Opinion analysis: Unanimous Justices recognize “massive” limit on transportation preemption

To those who haven’t explored the wonders of federal transportation preemption, the Supreme Court’s decision on Monday in Dan’s City Used Cars v. Pelkey may appear limited to a narrow issue that doesn’t come up often: Does federal law trump state-law claims stemming from a towing company’s storage and disposal of a car? The answer, explains Justice Ginsburg’s opinion for a unanimous Court, is no.

But Dan’s City is about much more than the storage and disposal of towed vehicles. The Court’s opinion will have implications for preemption defenses raised by the trucking and airline industries in a wide range of cases under consumer, employment, labor, and environmental laws. As I explained in my preview of the case, the Justices’ challenge was to identify some sound limits on a preemption statute, the Federal Aviation Administration Authorization Act (FAAAA), that was designed to prevent states from thwarting federal transportation deregulation but whose application often strays well beyond that goal. A lack of guidance from the Supreme Court, coupled with the statute’s open-ended text – it broadly preempts state laws “related to” carriers’ prices, routes, or services “with respect to the transportation of property” – has led lower courts to find preemption in unexpected places, like cases involving state-law bribery and racketeering claims.

After oral argument, I predicted that the Court would unanimously limit preemption, and do so in one of three ways: (1) by interpreting the word “transportation,” (2) by attempting to ensure that any preemption is moored in federal deregulatory purposes (as suggested by Justice Breyer and the Solicitor General), or (3) by precluding preemption of generally applicable laws with no special reference or application to transportation, based on a 2002 dissent by Justice Scalia. The first would be of limited help to the lower courts, but the second and third could affect many cases. As it turns out, the opinion contains a mix of all three flavors, with a strong emphasis on the third.

Adopting reasoning from the Scalia dissent as its own, the Court focused most heavily on seven words in the statute that previously received scant attention – “with respect to the transportation of property.” That qualifying language, the Court explained by quoting Justice Scalia, “massively limits the scope of preemption ordered by the FAAAA.” The phrase makes clear that federal law doesn’t preempt state laws that merely relate to a carrier’s prices, routes, or services “in any capacity,” but only state laws that focus on the “transportation of property.” So “state trucking regulations” are preempted, but Pelkey’s consumer-protection and common-law claims, which govern the towing company “as a bailee of his stored vehicle,” are not. That straightforward statutory analysis – the heart of the opinion – will make it much harder for the transportation industry to seek shelter from preemption in cases involving generally applicable state laws that were not aimed at transportation.

The Court offered a brief discussion of why Pelkey’s claims – which sought compensation for the loss of his car – would not interfere with Congress’s purpose of ensuring interstate competition in the market for interstate trucking. The Court also tied its approach to preemption in the ERISA context – another elusive preemption statute that focuses on whether state law is “related to” the concerns of federal law. The breadth of the phrase “related to” in the FAAAA, the Court emphasized, “does not mean that the sky is the limit.” As in ERISA, the phrase should not be read with an “uncritical literalism”; otherwise “for all practical purposes pre-emption would never run its course.”

Finally, echoing Justice Kagan’s comment at argument that Dan’s City had to “take the bitter with the sweet,” the Court criticized Dan’s City’s attempt to “have it both ways” by simultaneously relying on the state-law regulatory framework as authority to sell Pelkey’s car while at the same time arguing that Pelkey’s claims, invoking that same regulatory framework, are preempted. That would leave a gaping regulatory vacuum – a zone in which no law at all would address a subject on which federal law does not speak. The Court was unwilling to attribute such a design to “a rational Congress.”

(The Court has another FAAAA preemption case on its docket: American Trucking Associations v. City of Los Angeles, argued on April 16. In that case, the question is whether there is a “market participant” exception to the preemption statute.  A decision in American Trucking is expected by June. This week’s decision has no obvious impact on that case.)

Plain English Summary:  Under the U.S. Constitution’s Supremacy Clause, federal law trumps contrary state law. This doctrine is known as federal preemption. A 1994 federal law preempts state laws “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” A New Hampshire man sued Dan’s City Used Cars, seeking compensation under state law because the company had towed his car away from his home and sold it over his protest. The Supreme Court unanimously held that his suit could go forward – that is, that the 1994 law did not preempt his state-law claims because they were not related to the transportation of property or the service of a motor carrier.