Town of Southold, Town of Shelter Island, Cross Sound Ferry Services, Inc. v. Town of East Hampton, Docket No. 06-0335-Cv
Docket: 38
Court: Court of Appeals for the Second Circuit; February 7, 2007; Federal Appellate Court
Cross Sound Ferry Services, Inc. appeals a summary judgment from the United States District Court for the Eastern District of New York favoring the Town of East Hampton regarding Local Law No. 40 of 1997 (the "Ferry Law"). This law mandates that ferry operators obtain a special permit to use local terminals and restricts the types of ferries permitted. The plaintiffs, including Cross Sound and the Towns of Southold and Shelter Island, argue that the Ferry Law violates both the dormant Commerce Clause and the Equal Protection Clause of the U.S. Constitution, as well as the New York State Constitution. They claim the law represents an improper exercise of the Town's police power and sought to enjoin its enforcement.
The Town moved for summary judgment to dismiss the complaint, while the plaintiffs cross-moved for summary judgment on all claims except for their police power argument and sought to strike the Town's Rule 56.1 Statement, citing inadmissible evidence. The District Court granted the Town's motion and denied the plaintiffs' motions. The Court of Appeals vacated the District Court's judgment regarding the dormant Commerce Clause violation but affirmed the judgment on all other claims. Cross Sound, a Connecticut-based company, aims to expand its operations to East Hampton but is hindered by the Ferry Law, which effectively limits its service options to low-speed, passenger-only ferries unless in emergencies.
Long Island is situated in the Atlantic Ocean and is the southeasternmost part of New York State, extending 118 miles eastward from New York City and parallel to Connecticut's southern shore, separated by Long Island Sound. Suffolk County occupies the eastern section, bordered by Nassau County to the west, and is divided into two peninsulas, the North and South Forks, at Riverhead. Shelter Island lies between these two forks. The North Fork includes Southold, Orient Point, and Greenport, while the South Fork encompasses East Hampton, which contains the Village of East Hampton, parts of Sag Harbor, and various hamlets, including Montauk. Route 27, or Montauk Highway, serves as the primary east-west route through East Hampton.
Cross Sound operates ferry services connecting New London to Orient Point. For further travel to East Hampton, passengers can continue via car, bus, or train to Greenport, then take a ferry to Shelter Island, followed by another ferry to Sag Harbor. An alternative route involves a ferry from Bridgeport, Connecticut to Port Jefferson, then driving 52 miles to East Hampton. Seasonal ferry service from New London to Montauk is available from May to September.
East Hampton has long been a popular summer destination, with its population swelling to four or five times the year-round count due to tourism and seasonal homes. Traffic volumes on Montauk Highway are currently at or near capacity during summer, with other town roads experiencing an average annual increase of 8% in traffic. The Town Board of East Hampton is concerned about the significant public health and safety risks posed by road congestion, particularly in light of potential ferry service changes due to the development of nearby casinos and advancements in ferry technology.
In 1995, the Board placed a moratorium on new ferry services pending the completion of a comprehensive transportation plan, which led to the first town-wide transportation study since 1966. Following public hearings, the Board adopted the study as part of its Comprehensive Plan, highlighting severe summer road congestion in East Hampton that detracts from the town's rural character and safety, particularly on Route 27, where through traffic competes with local business traffic. The study indicated that traffic conditions are poor and likely to worsen with new ferry service, which could lead to significant degradation at roadway intersections near any new terminal.
Furthermore, the study assessed the environmental impact of increased traffic, emphasizing that additional ferry traffic would exacerbate vehicle emissions and noise, especially in light of the area’s current non-attainment status for ozone and carbon monoxide under the Clean Air Act. The Board also noted safety risks from high-speed ferries, citing their larger wave generation and high fuel consumption. In response to these concerns, the Board recognized the necessity for a special use permit for any ferry service, as adequate parking and public restrooms were deemed essential.
In 1997, after public hearings and opposition from Cross Sound regarding the moratorium, East Hampton enacted Local Law No. 40, known as the Ferry Law, effective December 29, 1997. This law mandates that no person may construct or expand a passenger ferry terminal or commence ferry service without obtaining a special permit that specifically authorizes the proposed use and the associated onshore terminal facilities.
Vessel limitations prohibit any ferry with over 2,000 installed horsepower or capable of exceeding 20 knots from docking at or utilizing passenger ferry terminals, except in emergencies. These rules apply uniformly, irrespective of the ferry's origin, destination, or ownership. The Ferry Law differentiates between "ferries," which transport passengers between the Town of East Hampton and other locations, and "excursion boats," which take passengers on trips without stopping at other ports outside the Town. On September 8, 2004, Cross Sound and the Town Plaintiffs initiated a legal action claiming that the Ferry Law infringes upon the dormant Commerce Clause and Equal Protection Clauses of both the federal and New York State Constitutions, and that it represents an overreach of the Town's police power. East Hampton responded with a motion for summary judgment, arguing the claim was barred by the statute of limitations, that the plaintiffs lacked standing, and that the claims were meritless. The plaintiffs countered with a cross-motion for summary judgment on all claims except the police power argument and sought to challenge certain documents. On December 21, 2005, the District Court granted East Hampton's motion, denied the plaintiffs' cross-motion, and upheld the Town's Rule 56.1 Statement, ultimately ruling that the plaintiffs lacked standing while Cross Sound had third-party standing to assert claims on behalf of its passengers. The court also determined that the statute of limitations did not bar the action.
The District Court evaluated Cross Sound's Complaint, focusing on claims related to the dormant Commerce Clause. The court found that the Ferry Law did not discriminate against interstate commerce, as it applied equally to all ferry operators and lacked any identified local interest favoring Cross Sound. Applying the Pike balancing test, the court determined that any burden on interstate commerce was not excessive compared to the local benefits, such as enhanced health and safety for residents. Cross Sound failed to demonstrate a different burden on interstate versus intrastate commerce and provided no supporting evidence for its claims.
Next, the court assessed the Ferry Law under the Equal Protection Clauses of both federal and New York Constitutions. It rejected Cross Sound's assertion that the law violated the fundamental right to travel, concluding that the law did not implicate this right and was subject to rational basis review. The court found that the law imposed only minor travel restrictions, rationally related to the Town's interest in resident protection. Furthermore, it ruled that the law was a legitimate exercise of East Hampton's police power, authorized by state law.
The Town Plaintiffs did not appeal the judgment, while Cross Sound's appeal is currently before the court. The standard of review for the district court's grant of summary judgment is de novo, requiring a determination that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. Summary judgment is appropriate when the evidence, viewed favorably for the non-moving party, does not support a verdict for that party.
The Commerce Clause grants Congress the power to regulate commerce among states, and this includes a "dormant Commerce Clause" that restricts local governments from enacting laws that negatively impact interstate commerce. The primary aim of the dormant Commerce Clause is to maintain a competitive national market without undue advantages for local entities. When assessing a local law under this clause, it is essential to identify whether it discriminates against interstate commerce or regulates impartially with only incidental effects. Discrimination is defined as preferential treatment of in-state over out-of-state economic interests.
If discrimination is evident, the law is generally invalid unless it can be justified by a legitimate reason unrelated to economic protectionism. Conversely, if the law only imposes incidental burdens on interstate commerce, it is evaluated using a balancing test that considers whether the burdens on commerce outweigh local benefits. The burden of proof initially lies with the party challenging the law to show disparate impacts on interstate commerce, rather than merely demonstrating any effect on commerce. Should discrimination be confirmed, the government must then prove that local benefits outweigh discriminatory impacts and that no nondiscriminatory alternatives were available. If no discrimination is established, the challenger must show that the law imposes a burden on interstate commerce that is clearly disproportionate to its local benefits.
A law is deemed discriminatory against interstate commerce if it meets three criteria: 1) facial discrimination, which involves laws that explicitly favor in-state over out-of-state interests; 2) discriminatory purpose, where the law, though neutral on its face, is intended to disadvantage out-of-state entities; and 3) discriminatory effect, where a neutral law disproportionately impacts interstate commerce despite not being explicitly biased. The Ferry Law in question does not fall into any of these categories. It does not discriminate on its face as it applies equally to both in-state and out-of-state ferry operators. Additionally, there is no evidence of a discriminatory intent behind the law; rather, it was enacted to address traffic issues in the Town, as noted in the law's "Findings and Objectives" section, which aims to enhance zoning regulations related to ferries. The Town Board’s discussions and official documents reflect a sincere intent to alleviate traffic concerns, not to favor local interests. While references to Connecticut casinos in the law’s objectives have been highlighted, they do not indicate a discriminatory motive, especially when considering that traffic issues predate the existence of these casinos. The law’s provisions are equally applicable to all ferry operators, irrespective of their origin, further supporting the absence of discrimination.
The Ferry Law distinguishes between ferries and excursion boats without violating the dormant Commerce Clause, as it does not create competition between these entities. The law's restrictions, which apply equally to all ferry operators, prevent any local business advantage over out-of-state competitors, unlike past regulations found unconstitutional for favoring local businesses. Evidence of this lack of discrimination includes challenges to the law by local businesses.
Additionally, the law’s validity will be assessed using the Pike balancing test, which allows for non-discriminatory regulations to be upheld if the local benefits outweigh the burdens on interstate commerce. A regulation must not impose greater burdens on interstate commerce compared to intrastate commerce, with the allowed burden depending on the local interest involved. The law must demonstrate that any burden on interstate commerce is distinct from that on intrastate commerce.
Three circumstances exist where evenhanded regulations impose incidental burdens on interstate commerce: (1) disparate impact on non-local entities; (2) regulation of activities occurring entirely outside the state's borders; and (3) inconsistencies with other states' regulations. Cross Sound does not claim that the Ferry Law regulates beyond New York's borders or conflicts with other jurisdictions, but asserts it disproportionately affects interstate travelers. The law reportedly restricts commerce between New England and Long Island, forcing longer and costlier routes, which Cross Sound argues burdens interstate commerce excessively compared to any local benefits.
The Ferry Law negatively impacts passengers and customers of Cross Sound Ferry by increasing travel time and costs, harming competitive businesses, and adversely affecting public health and safety. It limits vessel horsepower and speed for passenger ferries operating between New London and East Hampton, making such service impractical. Although the law does not overtly favor local interests, Cross Sound contends it increases costs for interstate travelers who must take longer detours while local drivers benefit from reduced traffic.
Cross Sound's argument includes an affidavit from traffic engineer Ronald N. Hill, asserting that the Ferry Law lengthens journeys for New England travelers to East Hampton, thus requiring more time and expense. The District Court's conclusion that Cross Sound did not allege any disparity between interstate and intrastate burdens was incorrect, as genuine issues of material fact regarding the burden on interstate commerce remain unresolved.
Genuine issues of material fact arise regarding the benefits of the Ferry Law, as Cross Sound argues that any burden on interstate commerce is disproportionate to local benefits. Utilizing data from Cross Sound's reservation database, Hill's affidavit estimates that the ferry service would lead to an annual reduction of 190,188 vehicle miles traveled (VMT), resulting in improved air quality, decreased intersection traffic, and better overall traffic conditions. Hill asserts that this reduction directly correlates with a decrease in vehicle emissions and associated benefits like reduced noise, air pollution, and less congestion at ferry queues, alongside positive traffic pattern changes between East Hampton and New England.
Hill criticizes the Transportation Element's findings as flawed, disputing the scenarios used to justify the Ferry Law and noting the study's failure to consider alternative traffic mitigation measures. In contrast, the Town counters with an affidavit from traffic engineer Raymond G. Di Biase, who supports the Transportation Element's conclusions and disputes Hill's VMT analysis.
The District Court, however, did not address these expert conflicts or thoroughly examine the claimed local benefits of the Ferry Law, dismissing Cross Sound's claims solely on the grounds that the law serves a legitimate local purpose related to the health and safety of East Hampton residents. While courts typically refrain from assessing legislative wisdom, they must be cautious in granting summary judgment amid conflicting expert reports. The court has previously remanded cases for further discovery when credible expert affidavits challenge the law's benefits and its burden on interstate commerce, recognizing that Cross Sound's critique raises factual disputes regarding the Ferry Law's impact on traffic congestion.
A reasonable fact finder may determine that the Ferry Law fails to deliver its intended benefits, questioning its justification for the burdens it imposes on interstate commerce. The District Court may have missed evidence due to Cross Sound's reliance on a discriminatory analysis. Consequently, the case is remanded for further discovery and arguments to assist the court in making a fact-intensive determination.
Cross Sound asserts that the Ferry Law violates the Equal Protection Clause by infringing on passengers' right to travel, a fundamental constitutional right. This right includes the ability to enter and leave states, to be treated as a welcome visitor, and for those who choose to stay, to be treated as other state citizens. Laws affecting this right often differentiate between in-state and out-of-state individuals, necessitating strict scrutiny if the regulation infringes on a constitutionally-protected right. The law must be narrowly tailored to serve a compelling governmental interest; otherwise, it only needs to meet rational basis review.
The Supreme Court defines an infringement on the right to travel as occurring when a law deters travel, has the primary objective of impeding travel, or penalizes the exercise of that right through classification. Cross Sound contends that the Ferry Law violates these principles, but the court disagrees with this assertion.
The Ferry Law does not penalize individuals for exercising their right to travel, unlike laws that condition benefits on residency. It differentiates between ferries and excursion boats to regulate distinct industries rather than imposing penalties on ferry passengers, as alternative transportation options are available. The law applies uniformly to both in-state and out-of-state ferry providers and passengers, making it an evenhanded regulation. Although Cross Sound argues that the law deters interstate travel by banning specific ferry types from East Hampton, it does not contest that operators can still service other New York destinations and utilize alternative transportation methods. The District Court noted that there is no constitutional right to the most convenient form of travel, and minor travel restrictions do not constitute a denial of fundamental rights. The Ferry Law’s potential to make travel less direct does not meet the criteria for strict scrutiny. Its intent is to protect the welfare of local residents and the environment, not to obstruct travel, thus it does not interfere with constitutionally protected rights related to interstate travel.
Infringements on interstate travel raise constitutional issues, necessitating rational basis review for any governmental acts that limit such travel. Under this standard, legislation is presumed valid if its classifications are rationally related to a legitimate state interest, as established in relevant case law. The Ferry Law, which restricts traffic flow in East Hampton, is deemed to rationally promote public safety and does not infringe upon passengers' right to travel, allowing East Hampton to avoid the least restrictive means requirement. Consequently, the Ferry Law is upheld against equal protection challenges.
Cross Sound's assertion that the Ferry Law represents an abusive use of the Town's police power is rejected. Municipal zoning ordinances will only be invalidated if they are arbitrary and unreasonable, lacking a substantial relationship to public welfare. Cross Sound claims the Ferry Law was enacted ultra vires, arguing it was not authorized by New York’s Town Law sections. However, Town Law § 130(17) permits towns to regulate vessel operations and sizes, which includes the authority to restrict or regulate, not just prohibit, the operation of vessels. The court finds that the Town Law grants similar authority to prohibit certain vessels as it does for personal watercraft, aligning with the legislative intent of the statute.
The 2000 amendment aimed to clarify the scope of the statute without revoking the Town's existing authority. It was motivated by an increase in accidents involving personal watercraft, as noted in the legislative sponsor's memorandum. Town Law § 263 empowers towns to implement regulations for public safety, congestion reduction, and general welfare. While Cross Sound argues that the Ferry Law is invalid due to a lack of evidence for traffic congestion reduction, the court found that the law is substantially related to public safety objectives outlined in the Transportation Element. Consequently, the court determined that the Ferry Law is a valid exercise of the Town's police power. The judgment of the District Court was vacated regarding the dormant Commerce Clause claim and remanded for further proceedings, while the remainder of the judgment was affirmed. Additionally, a related case involving similar claims against the Ferry Law is pending in the Eastern District of New York. Cross Sound primarily challenges the Ferry Law's validity but has not focused significantly on the Pike balancing test, with counsel asserting that it is discriminatory. The court's analysis also includes Equal Protection Clause considerations, as both federal and New York Constitutions provide similar protections. Cross Sound's evidentiary objections to the Town's statements were found to lack merit, affirming the District Court's decisions.
