July 01, 2013

Preempting the Port of Los Angeles’ efforts to improve air quality

Editor’s Note: The Supreme Court issued its unanimous opinion while this article was in the process of final publication. As the authors predicted, the Court issued a relatively narrow opinion, finding that certain placard and parking requirements imposed by the Port of Los Angeles on truckers were expressly preempted. The Court also concluded that the Port could exclude from its facilities those trucks in violation of financial and truck maintenance requirements, but declined to consider in a pre-enforcement posture whether implied preemption under Castle prevents the Port from “punishing past, cured violations of the requirements challenged” in this case.

Efforts to curtail California air pollution have found their way to the U.S. Supreme Court. In American Trucking Associations, Inc. v. City of Los Angeles, 133 S. Ct. 2096 (2013), the Court considered whether federal law preempts efforts by the Port of Los Angeles (Port) to reduce the environmental effects of commercial trucks operating within its facility. The Port pursued this goal by requiring each truck company to sign a “concession agreement” restricting their operations. The American Trucking Associations (ATA) filed suit arguing that aspects of the concession agreements are expressly preempted under the Federal Aviation Administration Authorization Act (FAAAA). ATA also argued that the concession agreements were impliedly preempted because they conflicted with the Motor Carrier Act.

The Court appears poised to hold the concession agreements preempted, but may do so on narrow grounds. If it takes that course, the decision will be a setback for California air quality but may have few repercussions for environmental law generally.

Preemption under the FAAAA and the Motor Carrier Act

The Motor Carrier Act was the first federal law regulating the trucking industry, requiring, among other things, that interstate trucking companies obtain a “certificate of public convenience and necessity” from the federal government. The Motor Carrier Act has no provision expressly preempting state law. The Supreme Court’s 1954 decision in Castle v. Hayes Freight Lines, 348 U.S. 61 (1954), however, applied principles of implied or conflict preemption to hold that a state must allow federally certified companies access to the state’s highways because denial of such access would constitute a “suspension or revocation of an interstate carrier’s . . . right to operate.”

Congress enacted the FAAAA in 1994 as part of ongoing deregulation of commercial transportation. Section 14501(c) of the FAAAA preempts 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.” 49 U.S.C. § 14501(c)(1). That section also limits its effect, providing that it does not apply to “the safety regulatory authority of a State with respect to motor vehicles.” Id. § 14501(c)(2)(A). Section 14506(a) further provides that no state may take action “having the force and effect of law that requires a motor carrier . . . to display any form of identification on or in a commercial motor vehicle . . . other than the forms of identification required by the Secretary of Transportation.” 49 U.S.C. § 14506(a).

The concession agreements

The Port of Los Angeles is the nation’s largest port. More than 16,000 trucks provide “drayage services” within the Port, hauling cargo from container ships to off-port facilities. The Port lies within California’s South Coast Air Quality Management Basin, which perpetually suffers from poor air quality. In 2008, the basin had the nation’s worst air quality for ozone and fine particulate matter.

The Port has perennially attempted to expand, but its efforts have met stiff opposition focused, in part, on concerns that expansion will require more drayage trucks, which will release more exhaust and affect parking in the area. To allay these concerns, the Port developed a concession agreement to govern drayage companies, requiring each to sign an agreement to operate within the Port. Those concession agreements include requirements that drayage companies, which both operate and contract with individual trucks: (1) submit for approval an off-street parking plan, (2) maintain all trucks in accordance with manufacturer instructions, (3) display a placard on all trucks providing a phone number for the public to report environmental or safety concerns, and (4) demonstrate financial capability to perform their required duties.

The litigation below

After the Port mandated the concession agreements, ATA brought suit challenging the agreements in federal district court. The district court litigation focused on whether § 14501(c) preempts the concession agreements or whether, instead, that section does not apply to governmental market participation. Additionally, the parties disputed whether the Motor Carrier Act prevents the Port from denying drayage companies access to Port facilities for violating their agreements. The parties similarly contested the application of § 14506(a) to the placard requirement.

The Port essentially prevailed before both the district court and the Ninth Circuit. The Ninth Circuit concluded that provisions of the concession agreements relate to a price, route, or service of a motor carrier and therefore falls under § 14501(c) and also that the placard requirement falls under § 14506(a). The Ninth Circuit, however, held that a market participant exception applies because the concession agreements advance the Port’s proprietary interest in quelling opposition to its expansion. The court further held Castle inapplicable because the Port comprises only a small portion of California’s transportation infrastructure and, therefore, denial of access did not constitute a revocation of a federal right to operate. Am. Trucking Ass’ns v. City of Los Angeles, 660 F.3d 384 (9th Cir. 2011), cert. granted, No. 11-798 (2013).

The Supreme Court proceedings

On January 11, 2013, the Supreme Court granted ATA’s petition for certiorari on the questions of (1) whether a market participant exception shields the concession agreements from preemption under § 14501(c) and § 14506(a); and (2) whether the MCA, as interpreted by the Court in Castle, prevents the Port from denying drayage companies access to port facilities. The Natural Resources Defense Council, which intervened below on behalf of the Port, participated as a respondent. The Court invited the United States to express its views.

ATA argued that under express preemption analysis, a market participation exception exists only if specified by statutory language. Because the FAAAA identifies no such exception, the concession agreements were preempted. ATA further argued that denying access to Port facilities constitutes an impermissible suspension of a federally issued right to operate.

The United States filed a brief supporting reversal but advancing arguments narrower than those of ATA. It explained that a market participant exception to the FAAAA might exist. But, it argued, the concession agreements have a regulatory character and are preempted because they are backed by criminal penalties, govern public infrastructure, and are generally applicable and insufficiently commercial. The Solicitor General further noted that the Port does not directly contract for transportation services. The United States further argued the Motor Carrier Act allows the Port to exclude drayage companies currently violating their concession agreement but does not allow exclusion based on wholly past violations.

The Port asserted that a market participation exception presumptively applies in all preemption cases. Because the concession agreements advanced commercial interests, rather than addressing regulatory concerns, the Port contended § 14501(c) and § 14506(a) do not apply. The Port also contended Castle has no relevance to the concession agreements because a federal right to operate does not guarantee access to “private” government property like port facilities.

The Court heard oral argument on April 16, 2013. The tenor of the argument suggests the Justices may have little interest in deciding whether express preemption provisions are generally limited by a market participant exception. But the Justices appeared deeply skeptical of the concession agreements for at least three reasons: First, § 14501(c) only preempts activity with the “force and effect of law,” and that limitation should functionally allow much proprietary government activity. Second, the FAAAA specifically exempts certain activity from preemption but not market participation, suggesting that § 14501(c) applies to such activity. And third, Congress included a market participation exception in the preemption provisions of other statutes regulating interstate transportation. Various Justices appeared more sympathetic to the placard requirement, suggesting the Port must have some authority to require identification for trucks operating at its facility. If these signals prove accurate, the Court may be poised to issue a narrow decision along the lines proposed by the United States, holding that the FAAAA preempts most quasi-regulatory activities like many of the provisions of the concession agreement.

With respect to the Motor Carrier Act, members of the Court appeared to seriously entertain the United States’ position that the Port could deny access to its facilities for ongoing violations, but not for wholly past violations.

Potential implications for environmental law

The questions posed by the Justices at oral argument suggest a somewhat bleak future for the concession agreements, thus potentially derailing the Port’s current efforts to improve air quality. The Court may, however, rule narrowly, and such a decision may have few broad implications for environmental law. The United States’ position supports the possibility of a narrow ruling.

But, the Court might resolve this case on at least two broad grounds that could have significant ramifications. First, the Court could broadly rule that in the absence of specific statutory text, express preemption provisions apply to governmental market participation. In Engine Manufactures Association v. South Coast Air Quality Management District, 541 U.S. 246, 259 (2004), the Court declined to decide whether preemption under Title II of the Clean Air Act applies to market participation. On remand, the Ninth Circuit concluded that such government activity was not preempted. Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist., 498 F.3d 1031 (9th Cir. 2007). If the Court holds express preemption provisions generally apply to government market participation, such a holding could jeopardize local and state government programs to purchase low emission cars and trucks.

Second, a broad ruling on implied or conflict preemption could have unpredictable implications for state and local environmental programs. Federal environmental statutes typically contain clauses allowing states to impose more stringent requirements. But some appellate courts have suggested such state laws might be void under principles of conflict or implied preemption. See North Carolina v. Tenn. Valley Auth., 615 F.3d 291 (4th Cir. 2010); Clean Air Mkts. Group v. Pataki, 338 F.3d 82 (2d Cir. 2003). If the Court issued a broad opinion in American Trucking Associations, then future courts could rely on such broad language to aggressively limit state and local regulatory authority. For example, a court could conceivably hold that state law addressing climate change is conflict preempted by the Clean Air Act merely because the act vests the U.S. Environmental Protection Agency with authority to regulate greenhouse gases.

The Court should release a decision in American Trucking Associations by the end of June 2013. The opinion will shape the Port’s efforts to reduce its impact to air quality and may further elucidate the approach of the Robert’s Court to express preemption.