Friday, June 14, 2013

Container Shipping Terminals and Road Haulage Group get Supreme Court Ruling on LA Freight Agreement

Los Angeles Port Decision will have Ramifications for Drayage Operators and Cargo Hubs beyond California
Shipping News Feature

US – For some years now we have tracked the simmering row between road haulage and drayage interests and the Port of Los Angeles as to the extent of regulatory rights which an operation such as a container shipping port or terminal could exercise over the operators who hauled the freight in and out of its jurisdiction. The case was never a simple one but yesterday the U.S. Supreme Court finally ruled on the matter, at least in part.

The row centred around the ‘concession agreement’ imposed by the Port as a codicil to its laudable and effective Clean Truck policy of ensuring commercial vehicles which operate within its environs were warranted as adhering to an acceptable level of environmental performance. With the proposition to expand port activities in 2007 it was felt that emissions should be reduced by ensuring older, more polluting trucks did not operate quayside.

The ‘agreement’ stipulated all drayage vehicles displayed permitted parking and contact details for the operator and additionally demanded evidence of a standard of operation venturing far beyond any environmental concerns including financial viability, maintenance records and employment details. Penalties for infringement included suspension debarring operators the right of entry to the port, which is owned and operated by the city authorities.

Alterations to the port’s ‘tariff’ meant any operator not prepared to sign up would not be allowed entry to the port whilst any terminal operator which transgressed the agreement conditions after acceptance could face imprisonment and fines if allowing an unregistered vehicle access.

The case has been batted about between Courts since the American Trucking Associations (ATA) first brought a case stating that the agreement was illegal. After various findings regarding which clauses in the agreement were and were not acceptable the Supreme Court has adjudged that, although the port authorities claimed to be acting exactly as would a private enterprise, i.e. have the right to permit or deny access to any operator unless it regulations were adhered to, such an order would not be enforceable by a penalty reinforced by law.

Because the Port of Los Angeles changed the tariff to enshrine the regulations and backed these up with the threat of fines or imprisonment, ‘the contract here functions as part and parcel of a governmental programme wielding coercive power over private parties, backed by the threat of criminal punishment’. This, the Court decided had the ‘force and effect of law’ with the port acting in a way beyond the possibility of any ordinary commercial enterprise, concluding, ‘In some cases, the question whether governmental action has the force of law may pose difficulties; the line between regulatory and proprietary conduct has soft edges. But this case takes us nowhere near those uncertain boundaries'.  

The Supreme Court ruled that the Port, and the previous Court’s decisions, had focused on motive rather than the means of enforcing its wishes. The desire to expand port activities by acting to improve local goodwill and thus achieve its objectives after a decade of successful objections by residents with environmental concerns, was not a valid argument no matter how well intentioned. The judgement was that ‘the Port chose a tool to fulfil those goals which only a government can wield: the hammer of the criminal law. And when the government employs such a coercive mechanism, available to no private party, it acts with the force and effect of law, whether or not it does so to turn a profit. Only if it forgoes the (distinctively governmental) exercise of legal authority may it escape….pre-emptive scope'. 

The port’s other argument, that it was only penalising terminal operators using criminal law was also rejected by the Court as it has previously rejected efforts by States to avoid pre-emption by shifting regulatory focus further along the supply chain. In language only an American Court might use, the judgement says imposition of possible criminal penalties made conditions in the agreement mandatory and, ‘Slice it or dice it any which way, the Port thus acted with the force of law'.

This judgement does not however completely conclude the matter, the Ninth Circuit Court previously upheld the financial capacity and truck maintenance requirements, and that part of its decision has become final. The Supreme Court would not violate the case raised in defence by the ATA (Castle*) if it barred a truck entry which did not comply with the terms of the agreement and could not envisage the port using those regulations for any other purpose. Because of LA’s past behaviour when enforcing the regulations the Court decided that if they ever acted in what the ATA (or others) decided was an unreasonable manner, then would be the time to rule on that aspect.

Overall then, with the reversal in part of the previous Court’s decision there the matter rests with both opponents seemingly bloodied but unbowed. Following the judgement ATA President and CEO Bill Graves, commented:

“We are gratified that, at the conclusion of many years of litigation, the highest court in the land unanimously agreed with ATA on these rules. Our position has always been that the Port’s attempt to regulate drayage operators – in ways that had nothing to do with its efforts to improve air quality at the Port – was inconsistent with Congress’ command that the trucking industry be shaped by market forces, rather than an incompatible patchwork of state and local regulations. The decision is sure to send a signal to any other cities who may have been considering similar programmes which would impermissibly regulate the port trucking industry.”

* full details of this case can be sourced via the Supreme Court’s decision.

 Photo: Port of Los Angeles terminal gateways. Courtesy of the Port of LA.