61 Pages Posted: 14 Nov 2019 Last revised: 4 Dec 2019
Date Written: November 1, 2019
The federal government has always contracted with private entities for mundane goods and services (e.g., pencils, laundry service, construction, and so on). Today, however, private actors implement major federal programs and exercise decisional authority in ways traditionally performed by federal actors. Public-law scholars have decried privatization’s distorting effects on constitutional rights, separation of powers, and administrative law. Missing from the literature, however, is a corresponding account for federalism. This Article pivots into that neglected space, with some urgency. In statehouses and courthouses around the county, politicians and advocacy groups aim to hold federal contractors accountable to state law. For example, recently enacted state laws seek to regulate private immigration detention facilities. Meanwhile, other states have passed laws targeting private entities that service federal student loans. Against these initiatives, the federal government and its contractors argue that state law is displaced not only by federal law, but also by federal contracts and implied constitutional immunities.
Asked whether federal contracts can displace state law, most if not all jurists and scholars would say ‘no'—only federal law can trump state law. That is right in theory but wrong in practice. In undertheorized and outmoded precedents, the Supreme Court has held that federal contracts can preempt state law (“preemption by contract”), and that federal contractors can be constitutionally immune from state regulation (“privatized immunity”). Following the Court’s lead, the federal government and its contractors portray these doctrines of “Supremacy, Inc.” as everyday federalism.
This Article rejects that premise and sounds the alarm. In our era of privatized governance, contractors may stand in for federal officials. But contracts need not, and should not, substitute for federal law. Efficiency is the coin of federal outsourcing, and the most efficient way to displace state law is by contract. Although the Supremacy Clause has been liberally construed in other contexts (for example, to give preemptive force to administrative regulations), the displacement of state law by federal contracts is a step too far. If accountability to state law interferes with programmatic efficiencies, that is a fair constitutional price for outsourced governance. Should the nation not wish to pay it, the government can shield contractors with federal laws—which are the “supreme Law of the Land.”
Keywords: Supremacy Clause, preemption, intergovernmental immunity, preemption by contract, immigration detention, student loan, loan servicers
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