Opinion ID: 2463
Heading Depth: 3
Heading Rank: 2

Heading: Market Participant

Text: NYTA argues that, even if plaintiffs have standing to pursue their dormant Commerce Clause claim, the policy is not unconstitutional because of the so-called market participant doctrine. [2] This doctrine differentiates between a State's acting in its distinctive governmental capacity, and a State's acting in the more general capacity of a market participant; only the former is subject to the limitations of the [dormant] Commerce Clause. New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 277, 108 S.Ct. 1803, 100 L.Ed.2d 302 (1988). The Supreme Court has held that [n]othing in the purposes animating the Commerce Clause prohibits a State, in the absence of congressional action, from participating in the market and exercising the right to favor its own citizens over others. Reeves, Inc. v. Stake, 447 U.S. 429, 436, 100 S.Ct. 2271, 65 L.Ed.2d 244 (1980). The Court has not articulated a bright-line rule to discern governmental regulation of commerce from market participation; courts must make fact-specific inquiries on a case-by-case basis. Thus, for example, when a State chooses to manufacture and sell cement, its business methods, including those that favor its residents, are of no greater constitutional concern than those of a private business. New Energy Co., 486 U.S. at 277, 108 S.Ct. 1803 (citing Reeves, 447 U.S. at 438-39, 100 S.Ct. 2271); see also Hughes, 426 U.S. at 809, 96 S.Ct. 2488 (holding that a state's program of purchasing abandoned vehicles from within the state but not from other states did not burden interstate commerce). But see Toomer v. Witsell, 334 U.S. 385, 406, 68 S.Ct. 1156, 92 L.Ed. 1460 (1948) (holding that the Commerce Clause was violated where a state required that shrimp boats fishing off of its coast pack their shrimp and pay state taxes before transporting their catch interstate). In sum, a court reviewing a claim that the dormant Commerce Clause has been violated must consider in each specific context if the government is acting like a private business or a governmental entity. NYTA contends that [i]n setting toll rates to raise revenue to maintain its property and satisfy its bondholders, [NYTA] is not regulating commerce, but is acting in a proprietary capacity as a market participant in the local highway transportation market. Appellee's Br. 9-10. However, the statute creating NYTA provides that NYTA  shall be regarded as performing a governmental function in carrying out its corporate purpose and in exercising the powers granted by this title. N.Y. Pub. Auth. § 353 (emphasis added). There is good reason for this designation and for our repeated observation that building and maintaining roads is a core governmental function. See USA Recycling, Inc. v. Town of Babylon, 66 F.3d 1272, 1284 (2d Cir.1995) (State governments have turned to the private sector to `contract out' or `outsource' numerous governmental functions, including ... the operation of toll roads.  (emphasis added)); Murray v. City of Milford, 380 F.2d 468, 470 (2d Cir.1967) (The construction and maintenance of roads is a `governmental function....'). Although there is undoubtedly a market comprised of private entities competing with one another for government contracts, we see no evidence in the record that NYTA competes with other entities that are also seeking to build and maintain highway systems. Unlike a private actor, NYTA may (1) use or possess any real property or rights in real property acquired by the state, see N.Y. Pub. Auth. § 357, (2) avoid holdouts by resorting to eminent domain to amass the property necessary to build roads, see id. §§ 358, 358-a, and (3) issue bonds that are fully and unconditionally guaranteed by the state in order to raise capital to fund road construction and maintenance projects, id. § 366(1). NYTA may also accept any gifts or any grant of funds or property from the federal government or from the state ... or any other federal or state public body. Id. § 354(14). NYTA's reliance on Endsley v. City of Chicago, 230 F.3d 276, 283-85 (7th Cir.2000), for the proposition that a state may act[ ] in a proprietary capacity as an entrant into the local highway transportation market, Appellee's Br. 17, is misplaced. In Endsley, plaintiffs challenging Chicago's operation of the city's Skyway toll bridge essentially plead[ed] themselves out of court by noting in their complaint that, [s]ince its inception, [Chicago] has operated [the bridge] as a proprietary enterprise, and not in its governmental capacity. 230 F.3d at 284. The Seventh Circuit's observation that the facts suggest that [Chicago] was indeed a market participant, id., was dicta and, in any event, not binding authority for this Court. On this record, we see no reason to conclude that the instant case is like Reeves, where South Dakota entered a market to produce and sell cement in competition with private cement suppliers, see 447 U.S. at 440, 100 S.Ct. 2271, or Hughes, where Maryland entered into the market as a purchaser, in effect, of a potential article of interstate commerce, 426 U.S. at 808, 96 S.Ct. 2488. In short, nothing in this record permits the conclusion that, in this instance, NYTA is a market participant. We need not reach the question whether, or under what circumstances, a governmental entity may act as a market participant by building and maintaining roads. We hold simply that, at least in this stage of the litigation, a finding that NYTA acted as a market participant (rather than in its governmental capacity) is not warranted. As we explain below, the toll may well be permissible, but, absent a finding that NYTA acted as a market participant, it is subject to scrutiny under the dormant Commerce Clause.