Ace Auto Body & Towing, Ltd. v. The City Of New YorkAce Auto Body & Towing, Ltd. v. The City Of New York
Mordecai Newman, New York, New York (Jeffrey D. Friedlander, Acting Corporation Counsel of the City of New York, Larry A. Sonnenshein, Robin Binder, New York, New York, of counsel), for Defendant-Appellee-Cross-Appellant.
CARDAMONE, Circuit Judge:
Looming over our Republican form of government, where each state in the exercise of sovereignty enacts its own laws, lies the Supremacy Clause of the U.S. Constitution, from which clause has been derived a legal concept known—to judges and lawyers, if not to laypersons—as preemption. Preemption, the doctrine by which federal law supplants contrary state and local law, is the subject of this appeal. Plaintiffs, who are members and affiliates of the regional and New York City tow truck industry, filed an action against the defendant City in the United States District Court for the Southern District of New York (Denise Cote, Judge) challenging a City ordinance aimed at eliminating the practice of “chasing“—where tow trucks race one another to an accident scene in competition for business—on the grounds that the regulation of intrastate towing is a field explicitly preempted by federal law. The challenge was turned down.
This appeal requires us to determine the extent to which a federal statute,
BACKGROUND
A. The New York City Towing Laws
New York City laws governing municipal towing are codified in the City Administrative Code (Admin.Code), Title 20, Chapter 2, Subchapter 31, §§ 20-495 to -528 (1996). The implementing regulations, promulgated by the New York City Department of Consumer Affairs (Department), are found in the Rules of the City of New York (RCNY), Title 6, Chapter 2, Subchapter EE, §§ 2-361 to -376 (1995). Because these laws are voluminous and were examined in detail by the district court, see Ace Auto Body & Towing, Ltd. v. City of New York, No. 96 Civ. 6547(DLC), 1997 WL 669891, at * 1-* 4 (S.D.N.Y. Oct. 28, 1997) (Ace ), we limit our discussion to those aspects most pertinent to this appeal.
1. General Towing Requirements
The City towing laws require tow truck businesses and operators employed by them to be licensed to engage in towing by the Department. See Admin. Code § 20-496. To qualify for a license, a towing company must maintain liability insurance, post a surety bond or cash alternative, and demonstrate that its principals have no relevant criminal history. See Admin. Code §§ 20-498(a), -499, -500; 6 RCNY §§ 2-362, -375. License requirements for operators include a minimum age of 18 years, possession of an appropriate driver‘s license, and lack of traffic or criminal convictions. See Admin. Code § 20-498; 6 RCNY § 2-364. Additional rules govern the mechanical safety of tow trucks, the information displayed on trucks, reporting, and recordkeeping. See Admin. Code §§ 20-501, -503, -507; 6 RCNY §§ 2-363, -365.
2. DARP and SARD Accident Management Programs
Under its towing laws, the City has established two management programs applicable to vehicles disabled by accidents and weighing less than 15,000 pounds: the Directed Accident Response Program (DARP), see Admin. Code § 20-518; and the Special Accident Response Districts Program (SARD), see id. § 20-518.1. The legislative history informs us, and plaintiffs concede, that both programs were adopted to eliminate the practice of “chasing,” in which tow truck operators monitor police radio transmissions to learn of vehicular accidents and then race each other, often recklessly, to accident scenes to earn fees from the resultant towing and ancillary repair work.
Under DARP, the Department has divided New York City into zones, and it maintains a list of qualified towing companies in each zone. See id. § 20-518(a)(2). As accidents occur within a given zone, the Police Department summons an approved towing company to the accident scenes on a rotating basis. The number of qualified companies per zone is not limited. However, it is important to note that a disabled vehicle to which DARP applies must be removed by an approved tower summoned by the police; it cannot be removed by a tower called independently by the operator of the disabled vehicle. See id. § 20-518(b)(1).
Under SARD, enacted to supplement DARP, the Department has designated certain City areas as districts and then subdivided each district into zones. One towing company per zone has exclusive responsibility for removing all vehicles in that zone for a specified period of time; other companies are not permitted to tow, even when called by the motorists involved. See id. § 20-518.1(a)(1), (c)(1). The maximum number of companies allowed to tow within a SARD zone is three, and if more than three meet certain initial requirements, then the three authorized are chosen by lottery. See id. § 20-518.1(a)(1), (b)(2); 6 RCNY § 2-371.1(d).
DARP and SARD participants are, in addition, required to maintain their own storage and repair facilities. See Admin. Code § 20-518(b)(3) (DARP); 6 RCNY § 2-371(h)-(n) (DARP); Admin. Code § 20-518.1(b)(1)(h) (SARD); 6 RCNY § 2-371.1(e)-(i) (SARD).
3. Rotation Tow Program
The City towing laws also establish the Rotation Tow Program (ROTOW). As its name suggests, ROTOW (like DARP) authorizes companies to tow vehicles on a rotating basis; however, ROTOW applies only to motor vehicles “suspected of having been stolen or abandoned,” as well as to certain other unattended vehicles. See Admin. Code § 20-519(a)(1). ROTOW companies must meet criteria ensuring their ability to remove vehicles promptly, see 6 RCNY § 2-372(e)-(h), and they must maintain storage facilities that meet specified requirements, see id. § 2-372(i).
4. Towing Rates
The towing laws also prescribe maximum rates for towing and storage of all vehicles, whether or not the tow in question is governed by DARP or SARD. See Admin. Code § 20-509; 6 RCNY § 2-368. Flat rates for towing and storage are specified for vehicles towed under ROTOW. See Admin. Code § 20-519(c)(1).
B. The Federal Law: 49 U.S.C. § 14501(c)
It is in this context of municipal governance that plaintiffs allege that the New York City towing laws are preempted by
At the same time, subdivision (2) of § 14501(c), entitled “Matters Not Covered,” exempts various categories of motor carrier regulation from preemption, two of which are relevant in the case at hand. First, the prohibition on state and local regulation does not
restrict the safety regulatory authority of a State with respect to motor vehicles ... or the authority of a State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.
does not apply to the authority of a State or a political subdivision of a State to enact or enforce a law ... relating to the price of for-hire motor vehicle transportation by a tow truck, if such transportation is performed without the prior consent or authorization of the owner or operator of the motor vehicle.
C. The District Court‘s Decision
Believing, as noted, that § 14501(c) preempted the City‘s towing laws, plaintiffs sued the City on August 28, 1996 seeking declaratory and injunctive relief against enforcement of those laws. On October 27, 1997 Judge Cote issued an opinion and order granting in part and denying in part the parties’ cross-motions for summary judgment, and judgment was entered three days later. See Ace, 1997 WL 669891.
In ruling on the parties’ cross-motions for summary judgment, the district court held that the towing laws largely withstood plaintiffs’ preemption challenge. See id. at * 7-* 11. It reasoned that although
At the same time the district court ruled that City laws regulating rates for nonconsensual tows were saved from preemption by
DISCUSSION
I Standard of Review
On appeal, a grant of summary judgment is reviewed de novo to determine whether the parties’ submissions “show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
II Preemption
The Supremacy Clause of the U.S. Constitution declares that “the Laws of the United States ... shall be the supreme Law of the Land ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”
Where, as with
A. Preemption Under 49 U.S.C. § 14501(c)(1)
The parties before us do not disagree that
The City asserts that, in this context,
The term “transportation” includes—
(A) a motor vehicle ... or equipment ... related to the movement of passengers or property, or both ...; and
(B) services related to that movement, including ... storage, handling, packing, unpacking, and interchange of passengers and property.
B. Exemption from Preemption Under § 14501(c)(2)
The principal question raised by plaintiffs is the extent to which the New York City towing laws are saved from preemption by language in
Hence, the precise issue before us is whether the City towing laws are properly characterized under § 14501(c) as safety and financial responsibility regulations or as economic regulations. In addressing this issue, we find it helpful first to examine the text and history of the statute in order to ascertain Congress’ purpose, which, as noted, is the gauge by which preemption analysis is measured.
1. Congressional Purpose
Statutory History. Section 14501(c) was originally enacted and codified at
The House Conference Report that accompanied the legislation indicates that the purpose behind § 11501(h)(1) was to free the motor carrier industry from state and local regulation and to put that industry on a playing field level with that of the air carrier industry, which had already been deregulated by the Airline Deregulation Act of 1978. See H.R. Conf. Rep. No. 103-677, at 85, 87 (1994), reprinted in 1994 U.S.C.C.A.N. 1715, 1757, 1759. In so doing, Congress hoped to eliminate the competitive advantage air carriers, such as Federal Express, had enjoyed under decisions interpreting the 1978 statute, relative to motor carriers, like United Parcel Service. See id. (citing Federal Express Corp. v. California Pub. Utils. Comm‘n, 936 F.2d 1075 (9th Cir.1991)).
The House Conference Report further clarifies that the exemptions from preemption under § 11501(h)(2)(A) simply reflect the fact “that State authority to regulate safety, financial fitness and insurance ... of motor carriers is unchanged since State regulation in those areas is not a price, route or service and thus is unaffected.” Id. at 85, reprinted in 1994 U.S.C.C.A.N. at 1757; see also id. at 84, reprinted in 1994 U.S.C.C.A.N. at 1756 (“[N]othing in these new subsections contains a new grant of Federal authority to a State.... The intention of the conferees is solely to identify certain areas that are not preempted....“). The Report nonetheless explicitly qualifies these exemptions, stating, “[t]he conferees do not intend for States to attempt to de facto regulate prices, routes or services of intrastate trucking through the guise of some form of unaffected regulatory authority.” Id.
Statutory Text. In its current incarnation,
The House Conference Report to the FAA Authorization Act explains that § 14501(c) was “intended to function in the exact same manner with respect to its preemptive effects” as
Recently we had occasion to explain that interpretation of the “relate to” language of ERISA ultimately “should be guided by common sense.” Plumbing Indus. Bd., Plumbing Local Union No. 1 v. E.W. Howell Co., 126 F.3d 61, 67 (2d Cir.1997). There, we elaborated:
[T]he Supreme Court has instructed that analysis under ERISA‘s preemption clause must begin with the starting presumption that Congress does not intend to supplant state law, and [has] admonished courts applying the preemption clause to look ... to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive.... Hence, to overcome the anti-preemption presumption, a party challenging a statute must convince a court that there is something in the practical operation of the challenged statute to indicate that it is the type of law that Congress specifically aimed to have ERISA supersede.
Id. at 66-67. In the context of the quoted case, we ruled that a state law that “refer[red] to” or had “a clear connection with” an ERISA plan would suffer preemption under the “relate to” language. Id. at 67. At the same time, we also found the presumption against preemption—because Congress does not aim to supplant state law—would not be overcome where the effects of state law on ERISA plans were only incidental and not coercive. See id. (citing De Buono v. NYSA-ILA Med. & Clinical Servs. Fund, 520 U.S. 806, 816 & n. 16 (1997)).
Guided by this precedent, we adopt a similar approach to § 14501(c) and its application to the New York City towing laws. On the one hand, as discussed earlier, the broad “related to” language of
2. Application to the New York City Towing Laws The DARP, SARD, and ROTOW Programs
At first blush, the purposes of the DARP, SARD, and ROTOW programs appear to be safety and not economic in nature. Plaintiffs do not dispute that the DARP and SARD programs were enacted to combat the practice of “chasing” described earlier. In a similar safety vein, as the district court noted, the ROTOW program is aimed at “removing abandoned and stolen vehicles that may (for example) present hazards to other motorists or opportunities for misuse to criminals or children.” Ace, 1997 WL 669891, at * 7.
An examination of the basic structure of these towing programs confirms this initial impression. The rotational system they employ attempts to curtail the competitive incentives that motivate the practice of chasing. Quite simply, requiring towers to service disabled vehicles on a rotating basis eliminates other towers from competing for fees. Further, neither DARP nor ROTOW limit the number of participants in the program or bar towing companies based outside the City from participating. Although the zoning system adopted by SARD limits the number of participants per zone, its legislative history reveals the program was adopted because DARP failed to eliminate chasing in several City precincts. Hence, it is difficult to treat these programs as a guise for economic regulation. As a consequence, the City of New York‘s rotational towing programs are sufficiently safety-oriented to survive preemption under § 14501(c). See Harris County Wrecker Owners for Equal Opportunity v. City of Houston, 943 F.Supp. at 732 (supporting this reading of rotational towing programs).
Plaintiffs aver that the safety exemption of
Neither the text nor the legislative history of
In addition, to the extent that our reading of the safety exemption may touch upon delicate matters of public policy, this view carefully tracks the interpretation given by the U.S. Department of Transportation. See U.S. Dep‘t of Transp., Intrastate Trucking Deregulation: An Analysis and Interpretation of Title VI, Federal Aviation Administration Authorization Act of 1994, P.L. 103-305 (Mar.1995) (Intrastate Trucking Deregulation) (“[W]e believe that State or local regulations governing the towing of damaged or abandoned vehicles that are public safety hazards would fall within this exemption, assuming again that such regulations are not a guise for broader economic restrictions.“). Even were the City‘s regulations to impose incidental economic constraints on free market competition, the presumption against preemption of state police authority, see Medtronic, 518 U.S. at 485, tips the balance decidedly in the City‘s favor.1
C. Eleventh Circuit‘s Contrary View
In holding that
In reaching this conclusion, Mayer relied largely on two arguments. First, the Eleventh Circuit reasoned that the term “State” as used in § 14501 is defined to include only the 50 states and the District of Columbia, see
We think these arguments do not carry the day in our case. Granted, the text of
Further, although the legislative history clearly illustrates Congress’ deregulatory purpose, the history is ambiguous as to the scope of that purpose. More particularly, the reports issued in connection with § 14501 suggest that its primary purpose was to eliminate local economic regulation, not local safety regulation. See H.R. Conf. Rep. No. 103-677, at 86-87, reprinted in 1994 U.S.C.C.A.N. at 1758-59. To the extent that the scope of Congress’ purpose is unclear, we hesitate to construe the text of § 14501 so as to frustrate unnecessarily the ability of municipalities to respond to the local safety concerns created by local towing industries. Such hesitance, furthermore, is consistent with the presumption against preemption of state and local regulations enacted under their historic police powers. See Medtronic, 518 U.S. at 485.
Moreover, the U.S. Department of Transportation has clarified its view that
As a consequence, we decline to follow Mayer, 158 F.3d 538, and hold instead that
D. Licensing and Eligibility Requirements
In addition to challenging the DARP, SARD, and ROTOW programs generally, plaintiffs also challenge the City‘s specific requirements regarding licensing, display of information, reporting, recordkeeping, criminal history, insurance, posting of bond, and maintenance of storage and repair facilities. Most of these requirements are so directly related to safety or financial responsibility and impose so peripheral and incidental an economic burden that no detailed analysis is necessary to conclude that they fall within the
The storage and repair requirements concededly present a more difficult question. Plaintiffs’ attack on this issue appears to focus not on the City‘s regulation of vehicle storage and repair per se, but rather on the City‘s requirement that eligible towing companies maintain their own storage and repair facilities. In plaintiffs’ view, these facilities requirements impose substantial barriers to market entry by new businesses insofar as they increase the cost of qualifying to participate in the City‘s exclusive towing programs. Plaintiffs observe, in addition, that many of the safety goals cited by the district court in support of these requirements, e.g., reducing the number of hazardous tows of damaged vehicles from one site to another, see Ace, 1997 WL 669891, at * 10, could be met by a scheme that would impose a lesser economic burden on competition in the towing industry. The City could, for example, allow towing companies to subcontract with other facilities for storage and repair services, but still meet its safety goals by regulating the subcontracting of storage and repair.
Plaintiffs’ hypothesis of a less restrictive regulatory scheme does carry a certain appeal, in light of the substantial economic burdens imposed by the City‘s storage and repair regulations. But preemption analysis does not insist upon a least restrictive means test. For these regulations to escape federal preemption, it is enough, in light of the text and history of § 14501(c), that the storage and repair provisions are reasonably related to the safety aspects of towing disabled vehicles and that the economic burdens thereby imposed are only incidental. Above and beyond the need to eliminate chasing, a disabled motor vehicle clearly presents a safety hazard in a municipality where vehicular traffic is so heavy, and the City has an obligation to make arrangements for its removal from the road and to place it in safe-keeping. And, because the economic burdens on interstate commerce are only incidental, the presumption against preemption of a state‘s police power to effect that removal supports preserving the City‘s storage and repair regulations. See Plumbing Indus. Bd., 126 F.3d at 67 (incidental burdens insufficient to overcome presumption against preemption where ERISA statute used similar “relate to” language).
E. Towing Rates
As stated, the City concedes its regulations governing rates for consensual tows are preempted, in light of the language of
In support of this view, the sole evidence offered by plaintiffs is the following statement, taken from the Congressional Record:
Nonconsensual towing situations are those where the owner of the vehicle is unable to consent to it being towed, such as in cases of a severe accident, where the vehicle is towed from a commercial establishment for being illegally parked, or towed from city streets as a result of police order.
141 Cong. Rec. H15600-02 (daily ed. Dec. 22, 1995) (statement of Rep. Rahall). This statement, we think, is at best ambiguous. There is no indication either that the list of examples of nonconsensual tows was meant to be exclusive, or that the phrase “unable to consent” should otherwise be construed in so restricted a fashion.
More to the point, the plain language of
III Commerce Clause
Finally, the City declares that insofar as
In framing this argument, the City relies primarily on the Supreme Court‘s decision in United States v. Lopez, 514 U.S. 549 (1995). There the Court held that the commerce clause power extends to regulation, first, of “the use of the channels of interstate commerce“; second, of “the instrumentalities of interstate commerce, or persons or things in interstate commerce“; and third, of “those activities that substantially affect interstate commerce.” Id. at 558-59. In determining whether a given activity “substantially affects” interstate commerce, the Court looked to the economic nature of the activity, its effects as viewed in the aggregate, other discernible ties to commerce, and congressional findings with respect to effects on commerce. See id. at 559-63.
Lopez clarified that “Congress normally is not required to make formal findings as to the substantial burdens that an activity has on interstate commerce.” Id. at 562. Rather, such findings play a key role only where “no ... substantial effect [is] visible to the naked eye.” Id. at 563. In the present case, the effects on interstate commerce are far from invisible. At least one affidavit submitted by plaintiffs, for instance, attests to the effects of the New York City towing laws on towing companies based in other states. See David Bender Aff. p 4 (“Because of our New Jersey geographic location, and our interstate operation, we frequently have to operate through New York City.“). Given that many cities are situated in close proximity to nearby states, e.g., Chicago, Philadelphia, Kansas City, and Washington, D.C., it is reasonable to infer that municipal towing laws have, in the aggregate, a substantial effect on interstate commerce. We, of course, defer to the legislative will where any rational basis may be discerned for finding a substantial effect on interstate commerce from a given activity. See Preseault v. ICC, 494 U.S. 1, 17 (1990); see also Lopez, 514 U.S. at 557 (noting that rational basis standard applies); Proyect v. United States, 101 F.3d 11, 12-13 (2d Cir.1996) (per curiam) (same).
But even were this visible effect on commerce seen as something less than “substantial,” see Lopez, 514 U.S. at 559 (effect must be substantial), we think, as did the district court, that Congress’ findings regarding state regulation of intrastate motor carriers provide a rational basis for preempting state regulation of intrastate towers as well. As the Supreme Court noted, ” ‘where a general regulatory statute bears a substantial relation to commerce, the de minimis character of individual instances arising under that statute is of no consequence.’ ” 514 U.S. at 558 (quoting Maryland v. Wirtz, 392 U.S. 183, 197 n. 27 (1968)) (emphasis removed). Since here the City similarly alleges that only a small subset of the activity encompassed by
CONCLUSION
Accordingly, and for the reasons stated, we hold that