SandBar 10.1, January, 2011
Recommended citation: Lindsey Etheridge, Court Upholds L.A. Port Program, 10:1 SandBar 7 (2011).
Court Upholds L.A. Port Program
Lindsey Etheridge
On August 26, 2010, a California district court decided a case in which the American Trucking Association (ATA) brought suit against the Port of Los Angeles (POLA or Port), challenging part of its new Clean Truck Program.1 The program and POLA’s Clean Air Action Plan were implemented in an effort to reduce all Port-related emissions, including those from drayage trucks, and improve air quality around the Port. The Clean Truck Program was successful in its first year, reducing the rate of truck emissions by an estimated 70 percent.
Background
The Port of Los Angeles is the leading container port in the United States in terms of shipping container volume and cargo volume. The cargo handled at the Port is usually transported in shipping containers, which can be offloaded directly from ships onto railcars or trucks for transfer inland. The movement of cargo between a marine terminal and a local destination by truck is commonly referred to as “drayage.”
On July 28, 2008, ATA challenged part of the Clean Truck Program, specifically, the Los Angeles Concession Agreement. The Concession Agreement requires drayage trucks to register and comply with a number of requirements in order to become “concessionaires” and be allowed to continue providing services at POLA. ATA claimed that the Agreement is preempted by the motor carrier provision of the Federal Aviation Administration Authorization Act (FAAA Act) and that the Agreement is preempted because it places an undue burden on and discriminates against the right of motor carriers to engage in interstate commerce.
Two days after it filed suit, ATA asked the district court to issue a preliminary injunction to stop the Port from implementing the mandatory Concession Agreement. The court denied the injunction, finding that ATA would likely lose its suit and also that ATA had not shown a likelihood of irreparable harm if the Agreement were allowed to go forward. ATA appealed the decision to the Ninth Circuit Court of Appeals which reversed and remanded the case for further proceedings. The district court then issued an order granting in part and denying in part the preliminary injunction so that only certain provisions of the Agreement were enjoined and others were allowed to proceed. The Ninth Circuit affirmed this decision with one limited exception. The district court was then ready to rule on ATA’s challenges to the Concession Agreement.
ATA’s Challenges to the Concession Agreement
ATA challenged five provisions of the Concession Agreement:
1. The Employee Driver Provision requiring that all drivers of drayage trucks be employees of motor carriers and not independent drivers;
2. The Off-Street Parking Provision requiring that motor carriers develop an off-street parking plan for their trucks to park off public streets and away from residential areas;
3. The Maintenance Provision requiring that motor carriers prepare a maintenance plan and be responsible for vehicle condition and safety;
4. The Placard Provision requiring that all trucks display a placard referring the public to a phone number to report concerns regarding emissions, safety, or security compliance; and
5. The Financial Capability Provision requiring that motor carriers prove that they possess the financial capability to perform their obligations under the Concession Agreement.
Preemption by the FAAA Act
The goal of the FAAA Act is to deregulate the motor carrier industry and to help ensure that transportation rates, routes, and services rely on competitive market forces.2 The Act contains a broad preemption statute which declares that a state may not enact or enforce a law or regulation that is related to a price, route, or service of any motor carrier.3 Relation to price, route, or service is found where “the regulation has more than an indirect, remote, or tenuous effect on the motor carrier’s prices, routes, or services.”4 Even if the law does not directly regulate motor carriers, preemption will apply if the effect of the regulation would be to make carriers offer different services than what the market would dictate.
The court found that the FAAA Act preempts both the employee driver provision and the off-street parking provision. The employee driver provision affects motor carriers’ routes and services by prohibiting trucks driven by independent operators from providing drayage services at POLA. The provision also significantly affects the costs of operating drayage services, causing the need to increase prices. The off-street parking provision affects prices because providing off-street parking causes motor carriers to incur increased costs, which are passed on to customers in the form of higher prices. The provision also affects routes by changing where trucks are located when they are not draying cargo. The court found that the FAAA Act does not preempt the maintenance provision, the placard provision, or the financial capability provision because the evidence showed that these provisions have no effect on prices, routes, or services.
The court then turned to the exceptions to preemption by the FAAA Act. The Port of Los Angeles argued that the provisions fall under three exceptions: the safety exception, the tidelands exception, and the market participant exception. The court considered each of the five provisions in light of each exception. Although the court had found that some of the provisions are not preempted by the FAAA Act and therefore need no exception, it made findings as to how the exceptions would apply to these provisions if they had been found to be preempted by the Act.
The Safety Exception
The FAAA Act specifically states that its preemption provision “shall not restrict the safety regulatory authority of a State with respect to motor vehicles.”5 In order to fall within the safety exception, a statute, regulation, or provision must be “genuinely responsive to safety concerns,” and not, for example, an economic regulation disguised as a safety regulation. The regulation must be directed at motor carrier safety and not just one that might incidentally increase safety.6
The court found that neither the employee driver provision nor the off-street parking provision falls under the safety exception because both are addressed at concerns unrelated to motor carrier safety. The primary reason for the employee driver provision is to increase efficiency and regulate the drayage market. The effect of the provision is the unemployment of thousands of independent contractors, including small businesses, who drive drayage trucks, allowing only employees who work for big companies to drive the trucks. While the evidence showed that the off-street parking provision would increase safety in residential areas by removing trucks from residential streets, the main reason for the provision is to appease residents in the area who are unhappy with the presence of trucks in their neighborhoods
The court found that the maintenance provision and the placard provision would fall under the safety exception. Requiring routine truck maintenance is genuinely responsive to safety concerns and will help to ensure that drayage trucks operate properly and safely. The placard provision is primarily related to safety because the placards provide the public with a means to report unsafe driving or other truck safety concerns. Finally, the court found that the financial capability provision would not fall under the safety exception. The provision may have a safety effect “in that a financially viable motor carrier may be less likely to cut corners regarding safety out of economic necessity.”7 However, the provision was mainly enacted to ensure that the motor carriers are financially stable and have the means to maintain their trucks.
The Tidelands Exception
The Port of Los Angeles argued that the provisions of the Concession Agreement fall under the tidelands exception because the Port sits on the sovereign tidelands of San Pedro Bay. The court quickly struck this argument down, saying that the Supreme Court had held that a state’s control over navigable waters such as tidelands is not absolute. The federal government’s power to regulate interstate commerce over these types of waters supersedes the state’s control.
The Market Participant Exception
The market participant exception applies when a state’s actions, rather than being regulatory, are instead proprietary in nature. If the state’s role in a decision is as a market participant rather than as a regulator, its decision is not generally preempted by statute. A state’s action is proprietary if it “essentially reflect[s] the [governmental] entity’s own interest in its efficient procurement of needed goods and services, as measured by comparison with the typical behavior of private parties in similar circumstances.”8
ATA argued that the Concession Agreement does not fall under the market participant exception because POLA does not itself purchase drayage services or directly participate in the drayage market. The court found that a state entity neither has to buy anything in the market nor directly participate in the market in order to act as a proprietor. The Port’s participation in the port services market is enough to make its management of the drayage services proprietary, as long as it advances POLA’s economic interests as a provider of port services.9
The court found that the Port adopted the Concession Agreement in order to sustain and promote Port operations and to allow the Port to manage its property and facilities, as any private operator would. POLA enacted the Clean Truck Program in response to its expansion projects being stopped because they created significant air pollution. This Port-generated air pollution interfered with Port growth and endangered the Port’s economic viability. POLA’s adoption of the Concession Agreement was a “business necessity” in order to allow it to expand, and therefore its actions were economically driven. The court then looked at each of the five contested provisions to determine whether each one qualified as a proprietary action. After considering each one, the court found that all five serve as a requirement for Port expansion and are therefore proprietary and fall under the market participant exception.
Preemption Because of Undue Burden on Interstate Commerce
ATA argued that the Concession Agreement places an undue burden on interstate commerce and is therefore preempted by the Dormant Commerce Clause, which “prohibits economic protectionism—that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.”10 ATA also argued that the Agreement discriminates against the right of motor carriers to engage in interstate commerce because the FAAA Act prohibits additional regulations to be placed on motor carriers to be able to operate within a state beyond those already imposed by the Secretary of Transportation.
The court found that ATA was wrong on both claims. While some provisions of the Concession Agreement, such as the employee driver and off-street parking provisions, increase costs to motor carriers, they do not burden out-of-state competitors. The increased costs would likely result in increased prices for drayage services, but drayage trucks from POLA rarely travel to destinations outside of California. The higher prices, therefore, would hardly affect interstate commerce. In addition, the Concession Agreement does not impose additional regulations on when motor carriers may operate within a state; it only requires motor carriers to comply to be able to operate at POLA. They may still operate at any other port in California.
Conclusion
Based on all of these findings, the court held that the Concession Agreement, and specifically the five contested provisions, could go forward. The Clean Truck Program is expected to reduce Port truck emissions by over 80 percent by 2012. POLA officials estimated that by spring 2010, between 6,500 and 7,000 trucks serving the ports would meet or exceed the EPA’s 2007 heavy duty truck emissions standards.
Endnotes
1. Am. Trucking Ass’ns, Inc. v. City of Los Angeles, 2010 U.S. Dist. LEXIS 88134 (Aug. 26, 2010).
2. Id. at *51-52.
3. 49 U.S.C. § 14501(c)(1) (2010).
4. Tocher v. City of Santa Ana, 219 F.3d 1040, 1047 (2000).
5. 49 U.S.C. § 14501(c)(2)(A).
6. Am. Trucking, 2010 U.S. Dist. LEXIS 88134 at *61 (citing City of Columbus v. Ours Garage and Wrecker Service, Inc., 536 U.S. 424, 442 (2002)).
7. Id. at *69.
8. Id. at *73 (quoting Engine Mfrs. Ass’n v. South Coast Air Quality Management Dist., 498 F.3d 1031, 1041 (9th Cir. 2007)).
9. Id. at *74-75, 79.
10. Id. at *95 (citing New Energy Co. v. Limbach, 486 U.S. 269, 273 (1988)).