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¥. SUPREME COURT

me OF THE UNITED STATES

No. 11-798

Title: American Trucking Associations, !nc . Petitioner

City of Los Angeles, California. et al

Docketed December 23, 2011

Lower Ct United States Court of Appeals for the Ninth Circuit

Case Nos.: (10-56465)

Decision Date: October 31, 2011

Questions

Presented

— lie —-- Proceedings and Orders~~~~~~~~~~~~~~~~~~~~~

Dec 22 2011 Petition for a writ of certioran filed. (Response due January 23, 2012)

Jan 42012 Order extending time to file response to petition to and including February 21

2012. for all respondents

Jan 23 2012 Brief amici curiae of Center for Constitutional Jurisprudence. et al. filed

Jan 23 2012 Brief amici curiae of Chamber of Commerce of the United States of America. et

al filed

Jan 23 2012 Brief amicus curiae of Owner-Operator Independent Drivers Association, inc

filed

Jan 23 2012 Brief amicus curiae of Airlines for America filed

Feb 21 2012 Brief of respondents National Resources Defense Council, et al. in opposition

filed

Feb 21 2012 Brief of respondents City of Los Angeles. California, et al. in opposition filed

Mar 22012 Reply of petitioner American Trucking Associations. Inc filed

Mar 72012 DISTRIBUTED for Conference of March 23, 2012

Mar 26 2012 The Solicitor General is invited to file a brief in this case expressing the views

of the United States

Nov 30 2012 Brief amicus curiae of United States filed

Dec 10 2012 Supplemental brief of petitioner American Trucking Associations. Inc. filed

Dec 12 2012 DISTRIBUTED for Conference of January 4, 2013

Jan 72013 DISTRIBUTED for Conference of January 11, 2013

Jan 11 2013 Petition GRANTED limited to Questions 1 and 3 presented by the petition

Feb 11 2013 SET FOR ARGUMENT ON Tuesday, April 16, 2013

Feb 15 2013 Brief of petitioner American Trucking Associations, !nc filed

Feb 15 2013 Joint appendix filed. (Statement 0’ costs filed }

Feb 22 2013 Brief amicus curiae of the United States supporting reversal filed

Feb 22 2013 Brief amici curiae of Owner-Operator Independent Drivers Association inc

filed

Feb 22 2013 Brief amicus curiae of Airlines for America filed

Feb 22 2013 Brief amicus curiae of California Construction Trucking Association filed

Feb 22 2013 Brief amicus curiae of Center for Constitutional Jurisprudence and Harbor

Trucking Association filed

Feb 22 2013 Brief amici curiae of Chamber of Commerce of the United States of America. et

al filed

Feb 25 2013 Record from US CA. for 9th Circuit is electronic

Feb 25 2013 Record from US DC. for Centra! Distnct of California is electronic

Mar 12013 CIRCULATED

Mar 18 2013 Brief of respondents City of Los Angeles, California, et a! filed (Distributed)

Mar 18 2013 Brief of respondents National Resources Defense Council, et a!. (Distributed)

filed

Mar 25 2013 Motion of the Solicitor Genera! for leave to participate in oral argument as

amicus Curiae and for divided argument filed

Mar 25 2013 Brief amicus curiae of Los Angleles Chamber of Commerce filed (Distributed)

Mar 25 2013 Brief amici curiae of National Organization of Counties, et al. filed

Mar 25 2013 Brief amicus curiae of Airports Council Internationa! - North Amenca filed

Mar 25 2013 Brief amici curiae of California and Washington filed (Distributed)

Apr 12013 Motion of the Solicitor General for leave to participate in oral argument as

amicus Curiae and for divided argument GRANTED.

Apr 52013 Reply of petitioner American Trucking Associations. Inc. filed (Distributed)

Apr 16 2013 Argued. For petitioner Daniel N Lerman, Washington D.C. and John F.

Bash, Assistant to the Solicitor General, Department of Justice. Washington, D

C (for United States. as amicus curiae )

PETITION

FOR

WRIT OF

CERTIORARI

IN THE

Supreme Court of the Anited States

AMERICAN TRUCKING ASSOCIATIONS, INC.,

Petitioner,

CITY OF LoS ANGELES, ET AL.,

Respondents.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

PETITION FOR A WRIT OF CERTIORARI

ROBERT DIGGES, JR.

American Trucking

Associations, Inc.

950 North Glebe Road

Arlington, VA 22203

(703) 838-1889

Roy T. ENGLERT, JR.

Counsel of Record

ALAN UNTEREINER

LEIF OVERVOLD

Robbins, Russell, Englert,

Orseck, Untereiner &

Sauber LLP

1801 K Street, N.W.

Washington, D.C. 20006

(202) 775-4500

renglert@robbinsrussell.com

Counsel for Petitioner

Library of Conaress

Law l int city

QUESTIONS PRESENTED

Title 49 U.S.C. § 14501(c)(1), originally enacted as

a provision of the Federal Aviation Administration

Authorization Act of 1994, provides that “a State [or]

political subdivision ... 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 . . . with respect to the transporta-

tion of property.” It contains an exception providing

that the express preemption clause “shall not restrict

the safety regulatory authority of a State with respect

to motor vehicles.” Jd. § 14501(c)(2)(A). The questions

presented are:

1. Whether an unexpressed “market participant”

exception exists in Section 14501(c)(1) and permits a

municipal governmental entity to take action that

conflicts with the express preemption clause, occurs

in a market in which the municipal entity does not

participate, and is unconnected with any interest in

the efficient procurement of services.

2. Whether a required concession agreement

setting out various conditions a motor carrier must

meet to serve a particular port imposes any

requirements that are “related to a price, route, or

service of any motor carrier” for the purposes of

preemption under Section 14501(c)(1).

3. Whether permitting a municipal governmental

entity to bar federally licensed motor carriers from

access to a port operates as a partial suspension of

the motor carriers’ federal registration, in violation of

Castle v. Hayes Freight Lines, Inc., 348 U.S. 61

(1954).

RULE 14.1(b) STATEMENT

Petitioner is the American Trucking Associations,

Inc., plaintiff-appellant below.

Respondents are the City of Los Angeles, the

Harbor Department of the City of Los Angeles, and

the Board of Harbor Commissioners of the City of Los

Angeles, all defendants-appellees below, and Natural

Resources Defense Council, Sierra Club, and

Coalition for Clean Aijir, Inc., all defendants-

intervenors-appellees below.

RULE 29.6 STATEMENT

Petitioner has no parent companies or non-whoily-

owned subsidiaries.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ..................cecceeceeceeeeees i

BUA 14.16) BEAT MEU cccccccccccccccoscccccccesesccers il

BPD CD EPI dncsccscnscsentessnsstascccsesonsine iii

CE GI GU OE ccescccssnnccosccsssnscssscsoncess vi

ET vnicciiccnsininaviveinemedenisttiadaeaiiidiiita 1

TE ciicricrcoesaiaseniiinieanbiipiniadimaliiaueiiiainls 1

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED .............c0cccssceseceseees 1

IEE scisictinisipiinnainasinnininimnninbineabannstniieadeiiehins 1

A. The Deregulatory Scheme of the

SPIT cicnstinciusritaiidinipadenesatimnaenanaiindnieiiinnnieints 2

B. The Port’s Mandatory Concession

i icniciicnitnisisnininancnnantiineiatnlabiatnititinis 3

C. Prior Proceedings in This Case.................... 5

D. The Court of Appeals’ Decision.................... 7

REASONS FOR GRANTING THE

Pee ncdcdcnsicisteventindinniilininiabiintinianienianbeinnss 10

I. The Circuits Are Deeply Divided over

the Scope of the “Market Participant”

PIII cciicsicsiniisiececcuiusichndeiieisammabiuiaediadaddnididubminedmatiianede 12

A. This Case Squarely Presents Two

Conflicts in the Context of the

SETI icsvavciccticniasipietiinasieieitaihdiaiesbaalaettaebsiadanamseiani 12

B. The Questions Presented Are

Significant and Recurring. .......................+ 19

TABLE OF CONTENTS-continued

Page

Il. The Ninth Circuit Decision Also

Expands and Entrenches a Circuit Split

as to When a State Kegulation Is

“Related to a Price, Route, or Service” ........... 20

A. This Case Creates a Conflict with

Preemption Decisions Under Related

aa cat aan at lata ale 20

B. This Case Entrenches a Conflict

Regarding the Scope of the FAAAA’s

EID GRIND cncrccnseutincncnseinnnnsnincnnssens 24

IlI.The Decision Below Conflicts with

Controlling Precedent of This Court .............. 26

IV.The Decision Below Wrongly Answers

Each of the Questions Presented.................... 29

SI iinciistiiieitereneaseciuinctebiciiniidiitaieananerieciaiaid 34

TABLE OF AUTHORITIES

Page(s)

CASES

Air Transp. Ass’n of Am. v. City & Cnty. of San

Francisco, 266 F.3d 1064 (Sth Cir. 2001).............. 25

Air Transp. Ass’n of Am. v. Cuomo, 520 F.3d

I ll lee atl 25

American Airlines, Inc. v. Wolens, 513 U.S. 219

STITT cil sietinscirinieetshicachateiiiiacinaaiaiiiadhaibetailiatidabipiabinndaddeaememiitniabneuntait 23

Antilles Cement Corp. v. Acevedo Vila, 408 F.3d

Be ey Si ircicniccicinitaiiiealiuniniintehiceaiaaiiinenmandidbaaenbiinits 14

Atl. Coast Demolition & Recycling, Inc. v. Bd.

of Chosen Freeholders, 48 F.3d 701 (3d Cir.

ES Tao ee Pen nme eee nee ens Sema eee 15

Bldg. & Construction Trades Council v. Assoc.

Builders & Contractors, 507 U.S. 217 (1993)..17, 31

Bonner v. City of Prichard, 661 F.2d 1206 (11th

ETT OLA TO LANE Tae TO 13

Branche v. Airtran Airways, Inc., 342 F.3d

I ls 23, 25

Brooks v. Vassar, 462 F.3d 341 (4th Cir. 2006)........ 14

Cardinal Towing & Auto Repair, Inc. v. City of

Bedford, 180 F.3d 686 (5th Cir. 1999)............. 15, 16

Castle v. Hayes Freight Lines, Inc., 348 U.S. 61

Ree cnr ee nant HINES REN passim

Chamber of Commerce v. Brown, 554 U.S. 60

ITC cen nee os eae Sener S 18, 32

Chance Mgmt., Inc. v. South Dakota, 97 F.3d

I, I oa cesieniiemaieiondinaiidaneis 15

vii

TABLE OF AUTHORITIES-continued

Page(s)

City of Charleston v. A Fisherman’s Best, Inc.,

eee 32

City of Chicago v. Atchison, Topeka & Santa Fe

Sans I TP iia ateiecacielenecia iablinainiennanens 28

City of Columbus v. Ours Garage & Wrecker

Service, Inc., 536 U.S. 424 (2002).................... 16, 17

Council of City of New York v. Bloomberg, 6

4 fk | Eee nee T enna ee one 17

Dep't of Revenue of Kentucky v. Davis, 553 U.S.

NEALE EN tonne me noe NN anne era O eee 14

DiFiore v. Am. Airlines, Inc., 646 F.3d 81 (1st

Cir. 2011), cert. denied, No. 11-221 (Nov. 28,

TET cca eeceenitiniecicinidinceenieandanaietaniaieiepingamienaienabiindnialibidiesinindtindei 25

Duncan v. Northwest Airlines, Inc., 208 F.3d

NC, SITE ciscsinissiishetinnncbiniieclidibindiaiiunabuniinietinadidins 24

Endsley v. City of Chicago, 230 F.3d 276 (7th

eas MEP snieiceth nsscieaiseniabecdeieseiscieailliaeldaiaibiahasiaindaaciidaegiiaian 14-15

Fla. Transp. Serv., Inc. v. Miami-Dade Cnty.,

757 F. Supp. 2d 1260 (S.D. Fla. 2010)................... 13

Four T’s, Inc. v. Little Rock Municipal Airport

Comm'n, 108 F.3d 909 (8th Cir. 1997) .................. 13

Ginsberg v. Northwest, Inc., 653 F.3d 1033 (9th

Saas HITT wcisncetiansinientsntincpdninniinpnssandinndtaaniinnnaionts 25-26

Goodspeed Airport LLC v. E. Haddam Inland

Wetlands & Watercourses Comm'n, 634 F.3d

I ha alc 22

TABLE OF AUTHORITIES~continued

Page(s)

Greater Washington Bd. of Trade v. Dist. of

Columbia, 948 F.2d 1317 (D.C. Cir. 1991),

i He i He CI viccrercncncncccnssstcuductenceecersce 22

GSW, Inc. v. Long County, Ga., 999 F.2d 1508

I (el 15

Healthcare Ass'n of New York State, Inc. v.

Pataki, 471 F.3d 87 (2d Cir. 2006)......................6. 17

Hodges v. Delta Airlines, Inc., 44 F.3d 334 (5th

ETT AL TTT 25

Huish Detergents, Inc. v. Warren Cnty., Ky.,

re ee ee ee i Be icisceccccesesunnsinscnsscuteosecss 15

In re Dyke, 943 F.2d 1435 (5th Cir. 1991)................. 22

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133

EC ear ARR ae a eRe ORE ee 21

Ky. Ass'n of Health Plans, Inc. v. Nichols, 227

F.3d 352 (6th Cir. 2000), affd sub nom. Ky.

Ass'n of Health Plans, Inc. v. Miller, 538 U.S.

i TE ee TE Le a eee 22

Lodi Truck Serv., Inc. v. United States, 706

ff EE Lee ee 28

Mackey v. Lanier Collection Agency & Seruv.,

Oca: cel 21

Morales v. Trans World Airlines, Inc., 504 U.S.

EASTER See SONNE eae Lee ee 3, 19

New England Legal Found. v. Mass. Port

Auth., 883 F.2d 157 (1st Cir. 1989) ....................... 20

TABLE OF AUTHORITIES~continued

Page(s)

Northwest Airlines, Inc. v. Duncan, 531 U.S.

TERT RIT AN SES LEE SSE IEE LO Bee Re 20, 24

Petrey v. City of Toledo, 246 F.3d 548 (6th Cir.

SI cc cieethein alii aia aaa a cy 16

Prudential Ins. Co. of Am. v. Natl Park Med.

Ctr., Inc., 154 F.3d 812 (8th Cir. 1998) ................. 22

R.R. Transfer Serv. Inc. v. City of Chicago, 386

Uy acs 28

Rowe v. N.H. Motor’ Transp. _ Ass'n,

Se Ee Ce IED cb iiccintitendineenticnnniiniesnnennds passim

Smith v. Comair, Inc., 134 F.3d 254 (4th Cir.

REESE RELA Soe Ome ee a ae Se SRS NER a 25

Smith v. Department of Agricu'ture, 630 F.2d

[REISE 9,12,13

South-Central Timber Development, Inc. v.

Wunnicke, 467 U.S. 82 (1984).............cccccceeeeees 10, 14

Stucky v. City of San Antonio, 260 F.3d 424

(5th Cir. 2001)

Taj Mahal Travel, Inc. v. Delta Airlines, Inc.,

Be Be Be ee Gos Fi ccesccceccccccscccvcsscsccececeses 24

Tocher v. City of Santa Ana, 219 F.3d 1040

I iain i tee 16

Travel All Over The World, Inc. v. Kingdom of

Saudi Arabia, 73 F.3d 1423 (7th Cir. 1996).......... 25

Tri-M Group, LLC v. Sharp, 638 F.3d 406 (3d

EATEN RAT CREE SAR Ee be Oe Oe 17

TABLE OF AUTHORITIES-continued

Page(s)

United Healthcare Ins. Co. v. Davis, 602 F.3d

I ali eds adaleaimeioninns 14

United Wire, Metal & Mach. Health & Welfare

Fund v. Morristown Mem Hosp., 995 F.2d

I iin a idee cus aleanemncnsie 22

USA Recycling, Inc. v. Town of Babylon, 66

ee EE EE NG ITED dbiciniwiccnncecnncumsaviituesnensneesiseenn 15

Ventress v. Japan Airlines, 603 F.3d 676 (9th

RN CI csiiacass peruhccheaianidine iikadabcatemap ed iesiueiiiies iaeliidisipiaiibeaeees 26

STATUTES AND LEGISLATIVE HISTORY

Oe a NL 30

A i cccicesratesisivisvindiulosisicdushdainesinnek 21

cs scaicasceninccsesdepbaninbl 4

I i ind si sicessnhinccdesdads ettustiolsinincisieteetsiamuintioaiapsiies l

Ee Doe 33

ee SE eiicinindeninesinsinninutiontnincgintss 2, 3, 31

GD UIA. © RGB ve scesscscccccncsicceccesccesssssss & BF

49 U.S.C. § 14501(c)(2)(C) .ccccccececesceceecececeeeseeceeeeeeeees 30

OE, © BI ni aden cscenscieccncicnsniesesnsvacensescninnse 31

gt aE ae oe 30

6d sia rinasnseensinvotsleseiaticnaiainiac 4

A i slaieideaehiialnail 4

ee i cnciineninitinianidasidannientgdpesameseatia 30

TABLE OF AUTHORITIES~continued

Page(s)

H.R. Conf. Rep. No. 103-677 (1994), reprinted

he og Fd oS RD) een eee ree 3

ICC Termination Act of 1995, Pub. L. No. 104—

a a Ss WI I, So oicc ccs dcscocadcenaseinbderececeses 27

Pub. L. No. 103-311, § 207 (1994), 108 Stat.

a a a 27

MISCELLANEOUS

Brief for the United States as Amicus Curiae

Supporting Reversal, Am. Trucking Ass’ns,

Inc. v. City of Los Angeles, 559 F.3d 1046

(9th Cir. 2009) (No. 08-56503) ............. 18, 23, 28, 33

PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

The opinion of the court of appeals, as amended

October 31, 2011 (App. 1la-58a), is reported at 660

F.3d 384. The opinion of the district court (App. 59a-

137a) is unreported. The earlier opinions of the court

of appeals in connection with petitioner’s request for

a preliminary injunction (App. 138a-148a, 208a-238a)

are reported at 596 F.3d 602 and 559 F.3d 1046. The

district court opinions issued in connection with the

preliminary injunction (App. 149a-207a, 239a-272a)

are unreported.

JURISDICTION

The court of appeals’ judgment was entered on

September 26, 2011. This Court’s jurisdiction is

invoked under 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The relevant provisions of the Supremacy Clause

of the Constitution and of the Federal Aviation Ad-

ministration Authorization Act, 49 U.S.C. § 14501 et

seq., are reproduced at App. 273a-279a.

STATEMENT

This case raises important and recurring ques-

tions that have divided the circuits concerning three

subjects. The first is the preemptive scope of the

Federal Aviation Administration Authorization Act

(“FAAAA”). The second is the scope and applicability

of the “market-participant exception”—first recog-

nized in the dormant Commerce Clause context—to

an express preemption scheme such as that set out by

the FAAAA. The third is the enduring vitality of this

Court’s decision in Castle v. Hayes Freight Lines.,

Inc., 348 U.S. 61 (1954), under the deregulatory

scheme created by the FAAAA.

As the dissent below observes, the majority's

opinion creates conflicts with at least one other cir-

cuit over whether the “market participant” defense

can be invoked by a governmental entity to save its

actions from preemption when (a) the governmental

entity owns property on which the market operates

but does not actually participate in the market in

which it is imposing conditions, and (b) the conditions

are unrelated to the efficient procurement of services.

The decision below also entrenches and extends a

longstanding conflict with the First, Second, Fourth,

Fifth, Seventh, and Eleventh Circuits over the mean-

ing of the preemption clause’s coverage of state and

local requirements “related” to motor carriers’

“price[s], route[s], or service[s]” (49 U.S.C.

§ 14501(c)(1)). Finally, the decision below conflicts

with Castle, a longstanding precedent of this Court

precluding States from enforcing regulations through

actions that (as here) amount to a partial suspension

of a federally licensed motor carrier's grant of nation-

wide operating authority.

A. The Deregulatory Scheme of the FAAAA

In 1994, Congress enacted the FAAAA, comple-

menting the earlier-enacted Motor Carrier Act of

1980 (“MCA”). The MCA had broadly deregulated the

trucking industry at the federal level. The FAAAA

prevented state and municipal governments from

counteracting that policy through their own regula-

tion of motor carriers. Congress believed state eco-

nomic regulation of motor carrier operations resulted

in “significant inefficiencies, increased costs, reduc-

tion of competition, inhibition of innovation and

technology and curtail[ment of] the expansion of

markets.” H.R. Conf. Rep. No. 103-677, at 86 (1994),

reprinted in 1994 U.S.C.C.A.N. 1715, 1758. Congress

concluded that broad preemption was required to free

interstate carriers from the inefficiencies created by a

multitude of local regulatory schemes.

The FAAAA therefore provides that a State or its

political subdivision “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... with respect to the transportation of

property.” 49 U.S.C. § 14501(c)(1). The Act provides

for limited exceptions, including a provision noting

that it “snall not restrict the safety regulatory

authority of a State with respect to motor vehicles.”

Id. § 14501(c)(2)(A). Nevertheless, the general scope

of the FAAAA’s express preemption clause— modeled

after language in the Aijrline Deregulation Act

(“ADA”)}—is expansive. Rowe v. N.H. Motor Transp.

Ass'n, 552 U.S. 364, 370 (2008). Broad preemption

fosters a deregulatory policy aimed at ensuring that

prices, routes, and services reflect “maximum reli-

ance on competitive market forces,’ thereby stimulat-

ing ‘efficiency, innovation, and low prices.” Jd. at 371

(quoting Morales v. Trans World Airlines, Inc., 504

U.S. 374, 378 (1992)).

B. The Port’s Mandatory Concession Agree-

ments

This litigation arises out of restrictions imposed

by the Port of Los Angeles on motor carriers seeking

to contract with shipping lines that lease terminal

space at the Port. The Port is an independent division

of the City of Los Angeles, occupying land granted to

the City by the State of California. App. 5a. The Port

acts much lke a “landlord,” developing terminal

facilities that it leases to shipping lines and

stevedoring companies in exchange for property

leases and fees. App. 5a-6a, 71a. The Port is a major

avenue of interstate and foreign commerce, handling

more containerized cargo than any other port in the

country. App. 6a.

The Port has no non-regulatory interaction with

the drayage trucks that transport cargo from the Port

to customers or to other trucking or railroad facilities.

Cargo from the ships docked at the Port is unloaded

by terminal operators into marine terminals. Cargo

owners, ocean carriers, railroads, and other providers

of freight transportation then arrange for drayage

services through federally licensed motor carriers

(LMCs).' Before 2008, these LMCs frequently

provided drayage services with and through inde-

pendent contractors who owned and operated the

drayage trucks. The Port does not itself contract with

any drayage providers. App. 6a.

In 2008, the Port began prohibiting its tenant

terminal operators from allowing drayage trucks to

enter their terminal facilities unless the drayage

trucks were operated by motor carriers that had first

agreed to enter into “concession agreements” with the

Port imposing multiple requirements on the carriers

and their operations. App. 3a-4a, 12a. This measure

was enacted as part of a larger “Clean Truck

Program,” designed in response to environmentally

grounded legal and political opposition to the Port’s

expansion. App. 4a.

‘ A motor carmer engaged in interstate commerce receives

operating authority from the Department of Transportation,

under the registration provisions of the MCA, 49 U.S.C. § 13902,

and must comply with safety regulations and inspection

requirements promulgated under the Federal Motor Carrier

Safety Act, id. §§ 31136, 31142.

Of the 14 requirements imposed under the conces-

sion agreements on motor carriers, five remain at

issue. These require a motor carrier seeking to serve

the Port to (1) transition over five years to the use of

only employee-drivers rather than independent

owner-operators (the “employee-driver provision”);

(2) submit an “off-street parking plan,” including

parking locations for all “Permitted Trucks,” and

ensure that Permitted Trucks comply with municipal

parking restrictions (the “off-street-parking pro-

vision”); (3) ensure that maintenance of all Permitted

Trucks is conducted in accordance with the manu-

facturers’ instructions, with the concessionaires re-

sponsible for vehicle condition and safety (the “main-

tenance provision”); (4) post placards on Permitted

Trucks while the trucks are entering, leaving, or on

Port property, providing a number for members of the

public to call with concerns regarding truck emis-

sions, safety, and compliance (the “placard provi-

sion’); and (5) demonstrate to the satisfaction of the

Port’s Executive Director that the concessionaire

possesses the financial capability to perform its

obligations under the agreement (the “financial-

capability provision”). App. 12a-13a.

C. Prior Proceedings in This Case

Petitioner American Trucking Associations, Inc.

(“ATA”), a national association of motor carriers, sued

to challenge the mandatory imposition of these

agreements, arguing that the Port’s requirements are

preempted by the FAAAA. App. 4a.

The district court originally denied a preliminary

injunction entirely. The court acknowledged that the

concession-agreement requirements fell within the

FAAAA’s preemption clause and the Port’s action

could not be justified as that of a market participant.

App. 247a-248a, 252a-261a. But, the court held, the

fact that some of the provisions could be upheld

under the vehicle-safety exception saved the agree-

ments from preemption in their entirety. App. 266a.

A unanimous panel of the Ninth Circuit agreed

that the agreements likely fell within the FAAAA’s

preemption clause, explaining: “[t]hat the Concession

agreements relate to prices, routes or services of

motor carriers can hardly be doubted.” App. 221la

(emphasis added). The Ninth Circuit reversed the

district court regarding its application of the safety

exception, holding that the court must consider

whether each individual provision of the concession

agreements could be justified under the safety excep-

tion. App. 229a-230a. On remand, the district court

granted a preliminary injunction with respect to a

number of the individual provisions of the concession

agreements. App. 203a.*

The district court conducted a bench trial con-

cerning a permanent injunction. ATA argued (1) that

the concession agreements were per se “related to a

price, route, or service” for the purposes of FAAAA

preemption, (2) that they could not be justified under

the “market participant” exception, and (3) that the

FAAAA’s vehicle-safety exception neither justified

any specific provision in the concession agreements

2 The district court preliminarily enjoined the employee-driver,

financial-capability, and off-street-parking provisions, but not

the maintenance and placard provisions. App. 203a-204a. In a

later appeal, the Ninth Circuit reversed the district court again

with regard to the placard provision. App. 144a. Consistent with

the Ninth Circuit's prior determination that it could “hardly be

doubted” that the concession agreements imposed requirements

that “relate to prices, routes or services of motor carriers,” App.

221la, petitioner and the City “agree[d]” on that point in this

second appeal. App. 143a.

nor allowed the Port to refuse access to LMCs as a

general matter. The district court held that none of

the disputed provisions of the concession agreement

was preempted. The court concluded that the Port

was acting as a “market participant” in requiring the

agreements and that specific provisions were further

justified either as not “related to the price, route, or

service of a motor carrier” or as falling within the

exception to preemption for motor vehicle safety. App.

136a-137a.

D. The Court of Appeals’ Decision

A divided panel of the Ninth Circuit affirmed in

part and reversed in part. App. 47a.

1. The majority began by addressing whether the

concession agreements and their individual provi-

sions were “related to a price, route, or service of any

motor carrier” such that they were preempted by the

FAAAA’s express preemption clause. The court of

appeals noted that under Ninth Circuit precedent the

phrase “price, route, or service” is understood only “in

the public utility sense,” referring to things such as

the “frequency and scheduling of transportation” or

the “courses of travel.” App. 17a-18a (internal

quotation marks omitted). The majority held “that a

State may condition access to State property so long

as the conditions do not impose costs that compel the

carrier to change rates, routes, or services.” App. 21a.

The majority concluded that the financial-capability

provision was insufficiently related to rates, routes,

or services to be preempted. App. 33a-34a.

The panel also held that some provisions of the

concession agreements escaped preemption under a

market-participant exception nowhere expressed in

the text of the FAAAA. According to the majority,

agreements can escape preemption even if (a) they

were not directed at the “efficient procurement” of

goods or services, and (b) the Port did not purchase

the drayage services on which it imposed the

disputed conditions. App. 23a-29a. In a statement

that made no pretense of having anything to do with

statutory text, the majority concluded that “[a] pri-

vate port owner could (and probably would) enter into

concession-type agreements with licensed motor

carriers in order to further its goals.” App. 29a.

Analyzing individual provisions of the agreements

to determine whether each served the government’s

“interests as a facilities manager,” App. 30a, the

panel concluded that the off-street-parking and

placard provisions were not preempted. In doing so, it

held that “[e]nhancing good-will in the community

surrounding the Port,” App. 40a, and “receiving

complaints about drayage trucks entering, leaving,

and operating on its property,” App. 46a, qualified as

proprietary interests justifying imposition of the

restrictions. None of those statements had anything

to do with the text of the statute.

The court also rejected petitioner's contention

that—under Castle v. Hayes Freight Lines, Inc., 348

U.S. 61 (1954)—States cannot limit a _ federally

registered motor carrier's access to a particular port

(even to enforce vehicle-safety laws). App. 30a-32a.

Without expressly deciding whether the FAAAA’s

enactment modified Castle’s holding, the majority

concluded that the ban on a motor carrier's access to

the Port did not so limit its participation in the

3 The Ninth Circuit did, however, reverse the district court with

respect to the employee-driver provision. The court concluded

that, “[w]hile the Port may impose conditions on licensed motor

carners seeking to operate on Port property, it cannot extend

those conditions to the contractual relationships between motor

carriers and third parties.” App. 43a.

transport of interstate goods as to run afoul of Castle.

App. 32a.

Finally, the panel considered the district court’s

application of the FAAAA’s vehicle-safety exception

to the maintenance provision. Acknowledging that

the restriction was imposed in part as a result of

environmental concerns, it held that such mixed mo-

tives did not preclude application of the safety excep-

tion and that the provision did respond to safety con-

cerns. App. 36a-37a. Moreover, although the provi-

sion largely duplicated federal safety requirements,

the court held that “the Port need not demonstrate

that the requirement to comply with manufacturer's

instructions creates safety benefits over and above

those [already] created by federal law.” App. 38a.

2. Judge N. Randy Smith dissented in part.

App. 47a. He agreed that the FAAAA preempts the

employee-driver provision but not the financial-

capability provision.‘ He also agreed that the main-

tenance provision is not preempted. Judge Smith dis-

agreed, however, with the panel’s conclusions regard-

ing both the market-participant exception and the

effect of Castle.

With respect to the market-participant exception,

Judge Smith noted that the majority opinion conflicts

with Smith v. Department of Agriculture, 630 F.2d

1081 (5th Cir. 1980). Smith held that simply owning

a facility does not make a government entity a par-

—— ———— ——— ———————

* Although the dissent states that Judge Smith “concur|red] that

the .. . financial capability provision|] [is] preempted by federal

law,” App. 58a, it appears he in fact agreed that this provision

was not preempted, as the dissent provides no other indication

of disagreement with the relevant portions of the majority

opinion.

ticipant in a market operating within that facility.

App. 49a.

Moreover, Judge Smith concluded that the majori-

ty permitted the Port to “reach[] beyond the immedi-

ate parties with whom it transacts.” App. 50a. Such a

holding, he noted, is in conflict with Ninth Circuit

precedent and with the plurality opinion in South-

Central Timber Development, Inc. v. Wunnicke, 467

U.S. 82 (1984). App. 50a.

Judge Smith noted further that, even if the Port

had been a participant in the relevant sense, in im-

posing the off-street-parking provision the Port was

“attempt[ing] to address political concerns the Port

alleges local community members have raised.” It

was not—as the market-participant doctrine re-

quires—-addressing the “efficient procurement” of

goods or services. App. 56a.

Finally, Judge Smith dissented from the conclu-

sion that the Port could completely deny access to

federally licensed motor carriers. As he recognized,

“revoking access, under Castle, is an enforcement

mechanism beyond the reach of California and its

political sub-parts, including the Port.” App. 55a. As

in Castle, barring motor carriers from accessing the

largest port in the United States both “would no

doubt ‘seriously disrupt’ drayage carriers’ ability to

transport goods from ships to other destinations in

and outside California” and represents an impermis-

sible “partial suspension’ of drayage carriers’ federal

permits to transport goods in the stream of interstate

commerce.” App. 55a-56a.

REASONS FOR GRANTING THE PETITION

The decision below creates and exacerbates mul-

tiple conflicts concerning important and recurring

issues of federal law. It represents the first time the

market-participant exception has been recognized

under the FAAAA outside the highly specific context

of municipal actions taken to arrange for the pro-

vision of involuntary towing services. No such excep-

tion is even hinted at in the statute. In addition, the

decision below construes this atextual exception ex-

pansively to allow a governmental entity to escape

preemption in regulating a market in which it does

not itself participate. And the Ninth Circuit, in con-

flict with previous decisions recognizing only a limit-

ed exception to FAAAA preemption, applied an excep-

tion untethered to any governmental interest in the

efficient procurement of goods and services. The

conflicts created by the decision below threaten to

create the very patchwork of regulation that the

FAAAA was enacted to prevent.

Further review would also allow the Court to re-

solve a circuit conflict over the scope of “related to”

language in the FAAAA preemption clause. That con-

flict persists even after Rowe. The decision below

reflects continuation of the Ninth Circuit’s uniquely

crabbed view of the meaning of the crucial phrase

“rates, routes, or services.”

Finally, review would allow the Court to reaffirm

the continued vitality of its decision in Castle. Since

Castle, federal regulatory policy related to the

trucking industry has shifted from one of compre-

hensive regulation to one of expansive deregulation.

But allowing municipal entities such as the Port here

to exercise a veto power over federally licensed motor

carriers remains entirely inconsistent with the uni-

form scheme established by Congress, and there is no

indication that in enacting the FAAAA Congress in-

tended to overturn Castle.

I. The Circuits Are Deeply Divided over the

Scope of the “Market Participant” Exception

A. This Case Squarely Presents Two Con-

flicts in the Context of the FAAAA.

The Ninth Circuit assumed that certain chal-

lenged provisions of the concession agreement would

be preempted but for an atextual market-participant

exception to FAAAA preemption. No such exception

exists at all, but we can assume for present purposes

that the exception does exist. Even on that assump-

tion, the decision below conflicts with two lines of

case law. First, it permits a municipal entity, as a

supposed market participant, to set conditions on a

market in which it does not participate, in conflict

with Smith v. Department of Agriculture, 630 F.2d

1081 (5th Cir. 1980). Second, it allows the Port to

impose restrictions wholly divorced from any govern-

mental interest in the “efficient procurement” of

goods or services, in conflict with FAAAA decisions

from other circuits.

1. The Ninth Circuit held that a State could es-

cape FAAAA preemption by using its ownership of a

facility to claim that it participated in markets oper-

ating within that facility. The Fifth Circuit has reject-

ed that argument. App. 43a-49a.

Smith involved a dormant Commerce Clause

challenge to rules adopted by Georgia’s Department

of Agriculture, which gave non-residents inferior

sales locations in a farmers’ market owned and

operated by the State. 630 F.2d at 1082. The Fifth

Circuit rejected the State’s argument that it was

acting as a market participant. The court noted that

neither the State nor its Department of Agriculture

“produce[d] the goods to be sold at the market” or

“engage[d] in the actual buying or selling of those

goods.” Jd. at 1083. Instead, the State “has simply

provided a suitable marketplace for the buying and

selling of privately owned goods.” /bid. As a result,

within that marketplace, the State’s “essential role is

that of market regulator” rather than a participant.

Ibid.

Smith is binding precedent in the Eleventh Cir-

cuit under Bonner v. City of Prichard, 661 F.2d 1206,

1209 (11th Cir. 1981) (en banc). Unsurprisingly,

Smith’s approach has been applied by a district court

in the Eleventh Circuit to a situation analogous to

that presented here. In Fla. Transp. Serv., Inc. v.

Miami-Dade Cnty., 757 F. Supp. 2d 1260, 1281-1282

(S.D. Fla. 2010), the district court concluded that

Smith precluded the Port of Miami from claiming it

was a market participant, when the Port sought to

impose conditions on the purchase and sale of steve-

doring services while not itself purchasing or provid-

ing such services. The court held that “[t]he market

participant doctrine does not help the County because

the market for port services is distinct from the

market for stevedore services. .. . Ownership of the

Port does not make the County a participant in the

stevedore market any more than ownership of the

farmers’ market made Georgia a participant in the

produce market.” Jd. at 1282.

The Eighth Circuit, by contrast, has indicated its

disagreement with Smith. According to the Eighth

Circuit, when a municipal airport commission pro-

vides facilities for a car rental company, it is acting as

a market participant. See Four T’s, Inc. v. Little Rock

Municipal Airport Comm'n, 108 F.3d 909, 912-913

(8th Cir. *997). Thus, the Ninth Circuit’s decision

rejecting Smith exacerbates a preexisting conflict.

The Ninth Circuit’s decision here additionally con-

flicts (as Judge Smith recognized in dissent) with the

plurality opinion in South-Central Timber Develop-

ment, Inc. v. Wunnicke, 467 U.S. 82 (1984). The ma-

jority did not attempt to claim its position is consis-

tent with Wunnicke, stating simply that Wunnicke is

“not controlling” and is “a perfect example of the

Supreme Court’s fractured views on the market

participant doctrine.” App. 26a a.12.

In Wunnicke, this Court addressed the permissi-

bility under the dormant Commerce Clause of a re-

quirement imposed by Alaska conditioning the sale of

timber on a contractual agreement that the timber be

processed within the State before export. See 467

U.S. at 84. A four-Justice plurality of an eight-Justice

Court rejected Alaska’s claim that it was acting as a

market participant. Reasoning that “the doctrine is

not carte blanche to impose any conditions that the

State has the economic power to dictate,” id. at 97,

the plurality concluded that “[t]he limit of the

market-participant doctrine must be that it allows a

State to impose burdens on commerce within the

market in which it is a participant, but allows it to go

no further,” ibid. Justice Powell, joined by Chief

Justice Burger, concurred in the judgment and sug-

gested that this Court should have remanded rather

than decided the market-participant issue. Jd. at 101.

This Court and federal courts of appeals have

followed the plurality opinion in Wunnicke.® Yet the

5 See, e.g., Dep’t of Revenue of Kentucky v. Davis, 553 U.S. 328,

348 n.17 (2008) (plurality opinion) (“[T]he type of ‘downstream

regulation’ that South—Central found objectionable is simply not

present here.”); United Healthcare Ins. Co. v. Davis, 602 F.3d

618, 625 (5th Cir. 2010); Brooks v. Vassar, 462 F.3d 341, 356-

357 (4th Cir. 2006); Antilles Cement Corp. v. Acevedo Vila, 408

F.3d 41, 46-47 (1st Cir. 2005); Endsiey v. City of Chicago, 230

Ninth Circuit felt free to contradict it. This Court

should resolve the conflict.

2. Even if a State may properly claim that it acts

as a market participant when imposing conditions on

markets in which it does not participate, the Ninth

Circuit’s holding creates a circuit conflict. According

to the decision below, a State acts as a market par-

ticipant and escapes preemption when it pursues con-

siderations entirely divorced from the efficient pro-

curement of services. Other circuits disagree, even in

the very FAAAA context in which this case arises.

The limited case law of this Court recognizing such

an exception to preemption under a different statute

is also wholly at odds with the Ninth Circuit’s

approach.

Only a few circuits have recognized any market-

participant exception to the FAAAA. All have done so

in one highly specific factual circumstance. In Car-

dinal Towing & Auto Repair, Inc. v. City of Bedford,

180 F.3d 686 (5th Cir. 1999), a municipality decided

that the non-consensual towing of vehicles from the

public streets would be handled by contracting with a

single company in lieu of the previous rotation sys-

tem. A losing bidder asserted that the contracting or-

dinance was preempted by the FAAAA. 7d. at 689.

Disagreeing, the Fifth Circuit concluded that a city’s

contracting decision is shielded from preemption if it

“applied to a single discre[te] contract” and was

F.3d 276, 285 (7th Cir. 2000); Huish Detergents, Inc. v. Warren

Cnty., Ky., 214 F.3d 707, 716 (6th Cir. 2000); Chance Mgmt., Inc.

v. South Dakota, 97 F.3d 1107, 1112 (8th Cir. 1996); USA

Recycling, Inc. v. Town of Babylon, 66 F.3d 1272, 1282-1283 (2d

Cir. 1995); Atl. Coast Demolition & Recycling, Inc. v. Bd. of

Chosen Freeholders, 48 F.3d 701, 716 & n.19 (3d Cir. 1995);

GSW, Inc. v. Long County, Ga., 999 F.2d 1508, 1515-1516 (Lith

Cir. 1993).

“designed to insure efficient performance rather than

advance abstract policy goals.” Jd. at 693. The court

set out its test as follows (ibid.):

First, does the challenged action essentially re-

flect the entity’s own interest in its efficient

procurement of needed goods and services, as

measured by comparison with the typical be-

havior of private parties in similar circum-

stances? Second, does the narrow scope of the

challenged action defeat an inference that its

primary goal was to encourage a general policy

rather than address a specific proprietary pro-

gram?

In contrast to the panel decision here, the Fifth

Circuit indicated that preemption would apply to a

similar scheme that had been primarily motivated by

“economics, community development, and social poli-

cies.” According to the Fifth Circuit, “[w]hile private

parties might choose to take into account such fac-

tors, the ever present temptation to leverage the

spending power and thus intrude on congressional

design is such that the proprietary exception should

be reserved for more archetypical market behavior.”

Id. at 693 n.2 (emphasis added).

The Fifth Circuit’s precise, narrow conclusion—

that municipal contracting with the providers of non-

consensual towing service was not preempted—was

adopted by the Sixth and Ninth Circuits. Petrey v.

City of Toledo, 246 F.3d 548, 559 (6th Cir. 2001)

(noting challenged provisions serve City’s “narrow

proprietary interest” with respect to towing),

abrogated in part on other grounds by City of

Columbus v. Ours Garage & Wrecker Service, Inc.,

536 U.S. 424 (2002); Tocher v. City of Santa Ana, 219

F.3d 1040, 1049-1050 (9th Cir. 2000), abrogated in

part on other grounds by City of Columbus, 536 U.S.

424. However, when a municipality attempted to

extend the holding to consensual towing services (for

which the municipality is not a party to the relevant

transaction), the Fifth Circuit rejected the effort. In

this context, the challenged provisions “frustrate the

normal working of private decisionmaking in a

market,” and “the City’s market power cannot be said

to be typical of similar private actors.” Stucky v. City

of San Antonio, 260 F.3d 424, 436 (5th Cir. 2001),

abrogated in part on other grounds by City of

Columbus, 536 U.S. 424.6

Only once has this Court applied a market-

participant exception to conclude that a state action

was not preempted—and it did so in a case involving

judicially created doctrines of implied preemption

under the National Labor Relations Act (NLRA).

Bldg. & Construction Trades Council v. Assoc. Build-

ers & Contractors 507 U.S. 217, 232 (1993) (“Boston

Harbor”). In doing so, the Court emphasized that the

challenged governmental action (1) “was attempting

to ensure an efficient project that would be completed

as quickly and effectively as possible at the lowest

cost” and (2) “was specifically tailored to one par-

ticular job.” Ibid. Here, the Ninth Circuit applied no

6 By applying a market-participant exception when the legisla-

tive purpose is not efficient procurement, the Ninth Circuit has

also created conflicts with decisions outside of the FAAAA con-

text. See Tri-M Group, LLC v. Sharp, 638 F.3d 406, 421-422 (3d

Cir. 2011); Healthcare Ass’n of New York State, Inc. v. Pataki,

471 F.3d 87, 109 (2d Cir. 2006) (quoting approvingly Fifth Cir-

cuit’s test in Cardinal Towing); Council of City of New York v.

Bloomberg, 6 N.Y.3d 380, 395 (2006) (“In enacting the Equal

Benefits Law the Council was obviously ‘setting policy.’. . . [I]t

was not acting just as a manager or owner of property concerned

with assuring the cheap and efficient performance of

contracts.”).

such limitations on the market-participant exception

to express FAAAA preemption.

The Court reinforced the limited scope of the

NLRA’s market-participant doctrine in Chamber of

Commerce v. Brown, 554 U.S. 60 (2008). Holding a

California law preempted by a 7-2 vote, the Court

rejected a market-participant defense. The defense

was unavailable because the legislative purpose was

“not the efficient procurement of goods and services,

but the furtherance of a labor policy,” id. at 70. So too

here.

Indeed, the United States, which submitted a brief

in this case at the preliminary-injunction stage,

termed the Port’s market-participant argument

“meritless.” Brief for the United States as Amicus

Curiae Supporting Reversal at 24, Am. Trucking

Ass'ns, Inc. v. City of Los Angeles, 559 F.3d 1046 (9th

Cir. 2009) (No. 08-56503) (“U.S. Amicus Br.”). As the

United States recognized, “[t]he Ports do not

participate in any relevant market.” Id. at 25.

Instead, because the Port’s “control over the channels

of interstate commerce permits the State to erect

substantial impediments to the free flow of

commerce,” the United States urged the court to

reject the Port’s market-participant argument. Id. at

25-26 (internal quotation marks omitted).

In this case, the majority acknowledged that the

governmental requirement challenged is not a “nar-

row spending decision{],” App. 23a, nor does it reflect

the Port’s interest in “efficient procurement” of goods

and services, tbid. Nevertheless, the panel concluded

that the Port may, without preemption, impose condi-

tions on a market in which it does not participate to

ensure that services it does not purchase “are pro-

vided in a manner that is safe, reliable, and consis-

tent with the Port’s overall goals for facilities man-

agement.” App. 29a. No other court of appeals would

have accepted that argument in the FAAAA context.

The analogous argument has been consistently

rejected—by this Court and others—outside the

FAAAA context. Further review is appropriate.

B. The Questions Presented Are Significant

and Recurring

As the many cases cited above demonstrate, the

market-participant exception is frequently invoked in

cases involving multiple statutes and the dormant

Commerce Clause. It arises under the FAAAA and

other statutes sharing similar express preemption

language, and in cases involving implied field

preemption (such as NLRA preemption). Thus,

reviewing this case would bring clarity to a doctrine

with potential application far beyond the particular

context of this statute. At the same time, because this

Court has never squarely addressed even the

existence of a market-participant exception under an

express preemption scheme, the context of this case

represents an opportunity to define the particular

limits applicable here.

Furthermore, the importance of uniformity to the

deregulatory scheme set out by the FAAAA has re-

peatedly been recognized. As this Court noted in

Rowe, the FAAAA’s preemption clause was modeled

on language in the ADA and reflected a congressional

goal of “helping assure transportation rates, routes,

and services that reflect ‘maximum reliance on

competitive market forces, thereby stimulating

‘efficiency, innovation, and low prices,’ as well as

‘variety and ‘quality.” 552 U.S. at 371 (quoting

Morales, 504 U.S. at 378). As with the ADA, “[ijn re-

ducing federal economic regulation of the field to al-

low the forces of free competition to rule the market-

place, Congress obviously did not intend to leave a

vacuum to be filled by the Balkanizing forces of state

and local regulation.” New England Legal Found. v.

Mass. Port Auth., 883 F.2d 157, 173 (1st Cir. 1989).

Yet allowing the intercircuit differences discussed

above to persist would lead to just that “patchwork of

state service-determining laws, rules, and regula-

tions” that this Court sought to avoid in Rowe. 552

U.S. at 373.

Il. The Ninth Circuit Decision Also Expands

and Entrenches a Circuit Split as to When a

State Regulation Is “Related to a Price,

Route, or Service”

The decision below reinforces the Ninth Circuit’s

cramped reading of “rates, routes, or services” under

both the ADA and FAAAA. That reading has long

conflicted with other circuits’ position, as three

Members of this Court recognized in Northwest

Airlines, Inc. v. Duncan, 531 U.S. 1058 (2000)

(dissent from denial of certiorari). In addition, the

challenged governmental restrictions here directly

targeted motor carriers. The panel’s conclusion that

such targeted restrictions are not preempted because

they are insufficiently related to the “prices, routes,

or services” of motor carriers flies in the face of the

teaching of this Court and other circuits in related

preemption settings.

A. This Case Creates a Conflict with Preemp-

tion Decisions Under Related Statutes

Relying on a Ninth Circuit precedent permitting a

municipality to condition airline leases of airport

facilities on compliance with a generally applicable

city ordinance, the decision below created a conflict as

to when a state regulation has a “reference to carrier

rates, routes, and services.” The majority created that

conflict by ignoring the specifically targeted nature of

the restrictions at issue in this case. That omission

contravenes the binding precedent of this Court in

the analogous context of preemption under the

Employee Retirement Income Security Act (ERISA)

and the decisions of several circuits that have faith-

fully followed that mandate.

In the ERISA context, this Court has recognized

the salience of the fact that a state law specifically

targets the subject matter regulated by the

preemptive federal statute. In Mackey v. Lanier

Collection Agency & Serv., Inc., 486 U.S. 825 (1988),

the Court concluded that a state garnishment statute

was preempted by ERISA, which displaces “any and

all State laws insofar as they may now or hereafter

relate to any employee benefit plan” covered by

ERISA. 29 U.S.C. § 1144(a) (emphasis added). The

state statute at issue, the Court noted, “expressly

refers to—indeed, solely applies to—ERISA employee

benefit plans.” Mackey, 486 U.S. at 829. The Court

had “virtually taken it for granted that state laws

which are ‘specifically designed to affect employee

benefit plans’ are pre-empted.” /bid. Later cases have

only reinforced the importance of that distinction.

E.g., Ingersoll-Rand Co. v. McClendon, 498 U.S. 133,

139-140 (1990) (“We are not dealing here with a

generally applicable statute that makes no reference

to, or indeed functions irrespective of, the existence of

an ERISA plan... . Here, the existence of a pension

plan is a critical factor in establishing liability under

the State’s wrongful discharge law. As a result, this

cause of action relates not merely to pension benefits,

but to the essence of the pension plan itself.”).

Numerous courts of appeals have analyzed in the

ERISA context whether the challenged regulation is

generally applicable or instead singles out the subject

of the federal scheme for special treatment. See, e.g.,

Ky. Ass'n of Health Plans, Inc. v. Nichols, 227 F.3d

352, 360 (6th Cir. 2000) (“While a mere reference to

an ERISA plan, without more, may not be enough to

cause preemption, .. . if such a reference is combined

with some effect on those plans, such as singling

them out for different treatment, preemption will

result.”), affd sub nom. Ky. Ass'n of Health Plans,

Inc. v. Miller, 538 U.S. 329 (2003); Greater

Washington Bd. of Trade v. Dist. of Columbia, 948

F.2d 1317, 1322 (D.C. Cir. 1991) (“[T]he ‘Shaw

“exception”—that ERISA does not preempt state laws

which affect benefit plans in a tenuous or peripheral

manner—applies only to laws of general application;

it does not protect state laws which specifically refer

to ERISA benefit plans.”) (quoting In re Dyke, 943

F.2d 1435, 1448 (5th Cir. 1991)), affd, 506 U.S. 125

(1992). See also Prudential Ins. Co. of Am. v. Nat'l

Park Med. Ctr., Inc., 154 F.3d 812, 822 (8th Cir.

1998); United Wire, Metal & Mach. Health & Welfare

Fund v. Morristown Mem’ Hosp., 995 F.2d 1179,

1192 (3d Cir. 1993).

Courts of appeals have also recognized the

salience of a law’s general applicability outside the

context of ERISA preemption. Applying the preemp-

tion provision of the ADA and conducting a field

preemption analysis under the Federal Aviation Act

of 1958, the Second Circuit in Goodspeed Airport LLC

v. E. Haddam Inland Wetlands & Watercourses

Comm'n, 634 F.3d 206, 212 (2d Cir. 2011), noted that

“the generally applicable state laws and regulations

imposing permit requirements on land use challenged

here do not, on the facts before us, invade thle]

preempted field [of aviation safety].” Applying the

ADA in Branche v. Airtran Airways, Inc., 342 F.3d

1248, 1258-1259 (llth Cir. 2003), the Eleventh

Circuit held that “the phrase ‘related to the .. . ser-

vices of an air carrier’ means having a connection

with or reference to the elements of air travel that

are bargained for by passengers with air carriers... .

This connection can be established by showing that

the state law in question either directly regulates

such services or... . has a significant economic impact

on them.”

The decision below conflicts with this long line of

authority and with the common understanding that

state laws targeting the very subject of a preemptive

federal act—whether it be ERISA plans, the airline

industry, or the trucking industry—are preempted.

As this Court noted in American Airlines, Inc. v.

Wolens, 513 U.S. 219, 229 n.5 (1995), the expansive

language of the ADA’s preemption clause should be

read in light of the statute’s deregulatory purpose to

indicate that “States may not seek to impose their

own public policies or theories of competition or

regulation on the operations of an air carrier”

(internal quotation marks omitted). The challenged

provisions in this case do exactly that.

Indeed, the United States, in its earlier amicus

brief, recognized that the concession agreements fall

“squarely within the FAAAA’s preemptive scope.”

U.S. Amicus Br. 7. As the United States noted (id. at

8-9):

The concession agreements at issue here affect

motor carriers’ “price, route, or service” far

more directly than the regulations on tobacco

shippers at issue in Rowe. The concessions are

essentially licenses to provide motor carrier

services within the Ports. To enter the Ports—

and thus to access any routes or provide any

services to customers within the Ports—

carriers must agree to comply fully with the

multifarious requirements of the concession

agreements.

Here, however, although petitioner raised the con-

cession agreements’ specific targeting of drayage

service providers in its Ninth Circuit brief, the panel

ignored the significance of targeting in concluding

that “a State may condition access to State property

so long as the conditions do not impose costs that

compel the carrier to change rates, routes, or

services.” App. 2la (emphasis added). Applying that

novel rule even to conditions targeting motor carriers

conflicts with governing precedent of this Court.

B. This Case Entrenches a Conflict Regard-

ing the Scope of the FAAAA’s Preemption

Clause

As far back as 2000, three Justices recognized a

conflict among the courts of appeals regarding when

a given restriction “relates to carrier rates, routes, or

services.” As Justice O’Connor recognized in dissent-

ing from the denial of certiorari, the Ninth and Third

Circuits define “services” narrowly for the purposes of

preemption to include only “the prices, schedules,

origins and destinations of the point-to-point trans-

portation of passengers, cargo, or mail.” Northwest

Airlines, 531 U.S. at 1058 (quoting Duncan v.

Northwest Airlines, Inc., 208 F.3d 1112, 1114 (9th

Cir. 2000), and citing Taj Mahal Travel, Inc. v. Delta

Airlines, Inc., 164 F.3d 186 (3d Cir. 1998)). In sharp

contrast, the Fourth, Fifth, and Seventh Circuits

have all adopted a broader definition of “services,”

covering the “[contractual] features of air trans-

portation.” Jbid. (alteration in original) (quoting

Hodges v. Delta Airlines, Inc., 44 F.3d 334, 336 (5th

Cir. 1995) (en banc), and citing Smith v. Comair, Inc.,

134 F.3d 254, 259 (4th Cir. 1998), and Travel All Over

The World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d

1423, 1433 (7th Cir. 1996)). The Eleventh Circuit

later adopted this broader understanding as well. See

Branche, 342 F.3d at 1257.

Since the conflict was first recognized, this Court

decided Rowe. There, it made clear that “services”

under the FAAAA must extend at least to such things

as a carrier's (a) use of a recipient-verification sys-

tem, see 552 U.S. at 368, 371-372, and (b) examina-

tion of a package to ensure that it is not being sent by

a party listed as an unlicensed tobacco retailer, id. at

369, 372-373. Although the Court did not expressly

resolve the circuit split, neither provision of the

Maine law held preempted in Rowe fits comfortably

within the Ninth Circuit’s “public utility” under-

standing of the FAAAA’s preemption clause. See Air

Transp. Ass’n of Am. v. City & Cnty. of San Fran-

cisco, 266 F.3d 1064, 1071 (9th Cir. 2001). As a result,

two circuits confronting this question after Rowe have

adopted the broader approach first set out by the

Fifth Circuit. DiFiore v. Am. Airlines, Inc., 646 F.3d

81, 87-88 (ist Cir. 2011), cert. denied, No. 11-221

(Nov. 28, 2011); Air Transp. Ass’n of Am. v. Cuomo,

520 F.3d 218, 223 (2d Cir. 2008). The First Circuit

has correctly understood that the conflict “has been

super[sjeded by controlling Supreme Court case

law—namely, by Rowe’s expansive treatment of the

term ‘service.” DiFiore, 646 F.3d at 88.

As this case demonstrates, however, the Ninth

Circuit still clings to its narrow construction of the

ADA’s and FAAAA’s preemption clauses. See App.

16a-17a; see also Ginsberg v. Northwest, Inc., 653

F.3d 1033, 1041-1042 (9th Cir. 2011); Ventress v.

Japan Airlines, 603 F.3d 676, 682-683 (9th Cir. 2010).

The concession agreements imposed by the Port

plainly regulate the contractual features of the

provision of trucking services. Had the Ninth Circuit

adopted other circuits’ interpretation of “services”

under the ADA and FAAAA, it would have been clear

that a requirement directly targeting the provision of

motor carrier services is subject to preemption under

the FAAAA. The decision below should be reviewed

(if not summarily reversed).

III. The Decision Below Conflicts with Control-

ling Precedent of This Court

Well before the passage of the FAAAA, this Court

recognized limitations on the ability of States and

municipalities to regulate federally licensed motor

carriers. Even when regulating in an area of

traditional state concern, a State is barred from

enforcing its laws through even a partial suspension

of the motor carrier’s ability to operate in interstate

commerce. The decision below rejects that limit—left

unaltered by the passage of the FAAAA—in

concluding that the Port can enforce a provision of

the concession agreements by denying LMCs access

to the Port of Los Angeles, thereby effecting a partial

suspension of their federally granted licenses.

In Castle v. Hayes Freight Lines, Inc., the Court

addressed the scope of a State’s “power . . . to bar

interstate motor carriers from use of state roads as

punishment for repeated violations of state highway

regulations.” 348 U.S. at 62. This Court noted that

the adoption of the Motor Carrier Act of 1935 had

greatly reduced States’ former power over interstate

motor carriers and that the Interstate Commerce

Commission (“ICC”) itself operated under specific

provisions governing the issuance and revocation or

suspension of certificates. “Under these

circumstances, it would be odd if a state could take

action amounting to a suspension or revocation of an

interstate carrier's commission-granted right to

operate.” Jd. at 64. Since “[i]t cannot be doubted that

suspension of this common carrier’s right to use

Iilinois highways is the equivalent of a partial

suspension of its federally granted certificate,” the

Court explained, a State may not enforce even an

indisputably proper state regulation by resorting to

such a penalty. Ibid.

Although the federal scheme regulating interstate

motor carriers has changed since Castle, those

changes have not altered this underlying limit on a

State’s regulatory authority. When Congress enacted

the motor-vehicle-safety exception in the FAAAA’s

preemption clause, it acted against the backdrop of

this settled law. It did not expand the regulatory

authority of the States. See 49 U.S.C. § 14501(c)(2)(A)

(noting the relevant preemption provision of the

FAAAA “shall not restrict the safety regulatory

authority of a State with respect to motor vehicles”).

lh. .2ed, just three days after the FAAAA’s enactment,

Congress enacted the Trucking Industry Regulatory

Reform Act of 1994, reinforcing the ICC’s authority to

grant LMCs operating authority, while providing that

the granted authority was now nationwide and not

limited by a need to make a route-specific public

interest finding. See Pub. L. No. 103-311, § 207

(1994), 108 Stat. 1683, 1686-1687. The 1995 ICC

Termination Act, Pub. L. No. 104-88, provided for the

retention of federal authority to license an interstate

motor carrier’s operations. See ICC Termination Act

of 1995, Pub. L. No. 104—88, § 13902, 109 Stat. 803.

Not one of those statutory amendments indicates an

intent to reverse the longstanding statutory

interpretation regarding the limits on States’ abilities

to enforce vehicle-safety regulations.

The limits set out in Castle, and reaffirmed in

cases such as City of Chicago v. Atchison, Topeka &

Santa Fe Ry., 357 U.S. 77 (1958), make clear that

States and municipalities are prohibited from

“exercising any veto power’ over interstate motor

carriers, id. at 85; see also R.R. Transfer Serv. Inc. v.

City of Chicago, 386 U.S. 351, 359 (1967). In its

amicus brief in_ the preliminary-injunction

proceedings in this case, the United States made

clear that, “[ljike a federal system of comprehensive

regulation, a federal system of broad deregulation is

susceptible to disruption by state or local officials’

attempts to ‘exercise veto power by imposing a

licensing requirement to provide services.” U.S.

Amicus Br. 10.

The panel majority below purported to distinguish

Castle on the ground that, “[u)nlike a ban on using all

of a State’s freeways, a limitation on access to a

single Port does not prohibit motor carriers from

participating in ‘transport [of] interstate goods to and

from that State’ or eliminate ‘connecting links to

points in other states.” App. 32a. The penalty,

according to the panel, did not rise to the level of the

“comprehensive ban” in Castle. Yet Castle does not

apply solely to a “comprehensive ban” on an LMC’s

operations but extends to a “partial suspension of its

federally granted certificate.” 348 U.S. at 64. A motor

carrier's federally granted interstate operating

authority includes the transport of commodities

between ocean ports and inland locations within the

same state. See Lodi Truck Serv., Inc. v. United

States, 706 F.2d 898, 899-900 (9th Cir. 1983). As a

result, suspending these operators’ ability to

transport commodities to or from the Port of Los

Angeles operates as a partial suspension of the

carriers’ federal registrations. The decision below

therefore conflicts with settled precedent of this

Court in a respect critical to the efficient operation of

the federal deregulatory scheme.

IV. The Decision Below Wrongly Answers Each

of the Questions Presented

The decision below is deeply flawed at every turn.

As an initial matter, the panel was wrong to reverse

the Ninth Circuit’s earlier conclusion that it “can

hardly be doubted” that “the Concession agreements

relate to prices, routes or services of motor carriers.”

App. 22la. The concession-agreement scheme

imposed by the Port directly targets motor carriers.

The panel was also wrong to suggest that the broad

term “relate to” should be interpreted as covering

only those state and local requirements that “compel

changes to” prices, routes or services. Moreover, the

authority claimed by the Port to prohibit motor carri-

ers from entering its property and providing services

represents “the very effect the federal law sought to

avoid, i.e., a State’s direct substitution of its own gov-

ernmental commands for ‘competitive market forces’

in determining (to a significant degree) the services

that motor carriers will provide.” Rowe, 552 U.S. at

365.

The Ninth Circuit similarly erred in concluding

that any aspect of the challenged provision can be

justified under a market-participant exception. The

FAAAA nowhere expressly provides that Ports or any

other governmental entities may enact otherwise-

preempted regulations provided they do so while

acting in a “proprietary capacity.” That absence is

telling since, under the ADA’s materially identical

preemption scheme, Congress did provide exactly

such an exception for municipally owned airports. See

49 U.S.C. § 41713(b)(3).

Congress likewise has elected to include market-

participant exceptions (in a variety of forms) in a

number of express preemption schemes, but not in

others. Compare, e.g., 15 U.S.C. § 2075(b) (allowing a

federal, state, or local government to “establish[] or

continu[e] in effect a safety requirement applicable to

a consumer product for its own use which require-

ment is designed to protect against a risk of injury

associated with the product and which is not identical

to the consumer product safety standard applicable to

the product under this chapter if the . . . requirement

provides a higher degree of protection from such risk

of injury”); 49 U.S.C. § 30103(b)(1) (allowing federal,

state, or local government to “prescribe a standard for

a motor vehicle or motor vehicle equipment obtained

for its own use that imposes a higher performance re-

quirement than that required by the otherwise

applicable standard”), with 49 U.S.C. § 14501(c)(2)(C)

(providing, in the FAAAA’s only provision even

arguably recognizing an exception for state and local

governments’ proprietary interests, that the Act does

not preempt laws “relating to the price of for-hire

motor vehicle transportation by a tow truck, if such

transportation is performed without the prior consent

or authorization of the owner or operator of the motor

vehicle”). There would be no need for Congress to

include such provisions if the “market participant”

exception could be read in by the courts. In addition,

when Congress has elected to include such an ex-

ception in a preemption scheme, it ordinarily has lim-

ited it to the procurement activities of state or local

governments (limits the Ninth Circuit in this case

disregarded).

There is no textual basis for inferring, as the

Ninth Circuit has, a market-participant exception to

the broad terms of the FAAAA’s preemption

provision. The provision at issue here—a municipal

ordinance backed by the threat of criminal prosecu-

tion requiring LMCs to enter into concession

agreements to serve the Port—is a “law, regulation,

or other provision having the force and effect of law.”

49 U.S.C. § 14501(c)(1). That should be the end of the

inquiry.

Boston Harbor is not to the contrary. That case

did not deal with express preemption, but rather

implied preemption. The same justification of adding

a doctrine grounded in assumed congressional intent

into the sphere of implied preemption under the

NLRA is wholly !acking where, as in this case,

Congress has expressly set out the scope of pre-

emption.

Moreover, in Boston Harbor this Court relied on

the fact that exempting a government’s truly propri-

etary actions would serve the goals of the NLRA,

because that statute included an exception for the

construction industry specifically authorizing the use

of pre-hire agreements of the very kind required by

the government as the purchaser of services. See 507

U.S. at 231. The FAAAA, by contrast, provides no

exceptions for private or public parties to create

restrictions of the sort instituted by the Port here.

Indeed, the FAAAA categorically bars a State from

“requir[ing}] a motor carrier... to display any form of

identification on or in a commercial motor vehicle . . .

other than forms of identification required by the

Secretary of Transportation” (49 U.S.C. § 14506(a)).

In light of that proscription, it is difficult to see why a

State or municipality should be entitled (as the Ninth

Circuit held) to impose exactly such a requirement

merely because it purports to act as a market

participant.

The Fourth Circuit has confronted a similar situa-

tion in which a municipal port sought to bar access to

federally licensed fishermen. Facing a preemption

challenge under the Magnuson Act, the port invoked

what it termed a “proprietary capacity exception.”

The Fourth Circuit refused to read such an exception

into the statute, concluding that there is “no explicit

provision creating a proprietary exception[,] ... [nJor

does the City point to any basis for concluding that

such an exception is implied.” City of Charleston v. A

Fisherman’s Best, Inc., 310 F.3d 155, 178-179 (4th

Cir. 2002).

Even if such an exception could properly be in-

ferred by the courts, the breadth of the exception

recognized here threatens to swallow the FAAAA’s

general preemption rule. The restrictions imposed by

the Port here are unconnected with any interest in

specifying what service it is procuring or “ensur[ing]

that [its] funds are spent in accordance with the pur-

poses for which they are appropriated.” Chamber of

Commerce, 554 U.S. at 70. Instead, the Port, as the

panel acknowledged, neither provides nor procures

any drayage services. App. 27a-28a. The Port’s

“participation” in the market is as a regulator only.

Nor is this all. The panel majority justified use of

the market-participant exception on the sweeping

ground that the Port’s actions were undertaken to

“fe]nhancfe] good-will in the community surrounding

the Port,” App. 40a, or to “receivi[e] complaints about

drayage trucks entering, leaving, and operating on its

property,” App. 46a. To allow a governmental actor to

pursue actions simply because they “enhance good-

will in the community” is to recognize a market-par-

ticipant exception that swallows the general rule of

preemption.

Finally, as noted above, the panel opinion is

inconsistent with this Court’s decision in Castle.

While Congress in enacting the FAAAA did preserve

the “safety regulatory authority of a State with

respect to motor vehicles,” 49 U.S.C. § 14501(a)(2),

neither the FAAAA nor any later statute indicated

that the authority preserved was unconstrained by

long-recognized limits on remedial authority. Instead,

as the United States argued in the preliminary-

injunction proceedings, “[ljike a federal system of

comprehensive regulation, a federal system of broad

deregulation is susceptible to disruption by state or

local officials’ attempts to ‘exercise veto power’ by im-

posing a licensing requirement to provide services.”

U.S. Amicus Br. 10. Moreover, as in Castle itself,

there is no indication that the “conventional forms of

punishment are inadequate” to enforce any safety

regulations imposed by the Port. See Castle, 348 U.S.

at 64.

The panel in this case did not directly conclude

that Castle has been modified or overturned by later

developments. Instead, it purported to distinguish

the decision on the ground that denial of access to a

Port is not the equivalent of a “comprehensive ban.”

App. 32a. But that rationale is untenable. The Port of

Los Angeles “handles more shipping container and

cargo volume than any other port in the country.”

App. 6a. Preventing federally licensed motor carriers

from accessing this Port undeniably precludes them

from engaging in the interstate transport of goods

entering the United States through the Port and

destined to customers both within and outside the

State of California. The Port’s actions thus plainly

serve as a partial suspension of these carriers’

operating authorities.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted.

ROBERT DIGGES, JR. Roy T. ENGLERT, JR.

American Trucking Counsel of Record

Associations, Inc. ALAN UNTEREINER

950 North Glebe Road LEIF OVERVOLD

Arlington, VA 22203 Robbins, Russell, Englert,

(703) 838-1889 Orseck, Untereiner &

Sauber LLP

1801 K Street, N.W.

Washington, D.C. 20006

(202) 775-4500

renglert@robbinsrussell.com

December 22, 2011

APPENDIX

APPENDIX A

United States Court of Appeals,

Ninth Circuit.

AMERICAN TRUCKING ASSOCIATIONS, INC.,

Plaintiff—Appellant,

Vv.

The CITY OF LOS ANGELES; the Harbor

Department of the City of Los Angeles; the Board of

Harbor Commissioners of the City of Los Angeles,

Defendants—Appellees,

Natural Resources Defense Council; Sierra Club;

Coalition for Clean Air, Inc., Defendants—

intervenors—Appellees.

No. 10—56465.

Argued and Submitted June 10, 2011.

Filed Sept. 26, 2011. Amended Oct. 31, 2011.

Counsel

Robert Digges, Jr. (argued), Chief Counsel, American

Trucking Associations, Inc., Arlington, VA; Stephen

S. Anderson, Jr., William Stephen Cannon, Seth

David Greenstein, Richard Levine, and Evan P.

Schultz, Constantine, Cannon LLP, Washington,

D.C.; Christopher Chad McNatt, Jr., Scopelitis,

Garvin, Light, Hanson & Feary, LLP, Pasadena, CA,

for the petitioner-appellant.

Steven S. Rosenthal (argued), Susanna Chu, David

Cousineau, and Alan Palmer, Kaye Scholer LLP,

Washington, D.C.; Joy Murakami Crose and Simon

Michael Kann, LA City Attorney’s Office, San Pedro,

CA; Thomas A. Russell and Carmen A. Trutanich,

City of Los Angeles, San Pedro, CA, for defendants-

appellants the City of Los Angeles and the Board of

Harbor Commissioners.

Melissa Lin Perrella (argued) and David Richard

Pettit, Natural Resources Defense Council, Inc.,

Santa Monica, CA, for defendants-intervenors-

appellees the National Resources Defense Council,

Sierra Club, and Coalition for Clean Air, Inc.

Anthony T. Caso, Law Office of Anthony T. Caso,

Orange, CA; John C. Eastman, the Claremont

Institute Center for Constitutional Jurisprudence,

Orange, CA, for amicus-curiae the Center for

Constitutional Jurisprudence and Harbor Trucking

Association.

Kamala Harris and Susan Lea Durbin, Office of the

California Attorney General, Sacramento, CA, for

amicus curiae the State of California.

John R. Bagileo, Law Office of John R. Bagileo,

Glenwood, MD; Mark Irving Labaton, Motley Rice

LLP, Los Angeles, CA, for amicus curiae the

Intermodal Association of North America, Inc.

William L. Messenger, National Right to Work Legal

Defense Foundation, Springfield, VA, for amicus

curiae Raymond Porras, Pilar Orellana, and the

National Right to Work Legal Defense Foundation.

Paul D. Cullen, Jr., the Cullen Law Firm, PLLC,

Washington, D.C., for amicus curiae the Owner-

Operator Independent Drivers Association, Inc.

Appeal from the United States District Court for the

Central District of California, Christina A. Snyder,

District Judge, Presiding. D.C. No. 2:08—cv—04920—

CAS—CT.

Before: BETTY B. FLETCHER and N. RANDY

SMITH, Circuit Judges, and RUDI M. BREWSTER,

District Court Judge.**

Opinion

Opinion by Judge B. FLETCHER; Dissent by Judge

N.R. SMITH.

ORDER

The majority opinion filed September 26, 2011, slip

op. 18193, is hereby amended as follows:

1. Lines 20-25 at slip op. 18208 are deleted and the

following are substituted in their stead: “The district

court’s factual determinations are reviewed for clear

error, and may be reversed only if they are “illogical,

implausible, or without support in inferences that

may be drawn from the facts in the record.” Hinkson,

585 F.3d at 1251.”

OPINION

B. FLETCHER, Circuit Judge:

Beginning in 2008, the Port of Los Angeles (POLA, or

the Port) prohibited motor carriers from operating

* The Honorable Rudi M. Brewster, Senior District Court Judge

for the U.S. District Court for Southern California, San Diego,

sitting by designation.

drayage trucks! on Port property unless the motor

carriers entered into “concession agreements” with

the Port. The concession agreements set forth

fourteen specific requirements covering, among other

things, truck driver employment, truck maintenance,

parking, and Port security. The agreements were

adopted as part of the Port’s “Clean Truck Program”

(CTP), which includes a progressive ban on older

(and higher-polluting) trucks on Port property, a

multi-faceted. incentive program to _ support

acquisition of clean trucks, and a system of penalties

on transport of cargo by older trucks. The Port

adopted the CTP in response to community

opposition, including litigation, that had successfully

stymied Port growth from the mid—1990s through

2007.

American Trucking Associations, Inc. (ATA, a

national association of motor carriers),? challenges

the concession agreements, arguing that they are

preempted by the Federal Aviation Administration

Authorization Act (FAAA Act), 49 U.S.C. § 14501 et

seq. After obtaining a preliminary injunction against

several provisions of the concession agreements, ATA

challenged five specific provisions at trial. The

district court held that none of the challenged

provisions fell within the scope of FAAA Act

preemption, first because some did not relate to

motor carriers’ rates, routes, and services, and

1 Drayage trucks move cargo from marine terminals at the Port

(where shipping companies unload containers) to customers,

railroads, or other trucks for long-distance transport.

2 Approximately thirty of the six hundred motor carriers

currently operating at the Port are members of ATA.

second because the State adopted the entire

agreement (and the challenged provisions in

particular) in its capacity as a market participant,

rather than a market regulator. See 49 U.S.C. §

14501(c)(1). The district court further held that the

FAAA Act’s exemption for regulation “genuinely

responsive to motor vehicle safety” saved from

preemption the provision requiring motor carriers to

create and administer regular maintenance plans.

See 49 U.S.C. § 14501(c)(2)(A).

ATA appeals. We have jurisdiction under 28 U.S.C. §

1291. We affirm the district court in large part, but

reverse its decision that the employee-driver

provision of the concession agreement falls within

the market participant doctrine and is _ not

preempted.

The Port of Los Angeles is an independent division of

the City of Los Angeles, managed by the Board of

Harbor Commissioners (BHC or the Board). It

“occup[ies] land that was granted by the State of

California ... via the California Tidelands Act, and

the Port{ ] hold{s] the land in trust for the benefit of

the people of California.” Am. Trucking Ass‘ns, Inc. u.

City of L.A., 559 F.3d 1046, 1048—49 (9th Cir. 2009)

(ATA-I}D. The Port is not, however, taxpayer-

supported; it depends entirely on property leases and

fees for its revenue, and manages its funds

independent of the City. The Port develops terminal

facilities and then leases those facilities to shipping

lines and stevedoring companies.’ It handles more

shipping container and cargo volume than any other

port in the country, and competes with other ports

for business.

Terminal operators unload cargo from ships docked

at the Port into marine terminals. From the marine

terminals, drayage trucks transport cargo to

customers (or to off-Port long-distance trucks or

railroads for further transport). “A supply of drayage

trucks and drivers is integral to cargo movement at

the Port.” Cargo owners, ocean carriers, railroads,

and other transportation providers arrange for

drayage services through Licensed Motor Carriers

(LMCs or motor carriers). Prior to 2008, most LMCs

serving the Port did not own or operate drayage

trucks; rather LMCs contracted with independent

owners and operators of trucks to actually provide

the drayage services. The Port does not directly

contract for any drayage services.

Around 1997, the Port developed plans to expand its

cargo terminal facilities in order to accommodate

more (and larger) ships. See Natural Res. Def.

Council, Inc. v. City of L.A., 103 Cal. App. 4th 268,

126 Cal. Rptr. 2d 615, 618 (2002). Those plans have

been stymied by legal opposition from community

and environmental groups, which claimed that the

Port’s expansion would increase air pollution, that

such pollution would adversely effect the health of

people in the surrounding communities,* and that

3 Stevedores manage the loading and unloading of ships. Black's

Law Dictionary 1539 (9th ed.2009).

* The Port is located in California’s South Coast Air Basin, an

EPA non-attainment area for several air quality standards. In

the Port did not comply with environmental laws in

planning its expansion. /d. In 2002, a California

appellate court enjoined construction of a new

terminal facility for the China Shipping Line

Company, concluding that the Port had failed to

comply with the requirements of the California

Environmental Quality Act. Id. at 628. The Port

settled that suit in 2003 for more than $80 million.

Similarly, in 2007, environmental and community

groups threatened to seek an injunction of the Port’s

plan to expand its TraPac Terminal. The Port

entered into a settlement agreement in April 2008,

requiring it to establish a five-year community

mitigation plan to offset the environmental impact of

the proposed expansion.

In response to the opposition to Port expansion, the

Boards of Harbor Commissioners for Los Angeles

and Long Beach adopted a Clear Air Action Plan

(CAAP) in November 2006.5 In the CAAP, the Port

announced its intention to “grow green” and achieve

a 45% reduction in total emissions by 2012. The

Ports stated that they “recognize that their ability to

2008, the Basin had the worst air quality in the nation for a

number of pollutants. The Port is responsible for a significant

portion of these pollutants. In 2008, the population residing in

the area around the Port suffered an average cancer risk from

air pollution more than 60% higher than the average in the

South Coast Air Basin.

5 The Ports of Los Angeles and Long Beach are contiguous and

form a single physical Port, although they are managed

independently. Though the Port of Long Beach was originally a

party to this lawsuit, the Port of Long Beach and Appellees

settled in October 2009, and the district court dismissed the

Long Beach defendants with prejudice. The Long Beach claims

are not at issue in this case.

accommodate the projected growth in trade will

depend upon their ability to address adverse

environmental impacts... that result from such

trade.”

Recognizing that trucks are a major source of air

pollution at the Port, the CAAP introduced the Clean

Truck Program, which was “designed to reduce

emissions from the heavy duty trucks involved in

port drayage to improve the health of people living in

the communities surrounding the [Port].” The CAAP

directed Port staff to “undertake a 5—year, focused

effort to replace or retrofit the entire fleet of over

16,000 trucks that regularly serve our Port....” From

November 2006 through February 2008, the Ports

worked to develop the Clean Truck program. The

Ports held a number of public meetings, consulted

with stakeholders, and hired consultants to evaluate

ideas for implementation.

In October 2007, the Port adopted the first part of its

Clean Truck Program: a progressive ban on older,

higher-polluting trucks, with the goal that by 2012

all trucks visiting the Port frequently or semi-

frequently will meet the United States

Environmental Protection Agency’s 2007 emissions

standards. The ban forbids terminal operators to

allow non-compliant trucks to enter Port property. In

December 2007, the Port also implemented a Clean

Truck Fee, which functions as a penalty to

incentivize rapid replacement of older trucks. The fee

is charged to terminal operators, not to motor

carriers, and applies to every container transported

during the transition period by a drayage truck not

in compliance with 2012 emissions goals. Neither the

progressive ban nor the Clean Truck Fee are directly

at issue in this appeal.

During its design of the Clean Truck Program, the

Port identified several dilemmas it believed it needed

to address. The Port believed that it would be very

difficult for drayage service providers to comply with

the progressive ban, particularly in light of research

showing that drayage service providers had low

capital and limited opportunities to obtain credit to

invest in the acquisition of new trucks. Accordingly,

the Port recognized that it would need to provide

substantial financial grants to support the Clean

Truck Program. The Port also wanted to “ensure that

the Clean Trucks Program funding system yields

more than temporary benefits.” The Port was

especially concerned with ensuring that trucks

purchased or retrofitted using State funding were

maintained to ensure environmental compliance and

safety. This concern stemmed from the Port’s belief

that independent owner-operators had little capital

to invest in maintaining cleaner trucks and that

current mechanisms were inadequate to ensure

maintenance on each individual truck.

The Port was also concerned that the Clean Truck

Program, in combination with the Transportation

Worker Identification Credential (TWIC) program,®

6 The Transportation Worker Identification Credential (TWIC)

is a “security measure that will ensure individuals who pose a

threat do not gain unescorted access to secure areas of the

nation’s maritime transportation system.” See Transportation

Security Administration, TWIC Program Information, available

at http://www.tsa.gov/what_we_do/layers/twic/program_info.

shtm.

10a

would result in significant losses of drayage truck

drivers and disruption of Port services. After

engaging in extensive study of Port drayage, the Port

estimated that approximately 16,800 trucks would

need to be replaced or retrofitted, and that an

additional 6,000 to 13,000 trucks would be necessary

to maintain drayage services when the Port

expanded. The Port suspected that the Clean Truck

Program would be prohibitively expensive for

independent owner operators and could result in a

significant disruption in drayage services. It also

believed that 10 to 20% of extant drayage truck

drivers would be unable to comply with TWIC

requirements and thus unable to continue with port

drayage. Left unaddressed, the Port concluded, these

dilemmas could result in a crisis.

To address its concerns, the Port decided to

implement concession agreements as part of the

Clean Truck Program. It hired consultants to

examine whether proposed concession agreements

would further the Port’s economic, operational, and

safety goals. Some of the major issues the

consultants considered were: (1) whether to provide

incentives only to licensed motor carriers, or to all

independent owner operators; (2) whether to require

operational criteria to provide oversight of drayage

truck operations; (3) and whether to require licensed

motor carriers to convert to an “employee-only”

model as opposed to using independent owner-

operators.

Ultimately, the consultants reached _ similar

conclusions. Kach report recognized that stringent

operational criteria and the adoption of an employee-

lla

only model for motor carriers would result in

significant economic hardship for drayage truck

providers, likely putting many of the more

economically-marginalized companies out of

business. Yet, each recommended that converting to

such a model would have greater long-term benefits

and provide the Port with the “best guarantee” of

long-term sustainability in port drayage.

In March 2008, the Port approved a multi-faceted

incentive program and a concession agreement

system. The incentive program was designed to

“encourage Licensed Motor Carriers to cooperate”

with the progressive ban. These programs included

the Truck Funding Program, which offers grants

covering 80% of the cost of obtaining a new,

compliant truck or 100% of the costs of retrofitting

older trucks, and a _ lease-to-own program with

financial institutions selected by the Port and

financial assistance towards the purchase of trucks

at the end of the lease term; a Scrap Truck Buyback

program, which provides a $5,000 bonus incentive for

scrapping pre—1989 drayage trucks; a Procurement

Assistance Program to help smaller motor carriers

obtain better terms on new truck purchases; and a

Concession Business Outreach Program. Though

other incentives are available to any owner of

qualifying trucks, the Truck Funding Program is

available only to licensed motor carriers who are

“concessionaires” in good standing with the Port, and

funding priority is given to “concessionaires with a

history of port drayage and financing.” The funding

is not available to independent owner-operators. In

addition, concessionaires receiving funding must

“commit to a minimum Port drayage frequency for

12a

each new truck of a minimum average of six trips per

week for five years.” The incentive programs are not

directly at issue in this appeal.

Finally, the Board issued an order approving

concession agreements and providing that, effective

October 1, 2008, “no Terminal Operator shall permit

access into any Terminal in the Port of Los Angeles

to any Drayage Truck unless such Drayage Truck is

registered under a Concession or a Day Pass from

the Port of Los Angeles.” The concession plans

created a direct contractual agreement between the

Port and motor carriers providing drayage services.

Five provisions of the concession agreements are at

issue in this appeal:

1. Provision III(d) requires concessionaires to

transition over five years to using 100% employee

drivers rather than using independent owner-

operators. (The employee-driver provision).

2. Provision III(f) requires concessionaires to

submit for approval “an off-street parking plan

that includes off-street parking locations for all

Permitted Trucks” and requires concessionaires

to ensure that Permitted Trucks are “in

compliance with parking restrictions by local

municipalities.” (The off-street parking provision).

3. Provision III(g) makes _ concessionaires

“responsible for vehicle condition and safety” and

requires them to “ensure that the maintenance of

all Permitted Trucks... is conducted in

accordance with manufacturer’s instructions.”

(The maintenance provision).

13a

4. Provision III) requires concessionaires to

“post placards on all Permitted Trucks” when the

trucks are “entering and leaving Port Property

and while on Port Property.” The placards shall

“refer| ] members of the public to a phone number

to report concerns regarding truck emissions,

safety, and compliance to the Concession

Administrator and/or authorities.” (The placard

provision).

5. Provision III(n) requires a concessionaire to

“demonstrate[ ] to the _ satisfaction of the

Executive Director that it possesses the financial

capability to perform its obligations under th[e}

Concession [agreement].” (The financial

capability provision).

Each concessionaire also agreed to pay a one-time

concession fee of $2,500, and an annual fee of $100

for each permitted truck. As of April 2010,

approximately 600 motor carriers had _ signed

concession agreements with the Port.

The procedural history of this case is extensive; we

commend the reader to the orders and opinions

discussing ATA’s quest for a preliminary injunction.’

1 See Am. Trucking Ass’ns, Inc. v. City of L.A., 577 F. Supp. 2d

1110 (C.D. Cal. 2008) (ATA-J (denying preliminary injunction

on the grounds that the safety exception applies); Am. Trucking

Ass'ns, Inc. v. City of L.A., 559 F.3d 1046 (9th Cir. 2009) (ATA-

IT) (reversing the safety exception decision and remanding);

Am. Trucking Ass'ns, Inc. v. City L.A., No. CV 08-4920, 2009

WL 1160212 (C.D. Cal. Apr. 28, 2009) (ATA-IID); Am. Trucking

l4a

Suffice it to say that ATA was initially denied a

preliminary injunction in full and this court

reversed. See generally Am. Trucking Ass’ns, Inc. v.

City of L.A., 577 F. Supp. 2d 1110 (C.D. Cal. 2008)

(ATA-JT (holding that the market participant

doctrine did not apply but denying preliminary

injunction on the grounds that the safety exception

applies); ATA-I/, 559 F.3d 1046 (reversing the safety

exception decision and remanding). On remand, the

district court granted a preliminary * ~nction

against the employee driver provision, the parking

provision, and the financial capability provision, but

not the maintenance and placard provisions. See

generally Am. Trucking Ass’ns, Inc. v. City of L.A.,

No. CV 08-4920, 2009 WL 1160212 (C.D. Cal. Apr.

28, 2009) (ATA-IJD. ATA again appealed. We

reversed only with respect to the placard provision.

Am. Trucking Ass’ns, Inc. v. City of L.A., 596 F.3d

602 (9th Cir. 2010) (ATA-IV). All told, the

maintenance and placard provisions have been

operative since April 2009, but the employee driver,

parking, and financial capability provisions have not.

After a bench trial on the merits, the district court

made 105 specific findings of fact, and concluded that

none of the challenged provisions were preempted.

ATA appeals.

Ass'ns, Inc. v. City of L.A., 596 F.3d 602 (Sth Cir. 2010) (ATA-—

IV).

15a

II.

We review a district courts decision regarding

federal preemption de novo. Tocher ». City of Santa

Ana, 219 F.3d 1040, 1045 (9th Cir. 2000), abrogated

on other grounds by City of Columbus v. Ours Garage

& Wrecker Serv., Inc., 536 U.S. 424, 428 (2002), and

Tillison v. City of San Diego, 406 F.3d 1126 (9th Cir.

2005); see also United States v. Hinkson, 585 F.3d

1247, 1259 (9th Cir. 2009) (en banc) (If a “ ‘question

requires us to consider legal concepts in the mix of

fact and law and to exercise judgment about the

values that animate legal principles, ... the question

should be classified as one of law and reviewed de

novo.’”) (quoting United States v. McConney, 728

F.2d 1195, 1202 (9th Cir. 1984)).

The district court’s factual determinations are

reviewed for clear error, and may be reversed only if

they are “illogical, implausible, or without support in

inferences that may be drawn from the facts in the

record.” Hinkson, 585 F.3d at 1251.

IIT.

We first discuss the law relevant to this appeal, and

address ATA’s contentions that the district court

misinterpreted the applicable law. We do not, in this

section, address ATA’s contentions that the district

court misapplied the law to the facts. We will apply

the law to the facts in section V of this opinion.

Congress enacted the FAAA Act in 1994 to prevent

States from undermining federal deregulation of

interstate trucking. Rowe v. N.H. Motor Transp.

Ass'n, 552 U.S. 364, 368 (2008); Tocher, 219 F.3d at

16a

1048. The FAAA Act provides as a “general rule” that

“a State[or] political subdivision of a State ... 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 ... with respect

to the transportation of property.” 49 U.S.C. §

14501(c)(1).

In determining whether § 14501(c)(1) of the FAAA

Act preempts State action, we ask three questions.

First, we must consider whether the provision “relate

[s] to a price, route, or service of a motor carrier.” Id.;

see also Rowe, 552 U.S. at 368. If the answer is no,

the provision does not fall within the preemptive

scope of § 14501(c)(1). If the answer is yes, we must

consider whether the provision “has the force and

effect of law”—that is, whether the provision was

enacted pursuant to the State’s regulation of the

market, rather than the State’s participation in the

market in a proprietary capacity. 49 U.S.C. §

14501(c)(1); see also Tocher, 219 F.3d at 1049—50. If

the provision does not fall within the market

participant doctrine and relates to rates, routes, or

services, we turn to the third inquiry and consider

whether any of the FAAA Act’s express exemptions

save the regulation from preemption. As relevant

here, the FAAA Act does not “restrict the safety

regulatory authority of a State with respect to motor

vehicles.” 49 U.S.C. § 14501(c)(2)(A); see also City of

Columbus, 536 U.S. at 428.

ATA argues that the district court misidentified and

misapplied the law at every step. We first consider

each of ATA’s general challenges to the district

court’s analysis. We reject ATA’s arguments that (1)

17a

the concession agreements per se affect rates, routes,

and services; (2) the market participant doctrine does

not apply because the Port does not “procure”

drayage services; and (3) that the Supreme Court’s

decision in Castle v. Hayes Freight Lines, Inc., 348

U.S. 61 (1954) precludes the application of the safety

exception to this case.

A. Related to Rates, Routes, or Services

“(S]tate enforcement actions having a connection

with, or reference to [motor] carrier rates, routes,

and services are preempted.” Rowe, 552 U.S. at 370—

371 (internal quotation marks and emphasis

omitted) (quoting Morales v. Trans World Airlines,

Inc., 504 U.S. 374, 384, 386-84, 390 (1992))

(interpreting the nearly identical preemption

provision of the Airline Deregulation Act of 1978, 49

U.S.C. app. § 1305(a)(1)). The terms “rates, routes,

and services” were “used by Congress in the public

utility sense; that is, service refers to such things as

the frequency and scheduling of transportation, and

to the selection of markets to or from which

transportation is provided.... Rates indicates price;

routes refers to courses of travel.”® Air Transport

Ass’n of Am. v. City & Cnty. of San Francisco, 266

F.3d 1064, 1071 (9th Cir. 2001) (internal quotation

8 The Airline Deregulation Act preempts any provision that

relates to “rates, routes and services.” 49 U.S.C. app. §

1305(a)(1) (emphasis added). The FAAA Act preempts any

provision that relates to “prices, routes, and services.” 49 U.S.C.

§ 14501(c)(1). We use the terms “prices” and “rates”

interchangeably. See Rowe, 552 U.S. at 375, 128 S. Ct. 989

(discussing whether a state provision relates to rates and is

preempted under the FAAA Act).

18a

marks, citations, and alterations omitted); see also

Rowe, 552 U.S. at 372-73 (describing a motor

carriers services as its system for picking up,

sorting, and carrying goods).

In determining whether a provision has a connection

to rates, routes, or services, we must examine the

actual or likely effect of a State’s action. Cf. Cal. Div.

of Labor Standards Enforcement v. Dillingham

Constr. NA, Inc., 519 U.S. 316, 325 (1997);

Californians for Safe & Competitive Dump Truck

Transp. v. Mendonca, 152 F.3d 1184, 1189 (9th Cir.

1998). If the State, for example, mandates that motor

carriers provide a particular service to customers, or

forbids them to serve certain potential customers,

the effect is clear, and the provision is preempted if it

has the force and effect of law. See Rowe, 552 U.S. at

372-73; Morales, 504 U.S. at 388-89 (noting that

advertising guidelines expressly referenced rates and

had a forbidden significant effect on the fares

charged). The waters are murkier, though, when a

State does not directly regulate (or even specifically

reference) rates, routes, or services. We recognize

that FAAA Act “pre-emption may occur even if a

[S]tate law’s effect on rates, routes, and services ‘is

only indirect.” Rowe, 552 U.S. at 370 (quoting

Morales, 504 U.S. at 386). At the same time, we

require that the effect on rates, routes or services be

more than “tenuous” or “remote.” Jd. at 371 (quoting

Morales, 504 U.S. at 390).

In such a “borderline” case, the proper inquiry is

whether the provision, directly or indirectly, “binds

the ... carrier to a particular price, route or service

and thereby interferes with competitive market

19a

forces within the... industry.” Air Transport, 266

F.3d at 1072; cf. Am. Airlines, Inc. v. Wolens, 513

U.S. 219, 232-33 (1995) (holding that the Airline

Deregulation Act’s preemption clause “stops States

from imposing their own substantive standards with

respect to rates, routes, or services” but does not

prevent States from enforcing dispute resolution

provisions in contracts signed by airlines);

Mendonca, 152 F.3d at 1189 (holding that a State

minimum wage statute did not affect rates, routes or

services). ATA argues that the district court erred in

examining the effect of each individual provision of

the concession agreements, contending that “the

requirement of a concession agreement per se affects

routes and services” because it provides “POLA [the]

ability to prohibit non-concessionaire LMCs from

entering its property.”

Our decision in Air Transport forecloses ATA’s

argument. 266 F.3d at 1071-72. Air Transport

considered whether a city ordinance requiring that

registered domestic partners be afforded treatment

equal to spouses had an effect on the routes of

airlines.? Id. at 1069. The Airlines contended that

® ATA argues that the concession agreements differ from the

ordinance at issue in Air Transport because the latter did “not

give the city discretion to decide which airlines could not serve

the airport.” ATA misreads Air Transport. The ordinance there

said “[njo contracting agency of the City ... shall execute or

amend any contract ... with any contractor that discriminates in

the provision of [benefits] ... between employees with domestic

partners and employees with spouses....” 266 F.3d at 1069. The

ordinance required the airport to establish that the airlines did

not discriminate, and prohibited the airport from contracting

with airlines that did, or executing pre-existing contracts.

There is no meaningful distinction between the ordinance in Air

20a

the ordinance would require them to raise their rates

or cease operating at San Francisco Airport due to

increased costs. Id. at 1072, 1074. We held that

because “[t]he Airlines [conceded] that they will use

airport property in San Francisco regardless of the

Ordinance ..., the Ordinance cannot be said to compel

or bind the Airlines to a particular route or service

and there is no preemption under the connection-

with test.” Jd. at 1074. The Airlines claimed that the

ordinance presented a “Hobson’s choice—either leave

the Airport or do not discriminate.” /d. We noted that

air carriers were allowed “to make their own

decisions about where to fly and how many resources

to devote to each route and service.” Jd. Though the

Airlines’ decision to operate in San Francisco “may

mean the Airlines will have to agree to abide by the

Ordinance’s non-discrimination requirements as a

‘cost’ of maintaining their leases at [San Francisco

Airport],” that did not, in itself, mean the Ordinance

was preempted. Jd. “Hypothetically, there might be

some contract term the City could demand whose

costs would be so high that it would compel the

Airlines to change their prices, routes, or services,”

but the San Francisco Ordinance “d{id] not approach

that level.” Jd. at 1075 (citing N.Y. State Conference

of Blue Cross & Blue Shield Plans v. Travelers Ins.

Co., 514 U.S. 645, 655 (1995) for the proposition that

“there may be a point at which costs from a [S]tate

law are so exorbitant that it could rise to the level of

a substantive mandate.”).

Transport and the concession agreements, which also require

the Port to ensure that concessionaires comply with certain

requirements before entering Port property.

2la

Air Transport establishes that a State may condition

access to State property so long as the conditions do

not impose costs that compel the carrier to change

rates, routes, or services (for example by forcing the

carrier to cease doing business with the State).

Accordingly, the concession agreements do not

necessarily affect rates, routes, or services simply

because they impose conditions on entering Port

property. The correct question is whether each

condition binds motor carriers, directly or indirectly,

to a particular rate, route, or service. We apply this

law to specific provisions of POLA’s concession

agreements in part V of this opinion.

B. The Market Participant Doctrine

The FAAA Act “preempt[s] only [Sjtate regulation,

and not actions a [S]tate takes as a market

participant.” Johnson v. Rancho Santiago Cmty.

Coll. Dist., 623 F.3d 1011, 1022 (9th Cir. 2010);

Tocher, 219 F.3d at 1049. In applying the market

participant doctrine, we undertake “a single inquiry:

whether the challenged program constitute[s} direct

[S]tate participation in the market.” Reeves, Inc. v.

Stake, 447 U.S. 429, 435 n. 7 (1980) (internal

quotation marks omitted); see also Bldg. & Constr.

Trades Council of the Metro. Dist. v. Associated

Builders & Contractors of Mass./R.J1., Inc.

(hereinafter Boston Harbor), 507 U.S. 218, 227—32

(1993) (considering whether the State was pursuing

“proprietary interests”).

ATA contends that the Port does not participate in

the market because the concession agreements do

not fall neatly within the two-prong test adopted by

our circuit as a guide for determining whether the

22a

market participant doctrine applies. Johnson, 623

F.3d at 1023-24. The test was first developed in

Cardinal Towing & Auto Repair, Inc. v. City of

Bedford, 180 F.3d 686, 693 (5th Cir. 1999), and asks:

First, does the challenged action essentially

reflect the entity’s own interest in its efficient

procurement of needed goods and services, as

measured by comparison with the _ typical

behavior of private’ parties in _— similar

circumstances? Second, does the narrow scope of

the challenged action defeat an inference that its

primary goal was to encourage a general policy

rather than address a_e specific proprietary

problem?

Id.; see also Chamber of Commerce v. Lockyer, 463

F.3d 1076, 1084 (9th Cir. 2006) (en banc), rev'd on

other grounds sub nom., Chamber of Commerce uv.

Brown, 554 U.S. 60 (2008) and vacated by 543 F.3d

1117 (9th Cir. 2008). The first question “looks to the

nature of the expenditure and _ protects

comprehensive [S]tate policies with wide application

from preemption, so long as the type of [S]tate action

is essentially proprietary.” Johnson, 623 F.3d at 1024

(internal quotation marks omitted) (quoting Lockyer,

463 F.3d at 1084). “The second question looks to the

scope of the expenditure and protects narrow

spending decisions that do not necessarily reflect a

[S]tate’s interest in the efficient procurement of

goods or services, but that also lack the effect of

broader social regulation.” Jd. (internal quotation

marks omitted) (quoting Lockyer, 463 F.3d at 1084).

If the answer to either question is yes, the market

participant exception applies. Jd.

23a

The second prong of the Cardinal Towing test is not

at issue here. The concession agreements are not

“narrow spending decisions” that “lack the effect of

broader social regulation.” Johnson, 623 F.3d at 1024

(quoting Lockyer, 463 F.3d at 1084) (internal

quotation marks omitted). “Narrow spending

decisions” tend to be expressly limited in time and

scope—for example, they apply to one city contract or

to a number of contracts of a particular size and

funded by a particular finite source. See id. at 1028—

29 (agreement limited to construction projects

costing over $200,000, in a three-year period, and

funded by specific initiative); Sprint Spectrum LP v.

Mills, 283 F.3d 404, 421—21 (2d Cir. 2002) (contract

applied only to one cellular phone tower located on

particular property); Cardinal Towing, 180 F.3d at

694 (restrictions applied to single contract for police

tows). Here, the concession agreements are not

limited to contracts of a particular size or subsidized

by State funds, and are not limited to drayage

operations for a particular time. These factors

indicate that the concession agreements do . ct fall

within the narrow scope prong.

Thus, we must consider whether the nature of the

concession agreements is essentially proprietary.

Johnson, 623 F.3d at 1024. ATA contends if the

State’s actions do not qualify as “efficient

procurement,” they cannot be _— considered

proprietary.!° We disagree.

‘© Contrary to ATA’s assertion, neither the district court's

decision at the preliminary injunction phase nor this court’s

affirmance of that decision are binding as law of the case. The

district court concluded that “[a]lthough case law provides some

24a

The Supreme Court has applied the market

participant doctrine to a case not involving

“procurement” of goods. In Hughes v. Alexandria

Scrap Corp., 426 U.S. 794, 796—97 (1976), the

Supreme Court upheld a Maryland policy penalizing

in-state wreckers who kept abandoned vehicles on

their property, and offering bounties to processors

who scrapped vehicles formerly titled in Maryland.

The Court held that Maryland’s “payment of [S]tate

funds—in the form of bounties—to encourage the

removal of automobile hulks” was proprietary and

did not violate the dormant commerce clause. Id. at

809. It stated that vehicles “remain within Maryland

in response to market forces, including that exerted

by money from the State.” Jd. at 810. Under

Alexandria Scrap, procurement for governmental use

is not the only way a State can participate in the

market.

conflicting indications, the Court finds that, on balance,

plaintiff has a significant likelihood of showing that defendants

are not participants in the relevant market.” ATA-I, 577 F.

Supp. 2d at 1120. We commended the district court’s “cogent

explanation” but offered no further analysis. ATA-—I/, 559 F.3d

at 1053.

As a “general rule, our decisions at the preliminary injunction

phase do not constitute the law of the case.” Ranchers

Cattlemen Action Legal Fund United Stockgrowers of Am. v.

USDA, 499 F.3d 1108, 1114 (9th Cir. 2007) (internal quotation

marks and citation omitted). “Any of our conclusions on pure

issues of law, however, are binding.” Jd. Neither ATA-IJ nor

ATA-II decided a “pure issue of law” with respect to the market

participant doctrine, and their equivocal holdings on the

likelihood that plaintiffs would prevail are not binding on this

panel.

25a

The first prong of Cardinal Towing is useful in cases

where the government is buying goods or seeking

services,'} but it is not the be-all-and-end-all of

proprietary action. Cardinal Towing acknowledged

as much, noting that its questions “seek to isolate”

those cases to which the market participant doctrine

applies and help courts to “distinguish[ ] between

proprietary action that is immune from preemption

and impermissible attempts to regulate through the

spending power.” 180 F.3d at 693. If the State is not

engaged in “efficient procurement” but nonetheless

directly participates in the market in a proprietary

manner, we see no reason why Cardinal Towing

should preclude the application of the market

participant doctrine. Cf. Tri-M Group, LLC v. Sharp,

638 F.3d 406, 422 (3d Cir. 2011) (identifying “several

questions a court should ask when conducting the

‘single inquiry’ to determine ‘whether the challenged

program constitute[s] direct state participation in

the market’ ” and emphasizing that the questions

must be considered in the “specific context”

presented) (quoting White v. Mass. Council of Constr.

Emp’rs Inc., 460 U.S. 204, 208 (1983)).

Here, the Port directly participates in the market as

a manager of Port facilities. In essence, the

concession agreements are contracts under which the

Port exchanges access to its property for a drayage

carrier's compliance with certain conditions. ATA

contends that the Port’s participation in the “port

1! See, e.g., Engine Mfrs. Ass'n v. S. Coast Air Quality Maint.

Dist., 498 F.3d 1031, 1040 (9th Cir. 2007) (the State was acting

as a market participant when it required transportation

vehicles purchased with State funds to meet environmental

standards); Tocher, 219 F.3d at 1049-50.

26a

market” cannot extend to imposing restrictions on

the “drayage market.”!2 To be sure, the State does

not act as a market participant every time it manages

any of its property. See Olympic Pipe Line Co. v. City

of Seattle, 437 F.3d 872, 881-82 (9th Cir. 2006). In

Olympic Pipe Line, for example, the City of Seattle

was not acting as a market participant when it

12 ATA argues that, in S.—Cent. Timber Dev., Inc. v. Wunnicke,

467 U.S. 82, 97-98, 104 S. Ct. 2237, 81 L. Ed. 2d 71 (1984)

(plurality), the Supreme Court limited the market participant

doctrine to State actions taken in a “narrow” market defined by

contractual privity. Wunnicke is not controlling precedent on

this question. Its discussion of the market participant doctrine

did not garner a majority of justices. See id. at 93-98, 104 S. Ct.

2237 (majority op.); id. at 101, 104 S. Ct. 2237 (Powell, J., in a

concurrence in part and concurrence in the judgment joined by

Burger, C.J.) (stating that they would remand to allow the

Court of Appeals to apply the market participant doctrine in

the first instance); id. at 101-103, 104 S. Ct. 2237 (Rehnquist,

J., in a dissent joined by O’Connor, J.) (arguing that the market

participant doctrine applied). Indeed, Wunnicke is a perfect

example of the Supreme Court's fractured views on the market

participant doctrine. See Shell Oil Co. v. City of Santa Monica,

830 F.2d 1052, 1056 (9th Cir. 1987).

Subsequent cases either distinguish Wunnicke as an outlier

involving special considerations of natural resources, foreign

commerce, and restrictions on resale, or cite Wunnicke for

general positions of law not unique to its analysis. See, e.g.,

Dep't of Revenue of Ky. v. Davis, 553 U.S. 328, 348 n. 17, 128 S.

Ct. 1801, 170 L. Ed. 2d 685 (2008) (responding to the dissent

and distinguishing Wunnicke as a case involving three unique

circumstances); United Haulers Ass'n, Inc. v. Oneida—Herkimer

Solid Waste Mgmt. Auth., 550 U.S. 330, 340 n. 4, 127 S. Ct.

1786, 167 L. Ed. 2d 655 (2007) (citing Wunnicke as an example

of local-processing requirements invalidated by the Court);

Shell Oil, 830 F.2d at 1057-58 (citing Wunnicke for the

proposition that “contractual privity does not insulate a state or

local body from commerce clause scrutiny”).

27a

refused to renew a franchise agreement giving a

right of way under city streets to a natural gas

pipeline because the pipeline did not conduct tests at

the behest of the city. Jd. at 875-76, 882. We noted

that, despite the city’s claim that it was acting as a

landlord, the city’s “interest is not that of a private

market participant that owns a pipeline or competes

in the pipeline market or a related market.” Id. at

881 (emphasis added). Rather, we stated that

“Seattle in its sovereign capacity owns the streets

and land under which the Seattle Lateral [pipeline]

runs, for the purpose of maintaining a transportation

system” and the city sought to exercise its power to

protect public health and safety. Id. at 882; see also

Shell Oil Co. v. City of Santa Monica, 830 F.2d 1052,

1057—58 (9th Cir. 1987) (holding that a city “is not a

market participant... in deciding whether, or on

what terms to grant a franchise for the use of city

streets”).

In this case, we are not faced with a situaticn where

the Port is managing property “in its sovereign

capacity,” or imposing restrictions unrelated to its

business interests as a property manager. As the

district court recognized, the Port of Los Angeles is a

business entity, operating wholly separately from the

city government. It is entirely self-sustaining and

does not depend on city funds. Furthermore, the Port

has a business interest in the drayage market. The

Port’s business is to provide a point of entry for ships

to unload goods. The Port necessarily requires the

interrelated service of drayage trucking in order to

transport those goods to customers or points of

forwarding. The district court found that (1) the

“Port has a direct financial interest in the

28a

unhindered and efficient flow of cargo through its

terminals and in increasing container traffic through

the Port”; (2) the Port “needs to continually improve

the efficiency of cargo operations at the Port to

maintain its competitive position with respect to

other ports and capture additional business”; and (3)

a supply of drayage trucks and drivers is integral to

cargo movement at the Port. ATA does not challenge

those factual findings as _ clearly’ erroneous.

Accordingly, we must conclude that even though the

Port does not purchase drayage services, such

services are an integral part of Port business. The

drayage and port markets are so closely related that

the Port’s interest in managing its facilities can

extend to imposing conditions on drayage carriers

that operate on Port property.'*

13 Both parties discuss as persuasive authority cases from other

circuits and district courts addressing the market participant

doctrine in the general context of State facilities. See Sprint

Spectrum L.P., 283 F.3d at 420-21 (upholding under the

market participant doctrine a school district’s restrictions on

cellular phone towers placed on school property); Four 7s, Inc.

u. Little Rock Mun. Airport Comm'n, 108 F.3d 909, 912-13 (8th

Cir. 1997) (holding that State restrictions on rental car

operators that leased airport terminal counter space fell within

the market participant doctrine); Smith v. Dep't of Agric., 630

F.2d 1081, 1083 (5th Cir. 1980) (holding that preferential

placement for local farmers at a State-run farmers market did

not fall within the market participant doctrine); Aeroground,

Inc. v. City & Cnty. of San Francisco, 170 F. Supp. 2d 950, 958—

59 (N.D. Cal. 2001) (holding for the purposes of a preliminary

injunction that an airport was not acting as a market

participant when it adopted a rule requiring employers

operating at the airport to permit certain union actions);

Transp. Limousine of Long Island, Inc. v. Port Auth. of N.Y. &

N.J., 571 F. Supp. 576, 581 (E.D.N-Y.1983).

29a

We hold that when an independent State entity

manages access to its facilities, and imposes

conditions similar to those that would be imposed by

a private landlord in the State’s position, the State

may claim the market participant doctrine. Here, the

Port leases its facilities to terminal operators, and

permits drayage trucks to access its facilities, for the

purpose of moving cargo through the Port and

increasing Port revenues. The Port has a financial

interest in ensuring that drayage services are

provided in a manner that is safe, reliable, and

consistent with the Port’s overall goals for facilities

management. A private port owner could (and

probably would) enter into concession-type

agreements with licensed motor carriers in order to

further its goals. See Boston Harbor, 507 U.S. at

231-32. We therefore conclude that the Port acted in

its proprietary capacity as a market participant

when it decided to enter into concession agreements.

We stop short, though, of holding that every

provision of the concession agreements is saved from

preemption. The Supreme Court has placed

limitations on what a State, acting as a market

participant, may do. “[W]here the [S]tate seeks to

affect private parties’ conduct unrelated to the

performance of contractual obligations to the

Factually, those cases are distinguishable, so any analogy to the

holdings would be strained. Cf. Tri-M, 638 F.3d at 422 (the

court must consider the government’s actions in the specific

context presented). These cases are useful only to illustrate that

other courts examine whether a particular provision is actually

related to the State’s proprietary interest in managing its

facilities, or whether it reflects the State’s regulatory interest in

unrelated industries.

30a

[S]tate,” the State’s actions are “tantamount to

regulation.” Johnson, 623 F.3d at 1025-26 (quoting

Wis. Dep't of Indus., Labor & Human Relations v.

Gould Inc., 475 U.S. 282, 289 (1986)); see also

Chamber of Commerce v. Brown, 554 U.S. 60, 70

(2008). Accordingly, we must examine whether the

provisions at issue further the State’s interests as a

facilities manager, or whether the provisions seek to

affect conduct unrelated to those interests. The

State’s avowed purposes may be relevant, but we

need not inquire into the State’s undisclosed

intentions. See Gould, 475 U.S. at 288 (examining

the State’s admitted motives); Johnson, 623 F.3d at

1026 (refusing to examine the State’s “ulterior

motives”). We do not examine each individual

provision of the concession agreements at this point,

saving that discussion for part V of this opinion.

C. Safety Exception

Finally, we consider whether the district court

identified the correct legal principles in applying the

safety exception to FAAA Act preemption. ATA

argues that, notwithstanding the express safety

exception of 49 U.S.C. § 14501(c)(2)(A), the Port has

no authority to “revoke a motor carriers’ ability to

engage in interstate commerce.” It argues that in

Castle, 348 U.S. 61, the Supreme Court held that if

interstate motor carriers violate the safety laws of

the State, it is up to the federal government to

“protect the State’s interest” through federal

enforcement proceedings. Thus, according to ATA, at

the time the FAAA Act was passed, the State’s

regulatory authority did not permit it to revoke the

ability of motor carriers to engage in interstate

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commerce. ATA argues that the safety provision

incorporates the then-existing regulatory authority

of a State, and simply does not grant the States

“Independent power to make _ safety-related

revocations.”

Castle does not, however, stand for the proposition

that the States have no power to limit motor carrier

access to particular land in order to further safety. In

Castle, Illinois punished freight carriers. that

repeatedly violated State limits on the weight of

commercial trucks by totally suspending the carriers’

right to use Illinois state highways for up to one

year. 348 U.S. at 63. At the time, the Interstate

Commerce Commission had the exclusive right to

issue and revoke certificates permitting motor

carriers to operate interstate. Id. at 63-64. The

Court held that Illinois’s action was “the equivalent

of a partial suspension of [a motor carrier’s] federally

granted certificate,” because Illinois highways were

used “to transport interstate goods to and from

[Illinois and] are also used as connecting links to

points in other states.” Jd. at 64. Accordingly,

Illinois’s action was prohibited. Jd. at 65. The Court

stated, though, that Illinois remained free to impose

“conventional forms of punishment” on _ over-

weighted or improperly loaded motor trucks. Id. at

64. The Court also made clear that it “know/(s] of no

reason why the Commission may not protect the

[S]tate’s interest, either on the Commission’s own

initiative or on complaint of the [S]tate.” Jd. at 65. It

did not, as ATA asserts, hold that only the federal

government may impose punishment for a motor

carrier's violation of State safety regulations.

32a

Even if the FAAA Act incorporated (rather than

modified) Castle's limitations on the State’s

authority,'* Castle does not preclude the Port from

permitting access only to motor carriers that comply

with its safety restrictions. Unlike a ban on using all

of a State’s freeways, a limitation on access to a

single Port does not prohibit motor carriers from

participating in “transport [of] interstate goods to

and from that State” or eliminate “connecting links

to points in other states.” Id. at 64. While a denial of

access to the Port may have more effect on motor

carriers than a traditional fine, it does not rise to the

level of the comprehensive ban at issue in Castle.

The district court did not err in applying the safety

exception to this case. In addition, it correctly

concluded that the safety exception is available only

when a regulation is “genuinely responsive to safety

concerns.” City of Columbus, 536 U.S. at 442; ATA-—

IT, 559 F.3d at 1053—54. The district court rightly

examined the avowed intent of the government, and

considered whether any “ ‘purported safety

justifications’ will withstand scrutiny.” ATA-II, 559

F.3d at 1055 (quoting Auto. Club of N.Y., Inc., v.

Dykstra, 520 F.3d 210, 215 (2d Cir. 2008) (per

curiam)). In sum, we determine that the district

court correctly identified the applicable law.

IV.

With these principles in mind, we analyze whether,

and on what grounds, each challenged provision is

subject to preemption by the FAAA Act. We agree

'¢ We express no opinion on this point.

33a

with the district court that the financial capability

provision has only a tenuous and remote connection

to rates, routes, or services, so 1s not preempted by §

14501(c) of the FAAA Act. We also agree with the

district court that the maintenance provision is

intended to be and is genuinely responsive to safety,

so is not preempted. We conclude that the off-street

parking and placard provisions were adopted to

address specific proprietary concerns faced by the

Port as a facilities manager and do not seek to affect

unrelated conduct by third parties, so fall under the

market participant doctrine. We hold, however, that

the employee-driver provision is pre-empted because

it is tantamount to regulation.

A. Financial Capability Provision

The financial capability provision requires a

concessionaire to “demonstrate[ } to the satisfaction

of the Executive Director that it possesses the

financial capability to perform its obligations under

th[e] Concession.” As with the maintenance

provision, the district court held that the provision

did not relate to rates, routes, and services in more

than a tenuous way. It concluded, however, that the

provision was not genuinely responsive to safety. We

agree with the district court that the financial

capability provision does not relate to rates, routes,

and services in a more than tenuous fashion, and is

not preempted; we therefore do not apply the market

participant doctrine or safety exception.

The financial capability provision does not directly

impact the drayage services provided to customers

(for example, picking up and transporting cargo). Nor

does it directly regulate the routes served or the

34a

prices charged. Cf. Indep. Towers of Wash. v. Wash.,

350 F.3d 925, 931-32 (9th Cir. 2003) (a State’s

regulation of payment method does not relate to the

tow truck operator’s route or service and is not

preempted by § 14501(c)). Thus, we must consider

whether the financial capability provision indirectly

binds drayage carriers to particular rates, routes, or

services. Air Jransporit, 266 F.3d at 1075. ATA

argues only that the provision “gives POLA

discretion to deny LMCs the right to provide drayage

services on routes involving the Port”—apparently,

that the financial capability provision could be used

by the Port to deny access to otherwise qualified

drayage carriers and thus affect routes. The district

court disagreed, and its conclusion is well supported

by the record. The Port has never refused to sign a

concession agreement on the basis of the financial

capability provision, and the motor carriers who

testified indicated that the financial capability

provision would not change their operations. While

this does not preclude the possibility that the

financial capability provision will effect rates, routes

or services, it makes that possibility “tenuous or

remote.” Rowe, 552 U.S. at 371. Accordingly, we hold

that the financial capability provision is not

preempted by § 14501(c) of the FAAA Act.

B. The Maintenance Provision

The maintenance provision makes concessionaires

“responsible for vehicle condition and safety” and

requires them to “ensure that the maintenance of all

Permitted Trucks ... is conducted in accordance with

manufacturer’s instructions.” The district court held

that the maintenance provision was not preempted

35a

by the FAAA Act because it does not have more than

an indirect, remote, or tenuous effect on rates,

routes, or services. Alternatively, the district court

concluded that, even if subject to preemption, the

maintenance provision was genuinely responsive to

safety concerns. Even assuming that’ the

maintenance provision relates to rates, routes, and

services,'5 we agree with the district court that the

provision was intended to be and is genuinely

responsive to safety and is thus exempt from

preemption by the FAAA Act.

We conclude that the maintenance provision was

intended to respond to safety concerns. The Port

cited concerns about vehicle safety (including vehicle

maintenance, repair and replacement, and driver

safety) as motivations for adopting the concession

agreements. The Port also “found that serious safety

and security problems existed in connection with

drayage trucks at the Port” and cited statistics

15 Though we do not rest our holding on this ground, we agree

with the district court that the maintenance provision has only

a tenuous and remote connection to rates, routes, and services.

Requiring regular maintenance of trucks does not directly affect

drayage pickups or deliveries, nor does it bind motor carriers to

particular routes or types of services. Though one would suspect

that maintenance could have a connection to costs and thus

rates, the evidence introduced at trial established that the

maintenance provision has not given rise to any significant

additional costs and that concessionaires have not increased

their rates as a result of complying with the provisions. ATA

does not challenge as clearly erroneous the district court’s

factual finding that the maintenance provision has not changed

the rates charged by motor carriers, further supporting our

view that the maintenance provision is not related to rates and

not preempted by the FAAA Act.

36a

indicating that heavy duty vehicles accounted for a

disproportionate share of traffic violations, accidents,

and citations for improper maintenance.

ATA correctly notes that the maintenance provision

was also motivated by environmental concerns. In

particular, the Port wanted to ensure that all

drayage trucks, including those purchased or

retrofitted with State funds, continued to meet

emissions standards over time. The presence of such

mixed motives, though, does not preclude the

application of the safety exception, provided that the

State’s safety motives are not pre-textual. Cf. Loyal

Tire & Auto Ctr., Inc. v. Town of Woodbury, 445 F.3d

136, 145-47 (2d Cir. 2006). For example, in Loyal

Tire, the city passed a towing ordinance with a broad

general statement that towing regulations as a whole

were in the public interest. Jd. at 146. At the same

time, there was significant evidence in the legislative

history that the statute had been passed in order to

discriminate against a particular out-of-town towing

company. Jd. at 146-47. Though the State alleged

that it was actually responding to safety, it didn’t

document any safety issues until after litigation

commenced. Jd. at 146. In addition, there was no

logical relationship between at least one of the city’s

purported safety justification and the measure at

issue. Jd. at 147—48. In light of this record, the court

held that the city’s purported safety justification did

not withstand scrutiny. Jd. at 148. Unlike Loyal Tire,

nothing in the record here demonstrates that the

Port’s safety motives are illusory or pretextual—the

Port’s safety motivation is genuine, albeit operating

in tandem with its other concerns. Cf. Ace Auto Body

& Towing, Ltd. v. City of New York, 171 F.3d 765,

37a

774 (2d Cir. 1999) (stating that because “it is difficult

to treat these programs as a guise for economic

regulation” the programs were “sufficiently safety-

oriented to survive preemption under § 14501(c)”).

We also agree with the district court that the

maintenance provision is genuinely responsive to

safety, because “requiring routine truck maintenance

will no doubt help to ensure that drayage trucks are

operating properly and safely, which will in turn

likely prevent motor vehicle accidents.” Again unlike

in Loyal Tire, there is a logical connection here

between the maintenance provision and motor

vehicle safety. ATA argues that the maintenance

provision is not genuinely responsive to safety

because the Port has not demonstrated that

requiring motor carriers to “comply with

manufacturers’ instructions” creates safety benefits

in addition to those already created by federal law.

In other words, according to ATA, because regular

maintenance is already required by federal law, the

Port must demonstrate that the non-duplicative

portion of the maintenance provision—the

requirement to comply with manufacturer’s

instructions—has an independent safety benefit.

We hold that State provisions duplicating federal law

may still be genuinely responsive to safety. At the

preliminary injunction phase of this case, we

“reject{ed] ATA’s contentions that the provisions are

not safety-related simply because they duplicate

already-existing federal laws.” ATA-IV, 596 F.3d at

606. Our conclusion comports with the Supreme

Court’s decision in City of Columbus. One of the

arguments raised in City of Columbus was that the

38a

safety exception should not extend to municipalities

because each one could adopt different regulations,

which would be _ needlessly duplicative and

burdensome. 536 U.S. at 441-42. The Court declined

to adopt such a broad rule; instead, it noted that 49

U.S.C. § 31141 authorizes the Secretary of

Transportation to void any State law that “has no

safety benefit” and thus permitted the federal

government to invalidate loca! safety regulations

“upon finding that their content or multiplicity

threatens to clog the avenues of commerce.” 536 U.S.

at 442.

Duplicity is not the death knell of a safety-related

regulation. Because provisions that duplicate federal

law may still have a safety benefit, we hold that the

Port need not demonstrate that the requirement to

comply with manufacturer’s instructions creates

safety benefits over and above those created by

federal iaw. The maintenance provision falls within

the safety exception and is not preempted.

C. Off-Street Parking Provision

The off-street parking provision requires

concessionaires to submit for approval a “plan that

includes off-street parking locations for all Permitted

Trucks” and requires concessionaires to ensure that

Permitted Trucks are “in compliance with parking

restrictions by local municipalities.” The district

court held that the provision would probably affect

motor carriers’ rates, because the carriers would

incur high costs in obtaining off-street parking and

be forced to pass those costs on to consumers. It also

concluded that the off-street parking provision was

not genuinely responsive to safety because the Port

39a

adopted the provision to mollify community

opposition, rather than to address existing safety

concerns. The Port does not challenge either of these

holdings on appeal, so the off-street parking

provision must rise or fall on the applicability of the

market participant exception. The district court was

correct that the concession agreements, as a whole,

were adopted by the Port in its proprietary capacity

as a facilities provider. The real issue is whether the

off-street parking provision was adopted to further

specific proprietary goals, or whether it is thinly-

veiled regulation.

The Supreme Court confronted a case of thinly veiled

regulation in Gould, 475 U.S. at 287-89. There,

Wisconsin forbade its procurement agents. to

purchase any product manufactured or sold by any

firm on a State-maintained list of repeat violators of

the National Labor Relations Act (NLRA). Id. at

283—83. “[O]n its face the debarment statute serve[d]

plainly as a means of enforcing the NLRA” and the

State conceded that its point was “to deter labor law

violations and to reward ‘fidelity to the law.’” Id. at

287. The Court held that Wisconsin “simply is not

functioning as a private purchaser of services,” but

instead attempting to impose a _ supplemental

sanction for violations of the NLRA that “conflicts

with the [federal government’s} comprehensive

regulation of industrial relations.” Jd. at 288. The

Court did not believe that Congress would permit a

State to interfere with that scheme “as long as [the

States} did so through exercises of the spending

power.” Id. at 290. The Court explained that “ ‘ijt is

the conduct being regulated... that is the proper

focus of concern.’” Id. at 289 (quoting Amalgamated

40a

Ass'n of St. Elec. Ry. & Motor Coach Emps. of Am. v.

Lockridge, 403 U.S. 274, 292 (1971)).

Unlike the provision in Gould, nothing on the face of

the off-street parking provision indicates it was

designed to circumvent the restrictions of the FAAA

Act by disguising impermissible regulation as

proprietary. Rather, the off-street parking provision

and the documents adopting it indicate that it was

designed to address specific proprietary problems.

Prior to the enactment of concession agreements,

community members complained that drayage trucks

regularly parked in surrounding neighborhoods,

posing safety and health risks. The Port believed

that off-street parking would mitigate drayage

trucks’ negative impacts and increase the community

good-will necessary to facilitate Port expansion.

Enhancing good-will in the community surrounding

the Port is an important and, indeed, objectively

reasonable business interest, particularly since the

community has already proved its ability to stymy

Port growth and operations by pursuing litigation

over health hazards and environmental impacts.

Further, maintaining Port security is an important

business interest of the Port. The district court found

that the Department of Homeland Security considers

the Port part of one of seven “ ‘Group I’ port areas at

the highest risk of terrorist attacks.” Jeffrey Brown,

an expert in port security, testified that the off-street

parking provision was “safety related” because, for

example, parking vehicles carrying hazardous cargo

on the street creates safety risks. The off-street

parking provision therefore serves the Port's

business interest in promoting Port security. Nor

4la

does the off-street parking provision reach beyond

the Port’s participation in the market as a facilities

provider and seek to impact the private behavior of

third parties. The provision binds only those motor

carriers operating on Port property, and applies to

only those trucks permitted to operate at the Port. It

is tailored to a specific proprietary problem facing

the Port.

ATA argues that there were alternative ways for the

Port to placate community concerns about truck

parking; for example, by lobbying the city to change

parking regulations, or by deploying Port police as

agents of the city to enforce existing regulations. The

fact that the State could have achieved its goals

through regulation does not bear on the question of

whether the Port’s chosen means were regulatory or

proprietary. Because the Port imposed the off-street

parking provision only on those drayage trucks

operating on Port property, and did so in response to

perceived business necessity, we hold that the off-

street parking provision falls within the market

participant doctrine.

D. Employee—Driver Provision

The employee-driver provision § requires all

concessionaires to gradually cease using independent

owner-operators for Port drayage. At the end of a five

year period, each Port drayage driver must be an

employee of a licensed motor carrier. The district

court held that the provision was preempted by the

FAAA Act as related to rates, routes and services,

and rejected the Port’s argument that the provision

was safety related. The Port does not challenge those

holdings on appeal, so the employee-driver provision

42a

survives preemption only if it falls within the market

participant doctrine.

The Port adopted the employee-driver provision for a

number of reasons. The record is replete with

evidence that the provision was designed to “ensure

sufficient supply of drayage drivers by improvement

of wages, benefits, and working conditions.”!®

Essentially, the Port wanted to ensure that motor

carriers would provide higher wages to drivers, thus

enabling them to attract drivers to replace those lost

through the TWIC program. In addition, the Port

believed that the employee-driver provision would

“protect the Port’s investment in clean trucks”

because it created an employer-employee

relationship between truck drivers and subsidized

concessionaires, ensuring that the trucks were

owned and operated by persons with the means to

maintain them. The Port also indicated that the

employee-driver provision would be “easier to

administer” because it would shift from the Port to

employers the burden of maintaining records on each

driver. ATA IT, 559 F.3d at 1056.

‘6 In assessing the Port's motivations, we focus exclusively on

the orders and published documents issued by the Port, and on

statements made at trial by high-ranking Port officials. Both

ATA and its amicus imply that statements of consultants hired

by the Port reflect the Port's motivations. This argument is

without merit, even though both reports were commissioned by

the Port, and the Port ultimately adopted the course

recommended by both reports. The consultants are not agents

of the Port, and it is too much to conclude that every statement

in each report was adopted by the Port or accurately reflects the

Port's motivations.

43a

We conclude that, under Gould, the employee driver

provision seeks to impact third party behavior

unrelated to the performance of the concessionaire’s

obligations to the Port. One of the Port’s primary

motives in adopting the employee driver provision

was to increase stability in Port drayage by ensuring

that drivers were paid higher wages. As a facilities

provider, the Port has an interest in continued

provision of drayage services, but it may not obtain

that stability by unilaterally inserting itself into the

contractual relationship between motor carriers and

drivers. The Port, unlike the governmental entities

in Boston Harbor or Johnson, does not pay driver

salaries or subsidize benefits, so has no connection

with drayage drivers justifying interference with the

drivers’ employment relationships. Cf. Boston

Harbor, 507 U.S. at 231-32 (emphasizing that the

State could require project labor agreements as a

purchaser of construction services); White, 460 U.S.

at 214 (holding that the city was entitled to the

market participant doctrine because it expended its

own funds in contracting for construction of public

projects); Johnson, 623 F.3d at 1029-30 (noting that

the State could require parties to maximize

opportunities for minority and women-owned

businesses as consideration for the benefits received

from the State). While the Port may impose

conditions on licensed motor carriers seeking to

operate on Port property, it cannot extend those

conditions to the contractual relationships between

motor carriers and third parties.

The Port argues that it subsidized approximately

35% of the drayage trucks operating at the Port, and

believes that employee-drivers will better protect

44a

that investment. But the concession agreements bind

all licensed motor carriers operating at the Port, not

merely those who drive Port-subsidized trucks.

Accordingly, even assuming that the Port's

investment in drayage trucks entitles it to control

the employment status of the drivers of subsidized

trucks, the employee-driver provision still seeks to

impact behavior beyond the scope of the obligations

imposed by the subsidies. Cf. Wyo. v. Okla., 502 U.S.

437, 456 (1992) (holding that a State which owned

and operated an electricity plant did not act as a

market participant in requiring all plants to use at

least 10% Oklahoma coal).

We recognize that a facilities provider in the Port’s

position has a proprietary interest in streamlined

administration. We also recognize that the employee-

driver provision furthers this interest, because it

permits the Port to hold accountable a smaller

number of licensed motor carriers, rather than

having to monitor a large number of independent

owner-operators. Nevertheless, under the

circumstances, this is insufficient to outweigh the

Port’s avowed desire to impact wages not subsidized

by the State. The employee-driver provision is

“tantamount to regulation” and thus does not fall

under the market participant exception. Gould, 475

U.S. at 289.

E. Placard Provision

Lastly, the placard provision requires

concessionaires to “post placards on all Permitted

Trucks” when the trucks are “entering and leaving

Port property and while on Port property.” The

placards shall “refer{ ] members of the public to a

45a

phone number to report concerns regarding truck

emissions, safety, and compliance to the Concession

Administrator and/or authorities.” Since April, 2009,

the Port has provided sticker placards to motor

carriers, although Permitted Trucks are allowed to

use other placards.

The placard provision may be preempted by §

14501(c) of the FAAA Act, prohibiting regulations

related to motor carriers’ rates, routes, and services.

We agree with the district court that the placard

provision is genuinely responsive to motor vehicle

safety, so not preempted by § 14501(c).!” The

placards help the Port to gather information about

the safety of drayage truck operations, both on and

off Port property. This information can _ be

communicated to motor carriers and informs the

Port’s operations. The fact that many drayage trucks

continue to display the placards off Port property

(although nothing in the provision requires them to

do so), and that community members have reported

off-Port safety violations, does not diminish the

placards’ safety benefit.

Though it survives preemption by § 14501(c) because

of the safety exception, the placard provision may be

preempted by 49 U.S.C. § 14506(a), which prevents

‘7 As discussed in section IV.C supra, application of the FAAA’s

safety exception is not precluded by Castle v. Hayes, 348 U.S.

61, 75 S. Ct. 191, 99 L. Ed. 68 (1954). The placard provision is a

reasonable measure aimed at promoting Port safety, which

applies only while trucks are operating on the Port’s private

property. It is not comparable to Illinois’ attempt to bar certain

federally licensed motor carriers from its state highways, which

was at issue in Castle.

46a

States from enacting or enforcing any “provision

having the force and effect of law that requires a

motor carrier ... to display any form of identification

on or in a commercial motor vehicle ... other than

forms of identification required by the Secretary of

Transportation.” The district court erroneously

concluded that the placards are not a “form of

identification” because they merely list a phone

number. The phone number, though, identifies the

truck as one serving the Port, and falls within the

broad scope of § 14506(a).

There is no safety exception to § 14506(a), ATA-IV,

596 F.3d at 606, but because it applies only to

provisions having the force and effect of law, §

14506(a) does not apply to State proprietary action.

Cf. Cardinal Towing, 180 F.3d at 695. The placard

provision is proprietary in nature, and, under the

market participant doctrine, is not preempted by §

14506(a). The Port adopted the placard provision in

response to community concerns about drayage truck

operation. The provision invites community

participation and increases goodwill, thus facilitating

Port expansion. As a facilities provider, the Port has

a proprietary interest in receiving complaints about

drayage trucks entering, leaving, and operating on

its property. A private facilities provider would do

the same. Cf. Boston Harbor, 507 U.S. at 231-32.

The placard provision does not seek to impact third

party behavior unrelated to the performance of

contractual obligations to the State, but is concerned

only with drayage truck operations immediately

connected to the Port. Thus, it is not preempted.

47a

Vv.

The district court meticulously identified and applied

the governing law. We affirm the district court’s

holdings that the financial capability, maintenance,

off-street parking, and placard provisions are not

preempted. We reverse the district court’s conclusion

that the employee-driver provision is saved from

preemption by the market participant doctrine, and

remand for further proceedings consistent with this

opinion.

AFFIRMED IN PART AND REVERSED IN PART.

N.R. SMITH, Circuit Judge, dissenting in parts

ItI.B., U1.C., T1V.B., 1V.C., and IV.E. of the majority

opinion:

I must dissent from the majority opinion because: (1)

the market participant exception to preemption does

not apply. Drayage services (not port services) form

the relevant market, and the Port of Los Angeles (the

“Port”) acts as a regulator of drayage services. (2)

Even assuming the Port qualifies as a proprietor, the

off-street parking provisions are preempted, because

they affect parties unrelated to contractual

obligations to the Port. (3) The placard provision is

preempted and not saved by the market participant

doctrine or the safety exception, because California

cannot revoke access to channels of interstate

commerce and identification requirements on motor

carriers are expressly preempted under 49 U.S.C. §

14506(a).

48a

Il. Market Participant Exception

The Port acts as a regulator (rather than a market

proprietor) of drayage services. It is therefore

ineligible for the “market participant” defense to

federal preemption. We apply a two-prong test for

distinguishing proprietary from regulatory actions:

First, does the challenged action essentially

reflect the entity’s own interest in its efficient

procurement of needed goods and services, as

measured by comparison with the _ typical

behavior of private parties in similar

circumstances? Second, does the narrow scope of

the challenged action defeat an inference that its

primary goal was to encourage a general policy

rather than address a_e specific proprietary

problem?

Johnson v. Rancho Santiago Cmty. Coll. Dist., 623

F.3d 1011, 1023-24 (9th Cir. 2010) (citation omitted).

If the answer to either question is yes, the market

participant exception applies. Jd. at 1024.

The Port's regulation of drayage services does not

qualify as “efficient procurement” of needed services.

The Ninth Circuit has no controlling precedent on

this point. However, the Fifth Circuit, in Smith v.

Department of Agriculture of the State of Georgia,

concluded that mere ownership of a facility does not

make the government a participant in the markets

operating in that facility. 630 F.2d 1081 (5th Cir.

1980); cf. Shell Oil Co. v. City of Santa Monica, 830

F.2d 1052, 1057—58 (9th Cir. 1987) (holding that a

city “control[ling] easements in the area beneath city

streets, a commodity with value.... [with which] the

49a

city competes with other entities],| ... is not a market

participant in the setting of franchise fees for

easements under public streets”). In Smith, the Fifth

Circuit held that Georgia acted as a market

regulator when it leased booths to farmers at a state-

owned-and-operated farmers market that gave

preferential treatment to Georgia farmers. Georgia

acted as a regulator, rather than a_ proprietor,

because it (1) did not “produce the goods to be sold at

the market,” (2) did not “engage in the actual buying

or selling of those goods,” and (3) had “simply

provided a suitable marketplace for the buying and

selling of privately owned goods.” Jd. at 1083. As the

district court in this case suggested in an earlier

order, Am. Trucking Ass’ns., Inc. v. City of L.A., 577

F. Supp. 2d 1110, 1120 (C.D. Cal. 2008), and a

concurring judge in Smith emphasized, the outcome

of this test depends on the definition of the market:

“fijf the market is ... one in sale booths for produce,

then Georgia [is a proprietor} of booths.... But

[because] the relevant market [is} one in

vegetables, ... [and] Georgia is not their producer or

seller,” Georgia is not a proprietor. Smith, 630 F.2d

at 1086 (Gee, J., concurring).!

1 Also not controlling but persuasive is the case of Fla. Transp.

Serv., Inc. v. Miami-Dade Cnty., 757 F. Supp. 2d 1260 (S.D.

Fla. 2010). In Florida Transportation the plaintiffs challenged

the Port of Miami's limitation on the number of stevedores. Jd.

Regarding the market participant doctrine, the court found the

county operating the Port of Miami not to be in the market of

stevedoring just because it participates in the market for port

services. Jd. at 1282 (“[T]he county simply provides a suitable

market place that it owns—the Port—for stevedores to offer

their services.”).

50a

The majority states that the “efficient procurement”

prong “is useful in cases where the government is

buying goods or seeking services, but it is not the be-

all-and-end-all of proprietary action.” Maj. Op. at ——

— (footnote omitted). Instead, the real inquiry is

distinguishing between propriety and regulatory

action. See id. In determining whether actions are

“as a market participant or regulator, a court must

examine whether the... government has imposed

restrictions that ‘reach beyond the immediate parties

with which the government transacts business.” Big

Country Foods, Inc. v. Bd. of Educ. of Anchorage Sch.

Dist., 952 F.2d 1173, 1178 (9th Cir. 1992) (citing

White v. Mass. Council of Constr. Emp'rs, 460 U.S.

204, 211 n. 7 (1983) and S.—Cent. Timber Dev. v.

Wunnicke, 467 U.S. 82, 95 (1984)).2 “In White,

Boston did not reach beyond the immediate parties

by requiring contractors to hire local workers

because everyone affected by the order was, ‘in a

substantial if informal sense, working for the city.’”

Id. (citing White, 460 U.S. at 211 n. 7). “In contrast,

the Court in Wunnicke found that the Alaska timber

processing requirement constituted a ‘downstream’

regulation prohibited by the commerce clause.” /d.

(citing Wunnicke, 467 U.S. at 95).

Here, the Port reaches beyond the immediate parties

with whom it transacts, because it does not transact

business with drayage service providers. Unlike the

rules requiring contractors to hire local workers in

White, the Port does not require the shipping lines

2 Although Wunnicke, 467 U.S. 82, 104 S. Ct. 2237 (1984), is a

plurality opinion, we cited its holding with approval in Big

Country Foods, 952 F.2d at 1178.

5la

and stevedoring companies (that rent terminals) to

regulate the drayage service providers. Further, the

drayage service providers do not, even in an informal

sense, work for the Port. See White, 460 U.S. at 211

n. 7. Therefore, the Port reaches the limits of the

market participation exemption. Id. (privity of

contract is not the boundary of the market

participation exemption, but “there are some limits

on a... government’s ability to impose restrictions

that reach beyond the immediate parties with which

the government transacts business.”).

The provision of maritime ports does not form the

relevant market here; rather, the market is the

provision of drayage services. The Port cannot be a

proprietor in this market, because it neither

purchases nor provides drayage services.’ Indeed,

the Port does not involve itself in any market activity

with the independent contractors and companies

providing drayage services. See Amicus Brief of the

Center of Constitutional Jurisprudence 11-12.

Therefore, the Port regulates third-party drayage

providers in its capacity as a regulator, eliminating

3 In virtually every Ninth Circuit case finding that a

government entity acted as a market proprietor, the

government was actually participating in the marketplace by

purchasing goods or services. See, e.g., Engine Mfrs. Ass'n v. S.

Coast Air Quality, 498 F.3d 1031 (9th Cir. 2007) (holding that a

state subdivision acted as a market participant in establishing

air quality rules governing state and local governments’

procurement of new fleet vehicles); Tocher v. City of Santa Ana,

219 F.3d 1040, 1049 (9th Cir. 2000) (holding the City of Santa

Ana acted as a market participant in “establishing rules and

regulations to guide the formation of contracts for towing

services provided exclusively to the City” (emphasis added)).

52a

the Port’s eligibility for the market participant

defense.

II. Safety Exception

The majority applies the safety exception in this case

by distinguishing Castle v. Hayes Freight Lines, 348

U.S.

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