American Trucking Assns., Inc. & USF Holland, Inc. v. Michigan Public Service Comm., et al. / Mid-Con Freight Syste (06/20/2005)

Questions presented: (1) Whether the $100 fee upon vehicles conducting intrastate operations violates the Commerce Clause of the U.S. Constitution? (2) Whether the $100 fee upon vehicles operating solely in interstate commerce is preempted by 49 U.S.C. sec. 14504?

BY SARAH ZYLSTRA, MEDILL NEWS SERVICE

When Congress enacted legislation in 1995 prohibiting states from charging truckers more than $10 a year per truck for registration, many states changed their fee structure to comply.

Until then, each state was allowed to charge a trucker operating within its borders an annual registration fee of up to $10 per vehicle. This became known as the "bingo card" system because each state issued a stamp for each vehicle, and the trucker put a stamp on a card that was carried in the vehicle, as proof of registration.

Michigan simply changed the name of its annual $100 charge. The payment, the state claimed, never was merely for registration but was meant to pay for state regulation.

"Michigan just conveniently decided to transform the fee from one that supported registration to one that would enforce supposed safety and other regulatory measures," said Robert Digges, an attorney for American Trucking Associations, which represents more than 37,000 trucking companies.

Under the Michigan Motor Carrier Act (MCA), trucking companies from any state are required to pay $100 per vehicle each year to operate intrastate, that is, to pick up and drop off a load within Michigan's borders.

For example, a trucker from Houston who brings a load to Detroit pays only the Congressionally regulated $10 per vehicle in his fleet for the registration fee. However, if the Texan trucker then picks up a load in Detroit and brings it to Grand Rapids, he must pay the state $100 for each vehicle in his fleet for that privilege.

In addition, any Michigan-based trucking company that does all of its business interstate, never dropping off a load in Michigan that it picked up in state, also pays $100 per vehicle per year for the administration of the Michigan Motor Carrier Act.

Even though each trucking company must pay these fees at the time it registers with the state, Michigan says the fee charged for the registration decal is used primarily for the cost of enforcing safety regulations.

On Jan. 3, 1995, the first lawsuit was brought against the state by a Michigan trucking company. Six days later another trucking company brought suit with the same claims. After the cases were consolidated, they were dismissed on summary judgment. That judgment was affirmed on appeal.

"If it walks like a duck and quacks like a duck," said James Hanson who argued for the plaintiffs, "then it must be a duck. They charge this (fee) in order to register and operate [trucks]. Therefore, it must be a registration fee. We don't care what they use the money for after that."

Hanson said he has no problem with the state raising funds for safety and road maintenance. They just have to do it the right way.

"You can do that (raise funds) for any type of a tax that is apportioned," he said. "Fuel taxes are based on the amount of miles you drive in that state. Those that use the roads more and create more of a safety burden pay more, because their mileage is more and they buy more gas."

Attorneys for the state argued that since the fee is for regulation, not registration, Congress' limit of $10 does not apply. In addition, they said, the Congressional fee limit only applies to participating states, not registration states. Therefore, any trucking company based in Michigan can face whatever fees the state decides.

The judges in both the trial and appeals court sided with Michigan. Deciding that the fee was partly registration, but mostly regulation, Appellate Court Judge Michael R. Smolenski said that collecting them at the same time was efficient and convenient.

"We find that the $100 interstate fee could reasonably be classified as a regulatory fee because it is a fee imposed for the administration of the MCA, particularly covering costs of enforcing safety regulations," Smolenski wrote.

Hanson was not satisfied with the ruling. Just labeling the tax as "regulatory" doesn't cut it, he said. "If there is such a thing as a distinction between the two, then the Commerce Clause comes into effect. Then it's a flat tax and it is a burden on interstate commerce."

The Commerce Clause prevents states from unjustifiably discriminating against or burdening the interstate flow of commerce.

"I'm from Virginia," Digges said. "If I've got 10 trucks, I drive perhaps all over the country. I'd like to be able to pick up a load to supplement my interstate activity.

"If I'm going to compete in Michigan, I have to pay $100 for every truck, even though some of my trucks may never pick up a load there. If I say ‘Well, it's not worth it,' I'm shut out of the intrastate market.

"If I say ‘I want to pay that,' I will pay $1,000 for a 10-truck fleet. I may have two loads a year, [which means I] pay $500 a load, while someone just operating in the state every day may pay $1 a load."

Judge James R. Giddings in the Michigan Court of Claims disagreed, saying that the Commerce Clause was not implicated because the fee only applied to intrastate carriers and does not cross state lines.

The appeals court disagreed with Giddings' reasoning, but affirmed his decision. "Any tax or regulation which effects interstate travel, even if imposed solely on intrastate commerce, is subject to Commerce Clause analysis," Smolenksi wrote. However, he said that while companies may be influenced to maximize intrastate operations to get the most out of the flat annual fee, "it is a matter of pure speculation."

There is "no evidence that any trucking firm's route choices are affected by the imposition of the fee, only surmising that this could occur in the hypothetical," Smolenski wrote. "Regardless of the $100 fee, topping off loads or adding intrastate hauls in between interstate ones is an economically efficient decision for the motor carriers. We do not find that the fee raises a significant barrier to participation in interstate trade. Any effect the fee has on interstate commerce is incidental and does not rise to the level of discrimination."

But Digges is arguing for a fee based on the level of activity, not a flat fee.

"If [the state] says ‘All right, I'll charge you $10 for every in-state haul,' I can do it," he said. "I can pay the same fee as the local guy and I'm not shut out of the market."

After the Michigan Supreme Court denied leave to appeal, the trucking associations sought review from the U.S. Supreme Court in two separate appeals. The Court asked the U.S. Solicitor General's office for the views of the federal government.

In its friend-of-the-court brief, the Solicitor General's office urged the Court to take the case, and to reverse because Michigan's fee creates barriers to interstate commerce that harm the national economy, "contrary to the Framers' intent to create a nationwide ‘area of trade free from interference by the States." The Solicitor General also pointed to a 1972 decision by the Montana Supreme Court that held that its state's fee was preempted by the federal bingo card system, which imposed a $5 cap at the time.

On Jan. 14, 2004, the Court accepted review in both cases, limited to the questions posed above.

Charles Rothfeld, who is representing the trucking companies before the Supreme Court, is looking at the bigger picture. "If every state enacted identical pacts, in every state you would have to pay $100 per vehicle. If you operated in all 50 states, it would take 50 times as much. That discourages trucks that operated interstate," he said.

On June 20, 2005, the Court issued its opinions, siding with the Michigan Public Service Commission in both cases. However, the Court was unanimous in its opinion in the American Trucking case, and split 6-3 in the Mid-Con case. Justice Stephen Breyer wrote the opinions in both cases.

In American Trucking, the Court held that the Michigan fee doesn't violate the Commerce Clause because it is imposed only on intrastate transactions and is applied evenhandedly to all carriers on those routes. In Mid-Con, the Court added that the federal Single State Registration System doesn't pre-empt Michigan's fee. The Court read the federal statute to apply only to those state requirements that relate to the federal registration. Though the federal statute was intended to simplify the then-existing "bingo card" system, Breyer concluded, it was not written to constrain states from having their own filings and fees.

Justice Anthony Kennedy wrote the dissent in Mid-Con for himself, Justice Sandra Day O'Connor and Chief Justice William Rehnquist. Their reasoning was that the majority was flawed in its statutory interpretation.

"Instead of heeding what Congress actually said, the Court relies on flawed textual analysis and dubious inferences from legislative silence to impose the Court's view of what it thinks Congress probably wanted to say," Kennedy wrote in dissent. "In my view, this is a mistake."

Attorneys:Attorneys for Petitioner:Charles RothfeldMayer, Brown, Rowe & Maw LLP(202) 263-32331909 K Street, NWWashington, DC 20006Party name: American Trucking Associations, Inc. and USF Holland, Inc.

Attorneys for Petitioner:James H. HansonScopelitits, Garvin, Light & Hanson, P.C.(317) 637-177710 W. Market StreetSuite 1500Indianapolis, IN 46204Party name: Mid-Con Freight Systems, Inc., et al.

Attorneys for Respondent:Thomas L. CaseySolicitor General(517) 373-1124Office of the Attorney GeneralP.O. Box 30212Lansing, MI 48909Party name: Michigan Public Service Commission, et al.

Other:PAUL D. CLEMENTActing Solicitor General, Counsel of RecordPETER D. KEISLERAssistant Attorney GeneralEDWIN S. KNEEDLERDeputy Solicitor GeneralDARYL JOSEFFERAssistant to the Solicitor GeneralMARK B. STERNSUSHMA SONI