P.R. Dep't of Consumer Affairs v. Isla Petroleum Corp. - 485 U.S. 495, 108 S. Ct. 1350 (1988)

Rule:

There is no federal pre-emption in vacuo, without a constitutional text or a federal statute to assert it. Where a comprehensive federal scheme intentionally leaves a portion of the regulated field without controls, then the pre-emptive inference can be drawn - not from federal inaction alone, but from inaction joined with action.

Facts:

In 1973, Congress passed the Emergency Petroleum Allocation Act (EPAA), 15 U.S.C.S. § 751 et seq., in reaction to severe market disruptions caused by an embargo on oil exports to the United States. The central provision of the legislation was 15 U.S.C.S. § 753, which required the President to promulgate regulations governing allocation and pricing of petroleum products. The Act also contained an express preemption provision, 15 U.S.C.S. § 755(b), precluding state and local regulation of allocation and pricing in conflict with a regulation or order. After the President's authority had terminated, the Commonwealth of Puerto Rico passed legislation which authorized its Department of Consumer Affairs to regulate prices and profit margins in the petroleum industry. Consequently, the department promulgated regulations which (1) required that the department be given advance notice of gasoline price increases, (2) prohibited gasoline wholesalers from passing on to retailers the cost of an excise tax imposed by the Commonwealth, and (3) imposed maximum profit margins on gasoline sales by wholesalers to retailers. Respondent oil companies filed consolidated complaints alleging that petitioner Puerto Rico Department of Consumer Affairs' orders were unconstitutional and requesting declaratory and injunctive relief. The district court enjoined the department from enforcing its regulations, holding that the department's authority was pre-empted by Congress's decision to decontrol petroleum prices. The Temporary Emergency Court of Appeals affirmed, and certiorari was granted.

Issue:

Were the regulations of the Puerto Rico Department of Consumer Affairs pre-empted by the EPAA and EPCA? 

Answer:

No.

Conclusion:

The Court reversed the judgment affirming the district court's order. The Court held that federal pre-emption of the law of Puerto Rico was governed by same test as that applied under the supremacy clause of the Federal Constitution (Art VI, cl 2) for pre-emption of the law of a state. According to the Court, although a pre-emptive inference can be drawn where a comprehensive federal scheme intentionally left a portion of the regulated field without controls, there can be no federal pre-emption of state law in a vacuum without any constitutional text or federal statute to assert it; and thus, the department's regulations were not pre-empted by the EPAA and EPCA--which created a federal regulatory scheme and then simply allowed it to expire--despite possible indications that Congress had intended to allow free-market forces to prevail in the petroleum industry.