Opinion ID: 3046278
Heading Depth: 2
Heading Rank: 6

Heading: analysis of fts’s claims

Text: We now turn to whether the County’s stevedore permit ordinance, as applied by the Port Director, violated the dormant Commerce Clause.41 The first question is whether the Port Director’s stevedore permitting practices “directly regulate[d] or discriminate[d] against interstate commerce.” Island Silver & Spice, 542 F.3d at 846 (internal quotation marks omitted). Specifically, we must determine whether the Port Director’s application of the County’s stevedore permit ordinance in 2003, 2004, and 2005 directly discriminated against interstate commerce by regulating participation in the interstate stevedore market on the basis of an applicant’s local versus out-of-state 41 FTS does not facially challenge the County’s stevedore permit ordinance. 57 Case: 11-10475 Date Filed: 12/28/2012 Page: 58 of 81 origin. Even if the Port Director’s permitting practices did not directly discriminate, the second question is whether the Port Director’s permitting regime imposed a (1) “burden on interstate commerce” that (2) “clearly exceeds the local benefits” under the Pike undue burden test. Id. (citing Pike, 397 U.S. at 142, 90 S. Ct. at 847) (internal quotation mark omitted). We need not address the first question because we conclude the district court did not commit reversible error in finding that the Port Director’s permitting practices unduly burdened interstate commerce under the Pike undue burden test. To explain our conclusion, we start by reviewing the burden imposed on interstate commerce by the Port Director’s permitting practices. We then examine the local benefits and show why the burden “clearly exceed[ed]” those benefits in violation of the dormant Commerce Clause.
At the outset, we agree with the district court that the Port Director’s permitting practices were not even-handed and were designed to prevent competition. Port of Miami stevedore permits expired annually. Miami-Dade County Code § 28A-6.6. All stevedore permit seekers, both new and old, were required to apply for a permit each year. Accordingly, the County ordinance required the Port 58 Case: 11-10475 Date Filed: 12/28/2012 Page: 59 of 81 Director to consider permit applicants, both incumbent and new, without regard to whether the applicant held a stevedore permit in the previous year. See id. Indeed, the permit ordinance authorized the Port Director to renew an incumbent stevedore’s permit only if the renewal application met the criteria for the issuance of a new permit. Id. But the Port Director did not apply the permit ordinance in this fashion. As discussed above, the Port Director in 2003, 2004, and 2005 automatically granted new permits to all companies that held permits in the previous year and automatically denied permits to all companies, like FTS, that did not hold permits in the previous year. As this rubber-stamp practice shows, the sole factor that determined whether the Port Director would grant a stevedore application was not need, safety, or any other criterion identified in the County ordinance; it was whether the applicant already had a permit at the Port. We also note the protectionist42 motivation underlying these practices. As the Port Director’s own statements show, these permitting practices were aimed to 42 We recognize that the terms “protectionist” and “protectionism” are narrowly defined in dormant Commerce Clause jurisprudence. We use the term more broadly here as the permitting practices did not burden only out-of-state competitors. See, e.g., New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 273, 108 S. Ct. 1803, 1807 (1988) (“This ‘negative’ aspect of the Commerce Clause prohibits economic protectionism—that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.”). 59 Case: 11-10475 Date Filed: 12/28/2012 Page: 60 of 81 prevent competition against incumbent stevedores. The Port Director stated in prior litigation against FTS that the permit ordinance was intended to prevent “economic hardship to the entire local stevedoring industry” that would result from “dilut[ing] the market” with excessive stevedore permits. Port documents from 2000 state that the Port would ensure that the “granting or renewal of a [stevedore] permit does not lead to duplication of services that could lead to destructive competition” at the Port.43 In 2003, 2004, and 2005, the Port Director dispensed with competency, safety record, financial, and needs assessments altogether in favor of a rubber-stamp procedure clearly designed and intended to protect incumbent stevedores and foreclose new entrants into Miami’s local stevedore market. As the district court observed, the Port Director’s permitting practices “protected and insulated” the existing stevedores “from any new competition.” Fla. Transp. Serv., 757 F. Supp. 2d at 1278; cf. also H.P. Hood, 336 U.S. at 528, 69 S. Ct. at 660 (invalidating licensing statute that conditioned license on assurances that “the issuance of the license will not tend to a destructive competition in a market already adequately served”). The Port Director’s regulating access to interstate markets in this manner 43 In deposition testimony, the Port Director considered this statement to be consistent with the ordinance’s needs assessment requirement. 60 Case: 11-10475 Date Filed: 12/28/2012 Page: 61 of 81 plainly burdened interstate commerce. New entrants were effectively shut out, even if they could have provided better service, better equipment, or lower prices than the incumbent stevedores. Fla. Transp. Serv., 757 F. Supp. 2d at 1278. Specifically, FTS elicited testimony suggesting that non-union stevedores—which FTS could provide—would have offered a cheaper alternative to cargo-terminaloperator Seaboard Marine, which used the union stevedore services of Eller-ITO. Additionally, there were concerns that the consolidation trend of existing stevedore permit-holder companies would result in even less stevedore competition at the Port. In fact, Seaboard Marine applied for its own stevedore permit in 2001 because of the prospect of dwindling stevedore options and higher prices as the result of consolidation. There was also evidence that no current shipper or cruise line at the Port would have even considered the business of FTS or any other nonincumbent stevedore company in the absence of a stevedore permit. Of course, increased costs are insufficient alone to constitute an unreasonable burden on interstate commerce in violation of the dormant Commerce Clause. See, e.g., Exxon Corp., 437 U.S. at 128, 98 S. Ct. at 2215 (“It may be true that the consuming public will be injured by the loss of the highvolume, low-priced stations operated by the independent refiners, but again that argument relates to the wisdom of the statute, not to its burden on commerce.”). 61 Case: 11-10475 Date Filed: 12/28/2012 Page: 62 of 81 But we must also evaluate “the practical effect of the statute” by considering “what effect would arise if not one, but many or every, State adopted similar legislation.” See Healy, 491 U.S. at 336, 109 S. Ct. at 2499. The permitting practices here did not simply impose a burden on entry into the Port’s stevedore market. It made entry impossible. Parallel stevedore permitting requirements barring new entrants would subject ports’ stevedore markets to the whims of the permitting authorities and drive up the price of virtually all goods imported through the nation’s ports. But not only prices would be impacted. Other ports’ adoption of the Port Director’s rubber-stamp practice, a process that disregards the quality of the applicant in favor of the sole criterion of whether the applicant (no matter what the safety record, equipment, or employee training) already has a permit, could result in ports manned by incompetent and unsafe stevedores. The County does not contest the above characterization of the Port Director’s permitting practices or that it excluded new entrants in 2003, 2004, and 2005 to limit permits to incumbent permit holders without examination of the applicant’s required competency, safety record, and financial strength, or the needs at the Port. Instead, the County argues that even under the Pike test, FTS must demonstrate that the Port Director’s permitting practices had a disparate impact on 62 Case: 11-10475 Date Filed: 12/28/2012 Page: 63 of 81 out-of-state interests, and that FTS failed to do so. The County says that it has not denied a stevedore permit to a single out-of-state applicant in ten years.44 Even assuming arguendo that a showing of disparate impact must be made under the Pike undue burden analysis, we conclude that the Port Director’s permitting practices caused such an impact. To be sure, some of the incumbent permit holders that received automatic permit renewals were incorporated out-ofstate, or were owned by companies incorporated out-of-state. But a company’s place of incorporation alone does not decide whether the Port Director’s permitting practices, as applied to FTS, imposed a disparate impact on out-of-state or nonlocal companies for the benefit of local companies. If that were the case, then a state or municipality’s dormant Commerce Clause liability would turn on the empty formality of where a company’s articles of incorporation were filed, rather than where the company’s business takes place or where its political influence lies. Cf. United Haulers Ass’n, Inc. v. Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330, 345, 127 S. Ct. 1786, 1797 (2007) (“Our dormant Commerce Clause cases often find discrimination when a State shifts the costs of regulation to other 44 But pursuant to the Port Director’s permitting practices in 2003, 2004, and 2005, a new out-of-state applicant would have been denied a permit because it could not have met the sole criterion the Port Director used to issue a permit: whether the applicant already held a permit. 63 Case: 11-10475 Date Filed: 12/28/2012 Page: 64 of 81 States, because when the burden of state regulation falls on interests outside the state, it is unlikely to be alleviated by the operation of those political restraints normally exerted when interests within the state are affected.” (internal quotation marks omitted)). The corporate structure of incumbent permit holder Eller-ITO illustrates this problem. Eller-ITO was owned in part by Ports America, a New Jersey corporation. But Eller-ITO did not operate outside of Florida and had been operating in Florida for decades. We take a functional approach to the question of whether the challenged permitting practices favor “local” companies and in turn burden “non-local” business interests for the purpose of dormant Commerce Clause analysis. Though some of the permit holders were incorporated out-of-state, all of the permit holders were operating locally at the Port or were otherwise entrenched at the Port as a cargo terminal operator or as co-owner of an operating stevedore.45 The Port Director did not deny a permit to a single incumbent permit holder that was already entrenched at the Port in one of those capacities and did not grant a permit to a single stevedore that was not. Indeed, four of the incumbent permit holders that 45 The outliers here—e.g., R.O. White and Hallmark—were otherwise entrenched as they had been permitted to operate at the Port long before 2003, 2004, and 2005. Furthermore, these incumbent permit holders were Florida companies. R.O. White was a Florida company until its purchase by an out-of-state company in 2005. 64 Case: 11-10475 Date Filed: 12/28/2012 Page: 65 of 81 were either incorporated out-of-state or owned by companies incorporated out-ofstate had entrenched relationships with the Port of Miami that predated the grant of their stevedore permits in 2003, 2004, and 2005. Seaboard Marine, owned by a Kansas company, was a cargo terminal operator and a shipper. Universal Maritime Service, a New York company, was owned by Maersk, which was a cargo terminal operator and a shipper. Ports America, a New Jersey company, co-owned permit holder Eller-ITO and owned permit holder Ports America Florida, which in turn co-owned cargo-terminal-operator POMTOC. These companies may have been incorporated elsewhere, but they either operated locally or had local interests in the Port of Miami apart from their stevedore services. Accordingly, we conclude that the Port Director’s permitting practices plainly burdened interstate commerce. We next balance that burden against the local benefits the County attributes to the Port Director’s permitting practices.
Consistent with the County stevedore permit ordinance, the County claims that the local benefits from its permitting practices were (1) “maximiz[ing] Port space and operational efficiencies” in light of the Port’s “limited space and resources” and (2) ensuring that stevedore customers had “a skilled, experienced, 65 Case: 11-10475 Date Filed: 12/28/2012 Page: 66 of 81 reliable, properly equipped, and safe pool of Port-permitted stevedores.” These local benefits are indeed legitimate. And these interests would have been served by the ordinance if it had been applied as written. But following the ordinance as written was not the Port Director’s practice in 2003, 2004, and 2005. The purposes and benefits identified by the County are not served or even furthered by the Port Director’s (1) automatic renewal of permits for incumbent stevedores, (2) automatic denial of permits to new applicants, and (3) wholesale failure to perform the required competency, safety record, financial and needs assessments in 2003, 2004, and 2005. When performed, the competency, safety record, financial, and needs assessments could both discern the level of need for stevedore services at the Port and ensure the incumbent stevedores remained “skilled, experienced, reliable, properly equipped, and safe.” An automatic renewal, however, in no way determines whether an incumbent permit holder currently satisfies any of the criteria in Miami-Dade County Code § 28A-6.1. Rubber-stamping inherently does not allow for an evaluation of, for example, (1) the applicant’s competence and trustworthiness; (2) the ability of present permit holders to “adequately serve new or existing business”; (3) “[t]he financial strength of the applicant”; or (4) “the experience of the applicant.” Id. § 28A-6.1(c), (c)(5), (c)(6), (c)(8). Indeed, the 66 Case: 11-10475 Date Filed: 12/28/2012 Page: 67 of 81 Port Director renewed the stevedore permits of three incumbent stevedores—R.O. White, Seaboard Marine, and Ports America Florida—that were not doing any stevedore work at the Port, which wholly undermines the County’s rationale of “maximiz[ing] Port space and operational efficiencies” given the Port’s “limited space and resources.” In sum, while the local benefits identified by the County are legitimate, the Port Director’s permitting practices do not rationally contribute to these purported local benefits. See Raymond Motor Transp., Inc v. Rice, 434 U.S. 429, 447–48, 98 S. Ct. 787, 797 (1978) (striking down Wisconsin highway trailer-length regulation under undue burden test where Wisconsin “failed to make even a colorable showing that its regulations contribute to highway safety”); Pike, 397 U.S. at 146, 90 S. Ct. at 849 (striking down Arizona cantaloupe packing requirement where “the State’s interest is minimal at best”). The County argues that the district court should have simply deferred to the County’s putative purposes and benefits. But any deference is not absolute. “[T]he incantation of a [legitimate] purpose . . . does not insulate a state law from Commerce Clause attack. Regulations designed for that salutary purpose nevertheless may further the purpose so marginally, and interfere with commerce so substantially, as to be invalid under the Commerce Clause.” Kassel v. Consol. 67 Case: 11-10475 Date Filed: 12/28/2012 Page: 68 of 81 Freightways Corp. of Del., 450 U.S. 662, 670, 101 S. Ct. 1309, 1316 (1981) (plurality opinion). That is the case here. The permitting practices did not further, but if anything rather disserved, the County’s purported purposes and benefits. In addition, the County has not identified any public interest warranting the removal of the local stevedore market at the Port from competition from new entrants (whether these new entrants be out-of-state or in-state). See Fort Gratiot, 504 U.S. at 361, 112 S. Ct. at 2025 (“[A] burden imposed by a State upon interstate commerce is not to be sustained simply because the statute imposing it applies alike to the people of all the States, including the people of the State enacting such statute.” (quoting Brimmer, 138 U.S. at 82-83, 11 S. Ct. at 214) (internal quotation marks omitted)). We also agree with the district court that even if the County had a legitimate interest in preventing destructive competition, such an interest was not served or even furthered by the Port Director’s actual permitting practices. The Port Director renewed the permits of at least two stevedores that were not doing any stevedore work at the Port whatsoever, apparently without any deleterious effects. In any event, the Port Director could have promoted the County’s safety and efficiency objectives without barring new entrants in the stevedore market by simply adhering to the County’s permit ordinance. See Pike, 397 U.S. at 142, 90 68 Case: 11-10475 Date Filed: 12/28/2012 Page: 69 of 81 S. Ct. at 847 (stating that “the extent of the burden [on interstate commerce] that will be tolerated will of course depend on . . . whether [the local interest] could be promoted as well with a lesser impact on interstate activities”). For example, the Port Director could have (1) subjected all stevedore permit applicants, and not merely new applicants, to the competency, safety record, financial and needs assessments, as required by the County ordinance, and (2) granted permits only to applicants that were “skilled, experienced, reliable, properly equipped, and safe,” without regard to whether they were permitted to operate at the Port already. See Locke v. Shore, 634 F.3d 1185, 1193–95 (11th Cir. 2011) (upholding Florida interior designer licensing requirement because statute did “not block entry altogether” and only required designers “to achieve proficiency”), cert. denied, 132 S. Ct. 1004 (2012). These reasonable and less burdensome alternatives would have served the County’s purposes, but the actual permitting procedures applied by the Port Director did not. Ultimately, the record here shows no local benefit rationally furthered by how the Port Director actually applied the stevedore permit ordinance. Rubberstamping all renewal permit applications and automatically denying all new permit applications simply cannot “maximize Port space and operational efficiencies” or ensure that stevedore customers have “a skilled, experienced, reliable, properly 69 Case: 11-10475 Date Filed: 12/28/2012 Page: 70 of 81 equipped, and safe pool of Port-permitted stevedores.” The burden on interstate commerce—effectively removing the Port of Miami stevedore market from the local, state, and national markets and preserving it for a select few privileged permit holders—is significant, whereas the actual permitting practices did not further any local benefits. Thus, the burden necessarily exceeded them. Accordingly, the stevedore permit ordinance as applied violates the dormant Commerce Clause.
The County next claims that it is immune from dormant Commerce Clause strictures under the market-participant exception. “[W]hen a state or local government enters the market as a participant it is not subject to the restraints of the [dormant] Commerce Clause.” White v. Mass. Council of Constr. Emp’rs, Inc., 460 U.S. 204, 208, 103 S. Ct. 1042, 1044 (1983). “The limit of the marketparticipant doctrine must be that it allows a State to impose burdens on commerce within the market in which it is a participant, but allows it to go no further.” South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 97, 104 S. Ct. 2237, 2245 (1984) (plurality opinion). We agree with the district court that the market-participant exception does not apply because the County does not provide stevedore services. See Fla. 70 Case: 11-10475 Date Filed: 12/28/2012 Page: 71 of 81 Transp. Serv., 757 F. Supp. 2d at 1281. A state or local government may take advantage of the market-participant exception only if the government is a proprietor of goods or services in the relevant market. For example, in Smith v. Department of Agriculture of the State of Georgia, 630 F.2d 1081 (5th Cir. 1980),46 this Court considered a challenge to a Georgia regulation providing Georgia residents priority space assignments at a state-owned farmers market. We rejected Georgia’s argument that the market-participant exception saved this regulation because Georgia “neither produce[d] the goods to be sold at the market, nor engage[d] in the actual buying or selling of those goods.” Smith, 630 F.2d at 1083. Similarly, in South-Central Timber, a plurality of the Supreme Court rejected Alaska’s claim that it acted as a market participant by requiring the in-state processing of timber cut on Alaska lands. 467 U.S. at 98, 104 S. Ct. at 2246. In that case, the Supreme Court plurality concluded that Alaska was a regulator because, inter alia, Alaska did not actually participate in the timber-processing market. Id. Likewise, the County’s ordinance gives the Port Director the authority to grant or deny stevedore permits to private parties. These private parties may not 46 In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this Court adopted as binding precedent all decisions of the former Fifth Circuit prior to October 1, 1981. 71 Case: 11-10475 Date Filed: 12/28/2012 Page: 72 of 81 provide stevedore services at the Port of Miami without a Port-issued permit. But neither the County nor the Port itself provides or purchases stevedore services. Rather, the County’s only relationship to the stevedore market is through permitting, which, as illustrated by the County’s permit ordinance, is intended to serve the County’s interests of safe and efficient port operations rather than any proprietary or commercial interest. See Miami-Dade County Code § 28A-6.4(c).