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Argument preview: When are states market participants – and when does it matter to preemption analysis?

In a sense, Tuesday’s argument in American Trucking Associations, Inc. v. City of Los Angeles returns the Court to familiar terrain: preemption questions are common at the Court , and the Court has already considered this Term the preemptive scope of the statute at issue, the Federal Aviation Administration Authorization Act (FAAAA).  Yet American Trucking will focus the Court on a less common wrinkle of preemption doctrine: when does a state’s status as a “market participant” shield its actions from preemption – under the FAAAA and potentially beyond?

First, a bit of background.  The dispute between petitioner American Trucking Associations (ATA) and respondent Los Angeles (and the Natural Resources Defense Council, a respondent on the City’s side) arises out of plans to expand the Port of Los Angeles, an independent division of the City and the nation’s largest port.   Beginning in the late 1990s, the Port’s expansion plans were repeatedly thwarted by litigation from community and environmental groups (including NRDC) concerned about the Port’s contribution to air pollution and about safety and health risks to surrounding neighborhoods caused by the large drayage trucks that service the Port.  (Drayage trucks are the vehicles that carry cargo from marine terminals at the port to long-distance shippers.)  In an effort to address opposition and move forward, the Port ultimately adopted a multi-faceted Clean Air Action Plan.  As relevant here, the Plan introduced a requirement that any licensed motor carrier (LMC) wishing to operate drayage trucks at the Port enter into a standard “concession agreement” containing various financial and operational requirements.   

ATA challenged several of the agreement’s requirements, arguing, inter alia, that they are preempted by federal transportation law.  Subject to an express exception for safety regulation, the FAAAA generally preempts any state “law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.”  A related transportation statute preempts state identification requirements for commercial motor vehicles; it too applies only to state provisions with “the force and effect of law.”  After a bench trial, the district court found none of the challenged requirements preempted.  A divided panel of the Ninth Circuit affirmed in large part, reversing only as to one requirement that is no longer at issue.  ATA then filed a petition for certiorari, which the Court granted as to two of the questions presented.

Question one: A market participant exception under the FAAAA?

The first question now presented to the Court asks whether, as the Ninth Circuit held, the two concession agreement requirements still at issue are saved from FAAAA preemption by some version of a market participant exception.  The first requirement at issue, the “off-street parking provision,” requires motor carriers to submit for approval a plan for off-street parking of all permitted trucks; the second requirement, the “placard provision,” requires motor carriers to post placards providing a phone number for members of the public to call with concerns – a variation of the familiar “how’s my driving” stickers often seen on large trucks.  The Ninth Circuit held that, absent a market participant exception, the off-street parking provision would be preempted as a requirement relating to a “price, route, or service,” and the placard provision would be preempted as an impermissible identification requirement.  The Court denied cert. on a question asking whether the requirements fall within the preemptive “price, route, or service” language, but agreed to consider the question whether a market participant exception exists.


ATA’s principal argument is textual: the FAAAA’s express preemption clause contains no market participant exception, and there is no reason to import to the FAAAA the market participant exception developed in the distinct context of the dormant Commerce Clause.  ATA rejects the notion that there is any freestanding, generally applicable market participant “doctrine” in preemption cases: it argues that the Court’s only previous recognition of a market participant defense in the preemption context (most notably in Building & Construction Trades Council v. Associated Builders & Contractors (“Boston Harbor”)) was based on implied preemption, not express preemption, and was limited to the particular features of the National Labor Relations Act.  To be sure, ATA agrees, state actions are not preempted by the FAAAA if they lack the “force and effect of law,” but the concession agreement meets that requirement because, according to ATA, it is tantamount to regulation.  Indeed, ATA points out, the Port’s tariff forbids terminal operators from doing business with LMCs that have not entered into a concession agreement, and tariff violations can lead to criminal penalties.  ATA further argues that if a market participant exception exists, it does not apply here, because the Port is not itself a participant in the drayage market and is not engaged in procurement; it is, instead, acting as a market regulator.


The Port responds that a market participant exception exists, either by way of the phrase “force and effect of law,” or as a general rule of construction derived from Boston Harbor.  As to the former, the Port notes that the concession agreements are private contracts with those carriers who choose to do business with the Port, and it contests the relevance of the tariff, which does not apply to LMCs.  The Port devotes most of its brief to explaining why the market participant exception applies here: because the Port’s imposition of the concession agreements was based on reasonable commercial objectives, particularly its need to achieve community goodwill in order to expand and be competitive.  NRDC’s brief focuses on the fact that the Port’s concession agreement, and its broader environmental goals, are business necessities similar to initiatives by many private corporations and constitute direct market participation.


The United States, participating as an amicus supporting reversal, takes a middle ground.  While agreeing with the Port that the FAAAA does not preempt direct state participation in the market, the Solicitor General concludes – relying on various principles borrowed from dormant Commerce Clause and implied statutory preemption cases – that the Port’s actions constitute regulation.  In particular, the Solicitor General emphasizes the availability of criminal penalties, the likeness of a container port to a public highway, the lack of concreteness of the Port’s “goodwill” justification, and the fact that the Port is not a participant in the drayage market.

Question two: The effect of Castle v. Hayes

The Court also granted cert. on a second question: the effect of its 1954 decision, Castle v. Hayes Freight Lines, Inc., on the Port’s ability to deny access to carriers for violations of any concession agreement requirements that are not preempted.  (This potentially includes provisions beyond those at issue in the first question presented.)  In Castle, the Court struck down a state law that punished carriers for repeatedly violating state trucking weight limitations by prohibiting their use of state highways for up to a year.  While noting that states retain authority to impose “conventional forms of punishment,” the Court explained that the Illinois prohibition was the equivalent of a “partial suspension” of the carrier’s federally granted certificate to operate in interstate commerce.  State highways, the Court reasoned, are used to transport interstate goods and serve as “connecting links” to other states.  Because only the federal government (via the now-abolished Interstate Commerce Commission) had authority to grant certificates to operate, the state prohibition was preempted.

ATA now argues that denying noncompliant carriers access to the nation’s largest port, just like denying carriers access to state highways in Castle, effectively suspends their federally granted access to interstate commerce and is thus preempted.  ATA notes that although the ICC no longer exists, the Department of Transportation still has exclusive authority to register interstate motor carriers.  While conceding that a state could impose a “conventional” remedy like taking out of service an individual unsafe truck, ATA argues that the Port’s claimed authority under the agreement to suspend the access of an entire business enterprise (a carrier) amounts to a forbidden “partial suspension” of operating authority under Castle.  The Port responds that Castle is probably no longer good law in light of deregulatory changes to the federal regime governing interstate trucking, but that in any event, denial of access to a single port (which is “private, restricted access land”) does not implicate Castle.  The Solicitor General again takes a middle ground, arguing that Castle bars the Port from denying access to carriers that previously failed to comply with valid concession requirements, yet permits the Port to deny entry to a carrier that is in ongoing violation of those requirements.  The Solicitor General thus recommends a remand to determine whether the Port claims the authority to deny access for past, cured violations.  Both ATA and the Port fight the remand recommendation: ATA urges that the authority claimed on the face of the agreement is dispositive, and the Port contends that the issue of how it would apply its suspension authority – not for cured violations, it notes – is not ripe.


Looking ahead

Although American Trucking raises potentially far-reaching questions regarding preemption doctrine, it is unlikely that the Court will decide the case based on a broad theory.  In particular, it is difficult to see the Court having much appetite to hold, as the Port suggests, that there is a generally applicable market participant exception in all statutory preemption cases.  Instead, the first question presented seems more likely to turn on the Court’s interpretation of the FAAAA’s phrase “force and effect of law” – and whether the Court understands the concession agreements as optional contracts with carriers who choose to patronize the Port or as coercive, criminally enforceable tariff components.


The analytical path for the second question, regarding Castle’s effect, is murkier.  The Court could sidestep the question by deeming it premature, but the Solicitor General made a similar argument at the cert. stage, and the Court nonetheless agreed to take up the question.  On the merits, the Port’s attempt to downplay the interstate commerce implications of access to “a single port” (the nation’s largest) seems unlikely to persuade the Justices, but requiring the Port to admit trucks that are in ongoing violation of valid state requirements is not an appealing alternative.  A solution along the lines of the Solicitor General’s distinction between past and ongoing violations offers the Court one way to recognize the exclusively federal power to grant access to interstate commerce while showing sensitivity to sovereign states’ traditional safety prerogatives; at a minimum, the Court seems likely to accept ATA’s concession that the Port can keep out individual noncompliant trucks.  Whatever the precise answers to these questions, American Trucking seems poised to yield a decision focused on the FAAAA rather than one that imposes a sweeping rule for all preemption cases.  

Recommended Citation: Miriam Seifter, Argument preview: When are states market participants – and when does it matter to preemption analysis?, SCOTUSblog (Apr. 15, 2013, 10:59 PM),