L.A. Port Plan ‘Coercive,’ ATA Tells Supreme Court

This story appears in the April 22 print edition of Transport Topics.

WASHINGTON — The Port of Los Angeles is violating a federal preemption law by imposing “binding standards of conduct” on carriers that want to access the nation’s largest port, an attorney representing American Trucking Associations told the U.S. Supreme Court last week.

Daniel Lerman, ATA’s counsel, told the justices the port was using its “full coercive power” to impose conditions on carriers in direct violation of the Federal Aviation Administration Authorization Act of 1994, which grants regulatory authority to the federal government.

The FAAAA prohibits state and local governments from enacting or enforcing any “law, regulation or provision having the force and effect of law related to a price, route or service of any motor carrier,” Lerman told the justices during the April 16 oral arguments here.

“Congress sought to prevent state actions that impede the free flow of trade or that would result in a patchwork of requirements from jurisdiction to jurisdiction,” Lerman said.

The high court is to weigh whether an appeals court was wrong in its view of the port as a business, and therefore its rules could be used to trump the federal law; and the court is to consider whether the port can limit access to its property if drayage operators violate the concession agreement.

The port’s attorney, Steven Rosenthal, argued that because the port is a business, it had the right to require drayage operators to comply with such requirements as off-street parking plans and posting placards on permitted trucks as part of its overall Clean Truck Program.

The program is a central element of the Clean Air Action Plan, which targets major sources of air pollution emissions at the ports of Los Angeles and Long Beach. The two large ports are contiguous.

Rosenthal said the concession agreement was a contract between “commercial actors” — the port and drayage operators.

“In our view, the FAAAA does not deal with contracts, and it doesn’t deal with the right of landowners to condition those seeking entry into their port,” Rosenthal told the justices.

The high court set the April 16 oral arguments to weigh evidence related to two of three major questions raised in ATA’s December 2011 appeal after the U.S. Court of Appeals for the 9th Circuit struck down, as ATA requested, a ban on independent owner-operators servicing the Los Angeles port, but left standing some of the concession requirements.

The case has been winding its way through the federal courts since 2008, when ATA first filed its lawsuit attempting to block the ban.

The Port of Long Beach, originally a defendant in ATA’s lawsuit, agreed to an out-of-court settlement in October 2009, agreeing to voluntarily drop the ban on independent dray operators.

Richard Pianka, ATA’s deputy chief counsel, said the group believes it’s clear that in 1980 Congress established that trucking should be shaped by the competitive market, rather than by government regulations.

“Despite this, leaders in Los Angeles moved forward with a plan to shape the market for trucking at the port by imposing a laundry list of regulations that should all be clearly preempted by the FAAAA,” Pianka said in a statement after the hearing. “If these rules are allowed to stand, it would clear the way for a patchwork of regulations that would lead to unreasonable burdens on the movement of goods.”

Port officials declined comment on the oral arguments.

In agreeing to hear the case, the high court said it would consider two of three legal questions posed by ATA in its appeal petition.

One question centered on whether the appeals court erroneously ruled that because it said the port was a business operation, the so-called “market participant” legal doctrine could be used to trump the federal preemption clause.

The other question was to review concerns as to whether the port could limit access to its property if drayage operators violated the concession agreement.

During the course of the hour-long arguments, the justices frequently interrupted the attorneys with questions and comments.

At one point during the oral arguments, Justice Antonin Scalia suggested to Rosenthal that the FAAAA does not exempt the port from federal preemption, even if it is considered a business enterprise.

“That’s a very high hill for you to climb, relying solely on the fact that you are a commercial enterprise,” Scalia told Rosenthal.

Lerman argued that by imposing the concession requirements, the port was in effect subjecting drayage operators to potential criminal penalties.

“Do market participants impose civil and criminal penalties?” Scalia asked Rosenthal.

“The answer is ‘no,’ but I think the criminal penalties [are] a red herring in this case,” Rosenthal responded.

Rosenthal said there are not criminal penalties that attach to the breach of the concession contract.

“It is purely a contract,” Rosenthal said. “The remedies are purely civil. Even our other side in their argument has conceded there are no criminal penalties to the breach of the concession agreement.”

However, Lerman told Scalia, the penalties are not a red herring; the requirements have the “force and effect of law.”