At Tuesday’s argument in American Trucking Associations, Inc. v. City of Los Angeles, the Court tried to sort out whether certain actions taken by the Port of Los Angeles, an independent division of the city, are preempted by the Federal Aviation Administration Authorization Act (FAAAA). As I explained in my previous post, the case involves two questions. The first question addresses two challenged provisions of the mandatory concession agreements that the Port enters into with motor carriers: One provision requires motor carriers to submit for approval a plan for off-street parking of all permitted trucks, and the other requires motor carriers to post placards providing a phone number for members of the public to call with concerns. The Ninth Circuit held that these requirements are saved from preemption by a “market participant exception” under the FAAAA, and the question now is whether such an exception exists and applies. Second, the Court agreed to consider whether its 1954 decision in Castle v. Hayes Freight Lines, Inc. prevents the Port from denying access to carriers who violate valid state or local requirements. As to both questions, the Port claims that the contractual terms it has established are crucial to its commercial needs – specifically, to overcoming environmental and community opposition, expanding its operations, and competing with other ports.
On the first question, arguments focused primarily on the FAAAA’s text rather than the possibility of a broader, implied market participant doctrine – an alternative position the Port had embraced in its brief. The Act preempts certain state actions that relate to prices, routes, and services of motor carriers transporting property, but only if the state actions have the “force and effect of law.” Representing ATA, Daniel Lerman argued that the Port’s concession-agreement requirements “have the force and effect of law in spades” because they are incorporated into a tariff and are enforceable by criminal penalties. He acknowledged the Port’s representation that the criminal penalties don’t apply directly to motor carriers (per the Port, criminal penalties could apply only to terminal operators who do business with noncompliant motor carriers), but argued the distinction is irrelevant: either way, the Port is engaging in “classic governmental action.” John Bash, an Assistant to the Solicitor General representing the federal government as an amicus, echoed the point. Bash hypothesized a scenario in which a state highway commission required trucks to sign an agreement and told truckers, “if you don’t abide to that agreement we won’t do anything to you, but we will throw every person who does business with you in jail.” This, Bash said, would quite clearly be a sovereign act with the force and effect of law.
These arguments led Justice Kagan to ask whether the Port’s requirements would still have the force and effect of law absent the criminal penalties. Bash answered yes, on the ground that the Port’s requirements implicated a second regulatory “bright line.” The Port is not equivalent to a commercial enterprise in the private marketplace, he argued, but rather is a regulatory body that holds land in trust for the public, governs a critical part of public infrastructure, and has offered noncommercial rationales for its requirements – like the region’s economic vitality and job growth. Here he got pushback from the Chief Justice, who noted that private companies might well seek to attract customers by developing a reputation for being “green” or by hiring local workers. But Bash (making the first of the argument’s several references to Wal-Mart) noted that the government cannot be said to be acting as a market participant just because “Wal-Mart or Starbucks could do a similar thing.”
When Steven Rosenthal rose to argue for the Port, Justice Scalia quickly directed him to the problematic issue of the criminal penalties. Rosenthal called the criminal penalties a “red herring,” emphasizing not only that they aren’t part of the concession agreement and don’t apply to the motor carriers themselves, but that as a practical matter, the criminal penalties have not been used in enforcing the concession-agreement requirement. Both the Chief Justice and Justice Scalia pushed back, observing that criminal penalties have a coercive effect even when not enforced.
Moving beyond the “force and effect of law” argument, Rosenthal also briefly advanced the Port’s broader preemption argument: that a market participant exception is a generally applicable background principle against which the FAAAA (and perhaps all preemptive statutes) must be construed. This argument, the most doctrinally significant and potentially far-reaching in the case, seemed to get little traction with the Court. Only Justice Sotomayor invoked the Court’s decision in Building & Construction Trades Council v. Associated Builders & Contractors (“Boston Harbor”), which, she said, identified a “presumption in favor” of protecting state proprietary activity “unless Congress explicitly indicated to the contrary.” Justice Scalia was quick to distinguish Boston Harbor. He noted that Boston Harbor was an implied preemption case, whereas the FAAAA has an express preemption clause that contains specific exceptions – but no market participant exception. Moreover, he pointed out, the FAAAA was modeled on the Airline Deregulation Act, which included an express proprietary exception, yet the FAAAA left out that exception. These factors, Justice Scalia told Rosenthal, create “a very high hill for you to climb.”
The arguments on both sides also touched on practical concerns. Rosenthal argued that the Port, as a business, “should be entitled under even-handedness to do what a Wal-Mart or any other company could do to enable us to prosper, grow, and nurture our business enterprise.” Whether or not the Justices embraced this precise position, several questions they posed to ATA and the government suggested a concern that state and local government enterprises must have some ability to address issues related to motor carriers. Justice Sotomayor found it “almost impossible” that a state can’t require a truck to place a placard on its window when entering a port. Justice Breyer posited that states must be allowed to establish routing requirements, and wondered whether those would fall within the FAAAA’s express safety exception, which isn’t at issue in this case. And Justice Ginsburg pressed the government to explain how the Port can address the environmental opposition that has thwarted its expansion – can’t the Port “go green” in order to move forward, she asked? Bash responded that the Port does have options, including the replacement of old trucks through the subsidy and incentive programs that the Port has already established with apparent success.
The arguments on the second question probed the modern implications of Castle. That case held preempted a state law that punished repeat violators of state trucking weight limitations by prohibiting their use of state highways for up to a year. The Castle Court noted that states retain authority to impose “conventional forms of punishment,” but concluded that the prohibition at issue amounted to an impermissible “partial suspension” of the carrier’s federally granted certificate to operate in interstate commerce. The question now is on which side of the line – conventional punishment or a partial suspension – the Port’s claimed authority falls.
On ATA’s behalf, Lerman argued that the Port’s claimed authority to suspend access to “a key channel of interstate commerce” is just like that in Castle. When pressed by Justice Scalia and Chief Justice Roberts, Lerman went further, stating that the channel need not be “key,” and that Castle bars a state from banning access even to a single highway. Lerman did, however, repeat the concession made in ATA’s brief: that the Port has the authority to ban individual trucks that are in continuing violation of valid safety requirements. The problem, in ATA’s view, is that the Port claims authority to suspend entire carriers rather than individual trucks, and to do so based on continuing or past violations.
Rosenthal responded that the Castle doctrine “died” along with the regulatory regime on which it was based, and that even under Castle, a truck’s federal certification never authorized it to cross a customer’s property line – “to go into Wal-Mart,” for example. But the Justices quickly asked Rosenthal to address the Port’s policy on the issues of carrier-wide suspensions and penalties for past violations. He explained that the Port has generally not excluded carriers, and that its policy is instead to try to obtain compliance. But in response to questions from Justices Scalia, Kagan, and Ginsburg, Rosenthal eventually stated that the Port can suspend or revoke an entire carrier’s right to enter the property. (As to whether the Port has authority to impose suspension for past, cured violations, Rosenthal answered only that the Port has never done so.) The ability to have some modicum of control over access to the property, he emphasized, is essential to the Port’s growth.
Ultimately, this appears to be a difficult case for the Port. The first question seems likely to rise and fall on the text of the FAAAA’s preemption clause – that is, whether the challenged requirements have the “force and effect of law” – rather than on any implied presumption regarding market participation. The force and effect of law analysis may come down to whether the availability of criminal penalties, even if seldom used and imposed only indirectly, renders the Port’s requirements too much like regulation to escape preemption. The only Justices who conveyed clear views on that issue (to be sure, not a reliable predictor of a case’s outcome) would seem to answer in the affirmative and thus find the requirements preempted. Such a ruling could have implications beyond the off-street parking and placard provisions; it could call into question other initiatives at the Port and potentially at other publicly owned enterprises. On the second question, the Port’s position that Castle has died did not seem to gain traction. Instead, the ruling on that question seems more likely turn on the narrower issue: whether the Port goes too far in its claimed authority to exclude entire carriers, potentially even for cured violations, rather than limiting exclusion to individual noncompliant trucks.