This case concerned preemption of state health and safety statute provisions and implementing regulations by federal Hazard Communications Standards (HCS)[1] under the Occupational Safety and Health Act (OSHA).[2] A truck manufacturer brought an action against the State of California seeking declaration that California Safe Drinking Water and Toxic Enforcement Act (Proposition 65)[3] and its regulations were preempted by the federal HCS regarding warning requirements imposed on manufacturers and distributors of industrial trucks (forklift trucks).

OSHA authorizes the Secretary of Labor to promulgate federal occupational health and safety standards such as the HCS to protect workers from hazardous chemicals in the workplace. This standard applies to all sectors of the economy and establishes rules for the identification and evaluation of such chemicals as well as training procedures for handling them. OSHA also permits states to assume and maintain regulatory responsibility for areas covered by a federal standard promulgated under the Act, but to do so, a state must submit to the Occupational Safety and Health Administration (Administration) a “state plan” with proposed state standards. If the state plan is approved by the agency, the state standards displace applicable federal standards; if not approved, the state plan is preempted by the federal statute.

California’s plan was first approved in 1973 and has since been modified and approved by the Administration several times. In 1986, California voters approved Proposition 65, which required the state to publish and maintain a list of chemicals known to cause cancer, birth defects, or other reproductive harm, and also prohibited any person doing business in the state from intentionally exposing individuals to those chemicals without a clear and reasonable warning prior to exposure. To implement this piece of legislation, the California Office of Environmental Health Hazard Assessment (OEHHA) promulgated regulations that provided specific warning methods (OEHHA Regs).[4] These regulations went into effect in 1988 and 1989.

In 1990, labor and environmental groups concerned that the HCS promulgated under OSHA would preempt Proposition 65 successfully sought a writ of mandamus from the California Court of Appeals ordering the California Occupational Safety and Health (Cal-OSH) Standards Board to incorporate the provisions of Proposition 65 into the State Plan and to submit the amended plan to the Administration for approval. To comply with the court’s order, the board issued regulations seeking to incorporate Proposition 65 and the OEHHA Regs into the state plan (Title 8 Regs),[5] which went into effect in 1991. The Administration recently approved the Proposition 65 modification to the state plan, subject to certain conditions. Therefore, California currently has two sets of regulations on its books dealing with Proposition 65 warnings: Title 8 Regs in the state plan and the OEHHA Regs.

In this action the plaintiffs, manufacturers and distributors of forklift trucks, alleged that enforcement of the warning provisions of Proposition 65 and the OEHHA Regs against industrial truck manufacturers was preempted under OSHA by the HCS, and sought declaratory and injunctive relief against the defendants, the Attorney General of California and the Director of OEHHA. The plaintiffs argued that the Title 8 Regs did not include all of the occupational provisions of the OEHHA Regs because Title 8 Regs expressly apply Proposition 65′s warning requirements to “employers” of California workers, as compared to the OEHHA Regs, which apply to “any person in the course of doing business.”[6] Plaintiffs argued that under the Title 8 Regs, the State Plan does not apply warning requirements to manufacturers or distributors of industrial trucks beyond imposing an obligation to warn their own employees, while the OEHHA Regs do apply to such entities. Therefore, plaintiffs argued that the broader language of the OEHHA Regs and Proposition 65 itself is preempted by the HCS standard under OSHA, because the Title 8 language submitted and approved by the Administration in the state plan did not incorporate the broader language. Plaintiffs moved for summary judgment against enforcement of the nonapproved provisions. Defendants moved to dismiss, arguing that Title 8 Regs did include all of the warning requirements of Proposition 65 and the OEHHA Regs through incorporation by reference in an appendix to the Title 8 Regs, and therefore there was no preemption argument. The district court granted the defendants’ motion to dismiss, but did not address whether Proposition 65 and the OEHHA Regs had been fully incorporated into the state plan. In addition, the court held that even if the regulations were not included in the state plan, the OEHHA Regs would not be preempted by the federal HCS standard. The Ninth Circuit reversed on appeal, holding that OSHA and the HCS do preempt Proposition 65 and the OEHHA Regs.

The court relied on the Supreme Court holding in Gade v. National Solid Waste Management Ass’n[7] that OSHA expressly manifests Congress’s intent to preempt state law. The Gade court quoted section 667(b) of OSHA in holding that unless a state plan is submitted to the Administration, OSHA preempts “all state occupational safety and health standards relating to any occupational safety or health issue with respect to which a Federal standard has been promulgated.”[8] Therefore, even if state regulations do not conflict with the federal scheme, as long as they relate to the issue of the federal standard, they are still preempted by the standard. Accordingly, if a state submits some regulations on a worker safety issue to the Administration as part of its state plan and omits other regulations relating to the same issue, the omitted regulations, even if complementary to OSHA’s scheme, will be preempted by the federal standard. Otherwise, state plan approval would be superfluous because states could pick and choose which occupational health and safety regulations to submit to the Administration.

The court then examined whether portions of Proposition 65 and the OEHHA Regs not included in the state plan related to the issue of the federal HCS. After justifying reasons for granting the Administration deference in interpreting the preemptive effects of its regulations, the court examined the agency’s definition of issue as it pertained to the HCS. The Administration stated in implementing regulations of the HCS that the standard was intended to address comprehensively the “issue of evaluating the potential hazards of chemicals, and communicating information concerning hazards and appropriate protective measures to employees, and to preempt any legal requirements of a state . . . pertaining to this subject.”[9] Therefore, the Ninth Circuit concluded that Proposition 65 and the OEHHA Regs fell “squarely within the ‘issue’ of the [HCS],” because both were state laws that required “evaluating the potential hazards of chemicals and communicating information concerning hazards.”[10] The defendant tried to counter this argument by stating that because the HCS did not impose a regulatory burden on plaintiffs, the standard could not preempt state regulations not applying to the plaintiff. However, the court disagreed, concluding that because the Administration defined the issue of the HCS on the basis of the type of regulation involved, rather than who bore the regulatory burden, the agency had completely occupied the field of hazard evaluation and communication.

The Ninth Circuit supported its conclusion that the state laws in question were preempted by the federal HCS by examining implementing regulations for section 18 of OSHA, which state that “no state . . . may adopt or enforce . . . any requirement relating to the issue addressed by this Federal standard, except pursuant to a Federally-approved state plan.”[11] Therefore, federal standards such as the HCS preempted not only state standards directly covering the same issue, but also the broader category of state laws relating to the federal issue. Because the OEHHA Regs and HCS both directly governed occupational health and safety, they were related to the same issue. Therefore, the court held that as applied to manufactures and distributors of industrial trucks, California’s Proposition 65 occupational warning requirements were preempted by OSHA and the HCS, except as contained within the California state plan.

[1]29 C.F.R. § 1910.1200 (1997).

[2]29 U.S.C. §§ 651-678 (1994).

[3]Cal. Health & Safety Code §§ 25249.5 – 25249.13 (West 1998).

[4]Cal. Code Regs. tit. 22, §§ 12000-12100 (1996).

[5]Cal. Code Regs. tit. 8, § 5194(b)(6) (1996).

[6]Id. § 5194(b)(6)(A).

[7]505 U.S. 88 (1992).

[8]Id. at 102 (emphasis in original).

[9]29 C.F.R. § 1910.1200(a)(2) (1997).

[10]Industrial Truck Ass’n v. Henry, 125 F.3d 1305, 1312 (9th Cir. 1997) (citing 29 C.F.R. § 1910.1200(a)(2) (1997)).

[11]29 C.F.R. § 1910.1200(a)(2) (1997).

Olympic Pipe Line Company (Olympic), which operates a hazardous liquid pipeline system through western Washington and Oregon, filed suit against the City of Seattle (Seattle) to prevent the city from shutting down its pipeline operations within the city. In addition, Olympic sought a declaratory judgment that the federal Pipeline Safety Improvement Act of 2002 (PSA)[1] preempts municipal regulations regarding the safety, design, construction, testing, or operation of the pipeline.[2] The district court granted both the motion for a preliminary injunction to prevent Seattle from closing the pipeline, and a motion for summary judgment that the PSA preempted the city’s safety regulations for the pipeline. Seattle appealed, and the Ninth Circuit affirmed the district court decision that the PSA preempts municipal pipeline safety standards.

Olympic operates a 400-mile hazardous liquid pipeline system in parts of Washington and Oregon, including a twelve-mile lateral delivery line (Seattle Lateral) off the main pipeline which travels from Renton, Wash., through several communities, including Seattle, to reach the commercial shipping terminals on Harbor Island. In Seattle, the pipeline runs past elementary schools, through a residential neighborhood, beneath Interstate 5, and alongside electricity transmission lines. Olympic’s original franchise to operate the Seattle Lateral through the city was granted in 1966, with the most recent franchise agreement between the city and Olympic dating back to 1991. In July 1999, a section of Olympic’s main pipeline exploded north of Seattle in Bellingham, Washington. The explosion killed three people, spilled approximately 230,000 gallons of gasoline, and caused millions of dollars of property and environmental damage. Following the explosion, Olympic shut down the northern half of its pipeline until early 2001, and prior to re-opening, entered into agreements with Bellingham granting safety oversight powers to the city and agreeing to perform hydrostatic tests on the pipeline. During the hydrostatic tests Olympic performed in the Washington communities of Bellingham, Renton, and Woodinville following the explosion, a portion of each tested pipeline failed.

When Olympic’s franchise for the Seattle Lateral expired in 2000, Seattle requested Olympic respond to a number of safety concerns and conduct a hydrostatic test in Seattle as a condition of renewal. Olympic refused. Seattle responded by notifying the company that it would suspend pipeline operations within sixty days until a new franchise agreement was signed or Olympic performed a hydrostatic test on the Seattle Lateral, that its failure to comply with the suspension would result in criminal sanctions, and that because Olympic had declared bankruptcy, the city would not enter into a new franchise agreement until the company or its successor emerged from bankruptcy. Olympic did not respond to the city’s demands and instead filed suit, seeking an injunction to prevent the city from shutting down the Seattle Lateral and a declaratory judgment that Seattle’s attempts to regulate pipeline safety were preempted by the federal PSA. The district court granted Olympic’s motion for an injunction, as well as its motion for summary judgment, holding that the city regulations were preempted by federal law. Seattle appealed, arguing that its safety regulations were not preempted by the PSA because its regulations can coexist with the federal regulations, that the franchise agreement and indemnity agreement between Olympic and the city waived any preemption defense, and that public policy required its agreements to be enforced.

The standard of review for a grant of summary judgment is de novo.[3] The Ninth Circuit affirmed the district court’s decision that the PSA preempted the city’s pipeline safety regulations. The court first addressed whether the PSA preempts municipal safety regulations on a hazardous liquid pipeline.[4] Interstate and intrastate hazardous liquid pipelines are subjected to different standards under the PSA. For interstate pipelines, the statute does not allow state and local authorities to “adopt or continue in force safety standards.”[5] The PSA does, however, create two exceptions to its general express preemption of state safety standards: if a state authority is authorized by the U.S. Department of Transportation (DOT) to oversee interstate pipeline facilities,[6] or if DOT delegates its authority to conduct pipeline inspections to ensure compliance with federal safety standards.[7] Aside from those narrow exceptions, the regulations for the PSA clarify that it “leaves to exclusive Federal regulation and enforcement the ‘interstate pipeline facilities,’ those used for the pipeline transportation of hazardous liquids in interstate or foreign commerce.”[8] For intrastate pipelines, the PSA permits state regulations requiring more stringent safety standards only if the state has been formally certified by DOT.[9]

The Ninth Circuit rejected Seattle’s argument that its franchise and indemnity agreements imposing safety standards on Olympic were not preempted by the PSA. The Washington Utilities and Transportation Commission (WUTC), the agency which regulates hazardous liquid pipeline safety in the state, has been delegated authority over interstate and intrastate pipeline issues in Washington. WUTC has entered into an agreement with DOT delegating it the authority to act as an agent of DOT in pipeline incident investigation, inspection, and safety monitoring. Although Seattle has the ability to enter into regulatory agreements with DOT relating to hazardous liquid pipelines, the city did not do so, nor had it been delegated authority by DOT to conduct pipeline inspections. Thus, the Ninth Circuit concluded that WUTC, not Seattle, was the only state agency delegated authority to regulate pipelines in the state and that “the PSA expressly preempts the City’s attempts to impose safety regulations on the Seattle Lateral.”[10] The Ninth Circuit distinguished a previous decision in which the court held that the HLPSA, a PSA predecessor, did not preempt a municipality from imposing safety standards in a franchise agreement with an intrastate pipeline operator.[11] At that time, the HLPSA had allowed state regulation of intrastate pipelines by “[a]ny state agency.”[12] However, when HLPSA was incorporated into the PSA in 1992, Congress amended the statutory language from “[a]ny state agency” to “[a] state authority that has submitted a current certification.”[13] The Ninth Circuit interpreted this amendment to indicate Congressional intent to limit regulatory authority over pipelines to certified state agencies. Because Seattle had not been certified, the court held that the city’s regulations were preempted by the PSA.

The Ninth Circuit next rejected Seattle’s argument that it could contractually require Olympic to comply with its safety conditions. The court observed that if the city acted as a municipal proprietor in the franchise agreement, it could impose safety measures as contractual conditions. To determine whether Seattle had acted as a proprietor or a regulator, the court evaluated whether the city acted to protect its own interests in the agreement which reflected “typical behavior of private parties in similar circumstances” and whether the “narrow scope of the challenged action defeat[s] an inference that its primary goal was to encourage a general policy rather than address a specific proprietary problem.”[14] The court concluded that Seattle’s interest in requiring the safety measures was to prevent pipeline accidents, and thus it had “acted pursuant to its general duty to protect the public health and safety–a duty grounded in the City’s regulatory, police power–rather than in an attempt to protect its role in the real estate market.”[15] Because its concern was with public safety, the Ninth Circuit held that the safety conditions were not valid contractual conditions because Seattle had acted as a regulator, not a
municipal proprietor, in conditioning the renewal of the franchise agreement with Olympic on compliance with its safety requirements.

Seattle argued that even if its regulations were preempted by the PSA, the court should nonetheless require Olympic to comply with the city’s safety conditions because the franchise and indemnity agreements waived Olympic’s right to contest such conditions. The Ninth Circuit first rejected Seattle’s argument that the Olympic’s agreements with the city waived the company’s right to raise a preemption argument against the city. Because “[p]reemption is a power of the federal government, not an individual right of a third party,”[16] the Ninth Circuit held that Olympic did not have the capacity to waive it’s claim. Seattle next argued that public policy demanded that the court require Olympic to comply with the safety measures to prevent it and other companies from entering into contracts they know are unenforceable. The Ninth Circuit rejected this argument because Congress, not the courts, should properly determine public policy. In addition, the court noted that while public policy “might normally discourage companies from entering into contracts that they do not intend to honor, that policy concern is more than balanced by the superordinate federal need to maintain the PSA’s policy of providing national uniformity in the establishment and enforcement of hazardous liquid pipeline safety regulations.”[17]

Thus, the Ninth Circuit affirmed the district court decision to grant summary judgment to Olympic on the grounds that the federal PSA preempts the city’s hazardous liquid pipeline safety regulations, thus enjoining the city from closing down the Seattle Lateral section of the pipeline.

[1] 49 U.S.C. §§ 6105, 60129-60133 (Supp. 2004).

[2] Olympic also originally sought a declaratory judgment that the city’s termination or denial of its franchise agreement would violate the Commerce Clause and that the city’s franchise fees were arbitrary and unreasonable. However, the Ninth Circuit reviewed only the question of whether the PSA pre-empted the city regulations. Olympic Pipe Line Co. v. City of Seattle, 437 F.3d 872, 874 (9th Cir. 2006).

[3] Hambleton Bros. Lumber Co. v. Balkin Enters. Inc., 397 F.3d 1217, 1226 (9th Cir. 2005).

[4] The U.S. Constitution grants Congress the power to preempt state and local laws in the Supremacy Clause. U.S. Const. art. IV, § 2.

[5] 49 U.S.C. § 60104(c) (Supp. 2002).

   [6] Id. § 60106(a).

   [7] Id. § 60117(c).

[8] 49 C.F.R. § 195, app. A (2005).

[9] 49 U.S.C. § 60105(c) (Supp. 2002).

[10] Olympic Pipe Line Co. v. City of Seattle, 437 F.3d 872, 880 (9th Cir. 2006).

[11] Shell Oil Co. v. City of Santa Monica, 830 F.2d 1052, 1066 (9th Cir. 1987).

[12] Id. at 1064 (relying on the text of the former 49 U.S.C. § 2002(d)).

[13] 49 U.S.C. § 60104(c) (Supp. 2002).

[14] Aeroground, Inc. v. San Francisco, 170 F. Supp. 2d 950, 957 (N.D. Cal. 2001) (citing Cardinal Towing & Auto Repair, Inc. v. Bedford, 180 F.3d 686, 693 (5th Cir. 1999)).

[15] Olympic Pipe Line, 437 F.3d at 881.

[16] Id. at 883.

[17] Id.