Petition for Writ of Certiorari — Troy Cab, Inc. v. Michigan Public Service Commission

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Supreme Court, US.

FILED

No. __Q31250F&B 272004

In THOFFICE OF 1:

HE CLERK

Supreme Court of the Gnited States

TROY CAB, INC., DEECO SERVICES, INC., d/b/a

DEECO TRANSPORTATION, FRANK TIBERIO, d/b/a

FAIRFIELD TOWING, LAFOND EXPRESS, INC.,

CALCUT SALES & SERVICES, INC., d/b/a CALCUT

TRUCKING COMPANY, MID-CON FREIGHT SYSTEMS,

INC., H & H ENTERPRISES, INC., d/b/aS & M

CARTAGE, INC., ECONOMY TRANSPORT, INC.,

MASON & DIXON LINES, INC., ROMEO EXPEDITORS,

INC., WESTLAKE TRANSPORTATION, INC.,

VANDERKOOI CARRIERS, INC., GERRIG’S TRUCKING

& LEASING, INC. and BESTWAY EXPRESS, INC.,

individually and on behalf of all others similarly situated,

Petitioners,

MICHIGAN PUBLIC SERVICE COMMISSION,

MICHIGAN DEPARTMENT OF TREASURY,

MICHIGAN DEPARTMENT OF COMMERCE,

AND THE STATE OF MICHIGAN,

Respondents.

On Petition For A Writ Of Certiorari

To The Michigan Court Of Appeals

PETITION FOR A WRIT OF CERTIORARI

ROBERT E. MCFARLAND*

FOSTER, SWIFT, COLLINS &

SMITH, P.C.

32300 Northwestern Highway,

Suite 230

Farmington Hills, MI 48334

(248) 539-9900

*Counsel of Record

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

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED FOR REVIEW

May Michigan continue to assess an annual $100 per-

powered-vehicle regulatory fee, on intrastate motor carri-

ers, when the purposes and provisions of its underlying

economic regulatory act were preempted by Congress in

1995?

LIST OF PARTIES

Additional parties to the proceedings below were as

follows: (a) As plaintiffs, Prism, Inc.; El Toro, Inc.; Myriah,

Inc.; Dale Constine & Sons, Inc.; Ambassador Transporta-

tion, Inc.; Hawkins Steel Cartage, Inc.; JLH Transfer, Inc.;

Central Transport, Inc.; Bancroft Trucking Co.; U.S. Truck

Co., Inc.; West End Cartage, Inc.; Central Cartage Co.;

CTX, Inc.; Mohawk Motor of Michigan, Inc.; McKinlay

Transport, Ltd.; Universal Am-Can, Ltd.; Tom Thumb

Services, Inc., d/b/a REI; O-J Transport Company; J. Law

Enterprises, Inc.; and Alliznce of O-J Transport, Inc.; (b)

as intervening plaintiffs, The American Trucking Associa-

tions, Inc. and TNT Holland Motor Express, Inc.; and (b)

as defendants, the Commissioners and Chairman of the

Michigan Public Service Commission; the Treasurer of the

State of Michigan; and the Director of the Michigan

Department of Commerce.

RULE 29.6 STATEMENT

Petitioners, Troy Cab, Inc., Deeco Services, Inc., d/b/a

Deeco Transportation, Frank Tiberio, d/b/a Fairfield

Towing, Lafond Express, Inc., Calcut Sales & Services,

Inc., d/b/a Calcut Trucking Company, Mid-Con Freight

Systems, Inc.. H & H Enterprises, Inc., db/a S & M

Cartage, Inc., Romeo Expeditors, Inc., Westlake Transpor-

tation, Inc., VanDerKooi Carriers, Inc., Gerrig’s Trucking

& Leasing, Inc. and Bestway Express, Inc. have no parent

companies and are not owned in any respect by any

publicly-held entity. Petitioners, Economy Transport, Inc.,

and Mason & Dixon Lines, Inc. are subsidiaries of Univer-

sal Truckload Services, Inc., and are not owned in any

respect by any publicly-held entity.

ill

TABLE OF CONTENTS

Page

QUESTION PRESENTED FOR BOI oisccsicesscasseses i

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CONSTITUTIONAL AND STATUTORY PROVISIONS

— SENSES Reni Seelam 2

STATEMENT OF THE CASE... oeeseccccccccoecceccccc. 2

REASONS FOR GRANTING THE MO Aictibintcsiitees _16

A. The Michigan Courts Ignored The Letter And

Spirit Of Federal Preemption Of Intrastate

Truck Regulation ....0..........cccccsecscssssessseececcs. 17

B. All Of The Pre-Preemption Michigan Authority

Supports The Underlying Economic Regula-

tory Purpose Of The MMCA............ccccccc 23

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TABLE OF AUTHORITIES

CASES

American Airlines, Inc. v. Wolens, 513 U.S. 219, 115

S.Ct. 817, 130 L.B.2d T1656 (1985).........rcccssecrsccoscoee

Associated Truck Lines, Inc. v. Michigan Public

Service Commission, 377 Mich. 259, 140 N.W.2d

515 (1966), appeal after remand, sub. nom. 73

Mich.App. 476, 252 N.W.2d 495 (1977), appeal

after remand, 94 Mich.App. 241, 269 N.W.2d 548

(1978), remanded, 404 Mich. 808, 272 N.W.2d

LD knsdccinssspunsnnecvnnsonstutiswnesannbessninenaserincottoassaphaaabeenians

City of Columbus v. Ours Garage and Wrecker

Service, 5386 U.S. 424, 122 S.Ct. 2226, 153

Rie GG LD cseeieretsssonnsuvensannisnccssnmanvionios 16, 21, 22

Federal Armored Service v. Michigan Public Service

Commission, 204 Mich.App. 24, 514 N.W.2d 178

ED civciniivesiinninminiiainestiuhceemnnviceumebinssncnciiimmamntenionnee

Federal Express Corporation v. California Public

Utilities Commission, 936 F.2d 1075 (9th Cir.

1991), cert. denied, 504 U.S. 979, 112 S.Ct. 2956,

DED FB Oe 0 CR asec cssnnenesnsesnsssvnsanesarevevansasovene

Fidelity Federal Savings and Loan Association v. de

la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73

Di IE ID Sasiesn ytnsindessciinnsemeedinaiienmamierantbantes

Furniture Capital Truck Lines, Inc. v. Michigan

Public Service Commission, 340 Mich. 173, 65

se re Ce ctintioniiesnncinnenninnnesniesabncsncetapemnineiess

G & B Transportation Co. v. Michigan Public

Service Commission, 19 Mich.App. 379, 172

Fee I CITE itech dssabniccntisesunkapbonvanciomntbblnniiedthorns

Giaras v. Michigan Public Service Commission, 301

Mich. 262, 3 N.W.2d 268 (1942)............csccsssssssseseeees

nee 26

TABLE OF AUTHORITIES - Continued

Greyhound Corporation v. Michigan Public Service

Commission, 360 Mich. 578, 104 N.W2d 395

TT xii inserncionsianeitdeasaeuuias toca bulatieae tie te ae 26

In the Matter of Contested Case Proceedings for an

Order regarding the Michigan Motor Carrier Act,

Federal Preemption, and Continuing Jurisdiction

of the Commission, T-12738................0..eccsosccoocoseesee, 13, 24

In Re Application of Smith, 270 Mich. 343, 259

Fass RAD AEE Eiciestncinvsmccinstvadeadiibea ine tee aes 25

In Re Federal Preemption of Provisions of the Motor

Carrier Act, 223 Mich.App. 288, 566 N.W.2d 299

(1997); lv. denied, 458 Mich. 852, 587 N.W.2d 632

(1998); cert. denied, 525 U.S. 1018, 119 S.Ct. 544,

FRE Bic I i ithicktnctasnictlteatdaetn 13, 14, 23, 24, 26

In Re Joe Brown & Sons, 273 Mich. 652, 263 N.W.

Pe SE tiviaviscsccernieseunieet mi ee eee 24

J.E. Bejin Cartage Co. v. Michigan Public Service

Commission, 352 Mich. 139, 89 N.W2d 107

CIP TT sicintcindpiteinsiicie hc tiacaiasiadinaasiiene laced tana 26

Kirkby v. Michigan Public Service Commission, 320

Mich. 608, 32 N.W.2d 1 (1948)... cecccsccsscesscssseesecees 26

Michigan Intra-State Motor Tariff Bureau, Inc. v.

Michigan Public Service Commission, 200

Mich.App. 381, 504 N.W.2d 677 (1998).......ccccccccccocceeeee 25

Morales v. Trans World Airlines, Inc., 504 U.S. 374,

112 S.Ct. 2031, 119 L.Ed.2d 157 (1992).............. 5, 18, 19

Russello v. United States, 464 U.S. 16, 104 S.Ct.

296, 78 L.Ed.2d 17 (1983)............cccccccccccoccocoosceeceece, 20, 21

TABLE OF AUTHORITIES — Continued

Telischak Trucking, Inc. v. Michigan Public Service

Commission, 11 Mich.App. 23, 160 N.W.2d 592

CIEE vnsivsvessscissensahiaiusesasanseatbupmuaiaiaaacanaann lamas 26

Westlake Transportation, Inc. v. Michigan Public

Service Comm’n, 255 Mich.App. 589, 662 N.W.2d

784 (2003), appeal denied, 673 N.W.2d 752............... 1,14

Yellow Transportation, Inc. v. Michigan, 537 U.S.

36, 123 S.Ct. 371, 154 L.Ed.2d 377 (2002).................... 27

CONSTITUTIONAL PROVISIONS

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STATUTES AND REGULATIONS

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Airline Deregulation Act (ADA) of 1978, Pub. L. No.

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vii

TABLE OF AUTHORITIES - Continued

Page

Federal Aviation Administration Authorization Act

of 1994 (F4A), Pub. L. No. 103-305, Title VI, 108

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TABLE OF AUTHORITIES - Continued

Page

MISCELLANEOUS

H.R. Conf. Rep. No. 103-677, August 5, 1994... 3, 4, 5, 6, 18

B. Orlebeke, Truck Safety and Economic Regulation

of the Trucking Industry, Michigan Department

of Commerce, Office of Policy and Legislative

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PETITION FOR A WRIT OF CERTIORARI

Petitioners, Troy Cab, Inc., Deeco Services, Inc., d/b/a

Deeco Transportation, Frank Tiberio, d/b/a Fairfield

Towing, Lafond Express, Inc., Calcut Sales & Services,

Inc., d/b/a Calcut Trucking Company, Mid-Con Freight

Systems, Inc, H & H Enterprises, Inc., db/a S & M

Cartage, Inc., Economy Transport, Inc., Mason & Dixon

Lines, Inc., Romeo Expeditors, Inc., Westlake Transporta-

tion, Inc., VanDerKooi Carriers, Inc., Gerrig’s Trucking &

Leasing, Inc. and Bestway Express, Inc. respectfully

petition for a writ of certiorari to review a judgment of the

Michigan Court of Appeals.

OPINIONS BELOW

The opinion of the Michigan Court of Appeals (App. 1-

35) is reported as Westlake Transportation, Inc. v. Michi-

gan Public Service Comm’n, 255 Mich.App. 589, 662

N.W.2d 784 (2003). The trial court rulings (App. 36-72)

and the judgment of the Michigan Supreme Court denying

leave to appeal (App. 73-75) are all unreported.

JURISDICTION

The Michigan Court of Appeals decision was entered

on March 11, 2003. The judgment of the Michigan Su-

preme Court denying Petitioners’ timely Application for

Leave to Appeal was entered December 3, 2003. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1257(a).

CONSTITUTIONAL AND

STATUTORY PROVISIONS INVOLVED

The Supremacy and Commerce Clauses of the United

States Constitution, Art. VI, cl. 2 and Art. I, § 8, cl. 3,

provide in relevant part as follows:

This Constitution, and the Laws of the United

States which shall be made in Pursuance thereof

... Shall be the supreme Law of the Land; and

the judges in every State shall be bound thereby,

any Thing in the Constitution or Laws of any

State to the Contrary notwithstanding.

* * *

The Congress shall have Power ... [t]o regulate

Commerce . . . among the several States. ...

STATEMENT OF THE CASE

On August 23, 1994, President Bill Clinton signed into

law the Federal Aviation Administration Authorization Act

of 1994 (F4A), Pub. L. No. 103-305, Title VI, 108 Stat.

1604,’ Section 601 of which preempted state regulation of

“price, route, or service” of intrastate motor carriers, with

the sole exception of household goods carriers. All of the

Petitioners (with the exception of two, which later ob-

tained intrastate authority) conducted operations in

" This section was amended and recodified in part, at 49 U.S.C.

§ 14501, by the I.C.C. Termination Act of 1995, Pub. L. No. 104-88

(December 29, 1995). It formerly appeared at 49 U.S.C. § 11501(h). See,

also, 49 U.S.C. § 41713(b)(4), for the corresponding “air carrier affili-

ates” preemption language of Section 601.

Michigan intrastate commerce at the time of the preemp-

tion, and were regulated economically with the Michigan

Public Service Commission (MPSC). On January 3, 1995,

the first business day following the law’s effective date, the

Petitioners, on behalf of themselves and as class represen-

tatives for other Michigan intrastate carriers similarly

situated, commenced a class action in the Michigan Court

of Claims, challenging the continued imposition of intra-

state economic regulatory fees assessed on them at the

rate of $100 per vehicle per year through the operation of

MCL 478.2(1). According to the Act’s own terms, these fees

were “assessed against and collected from each motor

carrier for the administration of this act,” the provisions of

which had been declared preempted by operation of

federal law. A second class action was commenced on

January 9, 1995, also challenging the imposition of the

intrastate fees.’ The two actions were consolidated and the

classes certified by the Michigan Court of Claims.

At the time of the federal preemption, 41 jurisdictions,

including Michigan, regulated intrastate prices, routes,

and services of motor carriers, according to the House

Conference Report No. 103-677, August 5, 1994 regarding

the F4A. (App. 88). The Conference Report accompanying

the preemption provision of the F4A discussed existing

state regulation:

Typical forms of regulation include entry

controls, tariff filing and price regulation, and

* The class actions also challenged the imposition of certain other

fees imposed by the Michigan Motor Carrier Act including an interstate

fee mandated by MCL 478.2(2). This petition involves only the issue of

the intrastate fee.

types of commodities carried. Not all 41 States

regulate each of these aspects nor do they all

regulate them in the same manner or to the

same degree.

Entry controls at the State level vary from

liberal to strict. Strict entry controls often serve

to protect carriers, while restricting new appli-

cants from directly competing for any given route

and type of trucking business. About 26 States

strictly regulate trucking prices. Such regulation

is usually designed to insure not that prices are

kept low, but that they are kept high enough to

cover all costs and are not so low as to be ‘preda-

tory’. Price regulation also involves filing of tar-

iffs and long intervals for approval to change

prices. A company which wants to change its

prices often must go through a costly and lengthy

hearing proceeding in each State in which it op-

erates.

Id. The conferees pointed out the differing level of regula-

tion for air carriers also conducting motor carrier opera-

tions, which had been found exempt from intrastate motor

carrier regulation in Federal Express Corporation v.

California Public Utilities Commission, 936 F.2d 1075 (9th

Cir. 1991), cert. denied, 504 U.S. 979, 112 S.Ct. 2956, 119

L.Ed.2d 578 (1992). Id. (App. 89). Congress wanted to end

the competitive disadvantage which ground carriers

competing with air carriers still faced, because of intra-

state economic regulation. Jd. (App. 81, 89).

Thus, Congress, in enacting the F4A preemption,

desired to extend to all motor carriers the deregulatory

approach which had been effected by the Airline Deregula-

tion Act (ADA) of 1978, Pub. L. No. 95-405, 92 Stat. 1707

(1978). Id. (App. 81). Continuing with their statement of

purpose, the conferees explained:

Despite the movement toward deregulation

by some individual states, the conferees believe

preemption legislation is in the public interest as

well as necessary to facilitate interstate com-

merce. State economic regulation of motor carrier

operations causes significant inefficiencies, in-

creased costs, reduction of competition, inhibition

of innovation and technology and curtails the ex-

pansion of markets.

House Conference Report at p. 87. (App. 90).

In the preemption of laws “related to price, route, or

service of any motor carrier”, the conferees were careful to

note the wide swath of the preemptive statute. They

underscored that:

In substituting the word ‘related’ for the prior

: word ‘relating’ and the word ‘price’ for the word

‘rates’ we are intending no substantive change to

the previously enacted preemption provision in

; Section 105 of the Federal Aviation Act and do

‘ not intend to impair the applicability of prior ju-

dicial case law interpreting these provisions. In

: particular, the conferees do not intend to alter

the broad preemption interpretation adopted by

the United States Supreme Court in Morales v.

Trans World Airlines, Inc., 504 U.S. 374, 112

S.Ct. 2031, 119 L.Ed.2d 157 (1992).

Id. (App. 81). The Act itself left a few areas untouched

by the preemption including certain specified “safety

regulatory authority” over vehicles, 49 U.S.C.

§ 14501(c)(2)(A); the transportation of household goods,’

49 U.S.C. §14501(c)(2)(B); so-called non-consensual

towing operations, 49 U.S.C. § 14501(c)(2)(C); and certain

articulated state standard transportation practices con-

cerning uniform cargo liability rules, uniform bills of

lading, uniform cargo credit rules, and antitrust immunity

for joint line rates or for household goods agent van line

operations, 49 U.S.C. § 14501(c)(3)(A)(i)-(v). (App. 76-77).

With regard to this residue of state regulatory authority,

the conferees issued a cautionary statement:

The conferees do not intend the regulatory

authority which the States may continue to exer-

cise ... to be used as a guise for continued eco-

nomic regulation as it relates to prices, routes or

services.

Conference Report at p. 84. (App. 83).

According to the statute itself, with respect to safety,

the preemptive effect:

... Shall not restrict the safety regulatory au-

thority of a State with respect to motor vehicles,

the authority of a State to impose highway route

controls or limitations based on the size or

weight of the motor vehicle or the hazardous na-

ture of the cargo, or the authority of a State to

regulate motor carriers with regard to minimum

amounts of financial responsibility relating to

* This class action does not involve in any respect carriers of

household goods, still economically regulated by Michigan, and

exempted by the preemption.

insurance requirements and self-insurance au-

thorization ...

49 U.S.C. § 14501(c)(2)(A). (App. 76). (Emphasis supplied).

Significantly, the authority of a state to regulate motor

carriers themselves was only mentioned in the statute

“with regard to minimum amounts of financial responsibil-

ity relating to insurance requirements and self-insurance

authorization.” There was safety regulatory authority

conferred on the states with respect to “motor vehicles,”

not “motor carriers”. The MPSC assesses the intrastate

regulatory fee only on regulated intrastate carriers, albeit

on a per-vehicle basis, not on commercial motor vehicles

generally. The MMCA says the $100 is a fee, not a tax, at

MCL 478.2(1). (App. 103).

The fee structure is part of the strict regulatory

regime of the Michigan Motor Carrier Act (MMCA), passed

in 1933. The word “safety” does appear once in the Act’s

title. However, the Act regulated only “carriers of property

for hire” in its title. (See App. 93). The MMCA’s title

indicates the legislation is “to preserve, foster, and regu-

late transportation and permit the coordination of motor

vehicle transportation facilities.” The law is designed “to

classify and regulate carriers of property by motor vehicles

for hire upon such public highways for such purposes... ”

Id. It is structured:

... to insure adequate transportation service; to

give the commission jurisdiction and authority to

* At the time of the Act’s passage, it regulated both motor carriers

of property and passengers. Passenger regulation was transferred to

another state agency in 1982.

fix, alter, regulate, and determine rates, fares,

charges, classifications, and practices of common

motor carriers for such purposes; to require filing

with the commission of rates, fares, and charges

of contract carriers and to authorize the commis-

sion to prescribe minimum rates, fares, and

charges...

Id.

The Michigan Legislature declared its purpose in

enacting the MMCA at MCL 475.2 (App. 94). Again, the

word “safety” is mentioned at MCL 475.2(b), in only one of

14 enumerated purposes. Those other purposes include

such economic regulatory designs as the promotion of

“efficient transportation services,” the meeting of the

needs of “shippers, receivers, and consumers,” the allow-

ance of “a variety of quality, price, and service options,” the

allowance of “the most productive use of equipment,” the

provision “for efficient and well-managed motor carriers to

earn adequate profits,” the promotion of “intermodal

transportation,” the prevention of “unjust discrimination,”

the maintenance of “service to small communities and

small shippers,” the promotion of “entrepreneurship in the

motor carrier industry by allowing greater contract carrier

economic and entry flexibility,” and the promotion of

“jointly considered and initiated rates.” See MCL 475.2(c),

(d), (e), (f), (g), (h), (i), (kK), (m), and (n). These purposes all

had as their root the regulation of price, route, and service

of the motor carrier industry. Even that one mention of

safety is limited to for-hire carriers only, thus excluding

from the scope of MPSC regulation all private fleets which

carry their own goods. Numerous other classes of vehicles

are exempted from the Act as delineated at MCL 479.2,

including transporters of logs, raw milk, agricultural

products, disabled motor vehicles from the location of an

accident, recyclable materials, fertilizers, and certain sand

and gravel shipments. Similarly, local transportation,

defined as operations within eight miles of the boundary of

a city or village, was deregulated for all but the City of

Detroit. The “safety” concerns of the Legislature did not

extend to such operations, because the focus of the Legis-

lature was on economic regulation.

The Michigan Legislature established an elaborate

process for motor carriers to obtain required certificates as

a common carrier at MCL 476.5 (App. 95). Existing carri-

ers were allowed to “protest” an application and demon-

strate that “the service proposed will create excess service

inconsistent with the public interest.” Id. Again, the word

“safety” is found at MCL 476.5(1)(a), as a small component

of a complicated application process. An important “re-

quired” public purpose component was in the MMCA

which had to be demonstrated through the presentation of

evidence by supporting shippers that additional motor

carrier service was required. See MCL 476.5(1)(c) (App.

95). It was mandated that the Commission consider not

only the transportation policy, but also:

Whether the service proposed will create ex-

cess service inconsistent with the public interest.

The commission shall not find diversion of reve-

nue or traffic from an existing motor carrier to be

in and of itself inconsistent with the public inter-

est.

MCL 476.5(2)(c) (App. 96). Certificates of authority

granted to common carriers were even divided into three

separate classes. MCL 476.5(6). (App. 97). Those classes

included those carriers operating over fixed routes, those

carriers operating within an eight-mile radius of a city

having a population of 500,000 or more (Detroit), and

certificates issued to all other motor common carriers. Id.

Common carriers holding authority were required to

keep tariffs on file. The MMCA prohibited predatory rates.

Joint rates over through routes were authorized for

carriers. MCL 476.6 (App. 98). All common carrier rates

were required to be “just and reasonable”. MCL 476.7

(App. 99). Rates could not “be unjustly discriminatory,

prejudicial, or preferential.” Jd. In making a determination

as to whether rates were just and reasonable, the MMCA

directed:

The commission shall take into account reason-

able estimated or foreseeable future costs in de-

termining whether rates, fares, and charges meet

the requirements of this subsection.

Id. Finally, carriers were required to charge the rates

contained in their tariffs filed with the MPSC. MCL

476.7(2) (App. 99). Refunds or remittances from those

rates were prohibited. MCL 476.7(3) (App. 99-100).

Contract carriers were distinguished from common

carriers. These carriers had a similar labyrinth of regula-

tions to negotiate. Again, contract carrier applications

were required to have shipper support. The Commission

again looked at the transportation policy at MCL 477.2

(App. 100). The Commission was also required to look at

whether the proposed operation of the contract carrier

“strictly conform[ed] with the definition of a motor con-

tract carrier.” MCL 477.2(1)(a) (App. 100). Safety was only

a minor component of that entire process.

Once a contract carrier had received authority, it also

was required to file its rates with the Commission. MCL

477.6 (App. 101). Contract carriers were also required to

make “available to the commission its complete contract or

contracts.” MCL 477.6(2) (App. 101-102). The MMCA

directed the Commission to “promulgate rules covering the

filing with the commission of the charges, and the opera-

tions of motor contract carriers in competition with motor

common carriers over the highways of this state.” MCL

477.6(1). (App. 101). The MPSC was again required in the

case of contract carrier rates to ensure that such rate

filings were not “predatory.” MCL 477.6(2) (App. 102). The

MPSC was even given the power in the MMCA to establish

“a prescribed minimum rate” for contract carriers. MCL

479.6(2)(b) (App. 102).

For the administration of this complex economic

regulatory act, carriers were assessed the annual intra-

state fee challenged here of $100 for each self-propelled

motor vehicle. MCL 478.2(1). (App. 103). The fee of $100

per power unit added up to substantial sums in the opera-

tion of larger carriers. In the case of United Parcel Service,

Inc., those amount to well over $100,000 per year. It is

termed a fee, not a tax. Id. The Court of Claims was

presented with uncontroverted evidence that those carri-

ers affiliated with class representative Economy Trans-

port, Inc. had expended over $50,000 per year from 1982

through 1994, the year prior to the F4A’s effective date. A

Michigan Senate agency report presented to the Court of

Claims revealed that, for the state fiscal years from 1982-

1983 through 1994-1995, the MMCA had generated fee

revenues of $63,861,600.

A separate agency, the Motor Carrier Division of the

Michigan State Police, is charged with the responsibility

for safety regulation of commercial motor vehicles on

Michigan highways. That division of the State Police

administers an entirely separate law, the Motor Carrier

Safety Act of 1963, MCL 480.11(a), et seq. Its jurisdiction

extends not just to intrastate for-hire trucking companies,

but to all commercial motor vehicles on the roads in

Michigan, as well as their operators. The Michigan De-

partment of Commerce, the department of which the

Michigan Public Service Commission was then a part,

commissioned its own study in November of 1992, entitled

Truck Safety and Economic Regulation of the Trucking

Industry by Britany Orlebeke. This report noted that:

MPSC regulates only segments of the for-hire

transportation of property within the state.

There are numerous exemptions to economic

regulation, none of which are motivated by safety

concerns.

Orlebeke, supra, at p. 32. On the other hand, the State

Police regulated “all commercial vehicles.” Jd. (Emphasis

in original). The report further noted that:

Most of the [MPSC] Motor Carrier Regulation

Division’s energy is spent supporting economic

regulation and its contributions to safety we

have already discussed.

Id. That study concluded that economic regulation con-

tributed only marginally to motor carrier safety, by pro-

moting an ethical atmosphere which was not “the most

effective nor the most efficient way to ensure that truck

companies operate safely.” Orlebeke, supra, Executive

Summary. The Orlebeke report was part of the record

before the Court of Claims.

On January 11, 1995, days after the commencement of

these consolidated class actions, the MPSC issued an order

in a contested case proceeding initiated sua sponte by the

Commission that “it continues to possess substantial

eS ee ae ee

regulatory authority over intrastate motor carriage ... ”

(In the Matter of Contested Case Proceedings for an Order

regarding the Michigan Motor Carrier Act, Federal Pre-

emption, and Continuing Jurisdiction of the Commission,

T-1273 at p. 24). This administrative proceeding had been

commenced on September 8, 1994, and consisted of two

days of administrative hearings on October 31 and No-

vember 1, 1994, as well as briefing by the parties. The

January 11 order of the Commission accepted its staff’s

own conclusions on every issue on which the MPSC made

a determination in that first holding, including the issue of

the continued validity of the intrastate fee involved here.”

The MPSC rushed to judgment, then, in order to preserve

its fee structure and continued regulatory power. An

appeal of that administrative agency decision is governed

by Michigan statute, with:

... appellant’s burden to show by clear and sat-

isfactory evidence that the order of the PSC com-

plained of is unlawful or unreasonable. ... This

Court gives due deference to the PSC’s adminis-

trative expertise and will not substitute its

judgment for that of the PSC, particularly in leg-

islative matters such as setting rates.

In Re Federal Preemption of Provisions of the Motor

Carrier Act, 223 Mich.App. 288, 295, 566 N.W.2d 299

(1997); lv. denied, 458 Mich. 852, 587 N.W.2d 632 (1998);

cert. denied, 525 U.S. 1018, 119 S.Ct. 544, 142 L.Ed.2d

* The Commission did hold open for decision two issues on which it

indicated that additional testimony was required — collective rate

making and the MMCA leasing provisions, and ultimately differed from

staff in its decision regarding preemption on those two issues in a

decision issued on May 18, 1995, not involved here.

452. In their complaint in the Court of Claims, Petitioners

had sought an impartial interpretation as to the continued

propriety of the intrastate fee, in the wake of the federal

preemption of economic regulation. A motion for summary

disposition was filed by Petitioners in the summer of 1995,

with oral argument on those motions taking place on

September 28, 1995. Later that fall, defendants filed a

motion for summary disposition, with oral arguments

heard on November 16, 1995. The Court of Claims subse-

quently issued an order dated November 12, 1998 (App.

51-53), based on its written opinion dated October 13, 1998

(App. 36-50), denying plaintiffs’ motion for summary

disposition on the intrastate claim.° Then, on December

30, 1998, the Court of Claims issued an order granting

defendants’ motion for summary disposition (App. 54-56),

to which plaintiffs filed a motion for reconsideration on

January 13, 1999. That motion was denied by the Court of

Claims on March 7, 2000. (App. 57-72).

Thereafter, the Michigan Court of Appeals affirmed

the Court of Claims decision in Westlake Transportation,

Inc. v. Michigan Public Service Comm’n, 255 Mich.App.

589, 662 N.W.2d 784 (2003), appeal denied, 673 N.W.2d

752. (App. 1-36). The Court of Appeals relied upon its

earlier affirmance of the MPSC decision In Re Federal

Preemption in affirming, as had the Court of Claims

* The Court of Claims also denied the motion for summary

disposition on the interstate decal fee, not the subject of this petition, at

the same time.

below.’ The Michigan Supreme Court denied leave to

appeal (App. 74-76).

The Court of Appeals and the Court of Claims simply

ignored the Congressional history of the F4A preemption,

in rejecting Petitioners’ claims. This is an instance where a

state has ignored the plain effect of federal preemption

legislation in order to protect its revenue sources.

Michigan, along with one other state, West Virginia,

continues to assess a regulatory fee of anywhere near this

magnitude (App. 105-110, presented to the Court of

Claims). Only two other states, Ohio and Idaho, charge a

per vehicle fee for intrastate carriers which exceeds the

$10 per vehicle maximum contained at 49 U.S.C. § 14504

for registration of interstate carriers’. Again, the only

direct safety regulatory authority left to the states by

Section 601 over motor carriers is insurance filings, the

same function for interstate carriers which leads to a $10

maximum per vehicle fee. The Michigan intrastate regula-

tory fee, then, of $100 per vehicle per year assessed

against intrastate motor carriers represents the same kind

’ Discovery had not closed in the Court of Claims when the

tribunal issued its summary disposition order. In fact, the court had

ordered that discovery was not to close until six months after its

summary disposition order was to be handed down. In this case, the

parties had agreed amongst themselves, with full knowledge and

approval of the Court of Claims as evidenced by the allowance of six

months to conduct discovery after the Court of Claims ruled on the

summary disposition motions, that they would await the court's

issuance of orders on the summary disposition motions that had been

placed before the court some three years earlier in the belief that the

court’s ruling would distill down the issues in the case.

* Ohio charges $30 per year per vehicle and Idaho charges $21 per

year. (App. 105-110).

of burden that Congress aimed to eliminate when it passed

Section 601 of the F4A in the summer of 1994. Despite the

prompt legal challenges initiated over nine years ago to

the continued imposition of those regulatory fees, the

courts of Michigan, using precedent involving the affir-

mance of a truncated and rushed administrative agency

decision designed to protect its own fund raising mecha-

nism, has allowed those fees to continue to be charged ever

since.

REASONS FOR GRANTING THE WRIT

This case represents a direct affront by a state to a

clear Congressional mandate of federal preemption of

intrastate laws regulating price, route, or service of

intrastate motor carriers, and is contrary to this Court’s

recent determination in City of Columbus v. Ours Garage

and Wrecker Service, 536 U.S. 424, 442, 122 S.Ct. 2226,

153 L.Ed.2d 430 (2002) that regulation “not genuinely

responsive to safety concerns garners no exemption” from

the preemption. The Michigan Motor Carrier Act was over

60 years old at the time of the federal preemption. It has

always been rooted in economic regulatory principles

which pitted carrier against carrier and, more occasionally,

carrier against shipper, in battles over entry, competition,

and price in the trucking industry. That Congress left to

the states in Section 601 certain specified residual author-

ity over safety of motor vehicles, and insurance filing by

motor carriers themselves, did not give license to the State

of Michigan to continue to impose the $100 per vehicle per

year regulatory fee for the purposes contained in the

MMCA, virtually all of which had been preempted by the

F4A. Michigan’s actions ignore an Act of Congress which

Pn ticle SRO aa ota Bh ARREARS SORA RI het

was a valid exercise of federal powers under the Com-

merce Clause. Michigan should not be allowed to continue

to burden interstate commerce with a fee which had been

designed to support an elaborate economic intrastate

regulatory structure. Michigan also puts motor carriers

which compete with air carriers, such as United Parcel

Service, at a continuing competitive disadvantage, directly

contrary to the Congressional intent behind the preemp-

tion in the first place. The writ should be granted.

A. The Michigan Courts Ignored The Letter And

Spirit Of Federal Preemption Of Intrastate

Truck Regulation

The Supremacy Clause of the U.S. Constitution, Art.

VI, cl. 2, provides that United States statutes “shall be the

supreme Law of the Land; ... any Thing in the Constitu-

tion or Laws of any State to the Contrary notwithstand-

ing.” This provision is the foundation of preemption

analysis. Determination of preemption questions requires

an examination of the “ultimate touchstone,” Congres-

_ sional intent. As the Supreme Court stated in Fidelity

Federal Savings and Loan Association v. de la Cuesta, 458

U.S. 141, 152-153, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982),

preemption may be either express or implied, and is

“‘compelled whether Congress’ command is explicitly

stated in the statute’s language or implicitly contained in

its structure and purpose.’” An examination of the Con-

gressional purpose points to the clear error of the state

courts below in finding the intrastate regulatory fees not

preempted.

With regard to intent, Congress made certain express

findings when it passed the federal preemption of state

regulation of price, route, or service of motor carriers. As

set forth in the F4A, Congress determined:

(1) the regulation of intrastate transportation

of property by the States has —

(A) imposed an unreasonable burden on

interstate commerce;

(B) impeded the free flow of trade, traffic,

and transportation of interstate com-

merce; and

American consumers...

108 Stat. 1605. By continuing to assess the onerous

annual regulatory fees on intrastate motor carriers from

what was an economic regulatory statute, Michigan

continues to impose an unreasonable burden on interstate

commerce, impede the free flow of trade, and place an

unreasonable cost on American consumers, just as Con-

gress found with the state economic regulation of motor

carriers generally, at the time that the preemption legisla-

tion was enacted.

Congress particularly indicated in the legislative

history that it desired to accomplish the same broad

preemption of state regulation that it had wrought in the

earlier deregulation of airlines. H.R. Conf. Rep. No. 103-

677, supra, at p. 83. Congress even cited the Supreme

Court’s Morales decision, supra, and its desire to follow

“the broad preemption interpretation” of that case. H.R.

Conf. Rep. No. 103-677, supra, at p. 83. Morales involved

an injunction action brought by the airlines which sought

to prevent enforcement of state deceptive practices laws

against their advertising. In ruling that the state

guidelines concerning such fair advertising had been

expressly preempted by the ADA, the Supreme Court

emphasized that the key “relating to” phrase in the Act

was “a broad one ... and the words thus express a broad

preemptive purpose.” Morales, supra, at 383. The court

further proclaimed:

... State enforcement actions having a connec-

tion with or reference to airline ‘rates, routes, or

services’ are pre-empted under 49 U.S.C.App.

§ 1305(a)(1).

Morales, supra, at 384. Thus, the state attempts to regu-

late airline advertising fell in the face of the federal

preemption.

This Court encountered a second case involving the

meaning of the ADA preemption shortly after the F4A

motor carrier preemption had taken effect, in American

Airlines, Inc. v. Wolens, 513 U.S. 219, 115 S.Ct. 817, 130

L.Ed.2d 715 (1995). In that case, the Supreme Court ruled

on a case commenced by frequent flyer members against

an airline for violations of a state consumer fraud act and

also for breach of contract. This Court in Wolens allowed

the breach of contract action to survive, while declaring

preempted the claim based on the state consumer fraud

law. With respect to the claim grounded in the consumer

fraud statute, the Court stated:

American maintains, and we agree, that

‘Congress could hardly have intended to allow

the States to hobble [competition for airline pas-

sengers] through the application of restrictive

state laws.’

Wolens, supra, 513 U.S. at 228. On the other hand, the

state law breach of contract action was viewed by the

Court in Wolens as an action to determine whether an

atmeapiniipanncien™

a”

airline’s own contractual undertakings have been

breached, which had nothing to do with restrictive state

enforcement.

The residual safety regulatory authority of the state

does not save the intrastate economic regulatory fee from

the broad preemption of the F4A in this case. That remain-

ing state regulatory authority is delineated at 49 U.S.C.

§ 14501(c)(2)(A). According to the statute’s own terms, the

preemption does not affect a state’s safety regulatory

authority with respect to: 1) “motor vehicles;” 2) “highway

route controls or limitations based on the size or weight of

the motor vehicle or the hazardous nature of the cargo;” or

3) the regulation of “motor carriers with regard to mini-

mum amounts of financial responsibility relating to

insurance requirements and self-insurance authorization.”

Id. (App. 76). Thus, the state has authority over “motor

vehicles” with respect to safety, size and weignt, route

controls, and hazardous cargo limitations. The state has

authority remaining over “motor carriers” only with

respect to insurance issues. The MMCA imposes the

intrastate fee, however, on motor carriers. It does not have

the authority to do so.

This use of disparate language, giving the states

authority over motor vehicles at one point in this section

and over motor carriers in another, must be presumed to

be intentional. See, in this regard, Russello v. United

States, 464 U.S. 16, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983).

As the court there stated, at 464 U.S. 23:

‘(W]here Congress includes particular language

in one section of a statute but omits it in another

section of the same Act, it is generally presumed

that Congress acts intentionally or purposely in

the disparate inclusion or exclusion.’

aetna

a eee

That is the situation here. Congress chose to confer au-

thority to the states over motor carriers only on the subject

of insurance. It could have provided state authority over

motor carriers with regard to both safety and the other

subjects, but did not do so.

Of course, this Court examined the Russello exception

in a recent decision involving the interpretation of-the

scope of exceptions to the F4A preemption, that being Ours

Garage, supra. In that case, the court held that 49 U.S.C.

§ 14501(c)(2)(A) (App. 76) “ ... spares from preemption

local as well as state regulation.” 536 U.S. 442. This was

true even though political subdivisions of states had not

been mentioned in the “safety authority” exception as they

had been at several other points in the F4A preemption. In

discussing the Russello precedent, the Supreme Court

stated:

The Russello presumption — that the presence of

a phrase in one provision and its absence in an-

other reveals Congress’ design — grows weaker

with each difference in the formulation of the

provisions under inspection.

536 U.S. 435-436. In the instant provision, the same

distinction does not apply. The disparate language is used

in the very same subsection, 49 U.S.C. § 14501(c)(2)(A).

That provision leaves authority to the states and, after

Ours Garage, their political subdivisions, with respect to

motor vehicles, on the subject of safety, highway route

controls, and hazardous cargo, and, with respect to motor

carriers, on insurance filings. There are not the numerous

differences in formulation that the Court noted in Ours

Garage. Neither do the other reasons stated in Ours

Garage for disregarding the Russello presumption arise.

The fee thwarts the broad regulatory effect of the

preemption intended by Congress. It also continues to

place ground carriers at a competitive disadvantage with

air carriers, which are not required to pay the annual fee.

Michigan still has safety authority over vehicles. That

safety authority is exercised by a separate state agency,

the Motor Carrier Division of the Michigan State Police,

which administers the separate Motor Carrier Safety Act

of 1963, MCL 480.11(a), et seg. The provisions of that Act

apply to the operation of all commercial motor vehicles on

Michigan highways and not just for-hire intrastate carri-

ers. Similarly, the size and weight laws are enforced by the

Michigan State Police, as well as political subdivisions of

the state. The MPSC still has the authority, under the

plain language of the preemption, to require insurance

filings to be made and for carriers to register their intra-

state operations, which they do. There is certainly no

justification, however, for the MPSC to impose on intra-

state carriers the regulatory fee of $100 per self-propelled

vehicle annually, when the registration fee for interstate

carriers cannot exceed $10 per vehicle per year for the

filing of satisfactory proof of required insurance with the

states. See 49 U.S.C. § 14504(c)(2)(B)(iv)(3). At a fee ten

times that level, Michigan still continues to burden inter-

state commerce through the assessment of an intrastate

economic regulatory fee, when Michigan is no longer

regulating motor carriers economically.

As this Court stated in Ours Garage, supra, at 536

U.S. 442:

We reiterate that § 14501(c)(2)(A) shields from

preemption only ‘safety regulatory authority’

(and ‘authority of a State to regulate ... with

POP IIE BE ig Fart,

regard to minimum amounts of financial respon-

sibility relating to insurance requirements’). Lo-

cal regulation of prices, routes, or services of

tow trucks that is not genuinely responsive to

safety concerns garners no exemption from

§ 14501(c)(1)’s preemption rule.

The Supreme Court further noted that it was expressing

no opinion on the issue of whether the regulations of the

municipality in that case qualified in whole or part for the

preemption exemption.

The economic regulatory fee contained in the MMCA,

imposed by the Michigan statute’s own terms “from each

motor carrier for the administration of this act,” flies

defiantly in the face of the federal preemption. It prevents

an even playing field for air and ground carriers. It should

have been held preempted below.

B. All Of The Pre-Preemption Michigan Authority

Supports The Underlying Economic Regulatory

Purpose Of The MMCA

The Michigan courts below relied upon a single case,

In Re Federal Preemption, supra, in finding that the

intrastate fee had not been preempted. This precedent,

again, involved a challenge to an administrative proceed-

ing commenced by the MPSC within days of the enactment

of the F4A preemption, which proceeding had as its clear

purpose from the outset the preservation of the economic

regulatory fees generated by the MMCA as well as the

maximum protection of the MPSC’s jurisdiction and role.

It was the burden of appellants in that case, pursuant to

the state standard for appellate review of decisions from

that agency, “to show by clear and satisfactory evidence

that the order of the PSC complained of is unlawful or

unreasonable.” 223 Mich.App. 295. As the MPSC itself

summarized the position of its staff in the administrative

proceeding:

The Staff takes the position that, based on

(1) the language of Section 601, (2) statements

found in the August 5, 1993 Conference Report

issued by Congress in conjunction with the FAA

Act (Conference Report), and (3) federal court

rulings concerning similar legislation, the pre-

emptive effect of Section 601 is relatively narrow.

T-1273, p. 5. (Emphasis supplied). The MPSC reflexively

endorsed its own staff’s view, despite the fact that it was

directly contrary to Congressional intent about the scope

of the preemption. The Michigan courts rubber-stamped

the same. They did so without a review of their own past

decisions interpreting that Act.

The MMCA became effective on October 17, 1933, in

the middle of the Great Depression. The Michigan Su-

preme Court shortly had occasion to examine a decision

under the then new Act, In Re Joe Brown & Sons, 273

Mich. 652, 263 N.W. 887 (1935), which case, although

turning on procedural grounds, involved the question of

whether an applicant should be awarded authority to

transport iron and iron products generally between Mus-

kegon, Grand Rapids, and Detroit and various points or be

limited within such geographical territory to the transpor-

tation of only certain types of iron and iron products (coil

springs, sheet steel, scrap iron, scrap metals, and used

machinery). In Re Joe Brown was a portent of the cases to

come. One proceeding, Associated Truck Lines, Inc. v.

Michigan Public Service Commission, 377 Mich. 259, 140

N.W.2d 515 (1966), appeal after remand, sub. nom. 73

Mich.App. 476, 252 N.W.2d 495 (1977), appeal after

a gS Wee ee

remand, 94 Mich.App. 241, 269 N.W.2d 548 (1978), re-

manded, 404 Mich. 808, 272 N.W.2d 563, a transfer of

operating rights proceeding involving the issue of whether

a carrier, Yellow Transit Freight Lines, Inc., had aban-

doned its Michigan intrastate authority prior to attempt-

ing to transfer the same, lasted nearly 18 years and, in

addition to the published opinions referenced, was the

subject of numerous unpublished opinions by the appellate

court of first review. The focus of such cases was entirely

economic.

That emphasis did not change until the time of the

MMCA’s preemption. See, in this regard, Michigan Intra-

State Motor Tariff Bureau, Inc. v. Michigan Public Service

Commission, 200 Mich.App. 381, 504 N.W.2d 677 (1993),

involving the propriety of an MPSC order revoking ap-

proval on the part of certain organizations to conduct

collective rate making, and Federal Armored Service uv.

Michigan Public Service Commission, 204 Mich.App. 24,

514 N.W. 2d 178 (1994), interpreting the meaning of the

term “demonstrated public need” and the quality of ship-

per support evidence required for a proposed new motor

carrier service, as well as that applicant’s financial fitness.

Indeed, over the MMCA’s 60-plus years, all decisions

turned on the economic regulation which Congress in-

tended to preempt through Section 601 of the F4A.” The

* See, also, In Re Application of Smith, 270 Mich. 343, 345, 259

N.W. 119 (1935), in which the Michigan Supreme Court rejected

appellant’s argument that the Commission’s findings “amount[ed] to a

stifling of legitimate competition”; Giaras v. Michigan Public Service

Commission, 301 Mich. 262, 3 N.W.2d 268 (1942), in which at issue was

the propriety of the Commission’s denial of an application for authority

based on adequate service already received from protesting carriers;

(Continued on following page)

courts below were wrong to rest their decisions on the

appeal in In Re Federal Preemption of Provisions of the

Motor Carrier Act, supra, a decision which particularly

noted that “the PSC does not possess the power to deter-

mine the constitutionality of statutes, and direct chal-

lenges to the constitutionality of statutes belong in a

different forum.” Jd. at 203. The courts below, as did the

precedent upon which they relied, ignored the language of

Congress and their own past decisions in straining to

convert an economic regulatory fee into a safety regulatory

fee, when the only safety regulation which remained for

existing intrastate carriers was the filing of insurance.

To rectify this blatant affront to the primacy of a

Kirkby v. Michigan Public Service Commission, 320 Mich. 608, 32

N.W.2d 1 (1948), in which at issue was the question of whether the

MPSC could issue a certificate of authority greater than that applied

for; Furniture Capital Truck Lines, Inc. v. Michigan Public Service

Commission, 340 Mich. 173, 65 N.W.2d 303 (1954), in which the issue

addressed was the validity of a Commission order revoking a permit for

non-use; J.E. Bejin Cartage Co. v. Michigan Public Service Commission,

352 Mich. 139, 89 N.W.2d 107 (1958), in which the issue involved was

prior abandonment or discontinuance of authority in a transfer case;

Greyhound Corporation v. Michigan Public Service Commission, 360

Mich. 578, 104 N.W.2d 395 (1960), where the issue was a grant of an

extension of authority to United Parcel Service, Inc. and whether it was

a contract, as opposed to a common carrier; Telischak Trucking, Inc. v.

Michigan Public Service Commission, 11 Mich.App. 23, 160 N.W.2d 592

(1968), which had to do with a complaint proceeding and whether a

carrier’s authority contained a commodity restriction as opposed to a

job site delivery restriction; and G & B Transportation Co. v. Michigan

Public Service Commission, 19 Mich.App. 379, 172 N.W.2d 898 (1969),

where the Commission interpreted what shipments were authorized

‘ under a grant of authority reading Grand Rapids and vicinity. These,

and every other published appellate court decision, support the

economic regulatory purpose of the MMCA and the fee which it

generated.

mre

eee ey ee ee ee ee ee Ee ee ee Se ee ee ee ae eee

Congressional statute involving interstate commerce, and

the concomitant negative effect thereon by intrastate

economic regulation of the motor carrier industry, a writ

should issue.

CONCLUSION

The MMCA calls for “fees,” not taxes, to be imposed on

motor carriers for the administration of an intrastate

economic regulatory act, preempted by Section 601 of the

F4A. These fees amount to tens and even hundreds of

thousands of dollars per year for the largest carriers. As

they impose additional costs on providing intrastate

transportation in Michigan, they burden interstate com-

merce, just as much as did the economic regulation which

the fees were designed to support. They prevent ground

carriers from competing on a fair basis with air carriers.

Michigan should not be allowed to continue this disregard

of federal preemption, any more than was the case in

Yellow Transportation, Inc. v. Michigan, 537 U.S. 36, 123

S.Ct. 371, 154 L.Ed.2d 377 (2002). This Petition for a Writ

of Certiorari should be granted.

Respectfully submitted,

ROBERT E. MCFARLAND*

FOSTER, SWIFT, COLLINS &

SMITH, P.C.

32300 Northwestern Highway,

Suite 230

Farmington Hills, MI 48334

(248) 539-9900

*Counsel of Record

App. l

APPENDIX A

STATE OF MICHIGAN

COURT OF APPEALS

WESTLAKE TRANSPORTATION, FOR PUBLICATION

INC., VANDERKOOI CARRIERS, March 11, 2003

INC., EL TORO MOTOR FREIGHT, 9:00 a.m.

INC., MYRIAH, INC., PRISM, INC.,

GERRIGS TRUCKING & LEASING,

INC., and BEST WAY EXPRESS, INC.,

Plaintiffs-Appellants,

and

AMERICAN TRUCKING

ASSOCIATION, INC. and TNT

HOLLAND MOTOR EXPRESS, INC.,

Intervening Plaintiffs-Appellants,

‘ No. 226052: 226122

MICHIGAN PUBLIC SERVICE ai

COMMISSION, DEPARTMENT

OF TREASURY, and the STATE

OF MICHIGAN,

Defendants-Appellees.

TROY CAB, INC., DEECO SERVICES,

INC., d/b/a DEECO TRANSPORTA-

TION, TIBERIO FRANK, d/b/a

FAIRFIELD TOWING, ELEX, INC.,

d/b/a LAFOND EXPRESS, DALE

CONSTINE & SONS, INC., CALCUT

SALES & SERVICES, INC., d/b/a

CALCUT TRUCKING COMPANY,

App. 2

AMBASSADOR TRANSPORTATION,

INC., HAWKINS STEEL CARTAGE,

INC., MIDCON FREIGHT SYSTEMS,

INC., JUH TRANSFER, INC., H & H

ENTERPRISES, INC., d/b/a S & M

CARTAGE, INC., CENTRAL

TRANSPORT, INC., BANCROFT

TRUCKING COMPANY, US TRUCK

COMPANY, INC., WEST END

CARTAGE, INC., CENTRAL

CARTAGE COMPANY, CTX, INC.,

MOHAWK MOTOR MICHIGAN,

INC., ECONOMY TRANSPORT,

INC., MCKINLAY TRANSPORT

LIMITED, MASON & DIXON LINES,

INC., UNIVERSAL AMCAN

LIMITED, ROMEO EXPEDITERS,

INC., TOM THUMB SERVICES,

INC., d/b/a REI, OJ TRANSPORT

COMPANY, JLAW ENTERPRISES

INC., and OJ TRANSPORT, INC.,

Plaintiffs-Appellants,

and

AMERICAN TRUCKING

ASSOCIATION, INC., and TNT

HOLLAND MOTOR EXPRESS, INC.,

Intervening Plaintiffs-Appellants,

v No. 226053; 226137

MICHIGAN PUBLIC SERVICE an ee mati tone

COMMISSION, DEPARTMENT OF |

TREASURY, DEPARTMENT OF

COMMERCE, and the STATE OF

MICHIGAN, Updated Copy

Defendants-Appellees. May 9, 2003

NS ee

App. 3

Before: Markey, P.J., and Saad and Smolenski, JJ.

SMOLENSKI, J.

In these consolidated class actions, plaintiffs, individ-

ual class-representative trucking companies, and interven-

ing plaintiffs, two trucking companies, appeal by right

from a December 30, 1998, judgment of the Court of

Claims that granted summary disposition in favor of

defendants. The appeals were consolidated. We affirm.

This case involves the effect of several federal laws,

specifically 49 USC 11501, 49 USC 11506, and subsection

601(h) of the Federal Aviation Administration Authoriza-

tion Act of 1994 (FAAAA), PL 103-105, subsection 601(h),

on various provisions of Michigan’s Motor Carrier Act

(MCA), MCL 475.1 et seq. This litigation began on January

3, 1995, when plaintiffs Westlake Transportation, Inc., et

al., filed their complaint, alleging that the state’s $100

annual fees for interstate and intrastate motor carriers

were unconstitutional because federal laws, 49 USC 11506

and 49 USC 11501, respectively, preempted the state laws.

On January 9, 1995, Troy Cab, Inc., et al., filed their

complaint, and made similar allegations.

In Michigan, since 1933, motor-carrier regulation has

been pursuant to the Michigan MCA. The act authorizes

the Michigan Public Service Commission (PSC) to enforce

the act. MCL 475.1(c); MCL 475.2. Under the MCA, motor

carriers must pay a fee of $100 for each application filed

with the commission for a certificate of authority or for a

permit to operate intrastate. MCL 478.1. Also, motor

carriers are required to pay an annua! fee of $100 a vehicle

App. 4

for the administration of the act. MCL 478.2(1) and (2).

Subsection 1 applies to motor-carrier vehicles that operate

intrastate pursuant to a certificate of authority, while

subsection 2 applies to motor-carrier vehicles licensed in

Michigan that engage entirely in interstate commerce.’

The act also provides that motor carriers that are regis-

tered outside Michigan are required to pay a registration

fee of $10 a vehicle. MCL 478.7.

In February 1995, intervening plaintiffs filed their

complaint, alleging that the intrastate-decal fee violated

the Commerce Clause, US Const, art I, § 8, cl 3, and were

subsequently granted the right to intervene. Plaintiffs

Westlake Transportation, Inc., et al., and intervening

plaintiffs both amended their complaints, adopting the

other’s substantive claims. The plaintiffs’ cases were

consolidated in April 1995 and the classes were certified in

June 1995.

On June 22, 1995, plaintiffs filed two separate mo-

tions for partial summary disposition pursuant to MCR

2.116(C)(10): one regarding their intrastate-preemption

claim and the other regarding their interstate-preemption

claim. On June 30, 1995, intervening plaintiffs filed their

motion for partial summary disposition pursuant to MCR

2.116(C)(10), regarding their claim alleging violation of the

Commerce Clause. On October 27, 1995, defendants

renewed their own motion for summary disposition. The

Court of Claims issued its opinion on October 13, 1998,

' The fees in MCL 478.1 and 478.2(1) will be referred to as the

“intrastate fees,” and the fee in MCL 478.2(2) will be referred to as the

“interstate fee.”

App. 5

concluding that plaintiffs’ and intervening plaintiffs’

claims were meritless, and denied their motions for partial

summary disposition in an order entered on November 12,

1998. Subsequently, the court granted defendants’ motion

for summary disposition “for the reasons defendants

stated in their November 10, 1998 supplemental brief,”

which relied on the court’s October 13, 1998, opinion.

The court concluded that § 601 of the FAAAA did not

preempt MCL 478.2(1) because the federal law did not

preempt safety-related regulatory fees. The court also

found that MCL 478.2(2) was not preempted because the

federal law imposed the $10 maximum only on “participat-

ing states,” not “registration states.” The court further

determined that MCL 478.2(1) did not implicate the

Commerce Clause because it did not burden foreign motor

carriers more heavily as compared to Michigan motor

carriers engaged in interstate commerce, since the state

statute only affects Michigan motor carriers who engage

solely in intrastate commerce. Plaintiffs filed a motion for

reconsideration, which was denied. Plaintiffs and inter-

vening plaintiffs now appeal by right.

Summary disposition of all or part of a claim or

defense may be granted when

[e]xcept as to the amount of damages, there is no

genuine issue as to any material fact, and the

moving party is entitled to judgment or partial

judgment as a matter of law. [MCR 2.116(C)(10).]

A motion for summary disposition under MCR

2.116(C)(10) tests whether there is factual support for a

claim, and is reviewed de novo on appeal. Spiek v Dep't of

0 LG

App. 6

Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998).

When deciding a motion for summary disposition, a court

must consider the pleadings, affidavits, depositions,

admissions, and other documentary evidence submitted in

the light most favorable to the nonmoving party. Ritchie-

Gamester uv Berkley, 461 Mich 73, 76; 597 NW2d 517

(1999). A motion for summary disposition based on the

lack of a material factual dispute must be supported by

documentary evidence. MCR 2.116(G)(3)(b), Meyer v

Center Line, 242 Mich App 560, 574; 619 NW2d 182 (2000).

All reasonable inferences are to be drawn in favor of the

nonmovant. Bertrand vu Alan Ford, Inc, 449 Mich 606, 618;

537 NW2d 185 (1995).

Plaintiffs argue that MCL 478.2(2) is preempted by

federal law, specifically 49 USC 11506.’ Determining

whether federal law preempts a state law presents an

issue of statutory construction and is a question of law.

Konynenbelt v Flagstar Bank, FSB, 242 Mich App 21, 27;

617 NW2d 706 (2000). Congressional intent is the corner-

stone of preemption analysis. Fort Halifax Packing Co, Inc

v Coyne, 482 US 1, 8; 107 S Ct 2211; 96 L Ed 2d 1 (1987).

The Supremacy Clause of the United States Constitu-

tion provides Congress with the power to preempt state

law. US Const, art VI, cl 2. A general presumption exists in

the law against federal preemption. Duprey v Huron & E

R Co, Inc, 237 Mich App 662, 665; 604 NW2d 702 (1999).

* This statute is currently codified as 49 USC 14504; however, we

will refer to the law as § 11506.

App. 7

Federal preemption occurs only under certain conditions,

such as when (1) Congress enacts a federal statute that

expresses a clear intent to preempt state law, (2) an

outright or actual conflict exists between federal and state

law, (3) compliance with both federal and state law is

effectively impossible, (4) an implicit barrier to state

regulation exists in federal law, (5) Congress has legislated

comprehensively, thereby occupying an entire field and

leaving no room for supplemental state law, or (6) the state

law stands as an obstacle to the accomplishment and

execution of the full objectives of Congress. Id.

49 USC 11506 provided, in part:

(b) General rule. — The requirement of a

State that a motor carrier, providing transporta-

tion subject to jurisdiction under subchapter I of

chapter 135 and providing transportation in that

State, must register with the State is not an un-

reasonable burden on transportation referred to

in section 13501 when the State registration is

completed under standards of the Secretary un-

der subsection (c). When a State registration re-

quirement imposes obligations in excess of the

standards of the Secretary, the part in excess is

an unreasonable burden.

(1) In general. — The Secretary shall main-

tain standards for implementing a system under

which —

(A) a motor carrier is required to register

annually with only one State by providing evi-

dence of its Federal registration under chapter

139;

App. 8

(B) the State of registration shall fully

comply with standards prescribed under this sec-

tion; and

deemed to satisfy the registration requirements

of all other States.

(2) Specific requirements. —

(A) Evidence of Federal registration; proof

of insurance; payment of fees. — Under the stan-

dards of the Secretary implementing the single

State registration system described in paragraph

(1) of this subsection, only a State acting in its

capacity as registration State under such single

State system may require a motor carrier regis-

tered by the Secretary under this part —

(i) to file and maintain evidence of such

Federal registration;

(ii) to file satisfactory proof of required in-

surance or qualification as a self-insurer;

(iii) to pay directly to such State fee

amounts in accordance with the fee system es-

tablished under subparagraph (B)(iv) of this

paragraph, subject to allocation of fee revenues

among all States in which the carrier operates

and which participate in the single State regis-

tration system; and

(iv) to file the name of a local agent for ser-

vice of process.

(B) Receipts; fee system. — The standards of

the Secretary =

(i) shall require that the registration State

issue a receipt, in a form prescribed under the

App. 9

standards, reflecting that the carrier has filed

proof of insurance as provided under subpara-

graph (A)(ii) of this paragraph and has paid fee

amounts in accordance with the fee system es-

tablished under clause (iv) of this subparagraph;

(ii) shall require that copies of the receipt

issued under clause (i) of this subparagraph be

kept in each of the carrier’s commercial motor

vehicles;

(iii) shall not require decals, stamps, cab

cards, or any other means of registering or iden-

tifying specific vehicles operated by the carrier;

(iv) shall establish a fee system for the fil-

ing of proof of insurance as provided under sub-

paragraph (A)(ii) of this paragraph that —

(I) is based on the number of commercial

motor vehicles the carrier operates in a State and

on the number of States in which the carrier op-

erates;

(II) minimizes the costs of complying with

the registration system; and

(III) results in a fee for each participating

State that is equal to the fee, not to exceed $10

per vehicle, that such State collected or charged

as of November 15, 1991; and

(v) shall not authorize the charging or col-

lection of any fee for filing and maintaining evi-

dence of Federal registration under subparagraph

(A)(i) of this paragraph.

lection of any fee under this section that is not in

accordance with the fee system established under

App. 10

subparagraph (B)(iv) of this paragraph shall be

deemed to be a burden on interstate commerce.

The MCA applies to entities engaged in interstate

commerce only to the extent it is consistent with federal

law. MCL 476.12. MCL 478.2(2) provides, in pertinent

part, “A motor carrier licensed in this state shall pay an

annual fee of $100.00 for each vehicle operated by the

motor carrier which is registered in this state and operat-

ing entirely in interstate commerce.””

Plaintiffs contend that the interstate fee was pre-

empted both before and after the implementation of the

Single State Registration System (SSRS) on January 1,

1994. With the implementation of the SSRS, § 11506 was

amended and significant language changes were made. We

will first address plaintiffs’ preemption argument regard-

ing § 11506 after January 1, 1994. However, before we do

so, an understanding of the evolution of this federal law is

helpful. The United States Supreme Court has summa-

rized this evolution in Yellow Transportation, Inc v Michi-

gan, 537 US __, __; 123 S Ct 371, 374-375; 154 L Ed 2d

377, 383-384 (2002):

Beginning in 1965, Congress authorized States

to require interstate motor carriers operating

within their borders to register with the State proof

of their Interstate Commerce Commission (ICC)

interstate operating permits. Pub L 89-170, 79

Stat 648, 49 USC § 302(b)(2) (1970 ed). Congress

provided that state registration requirements

* The subsection also provides that the fee is only $50 if the motor

carrier begins operations after June 30th of the year. The other

provisions in the subsection are not at issue in this appeal.

App. 11

would not constitute an undue burden on inter-

state commerce so long as they were consistent

with regulations promulgated by the ICC. Ibid.

Prior to 1994, the ICC allowed States to

charge interstate motor carriers annual registra-

tion fees of up to $10 per vehicle. See 49 CFR

§ 1023.33 (1992). As proof of registration, partici-

pating States would issue a stamp for each of the

carrier’s vehicles. § 1023.32. The stamp was af-

fixed on a “uniform identification cab car[d]” car-

ried in each vehicle, within the Square bearing

the name of the issuing State. § 1023.32(d)-(e).

This system came to be known as the “bingo

card” system. Single-State Insurance Registra-

tion, 9 ICC2d 610, 610 (1993).

The “bingo card” regime proved unsatisfac-

tory to many who felt that the administrative

burdens it placed on carriers and participating

States outweighed the benefits to those States

and to the public. HR Rep No 102-171, pt I, p 49

(1991), HR Conf Rep No 102-404, pp 437-438

(1991), US Code Cong & Admin News 1991, pp

1526, 1679. In the Intermodal Surface Transpor-

tation Efficiency Act of 1991 (ISTEA), Congress

therefore directed the ICC to implement a new

system to replace the “bingo card” regime.* See

Pub L 102-240, § 4005, 105 Stat 1914, 49 USC

§ 11506(c) (1994 ed). Under the new system,

called the Single State Registration System, “a

motor carrier [would be] required to register an-

nually with only one State,” and “such single

State registration [would] be deemed to satisfy

the registration requirements of all other

States.” §§ 11506(c)(1)(A) and (C). Thus, one

State would — on behalf of all other participating

States — register a carrier’s vehicles, file and

maintain paperwork, and collect and distribute

App. 12

registration fees. § 11506(c)(2)(A). Participation

in the Single State Registration System was lim-

ited to those States that had elected to partici-

pate in the “bingo card” system. § 11506(c)(2)(D).

ISTEA also capped the per-vehicle registra-

tion fee that participating States could charge in-

terstate motor carriers. Congress directed the

ICC to “establish a fee system ... that (I) will be

based on the number of commercial motor vehi-

cles the carrier operates in a State and on the

number of States in which the carrier operates,

(II) will minimize the costs of complying with the

registration system, and (III) will result in a fee

for each participating State that is equal to the

fee, not to exceed $10 per vehicle, that such State

collected or charged as of November 15, 1991.”

§ 11506(c)(2)(B)Giv). Congress provided that the

charging or collection of any fee not in accor-

dance with the ICC’s fee system would “be

deemed to be a burden on interstate commerce.”

§ 11506(c)(2)(C).

*Congress abolished the ICC in 1995 and as-

signed responsibility for administering the new

Single State Registration System to the Secre-

tary of Transportation. See ICC Termination Act

of 1995, Pub L 104-88, § 101, 109 Stat 803. The

provisions of ISTEA governing the system were

amended and recodified. See 49 USC § 14504(c).

The Federal Highway Administration, under the

Secretary of Transportation, adopted the ICC

regulations that implemented the Single State

Registration System, 61 Fed Reg 54706, 54707

(1996), and the Federal Motor Carrier Safety

Administration now has authority to administer

the system, 49 USC § 113(f)(1).

App. 13

Plaintiffs argue that the federal statutory language is

clear — a state may charge a maximum registration fee of

$10 a vehicle to motor carriers engaged in interstate

commerce, regardless of whether a motor carrier is regis-

tered in Michigan or another state. Plaintiffs acknowledge

that MCL 478.7 reflects the mandate of § 11506 with

regard to motor carriers registered out of state,‘ and

asserts that motor carriers registered in Michigan are

required to be charged similarly.

Defendants’ counterargument is_ two-fold. First,

§ 11506 applies to registration fees only, not regulatory

fees, and the interstate fee at issue is a regulatory fee.

Second, the fee limit in § 11506 applies to participating

States only, not the registration state. The court agreed

with defendants’ argument and granted summary disposi-

tion on this issue for the same reasons. Therefore, the key

questions are (1) to whom does the fee limit in § 11506

apply, and (2) to what type of fees. The answers to these

questions can be found in the language of the statute itself

and the federal regulations that interpret it.

It is not an unreasonable burden on interstate com-

merce to require vehicles to register with a state; however,

* MCL 478.7 provides, in part:

(4) The annual fee levied on each interstate or foreign

motor carrier vehicle operated in this state and licensed in

another state or province of Canada shall be $10.00. The

commission may enter into a reciprocal agreement with a

state or province of Canada that does not charge vehicles li-

censed in this state economic regulatory fees or taxes and

may waive the fee required under this subsection.

App. 14

any registration requirements of a state that are in excess

of the standards in subsection 11506(c) are considered an

unreasonable burden. Subsection 11506(b). Under the

SSRS, a motor carrier is required to register annually with

only one state, and that registration satisfies the registration

requirements of all the states. Subsection 11506(c)(1)(A). A

motor carrier may only register with a participating state, a

state which participated in the old “bingo card” system.

Subsection 11506(c)(2)(D). The motor carrier must register

with the state where its principal place of business is

located, if it is a participating state, or else register with

the participating state in which it operates the most

vehicles. 49 CFR 367.3.° Therefore, a registration state,

the state in which a motor carrier registers, is by defini-

tion a participating state. Michigan is a participating

state, Yellow Transportation, supra, 123 S Ct 376; 154

L Ed 2d 385, and therefore, can be a registration state.

The registration state may require a motor carrier to

(1) file proof of its federal registration (ICC permit), (2) file

proof of insurance, (3) file the name of its agent for service

of process, and (4) pay a fee. Subsection 11506(c)(2)(A).

The registration state is then to issue the motor carrier a

receipt, reflecting that proof of insurance was filed and

that the fee was paid, a copy of which is to be kept in the

carrier’s vehicles. Subsection 11506(c)(2)(B). The fee is for

the filing of the proof of insurance, and may not be

charged for the filing of the motor carrier’s ICC permit.

Subsections 11506(c)(2)(B)(iv) and (v).

* 49 CFR 1023.1 et seqg., was recodified as 49 CFR 367.1 et seq.

App. 15

In support of the registration fee, the motor carrier

must file with the registration state a form that delineates

(1) the number of vehicles it intends to operate in each

participating state, (2) the fee each~participating state

charges each vehicle, (3) the total fee due each participat-

ing state, and (4) the total of all the fees due. 49 CFR

367.4(c)(4). The fee each participating state is allowed to

charge each vehicle is equal to the amount the state

charged or collected as of November 15, 1991, not to

exceed $10. Subsection 11506(c)(2)(B)(iv\(III); 49 CFR

367.4(c)(4)(ii). Congress wanted to “minimize[] the costs of

complying with the registration system” for the motor

carriers, subsection 11506(c)(2)(B)(iv)(II), while at the

same time preserving “revenues for the states which had

participated in the bingo program,” HR Conf Rep No 102-

404 reprinted in 1991 USCCAN 1817. The fees a registra-

tion state collects on behalf of other participating states

are remitted to those states monthly. 49 CFR 367.6. Thus,

if a motor carrier registered in Michigan, it would first list

the number of vehicles it operated in each participating ©

state. Because Michigan is a participating state, it would

need to list the number of vehicles it operated in Michigan.

The fee Michigan could charge cannot exceed $10.

We find that the statutory language and its accompa-

nying federal regulations are clear. A registration state is

simply a participating state in which a motor carrier is

registering. Therefore, when the statute states that a

participating state may not charge a fee in excess of $10,

this includes the registration state. To conclude otherwise,

that a registration state could set its own fee, would

contravene the express language and purpose of the

statute.

App. 16

The next question is whether the $100 fee in MCL

478.2(2) is a registration fee, so that it is subject to the

limitation in § 11506, or whether it is a regulatory fee.

Plaintiffs assert that the fee is for all practical purposes a

registration fee. Because the fee must be paid at the time

a motor carrier registers with a state, and in return for the

fee receives an identification decal, plaintiffs contend that

one can only conclude that the fee is, in actuality, a regis-

tration fee. We disagree. Faced with a similar situation in

Franks & Son, Inc v Washington, 136 Wash 2d 737, 759-

760; 966 P2d 1232 (1998), the Washington Supreme Court

rejected the plaintiffs’ argument that because the regula-

tory fee and federal identification fee were collected at the

same time, an unlawful registration requirement resulted.

The court adeptly stated, “We believe a more realistic

rationale for concurrent collection of the two fees was

administrative convenience and efficiency.” Jd. at 760.

We find that the $100 interstate fee could reasonably

be classified as a regulatory fee because it is a fee imposed

for the administration of the MCA, particularly covering

costs of enforcing safety regulations.® If the purpose of a

fee is to regulate an industry or service, it can be properly

classified as a regulatory fee. Bolt v Lansing, 459 Mich

152, 161-162; 587 NW2d 264 (1998). Because the fee in

* Because vehicles licensed in Michigan that operate solely

interstate are required to pay the $100 regulatory fee, the PSC waives

the registration fee. Schneider Natl Carriers, Inc v Michigan (On

Remand), 247 Mich App 716, 721; 637 NW2d 838 (2001). Hence, the

registration fee Michigan charges for vehicles licensed in Michigan is

$0, less than the $10 limit imposed by § 11506. Therefore, the registra-

tion fee is within the federal mandate.

App. 17

MCL 478.2(2) is not a registration fee, it is not subject to

preemption by 49 USC 11506.

Plaintiffs argue that the federal law prohibits constru-

ing the fee as a regulatory fee, citing Roadway Express,

Inc v Treasurer of State of Illinois, 120 Il App 3d 133; 458

NE2d 66 (1983). That case involved a $31 registration fee

Illinois charged Ohio motor carriers. Id. at 133-134. At the

time, the federal regulation allowed a maximum registra-

tion fee of $& plus an additional reasonable fee imposed to

defray the cost of the regulation of carriers within the

state’s borders. Jd. at 135. Plaintiffs contend that Roadway

Express “issued a warning” that “no such additional

‘regulatory fee’ was permissible after 1981” because the

federal regulation interpreting § 11506 was amended in

1981 and set an absolute limit of $10 for identification

fees. However, Roadway Express issued no such warning.

The court merely noted, “again parenthetically,” that the

federal regulation, 49 CFR 1023.33 (redesignated), was

amended and set the limit at $10. Roadway Express, supra

at 135.

Plaintiffs appear to argue that because the amended

federal regulation did not explicitly provide for an addi-

tional fee, one was hence prohibited. However, plaintiffs

provide no support for their argument. Further, plaintiffs

fail to recognize the import of two other regulations in

existence at the time. 49 CFR 1023.105 (1991) (super-

seded) provided that the rules and regulations were not to

be construed to affect the collection of taxes or fees by a

state from motor carriers for the operation of vehicles

within the borders of a state. 49 CFR 1023.104 (1991)

(superseded) provided that states were “urged” to use fees

collected for the purpose of defraying the cost of regulation

of motor carriers within their borders. Therefore, the

App. 18

ability of a state to collect fees in addition to the registra-

tion fees was not affected by the removal from § 1023.33 of

the language providing for additional fees.’

Plaintiffs also argue that the interstate fee was

prohibited before the creation of the SSRS in 1994, under

the previous version of § 11506. Plaintiffs assert this.

argument because their complaint was filed in the begin-

ning of 1995, and with a three-year period of limitation,

plaintiffs contend that they are entitled to a refund for the

excess fees they have paid since 1992.

Before the 1994 enactment of the SSRS, § 11506 read,

in pertinent part:

(b) The requirement of a State that a motor

carrier ... register the certificate or permit is-

sued to the carrier under section 10922 or 10923

of this title is not an unreasonable burden on

transportation referred to in section 10521(a)(1)

and (2) of this title when the registration is com-

pleted under standards of the Commission under

” We note that the substance of 49 CFR 1023.104 and 1023.105 was

not included in the 1994 amendments, 49 CFR 1023.1-1023.6. However,

neither was there any express prohibition on state-imposed regulatory

fees. The statute and its regulations address registration requirements

only. Because there is a presumption against federal preemption, we

believe that Congress’s silence cannot be interpreted as prohibiting

state regulatory fees, see Wisconsin Pub Intervenor v Mortier, 501 US

597, 607; 111 S Ct 2476; 115 L Ed 2d 532 (1991), particularly given that

regulatory and registration fees can coexist in the same field without

conflicting, Duprey, supra at 665.

EE —————

App. 19

subsection (c) of this section. When a State regis-

tration requirement imposes obligations in ex-

cess of the standards, the part in excess is an

unreasonable burden.

(c(1) The Commission shall maintain

standards and amendments to standards (A)

prepared and certified to it by the national or-

ganization of the State Commissions, and (B)

prescribed by the Commission. .. .

The Commission prescribed the following interpretive

regulation:

The application for the issuance of such

identification stamps or number shall . . . be duly

completed and executed by an official of the mo-

tor carrier, and shall be accompanied by the fee,

if any, prescribed by the law of such State; pro-

vided, however, that such fee shall not exceed

$10 for the issuance of each such identification

stamp; and provided further (when the State

Commission assigns an identification number in

lieu of issuing an identification stamp or

stamps), that such fee shall not exceed $10 for

each vehicle operated under the authority of the

motor carrier identified in the cab card bearing

such identification number. [49 CFR 1023.33

(superseded).]

The pre-1994 federal regulation substantively mir-

rored subsection 11506(c) as amended in 1994. Because we

concluded that the interstate fee is a regulatory fee, it is

outside the scope of the federal law and was not preempted.°

* We note that the cases from other jurisdictions that plaintiffs cite

are inapplicable in this case. The conclusion in this case turns on

(Continued on following page)

App. 20

Accordingly, the court did not err in granting defendants

summary disposition.

In their complaints, plaintiffs and intervening plain-

tiffs allege that the intrastate fees in MCL 478.1 and MCL

478.2(1) were preempted by § 601 of the FAAAA. Subsec-

tion 601(h), which became effective on January 1, 1995,

prohibited state regulation of prices, routes, or services of

motor carriers, save for a few delineated exceptions.

(Currently codified as 49 USC 14501|[c].)

Plaintiffs argue that the court erred in granting

defendants summary disposition on this issue before

discovery was complete.” Plaintiffs assert that they should

have been allowed an opportunity to conduct additional

discovery in order to show that, as utilized, the intrastate

fees are prohibited by federal law.

In re Fed Preemption of Provisions of the Motor Car-

rier Act, 223 Mich App 288, 302; 566 NW2d 299 (1997),

held that § 601 did not preempt the entire MCA and did

not indicate an intent to preempt fee provisions such as

MCL 478.1 and MCL 478.2. The Court noted that in

response to the enactment of the FAAAA, the PSC “issued

considered decisions that indicated how its regulation of

the trucking industry in Michigan was affected by federal

whether the interstate fee is classified as a regulatory fee or a registra-

tion fee. In the cases plaintiffs cite, there was no disagreement that the

fee at issue was a registration fee.

* We note that plaintiffs do not contest the court’s summary-

disposition ruling, that § 601 did not preempt the intrastate fees.

App. 21

legislation preempting at least some aspects of state

regulation.” In re Motor Carrier Act, supra at 300. In

regard to the fee provisions at issue, the Court stated:

The PSC still has significant regulatory obli-

gations. For example, the PSC must supervise

and regulate the safety of motor carrier opera-

tions. MCL 479.41; MSA 22.587(1). There is stil]

a certification process. It follows that the fees for

obtaining a certificate of authority, MCL 478.1;

MSA 22.560, for protesting an application for a

certificate, MCL 478.1a; MSA 22.560(1), and for

administering the act, MCL 478.2(1); MSA

22.561(1), are unaffected by the preemptive effect

of § 601. In fact, because the PSC is not using its

resources to enforce preempted portions of the Mo-

tor Carrier Act, the fees collected by the PSC are

not related to the preempted provisions and rules.

Indeed, appellants Central Transport and Uni-

versal Am-Can have not shown that the cost of

the PSC’s operations has ever been totally

funded by the fees it collects, and they have not

provided any reason to believe that the fees col-

lected were or can be used only for what is now

preempted economic regulation. [Id. at 302-303;

emphasis added.]

Plaintiffs contend that the PSC intrastate fees were

being used to fund p»sempted portions of the MCA, and,

thus, the fees were elated to a preempted provision.

Therefore, the fees were also preempted. Plaintiffs did not

submit any documentary evidence below in support of this

contention. Plaintiffs argue that they had intended to do

so, but their opportunity was foreclosed when the court

denied their motion for partial stay and bifurcation of

issues. Plaintiffs requested a 90- to 120-day stay in the

Proceedings to conduct discovery in order to present a

Api. 22

factual record to the court in a supplemental brief in

response to the decision in In re Motor Carrier Act, supra;

however, the court denied the motion without prejudice

because it believed its summary-disposition ruling would

cover the issue.

A court’s decision regarding matters of discovery is

reviewed on appeal for an abuse of discretion. Jn re Pott,

234 Mich App 369, 373; 593 NW2d 685 (1999). Plaintiffs

could not address this Court’s decision in Jn re Motor

Carrier Act, supra, in their original motions for partial

summary disposition because they were filed and argued

in 1995, and the case was not decided until April 25, 1997.

However, plaintiffs did not file their motion for partial stay

and bifurcation of issues until March 1998, nearly one

year later. The record indicates that plaintiffs were con-

ducting discovery during this entire time, yet never sought

evidence relating to this issue.

We find that plaintiffs had ample opportunity to

conduct discovery following the decision in Jn re Motor

Carrier Act, supra, and file a supplemental brief contain-

ing their findings. Given that one year had passed, we also

find that there is no reason to believe that had plaintiffs

been given another three or four months in which to

conduct discovery, plaintiffs would have uncovered a

factual basis for their claim. Furthermore, we note that by

stipulation, discovery was to be completed 180 days after

the court issued its ruling on the parties’ motions for

summary disposition.

Plaintiffs assert in their reply brief that they are not

arguing that they were prevented from conducting discov-

ery, but that they were denied an opportunity to supple-

ment their motion papers. However, the court did not

— oe

App. 23

foreclose plaintiffs’ opportunity to present their argument.

They could have filed additional briefs at any time before

the court issued its ruling. In fact, on January 28, 1998,

plaintiffs filed a supplemental brief in support of their

motions for summary disposition and in opposition to

defendants’ motion, in which they specifically mentioned

In re Motor Carrier Act, supra. This indicates plaintiffs

were well aware of the import of the case, and could have

conducted discovery and presented their argument accord-

ingly. ‘'laintiffs mention that defendants did not submit

the opinion as authority until January 1998. However, In

re Motor Carrier Act was decided in April 1997, and

nothing prevented plaintiffs from proactively distinguish-

ing their case from it.

Moreover, the court specifically invited plaintiffs to

present their argument again if they thought its ruling did

not adequately cover the issue. Plaintiffs did file a motion

for reconsideration after the court issued its orders on the

parties’ motions for summary disposition, yet did not

reraise this issue. We recognize that plaintiffs renewed

their motion to stay on October 8, 1998; however, this was

before the court issued its ruling. Because the court had

not yet issued its ruling, plaintiffs could have attempted to

conduct discovery after its first motion was denied.

Therefore, we conclude that the court did not abuse its

discretion in denying plaintiffs’ request to stay the pro-

ceedings in order to conduct additional discovery. A deci-

sion of a court that obtained the correct result, albeit for a

different reason, will be affirmed on appeal. Lavey v Mills,

248 Mich App 244, 250; 639 NW2d 261 (2001).

App. 24

Plaintiffs Troy Cab, Inc., et al., allege that the intra-

state fees in MCL 478.1 and MCL 478.2(1) are unconstitu-

tional taxes in violation of various sections of the Michigan

Constitution. The fees at issue are credited to the PSC.

MCL 478.6. Whether a charge is a permissible fee or an

illegal tax is a question of law. Bolt, supra at 158. A court’s

factual findings are reviewed for clear error. A finding is

clearly erroneous when, although there is evidence to

support it, upon reviewing the entire record, the appellate

court is left with a definite and firm conviction that a

mistake was made. Christiansen v Gerrish Twp, 239 Mich

App 380, 387; 608 NW2d 83 (2000).

In determining whether a charge imposed by a unit of

government is a fee or a tax, a court must consider: (1)

whether the charge serves a regulatory purpose rather

than operates as a means of raising revenue; (2) whether

the charge is proportionate to the necessary costs of the

service to which it is related; and (3) whether the payor

has the ability to refuse or limit its use of the service to

which the charge is related. Bolt, supra at 161-162. These

factors should be considered in their totality, and a weak-

ness in one area does not mandate a particular finding. Jd.

at 167; Graham v Kochville Twp, 236 Mich App 141, 151;

599 NW2d 793 (1999).

Taxes have a primary purpose of raising revenue,

while fees are usually in exchange for a service rendered

or a benefit conferred. Bolt, supra at 162. The stated

purpose of the intrastate fees is for “the administration of

[the MCA].” MCL 478.1; MCL 478.2(1). The express

purposes of the act are

es eC

epanitinnses

App. 25

to confer upon the [PSC] the power and authority

and to make it its duty to supervise and regulate

the transportation of property by motor vehicle

for hire upon and over the public highways of

this state in all matters whether specifically

mentioned herein or not, so as to: (a) Relieve all

future undue burdens and congestion on the

highways arising by reason of the use of the

highways by motor vehicles operated by motor

carriers; (b) protect and conserve the highways

and protect the safety and welfare of the travel-

ing and shipping public in their use of the high-

ways; (c) promote competitive and efficient

transportation services; (d) meet the needs of mo-

tor carriers, shippers, receivers, and consumers;

(e) allow a variety of quality, price, and service

options to meet changing market demands and

the diverse requirements of the shipping public;

(f) allow the most productive use of equipment

and energy resources; (g) provide the opportunity

for efficient and well-managed motor carriers to

earn adequate profits and attract capital; (h)

promote intermodal transportation; (i) prevent

unjust discrimination; (j) promote greater par-

ticipation by minorities in the motor carrier sys-

tem; (k) provide and maintain service to small

communities and small shippers; (1) prevent eva-

sion of this act through any device or arrange-

ment; (m) promote entrepreneurship in the motor

carrier industry by allowing greater contract car-

rier economic and entry flexibility; and (n) pro-

mote the use of jointly considered and initiated

rates, classifications, divisions, allowances,

App. 26

charges, or rules of motor carriers under com-

mission approved agreements. [MCL 475.2."

This language indicates the exactions are regulatory.

Taxes are designed to raise revenue for the general

public, while a fee “confers benefits only upon the particu-

lar people who pay the fee, not the general public or even a

portion of the public who do not pay the fee.” Graham,

supra at 151. In this case, in exchange for the fees, a motor

carrier receives the right to operate its trucks in Michigan,

and the fees are used to enforce the provisions of the act

that carry out the above-listed purposes. Thus, there is a

direct benefit to the one who pays the fees. We recognize

that promoting and regulating safe use of the highways

benefits the general public as well. However, a regulatory

fee can have dual purposes and still maintain its regula-

tory characterization. As long as the primary purpose of a

fee is regulatory in nature, the fee can also raise money

provided that it is in support of the underlying regulatory

purpose, id. at 151, and thus benefit the general public.

Plaintiffs’ argument focuses on the second prong of the

test, whether the fees are proportional to the cost of the

services to which they relate. Plaintiffs assert that in

1982, when the fees were increased,” they became taxes

because the amounts collected were in excess of the

'° Any purposes that related to economic regulation were pre-

empted by § 601 of the FAAAA as of January 1, 1995, and the PSC

ceased to enforce those regulations. Jn re Motor Carrier Act, supra at

300. However, the Legislature has yet to amend the MCA to reflect the

federal preemption.

" 1982 PA 399 raised the fees in MCL 478.1 and MCL 478.2(1) to

their current levels.

App. 27

expenses related to the services. A fee must be proportion-

ate to the cost of the regulation, but its amount is pre-

sumed reasonable unless its unreasonableness is

established. Jd. at 151. “[W]here revenue generated by a

regulatory ‘fee’ exceeds the cost of regulation, the ‘fee’ is

actually a tax in disguise.” Gorney » Madison Hgts, 211

Mich App 265, 268; 535 NW2d 263 (1995).

In support of their contention, plaintiffs presented two

affidavits and a senate fiscal report. We find the affidavits

of minimal value in determining whether the fees are

unreasonable. Neither of the affiants worked for the PSC

and they could only offer their opinion regarding how the

fees were spent. The senate fiscal report, created by a

senate fiscal analyst, showed how the funds received by

the PSC were utilized for fiscal years 1982-83 to 1994-95,”

and one of the charts showed that there was a surplus

nearly every year.”

” Plaintiffs also assert that the report shows that the fees sup-

ported activities not related to the regulation of motor carriers because

a portion was allocated to the State Police, Department of Commerce,

and Department of Civil Service. However, it is the duty of the police to

assist the PSC in enforcement of the MCA, MCL 479.13, and the

Department of Commerce provides administrative support to the PSC

that enables it to carry out its duties. It follows that the PSC would

allocate a portion of the fees to them. In addition, the allocation of a

very small portion of the PSC’s revenues to the Department of Civil

Service is mandated by the Legislature in accordance with the constitu-

tion to fund the civil service. Const 1963, art 11, § 5. The allocations to

this department averaged only $23,000 each year when revenues

ranged from $3.2 to $6.3 million.

* Plaintiffs present no evidence regarding the proportionality of

the fees after 1995, when the PSC ceased any economic regulatory

functions as mandated by § 601 of the FAAAA. Therefore, we have no

basis on which to determine the proportionality of the fees after 1995.

App. 28

However, defendants dispute the accuracy of the

figures in the report. Defendants note that charts reflect

the total fees collected, not just the fees collected pursuant

to MCL 478.1 and MCL 478.2(1), and defendants got

confirmation from the author of the report that appropria-

tions to the Michigan Truck Safety Fund were not consid-

ered. Therefore, defendants contend that the excess

amounts were distorted.

It is clear that the report on which plaintiffs rely

included all fee revenues without excluding nonchallenged

interstate fees collected pursuant to the SSRS and its

predecessor system. Therefore, the surplus figures were

distorted to some degree. Even without reducing the

surplus figures, the aggregate excess during the thirteen

years was only 11.7 percent, a relatively small percentage.

The test is whether the fee is proportional, not whether it

is equal, to the amount required to support the services it

regulates. Graham, supra at 151. We conclude that the

Court of Claims did not clearly err in finding that the fees

were not “wholly disproportionate.”

Lastly, plaintiffs argue that the exaction is not volun-

tary because a motor carrier cannot operate its trucks in

Michigan without paying it. Defendants argue that a

motor carrier has a choice with regard to what extent its

trucks will have a presence in Michigan, and, therefore,

the exaction is voluntary. While this is true in regard to

the application fee, MCL 478.1, defendants’ logic is errone-

ous in regard to the administration fee, MCL 478.2(1),

because every vehicle licensed in Michigan must pay this

fee irrespective of where it operates. Even if we were to

view the exaction as more compulsory than voluntary,

when the totality of factors are considered, we believe the

exactions are most properly classified as regulatory fees.

App. 29

Bolt, supra at 167; Graham, supra at 151. Therefore, the

court did not err in granting defendants summary disposi-

tion on this issue.

Plaintiffs next argue that the intrastate and inter-

state fees violate the Equal Protection Clause of the

United States and Michigan Constitutions because they

apply to “for-hire” motor carriers only and not to private

motor carriers.“ Both the federal and state constitutions

guarantee equal protection, and afford similar protection.

Const 1963, art 1, § 2; US Const, Am XIV, §1; Vargo v

Sauer, 457 Mich 49, 60; 576 NW2d 656 (1998). A court’s

ruling whether a statute violates equal protection is a

question of law. McDougall v Schanz, 461 Mich 15, 24; 597

NW2d 148 (1999).

Legislative classifications that do not implicate a

fundamental right or target a suspect class are presumed

to be constitutional if they have a rational basis, and one

who challenges such a statute has the burden of showing

that it bears no rational relation to some independent and

legitimate legislative end. TIG Ins Co, Inc v Dep’ of

Treasury, 464 Mich 548, 557; 629 NW2d 402 (2001); Vargo,

supra at 60. Under the rational-basis test, a statute will

ordinarily be sustained if it can be said to advance a

legitimate governmental interest, even if the law seems to

be unwise or works to the disadvantage of a particular

“* Because we concluded that the fees are regulatory, plaintiffs

additional argument, that the fees violate Michigan’s Uniform Taxation

Clause, is without merit.

App. 30

group, or if the rationale seems to be tenuous. People v

Copper (After Remand), 220 Mich App 368, 372-373; 559

NW2d 90 (1996). A legislative classification may not be set

aside if any set of facts may reasonably be conceived to

justify it. Id. at 373.

Before 1994, the fees were used to fund the economic-

and safety-regulation of motor carriers. Motor carriers do

not include private carriers. MCL 475.1(i). A private

carrier is “any person engaged in the transportation of

property by motor vehicle upon public highways where the

transportation is incidental to, or in furtherance of, any

commercial enterprise of the person, other than transpor-

tation.” MCL 475.1(q). A “for hire” motor carrier is one that

receives “remuneration or reward of any kind, paid or

promised, either directly or indirectly.” MCL 475.1(e).

Thus, “for hire” motor carriers are engaged in the business

of transportation.

The rationale behind the classification distinction may

be supported by facts either known or reasonably as-

sumed, even if those facts may be debatable. TJG Ins,

supra at 557, citing Crego v Coleman, 463 Mich 248, 259-

260; 615 NW2d 218 (2000). We believe it is reasonable to

assume that motor carriers have larger fleets than private

carriers, operate under competitive pressures, and operate

more frequently than private carriers. We can surmise

that these carriers are in need of being more closely

scrutinized in order to protect the general public, which

also uses the public highways; thus, the need for regula-

tions and fees to cover their enforcement.

Even after economic regulation of the motor carriers

ceased, as In re Motor Carrier Act, supra at 302, recognized,

the PSC “still has significant regulatory obligations,”

App. 31

including supervising and regulating the safety of motor-

carrier operations, as well as the certification process.

Therefore, the need for fees to support such regulations

were not eliminated after the FAAAA was enacted. The

same concerns that existed before still existed. Accord-

ingly, we conclude that the Legislature’s classification bore

a rational relation to a legitimate state purpose, and the

court did not err in granting defendants summary disposi-

tion.

VII

Finally, intervening plaintiffs argue that the intra-

state fee imposed by MCL 478.2(1) violates the Commerce

Clause because it burdens interstate commerce. Again, we

disagree, but for a different reason than stated by the

Court of Claims.

The Commerce Clause provides that Congress “shall

have power ... [tlo regulate commerce ... among the

several states... .” US Const, art I, § 8, cl 3. The “dormant

Commerce Clause” “denies the States the power unjusti-

fiably to discriminate against or burden the interstate flow

of articles of commerce.” Oregon Waste Systems, Inc v Dep't

of Environmental Quality of the State of Oregon, 511 US

93, 98; 114 S Ct 1345; 128 L Ed 2d 13 (1994).

The Court of Claims held that the Commerce Clause

was not implicated because the fee applied to intrastate

carriers only. However, any tax or regulation that affects

interstate travel, even if imposed solely on intrastate

commerce, is subject to Commerce Clause analysis. Citi-

zens for Logical Alternatives & Responsible Environment v

Clare Co Bd of Comm’rs, 211 Mich App 494, 499; 536

NW2d 286 (1995). Because the fee is imposed on any

App. 32

vehicle that operates intrastate pursuant to a certificate of

authority, even if it also travels interstate, the fee affects

interstate commerce, and thus, implicates the dormant

Commerce Clause. Although the Court of Claims did not

address this issue, our review is nevertheless proper

because whether a statute violates the Commerce Clause

is a question of law. Gillette Co v Dep't of Treasury, 198

Mich App 303, 311; 497 NW2d 595 (1993).

“A statute is presumed constitutional absent a clear

showing to the contrary.” Caterpillar, Inc v Dep't of Treas- t

ury, 440 Mich 400, 413; 488 NW2d 182 (1992). The test for |

determining whether a regulatory fee violates the Com-

merce Clause involves a two-tiered approach.” The first

step is to determine whether the statute discriminates ;

against interstate interests or merely regulates evenhand-

edly with only incidental effects upon interstate commerce.

Oregon Waste, supra at 99. “‘[D]iscrimination’ simply

means differential treatment of in-state and out-of-state

economic interests that benefits the former and burdens

the latter.” Id. The United States Supreme Court has

recognized that there is no clear line separating the two

categories. The critical consideration is the overall effect of

the statute on both local and interstate activity. Brown-

Forman Distillers Corp v New York State Liquor Auth, 476

’* Intervening plaintiffs contend that the four-pronged test

enunciated in Complete Auto Transit, Inc v Brady, 430 US 274, 279; 97 |

S Ct 1076; 51 L Ed 2d 326 (1977), and utilized in American Trucking |

Ass’ns, Inc v Scheiner, 483 US 266, 283; 107 S Ct 2829; 97 L Ed 2d 226 a

(1987), is applicable. However, this test is used to analyze the constitu- :

tionality of state-taxation statutes that tax interstate commerce itself,

i.e., taxes for the privilege of doing business in the state, Complete Auto,

supra at 279, not regulatory statutes.

App. 33

US 573, 579; 106 S Ct 2080; 90 L Ed 2d 552 (1986). A state

law will be invalidated if it “discriminate[s] against an

article of commerce by reason of its origin or destination

out of State.” C & A Carbone, Inc v Town of Clarkstown,

New York, 511 US 383, 390; 114 S Ct 1677; 128 L Ed 2d

399 (1994).

In making this determination, we must consider all

the provisions of the challenged statute. MCL 478.2(1)

requires that motor carriers that are licensed in Michigan

and travel solely intrastate or travel both intrastate and

interstate, a “mixed” carrier, must pay a fee of $100 for

each vehicle. MCL 478.2(2) requires that motor carriers

that are licensed in Michigan and travel solely interstate

must also pay the $100 fee. Therefore, the regulatory fee is

the same for all motor carriers licensed in Michigan,

regardless of their final destination. It does not directly

regulate interstate commerce, Pike v Bruce Church, Inc,

397 US 137, 142; 90 S Ct 844; 25 L Ed 2d 174 (1970), nor

is economic protectionism at issue, Arkansas Electric Coop

Corp.v Arkansas Pub Service Comm, 461 US 375, 394; 103

S Ct 1905; 76 L Ed 2d 1 (1983).

Defendants assert that the majority of vehicles that

pay the fee operate solely intrastate, which presumably

leads to their conclusion that the effect on interstate

commerce is minimal. However, the number of interstate

vehicles burdened is inconsequential to a finding of dis-

crimination. New Energy Co of Indiana v Limbach, 486 US

269, 276-277; 108 S Ct 1803; 100 L Ed 2d 302 (1988).

Intervening plaintiffs argue that the mixed carrier

invariably will pay a higher per-mile fee than the carrier

who operates solely intrastate. They assert that because

the fee is a flat annual fee, in order to receive the greatest

App. 34

benefit for the fee, a carrier would need to maximize its

intrastate operations and this could potentially affect a

carrier’s economic decisions by discouraging an intrastate

carrier from engaging in interstate commerce.

While this may be so, it is a matter of pure specula-

tion. Intervening plaintiffs present no evidence that any

trucking firm’s route choices are affected by the imposition

of the fee, only surmising that this could occur in the

hypothetical. Only one affidavit was submitted by inter-

vening plaintiffs, in which James Crozier, manager of

licensing and fuel for intervening plaintiff TNT Holland

Motor Express, Inc., stated that mixed carriers often top

off their interstate loads with intrastate hauls or transport

intrastate loads in between interstate hauls. However, he

never averred that this was done only because of the fee

-imposed by MCL 478.2(1). Regardless of the $100 fee,

topping off loads or adding intrastate hauls in between

interstate ones is an economically efficient decision for the

motor carriers. We do not find that the fee raises a signifi-

cant barrier to participation in interstate trade. Any effect

the fee has on interstate commerce is incidental and does

not rise to the level of discrimination.

Having concluded that the statute regulates even-

handedly, it will be upheld unless the burden it imposes on

interstate commerce is “clearly excessive in relation to the

putative local benefits.” Pike, supra at 142. Intervening

plaintiffs do not contest that the statute serves a legiti-

mate nondiscriminatory purpose, i.e., funding safety and

related regulations. This is an exercise of the state’s police

power and serves a critical function in protecting the

people who use Michigan’s highways. Great deference is

given to state legislation in the field of highway safety

regulation and a strong presumption in favor of its validity

App. 35

exists. Raymond Motor Transportation, Inc v Rice, 434 US

429, 443; 98 S Ct 787; 54 L Ed 2d 664 (1978). On the basis

of the record before us, we cannot say that the burden

imposed on interstate commerce by the $100 annual fee is

clearly excessive in relation to Michigan’s substantial

interest in regulating safety on its highways. Therefore,

we hold that MCL 478.2(1) does not violate the Commerce

Clause. Accordingly, we affirm the Court of Claims’ sum-

mary-disposition ruling in favor of defendants even though

it reached its decision for the wrong reason. Lavey, supra

at 250.

Affirmed.

/s/_ Michael R. Smolenski

/s/_ Jane E. Markey

/s/_ Henry William Saad

App. 36

APPENDIX B

STATE OF MICHIGAN

IN THE COURT OF CLAIMS

WESTLAKE TRANSPORTATION,

INC., et al.,

Plaintiffs,

and

AMERICAN TRUCKING :

ASSOCIATIONS, INC. and DOCKET NO.

TNT HOLLAND MOTOR 95-15628-CM

EXPRESS, INC., OPINION

Intervening Plaintiffs,

-VS-

MICHIGAN PUBLIC SERVICE

COMMISSION, et al.,

Defendants. /

TROY CAB, INC., et al.,

Plaintiffs,

and

AMERICAN TRUCKING

ASSOCIATIONS, INC. and pegrenel =

TNT HOLLAND MOTOR -15631-

EXPRESS, INC., OPINION

Intervening Plaintiffs,

-VS-

STATE OF MICHIGAN, et al.,

Defendants. /

App. 37

Before the Court in these consolidated class actions

are three motions for partial summary disposition brought

by Plaintiffs and Intervening Plaintiffs. All Plaintiffs

collectively challenge the constitutionality and lawfulness

of certain fees imposed on the trucking industry by Michi-

gan statutes as administered by the Public Service Com-

mission. The constitutional challenges are brought under

both the federal and state constitutions, although those

brought under Michigan fundamental law are not the

subject of these motions. The nonconstitutional claims are

predicated on federal statute and assert that the chal-

lenged fees violate such supreme law and thus must be

enjoined.

The fees here challenged are mandated by Michigan’s

Motor Carrier Act (MCA or Act), 1933 PA 254 as amended,

MCL 475.1, et seq; MSA 22.531, et seq. They are three in

number and are delineated in two sections of article IV of

the Act.

First there is the intrastate authority fee of $100.00

required when submitting to the Public “ervice Commis-

sion (PSC or Commission) an application “or a certificate

application fee is authorized by article IV, sectic » 1 of the

Act, MCL 478.1; MSA 22.560.

Second, section 2 of article IV, MCL 478.2; MSA

22.561, mandates annual fees of $100.00 for each motor

vehicle operated by a motor carrier. Subsection (1) applies

that requirement “for the administration of this act” to

each vehicle used in intrastate service. Subsection (2)

makes the same requirement applicable to each vehicle

“registered in this state and operating entirely in inter-

State commerce” by a “motor carrier licensed in this state.”

App. 38

According to Plaintiffs, all three fees are unlawful

because they, and especially the intrastate vehicle fee

authorized by section 2(1), have been preempted by federal

law. Further, they assert that the section 2(2) fee on each

Michigan-registered vehicle operated entirely in interstate

commerce by a Michigan-licensed motor carrier contra-

venes another provision of federal law that created the

Single State Registration System for motor carriers in

interstate commerce. Finally, they complain also that the

section 2(1) fee imposed on vehicles operated in intrastate

service offends the dormant Commerce Clause of the

United States Constitution by discriminating against

foreign motor carriers operating substantially in interstate

commerce. The Court will treat each claim in order,

beginning with that on which Plaintiffs primarily rely.

FEDERAL PREEMPTION

Federal preemption has its erigin in the Supremacy

Clause of US Const, art VI, which declares that the laws of

the United States “shall be the supreme Law of the Land.”

However, federal provisions that invalidate state law must

be narrowly tailored to support a presumption against

preemption of state law. Ryan v. Brunswick Corp, 454

Mich 20, 27; 557 NW2d 541 (1997). State police powers are

not superseded by federal provisions unless that is the

clear and unequivocal intent of Congress. Jd. This is

especially true of state regulation of matters relating to

health and safety. Jd. The plain meaning of federal provi-

sions must be given effect unless there is reason to think

Congress intended a more restrictive reading. Jd, p 28.

Courts must seek the congressional intent from the text,

structure and purpose of the federal provision as a whole.

Id. Such considerations include “‘the way in which

ee ee ee

App. 39

Congress intended the statute and its surrounding regula-

tory scheme to affect business, consumers, and the law.’”

Id, quoting Medtronic, Inc v Lohr, 518 US _.) 2146 8 Ct

2240, 2251; 135 L Ed 2d 700 (1996).

The Federal Aviation Administration Authorization

Act of 1994 (FAAAA), PL 103-305, contains § 601, which

added sub-section (h), “Preemption of State economic

regulation of motor carriers,” to 49 USC 11501, subse-

quently recodified as 49 USC 14501.’ By virtue of § 601,

effective January 1, 1995, the FAAAA preempts state

economic regulation of motor carriers by providing that 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 ... or any

motor private carrier with respect to the transportation of

property.” 49 USC 11501 (h) (1), now recodified as 49 USC

14501 (c) (1). Such language clearly and expressly prohib-

its a state from enacting or enforcing laws related to

economic aspects of the service provided by a motor

carrier. See Fitzpatrick v Simmons Airlines, Inc, 218 Mich

App 689, 691; 555 NW2d 479 (1996). The question then

becomes whether Michigan’s MCA is a law related to the

price, route or service of a motor carrier. Jd.

In Morales v Trans World Airlines, Inc, 504 US 374,

383; 112 S Ct 2031; 119 L Ed 2d 157 (1992), the United

States Supreme Court concluded that, as used in a similar

statute respecting the service of air carriers, the phrase

' The entirety of this preemption provision is quoted in Jn re

Federal Preemption of Provisions of the Motor Carrier Act, 223 Mich

App 288, 293-294; 566 NW2d 299 (1997), lv den 458 Mich 852 (1998).

App. 40

“relating to” expressed a broad preemptive congressional

purpose. See Jn re Federal Preemption of Provisions of the

Motor Carrier Act, 223 Mich App 288, 300-301; 566 NW2d

299 (1997), lv den 458 Mich 852 (1998); Fitzpatrick, supra.

Morales, p 384, determined that state laws having a

“connection with” or “reference to” airline services were

“related to” the federal act for purposes of preemption. See

Fitzpatrick, p 692. Indeed, Morales, p 386, rejected the

view that the federal act’s preemptive scope is limited to

state laws specifically addressed to the air carrier indus-

try, ruling instead that a state law may be preempted even

if it is not designed to affect the area of preemption or its

effect on that area is only indirect.’ Morales held, p 391,

that a state law requiring truth-in-advertising of air fares

was related to the price and service of carriers and was

therefore preempted by the federal act. Accord American

Airlines, Inc v Wolens, 513 US 219; 115 S Ct 817; 130 L Ed

2d 715, 724-725 (1995): state consumer fraud law is

preempted where applied to rates and services of airline

frequent-flyer programs. Thus, the Fitzpatrick court held,

supra, that fidelity to the broad interpretation rendered by

the United States Supreme Court in Morales required the

conclusion that judicial enforcement of the Michigan Civil

* On the other hand, Morales, p 390, left room for state actions “too

tenuous, remote, or peripheral” to have preemptive effect — without,

however, explaining what was meant by those terms of qualification or

how they should be applied to “a borderline question.” Rather, Morales

said only that “we express no views about where it would be appropri-

ate to draw the line.” Jd, quoting Shaw v Delta Air Lines, Inc, 463 US

85, 100 n 21; 103 S Ct 2890; 77 L Ed 2d 490 (1983).

PS VR neee ed De thd POPC end

App. 41

Rights Act to protect against employment discrimination

in the air carrier industry was likewise preempted.’

If federal legislation preempts some applications of

the Michigan Civil Rights Act to the employment practices

of air carriers in this state, as ruled in Fitzpatrick, then a

fortiori the same preemptive effect of the FAAAA must

apply to any economic regulation imposed on motor

carriers by the MCA.* Thus, the question is whether the

Michigan requirements challenged here, viz., the fees

authorized by art IV, §§ 1 & 2 of the MCA, are manifesta-

tions of economic regulation. If so, they are preempted. If

not, they may still be preempted if related, no matter how

indirectly, to the price, route or service of a motor carrier.

See Morales, supra, p 386. However, where such indirect

relationship is “too tenuous, remote, or peripheral” to

* That ruling was recently limited by Gilman v Northwest Airlines,

Inc, 230 Mich App 293, 303-304; ___§ NW2d ____ (1998), which held that

the same federal statute does not preempt the Michigan Civil Rights

Act prohibitions of age and sex discrimination because those employee

characteristics have no apparent connection or relation to an airline’s

routes, prices or services. Gilman, at 298-300, distinguished Fitz-

patrick, supra, which had dealt only with height and weight discrimina-

tion in employment.

‘The PSC acknowledges such preemptive effect on specific

provisions of the MCA and has ceased to enforce those sections it

considers preempted. Thus, the PSC no longer requires applicants for

certificates of authority to present evidence that their proposed service

will serve a required public purpose without creating excess service. It

no longer mandates that carriers avoid predatory pricing practices or

file tariff schedules. Similarly, it no longer exercises its authority under

the MCA to determine reasonable and sufficient rates, fares, charges

and classifications or to penalize unlawful discrimination. See In re

Federal Preemption, supra, p 297.

ee eee

App. 42

implicate preemption, the state legislation may be permit-

ted to stand unaffected by the national policy of economic

deregulation. Id, p 390.

While the tenuousness or peripherality of an “indirect

relationship” has not been expressly addressed, there are

some indications that it need not be particularly remote

from the preempted field. For instance, in American

Airlines v Wolens, supra, 130 L Ed 2d at 726 n 5, the

United States Supreme Court endorsed the view that “the

ban on enacting or enforcing any [state] law ‘relating to

rates, routes, or services’ is most sensibly read, in light of

the [federal law’s] overarching deregulatory purpose, to

mean ‘States may not seek to impose their own public

a2 — policies or theories of competition or regulation on the

operation of an air carrier.’” That view was prefigured in

Morales, supra, p 378, which recognized that the federal

law was designed to place “maximum reliance on competi-

tive market forces” under a uniform national regime of

economic deregulation, i.e., “[tlo ensure that the States

would not undo federal deregulation with regulation of

their own.” Thus, that federal enactment, as American

Airlines stated at 728, “stops States from imposing their

own substantive standards with respect to rates, routes, or

services.” That would suggest that the fees challenged

here are not preempted by § 601 since they impose on

motor carriers no particular “substantive standards” of

competition or regulation.

The Commission’s determinations regarding the effect

of § 601 on the MCA were summarized recently in Jn re

Federal Preemption, supra, p 295:

“The PSC concluded that § 601 preempts only

regulatory provisions concerning price, routes,

and service — the essence of economic regulation.

ee eet Pe OL is eee

App. 43

The PSC found it had substantial residual regu-

latory authority, including regulatory authority

over matters such as safety. The PSC further

concluded that it should continue a certification

process (albeit, a ‘streamlined’ certification proc-

ess) for intrastate motor carriers and that it

could and should continue to assess statutorily

mandated fees.... Since issuing its decisions,

the PSC has ceased enforcing those provisions of

the Motor Carrier Act that it concluded had been

preempted.”

Thus federal preemption under § 601 and the Commis-

sion’s decisions applying that federal principle to the MCA

have substantially altered the regulatory framework for

the trucking industry in Michigan. Id, p 298.

Even so, the court in Jn re Federal preemption, p 301,

ruled that much of the MCA survives the federal preemp-

tion statute:

“[I]t is clear and unambiguous from the language

of § 601 that the congressional intent was not to

preempt all state regulation of the trucking in-

dustry. Section 601 expressly excepts from its

preemptive effect significant aspects of regula-

tion, including safety regulation, regulation of

size and weight of vehicles, regulation of insur-

ance requirements, and regulation of the trans-

portation of household goods. If the language of a

statute is clear and unambiguous, the plain

meaning of the statute reflects the legislative in-

tent. ... Furthermore, the House Conference Re-

port indicates that ‘economic regulation’ is

intended to be preempted and that states retain

their authority to regulate various aspects of the

transportation industry. See H R Conf Rep No

677, 103d Cong, 2d Sess, pp 84-85.... The

App. 44

argument that Congress intended to preempt the

entire field of regulation of motor carriers fails in

the face of the language of the legislation and its

history. The PSC’s determination that § 601 was

intended to preempt only economic regulation is

consistent with the language and history of the

legislation.”

See also Michigan Trucking Ass’n v Public Service Comm

(On Remand), 225 Mich App 424, 427-429; 571 NW2d 734

(1997).

Significantly, the Federal Preemption court, pp 302-

303, also rejected the contention reiterated by Plaintiffs

here that federal preemption of all economic regulation

means that the fees assessed under the MCA to finance

that regulation must likewise be preempted, especially

since the primary focus of the MCA had traditionally been

economic regulation of the trucking industry:

“Section 601 did not preempt the entire Mo-

tor Carrier Act. Section 601 of the FAAAA does

not in its words indicate an intent to preempt fee

provisions such as those challenged by these ap-

pellants. The legislative history reflects a con-

trary intent. The House Conference Report states

that nothing in the legislation is intended to

change the application of state tax laws to motor

carriers. H R Conf Rep No 677, supra, p 85.

“The PSC still has significant regulatory ob-

ligations. For example, the PSC must supervise

and regulate the safety of motor carrier opera-

tions. MCL 479.41; MSA 22.587(1). There is still

a certification process. It follows that the fees for

obtaining a certificate of authority, MCL 478.1;

MSA 22.560, for protesting an application for a

certificate, MCL 478.1a; MSA 22.560(1), and for

App. 45

administering the act, MCL 478.2(1); MSA

22.561(1), are unaffected by the preemptive effect

of § 601. In fact, because the PSC is not using its

resources to enforce preempted portions of the

Motor Carrier Act, the fees collected by the PSC

are not related to the preempted provisions and

rules. Indeed, appellants . . . have not shown that

the cost of the PSC’s operations has ever been to-

tally funded by the fees its [sic] collects, and they

have not provided any reason to believe that the

fees collected were or can be used only for what is

now preempted economic regulations.”

The Court of Appeals has spoken. In two published deci-

sions, Federal Preemption and Michigan Trucking Ass’n,

supra, it has ruled that § 601 did not preempt the MCA in

its entirety, and least of all in matters of safety regulation

and the application and vehicle fees challenged here. That

must be this Court’s judgment as well. In short, Plaintiffs’

motion based on the federal preemption claim must be

denied.

SINGLE STATE REGISTRATION SYSTEM

Congress has provided for a Single State Registration

System (SSRS) that requires a motor carrier having

interstate authority to register annually with only one of

the states among those it is authorized to provide trans-

portation service. Under 49 USC 11506, the SSRS is

deemed to satisfy the registration requirements of all

other states, except for a nominal fee “not to exceed $10

per vehicle” that is permitted annually to each participat-

ing state. The same section prohibits as an unreasonable

burden on interstate commerce any other fee not in accor-

dance with that specifically authorized.

App. 46

Plaintiffs complain that the MCA violates the SSRS

by its art IV, § 2(2) requirement of a $100.00 annual fee

per vehicle that is registered in Michigan and operated

entirely in interstate commerce by a Michigan-licensed

motor carrier. Alternatively, they contend that § 2(2) is

effectively preempted by the SSRS mandate that no

participating state, other than the registering state, exact

more than an annual fee of $10.00 per vehicle operated in

interstate commerce. In either case, this MCA vehicle fee

is supposedly rendered a nullity by the SSRS.

Of course, Michigan’s MCA “applies to entities en-

gaged in interstate commerce only to the extent it is

consistent with federal law. MCL 476.12; MSA 22.545.”

Federal Preemption, supra, p 294. Here, however, there is

no inconsistency. Section 2(2) of article IV of the MCA

applies only to vehicles registered in Michigan by Michi-

gan-licensed motor carriers, i.e., where Michigan is the

“registering state.” The SSRS fee system places a $10.00

annual vehicle fee limit on only the “participating states,”

however, not on the “registering state.” The SSRS neither

prohibits nor preempts the Act’s § 2(2) vehicle fee.

Moreover, the MCA expressly accommodates the fee

system mandated by the SSRS. In article IV, section 7,

MCL 478.7; MSA 22.566, the Act provides for the registra-

tion of and fees paid by carriers engaged in interstate

transportation pursuant to the SSRS and any other

reciprocal multistate agreement. In particular, subsection

(4) mandates that “[t]he annual fee levied on each inter-

state or foreign motor carrier vehicle operated in this state

and licensed in another state or province of Canada shall

be $10.00.” Obviously, that is perfectly consistent with the

annual $10.00 vehicle fee permitted each participating

App. 47

state by the SSRS. Plaintiffs’ motion must therefore be

denied.

COMMERCE CLAUSE

The dormant Commerce Clause of US Const, art I, § 8,

prohibits a state from erecting barriers to the national

regime of free trade by enacting tax or fee requirements

that constitute an undue burden on or discrimination

against interstate commerce. Plaintiffs assert that the

MCA art IV, § 2(1) vehicle fee for intrastate Michigan

transportation impermissibly discriminates against

interstate motor carriers by favoring domestic carriers

whose business is exclusively intrastate. This is supposed

to be so essentially because domestic intrastate carriers

necessarily derive a disproportionately greater financial

advantage for their § 2(1) fees than do those interstate

carriers that may want to make an occasional intrastate

haul while their vehicles are visiting Michigan. The Court

is not persuaded that the choice of whether to engage

primarily in interstate rather than exclusively in intra-

state transportation, made by private businesses compet-

ing in the free marketplace, affects Commerce Clause

concerns. And it surely cannet-result in the invalidation of

§ 2(1) on Commerce Clause grounds.

Plaintiffs cite American Trucking Ass’ns v Scheiner,

483 US 266, 282; 107 S Ct 2829; 97 L Ed 2d 226 (1987), for

its condemnation of “flat taxes” whose unapportioned

measure results in discrimination against some partici-

pants in interstate commerce in a manner that contradicts

the purpose of the Commerce Clause. As Goldberg v Sweet,

488 US 252, 266; 109 S Ct 582; 102 L Ed 2d 607 (1989),

explained, “In Scheiner, we held that Pennsylvania’s flat

App. 48

taxes on the operation of all trucks on Pennsylvania

highways imposed a disproportionate burden on interstate

trucks, as compared with intrastate trucks, because the

interstate trucks traveled fewer miles per year on Penn-

sylvania highways.” Here, the MCA intrastate vehicle fee

is alleged to be just such a “flat tax” and therefore imper-

missible under the principles enunciated in Scheiner.

Plaintiffs’ reliance on Scheiner is misplaced.

First, the taxes at issue in that case were exacted for

the purpose of financing roadway upkeep based on high-

way usage, but the flat tax on the privilege of operating on

the state roads failed to take into account varying degrees

of such usage by the different carriers. Here, however, the

fee exacted is regulatory and intended “for administering

the act.” Federal Preemption, supra, p 302. Such state

regulation as remains after federal preemption, including

regulation of vehicular size and weight, insurance re-

quirements and safety standards, is not amenable to a fee

structure based on apportionment by usage rates. And the

fee itself is plainly not a tax on the privilege of doing

business in Michigan.” Thus, Commerce Clause interests

are not affected by the intrastate vehicle fee.

Second, the flat taxes in Scheiner applied across the

board to any vehicle traveling the state’s highways,

* It might also be pointed out that there is a distinction between a

tax and a fee, although the Scheiner Court did not adhere to it. Neither

did the Court of Appeals in Federal Preemption, supra at 302, quoted

above in context, which spoke of the MCA fees as if they were nothing

different from “the application of state tax laws to motor carriers.”

(Emphasis added.)

App. 49

whereas the fee here is exacted only of those vehicles,

foreign or domestic, that the carrier chooses to operate in

point-to-point intrastate Michigan service. The interest

furthered by that fee, viz., ensuring that vehicles and

carriers operating on Michigan highways in intrastate

service comply with MCA safety and fitness norms, is an

exercise of state police power and the legitimate expres-

sion of the state’s concern that the welfare of its citizens be

protected. That interest plainly does not have a prejudicial

effect on interstate commerce and thus does not impact

the Commerce Clause.

Third, Scheiner itself provides ample reason to think

its principles are inapplicable to the intrastate vehicle fee

of the MCA. There the Court found dispositive its prece-

dents holding “that the Commerce Clause prohibits a

State from imposing a heavier tax burden on out-of-state

businesses that compete in an interstate market than it

imposes on its own residents who also engage in commerce

among States.” Id, p 282 (footnote deleted). Stated more

plainly, this principle applies only where foreign and

domestic carriers are all competing in interstate com-

merce. Thus, Michigan cannot, consistent with the Com-

merce Clause, tax foreign carriers more heavily than

domestic carriers engaged in interstate competition. It

can, however, impose the identical vehicle fee of $100.00,

as authorized by § 2(1), on all carriers that opt to provide

intrastate Michigan transportation services. That fee does

not implicate Commerce Clause concerns.

In short, the fee burden here does not fall more

heavily on foreign carriers than on Michigan carriers

engaged in interstate commerce. It is, rather, the same for

all carriers that choose to provide intrastate Michigan

haulage services either exclusively or in addition to

App. 50

interstate operations. As was said in Scheiner, p 283, “the

Commerce Clause is not offended when state boundaries

are economically irrelevant.” That is surely true of the

§ 2(1) intrastate vehicle fee based on Michigan boundaries,

which have no economic relevance for interstate traffic.

The motion challenging that fee on Commerce Clause

grounds must therefore be denied.

The Court determines that Plaintiffs’ motions for

partial summary disposition are meritless. All three

motions must therefore be denied. An order consistent

with this opinion may enter upon its proper presentation.

/s/ James R. Giddings

JAMES R. GIDDINGS

Circuit Judge

DATED: Oct. 13, 1998

App. 51

STATE OF MICHIGAN

IN THE COURT OF CLAIMS

WESTLAKE TRANSPORTATION,

INC., et al,

Plaintiffs,

File No. 95-15628 CM

Hon. James R. Giddings

MICHIGAN PUBLIC SERVICE

COMMISSION, et al

Defendants. /

TROY CAB, INC., et al,

Plaintiffs,

File No. 94-15631 CM

ig Hon. James R. Giddings

STATE OF MICHIGAN, et al

Defendants. /

Attorneys for Plaintiffs Attorneys for Intervening

in Westlake Plaintiffs in Westlake

Karl L. Gotting (P14220) Iris K. Socolofsky-Linder

Catherine A. Jacobs (P31673)

(P32996) Michael S. Ashton (P40474)

Loomis, Ewert, Ederer, Fraser, Trebilcock, Davis

Parsley, Davis & Gotting, & Foster, P.C.

P.C. 1000 Michigan National Tower

232 South Capitol Ave, Lansing, Michigan 48933

Suite 1000 Telephone: (517) 482-5800

Lansing, MI 48933-1525

Telephone: (517) 482-2400

App. 52

Andrew K. Light Daniel R. Barney

James H. Hanson Robert Digges, Jr.

Lynne D. Lidke Cynthia Tripi

Scopelitis, Garvin, Light & ATA Litigation Center

Hanson, P.C. 2206 Mill Road

1777 Market Tower, Alexandria, VA 22314-4677

Ten West Market Street Telephone: (703) 638-1865

Indianapolis, IN 46204

ee Attorneys for Defendants

Attorneys for Plaintiffs Henry J. Boynton (P25242)

in Troy Cab David M. Gadaleto (P30163)

John L. Collins (P12065) Tonatzin M. Alfaro Garcia

Robert E. McFarland (P36542)

(P17394) Judith I. Blinn (P26678)

Gary J. McRay (P17554) Department of Attorney

Kathryn M. Niemer (P34234) General

FOSTER, SWIFT, COLLINS Public Service Division

& SMITH 6545 Mercantile Way,

32300 Northwestern Suite 15

Highway, Suite 230 Lansing, MI 48911

Farmington Hills, MI 48334 Telephone: (517) 334-7650

Telephone: (810) 851-7500

ORDER

At a session of said Court, held in the Court of

Claims on: November 12, 1998

PRESENT:

For the reasons stated in its October 13, 1998 Opin-

ion, this Court hereby DENIES in their entirety Plaintiffs’

First and Second Motions for Partial Summary Disposition

filed on June 22, 1995 and June 22, 1995, respectively, and

Intervening Plaintiff’s Motion for Summary Disposition

filed on June 30, 1995.

App. 53

James R. Giddings

HONORABLE JAMES R. GIDDINGS

COURT OF CLAIMS JUDGE

A TRUE COPY

CLERK OF THE COURT

30TH JUDICIAL CIRCUIT COURT

App. 54

STATE OF MICHIGAN

IN THE COURT OF CLAIMS

WESTLAKE TRANSPORTATION,

INC., et al.,

Plaintiffs,

and

AMERICAN TRUCKING

ASSOCIATIONS, INC. and TNT

HOLLAND MOTOR EXPRESS, DOCKET NO.

INC., 95-15628-CM

Intervening Plaintiffs,

-VS-

MICHIGAN PUBLIC SERVICE

COMMISSION, et al.

Defendants. /

TROY CAB, INC., et al.,

Plaintiffs,

and

AMERICAN TRUCKING

ASSOCIATIONS, INC. and TNT

HOLLAND MOTOR EXPRESS, DOCKET NO.

INC., 95-15631-CM

Intervening Plaintiffs,

-vs-

STATE OF MICHIGAN, et al.,

Defendants. /

App. 55

ORDER GRANTING DEFENDANTS’

MOTION FOR SUMMARY DISPOSITION

At a session of said Court held in the City of

Lansing on the 30th day of December, 1998.

PRESENT: HONORABLE JAMES R. GIDDINGS

Circuit Judge

The Court having entered on November 12, 1998 its

Order denying Plaintiffs’ First and Second Motions for

Partial Summary Disposition and Intervening Plaintiffs’

Motion for Summary Disposition for the reasons given in

the Court’s written Opinion of October 13, 1998; Defen-

dants having renewed their Motion for Summary Disposi-

tion of all claims in their entirety by filing two

supplemental briefs in support; the Court having reviewed

the motion and the briefs of the parties in both consoli-

dated actions having heard oral argument on the motion,

and being fully advised in the premises;

NOW, THEREFORE, IT IS HEREBY ORDERED

AND ADJUDGED that Defendants’ Motion for Summary

Disposition is GRANTED. Plaintiffs and Intervening

Plaintiffs in each case cannot prevail as a matter of law

and both actions must therefore be DISMISSED for the

reasons stated in Defendants’ Second Supplemental Brief

in Support of Defendants’ Motion for Summary Disposition

filed on November 10, 1998, and in the other briefs re-

ferred to therein.

App. 56

IT IS SO ORDERED. :

/s/ James R. Giddings

JAMES R. GIDDINGS

Circuit Judge

A TRUE COPY

CLERK OF THE COURT

30TH JUDICIAL CIRCUIT COURT

App. 57

STATE OF MICHIGAN

IN THE COURT OF CLAIMS

WESTLAKE TRANSPORTATION,

INC., et al.,

Plaintiffs,

and

AMERICAN TRUCKING

ASSOCIATIONS, INC. and TNT

HOLLAND MOTOR EXPRESS, DOCKET NO.

INC., 95-15628-CM

Intervening Plaintiffs,

-VS-

MICHIGAN PUBLIC SERVICE

COMMISSION, et al.

Defendants. /

TROY CAB, INC., et al.,

Plaintiffs,

and

a AMERICAN TRUCKING

ASSOCIATIONS, INC. and TNT

HOLLAND MOTOR EXPRESS, DOCKET NO.

INC., 95-15631-CM

Intervening Plaintiffs,

-vs-

STATE OF MICHIGAN, et al.,

Defendants. /

App. 58

ORDER DENYING PLAINTIFFS’

MOTION FOR RECONSIDERATION

At a session of said Court held in the City of

Lansing on the 7th day of March, 2000.

PRESENT: HONORABLE JAMES R. GIDDINGS

Circuit Judge

The Court having entered on December 30, 1998 an

order granting Defendants’ renewed Motion for Summary

Disposition and dismissing these consolidated complaints

challenging the constitutionality of certain fees imposed on

the trucking industry by Michigan law as administered by

the Public Service Commission; Plaintiffs having filed a

Motion for Reconsideration and brief in support; the Court

having reviewed the motion and brief, and being fully

advised in the premises;

NOW, THEREFORE, IT IS HEREBY ORDERED

AND ADJUDGED that Plaintiffs’ Motion for Reconsidera-

tion is DENIED, because it does not appear that the order

of dismissal was erroneously entered. The motion does

little more than rehash issues presented and decided

earlier. “[A] motion for rehearing or reconsideration which

merely presents the same issues ruled on by the court,

either expressly or by reasonable implication, will not be

granted.” MCR 2.119(F) (3). Plaintiffs fail to demonstrate

palpable error by which the Court has been misled. Id.

Thus, there is no need to address each of Plaintiffs’ re-

newed issues. The Court will comment, however, on the

salient problems presented in the motion, principally those

challenging the constitutionality of certain fees, identified

and cited in the Court’s written opinion of October 13,

1998, imposed on for-hire motor carriers by the Motor

Carrier Act (MCA).

App. 59

There is a presumption favoring the constitutionality

of statutes. McDougall v Schanz, 461 Mich 15, 24; 597

NW2d 148 (1999); H J Tucker & Associates, Inc v Allied

Chucker & Engineering Co. 234 Mich App 550, 556; 595

NW2d 176 (1999), lv den 461 Mich 944 (2000). Not only

are statutes presumed constitutional but Michigan courts

also have a duty to construe a statute as constitutional

unless its unconstitutionality is clearly apparent.

Mahaffey v Attorney General, 222 Mich App 325, 344; 564

NW2d 104 (1997). A successful challenge to the facial

constitutionality of a statute must establish that there

exist no circumstances under which the statute would be

valid. Council of Organizations & Others for Education

About Parochiaid v Governor, 455 Mich 557, 568 & 602;

566 NW2d 208 (1997), quoting United States v Salerno,

481 US 739, 745; 107 S Ct 2095; 95 L Ed 2d 697 (1987).

Indeed, an interpretation of the Constitution that does not

result in a statute being found invalid is preferred to one

that does. House Speaker v Governor, 443 Mich 560, 585;

506 NW2d 190 (1993), quoting Marbury v Madison, 5 US

(1 Cranch) 137, 175; 2 L Ed 60 (1803). Plaintiffs fail to

overcome the presumption.

Accordingly, it is the Court’s duty to determine

whether the MCA is capable of any construction that

would make it constitutional. Michigan United Conserva-

tion Club v Dep’t of Treasury, ___ Mich App ___; __ NW2d

____ (opinion by Judge Markey, docket 208429, issued

December 10, 1999), slip opinion, p 4. Are the fees imposed

on for-hire carriers by the MCA at odds with the plain

language of the Constitution? The Court has already

deterroined, by the order of December 30, 1998, that they

are not. The same conclusion must prevail here.

App. 60

Plaintiffs assert first that these fees are invalid and

the Court must order that they be at least partially re-

funded because they are actually taxes that have not been

properly adopted in accordance with the constitutional

requirements. They contend that the fees are dispropor-

tionate to the necessary costs of regulating for-hire motor

carriers, and that the moneys collected from the fees are

largely used as general revenue to finance other aspects of

government activity. They also point to Yellow Freight

System, Inc v Michigan, 231 Mich App 194, 208; 585

NW2d 762 (1998), where the Court of Appeals opined that

revenue collection “in the form of a fee” imposed by the

MCA should be treated like “state tax cases” for purposes

of 42 USC 1983 and the rule enunciated in Nat'l Private

Truck Council, Inc v Oklahoma Tax Comm, 515 US 582;

115 S Ct 2351; 132 L Ed 2d 509 (1995). This Court, they

suggest, should therefore treat these fees as if they were

taxes. The Court disagrees.

There is no bright-line test for distinguishing a tax

from a fee. Bolt v City of Lansing, 459 Mich 152, 160; 587

NW2d 264 (1998); Graham v Kochville Twp, 236 Mich App

141, 150; 599 NW2d 793 (1999). Whether the charges

exacted for these applications and renewals of authority

and for truck decals are properly characterized as fees or

taxes requires consideration of several factors. Bolt at 161.

No single factor is determinative of the distinction; rather,

all factors should be considered in determining whether

together they preponderate in one direction or the other.

Id. at 163-169. Accord Graham at 151, citing Bolt at 167, n

16: “[T]hese criteria are not to be considered in isolation,

but rather in their totality, such that a weakness in one

area would not necessarily mandate a finding that the

charge at issue is not a fee.” -

App. 61

Generally, a fee is paid for a service rendered or a

benefit conferred where there is “some reasonable rela-

tionship” between the amount of the fee and the value of

the service or benefit, whereas a tax is meant simply to

raise revenue. Bolt at 161, quoting Saginaw Co v John

Sexton Corp of Michigan, 232 Mich. App 202, 210; 591

NW2d 52 (1998). Exactions imposed primarily for public

rather than private purposes are taxes; the revenue raised

by taxes inures to the benefit of all, as opposed to fees paid

by a few for benefits that inure to the persons or group

assessed. Id., citing Bray v Dep’t of State, 418 Mich 149,

162; 341 NW2d 92 (1983), which quoted Dukesherer

Farms, Inc v Dep’t of Agriculture (After Remand), 405

Mich 1, 15-16; 273 NW2d 877 (1979).’

Three criteria apply to the distinction between a fee

and a tax. The first criterion requires that a fee serve a

regulatory rather than a revenue-raising purpose. Bolt,

supra, citing Merrelli v St Clair Shores 355 Mich 575, 583-

584; 96 NW2d 144 (1959), which quoted Vernor v Secretary

of State, 179 Mich 157, 167-170; 146 NW 338 (1914).? The

‘ This “factor” can be confusing if it is mistakenly thought to

require that the moneys acquired from fees never be used to benefit the

public. On the contrary, regulatory fees such as those at issue here are

an exercise of the police power of the community whose purpose is the

protection of the public health, safety and welfare. Indeed, “such

moneys are incidental to the accomplishment of the primary purpose of

guarding the public.” Merrelli v St Clair Shores, 355 Mich 575, 583; 96

NW2d 144 (1959).

* Citing the same precedent, Graham, supra, recently qualified the

first criterion by saying that a fee can have a secondary revenue-raising

purpose without having to treat the fee as a tax: “While a fee must

serve a primary regulatory purpose, it can also raise money as long as it

is in support of the underlying regulatory purpose.” That principle

applies here.

App. 62

second criterion requires that a fee be proportionate to the

necessary cost of the benefit or service provided. Jd. at 162,

citing Merrelli, supra, and Bray, supra at 160, and quoting

Vernor, supra at 167. The third criterion requires that a

fee be characterized by some degree of “voluntariness” in

that those who pay it be able to refuse or limit their use of

the benefit or service. Jd. at 162-163, citing Ripperger v

Grand Rapids, 338 Mich 682, 686; 62 NW2d 585 (1954),

which quoted Jones v Detroit Water Comm'rs, 34 Mich 273,

275 (1876).°

The challenged fees are not unlawful taxes. As was

summarized in Bolt, supra at 162, quoting Vernor, supra

at 167:

““To be sustained [as a regulatory fee], the act we

are here considering must be one for regulation

only, and not as a means of producing revenue.

Such a measure will be upheld by the courts

* But see Bolt v City of Lansing (On Remand), 238 Mich App 37,

45-48; __. NW2d ____ (1999), where it appears that confusion over the

historic import of these factors persists. This Court agrees with Judge

Markman’s dissent, pp 67-71, pointing out that the Supreme Court in

Bolt, supra, relied on long-established precedent in distinguishing fees

from taxes and did not create some “new” test of the difference between

them. This Court also agrees with the dissent, at 71, when it says, “in

virtually all such disputes, the application of a ‘totality of factors’ test

will inevitably entail some uncertainty in terms of the ultimate result,

while also affording both sides some measure of reasonable argument.”

That, however, puts the Markman dissent in close proximity to that in

Bolt at 176, where Justice Boyle expressed strong doubt, shared by this

Court, that the “test” is straightforward and consistent enough to be

applied with any degree of precision to this “legal conundrum.” But

perhaps that should go without saying where the test is admittedly not

one of “bright lines” — which is, incidentally, one reason for the Bolt

decision having split 4:3.

App. 63

when plainly intended as a police regulation, and

the revenue derived therefrom is not dispropor-

tionate to the cost of issuing the license, and the

regulation of the business to which it applies.’”

(Brackets in original.)

In Merrelli, supra at 583-584, quoting Vernor, supra at

168, the proportionality of a fee was linked to its presumed

reasonability:

““[W]hat is a reasonable fee must depend largely

upon the sound discretion of the legislature, hav-

ing reference to all the circumstances and neces-

sities of the case. It will be presumed that the

amount of the fee is reasonable, unless the con-

trary appears upon the face of the law itself, or is

established by proper evidence... .

“In determining whether a fee required for a li-

cense is excessive or not, the absence or amount

of regulatory provisions and the nature of the

subject of regulation should be considered, and, if

the amount is wholly out of proportion to the ex-

pense involved, it will be declared a tax. ***’”

(Cites deleted.)

As Vernor also said at 168, in important language not

quoted in Merrelli, “If revenue is incidentally derived

which is not so disproportionate as to make the fee

charged unreasonable, there can be no objection.” Accord

Graham, supra (see footnote 2). That is the case here.

The Court determines that the MCA fees are not

“wholly out of proportion to the expense involved” in the

Commission’s regulation of the motor carrier industry. The

revenue incidentally derived therefrom, even if in excess of

the necessary costs of regulation, is not so disproportion-

ate as to render these fees unreasonable — especially since

App. 64

they are supportive of the underlying regulatory purpose.

Graham, supra. Payment of the fees is not compulsory

inasmuch as carriers choose just how much of a presence

in Michigan, if any, they want their trucks to have. Con-

sistent with the criteria set out in Bolt, supra at 161-162,

these fees serve a regulatory purpose, are proportionate to

the necessary costs of the regulatory service and are

voluntary. Compare Graham, supra at 152-156. The Court

must therefore defer to the sound discretion of the legisla-

ture in deciding what MCA fees would be reasonable. In

short, these fees are not taxes and Plaintiffs are therefore

not entitled to a refund.

Second, Plaintiffs assert that the challenged fees are

facially infirm for their disparate treatment of for-hire

motor carriers relative to all other motor carriers that

regularly travel Michigan highways. On this view, since

the latter group is not subject to the imposition of MCA

fees there can be no rational basis for such dissimilar

treatment of motor carriers. Saying that “[t]he classifica-

tion made by the [MCA] is arbitrary and discriminates

against for-hire motor carriers,” Plaintiffs complain that

the MCA denies them equal protection of the law by

requiring that only they, and not private or exempt carri-

ers, pay for police enforcement of safety provisions appli-

cable to the entire trucking industry. Indeed, “There is no

difference between for-hire motor carriers, on the one

hand, and private and exempt carriers, on the other hand,

in terms of the safety concerns that they pose to the

traveling public ... [or] of the amount of police enforce-

ment required to see that they are complying with the law

... [or] of the amount of damage caused by such carriers to

the state and federal highways.” Pointing out that the for-

hire carriers “have exactly the same interest as private

eee eae tas iencemcaeans iittala

App. 65

carriers in operating their equipment in a safe fashion,”

Plaintiffs conclude that imposition of these fees on only

the former must be “irrational,” “arbitrary” and “discrimi-

natory,” and therefore must offend equal protection of the

law principles.

This view fails to see, however, that the process of

drawing lines and distinguishing between kinds of motor

carriers for regulatory purposes is a legislative task of

identifying priorities, weighing relevant considerations

and choosing among competing alternatives. Equal protec-

tion guarantees do not require that such distinctions be

ideal: “‘[T]he drawing of lines that create distinctions is

peculiarly a legislative task and an unavoidable one.

Perfection in making the necessary classifications is

neither possible nor necessary.’” O’Donnell vy Farm Mutual

Automobile Ins Co, 404 Mich 524, 542; 273 NW2d 829

(1979), app dis 444 US 803 (1980), quoting Massachusetts

Bd of Retirement v Murgia, 427 US 307, 314; 96 S Ct 2562;

49 L Ed 2d 520 (1976), and Ohio Bureau of Employment

Services v Hodory, 431 US 471, 489; 97 S Ct 1898; 52 L Ed

2d 513 (1977).

Nor does equal protection require the legislature to

deal with every aspect of the problems presented in motor-

carrier regulation at the same time. A statute is not

unconstitutional merely because it might have gone

further than it did by solving all such problems at once.

The legislature need not simultaneously “strike at all

evils” associated with such regulatory problems; rather,

the measure adopted “‘may take one step at a time,

addressing itself to the phase of the problem which seems

most acute to the legislative mind.’” Id. at 543, quoting

Katzenbach v Morgan, 384 US 641, 657; 86 S Ct 1717; 16

App. 06

L Ed 2d 828 (1966), and New Orleans v Dukes, 427 US

297, 305; 96 S Ct 2513; 49 L Ed 2d 511 (1976). All that

need be shown is that there was a rational basis for the

particular lines that were drawn. If so, the legislative

judgment must then be sustained. Jd. “The mere fact that

the Legislature has chosen to draw a distinction; between

for-hire and private motor carriers for purposes of this

kind of regulation “does not mean that [the MCA] is

unconstitutional.” Jd. at 547. See also In re Forfeiture of

$109,901, 210 Mich App 191, 197; 533 NW2d 328 (1995).

Plaintiffs are not members of a protected class and

fundamental rights are not implicated in these consoli-

dated actions. This equal protection claim must therefore

be assessed by means of a rational basis test. Saginaw Co,

supra at 222-223, citing Yaldo v North Pointe Ins Co, 457

Mich 341, 349; 578 NW2d 274 (1998). Michigan courts

must uphold the challenged statute where it furthers a

legitimate governmental interest and the classification is

rationally related to achieving that interest. Id. at 223.

This requires only that the legislation’s distinctions bear a

reasonable relationship to a permissible legislative objec-

tive. Pioneer State Mutual Ins Co v Allstate Ins Co. 417

Mich 590, 599-600; 339 NW2d 470 (1983). There need only

be some reason for thinking that the means chosen, 1.e.,

the statute’s distinctions, are likely to further the legisla-

ture’s goals. Doe v Dep't of Social Services, 439 Mich 650,

662; 487 NW2d 116 (1992), citing Shavers v Attorney

General, 402 Mich 554, 613; 267 NW2d 72 (1978), cert den

442 US 934 (1978).

The application and renewal fee and the intrastate

and interstate decal fees required by the MCA reflect the

legislature’s intent to regulate the non-preempted aspects

Te ee eR a NTS

App. 67

of the for-hire moter carrier industry remaining after

federal preemption of the economic aspects. It surely was

not unreasonable for legislators to think that industry in a

materially different position relative to the public interest

than private carriers. That distinction rationally comports

with the legislative intent to subject the former to regula-

tion for the sake of guarding the public. Whether that

means to securing the public interest actually works out

as intended is another question that is of no concern to

equal protection analysis. O’Donnell, supra at 549.

Further, the legislature’s statutory distinction be-

tween commercial and private motor carriers for the

purpose of exacting these fees is a valid classification

designed to address the specific concerns of this legisla-

tion. The objective is without doubt a legitimate state

interest, and there is nothing unreasonable or irrational

about the classification scheme’s relationship to that goal.

The fees are not arbitrary since they represent a reason-

able effort by government to assure that the public is

adequately protected against potential dangers posed by

for-hire carriers. Although the lines drawn by the legisla-

ture in making the MCA applicable only to commercial

carriers may be imperfect, that is not sufficient to render

them unconstitutional. “‘That the legislative solution

appears undesirable, unfair, unjust or inhumane does not

of itself empower a court to override the legislature and

substitute its own solution.’” Doe, supra at 681, quoting

Manistee Bank

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