On October 23, 2019, the United States Department of Justice (“DOJ”) filed a complaint against the State of California “for unlawfully entering a cap and trade agreement with the Canadian Providence of Quebec.” In many ways, the complaint reflects a conventional disagreement between states and the federal government over the contours of federalism, but the complaint’s second cause of action, alleging a violation of the “Compacts Clause,” Article I, section 10(3) of the United States Constitution, is unique. The body of law and scholarship surrounding the Compacts Clause is often guesswork at best, for jurists and scholars alike, because typically states’ practice is not to seek congressional consent, and Congress’s, to rarely consider granting or denying it. Further, Congress has only explicitly rejected one state-made compact in its history.
Federal litigation challenges to agreements made by states are even more uncommon. While still limited, the vast majority of litigation is initiated by private parties. And when Congress does consider compacts made by states (also de minimis), they usually concern agreements made between two or more states, referred to as “interstate” agreements. A truly rarified species, though, is a direct federal legal challenge to an agreement under the second group in the Compacts Clause, concerning compacts made between states and foreign governments, referred to as “foreign state agreements” (“FSAs”).
Article I, section 10 of the United States Constitution directs, “no State shall, without the Consent of Congress, . . . enter into any Agreement or Compact with another State, or foreign Power.” While the body of law and scholarship concerning both interstate agreements and FSAs is limited, authors have not unreasonably assumed that the test for interstate agreements, originating from Virginia v. Tennessee, applies to FSAs as well, but the Supreme Court has never explicitly held so.
While Article I, section 10 is parallel in construction for both types of agreements, the potential harm each type of agreement poses is actually quite different. Therefore, the courts should see not one unitary Compacts Clause, but two: the more developed interstate Compacts Clause and the less well-defined “Foreign” Compacts Clause.
Positive or negative federal action under the Foreign Compacts Clause, either by Congress or the President, is so rare that most scholars accurately describe the Foreign Compacts Clause as having “fallen into desuetude.” Professor Sharmila Murthy, in her analysis of the suit, quickly dismisses the strength of DOJ’s Compacts Clause argument, asserting that, under the single Compacts Clause theory, “[m]ost experts believe that the functional test developed for interstate compacts applies to cross-border agreements.” Murthy concludes that the President “does not have the constitutional authority to end the Cap-and-Trade Agreement with Quebec.” The District Court agreed on both counts, as argued by both the State of California, as well as amici, Judge William Shubb, in his March 12, 2020, ruling, which adopted this commonly advanced view of a singular compacts clause, with the test from Virginia and its progeny controlling. But before reaching that conclusion, Judge Shubb concluded that the “agreement” was not a compact, stating “‘classic indicia’ . . . from Northeast Bancorp are missing.” Later, in separate motions, Judge Shubb further dismissed the DOJ’s arguments, finding the Cap-and-Trade Agreement did not violate Foreign Affairs Doctrine preemptions. For the sake of the current matter, California’s attempt to do something in the face of the disjointed, ineffective federal response to climate change, the result appears desirable, but I am skeptical that the current Supreme Court will take a similar view, or that the result is most favorable where unified national (not to mention international) action is required.
While likely apocryphally attributed to the eminently quotable Yogi Berra, it remains true that “it’s tough to make predictions, especially about the future.” However, if the current litigation reaches the Supreme Court, it seems likely that the Court will reanimate the disused requirement of congressional consent and find the current agreement between California and Quebec to be violative of the Foreign Compacts Clause. Strong textual arguments will be appealing to the current Court. Likewise attractive is the expansive view of the President’s power in foreign affairs, possible federal preemption in the form of environmental protection legislation, and the distinguishability of precedent for interstate agreements from FSAs. The current Court is unlikely to adopt a rule that is so clearly the opposite of the words in the Constitution. The upcoming presidential election will affect whether the federal government appeals. For now, the DOJ is “considering [their] next steps.”
If appealed, the current litigation should force answers to a number of important questions the Supreme Court has left unresolved: 1) Has federal inaction led the Foreign Compacts Clause to lose all (or almost all) of its meaning?; 2) Is there a separate standard for interstate agreements versus FSAs?; and, 3) If there is a separate standard, what should it be?
While certainly in overwhelming disuse, both congressional powers to approve or disapprove compacts made by states, and the executive’s ability to challenge agreements that encroach on presidential powers, are available to both Congress and the President. Congress clearly retains the power to disapprove agreements. But the President should be able to successfully challenge agreements that encroach upon plenary powers of the President, as well as agreements that infringe on authorities delegated to the executive by Congress. Delegation by Congress should function as disapproval of the agreement and be viewed as a form of federal preemption. Finally, California most likely has the ability to moot the current litigation by executing a new “understanding” with Quebec that would be without any legal effect, a mere political commitment that would neither purport to constrain the parties nor infringe on federal powers and thereby not implicate the Compacts Clause while still meeting California’s intent, namely reducing carbon emissions in both California and Quebec.