Supreme Court strikes down drayage concession agreement at Port of Los Angeles

In a victory for trucking interests and supporters of federalism, the U.S. Supreme Court today threw out a key part of the Port of Los Angeles' pollution-reduction program that established guidelines, restrictions, and penalties on drayage companies calling on the nation's busiest seaport.

In a unanimous 9-0 decision, the High Court ruled against a truck concession agreement embedded in the port's 2008 "Clean Truck" program. According to the ruling, the agreement is pre-empted by a 1994 federal law that bars a state from imposing laws and regulations that affect a trucker's rates, routes, or services. The law, known as the "Federal Aviation Administration Authorization Act," effectively deregulated intrastate commerce in the United States.

The ruling ends a nearly five-year legal battle between the trucking industry and the port and city of Los Angeles over language in the "Clean Truck" program, which was devised to address community concerns over the impact of port expansion on traffic, safety, and the environment. The concession agreement required drayage companies to place a placard on each truck displaying a phone number for reporting concerns. Drayage companies were also ordered to submit a plan listing off-street parking locations for each truck.

The agreement established penalties for alleged violators, including possible suspension or revocation of the authority to perform drayage services at the port. The port mandated that every drayage company enter into the agreement and made it a crime, punishable by fine or imprisonment, for a terminal operator to grant access to an unregistered drayage truck.

The American Trucking Associations sued the port and the city, arguing the agreement violated interstate commerce and had less to do with cleaning up the environment and more to do with the port flexing its regulatory muscle on its own behalf as well as for certain special interests, notably organized labor.

The issue before the High Court was if components of the concession agreement governing a trucker's rates, routes, and services could escape federal pre-emption because, as the port contended, it was acting as a business and not as a state regulatory body. If the port was viewed as a business, the agreements should be exempted from federal pre-emption laws.

Writing for the court, however, Justice Elena Kagan said the port "exercised classic regulatory authority" by imposing the placard and parking requirements on drayage operators. "It forced terminal operators—and through them, trucking companies—to alter their conduct by implementing a criminal prohibition punishable by imprisonment," she wrote.

Justice Kagan added that when "the government employs a coercive mechanism, available to no private party, it acts with the force and effect of law, whether or not it does so to turn a profit."

The High Court decision in part overruled a 2011 decision by a federal appeals court in California that the agreement was lawful except for language that required owner-operators to become port employees. Earlier, a federal district judge in California had found in favor of the port.

"[The Supreme Court decision] is sure to send a signal to any other cities [that] may have been considering similar programs, which would impermissibly regulate the port trucking industry," said Bill Graves, president and CEO of the ATA, in a statement. The group represents the nation's major motor carriers.

For its part, the port will be looking at how the ruling affects its Clean Truck program. "For nearly five years, the Clean Truck program has played a critical role in reducing harmful emissions by more than 90 percent from trucks operating at the Port of Los Angeles," said Phillip Sanfield, a port spokesperson. Noting the concession agreement was a key element of the program, Sanfield said the port is reviewing the ruling "to determine how it affects our current ability to provide a clean, safe, and secure trucking system consistent with the Court's guidance."

Joel D. Anderson, president and CEO of the International Warehouse Logistics Association (IWLA), hailed the decision as affirming Congress' intent to economically deregulate transportation at all government levels. In an e-mail to DC Velocity, Anderson, who was the president of the California Trucking Associations when the 1994 law was enacted, wrote, "I was pleased to read such clear and expansive justification for the court's rejection" of the concession agreement.