AAA Ne. v. Port Auth. of N.Y. & N.J.

• Decision Date: 18 November 2016
• Docket Number: 11 Civ. 6746 (RKE) (HBP)
• Parties: AAA NORTHEAST and AAA North Jersey, Inc., Plaintiffs, v. The PORT AUTHORITY OF NEW YORK AND NEW JERSEY, Defendant.
• Court: U.S. District Court — Southern District of New York

221 F.Supp.3d 374

AAA NORTHEAST and AAA North Jersey, Inc., Plaintiffs,

v.The PORT AUTHORITY OF NEW YORK AND NEW JERSEY, Defendant.

11 Civ. 6746 (RKE) (HBP)

United States District Court, S.D. New York.

Signed November 18, 2016

Kevin P. Mulry, Farrell Fritz, P.C., Uniondale, NY, Michael Francis Fitzgerald, Farrell Fritz, PC, New York, NY, for Plaintiffs.

Kathleen Gill Miller, Arnold Dennis Kolikoff, Law Office of James M. Begley, Richard W. Mark, Randy M. Mastro, Nancy Elizabeth Hart, Gibson, Dunn & Crutcher, LLP, Carlene V. McIntyre, David Robert Kromm, The Port Authority of New York and New Jersey, New York, NY, for Defendant.

OPINION

Richard K. Eaton, Judge^*

Before the court is the motion for summary judgment of defendant the Port Authority of New York and New Jersey ("defendant" or "the Port Authority"). See Def.'s Mem. of Law in Supp. of its Mot. for Summ. J. (ECF Dkt. No. 133) ("Def.'s Br."). Plaintiffs AAA Northeast and AAA North Jersey, Inc. ("plaintiffs" or "AAA") oppose the motion. See Pls.' Mem. of Law in Opp'n to Def.'s Mot. for Summ. J. (ECF Dkt. No. 153) ("Pls.' Br."). By its motion, defendant seeks to dispose of AAA's claims that certain toll and fare increases imposed by the Port Authority violate: (1) the Commerce Clause of the United States Constitution, U.S. Const. Art. I, § 8, cl. 3, and (2) the Surface Transportation and Uniform Relocation Assistance Act of 1987 (the "Highway Act"), 33 U.S.C. § 508 (2006). For the following reasons, defendant's motion is GRANTED.

BACKGROUND

I. FACTS ¹

AAA is a not-for-profit corporation that claims to represent the interests of nearly two million member-drivers. Def.'s Rule 56.1 Statement in Supp. of its Mot. for Summ. J. ¶¶ 1–2 (ECF Dkt. No. 134) ("Def.'s 56.1"); Compl. ¶ 5 (ECF Dkt. No. 1). The Port Authority is a bi-state governmental agency created by an interstate compact between the States of New York and New Jersey, which was approved by the U.S. Congress in 1921. Def.'s 56.1 ¶ 3; see N.Y. Unconsol. Law §§ 6401, 6404 (McKinney 2011); N.J. Stat. Ann. §§ 32:1–1, 32:1–4 (West 2011).

The Port Authority operates facilities in and around New York City, including: four interstate bridges (the Outerbridge Crossing, Bayonne, George Washington, and Goethals Bridges); two interstate tunnels (the Holland and Lincoln Tunnels); the interstate Port Authority Trans–Hudson ("PATH") Rail System; three bus terminals (the Port Authority Bus Terminal, George Washington Bridge Bus Station, and Journal Square Transportation Center); two truck terminals; seven marine terminals; four airports; two heliports; and the sixteen-acre World Trade Center site. Def.'s 56.1 ¶¶ 12–13. These facilities are organized into five "line departments" within the Authority: (1) Tunnels, Bridges & Terminals consisting of the four interstate bridges, the two tunnels, and the three bus terminals; (2) the PATH Rail System; (3) Aviation; (4) Port Commerce; and (5) Real Estate & Development (including the World Trade Center site). See Def.'s 56.1 ¶¶ 13, 17. The Port Authority also operates a facility on Staten Island called the Teleport, the Newark Legal & Communication Center, a ferries program, and has some activity at the waterfronts of Hoboken and Queens. Def.'s 56.1 ¶ 14.

The Tunnels, Bridges & Terminals Line Department, the PATH Rail System Line Department, and the ferries program collectively comprise what has been termed the "Interstate Transportation Network" ("ITN"). See Def.'s 56.1 ¶ 23. While the concept of the ITN is rooted in the state laws implementing the compact that created the Port Authority, the term was first used in Judge Pollack's opinion in Automobile Club of New York, Inc. v. Port Authority of New York & New Jersey (AAA 1989 I) , 706 F.Supp. 264 (S.D.N.Y. 1989), which was affirmed by Chief Judge Oakes' opinion in Automobile Club of New York, Inc. v. Port Authority of New York & New Jersey (AAA 1989 II) , 887 F.2d 417 (2d Cir. 1989). In that case, AAA argued the "PATH [Rail] operations should not form a part of the Port Authority rate base in the absence of statutory authorization therefor." AAA 1989 I , 706 F.Supp. at 266. In his findings of facts and conclusions of law, Judge Pollack wrote:

At the present time, pursuant to its Compact powers, and subsequent amendments and supplements thereto, the Port Authority owns and/or operates various facilities within the boundaries of the Port of New York District including the following facilities comprising its Interstate Transportation Network : four interstate bridges, the George Washington Bridge (including the George Washington Bridge Bus Station), the Bayonne Bridge, the Goethals Bridge and the Outerbridge Crossing; two interstate tunnels, the Lincoln Tunnel and the Holland Tunnel; one bus terminal, located at 40th Street and 8th Avenue in Manhattan; the [PATH Rail System]; and the Port Authority Bus Programs.

Id. at 278 ¶ 7 (emphasis added). On appeal, Chief Judge Oakes agreed: "Judge Milton Pollack found that the Port Authority's bridges, tunnels, bus terminal, bus programs and PATH [Rail System] form an ‘integrated, interdependent transportation system.’ Accordingly, [Judge Pollack] decided, it is proper to include [the] PATH [Rail System] in the rate base, from which it follows that the tolls are just and reasonable. We agree and affirm the decision below." AAA 1989 II , 887 F.2d at 418 (citations omitted) (quoting AAA 1989 I , 706 F.Supp. at 276–77, 280 ). Although the concept of the ITN is a fixture in case law and the Port Authority may take it into account in its capital plan, it does not otherwise account for it separately on its books and records. See Def.'s 56.1 ¶¶ 10–11, 16.

The Port Authority has statutory authority to collect tolls on its bridges and tunnels. Def.'s 56.1 ¶ 9; see N.Y. Unconsol. Law § 6501; N.J. Stat. Ann. § 32:1–118. On August 19, 2011, after public hearings and review by the governors of New York and New Jersey, the Port Authority's Board of Commissioners met and approved a toll and fare increase schedule for the ITN's bridges and tunnels, as well as phased fare increases for the PATH Rail System. Def.'s 56.1 ¶¶ 59–69. The proposed five-year schedule specified:

Tolls on EZPass will increase $1.50 in September 2011 and then 75 cents in December of each year from 2012–2015; Tolls on cars paying with cash will have the same increase but will be subject to an additional $2 penalty (rounded up to the nearest whole dollar); Tolls on trucks using EZPass will pay an additional $2 per axle in September 2011, and then an additional $2 per axle in December of each year from 2012–2015; Tolls on trucks paying cash will have the same increase but will be subject to an additional $3 per axle cash penalty; and Fares on the PATH train will increase 25 cents a year for four years.

Def.'s 56.1 ¶ 66. Thereafter, "[o]n September 18, 2011, the Port Authority implemented the first step of the approved increases in ITN tolls. The ITN tolls have increased annually in 2012, 2013, and 2014," with the final increase in 2015. Def.'s 56.1 ¶ 70.

II. PROCEEDINGS

On September 27, 2011, AAA filed this action, seeking a preliminary injunction to reverse the toll and fare increases and a declaratory judgment that the toll and fare increases violate the Dormant Commerce Clause and the Highway Act. See Compl. ¶ 1. AAA alleged that, since the revenue from the toll and fare increases was "earmarked to fund cost overruns in the Port Authority's speculative real estate development at the World Trade Center," the increases were illegal because they were "not functionally related to the Port Authority's integrated, interdependent transportation network." Compl. ¶¶ 2, 42 ("The revenues resulting from the 2011 toll increase are to be used by the Port Authority to unlawfully provide funding for the reconstruction of the World Trade Center which is totally unrelated to the Port Authority's integrated, interdependent transportation network.").

AAA further alleged that the increases were "unreasonable" under the Dormant Commerce Clause because the "inclusion of the World Trade Center ... improperly distorts [the Port Authority's] rate of return, creating the illusion that a toll increase is justified when in fact the Port Authority's integrated, interdependent transportation system is providing a significant surplus." Compl. ¶ 43–44. Thus, the Complaint contains the single claim that the toll and fare increases were unlawful because a portion of the proceeds would be diverted for reconstruction of the World Trade Center site which, would cause an apparent, but sham, deficit for the ITN.

This claim stemmed from a press release distributed by the Port Authority in August 2011. See Compl. ¶ 34 ("The Port Authority has revealed in a public statement that $11 billion of the toll increase will be used to rebuild the World Trade Center and fund significant cost overruns which the Port Authority has encountered because of delays in construction."); Decl. of Kevin P. Mulry in Opp'n to Mot. for Summ. J. Ex. D, at 1 (Aug. 21, 2015) (ECF Dkt. No. 151–4) ("Mulry Decl.") (Press Release, Port Auth. of N.Y. & N.J., Faced with Constrained Capacity due to Historic Economic Recession, Coupled with Billions in WTC and Post 9–11 Security Costs, and Unprecedented Need for Infrastructure Overhaul, Port Authority Proposes Toll and Fare Increase (Aug. 05, 2011)) ("Faced with three unprecedented challenges at once—(1) a historic economic recession that has sharply decreased revenue below projections, (2) steep increases in post–9/11 security costs, which have nearly tripled, and the overall cost of the [World Trade Center] rebuilding, and (3) the need for the largest overhaul of facilities in the agency's 90–year history—the Port Authority of New York and New Jersey today proposed a two-phase toll and fare increase to fully fund a new $33 billion ten-year capital plan, which will generate 167,000 jobs."); see also id. ("The factors leading to the agency's financial position include...