City of Columbus, et al. v. Ours Garage and Wrecker Service, Inc., et al. (06/20/2002)

By: Jenna Fournel, Medill News Service

Questions presented

Does 49 U.S.C. @ 14501(c) of the Interstate Commerce Act permit cities to enact safety regulations regarding local tow-truck operations, as the 2nd Circuit and California Court of Appeals have held, or does it preempt such regulations, as the 5th, 6th, 9th and 11th Circuits have held? Does it matter that the municipality is acting as market participant?

Brief

For the sake of public safety, the City of Columbus, Ohio, enacted an ordinance in 1991 that, among other things, required its tow-truck drivers to maintain a license. In September of 1998 the license of Ours Garage and Wrecker Service expired and the company did not renew.

When one of the companys drivers was cited for failure to have a license, Ours Garage teamed up with the Towing and Recovery Association of Ohio and on Dec. 3, 1998, they filed suit against the city of Columbus in federal court in Ohio.

They claimed a provision in the Federal Interstate Commerce Act (ICA) preempted the citys ordinance.

The statute, 49 U.S.C. 14501(c)(1), provides that ""a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce 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.""

Columbus responded that the federal law specifically exempted the city, providing that the statute ""shall not restrict the safety regulatory authority of a State ... to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.""

Ours Garage countered that nowhere in the wording is permission given to municipalities to do the regulating.

The district court sided with Ours Garage, and on June 19, 2001, a 6th Circuit Court of Appeals panel unanimously affirmed.

Judge Alice M. Batchelder wrote in her two-paragraph opinion, ""In Petrey v. City of Toledo ... we held that ICA does not preempt municipal licensing and safety regulation of non-consensual towing operations when a municipality acts as a market participant, but does preempt other regulation not falling within this narrow exception. On appeal, the City concedes that Petrey controls the disposition of this case.""

In Petrey v. City of Toledo, decided in April of 2001, the 6th Circuit concluded that because a city purchased tows ordered by its police department, it acted as a market participant, and therefore its restrictions did not violate federal law.

The Supreme Court first recognized a municipal-proprietor exemption to federal law in 1993 in Building & Constr. Trades Council v. Associated Builders & Contractors of Massachusetts/Rhode Island, Inc. The Court said that ""preemption doctrines apply only to state regulation, and not to a States actions when it acts in its proprietary capacity.""

In her opinion in Petrey, Judge Karen Nelson Moore wrote, ""like any private market participant, [the city wishes] to conduct its business with those towing companies that can provide the requisite facilities, experience, equipment, and service to satisfy fully the Citys towing needs.""

But the 6th Circuit held that for tows that the city was not buying, the ICA preempted any regulation. Ours Garage did not contest the municipal-proprietor exemption with regard to the citys purchases, but challenged specifically the wording of the safety exemption where it applied to private tows.

The 5th, 6th, 9th and 11th Circuits have all held that the safety exemption applies only to the state and not to local municipalities within the state. The 2nd Circuit and state courts of Michigan and California have decided just the opposite.

Courts that have considered 14501 preemptive of municipal restrictions follow the 1983 Supreme Court opinion in Russello v. U.S., which states that ""where Congress includes particular language in one section of a statute but omits it in another section of the same Act it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.""

The 6th Circuit also noted that the ICA was created to deregulate the motor carrier industry through the elimination of ""[S]tate economic regulation of motor carrier operations [which cause] significant inefficiencies, increased costs, reduction of competition ... and curtail the expansion of markets."" The court argued that the absence of municipalities from the laws exemptions served to eliminate ""yet another level of regulation at the local level.""

On the flip side, courts that have held that the federal law does not preempt municipal restrictions have argued as Jeffrey S. Sutton, attorney for the City of Columbus, did in his writ of certiorari to the U.S. Supreme Court. ""ÔThe safety regulatory of a State in the ICA is most sensibly read to include the power to delegate its authority to local government entities.""

Sutton examined the many court interpretations of the statute and concluded: ""This division authority by itself justifies the writ.""

On Jan. 4, 2002, the U.S. Supreme Court granted certiorari in the case, and on June 20, 2002, sided with Columbus, holding 7-2 that federal law does not keep a state from delegating to municipalities and other local units its authority to establish safety regulations governing tow trucks.

Justice Ruth Bader Ginsburg wrote the majority opinion, with Justices Antonin Scalia and Sandra Day O' Connor dissenting.