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Feldman v. Lederle Laboratories

Decided: July 24, 1991.

CAROL ANN FELDMAN, PLAINTIFF-APPELLANT,
v.
LEDERLE LABORATORIES, A DIVISION OF AMERICAN CYANAMID COMPANY, A MAINE CORPORATION DOING BUSINESS IN THE STATE OF NEW JERSEY, DEFENDANT-RESPONDENT



On certification to the Superior Court, Appellate Division, whose opinion is reported at For reversal and remandment -- Chief Justice Wilentz, and Justices Clifford, Handler, Pollock, O'Hern and Stein. Dissenting -- Justice Garibaldi. The opinion of the Court was delivered by Clifford, J. Garibaldi, J., dissenting.

Clifford

[125 NJ Page 121] In Feldman v. Lederle Laboratories, 97 N.J. 429, 479 A.2d 374 (1984) (Feldman I), we held that under the doctrine of strict products liability, "drug manufacturers have a duty to warn of dangers of which they know or should have known on the basis of reasonably obtainable or available knowledge." Id. at 434, 479 A.2d 374. At the retrial following our remand, plaintiff argued that Declomycin, an antibiotic manufactured by defendant, Lederle Laboratories (Lederle), had permanently turned her teeth gray, and that the drug had been defective during the years 1960 to 1963 (the time she had used it) because it had lacked a warning that its ingestion by young children might result in tooth staining. Defendant attempted to show that relevant federal statutes and regulations had precluded it from performing its state-law duty to warn, and asserted that it could not be held liable for doing that which the federal law had compelled. The trial court rejected that argument and submitted to the jury plaintiff's strict-liability claim based on failure to warn. On the basis of its finding that Declomycin had not been defective in either 1960 or 1961 but that it had been defective in 1962 and 1963, the jury found in favor of plaintiff and awarded her $300,000.

The Appellate Division, concluding that "the theory of liability which undergirded the jury verdict against Lederle was preempted by federal law," 234 N.J. Super. 559, 564, 561 A.2d 288 (1989), reversed and remanded the case for entry of judgment in favor of defendant. We granted plaintiff's petition for certification, 122 N.J. 348, 585 A.2d 360 (1990), to determine whether her strict-liability cause of action based on failure to warn is preempted under the supremacy clause, U.S. Const. art. VI, cl. 2. We hold that in the circumstances of this case federal law does not preempt liability under state law. Consequently, we reverse the judgment of the Appellate Division and remand to that court for consideration of the other issues previously raised on appeal there but not decided. See 234 N.J. Super. at 564-65 n. 3, 561 A.2d 288.

I

-- A --

Tetracyclines, a group of antibiotics first introduced in 1948, are used to combat bacterial infections. A primary benefit of tetracyclines is that they are effective against a wider variety of organisms than are other antibiotics. In 1959 Lederle introduced a new tetracycline analogue, demethylchlortetracycline, under the trade name Declomycin. The 1959 edition of the Physicians' Desk Reference (PDR), an annual used by doctors to determine the appropriate administration and effects of prescription drugs, stated that Declomycin had "greater antibiotic potency that made it possible to achieve therapeutic activity with less weight of antibiotic," that it had "a reduced renal clearance rate that produced a prolongation of the antibacterial levels in the body," and that it was "therapeutically equally effective as other tetracyclines in infections caused by organisms sensitive to the tetracyclines." Feldman I, supra, 97 N.J. at 436, 479 A.2d 374. The description did not mention tooth discoloration as a possible side effect. Ibid. Beginning some time after 1963, the PDR contained a warning that administration

of Declomycin during the developmental stage of the permanent teeth -- prenatal to approximately seven years of age -- could cause permanent tooth discoloration. Ibid.

Plaintiff, Carol Ann Feldman, was born in 1960. Her father, Dr. Harold Feldman, testified that he had treated plaintiff with Declomycin two or three times a year between 1960 and 1963. He had not maintained records of the administrations but said that he had given the antibiotic only nine or ten times during that period. ("Times" refers not to individual administrations but to courses of treatment lasting an indeterminate but brief period.)

Shortly after Declomycin was introduced, Dr. Feldman became acquainted with it through a medical representative employed by Lederle. Dr. Feldman stated that the representative "informed me as to its qualities, to its effectiveness, to how it was being suggested in its use," and that the representative had left samples with the doctor after telling him "how useful the drug was in treating upper respiratory infections and how that was palatable for children." The drug had been made available in cherry-flavored pediatric drops and syrup and custard-flavored oral suspension, and in varying forms of packaging, including clown-shaped bottles obviously intended for pediatric use. That no warning of the potential side effect of tooth discoloration accompanied the various forms of packaging of Declomycin prior to December 1963 is not disputed.

Plaintiff's baby teeth were discolored gray-brown. When plaintiff's permanent teeth began to erupt around 1965, Dr. Feldman became concerned because they too were discolored. After the family dentist examined plaintiff, he informed Dr. Feldman of "the possibility of a correlation between tetracycline and infant tooth staining." On learning from other physicians that some of them also were experiencing staining of teeth in patients treated with tetracyclines, Dr. Feldman stopped prescribing Declomycin for pediatric use.

No one disputes that the discoloration of plaintiff's teeth is the result of ingestion of tetracycline during the developmental stage of her permanent teeth, nor does defendant contest the jury's finding that Declomycin was the specific tetracycline involved. Rather, the dispute focuses on what action Lederle could and should have taken on acquiring knowledge of the correlation between the use of tetracyclines, particularly Declomycin, and staining of teeth.

Plaintiff contends that Lederle knew or through the exercise of reasonable diligence should have known of the possible serious and permanent side effects of Declomycin before and at the time she ingested the drug. She also asserts that Lederle "failed and refused to warn the plaintiff, pediatric consumers, and their physicians of those harmful effects in timely, adequate, and reasonable fashion." As evidence of Lederle's actual or constructive knowledge, plaintiff introduced at trial an internal Lederle report dated August 28, 1962. The third page of the report, under the heading " Declomycin - Achromycin," reads:

We are beginning to hear comments about the yellowing discoloration of teeth in children following tetracycline therapy. One physician, already reported to [Lederle's corporate headquarters], also states his own children's second teeth are soft following tetracycline therapy. This physician states he will discontinue using tetracyclines until this phenomenon is proven or disproven.

Within three months of that report, Dr. Swanzey, an employee of Lederle from 1955 through the 1970s, wrote a letter to the Food and Drug Administration (FDA) notifying it of the possibility of a correlation between tooth discoloration and tetracycline use. In the letter, dated November 16, 1962, Lederle proposed adding the following warning to the labeling of all its tetracycline products: "Use of any tetracycline during tooth development in the neonatal period or early childhood may cause discoloration of the teeth." The letter continued: "Your early opinion and consideration is requested in order that this statement may be added at the earliest possible time."

Dr. Raymond Barzilai, a medical officer with the FDA, responded to Dr. Swanzey's proposal by letter dated December 3,

1962. He indicated that the FDA had "not yet reached any form of final opinion (= medical, scientific, regulatory, etc.)," and was "currently devoting a great deal of active attention to the matter." Dr. Barzilai concluded: "[The FDA] will notify you as soon as any conclusion is reached." One copy of that letter bears a handwritten note suggesting that on its receipt, Lederle requested permission to disseminate the proposed warning in a circular but was "advised" by the FDA not to do so.

On January 15, 1963, Dr. Swanzey wrote to Dr. Barzilai with additional information relating to the possible correlation of tetracycline use and tooth discoloration. He related that he had spoken with a Dr. Zegarelli, who

confirmed that this phenomenon was peculiar to oxytetracycline, tetracycline, and chlortetracycline. He had no experience with demethylchlortetracycline. He felt that some statement is certainly indicated to be included in our package literature but expressed real concern that improper attention or publicity to this phenomenon should be avoided at all costs.

We [Lederle] are conducting some further discussions with others who may have had experience with the use of tetracyclines during the various periods of tooth developments, and based upon this we will arrive at a statement concerning which I will discuss with you later.

By letter dated February 4, 1963, the FDA informed Lederle of the following:

1. After an extensive analytical review of the subject, this Administration has concluded that the effects on bone and teeth caused by the systemic use of the Tetracycline(s) products are clinically substantial and should be properly brought to the attention of the medical profession.

2. At present, the alleged teratogenic effects from tetracycline(s) have not been sufficiently documented as to justify any form of action within our authorized functions.

The following warning statement is being proposed for insertion in the printed matter of all your Tetracycline products:

"Tetracyclines may form a stable calcium complex in any bone forming tissue with no serious harmful effects reported thus far in humans. However, use of any tetracycline drug during tooth development (= last trimester of pregnancy, neonatal period and early childhood) may cause discoloration of the teeth (= yellow-grey-brownish). This effect occurs mostly during long-term use of the drug but it has also been observed in usual short treatment courses".

In closing, I wish to mention that this Administration appreciated your initiative of offering constructive suggestions as well as your cooperative spirit.

On February 14, 1963, Dr. Swanzey agreed to incorporate the FDA's "suggested statement" in Lederle's literature and stated: "I assume that this statement is being proposed for chlortetracycline, oxytetracycline and demethylchlortetracycline as well." He continued:

Before incorporating this in our labeling, however, I would like confirmation from you that it is acceptable to other manufacturers or if appropriate changes are to be made, thereby assuring that these effects common to all of the tetracycline antibiotics will be identical for all products. [Emphasis added.]

A letter of Dr. Barzilai dated February 18, 1963, furnished the requested confirmation:

1. This statement will have to appear only on the labeling for: Tetracycline, Chlortetracycline and Oxytetracycline. There is practically no specific clinical evidence to substantiate such a labeling requirement for Demethylchlortetracycline at present, but we intend to remain alert for such a future possibility.

3. At any rate, I see no reasonable ground for any change in the wording of the statement and we [the FDA] expect to see it reproduced as is in the appropriate labelings as soon as possible.

In fact, the text of the warning was changed slightly, as Lederle learned from an FDA letter dated April 12, 1963. That letter went on to state: "We [the FDA] now have information that leads us to believe that this change in labeling should be made immediately. Therefore, we are asking that no further shipments be made of these drugs until the change has been made." Notably, although the letter displays a sense of urgency with respect to the warning, it, as well as other correspondence submitted by defendant, casts the FDA in a passive role. No change in the exception for Declomycin is indicated. That status was confirmed by a FDA press release issued April 18, 1963, which read in part: "'There is no evidence to date that a fourth drug, demethylchlortetracycline, causes the discoloration,' FDA said." In fact there was such evidence at that time, as indicated by subsequent correspondence, although that evidence may not then have been available to the FDA.

In response to the exchange with the FDA, Lederle issued a memorandum to all its salespeople on April 23, 1963. With respect to Declomycin, the memorandum stated:

You will note that DECLOMYCIN is not included in the list of tetracycline analogues involved in this current revision. Therefore, the inserts and stickers are not to be attached to DECLOMYCIN circulars and literature. While DECLOMYCIN has not been officially implicated with tooth staining, it probably will be within a short period of time, therefore, any gain by making an issue of this fact would rebound unfavorably at a later date. In the meantime, in answer to any questions from a doctor concerning DECLOMYCIN and tooth staining, your answer is, "DECLOMYCIN has not as yet been officially implicated with tooth staining." [Emphasis added.]

Significantly, that response by Lederle does not indicate any intention to prevent or curtail use of Declomycin by the at-risk group; nor does there appear to have been any consideration given to suspending production of Declomycin in the form of flavored pediatric drops, syrup, or oral suspension pending the probable implication of Declomycin with tooth staining. The answer to be given inquiring physicians can be described accurately as evasive.

Lederle continued to correspond with the FDA regarding the possibility of a correlation between Declomycin and tooth staining. That correspondence, however, did not attempt to convince the FDA that a warning for Declomycin was necessary. Rather, on May 8, 1963, Dr. Swanzey submitted additional information to the FDA with a letter stating: "This is our total experience to date and is certainly still insufficient to establish clearly that demethylchlortetracycline may cause tooth staining. It is probably premature to conclude that a warning in labeling is indicated."

Enclosed with that letter were publications and reports from practitioners strongly suggesting a correlation between Declomycin -- as distinguished from tetracycline drugs in general -- and tooth staining. The majority of those reports were in the possession of Lederle or its affiliates in 1962, with the most recent report being submitted to Cyanamid of Canada Limited (an affiliate of Lederle) in January 1963. The responsive letter from Cyanamid, dated February 1, 1963, stated in part: "At the

present time and with the information available, it can only be postulated that the discolouration has indeed been the result of Declomycin administration, and one must admit that there appears to be a likely association."

On May 31, 1963, FDA Commissioner George Larrick wrote to Dr. Swanzey regarding the warning and labeling change for tetracycline drugs. With respect to Declomycin he stated: "Actually, the original statement was revised to require the inclusion of the name of the drug in lieu of the word 'tetracyclines' because to date we have no evidence that your drug demethylchlortetracycline will stain teeth. If the warning statement as originally proposed is used, it automatically incriminates demethylchlortetracycline."

On July 1, 1963, Dr. Barzilai, responding to Lederle's letter of May 8th, stated:

We have reviewed your information and we believe that it cannot as yet justify any change in our current formal position on this matter.

You will realize, of course, that we need unequivocal factual evidence of adverse reaction in man to substantiate any official regulatory decision or action. Dr. Annett's case is only "suggestive" but, since grossly similar brown dental staining has long been observed in conditions other than Tetracycline treatment (cystic fibrosis is an example), this case would require further analysis by proper means (chemical, fluorescence, etc.) to eventually detect and identify the Tetracycline analogue.

Your information will be filed in our records for future reference and be assured that we are following the development of this matter with utmost interest.

The record is silent on whether at any time Lederle undertook "further analysis by proper means" to confirm the suggested adverse reaction.

On November 11, 1963, Lederle's J. Kevin Rooney wrote to Dr. Barzilai that the manufacturer would incorporate a toothstaining warning statement in all of its labeling for demethyl-chlortetracycline products. That letter was apparently a confirmation of a prior conversation authorizing the labeling change. The record does not reveal what additional information, if any, was brought to the FDA's attention in order to justify the change in its "current formal position." Lederle submitted the

revised labeling in December 1963 and incorporated it into the packaging of Declomycin shortly thereafter. The record contains no correspondence from the FDA reflecting its authorization of a change in labeling or its approval of the revised labeling submitted.

In 1975, Dr. Feldman wrote Lederle regarding the discoloration side effect. Lloyd S. Carr, then Lederle's Product Service Manager, replied in a letter stating that after "the causal relationship between tooth staining and tetracycline [had been] unquestionably demonstrated," Lederle had notified the FDA in November 1962 requesting permission to place a warning regarding discoloration on the labeling. Carr's letter went on to indicate that in April 1963 the FDA had "directed all manufacturers of tetracycline to include appropriate warnings in their labeling" but that Declomycin had been specifically excluded.

-- B --

Plaintiff, through her father as guardian ad litem, filed suit in 1978 against Lederle and its parent corporation, American Cyanamid Company, seeking recovery under theories of negligence, gross negligence, breach of express and implied warranties, and strict products liability, among others. She alleged that Declomycin had been defective as marketed during the period when she had ingested the drug. A jury returned a verdict for defendant in 1980, and the Appellate Division affirmed in an unreported opinion. This Court granted plaintiff's petition for certification and summarily remanded the cause to the Appellate Division, 91 N.J. 266, 450 A.2d 579 (1982), for reconsideration in light of Beshada v. Johns-Manville Products Corp., 90 N.J. 191, 447 A.2d 539 (1982). The Appellate Division again affirmed, 189 N.J. Super. 424, 460 A.2d 203 (1983), holding that Beshada did not apply and that prescription drugs are so important to society that suppliers should not be subject to strict liability. This Court granted a second petition for certification, 94 N.J. 594, 468 A.2d 230 (1983), and reversed and remanded for a new trial, holding that prescription drug

manufacturers are not immune from strict-liability claims. Feldman I, supra, 97 N.J. 429, 479 A.2d 374.

At the second trial in 1985 Lederle moved at the close of the evidence to dismiss the complaint on the basis of preemption. More specifically, it claimed that federal regulations in effect at the time of marketing and plaintiff's injury did not permit it to warn about the possibility of tooth staining without prior approval of the FDA. According to Lederle, compliance with the obligation under New Jersey law to communicate a warning based on subsequently-acquired actual or constructive knowledge of a danger "as soon as reasonably feasible," Feldman I, supra, 97 N.J. at 456, 479 A.2d 374, would have placed it in violation of federal regulations if the warning had been given without prior FDA approval. Lederle contended, therefore, that plaintiff's claim is preempted.

The court denied the motion, holding that the regulations at issue were not mandatory but discretionary, and

[did] not in any way bar a drug manufacturer from, in accordance with the language of Feldman [I], putting out adequate warnings when information indicating that the product may be dangerous to the public comes to that drug manufacturer's attention.

I am not satisfied that the defendant has in this record presented to the Court anything that would change the Opinion of the New Jersey Supreme Court in [ Feldman I] to the effect that this area has been pre-empted by the Federal Government.

The court noted specially that Lederle had cited no administrative decisions or case law construing the regulation to be mandatory. Moreover, the court observed that Dr. Goddard, the commissioner of the FDA from 1966 to 1968, had testified at a hearing pursuant to Evidence Rule 8 that the FDA had not been enforcing labeling regulations prior to his tenure as commissioner.

The jury returned a verdict for plaintiff on the sole count -- alleging strict liability for failure to warn -- of her amended complaint that the court had submitted. The verdict form reflected the following specific findings:

1. Plaintiff ingested Declomycin between 1960 and 1963.

2. There was not a defect in Declomycin because it failed to warn of tooth discoloration in 1960 and in 1961.

3. There was a defect in Declomycin because it failed to warn of tooth discoloration in 1962 and in 1963.

4. The failure to warn was a proximate cause of plaintiff's losses and injuries.

Lederle renewed its motion for judgment pursuant to Rule 4:40-2(b), and the trial court again denied the motion.

On appeal, Lederle continued to assert that plaintiff's claim based on failure to warn is preempted by federal laws and regulations governing labeling of antibiotics and prescription drugs. The Appellate Division reversed and remanded for entry of judgment in favor of Lederle:

We conclude that the Food and Drug Administration's (FDA) regulation of the drug industry does not warrant a finding of implied federal preemption of all State tort claims grounded in strict liability failure to warn. However, under certain circumstances, such as presented here, federal law may preempt a discrete issue upon which liability is predicated because compliance with State decisional law would require federal law to be violated. Thus, plaintiff's entire cause of action was not preempted. However, the theory of liability not preempted was decided adversely to plaintiff by the jury and is not challenged on appeal, while the theory of liability which undergirded the jury verdict against Lederle was preempted by federal law. Thus, Lederle's motion for judgment notwithstanding the verdict should have been granted. [234 N.J. Super. at 564, 561 A.2d 288.]

From that ruling plaintiff petitioned for certification, which we granted. 122 N.J. 348, 585 A.2d 360 (1990). Plaintiff presents two distinct issues. First, she contends that the Appellate Division was bound by what she claims this Court decided in Feldman I, namely, that plaintiff's strict-liability claim based on failure to warn is not preempted by federal law. Second, plaintiff argues that even if the Appellate Division was free to consider the issue of preemption, its conclusion that plaintiff's claim is preempted by federal law was erroneous.

II

The first issue is whether the Appellate Division was free to address the issue of preemption at all. Plaintiff contends that in Feldman I this Court determined that a cause of action

based on failure to warn was not preempted by FDA regulations governing the labeling of prescription drugs. According to plaintiff, the Appellate Division was consequently precluded by the law-of-the-case doctrine from reconsidering the issue after remand.

The law-of-the-case doctrine is a guide for judicial economy based on the sound policy that "when an issue is once litigated and decided during the course of a * * * case, that decision should be the end of the matter." State v. Hale, 127 N.J. Super. 407, 410, 317 A.2d 731 (App.Div.1974) (citing United States v. United States Smelting, Ref. & Mining Co., 339 U.S. 186, 198, 70 S. Ct. 537, 544, 94 L. Ed. 750, 760-61 (1950)). Plaintiff's argument, however, is more accurately considered as one of precedent and supremacy. If this Court had conclusively resolved the preemption issue in Feldman I, that determination would not have been open to re-examination by the lower courts on remand. See Liptak v. Frank, 206 N.J. Super. 336, 338-39, 502 A.2d 1147 (App.Div.1985), certif. denied, 103 N.J. 471, 511 A.2d 652 (1986); In re Educ. Ass'n, 117 N.J. Super. 255, 261, 284 A.2d 374 certif. denied, 60 N.J. 198, 287 A.2d 458 (1972). However, the precedential effect of an opinion depends on the court's intention to resolve an issue squarely presented. See, e.g., Lehigh Valley R.R. v. Chapman, 35 N.J. 177, 187, 171 A.2d 653, cert. denied, 368 U.S. 928, 82 S. Ct. 364, 7 L. Ed. 2d 192 (1961). Our analysis, therefore, necessarily turns to a determination of what we did -- and did not -- intend to resolve in Feldman I.

In Feldman I this Court noted that on the summary remand to the Appellate Division, defendant had raised for the first time the claim that federal regulations prohibited it from fulfilling its duty to warn because they precluded it from modifying its labeling without prior FDA approval. 97 N.J. at 458, 479 A.2d 374. The issue of federal preemption had been neither raised nor addressed at the first trial. Ibid. Consequently, Lederle had not presented evidence that FDA regulations

had prevented it from warning as soon as it became aware of the necessity. Id. at 446-47, 479 A.2d 374. We stated: "Under these circumstances we would ordinarily defer discussion of the issue. However, since the trial court may be faced with the problem on the retrial, * * * some comments are in order.' Id. at 458, 479 A.2d 374 (emphasis added).

In contrast, we stated in a footnote to the antecedent paragraph, addressing the proper jury charge on the obligation to warn to be used at the retrial, that

plaintiff did not object to the charge and did not raise this issue on her initial appeal. Since the cause must be retried, * * * and the issue was raised and argued before us, we have decided the question. [Id. at 458 n. 7, 479 A.2d 374 (emphasis added).]

The quoted and emphasized language establishes that this Court was not at a loss for precise expression when declaring the weight that should be accorded its pronouncements. The language of Feldman I taken in its entirety clearly indicates that it was not intended to resolve the preemption issue and therefore did not preclude defendant from making its preemption argument, with additional proofs, on remand. See United States Smelting, Ref. & Mining Co., supra, 339 U.S. at 198, 70 S. Ct. at 544, 94 L. Ed. at 760-61.

III

The more substantial issue is whether the Appellate Division correctly decided that plaintiff's cause of action based on failure to warn is preempted because of actual conflict with the obligations imposed by federal laws and regulations in effect at the time of distribution and ingestion. We conclude that plaintiff's cause of action is not preempted, there being no direct conflict with federal law.

-- A --

The preemption doctrine, rooted in the second clause of article VI of the United States Constitution, requires that when the mandates of federal law and state law are not consistent, the state law must yield. See Wisconsin Pub.

Intervenor v. Mortier, U.S. , , 111 S. Ct. 2476, 2481, 115 L. Ed. 2d 534 (1991). Federal regulations have the same preemptive effect as federal statutes. Hillsborough County v. Automated Medical Laboratories, Inc., 471 U.S. 707, 713, 105 S. Ct. 2371, 2375, 85 L. Ed. 2d 714, 721 (1985); Capital Cities Cable, Inc., v. Crisp, 467 U.S. 691, 699, 104 S. Ct. 2694, 2700, 81 L. Ed. 2d 580, 589 (1984). Furthermore, the doctrine applies equally to state common law and state statutory law. Chicago N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 325-26, 101 S. Ct. 1124, 1134, 67 L. Ed. 2d 258, 270 (1981).

Preemption may occur in several ways. Provided Congress or the federal agency is acting within the scope of its authority, express language may exclude state law. Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 299, 108 S. Ct. 1145, 1150, 99 L. Ed. 2d 316, 325 (1988). In the absence of a clear expression, the "intent to preempt all state law in a particular area may be inferred where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress 'left no room' for supplementary state regulation." Hillsborough County, supra, 471 U.S. at 713, 105 S. Ct. at 2375, 85 L. Ed. 2d at 721 (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S. Ct. 1146, 1152, 91 L. Ed. 1447, 1459 (1947)). Where "the object sought to be obtained by federal law and the character of obligations imposed by it may reveal the same purpose," the intent to preempt state law will be inferred. Rice, supra, 331 U.S. at 230, 67 S. Ct. at 1152, 91 L. Ed. at 1459. A third situation in which preemption will be implied occurs when "'the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject.'" Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153, 102 S. Ct. 3014, 3022, 73 L. Ed. 2d 664, 675 (1982) (quoting Rice, supra, 331 U.S. at 230, 67 S. Ct. at 1152, 91 L. Ed. at 1459).

Conflict preemption occurs when "compliance with both federal and state regulations is a physical impossibility," Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-43, 83 S. Ct. 1210, 1217, 10 L. Ed. 2d 248, 257 (1963), or when state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404, 85 L. Ed. 581, 587 (1941). Once the impossibility of dual compliance is established, the importance to the State of its own law is immaterial. Felder v. Casey, 487 U.S. 131, 138, 108 S. Ct. 2302, 2306, 101 L. Ed. 2d 123, 138 (1988); Brown v. Hotel Employees & Bartenders Int'l Union Local 54, 468 U.S. 491, 503, 104 S. Ct. 3179, 3186, 82 L. Ed. 2d 373, 384 (1984). When there is a conflict, "the federal law must prevail." Free v. Bland, 369 U.S. 663, 666, 82 S. Ct. 1089, 1092, 8 L. Ed. 2d 180, 183 (1962); see also de la Cuesta, supra, 458 U.S. at 153, 102 S. Ct. at 3022, 73 L. Ed. 2d at 675 ("state law is nullified to the extent that it actually conflicts with federal law"). The conflict, however, must be actual, not merely potential, speculative, or hypothetical. Rice v. Norman Williams Co., 458 U.S. 654, 659, 102 S. Ct. 3294, 3299, 73 L. Ed. 2d 1042, 1049 (1982).

In de la Cuesta, the Supreme Court addressed an alleged conflict between regulations issued by the Federal Home Loan Bank Board (Board) that authorized due-on-sale clauses (clauses that grant a lender the option to demand immediate payment of the loan balance if the subject property is sold or transferred without the lender's consent) in the loan contracts of federal savings and loan associations, and provisions of the California Civil Code that had been interpreted by the state to limit enforceability of such clauses. The Court found both a clear and manifest expression of an intent to preempt and an actual conflict:

[California law] explicitly bars a federal savings and loan from exercising a due-on-sale clause to adjust a long-term mortgage's interest rate towards current market rates -- a due-on-sale practice the Board has approved and views as critical to "financial stability of the association." [458 U.S. at 156, 102 S. Ct. at 3024, 73 L. Ed. 2d at 677.]

Because the Court also found that the Board was acting within its authority, the conflicting state regulations limiting due-on-sale practices of federal associations were preempted.

In contrast, in Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 104 S. Ct. 615, 78 L. Ed. 2d 443 (1984), the Court found that the Atomic Energy Act and its enacting regulations did not preclude an award of punitive damages under state law. The Court recognized that states had been expressly prohibited from regulating the safety aspects of hazardous materials, but refused to extend that prohibition to state-law remedies for persons injured from radiation exposure in nuclear plants. Id. at 250-51, 104 S. Ct. at 622-23, 78 L. Ed. 2d at 453-54. The Court rejected the contention that the award of damages would conflict with the federal remedial scheme, finding that "[p]aying both federal fines and state-imposed punitive damages for the same incident would not appear to be physically impossible." Id. at 257, 104 S. Ct. at 626, 78 L. Ed. 2d at 458. It concluded that

the provision cited by Kerr-McGee goes on to state that atomic energy should be developed and utilized only to the extent it is consistent "with the health and safety of the public." 42 U.S.C. ยง 2013(d). Congress therefore disclaimed any interest in promoting the development and utilization of atomic energy by means that fail to provide adequate ...


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