Federal Maritime Com'n v. City of Los Angeles, California

• Decision Date: 15 April 2009
• Docket Number: Civil Case No. 08-1895 (RJL).
• Parties: FEDERAL MARITIME COMMISSION, Plaintiff, v. CITY OF LOS ANGELES, CALIFORNIA, et al., Defendants.
• Court: U.S. District Court — District of Columbia

Page 192

607 F.Supp.2d 192

FEDERAL MARITIME COMMISSION, Plaintiff, v. CITY OF LOS ANGELES, CALIFORNIA, et al., Defendants.

Civil Case No. 08-1895 (RJL).

United States District Court, District of Columbia.

April 15, 2009.

Benjamin K. Trogdon, Federal Maritime Commission, Washington, DC, for Plaintiff.

Mark E. Nagle, Troutman Sanders, LLP, Steven Siegmund Rosenthal, Kaye Scholer, Washington, DC, Joy M. Crose, Thomas A. Russell, Los Angeles City Attorney's Office, San Pedro, CA, Dominic Holzhaus, City of Long Beach, Harbor Department, Long Beach, CA, for Defendants.

MEMORANDUM OPINION

RICHARD J. LEON, District Judge.

The Federal Maritime Commission ("FMC") has filed an unprecedented motion for a preliminary injunction pursuant to the Shipping Act of 1984, as amended, 46 U.S.C. §§ 40101 et seq., to enjoin certain discrete portions of the Port of Los Angeles's ("POLA") and Port of Long Beach's ("POLB") (collectively, the "Ports") respective Clean Truck Programs ("CTPs"). The CTPs are environmental programs aimed at reducing the air pollution caused by the trucks used to transport cargo to and from the Ports. The FMC alleges that an agreement between the Ports to discuss and potentially coordinate their CTPs is likely, by a reduction in competition, to cause an unreasonable increase in transportation costs and decrease in transportation service, in violation of Section 6(g) of the Shipping Act. Because the FMC has not made a sufficient showing of either a likelihood of success on the merits or irreparable harm to warrant the extraordinary relief of a preliminary injunction, the FMC's motion is DENIED.

BACKGROUND

A. The Ports' Clean Truck Programs

POLA and POLB are neighboring, and competing, ports in Los Angeles County's San Pedro Bay which together form the largest port area in the United States.¹ (Am. Compl. ¶ 38 [Dkt. #46].) Approximately 40 percent of the United States' import and export container traffic flows through the Ports, making them critical components of the nation's economy. (Id.; Decl. of John M. Holmes ("Holmes Decl.") ¶ 41.) Containers unloaded and loaded at the Ports are transported, or "drayed," by trucks to and from off-port terminals, rail yards, and other locations outside of the Ports at the expense of the cargo's owners. (Am.Compl. ¶ 39.) Drayage services are provided by Licensed Motor Carriers ("LMCs") that either employ truck drivers or contract with independent truck drivers, known as Independent Owner-Operators ("IOOs"). (Am.Compl. ¶ 42.) The drayage industry performs a critical function in the Ports' operations and involves thousands of trucks and truck drivers.

The economic benefits provided by the drayage industry, however, are offset, in no small part, by the considerable environmental and public health costs it generates. The thousands of diesel trucks that provide drayage services at the Ports contribute significantly to the serious air pollution problem in the region. (Decl. of Elaine Chang ¶¶ 7-12.) Indeed, emissions data provided by California's South Coast Air Quality Management District reveals that in 2002 the Ports were responsible for 24 percent of the total diesel particulate matter, 11 percent of the nitrogen-oxides pollutants, and 45 percent of the sulfuroxides pollutants emitted in the surrounding air basin. (Id. ¶ 7.) Still other data indicate that a possible consequence of drayage truck emissions are significantly higher cancer rates in the affected areas. (Id. ¶ 10.) If such emissions are not abated, California state authorities contend there is even a real potential for hundreds of premature deaths between 2010 and 2014 and thereafter. (Id. ¶¶ 11-12.)

In December 2007, the California Air Resources Board ("CARB") promulgated new rules mandating restrictive new limits on emissions from diesel trucks at California's ports. (Am.Compl. ¶ 45.) POLA and POLB thereafter crafted multi-faceted "Clean Truck Programs" to both reduce emissions associated with drayage services and improve the Ports' safety and security.² The Ports' CTPs, while not identical, share many of the same components and were crafted, in part, collaboratively. As part of their CTPs, both Ports adopted a tariff amendment that imposes a "rolling truck ban" under which certain older trucks are gradually prohibited from providing drayage services at each respective port, beginning with a ban on pre-1989 trucks that commenced October 1, 2008 and culminating January 1, 2012 with a ban on all trucks that do not meet Environmental Protection Agency ("EPA") 2007 truck emissions standards.³ (Am. Compl. ¶ 52; Holmes Decl. ¶¶ 12-13.) Both Ports also adopted a tariff amendment instituting a Clean Truck Fee of $35 to be paid by cargo owners for each twenty-foot container leaving each respective port on certain older trucks.⁴ (Am. Compl. ¶¶ 54, 87; Holmes Decl. ¶ 14.) The Ports intend to use the money raised by their Clean Truck Fees, along with money received from the state, to fund a subsidy program for the replacement, or retrofit, of older trucks that do not meet EPA 2007 emissions standards. (Am. Compl. ¶ 54; Holmes Decl. ¶ 14.) Finally, both Ports crafted a concession agreement into which all LMCs must enter in order to continue (or commence) providing drayage services at each respective port. (Am. Compl. ¶¶ 57-60; Holmes Decl. ¶ 15.) The concession agreements set forth certain safety and other requirements with which all trucks entering the port must comply.⁵ (Am.Compl. ¶ 61.)

The Ports' CTPs differ, however, in certain critical respects. First, POLA's concession agreement phases in over five years a requirement that all LMCs serving POLA use employee drivers, rather than IOOs. (Am.Compl. ¶ 56.) The first deadline occurs in the fourth quarter of 2009, during which period an average of twenty percent of drayage truck drivers serving POLA must be employees of an LMC. (Am. Compl., Ex. B, POLA Concession Agreement ¶ III(d).) POLB, in contrast, did not adopt such an "employee mandate," instead allowing LMCs to continue to utilize IOOs for the foreseeable future. (Am.Compl. ¶ 62.) Second, the Ports crafted slightly different exemptions to their Clean Truck Fees. For example, while POLA exempts from the fee all diesel trucks compliant with EPA 2007 truck emissions standards purchased without a CTP subsidy, POLB does not. (Am. Compl. ¶ 88.)

B. The Federal Maritime Commission

The FMC is an independent federal agency responsible for administering the Shipping Act. Under the Shipping Act, the FMC has jurisdiction over the rates, practices, and certain agreements of Marine Terminal Operators ("MTOs"), such as the Ports.⁶ 46 U.S.C. §§ 40301(b), 40501(f)(g), 41102(c), 41103, 41106. In pertinent part here, the Shipping Act provides that agreements between MTOs to "engage in exclusive, preferential, or cooperative working arrangements, to the extent the agreement involves ocean transportation in the foreign commerce of the United States," must be filed with the FMC.⁷ Id. §§ 40301(b), 40302. With such filing, the agreement receives an exemption from the antitrust laws upon becoming effective. 46 U.S.C. § 40307(a)(1). In exchange, however, the FMC reviews the agreement for compliance with the Shipping Act and can deny or modify the agreement as it determines necessary to ensure compliance with the Shipping Act's enumerated prohibitions.⁸ 46 U.S.C. § 41102(b)(1)-(2). In addition, the Shipping Act provides a "general standard" in Section 6(g) under which the FMC may seek to enjoin anticompetitive conduct by MTOs who are parties to an agreement within the FMC's jurisdiction. Section 6(g), codified at 46 U.S.C. § 41307(b)(1), provides in pertinent part:

If ... the [FMC] determines that the agreement is likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost, the [FMC] ... may bring a civil action in the United States District Court for the District of Columbia to enjoin the operation of the agreement.

The FMC's available remedies are set forth in Section 6(h) of the Shipping Act, codified at 46 U.S.C. § 41307(b)(2), which provides that the Court may issue a temporary restraining order, preliminary injunction, and, after a showing that the agreement is likely to have the effect described in Section 6(g), a permanent injunction.⁹

C. FMC's Section 6(g) Determination as to the Clean Truck Programs

In June 2006, the Ports filed with the FMC an agreement entitled Los Angeles and Long Beach Port Infrastructure and Environmental Programs Cooperative Working Agreement ("Agreement No. 201170"). (Am.Compl. ¶ 63.) The agreement, which became effective on August 10, 2006, authorized the Ports to confer, discuss, exchange information, and agree on a voluntary basis on the funding, establishment, and construction of port-related transportation infrastructure projects and environmental programs. (Id. ¶¶ 26, 63.) The Ports subsequently began developing their CTPs, a process which included innumerable public meetings and the receipt of public comment from interested stakeholders. (Holmes Decl. ¶ 10; see generally Decl. of Robert M. Blair ("Blair Decl.") at 3-11.) As the CTPs took their final form, the FMC informed the Ports in May 2008 that Agreement No. 201170 did not adequately describe the Ports' coordination on their CTPs for purposes of the FMC's review for compliance with the Shipping Act. (Am.Compl. ¶ 64.) On August 1, 2008, the Ports responded by filing an amended version of their agreement ("Agreement No. 201170-001").¹⁰ (Id. ¶¶ 64-65.) The amended agreement provided that the Ports could "discuss, exchange information, cooperate, and, to the extent each Port in its sole discretion deems appropriate, coordinate" the adoption of drayage truck deadlines, a clean truck fee, and concession programs with LMCs. (Id. ¶ 66; id., Ex. D, Agreement No. 201170-001, Art. V.E.) The Ports began implementation of their CTPs soon thereafter,...