Anna S. Petrey, D/B/A Magnum Towing v. City of Toledo

Citations: 246 F.3d 548; 2001 U.S. App. LEXIS 5414; 2001 WL 310320Docket: 99-4441

Court: Court of Appeals for the Sixth Circuit; April 2, 2001; Federal Appellate Court

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The case Anna S. Petrey v. City of Toledo involves an appeal by the City of Toledo against a district court's ruling that granted summary judgment in favor of Anna Petrey. Petrey challenged the legality of Toledo's towing ordinances, arguing they were preempted by federal law 49 U.S.C. §14501(c), which prohibits state and local laws regulating the price, route, or service of motor carriers regarding property transportation. Toledo's Municipal Code requires tow truck operators to obtain licenses (Class A or Class B) from the City, imposing various requirements for each license type. Class A licenses, which are more costly and have stricter requirements than Class B, allow for non-consensual tows at the request of the police. The court affirmed part of the district court’s decision but reversed another part, indicating a nuanced interpretation of Petrey's claims under federal law and 42 U.S.C. §1983 relating to the denial of federal rights.

The City is organized into police towing districts, with their size and boundaries set by the Director of Public Safety. Towing work is allocated among Class A license holders in each district. For several years in the 1990s, the same eleven companies held the exclusive Class A licenses for the city's police towing. Petrey's company, Magnum Towing, began operations in 1991 but failed to renew her Class B license in 1992 and 1993. After a citation for unlicensed towing in 1994, she renewed her Class B license and applied for a Class A license in March 1995. Her application was denied due to a lack of legal business operation in the preceding two years and because the number of Class A licenses was capped at eleven. Petrey continued to apply for a Class A license in 1996 and 1997, but these were also denied, and her 1998 application was returned for insufficient information.

On April 3, 1998, Petrey filed a lawsuit in federal court, seeking to challenge the enforcement of certain Toledo Municipal Code provisions that impacted her ability to obtain a Class A license and perform non-consensual tows. She contested various requirements applicable to Class A license holders, including storage space and special use permit mandates, and claimed violations of her equal protection and substantive due process rights under 42 U.S.C. §1983. Petrey alleged retaliatory actions against her for exercising her First Amendment rights following her complaints about the licensing process.

The City of Toledo moved for summary judgment on February 16, 1999. The district court ruled that while states could regulate safety under 49 U.S.C. §14501(c), political subdivisions like Toledo could not, ultimately denying the City's motion regarding Petrey's §1983 claims. However, it granted the City's motion concerning her First Amendment claim. The court allowed Petrey to file a motion for summary judgment by June 30, 1999. On that date, she submitted her motion regarding the preemption of Chapter 765 by federal law, prompting the City to renew its motion concerning her §1983 claims.

On October 21, 1999, the district court ruled in favor of Petrey, granting her motion for summary judgment by declaring Toledo's towing ordinances preempted by federal law and permanently enjoining the City from enforcing the challenged provisions. The court denied the City's summary judgment motion concerning Petrey's §1983 claims, establishing that Petrey had been deprived of her federal rights due to the preemption of Toledo's regulations. Remaining issues included determining damages Petrey incurred and her eligibility for attorneys' fees, expenses, and costs under 42 U.S.C. §1988. The court, under Fed. R. Civ. P. 54(b), found no just reason to delay the City's appeal regarding the permanent injunction, which was subsequently filed. While the appeal was pending, the district court stayed its injunction, noting that the City had granted Petrey a Class A license during the litigation.

The appellate court reviews summary judgments de novo, requiring the moving party to prove there are no genuine material fact issues and that they are entitled to judgment as a matter of law. The review of preemption under 49 U.S.C. §14501(c) is also a question of law subject to de novo review. The preemption doctrine, rooted in the Supremacy Clause of the U.S. Constitution, asserts that state laws cannot supersede federal laws unless Congress clearly intends to do so. The preemption provision of §14501(c) originated from the Federal Aviation Administration Authorization Act of 1994 and was later recodified in the Interstate Commerce Commission Termination Act of 1995, stating that states cannot enact laws affecting motor carriers' pricing, routes, or services regarding property transportation.

Two exceptions to the general preemption rule under §14501(c)(1) are pertinent in this case. The first exception, enacted in 1994, allows states to implement safety regulations without being subject to preemption as outlined in 49 U.S.C. §14501(c)(2)(A). The second exception, added later under the ICCTA, enables states or their political subdivisions to regulate the pricing of non-consensual tow truck transportation, as per 49 U.S.C. §14501(c)(2)(C). This indicates that Congress intended the general preemption provision to encompass tow trucks.

The City of Toledo argues that its towing ordinances are not preempted by §14501(c)(1) through two main contentions. First, Toledo claims that its provisions fit within the safety regulation exception of §14501(c)(2)(A), a stance deemed unpersuasive. Second, Toledo asserts that its standards for towers conducting non-consensual tows do not constitute laws or regulations with legal force under §14501(c)(1). Instead, these standards reflect Toledo's interests as a market participant in selecting towing companies based on their capabilities. 

Toledo also argues that even if its Class B license provisions for private tows are preempted, its Class A license requirements fall under the municipal-proprietor exception. Recent rulings by the Fifth and Ninth Circuit Courts of Appeals support this viewpoint, affirming that Toledo can set standards for non-consensual police tows without falling under the preemption of §14501(c). The municipal-proprietor exception, recognized in the Supreme Court case Associated Builders, confirms that such local government actions can be exempt from preemption when acting as a market participant.

The court order mandated an uninterrupted clean-up project, disallowing delays due to labor disputes. In response, the Massachusetts Water Resources Authority (MWRA) and its project manager, Kaiser, established a labor agreement aimed at ensuring labor stability. This agreement required specific dispute resolution methods and mandated union membership for employees within seven days of employment. Compliance with this labor agreement was a prerequisite for all contractors and subcontractors wishing to participate in the project. 

A contractor contested the labor agreement's enforcement, arguing that it was preempted by the National Labor Relations Act (NLRA). The Court rejected this claim, delineating between the state's regulatory role and its capacity as a market participant. It emphasized that pre-emption doctrines pertain only to state regulation, not to proprietary actions. The Court characterized the labor agreement as a measure to facilitate an efficient project completion rather than a regulatory attempt. 

This position contrasted with the precedent set in Wisconsin Dep't of Indus., Labor, Human Relations v. Gould, where a Wisconsin statute prohibiting procurement from labor law violators was deemed preempted by the NLRA, as it aimed to deter violations rather than address economic needs. The Fifth Circuit further supported this distinction by applying the municipal-proprietor exception to 49 U.S.C. §14501(c)(1) in Cardinal Towing, where a city ordinance for police towing services was upheld as it focused on the city's proprietary interest rather than broader societal objectives.

The court determined that contracting with a single towing company enhances administrative efficiency and monitoring of towing performance, with city-imposed specifications focused on reliable service. The Ninth Circuit evaluated a broader towing scheme in Santa Ana, California, where various provisions required permits for towing companies and drivers, mandated storage facilities and business hours, and displayed towing rates. A specific provision authorized the police chief to create a rotation for non-consensual police tows, which was upheld as a municipality acting as a market participant, establishing rules for contracts exclusive to the City. However, the court preempted generally applicable permit requirements for towers wishing to participate in this rotation, indicating that while the city can set standards for participation, it cannot impose the city-wide permit requirement that was found preempted. The court aligned its reasoning with the Fifth and Ninth Circuits, affirming the municipal-proprietor exception to preemption under §14501(c)(1), which is consistent with the aim of deregulating the motor carrier industry. It will examine whether Toledo's towing ordinances are similarly protected from preemption; most of the challenged ordinances pertain to non-consensual tows for the Toledo Police Department, with specific license requirements impacting only towing services for the City.

Toledo's non-consensual police towing provisions are designed to ensure safe and efficient vehicle towing and storage, preventing street congestion. Section 14501(c)(1) does not restrict Toledo's ability to select towing companies, allowing the City to avoid working with substandard or slow-response towers. By establishing criteria for towing companies, Toledo can guarantee adequate space for towed vehicles, safe storage facilities, and well-trained tow truck drivers. Limiting the number of towers in the Class A program enhances administrative efficiency and performance monitoring. These towing provisions are proprietary, aimed at meeting the specific needs of the Toledo Police Department, and do not constitute broader regulatory attempts on the towing industry, thus are not preempted by 49 U.S.C. §14501(c)(1).

In contrast, the challenge to Toledo Mun. Code §765.02(c), which mandates that all tow drivers obtain a special license, does not fall under the proprietary interest exception since it applies universally, not just to police-ordered tows. This provision has been removed since the lawsuit was filed and will not be considered for declaratory or injunctive relief. However, it is still relevant for assessing potential monetary damages under 42 U.S.C. §1983. Section 14501(c)(1) prohibits state and local laws that affect motor carrier services, including those regulating towing, and all relevant circuits have upheld its applicability to such provisions.

Courts have determined that ordinances like Toledo's are related to the towing industry's price, route, or service. Consequently, §765.02(c) is preempted by the plain language of §14501(c)(1), unless an exception applies. One such exception, §14501(c)(2)(C), allows states to regulate the price of non-consensual tows, which does not pertain to Toledo's licensing requirement for tow drivers. Another relevant exception is §14501(c)(2)(A), which preserves state safety regulatory authority concerning motor vehicles and insurance requirements. Toledo argues that its towing regulations are safety-related and thus exempt from preemption. 

To assess this, two questions arise: whether §14501(c)(2)(A) applies to regulations by political subdivisions and if Toledo's provisions qualify as safety regulations. §14501 references the powers of both states and their political subdivisions, allowing for regulations related to transportation. However, §14501(c)(2)(A) lacks language referring to political subdivisions, leading to a circuit split: the Ninth and Eleventh Circuits have ruled that safety regulations by political subdivisions are not exempted, while the Second Circuit holds the opposite view. After examining statutory language and precedent, this analysis agrees with the Ninth and Eleventh Circuits, concluding that safety regulations by political subdivisions do not fall within the preemption exception.

The statutory language of §14501 indicates that the safety regulation exception to preemption does not apply to political subdivisions. Although political subdivisions are referenced seven times in §14501, they are absent in §14501(c)(2)(A). The term "State" is defined explicitly to include the 50 states and the District of Columbia. The Supreme Court's principle, established in Russello v. United States, suggests that Congress's inclusion of specific language in some sections while omitting it in others implies intentionality. Thus, it can be concluded that while states can regulate motor carrier safety, political subdivisions cannot.

In Ace Auto, the Second Circuit's reliance on Wisconsin Public Intervenor v. Mortier is deemed inappropriate because Mortier addressed the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), which does not contain explicit preemptive language like §14501 does concerning the towing industry. Although there is a presumption that state police powers are not to be overridden by federal law unless explicitly stated, §14501(c)(1) clearly expresses Congress's intent to preempt state and local regulation of the towing industry, with limited exceptions.

The Eleventh Circuit's opinion in Mayer draws a distinction between FIFRA and §14501(c), highlighting that the Mortier decision involved insufficient evidence of preemption due to Congress's silence regarding political subdivisions. However, in this case, the explicit preemption in §14501 contradicts any implication that political subdivisions are included in the exception to the preemption rule. Additionally, while FIFRA contains minimal references to political subdivisions, §14501 includes multiple references, reinforcing the conclusion that political subdivisions are not exempt from the stated preemption.

Congress did not intend for political subdivisions to be exempt from preemption in safety regulation matters. This is supported by Sixth Circuit case law, particularly in CSX Transp. Inc. v. City of Plymouth, where the court held that the Federal Railway Safety Act (FRSA) preempted municipal regulations enacted under state constitutional authority, emphasizing that exceptions to preemption apply only to state laws, not municipal ordinances. Similarly, in the current case, Toledo's request for its safety regulations to be exempted under §14501(c)(2)(A) is rejected, as §14501(c)(1) preempts municipal regulation of the towing industry without an explicit exemption for municipal safety regulation. The Ohio Manufacturers Ass'n v. City of Akron case further supports this interpretation, where the court noted that OSHA's preemption of "state law" did not extend to municipal law because Congress had explicitly referred to political subdivisions in other sections of the OSH Act. The conclusion drawn is that Congress's omission of political subdivisions in the exceptions to preemption in §14501(c)(2)(A) indicates a deliberate intention to include them under the general preemption provisions.

The legislative history and purpose of §14501 indicate that Congress intentionally excluded political subdivisions from §14501(c)(2)(A) to promote competition in the motor transportation industry by minimizing local regulations. The ICCTA aimed to eliminate diverse and conflicting state regulations that could hinder interstate commerce, as stated in the conference report, which highlighted the inefficiencies and increased costs caused by state economic regulation. The Eleventh Circuit inferred that safety and insurance regulations should be established at the state level to avoid disruptive local ordinances.

Consequently, Toledo lacks the authority to impose safety regulations under §14501(c)(2)(A), leading to the conclusion that Toledo's towing provisions related to non-consensual towing work for the city fit within the municipal-proprietor exception to preemption and are not affected by §14501(c)(1). However, the city's general licensing requirement for tow drivers does not qualify for this narrow exception and is preempted by §14501(c)(1), meaning it should not have been enforced against Petrey or other tower operators. The district court's ruling favoring Petrey’s preemption claims is partially affirmed and partially reversed.

In Petrey's amended complaint, she alleges that Toledo's enforcement of its towing regulations, despite federal preemption, harmed her, seeking damages under 42 U.S.C. §1983. The district court denied Toledo's summary judgment motion regarding these claims, recognizing that Toledo's violations of §14501(c) deprived Petrey of her federal right to not be regulated. Although most of Toledo's towing provisions are not preempted, relief under §1983 may still be available based on the enforcement of §765.02(c).

The provision in question was deemed preempted and violated a federal right belonging to Petrey, which is not subject to regulation. Under 42 U.S.C. §1983, cities can be directly sued, as established in Monell v. Department of Social Services, affirming that §1983 is applicable when actions under state law infringe federal statutes. A two-step analysis determines the availability of §1983 remedies: first, the plaintiff must demonstrate a violation of a federal right which includes a clear obligation on the governmental unit and not merely a preference by Congress. The right asserted must also be specific enough for judicial enforcement and intended to benefit the plaintiff. The second step requires the defendant to prove that Congress provided a comprehensive enforcement mechanism that precludes §1983 remedies. This burden lies with the defendant, and the court tends to assume §1983 is available unless Congress explicitly states otherwise.

In Golden State Transit Corp. v. City of Los Angeles, the Supreme Court ruled that §1983 relief was warranted due to unlawful state interference with federally protected rights, establishing that the NLRA lacked a comprehensive enforcement scheme for such protections. The Court recognized the cab company as the intended beneficiary of the NLRA’s preemption.

Applying this analysis, Petrey's case meets the first step, as her towing company is clearly the intended beneficiary of 49 U.S.C. §14501(c)(1), which prohibits state regulation of the towing industry. Toledo's regulation violated this provision, thus infringing upon Petrey's federal right. For the second step, the district court demonstrated that 49 U.S.C. §14501 does not provide a comprehensive enforcement mechanism, allowing Petrey to seek §1983 relief for the unlawful state regulation. The enforcement provisions of the ICCTA do not permit relief against states or municipalities for violations of §14501(c).

Petrey's federal right under §14501(c) against regulation was violated, allowing for §1983 relief. The case is remanded to the district court to assess damages Petrey may have incurred due to this violation, as well as her entitlement to attorneys' fees, expenses, and costs under 42 U.S.C. §1988. However, the Class A license requirements imposed by Toledo are not preempted, meaning the City did not violate Petrey's federal right by denying her towing company the opportunity to perform non-consensual tows for the Toledo Police Department. The decision affirms in part and reverses in part the district court's ruling on preemption claims, confirming that Petrey was denied a federal right for which §1983 relief is available. The remand is specifically for determining the amount of damages incurred. Additionally, recent amendments to Toledo's licensing provisions do not affect the analysis, and several challenged provisions are no longer in effect, which will not be considered for injunctive or declaratory relief, although their preemption status remains relevant for potential monetary damages.

Section 14501(c)(2)(A) clarifies that general preemption does not limit a state's safety regulatory authority regarding motor vehicles, nor does it restrict a state's ability to impose highway route controls based on vehicle size, weight, or cargo hazards, or to regulate motor carriers concerning financial responsibility and insurance requirements. All four circuits that have considered the matter agree that §14501(c)(1) applies to state and local laws governing towing services. The specific Toledo towing provision challenged by Petrey is the requirement for all towers to obtain a special City towing license for operations within city limits, separate from the Class A licensing requirements. The dormant Commerce Clause prohibits state regulations that discriminate against or unduly burden interstate commerce. The distinction between a state acting as a market regulator versus a market participant is crucial; while states cannot favor their own citizens as regulators, they may do so as participants. Section 14501(c)(2)(C) permits political subdivisions to regulate prices for both private and police-ordered non-consensual tows, but this does not extend to the general towing license requirement in §765.02(c), as it is not a price regulation and applies beyond non-consensual tows.