Petition for Writ of Certiorari — Bridgeport Port Authority Authority v. Bridgeport & Port Jefferson Steamboat (No. 09-528)

4

Supreme Court, U.S.

FILED

No 097528 OCT 29 2009

OFFICE OF THE CLERK —

In TYHailem K. Suter, Clerk

Supreme Court of the United States

BRIDGEPORT PORT AUTHORITY,

Petitioner,

Vv.

BRIDGEPORT AND PORT JEFFERSON

STEAMBOAT COMPANY, FRANK L. ZAHRADKA,

and D&D WHOLESALE FLOWERS, INC.,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Second Circuit

PETITION FOR WRIT OF CERTIORARI

RICHARD L. ROSE Timotiry F. NOELKER

Murtha Cullina LLP Counsel of Record

177 BROAD STREET JAMES W. Erwin

STAMFORD, CT 06901 Ryan K. MANGER

203-653-5400 THOMPSON CospuRN LLP

Evererr E. Newton One U.S. Bank Plaza

Murua CuLutina LLP St. Louis, MO 63101

CitTyPLAcE I, 185 ASYLUM STREET 314-552-6000

HARTFORD, CT 06103-3469 Counsel for Petitioner

860-240-6000

Counsel for Petitioner

Becker Gallagher «- Cincinnati, OH - Washington. D.C. - 800.890.5001

i

QUESTIONS PRESENTED FOR REVIEW

1. Whether the Commerce Clause requires a fee

imposed for the use of government-owned facilities to

have a dollar-for-dollar correspondence with the

benefits conferred on the users under the “fair

approximation” test of Evansville-Vanderburgh Airport

Authority District v. Delta Airlines, Inc., 405 U.S. 707

(1972).

2. Whether the ‘Tonnage Clause requires

governmental authorities to use all of the fees imposed

on ferry passengers for services that directly benefit

the passengers when the fees were kept low because

the facilities used by the passengers were primarily

financed by state and federal grants.

il

PARTIES TO THE PROCEEDINGS

Pursuant to Supreme Court Rule 14.1, petitioner

states that all parties to the proceedings in the court

whose judgment is sought to be reviewed are listed in

the caption.

RULE 29.6 STATEMENT

Bridgeport Port Authority is a quasi-independent

agency of the City of Bridgeport, formed under the

laws of the State of Connecticut. Connecticut General

Statutes §§ 7-329a to 8-329u and Chapter 2.28 of the

Bridgeport Municipal Code. Bridgeport Port Authority

is not a publicly held corporation that issues stock.

il

TABLE OF CONTENTS

Questions Presented for Review ................ i

Parties to the Proceedings ............. Pee ee

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Petition for a Writ of Certiorari ............... 1

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US gk os $48 Oe eee 1

Constitutional Provisions Involved ............ 1

Statement of te CASO. 6... cece cas andees 2

A. Pactual BACKMBYOUNG ...... 0. 5c ce eeteaes 3

B. Proceedings Below .............c0e000. 5

Reasons for Granting the Petition ............. 8

I. The Court Should Grant Review Because

The Decision Conflicts With This Court’s

Dormant Commerce Clause Analysis in

Pe oye te 10

Il. The Court Should Grant Review Because the

Second Circuit Decision Conflicts With The

iv

Court’s Tonnage Clause Analysis in Clyde

eae gc vay eee ek ee ey dees 12

CEE ee eer rer ear ee 15

Appendix:

Appendix A: Second Circuit Opinion

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Appendix B: District Court Judgment

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Appendix C: District Court Memorandum

of Decision (July 3, 2008) ..... 23a

Appendix D: Second Circuit Order re Rehearing

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TABLE OF AUTHORITIES

Cases

Barber v. Hawait,

42 F.3d 1185 (Oth Cir. 1904) .............. 13

Captain Andy’s Sailing, Inc. v. Johns,

195 F.Supp.2d 1157 (D. Haw. 2001) ........ 13

Clyde Mallory Lines v. Alabama,

BOO UL. MOR UEGOO) 66 cee veces 9, 12, 13, 15

Evansville-Vanderburgh Airport Authority Dist. v.

Delta Airlines, Inc.,

ee Paes. ME Ay BOTS) ov ene eee eees 12

Evansville-Vanderburgh Airport Authority District

v. Delta Airlines, Inc..,

SOG U.m. FUT CEB ia) «ww oe ec ess 8,10, 11, 12

New Orleans Steamship Ass’n v. Plaquemines Port,

874 F.2d 1018 (5th Cir. 1989) ............. 13

Northwest Airlines, Inc. v. County of Kent,

BIG U.S. SOO CGO E) ow cece ces cesvuces 8

Northwest Union Packet Co., v. City of St. Louis,

et re, OD oc cs vee ee dae een hee 13

Plaquemines Port, Harbor and Terminal Dist. v.

Federal Maritime Commission,

838 F.2d 536 (D.C. Cir. 1988) ............. 13

vi

Polar Tankers, Inc. v. City of Valdez,

-- U.S. --, 129 S. Ct. 2277, 174 L. Ed. 2d 1

apa ee ell A a a oa a 14, 15

Constitutional Provisions

OB ae ae a passim

ey Ee Se De. he. passim

Statutes

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aig a 65 se kA 88 a 6 8 eee aaa eee 2

]

PETITION FOR A WRIT OF CERTIORARI

Petitioner Bridgeport Port Authority respectfully

petitions for a writ of certiorari to review the judgment

of the United States Court of Appeals for the Second

Circuit in this case.

OPINIONS BELOW

The opinion of the United States Court of Appeals

for the Second Circuit appears at Appendix A (App. la-

20a), and is reported at 567 F.3d 79 (2d Cir. 2009). The

opinion of the United States District Court for the

District of Connecticut appears at Appendix C (App.

23a-82a), and is reported at 566 F. Supp. 2d 81 (D.

Conn. 2008).

JURISDICTION

The court of appeals entered its judgment on May

29, 2009. App. A. The court of appeals denied a timely-

filed petition for rehearing on July 31, 2009. App. D.

The jurisdiction of this Court is invoked under 28

U.S.C. §1254(1).

CONSTITUTIONAL PROVISIONS INVOLVED

The Commerce Clause of the United States

Constitution, art. I, § 8, cl. 3, provides, in relevant

part:

The Congress Shall have the Power * * * To

Regulate Commerce * * * among the several

States.

2

The Tonnage Clause of the United States

Constitution, art. I, § 10, cl. 3, provides, in relevant

part:

No State shall, without the Consent of

Congress, lay any Duty of Tonnage * * *.

STATEMENT OF THE CASE

Respondents Bridgeport and Port Jefferson

Steamboat Company (“Ferry Company”), D&D

Wholesale Flowers, Inc., and Frank L. Zahradka filed

this action in the United States District Court for the

District of Connecticut challenging the validity of a

passenger wharfage fee imposed on ferry passengers

by the Bridgeport Port Authority. The Ferry Company

leases dock facilities from the Port Authority. D&D

paid the passenger fee for one of its employees who

rode the ferry twice a week since 2001. Zahradka was

a ferry passenger.

Respondents alleged that the passenger fee violated

the Commerce Clause, U.S. Const., art. I, § 8, cl. 3,

because the amount collected exceeded the Port

Authority’s direct costs of providing services to the

passengers. Respondents alleged that the passenger

fee also violated the Tonnage Clause, U.S. Const., art.

I, § 10, cl. 3, because the revenues from the passenger

fees were used for services other than those that

directly benefited the passengers.

The jurisdiction of the district court was invoked

under 28 U.S.C. §1331.

3

A. Factual Background

The Port Authority is a quasi-independent agency

of the City of Bridgeport, formed in 1993 under the

laws of the State of Connecticut and the City of

Bridgeport Municipal Code. App. B at 25a-26a. The

Port Authority has jurisdiction over the Port District,

which includes the Water Street Dock, the Bridgeport

Regional Maritime Complex, the Cilco Shipping

Terminal, and other port facilities. Jd. at 26a. The

Authority promotes and regulates port facilities and

economic development of waterfront arcas -- a mission

that is typical of port authorities throughout the

country. See id.

The Ferry Company operates a ferry service

between Bridgeport, Connecticut and Port Jefferson,

New York. The Port Authority leases the Water Street

Dock, a portion of the terminal building, and a staging

area for vehicles on the roadway to the Ferry

Company. Jd. at 26a-27a.

Since its inception, the Port Authority has collected

a passenger wharfage fee from ferry passengers to

recoup the expenses of operating and administering

the Port of Bridgeport. Jd. at 29a. The Ferry Company

collects the passenger fee, along with its own ticket

charge, from its passengers and, after retaining an

amount as compensation for its services, remits the

balance of the fees to the Port Authority. Jd. at 29a-

30a. The passenger fee is a relatively small portion of

the total ferry ticket price. For example, at the time of

trial, the ferry price for a one-way ticket for a vehicle

with unlimited passengers was $51.25, while the

corresponding passenger fee was $2.75. Jd. at 29a.

4

The Port Authority reccives no operational funding

from the federal government, the State of Connecticut,

or the City of Bridgeport. See id. at 30a. The Port

Authority’s budget is financed through several revenue

streams, including lease revenue generated from

leases with the Ferry Company and Steamboat

Concessions, Inc. (a subsidiary of the Ferry Company);

leases of other facilities in the harbor such as

Derecktor Shipyard; a property management fee from

Derecktor Shipyard; dockage fees; and the passenger

fee. Id. While the Port Authority receives its income

from this mix of resources, the passenger fee and the

rent generated from lease agreements provide the

principal source of revenue for the Port Authority’s

operational budget. Jd.

The Port Authority used over $14 million in state

and federal grants to build a new (and vastly

improved) terminal building, to make bulkhead repairs

to the ferry dock, to reconstruct the ferry dock, to

improve the access road to the terminal, to prepare to

build a parking facility for ferry passengers, and to

provide security systems for the terminal. See id. at

37a-39a. After completion of these projects,

particularly construction of the new terminal building

and access road, ferry ridership (and the Ferry

Company's profits) increased dramatically. See id. at

37a, 48a.

The Port Authority invested in other projects

within the Port District, including obtaining grants for

dredging the harbor, performing pump-out services to

recreational boats to maintain the cleanliness of the

harbor, working to expand ferry service by establishing

a high-speed ferry from Bridgeport to Stamford and

5

New York City, and fostering economic development in

the Port District. See id. at 79a-81a.

During the period covered by the lawsuit, the Port

Authority received $9.5 million in passenger fees. Id.

at 30a.The Port Authority’s costs of operations during

the same time were approximately $9.86 million. Jd. at

33a. The district court found that from 46% to 57% of

the annual revenues from the passenger fees were

used for services that did not directly benefit the ferry

passengers. See id. at 54a. The court refused to take

into consideration the additional $14 million in grants

received during this time that were used for

improvements to the ferry terminal and associated

facilities. See id. at 34a, 37a-39a.

The activities that the court refused to consider as

benefiting ferry passengers were efforts to promote a

high-speed ferry service to Stamford and New York

City, pump out services to clean the septic tanks of

pleasure craft using the harbor, development of a

barge feeder and container facility to relieve

congestion on nearby Interstate 95, development

projects for a marina and casino, development of the

Derecktor Shipyard, a foreign trade zone, the Cilco

Terminal providing services to commercial shipping,

dredging of the harbor, and _ various’ other

miscellaneous activities. /d. at 40a-46a.

B. Proceedings Below

The district court upheld the Port Authority’s right

to assess a passenger fee. App. C. Morcover, the court

found that the passenger fee does not discriminate

against interstate commerce or travel. /d. at 56a. But

the court held that, to the extent it found the

6

passenger fee funds activities that do not directly

benefit the ferry passengers, the fee violates the

Commerce Clause and Tonnage Clause. Jd. at 56a-69a.

The district court limited the facilities for which the

ort Authority could charge a fee to ferry passengers

to the Water Street Dock, terminal building and access

road, as opposed to the Port District as a whole. With

this limitation, the district court found the passenger

fee was excessive because it did not fairly approximate

the cost of operating the ferry terminal and associated

facilities. Jd. at 6la-65a. The district court examined

in detail the Port Authority’s activities (including such

minutiae as the subject matter of phone calls by

administrative staff). /d. at 37a-46a. The district court

eliminated the expenditures it deemed to not benefit

ferry passengers, and concluded that from 46% to 57%

of the fees were used for such activities. Jd. at 54a. The

district court also found that the passenger fee

partially violated the Tonnage Clause because the Port

Authority used the revenue for projects unrelated to

any use by the ferry passengers. /d. at 67a-69a.

The district court entered a permanent injunction

prohibiting the Port Authority from further use of the

passenger fee revenues to fund activities that are

“unrelated to and do not benefit the ferry passengers

or approximate their use of the Port.” App. B, App. C

at 80a-81la. The district court further enjoined the Port

Authority from collecting the passenger fee “in an

amount that exceeds what is necessary for expenses

that benefit ferry passengers and fairly approximate

their use of the Port.” Jd.

The court held that the Ferry Company failed to

prove that it was damaged but awarded the Ferry

7

Company nominal damages of $1. Id. at 76a-78a. The

court awarded D&D damages of $494.63, representing

what the court found to be the excessive portion of the

passenger fees it paid for its employee’s use of the

ferry terminal and facilities. Jd. at 78a. The court

awarded no monetary relief to Zahradka because he

withdrew his claim for damages and did not appear at

trial. Jd. at 25a n.3.

A two-member panel of the Second Circuit affirmed

the district court’s judgment.’ App. A. The court

agreed that, while the Port Authority may assess a

passenger fee, a portion of the passenger fee violated

the Commerce Clause. App. A at 14a-18a. The court

held that the fair approximation and the excessiveness

criteria “substantially overlap” because the passenger

fee supports “virtually the entirety of the Port

Authority’s operating budget.” Jd. at 14a. Even though

the court questioned the district court’s finding that

certain expenditures did not benefit the ferry

passengers, e.g., dredging the harbor and pump-out

service for recreational boats, it nevertheless affirmed

the exclusion of these expenses from the permissible

passenger fee. See id. at 17a-18a. The court further

affirmed the judgment that, to the extent the Port

Authority used the passenger fee revenue for activities

that were not found to directly benefit the ferry

passengers, it violated the Tonnage Clause as well. Jd.

at 18a-20a.

1 ory - e °

rhe appeal was decided by the remaining two panel members

after the Hon. Guido Calabresi recused himself before oral

argument.

8

REASONS FOR GRANTING THE PETITION

The Court should grant review because the decision

below conflicts with Evansville-Vanderburgh Airport

Authority District v. Delta Airlines, Inc., 405 U.S. 707

(1972). Evansville cautioned that the courts should

give broad discretion to a governmental entity’s

determination of the proper use for and the amount of

a fee charged for use of its facilities. In that regard,

Evansville required only that the fee imposed be a “fair

approximation” of the cost of operating the facility and

not be excessive in comparison with the government

benefit conferred. And Evansville did not require that

fee be used only for the operation of that part of the

government-owned facility that the payers of the fee

directly used.

Here, the courts below refused to give deference to

the Port Authority’s determination of the proper

passenger fee. The district court acknowledged that its

decision went further than any other federal court to

regulate and control how a government authority

allocates the revenue collected from a reasonable user

fee. App. C at 66a. And, indeed, the district court

scrutinized every expenditure as if it were conducting

an audit, instead of deciding whether the fees reflected

a “fair, if imperfect, approximation” of the cost of the

use of the facilities. See, e.g., Northwest Airlines, Inc.

v. County of Kent, 510 U.S. 355, 369 (1994).

This procedure converted the fair approximation

test to one that required instead that the Port

Authority demonstrate a_ dollar-for-dollar

correspondence between the fee charged and the

services provided to the ferry passengers. And in

reaching the conclusion that the user fees exceeded the

9

direct benefit to the passengers, the courts below

ignored the $14 million in state and federal grants

used to improve the dock and other facilities used by

the passengers that otherwise would have had to have

been paid for by increased passenger fees. Thus, the

Port Authority was punished for successfully obtaining

alternate sources of funds that directly benefited the

passengers, but avoided additional direct charges to

them.

The finding that a portion of the passenger fee

violated the Tonnage Clause also conflicts with the

Supreme Court decision in Clyde Mallory Lines uv.

Alabama, 296 U.S. 261 (1935). Until this decision,

federal courts interpreted Clyde Mallory to allow state

and local authorities to impose fees in exchange for

general services, even where the revenue collected

exceeds the expenses spent on the vessel’s behalf.

Moreover, the decision below failed to take into

account the benefits the Port Authority’s state and

federal grants provided to the ferry passengers by

paying for significant upgrades to the ferry terminal

and facilities without charging a _ corresponding

increase in fees.

But for the grants the Port Authority would have

had to increase the passenger fees by more than 50%

to raise the cash necessary to finance the terminal

improvements. Taking all of the Port Authority’s

expenditures into account, over 80% of its total income

-- $14 million in grants and the approximately $4.25

million in fees — was spent on the facilities that the

court found directly benefited the passengers.

In view of these benefits along with the other

services provided by the Port Authority, the fees did

10

not exceed the total cost of operating and maintaining

the facilities that benefit the passengers and

represented a fair approximation of the benefits the

passengers received from all of the Port Authority’s

activities.

I. The Court Should Grant Review Because The

Decision Conflicts With This Court’s Dormant

Commerce Clause Analysis in Evansville.

The Court should grant review because the decision

below conflicts with the dormant Commerce Clause

test approved in Evansville-Vanderburgh Airport

Authority v. Delta Airlines, Inc., 405 U.S. 707 (1972) by

significantly expanding the federal courts’ oversight of

local finance decisions, while at the same time

narrowing the “fair approximation” test to require, in

effect, a dollar-for-dollar correspondence between user

fees and benefits.

The test to determine whether a user fee imposed

by a government authority is valid under the

Commerce Clause is well-established. A user fee may

be appropriately charged under the Commerce Clause

if it: (1) is based on some fair, if imperfect,

approximation of use or privilege for use of the

facilities for whose benefit it is imposed; (2) does not

discriminate against interstate commerce; and (3) is

not excessive in comparison to the governmental

benefit conferred. See Evansville, 405 U.S. at 716-17.

The district court acknowledged that its decision

was contrary to “the great majority of the courts that

have previously considered similar user fees have

reached the opposite conclusion and given the

government authorities wide discretion to spend user

11

fees.” App. C at 66a. The decisions below that the Port

Authority’s allocation of the passenger fee is not a fair

approximation of the passengers’ use of the facilities

and “exceeds permissible bounds” is at odds with this

Court’s approval of similar fees in Evansville.

In Evansville, the Court found that the passenger

fee assessed by the New Hampshire airport authority

was constitutional even though only fifty percent of the

passenger fee revenue was allocated to the state

aeronautical fund. See Evansville, 405 U.S. at 720. The

remaining “fifty percent was allocated to the

municipalities or airport authorities owning the

landing areas at which the fees were imposed in the

form of unrestricted general revenues.” Jd.

The key is not whether the funds collected are

allocated to a specific fund for the benefit of the users.

“{Sjo long as the funds received by local authorities

under the statute are not shown to exceed their airport

costs, it is immaterial whether those funds are

expressly earmarked for airport use.” Id. at 720.

The Second Circuit held that any part of the fee

that went to a facility or activity that was not directly

enjoyed by or that could not be directly enjoyed by the

ferry passengers “is not a fair approximation of the use

of the facilities supported by the fee and is also

excessive in relation to the benefits enjoyed or

available to be enjoyed by the passengers.” App. A at

14a. This directly conflicts with this Court’s rejection

of the same approach taken by the Indiana Supreme

Court in Evansville.

The Indiana court invalidated the tax imposed on

certain commercial passengers because they were

12

subject to the tax regardless of the extent to which

they used the airport facilities. See HEvansuville-

Vanderburgh Airport Authority Dist. v. Delta Airlines,

Inc., 265 N.E. 26, 29-30 (Ind., 1970). But, in reversing,

the Court held that the tax was valid, even though

some of the expenses conferred no benefit at all on

airline passengers. Evansville, 405 U.S. at 717-18. For

example, the airport authority used the tax revenue to

pay for “other facilities” such as private hangar

facilities and nonscheduled airline hangar facilities

which airline passengers would never use. See

Evansville, 265 N.E. at 29. The Court looked at the

operations of the entire airport as the appropriate

facility against whose costs the revenues were to be

measured, not just the part of the airport used only by

airline passengers. The injunction here, by contrast,

prohibits the Port Authority from using the passenger

fee for any activities except those that directly benefit

the ferry passengers, including limiting phone calls by

Port Authority staff.

II. The Court Should Grant Review Because the

Second Circuit Decision Conflicts With The

Court’s Tonnage Clause Analysis in Clyde

Mallory.

The Court should also grant review of whether the

same portion of the passenger fee the court found to

violate the Commerce Clause also violates the Tonnage

Clause. While the standard under the Tonnage Clause

is expressed differently than under the Commerce

Clause, its effect is the same. The Tonnage Clause

prohibits reliance on tonnage duties to “raise general

revenues, to regulate trade, or to charge for the

privilege of entering, lying in, or trading in a port” but

it does not prohibit reasonable charges for general port

13

services, even if the particular user does not use those

services. New Orleans Steamship Ass’n v. Plaquemines

Port, 874 F.2d 1018, 1020, 1023 (5th Cir. 1989); see

also Clyde Mallory Lines v. Alabama, 296 U.S. 261,

265-67 (1935).

A “reasonable charge” for services rendered is one

for which “[b]enefits and fees have been apportioned as

closely as practicable.” See Plaquemines Port, Harbor

and Terminal Dist. v. Federal Maritime Commission,

838 F.2d 536, 545 n.8 (D.C. Cir. 1988) (noting a slight

divergence between the class that benefits and the

class that pays is of no significance under Clyde

Malley).

In contrast to the Second Circuit’s strict refusal to

consider any expenditure that did not directly benefit

the ferry passengers, other federal courts have

approved fees imposed by state and local authorities to

fund general services such as vessel safety, movement

of vessels in the harbor, port facilities, parking, trash

disposal, security and harbor maintenance, and

improvement. See, e.g., Barber v. Hawaii, 42 F.3d

1185, 1196 (9th Cir. 1994); Captain Andy’s Sailing,

Inc. v. Johns, 195 F.Supp.2d 1157, 1175 (D. Haw.

2001). In Johns, for example, the court held that a fee

assessed to vessels for harbor maintenance was valid

under the Tonnage Clause, even though the fees

collected were nearly ten times higher than the

expenses made on the vessel’s behalf. See id. at 1175.

By focusing on a strict cost-benefit ratio, the Second

Circuit failed to properly evaluate whether the

passenger fee “fairly remuncrates” the Port Authority

for the cost of the services provided to the ferry

passengers as a whole. See Northwest Union Packet

14

Co., v. City of St. Louis, 100 U.S. 423, 427 (1879).

Instead, the court used the Tonnage Clause to place

the judiciary as the regulator of the Port Authority and

to oversee each expenditure it makes.

Through state and federal grants, the Port

Authority provided benefits and services that included

the construction and maintenance of the terminal

building, provision of port security, development for

parking, and creation of the new access road. Although

the passengers did not pay for these costs through an

increased passenger fee, they received the benefits of

the Port Authority’s cfforts. This allowed the Port

Authority to keep the passenger fee low, but the trade-

off for the low passenger fees was the use of part of

them to pay for improvements and development of

other areas of the port that the ferry did not directly

use.

The passenger fee represented about 40% of the

costs incurred by the Port Authority in providing all of

the benefits and services enjoyed by the passengers.

By simply excluding the services that the district court

found were not directly used by the ferry passengers,

and by ignoring the significant benefits the Port

Authority provided to the passengers through grant

revenues, the Second Circuit wrongly concluded that

a portion of the passenger fee was raised for general

revenues and, thus, violates the Tonnage Clause.

The Court recently examined the application of the

Tonnage Clause to a local property tax assessed

against oil tankers and certain other vessels. Polar

Tankers, Inc. v. City of Valdez, -- U.S. --, 129 S. Ct.

2277, 174 L. Ed. 2d 1 (2009). Unlike the property tax

in Polar Tankers, however, the passenger fee assessed

15

by the Port Authority is not deposited into the City’s

coffers to fund general municipal services. The

revenues are used to support the Port Authority’s

operations at the port. Thus, Polar Tankers does not

modify the rule of Clyde Mallory that a local

government entity can charge for port services, even if

the particular ship does not use those services.

CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

TIMOTHY fF’. NOELKER

Counsel of Record

JAMES W. ERWIN

RYAN K. MANGER

THOMPSON COBURN LLP

One U.S. Bank Plaza

St. Louis, MO 63101

314-552-6000

RICHARD L. ROSE

MURTHA CULLINA LLP

177 Broad Street

Stamford, CT 06901

203-653-5400

October 2009

16

EVERETT E. NEWTON

MURTHA CULLINA LLP

CityPlace I, 185 Asylum Street

Hartford, Connecticut 06103-3469

860-240-6000

Counsel for Petitioner

APPENDIX

la

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Docket No. 08-3886-cv

August Term 2008

Heard: December 23, 2008

Decided: May 29, 2009

BRIDGEPORT AND PORT JEFFERSON

STEAMBOAT COMPANY, FRANK C.

ZAHRADKA, and D & D WHOLESALE

FLOWERS, INC.,

Plaintiffs-Appellees,

v<

BRIDGEPORT PORT AUTHORITY,

)

)

)

)

)

)

)

)

)

Defendant-Appellant. )

)

Before: NEWMAN and SACK, Circuit Judges.’

Appeal from the July 8, 2008, judgment of the

United States District Court for the District of

" Honorable Guido Calabresi, originally a member of the panel,

recused himself before oral argument, and the appeal is being

decided by the remaining panel members, who are in agreement.

See 2d Cir. R. § 0.14(b).

2a

Connecticut (Christopher F. Droney, District Judge),

declaring a fee imposed on ferry passengers

unconstitutional under the Commerce Clause and the

Tonnage Clause, and enjoining collection of the fee

until revised.

Affirmed.

Timothy F. Noelker, St. Louis, Mo., (James W.

Erwin, Ryan K. Manger, Thompson Coburn

LLP, St. Louis, Mo.; Richard L. Rose,

Everett E. Newton, Murtha Cullina LLP,

Stamford, Conn., on the _ brief), for

Defendant-Appellant.

Martin Domb, New York, N.Y. (Jeremy A.

Shure, Jordan M. Smith, Akerman Senterfitt

LLP, New York, N.Y.; Jonathan S. Bowman,

Stewart I. Edelstein, Cohen and Wolf, P.C..,

Bridgeport, Conn., on the _ brief), for

Plaintiffs-Appellees.

(Steven EF. Bers, Whiteford, Taylor & Preston

LLP, Baltimore, Md. for amicus curiae Nat’!

Ass'n of Passenger Vessel Owners, Inc., in

support of Plaintiffs-Appellees. )

JON O. NEWMAN, Circuit Judge.

This appeal concerns the constitutionality of a fee

imposed on passengers traveling by ferry from

Bridgeport, Connecticut, across Long Island Sound to

Port Jefferson, New York. The fee is alleged to violate

the Commerce Clause, the constitutional right to

travel, andthe rarely litigated Tonnage Clause, as well

as federal and state statutes. The Defendant-Appellant

3a

Bridgeport Port Authority (“BPA”) appeals from the

July 8, 2008, judgment of the District Court for the

District of Connecticut (Christopher F. Droney,

District Judge), in a suit brought by the

Plaintiffs-Appellees Bridgeport & Port Jefferson

Steamboat Company (the “Ferry Company”), D & D

Wholesale Flowers, Inc. (“D&D”), and Frank

Zahradka. Greg Rose, the owner of D & D, and

Zahradka are regular ferry passengers. The judgment

declared the fee unconstitutional under both the

Commerce Clause and the Tonnage Clause, enjoined

its collection, and awarded nominal damages to the

Ferry Company and modest damages to D&D. We

affirm.

Background

The BPA. The BPA is a quasi-public entity created

in 1993, pursuant to a state statute that authorizes

Bridgeport to establish a port authority, see Conn.

Gen. Stat. § 7-329a, and the City of Bridgeport

Municipal Code. The Municipal Code gives broad

definition to the BPA’s purposes, which include “to

foster and stimulate the shipment of freight and

commerce through the ports,” “to develop and promote

port facilities with the district in order to create jobs,

increase the city’s tax base and provide special

revenues to the city,” and to work with the City “to

maximize the usefulness of available public funding.”

The BPA’s independent auditors’ report also describes

the BPA’s purposes broadly, including “to develop

strategies and initiatives to promote and create port

facilities within the district, [and] participate in the

economic development of the harbor and waterfront

areas.”

4a

The BPA has jurisdiction over a geographic area

known as the Port District. The Port District extends

approximately 1,000 feet inland from the waterways of

Bridgeport Harbor, Black Rock Harbor, and their

navigable waters and tributaries, excluding residential

property and park lands. The BPA also has jurisdiction

over certain lands outside the 1,000-foot limit. Located

within the Port District are the Water Street Dock (the

“Dock”), the Cilco Shipping Terminal, the 50-acre Steel

Point Peninsula, and the 48-acre Bridgeport Regional

Maritime Complex (“BRMC”), which includes the

Derecktor Shipyard.

The BPA is directed by a five-member Board of

Commissioners, three of whom are appointed by the

mayor of Bridgeport and two of whom serve by virtue

of their positions as the City’s Director of Economic

Development and Harbor Master. The BPA is

managed by an executive director and staff.

When the BPA was created in 1993, the City of

Bridgeport transferred control over the Dock to the

BPA under a property management agreement. The

Dock favilities were in very poor condition prior to the

BPA’s existence. The Harbor Master at the time

described them as “deplorable”; “[t]he dock was just a

[mishmash] of steel plates over various holes, rotted

timbers. ... At night, ... the place was just a haven

for people breaking into cars, prostitution.” At that

time, the terminal consisted of a concrete block

building that housed two poorly maintained restrooms

and a small office. There were no food facilities or

other concessions and no waiting areas for passengers.

With government grant money, the BPA built a

new ferry terminal, which was completed in 1996. The

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District Court found that the new terminal building

was “a dramatic improvement from the preexisting

structure.” It had two floors: the ground floor had a

public waiting area, restrooms, information counter,

cafeteria, and small office; the second floor, which was

not open to the public, housed the BPA and the offices

of the Connecticut World Trade Association, a

reception area, conference room, and several other

offices.

Since its inception, the BPA has obtained

government grants to fund many other development

projects in the Port District that have contributed to

the revitalization of the area.

Passenger plaintiffs. Rose and Zahradka were

recruited to be plaintiffs in this case by the Ferry

Company’s vice-president and general manager

Frederick Hall.’ The Ferry Company paid the legal

fees and expenses for both individuals.

The Ferry Company. The Ferry Company is a

privately owned company that has been providing

vehicle and passenger ferry service between

Bridgeport and Port Jefferson since 1883. Its

president, Brian McAllister, has owned a 100 percent

interest in the Ferry Company since 1980. Currently,

the Ferry Company owns and operates three ferry

boats. In 2005, the Ferry Company transported

approximately 460,000 vehicles and one million

passengers.

' Zahradka withdrew his claim for past damages but remains a

plaintiff for purposes of prospective relief.

6a

On the Port Jefferson side, the Ferry Company

owns most of the dock and terminal facilities and

provides all ferry-related services. Neither the Ferry

Company nor its passengers pay a user fee to any

government agency in Port Jefferson.

On the Bridgeport side, however, the Ferry

Company does not own the dock or terminal! facilities.

Until 1993, the Ferry Company leased the use of the

Dock from the City of Bridgeport. When the City

transferred control of the Dock to the BPA, the Ferry

Company entered a lease to rent the Dock from the

BPA at an annual rate, which was $100,000 for the

first year and increases to $158,956 through 2011.

The lease agreement entitles the Ferry Company to

“non-exclusive preferential use” of the Dock. The BPA

reserved for itself all other uses of the Dock and the

premises, except for the following: operation of the food

concession, which was the subject of another

agreement between the parties; use of office and

waiting room space in the two-story terminal building

that the BPA “may from time-to-time make available”;

and use of a few parking spaces for Ferry Company

employees.

Before and after the creation of the BPA, the Ferry

Company has bcen responsible for running daily ferry

operations at the Dock. The Ferry Company employs

a Dock Manager and a staff of 15 to 22 to handle all

docking and undocking of ferries, staging of vehicles on

the roadway to board, directing passengers and

vehicles on and off the ferries, shuttling passengers to

and from the parking lots, and removing snow on the

Dock. Ferry Company employees also perform security

functions at the Dock.

Ta

The passenger fee. Since its inception in 1993, the

BPA has imposed a passenger fee on all persons and

vehicles embarking on, or disembarking from, the

Ferry Company ferries at the Dock. The amount of the

fee varies depending on whether the passenger is a

person, a car, a truck, or a bus. In 1993, the fee for an

adult foot passenger was 50¢ and for a vehicle, $1.00.

In 2003, the fee for an adult foot passenger was $1.00

and for a vehicle including a driver, $2.00. In February

2006, the BPA began assessing a one-dollar surcharge

to cover the BPA’s fees and costs in this litigation.

The fee is a relatively a small portion of the total

ferry ticket price. For example, in 2005, a one-way

ferry ticket for a vehicle with unlimited passengers

was $51.25, while the corresponding passenger fee was

$2.75. The fee is added to the ticket price and collected

by the Ferry Company on behalf of the BPA at the

time passengers purchase their ferry tickets on board.”

For this service, the BPA pays the Ferry Company an

administrative fee, which was $22,500 per year until

May 2003 when it was increased to $32,500. After

retaining its administrative fees, the Ferry Company

remits the proceeds of the passenger fee to the BPA on

a monthly basis, along with a written report of the

number of tickets sold and the amounts collected from

each type of passenger.

The BPA’s revenue and expenses. From 1993 to

2004, the BPA collected a total of approximately $9.5

* The Ferry Company has refused to collect the $1 litigation

surcharge on the BPA’s behalf, and the BPA has hired a firm to

collect the surcharge directly from passengers embarking or

disembarking from the ferry.

8a

million in passenger fees and more than $1 million in

rental revenues from the lease agreements with the

Ferry Company and its food concession subsidiary. The

passenger fee and ferry leases are almost the sole

source of operating revenue for the BPA. Until 2002,

the passenger fee and lease revenue exceeded the total |

operating expenses of the BPA. As the District Court

noted, “[T]he total amount of Passenger Fees collected

alone from 1993 to 2004 correlates very closely with

the Port Authority’s total operating expenses during

the same period.” The BPA’s executive director

admitted that the BPA has used the revenue from the

passenger fee and the Dock lease to pay for essentially

all of its operating expenses, including all salaries,

health benefits, pension payments, payroll taxes,

telephone, utilities, office equipment, travel, charitable

contributions, and automobile and lease expenses.

The District Court’s decision. The District Court,

relying on the Supreme Court’s so-called “dormant”

Commerce Clause jurisprudence, see United Haulers

Ass’n,_ Inc. v. Oneida-Herkimer Solid Waste

Management Authority, 550 U.S. 330, 338 (2007),

endeavored to apply the test the Supreme Court has

set forth for determining the constitutionality of fees

imposed by governmental entities to defray the costs

of facilities used by those engaged in interstate

commerce. The test was first announced in

Evansville-Vanderburgh Airport Authority District v.

Delta Airlines, Inc., 405 U.S. 707 (1972), involving an

airport user fee imposed on commercial airlines. The

Supreme Court stated that

a charge designed only to make the user of

state-provided facilities pay a reasonable fee to

help defray the costs of their construction and

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maintenance may constitutionally be imposed

. so long as the toll is based on some fair

approximation of use or privilege for use . . . and

is neither discriminatory against interstate

commerce nor excessive in comparison with the

governmental benefit conferred.

Id. at 714, 716-17.

In Northwest Airlines, Inc. v. County of Kent, 510

U.S. 355 (1994), the Supreme Court reformulated its

Evansville standard into a three-pronged test. “[A]

levy is reasonable under Evansville if it (1) is based on

some fair approximation of use of the facilities, (2) is

not excessive in relation to the benefits conferred, and

(3) does not discriminate against interstate commerce.”

Id. at 369.

In the pending case, the District Court ruled that

the third criterion was satisfied because the passenger

fee did not distinguish between intrastate and

interstate travel. However, the Court ruled that the

fee did not meet either the first or second Evansville

criteria.

The Court stated that the fee was not based on a

fair approximation of the ferry passengers’ use of the

port facilities because it was “calculated according to

a method which ensures the Passenger Fee revenue

will cover all of the Port Authority’s operating costs

and development projects throughout the Port

District,” and “many” of the “Port District activities

funded by the fee are not even available to the ferry

passengers (such as Derecktor, BRMC, harbor

dredging, the barge feeder service, and the foreign

trade zone).”

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The Court also ruled “that the Passenger Fee is

excessive in comparison with the government benefit

conferred and in relation to the costs incurred by the

taxing authority.” Distinguishing the airport user fee

upheld in Evansville, the Court stated that “the vast

majority of airport development is intended to benefit

the passengers traveling on airplanes leaving the

airport, or to facilitate their air travel; the Port

District, however, includes many projects beyond the

Dock that are not functionally related to the ferry

operation, and are not intended to benefit the travelers

on ferries, or to facilitate their boat travel from

Connecticut to Long Island.”

To determine whether the revenue from the

Passenger Fee was unreasonably high compared to the

benefits that the BPA provided to the ferry passengers,

the District Court examined separately each activity of

the BPA. The Court concluded that the following BPA

activities benefitted ferry passengers: (1) construction

and maintenance of a new ferry terminal building,

(2) repair of the bulkhead of the Dock, (3) construction

of the access road, (4) planning of the parking facility

for ferry passengers, (5) security for the Dock, and

(6) daily operations related to the ferry.

On the other hand, the Court found that the

following activities did not benefit ferry passengers:

(1) development projects on Steel Point Peninsula;

(2) development projects on the BRMC and the leasing

of a portion of the BRMC to Derecktor Shipyards;

(3) establishing a high-speed ferry from Bridgeport to

Stamford and New York City; (4) developing a

barge-feeder service that would ship containers by

barge from the Port of New York and New Jersey to

Bridgeport; (5) operating a foreign trade zone in

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Bridgeport; (6) activities at the Cilco commercial

shipping terminal located on land near the BRMC;

(7) dredging the Bridgeport harbor; (8) operating a

complimentary pump-out service for pleasure boats;

(9) BPA review of other projects within the Port

District; and (10) some miscellaneous activities,

including payment of attorneys to register a new

trademark for the BPA and purchasing season tickets

to local minor league teams.

Having made this analysis of the BPA’s

expenditures, the Court determined that the passenger

fee revenue collected by the BPA substantially

exceeded the amount of money spent by the BPA for

those activities that benefitted the ferry passengers.

That determination led the Court to conclude that the

fee violated the Commerce Clause and_ the

constitutional right to travel, which the parties agreed

was subject to the same standards applicable to the

Commerce Clause.

The Court also concluded that the excessive nature

of the fee, in relation to benefits conferred, rendered

the fee in violation of the Tonnage Clause, which

provides that “[n]o State shall... lay any Duty of

Tonnage.” U.S. Const. art. I, § 10, cl. 3. The Court

noted that the Supreme Court in Clyde Mallory Lines

v. Alabama, 296 U.S. 261, 265-66 (1935), held that the

prohibition on all “chargels] for the privilege of

entering, trading in, or lying in a port” did not extend

to “charges . . . for services rendered to and enjoyed by

the vessel.” The District Court concluded that the

passenger fee violated the Tonnage Clause of the

Constitution because it was “used for’ the

impermissible purpose of raising general revenues and

for projects which do not and could not benefit the

12a

ferry passengers.” The passenger fee revenue “fund[ed]

projects completely unrelated and unavailable to the

fee payers, such as negotiations, legal fees, and

development proposals for the BRMC, Derecktor, the

foreign trade zone, the barge feeder service, harbor

dredging, and the high-speed ferry.” As such, it was an

impermissible fee of tonnage.”

Turning to the appropriate remedy, the District

Court first determined that, although the Ferry

Company could have suffered an economic loss

quantifiable in damages, the Ferry Company had

failed to provide any non-speculative evidence of its

damages. The Court then found that the passenger

plaintiff D & D was entitled to $494.63, based on the

extent to which the passenger fee revenue was

excessive compared to the benefits to ferry passengers.

Finally, the Court ruled that the plaintiffs were

entitled to an injunction prohibiting the BPA from

collecting a passenger fee in an amount that exceeded

what was necessary to pay for benefits to the ferry

passengers.

Discussion

I. Standing

Initially, we consider the BPA’s contention that the

Ferry Company lacks standing because it failed to

show injury-in-fact. Incorrectly assuming that

injury-in-fact requires quantifiable damages, the BPA

* The District Court rejected the plaintiffs’ claims under federal

and state statutes, and those claims are not pursued on this

appeal.

l3a

argues that because the district court did not award

the Ferry Company any compensatory damages, it

suffered no injury. But as this Court explained in Ross

v. Bank of America, 524 F.3d 217 (2d Cir. 2008), lack

of compensatory damages “does not negate standing.”

Id. at 222 (internal quotation marks omitted).

As the Ferry Company argued, it sustained injuries

in the following respects:

(1) The added cost to its passengers reduces

both demand for ferry services and the Ferry

Company’s revenue. Although the District Court found

that the Ferry Company failed to present sufficient

evidence to establish quantifiable damages, the Court

noted that “[iJt is undisputed that the price elasticity

for the ferry service is greater than zero but less than

one, indicating on a theoretical level that a change in

price at a given point in time would lead to slightly

decreased demand.”

(2) The fee requirement obliges the Ferry

Company, as a practical matter, to collect the

passenger fee and remit the proceeds to the BPA.

(3) TheFerry Company adequately pleaded that

its individual rights under the Commerce Clause are

being violated. See Dennis v. Higgins, 498 U.S. 439,

449 (1991) (noting that the Commerce Clause creates

an individual right); see also Boston Stock Exchange v.

State Tax Commission, 429 U.S. 318, 320 n.3 (1977).

(4) The Ferry Company adequately alleged that

it is exposed to future injury, which would entitle it to

injunctive relief.

l4a

The Ferry Company also satisfies the requirements

of prudential standing because (a) it sustained its own

injury and thus asserts its own rights, not those of the

passengers, (b) it does not assert a general grievance,

in view of its special relationship with its customers,

and (c) it operates an interstate ferry service and thus

falls within the zone of interest protected by the

Commerce Clause.

The BPA’s challenge to the Ferry Company’s

standing is without merit.

II. Commerce Clause

The parties do not dispute that the passenger fee

satisfies the first prong of the Evansville test; the fee

does not discriminate against interstate commerce.

The BPA contends, however, that the fee is based on a

fair approximation of the ferry passengers’ use and

that it is not excessive in relation to the benefits

conferred on them. In this case, the “fair

approximation” and the “excessiveness” criteria

substantially overlap. The reason is that the passenger

fee supports virtually the entirety of the BPA’s

operating budget. If, as the District Court ruled, some

of the BPA’s expenses confer no benefit on the ferry

passengers, either enjoyed or available to be enjoyed,

then to that extent the fee, imposed solely on ferry

passengers, is not a fair approximation of the use of

the facilities supported by the fee and is also excessive

in relation to the benefits enjoyed or available to be

enjoyed by the passengers.

The BPA correctly argues that there need not be a

perfect fit between the use of the facilities and the

support of those facilities by the fee, see United States

15a

v. Sperry Corp., 493 U.S. 52, 60 (1989) (“This Court

has never held that the amount of a user fee must be

precisely calibrated to the use that a party makes of

Government services.”), but the discrepancy here

exceeds permissible bounds. The point emerges from a

comparison of the airport cases with this case. In

Evansville, embarking commercial airline passengers

were the only payers of the user fees at issue—other

classes of passengers (and non-passengers) were

exempt. The Court concluded that those commercial

airline passengers reasonably bore that share of

airport costs because it was they who enjoyed the

principal benefit of “facilities built primarily to meet

[their] needs.” 405 U.S. at 718-19. Furthermore,

although the airlines did not use every facility located

anywhere in the airport (for example, the lounges for

v.i.p. airlines passengers), the benefit derived from

having the entire airport operating made a fee based

on airline traffic into the airport reasonable. Similarly,

in -a-Car, Inc. v. Sarasota-Manatee-Airport

Authority, 906 F.2d 516 (11th Cir. 1990), the operation

of the airport provided a benefit to the car rental

company located near, but unlike some of its

competitors, not at, the airport, and the Eleventh

Circuit therefore rejected the company’s claim that it

should be charged only for use of the road leading from

its location to the airport. See id. at 519.

By contrast, in the pending case, the Port District

is not a facility whose existence and entire operation

benefit the ferry passengers. The BPA is a

governmental unit created to accomplish a variety of

tasks, only some of which afford actual or potential

benefits to ferry passengers. Had the Dock and some

of the related activities been operated directly by the

City of Bridgeport, it could not be seriously maintained

l6a

that a passenger fee could be used to pay a portion of

Bridgeport’s school or welfare expenses. The limits of

both a fair approximation of use and excessiveness are

plainly exceeded when the fees support a BPA budget

that includes, for example, a development project for

reducing traffic on I-95, the interstate highway

running generally along the Connecticut shore. No

doubt those ferry passengers who drive to or from the

Dock along I-95 are grateful for any reduction in

traffic, but they would be equally grateful for whatever

steps the BPA or the City of Bridgeport might take to

reduce air pollution or otherwise improve the

environment along 1-95. Such quality-of-life

improvements cannot be said to confer an actual or

potential benefit to the ferry passengers as users of the

ferries and thus exceed the bounds of what may

reasonably serve as the basis for the BPA’s fee.

A user fee, however, may reasonably support the

budget of a governmental unit that operates facilities

that bear at least a “functional relationship” to

facilities used by the fee payers. See Automobile Club

of New York, Inc. v. Port Authority, 887 F.2d 417, 421

(2d Cir. 1989). In that case, this Court held that a

“functional relationship” existed between the Port

Authority’s cross-river PATH train and its bridges and

tunnels (Lincoln Tunnel and Holland Tunnel),

justifying inclusion of the PATH in the rate base of the

tolls that the Port Authority charged on its bridges and

tunnels, and rendering the tolls “just and reasonable”

under the Federal-Aid Highway Act.

In the pending case, once it appeared that the

passenger fees were supporting the entirety of the

BPA’s operating budget and that this budget was

supporting some BPA activities of no benefit to the

l7a

ferry passengers (at least, not in their capacity as ferry

passengers), the District Court had no choice but to

make particularized inquiries as to the various BPA

expenditures. Activities properly deemed of no actual

or potential benefit to the ferry passengers are

(1) development projects on Steel Point Peninsula,

(2) development projects on the BRMC and the leasing

of a portion of the BRMC to Derecktor Shipyards,

(3) establishing a high- speed ferry from Bridgeport to

Stamford and New York City, (4) developing a

barge-feeder service that would ship containers by

barge from the Port of New York and New Jersey to

Bridgeport, (5) operating a foreign trade zone in

Bridgeport, (6) activities at the Cilco commercial

shipping terminal located on land near the BRMC, and

(7) some miscellaneous activities, including payment

of attorneys to register a new trademark for the BPA

and purchasing season tickets to local minor league

teams.

Slightly closer questions are presented by the

District Court’s disallowance of the portion of the fees

that supported dredging the Bridgeport harbor and

operating a complimentary pump-out service for

pleasure boats. Since the harbor was already

sufficiently deep to accommodate the ferries, the

Appellees contend that they derive no benefit from

additional dredging. However, they do benefit from

minimizing the risk that larger vessels will run

aground for lack of additional dredging and block use

of the harbor by the ferries. Similarly, the appellees

contend that they derive no_ benefit from

complimentary pump-out services for pleasure boats,

but the resulting reduction of pollution in the harbor

is a benefit to the ferry passengers.

18a

Although using a portion of the passenger fees to

pay for these two services, which provide some benefit

to ferry boat passengers, does not render the passenger

fees excessive, it does fail to satisfy the fair

approximation test. There is nothing in the record to

indicate how the portion of dredging costs borne by the

ferry passengers compares to the costs, if any, borne by

large vessels docking at Bridgeport. And because the

pump-out service is available to and benefits only the

pleasure boats and only minimally benefits the ferry

passengers, imposing the total cost on them through

the passenger fee with no charge on the pleasure boats

is not a fair approximation of use.

In sum, the District Court properly concluded that

the existing fee violated the Commerce Clause and

required an adjustment.

III. Tonnage Clause

The Tonnage Clause provides that “[nJo State shall

... lay any Duty of Tonnage.” U.S. Const. art. 1, § 10,

cl. 3. As interpreted by the case law, the Tonnage

Clause “prohibits . . . duties to raise general revenues.”

New Orleans Steamship Association v. Plaquemines

Port, Harbor & Terminal District, 874 F.2d 1018, 1023

(5th Cir. 1989). Moreover, it requires that benefits and

fees be “apportioned as closely as is practicable,”

Plaquemines Port, Harbor & Terminal District _v.

Federal Maritime Commission, 838 F.2d 536, 545 n.8

(D.C. Cir. 1988), and that the service be available to all

fee payers, Clyde Mallory Lines, 296 U.S. at 266.

The District Court correctly applied the law to the

facts in holding that “|t]he Passenger Fee imposed by

the Port Authority is used for the impermissible

19a

purpose of raising general revenues and for projects

which do not and could not benefit the ferry

passengers.” The testimony of the BPA’s own expert

and officials supports the Court’s conclusion. John

Arnold, the BPA’s expert, testified that the BPA “act|s]

as an incubator for growth of economic activity that

supports the city itself”; the BPA’s accountant testified

that non- ferry projects benefit the City and “the entire

community”; a commissioner of the BPA testified that

the purpose of passenger fee has always been “to

create a source of revenue to support the operations of

the Port Authority.” Finally, the BPA’s executive

director Riccio testified, “I think anything that helps

business and commerce in the State of Connecticut is

going to indirectly benefit the ferry passengers.” When

asked whether it is fair to fund his travel expenses

related to the BPA’s non--ferry activities, Riccio

testified “We don’t work for the Port Jefferson Ferry

Company or the Port Jefferson ferry passengers. We’re

a Port Authority and this is what we do. We’re

developing the port as our mission, bringing other

maritime interest and businesses to the Port of

Bridgeport.” Based on these facts, the district court did

not err in its legal conclusion.

In addition, the passenger fee offends the Tonnage

Clause because the BPA’s non-ferry services are not

available to ferry passengers; they were “completely

unrelated and unavailable to the fee payers.” Charging

the fee-payers for services that are not available to

them is impermissible under the Tonnage Clause, even

if not all fee payers actually use them. See

Plaquemines, 838 F.2d at 545.

20a

Conclusion

The judgment of the District Court is affirmed.

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APPENDIX B

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

Civil No.: 3:03CV599 (CFD)

[Filed July 8, 2008]

BRIDGEPORT AND PORT JEFFERSON

STEAMBOAT COMPANY et al.,

Plaintiffs,

¥.

BRIDGEPORT PORT AUTHORITY,

Defendant.

ee a a Le Le a

JUDGMENT

This action came to trial by the court, before the

Honorable Christopher F. Droney, United States

District Judge. The issues having been tried and in

accordance with the Court’s July 3, 2008 Memorandum

of Decision, the plaintiff Bridgeport & Port Jefferson

Steamboat Company is awarded nominal damages in

the amount of one dollar, and the plaintiff D&D

Flowers is awarded damages in the amount of $494.63

and further,

The Port Authority is enjoined from the further use

of the revenues from the Passenger Fee to fund its

22a

activities that are unrelated to and do not benefit the

ferry passengers or approximate their use of the Port,

and the Passenger Fee shall be reduced accordingly.

The Port Authority shall not be allowed to collect a

Passenger Fee in an amount that exceeds what is

necessary for their expenses that benefit ferry

passengers and fairly approximate their use of the

Port, it is therefore

ORDERED, ADJUDGED and DECREED that

judgment be and is hereby entered as stated above.

Dated at Hartford, Connecticut, this 8" day of July,

2008.

ROBIN D. TABORA, Clerk

By _/s/LIK____

Linda I. Kunofsky

Deputy-in-Charge

23a

APPENDIX C

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

Civil Action No. 3:03 CV 599 (CFD)

[Filed July 3, 2008]

BRIDGEPORT AND PORT JEFFERSON

STEAMBOAT COMPANY et al.,

Plaintiffs,

BRIDGEPORT PORT AUTHORITY,

)

)

)

)

Vv. )

)

)

Defendant. )

)

MEMORANDUM OF DECISION

I. Introduction

This action was brought by the Bridgeport and Port

Jefferson Steamboat Company (the “Ferry Company”),

a corporation that provides a public ferry service for

passengers and _ vehicles between Bridgeport,

Connecticut and Port Jefferson, New York, and by two

of its frequent passengers (collectively the

24a

“plaintiffs”),’ against the Bridgeport Port Authority

(the “Port Authority”). The Ferry Company leases dock

facilities in Bridgeport for its ferry boat operation from

the Port Authority. The subject of this action is the

validity of a passenger wharfage fee (“Passenger Fee”)

that the Port Authority imposes on all ferry

passengers. The Passenger Fee - which has been in

effect since 1993 - is collected by the Ferry Company

and then turned over to the Port Authority.? The

plaintiffs challenge the legality of the Passenger Fee,

claiming it violates the Commerce Clause of the U.S.

Constitution, the right to travel under the U.S.

Constitution, the Tonnage Clause of the US.

Constitution, the Rivers and Harbors Appropriation

Act of 1884, and several Connecticut statutes. The

plaintiffs also asserted a claim for unjust enrichment.

The basis for these claims by the Ferry Company is its

contention that the Port Authority uses too small a

portion of the Passenger Fee proceeds to support

activities related to ferry operations, and spends most

of such proceeds for purposes unrelated to the ferry.

This Court presided over a bench trial and the

following are the Court’s findings of fact and

conclusions of law.

' The two passenger plaintiffs are D & D Wholesale Flowers

(substituted as plaintiff for the individual Greg Rose) and Frank

Zahradka. A third passenger plaintiff, Robert Heller, was

voluntarily dismissed from this action.

* The Ferry Company also collects ticket charges from its

passengers, but keeps those funds

25a

II. The Parties’ Claims

A. Findings of Fact

The Court finds the following facts with respect to

the parties’ claims:

1. The Parties

The Ferry Company is a Connecticut corporation

with a principal office in Port Jefferson, New York.

Since 1883, the Ferry Company has provided a public

ferry service for passengers and vehicles traveling

between Bridgeport, Connecticut and Port Jefferson,

New York.

Plaintiff D & D Wholesale Flowers (“D&D”) is a

corporation owned by Greg Rose, who was originally

named as a plaintiff in this action. Rose has taken the

ferry at least twice a week since April 2001 for D&D

business purposes. Plaintiff Frank Zahradka is a

natural person.®

The Port Authority is a quasi-independent agency

of the City of Bridgeport, formed in 1993 under

Connecticut state law.* The Port Authority’s affairs are

directed by a five-member Board of Commissioners,

three of whom are appointed by the Mayor of

° Zahradka withdrew his claim for past damages as he did not

testify at trial, but remains a plaintiff for purposes of prospective

relief.

“The Port Authority was created pursuant to Conn. Gen. Stat.

§§ 7-239a to 7-329u, and governed by Chapter 2.28 of the

Bridgeport City Code.

26a

Bridgeport, and two serve by virtue of their positions

as the City’s Director of Economic Development and

Harbor Master. Joseph Riccio served as Executive

Director from November 1996 until the time of trial.

Riccio directs the daily operations of the Port

Authority. The Port Authority has two additional

employees, Martha Klimas and Charmaine Johnson,

who assist Riccio in his daily duties.

The Port Authority’s mission is to promote port

facilities and economic development of its waterfront

areas. The Port Authority’s jurisdiction is over the Port

District, a geographically defined area which extends

approximately 1000 feet inland from the waterways of

the Bridgeport Harbor, Black Rock Harbor,

Pequonnock River, and Yellow Mill River, excluding

property zoned as residential and park land. The Port

District also includes other areas not located within

1000 feet of the waterways, including the Remington

Woods and the General Electric factory in Bridgeport.

The Port Authority owns the Water Street Dock, as

well as the Bridgeport Regional Maritime Complex

(“BRMC”), which includes the Derecktor Shipyard, the

Cilco Shipping Terminal, and the Steel Point

Peninsula. The Port Authority’s jurisdiction extends to

all shipping and terminal facilities within the

Bridgeport and Black Rock Harbors, including the

Motiva terminal and two other terminals.

2. The Dock and the Ferry Operation

The Ferry Company boats use the Water Street

Dock (the “Dock”), and has done so since before 1980.

Before the Port Authority was created in 1993, the

Ferry Company leased the the Dock and other

facilities at the Dock from the City of Bridgeport (the

27a

“City”). The City provided a concrete block building

with a small office and public restrooms, a food and

beverage cart, and no shelter for passengers. In 1993,

when the Port Authority was created, the City of

Bridgeport transferred control of the Dock to the Port

Authority under a Property Management Agreement.

The agreement requires the Port Authority to pay the

City fifteen percent of all net operating income related

to the operation of the Dock.

The Ferry Company leases the Dock facilities from

the Port Authority pursuant to a lease agreement

dated December 1, 1998, and amended on July 29,

2002 (the “Current Lease”). The Current Lease expires

on November 30, 2011, and may be extended by the

Ferry Company for two additional terms of ten years

each. Under the Current Lease, the Ferry Company

has a “nonexclusive preferential use” of the Dock, and

may use the dock facilities and vehicle staging areas

for scheduled ferry services. The Ferry Company also

has access to “such office space and waiting room space

at the Premises as the Port Authority may from

time-to-time make available to the Company” and up

to four parking spaces for the Ferry Company’s

employees. The Port Authority reserves for itself all

other uses of the Dock. The Ferry Company is also

required to purchase and maintain insurance covering

the Premises, to indemnify the Port Authority with

respect to any claim arising from the activities of the

Ferry Company, and to undertake snow removal at the

Dock. The Current Lease requires the Ferry Company

to pay monthly rent to the Port Authority at annual

rates that increase each year, ranging from $100,000

for the initial year to $158,956 for the final year. These

rates are at or over the market rental value of the

land.

28a

The Ferry Company is responsible for the

day-to-day operations at the Dock. Louis Rinaldo, the

Dock Manager, and his staff of fifteen to twenty-two

dock hands and reservation clerks are responsible for

docking and undocking the ferryboats, staging vehicles

waiting to board the ferries, directing passengers and

vehicles on and off of the ferries, shuttling passengers

in vans and golf carts to and from nearby parking lots,

snow removal on the Dock, and garbage disposal from

the Dock and the Port Authority Office.

The Ferry Company personnel perform security

functions in both Bridgeport and Port Jefferson, and

are trained in homeland security procedures by the

Ferry Company’s security officer. These security

functions include selectively searching vehicle trunks,

vetting trucks, and reporting suspicious activities. The

Port Authority provides additional security functions

at the Dock on the Bridgeport side; however, if it did

not, the Ferry Company would perform all security

functions as it does on the Port Jefferson side.® The

Ferry Company also maintains insurance covering the

Dock, as required by the Current Lease.

The Ferry Company’s wholly owned subsidiary,

Steamboat Concessions, Inc. (“Concessions”), entered

into a lease in August 1996 with the Port Authority,

under which Concessions operates a restaurant and

food services facility in the Ferry Terminal. Under the

Lease and Food Services Agreement, Concessions is

required to pay the Port Authority $1000 per month

base rent, plus additional rent equal to 1% of

Concessions’ annual gross receipts above $100,000 and

° The City of Bridgeport funds police services and a harbor master.

29a

up to $200,000, plus additional rent of up to $700 per

month to defray the Port Authority’s costs incurred in

cleaning the Terminal premises. Concessions also

must pay for its use of electricity, gas, telephone

services, as well as for cleaning and maintenance of

the area it occupies in the Terminal.

3. The Passenger Fee

Since 1993, the Port Authority has imposed a

Passenger Fee (also referred to as a “wharfage fee” or

“tariff’) on passengers and vehicles embarking on or

disembarking from the Ferry Company ferries at the

Dock. As mentioned, this fee is in addition to the ticket

price for the ferry. The Passenger Fee is collected from

passengers by the Ferry Company on behalf of the Port

Authority at the time passengers purchase their ferry

tickets. The Passenger Fee was fifty cents per

passenger and one dollar per vehicle in 1993. In 2003,

the rates were two dollars for cars including a driver

and one dollar per passenger, and other fees for other

categories of passengers. A one dollar surcharge, in

addition to the Passenger Fee, was imposed beginning

in February of 2006 in order to pay for the Port

Authority’s fees and costs in this litigation.® This Fee

is a relatively small portion of the total ferry ticket

price to passengers. For example, in 2005, a one-way

passenger ticket vehicle with unlimited passengers

was $51.25, while the corresponding Passenger Fee

was $2.75. The Ferry Company increased its one-way

® Because the Ferry Company refused to collect this surcharge, it

is collected directly from passengers embarking or disembarking

from the ferry by a firm hired by the Port Authority. An earlier

surcharge of 50 cents was the subject of a motion for a preliminary

injunction that this Court denied on April 15, 2004

30a

ticket price for a vehicle with unlimited passengers by

$14.25 from 1993 to 2003.

Each month, the Ferry Company remits the

amount collected the previous month to the Port

Authority, along with a written report of the number

of tickets sold and amounts collected in the various

categories of passengers and vehicles. The Port

Authority pays the Ferry Company a fee for collecting

the Passenger Fee. This fee was $22,500 per year until

May 2003, when it was increased to $32,500 per year.

4. The Port Authority’s Operating

Revenues and Expenses

The Port Authority collected a_ total of

approximately $9.5 million in Passenger Fees from

1993 to 2004, and slightly over $1 million in rental

revenues from the lease agreements with the Ferry

Company and Concessions. The Passenger Fee,

together with the rent generated from the lease

agreements, constitutes the primary source of

operating revenues for the Port Authority. Revenues

from the Passenger Fee finance the operation and

maintenance of the Dock and Ferry Terminal, as well

as operating costs for other Port Authority projects

described below.’ The following table illustrates that

the Port Authority’s annual revenues from the ferry

operation (between the Passenger Fee and the Lease)

’ The Port Authority receives minimal income from collecting

dockage fees from other Port Users. The Port Authority also

receives some income from its lease and management agreement

with Derecktor Shipyards; however, as discussed below, this

money is remitted to the City and is thus not included in the

rental income column in the table.

3la

actually exceed the total operating expenses of the

Port Authority. In fact, the total amount of Passenger

Fees collected alone from 1993 to 2004 correlates very

closely with the Port Authority’s total operating

expenses during the same period:

32a

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34a

The Port Authority has applied for and received

government grants which fund a majority of the

capital costs for its development projects, including

those at the Dock. These awards totaled almost $30

million dollars as of 2004, much of which has yet to be

spent. The grants are only available to government

entities, and must be spent according to specific

terms.®

For example, the Ferry Terminal was built with

federal grants and municipal funds, but is maintained

by funds from the Passenger Fee. Thus, the Port

Authority cannot properly include the grant funds

spent on projects, like the Terminal, which benefit the

ferry operation, in its accounting of expenses for

projects benefitting passengers. Likewise, it does not

fund the capital costs for other numerous development

projects away from the Dock with its operating

revenues. Rather, the Port Authority’s resources spent

on these projects consist of personnel time, overhead,

advertising, and other tangential costs to pursuing the

projects, as described below. In other words, the

controversy between the parties centers mainly on the

Port Authority’s allocation of its operating expenses,

not capital costs.

Each year, the Port Authority prepares a report

setting forth the net revenue earned from the

operation of the Dock (the “net revenue report”). The

purpose of the net revenue report is to calculate fifteen

percent of the net operating income from the Dock that

the Port Authority is required to pay to the City each

*The Port Authority's auditors have found that the Port Authority

obeyed the grant terms.

ian acct aici

35a

year under the 1993 Property Management Agreement

with the City. The amount payable under the Property

Management Agreement in 1993, the first year of the

Port Authority’s existence, was calculated by Edward

Oppel, then Executive Director of the Port Authority.

Oppel prepared the calculation in a manner he

believed complied with the Property Management

Agreement, allocated some expenses to activities that

did not relate to the Dock, and sent a letter to the City

presenting his formula, which was meant to reflect the

“spirit of the agreement” between the City and the

Port Authority. Oppel allocated 50% of the Port

Authority’s expenses to its activities that did not relate

to the Dock, except for the cost of defending an earlier

lawsuit by the Ferry Company, which he allocated

entirely to the Dock. The amount payable to the City

in Oppel’s calculation for 1993 coincides with the

audited financial statements of the Port Authority that

year.

With a few minor exceptions, the Port Authority, in

conjunction with their auditor, has continued since

1993 to allocate 50% of the Port Authority’s total costs

to the Dock.’ The Port Authority’s auditors reviewed

the allocations and computed the amounts payable to

the City under the Property Management Agreement

based on the allocations which were included in the

® The Port Authority made several exceptions to the 50%

allocation of expenses to the Dock. A category named

“Contributions” was allocated 100% to the Dock from 1994 to

2004, the latest year for which allocations are available. All of the

“Legal and Accounting” expenses were allocated to the Dock from

1996 to 2002. Since 2003, 80% of the Legal and Accounting

expenses have been allocated to the Dock. Since 1998, “Building

Services” and “Security” are allocated 80% to the Dock.

36a

Port Authority’s financial statements. The auditors

believed the calculations in the net revenues reports

were correct and complied with the agreement with

the City, and testified that their favorable opinions as

to the financial statements of the Port Authority would

not have been issued had they known otherwise.

Port Authority witnesses and the auditor, however,

testified that the net revenue reports were not true

statements of the Port Authority’s net income

attributable to the Dock and were based on allocations

which were artificial computations of the yearly

amounts payable to the City to reflect an unspecified

agreement between the Port Authority and the City as

to how such payments were to be computed. The Port

Authority, however, has not provided any evidence of

this agreement, and continued to use the allocation

method over a course of many years without giving any

different instruction to its auditors. Thus, the Court

finds that the Port Authority’s repeated use of the 50%

allocation method over a long period of time, in

addition to the periodic adjustments it made to the

allocations, is tantamount to an admission on the part

of the Port Authority that its expenditures were

largely not related to the ferry operation or the Dock."°

In fact, the expert analyses of the Ferry Company of

'° In 2004, the Port Authority’s financial statements for the first

time contain a footnote stating “The percentage allocation of

operating expenses were determined by the City of Bridgeport

officials in arriving at the net operating income. These

percentages were utilized solely in determining the fees due the

City of Bridgeport and are not used for any other purpose.”

However, this note was only added after the net revenue reports

came under scrutiny in this litigation, and it does not effect the

Court's conclusion that the percentage allocations are relevant.

37a

the Port Authority’s activities indicate that the Port

Authority spent considerably less money on the Dock

than these reports indicate, not more.’ For example,

the Port Authority allocated a far larger portion of its

personnel, advertising, automobile costs, contributions,

professional fees, and expenses from other projects to

the Dock.

5. Port Authority Services Benefitting

Ferry Passengers

The Port Authority engages in several activities

that benefit ferry passengers:

A. The Ferry Terminal

The Port Authority built the Ferry Terminal, which

was completed in 1996. The new building was a

dramatic upgrade from the preexisting structure. The

Ferry Terminal consists of two floors: the ground floor,

which has a public waiting area, public restrooms, a

ferry service information counter, a cafeteria, and a

small office for the Ferry Company; and the second

floor, which houses the Port Authority and Connecticut

World Trade Association offices, a reception area,

conference room, and several other offices, and is not

open to the public. Construction of the Terminal cost

between three and four million dollars and was funded

mostly by city, state, and federal grants. This type of

funding is only available to government agencies such

as the Port Authority, and thus could not have been

'' The expert reports are discussed further below.

38a

awarded to the Ferry Company.” Maintenance of the

Terminal is funded by the Port Authority’s operating

budget. The Ferry Terminal directly benefits the ferry

passengers because it provides them shelter and

services while they wait for the ferry boats to arrive.

B. Repair of Bulkhead

In addition, the Port Authority asked the State of

Connecticut to repair the bulkhead of the Dock, and

the state and federal government subsequently funded

the construction. This service benefits the ferry

passengers because it ensures the continued viability

of the Dock from which the ferry boats embark.

C. The Access Road

The Port Authority initiated the construction of an

access road which made the Dock considerably more

accessible and safe to passengers. The construction

was funded by the State of Connecticut.

D. The Planned Parking Facility

The Port Authority has plans to construct a parking

facility in which ferry passengers would be required to

park. The Port Authority was able to obtain property

that abuts the terminal from an energy company, and

The federal funding for the Ferry Terminal came from the Ferry

Boat Discretionary Fund, which is a federal grant program

earmarked for ferry operations. The funds are only available to

government or quasi-public agencies, but may only be used for

purposes related to ferry operations. In spite of this, the second

floor of the Ferry Terminal is used solely by the Port Authority

and the Connecticut World Trade Association

39a

sought and was awarded $3,550,700 from the Ferry

Boat Discretionary Fund. Construction has not begun,

although the Port Authority has spent over one million

dollars in pre-development costs. Since passengers

would have to pay in order to park in the garage, the

parking facility will generate additional revenue for

the Port Authority. At the same time, it will benefit

ferry passengers by making parking more convenient

than under the current system, in which passengers

park in remote lots and must walk or be shuttled to

the Dock.

E. Security Measures

The Port Authority applied for and received federal

grants of $2.9 million through the United States

Department of Homeland Security in order to procure

security equipment for the Dock, as well as for the

BRMC and the harbor generally. These funds have

been used to upgrade the terminal, improve lighting

and surveillance, implement key access systems, and

for a new port security boat. The Port Authority will

also receive an additional $1.4 million with which to

purchase equipment to detect improvised explosive

devices. These security measures benefit the ferry

passengers by ensuring thcir safety and security once

upon the ferry boats.

F. Daily Operations

Finally, the Port Authority performs limited daily

operations - mainly the supervision of security and

cleaning personnel - relating to the ferry operation and

which benefit the ferry passengers.

40a

6. Port Authority’s Activities Not

Benefitting Ferry Passengers

The Port Authority is also involved in many

projects that do not benefit ferry passengers:

A. Steel Point

The Port Authority has pursued development

projects on the Steel Point Peninsula, which is a tract

of about fifty acres of land located within the Port

Authority's jurisdiction but not owned by the Port

Authority. The projects include efforts to acquire the

property and to promote the construction of casinos, as

well as the relocation and management of the

Hitchcock Marina. The Port Authority has spent some

of its operating funds on Steel Point. For example, in

1993, it paid $10,000 for a design study for Steel Point.

In addition, the Port Authority has issued and

administered requests for the development of Stee}

Point, installed a new computer program in connection

with these solicitations, and mailed out more than five

hundred packages to bidders, and reviewed the

proposals. The Port Authority’s employees have spent

considerable time working on the Steel Point projects,

and Steel Point as been discussed at many Port

Authority Board meetings.

B. Cartech, the BRMC, and _ Derecktor

Shipyard

___The Cartech property is a tract of about forty eight

acres of land located within the Port Authority’s

jurisdiction, and acquired by the Port Authority in

1999 by condemnation. The acquisition process was

the subject of numerous Board meetings and personnel

41a

time. When the Cartech property was acquired, it was

renamed the BRMC. The Port Authority has been

involved with the BRMC’s development and has

administered multiple requests for development

proposals and entered into several contracts for its

environmental cleanup and development. These

contracts have been made with funds from government

grants.’* Port Authority employees have made trips to

the BRMC, done paperwork, obtained insurance,

placed ads seeking bids, and arranged for the payment

of invoices. The BRMC has been the subject of

discussion on Board meetings on multiple occasions.

The Port Authority has discussed the development of

the BRMC with residents of the east end of Bridgeport,

where the BRMC is located, and funded a study

regarding such development.

The Port Authority has been involved in the

development and leasing of a portion of the BRMC,

consisting of about twenty-three acres, to a private

shipyard known as Derecktor Shipyards (“Derecktor”).

The Port Authority applied for and administered

government grants for developing the property for

Derecktor, and arranged for environmental

remediation of the area. The Port Authority retained

and paid for attorneys to advise it in connection with

Derecktor. The Port Authority hosted a forum at a

hotel to garner support for the Derecktor project, and

has arranged and paid for security on the Derecktor

site.

'’ The Port Authority has been awarded approximately $11

million in government grants in connection with the BRMC and

Derecktor.

42a

Riccio negotiated and signed a lease on behalf of

the Port Authority with Derecktor. The Derecktor

lease calls for an initial term of twenty-five years and

an option for Derecktor to renew for two consecutive

fifteen-year terms, and sets out payment for each of

the fifty-five years, which increases from zero for the

first three years to $589,486.90 for the last two years.

The Derecktor lease also required Derecktor to pay the

Port Authority a $15,000 annual management fee, and

this fee will increase by 10% every five years. A

significant portion of the revenue earned from the

Derecktor lease is remitted to the City of Bridgeport in

order to repay the amount the City advanced to the

Port Authority in order to acquire the Cartech site.

The Derecktor Shipyard has been the subject of

discussion at multiple Board meetings. The Port

Authority has devoted its personnel time and other

resources including salary and overhead expenses to

activities related to Derecktor.

None of the above-described development benefits

ferry passengers nor is it available for their use.

>. High-Speed Ferry to Stamford and New

York City

For several years, the Port Authority has pursued

a project to establish a high-speed ferry service linking

Bridgeport with Stamford, Connecticut, and New York,

New York. This high-speed service would be for

passengers only, not vehicles. The objective of the

high-speed ferry is to alleviate congestion on Interstate

95 and the trains to Stamford and New York by

providing an alternative mode of transportation. Port

Authority personnel have traveled to New York City,

Washington, D.C., San Francisco, California, and

43a

Seattle, Washington to investigate possibilities for this

project using Port Authority funds. The Port Authority

has retained and paid a lobbyist to promote the high

speed ferry service. The Port Authority has issued

requests for development proposals, paid for

advertisements, applied for government grants and

consulted with counsel in connection with this project.

The high-speed ferry has been discussed at numerous

Board meetings.

The high speed ferry will not benefit passengers on

the Bridgeport to Port Jefferson ferry, because the two

ferries would have entirely different routes and

presumably service different commuters. Indeed, the

high speed ferry will not accommodate vehicles, which

compromise the majority of the traffic on the

Bridgeport to Port Jefferson ferry.

D. Barge-Feeder Service

The Port Authority is currently pursuing the

development of an inland distribution network for

cargo containers, which would ship containers by

barge from the Port of New York and New Jersey to

Bridgeport. The purpose of the project is to relieve

congestion on Interstate 95. The Port Authority has

spent personnel time and monetary resources on the

project, including for employee travel. For example, it

has issued numerous requests for proposals and

reviewed bids, loibied for the project to be exempt

from a federal harbor maintenance tax, and discussed

the project at multiple Board meetings. The Port

Authority has received about $1.5 million from the

State of Connecticut in connection with the feeder

services, but the project is not operational and has not

44a

created any revenue for the Port Authority. The barge

feeder service does not benefit ferry passengers.

E. Foreign Trade Zone

The Port Authority is involved in the operation of

a foreign trade zone in Bridgeport. The foreign trade

zone is an area, approximately one hour away from

Bridgeport, in which manufacturers and distributors

can obtain tariff benefits under federal law. The Port

Authority has expended resources in the form of

employee time, travel, and legal fees in connection

with the trade zone. The foreign trade zone project

does not benefit ferry passengers.

F. Cilco and Other Commercial Terminals

__The Cilco terminal is a commercial shipping

terminal located on land near the BRMC within the

Port District, but not owned by the Port Authority. The

Cilco terminal is used for overseas cargo, mainly the

importation of fruit. The Port Authority has lobbied for

government grants relating to the terminal, paid for

advertisements, and otherwise promoted the terminal.

The Cilco terminal does not benefit ferry passengers.

G. Dredging of Bridgeport Harbor

The Port Authority has obtained federal funds to

dredge the Bridgeport harbor. Dredging will increase

the depth of the harbor from its current level,

twenty-seven to twenty-nine feet, to its maximum

depth of thirty-five feet. The ferry boats only require a

harbor depth of fifteen feet; however, some of the

commercial shipping boats requires a deeper harbor.

45a

The dredging of the harbor will not affect the ferry

boats and will thus not benefit the ferry passengers.

H. Pump-out Service

The Port Authority operates a seasonal boat

pump-out service, in which it cleans the septic tanks of

pleasure boats free of charge. Approximately 75% of

the cost of this service is funded by government grants,

and the remaining 25% is funded from the Port

Authority’s operating funds. The pump-out service is

not provided to the ferry boats and does not benefit

ferry passengers beyond the minimal effect it has on

the general cleanliness of the harbor.

I. Other Projects on Port District Land

The Port Authority reviews and votes on any

projects affecting land within its jurisdiction in the

Port District. This entails a review of the project and

a recommendation by the Executive Director, a

presentation and submission of documents to the

board, discussion at Board meetings, and a vote. This

process utilizes personnel time and other resources.

The projects that the Port Authority has reviewed

include: (1) a methanol plant; (2) expansion of a

marina on the Yellow Mill River; (3) construction of a

dog kennel; (4) an emission testing facility; (5) a

plastics manufacturing plant; (6) a paper recycling

plant; (7) an asphalt plant; (8) an automobile and

marine service and sales facility; (9) a commercial

laundry facility; and (10) purchase and redevelopment

of property on the Pequonnock River. None of these

projects would benefit ferry passengers.

46a

J. Miscellaneous Activities

The Port Authority has also devoted time and

resources to the following activities which are not

related to the ferry and do not benefit ferry

passengers: (1) retention and payment of attorneys

and other professionals to create, select, and register

a new trademark for the Port Authority;

(2) management of the Hitchcock Marina and the

Captain’s Cove Marina; (3) a proposal to exercise the

Port Authority’s condemnation power to acquire land

in Bridgeport to be used by Sikorsky Aircraft to

expand its helicopter manufacturing facilities;

(4) providing free office space to the Connecticut World

Trade Association; (5) purchasing season tickets to

local minor league baseball and hockey games;

(6) obtaining directors’ and officers’ liability insurance;

(7) making charitable contributions; (8) long-distance

telephone calls; (9) meals for the Executive Director;

(10) employee travel on business unrelated to the

ferry; (11) a leased automobile and gas for the

Executive Director; and (11) other miscellaneous

expenses such as club memberships and Christmas

gifts.

7. Damages for Ferry Company

While it is possible that the Ferry Company

sustained economic loss as a result of the addition of

the amount of the Passenger Fee to its ticket prices, it

has not provided any substantial evidence of its

damages to the Court. The Ferry Company contends

that if there were no Passenger Fee or the amount of

the Passenger Fee were less, it would have raised the

prices for its tickets and been able to keep the entire

amount rather than remitting the Fee to the Port

Alva

Authority. However, it has not presented evidence of

this proposition except the general testimony of

several employees that they would have raised rates,

which is too speculative to prove the fact of these

damages by a preponderance of the evidence.

In the alternative, the Ferry Company contends

that if its rates remained the same, without the

Passenger Fee, there would have been greater demand

for the ferry service because of the decreased cost, and

thus the Ferry Company would have carried more

passengers and vehicles and made more profits. It is

undisputed that the price elasticity’* for the ferry

service is greater than zero but less than one,

indicating on a theoretical level that a change in price

at a given point in time would lead to slightly

decreased demand. However, the Ferry Company has

not presented any credible evidence of any decrease in

demand or a corresponding loss in profits. It has not

presented any significant modeling or expert opinion

as to how this economic principle actually applies to

the facts here, especially considering all of the

variables that factor into this equation. For example,

factors such as the economy, gasoline prices, traffic

and weather conditions, the replacement of an older

ferry boat with a bigger boat, the addition of a new

ferry boat, the new access road, and the improvement

in Dock conditions and security, all had an effect on

demand for the ferry and ridership since 1993.

'* Price elasticity of demand measures the nature and percentage

of the relationship between changes in quantity demanded of a

good and changes in its price (% change in demand/% change in

price). A price elasticity of less than 1.0 is considered relatively

inelastic.

48a

Indeed, the Ferry Company has not presented any

evidence that it lost ridership because of the Passenger

Fee. Ferry ridership has risen steadily since 1993.” In

addition, the ferry operation has been highly profitable

since the creation of the Port Authority. Its operating

revenues increased from $9,774,666 in 1992 to

$26,801,121 in 2005, and its profits increased from

$659,375 in 1992 to $2,395,832 in 2005."° The following

chart presents those increases through 2003:

'? This increase in ridership is partly attributable to both the

Ferry Company’s addition of another ferry boat, and the Port

Authority’s construction - through government grants - of

improved and safer facilities at the Dock.

© While the increase in profitability does not mean that the Ferry

Company could not have shown that it would have been more

profitable without the Passenger Fee, the Court has found the

Ferry Company has not presented sufficient evidence of this

effect.

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Furthermore, the Ferry Company has _ not

presented any evidence that it was unable to further

increase its ticket prices, and indeed did increase the

ticket prices on a near annual basis since the Port

Authority’s creation. For example, from 1997 to 2003,

the price of a one-way passenger ticket for a vehicle

with unlimited passengers increased by $14.25. In

contrast, the Passenger Fee has been raised only twice.

For example, from 1997 to 2003, the Fee was raised

from $2.50 to $2.75, an increase of only twenty-five

cents. The increase in the ticket price was thus

fifty-seven times greater than the corresponding

increase in the Passenger Fee over the same

seven-year period. The Ferry Company conceded that

the Passenger Fee does not affect its decisions to

adjust ticket rates, and the general manager of the

Ferry Company stated that he would have set the

same rates without the additional Passenger Fee.

Finally, the Ferry Company considers the rates

charged by a competitor, the Cross Sound Ferry

between New London, Connecticut and Orient Point,

New York on Long Island, as one factor when it sets its

rates. However, it has not shown any evidence that

passengers choose one ferry over the other based on a

de minimus difference in its rates.

8. Damages for Individual Plaintiffs

Greg Rose, an employee of Plaintiff D&D, rode the

ferry twice a week for at least five years preceding the

trial date, or since April 2001. During this time, D&D

paid the full ticket price including the Passenger Fee.

Thus, D&D was damaged to the extent that this fee

was excessive under the Commerce Clause during

those years. To determine excessiveness for purposes

5la

of the individual damages only, the Court relies on the

expert testimony presented below.

The plaintiffs’ expert forensic accountant, Alan

Schachter, created three different models in order to,

in the plaintiffs’ words, determine “the amounts, if

any, by which the Passenger Fees received by the Port

Authority have exceeded the reasonable cost of the

facilities and services that the Port Authority has

actually provided to the ferry operation.””* In the first

model, Schachter simply adopted the figures used by

the Port Authority in its own net income reports,

discussed above, and calculated an “overcharge” of

$2,732,200 from 1993 to 2003. Schachter concluded

that the Port Authority’s own figures represented a

“floor” for the total overcharge because his review of its

financial records suggested the figures in many

categories were not accurate and overstated the

allocations to the Dock and thus the ferry.

In the second model, Schachter used the Port

Authority’s calculations as a base, and then adjusted

the allocations for those categories for which he had

sufficient information to determine that the allocation

used by the Port Authority was inappropriate. For

example, he reduced the allocations for personnel

costs, advertising and marketing, automobile

expenses, contributions, and professional fees based on

his review of the available documents. The overcharge

'© In undertaking his analysis, Schachter reviewed the records

kept by the Port Authonty’s auditor, the minutes of the Port

Authority’s board meetings, the Port Authority's available general

ledgers, the Port Authority’s available telephone and credit card

bills, copies of the Port Authority’s advertising materials, and the

relevant deposition transcripts.

52a

under the second model, from 1993 to 2003, was

$4,360,700. However, Schachter was unsatisfied with

this model because he did not wish to be fettered by

the Port Authority’s accounting and the “layer of.

bureaucratic authority” between the ferry operation

and the Port Authority.

Finally, in the third model, Schachter made his

own calculation of the overcharge by comparing the

proceeds of the Passenger Fee each year with the

reasonable cost to the Port Authority of what it

actually provided to the ferry operation that year.

Because the Ferry Company already provides some of

the services and facilities at the Dock, such as dock

hands, office and telephone expenses, insurance, snow

removal, and some security, Schachter eliminated

duplication by discounting the Port Authority’s

allocations to these same expense categories. If there

was a documentary basis for the Port Authority’s

allocation, Schachter accepted it. Under the third

model, the overcharge from 1993 to 2003 was

$6,728,300.

The Court acknowledges that none of these models

represents a completely accurate application of the

correct legal standard for user fees, discussed below, to

the Port Authority’s use of the Passenger Fee

revenues. However, the standard that Schachter relied

on is reasonably close to the constitutional standard

such that the Court will rely on it solely for purposes

of computing the amount by which D&D overpaid the

Port Authority in the five years preceding the trial. For

this purpose, the Court credits the second model,

because it starts from the Port Authority’s own

accounting system and records and adjusts it based on

the available evidence, reflecting an approximation of

53a

which of the Port Authority’s actual expenditures do or

do not benefit the ferry passengers.’

Under the second model, in 2001, the overcharge

was 49% of the Passenger Fee revenue, and in 2002,

the overcharge was 46% of Passenger Fee revenue.” In

those years, D&D paid a Passenger Fee of $1.50 (for a

vehicle and driver) on each ferry ride. In 2003, the

overcharge was 57% of Passenger Fee revenue, and

D&D paid a $2.00 Passenger Fee for each ferry ride.

After February 1, 2006, when the $1.00 surcharge was

implemented, D&D paid a $3.00 Passenger Fee per

ticket. Using these percentages, applying the 2003

percentage to the ensuing periods up until April 19,

2006,” when Greg Rose testified, and assuming two

ferry trips per week, D&D incurred total damages of

$494.63, computed as follows:

'? Because the first model is based solely on the Port Authority’s

inaccurate reports, it is less accurate than the second model.

The third model represents how Port Authority and the Ferry

Company would allocate the expenses of operating the ferry and

Dock most efficiently, but does not reflect actual practice. While

it might be preferable and more efficient for the Port Authority

not to duplicate expenditures already paid for by the Ferry

Company, such as insurance at the Dock, this decision seems to

the Court to be within the discretion of the Port Authority as a

government agency.

” These figures were computed by comparing the total amount of

Passenger Fee revenue in a given year and the total amount of the

overcharge in that year.

*! The 2003 percentage was the latest available when Schachter

prepared his report.

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Ill. Conclusions of Law

The plaintiffs brought claims for damages or

injunctive relief under seven different legal theories.

The following are the Court’s conclusions of law:

A. Claims under the Commerce Clause and

Right to Travel

The Commerce Clause provides: “The Congress

shall have Power. . .[tlo regulate Commerce. . .among

the several states.” U.S. Const. Art. 1, § 8. Although

the Constitution’s text does not explicitly limit the

power of states to regulate commerce, the United

States Supreme Court has long interpreted the

Commerce Clause as an implicit restraint on state

authority, even in the absence of a conflicting federal

statute. United Haulers Ass’n, Inc. v.

Oneida-Herkimer Solid Waste Management Authority,

127 S.Ct. 1786, 1793 (2007) (citing cases). The

Commerce Clause thus prevents states from passing

laws or engaging in activities that discriminate against

interstate commerce. See West Lynn Creamery, Inc. v.

Healy, 512 U.S. 186, 201 (1994).

In Evansville-Vanderburgh Airport Authority

District. v. Delta Airlines, Inc., the United States

Supreme Court ruled that the Commerce Clause did

not prohibit states or municipalities from charging

commercial airlines $1 per passenger at airports

within their jurisdiction in order to defray costs

related to airport facilities. 405 U.S. 707, 716-17

(1972). “|A] facility provided at public expense aids

rather than hinders the right to travel. A permissible

charge to help defray the cost of the facility is

therefore not a burden in the constitutional sense.”

56a

Evansville, 405 U.S. at 714. The Court established a

three-part test for determining whether a user fee

imposed by a government transportation authority is

valid under the Commerce Clause and adequately

protects the right to travel.”” A user fee comports with

both constitutional clauses if (1) it does not

discriminate against interstate commerce; (2) it is

based on a fair approximation of use or privilege for

use of the facilities for whose benefit they are imposed;

and (3) it is not excessive in comparison with the

government benefit conferred or in relation to the costs

incurred by the charging authority.” Id. at 716-17. An

application of this test to the Passenger Fee follows.

1. Discrimination Against Interstate Commerce

It is clear the Passenger Fee does not discriminate

against interstate commerce or travel, as it does not

distinguish among citizens of different states or

between intrastate and interstate travel. See id. at

717.

* The constitutional right to travel from one state to

another. . .occupies a position fundamental to the concept of our

Federal Union. It is a right that has been firmly established and

repeatedly recognized.” United States v. Guest, 383 U.S. 745, 757

(1966). The Ferry Company brought a separate claim for a

violation of its right to travel; however, the parties agree the

standard is the same as for the Commerce Clause and both will be

addressed in this section.

* The Evansville test has also been referred to by courts as the

“Massachusetts test” because it was relied on by the Supreme

Court in Massachusetts v. United States, 435 U.S. 444 (1978),

Jorling v, United States Dept. of Energy, 850 F. Supp. 132, 142

n.8 (N.D.N.Y. 1994)

5a

2. Fair Approximation of Use

The Court finds that the second requirement of

Evansville, that the user fee must be based on a fair

approximation of use or privilege for use of the

facilities for whose benefit they are imposed, is not met

by the Port Authority’s Passenger Fee. In its

application of the fair approximation prong in

Evansville, the Supreme Court concluded that the

charges on emplaning passengers “reflect a fair, if

imperfect, approximation of the use of facilities for

whose benefit they are imposed;” id. at 717; despite

exemptions for certain classes of passengers and

aircraft and for non-passenger users of airport

facilities, because “distinctions based on aircraft

weight or commercial versus private use do not render

these charges wholly irrational as a measure of the

relative use of the facilities for whose benefit they are

levied.” Id. at 719.

The Passenger Fee is charged to all passengers

embarking or disembarking in Bridgeport, and its

amount varies according to the passenger’s age and

whether the passenger has a vehicle. Other Port users,

such as those dropping off passengers at the Dock, or

eating in the Terminal, are not charged any fees by the

Port Authority. Thus, the Port Authority argues that

the Passenger Fee is based on a fair approximation of

use of the Port facilities since it is permissible to draw

rational distinctions among different classes of Port

users, and the ferry passengers are an

administratively easier group to charge than users of

other Port facilities.

However, even if the Port Authority may charge

ferry passengers rather than other Port users, it still

58a

cannot charge a fee that is not based on a fair

approximation of the ferry passengers’ general or at

least potential use of the facilities for which the fee is

imposed.”* In Northwest Airlines, Inc. v. County of

Kent, the United States Supreme Court found that an

airport’s decision to allocate costs according to a

formula which charged the airlines only their allocated

share of the airfield and terminal costs, and which did

not allocate a portion of aircraft costs to airport

concessionaires reflected a “fair, if imperfect,

approximation” of the use of facilities for whose benefit

they are imposed” because only the airlines and

general aviation actually use the runways and

navigational facilities. 510 U.S. 355, 369 (1994); see

also Massachusetts v. United States, 435 U.S. 444,

467-49 (1978) (federal tax on noncommercial aircraft

flying in navigable airspace of United States based on

gallons of fuel used, pounds per aircraft tire, pounds

per tube, and annual aircraft registration fee is fair

approximation of costs of benefits each aircraft

receives from navigational assistance and other special!

services supplied by United States).

One district court elaborated on the fair

approximation requirement:

[The fair approximation prong] of the . . . test

does not require an exact correlation, in terms

of dollars and cents, between the costs of the

overall services provided and the fees assessed

“' There is no dispute as to whether the different charges for

different categories of passengers is a fair approximation of use

Rather, the dispute here centers on whether itis fair to charge the

ferry passengers for the use of the entire Port District

59a

for such services. Nor does it require that a

governmental entity adopt a formula that

results in a 1:1 relationship between the actual

use of the services by a particular entity and the

cost of providing those services to that entity.

Rather, it requires only a rational relationship

between the method used to calculate the fees

and the benefits available to those who pay

them.

Jorling v. United States Dept. of Energy, 850 F. Supp.

132, 142-43 (N.D.N.Y. 1994), aff'd, 218 F.3d 96 (2d Cir.

2000).

The Court finds there is no such rational

relationship between the method used to calculate the

Passenger Fee and the benefits available to the

Passenger Fee-payers. The Passenger Fee appears to

be calculated according to a method which ensures the

Passenger Fee revenues will cover all of the Port

Authority’s operating costs and development projects

throughout the Port District, as almost all of the Port

Authority’s revenues and all of their operational

funding come from the Passenger Fee. The Port

Authority has not presented sufficient evidence that it

calculates the fee based on any method meant to even

roughly approximate the ferry passengers’ use of the

Port District.

The ferry passengers may use only the access road,

the Ferry Terminal, and the Dock when they visit the

Port District. The Passenger Fee is thus imposed for

the benefit of all of the facilities in the Port District,

but the ferry passengers only use one specific area of

the Port District, and the passengers are being

charged for the privilege of using the entire Port

60a

District, when in fact they may only use a small

portion of the District.

The Port Authority correctly notes that in

calculating the fee, it may consider more than the cost

of the services actually used by each person, but also

the services available for use. Jorling v. United States

Dept of Energy, 218 F.3d 96, 103 (2d Cir. 2000)

(hereinafter “Jorling IT.”). However, many of the other

Port District activities funded by the fee are not even

available to the ferry passengers (such as Derecktor,

BRMC, harbor dredging, the barge feeder service, and

the foreign trade zone). Nor are the development

projects or activities away from the Dock intended to

facilitate travel on the ferry or travel by passengers in

and out of the Port District generally. Rather, they are

intended to develop completely separate areas of the

Port. This differs from the airport in Evansville,

because while each emplaning passenger did not

necessarily use all of the different airport facilities, the

vast majority of them were available for the

passengers’ use or intended to facilitate air travel in

general. The ferry passengers should not be charged

for the use of the entire Port District, because the

other Port Authority activities are not available to

them and do not benefit them.” 510 U.S. at 369.

* As the Second Circuit noted in Jorling II, cases applying the

“fair approximation” requirement test in the Commerce Clause

context reflect some disagreement as to whether the focus is on

use or cost. The Jorling II court concluded that:

Ultimately, of course, the Massachusetts test is concerned

with whether the challenged method for imposing charges

fairly apportions the cost of providing a service, but by

framing the second component of the test in terms of

6la

Thus, the Passenger Fee is not based on a fair

approximation of the use or privilege for use of the

facilities for whose benefit they are imposed.

3. Excessiveness

Finally, the Court finds that plaintiffs have shown

that the Passenger Fee is excessive in comparison with

the government benefit conferred and in relation to the

costs incurred by the taxing authority.”° In Evansville,

“use,” the Court made clear that a method for imposing

charges based on each payer’s approximate use will pass

muster as an adequate apportionment of costs. The

alternative. . .is to engage in a detailed cost accounting

analysis that endeavors to determine the cost, properly

allocated to each payer, of every person, product, and

facility involved in providing the service. The Court

evidently was satisfied that a fair approximation of the

use of the service adequately serves as a surrogate for an

otherwise complicated and expensive attempt to allocate

costs.

218 F.3d at 103. Here, the Passenger Fee is not a fair

approximation of either the cost of the facilities provided to the

ferry passengers, which is largely covered by the Lease and

government grants, nor of the use of ferry passengers of the

available facilities.

The Port Authority also contends that the value of the services

it provides to the ferry passengers should be considered, rather

than the cost. The Second Circuit, however, made clear in Jorling

Ii that the concern is regarding use and cost. Cf. United States

Shoe Corp. V. United States, 114 F.3d 1564, 1574 (Fed. Cir. 1997)

(“cost of benefits, rather than the value, is the appropriate

measure” in evaluating constitutionality of user fees under Export

Clause).

© The Evansville court used the “government benefit conferred”

language in announcing the standard, and the “costs incurred by

62a

the Supreme Court found that the airlines did not

show the fees were excessive in relation to the costs

incurred by the taxing authority, where the total fees

collected were less than the total costs incurred on

airport facilities. 405 U.S. at 720. Subsequently, in

Northwest Airlines, the Supreme Court found that, in

light of the fact that the airport charged the airlines

the “break-even costs for the areas they use,” it could

not conclude that the airlines charged fees excessive in

comparison with the government benefit conferred.”’

510 U.S. at 370; citing Brief for United States as

Amicus Curiae (“As jong as an airport’s charges to air

carriers do not result in revenues that exceed by more

than a reasonable margin the costs of servicing those

carriers. . .[the] charges [are] reasonable under federal

law.”). See Massachusetts, 435 U.S. at 422 (tax not

excessive in relation to cost of government benefits

supplied when “revenues from user fees fell far short

of covering the annual civil aviation outlays”); Alamo

Rent-A-Car v. Sarasota-Manatee Airport Auth., 906

F.3d 516, 522 (11 Cir 1990) (user fee on rental car

agency receipts not excessive when total amount

collected constituted less than 5% of airport authority’s

annual operating expenses).

It is undisputed that the Passenger Fee covers all

of the Port Authority’s operating expenses and is

the taxing authority” language in applying the standard. Courts

applying the standard use the concepts interchangeably.

27 In fact. the District Court in Northwest Airlines found that the

airport overcharged the airlines for aircraft parking and ordered

the airport “to recalculate this fee to result in a true break-even

charge.” 510 U.S. at 370 n.16, quoting 738 F. Supp. 1112, 1115(W.

Mich. 1990).

63a

almost the sole source of revenue for the Port

Authority.” The Port Authority urges the Court to find

that all of its activities at least indirectly benefit the

ferry passengers because they benefit the general

public by developing the Port District, and thus the

fees charged are not excessive in relation to the

government benefit conferred on the payers. In making

this argument, the Port Authority analogizes the Port

District to the Airport in Evansville, as the revelant

facility by which to measure costs and benefits.

The Court finds the Port Authority's argument

unconvincing. First, the Port District differs

significantly from the airport in Evansville: the vast

majority of airport development is intended to benefit

the passengers traveling on airplanes leaving the

airport, or to facilitate their air travel; the Port

District, however, includes many projects beyond the

Dock that are not functionally related to the ferry

operation, and are not intended to benefit the travelers

on ferries, or to facilitate their boat travel from

Connecticut to Long Island. Cf. Auto. Club of New

York v. Port Auth, of New York and New Jersey., 887

F.2d 417, 422-23 (2d Cir. 1989) (Port Authority could

include toll revenue from tunnels and bridges to fund

commuter train, when the bridges, tunnels, train, and

bus facilities were sufficiently functionally related

because all facilities contributed to Port Authority’s

performance of duty to provide transportation to

* The Port Authority’s lease with Derecktor generates some

income; however, these funds are remitted to the City in order to

repay them for the costs of obtaining the land. The Port Authority —

also covers some expenses by collecting rent from the Ferry

Company.

64a

travelers over and under waterways between southern

New York and northern New Jersey).

In addition, the benefits to the ferry passengers as

members of the general public are too attenuated to

serve as the basis for the Passenger Fee. None of the

cases cited by the parties suggests that a government

benefit conferred on fee payers in their capacities as

members of the general public, rather than of users of

the government facilities, is sufficient to satisfy the

Evansille test. See Northwest Airlines, 510 U.S. at

864-65 (government benefit to airlines as users of

airport); Massachusetts, 435 U.S. at 469 (government

benefits to civil aircraft as users of government

provided civil aviation facilities); Evansville, 405 U.S.

at 720 (government benefit was use of airport

facilities); Alamo Rent-A-Car., 906 F.3d at 521 (off-site

rental car agency received government benefit of

improved airport facilities, including roads upon which

its vans travel). Rather, the Janguage in the relevant

case law, cited throughout this opinion, implies that

user fees are sustainable in exchange for a benefit or

service rendered to the payers.

The Port Authority, mainly through government

grants, financed the construction of an access road,

new terminal, and repairs to the Dock, al! of which

benefit the Passenger Fee payers. However, the costs

to the Port Authority of the facilities used by, or that

benefit, the ferry passengers are far less than the total

65a

amount it collects from the Fee.”” Thus, the benefits

conferred by the Port Authority on the passengers are

not even roughly proportional to the fees paid.

Thus, it cannot be said that the Port Authority

charges the ferry passengers “the break-even costs for

the areas they use,” and the Court finds that the Port

Authority’s charges result in revenues that exceed the

costs of services to the ferry passengers by an

* The Port Authority correctly argues that it may offset asurplus

in revenues over outlays in any one year against actual deficits of

past years, and perhaps projected deficits of future years.

Evansville, 405 U.S. at 719-20, cited in Massachusetts, 435 U.S.

at 470 n.24. However, the Court finds this principle inapplicable

here, because it assumes the use of revenues from the Fee for

expenditures by the Port Authority on or at least related to the

ferry operation. Rather, the Port Authority spends all of the

Passenger Fee revenues each year on all of its projects, regardless

of whether they benefit the ferry passengers. In addition, the

record does not reflect any Port Authority deficits from past years,

or any intention by the Port Authority to save excess fees collected

for future projects to benefit ferry users.

66a

unreasonable margin and thus are excessive.” See

Northwest, 510 U.S. at 370.

Therefore, the Court finds that the Port Authority’s

imposition of the Passenger Fee violates the Commerce

Clause. The Court recognizes that the great majority

of the courts that have previously considered similar

user fees have reached the opposite conclusion and

given the government authorities wide discretion to

spend user fees. In this case, however, the vast

majority of the Port Authority’s revenues come from

the Passenger Fee, and so little of the Port Authority’s

expenses, time, efforts, and resources go toward any

benefits even available to the ferry passengers, that it

*° The Ferry Company contends that the fact that most of the

revenue generated by the Passenger Fee goes to projects that are

not used by the ferry passengers also renders the Fee excessive.

In Evansville, the Supreme Court rejected the similar argument

that charges were not based on use because half of the revenues

generated were allocated to unrestricted general revenue. See

Evansville, 405 U.S. at 720. “[S]o long as the funds received by

local authorities under the statute are not shown to exceed their

airport costs, it is immaterial whether those funds are expressly

earmarked for airport use.” Id; see also Jorling II, 218 F.3d at 105

(New York does not violate the Massachusetts test by earmarking

half of the hazardous waste fees tor its superfund and using

general revenues to pay for portions of the services available to

hazardous waste producers); Center for Auto Safety, Inc. v. Athey,

37 F.3d 139, 144 (4th Cir. 1994) (immaterial that Maryland does

not keep charity registration fees in separate fund but turns them

over to state treasury). However, the plaintiffs showed that the

funds received from the Passenger Fee do indeed far exceed the

Dock costs. In addition, in the cases cited above, the funds for the

services provided to the fee payers simply came from another

revenue source, not exclusively from the fees paid, whereas here,

the Passenyer Fee is the only significant revenue source of the

Port Authority.

67a

simply cannot be said that the Fee fairly approximates

passenger use of the Port, or that it is not excessive in

relation to the government benefit conferred. In short,

the Evansville test would be completely eviscerated if

this activity was considered to be within its bounds.

B. Tonnage Clause

The Tonnage Clause provides “[N]o State

shall. . lay any Duty of Tonnage.” U.S. Const., Art 1,

§ 10, cl. 3.°4 In Clyde Mallory Lines v. Alabama, the

United States Supreme Court explained the reach of

the Tonnage Clause:

[T]he prohibition against tonnage duties has

been deemed to embrace all taxes and duties

regardless of their name or form, and even

*! The Clyde Mallory Court explained the history and purpose of

the Tonnage Clause:

It seems clear that the prohibition against the imposition

of any duty of tonnage was due to the desire of the

Framers to supplement Art. I, § 10, Clause 2, denying to

the states power to lay duties on imports or exports .. . by

forbidding a corresponding tax on the privilege of access

by vessels to the ports of a state, and to their doubts

whether the commerce clause would accomplish that

purpose. If the states had been left free to tax the

privilege of access by vessels to their harbors the

prohibition against duties on imports and exports could

have been nullified by taxing the vessels transporting the

merchandise. At the time of the adoption of the

Constitution “tonnage” was a well understood commercial

term signifying in America the internal cubic capacity of

a vessel.

296 U.S. at 264 65.

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though not measured by the tonnage of the

vessel, which operate to impose a charge for the

_ privilege of entering, trading in, or lying in a

port. But it does not extend to charges made by

state authority, even though graduated

according to tonnage, for services rendered to

and enjoyed by the vessel, such as pilotage, or

wharfage, or charges for the use of locks on a

navigable river.

296 U.S. 261, 265-66 (1935) (internal citations

omitted). The Clyde Mallory Court upheld a harbor fee

imposed on all ships entering the Port of Mobile

because the fee was a reasonable charge for a police

and fire service provided to the vessels entering the

harbor. Id. at 266-67. The Court reasoned that the

general safety services “inure to all who enter [the

harbor]” even if a particular vessel is not given any

special assistance. Id.; see also New Orleans

Steamship Assoc. Plaquemines Port, Harbor, &

Terminal Dist., 874 F.2d 1018, 1023 (5th Cir. 1989)

(tonnage clause prohibits reliance on tonnage duties to

raise general revenues, and thus permits fee for

available emergency services); Plaquemines Port

Harbor & Terminal Dist. v. Fed. Mar. Comm’n, 838

F.2d 536, 545 (D.C. Cir. 1988) (reasonable fee to

support emergency services rendered by Port inured to

all who used Port because all vessels, whether or not

they need rescue services, benefit from _ their

availability); Hawaiian Navigable Waters Pres. Soc’y

v. State of Hawaii, 823 F. Supp. 766, 776 (D. Haw.

1993) (reasonable mooring and anchoring fees charged

for use of restroom facilities, parking, trash disposal,

and security services rendered were not impermissible

duty of tonnage).

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The Passenger Fee imposed by the Port Authority

is used for the impermissible purpose of raising

general revenues and for projects which do not and

could not benefit the ferry passengers. It is not used

for emergency or other services available to, but not

necessarily used by, all vessels and persons using the

harbor. Instead, a significant portion of the Passenger

Fee funds projects completely unrelated and

unavailable to the fee payers, such as negotiations,

legal fees, and development proposals for the BRMC,

Derecktor, the foreign trade zone, the barge feeder

service, harbor dredging, and the high-speed ferry.*

Thus, the difference between the amount of the fee and

the benefits received by the ferry passengers is vast,

and creates more than a “slight divergence between

the class that benefits and the class that pays.”

Plaquemines; 838 F.3d at 545 n.8. Thus, it is not a

reasonable fee for general services rendered, but

rather is an impermissible duty of tonnage.

C. The Rivers and Harbors Appropriation Act

The Port Authority contends that the Maritime

Transportation Security Act of 2002, which added new

subsection (b) to the Rivers and Harbors Appropriation

Act of 1884, 33 U.S.C. § 5(b), codified the existing

Commerce Clause jurisprudence with respect to user

fees. The relevant provision reads:

*” The Port Authority suggests that the Fee is used for services

such as the construction of the Ferry Terminal, access road, and

the parking garage, when these projects were actually funded by

government grants. Def.’s Proposed Findings at 71. While the

costs of the Port Authority’s efforts to obtain these grants are

properly funded by the Passenger Fee, it is simply not accurate to

state that the Fee funded these projects.

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(b) No taxes, tolls, operating charges, fees, or

any other impositions whatever shall be levied

upon or collected from any vessel or other water

craft, or from its passengers or crew, by any

non-Federal interest, if the vessel or water craft

is operating on any navigable waters subject to

the authority of the United States, or under the

right to freedom of navigation on those waters,

except for. . .(2) reasonable fees charged on a

fair and equitable basis that (A) are used solely

to pay the cost of a service to the vessel or water

craft; (B) enhance the safety and efficiency of

interstate and foreign commerce; and (C) do not

impose more than a small burden on interstate

or foreign commerce.

33 U.S.C. § 5(b). There is no case law applying this

provision. The language of the requirements closely

tracks the Commerce Clause and Tonnage Clause

cases discussed above in its focus on reasonable fees

used to cover the cost of service to vessels, and the

parties agree the provision was intended to clarify, not

change, the Commerce Clause jurisprudence

concerning legal fees. It is not clear to the Court

whether the RHAA applies to the ferry passengers, or

whether there is a private right of action under the

statute, and the parties have not addressed these

questions. However, since the Court has found

violations of the Constitution and any relief under this

act would be duplicative, it need not reach these

issues.

Fla

D. Unjust Enrichment under Connecticut

Law

“Unjust enrichment applies whenever justice

requires compensation to be given for property or

services rendered under a contract, and no remedy is

available by an action on the contract.... Indeed, lack

of a remedy under the contract is a precondition for

recovery based upon unjust enrichment.” Gagne v.

Vaccaro, 766 A.2d 416, 424 (Conn. 2001) (internal

quotation marks omitted) (citing 12 S. Williston,

Contracts (8d Ed.1970) § 1479, p. 272). Plaintiffs

seeking recovery for unjust enrichment must prove

‘(1) that the defendants were benefited [sic], (2) that

the defendants unjustly did not pay the plaintiffs for

the benefits, and (3) that the failure of payment was to

the plaintiffs’ detriment. Hartford Whalers Hockey

Club v. Uniroyal Goodrich Tire Co., 231 Conn. 276, 283

(1994); see also 12 Williston, Contracts § 1479, p. 276

(3d ed. 1978).

The plaintiffs claim that the evidence has

established all three required elements. First, they

claim that the Port Authority has received benefits in

the form of monetary proceeds from the Passenger Fee.

Next, the plaintiffs argue that the Port Authority has

unjustly not paid the plaintiffs for the benefits because

the cost to the Port Authority of the facilities and

services it has provided to the ferry operation has been

substantially less than the proceeds it has received

from the Passenger Fee. Finally, the plaintiffs argue

that the Port Authority’s failure to provide

consideration for the full amount of the Passenger Fee

has been detrimental! to the plaintiffs because it has

caused passengers to pay an unnecessarily high fee in

relation to the cost of the facilities and services they

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have received from the Port Authority, which has

resulted in monetary damages to the Ferry Company

and the passenger Plaintiffs.

As noted above, the Court finds that the Ferry

Company has not proved any monetary damages, so

the unjust enrichment claim fails as to the Ferry

Company.” As for the ferry passenger plaintiff, since

the Passenger Fee only unjustly benefitted the Port

Authority to the degree that it violated the

Constitution, any potential relief under the unjust

enrichment theory would necessarily only duplicate

the compensatory damages he will receive under the

Constitution. Thus, the Court will not reach the merits

of this claim as to the passengers.

E. Conn. Gen. Stat. §§ 7-329a to 7-329u

The plaintiffs claim that the Port Authority has

exceeded the authority to collect fees granted to it

pursuant to Conn. Gen. Stat. §§ 7-329a to 7-329u,

under which the Port Authority was created. Section

7-329c(10) gives the Port Authority the power to

Fix fees, rates, rentals or other charges for the

purpose of all port facilities owned by the port

“ In addition, the plaintiffs argue the Port Authority has been

unjustly enriched because it has charged the Ferry Company

twice for the same services, namely the use of the Dock, because

under the Lease, the Ferry Company is required to maintain the

Dock area, yet the Port Authority attempts to justify the amount

of the Passenger Fee by the cost of providing the same

maintenance service. However, since the Ferry Company did not

itself pay the Passenger Fee, the Court finds this claim to be

without merit

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authority and collect such fees, rates, rentals

and other charges for such facilities owned by

the port authority, which fees, rates, rentals or

other charges shall at times be sufficient to

comply fully with all covenants or agreements

with the holders of any bonds issued under the

provisions of sections 7-329a to 7-329f,

inclusive.

In addition, section 7-329i authorizes the Port

Authority to “fix, revise, charge and collect rates,

rents, fees and charges for the use of and for the

services furnished or to be furnished by each project.”

“Project” means the acquisition, purchase,

construction, reconstruction, improvement or

extension of a port facility;. § 7-329b(2). “Port

facilities” are defined quite broadly as:

(A) wharves, docks, piers, vessels, air or bus

terminals, railroad tracks or terminals, cold

storage and refrigerating plants, warehouses,

elevators, freight-handling machinery and such

equipment as is used in the handling of freight,

passengers and vessels, vehicles, and the

establishment and operation of a port and any

other works, vessels, vehicles, rolling stock,

properties, buildings, structures or other

facilities necessary or desirable for commerce

and industry or waterfront development within

a district or in connection with the development

and operation of port facilities, or

(B) manufacturing and industrial facilities,

recreational and entertainment facilities,

residential facilities or other commercial

facilities necessary for commerce and industry

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or waterfront development within a district, and

(C) located within or benefiting the district.

§ 7-329b(4). Such charges may be imposed for the

purpose of funding (1) the cost of maintaining and

operating the project; (2) payments of principal and

interest on any bonds issued in respect of such project;

and (3) any reserves required to secure such bonds.

Because a substantial portion of the Passenger

Fees imposed by the Port Authority is not used to fund

the cost of a particular project, but to fund general

Port Authority activities, the plaintiffs contend the

Port Authority has exceeded its power under the

Enabling Statute.

It is not clear to the Court that there is a private

right of action under the statute. However, since the

Court has found violations of the Constitution and any

relief under this act would be duplicative, it need not

reach this issue.

F. Connecticut Unfair Trade Practices Act

(“CUTPA”)

The Connecticut Unfair Trade Practices Act, Conn.

Gen. Stat. §§ 42-110a et seq., provides that “[n]o

person shall engage in unfair or deceptive acts or

practices in the conduct of any trade or commerce.”

§ 42-110b(a). To determine whether a practice is an

unfair trade practice under CUTPA, a Court weighs:

(1) [[W]hether the practice, without necessarily

having been previously considered unlawful,

offends public policy as it has been established

by statutes, the common law, or otherwise -

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whether, in other words, it is within at least the

penumbra of some common law, statutory, or

other established concept of unfairness;

(2) whether it is immoral, unethical, oppressive,

or unscrupulous; (3) whether it causes

substantial injury to consumers [(competitors or

other businessmen)}.

Fabri v. United Technologies Intern., Inc., 387 F.3d

109, 120 (2d Cir. 2004); quoting Cheshire Mortgage

Serv. Inc. v. Montes, 612 A.2d 1130, 1143 (Conn. 1992).

“A practice may be unfair because of the degree to

which it meets one of the criteria or because to a lesser

extent it meets all three.... Thus a violation of CUTPA

may be established by showing either an actual

deceptive practice ... or a practice amounting to a

violation of public policy.... Furthermore, a party need

not prove an intent to deceive to prevail under

CUTPA..” Cheshire, 612 A.2d at 1143-44 (citations and

internal quotation marks omitted).

The Court finds that the plaintiffs have not shown

that the Port Authority’s imposition of an excessive

passenger fee is an unfair trade practice by the

preponderance of the evidence. The fee does violate the

Commerce Clause, so arguably it is contrary to public

policy as established by the Constitution. However, the

imposition of a user fee on ferry passengers is not in

itself unconstitutional, but only becomes so because

the Port Authority has used the revenues for overly

broad purposes. Thus, the degree to which public

policy is offended is slight. The imposition of the

Passenger Fee cannot be said to be “immoral,

unscrupulous, or oppressive.” Finally, and importantly,

the Passenger Fee has not caused substantial injury to

consumers, competitors or businessmen. Indeed, the

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Ferry Company has failed to prove it has sustained

monetary damages. The monetary damages to the

passenger plaintiff likewise have been minimal. Thus,

the Court finds the plaintiffs have not provided

sufficient evidence to support their CUTPA claim.

G. Damages

The Ferry Company correctly cites the principle

that if a reasonable probability of damages has been

established, damages need not be calculated with

mathematical precision, but rather may be

approximated if there is a reasonable basis of

computation. See, e.g. Storey Parchment Co. v.

Paterson Parchment Paper Co., 282 U.S. 555, 563

(1931); Hydro Investors, Inc. Trafalgar Power Inc., 227

F.3d 8, 19 (2d Cir. 2000). Based on this principle, the

Ferry Company urges the Court to award it

$9,038,500, which is the amount of the overcharge

calculated by their expert in his third model, described

above, plus interest. However, as discussed above, the

Ferry Company has not proved by the preponderance

of the evidence the fact that it has sustained damage

or any economic losses as a_ result of the

constitutionally excessive Passenger Fee.** Thus, the

4 The Ferry Company argues that this Court’s ruling denying the

Port Authority’s motion to dismiss, which found that the Ferry

Company had standing to pursue this claim, provides support for

its claim that it has in fact been damaged, even if it could not

prove the amount. See Bridgeport and Port Jefferson Steamboat

Co. v. Bridgeport Port Auth., 335 F. Supp. 2d 275, 283 (D. Conn.

2004). However, the Court’s ruling that the Ferry Company had

standing only indicated that the Ferry Company alleged sufficient

injury to pursue its claim in this Court, not that the Ferry

Company had proved the fact of their damages for trial purposes.

T7Ta

Court declines to award the damages suggested by the

Ferry Company.

However, “lilf the wrong complained of is a mere

technical violation of the plaintiffs constitutional

rights and she is unable to prove actual damage, she

would nevertheless be entitled to a recovery of nominal

damages.” Davis v. Village Park II Realty Co., 578

F.2d 46, 463 (2d Cir. 1978). The right to engage in

interstate commerce free of discriminatory taxes or

fees has been recognized as an_ individual

constitutional right.* Dennis v. Higgins, 498 U.S. 439,

449 (1991). The Passenger Fee is unconstitutional, and

as the collector of the Fee, the unconstitutional nature

of the Fee affects the Ferry Company. Thus, the Ferry

Company has proved that it has in fact suffered

See, e.g. Sierra Club v. Morton, 405 U.S. 727, (1972). The Ferry

Company proved constitutional injury at trial, but it did not prove

any monetary damages resulting from that injury.

3° Dennis v. Higgins held that a cause of action under 42 U.S.C.

§ 1983 existed for a violation of the dormant Commerce Clause

because “the combined restriction on state power and entitlement

to relief under the Commerce Clause amounts to a ‘right,

privilege, or immunity’ under the ordinary meaning of those

terms.” Although this case was not brought under § 1983, the

same reasoning should apply to violations of the Commerce

Clause brought by individuals under the Constitution itself

pursuant to “federal question” jurisdiction conferred by 28 U.S.C.

§ 1331. While lawsuits for violations of constitutional rights

including economic rights such as those under the Commerce

Clause are increasingly brought under § 1983, there continues to

be a viable cause of action pursuant to § 1331. See Michael G.

Collins, ‘Economic Rights,’ Implied Constitutional Actions, and

the Scope of Section 1983, 77 Geo. L. J. 1493 (1989).

The same damages analysis applies to the Tonnage Clause

violations.

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nominal constitutional injury due to the Port

Authority’s unconstitutional practice, and is awarded

nominal damages.

The ferry passengers, however, who are the

actually fee payers, were damaged by paying fees in

excess of constitutionally appropriate levels which

were used to fund activities that did not benefit them

as Port users. Thus, the passenger plaintiff D&D is

awarded damages in the amount of $494.63,

representing the Court’s best estimate, according to

the calculation discussed above, of the amount by

which the Passenger Fees paid exceeded

constitutionally appropriate levels and thus benefitted

the Port Authority to the detriment of the passengers.

H. Declaratory Judgment

The plaintiffs request a declaratory judgment that

the Port Authority is barred from imposing or

collecting the Passenger Fee to the extent that it

exceeds, or is calculated to exceed, the reasonable cost

to the Port Authority of the facilities and services that

the Port Authority actually provides to the ferry

operation.

The Declaratory Judgment Act provides in relevant

part:

In a case or controversy within its

jurisdiction. . .any court of the United States,

upon the filing of an appropriate pleading, may

declare the rights and other legal relations of

any interested party seeking such declaration,

whether or not further relief could be sought.

Any such declaration shall have the force and

79a

effect of a final judgment or decree and shall be

reviewable as such.

28 U.S.C. § 2201(a). The Second Circuit has stated

that “two principal criteria guiding the policy in favor

of rendering declaratory judgments are (1) when the

judgment will serve a useful purpose in clarifying and

settling the legal relations in issue, and (2) when it

will terminate and afford relief from the uncertainty,

insecurity, and controversy giving rise to the

proceeding.” Broadview Chemical Corp. v. Loctite

Corp., 417 F.2d 998, 1001 (2d Cir. 1969).

Under these criteria, the Court finds that a

declaratory judgment would be neither appropriate nor

helpful in this case. The legal relationship between the

parties does not require clarification, and the Court’s

findings on the substantive claims and the permanent

injunction will provide the necessary relief to the

plaintiffs.

G. Permanent Injunction

Generally, to obtain a permanent injunction a party

must show the absence of an adequate remedy at law

and irreparable harm if the relief is not granted. New

York State Nat. Org. for Women v. Terry, 886 F.2d

1339, 1362 (2d Cir. 1989). “The standard for a

preliminary injunction is essentially the same as for a

permanent injunction with the exception that the

plaintiff must show a likelihood of success on the

merits rather than actual success.” Amoco Prod. Co. v.

Vill. of Gambell, 480 U.S. 531, 546 n. 12 (1987). “To

obtain a _ preliminary injunction a party must

demonstrate: (1) that (he or she] will be irreparably

harmed if an injunction is not granted, and (2) either

80a

(a) a likelihood of success on the merits or

(b) sufficiently serious questions going to the merits to

make them a fair ground for litigation, and a balance

of the hardships tipping decidedly in its favor.” Lusk v.

Village of Cold Spring, 475 F.3d 480, 485 (2d Cir.

2007).

The Ferry Company and passenger plaintiffs have

succeeded on the merits of their constitutional! claims.

This Court agrees with the plaintiffs, for the reasons

discussed above, that the imposition of the Passenger

Fee as currently charged and calculated is a violation

of the Commerce Clause to the extent that it funds

activities of the Port Authority unrelated to and that

do not benefit the ferry passengers, and also violates

the Tonnage Clause. The passenger plaintiffs, as well

as any other future ferry passengers, will be

irreparably harmed if the Port Authority were

permitted to continue its practice of instituting a

Passenger Fee in violation of the Constitution. There

is no adequate remedy at law which would prevent the

occurrence of this future constitutional harm, and the

plaintiffs have succeeded on the merits of their claim.

The Court hereby enjoins the Port Authority from

the further use of the revenues from the Passenger Fee

to fund its activities that are unrelated to and do not

benefit the ferry passengers or approximate their use

of the Port. The Port Authority shall not be allowed to

collect a Passenger Fee in an amount that exceeds

what is necessary for their expenses that benefit ferry

passengers and fairly approximate their use of the

Port. The Court has made factual findings as to which

of the Port Authority’s activities were properly funded

by the Passenger Fee revenues and which were not

properly funded by the Passenger Fee based on the

Sla

benefit of these activities to the ferry passengers.

These findings should serve as guidance to the Port

Authority in its future in its future calculations of an

appropriate Passenger F ce.

H. Affirmative Defenses

The Court finds the Port Authority’s affirmative

detenses to be without merit for the reasons detailed

above.

Ill. Conclusion

The plaintiff Bridgeport & Port Jefferson

Steamboat Company is awarded nominal damages in

the amount of one dollar. The plaintiff D&D Flowers is

awarded damages in the amount of $494.63.

The Port Authority is enjoined from the further use

of the revenues from the Passenger Fee to fund its

activities that are unrelated to and do not benefit the

ferry passengers or approximate their use of the Port,

and the Passenger Fce shall be reduced accordingly.

The Port Authority shall not be allowed to collect a

Passenger Fee in an amount that exceeds what is

necessary for their expenses that benefit ferry

passengers and fairly approximate their use of the

Port.

The defendant’s Oral Motion for Judgment as a

Matter of Law [Dkt. # 163] ts DENIED as moot in light

of this decision.

SO ORDERED this _3rd_ day of July 2008, at

Hartford, Connecticut.

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/s/ Christopher F. Droney

CHRISTOPHER F. DRONEY

UNITED STATES DISTRICT JUDGE

83a

APPENDIX D

UNITED STATES COURT OF APPEALS

FOR THE

SECOND CIRCUIT

At a stated Term of the United States Court of

Appeals for the Second Circuit, held at the Daniel

Patrick Moynihan United States Courthouse, 500

Pearl Street, in the City of New York, on the 31st day

of July, two thousand and nine,

Docket Number: 08-3886-cv

[Filed July 31, 2009]

Bridgeport and Port Jefferson Steamboat

Company, Frank C. Zahradka, and

D & D Wholesale Flowers, Inc.,

Plaintiffs-Appellees,

ve

Bridgeport Port Authority,

Defendant-Appellant.

Nem ee Nee eee ee”

ORDER

Appellant Bridgeport Port Authority having filed a

petition for panel rehearing, or, in the alternative, for

rehearing en banc, and the panel that determined the

appeal having considered the request for panel

84a

rehearing, and the active members of the Court having

considered the request for rehearing en banc,

IT IS HEREBY ORDERED that the petition is

denied.

For the Court:

Catherine O’Hagan Wolfe, Clerk

_.. ae

Frank Perez, Deputy Clerk