Opposition Brief — V-1 Oil Co. v. United States

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APR 22 1996

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No. 95-1308

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In the Supreme Court of the Gnited States

OCTOBER TERM, 1995

V-1 O11 COMPANY, INC., D/B/A V-1 PROPANE,

PETITIONER

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

NANCY E. McFADDEN

General Counsel

PAUL M. GEIER

Assistant General Counsel

for Litigation

Department of Transportation

Washington, D.C. 20590

DANIEL CAREY SMITH

Assistant Chief Counsel

BILLIE STULTZ

Deputy Assistant Chief

Counsel

JONATHAN L. KAPLAN

Trial Attorney

Federal Railroad Administration

Washington, D.C. 20590

DREW 8S. DAYS, III

Solicitor General

FRANK W. HUNGER

Assistant Attorney

General

WILLIAM KANTER

JOHN F. DALY

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 514-2217

QUESTIONS PRESENTED

1. Whether the system of warrantless regulatory

inspections of property and records provided by the

Hazardous Materials Transportation Act, 49 U.S.C.

1801 et seq. (HMTA), comports with the Fourth

Amendment.

2. Whether the district court properly enjoined

petitioner to comply with searches under the HMTA.

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Colonnade Catering Corp. v. United States, 397

I ais cal alenssieescbesoeceucnss =

Donovan v. Dewey, 452 U.S. 594 (1981) ...........0....... 9, 10

Lesser v. Espy, 34 F.3d 1301 (7th Cir. 1994) .......... 13

New York v. Burger, 482 U.S. 691 (1987) ............. 6, 7, &,

S &S Pawn Shop, Inc. v. Del City, 947 F.2d 432 +

a ID Ge siacniciis Acieticevsatendivabiedctacevadiotwenterwe 11, 13

See v. City of Seattle, 387 U.S. 541 (1967) ............... 7

United States v. Biswell, 406 U.S. 311 (1972) ...... 7.8.10

United States v. Salerno, 481 U.S. 739 (1987) ......... 12

Constitution, statutes and regulations:

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Act of July 5, 1994, Pub. L. No. 103-272, 108

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Hazardous Liquid Pipeline Safety Act of 1979, Pub.

L. No. 96-129, § 216(b), 93 Stat. 1015 ....................... 2

Hazardous Materials Transportation Act, 49 U.S.C.

1801 et seq. ....... anda atehiiebhieinterniinieeieorrs 2

49 U.S.C. App. 1802(11) (1988 & Supp. V 1993) ... 1]

49 U.S.C. App. 1802(15) (1988 & Supp. V 1993) ... 3

49 U.S.C. App. 1803-1805 (1988 & Supp. V 1993) . 2

49 U.S.C. App. 1808 (1988 & Supp. V 1993) ......... 3

49 U.S.C. App. 1808(c) (1988) ................... 3, 11-12, 13

19 U.S.C. App. 1808(c)(1) (1988) ...............0ccceceeee 3

Statutes and regulations—Continued: Page

49 USA. AD. LGIG) (IGBS) civcscerscocsconsvsccvessicens 5

Transportation of Explosives Act, ch. 234, 35 Stat.

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Transportation Safety Act of 1974, Pub. L. No. 93-

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Miscellaneous:

H.R. Rep. No. 1088, 93d Cong., 2d Sess. (1974) .......... 7)

Jn the Supreme Court of the Ginited States

OCTOBER 'TERM, 1995

No. 95-1308

V-1 O1L COMPANY, INC., D/B/A V-1 PROPANE,

PETITIONER

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES IN GPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 2a-

14a) is reported at 63 F.3d 909. The order and judg-

ment of the district court (Pet. App. 16a-32a, 33a-34a)

are unreported.

JURISDICTION

The judgment of the court of appeals (Pet. App. 15a)

was entered on August 24, 1995. A petition for re-

hearing was denied on November 1, 1995. Pet. App. 1a.

The petition for a writ of certiorari was filed on

January 30, 1996. The jurisdiction of this Court is

invoked under 28 U.S.C. 1254(1).

STATEMENT

1. In 1975, Congress enacted the Hazardous Ma-

terials Transportation Act, 49 U.S.C. 1801 et seq.

(HMTA or Act), in order “to protect the Nation

adequately against the risks to life and property

which are inherent in the transportation of hazardous

materials in commerce.” 49 U.S.C. App. 1801 (1988);

see Pub. L. No. 93-633, 88 Stat. 2156.’ Although

congressional efforts to control the transportation of

dangerous materials, especially by rail, date back to

the early part of this century,” the HMTA provides a

comprehensive regulatory scheme affecting the

transportation of such materials in commerce, by all

modes of transportation. It empowers the Secretary

of Transportation to designate various dangerous

substances as “hazardous materials,” and to promul-

gate regulations regarding their transportation and

handling. 49 U.S.C. App. 1803-1805 (1988 & Supp. V

1993). The Secretary is also specifically authorized

to conduct investigations, require the maintenance

and submission of reports and records, and conduct

| During the pendency of this action, Congress recodified a

number of federal transportation laws, including the HMTA,

which now appears at 49 U.S.C. 5101-5127. See Pub. L. No. 103-

272, 108 Stat. 745 (1994). As the court of appeals noted,

however, that recodification does not make substantive changes

in the affected laws, and is in any event not applicable to

actions commenced prior to its enactment. Pet. App. 8a n.1;

Pub. L. No. 103-272, §§ 6(a), 7(b), 108 Stat. 1378-1379. Like the

court of appeals and petitioner, we cite herein to the pre-1994

codification.

* See Transportation of Explosives Act, ch. 234, 35 Stat.

554 (1908); 18 U.S.C. 831-835 (1976) (repealed by Pub. L. No. 96-

129, § 216(b), 93 Stat. 1015 (1979)).

inspections. 49 U.S.C. App. 1808 (1988 & Supp. V

1993).

Of particular lonificance to this case, the Act pro

vides:

The Secretary may authorize any officer, em

plovee, or agent to enter upon, inspect, and exa

mine, at reasonable times and in a reasonable

manner, the records and properties of persons to

the extent such records and properties relate to

‘ + A« . ] | - ‘

2) the transportation or shipment by any

. ) > Wh eepe . 7 yyeyT 1.1 } ’ y

person of hazardous materials in com

merce.

An) such officer, employee, or agent hall, upon

request, display proper credentials.

19 U.S.C. App. 1808(c) (1988). Section 1808(c) thus

authorizes inspections, without notice or warrant, “to

the extent” that the property or records at issue

relate to the particular activities to which the Act is

addressed—e.g., the transportation of hazardous ma

terials in commerce.” The statute defines “trans

portation” to include any mpvement of hazardous

materials, including loading, unloading, and incidental

storage. 49 U.S.C. App. 1802(15) (1988 & Supp. V

199%).

The Secretary has promulgated extensive regu

lations to implement the HMTA, see 49 C.F.R. Pt

The other clause of Section 180&8(c), not pertinent here,

autnorizes similar Inspections with respect to tne manutacture

or maintenance of containers for use in the transportation

hazardous materials in commerce 9 U.S.C. App. 1L808(¢c)(1

(1988).

107, 171-180, including regulations specific to car-

riage by rail. 49 C.F.R. Pt. 174. The Secretary has

delegated to the Federal Railroad Administration

(FRA) responsibility for administering the HMTA

and all regulations issued under it insofar as they

apply to transportation by rail, including carrying out

inspections of records or property relating to the

transportation of hazardous materials by rail. 49

C.F.R. 1.49(s)(1).. Several of the Secretary’s regu-

lations are pertinent to this case. First, in accord-

ance with the statutory definition of “transporta-

tion,’ the regulations make clear that the process of

unloading a railroad tank car filled with hazardous

materials is subject to the Act’s requirements. See,

e.g., 49 C.F.R. 174.67. The regulations also address

the situation of containers (including railroad tank

cars) that may contain residual amounts of hazardous

materials. 49 C.F.R. 173.29. Although some special

provisions are made for such containers, they

generally remain subject to the Act and regulations.

Ibid. Insofar as property or records relate to rail

transportation of hazardous materials, FRA _ in-

spectors are responsible for inspecting for compli-

ance with all aspects of the requirements of the Act

and regulations, including the adequacy of packaging,

marking, and labeling, the procedures used in loading

and unloading, the securing of container closures, and

the documentation of hazardous materials shipments.

See, e.g., 49 C.F.R. 172.200-172.204, 172.330(a)(1)(i),

173.31, 174.59, 174.67.

2. Petitioner is a dealer in liquefied petroleum gas

(propane) and is active in several western States.

Pet. 3-4. Propane is a highly hazardous material,

classified as a flammable gas under the HMTA. 49

C.F.R. 173.2, 173.2a, 172.101. Petitioner receives rail

tank cars of propane from suppliers, which it unloads

into its own storage facilities. CA ER 195-196." It

then sends the unloaded cars—which contain residual

amounts of propane—back to the original shipper.

Both of those activities are subject to the HMTA and

the regulations promulgated thereunder: the receipt

and unloading of the rail tank cars constitutes

“transportation,” and the return of the unloaded cars

is subject to regulatory requirements, such as that

the cars be properly sealed and marked and that the

shipments be properly documented. See 49 C.F.R.

173.29.

On one occasion in 1990, and three occasions from

1992 and 1993, FRA inspectors attempted to conduct

unannounced inspections of petitioner’s facilities.

Pet. App. 5a-6a. Each time, petitioner refused eper-

mission to conduct an immediate inspection, indicat-

ing that it would permit inspection only after FRA

officials completed a form developed by petitioner,

after which petitioner would, if it “approved” the

request, schedule an inspection. Jbid.

3. In August 1993, the United States brought suit

against petitioner pursuant to 49 U.S.C. App. 1810(a)

(1988), which authorizes district courts to enter

injunctive ‘or other relief to remedy violations of the

Act. The district court first entered a preliminary

injunction, requiring petitioner to submit to war-

' “CA ER” refers to the Excerpts of Record filed by peti

tioner in the court of appeals.

° Petitioner’s form, which the district court described as

being “couched in noticeably combative terms,” required FRA

inspectors to identify the purpose of the inspection, to describe

their qualifications for performing the inspection, and to “read

aloud” the provision of law authorizing the inspection. See

Pet. App. 19a & n.2; id. at 5a-6a; CA ER 202.

rantless, unannounced inspections. Pet. App. 35a-47a.

Pursuant to that injunction, FRA personnel

conducted inspections of petitioner’s facilities, which

revealed a number of deficiencies in its operations.

CA ER 225-228, 266-269.° The district court later

granted the United States’ motion for summary judg-

ment, holding that the HMTA provides authority for

warrantless inspections, Pet. App. 19a n.1,‘ that such

inspections comport with the Fourth Amendment,

Pet. App. 22a-28a, and that petitioner’s continued

refusal to comply with the HMTA, along with the

interest in public safety, justified permanent

injunctive relief. Jd. at 28a-30a.

The court of appeals affirmed, holding, based on

New York v. Burger, 482 U.S. 691 (1987), that war-

rantless inspections by the FRA pursuant to the

HMTA comport with the Fourth Amendment. Pet.

App. 2a-l4a. The court first rejected petitioner’s

claim that it is not part of the “railroad industry,”

holding that petitioner’s involvement in the rail

transportation of propane places it within a per-

vasively regulated industry. /d. at 7a. The court next

applied Burger’s three-part test for evaluating the

validity of warrantless regulatory searches. It held

that the first two prongs of the test are “easily

satisfied,” because the underlying regulatory scheme

advances the “substantial governmental interest” in

protecting life and property from dangers associated

® Certain of the cited pages (CA ER 225-227) are also re-

produced as Pet. App. I, in the “Lodging Appendix” sub-

mitted by petitioner.

Petitioner has not challenged that statutory inter-

pretation, either before the court of appeals or in its petition

for review by this Court.

with the transportation of hazardous materials, and

because unannounced inspections are necessary to

“reasonably ensure that the statute is satisfactorily

enforced.” Ibid. (citing United States v. Biswell, 406

U.S. 311 (1972)). The court also held that the

HMTA’s inspection program satisfies the final prong

of the Burger test, because it provides notice to

entities such as petitioner that they are subject to

periodic inspections, and because it reasonably limits

the time, place, and scope of inspections. Pet. App. 7a-

9a. Finally, the court held that the district court had

not abused its discretion in entering permanent

injunctive relief. Jd. at 9a-10a."

ARGUMENT

The court of appeals correctly applied the Fourth

Amendment standards governing inspections of busi-

nesses in a closely regulated industry that this Court

set out in New York v. Burger, 482 U.S. 691 (1987).

Its decision does not conflict with any other reported

decision; rather, as petitioner concedes (Pet. 3, 6), the

application of Burger to inspections under the HMTA

presents a question of “first impression.” Nor does

petitioner offer any other reason why this Court’s re-

view is warranted.

1. The Fourth Amendment’s prohibition against

unreasonable searches and seizures applies not only

to individuals and private residences, but also to

corporations and places of business. See See v. City

of Seattle, 387 U.S. 541 (1967). As this Court has re-

* Judge Noonan dissented. Judge Noonan was of the view

that the HMTA scheme does not afford sufficient “certainty

and regularity” in light of the large number of potentially

hazardous materials and in light of what he believed to be the

infrequency of FRA inspections. Pet. App. 10a-14a.

cognized, however, although searches of residences

ordinarily must proceed pursuant to a search war-

rant, the Fourth Amendment does not necessarily

require a duly-authorized governmental agency to

obtain a warrant to inspect a regulated business. See

United States v. Biswell, 406 U.S. 311, 316 €1972):

Colonnade Catering Corp. v. United States, 397 U.S.

72, 76 (1970). That is because, “[wJhen a [person]

chooses to engage in [a] pervasively regulated

business * * * , he does so with the knowledge that

his business records [and facilities] will be subject to

effective inspection.” Biswell, 406 U.S. at 316.

In Burger, this Court synthesized its earlier de-

cisions involving regulatory searches and held that

such a search comports with the Fourth Amendment

where the business in question is part of a “closely

regulated” industry, 482 U.S. at 702, and where three

criteria are met:

First, there must be a ‘substantial’ government

interest that informs the reguiatory scheme, pur-

suant to which the inspection is made.

‘Second, the warrantless inspections must be

necessary to further [the] regulatory scheme.’

Finally, ‘the statute’s inspection program, in

terms of the certainty and regularity of its appli-

cation, {must] provide a constitutionally adequate

substitute for a warrant.’ In other words, the

regulatory statute must perform the two basic

functions of a warrant: it must advise the owner of

the commercial premises that the search is being

made pursuant to the law and has a properly

defined scope, and it must limit the discretion of

the inspecting officers.

482 U.S. at 702-703 (quotations and citations omitted);

see Donovan v. Dewey, 452 U.S. 594, 600 (1981)

(regulatory inspection programs are reasonable

where “Congress has reasonably determined that

warrantless searches are necessary to further a

regulatory scheme and the federal regulatory

presence is sufficiently comprehensive and defined

that the owner of commercial property cannot help

but be aware that his property will be subject to

periodic inspections undertaken for specific pur-

poses”).

As the court of appeals held, those standards were

met in this case. Petitioner was plainly involved in a

pervasively regulated industry—the transportation of

liquid propane—and thus, as the court of appeals

observed (Pet. App. 7a), “has a reduced expectation of

privacy because it transports, stores, and sells

propane gas.” Moreover, there is no serious question

that ensuring the safe transportation of explosive or

otherwise hazardous materials represents a “sub-

stantial government interest,” Burger, 482 U.S. at

702. Congress enacted the HMTA in response to a

series of catastrophic hazardous materials accidents,

including accidents involving rail transportation. See

H.R. Rep. No. 1083, 93d Cong., 2d Sess. 15-16 (1974).

Also unavailing is petitioner’s claim (Pet. 15-16)

that unannounced inspections are “not necessary to

the regulatory scheme,” the second criterion under

Burger. As this Court has explained, that criterion

does not require that warrantless searches be ab-

solutely essential in order for the regulatory scheme

to have any efficacy, but instead is satisfied where the

regulatory program could be “‘frustrate([d]’” and be

undermined as an “‘effective and * * * credible

deterrent’” absent unannounced warrantless inspec-

tions. Burger, 482 U.S. at 710 (quoting Donovan v.

Dewey, 452 U.S. at 600); Biswell, 406 U.S. at 316. As

the court of appeals recognized (Pet. App. 7a), in the

context of the HMTA, “laldvanced notice of in-

spections could permit [petitioner] to temporarily

correct violations and frustrate enforcement efforts.”

Petitioner’s assertion (Pet. 15) that “there is no

illegal behavior to deter” on its part is incorrect and,

in any event, irrelevant to the Fourth Amendment

inquiry. It is undisputed that the FRA’s inspections

of petitioner’s business premises following entry of

the preliminary injunction in this case revealed vio-

lations of the HMTA. CA ER 225-228, 266-269; Pet.

App. I. Moreover, because many of the practices

against which the HMTA guards may either be

rectified quickly or concealed, advance notice of

official inspections would undermine enforcement of

the Act. Those practices include the improper se-

curement of rail cars carrying hazardous materials,

the use of improper procedures during unloading

operations, and the failure to retain proper records

that may be urgently needed in the event of a derail-

ment or other release of hazardous materials.

Finally, petitioner is wrong to suggest that a dearth

of demonstrated violations would indicate a lack of

need for unannounced inspections. On the contrary,

the goal of having unannounced inspections under the

HMTA is to induce a high level of voluntary compli-

ance with HMTA regulations on the part of busi-

nesses that cannot be assured that an inspection will

not be forthcoming. As the Tenth Circuit has put the

point, an argument like petitioner’s that a low in-

cidence of regulatory violations indicates minimal

need for an inspection program essentially asks the

court to “discount the government interest in any

regulatory scheme that has successfully furthered

its purpose.” S&S Pawn Shop, Inc. v. Del City, 947

F.2d 432, 437 (10th Cir. 1991).

The third and final criterion of the Burger test is

whether the statutory scheme serves the basic

functions of a warrant, by putting the subject on

notice of the prospect of inspection and by limiting

the discretion of the inspecting officers. See 482 U.S.

at 703. As the court of appeals held, the inspection

scheme under the HMTA satisfies that standard, by

putting entities such as petitioner on notice that they

are subject to periodic inspections, by reasonably

limiting the time, place, and scope of inspections and

by limiting the discretion of the inspecting officers.

Pet. App. 8a-9a.

Petitioner argues (Pet. 11-13) that, given the large

number of substances identified as hazardous,

“anyone” could be subject to the Act, and thus peti-

tioner was not put on notice of the likelinood of

inspection. Under the HMTA, however, the only

entities subject to inspection are those that “offer{]

hazardous materials for transportation in commerce

or transport[] hazardous materials in furtherance of a

commercial enterprise.” 49 U.S.C. App. 1802(11) (1988

& Supp. V 1993). Moreover, such entities are subject

to inspection only “to the extent” that the properties

or records in question relate to either the trans-

portation or the shipment of hazardous materials in

commerce (or to the manufacture or maintenance of

containers for such transportation). 49 U.S.C. App.

1808(c) (1988). As the court of appeals recognized

(Pet. App. 8a-9a), those provisions make clear that a

business, such as petitioner’s, that routinely unloads

rail cars containing propane and dispatches cars

containing propane residues for return shipment, is

subject to inspection.

Petitioner also faults (Pet. 10-11) the court of

appeals for referring to the nature of petitioner’s

business activities in concluding that petitioner was

on notice of the possibility of an inspection. See Pet.

App. 9a. The court of appeals, however, did no more

than explain why the Act itself puts that type of

business on notice of the likelihood of inspection.

Ibid.” Petitioner also contends (Pet. 13-14) that the

FRA’s inspection program under the HMTA lacks

“certainty and regularity” because of the purported

infrequency with which inspections are condacted.

Pet. 13-14. Petitioner’s factual assertions about the

frequency of inspection are incorrect.” In any event,

as this Court has noted, the frequency of inspection,

* Nor may petitioner establish a Fourth Amendment

violation by speculating that warrantless inspections of other

types of businesses under the HMTA would be invalid. See

United States v. Salerno, 481 U.S. 739, 745 (1987) (“The fact

that [a statute] might operate unconstitutionally under some

conceivable set of circumstances is insufficient to render it

wholly invalid, since we have not recognized an ‘overbreadth’

doctrine outside the limited context of the First Amend-

ment.”).

Petitioner asserts (Pet. 14) that the FRA attempted no

inspections before 1990. In the district court, however, the

United States presented evidence documenting inspections in

1985, 1986, 1988, and 1989. CA ER 229, 256-259, 270-271, 287-

288. While petitioner now asserts that it was “not aware” of

those inspections (Pet. 4 n.2), it did not offer any evidence

refuting the government’s proof.

although a factor to be considered, is “not determin-

ative of the result so long as the statute, as a whole,

places adequate limits upon the discretion of

inspecting officers.” Burger, 482 U.S. at 711 n.21. As

the court of appeals held (Pet. App. 9a), the HMTA

properly cabins such discretion. /bid. With regard to

timing, the Act provides that inspections may be

conducted only “at reasonable times and in a reason-

able manner.” 49 U.S.C. App. 1808(c) (1988). The

FRA’s Enforcement Manual further provides that in-

spections are ordinarily to be conducted during

normal business hours. CA ER 232. Compare

Burger, 482 U.S. at 711; S & S Pawn Shop, Inc. v. Del

City, 947 F.2d at 438-439; Lesser v. Espy, 34 F.3d 1301,

1308-1309 (7th Cir. 1994).

Furthermore, as the court of appeals noted (Pet.

App. 9a), “[t]he permissible scope of these searches

(under the HMTA|] is narrowly defined.” The HMTA

authorizes inspections only “to the extent that such

records or properties relate to” the transportation of

hazardous materials in commerce. 49 U.S.C. App.

1808(c) (1988). Thus, while the FRA inspects to

determine compliance with regulatory requirements

e.g., Whether hazardous materials are marked for

shipment, whether tank cars and other packages used

for rail transportation are properly secured, whether

loading and unloading procedures used for such

materials are followed, and whether required docu-

mentation of hazardous materials shipments is

maintained—it does not inspect the business entity’s

tax returns or other records unrelated to those

regulations. Nor does the FRA conduct inspections

of retail stores or other areas unrelated to rail trans-

portation.

2. Petitioner also argues (Pet. 18-19) that the

court of appeals erred in upholding the district

court’s injunction requiring petitioner to submit to

inspections pursuant to the HMTA. That argument

is derivative of petitioner’s claim that the HMTA’s

provision for warrantless inspections of transporters

of hazardous material is unreasonable under the

Fourth Amendment. And, as the courts below held,

given petitioner’s repeated refusals to permit in-

spections in the past, an injunction was appropriate to

permit the FRA to carry out its regulatory responsi-

bilities under the HMTA.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

DREW S. Days, IIl

NANCY E. McFADDEN Solicitor General

General Counsel FRANK W. HUNGER

PAUL M. GEIER Assistant Attorney

Assistant General Counsel General

for Litigation | WILLIAM KANTER

Department of Transportation JOHN F. DALY