Giving the Power of Prevention to Private Business

Florida lawmakers create a pathway for companies to challenge local regulations that affect profits.

Although many US political battles over the COVID-19 pandemic have taken place on the national stage — such as fights over the reach of federal mandates into state affairs — the pandemic has also revealed tensions between state and local governments. Municipalities sometimes have provided more rules than state legislatures and governors, and local school boards have tried to retain masking requirements in opposition to state-level orders.

Now, the Florida legislature appears ready to redefine the state-local power dynamic with a new regulatory preemption bill. The new bill, titled the Local Business Protection Act, would set up a new cause of action for businesses to sue local governments over local ordinances that affect company profits.

State legislatures usually pass topic-specific preemption bills each year, such as laws preventing local governments from setting a higher minimum wage or prohibiting plastic bag bans.

Florida’s new bill would eliminate that process by allowing local businesses to sue local governments directly if the business can show that an ordinance reduces profits by 15 percent. To bring a challenge, businesses must establish residence in the local jurisdiction for three years, and the challenging business must provide evidence of a reduction in profits.

Not every local action could be challenged under the new bill, as the final text passed by the Florida Senate provides some carve-outs. For example, businesses could not challenge a local government if the challenged ordinance exists to implement state or federal law or if a local government adopts an emergency ordinance under the State Emergency Management Act.

But concerns abound from community organizations that the Local Business Protection Act will reduce the willingness of local governments to create new regulations to respond to new problems. According to Rebecca O’Hara, deputy general counsel for the Florida League of Cities, local governments will reduce their decision processes to one question: “Does it meet the threshold of causing a 15 percent impact on business’s profits?”

The sponsoring legislator, Florida Senator Travis Hutson (R-District 7), has articulated the bill’s purpose as reducing repetitive state legislation preempting local ordinances. Instead of the yearly “tradition” of the Florida legislature passing laws to reserve areas of regulation for itself, municipalities and counties would face direct challenges from local businesses and get a chance to amend or rescind an ordinance themselves. Florida Senate President-designate Kathleen Passidomo (R-District 28) agreed, saying in debate that “local governments should be managing this” and the Local Business Protection Act “gives them the tools they need to manage their ordinance process.”

Indeed, the Local Business Protection Act would create a process for local governments to confront a business’s challenge to their ordinances before facing the complaining business in court. To sue under the Act, a business would need to file a settlement offer with the local government within one year of the ordinance’s passage but 180 days before filing suit.

The local government could then take action within 120 days: It could accept the settlement offer, reject the offer, or make a counteroffer, which can include curing the allegedly offending ordinance through a waiver for business, repeal of the ordinance, or an amendment. .

Even with this process — and with the burden of proving the adverse effect on profits remaining with a challenging business — opponents of the bill worry about negative effects on local administration and taxpayers. Florida Senator Gary M. Farmer, Jr. (D-District 34), who voted against the bill with fellow Democratic senators, voiced concern about local governments’ “ability to do what they were elected to do, and that is govern.”

Critics testifying during committee hearings reportedly expressed concern over the financial burden on taxpayers for business damage payments, whether as a result of a pre-suit settlement or in judgments against local governments. The bill also allows a court to award reasonable attorney fees and costs to the winner, so local tax dollars could also end up in the hands of the lawyers filing lawsuits on behalf of business clients.

Beyond the potential effects of the Local Business Protection Act in Florida, opponents warn that similar measures could become popular in other states. Florida functions as a “pilot state” for trying out new statutes that limit local power, such as when Florida and Texas threatened to punish municipalities trying to “defund the police” last year.

If the Local Business Protection Act does become law, other conservative-leaning state legislatures may emulate its text and goal, according to Francesca Weaks of the Local Solutions Support Center, an advocacy group that represents local governments trying to retain local power.

The Local Business Protection Act now awaits the signature of Florida’s Republican governor Ron DeSantis before becoming law. DeSantis’s spokeswoman, Christina Pushaw, reportedly said that the governor will review the final text of the bill before signing.

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