Am. Trucking Ass'ns, Inc. v. N.Y.S. Thruway Auth.

• Decision Date: 29 March 2018
• Docket Number: August Term 2017,No. 17-737 (L), 17-873 (Con),17-737 (L), 17-873 (Con)
• Citation: 886 F.3d 238
• 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, American Bus Association, DATTCO, Inc., Starr Transit Co., Inc., 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 Board of Directors, Richard N. Simberg, in their official capacities as Members of the New York State Thruway Authority/Canal Corporation Board of Directors, Brandon R. Sall, in their official capacities as Members of the New York State Thruway Authority/Canal Corporation Board of Directors, J. Rice Donald, Jr., in their official capacities as members of the New York State Thruway Authority/Canal Corporation Board of Directors, Jose Holguin–Veras, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Board of Directors, Bill Finch, in his official capacity as Acting Executive Director of the New York State Thruway Authority, Joanne M. Mahoney, in her official capacity as Chair of the New York State Thruway Authority/Canal Corporation Boards of Directors, Robert L. Megna, in his official capacity as a member of the New York State Thruway Authority/Canal Corporation Boards of Directors, Stephen M. Saland, in his official capacity as a member of the New York State Thruway Authority/Canal Corporation Boards of Directors, Defendants–Appellees.
• Court: U.S. Court of Appeals — Second Circuit

886 F.3d 238

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, American Bus Association, DATTCO, Inc., Starr Transit Co., Inc., 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 Board of Directors, Richard N. Simberg, in their official capacities as Members of the New York State Thruway Authority/Canal Corporation Board of Directors, Brandon R. Sall, in their official capacities as Members of the New York State Thruway Authority/Canal Corporation Board of Directors, J. Rice Donald, Jr., in their official capacities as members of the New York State Thruway Authority/Canal Corporation Board of Directors, Jose Holguin–Veras, in their official capacities as members of the New York State Thruway Authority/Canal Corporation Board of Directors, Bill Finch, in his official capacity as Acting Executive Director of the New York State Thruway Authority, Joanne M. Mahoney, in her official capacity as Chair of the New York State Thruway Authority/Canal Corporation Boards of Directors, Robert L. Megna, in his official capacity as a member of the New York State Thruway Authority/Canal Corporation Boards of Directors, Stephen M. Saland, in his official capacity as a member of the New York State Thruway Authority/Canal Corporation Boards of Directors, Defendants–Appellees.

No. 17-737 (L), 17-873 (Con)

August Term 2017

United States Court of Appeals, Second Circuit.

Argued: March 6, 2018

Decided: March 29, 2018

Charles A. Rothfeld, Evan M. Tager, Matthew A. Waring, Mayer Brown LLP, Washington, DC; Richard Pianka, ATA Litigation Center, Arlington, VA, for Plaintiffs–Appellants.

Andrew W. Amend, Senior Assistant Solicitor General, of counsel, (Barbara D. Underwood, Solicitor General, Steven C. Wu, Deputy Solicitor General, on the brief), for Eric T. Schneiderman, Attorney General, State of New York, for Defendants–Appellees.

Before: Calabresi, Cabranes and Lohier, Circuit Judges.

José A. Cabranes, Circuit Judge:

The questions presented are: (1) whether the District Court correctly dismissed the Dormant Commerce Clause claims of plaintiffs, challenging the authority of defendants to allocate surplus highway toll revenues to New York's canal system; and (2) whether the District Court properly determined that defendants did not waive the argument that Congress authorized them to depart from the Dormant Commerce Clause.

American Trucking Associations, Inc. and its fellow plaintiffs (jointly, "ATA") claim that the New York State Thruway Authority and its aligned state entities (jointly, the "Thruway Authority") violated the Dormant Commerce Clause when it used surplus revenue from highway tolls to fund New York State's Canal System ("the Canal System"). The District Court dismissed this claim, finding that Congress specifically authorized the Thruway Authority to allocate highway tolls to canal uses. ATA further claims that the District Court abused its discretion in reaching the question of congressional authorization because the Thruway Authority did not discover or raise this argument until several years into the litigation.

We conclude that Congress evinced unmistakably clear intent to authorize the Thruway Authority to allocate highway tolls to support the Canal System. We also conclude that the District Court had discretion to reach the question of congressional authorization. Accordingly, we AFFIRM the judgment of the District Court.

I. BACKGROUND

A. The Thruway Authority's Tolling Powers

The New York State Thruway Authority is a public benefit corporation, created in 1950 by the New York State Legislature to construct and operate transportation facilities.¹ Since its establishment, it has operated the Governor Thomas E. Dewey Thruway System (the "Thruway"), a 570–mile cross-state highway that is a "major artery of interstate commerce in the Northeast" United States and a "critical route for commercial truckers serving the region."²

New York originally funded the Thruway through bond issuances, and authorized the Thruway Authority to charge tolls both to repay the bonds and to support maintenance and operations.³ In 1956, Congress passed the Federal–Aid Highway Act, which incorporated existing toll highways, including the Thruway, into the Interstate Highway System, but prohibited the use of any federal funds to construct or improve such highways.⁴ The Thruway and other toll highways became eligible for federal financial support only when, in 1978, Congress enacted the Surface Transportation Assistance Act ("STAA").⁵ Section 105 of that statute mandated that, in order to receive federal financial aid, state public authorities responsible for toll highways in the Interstate Highway System had to discontinue levying tolls once they had collected sufficient revenues to retire outstanding bonds.⁶ If those authorities failed to make a toll road free once they had collected sufficient tolls to retire those bonds, STAA required them to repay the federal government for the financing it had provided them.⁷

Against this background, Congress enacted the Intermodal Surface Transportation Efficiency Act of 1991 ("ISTEA"), the statute at issue here.⁸ Through ISTEA, Congress sought to foster "a National Intermodal Transportation System," consisting of "all forms of transportation in a unified, interconnected manner."⁹ To do so, ISTEA freed states from their obligation under the STAA to repay the federal government should they continue to collect tolls after retiring outstanding debts, and granted them greater flexibility to operate toll facilities and use toll revenues for a variety of transportation projects.

Two provisions of ISTEA stand at the heart of this case. The first, section 1012(a), authorized state public authorities to collect highway tolls without repaying the federal government, so long as those funds "will be used first for debt service, for reasonable return on investment of any private person financing the project, and for the costs necessary for the proper operation and maintenance of the toll facility."¹⁰ Once a state certified adequate maintenance, it could use any excess toll revenues "for any purpose for which Federal funds may be obligated by a State under [Title 23]."¹¹

As part of ISTEA, Congress simultaneously broadened the list of purposes for which states could use federal funds under Title 23. The expanded list included "transportation enhancement activities," such as "historic preservation, rehabilitation and operation of historic transportation buildings, structures, or facilities (including historic railroad facilities and canals )."¹²

In the second provision, section 1012(e), Congress enacted a "Special Rule" that largely paralleled section 1012(a) but added specific conditions regarding two toll facilities: the New York State Thruway and the Fort McHenry Tunnel in Maryland. Regarding the Thruway, it provided that the Thruway Authority could use excess toll revenues to cover "costs associated with transportation facilities under [its] jurisdiction ..., including debt service and costs related to the construction, reconstruction, restoration, repair, operation and maintenance of such facilities."¹³

Following the passage of ISTEA, in 1992 the New York State Legislature directed the Thruway Authority to assume management of the Canal System.¹⁴ At all times relevant to these appeals, the Thruway Authority managed the Canal System.

B. The Canal System

The rise of the Interstate Highway System, a marvel of American infrastructure, cemented the decline of perhaps the most awesome earlier such marvel: the New York Canal System. That system is "a network of waterways that stretches across upstate New York, including the Erie, Oswego, Champlain, Cayuga, and Seneca Canals."¹⁵ In the nineteenth century, it served as "the model for canal-building throughout the world" and fueled "the unprecedented development and prosperity that came not alone to New York State but to ... the whole country."¹⁶ In the words of Senator Daniel Patrick Moynihan of New York—then chairman of the Water Resources, Transportation, and Infrastructure Subcommittee of the Senate Committee on Environment and Public Works, and the principal architect of ISTEA—the Canal System is "what has made America great."¹⁷

As road and air transportation proliferated, however, the Canal System largely became "a recreational byway, drawing pleasure boats, fishing lines and the occasional canal fan."¹⁸ Traditionally supported through taxpayer funds and managed by the New York State Department of Transportation, the Canal System, as noted, was transferred to the management of the Thruway Authority in 1992.¹⁹ The Thruway Authority began funding the Canal System principally through excess highway toll revenues. Between 1992 and 2016, it expended approximately 9 to 14 percent of Thruway tolls to the Canal System.²⁰

C. Procedural History

In November 2013, ATA, a trucking industry trade group, and three of its members brought a class action suit against the Thruway Authority, the New York State Canal Corporation, and certain Thruway officials, alleging that they violated the Dormant Commerce Clause by using Thruway tolls to fund the Canal System.²¹ In August 2014, the District Court dismissed the complaint for failure to join the State of New York as a necessary p...