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Defending Transportation Deregulation

March 4, 2008
When legislators borrowed the language of the Airline Deregulation Act of 1978 to preempt state regulation of the motor carrier industry, the industry

When legislators borrowed the language of the Airline Deregulation Act of 1978 to preempt state regulation of the motor carrier industry, the industry considered that the fulfillment of the intent of the Motor Carrier Act of 1980—a fait accompli for economic deregulation of the industry. A recent case heard in the US Supreme Court put that language to the test against a strong argument—public health.

It is not uncommon for legislators at the federal, state, or local level to lift language from regulations and legislation in other jurisdictions and incorporate it into their own rules and bills. In the best of circumstances, this is an efficient way to use vetted language and avoid potential errors. In the worst case, the rule of unintended consequences takes over and a host of potential problems can descend on the borrower if the new law or rule is not time tested against various challenges and interpretations.

The state of Maine provided one of those tests for the federal act that preempted state actions having a connection with carrier rates, routes or services. Maine’s Tobacco Delivery Law, as it has been called, was attempting to prevent minors from obtaining cigarettes by requiring the same sort of age verification safeguards for home delivery as are required for over the counter sales.

The Maine law required the delivery service to confirm that the person who bought the tobacco is the person to whom the package is addressed, that the person to whom the package is addressed is of legal age to purchase tobacco, that the addressee actually signed for the package, and if the
addressee is under 27, the carrier had to confirm that person produced a valid government-issued photo identification with proof of age.

The Maine law also prohibited unlicensed tobacco shipments into the state, saying that the carrier was deemed to know that a package contains tobacco if it is marked as originating from a Maine licensed tobacco retailer or it is received from someone whose name appears on an official list of unlicensed tobacco retailers that the state distributes to package-delivery companies.

What makes this an issue for federal preemption is that the Maine law “requires carriers to offer a system of service that the market does not now provide (and which the carriers would prefer not to offer),” said Justice Breyer in the Court’s opinion. It, therefore, has a significant impact on carrier services, which is preempted by the federal rule. Further, the Court said, “the law would freeze into place services that carriers might prefer to discontinue in the future.”

The Court considered this service level requirement imposed on the industry as “producing the very effect the federal law sought to avoid—the state’s direct substitution of its own governmental commands for ‘competitive market forces’ in determining the services that motor carriers will provide.” But it took the Maine law to task even further for layering on a “presumption of carrier knowledge that a shipment contains tobacco in the specified circumstances.”

That presumption, said the Court, means the law imposes civil liability on the carrier not only for its knowing transport of unlicensed tobacco but also for the carrier’s failure to examine every package sufficiently to check each shipment for certain markings and to compare it against the list of proscribed shippers. This, said the Court, directly regulated a significant aspect of the motor carrier’s package pickup and delivery service. And that also creates the kind of state-mandated regulation the federal act preempts.

Maine attempted to trump the preemption with a public health argument. The law’s intent is to prevent minors from obtaining cigarettes and, thereby, protect the citizens’ public health, said Maine’s argument. The Court said it didn’t find sufficient support for the exception. Included in the Court’s discussion is the point that Maine could simply prohibit all non-face-to-face sales of tobacco products.

The Court did not find the public health argument sufficient to warrant an exception to the preemption. It cited the 1994 Federal Aviation Administration Authorization Act as specifically listing exceptions for motor vehicle safety and certain local route controls, but there is no mention of public health.

The Court spent some time looking at the intent of the Congress that enacted the transportation deregulation legislation. Perhaps foremost among the arguments was the inclusion of a federal preemption. In 1978, when the Congress pursued airline deregulation, it included the preemption provision specifically to ensure that the states would not undo federal deregulation with regulations of their own.

Congress was specific in stating its intent to deregulate rates, routes, and services carriers offered, and it took that same position with motor carrier deregulation, which followed airline deregulation in 1980. To take motor carrier deregulation to the next step and apply it to intrastate motor carriage, Congress borrowed the language of the airline deregulation bill in a 1994 law (Federal Aviation Administration Authorization Act of 1994) that forbids states from enacting or enforcing a law related to the price, route, or service of any motor carrier.

“The Congress that wrote the language before us copied the language of the air carrier preemption provision of the Airline Deregulation Act of 1978,” said the Court. That language had come under review by the Court in an airline-related case, and the Court had ruled that the federal preemption should stand. “We have said that ‘when judicial interpretations have settled the meaning of an existing statutory provision, repetition of the same language in a new statute indicates, as a general matter, the intent to incorporate its judicial interpretation as well,’” said the Court. In other words, if you adopt the language the Court has already ruled on, you carry along the Court’s interpretation of its meaning.

The Court decision further stated that, not only had Congress carried forth the language of the earlier law and, with it, the Court’s interpretation on federal exemption, “it did so fully aware of this Court’s interpretation of that language.” So, it was the intent of that Congress to establish a robust federal preemption that had already withstood challenge all the way to the US Supreme Court.

In his concurring opinion, Justice Scalia expressed concerns over the intent of Congress. He joined the opinion except in the areas that rely on reports of committees of one house of Congress to show the intent of the full House and of the full Congress. Scalia’s concern appears to be that the Court has considered a minority view of a congressional committee to represent the view of the full Congress. But, from the Court’s own statement, its review of the facts in the 1994 law show that Congress acted with full knowledge of the Court’s previous rulings on the language of the airline act when it incorporated that same language into the later law deregulating intrastate transportation.

Interestingly, the Court decision acknowledged that the Maine regulation “tells shippers what to choose rather than carriers what to do.” The effect was the same in that it required the carriers to offer services the market forces might not require in the absence of the regulation. “Treating sales restrictions and purchase restrictions differently for preemption purposes would make no sense,” said the Court.

The Court discussed at length the provisions of the Maine law that established that carriers were “deemed to know” that a shipment contained tobacco products if it came from a Maine-licensed or unlicensed retail source. The presumption established civil liability for carriers that failed to examine every package sufficiently. That would mean the carrier would be required to inspect each shipment for certain markings and compare those to the Maine attorney general’s list of proscribed shippers. This directly regulates the carriers, the Court said, because it regulates a significant aspect of the carrier’s package pick-up and delivery service. The federal preemption clearly prohibits regulation of services, but the Court also pointed out a concern that interpreting the federal law to permit these and similar state requirements would open the door to a “patchwork of state service-determining laws, rules, and regulations.”

A brief filed on behalf of the New Hampshire Motor Transport Association, Massachusetts Motor Transportation Association and the Vermont Truck and Bus Association had earlier pointed out that each year “commercial motor and air carriers move billions of packages worth more than $6 trillion in interstate and intrastate commerce.” In that testimony, the carriers said, “The successful development of a national cargo transportation industry that can handle this massive volume of shipments is due in large part to Congress’s mandate in the Federal Aviation Administration Authorization Act [of 1994] that the services of cargo carriers not be subject to an inefficient patchwork of state laws.” The Court agreed that allowing the Maine law to stand in spite of the preemption would open the door for such a patchwork of state laws to develop and “Given the number of states through which carriers travel, the number of products, the variety of potential adverse public health effects, the many different kinds of regulatory rules potentially available, and the difficulty of finding a legal criterion for separating permissible from impermissible public-health-oriented regulations, Congress is unlikely to have intended an implicit general ‘public health’ exception broad enough to cover even the shipments at issue here.”

The case of Rowe vs. the New Hampshire Motor Transport Association may remain relatively unknown among the general public and, for that matter, among many logistics professionals, but the Supreme Court’s reaffirmation of the federal preemption over state laws that would affect carrier prices, routes, and services supports the mandate of transportation deregulation established 30 years ago with deregulation of the aviation industry and subsequently spread to rail and motor carriage.

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