Oral argument: April 26, 2005
Appealed from: Michigan Court of Appeals
Commerce Clause, Michigan Motor Carrier Act, fees, interstate/intrastate commerce, federal preemption
Under the Michigan Motor Carrier Act (MCA), intrastate and interstate motor carrier vehicles must pay a $100 fee for a certificate of authority to operate within Michigan. The American Trucking Association alleges that the MCA violates the Commerce Clause, which generally prohibits states from discriminating against out-of-state business in favor of in-state business, and second, that the MCA is federally preempted because the statute conflicts with and frustrates 49 U.S.C. § 14504, which maintains a $10 ceiling for registration fees. How the Supreme Court will ultimately decide the case will turn upon the rules of statutory construction. If the State of Michigan properly characterized the $100 fee as a regulatory fee, the Court will uphold Michigan's Motor Carrier Act as a minimal burden imposed on interstate commerce that is not excessive in relation to Michigan's substantial interest in regulating highway safety. However, if the Court finds that the State of Michigan wrongly characterized the fee as a regulatory fee in order to avoid federal preemption problems with 49 U.S.C. § 14504, the Court will reverse.
- Whether the $100 fee upon vehicles conducting intrastate operations violates the Commerce Clause of the U.S. Constitution?
- Whether the $100 fee upon vehicles operating solely in interstate commerce is preempted by 49 U.S.C. § 14504?
Under the Michigan Motor Carrier Act (MCA), motor carrier vehicles must pay $100 for a certificate of authority to operate within the state if they operate intrastate, or for administration of the MCA if they operate interstate. Westlake Transportation, Inc. v. Michigan Public Service Comm'n, 662 N.W.2d 784, 789 (Mich.App. 2003). Under 49 U.S.C. § 14504, a state may charge no more than $10 per vehicle when motor carriers register with the state. See Brief for Petitioners Mid-Con Freight Sys., at 2. The petitioners in this case, who operate motor carriers companies, argue that 49 U.S.C. § 14,504 preempts the MCA. Westlake Transportation, Inc., 662 N.W.2d at 789. The petitioners also allege that the MCA violates the Commerce Clause. Id.
The trial court concluded that the MCA did not violate the Commerce Clause because it did not burden out-of-state motor carriers more than in-state motor carriers. Id. at 790. The trial court also concluded that federal law did not preempt the MCA as a matter of statutory interpretation. Id. The Michigan Court of Appeals affirmed. Id. at 804. The Michigan Supreme Court refused to hear the case. Brief for Petitioners Mid-Con Freight Sys., at 1.
Both of the questions presented are important in that they concern a recurring issue of whether the fair apportionment and anti-discrimination requirements of the Commerce Clause invalidate flat state taxes on participants in interstate commerce, and whether states may circumvent federal caps on taxes and fees by characterizing them as regulatory/administration fees. The first $100 fee, imposed upon interstate as well as intrastate commercial operations for their intrastate activities, impacts interstate commerce indirectly, while the second fee, imposed upon interstate commercial operations alone, more openly discriminates against interstate operations in favor of intrastate operations.
The first question posed in this case, then, asks whether, when a state imposes a flat fee likely to negatively impact interstate business and favor intrastate business, such a fee can be said to violate the Commerce Clause, which generally holds that no state may discriminate against interstate commerce. The flat fee imposed by Michigan imposes a $100 flat permit fee upon each vehicle operating intrastate, regardless of the number of miles or trips the vehicle undertakes intrastate within the course of a year. The vehicles belonging to interstate commercial operations may be more negatively impacted than vehicles operating exclusively intrastate as a result, since interstate operations may undertake fewer numbers of intrastate trips as compared to vehicles exclusively serving the Michigan area.
The second question presented implicates the power of the state to circumvent the Commerce Clause and certain federal regulations on point by re-characterizing fees and taxes as regulatory or administration fees. The Supreme Court has repeatedly held in the past that state taxes may not, in practice, discriminate against participants in interstate commerce. See Oregon Waste Systems, Inc. v. Dep't of Environmental Quality of the State of Oregon, 511 U.S. 93, 98 (1994). The Michigan Court of Appeals upheld the $100 fee by characterizing it as a regulatory fee necessary to administer state highway safety regulations, thus circumventing federal statute 49 U.S.C. § 14,504, which only allows states to impose a vehicle registration fee of up to $10. If the Supreme Court allows such a fine distinction between regulatory fees and taxes, more states may be encouraged to impose extraneous, non-tax "fees" upon interstate operations against the equity principle of the Commerce Clause as well as against certain federal laws on point.
Plaintiffs argue that the $100 fee violates the Commerce Clause. As a threshold matter, the Commerce Clause provides that Congress "shall have the power … [t]o regulate commerce … among the several states." U.S. Const., art. I, § 8, cl. 3. The "dormant Commerce Clause" prohibits the States from unjustifiably discriminating the interstate flow of commerce. See Oregon Waste Systems, Inc. v. Dep't of Environmental Quality of the State of Oregon, 511 U.S. 93, 98 (1994). Discrimination simply means favoring in-state over out-of-state economic interests. Id. at 99. The test for determining whether a regulatory fee violates the Commerce Clause asks "whether the statute discriminates against interstate commerce or merely regulates evenhandedly with only incidental effects upon interstate commerce." Westlake Transportation, Inc., 662 N.W.2d at 803. If the statute regulates commerce evenhandedly, a court will uphold the statute unless the burden it imposes on interstate commerce is "clearly excessive in relation to the putative local benefits." Pike v. Bruce Church, Inc., 397 U.S.137, 142 (1970).
The Supreme Court will most likely hold that the $100 flat fee does not violate the Commerce Clause. MCL 478.2(1) requires that motor carriers that either travel solely intrastate or travel both intrastate and interstate pay a $100 fee for each vehicle. MCL 478.2(2) requires that all interstate motor carriers that travel solely interstate must also pay the $100 fee. Since the regulatory fee affects both interstate and intrastate motor carriers, the regulatory fee is the same for all motor carriers licensed in Michigan, regardless of their final destination. The purpose of the Commerce Clause is to prevent economic protectionism by prohibiting states from burdening or discriminating against out-of-state business in favor of in-state business. Consequently, the Supreme Court may find that the fee does not directly regulate interstate commerce at all.
Although interstate motor carriers wishing to make intrastate hauls will pay a higher per mile fee than carriers that operate solely intrastate, the regulatory fee is not excessive in relation to the putative local benefits, i.e. funding safety and related regulations. Furthermore, the flat fee does not necessarily disadvantage interstate commerce operations, because it is by no means certain that any interstate trucking business would make fewer intrastate trips than purely intrastate operations, especially given the fact that interstate operations are likely to be more sizeable and less burdened by the $100 flat fee requirement. In addition, the interstate operations are always free to expand intrastate operations and make the best of the $100 fee paid.
Plaintiffs also argue that the portion of the MCA which requires a $100 fee upon vehicles operating solely in interstate commerce is preempted by 49 U.S.C. § 14504. The Supremacy Clause of the U.S. Constitution provides Congress with the power to preempt state law. U.S. Const., art. VI, cl. 2. Where a state statute conflicts with or frustrates federal law, federal law trumps. CSX Transp., Inc., v. Easterwood, 507 U.S. 658, 663 (1993). However, federal preemption occurs only when Congress enacts a federal statute that expresses a clear intent to preempt state law. Id. at 664. In the absence of a clear Congressional command, state law is preempted if the law conflicts with federal law, or if federal law so thoroughly occupies the entire legislative field as to make reasonable the inference that Congress left no room for supplemental state legislation. Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992).
Upon the question of whether MCL 478.2(2), which requires the $100 fee for vehicles operating solely interstate, the Supreme Court may rule that federal law preempts the state statute. State registration requirements do not constitute an undue burden on interstate commerce so long as they are consistent with regulations promulgated by the Interstate Commerce Commission (ICC). The ICC allowed States to charge interstate motor carriers annual registration fees of up to $10 per vehicle. See CFR §1.23.33 (1992). The defendants may prevail on their argument that Congress has set a maximum registration fee of $10 per vehicle. However, it is possible that the Supreme Court will find that the $10 ceiling applies only to vehicle registration fees per vehicle and not regulatory fees imposed for administering safety regulations.