Am. Trucking Associations, Inc. v. N.Y. State Thruway Auth.

• Decision Date: 04 August 2015
• Docket Number: No. 14–3348.,14–3348.
• Parties: AMERICAN TRUCKING ASSOCIATIONS, INC., Wadhams Enterprises, Inc., Lightning Express Delivery Service Inc., Ward Transport & Logistics Corp., on behalf of themselves and all others similarly situated, Plaintiffs–Appellants, v. NEW YORK STATE THRUWAY AUTHORITY, New York State Canal Corporation, Thomas J. Madison, Jr., in his official capacity as Executive Director of the New York State Thruway Authority, Howard Milstein, in his official capacity as Chair of the New York State Thruway Authority/Canal Corporation Boards of Directors, Donna J. Luh, in her official capacity as Vice–Chair of New York State Thruway Authority/Canal Corporation Boards of Directors, E. Virgil Conway, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, Richard N. Simberg, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, Brandon R. Sall, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, J. Rice Donald, Jr., in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, Jose Holguin–Veras, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, Defendants–Appellees.
• Court: U.S. Court of Appeals — Second Circuit

795 F.3d 351

AMERICAN TRUCKING ASSOCIATIONS, INC., Wadhams Enterprises, Inc., Lightning Express Delivery Service Inc., Ward Transport & Logistics Corp., on behalf of themselves and all others similarly situated, Plaintiffs–Appellants

v.NEW YORK STATE THRUWAY AUTHORITY, New York State Canal Corporation, Thomas J. Madison, Jr., in his official capacity as Executive Director of the New York State Thruway Authority, Howard Milstein, in his official capacity as Chair of the New York State Thruway Authority/Canal Corporation Boards of Directors, Donna J. Luh, in her official capacity as Vice–Chair of New York State Thruway Authority/Canal Corporation Boards of Directors, E. Virgil Conway, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, Richard N. Simberg, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, Brandon R. Sall, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, J. Rice Donald, Jr., in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, Jose Holguin–Veras, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Boards of Directors, Defendants–Appellees.

No. 14–3348.

United States Court of Appeals, Second Circuit.

Argued: June 17, 2015.

Decided: Aug. 4, 2015.

Richard B. Katskee, Mayer Brown LLP, Washington, District of Columbia (Evan M. Tager, Thomas P. Wolf, Mayer Brown LLP, Washington, District of Columbia; Richard Pianka, ATA Litigation Center, Arlington, Virginia, on the brief), for Plaintiffs–Appellants.

Andrew W. Amend, Assistant Solicitor General (Barbara D. Underwood, Solicitor General; Cecelia C. Chang, Special Counsel to the Solicitor General; Philip V. Tisne, Assistant Solicitor General; on the brief; for Eric T. Schneiderman, Attorney General of the State of New York), New York, New York, for Defendants–Appellees.

Before: NEWMAN, JACOBS, and CALABRESI, Circuit Judges.

Opinion

DENNIS JACOBS, Circuit Judge:

Three commercial trucking companies along with their national trade association and a putative class of commercial truckers (“plaintiffs”) sue the New York State Thruway Authority (the “Thruway Authority”) under 42 U.S.C. § 1983, alleging that the Thruway Authority charges excessive tolls in violation of the Commerce Clause of the United States Constitution. In particular, plaintiffs allege that the Thruway Authority diverts excessive highway tolls to fund maintenance and improvements to the New York Canal System (the “Canal System”)—projects that are unrelated to maintaining the Thruway as a channel of interstate commerce. The district court (McMahon, J. ) dismissed under Federal Rule of Civil Procedure 12(b)(7) for failure to join the State of New York as a necessary party under Rule 19. We conclude that the ruling was an abuse of discretion, and therefore vacate the judgment and remand for further proceedings consistent with this opinion.

BACKGROUND

The district court dismissed under Federal Rule of Civil Procedure 12(b)(7). Accordingly, the following facts drawn from plaintiffs' complaint are presumed true, and are presented in the light most favorable to plaintiffs. See, e.g., Clarendon, Ltd. v. Bank of Saurashtra, 77 F.3d 631, 633 (2d Cir.1996). Most facts are undisputed.

The Governor Thomas E. Dewey Thruway system (the “Thruway”) is New York's piece of the National Interstate Highway System; stretching 570 miles across the State of New York, it includes portions of I–87, I–90, I–95, I–190, and I–287. As a major artery of interstate commerce in the Northeast, it is a critical route for commercial truckers serving the region.

The Thruway is operated and managed by the New York State Thruway Authority, an “autonomous public-benefit corporation” created by a statutory charter from the State of New York. Compl. ¶ 17. Its statutory mandate is “to finance, construct, reconstruct, improve, develop, maintain, or operate” the Thruway. N.Y. Pub. Auth. Law § 353. Its organic statute authorizes the Thruway Authority to “sue and be sued,” to “make contracts,” and to “borrow money and issue negotiable notes.” Id. § 354(1), (7), (12).

The Thruway Authority is not an “arm of the state” and therefore does not enjoy New York's Eleventh Amendment state sovereign immunity.

Mancuso v. N.Y. State Thruway Auth., 86 F.3d 289, 296 (2d Cir.1996) (“We are unable to conclude that subjecting the Thruway Authority to suit in federal court would be an affront to the dignity of New York.”). As we explained in Mancuso,

[t]he Thruway Authority ... is not a traditional state agency, but a public entity that is generally self-funded and, except for the appointment of its members to nine-year terms, it is not under significant state control. Although the Thruway Authority may be identified closely with the state, New York State has given the Thruway Authority an existence quite independent from the state and exercises the most minimal control over the Thruway Authority.

Id. at 296.

“No provision of New York law requires the state to fund the Thruway Authority's operations,” id. at 295, the state is not liable for its debts, id. at 296; and it receives no state tax dollars and only de minimis federal funds. Instead, the Thruway Authority relies almost entirely on tolls. It is a “strictly ... user-supported system,” Compl. ¶ 47, that is “structured ... to be self-sustaining.” Mancuso, 86 F.3d at 296 (internal quotation marks omitted).

With the ascendancy of the Thruway and other modern channels of interstate commerce, the New York Canal System has faded into obsolescence. The Canal System—“a network of waterways that stretches across upstate New York,” including the Erie, Oswego, Champlain, Cayuga, and Seneca Canals—“[o]nce a vital link between the markets of the East Coast and suppliers in the Midwest, ... is now primarily a recreational space for tourists.” Compl. ¶ 2.

Since the completion of the Erie Canal in the early 1800s, the New York constitution has included explicit textual protections for the Canal System, and entrusted its management and care to the State. The wording has shifted over the years, but there has always been a constitutional commitment by the State of New York to care for the Canal System. The current provision is as follows:

The legislature shall not sell, abandon or otherwise dispose of the now existing or future improved barge canal, the divisions of which are the Erie canal, the Oswego canal, the Champlain canal, and the Cayuga and Seneca canals, or of the terminals constructed as part of the barge canal system; ... such canals and terminals shall remain the property of the state and under its management and control forever.

N.Y. Const. art. XV, § 1.

The New York constitution also obligates the legislature to support the canals financially, to some degree: “The legislature shall annually make provision for the expenses of the superintendence and repairs of the canals, and may provide for the improvement of the canals in such manner as shall be provided by law.” Id. § 3.

Historically, the Canal System was supported through the normal appropriations process and was managed by the New York Department of Transportation. In 1992, the legislature transferred responsibility for management of the Canal System from the New York Department of Transportation to the Thruway Authority. See N.Y. Canal Law § 5. The 1992 legislation created a subsidiary corporation of the Thruway Authority, called the New York Canal Corporation (the “Canal Corporation”), “which shall be deemed to be the state for the purposes of such management and control of the canals but for no other purposes.” Id. § 6(1). Finally, to respect the constitutional mandate that the State own and operate the canal system “forever,” the 1992 legislation confirmed that the “canal system shall remain the property of the state and under its management and control as exercised by and through” the Thruway Authority and the Canal Corporation. Id.

Now that the Canal System is operated by the Canal Corporation as a subsidiary of the Thruway Authority, the considerable cost of maintaining (and sometimes upgrading, developing, and expanding) the Canal System is funded almost entirely through the collection of highway tolls. No appropriations from New York's general fund have been needed for many years. When the Canal System needs more funding, the Thruway Authority raises tolls. Approximately ten to twelve percent of Thruway tolls are diverted to canal-related development projects: about 80 to 100 million dollars annually.

Plaintiffs, who pay tolls on the Thruway daily, filed this lawsuit in November 2010. Primarily, plaintiffs allege that the Thruway Authority is unduly burdening interstate commerce by collecting excessive tolls to fund canal-related development projects upstate, rather than to maintain the Thruway as a channel of interstate commerce.

Plaintiffs did not name the State of New York as a defendant, and the State has not sought to intervene. The Thruway Authority—through its counsel, the Attorney General for the State of New York—moved to dismiss under Federal Rule of Civil Procedure 12(b)(7) for failure to join a necessary party under Rule 19. (Because of the Eleventh Amendment, the State cannot be joined without its consent.)

The district court granted the motion and dismissed without prejudice. First, the court noted its disagreement with our precedent in Mancuso, which forecloses Eleventh Amendment sovereign immunity for the Thruway Authority. See Am. Trucking Ass'ns, Inc. v. N.Y. State Thruway Auth., No. 13 Civ. 8123, 2014 WL 4229982, at *5 (S.D.N.Y. Aug. 6, 2014) (“Were I writing on a blank slate, I would conclude that the Thruway Authority was in fact cloaked with sovereign immunity ... [a]nd I would dismiss this lawsuit on that ground.”). Then, after...