In Geo Grp., Inc. v. Newsom,[1] the en banc panel of the Ninth Circuit Court of Appeals declared California enacted Assembly Bill 32 (“AB 32”), which states that a “person shall not operate a private detention facility within the state,” is in violation of the Supremacy Clause.  In reaching its conclusion, the Court found that otherwise, AB 32 would give California a virtual power of review over Immigration and Customs Enforcement (ICE)’s detention decisions.

Background

Congress has directed federal officials to detain noncitizens in various circumstances during immigration proceedings.  The Immigration and Nationality Act provides that the Secretary of the Department of Homeland Security (“DHS”) “shall arrange for appropriate places of detention for aliens detained pending removal or a decision on removal.”  8 U.S.C. section 1231(g)(1).  Section 1231(g)(1) gives both “responsibility” and “broad discretion” to the Secretary “to choose the place of detention for deportable aliens.”[2]  Congress has expressed that the Secretary should favor the use of existing facilities for immigration detention, whether through purchase or lease.  Section 1231(g)(1)-(2).

The Secretary also has general administrative powers to contract with private parties.  The Secretary has “authority to make contracts . . . as may be necessary and proper to carry out the Secretary’s responsibilities.”[3]  Pursuant to federal procurement regulations, the Secretary has “authority and responsibility to contract for authorized supplies and services,” and the Secretary “may . . . delegate broad authority to manage the agency’s contracting functions to heads of such contracting activities.”[4]  Immigration and Customs Enforcement (“ICE”), a component of DHS, carries out immigration detention.  As one option, ICE officials “may enter into contracts of up to fifteen years’ duration for detention or incarceration space or facilities, including related services.”[5]

A substantial portion of ICE’s detention operations take place in California.  California law prohibits local governments from entering into new agreements or expanding existing agreements to house immigration detainees.[6]  There are significant fluctuations in the population of noncitizens who are detained, requiring ICE to maintain flexibility.  Given all these constraints, ICE has decided to rely almost exclusively on privately owned and operated facilities in California, rather than building or operating its own detention facilities.  ICE contracts out its detention responsibilities to (1) private contractors, who run facilities owned either by the contractor or the federal government, and (2) local, state, or other federal agencies.  Two of these detention facilities are run by The GEO Group, Inc. (“GEO Group”).

In 2019, California enacted Assembly Bill 32 (“AB 32”),[7] which states that “a person shall not operate a private detention facility within the state.”  Penal Code section 9501.  A “private detention facility” is defined as “a detention facility that is operated by a private, nongovernmental, for-profit entity, and operating pursuant to a contract or agreement with a governmental entity.”[8]  AB 32 does not prohibit the federal government from leasing existing facilities owned by private companies.[9]

AB 32 provides a “temporary safe harbor” to accommodate existing contracts.  The safe harbor exempts facilities operating under a contract “in effect before January 1, 2020,” but does not “include any extensions made to or authorized by that contract.”[10]  ICE’s contracts with private detention facilities in California run from December 2019 through December 2034, with two options to terminate at five-year intervals.  Thus, if those options are interpreted as “extensions,” AB 32 would make ICE’s California operations unlawful as early as 2024.

The United States and GEO Group filed suit to enjoin the enforcement of AB 32.  The District Court consolidated the proceedings.  The United States and GEO Group each moved for a preliminary injunction, and California moved to dismiss and for judgment on the pleadings.  The District Court dismissed the United States and GEO’s claims as to ICE-contracted facilities and denied the motion for a preliminary injunction as to those facilities because it found no likelihood of success on the merits.

The United States and GEO Group (together, “appellants”) appealed.  A divided three-judge Ninth Circuit Court of Appeals panel reversed.[11]  The Ninth Circuit granted California’s petition for rehearing en banc.

Discussion

The en banc Ninth Circuit Court of Appeals explained that the “the Constitution guarantees ‘the entire independence of the General Government from any control by the respective States .’” Trump v. Vance, 140 S. Ct. 2412, 2425 (2020) (citation omitted).  The Supremacy Clause states that “the Laws of the United States . . . shall be the supreme Law of the Land . . . , any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”  U.S. Const. art. VI, cl. 2.  The Supremacy Clause “prohibit[s] States from interfering with or controlling the operations of the Federal Government.” United States v. Washington, 142 S. Ct. 1976, 1984 (2022).

The Court observed that the Supremacy Clause precludes states from dictating to the federal government who can perform federal work.  A state may not “require[] qualifications” for those doing government work “in addition to those that the Government has pronounced sufficient.”  Johnson v. Maryland, 254 U.S. 51, 57 (1920), and “[a state] may not deny to those failing to meet its own qualifications the right to perform the functions within the scope of the federal authority.”  Sperry v. Florida ex rel. Fla. Bar, 373 U.S. 379, 385 (1963).

The Court acknowledged that the scope of a federal contractor’s protection from state law under the Supremacy Clause is substantially narrower than that of a federal employee or other federal instrumentality.  The Court explained that because private contractors do not stand on the same footing as the federal government, states can impose many laws on federal contractors that they could not apply to the federal government itself.  For example, although a state can tax a federal contractor, it cannot tax the federal government itself.  See New Mexico, 455 U.S. at 733-34.  The Court explained, however, that even when evaluating state regulations of federal contractors, courts distinguish regulations that merely increase the federal government’s costs from those that would control its operations.

In Leslie Miller, Inc. v. Arkansas, 352 U.S. 187 (1956) (per curiam), the United States Supreme Court held that a state law requiring building contractors to obtain a state license could not be enforced under the Supremacy Clause against a contractor hired on a federal construction project.  The Leslie Miller Court further explained that applying the state licensing requirement to a federal contractor would “require[] qualifications in addition to those that the Government has pronounced sufficient.”  Id. at 190 (quoting Johnson, 254 U.S. at 57).  Similarly, in Public Utilities Commission v. United States, 355 U.S. 534 (1958), the Supreme Court held that it violated the Supremacy Clause for a state law to require common carriers to seek approval from a state agency for rates negotiated with the federal government to transport federal property.  (Id. at 544.)

Here, the en banc Court stated that, under Leslie Miller and Public Utilities Commission, when federal law gives discretion to a federal official to hire a contractor to perform federal work, a state cannot override the federal official’s decision to do so under the Supremacy Clause.  The Court stated that “interfering with the federal government’s hiring decisions goes too far—regardless of whether the decision is to hire an employee or a private contractor.”  The Court stated that AB 32 would give California the power to control ICE’s immigration detention operations in the state by preventing ICE from hiring the personnel of its choice.  Given the fluctuating demand, Congress’s preference for existing facilities, and California’s limits on agreements with local governments, ICE had determined that privately run facilities are the most “appropriate” for California.  Section 1231(g)(1).  The Court explained that AB 32 would take away that choice.  AB 32 would instead give California a “virtual power of review over the federal determination” of appropriate places of detention (Leslie Miller, 352 U.S. at 190); would allow the “discretion of the federal officers [to] be exercised . . . only if the [state] approves” (Public Utilities Commission, 355 U.S. at 543); and would effectively “require[] qualifications in addition to those that the Government has pronounced sufficient” (Johnson, 254 U.S. at 57).

To comply with California law, the Court explained, ICE would have to cease its ongoing immigration detention operations in California and adopt an entirely new approach in the state.  The Court concluded that AB 32 breached the core promise of the Supremacy Clause.

The en banc court also examined how AB 32 fits within modern Supremacy Clause cases, which discuss two separate doctrines: intergovernmental immunity and preemption.  The Court explained that intergovernmental immunity “prohibit[s] state laws that either regulate the United States directly or discriminate against the Federal Government or those with whom it deals (e.g., contractors).”[12]  California argued that intergovernmental immunity never applies to a generally applicable state regulation of a federal contractor like AB 32, even when the regulation would control federal operations.  The Court found that “AB 32 clearly falls on the same side as Leslie Miller and Public Utilities Commission, controlling federal operations by interfering in the same way with ICE’s contracting decisions.”  The en banc Court thus rejected California’s argument that AB 32 does not implicate intergovernmental immunity.

California also urged the court to apply the presumption against preemption and conclude that Congress did not speak clearly enough about privately run immigration detention facilities for AB 32 to be preempted.  Under the doctrine of obstacle preemption (the only preemption doctrine the parties discussed), a state law is preempted if it “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”  California, 921 F.3d at 879 (quoting Arizona v. United States, 567 U.S. 387, 399 (2012)).  The en banc court likewise disagreed with California’s preemption argument and held that AB 32 was preempted by federal law.  Whether analyzed under intergovernmental immunity or preemption, the Court determined that California could not exert the level of control AB 32 would provide over the federal government’s detention operations.

The en banc Ninth Circuit Court of Appeals held that appellants were likely to prevail on their claim that AB 32 violated the Supremacy Clause as AB 32 would give California a virtual power of review over ICE’s detention decisions.  Accordingly, the en banc Court of Appeals vacated the District Court’s denial of the appellants’ motion for preliminary injunctive relief and remanded for further proceedings.

HOW THIS AFFECTS YOUR AGENCY

Agencies will observe that because the Court held that appellants were likely to prevail on their claim that AB 32 violated the Supremacy Clause by controlling the operations of the federal government, the Court did not consider whether it is generally applicable, or whether it unconstitutionally discriminated against the federal government.

Also, the Ninth Circuit wrote that it “spoke too broadly in United States v. California when we said that ‘[f]or purposes of intergovernmental immunity, federal contractors are treated the same as the federal government itself.’  921 F.3d at 882 n.7.  Rather, states may impose some regulations on federal contractors that they would not be able to impose on the federal government itself.”

Agencies are advised to consult with a trusted legal advisor on issues involving the complex interplay of state and federal powers, particularly with regards to immigration, if applicable to your jurisdiction.

As always, if you want to discuss any of this in greater detail, do not hesitate to contact James Touchstone at jrt@jones-mayer.com or by telephone at (714) 446-1400.

Information on www.jones-mayer.com is for general use and is not legal advice. The mailing of this Client Alert Memorandum is not intended to create, and receipt of it does not constitute, an attorney-client-relationship.

[1] 2022 U.S. App. LEXIS 26882 (9th Cir. Sep. 26, 2022).

[2] Comm. of Cent. Am. Refugees v. INS, 795 F.2d 1434, 1440 (9th Cir.), amended by 807 F.2d 769 (9th Cir. 1986).

[3] 6 U.S.C. section 112(b)(2).

[4] 48 C.F.R. section 1.601(a).

[5] 48 C.F.R. section 3017.204-90.

[6] See Civil Code section 1670.9(a)-(b); see also Government Code section 7310(a)-(b).

[7] 2019 Cal. Legis. Serv. Ch. 739 (West).

[8] Penal Code section 9500(b).

[9] See Penal Code section 9503 (clarifying that AB 32 does not prohibit “any privately owned property or facility that is leased and operated by the Department of Corrections and Rehabilitation or a county sheriff or other law enforcement agency”).

[10] Penal Code section 9505(a).

[11] See GEO Grp., Inc. v. Newsom, 15 F.4th 919 (9th Cir. 2021); see also Client Alert Vol. 36, No. 21.

[12] Washington, 142 S. Ct. at 1984 (cleaned up).