gottesman agreed, but clarified that he shared the en banc decision’s view that AB 1889 does not violate First Amendment rights.

With four minutes remaining in rebuttal, Goldsmith returned to the lectern, and the Justices gave him room to make several prepared points. First, Goldsmith sought to clarify the Chamber of Commerce’s view of the preamble of AB 1889 as staking out a labor policy purpose for the bill. Second, he refuted California’s characterization of the Chamber’s reading of the NLRA, explaining that in the Chamber’s view the NLRA requires states to stay away from regulation of noncoercive employer speech about unionization, but that no one is arguing that it affirmatively requires states to fund unionization activities and the Court need not read it that way to decide for the Chamber. Finally, he rebutted California’s characterization of AB 1889 as neutral, arguing that it reflects the non-neutral policy determination that noncoercive employer speech interferes with employee choice, and that withdrawal of funds is not “neutral,” just as the Hyde Amendment, which withdrew federal funds for abortion, was not “neutral” toward abortions.

In closing, the Chief Justice asked Goldsmith to distinguish AB 1889 from Lyng, in which the Court upheld against First Amendment challenge a law that withheld food stamps from the families of striking workers. Goldsmith first noted that Lyng involved a federal statute that was not subject to preemption, and then sought to distinguish the statute in that case because it involved none of the burdensome measures in AB 1889.

***

After a bruising argument for both sides, no clear outcome is apparent. It seems unlikely that the respondents will be able to cobble together a majority to affirm in their favor, but they will be heartened by the interest several justices showed in the possibility of a remand to consider whether in fact AB 1889 is so burdensome as to demand preemption. The Chief Justice, however, seems clearly opposed to this result, having suggested in several of his questions that the outcome will rest on the purely legal “spending clause question” of whether AB 1889 is a permissible condition on spending, or whether instead it is impermissible labor regulation, regardless of how burdensome. If the Court concludes that remand is unnecessary it seems likely that it will resolve the merits in favor of the Chamber of Commerce, deeming AB 1889 regulatory, and preempted.