NATIONWIDE FREIGHT SYSTEMS, INC., et al., Plaintiffs-Appellants, v. ILLINOIS COMMERCE COMMISSION, et al., Defendants-Appellees.
No. 13-3316.
United States Court of Appeals, Seventh Circuit.
Argued Dec. 12, 2014. Decided April 23, 2015.
784 F.3d 367
Kurt E. Vragel, Jr., Glenview, IL, for Plaintiffs-Appellants.
Clifford Berlow, Office of the Attorney General, Chicago, IL, for Defendants-Appellees.
Before ROVNER, WILLIAMS, and TINDER, Circuit Judges.
The appellants in this case are three motor carriers that were cited for engaging in intrastate operations in Illinois without a license from the Illinois Commerce Commission (the “ICC” or “Commission“). When the ICC conducted a follow-up investigation of the carriers and requested documents relating to their operations in Illinois, the carriers refused to comply, reasoning that because the documents sought by the ICC would reveal their rates, routes, and services, the requests were “related to” those rates, routes, and services and therefore were preempted by the Federal Aviation Administration Authorization Act of 1994 (the “FAAAA“),
I.
Since 1953, Illinois has prohibited motor carriers of property from conducting intrastate operations without first procuring a license from the ICC. See 1953 Ill. Laws 933, 937-38;
Each of the three appellants is a motor carrier engaged in the intrastate transportation of property in Illinois that was cited by the ICC police force for conducting such activity without a license. Nationwide Freight Systems, Inc. and Stott Contracting, Inc. were cited in May of 2010 and were each fined $750. Leader U.S. Messenger, Inc., which previously had obtained a license but had allowed it to lapse, was cited in March of 2011 and was subjected to a civil penalty of $200.1 After those penalties were paid, the ICC opened investigations into each carrier in order to determine the extent to which the operator may have committed additional violations by conducting unlicensed, intrastate operations for hire prior to the occasion on which the operator was cited. Toward that end, each carrier was asked to produce, for a period of five or six months preceding the violation, documents (including, but not limited to, bills of lading,2 driver logs, and invoices from any owner/operators leased to the carrier) that would show the dates of transport, a description of the cargo carried, the origin and destination of that cargo, and the revenues generated from the transportation provided. The authorization for these requests is supplied by section 1703 of the Illinois Commercial Transportation Law: “Authorized employees of the Commission shall have the power at any and all times to examine, audit, or demand production of all accounts, books, memoranda, and other papers in the possession or control of a license or registration holder, its employees, or agents.”
The carriers filed motions to dismiss these citations with the ICC. They argued that the document requests were preempted by the FAAAA because they sought records that would reveal the rates, routes, or service of each carrier. “To the extent that the commerce commission‘s minions are asking for information about such things as bills of lading, owner-operator contracts, and any other documents concerning the origins or destinations of cargo, they are running afoul of clearly-stated federal law,” they argued. “Their conduct should be barred and sanctioned.” See R. 1-1 at 6-7 (Stott); R. 44-4 at 5-6 (Nationwide).
The enactment of the FAAAA extended the 1978 preemption of state regulation of air carriers to motor carriers. Pursuant to the FAAAA‘s preemption provision, neither a state nor its political subdivision may enact or enforce laws “related to a price, route, or service of any motor carrier... with respect to the transportation of property.”
The ICC‘s chief administrative law judge (“ALJ“), Latrice Kirkland-Montague, denied the carriers’ motions to dismiss, found each in violation of its obligation to comply with the Commission‘s document requests, and ordered each of them to pay fines of $500 for the failure to comply. The carriers filed a consolidated petition for rehearing with the ICC, and Judge Kirkland-Montague issued a memorandum to the ICC‘s commissioners explaining why, in her view, the petition should be denied. First, the carriers had made no showing that the document requests might have anything more than an indirect, remote, or tenuous effect on their rates, routes, or services. The Commission had only asked the carriers to produce records already in their possession. Second, the statute exempts from preemption the state‘s power to regulate carriers with respect to minimum insurance requirements. Without the ability to demand the types of records that the ICC had sought from the carriers, Kirkland-Montague asserted, the state would be unable to ascertain whether a carrier was or is operating without a license or without the insurance coverage necessary to obtain a license. R. 44-3 at 45-46. The Commission denied the carriers’ petition for rehearing.
The carriers turned to federal court, where they filed suit against the ICC and three of its officers and agents in their official capacities. (The ICC was dismissed from the suit on Eleventh Amendment grounds, and that decision is not challenged here.) The carriers sought a declaratory judgment deeming the ICC‘s document requests and its investigations preempted by the FAAAA to the extent they implicated the carriers’ rates, routes, or services. “The fact is,” the carriers alleged, “that the Interstate Commerce Commission is attempting to regulate—by investigating—a motor carrier‘s rates, routes, or services for purposes which are preempted by
The parties filed cross-motions for summary judgment. In connection with those motions, acting ICC police chief Craig Baner submitted a declaration in which he represented that the ICC typically opens an investigation when a commercial motor carrier is discovered to be operating without a public carrier certificate. The purpose of that investigation is to determine how long the carrier has been conducting operations without such a certificate in the time period preceding that violation, and also to determine whether the carrier had the requisite insurance coverage (and had proof of such coverage on file with the ICC) during that same time period. In seeking a carrier‘s business records, Baner averred, the ICC has no interest in regulating a carrier‘s prices, routes, or services. Its sole purpose in seeking the types of documents demanded of the carriers in this case is to enforce the certification and insurance requirements imposed on the carriers by Illinois law, and to determine the nature of any additional penalties the ICC may impose on the carrier for violations of those requirements. R. 44-9 at 3 ¶¶ 3-5. For their part, the plaintiff carriers were somewhat vague as to how the document requests might affect their rates, routes, or services. They suggested that the practical result of the ICC‘s investigation might be to require a carrier and its customers to prepare particular forms responsive to the ICC‘s demands for information and thereby incur additional costs or, alternatively, face additional penalties if they did not. R. 42 at 5.
The district court granted summary judgment in the ICC‘s favor. To the extent that the document requests could be construed “[a]t a broad level” to relate to a carrier‘s rates, routes, or services in the sense of having some connection with them, 2013 WL 5346450, at *6, this alone was insufficient to trigger preemption, the court reasoned. Rather, the challenged conduct must “have ‘a significant impact on carrier rates, routes, or services’ ” to be preempted. Id., at *7 (quoting Rowe v. New Hampshire Motor Transp. Ass‘n, 552 U.S. 364, 375, 128 S.Ct. 989, 997, 169 L.Ed.2d 933 (2008) (emphasis in Rowe)). The court had been presented with no evidence that the document requests affected the plaintiffs’ rates, routes, or services in any way, and the plaintiffs did not claim that they did. Id. The carriers could do no more than speculate that the ICC‘s document requests might force them to create new forms in order to supply the sort of information that the ICC demanded; but that speculation was not supported by the record. Id. Consequently, the carriers had no basis for claiming that the ICC‘s effort to obtain the challenged documents from the plaintiffs was preempted.
Alternatively, the ICC‘s pursuit of documents was covered by the statutory exemption for activities aimed at enforcing carrier financial responsibility. Id., at *8. Baner‘s declaration indicated that the ICC sought the documents in order to determine how long each carrier had been operating without the requisite certificate, whether the carrier had the requisite insurance coverage during that time, and, if so, whether the carrier had proof of its coverage on file with the ICC during that time. There was no indication that Baner‘s explanation for the document requests was false. Id. The carriers’ argument that the document requests were not, in fact, focused on insurance or safety issues was unpersuasive in light of the information actually sought by the request—including the origin, nature, and destination of cargo transported, the dates of transportation, and so forth—and Baner‘s explanation that this information was sought in order to ascertain how long the carriers may have
II.
We are presented on appeal with essentially the same two issues presented to the district court. First, we must consider whether the ICC‘s investigation “relates to” the plaintiff carriers’ rates, routes, and services, and is therefore preempted by the FAAAA, because the Commission has demanded documents, which will disclose those rates, routes, and services, absent any additional indication that the Commission‘s investigation will have a significant economic impact on the carriers’ rates, routes, and services. Second, we must consider whether the Commission‘s document requests fall within the FAAAA‘s exception for state insurance requirements, given that the requests are not confined to documents reflecting whether and when the carriers were insured and had proof of their insurance on file with the ICC. We review the district court‘s resolution of these issues on summary judgment de novo. E.g., Hotel 71 Mezz Lender LLC v. Nat‘l Retirement Fund, 778 F.3d 593, 601 (7th Cir.2015); see also Mass. Delivery Ass‘n v. Coakley, 769 F.3d 11, 17 (1st Cir.2014) (“Since federal preemption is a question of statutory construction, we review these issues de novo.“).
A. Connection Between the ICC‘s Document Requests and the Carriers’ Rates, Routes, and Services
The plaintiff carriers contend that the FAAAA bars an investigation into the operations of a motor carrier whenever that investigation, however incidentally, touches upon a carrier‘s rates, routes, or services with respect to the transportation of property. In the exercise of its audit authority, the ICC has sought documents which will disclose a carrier‘s rates, routes, and services with respect to the transportation of property; and to that extent, the ICC‘s investigation arguably “relates to” those rates, routes, and services, as the district court acknowledged. 2013 WL 5346450, at *6. This, in the carriers’ view, is enough to demonstrate that the Commission‘s investigation (including, in particular, the document requests) is preempted, notwithstanding the ICC‘s unchallenged representation that it seeks these documents solely for purposes of determining how long each carrier may have been operating without the requisite license (and potentially without the insurance coverage needed to obtain such a license) and determining appropriate penalties, and not with any intent to regulate a carrier‘s rates, routes, or services. They argue:
When coupled with the Illinois Commerce Commission‘s demands for transportation-related documents, the admission by the commission that it was seeking information about how long the motor carriers were operating (that is, providing services) without licenses is as clear an indication as any that the commission was investigating the rates, routes and services of motor carriers.
Appellants’ Br. 16. This is an exceedingly broad view of preemption principles that finds no support in case law.
The Supremacy Clause of the Constitution establishes a rule of decision precluding courts from “giv[ing] effect to state laws that conflict with federal laws.” Armstrong v. Exceptional Child Ctr., Inc., — U.S. —, 135 S.Ct. 1378, 1383, 191 L.Ed.2d 471 (2015); see
Congress enacted the FAAAA‘s preemption provision in 1994 with the aim of eliminating the patchwork of state regulation of motor carriers that persisted fourteen years after it had first attempted to deregulate the trucking industry. See Dan‘s City, 133 S.Ct. at 1775 (citing City of Columbus v. Ours Garage & Wrecker Serv., Inc., 536 U.S. 424, 440, 122 S.Ct. 2226, 2236, 153 L.Ed.2d 430 (2002)); S.C. Johnson & Son, Inc. v. Transp. Corp. of Am., Inc., 697 F.3d 544, 548-49 (7th Cir. 2012). Borrowing language from the 1978 legislation deregulating the airline industry, see Dan‘s City, 133 S.Ct. at 1775, Congress precluded any state or its political subdivision from “enact[ing] or enforc[ing] a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier ... with respect to the transportation of property.”
Thus, as is typical in preemption cases, this appeal focuses on whether the Commission‘s attempt to enforce the Illinois licensing requirement reasonably can be said to “relate[] to” the plaintiff motor carriers’ rates, routes, or services. See, e.g., Dan‘s City, 133 S.Ct. at 1778; S.C. Johnson, 697 F.3d at 549. “The ordinary meaning of these words is a broad one—‘to stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with,‘—and the words thus express a broad pre-emptive purpose.” Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383, 112 S.Ct. 2031, 2037, 119 L.Ed.2d 157 (1992) (citation omitted); see also Dan‘s City, 133 S.Ct. at 1778; Rowe v. New Hampshire Motor Transp. Ass‘n, 552 U.S. 364, 370, 128 S.Ct. 989, 994-95, 169 L.Ed.2d 933 (2008). The universe of state regulatory efforts preempted by the FAAAA thus includes laws or actions having some type of connection with or reference to a carrier‘s rates, routes, or services, whether direct or indirect. Dan‘s City, 133 S.Ct. at 1778 (citing Rowe, 552 U.S. at 370, 128 S.Ct. at 995); see also Morales, 504 U.S. at 384, 112 S.Ct. at 2037). But “the sky is [not] the limit.” Dan‘s City, 133 S.Ct. at 1778. A state‘s regulatory action is not preempted where its relationship with carrier rates, routes, or services is “tenuous, remote, or peripheral.” Id. (citing Rowe, 552 U.S. at 371, 128 S.Ct. at 995); see also Morales, 504 U.S. at 390, 112 S.Ct. at 2040). Rather, state action must have a substantial economic effect on carrier rates, routes, or services in order to be subject to preemption. Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1431 (7th Cir.1996); see also Rowe, 552 U.S. at 375, 128 S.Ct. at 997 (“we have written that the state laws whose ‘effect’ is ‘forbidden’ under federal law are those with a ‘significant impact’ on carrier rates, routes, or services“) (quoting Morales, 504 U.S. at 388, 390, 112 S.Ct. at 2039, 2040) (emphasis in Rowe).
We have thus articulated two requirements for preemption. First, a state must have enacted or attempted to enforce a
Without doubt, the state‘s regulatory efforts satisfy the first of these two criteria. The licensing requirement imposed by section 4104 of the Illinois Commercial Transportation Law, which the ICC was attempting to enforce by way of the document request promulgated pursuant to section 1703 of the statute, applies to motor carriers of property. But does the Commission‘s enforcement effort meaningfully “relate to” carrier rates, routes, or services? We agree with the district court that it does not, as the economic impact of the document requests on rates, routes, or services is, if anything, insignificant.
The Illinois statute does not expressly refer to rates, routes, or services, nor does it betray an effort to regulate their operations in any way. It simply imposes a licensing requirement on all motor carriers transporting property within the state and subjects a carrier to penalties for failure to comply with that requirement.
Nor, for that matter, do the challenged document requests expressly refer to rates, routes, or services. It is undisputed that the aim of those requests was to obtain documents that would establish how many times the plaintiff carriers had conducted unlicensed—and potentially uninsured—operations during the time period preceding their citations for operating without the required certificate. The only sense in which the requests implicate rates, routes, or services is that the business records sought (for example, invoices) will necessarily disclose information about the transportation services that a carrier has provided to its customer and the prices charged for those services. It is by no means unusual for one type of record to disclose a variety of information; for that matter, one piece of data can be informative and relevant in any number of ways. Documents which illuminate how many times a carrier engaged in unlicensed operations, how many miles of Illinois roads it used in those operations, and so forth will necessarily touch upon and overlap with the carrier‘s rates, routes, and services, yes, but the Commission was not interested in the plaintiffs’ rates, routes, and services as such.
The district court accepted the notion that the document requests could be said to relate to the carriers’ rates, routes, and services in the limited sense that they call for production of records that will disclose their prices, routes, and services. But in the absence of evidence that the ICC‘s investigation would have any meaningful impact on the carriers’ rates, routes, or services, the court concluded that Travel All Over the World‘s second criterion—that the enforcement effort have a significant economic effect on rates, routes, or services—had not been met.
Indeed, the carriers have never been able to demonstrate how the ICC‘s document requests might meaningfully affect their rates, routes, or services. As below, they can only speculate that the need to document their compliance with the ICC‘s registration and insurance requirements might compel the carriers and their customers to generate extra paperwork and thereby increase costs by some indefinite amount. But the ICC has not demanded
The carriers are thus left with the contention that any nexus between the challenged state action and their rates, routes, and services—including investigatory actions which would result in the disclosure of their rates, routes, and services—is sufficient to trigger preemption, however minimal the connection might be, and that our own decision in Travel All Over the World erred in requiring a showing of a significant economic impact. But the Supreme Court has never indicated that a de minimis impact on rates, routes, or services suffices for purposes of preemption, and we believe Travel All Over the World is in fact consistent with the high Court‘s cases on this point.
The Supreme Court‘s preemption precedents are clear that not any relationship between state law and carrier rates, routes, and services, no matter how insignificant, will necessarily result in preemption. The cases do acknowledge that a state statute or effort to enforce that statute need not expressly cite a carrier‘s rates, routes, or services, and that state regulatory action may be preempted as long as it affects a carrier‘s rates, routes, and services, even if the effect is indirect. E.g., Dan‘s City, 133 S.Ct. at 1778; Rowe, 552 U.S. at 370–71, 128 S.Ct. at 995; Morales, 504 U.S. at 386, 112 S.Ct. at 2038. Even so, Dan‘s City observes that, notwithstanding the broad preemptive reach of the FAAAA‘s “related to” clause, “the sky is [not] the limit,” and a “tenuous, remote, or peripheral” impact will not trigger preemption. 133 S.Ct. at 1778. The plain import of this qualifying language is that the challenged statute or regulatory action must have a meaningful impact in order to be preempted. To be fair, the Supreme Court has not yet had occasion to identify precisely what types of effects will be too insignificant to trigger preemption, because the cases that the Court has decided under the airline and motor carrier preemption statutes have not been close to the line, wherever that line may be. See S.C. Johnson, 697 F.3d at 552 (citing Rowe, 552 U.S. at 371, 128 S.Ct. at 995). But whatever room this may leave for the plaintiff carriers to argue that the mere disclosure of their rates, routes, and services is enough of an effect to trigger
All that the carriers have shown, in the end, is that the Commission‘s document requests will require them, incidentally, to disclose information regarding their rates, routes, and services, not that the aim or the result of the investigation will be to affect those aspects of their operations. The carriers’ speculation concerning extra paperwork at best suggests a de minimis (potential) economic effect on their operations in the form of unspecified paperwork. And despite the carriers’ insinuation that if the ICC is requesting documents that will reveal their rates, routes, and services, the Commission must have an agenda to influence those aspects of their operations, there is no indication that the Commission is interested in their rates, routes, or services as such, let alone that it intends to (or necessarily will) regulate or otherwise affect them.
We confronted a similar line of argument when S.C. Johnson & Son sued motor carriers that had allegedly bribed the company‘s transportation director to contract with them to provide transportation services to the company. S.C. Johnson had alleged, among other things, that the bribery had injured it by increasing the company‘s transportation costs—i.e., the price it had paid to the carriers for their services. The carriers cited this allegation as “the smoking gun that proves that S.C. Johnson‘s claims are ‘really’ just about rates and services.” 697 F.3d at 559. We rejected the argument as to S.C. Johnson‘s bribery and racketeering claims, reasoning that although the injury that S.C. Johnson experienced as a result of the defendants’ alleged criminal acts might have some relation to the carriers’ rates or services, the relationship was too tangential to warrant preemption. Id. at 560. Our decision in that case makes clear that simply because a carrier can show some link between the state action it challenges and its rates, routes, or services does not invariably mean that the challenged action is preempted as one “related to” those rates, routes, or services. The nexus must be
Finally, it should be noted that the records the ICC has asked the carriers to produce are of a type that might be sought in any number of civil and criminal settings. A customer suing a motor carrier for theft, for example, might ask for these same records, perhaps to establish a pattern of wrongdoing (and other potential victims), to identify the errant driver responsible for the theft(s), or to trace the path the victim‘s property took after it was stolen. The state itself might seek to subpoena such records, and for similar purposes, in the course of investigating potential criminal charges of theft, bribery, racketeering, or tax evasion in connection with a carrier‘s operations. To say that the ICC‘s requests are preempted simply because the documents they seek will disclose the carriers’ rates, routes, and services would call into question any number of legitimate requests for a motor carrier‘s business records, even when those records are being sought for purposes entirely unrelated to the deregulatory purposes of the FAAAA. Motor carriers, as members of the public, see S.C. Johnson, 697 F.3d at 558 (citing Rowe, 552 U.S. at 375, 128 S.Ct. at 997), remain subject to the civil and criminal constraints that “set basic rules for a civil society,” id. at 558. But, as a practical matter, those rules would be unenforceable against motor carriers if such carriers were deemed exempt even from routine investigatory efforts that would result in incidental disclosures of their rates, routes, or services, notwithstanding the absence of any purpose to interfere with the competitive forces of the free market. This is the unmistakable import of the carriers’ reply brief, which flatly argues that any effort to document and fine a carrier based on the number of days it has conducted unlicensed operations is preempted by the FAAAA. Reply Br. at 6.
B. Safety and Insurance Exception
Even if it could be said that the ICC‘s investigation meaningfully relates to the carriers’ rates, routes and services, the district court correctly determined that the Commission‘s enforcement actions fall within the exception to preemption set forth in the insurance provision of the FAAAA. The statute provides that the general rule of preemption set forth in
The carriers suggest that if the Commission were truly interested in insurance, it would simply ask the carriers about their coverage and leave it at that. But when a carrier has been cited for operating without a license, as each of these carriers was presenting the possibility that the carrier was also operating without appropriate insurance coverage—the Commission is not required to take the carrier at its word for how long it may have been out of compliance with the ICC‘s requirements. It may legitimately seek to establish, independently, to what extent the carrier has engaged in unlicensed operations—i.e., how many operations it has conducted over Illinois roads without a license. This is the obvious point of the ICC‘s document requests, and we are given no reason to believe that its requests were a subterfuge for something else, including in particular an effort to affect the carrier‘s rates, routes or services.
On this point, it bears emphasizing that the carriers have consistently refused to acknowledge the stated purpose for which the ICC has sought the requested documents, which is to document the extent of the carriers’ intrastate operations in violation of Illinois’ licensing and insurance requirements. The carriers seem to assume that the Commission has no need to know anything beyond the fact that a particular carrier was or was not licensed and insured. But, as the ICC has argued without contradiction, the extent of a carrier‘s unlicensed and potentially uninsured operations factors into the magnitude of the penalty that the Commission will impose for such operations. Recall that each day
The carriers go so far as to suggest that any inquiry attempting to ascertain the total number of unlicensed operations they conducted in Illinois represents the very “kind of economic regulation that Congress intended to bar when it passed the FAAAA” and that treating each day of unlicensed operation as a separate violation of Illinois law “is nothing more than economic regulation.” Reply Br. at 5-6. Why they believe this is so is not clear. We are aware of no case holding that a state may not require a motor carrier of property doing business within its borders to be licensed by that state, particularly when licensing is the state‘s means of ensuring that the carrier is appropriately insured. Nor are we convinced that a system of penalties proportionate to the extent of a motor carrier‘s unauthorized operations could have anything more than a tangential effect on the carrier‘s rates, routes, or services. The services a carrier has provided while unlicensed will inform whatever penalty the ICC later chooses to impose, but that penalty logically would not restrain, influence, or otherwise affect the carrier‘s choice of rates, routes, or services thereafter. Once the penalty is paid and a license is secured, the carrier is free to provide whatever services it wishes, at the rates it believes appropriate and over the routes of its choosing.8 A proportionate penalty surely will discourage the carrier from ignoring the licensing requirement in the future, but if the licensing requirement itself is permissible, as we are certain it is, then so too is this salutary effect.
Promoting financial responsibility by requiring that motor carriers operating with
III.
For the foregoing reasons, we AFFIRM the grant of summary judgment in favor of the defendants-appellees.