Opinion
No. 97-C-1531.
September 9, 1998.
Appeal from the Nineteenth Judicial District Court, Parish of East Baton Rouge, J. Michael McDonald, J.
Stewart F. Peck, Scott R. Wheaton, Jr., Lugenbuhl, Burke, Wheaton, Peck, Rankin Hubbard, New Orleans, for Applicant.
Richard B. Foster, Hyde D. Healy, Ernest L. Edward, Lemle Kelleher, New Orleans, Stephan W. Glusman, Glusman, Moore, Arbour, Broyles Glusman, Baton Rouge, Tina V. Grant, Baton Rouge, Bruce D. Burglass, Metairie, for Respondent.
Several tug boat companies filed this action seeking to enjoin the enforcement of a contract between a competitor towing company and the lessee of a public marine cargo terminal under which the lessee has exclusively employed the competitor to provide harbor tug service to ships that loaded and unloaded cargo at that terminal. In their petition, plaintiffs asserted, among other things, that the operations under the contract violate the Interstate Commerce Clause. After the lower courts denied plaintiffs any preliminary or permanent injunctive relief, this court granted certiorari solely to address the Interstate Commerce Clause issue.
Facts
The Greater Baton Rouge Port Commission is the owner of a bulk cargo marine terminal located on the lower Mississippi River. The construction of the terminal pursuant to La.Rev.Stat. 34:1221-1226 was financed by the issuance of general obligation bonds. The Commission immediately upon completion of construction leased the terminal, which includes a dock and a nearby mooring buoy system for ships which load and unload cargo, to a chemical company with an industrial plant adjacent to the terminal. In October 1973, the original lessee assigned the lease to the Ormet Corporation.
The lease, which places responsibility on Ormet for operating, maintaining and repairing the terminal, provides that the terminal "shall be a public marine terminal for loading, discharging, transferring, storing and handling commodities in bulk," specifying that the terminal is to be used primarily for the businesses of the lessee and its subsidiaries, but, to the extent the terminal is not required for their businesses, is to be made available to the public "without undue discrimination."
The original lease also provided that all rules, regulations, tariffs, rates and charges for use of the terminal were subject to the Commission's approval, but that requirement was deleted by addendum dated January 1, 1992.
Ormet primarily uses the terminal to import the raw materials for its alumina plant and to export its products. In addition to fulfilling its own needs, Ormet's terminal operation provides services, such as stevedoring, line handling, derrick barges, barge fleeting and the like, to shippers with cargo to be handled and transported to and from ships, barges and railcars. Ormet charges fees for these services, and the Commission, which receives approximately $300,000 per year from Ormet as rent for the terminal, has never regulated these charges.
Both the docking and the undocking of the vessels require harbor tug service. Before May 1995, the harbor tug service for the terminal was provided by four companies that vigorously competed for the business. The owner of each vessel arranged for its own tug service and negotiated the price and terms of payment with the towing company of its choice.
Harbor tug service is required because the vessels are unable to maneuver into position alone, being unable to navigate laterally in the fast-moving current of the lower Mississippi River. The services of at least two harbor tugs are required per vessel that docks at the terminal.
In April 1995, Ormet decided to provide its own harbor tug service at the terminal after observing the success of a competing private terminal which initiated the exclusive use of a designated towing company in order to avoid costly delays and wharf damage caused by inefficient or negligent harbor tugs. Ormet announced to vessel owners and agents that "[e]ffective May 1, 1995, all vessels must arrange for 'our' tugs when docking/undocking or any other activity requiring tug service. NO OUTSIDE TUGS EFFECTIVE 05/01/95." Since Ormet had no tugs or crew for furnishing this service, it chose to seek bids for the service. Bisso Towing Company was the low bidder, and Ormet entered into a "non-exclusive" contract with Bisso, who established a permanent base near the terminal with several tugs and crews available for service. Under this contractual arrangement, Ormet paid Bisso $1,100 per tug for the service and charged shippers a fixed price of $1,450 per tug. Thus Ormet charges shippers a fee for providing this service, just as it charges fees for other services provided to shippers, and makes a profit on providing the service.
The contract provides that Ormet is not obliged to use Bisso tugs and that either Bisso or Ormet may contract with other tug companies if the need arises. However, Ormet conceded that it currently uses only Bisso tugs, assertedly in order to take advantage of the benefits of a single harbor boat service.
Although disputed, there is evidence that the $1,450 charge is a competitive rate.
In August 1995, plaintiffs, after unsuccessfully seeking relief from the Commission, filed this action alleging they were improperly denied access to the terminal and were damaged economically. Plaintiffs requested injunctive relief on the basis that Ormet's contract with Bisso was illegal and contrary to public policy. Among other things, plaintiffs asserted that Ormet's requirement for vessels to use only its tugs violates the Commerce Clause in that "[r]equiring carriers to buy Ormet's harbor tug services is equivalent to assessing a license fee for the privilege of using the public Burnside Terminal."
A month before this action was filed, plaintiffs and several shippers and agents presented to the Commission their objections to Ormet's arrangement. Deciding that Ormet was not violating its lease, the Commission tabled further consideration of the issues.
The district court, after an extensive hearing, denied the request for injunctive relief. While noting concerns that the contract was "about as exclusive an arrangement as I can imagine," the district court nevertheless found no violation of the Commerce Clause and no other legal basis for granting the relief sought by plaintiffs.
On appeal, plaintiffs argued that the stifling of competition in favor of Bisso adversely affected tug services used in interstate commerce. Plaintiffs relied on the decision in C A Carbone, Inc. v. Town of Clarkstown, New York, 511 U.S. 383, 114 S.Ct. 1677, 128 L.Ed.2d 399 (1994), which held that a municipal ordinance requiring all nonhazardous solid waste leaving the city to be sorted at a transfer station built by the city and operated by a designated private contractor, although allegedly intended to preclude unprocessed garbage from entering the stream of commerce, effectively prevented everyone but the favored local operator from performing the initial processing.
The court of appeal affirmed. 96-1333 (La.App. 1st Cir. 5/9/97); 694 So.2d 1121. Rejecting plaintiffs' argument, the intermediate court held that Carbone did not avail plaintiffs in establishing a violation of the Commerce Clause, reasoning:
While the court of appeal also addressed several other issues raised by plaintiffs, our grant of certiorari in this case limited argument to the Commerce Clause issue. We thus do not address the other issues.
The instant case can be distinguished from the facts presented in Carbone, because Ormet's policy of requiring vessels which call at its terminal to utilize its tug services does not regulate or impede the free flow of commerce passing through the terminal, but rather, seeks to facilitate and improve the overall efficiency and profitability of terminal operations. This is achieved by avoiding the potential for costly delays in tug assistance, and reducing the risk of damage to vessels and the terminal itself through the use of regular tug crews who are intimately familiar with the particular river currents and eddies which may be encountered by vessels entering or leaving the dock.
While there can be no doubt that tug policy adopted by Ormet results in a nominal increase in shipping costs, it is the opinion of this court that its effects on interstate commerce are merely incidental. Because said policy has been applied in an even-handed manner to all vessels calling at the Burnside terminal, we believe the overall benefits to both shippers and the terminal cannot be held to violate the dormant provisions of the commerce clause.
96-1333 at 12-13; 694 So.2d at 1129. (emphasis added). Thus the court of appeal premised its holding, in part, on the absence of any regulation of commerce.
We granted certiorari to address the Commerce Clause issue. 97-1531 (La.10/10/97); 703 So.2d 588.
The Commerce Clause
The Commerce Clause provides that "Congress shall have Power . . . To regulate Commerce with foreign Nations, and among the several States. . . ." U.S. Const. art. I, § 8. On its face, the Commerce Clause simply empowers Congress to regulate interstate commerce. This clause, however, historically has been construed as not only empowering Congress, but also limiting the states. Cooley v. Board of Wardens, 12 How. 299, 13 L.Ed. 996 (1852); see generally Laurence H. Tribe, American Constitutional Law §§ 6.3-6.4 (2d ed. 1988). The latter limiting aspect is referred to as the dormant Commerce Clause.
Under the dormant Commerce Clause, there is a "virtually per se rule of invalidity" applicable to state regulations that directly discriminate against interstate commerce — i.e., favor in-state over out-of-state economic interests. City of Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S.Ct. 2531, 57 L.Ed.2d 475 (1978) (striking down a New Jersey law that barred local landfills from importing out-of-state wastes). The dormant Commerce Clause also invalidates state regulations that indirectly discriminate if the regulation imposes an undue burden on interstate commerce. Hughes v. Oklahoma, 441 U.S. 322, 99 S.Ct. 1727, 60 L.Ed.2d 250 (1979). The criteria for determining what constitutes "undue" include:
(1) whether the challenged statute regulates evenhandedly with only "incidental" effects on interstate commerce, or discriminates against interstate commerce either on its face or in practical effect; (2) whether the statute serves a legitimate local purpose; and, if so, (3) whether alternative means could promote this local purpose as well without discriminating against interstate commerce.
Hughes, 441 U.S. at 336, 99 S.Ct. 1727; see also Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970).
Historically, the Commerce Clause has been utilized principally in cases involving state taxes and regulatory measures "impeding free private trade in the national market place." Reeves, Inc. v. Stake, 447 U.S. 429, 437, 100 S.Ct. 2271, 65 L.Ed.2d 244 (1980); Tribe, supra, § 6-11, p. 431. The Court, in focusing on cases of Commerce Clause violations by state or municipal action in enacting statutes or ordinances, developed an exception when the action by the government is as a market participant, akin to a private party, as opposed to a market regulator. See Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 822 n. 4, 96 S.Ct. 2488, 49 L.Ed.2d 220 (1976)(Brennan, J., dissenting). Explaining this exception, the Court has stated:
There is no indication [in the Commerce Clause] of a constitutional plan to limit the ability of the States themselves to operate freely in the free market. . . . Restraint in this area is also counseled by considerations of state sovereignty . . . and "the long recognized right of trader or manufacturer, engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal." Moreover, state proprietary activities may be, and often are, burdened with the same restrictions imposed on private market participants. Evenhandedness suggests that, when acting as proprietors, States should similarly share existing freedoms from federal constraints, including the inherent limits of the Commerce Clause.
Reeves, 447 U.S. at 436-38, 100 S.Ct. 2271. Stated otherwise, "[w]hen a state government regulates or taxes, it turns over nothing that belongs to it; rather, it compels private action through the exercise of raw governmental power. In contrast, when a state government buys or sells, it is controlling and distributing its own resources." Dan T. Coenen, Untangling the Market-Participant Exemption to the Dormant Commerce Clause, 88 Mich. L. Rev. 395, 422 (1989). The distinction between a state's regulating and taxing, as opposed to a state's buying and selling, often is the focal point courts consider when addressing the threshold question of the existence of a governmental regulation of commerce in applying the dormant Commerce Clause analysis.
State Regulation
The dormant Commerce Clause applies only to "state regulation" that burdens interstate commerce and not to burdens imposed by private actors. Note, Kevin W. Barrett, Federal Limitations on Target Defensive Tactics: Applying Edgar v. Mite Corp. To the "Private Conduct" of Target Directors, 64 Wash. L.Q. 1187, 1195 (1986). While Ormet is a private party, the Commission is a public body, and its acts are those of a state actor subject to constitutional constraints. The issue is whether the Commission violated Commerce Clause constraints either by its own actions or its inaction in failing to prohibit the enforcement of Ormet's contract that allegedly regulates commerce in an unconstitutional manner.
Defendants argue that the Commission's actions in this case are subject to market participant exception because the Commission acted solely as the lessor of the terminal and, in that role, was a market participant. Plaintiffs counter that the Commission's action was one of "provid[ing] the marketplace itself," which was held to fall outside the scope of the market participant exception in Smith v. Department of Agriculture of the State of Georgia, 630 F.2d 1081, 1083 (5th Cir. 1980), cert. denied, 452 U.S. 910, 101 S.Ct. 3040, 69 L.Ed.2d 412 (1981).
In Smith, the State of Georgia promulgated a preference in its farmers' market for in-state growers in renting out prime spaces at the market. The Court characterized the state's role as a "hybrid" one of providing "the marketplace" for buying and selling, reasoning that while the state owned, operated and partially financed the market, the state did not engage in buying and selling of the farm products sold there, but "simply provided a suitable marketplace for the buying and selling of privately owned goods." 630 F.2d at 1081. Thus the Court held that the State was not a market participant and the exception was inapplicable to the Commerce Clause analysis of the governmental regulation that favored local farmers.
The Smith decision is distinguishable from the instant case in that it involved a preferential regulation directly issued by the State of Georgia. There was no such direct regulatory action by the Commission in this case. The Commission's actions, merely as the lessor of a marine terminal, were those of a market participant, in competition with other terminals, rather than a market regulator. Plaintiffs have failed to establish any action by the Commission that constitutes market regulation on which to base a Commerce Clause challenge.
The issue as to the Commission's inaction is whether the private contractual arrangement between Ormet and Bisso is so sufficiently connected to the Commission's regulatory role as to constitute state regulation.
State action questions arise when the entity who allegedly violated the Constitution claims it was not acting on the government's behalf. A private actor is free to determine with whom to deal and to fix the terms under which to buy and sell in the marketplace. Perkins v. Lukens Steel Co., 310 U.S. 113, 60 S.Ct. 869, 84 L.Ed. 1108 (1940).
This distinction between proprietary participation in the market and state regulation is also the basis for the market participation exception discussed elsewhere in this opinion.
Plaintiffs contend that discrimination by a private lessee on state-owned property can constitute unconstitutional state action when there is a symbiotic relationship between the private lessee and the public lessor. A "symbiotic relationship" is said to exist when the actions provide such tangible aid to both the alleged private wrongdoer and the government that the state and private actor become, in effect, "joint venturers" and the alleged wrongdoer's beneficial ties to the state justify subjecting its actions to constitutional scrutiny. John E. Nowak et al., Constitutional Law 513-14 (2d ed. 1983).
Here, plaintiffs argue that a symbiotic relationship exists between Ormet and the Commission based on the following factors: (1) the public ownership of the terminal; (2) the lease requirements imposed on Ormet to make the terminal available to the public "without undue discrimination"; (3) the Commission's statutory obligations under La.Rev.Stat. 34:1223 C and E to "regulate the commerce and traffic within such port area in such a manner as may, in its judgment, be for the best interest of the state" and not to grant an exclusive franchise to any carrier; and (4) the Commission's collection of sizeable annual rent from Ormet. In support of this contention, plaintiffs cite the seminal case on symbiotic relationship, Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961).
The Burton case, like the present case, involved a private party leasing from the state a building constructed by the state and receiving privileges from the state. However, the similarity ends there. Burton raised the entirely different legal issue of whether the private party lessee's racially discriminatory action could be the subject of Fourteenth Amendment scrutiny. Holding that the lessee's discriminatory action was not "so purely private" as to fall outside the broad reach of the Fourteenth Amendment, the Court concluded that the public lessor's inaction amounted to condoning the discriminatory decision and rendered the private lessee and the public lessor joint participants in the constitutional transgression. Moreover, the Court was careful to confine its decision to the facts and circumstances of the case, stating that it was not rendering a decision applicable to all state lease arrangements and commenting that state action decisions were to be made ad hoc by "weighing circumstances." 365 U.S. at 722, 81 S.Ct. 856.
State action for Commerce Clause purposes arguably may be narrower than state action for Fourteenth Amendment purposes for two reasons:
First, the values at stake for the latter purposes may strike the Court as of a higher order of importance than those at stake for the former purposes particularly given Congress' authority and capacity to act under the commerce clause if the Court errs in favor of the state. . . . Second, the states may be viewed as the primary lawmakers in ordering and structuring private activity — that is, in enabling private conduct. The states' role in providing structures for "private law" would be threatened by an expansive version of state action doctrine in this context.
Paul N. Cox, The Constitutional "Dynamics" of the Internal Affairs Rule — A Comment on CTS Corporation, 13 J. Corp. L. 317, 344 n. 153 (1988). In an analogy between state action under the Fourteenth Amendment and state regulation under the Commerce Clause, it is important to consider that the particular constitutional right at issue fixes the "parameters" of state action. Tribe, supra at § 18-3.
While the state action concept was broadly construed in Burton to apply to state inaction, that result may be attributable to the broad constitutional language empowering Congress to enforce the Fourteenth Amendment by all appropriate means. The Commerce Clause contains no such language. Indeed, Commerce Clause analyses historically have been directed at state action taken in a sovereign capacity.
In any event, the precedential value of Burton, even in the traditional Fourteenth Amendment state action setting, may be questionable in light of the Court's passing footnote reference to it in the subsequent case of San Francisco Arts Athletics v. Olympic Committee, 483 U.S. 522, 107 S.Ct. 2971, 97 L.Ed.2d 427 (1987). See Tribe, supra at § 18-3 n. 13 (noting that Burton has often been cited but seldom followed).
The Court took a narrower view of state action which is a product of a private actor's decision in San Francisco Arts Athletics v. Olympic Committee, 483 U.S. 522, 107 S.Ct. 2971, 97 L.Ed.2d 427 (1987). There, the Court declined to find a symbiotic link between the Olympic Committee, which was a privately incorporated entity, and the government. The Court noted that it "has held that a government 'normally' can be held responsible for a private decision only when it has exercised coercive power or has provided such significant encouragement, either overt or covert, that the choice must in law be that of the [government.]" 483 U.S. at 546, 107 S.Ct. 2971 (collecting cases). Absent that degree of "'close nexus' between the [government] and the challenged action," the challenged action cannot be characterized as state action. 483 U.S. at 547 n. 29, 107 S.Ct. 2971. Hence, when the private entity's decision is, at most, merely approved by or acquiesced in the government, the private entity's action likely will not be characterized as state action.
The reasoning of the Olympic Committee decision applies here. Plaintiffs have not alleged that the Commission compelled or encouraged Ormet's harbor tug contract. Plaintiffs have alleged only that the Commission's refusal to prohibit, and its consequent acquiescence in, the contract constituted state regulation. This acquiescence alone, under the facts and circumstances of this case, is insufficient to amount to state regulation for purposes of Commerce Clause analysis.
We conclude that neither the Commission's actions as lessor nor its acquiescence in Ormet's private contract is state regulation that violates the Commerce Clause.
Decree
For the foregoing reasons, the judgments of the lower courts are affirmed.
JOHNSON, J., dissents.
KNOLL, J., dissents and assigns reasons.
For the following reasons, I respectfully dissent from the majority's determination that there was no State action on the part of the Baton Rouge Port Commission and, even if there was, that it acted as a market participant, not a market regulator.
The majority ignores that Louisiana's history and economy are closely tied to the Mississippi River, and because of that relationship, the state "jealously guards against impediments to the river's commerce." Wood Marine Service, Inc. v. City of Harahan, 858 F.2d 1061, 1064 (5th Cir. 1988). It is likewise evident that the United States national government recognized the significance of the Mississippi River, as seen when Louisiana was admitted to the Union, Act of Feb. 20, 1811, codified 33 U.S.C. § 10, it conditioned statehood on the proviso that "[a]ll the navigable rivers and waters in the Territory of Orleans and Louisiana shall be and forever remain public highways." Correlatively, it is well recognized that the power of the United States over its waters which are capable of use as interstate highways flow from the Commerce Clause of the Constitution. United States v. Appalachian Elec. Power Co., 311 U.S. 377, 61 S.Ct. 291, 85 L.Ed. 243 (1940). Thus, it was held early in our country's history that the power to regulate commerce necessarily includes the power over navigation. Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 189, 6 L.Ed. 23 (1824); Leovy v. United States, 177 U.S. 621, 20 S.Ct. 797, 44 L.Ed. 914 (1900).
I recall this history, since I find that the case before us essentially involves the navigation of vessels on the public highway of the Mississippi River. Bisso's tugs meet ships at mid-stream and propel them across the water so that they can dock at the Burnside terminal. Likewise, when ships have completed the delivery/loading of their cargo dockside, Bisso's tugs propel them from the Burnside terminal back to mid-stream so that they can again enter the stream of commerce. It is this activity, all of which occurs in the free-flow of the Mississippi River, that Ormet's mandatory tug arrangement affects.
It is conceded that the Burnside terminal processes cargo that is in interstate and foreign commerce. The discrimination that Crescent, ENB, and RivCo identify is that the Ormet-Bisso contract causes the cost to rise for ships from out-of-state to use the terminal and deprives other tug companies from servicing the Burnside terminal. Although I find it unnecessary to enter the fray as to whether costs are indeed higher, since I find that such inquiry distracts from the real discrimination at hand, I choose to focus on the monopolistic control of tug services at a publicly owned facility. With this as my focal point, I find that the Ormet-Bisso contract has upended the way that business has been traditionally conducted and, in the process, has removed competition from the process of fixing rates that ship owners pay for tug services at this public terminal. The outcome of this contract has deprived everyone but Bisso from serving ships who call on this publicly funded terminal. Furthermore, ships calling on this public terminal have been denied the opportunity to negotiate tug fees and to receive the economic benefits from discounts that they heretofore garnered.
Although, as adroitly pointed out by Ormet and the Port Commission, no ship owners or their agents are parties to this litigation, the record bears out that complaints about the Bisso contract were raised from these quarters in the hearing before the Port Commission's executive committee.
As evidence of my concern, I reference the trial court's poignant commentary on the monopolistic practice Ormet and Bisso entered with the quiet blessing of the Port Commission. Addressing Ormet's anti-competitive contract with Bisso, the trial court recognized that this business arrangement may not be in the best interest of the Port of Baton Rouge. In particularizing this concern, the trial court, paraphrasing Channing Hayden, the president of the New Orleans Steamship Association, said, "[I]f this arrangement is allowed, it very likely might spread, it could have a deleterious effect."
Against this backdrop, I disagree with the majority's determination that the Commission's actions as lessor or its acquiescence in Ormet's private contract do not constitute state regulation that violates the Commerce Clause scrutiny.
It is well recognized that the Commerce Clause grants to Congress and correspondingly withholds from the various states the power to regulate commerce among the several states. U.S. Const. Art. I, § 8. Because the authority which the Constitution confers is the power to regulate, the dictates of the dormant Commerce Clause are not activated unless state action may be characterized as a regulation. SSC Corp. v. Town of Smithtown, 66 F.3d 502 (2nd Cir. 1995), cert. denied, 517 U.S. 1150, 116 S.Ct. 1453, 134 L.Ed.2d 571 (1996).
I agree with Crescent, ENB, and RivCo that the public ownership of the land and terminal and Ormet's obligations under its lease with the Port Commission constitute the grounds for finding tangential state action which would invoke the dormant Commerce Clause. Pursuant to La.R.S. 34:1223(C), "[t]he [port] commission shall regulate the commerce and traffic within such port area in such a manner as may, in its judgment, be for the best interest of the state." In furtherance of this statutory obligation, Ormet agreed in its lease with the Port Commission to make the Burnside terminal available to the public "without undue discrimination." From this it can be readily seen that there exists a symbiotic relationship between the Port Commission and Ormet. Thus, I find that Ormet's use of the Burnside terminal is intertwined with public use.
In Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961), the United States Supreme Court held that a municipal landlord cannot permit its private tenants to discriminate in violation of the constitution. There the Wilmington Parking Authority, a state agency, leased space in a publicly owned parking facility to a restauranteur. When the restaurant refused to serve Burton solely because of his race, the patron, naming both the parking authority and the private lessee, sought declaratory and injunctive relief to end the discrimination. Addressing the question of whether this private discrimination constituted state action, the Burton Court held that "no State may effectively abdicate its responsibilities by either ignoring them or by merely failing to discharge them whatever the motive may be." Id., 365 U.S. at 725, 81 S.Ct. at 861. Moreover, the Court held that "[b]y its inaction, the Authority, and through it the State, has not only made itself a party to the refusal of service, but has elected to place its power, property and prestige behind the admitted discrimination." Id., 365 U.S. at 725, 81 S.Ct. at 862.
Although Burton was decided under the Fourteenth Amendment, I find its analysis applicable to the facts herein. Ormet agreed in its lease of this public facility not to unduly discriminate. Accordingly, I find that Ormet may not take solace in its characterization as a private corporation, reap the benefits of its leasehold of a publicly funded terminal, and yet attempt to insulate itself from the implications of the Commerce Clause. In like manner, the Port Commission is duty-bound to operate the Burnside terminal with the State's best interest in mind. Accordingly, I find that the Port Commission may not shirk its statutory duties by using Ormet as a shield. Therefore, I find that Ormet and the Port Commission have acted to regulate interstate commerce under the dormant Commerce Clause.
In the original lease agreement with Ormet, all rules, regulations, tariffs, rates and charges for use of the Burnside terminal were subject to the approval of the Port Commission. By addendum dated January 1, 1992, the Port Commission and Ormet deleted that portion which required the Port Commission's approval.
I further disagree with the majority's determination that the Port Commission is immune from scrutiny under the Commerce Clause because the Port Commission as a landlord is acting as a market participant, not a market regulator.
At the threshold of its Commerce Clause analysis, the Supreme Court has drawn an important distinction between "regulation" of, and "participation" in, a market. When a state engages in market "participation" — that is, when it enters the open market as a buyer or seller on the same footing as private parties — there is less danger that the state's activity will interfere with Congress's plenary power to regulate the market. As the Court has explained, the Commerce Clause "restricts 'state taxes and regulatory measures impeding free private trade in the national marketplace,' but '[there] is not indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market.'"
SSC, 66 F.3d at 510, citing Wisconsin Dep't of Indus., Labor Human Relations v. Gould, Inc., 475 U.S. 282, 289, 106 S.Ct. 1057, 1062, 89 L.Ed.2d 223 (1986) (quoting Reeves Inc. v. Stake, 447 U.S. 429, 437, 100 S.Ct. 2271, 2277, 65 L.Ed.2d 244 (1980)). (Emphasis added).
In the present case, it is evident that the Port Commission is not just a landlord, seeking to earn rental revenues from the wise investment of its property. Unlike private landlords, the Port Commission is constrained to operate the Burnside terminal with the State's best interest in mind, La.R.S. 34:1223(C), and is prohibited from granting an exclusive franchise to any carrier, La.R.S. 34:1223(E). Thus, I find, unlike the majority, that the Port Commission is a "market regulator."
I further note that although the Port Commission was authorized to enter into a lease agreement with Ormet for the Burnside terminal, nowhere in the lease was Ormet granted authority beyond the public facility. Specifically, I point out that the Port Commission leased to Ormet particularly described immovable property in Ascension Parish, together with a ship and barge dock and all improvements located thereon. By seeking to control tugboat and steamship operations on the Mississippi River, it is evident to me that Ormet has attempted to extend the tentacles of the lease into a realm over which it has no authority. Thus, I find that Ormet has exceeded the authority granted it under the lease agreement and has impermissibly regulated navigation on the Mississippi River thereby burdening the free flow of interstate commerce.
Moreover, it is clear to me that this exclusive arrangement profoundly impacts interstate commerce by regulating the market between the tugboat and steamship industry in this aspect of navigation and is thereby directly burdened. Simply stated, the exclusive contract between Ormet and Bisso discriminates against the stream of interstate commerce because it mandates that only the favored operator, Bisso, may provide tug service to vessels in interstate commerce who utilize a public owned facility. In this regard, I find that the Commerce Clause protects the interstate market, i.e. the unfettered use of the public terminal by interstate shippers on the Mississippi River, not just the tug companies who compete to serve the interstate carriers. Compare Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978).
I further observe that the end result in the Exxon Corp. case was that competition was encouraged. In the present case, competition is squelched.
Lastly, I find that it is significant that Ormet retains $350 from the amount charged shipowners for the use of each Bisso tug assisting in docking and undocking at the Burnside terminal and that Bisso is paid only $1,100 for the tug services it provides ships utilizing this public facility. As admitted in Ormet's brief, "[t]erminal management sought to improve the terminal's efficiency and safety and to make a profit on the services as well." In C A Carbone, the Supreme Court stated that "[d]iscrimination against interstate commerce in favor of local business or investment is per se invalid, . . . ." CA Carbone, 511 U.S. at 392, 114 S.Ct. at 1683. Applying this proposition to the present case, I further find that the imposition of this fee benefits a local actor, Ormet, to the detriment of interstate commerce. Thus, I find that it has been demonstrated that Ormet's exclusive contract with Bisso both discriminates against and burdens interstate commerce.