Reply Brief — Mid-Con Freight Systems, Inc. v. Michigan Pub. Serv. Comm'n

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Suopre mec t.U ‘Ss

’ Tr

S FILED

No. 08-1284 MAW 14 2004

In The

Supreme Court of the Gnited States

Mib-CON FREIGHT SYSTEMS, INC.

AND LAFGOND EXPRESS, INC., on behalf

of themselves and all others similarly situated,

Petitioners,

MICHIGAN PUBLIC SERVICE COMMISSION,

MICHIGAN DEPARTMENT OF TREASURY,

MICHIGAN DEP: RTMENT OF COMMERCE,

AND THE STaTE OF MICHIGAN,

Respondents.

On Petition For A Writ Of Certiorari

To The Michigan Court Of Appeals

PETITIONERS’ REPLY BRIEF

JAMES H. HANSON*

ANDREW K. LIGHT

LYNNE D. LIDKE

SCOPELITIS, GARVIN, LIGHT &

HANSON, PC.

10 W. Market St., Suite 1500

Indianapolis, IN 46204

(317) 637-1777

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

—

Of The Issue Presented Here

TABLE OF AUTHORITIES

Page

CASES

Adams Fruit Co. v. Barrett, 494 U.S. 638 (1990)...........0.-- 5

American Trucking Ass’ns v. Scheiner, 483 U.S. 266

(RGF) «.ccvececececesesseosenneeuseeesusesneinninniiaaninnnnnnnnnnnn 8, 9, 10

Buckman Co. v. Plaintiffs’ Legal Committee, 531

oe NT: | ee 1

Central Machinery Co. v. Arizona State Tax Com-

mission, 448 UB. 260 CRGGED .ccecscscessessesevestesssensmennnnninnn: 3

City of Detroit v. Murray Corp., 355 U.S. 489 (1958).......... 3

Gade v. National Solid Wastes Management Ass’n,

BOS UG. GB CRBGED .cccrcccecsecsscescsssctconessinnennnnennnaaan 6

Geier v. American Honda Motor Co., 529 U.S. 861

CBB D ence ccccse1cs2ccscesesenesenenstonesssssinnsiansniiniiinsninnnnnnnnnnnnnnEEE 5

Hines v. Davidowitz, 312 U.S. 52 (1941)...........ccccceeeeeeeeeees 5

Jefferson County v. Acker, 527 U.S. 423 (1999) ...............0 3

Napier v. Atlantic Coast Line R. Co., 272 U.S. 605

CRIED .ecccocessvessncseseecesesestesisnsnsnsmmninanneessiananiannann nnn 8

New York v. FERC, 535 U.S. 1 (2003) vesdideiidieesniiesaadamaala 1

Perez v. Campbell, 402 U.S. 637 (1971) .............cccceecseeeee 5,6

Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947) ............. 1

United States v. Locke, 529 U.S. 89 (2000) ............... eee 1

Xerox Corp. v. County of Harris, 459 U.S. 145 (1982)............. 4

STATUTES AND REGULATIONS

49 U.S.C. § 11506(c)(2)B)iv)(ID (1994 ed.)...........ccceeeeeeees 7

49 US.C. § 14504(c)(2)(B)(@ii) (2000 ed.)..........cccccceeeseesseeees 3

TABLE OF AUTHORITIES — Continued

Page

49 U.S.C. § 14504(cX2)C) (2000 ed.) 20.0.0... eeeeceeeeceeeeceeeees 5

Mich. Comp. Laws Ann. § 478.6 (West 2002)...............000000. 4

Mich. Comp. Laws Ann. § 478.7(1) (West 2002) ................. 2

Mich. Comp. Laws Ann. § 478.7(5) (West 2002)................. 4

MISCELLANEOUS

H.R. Conf. Rep. No. 102-404 (1991), reprinted in

Ec 7

H.R. Rep. No. 89-253 (1965), reprinted in 1965

EE EL 7

PETITIONERS’ REPLY BRIEF

Choosing to disregard this Court’s recent clarification

that no presumption against preemption applies to mat-

ters “inherently federal in character”’ or to state regula-

tion in areas with “a history of significant federal

presence,”* Respondents’ brief fails in its attempt to

trivialize the importance of the ruling below. Neither a

meaningless registration/regulatory fee distinction nor

selective application of the $100 per-vehicle Interstate

Decal Fee to Michigan-plated trucks lessens the fee's

practical impact upon fee-paying interstate carriers. Thus,

Respondents’ arguments do not rescue the fee from Con-

gress’s express preemptive net or diminish the real threat

the Michigan decision poses to interstate truckers across

the nation. Further review is plainly warranted.

A. The Illusory “Regulatory Fee” Label Does Not

Yield An Answer To The Preemption Question

Posed

In an exercise in misdirection and pointless seman-

tics, Respondents insist that only “registration” fees are

preempted by the Single State Registration System

(“SSRS”) and that the Interstate Decal Fee is saved from

* Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341, 347-

348 (2001).

* United States v. Locke, 529 U.S. 89, 108 (2000). Respondents

advance Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947) in support

of “a general presumption against federal preemption,” Opp. 18, but Rice

was expressly rejected as standing for that proposition in Locke, 529 U.S.

at 108. Curiously, Respondents also cite New York v. FERC, 535 U.S. 1

(2003), which involved defining the proper scope of a federal agency's

power and plainly has no bearing upon the question in this case.

preemption because it is a “regulatory” fee, not a registra-

tion fee. This now-familiar refrain, borrowed as it is from

the Michigan Court of Appeals decision, evades the legal

question presented. The question before this Court is

whether the label attached to the Interstate Decal Fee or

even the use to which its revenues are put can legally

distinguish it from the per-vehicle fees Congress capped at

$10 under the SSRS and the predecessor “bingo card” law.

The unmistakable answer to that question is “no.”

Remarkably, Respondents claim that payment of the

$100 Interstate Decal Fee to the Michigan Public Service

Commission (“PSC”) is unlike payment of the $10 SSRS

fee because it is “not a requirement to prove an interstate

carrier is properly certified under federal authority or that

its motor vehicles are legally registered or that the carrie

is insured or that it has a named agent for service of

process.” Opp. 6. In fact, just the opposite is true. Every

interstate carrier, regardless of the state in which it plates

its vehicles, is prohibited from engaging in the interstate

transportation of property in Michigan “without first

having registered with the [PSC] and paid the required

registration and vehicle fees.” Mich. Comp. Laws Ann.

§ 478.7(1) (West 2002). The way all interstate carriers

each of them to do the same things to prove the lawfulness

of their operations except that, under Michigan law,

Michigan-plated carriers pay $90 per truck more for

registration.

Thus, prior to the 1994 implementation of the SSRS,

Michigan-plated carriers paying $100 per truck — just like

carriers plated elsewhere but paying $10 per truck — were

required to file proof of their federal authority, register

their motor vehicles, submit evidence of insurance, and

identify their agent for service of process. Since 1994,

those same Michigan-plated carriers — just like carriers

that purchase their license plates elsewhere — must still

file proof of federal authority, submit evidence of insur-

ance, and name their agent for service of process. The only

difference between the two carriers is that Michigan’s

SSRS form directs the Michigan-plated carrier to pay

$100, instead of $10, per vehicle and to fill out another

form identifying its trucks by make, model, and serial

number to obtain a decal for each — even though the SSRS

expressly prohibits decal requirements and the registra-

tion or identification of specific vehicles operated by the

carrier. 49 U.S.C. § 14504(c)(2B)iii) (2000 ed.).

In short, Respondents cannot at once acknowledge

that Congress has “preemptled] a State from charging

more than $10 to register and operate within the borders

of that State,”* yet disregard the fact that Michigan-plated

interstate carriers pay $100 per truck to register and

operate within Michigan’s borders while other carriers pay

$10 per truck for the exact same privilege. Michigan-

plated carriers “register” with Michigan for the price of

$100, whether Michigan calls the assessed fee a “regula-

tory” fee or not. See Central Machinery Co. v. Arizona

State Tax Commission, 448 U.S. 160, 164 n.3 (1980)

(transaction privilege tax was preempted by Indian trader

statutes “regardless of the label” placed upon it). See also

Jefferson County v. Acker, 527 U.S. 423, 439 (1999) (“prac-

tical impact, not the State’s name tag,” determines

whether tax violates Public Salary Tax Act); City of Detroit

* Opp. 19.

v. Murray Corp., 355 U.S. 489, 492 (1958) (in determining

constitutionality of a tax, “we must look through form and

behind labels to substance”).

Nor can the so-called “regulatory” use to which its

revenues are put distinguish the Interstate Decal Fee from

the $10 SSRS fee Michigan otherwise collects. Respon-

dents emphasize witness testimony that the Interstate

Decal Fee supports a whole host of laws governing com-

mercial motor vehicles and carriers after it is “placed to

the credit of the [PSC]” and “appropriated ... in such

proportions as the legislature may determine.” Mich.

Comp. Laws Ann. § 478.6 (West 2002). However, Respon-

dents conveniently ignore that the $10 SSRS fee (along

with every other fee collected by the PSC) is also “placed to

the credit of the [PSC]” and, as Respondents’ own witness

explains, combined with all other motor carrier fee reve-

nue for appropriation to the same “regulatory” agencies for

the same “regulatory” use Respondents so insistently

assign to the Intestate Decal Fee alone.‘ The $10 SSRS fee

is just as “regulatory” in nature as the $100 Interstate

Decal Fee, and the Interstate Decal Fee serves no more

“regulatory” purpose than any other fee collected by the

PSC from any motor carrier in Michigan.

Therefore, whatever differences there may be between

the $10 SSRS fee and the $100 Interstate Decal Fee, “they

are distinctions without a legal difference.” Xerox Corp. v.

County of Harris, 459 U.S. 145, 154 (1982). The only real

* Opp. App. 8b-14b. In addition, under Mich. Comp. Laws Ann.

§ 478.7(5), a portion of the SSRS fee is designated for deposit in the

Michigan Truck Safety Fund for use in “regulatory” endeavors. Opp.

App. 13b.

difference between the two fees is $90, and it is that

distinction that makes the Interstate Decal Fee incom-

patible with Congress’s proclamation that “[t]he charging

or collection of any fee under this section that is not in

accordance with the fee system established [herein] shall

be deemed to be a burden on interstate commerce.” 49

U.S.C. § 14504(c)(2)(C) (2000 ed.).

B. The Interstate Decal Fee’s Practical Impact, Not

Its Name Or Its Purpose, Determines the Out-

come Of This Controversy

It makes no difference that Congress did not make

specific reference to “regulatory fees” in adopting the

SSRS or its predecessor “bingo card” program. State law

yields under Supremacy Clause analysis if it “stands as an

obstacle” to full implementation of the federal law, Hines v.

Davidowitz, 312 U.S. 52, 67 (1941), or otherwise frustrates

the accomplishment of a federal objective. Geier v. Ameri-

can Honda Motor Co., 529 U.S. 861, 873 (2000). Thus, by

way of example only, Perez v. Campbell, 402 U.S. 637

(1971) did not require an express reference to state high-

way safety laws before construing the Bankruptcy Act to

bar application of a state statute suspending the driver’s

licenses of uninsured tortfeasors. Nor did federal law

make express reference to state registration standards for

aliens when the Federal Alien Registration Act was

deemed preemptive of state registration laws in Hines,

supra. Whether or not Congress has made an express

preemptive pronouncement on a particular topic, state

regulation must yieid to the extent it actually conflicts

with federal law. See Adams Fruit Co. v. Barrett, 494 U.S.

638, 648-649 (1990).

Furthermore, it matters not whether the Michigan

legislature : ended by its adoption of the Interstate Decal

Fee to serve some purpose other than to frustrate the

goals of the SSRS. Over three decades ago, this Court

declared that it could no longer “adhere to the aberrational

doctrine ... that state law may frustrate the operation of

federal law as long as the state legislature in passing the

law had some purpose in mind other than one of frustra-

tion.” Perez, 402 U.S. at 651-52. Differently stated,

“[w]hatever the purpose or purposes of the state law, pre-

emption analysis cannot ignore the effect of the challenged

state action on the pre-empted field.” Gade v. National

Solid Wastes Management Ass’n, 505 U.S. 88, 107 (1992).

Accordingly, the “key question” is “at what point the state

regulation sufficiently interferes with federal regulation

that it should be deemed pre-empted.” Jd.

That the Interstate Decal Fee blatantly interferes

with and frustrates Congress’s purpose in limiting per-

vehicle fees imposed on interstate carriers cannot be

seriously debated. Every Michigan-plated motor carrier

seeking to engage in interstate trade on Michigan’s high-

ways must pay the PSC $100 per truck for the privilege of

conducting its business. The fee, therefore, stands as a

$100 obstacle for each truck the interstate motor carrier

hopes to operate in and out of the state even though

Congress declared that no more than $10 should be paid to

clear the roadway for each such truck. Under such circum-

stances, the Interstate Decal Fee unquestionably frustrates

the purpose of Congress when, through implementation of

the original “bingo card” program, it sought to afford

interstate carriers “relief from [a] multiplicity of different

State registration requirements” and to establish uniform

registration requirements imposed by state regulatory

commissions. H.R. Rep. No. 89-253 (1965), reprinted in

1965 U.S.C.C.A.N. 2923, 2929. Similarly, the Interstate

Decal Fee interferes with Congress’s goal in enacting the

SSRS, which was to establish “a fee system ... that

[would] minimize the costs of complying with the registra-

tion system,” 49 U.S.C. § 11506(c\2)(B)iv(IT) (1994 ed.),

and “benefit the interstate carriers by eliminating unnec-

essary compliance burdens” so that consumers would also

profit from cost savings. H.R. Conf. Rep. No. 102-404

(1991), reprinted in 1991 U.S.C.C.A.N. 1679, 1817.

No evidence was required for the lower courts to reach

such conclusions. Nor was evidence required to rebut

Respondents’ new-found contention that the Interstate

Decal Fee is somehow justified by “actual vehicular ‘pres-

ence’ in Michigan” allegedly evidenced by “commercially

license plating the fee paying vehicle in [Michigan].”

Opp. 17. Setting aside for the moment that the Michigan

Court of Appeals made no mention of any “vehicular pres-

ence” justification for the Interstate Decal Fee, Petitioners

previously demonstrated that Michigan may be the base-

plating state pursuant to the International Registration

Plan (“IRP”) under circumstances that have little to do

with a “regulatory presence” within the state’s borders.°

In any event, whatever Michigan’s professed purpose

for the Interstate Decal Fee might be, that purpose is no

* Pet. 23-24. Despite its heavy dose of sarcasm (Opp. 21), Respon-

dents’ brief does not dispute the inherent truth of our point that small

Michigan-based carriers imposing little regulatory burden upon the

State cannot avoid the fee because they have no out-of-state terminals

while large carriers with a significant Michigan presence and a

terminal out of state can escape fee payment altogether.

more determinative than the fee’s name. Preemption

analysis turns not on whether federal and state laws “are

aimed at distinct and different evils,” but whether they

“operate upon the same object.” Napier v. Atlantic Coast

Line R. Co., 272 U.S. 605, 612 (1926). In this case, the

object upon which federal and state law both operate is the

same interstate truck, and the Interstate Decal Fee’s

application to any interstate truck — paid as it is for the

mere privilege of traveling upon the state’s highways —

does not square with the $10 per-vehicle fee cap imposed

by federal law. The Interstate Decal Fee must therefore

yield to Congress’s express preemptive strike.

C. The Importance Of The Issue Presented Here

Should Not Be Trivialized

Notwithstanding their characterization of our position

as “erroneous, speculative and exaggerated,” Opp. 18,

Respondents’ argument acknowledges that the issue

presented here is a potentially recurring one of great

practical importance. Both the Michigan Court of Appeals

and Respondents maintain that, because the SSRS does

not prohibit flat per-vehicle “regulatory” fees, Michigan

may charge Petitioners $100 per vehicle every year for

whatever “regulatory” purpose it desires. That rationale, if

true, proves our point that the Michigan court ruling

opens the floodgates for other States to assess any and all

per-vehicle “regulatory” fees they see fit to impose in any

amount for any “regulatory” reason. The adverse impact

upon interstate trucking interests, in that event, could be

monumental.

Seventeen years ago in American Trucking Ass’ns v.

Scheiner, 483 U.S. 266 (1987), this Court recognized that

plating fees imposed under the IRP and fuel taxes as-

sessed under the International Fuel Tax Agreement, both

of which are apportioned based upon a motor vehicle’s

mileage within a state, readily satisfy dormant Commerce

Clause jurisprudence. Jd. at 282-283. In contrast, however,

flat unapportioned per-vehicle fees imposed on interstate

carriers

penalize some travel within the free trade

area.... [T)heir inevitable effect is to threaten

the free movement of commerce by placing a fi-

nancial barrier around the State.... If each

State imposed flat taxes for the privilege of mak-

ing commercial entrances into its territory, there

is no conceivable doubt that commerce among the

States would be deterred.

Id. at 284. Scheiner thus teaches that States requiring

“regulatory” revenue must collect it on an apportioned

basis that measures the fee-payer’s use of State facilities

because a flat unepportioned per-vehicle fee “exerts an

inexorable hydraulic pressure on interstate businesses to

ply their trade within the State that enacted the measure

rather than ‘among the several States.’” Jd. at 286-287.

The words of Scheiner echo back at interstate truckers

when they hear Respondents’ hollow claim that any State

is free to impose a flat per-vehicle “regulatory fee” in any

amount it chooses. Congress, as the federal authority with

preeminent power over matters involving interstate

commerce and interstate trucking in particular, saw fit to

authorize flat per-vehicle fees of no more than $10 and

declared anything higher than that charge to be a burden

upon interstate commerce. Nevertheless, Respondents’

position and the lower court ruling both demonstrate that

the SSRS may be read by state regulatory commissions as

Congressional authority for flat, per-vehicle “regulatory

fees” in any amount, and, if so, interstate carriers will be

required to revisit and fight again the same flat fee battles

they fought so hard to win in Scheiner. The Michigan

court’s ruling, therefore, should not be permitted to stand.

For the foregoing reasons and those stated in the

petition, the petition for a writ of certiorari should be

granted.

Respectfully submitted,