Massachusetts Delivery Assoc. v. Coakley

United States Court of Appeals
For the First Circuit
No. 13-2307
MASSACHUSETTS DELIVERY ASSOCIATION,
Plaintiff, Appellant,
v.
MARTHA COAKLEY,
Attorney General of the Commonwealth of Massachusetts,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Lynch, Chief Judge,
Ripple* and Selya, Circuit Judges.
David C. Casey, with whom Christopher B. Kaczmarek, Stephen T.
Melnick, and Littler Mendelson, P.C. were on brief for appellant.
Kate Comerford Todd, Steven P. Lehotsky, National Chamber
Litigation Center, Inc., James C. Rehnquist, Kate E. MacLeman,
William M. Jay, and Goodwin Procter LLP on brief for the Chamber of
Commerce of the United States of America, amicus curiae.
Wesley S. Chused and Looney & Grossman LLP on brief for
Massachusetts Motor Transportation Association, amicus curiae.
Peter Sacks, State Solicitor, with whom Martha Coakley,
Attorney General of Massachusetts, and Pierce O. Cray, Kate J.
Fitzpatrick, and Douglas S. Martland, Assistant Attorneys General,
were on brief for appellee.
*
Of the Seventh Circuit, sitting by designation.
Scott L. Nelson, Adina H. Rosenbaum, and Public Citizen
Litigation Group on brief for Public Citizen, Inc., amicus curiae.
Harold L. Lichten, Shannon Liss-Riordan, Catherine
Ruckelshaus, and National Employment Law Project on brief for
Massachusetts Employment Lawyers Association and the National
Employment Law Project, amici curiae.
September 30, 2014
LYNCH, Chief Judge. The Federal Aviation Administration
Authorization Act ("FAAAA") preempts any state law "related to a
price, route, or service of any motor carrier . . . with respect to
the transportation of property." 49 U.S.C. § 14501(c)(1). In a
previous appeal in this case, we held, contrary to the district
court, that abstention under Younger v. Harris, 401 U.S. 37 (1971),
was not appropriate and remanded. Mass. Delivery Ass'n v. Coakley,
671 F.3d 33 (1st Cir. 2012) (hereinafter, "MDA I"). The question
now presented is whether the express preemption provision of the
FAAAA preempts one prong of the Massachusetts Independent
Contractor Statute, Mass. Gen. Laws ch. 149, § 148B(a)(2), which
requires that workers perform a service "outside the usual course
of the business of the employer" to be classified as independent
contractors. The district court held that Section 148B(a)(2)
escapes FAAAA preemption. Finding that the district court did not
sufficiently credit the broad language and legislative history of
the FAAAA's express preemption provision, we reverse and remand.
I. Background
The Massachusetts Delivery Association ("MDA") is a non-
profit trade organization representing same-day delivery companies
in Massachusetts. The MDA filed this action for a declaration that
the "B Prong" of Section 148B is preempted by the FAAAA, and for an
injunction barring the Attorney General from enforcing it against
the MDA's members. The MDA used one member company, X Pressman
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Trucking & Courier, Inc. ("Xpressman"), as an exemplar for the
purposes of this litigation.
Like other members, Xpressman relied heavily on
independent contractors to provide same-day delivery services to
its customers in Massachusetts and throughout New England. Roughly
58 couriers provide delivery services for Xpressman's clients as
independent contractors. Xpressman's independent contractors are
paid for each completed delivery, rather than by the hour or week,
and they do not receive benefits such as health insurance or
retirement. Xpressman has only 6 full-time and 2 part-time
employees to oversee its administrative and warehouse functions.
No employees perform courier functions.
However, Xpressman argues that, under Massachusetts law,
it is required to designate the couriers as employees rather than
as independent contractors. Section 148B sets up a three-part test
to differentiate employees from independent contractors, as
follows:
For the purpose of this chapter and chapter
151, an individual performing any service,
except as authorized under this chapter, shall
be considered to be an employee under those
chapters unless:
(1) the individual is free from control
and direction in connection with the
performance of the service, both under
his contract for the performance of
service and in fact; and
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(2) the service is performed outside the
usual course of the business of the
employer; and,
(3) the individual is customarily engaged
in an independently established trade,
occupation, profession or business of the
same nature as that involved in the
service performed.
Mass. Gen. Laws ch. 149, § 148B(a) (2004). The MDA argues that the
couriers will always fail the "B Prong," or the second requirement,
of Massachusetts's test for independent contractors, since these
contractors perform delivery services within the usual course of
business for the delivery companies.
The legislative purpose of Section 148B is "to protect
employees from being deprived of the benefits enjoyed by employees
through their misclassification as independent contractors." MDA
I, 671 F.3d at 36-37 (quoting Somers v. Converged Access, Inc., 911
N.E.2d 739, 749 (Mass. 2009)). An "employee" classification under
Section 148B triggers legal requirements on the "employers" under
various wage and employment laws.1 See id. at 36. If an employing
entity improperly classifies an employee as an independent
contractor under Section 148B, a variety of sanctions is available.
1
The parties dispute which Massachusetts statutes are
triggered by the classification of a courier as an employee,
instead of an independent contractor. We previously noted that the
classification was relevant for chapters 62B, 149, 151, and 152 of
the Massachusetts General Laws. MDA I, 671 F.3d at 36. The
Attorney General disagrees with our inclusion of chapters 62B and
152, but concedes the remaining chapters are applicable.
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Id. at 37. Actions for failure to comply with Section 148B can be
pursued by the Commonwealth, or by the employees themselves. Id.
According to the MDA, being forced to treat the couriers
as employees, rather than independent contractors, "would
profoundly alter Xpressman's business model as well as the prices,
routes and services it offers customers." Xpressman has provided
evidence as to the changes that would ensue to recruiting,
interviewing, and hiring; the need for human resources management;
and the increased compensation, fringe benefits, and taxes. It
provided evidence that routes would also change since couriers
treated as employees would have to drive to and from Xpressman's
facility, would have less flexibility to accept short routes, and
could not drive the long routes without a mandatory break.
Finally, Xpressman contends that it would no longer be able to
provide on-demand services with employees. "All told, converting
independent contractor-couriers to employees would nearly double
Xpressman's labor costs . . . annually."
The FAAAA expressly preempts certain state laws relating
to motor carriers. Specifically, the FAAAA states:
Except as provided in paragraphs (2) and (3),
a State, political subdivision of a State, or
political authority of 2 or more States may
not enact or enforce a law, regulation, or
other provision having the force and effect of
law related to a price, route, or service of
any motor carrier (other than a carrier
affiliated with a direct air carrier covered
by section 41713(b)(4)) or any motor private
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carrier, broker, or freight forwarder with
respect to the transportation of property.
49 U.S.C. § 14501(c)(1) (2005).
The MDA moved for summary judgment, arguing that the
FAAAA preempts the B Prong, the second requirement, of Section
148B. The Attorney General cross-moved for summary judgment on all
counts, arguing that the case does not present a justiciable case
or controversy. In the event that summary judgment was not granted
in her favor, the Attorney General argued that the FAAAA does not
preempt Section 148B and asked for additional discovery pursuant to
Federal Rule of Civil Procedure 56(d). The Attorney General
subsequently moved to compel additional deposition time under
Federal Rule of Civil Procedure 30(d)(1), and the further
production of documents.
The district court found a justiciable case or
controversy and denied the Attorney General's cross-motion for
summary judgment on this ground. The district court held that the
FAAAA does not preempt Section 148B, and dismissed the MDA's
preemption claims on the merits. Finally, the district court
denied as moot the Attorney General's motion to compel since it
sought information solely related to the now-dismissed preemption
claims. The MDA appealed the district court's holding.
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II. Justiciability
In her brief, the Attorney General argues that the
district court erred in ruling that the MDA alleged a justiciable
case or controversy. The Attorney General failed to cross-appeal
the district court's ruling on this issue. Generally, "[a] party
who neglects to file a cross-appeal may not use his opponent's
appeal as a vehicle for attacking a final judgment in an effort to
diminish the appealing party's rights thereunder." Sueiro Vázquez
v. Torregrosa de la Rosa, 494 F.3d 227, 232 (1st Cir. 2007)
(quoting Figueroa v. Rivera, 147 F.3d 77, 81 (1st Cir. 1998)).
Here, however, we will review the Attorney General's argument since
it concerns our own jurisdiction as well. See, e.g., United
Seniors Ass'n, Inc. v. Philip Morris USA, 500 F.3d 19, 23 (1st Cir.
2007).
The Attorney General argues that the "MDA essentially
seeks an advisory opinion on whether one prong of section 148B's
three-prong test is preempted." There is no dispute that in order
to classify its couriers as independent contractors, the MDA must
satisfy all three prongs of the Massachusetts statute. The MDA has
made no showing, however, as relates to Prong A or Prong C. Even
if we hold Prong B preempted, according to the Attorney General,
the couriers may still be classified as employees.
The divide between a valid declaratory judgment and an
invalid advisory opinion can be narrow. See MedImmune, Inc. v.
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Genentech, Inc., 549 U.S. 118, 127 (2007). "Basically, the
question in each case is whether the facts alleged, under all the
circumstances, show that there is a substantial controversy,
between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory
judgment." Id. (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312
U.S. 270, 273 (1941)).
The MDA's complaint alleges that "[b]ecause many MDA
members engage independent contractor delivery drivers or contract
with entities that engage independent contractor delivery drivers,
they arguably violate the Statute and this places them in peril of
an enforcement action and civil actions by private parties." This
peril is not remote or speculative as evidenced by the three MDA
members who were defendants in state civil suits brought by private
parties for misclassification under Section 148B. See MDA I, 671
F.3d at 39.
A decision on Prong B would lift a bar to couriers'
classification as independent contractors even if it does not
conclusively resolve their classification. In Weaver's Cove
Energy, LLC v. Rhode Island Coastal Resources Management Council,
589 F.3d 458 (1st Cir. 2009), we held that a plaintiff could
challenge two regulatory barriers in the process of obtaining
authorization for a Liquified Natural Gas terminal, even if more
remained. See id. at 467-69. Resolution of these two requirements
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would be neither "advisory" nor "irrelevant," we held, since they
"would cease to be barriers to ultimate approval of the project."
Id. at 469. Likewise, review of Prong B is not advisory since it
stands as a barrier to individual couriers' classification as
independent contractors.
III. Preemption
The MDA challenges the district court's formulation of
the preemption test under the FAAAA and its application to Section
148B. Since federal preemption is a question of statutory
construction, we review these issues de novo. DiFiore v. Am.
Airlines, Inc., 646 F.3d 81, 85 (1st Cir. 2011).
"Congressional intent is the principal resource to be
used in defining the scope and extent of an express preemption
clause." Brown v. United Airlines, Inc., 720 F.3d 60, 63 (1st Cir.
2013). We must "focus first on the statutory language, 'which
necessarily contains the best evidence of Congress' pre-emptive
intent.'" Dan's City Used Cars, Inc. v. Pelkey, 133 S. Ct. 1769,
1778 (2013) (quoting CSX Transp., Inc. v. Easterwood, 507 U.S. 658,
664 (1993)). We may also consider the clause's purpose, history,
and the surrounding statutory scheme. Brown, 720 F.3d at 63.
The FAAAA states: "[A] State . . . may not enact or
enforce a law . . . related to a price, route, or service of any
motor carrier . . . with respect to the transportation of
property." 49 U.S.C. § 14501(c)(1) (emphasis added). The first
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phrase, "related to a price, route, or service," is borrowed from
the earlier Airline Deregulation Act ("ADA") and interpreted
identically. See Rowe v. N.H. Motor Transp. Ass'n, 552 U.S. 364,
370 (2008). The second phrase, "with respect to the transportation
of property," is unique to the FAAAA. See Dan's City, 133 S. Ct.
at 1778.
We hold that the district court incorrectly applied the
first clause, and incorrectly interpreted the second clause. It
read the first clause too narrowly, and the second clause too
broadly. We consider each in turn.
A. Related to a Price, Route, or Service
1. Broad Standard
To trigger preemption under the FAAAA, a state law must
"relate[] to a price, route, or service" of a motor carrier. 49
U.S.C. § 14501(c)(1). "The phrase 'related to' . . . embraces
state laws 'having a connection with or reference to' carrier
'rates, routes, or services,' whether directly or indirectly."
Dan's City, 133 S. Ct. at 1778 (quoting Rowe, 552 U.S. at
370)(internal quotation marks omitted). Under this rubric, a state
statute is preempted if it expressly references, or has a
significant impact on, carriers' prices, routes, or services. See
Morales v. Trans World Airlines, Inc., 504 U.S. 374, 388 (1992).
The "related to" test is purposefully expansive. In
Morales, the Court first explained that a statute relates to
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prices, routes, or services if it "ha[s] a connection with or
reference to" the same. 504 U.S. at 384. The Court held that
guidelines governing airlines triggered preemption under the ADA
because they expressly referenced fares, but also because they had
a "forbidden significant effect upon fares." Id. at 388.
Congress used the same language as found in the ADA when
writing the FAAAA and intended to incorporate the Morales Court's
"broad preemption interpretation." Rowe, 552 U.S. at 370 (quoting
H.R. Conf. Rep. 103-677, at 83 (1994), reprinted in 1994
U.S.C.C.A.N. 1715, 1755). As such, the Court has applied the same
sweeping test to the "related to" language in the FAAAA. Id. at
370-71. In Rowe, the Court held that a Maine law regulating the
delivery of tobacco to customers within the state was preempted
under the FAAAA, in part, because it had a "'significant' and
adverse 'impact' in respect to the federal Act's ability to achieve
its pre-emption-related objectives." Id. at 371-72.
Recently, the Supreme Court highlighted the breadth of
the test when it held that a common law claim for breach of an
implied covenant "relates to" airlines' prices, routes, or
services. Northwest, Inc. v. Ginsberg, 134 S. Ct. 1422, 1430-31
(2014). The Court's analysis focused not on the claim in the
abstract, but on the underlying facts. See id. The Court found
that the claim "clearly has such a connection" since it sought
respondent's reinstatement in Northwest's frequent flyer program.
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Id. at 1430. "[T]he Northwest program is connected to the
airline's 'rates' because the program awards mileage credits that
can be redeemed for tickets and upgrades." Id. at 1431. "The
program is also connected to 'services,' i.e., access to flights
and to higher service categories." Id.
There is, however, a necessary limit to the scope of
FAAAA preemption. We have previously noted that "countless state
laws have some relation to the operations of airlines and thus some
potential effect on the prices charged or services provided."
DiFiore, 646 F.3d at 86. State laws whose effect is only "tenuous,
remote, or peripheral" are not preempted. See Rowe, 552 U.S. at
371 (quoting Morales, 504 U.S. at 390). In Morales, the Court thus
dismissed concerns that the ADA would preempt state laws against
gambling or prostitution. 504 U.S. at 390. In Rowe, the Court
suggested that a "state regulation that broadly prohibits certain
forms of conduct and affects, say, truckdrivers, only in their
capacity as members of the public (e.g., a prohibition on smoking
in certain public places)" would not be preempted. 552 U.S. at
375.
The Attorney General argues for a categorical rule
against preemption of "background" labor laws, drawing on certain
cases. The Attorney General proffers "a sensible rubric" to
confine FAAAA preemption: "background state statutes are not
preempted if they are generally applicable and not directed to a
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particular area of federal authority." Thus, "general State
employment statutes and other State background laws [are] per se
'tenuous' and 'remote.'" According to the Attorney General,
"Section 148B's definition of 'employee' is the quintessential
'background law' that applies to every industry in the Commonwealth
and that arises in an area -- general employment law -- that is
separate and distinct from the regulation of inter-firm competition
that concerned Congress in the FAAAA."
Some courts have indeed used the language of "background"
laws as a shorthand for laws that are found to be too tenuous,
remote, or peripheral to carriers' prices, routes, or services to
satisfy the "related to" test. While we have never used that
language and do not find such language particularly helpful, we
describe the cases.
In Dilts v. Penske Logistics, LLC, No. 12-55705, 2014 WL
4401243 (9th Cir. Sept. 8, 2014), for example, the Ninth Circuit
found that "generally applicable background regulations that are
several steps removed from prices, routes, or services, such as
prevailing wage laws or safety regulations, are not preempted."
Id. at *7. These laws may have some effect on prices, routes, or
services, but that effect is insufficient to trigger federal
preemption. See id. The Ninth Circuit determined that
California's meal and rest break laws were "broad laws applying to
hundreds of different industries with no other forbidden connection
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with prices, routes, and services." Id. (alterations omitted)
(internal quotation marks omitted). The Ninth Circuit concluded
that "[t]he FAAAA does not preempt California's meal and rest break
laws as applied to Defendants, because those state laws are not
'related to' Defendants' prices, routes, or services." Id. at *10.
The Attorney General also relies on S.C. Johnson & Son,
Inc. v. Transport Corp. of America, Inc., 697 F.3d 544 (7th Cir.
2012).2 There, the Seventh Circuit considered the plaintiffs'
claims for fraudulent misrepresentation by omission, conspiracy to
commit fraud, criminal conspiracy to violate Wisconsin's bribery
statute, and Wisconsin's state equivalent of the federal
racketeering statute. Id. at 557-58. The Seventh Circuit held
that the first two claims were preempted, as a matter of law, since
they "relate sufficiently to rates, routes, or services." Id. at
557. The latter two claims were not preempted since they were too
tenuously related to the regulation of the prices, routes, and
2
A district court in the Northern District of Illinois
recently cited S.C. Johnson & Son, Inc. v. Transport Corporation of
America, Inc. when holding that a state labor law, which included
the definition of an independent contractor, was not preempted
under the FAAAA. Costello v. BeavEx Inc., No. 12 C 7843, 2014 WL
1289612, at **3, 5-7 (N.D. Ill. Mar. 31, 2014). The court found
that the Illinois Wage Payment and Collection Act ("IWPCA") "fits
the mold of a 'background law.'" Id. at *6. "The law applies to
all employers and employees in Illinois and lays out guidelines
for, among other things, pay periods, deductions from wages, and
avenues to pursue in the event of employment disputes." Id. Like
all economic regulation, the IWPCA may "play[] a role in setting
the market price," but "[t]his is not sufficient to support
preemption." Id. (citing S.C. Johnson, 697 F.3d at 558).
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services of the trucking industry. Id. at 558-60. The Seventh
Circuit characterized them as "state laws of general application
that provide the backdrop for private ordering." Id. at 558.
Phrased another way, they were "background laws" that affected the
costs of inputs to market transactions, such as labor, capital, or
technology. Id. "[L]aws that regulate these inputs operate one or
more steps away from the moment at which the firm offers its
customer a service for a particular price." Id.
The Attorney General's proposed construct, however, runs
counter to Supreme Court precedent broadly interpreting the
"related to" language in FAAAA. In the first articulation of the
test, the Morales Court dismissed the idea that a state statute
must regulate or specifically address the airline industry in order
to be preempted. 504 U.S. at 385-86. "Besides creating an utterly
irrational loophole (there is little reason why state impairment of
the federal scheme should be deemed acceptable so long as it is
effected by the particularized application of a general statute),
this notion similarly ignores the sweep of the 'relating to'
language." Id. at 386. The error of the Attorney General's test
is perhaps best highlighted by the Court's recent decision
concerning a state law claim for breach of an implied covenant of
good faith and fair dealing. See Northwest, 134 S. Ct. at 1430-31.
This generally applicable state common law claim would fail the
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Attorney General's "sensible rubric," and yet, the Court found that
it "clearly" satisfied the "related to" test, id. at 1430.
In addition, the Attorney General's construct is not
supported by the jurisprudence in this circuit. In DiFiore, we
recognized that some cases would fall beyond the scope of FAAAA
preemption, but never suggested a categorical rule. See 646 F.3d
at 87. More recently, in Bower v. Egyptair Airlines Co., 731 F.3d
85 (1st Cir. 2013), we held that the plaintiff's common law tort
claims of interference with custodial relations, negligence,
negligent infliction of emotional distress, and loss of filial
consortium were preempted by the ADA since they related
sufficiently to the service of an air carrier. Id. at 93, 98. We
noted that a "state law may be preempted even if it is indirectly
or generally applicable." Id. at 95.
Finally, the Attorney General's construct is contradicted
by the very cases on which she relies. The Seventh Circuit
disclaimed any notion of "a simple all-or-nothing question." See
S.C. Johnson, 697 F.3d at 550. "[I]nstead, the court must decide
whether the state law at issue falls on the affirmative or negative
side of the preemption line." Id. A careful analysis of two of
the claims at issue showed the label of "background" to be
warranted given their tenuous effect on prices, routes, and
services. See id. at 558-60. The Seventh Circuit found two other
claims, for fraudulent misrepresentation by omission and conspiracy
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to commit fraud, sufficiently related to rates, routes, or services
to trigger preemption, despite their general applicability. Id. at
557.
Further, in Dilts, the Ninth Circuit recognized that
generally applicable statutes, "broad laws applying to hundreds of
different industries," could be preempted if they have a "forbidden
connection with prices, routes, and services." See 2014 WL
4401243, at *7 (alterations omitted). "[T]hat is," the Ninth
Circuit specified, "those that do not directly or indirectly
mandate, prohibit, or otherwise regulate certain prices, routes, or
services [] are not preempted by the FAAAA." Id.
We refuse the Attorney General's invitation to adopt such
a categorical rule exempting from preemption all generally
applicable state labor laws. As evidenced by Northwest, we must
carefully evaluate even generally applicable state laws for an
impermissible effect on carriers' prices, routes, and services.
The court must engage with the real and logical effects of the
state statute, rather than simply assigning it a label.
2. Application of the FAAAA to Section 148B
The MDA argues that Section 148B's effective ban on the
use of independent contractors renders it preempted under either a
facial or an as-applied challenge. The MDA argues that the FAAAA
preempts Section 148B on its face due to its logical effect on the
same-day delivery industry as a whole. Since individual couriers
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necessarily act within the usual course of the business of their
employers, they must be deemed employees. As such, Section 148B
"effectively prohibits motor carriers from engaging their couriers
as independent contractors."
The MDA's amicus curiae,3 the Chamber of Commerce, argues
that "[a] state law specifying who must provide the service -- an
employee of the carrier -- is no different from regulating the
service itself." The Attorney General contests the MDA's
characterization of the law as one that bans the use of individual
independent contractors.4
The MDA also argues that the FAAAA preempts Section 148B
due to its impermissible effect on the prices, routes, and services
of Xpressman. Preemption is implicated if the statute has a
forbidden significant effect on even one motor carrier. See N.H.
Motor Transp. Ass'n v. Rowe, 448 F.3d 66, 72-73 (1st Cir. 2006),
aff'd on other grounds sub nom. Rowe v. N.H. Motor Transp. Ass'n,
552 U.S. 364 (2008). According to Xpressman, the re-classification
3
We express our appreciation to the several amici for their
assistance.
4
At oral argument, the Attorney General argued that Section
148B did not operate as a bar to the classification of individual
couriers as independent contractors so long as the delivery company
arranged deliveries, and the courier performed the deliveries.
This parses the issue too finely. On the facts presently reflected
in the record, the couriers deliver packages for delivery
companies. There can be no dispute that they act in the course of
business for the delivery companies, even if one performs the
deliveries and the other arranges the deliveries.
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of its 58 independent couriers as employees would change the routes
offered to customers, would preclude on-demand delivery services,
and would drastically increase Xpressman's costs and thus its
prices. The Attorney General argues that the MDA "misstates or
overstates" this effect.
The district court held that Section 148B's "connection
to prices, routes and services is insufficient for the FAAAA
. . . to preempt it." The district court characterized Section
148B as a generally applicable wage law, and noted, "[t]hat a
regulation on wages has the potential to impact costs and therefore
prices is insufficient to implicate preemption." The district
court worried that "to find the 'FAAAA preempts wage laws because
they may have an indirect impact on [a motor carrier]'s pricing
decisions amounts to an invitation to immunize it from all state
economic regulation.'"
In so holding, the district court made several critical
errors. First, a statute's "potential" impact on carriers' prices,
routes, and services can be sufficient if it is significant, rather
than tenuous, remote, or peripheral. We have previously rejected
the contention that empirical evidence is necessary to warrant
FAAAA preemption, and allowed courts to "look[] to the logical
effect that a particular scheme has on the delivery of services or
the setting of rates." Rowe, 448 F.3d at 82 n.14. Second, this
logical effect can be sufficient even if indirect, as described
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above. Far from immunizing motor carriers from all state economic
regulations, we are following Congress's directive to immunize
motor carriers from state regulations that threaten to unravel
Congress's purposeful deregulation in this area. Finally, the
district court failed to consider the impact of the statute on
carriers' routes and services, and not merely their prices.
"Ultimately," the district court held, "the Statute's
effect on Xpressman's labor costs is immaterial." "Even if the
impact was 'significant,' . . . this would not change the fact that
the Statute does not relate to the 'movement of property.'" In
essence, the district court found that its holding that Section
148B did not meet the second requirement, "with respect to the
transportation of property," obviated the need to investigate its
potential success on the first requirement. Since we conclude that
the district court erred in its interpretation of the second
section of the FAAAA, a determination on the first requirement is
now necessary.
We express no view on the sufficiency of the evidence
before the district court. In opposition to the MDA's motion for
summary judgment, the Attorney General had argued that it needed to
conduct additional discovery in order to develop facts necessary to
its opposition. See Fed. R. Civ. P. 56(d). The district court did
not reach the Rule 56(d) motion. The district court ought to
decide this matter in the first instance and determine whether the
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Attorney General has met her burden of establishing the need for
additional discovery under Rule 56(d).
B. With Respect to the Transportation of Property
The FAAAA preempts state laws "related to a price, route,
or service of any motor carrier . . . with respect to the
transportation of property." 49 U.S.C. § 14501(c)(1) (emphasis
added). The district court interpreted the second phrase as
imposing an independent, and severe, requirement for FAAAA
preemption. The district court explained that, "[u]nlike the ADA,
FAAAA preemption applies only [] to state statutes regulating the
'transportation of property.'" Since Section 148B "has a broad
application to a swath of state wage and hour laws, which, in turn,
apply to all employees regardless of the underlying industry," the
district court determined that Section 148B failed to relate
sufficiently to the transportation of property.
In reaching this conclusion, the district court relied
heavily on the Supreme Court's recent decision in Dan's City, 133
S. Ct. 1769. There, the Court considered state law claims based on
a New Hampshire statute that regulated the removal, storage, and
disposal of abandoned motor vehicles after they had been towed, id.
at 1776, and concluded that the state law claims were not preempted
under the FAAAA, id. at 1775. The Court noted that the phrase,
"with respect to the transportation of property," in the FAAAA was
a "conspicuous" addition to the ADA preemption provision. Id. at
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1778. The Court stated that the second phrase "'massively limits
the scope of preemption' ordered by the FAAAA." Id. "[F]or
purposes of FAAAA preemption, it is not sufficient that a state law
relates to the 'price, route, or service' of a motor carrier in any
capacity; the law must also concern a motor carrier's
'transportation of property.'" Id. at 1778-79.
The district court's rule misreads the import of Dan's
City. While Dan's City stated only that the law must "concern" a
motor carrier's transportation of property, the district court
required the law to "regulate" the motor carrier's transportation
of property. Such a strict reading of the second phrase would
effectively nullify the expansive reading of the first phrase. A
general statute, whose effect was indirect but significant, would
no longer be preempted. Although the Court expressed its
understanding that the second phrase "limits" the scope of FAAAA
preemption, it gave no indication that the second phrase in fact
overrules all earlier precedent on the first phrase. Without a
clear statement from the Court, we cannot assume that its opinion
intended to do so.
Instead, we understand Dan's City to ensure that FAAAA
preemption does not apply when a state statute concerns motor
carriers in matters unrelated to the transportation of property.
In Dan's City, the Court acknowledged that a tow truck qualifies as
a motor carrier, but stressed that the statute did not affect the
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operation of tow trucks. 133 S. Ct. at 1776 n.1, 1779. Instead,
the statute regulated the disposal of vehicles after their
transportation by towing had ended. Id. at 1779. The Court stated
"it is not sufficient that a state law relates to the 'price,
route, or service' of a motor carrier in any capacity; the law must
also concern a motor carrier's 'transportation of property.'" Id.
at 1778-79 (emphasis added).
This interpretation of the second phrase limits the scope
of FAAAA preemption, as noted by the Court in Dan's City. The
second phrase excludes from FAAAA preemption any state law that
affects a motor carrier's prices, routes, or services outside the
context of the transportation of property. The scope of FAAAA
preemption would be far broader if it encompassed state statutes
that affected motor carriers in any capacity. Instead, the FAAAA
is carefully tailored to preempt only those statutes that affect a
motor carrier's transportation of property. This excludes, for
example, statutes that affect a motor carrier's transportation of
passengers, statutes that affect a motor carrier's transportation
of garbage, or, like in Dan's City, statutes that relate to motor
carriers after the transportation of property has ended.
The facts of this case are a far cry from Dan's City.
Section 148B governs the classification of the couriers for
delivery services. It potentially impacts the services the
delivery company provides, the prices charged for the delivery of
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property, and the routes taken during this delivery. The law
clearly concerns a motor carrier's "transportation of property."
The district court must address on remand whether this effect on
delivery companies' prices, routes, and services rises to the
requisite level for FAAAA preemption.
IV. Conclusion
The FAAAA preempts state laws that "relate to" the
prices, routes, or services of a motor carrier "with respect to the
transportation of property." We reverse and remand to the district
court to determine, consistent with the principles elucidated in
this opinion, whether Section 148B satisfies the broad preemption
test based on a review of the full record.
So ordered.
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