Unraveling Patchwork Regulation - Little-Noticed Aspects of Supreme Court's Pro-Preemption Decision in Rowe Case
By Mark Andrews
Welcome to Strasburger’s new Logistics Blog. As one of my first postings, I'd like to share a few observations about the Supreme Court's landmark decision issued February 20, 2008 in Rowe v. New Hampshire Motor Transport Ass’n (2008 U.S. LEXIS 2010).
As you probably have read by now, the Court unanimously held that the federal preemption provisions of the ICC Termination Act (ICCTA) precluded Maine from regulating the tobacco delivery procedures used by motor carriers. The most widely reported basis for this decision was that States cannot force motor carriers to provide particular services that the marketplace doesn't demand and carriers don't want to offer (see 2008 U.S. LEXIS at 2010 *13). Behind the headlines (and headnotes), however, the Court made numerous other points that surface transportation providers can use to their advantage on a wide range of state regulatory issues. Here are some implications of Rowe that few observers seem to have noticed:
1. ICCTA preemption is not limited to areas of "traditional" economic regulation, such as the pricing, service and route controls formerly enforced by the old Interstate Commerce Commission (id. at *17). This was an implicit rebuff to a line of Ninth Circuit cases that have refused to enforce ICCTA preemption against state regulations that indirectly affected trucking prices and service, such as minimum wage orders and California's unique "meal break" rules. In all likelihood, the trucking industry will use this holding to attack the "clean air" trucking concession rules proposed by the Port of Los Angeles, if the port makes good on its threat to limit concessions to carriers using employee drivers (not owner-operators).
2. Professed good intentions will not save state restrictions that violate the plain preemptive language of ICCTA (id. at **21-22). This holding would appear applicable to the stated environmental goals of the Port of Los Angeles, just as it covers Maine's expressed desire to control underage tobacco use.
3. "Governmental commands" that carriers provide particular services are particularly unacceptable when "the State seeks to enlist the motor carrier operators as allies in its enforcement efforts" (id. at **13, 20). This holding appears to confirm the position I have argued on behalf of several clients when specialized "bounty hunter" auditing firms attempted to make them undergo multistate unclaimed property audits under the theory that any unapplied transportation revenues should be reported and ultimately escheated to the States. These bounty hunters are still around, and still attacking large carriers of all modes. The forced-enlistment language of Rowe should be very helpful if these people come after you.
4. A "state regulatory patchwork" of conflicting rules is especially "inconsistent with Congress' major legislative effort to leave [service-related] decisions, where federally unregulated, to the competitive marketplace" (id. at **15-16). The "patchwork" argument clearly applies to state unclaimed-property rules, among others.
5. Preemption should apply if a state requirement has a "significant impact" on "essential details of the carriage itself' (id. at **11, 16). The Court did not explicitly equate "significant impact" to significant economic impact, and instead held that significant governmentally-commanded services were enough to invoke preemption. The Court probably took this approach because the extent of the economic burden of Maine's rules was disputed on the record before it. On reflection, I think the Court actually did the industry a favor by declining to transform every preemption case into a battleground for dueling economic experts. In situations where the economic burden of the state rules is undisputed, the industry still can argue that the case for preemption is even stronger than in Rowe.
6. Finally, please recall that the expanded scope of preemption after Rowe is not limited to motor carriers. The statutory provision construed in Rowe (49 USC 14501(c)) extends as well to transportation brokers and surface freight forwarders, which often are "hats" worn by third-party logistics providers (3PLs). One of the corollaries of ICCTA preemption is that state-law theories of liability (arguably including negligent selection of underlying carriers) are preempted except to the extent that the transportation provider's contract with a customer voluntarily assumes a particular duty (such as a duty of care with regard to selection of carriers). See American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995). It would be appropriate for 3PLs to review their standard customer contract forms (if any) with this principle in mind.
If particular state-law issues are on your radar screen at the moment (for example, proposed restrictions on inner-city delivery times?), I would be happy to take a closer look at the potential for preemption in light of Rowe. Please feel free to contact me with questions about any of the foregoing points. My telephone is 202.742.8601 and my e-mail is mark.andrews@strasburger.com . Thanks and best regards.
Editor’s Note: Mark Andrews is the partner-in-charge of Strasburger’s Washington, D.C. office and a co-leader of the firm’s transportation and logistics practice team.
