ATA, Port of Los Angeles Continue Court Fight Over Classification of Independent Truckers

This story appears in the June 20 print edition of Transport Topics.

Is the Port of Los Angeles a business enterprise or a governmental entity?

That question was at the heart of the debate between attorneys representing American Trucking Associations and the Port of Los Angeles in oral arguments earlier this month in Pasadena, Calif., before a three-judge panel of the 9th U.S. Circuit Court of Appeals.

The answer, expected to come in a ruling by the appeals court later this summer, will determine whether the port’s clean-trucks plan can ban independent owner-operators from performing drayage at the port.

If the appeals court agrees with a lower court judge who backed the port’s argument that it is a business, then all drayage truck drivers will be required to be employees of licensed motor carriers.

But if ATA convinces the appeals court that the port is not a business, then the port would be required to continue allowing both independent contractors and large motor carriers as long as they comply with the port’s diesel-emissions standards. Because the case is pending, owner operators are currently still servicing the port.

The port won the last round in the ATA lawsuit on Aug. 26, when U.S. District Judge Christina Snyder of Los Angeles ruled that the port’s employee-only concession program was legal because the port acted as a “market participant” out of business necessity and therefore was exempt from the federal law that gives only the federal government the authority to regulate interstate trucking (9-6-2010, p. 1).

ATA claims the port did not act as a business, but rather as a government regulator, and is not entitled to an exemption from the federal statute that preempts any local government action that interferes with the “prices, routes, or services of a federally licensed motor carrier.”

ATA, which filed the lawsuit in 2008, is not challenging the port’s emissions-reductions program, but claims the employee-only provision violates the federal preemption clause.

“Nothing could more fully impact a motor carrier’s rates, routes and services than being shut out of a market and having no ability to compete in that market,” Robert Digges, ATA’s vice president and chief counsel, told the appeals court during the June 10 hearing.

Digges argued that the district judge was mistaken in applying the “market participant” doctrine to exempt the port from federal preemption.

When it adopted the employee-only plan, the port, acting as a government regulator and not a business, intended to reshape the economics of the drayage industry, shrink the number of operators and allow only larger carriers to operate, Digges told the court.

Funding incentives for environmental improvements is a “quintessential government function,” not the act of a business, Digges argued.

However, port attorney Steven Rosenthal told the court that port officials adopted the clean-trucks plan and employee-only provisions to “to address commercial interests.”

“There is literally no evidence in this voluminous record that shows that the port adopted this concession program other than as a proprietor, other than to advance its business goals of fostering and growing a port,” Rosenthal said. “That’s the only reason they did it.”

The employee-only provision gives the port “control and oversight” of drayage drivers because many independent operators lack the financial wherewithal to maintain their trucks in the proper manner, Rosenthal said.

In a related development, independent owner-operators plying California’s ports have temporarily dodged a bullet after a proposed bill that would have banned them was shelved.

The measure, AB 950, sponsored by California Assembly Speaker John Perez, would have limited drayage carriage at all ports in the state to only company drivers.

Although the bill will not be considered by the Assembly Labor and Employment Committee this year, it could be resurrected in 2012, said Greg Campbell, Perez’s deputy chief of staff.

“It’s not dead at all. It simply will not move this year,” Campbell said.

But that’s not making any independent truckers happy.

“Because [Perez] is the speaker, he can simply ask for a rules waiver and it becomes a bill again,” said Joel Anderson, president of the International Warehouse Logistics Association.

Anderson said that with California in the midst of a budget crisis and facing other high priority issues, Perez wanted to put the bill aside and give all parties time to consider their options.

“We don’t recognize it as anything but breathing space,” Anderson said.

Independent truckers have condemned AB 950, claiming it would imperil owner operators’ jobs and make California ports uncompetitive with other ports on the West Coast, in Canada and on the Gulf of Mexico.

To understand how drayage carriage works and then to support this bill defies common sense, said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association.

Spencer noted the majority of the trucks that operate at California’s ports are independent owner-operators. He added long-haul truckers do so infrequently.

Campbell confirmed that it’s possible AB 950 may be redrafted with new language or even replaced by a fresh bill next year.

And he warned the issue isn’t going away: “This was to spur a good conversation. But it was probably not the best time to push something this big.”