No. 14 EAP 2018, No. 15 EAP 2018
IN THE SUPREME COURT OF PENNSYLVANIA EASTERN DISTRICT
DECIDED: April 26, 2019
SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
Appeal from the Order entered on September 13, 2017 in the Commonwealth Court at No. 1989 CD 2016 (reargument denied 11/13/2017) reversing the Order entered on November 2, 2016 in the Court of Common Pleas, Philadelphia County, Civil Division at No. 00841 October Term 2015. ARGUED: December 5, 2018
JUSTICE WECHT
OPINION
DECIDED: April 26, 2019
With the enactment of Act 941 in 2004, the General Assembly transferred regulatory authority over Philadelphia taxicabs to the Philadelphia Parking Authority (“Authority“). Act 94 also created a budget submission process for the Authority to follow, and prescribed a formula that the Authority uses to ascertain assessments imposed upon Philadelphia taxicabs. In 2013, the Commonwealth Court found certain portions of Act 94 to be unconstitutional. See MCT Transp. Inc. v. Phila. Parking Auth., 60 A.3d 899 (Pa. Cmwlth. 2013). The General Assembly then enacted Act 642 to cure the constitutional shortcomings identified by the Commonwealth Court. Partial rights taxicab owners in Philadelphia challenged the new scheme on constitutional grounds. The Commonwealth Court granted relief, finding that
This Court granted allowance of appeal in order to consider these two constitutional holdings. We conclude that the Commonwealth Court erred in both respects.
I. Background
Prior to 2005, the Pennsylvania Public Utility Commission (“PUC“) regulated taxicabs in Pennsylvania. In March 2005, the General Assembly enacted Act 94, which amended Chapter 57 of the Parking Authorities Law to transfer regulatory and oversight authority for taxicabs operating in Philadelphia (the “City“) from PUC to the Authority. See Act of July 16, 2004, P.L. 758, No. 94;
This legislative change reflected the General Assembly‘s finding that “[t]he health, safety and general welfare of the people of this Commonwealth” benefit
Initially, the version of
In MCT Transportation, the Commonwealth Court held that this process constituted an unconstitutional delegation of legislative power because it granted the Authority the power to formulate its own budget and fee schedule without restriction or guidance from the General Assembly. See MCT Transp., 60 A.3d at 914-15. In this respect, the Commonwealth Court rejected the argument that the legislative mandate to spend whatever was “necessary to advance the purpose of this chapter” limited the Authority‘s creation of its budget and fee schedule.
Finally, the Commonwealth Court contrasted the procedure established by
In July 2013, the General Assembly enacted Act 64 to amend the Parking Authorities Law in response to MCT Transportation. In particular, Act 64 established a new process for setting the Authority‘s budget and fee schedule and for calculating the individual taxicab assessment that is central thereto by amending
of this chapter” for the next fiscal year.
To develop its proposed budget, the Authority must estimate the “expenditures
Fund. Id.
Relevant to this case is the assessment allocated to the taxicab utility group, which is established in
assessment allocated to the taxicab utility group is divided among the taxicabs that will be operating in that fiscal year. Each taxicab, regardless of kind, pays the same assessment. The amount of this individual assessment will depend upon the number of taxicabs that will operate in the City during the relevant fiscal year.
The number of medallion taxicabs that will be operating in the City during the fiscal year is easily ascertainable by the Authority, because each medallion is granted to a specific taxicab. While the statute permits 1,600 individual medallion taxicabs, it permits only six certificates of public convenience for partial rights taxicab owners. Id.
Because the Authority will not know from year to year how many partial rights taxicabs will be operating in the City, and,
Authority then divides the portion of the total assessment allocated to the taxicab utility group by this estimate. Id.
The dispute in this case involves the Authority‘s budget for the 2015 fiscal year (July 1, 2014 through June 30, 2015) (“FY 2015“) and the resulting taxicab assessment. Pursuant to
The amount allocated to the regulation of the taxicab utility group was $6,739,189. After deducting the estimated fees the Authority believed it would collect in FY 2015, money remaining in the Regulatory Fund, and a transfer from the Medallion Fund, the Authority determined that the total assessment allocated to the taxicab utility group was $2,438,973.
Having arrived at the total assessment, the Authority was left to estimate how many taxicabs would be in service in FY 2015. The Authority knew that there would be 1599 medallion taxicabs operating that year. To ascertain how many additional taxicabs would be operating in the City, the Authority turned to the PR-1 forms it received from all but one of the partial rights taxicab owners.9 Collectively, the owners that submitted timely PR-1 forms identified thirty-three taxicabs for FY 2015.
Germantown, which operates a fleet of partial rights taxicabs in the City, and which holds a certificate of public convenience (“CPC“) originally granted by PUC, failed to file a timely PR-1 form estimating the number of taxicabs it would have in service in FY 2015. This forced the Authority to estimate the number of taxicabs that would be in service without input from Germantown. The Authority considered several factors in arriving at its estimate: “(1) the unverified information submitted
Adding the estimated seventy-five partial rights taxicabs to the 1,599 medallion taxicabs, the Authority estimated that it would have 1,674 taxicabs in service in FY 2015. Dividing the total assessment allocated to the taxicab utility group, or $2,438,973, by the estimate of 1,674 taxicabs, the Authority determined that the individual taxicab assessment would be $1,457.
The estimate of 1,674 taxicabs was used solely to determine the individual taxicab assessment during the budgetary proceedings, which, as noted, ended on July 10, 2014, when the General Assembly approved the appropriation. After the Authority‘s budget was approved, the Authority assessed each partial rights taxicab operator pursuant to
The Authority served notice of the assessments to all partial rights taxicab owners. On August 7, 2014, Germantown received notice that its assessment for FY 2015 was $246,233, based upon the Authority‘s estimate of 169 taxicabs multiplied by the individual assessment of $1,457. Thus, although the Authority had estimated that 1,674 taxicabs would be in service in FY 2015 for purposes of determining the individual assessment, it ultimately assessed a total of 1,801 taxicabs for FY 2015. Because there is no authority in the Parking Authorities Law to alter the quotient used to establish the individual assessment after March 31, the Authority made no adjustment to the individual taxicab
assessment. Any extra money the Authority received would be deposited into the Regulatory Fund and carried over into the next fiscal year‘s budget.
Germantown reacted on August 11, 2014, by filing an untimely PR-1 form identifying 174 taxicabs. Germantown‘s owner later testified that he believed that the PR-1 form was simply to identify the fleet size, not to determine the individual assessment. Germantown indicated on the untimely PR-1 form that it reserved the right to change this number if the Authority sought to use it for assessment purposes. The Authority ignored this untimely filing.
Germantown and Bucks County Services did not pay the assessment. Consequently, the Authority placed Germantown out of service. Thereafter, Germantown attempted
Germantown filed a petition for review with the Authority pursuant to
also affirmed the Authority‘s decision. Germantown and Bucks County Services appealed to the Commonwealth Court.
On September 13, 2017, a three-judge panel of the Commonwealth Court reversed the trial court and struck down the assessment procedure of
In its substantive due process challenge, Germantown and Bucks County Services argued that the assessment scheme was unclear and vague because it did not define which partial rights taxicabs it should include on the PR-1 form and which taxicabs were subject to the individual assessment. Addressing this due process challenge, the Commonwealth Court held that a certificate of public convenience is a constitutionally protected property interest. It proceeded to examine whether the assessment scheme of
Although the Commonwealth Court agreed with the Authority that
Assembly failed to instruct the Authority how to estimate the total number of partial rights taxicabs it would be regulating. In addition, the Commonwealth Court believed that, by assigning each taxicab the same individual assessment,
Turning to the budget request process of
This Court granted the Authority‘s petition for allowance of appeal in order to consider whether Act 64 deprives partial rights taxicab owners of substantive due process, and whether that Act violates non-delegation principles. Germantown Cab Co. v. Phila. Parking Auth., 184 A.3d 944, 944-45 (Pa. 2018) (per curiam). Constitutional challenges to legislative enactments present this Court with questions of law, as to which
our standard of review is de novo and our scope of review is plenary. Lebanon Valley Farmers Bank v. Commonwealth, 83 A.3d 107, 111 (Pa. 2013).
II. Substantive Due Process Challenge
Legislation enacted by the General Assembly enjoys a presumption of constitutionality. See Pa. State Ass‘n of Jury Comm‘rs v. Commonwealth, 64 A.3d 611, 618 (Pa. 2013);
Germantown and the other challengers raised a facial constitutional challenge to
Invoking the rational basis test to assess the constitutionality of legislation, the Authority asserts that, to withstand a substantive due process challenge, a statute must seek to achieve a valid state objective by means that are rationally related to that objective. See Khan v. State Bd. of Auctioneer Exam‘rs, 842 A.2d 936, 946 (Pa. 2004). Because the Commonwealth Court agreed that
state interest, the Authority focuses its argument upon disputing the Commonwealth Court‘s holding that
In this respect, the Authority argues that the General Assembly made a deliberate decision to assess medallion and partial rights taxicabs identically, a decision the Authority believes was eminently reasonable. Emphasizing that partial rights taxicab owners operate fleets, the Authority asserts that partial rights taxicabs have a large footprint in the City, often without the added costs applicable to medallion taxicabs, such as certified dispatchers, medallions, or modern taxicab meters. The General Assembly‘s decision to equalize assessments between the two groups was, according to the Authority, the result of a legislative recognition that all taxicabs providing service in the City and regulated by the Authority should share equally in the cost of the Authority‘s regulatory obligations.
Turning to the estimation process inherent in
Germantown responds by characterizing
The due process clause of the Fourteenth Amendment to the United States Constitution provides that “[n]o State shall make or enforce any law which shall . . . deprive any person of life, liberty, or property, without due process of law.”
For substantive due process rights to attach, there must be a deprivation of a constitutionally protected interest or property right. Khan, 842 A.2d at 946. If the statute restricts a fundamental right, it is reviewed under strict scrutiny. If the statute impacts a protected but not fundamental right, then it is subject to rational basis review. Khan, 842 A.2d at 946-47; Nixon v. Commonwealth, 839 A.2d 277, 287 (Pa. 2003); cf. Washington v. Glucksburg, 521 U.S. 702, 721 (1997) (stating that, under federal precedent, legislation restricting a right that is not fundamental is subject to rational basis review).
in Pennsylvania. Like other licensees, taxicab owners operating pursuant to a certificate of public convenience have a protected property right in that livelihood. See Khan, 842 A.2d at 946 (recognizing that a license to practice a particular profession vests in the licensed professional a protected interest in practicing that profession); Bucks Cty. Servs., Inc. v. Phila. Parking Auth., 584 M.D. 2011 (Pa. Cmwlth. Nov. 28, 2016), slip op., at 45-46 (holding that PUC‘s issuance of certificates of public convenience to partial rights taxicab owners was akin to the issuance of a license to practice a profession, creating a protected property interest in operating within the City); MCT Transportation, 60 A.3d at 915-19 (recognizing that partial rights taxicab owners have a protected property interest in their certificates of public convenience for purposes of procedural due process).
We further agree with the Commonwealth Court that, although the right to engage in a licensed profession is an important right, it is not a fundamental right. See Nixon, 839 A.2d at 288 (recognizing that the right to engage in a particular occupation is not a fundamental right). Because Germantown‘s right to operate its fleet of partial rights taxicabs does not impact a fundamental right, we must apply rational basis review. See Khan, 842 A.2d at 946-47.
From a historical perspective, the federal approach to substantive due process has evolved from the early days of the so-called Lochner Era, which lasted roughly from the turn of the twentieth century until the mid-1930s. During this era, the Supreme Court of the United States overturned a wide range of economic legislation on substantive due process grounds after finding that the legislation violated the freedom of contract, a freedom which, the Court believed, was included within the due process clause. See, e.g., Allgeyer v. Louisiana, 165 U.S. 578, 589 (1897); Lochner v. New York, 198 U.S. 45 (1905) (holding that a statute regulating the number of hours bakery employees could work violated substantive due process). In Lochner, the Court held that only a valid
exercise of the state‘s police power, bearing a direct relationship to the protection of the welfare and safety of the public, could interfere with one‘s freedom of contract. Lochner, 198 U.S. at 53. Finding no relationship between the public health and legislation limiting the number of hours bakers could work, the Lochner Court held that the legislation was not a valid exercise of the state‘s police power. Id. at 57.
In reaching this conclusion, the Lochner Court declined to defer to the legislature‘s belief that the legislation was, in fact, necessary for public health and welfare. It went so far as to examine independently the reasonableness of the legislative decision. Lochner, 198 U.S. at 56 (“In every case that comes before this court, . . . the question necessarily arises: Is this a fair, reasonable, and appropriate exercise of the police power of the state...?“).15
state purpose, statutes are presumed to be constitutional, and state legislatures are entitled to deference. See United States v. Carolene Prod. Co., 304 U.S. 144, 152 & n.4 (1938) (establishing two levels of judicial review and the Court‘s presumption of the constitutionality of rational laws); see also Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 488 (1955) (“The day is gone when this Court uses the Due Process Clause of the Fourteenth Amendment to strike down state laws, regulatory of business and industrial conditions, because they may be unwise, improvident, or out of harmony with a particular school of thought.“).
In more modern times, rational basis review has evolved not only to include the presumption of constitutionality and the deferential standard of review, but also to require an individual challenging legislation to show either that the legislation does not further a legitimate state interest, or that the legislation is not rationally related to this legitimate state interest. See Glucksburg, 521 U.S. at 728 (“The Constitution also requires, however, that Washington‘s assisted-suicide ban be rationally related to legitimate government interests.“); Romer v. Evans, 517 U.S. 620, 635 (1996) (“[A] law must bear a rational relationship to a legitimate governmental purpose. . . .“).
As this Court has explained, the right to practice one‘s chosen profession is subject to the lawful exercise of the Commonwealth‘s power to protect the health, safety, welfare, and morals of the public by regulating the profession. Khan, 842 A.2d at 949. Pursuant to the rational basis test, this Court requires social and economic legislation to be directed toward a valid state objective by means that are rationally related to that objective. Id. at 946. The fit between the legislative ends and the statutory means must be real and substantial. See id. (“The rational relationship standard of substantive due process by which legislation is judicially measured is that the statute or regulation at issue must have a real and substantial relationship to the object sought to be obtained.“). In addition,
Pennsylvania balances the
Rational basis review requires this Court to examine whether
The legislative objective in this case is clear, uncontested, and uncontroversial.
We now turn to the means analysis: whether
We agree with the Authority that having each taxicab that the Authority regulates contribute equally to the cost of that regulation is rationally related to the legitimate state purposes identified above. Each taxicab provides service in the City, is subject to the
Authority‘s regulatory authority, and is assessed by the Authority. Consequently, the General Assembly decided that each taxicab will contribute in equal measure to the cost of this locally-focused regulation. While there may be differences between medallion and partial rights taxicabs, they also bear a compelling similarity: each provides taxicab service to the public in the City and is regulated by the same entity. It is rational to spread the cost of regulation equally among the regulated entities and to link the individual assessment to the number of taxicabs operating in the City.
The legislature chose to assess medallion and partial rights taxicabs equally, rather than accounting for what Germantown and the Commonwealth Court believe to be material differences between the two types of taxicabs. See
Although equal assessments may have resulted in a heavier burden than partial rights taxicabs previously encountered, we must uphold the statute where, as here, the legislation is rationally related to the legitimate state interest of a clean, safe, reliable, and well-regulated taxicab industry. This was a matter of legislative policy prerogative.
Whether or not the statute is wise, or whether or not it is the best means to achieve the intended result, are matters for the General Assembly to determine. See Khan, 842 A.2d at 947.
We now turn to Germantown‘s argument that its substantive due process rights have been violated by the estimation processes inherent in
The taxicab owners’ decision to estimate the number of taxicabs they intend to run is entirely a business decision left to the discretion of the owners. These owners are free to self-designate whatever number of taxicabs they determine, in their business judgment, to run in the City. By asking the business owners to self-designate this number, the statute has provided sufficient guidance and vested appropriate discretion in this business decision.16
This process is neither complex nor unclear. Businesses are familiar with their own business needs and the marketplace within which they operate, and they are equipped to make calculations in their own interest. Similarly, agencies routinely assess the financial costs of fulfilling their regulatory obligations. The only difficulty in the
assessment scheme of
We reject Germantown‘s contention that a statute must succumb to a facial challenge when the statute, on its face, does not itself violate substantive due process. Germantown‘s argument is, essentially, that the statute did not account for what happened here, when Germantown itself chose to ignore its statutory obligation to furnish accurate information to the Authority. By ignoring this obligation, and by failing to comply with a facially constitutional statute, Germantown has itself created the deprivation of which it now complains.
III. Delegation Challenge
Turning to Germantown‘s argument that Act 64 amounts to an unconstitutional delegation of legislative power, we observe that the separation of powers doctrine divides the functions of government equally between the executive, legislative, and judicial branches. Jefferson Cty. v. Court Appointed Emps. Ass‘n v. Pa. Labor Relations Bd., 985 A.2d 697, 702 n.8 (Pa. 2009). As we recently explained,
Article II, Section 1 of the Pennsylvania Constitution states that “[t]he legislative power of this Commonwealth shall be vested in a General Assembly, which shall consist of a Senate and a House of Representatives.”
PA. CONST. art. II, § 1 . That is why, when the General Assembly empowers some other branch or body to act, our jurisprudence requires “that the basic policy choices involved in ‘legislative power’ actually be made by the
[l]egislature as constitutionally mandated.” Tosto v. Pa. Nursing Home Loan Agency, 460 Pa. 1, 331 A.2d 198, 202 (1975). This constraint serves two purposes. First, it ensures that duly authorized and politically responsible officials make all of the necessary policy decisions, as is their mandate per the electorate. Wm. Penn Parking Garage, Inc. v. City of Pittsburgh, 464 Pa. 168, 346 A.2d 269, 291 (1975) (plurality opinion). And second, it seeks to protect against the arbitrary exercise of unnecessary and uncontrolled discretionary power. Id.
Protz v. Workers’ Comp. Appeal Bd. (Derry Area Sch. Dist.), 161 A.3d 827, 833 (Pa. 2017).
Although the legislature may not delegate legislative power, it may, in some instances, assign the authority and discretion to execute or administer a law, subject to two fundamental limitations: First, the General Assembly must make “the basic policy choices.” Id. at 834. Once it does so, the General Assembly may “impose upon others the duty to carry out the declared legislative policy in accordance with the general provisions” of the legislation. Chartiers Valley Joint Schs. v. Cty. Bd. of Sch. Dirs. of Allegheny Cty., 211 A.2d 487, 492 (Pa. 1965). Second, the legislation must include “adequate standards which will guide and restrain the exercise of the delegated administrative functions.” Protz, 161 A.3d at 834 (citing Pennsylvanians Against Gambling Expansion Fund, Inc., 877 A.2d at 418; State Bd. of Chiropractic Exam‘rs v. Life Fellowship of Pa., 272 A.2d 478, 481 (Pa. 1971)). In determining whether the legislature has established adequate standards, “we are not limited to the mere letter of the law, but must look to the underlying purpose of the statute and its reasonable effect.” Commonwealth v. Cherney, 312 A.2d 38, 41 (Pa. 1973). Further, the General Assembly does not delegate legislative powers by delegating mere details of administration. Id.; Chartiers Valley Joint Schs., 211 A.2d at 492.
Based upon our jurisprudence on the question of legislative delegation, we must examine whether, in
Pursuant to Act 64, the Authority has no power to make appropriations to actualize this proposed budget. Rather, the General Assembly has mandated that the Authority‘s proposed budget is to be prepared and submitted pursuant to the process created in the Administrative Code of 1929.
Authority‘s proposed budget then is subject to rejection, alteration, consideration in hearings, legislative inquiries, and any other scrutiny that the political branches deem appropriate.
The flaw in the Commonwealth Court‘s analysis is that it conflated the Authority‘s creation of its budget request with the General Assembly‘s power to approve the appropriation. Although
Certainly, the prohibition of the delegation of legislative power does not require the legislature to create an agency budget without input from that agency. The Authority is tasked with regulatory obligations under legislation passed by the General Assembly and is uniquely situated to assess the financial burdens of that regulation and to convey its conclusions in the form of a budget request.
Because Act 64 did not delegate legislative power when it tasked the Authority with the administrative function of submitting a proposed budget, the Commonwealth Court
erred in holding that
To summarize, we conclude that the Commonwealth Court erred in holding that the assessment scheme of
Chief Justice Saylor and Justices Baer, Todd, Donohue, Dougherty and Mundy join the opinion.
Notes
Due to the size, total population, population density and volume of both tourism and commerce of a city of the first class, it may be more efficient to regulate the taxicab and limousine industries through an agency of the Commonwealth with local focus than an agency with diverse Statewide regulatory duties. Well-regulated local focus on improving those industries can be an important factor in the continual encouragement, development, attraction, stimulation, growth and expansion of business, industry, commerce and tourism within a city of the first class, the surrounding counties and this Commonwealth as a whole.
(1) The authority shall prepare and, through the Governor, submit annually to the General Assembly a proposed budget consistent with Article VI of the act of April 9, 1929 (P.L. 177, No. 175), known as The Administrative Code of 1929, consisting of the amounts necessary to be appropriated by the General Assembly out of the funds established under section 5708 (relating to funds) necessary for the administration and enforcement of this chapter for the fiscal year beginning July 1 of the following year. The authority shall be afforded an opportunity to appear before the Governor and the Appropriations Committee of the Senate and the Appropriations Committee of the House of Representatives regarding its proposed budget. Except as provided in section 5710 (relating to fees), the authority‘s proposed budget shall include a proposed fee schedule.
(2) The authority‘s proposed budget shall include an estimate of the amount of its expenditures necessary to meet its obligation to administer and enforce this chapter. The authority shall subtract from the expenditure estimate:
(i) The estimated fees to be collected under section 5710 during the fiscal year.
(ii) Money deposited into the regulatory fund as payment for assessments, fees or penalties and any other moneys collected pursuant to this chapter but not allocated during a prior fiscal year. Unallocated assessment revenue from a prior fiscal year shall be applied to reduce the portion of the total assessment applicable to the utility group from which the unallocated assessment originated.
(iii) Money budgeted for disbursement from the medallion fund, if any, as part of the authority‘s estimated budget.
(3) The remainder so determined, herein called the total assessment, shall be allocated to and paid by the utility groups identified in subsection (c) in the manner prescribed.
(4) If the authority‘s budget is not approved by March 30, the authority may assess the utility groups on the basis of the last approved operating budget. At the time the budget is approved, the authority shall make any necessary adjustments in the assessments to reflect the approved budget. If, subsequent to the approval of the budget, the authority determines that a supplemental budget is needed, the authority shall submit its request for that supplemental budget simultaneously to the Governor and the chairman of the Appropriations Committee of the Senate and the chairman of the Appropriations Committee of the House of Representatives.
(i) The taxicab utility group shall be comprised of each taxicab authorized by the authority pursuant to sections 5711(c) (relating to power of authority to issue certificates of public convenience) and 5714(a) and (d)(2) (relating to certificate and medallion required).
(ii) On or before March 31 of each year, each owner of a taxicab authorized by the authority to provide taxicab service on a non-citywide basis shall file with the authority a statement under oath estimating the number of taxicabs it will have in service in the next fiscal year.
(iii) The portion of the total assessment allocated to the taxicab utility group shall be divided by the number of taxicabs estimated by the authority to be in service during the next fiscal year, and the quotient shall be the taxicab assessment. The taxicab assessment shall be applied to each taxicab in the taxicab utility group and shall be paid by the owner of each taxicab on that basis.
(iv) The authority may not make an additional assessment against a vehicle substituted for another already in taxicab service during the fiscal year and already subject to assessment as provided in subparagraph (iii). The authority may, by order or regulation, provide for reduced assessments for taxicabs first entering service after the initiation of the fiscal year.
(v) The taxicab assessment for fiscal years ending June 30, 2013, and June 30, 2014, shall be $1,250.