Opinion
No. CV07-1355-PHX-NVW (lead), No. CV07-1684-PHX-NVW (member).
December 21, 2007
ORDER
I. Nature of the Motion and Related Proceedings
Plaintiffs have appealed the December 7, 2007 judgment dismissing this action without prejudice for lack of a justiciable case or controversy against these Defendants. They now seek an injunction preventing the Defendants from implementing or enforcing the Legal Arizona Workers Act, A.R.S. §§ 23-211 through 214 (the Act), for the duration of the appeal. Fed.R.Civ.P. 62(c). (Doc. ## 91 and 94.) The court's corrected Findings of Fact and Conclusions of Law (Doc. # 87) and Judgment thereon (Doc. # 85) principally concluded: (1) that Plaintiffs lack standing based on imminent threat of enforcement, as they proved no threat by anyone, including the Defendants; (2) that Plaintiffs proved cost-of-compliance injury from forced participation in E-Verify sufficient for standing if they sued a proper defendant; and (3) that redress would not be effective against the Defendants Governor, Attorney General, and Director of the Department of Revenue because the Act does not give them the enforcement power that coerces participation in E-Verify.
Both groups of Plaintiffs have filed new actions on December 10 and 12, 2007, adding one or all of the county attorneys as defendants and seeking interim injunctive relief identical to what is sought here as an injunction pending appeal. Those actions are now consolidated under Arizona Contractors Association, Inc. v. Candelaria, No. CV 07-2496 PHX-NVW ("Arizona Contractors II"). On December 18, 2007, the court held a case management conference and set a hearing for January 16, 2008, on the motions for preliminary injunction.
Plaintiffs' motions for temporary restraining order in Arizona Contractors II were heard on December 18, 2007. The county attorney Defendants acknowledged that it would take them weeks or months to investigate complaints and prepare to initiate any proceedings under the Act. They avowed that, though they will carry out their duties without intentionally delaying, they could and would bring no proceedings before February. If, because of extraordinary or unforeseeable events, they were able and thought it necessary to bring proceedings before then, they would advise the court and Plaintiffs in time for them to seek a temporary restraining order. Thus, the immediate relief against enforcement sought in these motions and by the motions for temporary restraining order in Arizona Contractors II is now unnecessary and could not become necessary until February at the earliest. By that time the court will have heard and ruled on the motions for preliminary injunction in Arizona Contractors II.
Despite that withdrawal of any need for interim injunctive relief against the enforcing officers before February, Plaintiffs continue to seek an immediate injunction against compliance with E-Verify. They no longer seek an order against anyone who will do anything to them during the term of the injunction. Rather, they effectively seek a declaratory judgment to commence and run for a limited time period, but with permanent effect thereafter, absolving them from any liability for not using E-Verify. The relief sought in these motions for injunction pending appeal and in the motions for temporary restraining order in Arizona Contractors II has been transformed.
By separate order this day, the motions for temporary restraining order in Arizona Contractors II are denied for the following reasons: (1) there is insufficient likelihood that Plaintiffs will succeed on issues that demand remedies in the short term; (2) it may be improper to issue a temporary restraining order that is really a declaratory judgment; (3) the balance of hardships tips against Plaintiffs rather than for them; and (4) there will be full opportunity at the January 16, 2008 preliminary injunction hearing to address issues that may occasion interim relief thereafter.
II. Standards for Injunction Pending an Appeal
An injunction pending appeal under Federal Rule of Civil Procedure 62(c) is an extraordinary remedy that should be granted sparingly. Reading Bates Petroleum Co. v. Musslewhite, 14 F.3d 271, 275 (5th Cir. 1994) ("Stays pending appeal constitute extraordinary relief."); United States v. Texas, 523 F. Supp. 703, 729 (E.D. Tex. 1981) ("Since such an action interrupts the ordinary process of judicial review and postpones relief for the prevailing party at trial, the stay of an equitable order is an extraordinary device which should be sparingly granted.").
Four factors must be considered on Rule 62(c) motions: "(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies." Hilton v. Braunskill, 481 U.S. 770, 776 (1987); NRDC v. Winter, 502 F.3d 859, 863 (9th Cir. 2007) (noting the importance of the public interest factor) (citations omitted). See also Alaska Conservation Council v. U.S. Army Corps of Eng'rs, 472 F.3d 1097, 1100 (9th Cir. 2006) ("[T]he moving party [must] demonstrate `either a combination of probable success on the merits and the possibility of irreparable injury or that serious questions are raised and the balance of hardships tips sharply in his favor.'").
"The requirement of a `strong showing' of likelihood of success on the merits is more stringent than the `reasonable probability' standard that is applicable to an application for a preliminary injunction." Davis v. Meyers, 101 F.R.D. 67, 69 (D. Nev. 1984) (citing Bayless v. Martine, 430 F.2d 873, 879 (5th Cir. 1970)). It is sometimes said that the "success on the merits factor cannot be rigidly applied," and that "district courts properly `stay their own orders when they have ruled on an admittedly difficult legal question.'" Pac. Merch. Shipping Ass'n v. Cackette, No. Civ. S-06-2791, 2007 U.S. Dist. LEXIS 76933 at *6, 2007 WL 2914961 at *2 (E.D. Cal. Oct. 5, 2007) (citations omitted). "However, the Hilton test is only to be reformulated in this manner when the movant has made a strong showing as to the other three Hilton factors." Digital Commc'ns. Network, Inc. v. AB Cellular Holding LLC, Case No. 99-5418, 1999 U.S. Dist. LEXIS 15107 at *18, 1999 WL 1044234 at *6 (C.D. Cal. Aug. 19, 1999) ("Because Plaintiffs have not made a strong showing as to the other three Hilton factors, the Court declines to give the Plaintiffs a `break' on the question of strong likelihood of success on the merits.") (citations omitted).
"In a case in which `the moving party seeks to stay governmental action taken in the public interest pursuant to a statutory or regulatory scheme,' the injunction should be granted only if the moving party meets the more rigorous likelihood-of-success standard." Bery v. City of New York, 97 F.3d 689, 694 (2d Cir. 1996) (citing Plaza Health Labs., Inc. v. Perales, 878 F.2d 577, 580 (2d Cir. 1989)); Tunick v. Safir, 209 F.3d 67, 70 (2d Cir. 2000). The movant also must make a "strong showing" of likelihood of success where the irreparable injury it claims is merely prospective monetary damages. "Traditionally, the irreparable injury contemplated by Rule 62(c) is that which will make the appeal moot. Thus, prospective monetary damage is not irreparable injury." Stop H-3 Ass'n v. Volpe, 353 F. Supp. 14, 18 (D. Haw. 1972) rev'd on other grounds, 533 F.2d 434 (9th Cir. 1976) (citations omitted).
In this case, an injunction pending appeal is not needed to protect the jurisdiction of the appellate courts from mootness or other threat. Appellate jurisdiction of this case is secure whether or not the Act is enjoined in the meantime. Rather, the injunction deprives the Act's beneficiaries of its substantive protection for the extended period of an appeal and causes other harms, despite the court's probable lack of jurisdiction to give that substantive relief. This suggests that a strong likelihood of success on the merits ought to be necessary to issue an injunction pending appeal that grants substantive relief.
Another circumstance of this case also suggests that more be demanded for an injunction pending appeal. Plaintiffs' new suit Arizona Contractors II is identical, except that it is against proper defendants and has subject matter jurisdiction, and is pending and ready for a preliminary injunction ruling in January.
III. Plaintiffs Have Little Hardship from Participating in E-Verify, and the Balance of Hardships is Strongly Against an Injunction Pending Appeal
A. Plaintiffs' Hardship is Minimal
Plaintiffs offer mostly sweeping generalities for the hardship they must show to warrant an injunction pending appeal or a temporary restraining order before the January 16, 2008 preliminary injunction hearing in Arizona Contractors II. The hardship comes down to nothing more concrete than the expense of using E-Verify. Counsel admitted at trial that no Plaintiff lacks a computer or internet access. The only cost is employee time in learning the program, submitting the names of new hires after January 1, 2008, and assisting new employees who wish to communicate with the federal government to resolve out-of-date government records. That would be a few hundred to a few thousand dollars a year for the large majority of employers. (Doc. # 87 at 8, 11.)
If Plaintiffs bear this hardship of complying with the Act, there will be no other hardship because the Act itself effectively assures that compliance with E-Verify will avoid virtually all license sanction proceedings and defeat any that are brought. (Doc. # 87 at 9, 18 — 19.) If lawful workers with tentative nonconfirmations show the basis, the E-Verify process itself assures that their government records will be updated and their employers will not be charged with violating the Act.
The hardship of using E-Verify is an increment to the already pervasive regulation of labor and employment in our society. The cost of it meets the minimum for standing, but no Plaintiff showed at trial that the actual cost will be material in the context of its business operations. See Yniguez v. Mofford, 730 F. Supp. 309, 317 (D. Ariz. 1990) rev'd on other grounds, 939 F.2d 727 (9th Cir. 1991) ("While Yniguez has established a sufficient threat of enforcement to provide an actual controversy for purposes of Article III and the Declaratory Judgment Act, she has not established an enforcement threat sufficient to warrant injunctive relief."); Lawson v. Hill, 368 F.3d 955, 959 (7th Cir. 2004) ("Even if we are wrong to suppose the risk of prosecution too remote to confer standing to sue . . . the district judge was right not to enter an injunction. . . . [A]n injunction is an extraordinary remedy."). Moreover, complying with E-Verify, unwelcome though it may be for other reasons, will have off-setting business benefits for Plaintiffs. If historical statistics hold true, 92% of them will find it easier than the I-9 process alone. An overwhelming majority will find it an effective and reliable tool for employment verification. All of them will rate the program "Excellent," "Very Good," or "Good." (Doc. # 87 at 8.) The one thing it will not do is allow them to keep hiring nearly as many unknown unauthorized aliens, but that is not a "hardship" that could count under the law.
The hardship that could count from complying with the Act while the court of appeals considers this case, which is having to participate in E-Verify, is insignificant in practical terms for all but the fewest of businesses. No Plaintiff presented evidence at trial, or credible evidence since trial, that the cost of E-Verify compliance for it or any of its members will be significant.
Moreover, since no county attorney could bring an enforcement proceeding before completion of preliminary injunction proceedings in Arizona Contractors II, the justification for emergency injunctive relief or a restraining order — to stop someone from doing something harmful — is absent. Plaintiffs now reach beyond asking for protection from imminent government action and instead are demanding a binding adjudication that absolves them from the legal effect of the Act. Plaintiffs offer no authority for this kind of declaratory judgment relief at the commencement of a case, or upon the appeal of a case where jurisdiction was lacking, when no overt acts of harm are threatened by any Defendant.
B. An Injunction Will Gravely Injure the Interests of the State, the Interests of Others, and the Public Interest
Plaintiffs' motions wholly fail to acknowledge the harm to the interests of the State, the interests of others, and the public interest from an injunction pending appeal or temporary restraining order. Those ignored harms can be listed in somewhat ascending order as follows.
1. The State's expenditure to inform every employer by October 1, 2007, of the Act and of the obligation to comply with E-Verify after December 31, 2007, would be wasted. 2007 Ariz. Sess. Laws, Ch. 279, § 3. (Joint Statement of Facts, Doc. # 72 ("Facts") Ex. 6.) Giving individuals actual notice of the law, when it begins, and how to avoid risk by complying with E-Verify, was critical to the legislature's purpose of achieving effective deterrence with the fewest number of employers suffering actual sanctions. If the effective date of the Act is delayed by court order, that legislative purpose of fairness by giving individual notices would be defeated unless a new notice is sent when the Act is allowed to go into effect. This suggests that such delay must be denied or that Plaintiffs must post a bond to cover the cost of a new notice under Rule 62(c) in the appeal or Rule 65(c) in Arizona Contractors II.
At the December 18, 2007 hearing, the Executive Branch of the State of Arizona spoke in two voices. Counsel for the Attorney General took the position that no second notice would be necessary after an injunction is lifted because the Act does not speak to it and no money is appropriated to pay for it. Counsel for the Governor took the position that a second notice would be necessary to repair the harm of an injunction. The court concludes that the Governor has the better understanding of the Act and of the consequences of an interim injunction. This either weighs against an interim injunction or weighs in favor of requiring a bond from Plaintiffs to cover the cost of a second notice.
2. Confusion would arise among employers, with the prospect of serious prejudice to some. Of approximately 150,000 employers in Arizona, the large majority apparently have not yet enrolled in E-Verify. An injunction easily could cause many to think they are excused from the Act and from E-Verify compliance, perhaps permanently, even though this is not a class action and an injunction would protect only the Plaintiffs. If Plaintiffs' case fails in the end, many employers could in good faith find themselves exposed to the Act's harsh sanctions because they did not know when to comply. The risk of catastrophic loss to other employers from a confusion-causing injunction outweighs the minimal cost to Plaintiffs from compliance.
The harm of confusion would be multiplied by the legal uncertainty about whether an injunction that restrains an officer's conduct would grant anyone any long-term protection. It is only certain that an injunction would prevent the commencement or maintenance of enforcement proceedings until the injunction is lifted. If the injunction were lifted, the county attorneys would not be barred from bringing future proceedings for violations that occurred during the term of the temporary injunction, and it is unsettled whether the interim injunction would be a defense to the later enforcement actions. Edgar v. MITE Corp., 457 U.S. 624, 630 (1982) (noting that the issue is unresolved); Farmers Union Cent. Exch. v. Thomas, 881 F.2d 757, 760 (9th Cir. 1989) (whether the interim injunction is a defense would have to be decided in the later enforcement action itself). These are risks with grave consequences to the public, even if Plaintiffs are willing to take them.
3. People disagree whether the great number and continuing flow of unauthorized workers into the United States has more benefits than costs. But no one can disagree that the costs and benefits accrue differently to different people in our society. It is the responsibility of our elected representatives in Congress and in our legislatures to strike the balance among those competing social and economic interests. It is the responsibility of the courts to implement the balance as it has been struck, until it is struck differently. See Bery v. City of New York, 97 F.3d 689, 694 (2d Cir. 1996).
The balance now struck is in favor of an economy for those who may work in the United States. See Incalza v. Fendi N. Am., Inc., 479 F.3d. 1005, 1011 (9th Cir. 2007) (quoting H.R. Rep. 99-682(I), at 46, as reprinted in 1986 U.S.C.C.A.N. at 5650) ("In passing IRCA, Congress wished to stop payments of wages to unauthorized workers, which act as a `magnet . . . attract[ing] aliens here illegally,' and to prevent those workers from taking jobs that would otherwise go to citizens."). The benefits in fact to those who come to this country against the law to make better lives for themselves, to those who save from lower cost labor and general depression of wages from employing unauthorized aliens, and to those who enjoy the products of unauthorized labor at lower prices, do not count. The beneficiaries chosen identically by federal and Arizona law prevail over all who benefit from unauthorized alien labor.
Suspension of the Act, whether for a month or for the years it could take to conclude an appeal, would defeat the public interest as chosen by the Legislature and as permitted by Congress. If there is room for debate about the means Congress has permitted to states, there is none about whether Congress and the Legislature have vindicated the same substantive policies.
4. Those who suffer the most from unauthorized alien labor are those whom federal and Arizona law most explicitly protect. They are the competing lawful workers, many unskilled, low-wage, sometimes near or under the margin of poverty, who strain in individual competition and in a wage economy depressed by the great and expanding number of people who will work for less. (Facts Ex. 22I at 1.) ("[T]he U.S. Commission on Immigration Reform reported . . . [that] illegal immigration, can have adverse consequences by helping to depress wages for low-skilled workers and creating net fiscal costs for state and local governments."). See also De Canas v. Bica, 424 U.S. 351, 357 — 58 (1976) ("Employment of illegal aliens in times of high unemployment deprives citizens and legally admitted aliens of jobs; acceptance by illegal aliens of jobs on substandard terms as to wages and working conditions can seriously depress wage scales and working conditions of citizens and legally admitted aliens; and employment of illegal aliens under such conditions can diminish the effectiveness of labor unions."); Incalza, 479 F.3d at 1011.
If the Act is suspended, whether for a month or for years, the human cost for the least among us, measured by each person's continued deprivation, multiplied by their number, will be a great quantum. Even if the injunction is lifted later, their loss will never be paid back. Against all this, Plaintiffs suffer only the expense of having their computer staff log some more hours, with off-setting business benefits as well, and helping authorized workers clear up their records. This is not a sharp tipping of the balance of hardships in favor of Plaintiffs. The balance does not even tip in their direction.
C. Pendency of a Jurisdictionally Sound Fresh Action Against Proper Parties, Ready for a Preliminary Injunction Ruling in January, Weighs Against an Appeal Injunction in the Weeks Before Then
Plaintiffs' inexplicable failure to join one or more county attorneys as defendants when warned about it in September weighs heavily against a jurisdictionally infirm merits injunction in this appeal. Plaintiffs could have joined them with trivial expense and no delay. They took a profitless gamble in ignoring the need for a county attorney defendant, and their urgency is of their own making. Plaintiffs' newly filed action, Arizona Contractors II, seeks identical relief against the proper defendants and will result in an appealable preliminary injunction ruling as soon as January. That tips the balance of hardships more strongly against them on their requests for interim injunctive relief.
IV. Likelihood of Success on the Merits
A. Jurisdictional and Justiciability Issues
The court sees little prospect of success on appeal on any of Plaintiffs' alleged justiciable injuries except the one injury the court found sufficient. That ground is that the operation of the Act coerces Plaintiffs to endure economic injury from use of E-Verify. (Doc. # 87 at 18 — 21.) That issue has some novel aspects (id. at 18, 20) and is based on fears grounded in credible but not certain interpretations of the Act and of federal law. It is subject to fair debate. Plaintiffs could lose ground if the court of appeals has a different understanding of that issue.
The court resolved only one debatable question of justiciability against Plaintiffs. It held that it could provide no redress against the Attorney General, since only county attorneys have the enforcement power that forces Plaintiffs to use E-Verify. Having considered Plaintiffs' further briefing on their pending motions, the court remains of the view that Plaintiffs misunderstand the redressability requirement for justiciability in cost-of-compliance injury cases. They appear to think that since a declaratory judgment invalidating the Act would help them, it matters little whom the declaratory judgment runs against. This expansion of coercive relief to officers in the umbras and penumbras of those with the actual power that harms would take the redressability requirement into fictions. It would threaten, and perhaps step across, the Eleventh Amendment boundaries on the jurisdiction of federal courts. See, e.g., Okpalobi v. Foster, 244 F.3d 405 (5th Cir. 2001) (en banc); Snoeck v. Brussa, 153 F.3d 984 (9th Cir. 1997). Giving leeway to the abstractions and difficulty that attend questions of justiciability, the court still concludes that it is unlikely that Plaintiffs will sustain this contention or their claim of subject matter jurisdiction against these Defendants.
Because Plaintiffs are not likely to succeed on their jurisdictional appeal, and an injunction pending appeal is not necessary to avoid loss of appellate jurisdiction, they have a much heightened burden to warrant an injunction.
B. The Immigration Reform and Control Act Expressly Authorizes, Rather Than Preempts, the Licensing Sanctions in the Act
The court also must assess Plaintiffs' likelihood of success on the merits, assuming they prove jurisdiction in this appeal, for the relief they seek in these motions is on the merits of their claims. Because the court has found that the balance of hardships tips strongly in favor of the Defendants, Plaintiffs bear a high burden to prove that the statute is most likely invalid. They have not shown a likelihood of success on the merits, much less a strong likelihood.
The Supremacy Clause of the United States Constitution gives Congress the power to exclude state legislation in a field as Congress defines it. Any analysis of state authority "begin[s] with the axiom that, under our federal system, the States possess sovereignty concurrent with that of the Federal Government, subject only to limitations imposed by the Supremacy Clause." Tafflin v. Levitt, 493 U.S. 455, 458 (1990). Preemption analysis does not infer that "Congress ha[s] deprived the States of the power to act." Affordable Hous. Found., Inc. v. Silva, 469 F.3d 219, 238 (2d Cir. 2006) (quoting N.Y. Tel. Co. v. N.Y. State Dep't of Labor, 440 U.S. 519, 540 (1979)). The analysis "start[s] with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was a clear and manifest purpose of Congress." Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)). The intent of Congress is the "touchstone" of any preemption analysis, Retail Clerks Int'l Ass'n v. Schermerhorn, 375 U.S. 96, 103 (1963), and there is generally a "strong presumption against finding that state law is preempted by federal law," Comm. of Dental Amalgam Mfrs. Distribs. v. Straton, 92 F.3d 807, 811 (9th Cir. 1996) (citing Chem. Specialties Mfrs. Ass'n, Inc. v. Allenby, 958 F.2d 941, 943 (9th Cir. 1992)).
Field preemption can be "explicitly stated in the statute's language or implicitly contained in its structure and purpose." Gade v. Nat'l Solid Waste Mgmt. Ass'n, 505 U.S. 88, 98 (1992) (plurality opinion) (citations omitted). Implied field preemption exists where "the scheme of federal regulation is `so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it.'" Id. (quoting Fid. Fed. Sav. Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153 (1982)).
A state law may also be "preempted' if it conflicts with a federal law, but that simply means that federal law is supreme over any contrary state law. Conflict preemption is present when "compliance with both State and federal law is impossible, or when the state law `stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" Mich. Canners Freezers Ass'n, Inc. v. Agric. Mktg. Bargaining Bd., 467 U.S. 461, 469 (1984) (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)). A mere difference between state and federal law is not conflict. Fla. Lime Avocado Growers, Inc. v. Paul, 373 U.S. 132, 141 (1963).
Before the Immigration Reform and Control Act of 1986 ("IRCA"), 8 U.S.C. § 1101, et seq., there was no express or implied field preemption of state laws prohibiting the employment of unauthorized aliens. De Canas v. Bica, 424 U.S. 351 (1976). In De Canas v. Bica, a California statute prohibited employers from hiring aliens who were not entitled to lawful residence in the United States if the employment would adversely affect lawful resident workers. The Supreme Court held that the state law was not preempted because it did not regulate immigration or regulate in a field that the federal government had occupied. It did not decide whether the California law conflicted with any specific federal law. Id. at 358 — 64. Like the California law, the Act does not regulate immigration because it does not determine "who should or should not be admitted into the country, and the conditions under which a legal entrant may remain." Id. at 355. De Canas sets the framework for implied preemption analysis of unauthorized alien employment laws.
1. The Plain Language of 8 U.S.C. § 1324a(h)(2) Authorizes State Licensing Sanctions
Congress left no room in IRCA for courts to infer field preemption; it expressly preempted some state powers and expressly affirmed other state powers. Section 1324a(h)(2) of Title 8, U.S.C., provides:
The provisions of this section [ 8 U.S.C. § 1324a] preempt any State or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ, or recruit or refer for a fee for employment, unauthorized aliens.
(Emphasis added.) The task at hand is to give fair meaning to this express permission of sanctions by "licensing and similar laws" upon "those who employ . . . unauthorized aliens." The task is not to wonder whether field preemption could be found in IRCA's structure if Congress had not expressly condoned state licensing sanctions.
Consistent with IRCA, the Act authorizes suspension or revocation of business licenses for conduct that is also prohibited by IRCA. A.R.S. § 23-212(A) and (F). The Act falls within the plain meaning of IRCA's safe harbor for "licensing and similar laws." 8 U.S.C. § 1324a(h)(2). That is enough to defeat this facial challenge. A facial challenge to a law must prove that "no set of circumstances exists under which [the law] would be valid." United States v. Salerno, 481 U.S. 739, 745 (1987).
For example, only an individual adjudicated to have violated the Act could raise a challenge that the ancillary remedy of ordering dismissal of all unauthorized aliens exceeds the safe-harbor of § 1324a(h)(2). No Plaintiff stands in that place yet. If a non-essential part of the Act did fall in a proper case, the rest still would stand. 2007 Ariz. Sess. Laws, ch. 279, § 5 (severability clause).
The Act's definition of licenses that may be suspended or revoked comes within the plain meaning of "licensing" as IRCA uses it. "License" means any state or local "authorization that is required by law and that is issued . . . for the purposes of operating a business in this state." A.R.S. § 23-211(7)(a). It includes articles of incorporation, a certificate of partnership, a foreign corporation registration, and a transaction privilege (sales) tax license, but not a professional license. A.R.S. §§ 23-211(7)(b) and (c). Plaintiffs' further argument that Congress could not have meant to permit the grave sanction of license suspension or revocation again fights the most obvious meaning of the words Congress used.
Whether the Act's definition of license is too broad in some particulars is an as-applied challenge that must await a case and a plaintiff threatened to lose what he contends is not a "license" within the meaning of 8 U.S.C. § 1324a(h)(2).
2. The Licensing Sanction Authorization is Not Conditioned on Completed Federal Proceedings Against the Violator; the Legislative History Does Not So State and Could Not Defeat the Statutory Language if it Did
Plaintiffs contend that the § 1324a(h)(2) authorization of state licensing sanctions only authorizes states to enforce the federal sanctions of IRCA and, of course, states cannot do that because only the Attorney General of the United States can commence federal enforcement proceedings. Defendants rephrase this argument, without changing its substance, as contending that states may only impose further licensing sanctions on employers who already have been found liable in completed federal proceedings under IRCA.
This interpretation would reduce the express authorization of state "licensing and similar laws" to nothing. It is wholly without textual basis in the statute. Plaintiffs base their argument on a sentence in the House Judiciary Committee Report on IRCA. H.R. Rep. No. 99-682(I), at 58 (1986), reprinted in 1986 U.S.C.C.A.N. 5649, 5662. The legislative history does not substantiate Plaintiffs' interpretation, but even if it did, it could not change the statute or add words. The language of the statute that Congress approved, not language from the House Report concerning the statute, controls. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 568 (2005) ("[T]he authoritative statement is the statutory text, not the legislative history."); Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, 150 n. 4 (2002) (describing House Report No. 99-682 as a "single Committee Report from one House of a politically divided Congress" and noting that the dissent's reliance on the report "is a rather slender reed"); Sprietsma v. Mercury Marine, 537 U.S. 51, 62 — 63 (2002) (quoting CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664 (1993)) (asserting that express preemption analysis focuses on the plain wording of the statute, "which necessarily contains the best evidence of Congress' pre-emptive intent."). Based on the plain statutory language, no prior federal enforcement action is necessary before a state may impose sanctions against an employer's license, and the field preemption inquiry ends there.
In any event, the legislative history, and the House Report in particular, do not compel the meaning Plaintiffs urge. After the De Canas decision, Congressional bills calling for federal employer sanctions began to contain preemption clauses for the first time. See, e.g., S. 2252, 95th Cong. § 5 (1976); H.R. 9531, 95th Cong. § 5 (1976). None passed.
The March 1, 1981 final report and recommendation of the Select Commission on Immigration and Refugee Policy recommended that any attempt at immigration reform provide sanctions for employers who knowingly hire undocumented immigrants, but the report did not recommend federal preemption of complementary state laws. In following sessions of Congress, bills were introduced based on the recommendations of the Select Commission, but they included preemption clauses similar to that in the bills from the 95th Congress. See S. 1765, 97th Cong. (1981); H.R. 4832, 97th Cong. (1981); S. 2222, 97th Cong. (1982); H.R. 5872, 97th Cong. (1982); S. 529, 98th Cong. (1983); H.R. 1510, 98th Cong. (1983). Again, none passed.
In the 99th Congress, S. 1200 and H.R. 3810 contained preemption clauses that for the first time included the exception "other than through licensing and similar laws." Unlike the earlier bills, S. 1200 was enacted and became the Immigration Reform and Control Act of 1986. The Senate Judiciary Committee Report dated August 25, 1985, did not comment on the express authorization of state licensing and similar laws, and the Senate passed the bill on September 19, 1985. See S. Rep. No. 99-132 (1985). One of four House Committee Reports, however, the House Judiciary Committee Report dated July 16, 1986, did comment on the licensing exception to preemption:
The penalties contained in this legislation are intended to specifically preempt any state or local laws providing civil fines and/or criminal sanctions on the hiring, recruitment or referral of undocumented aliens.
They are not intended to preempt or prevent lawful state or local processes concerning the suspension, revocation or refusal to reissue a license to any person who has been found to have violated the sanctions provisions in this legislation. Further, the Committee does not intend to preempt licensing or "fitness to do business laws," such as state farm labor contractor laws or forestry laws, which specifically require such licensee or contractor to refrain from hiring, recruiting or referring undocumented aliens.
H.R. Rep. No. 99-682(I), at 58 (1986), reprinted in 1986 U.S.C.C.A.N. 5649, 5662 ("House Report"). The conference committee report said nothing about preemption. See H. Conf. Rep. No. 99-1000 (1986), reprinted in 1986 U.S.C.C.A.N. 5840. Therefore, whatever the meaning of the House Judiciary Committee Report's comment, it was not before the Senate when it approved the bill.
The House Report also does not support Plaintiffs' argument. Their interpretation overlooks the first quoted sentence, which paraphrases the bill as preempting only state "fines" and "criminal sanctions." The Arizona Act imposes no fines or criminal sanctions. Plaintiffs rely on the second quoted sentence, which no doubt correctly states that state licensing processes are not preempted as to "any person who has been found to have violated the sanctions provisions of this legislation." But Plaintiffs go further and assert that the example given in that sentence exhausts the entire meaning of the licensing sanction authorization. The passage does not so state, and the very next sentence gives further examples of permitted licensing sanction laws that are not tied to completed federal violation proceedings. Though one could look for further light in the legislative history (Plaintiffs acknowledged that they did not review the floor debates), one need look only to the sentence after the one Plaintiffs rely upon to see that the House Report does not bear the meaning they would give it.
Finally, if the House Report did mean what Plaintiffs contend, such an attempt to override the plain language of the statute would be precisely the kind of excess that the modern view of legislative history illegitimates. The Members or their staff must write amendments into the bill, not into the Report.
C. The Act Does Not Conflict With IRCA
As noted above, conflict preemption exists when "compliance with both State and federal law is impossible, or when the state law `stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" Mich. Canners Freezers Ass'n Inc. v. Agric. Mktg. Bargaining Bd., 467 U.S. 461, 469 (1984). A mere difference between state and federal law is not conflict. Fla. Lime Avocado Growers, Inc. v. Paul, 373 U.S. 132, 141 (1963). Conflict preemption is not implied absent an "actual conflict." English v. Gen. Elec. Co., 496 U.S. 72, 90 (1990) (citation omitted). "Tension between federal and state law is not enough to establish conflict preemption." Incalza v. Fendi N. Am., Inc., 479 F.3d. 1005, 1009 (9th Cir. 2007) (citing Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 256 (1984)). In addition, "[w]here state enforcement activities do not impair federal regulatory interests concurrent enforcement activity is authorized." Gonzales v. City of Peoria, 722 F.2d 468, 474 (9th Cir. 1983) (citing Fla. Avocado Growers, 373 U.S. at 142), overruled on other grounds by Hodgers-Durgin v. de la Vina, 199 F.3d. 1037 (9th Cir. 1999).
In passing the federal laws that prohibit the employment of unauthorized aliens, "Congress wished to stop payments of wages to unauthorized workers, which act as a magnet . . . attract[ing] aliens here illegally, and to prevent those workers from taking jobs that would otherwise go to citizens." Incalza, 479 F.3d at 1011 (internal quotation marks omitted) (holding that IRCA did not preempt California employment law). Likewise, the Act aims to sanction the licenses of knowing employers of unauthorized aliens within the express permission of 8 U.S.C. § 1324a(h)(2), and it does so without conflicting with other federal laws.
Plaintiffs assert that Congress carefully selected the prohibitions, penalties, procedures, and protections that properly balanced the competing policy objectives surrounding passage of IRCA, and that any departure from those exact parameters by the State necessarily stands as an obstacle to Congress' full objectives. The argument that Congress created an "integrated scheme," any departure from which necessarily poses a conflict, is an argument for implied field preemption. See, e.g., Wisconsin Dept. of Indus., Labor and Human Relations v. Gould, 475 U.S. 282, 288 (1986). As the court has explained, the fact that Congress expressly allowed states to impose licensing sanctions forecloses the argument that it impliedly occupied the same field. Since Plaintiffs' proposed "conflicts" are all based on differences between the State and federal procedures, not incompatibilities, those contentions are merely reworded arguments for field preemption.
For example, Plaintiffs complain that the licensing penalties in the Act are more severe than the penalties in the federal law. That argument ignores Congress' express approval of such state licensing penalties in 8 U.S.C. § 1324a(h)(2). Similarly, they note that the Act's definition of "employee" does not match exactly the federal definition. As a matter of statutory construction, it is improbable that the Act's definition requires verification of persons who are exempted from IRCA such as casual hires and independent contractors. An "employment relationship" is required. A.R.S. § 23-211(3). Regardless, such a contention would at most narrow the Act and must be raised in an as-applied challenge by such an employer rather than in this facial challenge. Nor does any Plaintiff show it has the types of workers necessary to raise this challenge.
The Act does use a different adjudicatory process than IRCA, but conflict preemption does not arise merely because state laws do not replicate federal laws and procedures. The State's law probably would be invalid if it attempted to invoke IRCA's hearing process for its own purposes, or if it attempted to make its own determination of immigration status to affect a person's admissibility or deportability from the United States. See 8 U.S.C. §§ 1229a(a)(1), 1229a(a)(3). Instead, the Act determines an employee's eligibility to work in the United States for the purpose of imposing licensing sanctions on an employer.
Such a determination does not decide "who should or should not be admitted into the country," so it does not conflict with the federal government's regulation of immigration. De Canas, 424 U.S. at 355. Nor is the State's procedure likely to conflict with IRCA's procedure, because the State makes its determination in the exercise of the power that Congress expressly left to it under 8 U.S.C. § 1324a(h)(2). See Garrett v. City of Escondido, 465 F. Supp. 2d 1043, 1057 (S.D. Cal. 2006) (noting that states may make a formal determination of an individual's alienage status for purposes authorized by federal statute); House Report at 66 — 68, 1986 U.S.C.C.A.N. at 5670 — 72 (discussing the states' responsibility to "verify whether alien applicants for certain public assistance programs are in a lawful immigration status and thus eligible for participation"). States must often determine an individual's immigration status to administer state laws that do not conflict with federal laws. See, e.g., A.R.S. § 36-2933 (eligibility for State health care services); § 46-292 (eligibility for cash assistance); § 28-3153(D) (eligibility for a drivers' license); Ariz. Const. art. II, § 22.A.4 (eligibility for bail); Hernandez v. Lynch, 167 P.3d 1264 (Ariz.Ct.App. 2007) (eligibility for bail).
Importantly, the State defers to the federal government's response to a lawful request under 8 U.S.C. § 1373(c) to make this determination. It then ostensibly allows the employer the opportunity to present evidence to rebut the federal government's determination. See A.R.S. § 23-212(H) (according the federal government's determination only a rebuttable presumption of accuracy); Ariz. R. Civ. P. 65.2 (requiring an evidentiary hearing before sanctions may be imposed unless all parties waive the hearing). This is harmonization with federal law, not conflict. The mere fact that the parallel procedures could result in an employer being found in violation of the Act but not IRCA does not establish conflict preemption. That is simply the result of the concurrent enforcement activity in our federal system where Congress has specifically preserved state authority.
When enacting IRCA, Congress sought to minimize undue burdens on employers. The Act does not make employers conform to a stricter standard of conduct than the federal law. Liability under both IRCA and the Arizona Act requires that, at a minimum, the employer "knowingly" employ an unauthorized alien. 8 U.S.C. § 1324a(a)(1)(A); A.R.S. § 23-212(A). Both statutes include procedures for weeding out frivolous complaints, and under both statutes the enforcement official has ultimate discretion to decide whether to bring an enforcement action in any given case. 8 U.S.C. § 1324a(e); A.R.S. § 23-212(C).
Congress and the State of Arizona have enacted anti-discrimination laws. Plaintiffs contend that Arizona's reliance on those laws, rather than placing duplicate provisions within the Act, conflicts with the federal policy of minimizing discrimination. The Supremacy Clause is not that weak. Arizonans remain protected by the prohibitions against such discrimination in IRCA itself. See 8 U.S.C. § 1324b (defining and prohibiting unfair immigration-related employment practices). Those protections somewhat overlap the employment discrimination prohibitions found in federal and Arizona law generally. 42 U.S.C. § 2000e-2 (prohibiting discrimination based on "race, color, religion, sex, or national origin"); A.R.S. § 41-1463(B) (prohibiting employment discrimination based on "race, color, religion, sex, age, disability or national origin"). Moreover, the Act provides that it "shall not be construed to require an employer to take any action that the employer believes in good faith would violate federal or state law." A.R.S. § 23-213. There is no conflict with the federal goal of discouraging discrimination because the Act does not authorize, encourage, or even allow discrimination; nor does it deprive any worker of the express federal protections.
In sum, Plaintiffs have little chance of prevailing on their conflict preemption argument. They simply note differences between IRCA and the Arizona Act. Differences are bound to arise where Congress has left it to the states to regulate a given area concurrently with the federal government.
D. Required Participation in E-Verify as Part of a State Licensing Sanction Program Permitted by 8 U.S.C. § 1324a(h)(2) is Not in Conflict With or Pre-Empted by Federal Law
Because use of E-Verify is voluntary under federal law, Plaintiffs assert that the State's requirement that all employers check the employment eligibility of new hires through E-Verify is invalid under implied field preemption and conflict preemption. Neither the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 ("IIRIRA"), Pub.L. No. 104-208, 110 Stat. 3009-655 (Sept. 30, 1996), nor the Basic Pilot Program Extension and Expansion Act of 2003 ("Expansion Act"), Pub.L. No. 108-156, 117 Stat. 1944 (Dec. 3, 2003), requires such a conclusion.
Congress' purpose for creating E-Verify was to experiment with a system to improve employers' ability to verify the work authorization of new hires beyond the I-9 system. The program was in an evaluative stage when it was created, and so Congress was leery of mandating its use right away itself. Accordingly, it prohibited the Attorney General from requiring participation in the program. IIRIRA § 402(a), 110 Stat. 3009-656. But that does not necessarily mean that Congress placed the conduct that it excluded from federal mandate — whether to use E-Verify — also outside of the residuum of conduct subject to the police power of the state. A decision not to invoke federal coercive powers leaves conduct within the power of the states to compel or forbid for proper legislative purposes.
Unlike the regulation in Geier v. Am. Honda Motor Co., 529 U.S. 861 (2000), nothing in the statutory text or history suggests that Congress intended to vest employers with an individual right, good against the states' police power, to choose whether or not to participate in E-Verify. The federal statute in Geier sought to create a marketplace of individual choices from which better mixes of automobile safety and economy could emerge. Id. at 874 — 75. When a California law mandated one choice, it defeated the federally preferred marketplace. In contrast, federal policy encourages the utmost use of E-Verify, not individual autonomy for the sake of some higher federal goal.
Congress did not cap participation levels. It allowed all employers in the authorized states to use the program. Later, the Expansion Act opened participation to employers in all fifty states. The federal government undertook advertising campaigns to increase participation levels and utilize the excess capacity available. (Facts Ex. 11 at 10.) Notably, no party has submitted evidence that the federal government officers who administer E-Verify view the state requirement as an obstruction. To the contrary, the current administration and the DHS Secretary have endorsed making E-Verify mandatory for all employers nationally. (Facts Ex. 15 at 8.) All of this proves that the federal government encourages increased participation in E-Verify; it does not support an inference that federal policy leaves no room for the states to supplement federal requirements by mandating that employers use E-Verify. Plaintiffs' failure to present evidence from federal officers that the required Arizona participation in E-Verify is unwelcome is highly damaging to their case.
Arizona's requirement will increase the volume of registered employers and the number of inquiries processed through E-Verify. But Congress encourages state and federal authorities to communicate regarding immigration status. See 8 U.S.C. § 1373(a); 8 U.S.C. § 1644. Requiring Arizona employers to check employment eligibility through E-Verify does not abuse the system for a purpose that Congress did not intend. E-Verify was created for precisely that purpose. Furthermore, Arizona's use of E-Verify is for a licensing sanctions program authorized by Congress in section 1324a(h)(2) of IRCA. Therefore, Garrett v. City of Escondido, 465 F. Supp. 2d 1043, 1057 (S.D. Cal. 2006), which found a conflict where the federal government was burdened by an inappropriate use of its program, does not apply. The fact that the Act will result in additional inquiries to the federal government is consistent with federal law.
The federal government, of course, retains the ability to terminate an employer's use of E-Verify or to discontinue the E-Verify program entirely. Despite Plaintiffs' concerns that such an occurrence would force employers into non-compliance with State law, there is no reason to think that the government would exclude users except for their own misconduct. If E-Verify ceases to exist, there will be time enough to deal with that currently imaginary case.
Arizona's decision to require employers to use E-Verify is an attempt to coordinate State efforts to reduce the hiring of unauthorized aliens through licensing sanctions with a federal government program that has the same goal. It does not stand as an obstacle, but rather an aid to achieving the federal government's purposes and objectives in a realm explicitly left open to the states.
E. Procedural Due Process
1. Preclusion of the Employer's Evidence Concerning Whether the Employee Is Authorized Would Raise a Serious Question of Procedural Due Process
Under both the federal and State constitutions, procedural due process requires that a party have an opportunity to be heard "at a meaningful time and in a meaningful manner." Mathews v. Eldridge, 424 U.S. 319, 333 (1976) (quoting Armstrong v. Manzo, 380 U.S. 545, 552 (1965)). Due process requires notice that is reasonably calculated under all of the circumstances to apprise interested parties of the pendency of the action and afford them the opportunity to present their objections. Mullane v. Cent. Hanover Bank Trust Co., 339 U.S. 306, 314 (1950). It also requires "a fair trial in a fair tribunal." In re Murchison, 349 U.S. 133, 136 (1955); United States v. Superior Court, 144 Ariz. 265, 280, 697 P.2d 658, 673 (1985). Due process "is flexible and calls for such procedural protections as the particular situation demands." Mathews, 424 U.S. at 334 (quoting Morrissey v. Brewer, 408 U.S. 471, 481 (1972)).
The Act raises a serious question of procedural fairness to employers charged with knowingly or intentionally employing an unauthorized alien. It provides the following concerning Superior Court proceedings under the Act:
On determining whether an employee is an unauthorized alien, the court shall consider only the federal government's determination pursuant to 8 United States Code section 1373(c). The federal government's determination creates a rebuttable presumption of the employee's lawful status. The court may take judicial notice of the federal government's determination and may request the federal government to provide automated or testimonial verification pursuant to 8 United States Code section 1373(c).
A.R.S. § 21-212(H). This subsection is somewhat at war with itself. On the one hand, the Superior court "shall consider only" the federal government's determination. But on the other hand, that determination only creates "a rebuttable presumption," meaning that other evidence may be considered.
Unless there has already been an opportunity for fair and adequate determination of the employee's work authorization, the Superior Court proceeding must supply that fair and adequate procedure. A procedure that bars all evidence from the employer on an essential element plainly would fall short of due process of law. If this were the case, Plaintiffs would have made a very substantial showing that the Act's procedure is probably unconstitutional.
However, that is probably not the meaning of subsection (H). It parallels subsection (B), which prohibits enforcing officers from "independently making a final determination on whether an alien is authorized to work in the United States" apart from the government's § 1373(c) response. Subsections (B) and (H) are meant to protect workers from being the direct subject of investigation and enforcement under the Act. But where the employer is on trial, the § 1373(c) determination creates only a rebuttable presumption — meaning that the employer may present any evidence to prove the employee's lawful status and the employer's lack of knowledge. It is only the State that is prohibited from investigating workers directly and from offering extrinsic evidence of their status.
This reconciliation of these difficult statutory passages has the virtues of making sense, being fair to the employer, and avoiding unconstitutionality. See Mejak v. Granville, 212 Ariz. 555, 557, 136 P.3d 874, 876 (2006) ("[I]n interpreting a statute, this Court must . . . give effect to every provision in the statute . . . [and] interpret the statute so that no provision is rendered meaningless, insignificant, or void."); Business Realty v. Maricopa County, 181 Ariz. 551, 559, 892 P.2d 1340, 1349 (1995) ("We interpret statutes to uphold their constitutionality, if that is possible. As a corollary, we strive to give statutes meanings that avoid serious constitutional issues. We reach those only when absolutely necessary."). Defendants point out that because the Superior Court must adjudicate whether the employer "knowingly" or "intentionally" employed an unauthorized alien, "a judge will consider arguments and evidence that go to essential elements of the Act." (Doc. # 58 at 22 and n. 17.) Since that includes considering all the employer's evidence on whether the employee was an unauthorized alien, not just the government's § 1373(c) response, procedural due process will likely be afforded to employers. See Ariz. R. Civ. P. 65.2 (requiring an evidentiary hearing before sanctions under the Act may be imposed unless all parties waive the hearing).
Plaintiffs also argue that under § 1373(c) the government does not make a "determination" of the employee's "lawful status" to work. The government's response gives "the citizenship or immigration status" of a person. 8 U.S.C. § 1373(c). It is not clear that a response failing to confirm an employee's "lawful status" is a "determination" that the employee lacks lawful status. In some circumstances, it may be that the government's response of non-confirmation means little in its own right. However, if the government's response fails to give enough information to determine an employee's work authorization, the State's case fails. It does not mean that the employer is sanctioned anyway. These questions are not adequately explored in this record.
Furthermore, Plaintiffs have not shown that the government's response under 8 U.S.C. § 1373(c) will exclude an interactive process like that employed in E-Verify. That process is fair, prompt, adequate, and provides opportunity to be heard. (Facts, Ex. 13, App. C at C-2.) Errors in the government's database concerning authorized workers can be corrected. This record does not show what the government does or would do if the State or the Superior Court requests such interactive and error-correcting processes under § 1373(c). Plaintiffs fall short of proving that "no set of circumstances exists under which [the Act] would be valid." United States v. Salerno, 481 U.S. 739, 745 (1987). Perhaps this shortfall can be made up in the second case, Arizona Contractors II.
Moreover, the issue is not ripe, as it could arise only in a Superior Court enforcement proceeding, which no Plaintiff faces and which could not happen before preliminary injunctive relief will be considered in Arizona Contractors II in January. Finally, if § 23-212(H) does unconstitutionally bar an employer from offering evidence, it would be voided and severed, leaving the rest of the Act standing.
Though Plaintiffs have raised a substantial issue, they have not met their burden of showing a strong likelihood of success on this issue.
2. The Superior Court Process Is Fair and Adequate
Plaintiffs' other procedural due process challenges have no merit. The other Superior Court processes are subject to all the procedural protections of the Arizona Rules of Civil Procedure. Since the Superior Court has full evidence-taking, fact-finding, and discretionary authority on these issues, with the burden of proof on the State, there can be no due process right to participate in the enforcing officer's investigation and preparation of his case (though civil enforcement proceedings are rarely brought without first contacting the defendant).
The Act nowhere says that county attorneys must prosecute all non-frivolous cases, or ones motivated by discrimination. Plaintiffs' other procedural fears are improbable. If they ever arose in a real case, they could be decided, but there are no real facts here and the Act is not deficient on its face.
F. Other Contentions
The Plaintiffs in No. CV 07-1355 raise other contentions that call only for brief comment.
The Act does not purport to reach the out-of-state employees of Arizona employers; therefore it does not implicate the Commerce Clause. The county attorney can bring an enforcement action only "in the county where the unauthorized employee is employed." A.R.S. § 23-212(D).
Plaintiffs have no substantive due process right to employ unauthorized aliens or to refuse lawful precautions against doing so. This is not a separate argument but a restatement of the federal preemption and procedural due process contentions.
The Act does not violate the separation of powers principle of Art. III of the Arizona Constitution and does not have the improbable meanings Plaintiffs would give it to implicate that principle.
V. Conclusion
For the foregoing reasons, Plaintiffs have failed to make a sufficient showing for an injunction pending appeal.
IT IS THEREFORE ORDERED that the motions for injunction pending appeal (Doc. ## 91 and 94) are denied.