V-1 Oil Co. v. Utah State Dept. of Public Safety

• Decision Date: 22 December 1997
• Docket Number: No. 96-4090,V-1,96-4090
• Citation: 131 F.3d 1415
• Parties: 97 CJ C.A.R. 3468 OIL COMPANY, Plaintiff-Appellant, v. UTAH STATE DEPARTMENT OF PUBLIC SAFETY; D. Douglas Bodrero, in his capacity as Commissioner of Public Safety; Utah State Fire Marshal Division, Lynn B. Borg, in his capacity as Utah State Fire Marshal; the Liquefied Petroleum Gas Board; and the State Of Utah, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1415

131 F.3d 1415

97 CJ C.A.R. 3468

V-1 OIL COMPANY, Plaintiff-Appellant, v. UTAH STATE DEPARTMENT OF PUBLIC SAFETY; D. Douglas Bodrero, in his capacity as Commissioner of Public Safety; Utah

State Fire Marshal Division, Lynn B. Borg, in his capacity

as Utah State Fire Marshal; the Liquefied Petroleum Gas

Board; and the State Of Utah, Defendants-Appellees.

No. 96-4090.

United States Court of Appeals, Tenth Circuit.

Dec. 22, 1997.

Linette Bailey Hutton (with Peter Stirba, on the briefs), Stirba and Hathaway, Salt Lake City, UT, for Plaintiff-Appellant.

Brent A. Burnett, Assistant Attorney General (with Jan Graham, Utah Attorney General on the briefs), Salt Lake City, UT, for Defendants-Appellees.

Before SEYMOUR, McKAY and HENRY, Circuit Judges.

HENRY, Circuit Judge.

Plaintiff-appellant V-1 Oil Company appeals the district court's grant of summary judgment in favor of the defendants. V-1 alleges that the defendants' imposition of licensing and certification fees upon its out-of-state liquefied petroleum gas (LPG) facilities constitutes an impermissible tax upon the privilege of engaging in interstate commerce. For the reasons set forth herein, we remand to the district court for vacation of judgment in part, and we affirm in part.

I. BACKGROUND

V-1 owns and operates four LPG storage facilities within the borders of Utah: one each in Salt Lake City, Woodruff, Manilla, and Ogden. At issue are V-1's facilities in Preston, Idaho and Rock Springs, Wyoming, which sell LPG to private consumers in Utah for home heating as well as to two convenience stores located across the Utah border in the towns of Manilla and Logan, Utah. These Utah customers, estimated to be 500 in number, consume approximately 312,400 gallons of LPG annually, generating approximately $136,000 in annual gross profit. See Aplt's App. doc. F p 9 (Aff. of Gary D. Huskinson, President, V-1 Oil Co.).

In 1993, Utah enacted the Liquefied Petroleum Gas Act, see Utah Code Ann. §§ 53-7-301 to 53-7-316, to provide a comprehensive system of safety regulations for the LPG industry in Utah. The statutes provide for the creation of the Utah Liquefied Petroleum Gas Board to create rules for the protection of the health, welfare, and safety of the public and persons using LPG. See Utah Code §§ Ann. 53-7-304 to -305. The Board, working in conjunction with the Division of the State Fire Marshal, see Utah Admin. Code R710-6, assumes responsibilities including the issuance, suspension, and denial of licenses, the examination of every LPG license applicant, and the collection of fees for any facility that handles LPG. See Utah Code Ann. §§ 53-7-307(3), (9), 53-7-308(4).

Under the LPG Act, a person may not sell, transport, dispense, or store LPG in Utah without a state license. See Utah Code Ann. § 53-7-308. V-1 contests the requirement that its Preston, Idaho and Rock Springs, Wyoming facilities must pay the license and certification fees required in Utah Code Ann. §§ 53-7-309(2)(b), 53-7-314, and Utah Admin. Code R710-6-6. After the Utah Fire Marshal threatened civil penalties and criminal prosecution for nonpayment of the fees covering the Preston facility, V-1 paid the $225.00 fee under protest. V-1 also contests the certification fees for employees that handle LPG under Utah Code Ann. § 53-7-311 and Utah Admin. Code R710-6-6, set at $30.00 per employee annually.

The United States Department of Transportation's Research and Special Programs Administration has issued hazardous materials regulations "to enhance training requirements for persons involved" in the transportation, handling, storing, loading, and unloading of hazardous materials. Aplt's App. doc. J, at 81 (Training for Safe Transp. of Hazardous Materials, 49 C.F.R. pts. 171-177, Summary (1992)). V-1 "maintains annual certification pursuant to the federal safety guidelines [the United States Department of Transportation's regulations] as required by Idaho and Wyoming for its facilities" conducting business in those states. Aplt's App. doc. F p 7; see id. docs. H-I (hazardous materials regulations training information). "V-1 requires that its employees complete initial and recurrent training and examinations as required under [the United States Department of Transportation's regulations] for persons handling or transporting hazardous substances." Aplt's App. doc. F p 8; see id. docs. H-I.

V-1 delivers propane from its storage facilities to its customers in trucks. See id. doc. N, at 99. V-1's vendors deliver propane to its storage facilities either by train or truck. See id. None of V-1's facilities or customers are served by pipeline. See id. at 99-100.

Most of V-1's customers, apart from those who purchase from the retail outlets, are "residential customers located in rural areas." Id. at 100. "In some cases [V-1] provides storage tanks at the service location as part of its service and retains title to the tanks. [V-1] has a few accounts at commercial locations." Id.

"As part of its service, at a customer's request, [V-1] installs service lines from a tank at a customer's location, whether customer-owned or [V-1]-owned to a customer's premises where the propane is used. [V-1] charges for time and materials for such line installation and does not retain title to the line. [V-1] does not assume responsibility for subsequent line maintenance." Id.

In its motion for summary judgment and injunctive relief before the district court, and on appeal, V-1 contends that the assessment, enforcement, and collection of the LPG Act's fees run afoul of the Commerce Clause, U.S. Const. art. I, § 8, cl. 3 ("The Congress shall have Power To ... regulate Commerce with foreign nations, and among the several States,...."). V-1 claims that its Preston, Idaho and Rock Springs, Wyoming facilities and their employees are compelled to pay these fees, and in theory, the Utah Fire Marshal in return conducts inspections at the facilities. Because defendants have performed no inspections of V-1's out-of-state facilities, V-1 contends that it is paying the State of Utah a fee for the privilege of entering the state to transact business, which discriminates against interstate commerce. V-1 asks that the defendants be enjoined from assessing any and all fees under the LPG statutes, and that they reimburse V-1 for all monies paid for licensing at its out-of-state facilities, and for reimbursement of the fees paid for the certification of its agents, salesmen and employees at these facilities.

In their motion to dismiss, the defendants argued that under the prevailing four-prong test outlined in Complete Auto Transit Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977), they are justified in imposing a reasonable tax on V-1's out-of-state facilities.

Noting that the defendants' motion to dismiss relied on matters outside of the pleadings, the district court appropriately treated it as a motion for summary judgment, see Brown v. Zavaras, 63 F.3d 967, 969 (10th Cir.1995) ("A court may convert a Rule 12(b)(6) motion to dismiss into a summary judgment proceeding in order to consider matters outside of the plaintiff's complaint."), and ruled in favor of defendants on all issues. This appeal followed.

.

II. DISCUSSION

A. Eleventh Amendment Immunity

"At the outset, we note that because [V-1 has] brought suit in federal court against [d]efendants in their official capacities as directors of Utah state agencies," against two state agencies and against the State of Utah, V-1's "suit may be barred in part or whole by the Eleventh Amendment." Johns v. Stewart, 57 F.3d 1544, 1552 (10th Cir.1995) (citing Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 101, 104 S.Ct. 900, 908, 79 L.Ed.2d 67 (1984)). At oral argument before this court, we raised the question of the Eleventh Amendment bar. The State of Utah admitted it chose not to raise the potential constitutional limitation of our subject matter jurisdiction at either the district or appellate level.

1. Sua Sponte Consideration of Eleventh Amendment Immunity

Unlike most jurisdictional questions which must be considered by the court on its own motion if the parties fail to raise them, whether sua sponte consideration of a possible Eleventh Amendment bar is obligatory or discretionary "has been subject to prolonged debate." Mascheroni v. Board of Regents of the Univ. of Calif., 28 F.3d 1554, 1558 (10th Cir.1994). The Supreme Court appears not to have decided whether consideration of the Eleventh Amendment bar is required or optional. Compare Pennhurst, 465 U.S. at 98, 104 S.Ct. at 906 (noting that the Eleventh Amendment "affirm[s] that the fundamental principle of sovereign immunity limits the grant of judicial authority in Art[icle] III") with Patsy v. Board of Regents, 457 U.S. 496, 515 n. 19, 102 S.Ct. 2557, 2567 n. 19, 73 L.Ed.2d 172 (1982) (stating that the Court has "never held that [the Eleventh Amendment bar] is jurisdictional in the sense that it must be raised and decided by this Court in its own motion").

In Mascheroni, we outlined the circuit split between mandatory and permissive sua sponte consideration of the Eleventh Amendment bar. See 28 F.3d at 1558 (collecting authority). We also noted that this circuit in recent cases has not explicitly adopted either rule, but has "in fact consider[ed] sua sponte whether the Eleventh Amendment barred its jurisdiction." Id. As we have previously raised the issue sua sponte, we will do so here.

2. Eleventh Amendment Provisions

The Eleventh Amendment provides:

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

U.S. Const. amend. XI. "Even though the clear language does not so provide, the Eleventh Amendment has been interpreted to bar a suit by a citizen against the citizen's own State in Federal Court." AMISUB (P...