V-1 Oil Co. v. Utah State Department of Public Safety , 131 F.3d 1415 ( 1997 )

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
DEC 22 1997
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT PATRICK FISHER
Clerk
V-1 OIL COMPANY,
Plaintiff-Appellant,
v.
No. 96-4090
UTAH STATE DEPARTMENT OF
PUBLIC SAFETY; D. DOUGLAS
BODRERO, in his capacity as
Commissioner of Public Safety;
UTAH STATE FIRE MARSHAL
DIVISION, LYNN B. BORG, in his
capacity as Utah State Fire Marshal;
the LIQUEFIED PETROLEUM GAS
BOARD; and the STATE OF UTAH,
Defendants-Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
(D.C. No. 95-CV-504-C)
Linette Bailey Hutton (with Peter Stirba on the briefs), Stirba and Hathaway, Salt
Lake City, Utah, for Plaintiff-Appellant.
Brent A. Burnett, Assistant Attorney General (with Jan Graham, Utah Attorney
General, on the briefs), Salt Lake City, Utah, for Defendants-Appellees.
Before SEYMOUR, McKAY, and HENRY, Circuit Judges.
HENRY, Circuit Judge.
Plaintiff-appellant V-1 Oil Company appeals the district court’s grant of
summary judgment in favor of the defendants. V-1 alleges that the defendants’
imposition of licensing and certification fees upon its out-of-state liquefied
petroleum gas (LPG) facilities constitutes an impermissible tax upon the privilege
of engaging in interstate commerce. For the reasons set forth herein, we remand
to the district court for vacation of judgment in part, and we affirm in part.
I. BACKGROUND
V-1 owns and operates four LPG storage facilities within the borders of
Utah: one each in Salt Lake City, Woodruff, Manilla, and Ogden. At issue are
V-1's facilities in Preston, Idaho and Rock Springs, Wyoming, which sell LPG to
private consumers in Utah for home heating as well as to two convenience stores
located across the Utah border in the towns of Manilla and Logan, Utah. These
Utah customers, estimated to be 500 in number, consume approximately 312,400
gallons of LPG annually, generating approximately $136,000 in annual gross
profit. See Aplt’s App. doc. F ¶ 9 (Aff. of Gary D. Huskinson, President, V-1 Oil
Co.).
In 1993, Utah enacted the Liquefied Petroleum Gas Act, see Utah Code
Ann. §§ 53-7-301 to 53-7-316, to provide a comprehensive system of safety
2
regulations for the LPG industry in Utah. The statutes provide for the creation of
the Utah Liquefied Petroleum Gas Board to create rules for the protection of the
health, welfare, and safety of the public and persons using LPG. See Utah Code
§§ Ann. 53-7-304 to -305. The Board, working in conjunction with the Division
of the State Fire Marshal, see Utah Admin. Code R710-6, assumes responsibilities
including the issuance, suspension, and denial of licenses, the examination of
every LPG license applicant, and the collection of fees for any facility that
handles LPG. See Utah Code Ann. §§ 53-7-307(3), (9), 53-7-308(4).
Under the LPG Act, a person may not sell, transport, dispense, or store LPG
in Utah without a state license. See Utah Code Ann. § 53-7-308. V-1 contests
the requirement that its Preston, Idaho and Rock Springs, Wyoming facilities must
pay the license and certification fees required in Utah Code Ann. §§ 53-7-
309(2)(b), 53-7-314, and Utah Admin. Code R710-6-6. After the Utah Fire
Marshal threatened civil penalties and criminal prosecution for nonpayment of the
fees covering the Preston facility, V-1 paid the $225.00 fee under protest. V-1
also contests the certification fees for employees that handle LPG under Utah
Code Ann. § 53-7-311 and Utah Admin. Code R710-6-6, set at $30.00 per
employee annually.
The United States Department of Transportation’s Research and Special
Programs Administration has issued hazardous materials regulations “to enhance
3
training requirements for persons involved” in the transportation, handling,
storing, loading, and unloading of hazardous materials. Aplt’s App. doc. J, at 81
(Training for Safe Transp. of Hazardous Materials, 49 C.F.R. pts. 171-177,
Summary (1992)). V-1 “maintains annual certification pursuant to the federal
safety guidelines [the United States Department of Transportation’s regulations]
as required by Idaho and Wyoming for its facilities” conducting business in those
states. Aplt’s App. doc. F ¶ 7; see id. docs. H-I (hazardous materials regulations
training information). “V-1 requires that its employees complete initial and
recurrent training and examinations as required under [the United States
Department of Transportation’s regulations] for persons handling or transporting
hazardous substances.” Aplt’s App. doc. F ¶ 8; see id. docs. H-I.
V-1 delivers propane from its storage facilities to its customers in trucks.
See id. doc. N, at 99. V-1's vendors deliver propane to its storage facilities either
by train or truck. See id. None of V-1's facilities or customers are served by
pipeline. See id. at 99-100.
Most of V-1's customers, apart from those who purchase from the retail
outlets, are “residential customers located in rural areas.” Id. at 100. “In some
cases [V-1] provides storage tanks at the service location as part of its service and
retains title to the tanks. [V-1] has a few accounts at commercial locations.” Id.4
“As part of its service, at a customer’s request, [V-1] installs service lines
from a tank at a customer’s location, whether customer-owned or [V-1]-owned to
a customer’s premises where the propane is used. [V-1] charges for time and
materials for such line installation and does not retain title to the line. [V-1] does
not assume responsibility for subsequent line maintenance.” Id.In its motion for summary judgment and injunctive relief before the district
court, and on appeal, V-1 contends that the assessment, enforcement, and
collection of the LPG Act’s fees run afoul of the Commerce Clause, U.S. Const.
art. I, § 8, cl. 3 (“The Congress shall have Power To . . . regulate Commerce with
foreign nations, and among the several States, . . . .”). V-1 claims that its
Preston, Idaho and Rock Springs, Wyoming facilities and their employees are
compelled to pay these fees, and in theory, the Utah Fire Marshal in return
conducts inspections at the facilities. Because defendants have performed no
inspections of V-1's out-of-state facilities, V-1 contends that it is paying the State
of Utah a fee for the privilege of entering the state to transact business, which
discriminates against interstate commerce. V-1 asks that the defendants be
enjoined from assessing any and all fees under the LPG statutes, and that they
reimburse V-1 for all monies paid for licensing at its out-of-state facilities, and
for reimbursement of the fees paid for the certification of its agents, salesmen and
employees at these facilities.
5
In their motion to dismiss, the defendants argued that under the prevailing
four-prong test outlined in Complete Auto Transit Inc. v. Brady, 430 U.S. 274(1977), they are justified in imposing a reasonable tax on V-1's out-of-state
facilities.
Noting that the defendants’ motion to dismiss relied on matters outside of
the pleadings, the district court appropriately treated it as a motion for summary
judgment, see Brown v. Zavaras, 63 F.3d 967, 969 (10th Cir. 1995) (“A court may
convert a Rule 12(b)(6) motion to dismiss into a summary judgment proceeding in
order to consider matters outside of the plaintiff’s complaint.”), and ruled in favor
of defendants on all issues. This appeal followed.
.
II. DISCUSSION
A. Eleventh Amendment Immunity
“At the outset, we note that because [V-1 has] brought suit in federal court
against [d]efendants in their official capacities as directors of Utah state
agencies,” against two state agencies and against the State of Utah, V-1's “suit
may be barred in part or whole by the Eleventh Amendment.” Johns v. Stewart,
57 F.3d 1544, 1552 (10th Cir. 1995) (citing Pennhurst State Sch. & Hosp. v.
6
Halderman, 465 U.S. 89, 101 (1984)). At oral argument before this court, we
raised the question of the Eleventh Amendment bar. The State of Utah admitted it
chose not to raise the potential constitutional limitation of our subject matter
jurisdiction at either the district or appellate level.
1. Sua Sponte Consideration of Eleventh Amendment Immunity
Unlike most jurisdictional questions which must be considered by the court
on its own motion if the parties fail to raise them, whether sua sponte
consideration of a possible Eleventh Amendment bar is obligatory or discretionary
“has been subject to prolonged debate.” Mascheroni v. Board of Regents of the
Univ. of Calif., 28 F.3d 1554, 1558 (10th Cir. 1994). The Supreme Court appears
not to have decided whether consideration of the Eleventh Amendment bar is
required or optional. Compare Pennhurst, 465 U.S. at 98 (noting that the
Eleventh Amendment “affirm[s] that the fundamental principle of sovereign
immunity limits the grant of judicial authority in Art[icle] III”) with Patsy v.
Board of Regents, 457 U.S. 496, 515 n.19 (1982) (stating that the Court has
“never held that [the Eleventh Amendment bar] is jurisdictional in the sense that
it must be raised and decided by this Court in its own motion”).
7
In Mascheroni, we outlined the circuit split between mandatory and
permissive sua sponte consideration of the Eleventh Amendment bar. See 28 F.3d
at 1558 (collecting authority). We also noted that this circuit in recent cases has
not explicitly adopted either rule, but has “in fact consider[ed] sua sponte whether
the Eleventh Amendment barred its jurisdiction.” Id. As we have previously
raised the issue sua sponte, we will do so here.
2. Eleventh Amendment Provisions
The Eleventh Amendment provides:
The Judicial power of the United States shall not be construed to
extend to any suit in law or equity, commenced or prosecuted against
one of the United States by Citizens of another State, or by Citizens
or Subjects of any Foreign State.
U.S. Const. amend. XI. “Even though the clear language does not so provide, the
Eleventh Amendment has been interpreted to bar a suit by a citizen against the
citizen’s own State in Federal Court.” AMISUB (PSL), Inc. v. Colorado Dep’t of
Soc. Servs., 879 F.2d 789, 792 (10th Cir. 1989) (citing Hans v. Louisiana, 134
U.S. 1, 10 (1890)). As such, “the Eleventh Amendment bars a suit brought in
federal court by the citizens of a state against the state or its agencies,” Johns, 57
F.3d at 1552 (citing Pennhurst, 465 U.S. at 100), “‘whether the relief sought is
8
legal or equitable.’” Id. (quoting Ramirez v. Oklahoma Dep’t of Mental Health,
41 F.3d 584, 588 (10th Cir. 1994) (quoting Papasan v. Allain, 478 U.S. 265, 276
(1986))). Utah, the state’s governmental bodies, as arms of the state 1
1
The parties did not brief the issue, but on the record before us, it appears that the
Utah State Department of Public Safety, the Utah State Fire Marshal Division and the
Liquefied Petroleum Gas Board are arms of the state, and as such, they are entitled to
Eleventh Amendment immunity. See Regents of the Univ. of Cal. v. Doe, 117 S. Ct. 900,
903 (1997) (“It has long been settled that the reference to actions ‘against one of the
United States’ encompasses not only actions in which a State is actually named as the
defendant, but also certain actions against state agents and state instrumentalities.”)
(emphasis added). The question of whether a particular state agency has Eleventh
Amendment immunity is a question of federal law. Regents of the Univ. of Cal., 117 S.
Ct. at 904 n.5. “But that federal question can be answered only after considering the
provisions of state law that define the agency’s character.” Id.“To make the determination whether an entity is an arm of the state we engage in
two general inquiries.” Watson v. University of Utah Med. Ctr., 75 F.3d 569, 574 (10th
Cir. 1996). “[T]he court first examines the degree of autonomy given to the agency, as
determined by the characterization of the agency by state law and the extent of guidance
and control exercised by the state. Second the court examines the extent of financing the
agency receives independent of the state treasury and its ability to provide for its own
financing.” Haldeman v. Wyoming Farm Loan Bd., 32 F.3d 469, 473 (10th Cir. 1994).
Utah’s Governmental Immunity Act defines the “State” to include “the state of
Utah, and . . . any office, department, agency, authority, commission, [and] board. . . .”
Utah Code Ann. § 63-30-2(9). By contrast, under the statute, Utah’s political
subdivisions encompass “any county, city, town, school district, public transit district,
redevelopment agency . . . or other governmental subdivision or public corporation.” Id.§ 63-30-2(7).
As to the Utah Department of Public Safety, it is a department of the state
government’s executive branch, see Utah Code Ann. § 53-1-103, and its commissioner is
appointed and his salary determined by the governor. See id. § 53-1-107(2)(a)(5). The
commissioner has “recognized executive and administrative capacity.” Id. § 53-1-
107(3)(a). The Department has many policy-making functions within the executive
branch. See id. § 53-1-106. It is clearly an arm of the state.
The Utah State Fire Marshal Division, a division of the Department of Public
Safety, “complete[s] the duties assigned by the commissioner [of Public Safety].” Id. §
9
(here, the Utah Department of Public Safety, the Utah State Fire Marshal
Division, and the Utah Liquefied Petroleum Gas Board), and Utah’s “state
officials sued in their official capacities would, therefore, normally be immune
from suit in the federal courts.” In re SDDS, Inc., 97 F.3d 1030, 1035 (8th Cir.
1996); see Mascheroni, 28 F.3d at 1559.
In Ex parte Young, 209 U.S. 123, 155-56, 159 (1908), the Supreme Court
held that individuals may sue state officials in their official capacities for
prospective injunctive relief, establishing an exception to the Eleventh
Amendment immunity doctrine. See Green v. Mansour, 474 U.S. 64, 68 (1985).
Insofar as V-1 seeks prospective injunctive relief from Utah’s alleged ongoing
violation of the Commerce Clause, Utah state officials do not enjoy immunity
53-7-103(4)(b). The division enforces its rules in several areas, including on state-owned
property, and school-district owned property. Id. § 53-7-104(3)(b). It too is an arm of the
state.
Finally, the Liquefied Petroleum Gas Board, a policymaking board within the
Department of Public Safety, is also an arm of the state. See id. § 53-1-104(1)(d). The
governor appoints the members of the Board. In addition, any “[f]ees collected by the
division under this part shall be deposited with the state treasurer . . . .” Id. § 53-7-314.
As “alter egos or instrumentalities” of the State, each entity is immune from suits in law
or equity under the Eleventh Amendment. Watson, 75 F.3d at 574.
10
under the Eleventh Amendment. See In re SDDS, 97 F.3d at 1035; Johns, 57 F.3d
at 1555. 2
3. Did Utah Waive its Eleventh Amendment Immunity?
The defendants do not dispute that they have appeared throughout this
action without invoking Eleventh Amendment immunity or that “[a] state may
waive its Eleventh Amendment immunity and consent to suit in federal court.”
Johns, 57 F.3d at 1553. However, “[t]he mere fact that [the defendants] ha[ve]
2
Some scholars have suggested that the Supreme Court’s recent decision in
Seminole Tribe of Fla. v. Florida, 116 S. Ct. 1114 (1996), calls into question the
continued validity of Ex parte Young. See e.g., Vicki C. Jackson, Seminole Tribe, The
Eleventh Amendment & the Potential Evisceration of Ex Parte Young, 72 N.Y.U. L. Rev.
495 (1997). However, the Court was careful in Seminole Tribe to distinguish Ex parte
Young. Specifically, the Supreme Court commented on the “narrow exception to the
Eleventh Amendment provided by the Ex parte Young doctrine,” 116 S. Ct. at 1133, and
held that “Ex parte Young was inapplicable to petitioner’s suit,” id., explaining that the
suit against the Governor of Florida was barred because “Congress does not have
authority under the Constitution to make the State suable in federal court under [the
Indian Regulatory Gaming Act].” Id. Thus, we agree with the Second Circuit that Ex
parte Young is still viable. See Burgio & Campofelice, Inc. v. New York State Dep’t of
Labor, 107 F.3d 1000, 1007 (2d Cir. 1997) (noting that the “[Supreme] Court in Seminole
Tribe took great pains to assert the continued viability of Ex parte Young”) (citing
Seminole Tribe, 116 S. Ct. at 1131-33, nn. 14, 16-17). See also David Currie, Response:
Ex Parte Young After Seminole Tribe, 72 N.Y.U. L. Rev. 547, 547 (1997) (“Not to
worry; Ex parte Young is alive and well and living in the Supreme Court.”) (citation
omitted).
11
appeared in this suit, without explicitly invoking Eleventh Amendment immunity
does not, by itself, constitute a waiver of Eleventh Amendment immunity.”
Mascheroni, 28 F.3d at 1560. A state’s waiver is subject to a stringent test:
Utah’s consent to suit against it in court must be express and unequivocal. See
Pennhurst, 465 U.S. at 99. A state may waive its Eleventh Amendment immunity
“only where stated ‘by the most express language or by such overwhelming
implication from the text [of a state statutory or constitutional provision] as [will]
leave no room for any other reasonable construction.’” Atascadero State Hosp. v.
Scanlon, 473 U.S. 234, 239-40 (1985) (quoting Edelman v. Jordan, 415 U.S. 651,
673 (1974)).
As we have concluded previously, there is no Utah statutory or
constitutional provision that expressly waives the state’s Eleventh Amendment
immunity with respect to the claims V-1 alleges here. See Johns, 57 F.3d at 1554.
Although Utah has several general consent to suit provisions in its
Governmental Immunity Act, Utah Code Ann. § 63-30-1 to 63-30-38,
which waive its immunity to suits brought in Utah state courts, “a
state’s consent to be sued in the state’s own courts does not serve to
waive its Eleventh Amendment immunity.” Indeed, Utah law
expressly provides that its state district courts have exclusive
jurisdiction over suits brought against it. Utah Code Ann. § 63-30-
16. This provision clearly evidences Utah’s intent to retain its
Eleventh Amendment immunity.
12
Id. (quoting Richins v. Industrial Constr., Inc., 502 F.2d 1051, 1055 (10th Cir.
1974), and citing Port Auth. Trans-Hudson Corp. v. Feeney, 495 U.S. 299, 306
(1990)). Accordingly, we conclude that Utah has not waived its sovereign
immunity.
4. Application of the Eleventh Amendment Bar
The portion of V-1's claims that seeks retroactive monetary reimbursement
for licensure and certification fees is barred by the Eleventh Amendment. We
therefore dismiss this portion of V-1's claim. See Edelman, 415 U.S. at 662-71;
Green, 474 U.S. at 68. We remand with instructions to the district court to vacate
its judgment as to this portion of V-1's Commerce Clause claim and dismiss for
lack of jurisdiction. See Green, 474 U.S. at 68.
V-1 also seeks a declaration that Utah and its agencies and officials
violated the Commerce Clause in the past by imposing licensing and certification
fees. Similarly, because the Eleventh Amendment “does not permit judgments
against state officers declaring they violated federal law in the past,” Puerto Rico
Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 146 (1993)
(citing Green, 474 U.S. at 68), we dismiss the declaratory portion of V-1's claim.
13
See id. We remand with instructions to the district court to vacate its judgment as
to the declaratory portion of V-1's Commerce Clause claim and dismiss for lack
of jurisdiction. See id.; Green, 474 U.S. at 68.
To the extent V-1 seeks to enjoin prospectively Utah officials from
violating the Commerce Clause in their official capacities to prevent the ongoing
violation of federal law, we will address this portion of V-1's Commerce Clause
claim on the merits. See Johns, 57 F.3d at 1555; Green, 474 U.S. at 68.
B. Imposition of Licensing and Certification Fees
We note at the outset that the parties argued and the district court decided
that the LPG Act licensing and certification assessments on V-1's out-of-state
facilities are taxes. However, we decline to adopt this approach. We believe that
there is considerably more to the police-power-based-regulatory-fee-versus-tax
dichotomy than the parties have maintained. While a regulatory police power fee
that is reasonable in relationship to its costs is almost always sustained, see
Aldens, Inc. v. LaFollette, 552 F.2d 745, 749-50 (7th Cir. 1977), a tax with
effects upon interstate commerce is “more carefully scrutinized and more
consistently resisted . . . .” Freeman v. Hewit, 329 U.S. 249, 253 (1946). See
14
also Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970) (outlining balancing
test for a nondiscriminatory regulation). Because we may affirm for any grounds
supported in the record, see Schalk v. Gallemore, 906 F.2d 491, 498 (10th Cir.
1990), and we hold that the assessments are fees, the former inquiry is applicable
here.
We review the district court’s grant of summary judgment de novo. See
Kaul v. Stephan, 83 F.3d 1208, 1212 (10th Cir. 1996). Summary judgment is
appropriate if there is no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). This court’s
resolution of the conflict between the constitutional protection of free interstate
commerce and the states’ reserved power to tax must be accomplished on a case-
by-case basis, with the particular facts and statutory characteristics determining
the outcome. Boston Stock Exch. v. State Tax Comm’n, 429 U.S. 318, 329
(1977).
1. Taxes versus Fees
V-1 alleges that the licensing and certification assessments imposed on its
out-of-state facilities and employees impermissibly tax the privilege of engaging
15
in interstate commerce. “The police power of a state and its power to tax are of
course treated differently for constitutional purposes.” Aldens, 552 F.2d at 749
(citing Freeman, 329 U.S. at 253). “[T]he burden on interstate commerce
involved in a direct tax upon it is inherently greater, certainly less uncertain in its
consequences, than results from the usual police regulations.” Freeman, 329 U.S.
at 253. Because “[t]he power to tax is a dominant power over commerce . . . .
[a]ttempts at such taxation have always been more carefully scrutinized and more
consistently resisted than police power regulations of aspects of [interstate]
commerce.” Id. Thus, our characterization of the monetary assessment in this
case as a tax or as a fee determines the level of scrutiny we shall apply.
2. The Assessments on V-1 Facilities are Fees
Under Utah law,
If the money collected is for a license to engage in a business and the
proceeds therefrom are purposed mainly to service, regulate and
police such business or activity, it is regarded as a license fee. On
the other hand, if the factors just stated are minimal, and the money
collected is mainly for raising revenue for general municipal
purposes, it is properly regarded as the imposition of a tax . . . .
Weber Basin Home Builders Ass’n v. Roy City, 487 P.2d 866, 867 (Utah 1971)
(emphasis supplied).
16
Here, the fee is assessed to “service, regulate and police,” id., the
inspection and certification of LPG facilities and employees. See Aldens, 552
F.2d at 750 (upholding Wisconsin Consumer Act’s “fee imposed . . . to cover the
costs of administering the [a]ct” as valid exercise of police power). The fee must
be in reasonable relation to the cost of policing these activities. See Utah Code
Ann. § 53-7-315(5)(d); see Aldens, 552 F.2d at 749-50 (stating that the exercise
of “a state’s police power . . . is sustainable absent an undue burden on interstate
commerce which is clearly excessive in relation to local benefits”); V-1 Oil Co. v.
Utah State Tax Comm’n, 942 P.2d 906, 917 (Utah 1996) (holding environmental
surcharge a fee and “not[ing] that fixing the amount of a fee is a legislative act to
which we grant great deference.”). Finally,
A police regulation of local aspects of interstate commerce is a
power often essential to a State in safeguarding vital local interests.
At least until Congress chooses to enact a nation-wide rule, the
power will not be denied to the State.
Freeman, 329 U.S. at 253.
As in Aldens, the assessments involved here cannot be characterized as use
or excise taxes, but rather as an unadorned fee assessed to help defray the costs of
inspecting LPG facilities and to ensure that all LPG handlers providing LPG
services within the State of Utah meet minimum standards of safety. See 552
F.2d at 750; Interstate Towing Assoc., Inc. v. City of Cincinnati, 6 F.3d 1154,
17
1162-63 (6th Cir. 1993) (“The City’s fee cannot properly be characterized as a
user fee . . . . [r]ather [it] is assessed to help defray the costs of inspecting towing
vehicles to ensure that all trucks providing towing services . . . meet certain
standards of safety . . . .”). Finally, V-1 concedes “the license and certification
fees assessed and collected by the Utah State Office of the Fire Marshal, as
assessed against the in-state facilities of V-1 and other suppliers, are properly
considered fees” because they are “used to defray the costs of regulation.” Aplt’s
Br. at 10. Furthermore, we can see no discernible difference between the
characterization of fees assessed against V-1's in-state facilities and against its
out-of-state facilities: if the in-state facility fees are acceptable, the out-of-state
facility fees which involve precisely the same kinds of state services, are also
acceptable.
3. Analysis of the Fee
There is no question that legitimate state interests may conflict with the
national interests expressed by the Commerce Clause, and as such, we review
with “sensitive consideration . . . of the state regulatory concern” Utah’s
regulations, applying a “delicate adjustment” of these conflicting interests.
18
Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429, 440-41 (1978). The test that
has emerged is as follows:
Where the statute regulates evenhandedly to effectuate a legitimate
local public interest, and its effects on interstate commerce are only
incidental, it will be upheld unless the burden imposed on such
commerce is clearly excessive in relation to the putative local
benefits. If a legitimate local purpose is found, then the question
becomes one of degree. And the extent of the burden that will be
tolerated will of course depend on the nature of the local interest
involved, and on whether it could be promoted as well with a lesser
impact on interstate activities.
Pike, 397 U.S. at 142 (citation omitted) (emphasis supplied); see Dorrance v.
McCarthy, 957 F.2d 761, 763 (10th Cir. 1992) (applying Pike principles).
Accordingly, we will consider Utah’s LPG fees under the three factors outlined in
Pike: (1) whether there is the furtherance of a legitimate local public interest; (2)
whether the statute regulates evenhandedly; and (3) whether the statute places an
undue burden upon interstate commerce.
a. Legitimate local public interest
V-1 does not dispute that Utah has a legitimate interest in the regulation of
the transportation and distribution of LPG within its borders. Nor does it contend
that federal regulation of hazardous materials has pre-empted state regulation of
licensing and certification of LPG facilities.
19
Utah deems public safety and consumer protection to be priorities for the
provision of LPG services within its borders. See Utah Code Ann. § 53-7-
305(1)(a) (“The board shall make rules as reasonably necessary for the protection
of the health, welfare, and safety of the public and persons using LPG.”). V-1 has
presented no evidence to disprove the State’s assertion that the regulations of
these hazardous materials contribute to furthering the “health, welfare, and safety
of the public and persons using LPG.” Utah Code Ann. § 53-7-305(a); see id. §
53-7-315(4) (the Fire Marshal “may declare any container, appliance, equipment,
transport, or system that does not conform to the safety requirements of this part
or the rules or orders of the board, or that is otherwise defective, as unsafe or
dangerous for LPG service, and shall attach a red tag in a conspicuous location.”);
Utah Admin. Code R710-6-3.15 to -16 (the LPG Board may respond to and
investigate all serious accidents involving a licensee and LPG). Cf. Raymond
Motor Transp., 434 U.S. at 444 (“[A]ppellants produced a massive array of
evidence to disprove the State’s assertions that the regulations make some
contribution to highway safety.”).
There is no question that the proper handling of hazardous materials is a
valid “regulation of local aspects of interstate commerce” that “is a power . . .
essential to a State in safeguarding vital local interests.” Freeman, 329 U.S. at
20
253; see Blue Circle Cement, Inc. v. Board of County Comm’rs, 27 F.3d 1499,
1511 (10th Cir. 1994) (noting that “[l]egislation relating to public safety has long
been recognized as an important public interest”). We are reluctant to deny Utah
the exercise of its police power, absent an excessive burden on interstate
commerce, or Congressional action. See Freeman, 329 U.S. at 253 (“At least
until Congress chooses to enact a nation-wide rule, the [police] power will not be
denied to the State.”); Raymond Motor Transp., 434 U.S. at 443 (noting that “the
[Supreme] Court has been most reluctant to invalidate under the Commerce
Clause ‘state legislation in the field of safety where the propriety of local
regulation has long been recognized.’”) (quoting Pike, 397 U.S. at 143) (quoting
Southern Pac. Co. v. Arizona, 325 U.S. 761, 796 (1945) (Douglas, J.,
dissenting))). Accordingly, we hold that Utah’s LPG statutes effectuate a
legitimate local public interest.
b. Evenhanded Regulation
Utah’s regulations impose the same fees for licensing and certification on
in-state based facilities as upon out-of-state facilities. V-1 contests the even-
handed nature of the fees, asserting the Utah statutes impermissibly subject it to
“double taxation.” V-1 pays fees in Idaho and Wyoming, where its Preston and
21
Rock Springs facilities are based, and also in Utah, whereas Utah-based facilities
only pay once to engage in business within the State. As such, V-1 argues, under
Utah’s fee scheme, “if every State were to impose an identical tax,” “multiple
taxation would result,” which decreases V-1's out-of-state facilities’ ability to
remain competitive, thereby discriminating against interstate commerce. Aplt’s
Br. at 17, 20-21 (quoting Goldberg v. Sweet, 488 U.S. 252, 261 (1989)).
There is no tenable basis for this assertion, however. Clearly, Utah-based
facilities will pay less, as a percentage of revenues, to engage in business
exclusively in Utah, and the percentage will decrease further still if the Utah-
based companies engage in a greater amount of business in Utah than does V-1.
Cf. Interstate Towing, 6 F.3d at 1163 (noting that the “per-mile” cost of the fee
on towing companies may be “less, as a percentage of revenue, for those firms
that do more business in Cincinnati, [but] this has nothing to do with the towing
company’s home state”). Accordingly, under Utah’s LPG Act, an LPG company’s
home state is immaterial because it is unrelated to the percentage of business
affected by Utah’s LPG licensing fees. See id.Unlike in American Trucking Associations, Inc. v. Scheiner, 483 U.S. 266,
284 (1987), where Pennsylvania erected, and the Supreme Court invalidated, a tax
that essentially “threaten[ed] the free movement of commerce by placing a
22
financial barrier,” id., around the state, here, Utah is “trying to regulate what it
reasonably thinks is a potentially dangerous or troublesome activity carried on
within its borders.” Interstate Towing, 6 F.3d at 1165 (upholding municipal
ordinance regulating towing of vehicles). The LPG Act discriminates neither in
favor of local commerce or against out-of-state commerce. See Oregon Waste
Sys., Inc. v. Department of Envtl. Quality of Or., 511 U.S. 93, 108 (1994)
(striking down as discriminatory a $2.25 per ton surcharge on solid “waste
generated in other States,” as opposed to the $0.85 per ton surcharge on in-state
waste); Scheiner, 483 U.S. at 290 (invalidating Pennsylvania’s weight-based
registration fees in combination with an axle tax that “discriminate[d] against out-
of-state vehicles by subjecting them to a much higher charge per mile . . . and
they do not even purport to approximate fairly the cost or value of the use of
Pennsylvania’s roads”). The licensing and certification fees are imposed on in-
state and out-of-state facilities and employees alike. See Minnesota v. Clover
Leaf Creamery Co., 449 U.S. 456, 471-72 (1981) (upholding Minnesota statute
because it regulated evenhandedly “by prohibiting all milk retailers from selling
their products in plastic, nonreturnable containers, without regard to whether the
milk, the containers, or the sellers [we]re from outside the State”); Baltimore Gas
& Elec. Co., v. Heintz, 760 F.2d 1408, 1423 (4th Cir. 1985) (concluding statute
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that “prevents the acquisition of more than ten percent of the stock of only
Maryland public service companies” is an evenhanded regulation). We hold that
the LPG Act’s fees regulate evenhandedly.
c. Burden Upon Interstate Commerce
Having determined that the LPG fees are in furtherance of a legitimate
local interest, and regulate evenhandedly, we must now evaluate the LPG Act’s
effects on interstate commerce.
We first examine whether the Act imposes any burden upon interstate
commerce. V-1 “bears the burden of showing that the incidental burden on
interstate commerce is excessive compared to the local interest.” Dorrance, 957
F.2d at 763. The “incidental burdens” of the Pike inquiry “are the burdens on
interstate commerce that exceed the burdens on intrastate commerce.” New York
State Trawlers Ass’n v. Jorling, 16 F.3d 1303, 1308 (2d Cir. 1994) (citing Clover
Leaf Creamery, 449 U.S. at 471). Such incidental burdens might also “include the
disruption of [interstate] travel and shipping due to a lack of uniformity in state
laws, impacts on commerce beyond the borders of the defendant [S]tate, and
impacts that fall more heavily on out-of-state interests.” Pacific Northwest
Venison Producers v. Smitch, 20 F.3d 1008, 1015, 1017 (9th Cir. 1994)
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(upholding Washington State’s regulations “protecting native wildlife”) (internal
citations omitted).
Although the LPG Act’s fees may have some relatively minor effects on
both interstate and intrastate commerce, the fees at issue do not attempt to
regulate or prohibit the introduction of LPG into Utah. The fees involved here
are not assessed “for the privilege of making commercial entrances into” the
State. Scheiner, 483 U.S. at 284. They do not apply to the production,
manufacture or refining of LPG. See Utah Code Ann. § 53-7-303(1). They do
not apply to transportation of LPG by pipeline, or by railcar, or to pipeline
terminals. See id. § 53-7-303(2), (5). In a similar context, the Sixth Circuit
emphasized that:
those cases which have held certain fees, licenses, and other local
regulations impermissibly to burden interstate commerce have all
dealt with trades that consist solely or essentially of interstate
carriage. In such cases, the [Supreme] Court has read between the
statutory lines to see whether a state . . . actually has a defensible
interest in regulating this commerce, or whether it is, in a sense,
extorting money in exchange for permitting interstate commerce
within its jurisdiction.
Interstate Towing, 6 F.3d at 1164 (upholding municipal license fees imposed on
towing industry) (emphasis added); City of Philadelphia v. New Jersey, 437 U.S.
617, 624, 628 (1978) (when one State “overtly blocks the flow of interstate
commerce at a State’s borders” or attempts “to isolate itself from a problem
25
common to many by erecting a barrier against the movement of interstate trade,” a
“per se rule of invalidity has been erected”). As emphasized above, the Utah LPG
Act does not “block the flow of interstate commerce” in any discernible way, City
of Philadelphia, 437 U.S. at 624, and as such, there is no need to “read between
the statutory lines.” Interstate Towing, 6 F.3d at 1164. See also Raymond Motor
Transp., 434 U.S. at 444-45 (striking down Wisconsin regulation barring double-
trailer trucks or vehicles longer than 55 feet from the State’s highways
emphasizing the “substantial burden” imposed on the “interstate movement of
goods”); Bourjois, Inc. v. Chapman, 301 U.S. 183, 186 (1937) (upholding Maine
statute requiring registration of dealers and manufacturers of cosmetics because
“[i]t does not attempt to prohibit or regulate the introduction of cosmetics into the
State”); Lemke v. Farmers’ Grain Co., 258 U.S. 50, 53 (1922) (invalidating North
Dakota statute regulating and requiring licenses of interstate traders in grain that
is primarily “for transportation beyond [the States’s] borders”).
V-1 argues that by virtue of its Preston and Rock Springs locations near the
border of the State, the fees impermissibly burden interstate commerce. See
Aplt’s Br. at 20-21. However, the near-border locations of V-1's facilities do not
transform the “essential character” of the regulated services into an interstate
activity, thus “rendering the otherwise neutrally applicable provisions of the
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[statute] impermissible burdens on interstate commerce.” Interstate Towing, 6
F.3d at 1165. Rather, the “state boundaries are entirely irrelevant to this fee.” Id.
at 1163.
In Interstate Towing, 6 F.3d 1154, the Sixth Circuit upheld a similar
municipal statute requiring licensing fees from towing companies. The court
examined a Cincinnati ordinance that assessed an $80.00 licensing fee on all
towing companies whose places of business were within 25 miles of the city
limits. See id. at 1162-63. After determining that the fee was not a user tax,
because it was “assessed to help defray the costs of inspecting towing vehicles” to
ensure they met certain standards, id. at 1162, the court examined the fee’s effect
on interstate commerce.
The Interstate Towing court determined that the “towing ordinance protects
inarguably important municipal interests,” id. at 1164, and that Cincinnati’s
“serendipitous location in an area where three states converge” did not foreclose
it from regulating local activities, which might “entail movement across state
lines.” Id. at 1163.
Similarly here, V-1 complains it is victimized because of its locations near
Utah’s borders. However, the regulation of the handling of LPG, a hazardous
material, and the provision of fire and police services to ensure the “safety of the
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public and persons using LPG,” Utah Code Ann. § 53-7-305(1)(a), are
undisputedly important local interests. “Such concerns have consistently been
regarded as legitimate, innately local in nature, and presumptively valid, even
where regulations enacted to address those concerns have an impact on interstate
commerce. Interstate Towing, 6 F.3d at 1163 (citing Pike, 397 U.S. at 142). As
in Interstate Towing, that the regulated activities might “entail movement across
state lines” does not preclude Utah’s regulation in this field. We are reluctant to
invalidate state legislation that furthers a legitimate local public interest such as
this one, which ensures the safety of the States’s roads and provides emergency
services to the public. There is no evidence that the burdens upon interstate
commerce are anything but incidental, and certainly are not “clearly excessive”
under Pike. 397 U.S. at 142; see also Aldens, Inc. v. Ryan, 571 F.2d 1159, 1162
(10th Cir. 1978) (concluding that “conformance with the Oklahoma cost of credit
rules would not constitute an undue burden on interstate commerce”).
V-1 also claims that in exchange for the facility license, its “out-of-state
facilities receive nothing.” Aplt’s Br. at 21. V-1 alleges, and the defendants
agree, that the State has not inspected V-1's out-of-state facilities (although there
is some dispute as to why this is the case, and whether these inspections will take
place in the future). The statute expressly states that the assessment of the fee
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“may not exceed the cost of service or inspection provided.” Utah Code Ann. §
53-7- (d) (emphasis supplied). There is no evidence in the record as to the costs
of administering the LPG statutes’ regulations or regarding the costs of the
services provided by the State. See also V-1 Oil Co., 942 P.2d at 917 (Because
fees are not susceptible to exact measurement, and because fee-setting bodies
must have “the power to deal creatively” with the various problems they
encounter, “[f]ee-setting bodies are entitled to flexibility in their legislative
solutions to problems.”).
We also agree with the Sixth Circuit that,
While non-compliance with established enforcement measures does
suggest ulterior motives for a regulatory scheme, particularly where
part of the inspection involves collection of the fee, the evidence
does not indicate that this [statute] is simply a ruse. Imperfect
enforcement does not render an underlying statute unconstitutional.
Interstate Towing, 6 F.3d at 1164 n.10 (citing Hameetman v. City of Chicago, 776
F.2d 636, 641 (7th Cir. 1985) (“The Constitution does not require states to
enforce their laws . . . with Prussian thoroughness as the price of being able to
enforce them at all.”)). “More importantly, since the mandates of the [Utah
statutes] promote the public safety and consumer confidence in the regulated
services, we must assume that the [statutes] also benefit[] [LPG] companies
themselves.” Id. at 1164. V-1's allegations that Utah’s failure to inspect its out-
29
of-state facilities do not amount to factual disputes that might affect the outcome
of this suit. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The
district court was correct when it held that V-1 receives many benefits in return
for its payments of the statutes’ de minimis fees.
Accordingly, the LPG fees had a reasonable relation to the protections and
services provided by the State. Finally, because the local interest involved (i.e.,
the promotion and achievement of public safety and awareness with respect to the
handling of hazardous materials) is undisputedly a legitimate and important public
interest, see Utah Code Ann. §§ 53-7-305(1)(a), Blue Circle Cement, 27 F.3d at
1511, we hold that any potential burden the de minimis license and certification
fee requirements place upon interstate commerce is purely incidental.
III. CONCLUSION
In sum, we DISMISS the portions of V-1's claims seeking retroactive
monetary reimbursement of the assessed certification and license fees and
declaratory relief. We DISMISS V-1's claims for injunctive relief. We
REMAND for the district court to vacate its judgment as to the aforementioned
claims and portions of V-1's suit and dismiss for lack of jurisdiction. As to V-1's
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claims for prospective injunctive relief against Utah’s officers, we AFFIRM the
decision of the district court.
31