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American Bus Association, Inc. v. Rogoff

June 9, 2010

AMERICAN BUS ASSOCIATION, INC. PLAINTIFF,
v.
PETER M. ROGOFF, ADMINISTRATOR, FEDERAL TRANSIT ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION, ET AL., DEFENDANTS.
UNITED MOTORCOACH ASSOCIATION, INC., PLAINTIFF,
v.
PETER M. ROGOFF, ADMINISTRATOR, FEDERAL TRANSIT ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION, DEFENDANT.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

The above-captioned cases involve suits by charter bus trade associations against the Federal Transit Administration ("FTA" or "the agency"), a division of the Department of Transportation ("DOT"), and/or Peter M. Rogoff, the FTA Administrator. Because both plaintiffs allege identical constitutional violations of the First and Fifth Amendments and of the doctrine of separation of powers, the Court will address plaintiffs' claims in one Memorandum Opinion.

At the heart of this dispute are the regulations in 49 C.F.R. Part 604, known as the "Charter Rule," which was designed to effectuate the goal of 49 U.S.C. § 5323(d) of preventing local governmental authorities that receive federal transportation financial assistance from providing charter bus service if a private charter operator is willing and able to provide such service. Plaintiffs request that the Court declare unconstitutional section 172 of the Consolidated Appropriations Act of 2010 ("Appropriations Act"), Pub. L. No. 111-117, § 172, 123 Stat. 3034, 3065-66 (Dec. 16, 2009), also known as the "Murray Amendment," because it singles out Washington state's King County Department of Transportation Metro Transit Division ("KCM") as the sole federally funded transit agency against whom FTA may not enforce the Charter Rule, to the detriment of private charter operators in the King County area.

This matter initially came before the Court on plaintiffs' applications for a preliminary injunction, but the Court subsequently consolidated the applications hearing with a trial on the merits, which was conducted on June 3, 2010. (See Order, May 14, 2010.) Based on the entire record, the arguments of counsel at the hearing on June 3, and the relevant law, and for the reasons discussed herein, the Court will grant judgment in favor of plaintiffs and issue the requested relief.

BACKGROUND

American Bus Association ("ABA") and United Motorcoach Association ("UMA"), both organized as not-for-profit corporations, are national trade associations representing the charter bus industry. (ABA Compl. ¶ 3; UMA Compl. ¶ 3.) Plaintiffs' members are private entities that provide passenger services, including charter bus service. A number of these members provide charter bus service between various states and within King County, Washington, which includes the city of Seattle. (ABA Compl. ¶ 4; UMA Compl. ¶ 4.) One such member of both ABA and UMA is Starline Luxury Coaches, a division of Transportation Demand Management, Inc., which does business as Starline Transportation (collectively "Starline"). (UMA's Reply in Supp. of Mot. for Prelim. Inj. ("UMA Reply"), Ex. B ("Gillis Aff.") ¶ 2; see also UMA's Mem. of P. & A. in Supp. of Mot. for Prelim. Inj. ("UMA Mem."), Ex. A ("Presley Aff.") ¶ 9; ABA's Reply in Supp. of Mot. for Prelim. Inj. ("ABA Reply"), Suppl. Aff. Of Peter Pantuso ("2nd Pantuso Aff.") ¶ 5.) According to Starline's chief executive officer, Gladys Gillis, Starline is "a woman-owned State of Washington Corporation engaged in transportation services in the Puget Sound Region, including charter service," and it is "the largest privately owned and operated motorcoach carrier in Seattle." (Gillis Aff. ¶¶ 2, 4.)

I. THE ADMINISTRATIVE SCHEME

Under the Federal Transit Act, 49 U.S.C. §§ 5301-5540, the FTA Administrator oversees the federal government's funding of state and local public transportation systems throughout the United States, including charter services. See generally 49 U.S.C. § 5301(f); 49 C.F.R. §§ 1.45, 1.51 (delegating authority to the FTA Administrator). Under the regulatory scheme, "recipients" are entities receiving FTA-distributed federal funds, whether directly or indirectly as "subrecipients." 49 C.F.R. § 604.3(r). "Charter service" is defined as including (1) "[t]ransportation provided by a recipient at the request of a third party for the exclusive use of a bus or van for a negotiated price" and (2) "[t]ransportation provided by a recipient to the public for events or functions that occur on an irregular basis or for a limited duration" and either a premium fare is charged or a third party pays in whole or in part for the service. Id. § 604.3(c). It is undisputed that at all relevant times, KCM has been a transit service operated by the State of Washington, that it has received financial assistance from the FTA, and that it has provided "charter service" as defined by FTA regulations.

In order to ensure that state or local governments do not use federal funds "to foreclose a private operator from providing intercity charter bus service if the private operator can provide the service," a recipient that is a governmental authority (or an entity operating public transportation on that authority's behalf) cannot "provide charter bus transportation service outside the urban area in which it provides regularly scheduled public transportation service." 49 U.S.C. § 5323(d)(1). This serves to "protect[] private charter operators from unauthorized competition from recipients of Federal financial assistance . . . ." 49 C.F.R. § 604.1(a) (implementing 49 U.S.C. § 5323(d)).

The Charter Rule, 49 C.F.R. §§ 604.1-604.50, sets forth the comprehensive protections given to private charter operators.*fn1 One such protection is the requirement that recipients enter a "Charter Service Agreement" as a condition of receiving FTA funds for the acquisition or operation of public transportation equipment or facilities. See 49 C.F.R. § 604.4(a). Under that agreement, [t]he recipient agrees that it, and each of its subrecipients, and third party contractors at any level who use FTA-funded vehicles, may provide charter service using equipment or facilities acquired with Federal assistance authorized under the Federal Transit Laws only in compliance with the regulations set out in 49 CFR 604, the terms and conditions of which are incorporated herein by reference.

Id. § 604.4(b); see also 49 U.S.C. § 5323(d)(1).

The Charter Rule permits "interested part[ies]" to "request an advisory opinion from the [FTA's] Chief Counsel on a matter regarding specific factual events only." 49 C.F.R. § 604.18(a). An "[i]nterested party" can be a "corporation, association, or other organization that has a financial interest that is affected by the actions of a recipient providing charter service under the Federal Transit Laws." Id. § 604.3(l) (emphasis added). "An advisory opinion represents the formal position of FTA on a matter" and, with an exception not relevant here, "obligates the agency to follow it until it is amended or revoked." Id. § 604.20(a). An opinion can be used in administrative or judicial proceedings "to illustrate acceptable and unacceptable procedures or standards, but not as a legal requirement . . . ." Id. § 604.20(b). A request for an advisory opinion may also include a request that the Chief Counsel issue a cease-and-desist order, "which would be an order to refrain from doing an act which, if done, would be a violation of" the Charter Rule. Id. § 604.17. Such an order would be directed at a recipient whose provision of charter service violates the Charter Rule and "is likely" to cause the interested party to lose business opportunities and thus harm "the public interest." See id. § 604.22(a)(1). The Chief Counsel must "make every effort to respond to a [valid] request for an advisory opinion within ten days of receipt . . . ." Id. § 604.19(b).

In addition, if the agency receives a formal complaint that the charter agreement set forth in the Charter Rule has been violated, it "shall investigate and decide whether a violation has occurred." 49 U.S.C. § 5323(d)(2)(A). The agency "shall correct" any violation of the agreement's terms that it determines to have occurred. Id. § 5323(d)(2)(B). A private charter operator can become a "registered charter provider" in order to acquire "standing" to file such a formal complaint challenging a recipient's violation of the Charter Rule. Id. § 604.13(b).*fn2 Once registered, a private charter operator that is "affected by" a recipient's "alleged noncompliance" with the Charter Rule "may file a complaint" with the FTA's Office of Chief Counsel. Id. § 604.27(a). The complaint must specify, inter alia, how the private operator was "directly and substantially affected by the things done or omitted by the recipients . . . ." Id. § 604.27(b)(4).*fn3

The recipient must answer a valid complaint within 30 days of being notified of its docketing, after which the complaining operator may file a reply, to which the recipient may file a rebuttal. See id. § 604.27(c)-(e). If the submissions and supporting documentation establish "a reasonable basis for investigation," the FTA "shall investigate the subject matter of the complaint." 49 C.F.R. § 604.32(a).*fn4

The FTA's investigation into a complaint may include a review of the written submissions, further informal investigation by FTA, and review of any additional information furnished by the parties at the FTA's request. 49 C.F.R. § 604.32(b). No later than 90 days after receiving the last pleading, the FTA shall notify the parties of the investigation's completion, id. § 604.32(c), and then either issue a decision based on the pleadings, appoint a Presiding Official ("PO"), or dismiss the complaint. Id. § 604.34(a). If a PO is appointed, the Chief Counsel must issue a hearing order that sets forth, inter alia, the issues to be decided, the relevant legal authorities, any necessary supplemental rules of procedure not specified in the Charter Rule, and the deadline for the PO's recommendation. Id. § 604.32(b)(2)-(6).

The PO presides over a public hearing subject to a variety of procedural protections.*fn5

The private charter operator bears the burden of proof by a preponderance of the evidence to show that the recipient has not complied with the Charter Rule. 49 C.F.R. §§ 604.41, 604.42. Following the hearing, the PO "shall issue a recommended decision" based on the record, and the Chief Counsel has 30 days to ratify or modify the decision. Id. § 604.46; see § 604.44. If the Chief Counsel determines that the Charter Rule has been violated, he or she may bar the recipient from receiving future FTA funds, order the partial withholding of FTA funds from the recipient, or seek suspension and debarment of the recipient or its agents. Id. § 604.47(a). The type and amount of the remedy are to be determined in light of, inter alia, the nature and circumstances of the violation, the extent and gravity of the violation, and the revenue earned by providing the charter service. See id. § 604.47(b).

A party may appeal the Chief Counsel's decision to the FTA Administrator, who reviews the record (including the parties' appellate submissions, if any) and issues a final agency decision that accepts, rejects, or modifies the decision.*fn6 49 C.F.R. ยง 604.48(a)-(b). A petition for judicial review under the Administrative Procedure Act ("APA") may be filed "in an appropriate United States ...


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