Tuesday, August 31, 2010

Judge Upholds Los Angeles Port Truck Plan, ATA to Appeal

A federal judge on Thursday ruled against the trucking industry in a two-year-old suit that sought to block a trucking re-regulation scheme proposed by the Port of Los Angeles.

In her ruling against the American Trucking Associations, District Court Judge Christina Snyder said that while portions of the port truck plan did violate federal law, the port plan was exempt because the landlord port, in her opinion, is an economic participant in the trucking industry.

Her ruling paves the way for the port to fully implement the trucking plan, portions of which began in October 2008.

The ruling was greeted with surprise by many in the transportation industry and cheers by environmental, labor and “social justice” groups.

Many members of the industry who followed the case had expected Judge Snyder to uphold certain previously-blocked portions of the truck plan, including an access license scheme that would require truckers to adhere to various port-defined criteria to obtain port access. However, the conventional wisdom was that the judge would also strike down the most contentious of those criteria – a requirement that trucking firms servicing the port only hire employee drivers.

This employee-only mandate would open the doors for port truck drivers to be unionized, a situation not relished by a transportation industry all too familiar with the longshore and railroad unions.

While proponents of the truck plan praised the judge's ruling, the legal actions surrounding it appear far from over. The ATA said Friday it will file an appeal to the Ninth Circuit Court of Appeals.

The origins of the case date back to 2000 when an air quality study revealed the scope of the Southern California diesel emissions problem. In response to public outrage at, and legal action related to, the emission problem, the ports in 2002 began funding a local quasi-governmental effort to replace the oldest and dirtiest trucks working in the ports. Truck replacement was identified by the ports as the most viable means to cut truck emissions.

While the ports-funded program never replaced more than 600 of the more than 19,000 trucks estimated at the time to visit the ports frequently, the nearly $11 million program proved to be a test bed for concepts later used in the ports’ own program.

In 2006, the two ports began to work together on an omnibus ports-wide environmental program called the Clean Air Action Plan. Included in the CAAP were numerous options for dealing with the problem of diesel truck emissions. Early in 2006, industry members, state air regulators and port staff met to discuss details of proposed state regulations aimed at curbing diesel truck emissions. According to attendees at the time, progress was made toward a comprehensive program to deal with ports-generated trucking emissions.

At this time the port officials were considering a plan that would essentially see the ports pay for the replacement of about 16,000 trucks.

However, in mid-2006, International Brotherhood of Teamsters President James Hoffa met with Los Angeles Mayor Antonio Villaraigosa and presented the union's vision of a truck replacement program.

Unlike original plans by the ports that simply called for providing money to expand the already operating truck replacement program, the Teamsters’ plan diverged sharply into social engineering, including criteria that would define the labor status of truck drivers.

Meetings on the cooperative plan with the industry stalled immediately after the Teamsters meeting, and at some point were ended altogether.

The joint truck plan ultimately developed by the two ports in 2007 mirrored the Teamsters' plan and included provisions that would force trucking firms to hire drivers as employees, not as independent owner operators. More than 80 percent of port truckers at the time were independent owner-operators. Under federal deregulation laws, only employee drivers can be unionized, not owner-operators.

However, in late 2007, the two ports – who until then had developed the truck plan jointly – split ways, mainly over the employee-only mandate. The Port of Los Angeles chose to adopt a truck plan including the employee-only provision, while the neighboring Port of Long Beach chose to allow both employees and owner-operators to continue servicing Long Beach facilities.

At the center of both plans were two main components. The first was a rolling multi-year ban that would incrementally bar older-model trucks through 2012 when only 2007-or-newer model year trucks would be allowed to enter. According to some estimates, 2007 model year trucks produce up to 90 percent fewer emissions than their older counterparts.

The second component was requiring trucking firms to obtain access licenses for trucks working for them. The ports planned to mandate certain criteria, such as the employee-only mandate, as a requirement of obtaining an access license.

In July, 2008, after both ports had formally adopted their versions of the truck plan, the American Trucking Association – which represents 37,000 trucking firms nationwide – sued to block the access license components of the two plans.

The ATA argued in federal District Court that while the group did not oppose the purely environmental portions of the truck plans such as the incremental model year bans, the access license portions violated federal law. Specifically, the Supremacy Clause of the United States Constitution and the Federal Aviation Administration Authorization Act of 1994 (FAAAA).

The Supremacy Clause of the US Constitution provides that federal laws “shall be the supreme law of the land.” Thus, when state and federal law conflict, federal law trumps – or preempts – the state law.

The FAAAA, also known as F4A, includes a federal statue regarding preemption that states, “A State, political subdivision of a State, or political authority of two or more States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier.”

The ATA also argued that the access license scheme was preempted by federal interstate commerce laws because it placed an undue burden on and prevented trucking firms from engaging in interstate commerce.

The ports argued that the issue was one of safety, security and environmental remediation.

In September 2008, Judge Christina Snyder rejected the ATA request for an injunction. While Judge Snyder found merit in some of the ATA's arguments, she ruled that the ports were exempt from the federal interstate commerce laws under the F4A "safety exemption" because the ports' trucking plans were at heart related to safety and security issues.

“The public has a significant interest in ensuring that the ports are safe from security concerns,” wrote Judge Snyder in her ruling. “Enjoining the [access license component] would have the potential to compromise security measures contained therein, which could significantly harm the public interest in secure ports.”

She also found that the ATA had not proved that an undue burden would be placed on the trucking industry by implementation of the ports' trucking plans.

The ATA immediately filed an appeal with the Ninth Circuit Court of Appeals, asking for an emergency injunction against the access license components. The court refused the emergency injunction, instead setting a full hearing for a preliminary injunction for early 2009.

In October 2008, the two ports implemented their individual trucking plans, including the first ban, which prevented all pre-1989 model year trucks from entering the ports. Because a scrapping component of the truck plans was never fully realized and only destroyed a handful of trucks, the first ban is estimated to have shifted, rather than eliminated, more than 2,200 pre-1989 model year trucks to work outside the ports.

In March 2009, the Ninth Circuit ruled against the ports, blasting the earlier lower court ruling by Judge Snyder.

The three-member Ninth Circuit panel said in its ruling that the truck program devised by the two adjacent ports "is likely to result in at least some irreparable harm to the motor carriers, and, on balance, the district court abused its discretion when it denied a preliminary injunction as to significant parts of the [access license] agreements."

The appeals panel also took exception to the ports' safety and security argument, ruling, "the record demonstrates that the ports' concern was increasing efficiency and regulating the drayage market," rather than motor vehicle safety.

The panel also found that contrary to Judge Snyder's ruling, the ATA had demonstrated a likelihood of irreparable harm and that "the balance of the equities and the public interest do weigh in favor of preliminary injunction in this case as to at least portions of the [access license] agreements."

The appeals panel did not issue an injunction, but sent the case back to Judge Snyder with strict instructions on how to handle the case and with implicit orders to issue an injunction on at least portions of the access license component.

On April 28, 2009, Judge Snyder issued a preliminary injunction against seven components of the access license scheme, including the employee-only mandate.

Keep in mind that these cases were only regarding an injunction against portions of the truck plan and the ATA still had a full suit against the ports sitting in District Court.

In October 2009, the Port of Long Beach reached an agreement with the ATA removing the port from the lawsuit. The port agreed to replace the access license component of the truck plan with a registration system that provided port officials with nearly the same information and control as the access license agreements.

Late in 2009 it was revealed that diesel emissions from port trucking had declined by an estimated 70 percent during the first year of the truck plan.

More Litigation
The trial for the full ATA suit, sans Long Beach, was held between April 20 and April 29, 2010 before Judge Snyder.

In the full trial, the ATA argued against five components of the Port of Los Angeles access license scheme: the employee-only mandate; a requirement for each trucking firm to have an off-street parking plan for each truck; a requirement that each trucking firm have a full maintenance plan for each truck; a requirement that each truck display a placard with certain contact information; and, a requirement that each trucking firm prove it has the financial capability to perform its obligations under the access license agreement with the port.

On August 26, Judge Snyder issued her ruling on the case. She found that the federal F4A of 1994 preempted the employee-only mandate and the off-site parking plan requirement. She also found that the ATA failed to make a case in the instance of the maintenance plan, placard, and financial capability requirements.

However, Judge Snyder then ruled that the employee-only mandate and off-street parking requirement, while preempted by federal law, were in turn exempted from such preemption because the port was operating as a business when it enacted the truck plan.

She pointed out that the law distinguishes between when a state or local government (in this case the port authority) operates as a regulator and as a market participant. Preemption only applies when the state or local government is operating as a regulator. Judge Snyder determined that the port, in implementing the truck plan and access license scheme, was acting as a business, not as a regulator. Therefore, the entire plan is exempted from preemption by federal law.

The ATA had argued to Judge Snyder that because the port does not actually participate in the operation of the facilities it leases to private entities, including the hiring of trucks, the port is not a market participant in the trucking industry.

It is worth noting that the port operates as a landlord, leasing port property to private firms that in turn operate the various marine facilities. The port is, in essence, a property management company. The port does not engage in any day-to-day business dealings related to the movement of goods, other than to set policies, lease terms, docking fees, and other regulatory actions that set guidelines and limitations on the private firms.

Judge Snyder found that the port does not need to be the actual purchaser of trucking services to establish that it is a market participant – it only need establish that it is taking the action "in pursuit of profit maximization," much as a private company would do.

Surprise Basis
The decision to base the ruling on market participation struck many as odd, especially considering the previous actions of Judge Snyder and the Ninth Circuit.
"While I am disappointed but not surprised that the Judge ruled in favor of [the port], I am surprised that she used market participation as the legal rationale," said Curtis Whalen, executive director of the ATA's Intermodal Motor Carriers Conference.

In the injunction cases both Judge Snyder and the Ninth Circuit gave little weight to the market participation argument and said that the argument did not apply. In fact, the Ninth Circuit appeared to lean toward the ports operating in a regulatory manner, ruling that the motivating factor behind the truck plan was the ports gaining better "efficiency and regulating the drayage market."

In addition, in her 43-page April 2009 ruling issuing an injunction against portions of the truck plan, Judge Snyder never mentioned the market participation issue.

The Port of Los Angeles is expected to file papers this week to make Judge Snyder's Thursday ruling final. Once this is done, the ATA plans to appeal Judge Snyder's ruling and ask the courts to keep the current injunction in place while the Ninth Circuit reviews the case.

"Inasmuch as all parties agreed at trial that the benefits of the clean truck and clean air elements of the Clean Trucks Plan have been fully realized with the injunction in place, neither the Port nor the people of California have been harmed by the preliminary injunction, and we hope that request will be granted," said the ATA's Whalen.

Los Angeles Mayor Antonio Villaraigosa and Port of Los Angeles Executive Director Geraldine Knatz both expressed their satisfaction with the court ruling.

Villaraigosa said the ruling was "evidence that we are making real progress on growing and greening our port," while Knatz said that the ability to implement the full truck plan would "help provide a safer and secure trucking system for the long term."

Numerous port authorities such as Oakland and New York/New Jersey have been watching the case closely as they consider trucking plans of their own.

Despite the access license component of the plan being enjoined almost from day one, the truck plans have been by all accounts an environmental success for the ports. Officials from both ports estimate that as many as 12,000 older trucks have been banned from operating at the two ports and that nearly 90 percent of all cargo is now handled by 2007-or-newer model year trucks.

In addition, both ports have managed to save a tremendous amount of money over the original predictions of the truck plans' costs. The ports originally estimated that the truck plans would cost upward of $2.4 billion, but two years into the plans, the ports have spent roughly $100 million. The rest of the cost has been borne by the trucking industry.