Opposition Brief — Central Transport, Inc. v. Michigan Public Service Commission

> FILED |

ha “

C1 27 1998

No. 98-533

In the Supreme Court of the United Sfites °F se ‘er

October Term, 1998 | SUPREME COURT. US:

——_

CENTRAL TRANSPORT, INC. and

UNIVERSAL AM-CAN, LTD.,

Petitioners,

Vv.

MICHIGAN PUBLIC SERVICE COMMISSION,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE MICHIGAN SUPREME COURT

BRIEF OF RESPONDENT IN OPPOSITION

FRANK J. KELLEY

Attorney General

Thomas L. Casey

Solicitor General

Counsel of Record

P. O. Box 30212

Lansing, Michigan 48909

(517) 373-1124

David A. Voges

Henry J. Boynton

Assistant Attorneys General

Attorneys for Respondent

Michigan Public Service

Commission

QUESTION PRESENTED

Whether section 601 of the Federal Aviation

Administration Authorization Act of 1994, which preempted

state economic regulation of motor carriers as to price, route

and services but which expressly excepted from that

preemption state regulation of matters pertaining to safety

and insurance, preempted the assessment of motor carriers’

fees to fund the non-preempted regulatory activities of the

Michigan Public Service Commission?

-ii-

TABLE OF CONTENTS

Pages

QUESTION PRESENTED) 0...iki ci eaienka. i

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OPTIONS . BELOW «iiss din ioacen a. 1

JOURN TION oincccs sence sseciltcdiddieresaibiats Boletellus 1

CONSTITUTIONAL AND STATUTORY PROVISIONS

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ETRE EIEN © vsavesiincavsesvunninesepsvilcusabionigeacones siNthcanasabbilaadtiebiona 1

PERTTI GA, os gegnessicesesnnjanavaqennsiil visagenbtdidepcuesbiieaniiiedinnss en 6

A. THE MICHIGAN COURT OF APPEALS PROPERLY

AFFIRMED THE MPSC’S DECISION THAT NON-

ECONOMIC STATE REGULATION OF MOTOR

CARRIERS WAS NOT PREEMPTED BY FEDERA

LYY ici, viesaiiuscidesiinavesncrdnctihisvous abated taieasetetaarcdaiannies Raabe @

1. Federal Preemption Is Determined By

Congressional Intent, And Is Limited And

Strictly Construed With Respect To Statutes

Enacted Under The State's Police Powers ............ 7

2. The Express Language Of FAAAA Section 601

And Its Legislative History Establish That

Congress Did Not Intend To Preempt Non-

Economic State Regulation Of Intrastate

Transportation Of Property By Motor Carriers,

Including Safety and Fitness Regulation, And

The Issuance Of Certificates And Collection Of

Fees Related Exclusively To Such Non-Preempted

PORE saseseveisecsscseanplabnnecaetasdnbovsaleenngs saatpeishtbaasbe 9

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: 3. The Michigan Court of Appeals Correctly Held

That FAAAA Section 601 Does Not Preempt

The MMCA Fee Provisions ...............cccccsseseecsseee: 14

4. A Major Purpose Of The MMCA Extends To

Safety Regulation, Which Has Been Preserved

By FAAAA Section 601

Sear Tas I eA ao doi ch iS scabecdonk 20

-iV-

Pages

CASES

Cloverleaf Butter Co v Patterson,

315 U.S. 148; 62 S. Ct. 491;

Oh Te I ici aii crinccsewnerviinnn Rode baadben 8

Florida Lime & Avocado Growers v Paul,

373 U.S. 132; 83 S. Ct. 1210;

a I io Licasesiencushabeneevhaqeant 8

Fort Halifax Packing Co v Coyne,

482 U.S. 1; 107 S. Ct. 2211;

I Tie TIED: sinincshsoieshaniincessngsininicesapsiiinanitininvensn 8

Hillsborough County v Automated Medical Laboratories,

471 U.S. 707; 105 S. Ct. 2371;

ee oe SEIS Neen Ae 8

Interstate Circuit, Inc. v Dallas,

390 U.S. 676; 88 S. Ct. 1298;

Se i 1

Louisiana Public Service Comm. v Federal Communications

Comm,

476 U.S. 355; 106 S. Ct. 1890;

ie Eg | Se ree ce a Cee 7

Mabee v White Plains Publishing Co,

327 U.S. 178; 66 S. Ct. 511;

ee Ri I Beano cesdiacnainciiitiecdacesncesvensees 8

Morales v TransWorld Airlines,

504 U.S. 374; 112 S. Ct. 2031;

129 Be ee A AIRY nis. ied 12-13

-V-

STATUTES

1963 P.A. 181,

M.C.L. 480.11, et seq.; M.S.A. 9.1666(1a) et seq.

(Motor Carrier Safety Act) ...........c:cccseeeeeeeeeees 18-19

MBAS. BR eS. RRB he pind 1

Airline Deregulation Act of 1978 (ADA),

Be aR UEP icici caaduscixepnpbadtnanssietinimncdunannisvieashions 12

Federal Aviation Administration Authorization Act of

1994, (“Section 601”) 49 U.S.C. 14501(c) ........ passim

Wh APG Bs MAB SRG Ck tok 18

M.C.L. 478.1, 478.2(1) and 478.2(2) ..........cccecceseeeeeeeees 14

Michigan Motor Carrier Act (“MMCA”),

M.C.L. 475.1 et seq.; M.S.A. 22.531 et seq .......... passim

CONSTITUTION

U.S. Const., Art. VI., cl. 2 (Supremacy Clause) ................ 1

OTHER

House Conference Report No. 103-677,

page 84, reprinted in 1994 U.S.C.C.A.N. 1756 ... 11-14

OPINIONS BELOW

The order of the Michigan Supreme Court denying leave

to appeal is reported at 458 Mich. 852 (Pet. App. 30-31). The

opinion of the Michigan Court of Appeals affirming in part,

and reversing in part, the decision of the Michigan Public

Service Commission is reported at 223 Mich. App. 288, 566

N.W.2d 299 (1997) (Pet. App. 1-30). The decision of the

Michigan Public Service Commission is unreported (Pet. App.

32-78).

JURISDICTION

The order of the Michigan Supreme Court denying leave

to appeal was entered on June 29, 1998. The petition for a

writ of certiorari was filed September 28, 1998. The

jurisdiction of this Court is invoked under 28 U.S.C. 1257(a).

Although the petition incorrectly states that it seeks a writ of

certiorari to the Michigan Supreme Court, because that court

denied discretionary review (Michigan Court Rule 7.301(A)(2))

it is the judgment of the Michigan Court of Appeals which is

reviewable under 28 USC § 1257(a). Interstate Circuit, Inc. v

Dallas, 390 Us 676, 678 n.1 (1968); Stern, Gressman, Shapiro

& Geller, Supreme Court Practice, § 3.12, p. 115 (7th ed.

1993).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Supremacy Clause, U.S. Const., Art. VI., cl. 2 is set

forth at Pet. App. 79. Section 601 of the Federal Aviation

Administration Authorization Act of 1994, (“Section 601”) 49

U.S.C. 14501(c) is set forth at Pet. App. 80-83.

STATEMENT

1. On August 23, 1994, President Clinton signed into

law the Federal Aviation Administration Authorization Act of

1994 (“FAAAA”). Section 601 of the FAAAA preempted

state economic regulation of motor carriers related to price,

route or services. Contrary to Petitioners’ statement of the

issue, Section 601 did not prohibit “virtually all state

regulation of intrastate motor carriers.” Instead, that section

effected only a partial preemption of state law, which is

evidenced by Section 601’s (49 U.S.C. 14501(c)(2))

description of matters not covered, wherein Congress stated

that the preemption:

(A) shall not restrict the safety regulatory

authority 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 nature of the cargo, or the authority

of a State to regulate motor carriers with regard

to minimum amounts of financial responsibility

relating to insurance requirements and self-

insurance authorization; and

(B) does not apply to the transportation of

household goods.

2. On September 8, 1994, the Michigan Public Service

Commission (“MPSC”) issued an order, with notice to all

interested parties including Petitioners, initiating a contested

case proceeding (MPSC Case No. T-1273) to examine the

effect of Section 601 of the FAAAA on the Michigan Motor

Carrier Act (“MMCA”), M.C.L. 475. 1 et seq. and rules

promulgated thereunder. In that September 8, 1998 order, the

MPSC indicated that following the submission of evidence and

testimony, it would issue a decision determining which

sections of the MMCA and its rules had been preempted and

which had not. The MPSC further stated the contested case

proceeding was not intended to address the FAAAA’s

constitutionality but rather was intended to provide a

framework for motor carriers to follow pending anticipated

action by the Michigan Legislature to conform the MMCA with

the FAAAA.

3. On January 11, 1995, following contested case

hearings and the submission of briefs by interested parties, the

MPSC issued its opinion and order in MPSC Case No. T-1273

(Pet. App. 32-78),! identifying those provisions of the MMCA

and rules promulgated thereunder, that were preempted by

Section 601 of the FAAAA as well as those sections that were

not preempted by Section 601 and which remained binding on

motor Carriers.

4. In its January 11, 1995 Opinion and Order, the

MPSC found that despite some parties’ assertions to the

contrary, the wording of Section 601 stops far short of

precluding the state regulation of all aspects of motor carriage.

Pet. App. 57. The MPSC’s order noted, for example, the

heading to Section 601 which reads “Preemption of State

Economic Regulation of Motor Carriers,” and stated:

This implies that, of the range of areas

presently covered by state regulation, economic

regulation (rather than regulation of safety,

fitness, insurance, etc.) was singled out by

Congress for at least partial preemption. Such

an implication is further supported by the

“General Rule” set forth in Section 601(h)(1),

which states only that_states “may not enact or

enforce a law, regulation, or other provision . .

. related to a price, route, or service” of any for-

hire or private motor carrier. (Emphasis

added.) Issues involving prices, routes, and

1 The MPSC’s January 11, 1995 Opinion is reprinted in the

Petitioners’ Appendix at pages 32-78. However, the Petitioners’

Appendix does not contain Exhibit A and Exhibit B that were

attached to the MPSC’s order which the MPSC refers to in its order

at Pet. App. 77. Exhibits A and B comprise 182 pages and sets forth

the text of all Michigan statutes and regulations pertaining to

motor carriers. In each Exhibit, the MPSC did a section-by-section

analysis of those rules and regulations, carefully lining out those

sections that were preempted by Section 601 of the FAAAA.

services have long been considered by the motor

carrier industry to fall within the definition of

economic regulation.

Pet. App. 57. The MPSC further found that Section 601 itself

provided a list of matters not covered by the preemption. The

MPSC stated that the finding of a partial preemption was

further supported by the FAAAA’‘s legislative history. Pet.

App. 58-59. The MPSC thus concluded:

Based on Section 601’s wording and

legislative history, the Commission concludes

that it preempts only those provisions of the

Act and the Rules relating to price, route, and

service. In reaching this conclusion, the

Commission specifically rejects Central's

argument that, because the primary focus of the

Act has always been on economic regulation, no

basis exists for continuing state regulation of

motor carriage. The Commission reaches this

conclusion for two reasons. First, Section 601

does not require that, to avoid preemption,

safety regulation must be the po velg focus of

any state statute regulating motor carriage.

Second, as correctly noted by the Staff, salary

concerns occupy at least co-equal status with

the economic regulation found in the Act.

5. Having determined that Congress intended only a

partial preemption of state motor carrier laws, the MPSC’s

January 11, 1995 Opinion and Order then addressed whether

specific areas of state motor carrier regulation were

preempted. They include: regulation of household goods

movers (Pet. App. 61-62); the certification process (Pet. App.

62-66); the assessment of annual registration fees (Pet. App.

66-68); jointly-established rates and classifications (Pet. App.

68-71); leasing requirements under M.C.L. (Pet. App. 71-72),

and; other miscellaneous issues (Pet. App. 73-76).

With regards to the assessment of annual registration

fees, the MPSC found that they were not preempted by

Section 601 of the FAAAA, stating:

The Commission agrees with the AAMA

and the Staff. As already discussed in detail,

the preemptive effect of Section 601 extends

only to issues of price, route, and service.

Neither the language of Section 601 nor the

Conference Report imply that fees imposed by

a state’s existing regulatory structure might fall

within that relatively narrow range of issues.

Thus, application of the annual registration fee

required by MCL 478.2 is not preempted.

Pet. App. 67. Importantly, the MPSC’s opinion also notes

that the MMCA does not require that revenue received (i.e.

from fees) under that law be used exclusively for economic

reasons. Id. Thus, the fees received can be used only to fund

non-preempted motor carrier regulatory activities performed

by the MPSC. |

In response to the argument that the motor carrier fees

should nonetheless be suspended or reduced the Commission

reasoned there was an insufficient legal or factual basis for

doing so. First, the MPSC noted that the amount of the fees

was set by statute. Because of this, the MPSC concluded that

it could not lawfully intrude in this area which was reserved to

the Legislature. Pet. App. 67. Secondly, the Commission

determined ‘that even if it was authorized to make such a

change, “the record provides an inadequate basis for doing

so.” Pet. App. 67.

6. Onappeal, the Michigan Court of Appeals upheld

the MPSC’s opinion and order with respect to fees, finding

that it was not only in keeping with Section 601’s partial

preemption but also supported by the record, as follows:

The PSC still has significant regulatory

obligations. For example, the PSC must

supervise and regulate the safety of motor

carrier operations. 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 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 Central Transport and Universal 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 collected were or can be used

only for what is now preempted economic

regulation. (Emphasis added.)

Pet. App. 18-19. Petitioners then sought leave to appeal the

decision of the Michigan Court of Appeals to the Michigan

Supreme Court, which unanimously denied in an order dated

June 29, 1998.

7. |The MPSC has not enforced any provision of the

MMCA or its Rules which the MPSC found preempted by

Section 601 in its January 11, 1995 order. However, the MPSC

has continued to enforce those non-preempted provisions of

the MMCA and its rules relating to such matters as safety,

fitness, etc. Furthermore, the MPSC has also utilized the fees

collected only for such non-preempted regulation conducted as

of January 1, 1995.

ARGUMENT

Petitioners contend that the Michigan Court of Appeals

erred in finding that Section 601 of the Federal Aviation

Administration Authorization Act of 1994 (“FAAAA”), 49

U.S.C. 14501(c) did not result in the preemption of virtually

all state motor carrier laws. The claim is without merit. As

the Michigan Court of Appeals correctly recognized, the

FAAAA, by its own terms, does not support the broad sweep

of federal motor carrier preemption, urged by the Petitioners.

Section 601 expressly excepts from its preemptive effect

significant aspects of regulation, including safety regulation,

regulation of size and weight of vehicles, regulation of

insurance requirements, and regulation of the transportation of

household goods.

The Petitioners erroneously contend that the sole focus

of the Michigan Motor Carrier Act (“MMCA”), M.C.L. 475.1

et seq.; M.S.A. 22.531 et seq. is the economic regulation of

competition. This is not true since the MMCA, from its very

inception, has had as a dual purpose to “protect and conserve

the highways and protect the safety and welfare of the

traveling and shipping public in their use of the highways.”

M.C.L. 475.2; M.S.A. 22.532. Because the Petitioners’ claim

lacks merit and because this case does not involve an

important question of federal law that has not been, but

should be, settled by this Court, or has been decided in a way

that conflicts with relevant decisions of this Court, the petition

for writ of certiorari should be denied.

A. THE MICHIGAN COURT OF APPEALS

PROPERLY AFFIRMED THE MPSC’S

DECISION THAT NON-ECONOMIC STATE

REGULATION OF MOTOR CARRIERS

WAS NOT PREEMPTED BY FEDERAL LAW.

1. Federal Preemption Is Determined By

Congressional intent, And Is Limited

And Strictly Construed With Respect To

Statutes Enacted Under The State's

Police Powers.

Congressional intent determines whether federal law

preempts state law. “[T]he critical question in any preemption

analysis is always whether Congress intended that federal

regulation supersede state law." Louisiana Public Service Comm.

v Federal Communications Comm., 476 U.S. 355, 369 (1986)

("Louisiana PSC”). This Court in Louisiana PSC identified when

Congress can be understood to have preempted state law:

Pre-emption occurs when Congress, in enacting

a federal statute, expresses a clear intent to

pre-empt state law..., when there is outright or

actual conflict between federal and state law...,

where compliance with both federal and state is

in effect physically impossible..., where there is

implicit in federal law a barrier to state

regulation..., where Congress has legislated

comprehensively, thus occupying an entire field

of regulation and leaving no room for the States

to supplement federal law..., or where the state

law stands as an obstacle to the

accomplishment and execution of the full

objectives of Congress.... (Citations omitted).

476 U.S. at 368-369.

Petitioners erroneously argue that Congress has occupied

virtually the entire field of regulation. However, federal

occupation of a field will not be lightly inferred:

The principle to be derived from [Supreme

Court] decisions is that federal regulation of a

field of commerce should not be deemed

preemptive of state regulatory power in the

absence of persuasive reasons - either that the

nature of the regulated subject matter permits

no other conclusion or that the Congress has

unmistakably so ordained.

Florida Lime & Avocado Growers v Paul, 373 U.S. 132, 147

(1963).

Moreover, preemption of matters "within the traditional

police power of the State should not be lightly inferred." Fort

Halifax Packing Co. v Coyne, 482 U.S. 1, 21 (1987). A federal

statute will be read to supersede a State's historic powers only

if this is “the clear and manifest purpose of Congress."

Hillsborough County v Automated Medical Laboratories, Inc., 471

US 707, 715 (1985).

This Court has also recognized that, in exercising its

power under the Commerce Clause, "Congress may weigh

relative needs and restrict the application of a legislative

policy to less than the entire field." Mabee v White Plains

Publishing Co., 327 U.S. 178, 184 (1946). In Cloverleaf Butter

Co. v Patterson, 315 U.S. 148, 155 (1942), this Court added

that, where there has only been a partial exercise of the federal

government's power over interstate commerce, "the state may

legislate freely upon those phases of the commerce which are

left unregulated by the nation."

As is evident from its plain language, Congress in Section

601 effected only a partial preemption, while expressly

preserving other state regulation (safety, fitness, etc), which

necessarily includes the attendant fees used for such continued

regulation. Congress neither sought nor intended to occupy

virtually all motor carrier regulation (or to bar continued state

regulation in the areas not preempted). The MPSC’s decision,

as affirmed by the Michigan Court of Appeals, recognized

Section 601's preemption, and the Congressional intent not to

preempt areas relating to safety, fitness, certificates, fees,

among others.

2. The Express Language Of FAAAA

Section 601 And Its Legislative History

Establish That Congress Did Not Intend

To Preempt Non-Economic State

Regulation Of Intrastate Transportation

Of Property By Motor Carriers,

Including Safety and _ Fitness

Regulation, And The Issuance Of

Certificates And Collection Of Fees

Related Exclusively To Such Non-

Preempted Regulatior.

FAAAA Section 601 provides for only partial preemption

of traditional state authority to regulate intrastate motor

carrier matters, and did not preempt all state regulation of for-

hire carriers as Petitioners’ claim. By its own terms, Section

601 provides for only partial preemption of state regulation,

namely, economic regulation “related to a price, route, or

service of any motor carrier". Section 601(h) [49 U.S.C.

14501(c)}, in pertinent part, states:

(1) GENERAL RULE. -- Except as provided

in paragraphs (2) and (3), a State, political

subdivision of a State, or political authority of

2 or more States may not enact or enforce a

10

law, regulation, or other provision having the

force and effect of law related to a price, route,

or service of any motor carrier (other than a

carrier affiliated with a direct air carrier

covered by section 41713(b)(4) of this title) or

any motor private carrier with respect to the

transportation of property.

(2) MATTERS NOT COVERED.--Paragraph (1)--

(A) shall not restrict the safety regulatory

authority 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 nature of the

cargo, or the authority of a State to regulate motor

carriers with regard to minimum amounts of

financial responsibility relating to insurance

requirements and self-insurance authorization; and

(B) does not apply to the transportation of

households goods. (Emphasis added).

Besides the plain language of Section 601's statutory

provisions, the legislative history also establishes that only a

partial preemption was intended by Congress, and not the

sweeping preemption that Petitioners suggest. The preemption

as stated pertains only to that which is “related to a price,

route, or service of any motor carrier." The legislative history

further indicates that the specific exemptions from preemption

listed in Section 601(h)(2)(A) (e.g., safety, financial fitness,

fees, size, weight, etc.) were not intended as a specific or

exhaustive list, but were meant as examples of the kind of

state regulation that remains. In other words, Congress

preempted only those matters which are expressly preempted

in the FAAAA, and nothing else. In this regard, the House

Conference Report No. 103-677, p. 84, reprinted in 1994

U.S.C.C.A.N. 1756 states:

Paragraph (4)(B) emphasizes that State

authority to regulate safety, financial

responsibility relating to insurance,

transportation of household goods, vehicle size

and weight and hazardous materials routing of

air carriers and carriers affiliated with a direct

11

air carrier through common controlling

ownership is unchanged, since State regulation

in those areas is not a price, route or service

and thus is unaffected. (This provision is

identical to the new subsection 11501(h)(2)(A)

discussed below.) This list is not intended to be

all inclusive, but merely to specify some of the

matters which are not “prices, rates or services” and

which are therefore not preempted. (Emphasis

added).

The House Conference Report No. 103-677, reprinted in

1994 U.S.C.C.A.N. 1757 further indicates that those matters

which are not a price, rate or service are not preempted,

stating as follows:

New subsection (h)(2) emphasizes that ~

State authority to regulate safety, financial

fitness and insurance, transportation of

household goods, vehicle size and weight and

hazardous materials routing of motor carriers is

unchanged since State regulation in those areas

is not a price, route or service and thus is

unaffected. This subsection is identical to

section 41713(b)(4)(B), described above.

The same House Conference Report also provides

compelling evidence that congressional intent is not to preempt

the ability of the states to issue statewide certificates of

authority applicable to motor carriers to demonstrate their

compliance with state and federal laws, or to interfere with

tax (or fee) laws, as follows:

Furthermore, neither preemption provision

would preempt the ability of a State to issue a

certificate or other documentation (in written or

electronic form) demonstrating that the carrier

complies with State requirements which are not

preempted by these sections and nothing in this

amendment is intended to change the

application of State tax laws to motor carriers.

12

House Conference Report, 103-677, p. 85, reprinted in 1994

U.S.C.C.A.N. 1757.

Petitioners, however, claim that a broad preemptive

purpose can be ascertained by looking at the language

Congress has used to deregulate the airline industry (citing

Airline Deregulation Act of 1978 (ADA), 49 U.S.C. 41713).

Petitioners indicate that the ADA prohibited the states from

enacting or enforcing Laws "relating to rates, routes, or

services." Citing the House Conference Report on Section 601,

Petitioners claim that this Court’s decision in Morales v

TransWorld Airlines, 504 U.S. 374; 112 S. Ct. 2031; 119 L. Ed.

2d 157 (1992) should be the starting point for any

determination of the preemptive effect of the FAAAA.

The Morales case, however, involved a different issue,

under a different Act, relating to solely to airlines.

Furthermore, the FAAAA, adopted in August 1994, and

effective January 1, 1995, was simply not before this Court in

Morales in 1992. As with any other statutory construction

issue, and as the Michigan Court of Appeals below held, any

analysis of Section 601 of the FAAAA should start with the

plain language of the FAAAA itself. The Michigan Court of

Appeals properly addressed itself to the plain language of the

FAAAA in determining its preemptive scope. Moreover, a

review of House Conference Report 103-677 indicates that the

Michigan Court ef Appeals’ reading of the language of the

FAAAA was correct.

It should also be noted that Section 601 was expressly

given prospective, not retroactive, effect. By its terms, Section

601 is effective January 1, 1995. The FAAAA did not

transform this Court's ruling in Morales, applicable to an

airline, into a retroactive preemption of state law relative to

motor carrier regulation. Moreover, the MPSC prior to the

adoption of Section 601 had already ruled that economic

regulations related to rates, routes, or services do not apply to

air Carriers, or to motor carrier operations integrated with air

carriers, but would apply only to ground-only motor carrier

13

functions, not having a connection with air carriers.2 Thus, the

MPSC has always regulated in a manner consistent with the

1992 Morales decision.

Also, in Morales, the airlines sued to enjoin various State

attorneys general from enforcing state guidelines requiring that

airline advertisements contain certain disclosures as to fare

terms, restrictions and availability. The Court concluded that

the airlines’ advertisements "relat[ed] to rates" and were

therefore preempted by the ADA. This Court, however, in

Morales emphasized the limited reach of its holding:

Nor need we address whether state regulation

of the non-price aspects of fare advertising (for

example, state laws preventing obscene

depictions) would similarly 'relat[e] to’ rates;

the connection would obviously be far more

tenuous. ... ‘[s]ome [S]tate actions may affect

[airline fares] in too tenuous, remote, or peripheral a

manner’ to have pre-emptive effect. (Emphasis

added).

504 U.S. at 390.

Both Section 601 itself and House Conference Report

103-677 thus indicate that with the preemption of state

regulation "related to a price, route, or service of a motor

carrier” that Congress listed, by example and not limitation,

several major areas of state regulation which were not

preempted. Such examples included, inter alia, the major area

of safety related regulation and the ability of states to review

and issue (or deny) statewide certificates of authority to

ensure compliance with state and federal law. Similarly,

Section 601 contains no language suggesting that the collection

of fees is in any way altered. In fact, the presumption is that

the fee collection power was continued in order to provide

2 The MPSC in its August 25, 1992 Order In Re Federal Armored,

MPSC File No. 23409, Case No. 5, determined that the economic

regulation of motor carrier air-ground services were subject to

preemption under Section 1305 of the Airline Deregulation Act, but

the carrier's strictly ground-based services were not preempted.

14

revenues to ensure proper safety related regulation, and to

ensure that the motor carrier industry pays its fair share of

services rendered by the states, which benefit motor carriers.

The legislative history indicates that a primary intent

behind Section 601's preemption was to provide a level

playing field relative to economic regulation of motor carriers

and air carriers, and not to impact safety or other non-

economic motor carrier regulation. House Conference Report,

103-677, pp. 85-87, reprinted in 1994 U.S.C.C.A.N. 1757-

1759. Thus, the overriding goal of Section 601 was to put all

motor carriers on an equal competitive footing regardless of

whether their services did or did not include an air carrier

component. Therefore it may be seen that the FAAAA’s

preemption relates to the economic regulation relating to a

“price, route, or service" and not to other regulatory areas, and

not to areas of state regulation that Section 601 expressly

exempted from preemption (safety, fitness, etc).

3. The Michigan Court of Appeals

Correctly Held That FAAAA Section

601 Does Not Preempt The MMCA Fee

Provisions.

Petitioners argue that M.C.L. 478.1, 478.2(1) and

478.2(2), which provide for the collection of fees, were

preempted by Section 601 as of January 1, 1995. The

Petitioners’ entire theory, however, is based upon the

erroneous premise that the fees are to be impliedly swept into

preemption as relating to "a price, route, or service of any

motor carrier." As noted, however, neither the issuance and

renewal of statewide certificate authority, nor the state fees at

issue, were intended to be preempted by Congress, as they are

not related to "a price, route, or service" of a motor carrier.

The Petitioners fail to acknowledge that Congress, by

expressly preserving significant aspects of state motor carrier

regulation such as safety, fitness, etc., adopted only a partial

preemption of state law. Moreover, the part of regulation

preempted by Section 601 does not affect the regulatory fees

in this case as the MPSC has not engaged in any economic or

15

other regulation preempted by Section 601. Since January 1,

1995, the MPSC has only engaged in regulatory activity, such

as safety, which is expres 1y not preempted by Section 601,

and has used all collected regulatory fees only for said activity

or to reimburse the state for motor carrier related costs.

The Michigan Court of Appeals below correctly found

that the clear and unambiguous language of Section 601

expressed Congressional intent not to preempt all state

regulation of the trucking industry. The Court of Appeals

characterized Section 601’s preemptive effect as follows:

Congressional intent is the cornerstone of

preemption analysis. Ryan v Brunswick Corp,

454 Mich 20, 27; __ NW2d ___ (1997).

Regardless of the similarities between the

Airline Deregulation Act of 1978 and § 601 of

the FAAAA, it is clear and unambiguous from

the language of § 601 that the congressional

intent was not to preempt all state regulation of

the trucking industry. Section 601 expressly

excepts from its preemptive effect significant

aspects of regulation, including safety

regulation, regulation of size and weight of

vehicles, regulation of insurance requirements,

and regulation of the transportation of

household goods. If the language of a statute is

clear and unambiguous, the plain meaning of

the statute reflects the legislative intent. (223

Mich App 288, 301). (Pet. App. 17).

[T]he House Conference Report 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, 103rd Cong, 2nd Sess, pp 84-85. The title

given to 49 USC 11501(h) is “Preemption of

State Economic Regulation of Motor Carriers.”

(Emphasis added.) Appellants’ argument that

Congress intended to preempt the entire field of

regulation of motor carriers fails in the face of

16

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. (Pet. App. 17).

Although the Petitioners’ claim that preemptive effect of

the FAAAA was more extensive than what the Michigan

Court of Appeals found, they have failed to address or rebut

major underpinnings of the Michigan Court of Appeals

decision. For example, the Court of Appeals found that the

FAAAA, by its own terms, does not support the “broad sweep

of the federal motor carrier preemption”, urged by the

Petitioners.

,

The Petitioners fail to come to grips with the fact that

the Michigan Court of App -als finding with respect to the

extent of the FAAAA’s preemption comes from a plain

reading of that Act. In essence, what the Michigan Court of

Appeals found is that because the statute is clear and

unambiguous, no statutory interpretation is necessary. Thus,

the language of the statute controls.

Additionally, the Petitioners have failed to contest two

critical findings made by the Michigan Court of Appeals, 223

Mich. App. 288, 302-303, where the Court states:

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 Central Transport and

Universal Ameritech-Can have not shown that

the cost of the PSC’s operations has ever been

totally funded by the fees its 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 regulation. (Pet. App. 18-

19).

In summary, Section 601 contains no language that

preempts the continued authority of the states to grant

17

statewide certificates to ensure continued compliance with

state and federal laws applicable to motor carriers, and to

collect applicable fees to fund non-preempted regulation such

as safety and fitness. Moreover, Congressional intent,

discussed supra, indicates that no preemption of statewide

certificates or fees was intended.

Pet. App. 59-60.

4. A Major Purpose Of The MMCA

Extends To Safety Regulation, Which

Has Been Preserved By FAAAA Section

601.

Petitioners erroneously contend that the sole focus of

the MMCA state economic regulation of motor carriers.

Petitioners are incorrect because the MMCA, since its

enactment in 1933, has had the dual purpose of not only

economic regulation, but also, importantly, safety regulation.

The very first titled purpose of the Motor Carrier Act is

"to promote safety upon and conserve the use of public

highways of the state..." This is restated in the purpose and

policy section of the Act, M.C.L. 475.2; M.S.A. 22.532, which

states in part as follows:

It is hereby declared to be the purpose and

policy of the Legislature in enacting this law to

confer upon the Commission the power and the

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...

(b) protect and conserve the highways and protect

the safety and welfare of the traveling and shipping

public in their use of the highways;... (emphasis

added).

The current title to the MMCA also provides for the collection

of fees and taxes from motor carriers to promote highway

safety and conservation as follows:

18

[T]o provide for the levy and collection of

certain privilege fees and taxes for such carriers

for such purposes and the disposition of such

fees and taxes; ... (emphasis added).

The MMCA extensively addresses safety, fitness, and

insurance issues. M.C.L. 475.5; M.S.A. 22.533(3) tailors the

duration of evidentiary proceedings to accommodate fitness

issues, and M.C.L. 476.3; M.S.A. 22.536 requires Commission

review of applications for certificates of authority to verify the

physical condition of the equipment and property of the

applicant as well as to ascertain that the vehicles of the

applicant have passed an inspection within the proceeding 12

months pursuant to the requirements of the Motor Carrier

Safety Act, 1963 P.A. 181, M.C.L. 480.11, et seq.; M.S.A.

9.1666(1a) et seq.

Sections 476.5, 476.10, 478.7, 479.9, 479.10, 479.11,

479.12 and 479.13 all underscore and amplify the

Commission's regulatory duties relating to public safety as

they apply to motor carriers. These sections spell out the

Commission's responsibilities ranging from insurance

monitoring and other record checking to leasing, contested case

evidentiary presentations, rulemaking responsibilities, and

collection of assessments. The MPSC is also granted

“authority to prevent evasion of this act through any device or

arrangement" [Title and M.C.L. 475.2(1)] and to do "all things

necessary to carry out and enforce this act." (M.C.L. 476.10).

Both the MPSC and the State Police also act in concert,

in many instances, to enforce both the MMCA and the

Michigan Motor Carrier Safety Act, 1963 P.A. 181, M.C.L.

480.11, et seq.; M.S.A. 9.1666(1a), et seq. In addition, a recent

act, 1993 P.A. 352, effective January 13, 1994, now Article VI

of the MMCA, M.C.L. 479.41; M.S.A. 22.587(1) ("Art VI"),

which expands the MPSC jurisdiction and authority relative to

motor carrier safety, in conjunction with the State Police,

states:

Sec. 1. The commission shall supervise and

regulate the safety of operations of each motor

carrier. The commission may promulgate rules

19

for the purpose of promoting safety upon the

highways and the conservation of their use.

[M.C.L. § 479.41; M.S.A. 22.587(1)].

\ + + *

Sec. 2. Upon request of the commission, the

department of state police shall review the

operation of an intrastate motor carrier to

determine whether the carrier is in compliance

with applicable safety related laws and rules

and issue a report within 60 days after

completion of its review to the commission.

[M.C.L. § 479.42; M.S.A. 22.587(2)].

* + *

Sec. 3. The public service commission, in

cooperation with the department of state

police, will develop and implement by rule or

order a motor carrier safety rating system

within 12 months after the effective date of this

article. In the rating system, an unsatisfactory

rating shall not be imposed without an on-site

safety review being conducted by the

department of state police. [M.C.L. § 479.43;

M.S.A. 22.587(3)].

MMCA Art VI thus explicitly authorizes cooperative functions

between the MPSC and State Police in furthering motor carrier

related public safety. Pursuant to Art. VI, the MPSC may

request State Police review of the operations of particular

motor carriers for compliance with safety related iaws and

rules. Moreover, the two agencies are directed to cooperate in

developing a motor carrier safety rating system which is now

in place and is being administered by the MPSC.

In light of the foregoing, the Petitioners contention that

the MMCA’s sole focus was the economic regulation of motor

carriers lacks merit. Instead, the MMCA contains numerous

provisions related to safety and other matters not preempted

by Section 601 of the FAAAA. The MPSC has made a good

faith effort to comply with federal law and has done so by

identifying those provisions of the MMCA that were

preempted by the FAAAA and which would no longer be

enforced by the MPSC pending anticipated action by the

20

Michigan Legislature to conform the MMCA with the FAAAA.

The determinations made by the MPSC are consistent not only

with the plain language of Section 601 of the FAAAA but also

with the legislative history underlying that enactment. The

Michigan Court of Appeals’ decision affirming the MPSC’s

decision and the Michigan Supreme Court’s denial of the

Petitioners’ Application for Leave to Appeal to that Court

were correct.

CONCLUSION

The Petition for Writ of Certiorari should be denied.

FRANK J. KELLEY

Attorney General of Michigan

THOMAS L. CASEY

Solicitor General of Michigan

Counsel of Record

DAVID A. VOGES

HENRY J. BOYNTON

Assistant Attorneys General

760 G. Mennen Williams Building

P.O. Box 30212

Lansing, MI 48909

Telephone: (517) 373-1124

Attorneys for Respondent

Michigan Public Service

Commission

Dated: October, 1998