VRC LLC v. City of Dallas ( 2006 )

United States Court of Appeals
Fifth Circuit
F I L E D
REVISED AUGUST 10, 2006
August 9, 2006
UNITED STATES COURT OF APPEALS
For the Fifth Circuit Charles R. Fulbruge III
Clerk
No. 05-10116
VRC LLC,
Plaintiff-Appellant
VERSUS
CITY OF DALLAS; DON BEARDEN; MARCUS CURRIE; DOES 1-30,
Defendants
CITY OF DALLAS,
Defendant-Appellee
Appeal from the United States District Court
For the Northern District of Texas
(3:03-CV-2450-B)
Before KING, BARKSDALE, and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
The plaintiff-appellant, VRC LLC, provides non-
1
consent towing services from private property in Dallas,
Texas. VRC sued the City of Dallas for declaratory
relief and a permanent injunction preventing enforcement
of a city ordinance regulating such activities. The
challenged ordinance, Dallas City Code Chapter 48A,
section 48A-36, requires that signs warning of the threat
of towing be posted on private property when, and for
twenty-four hours before, a vehicle is towed without the
vehicle owner’s consent.1 The ordinance contains specific
requirements regarding the content and placement of the
signs.2 The ordinance is penal in nature and is
punishable by a fine of $200-$500 subject to doubling or
trebling for subsequent offenses. DALLAS, TEX. CITY CODE Ch.
1
REQUIREMENTS FOR POSTING SIGNS
(a) A person commits an offense if he removes or
causes the removal of a vehicle from private
property without signs being posted and
maintained on the private property in
accordance with this section at the time of
towing and for at least 24 hours prior to
the removal of the vehicle.
DALLAS, TEX. CITY CODE Ch. 48A § 48A-36.
2
The regulation includes requirements about the
placement, size, color, language, and lettering of the
sign.
2
48A § 48A-50. The City stipulated that the ordinance was
enforced against VRC.
VRC argues that § 48A-36 is preempted by federal law,
the Interstate Commerce Commission Termination Act of
1995, specifically 49 U.S.C. § 14501(c). VRC further
argues that the ordinance is not exempted from preemption
by subsection (c)(2)(A) of that statute. The statute’s
relevant general preemption rule, 49 U.S.C. § 14501(c),
says:
(c) Motor carriers of property.--
(1) General rule.– Except as provided in
paragraphs (2) and (3), a State, political
subdivision of a State, or political authority
of 2 or more States may not enact or enforce a
law, regulation, or other provision having the
force and effect of law related to a price,
route, or service of any motor carrier (other
than a carrier affiliated with a direct air
carrier covered by section 41713(b)(4)) or any
motor private carrier, broker, or freight
forwarder with respect to the transportation of
property.
The parties agreed in the trial court that the city
ordinance is preempted by this general rule, as applied
without the safety regulation exception found in
subsection (c)(2)(A). On appeal, however, the City seeks
to raise an issue about whether the city ordinance
3
relates to a “service of any motor carrier,” such that
the general preemption rule applies. Of course, the
parties continue to dispute whether the safety regulation
exception in subsection (c)(2)(A) applies to exempt the
ordinance from preemption under the general rule.
The safety regulation exception in subsection
(c)(2)(A) says:
(2) Matters not covered.– Paragraph (1) . . .
(A) shall not restrict the safety regulatory
authority of a State with respect to motor
vehicles, the authority of a State to impose
highway route controls or limitations based on
the size or weight of the motor vehicle, or the
authority of a State to regulate carriers with
regard to minimum amounts of financial
responsibility relating to insurance
requirements and self-insurance authorization.
49 U.S.C. § 14501(c). The City argues that the ordinance
is a safety regulation because it prevents violent
confrontations between the owners of cars being towed
from private property and tow truck drivers and because
it cuts down on the number of false reports of stolen
cars, which waste police resources that could be better
spent protecting public safety. VRC argues that the
regulation is merely an economic regulation dressed up as
4
a safety regulation to avoid federal preemption by
section 14501.
The preamble to the city ordinance recites a safety
purpose. Specifically, it provides:
WHEREAS, the city council finds that the
proposed regulations governing persons
performing nonconsensual tows from private
property, which regulations include, but are not
limited to, licensing, signage, reporting,
inspection, vehicle equipment, insurance, and
rate requirements, are all safety-related or
otherwise fall within the 49 U.S.C. § 14501(c)
exception; and
WHEREAS, the city council believes that the
proposed safety-related regulations for non-
consensual tows would promote the public safety
of both visitors and residents of the city of
Dallas by contributing to a decrease in the
potential for confrontation and violence between
vehicle owners and the persons who tow their
vehicles; a decrease in bodily injury and
property damage caused by faulty tow truck
vehicles and equipment or by incompetent,
negligent, and criminal actions of tow truck
operators and drivers; a decrease in the number
of false auto theft reports processed by the
police department, thereby allowing the police
to devote more time to responding to more
critical public safety situations; and a
decrease in auto theft incidences and an
increase in the recovery of stolen autos by
allowing the police to more quickly and
efficiently determine when a car has been
stolen, rather than towed, and take appropriate
action; . . . .
DALLAS, TEX. ORDINANCE 24175 (Jan. 20, 2000) (preamble).
5
At a trial on the merits, Mr. Don Bearden, the
Interim Administrator of Transportation Regulation,
testified about his experiences as the City’s
administrator of the ordinance. He testified that he
“ha[d] seen some of the aftermath” of confrontations
between vehicle owners and tow truck drivers. He also
testified that on one occasion while visiting one of the
towing companies he overheard the drivers talking about
bullet holes in their trucks from where the trucks had
been shot and saw the bullet holes. He also testified
that he was aware of other similar concerns about
altercations between tow truck drivers and the public and
that sometimes his offices received complaints from
vehicle owners as a tow was ongoing, i.e., while the tow
truck was present and preparing to tow the person’s car.
Mr. Bearden could not, however, produce any documentary
evidence, reports, or studies of the phenomenon of
vehicle owner/tow truck driver altercations. Counsel for
VRC asked Mr. Bearden a series of questions about
whether, given the premise that car owners are likely to
become irate about their vehicles being towed, the
6
presence of the signs can help defuse the situation. In
essence, Mr. Bearden, who helped draft the ordinance,
testified that he believed the signs did help reduce the
likelihood of violent altercations. He testified in
response to a question from VRC’s attorney:
Citizens have called in and they can be very
irate and didn’t know why their car was towed or
anything. They are basically ready to go out
and do physical bodily damage to somebody. We
can point out that the signs are supposed to be
posted, it would tell them who has got the car.
And once we got through the process of telling
them what to look for, where to find the
information on where the car is, they have
calmed down quite a bit.
Mr. Bearden also testified that the signs helped tow
truck drivers defuse situations by concretely justifying
the towing company’s actions as being under contract with
the property owner. Further, Mr. Bearden testified that
in his opinion the signs helped inform the public that
their cars had been towed, not stolen, thereby reducing
the number of false stolen car reports, and thus the
police department’s workload in responding to such
reports.
Larry White, the manager of VRC, testified that his
company, which has contracts with over 6,000 properties
7
in Dallas, incurs an average cost of $11,500 per month
for placing and maintaining the signs as required by
Section 48A-36. This makes the monthly average cost
about $1.92 per property. The company would likely incur
at least some of these costs regardless of the statute
because, as Mr. White also testified, it would be in
VRC’s best interests to post signs warning that
unauthorized vehicles would be towed, and informing
hapless vehicle owners where to retrieve their cars.
The district court found that § 48A-36 was
sufficiently safety-related and filed findings of fact
and conclusions of law in favor of the City of Dallas.
VRC timely appealed.
Standard of Review
Generally, the denial of a permanent injunction is
reviewed for abuse of discretion. North Alamo Water
Supply Corp. v. City of San Juan, Tex., 90 F.3d 910, 916
(5th Cir. 1996); Thomas v. Texas Dept. of Criminal
Justice, 220 F.3d 389, 396 (5th Cir. 2000). In an
express preemption case, however, the court reviews a
district court’s preemption determinations de novo.
8
White Buffalo Ventures, LLC v. Univ. of Texas at Austin,
420 F.3d 366, 370 (5th Cir. 2005); Baker v. Farmers Elec.
Coop., Inc., 34 F.3d 274, 278 (5th Cir. 1994)
(“Preemption is a question of law reviewed de novo.”).
Therefore, the ultimate issue in this case is reviewed de
novo.
Discussion
The party seeking a permanent injunction must meet a
four-part test. It must establish (1) success on the
merits; (2) that a failure to grant the injunction will
result in irreparable injury; (3) that said injury
outweighs any damage that the injunction will cause the
opposing party; and (4) that the injunction will not
disserve the public interest. Dresser-Rand, Co. v.
Virtual Automation, Inc., 361 F.3d 831, 847-48 (5th Cir.
2004) (citing Amoco Prod. Co. v. Village of Gambell, 480
U.S. 531, 546 n.12 (1987)). In an express preemption
case, however, “the finding with respect to likelihood of
success carries with it a determination that the other
three requirements have been satisfied.” Trans World
Airlines, Inc. v. Mattox, 897 F.2d 773, 783 (5th Cir.
9
1990); see also Greyhound Lines, Inc. v. City of New
Orleans, 29 F. Supp. 2d 339, 341 (E.D. La. 1998).
An analysis of any claim that federal law preempts
state law starts with the “presumption that Congress does
not intend to supplant state law.” New York State Conf.
of Blue Cross & Blue Shield Plans v. Travelers Ins. Co.,
514 U.S. 645, 654 (1995). Whether federal law expressly
preempts a state law is at bottom a question of statutory
intent. Morales v. Trans World Airlines, 504 U.S. 374,
383 (1992).
The first issue to be addressed is whether the City
of Dallas may argue for the first time on appeal that the
general rule found in 49 U.S.C. § 14501(c) does not apply
to the ordinance at issue because it does not relate to
VRC’s towing services. The City concedes in its brief
that “the focus in the trial court was on whether Section
48A-36 falls under the safety exception in Paragraph
(2)(a).” It argues, however, that notwithstanding this
“focus,” VRC must still first meet its burden of
persuasion that the sign ordinance is “related to” VRC’s
services. The City points out that the burden of
10
persuasion in preemption cases lies with the party
seeking to nullify the state statute. AT&T Corp. v. Pub.
Util. Comm’n, 373 F.3d 641, 645 (5th Cir. 2004). VRC
replies that arguments made for the first time on appeal,
and therefore not raised in the district court, are
waived. See Charter School of Pine Grove, Inc. v. St.
Helena Parish Sch. Bd., 417 F.3d 444, 447 (5th Cir. 2005)
(“Ordinarily, arguments not raised in the district court
cannot be asserted for the first time on appeal.”); Kona
Tech. Corp. v. S. Pac. Transp. Co., 225 F.3d 595, 604
(5th Cir. 2000). Nothing in the amended pretrial order
indicated that this issue was in dispute in the trial
court, and the district court’s findings of fact
specifically state that “[t]he parties have not disputed
that tow trucks are motor carriers or the Dallas City
Code Chapter 48A Section 36 relates to the services
provided by motor carriers. Therefore, the Ordinance is
preempted by 49 U.S.C. § 14501 unless it falls within the
safety-related exception.” Given the City’s failure to
bring this issue up before the trial court, we find that
the City has waived this argument.
11
The second, and major, issue is whether the safety
exception in 49 U.S.C. § 14501(c)(2)(A) applies to exempt
the ordinance from federal preemption. The City begins
its argument around a fairly recent Supreme Court case,
Ours Garage, which held that States can delegate their
safety regulatory authority with respect to motor
vehicles to their cities or other political subdivisions.
City of Columbus v. Ours Garage & Wrecker Serv., 536 U.S.
424, 428 (2002). In Ours Garage, the Court considered a
different aspect of 49 U.S.C. § 14501(c), but began by
stating that “[p]reemption analysis ‘starts with the
assumption that the historic police powers of the States
were not to be superseded by the Federal Act unless that
was the clear and manifest purpose of Congress.” Id. at
438 (quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485
(1996)). The Court went on to opine on the congressional
purpose for the safety exception, saying, “Congress’
clear purpose in § 14501(c)(2)(A) is to ensure that its
preemption of States’ economic authority over motor
carriers of property, § 14501(c)(1), ‘not restrict’ the
preexisting and traditional state police power over
12
safety.” Id. at 439.3 The Court also warned that states
and municipalities could not hide economic regulation
under the guise of safety regulation. The Court said,
“Local regulation of prices, routes, or services of tow
trucks that is not genuinely responsive to safety
concerns garners no exemption from § 14501(c)(1)’s
preemption rule.” Id. at 442. After determining that the
state could validly delegate its regulatory authority,
the Supreme Court remanded for determination of whether
the ordinances at issue in Ours Garage fell within the
safety exception. Id. The Supreme Court expressly
declined to define the parameters of the exception. Cole
v. City of Dallas, 314 F.3d 730, 732 (5th Cir. 2002)
(citing Ours Garage, 536 U.S. at 442).
Case law both predating and applying the principles
discussed in Ours Garage has on the whole given a broad
construction to the safety regulation exception. Even
the appellant, VRC, implicitly concedes this by
essentially arguing for a change in the law. Its
3
The Court supported this opinion with legislative
history not cited here.
13
‘Summary of the Argument’ states that “[m]ore recently,
courts have allowed regulations to escape preemption
because the regulations included a recitation that their
purpose is safety.” VRC argues for an essentially new,
‘workable’ standard wherein the court inquires closely
into the legitimacy of the municipality’s safety concern
and ensures that it is not a guise for economic
regulation. Such a standard would include a requirement
that there be a close nexus between the safety concern
and the regulation.4
Following Ours Garage, this court, in Cole, upheld a
city ordinance prohibiting persons convicted of a felony
under the Texas Controlled Substances Act, or a
comparable law, within the preceding five years from
4
VRC’s example case is a district court case which
was overturned on appeal, but some conclusions of which
ultimately were vindicated. See Harris County Wrecker
Owners for Equal Opportunity v. City of Houston, 943 F.
Supp. 711 (S.D. Tex. 1996). VRC admires this opinion
for the depth with which the district court reviewed
the issues. Unfortunately for VRC, that case has been
abrogated. See Stucky v. City of San Antonio, 260 F.3d
424 (5th Cir. 2001), vacated, 536 U.S. 936 (2002)
(remanding for further consideration in light of Ours
Garage.) And, as VRC acknowledges, most of the courts
that have addressed the safety exception since then
have done so in a relatively “cursory” manner.
14
obtaining a wrecker driver’s permit. 314 F.3d at 734-35.
The Cole court described Congress’ purpose when enacting
49 U.S.C. § 14501(c) as the “slender congressional goal
of addressing economic authority over such carriers” and
“decline[d] to elasticize Congress’s economic goal by
narrowly interpreting safety regulatory authority of a
State with respect to motor vehicles.” Id. at 733-734
(internal quotation marks omitted). The court
specifically considered the preamble to the ordinance and
did not note that the city had entered any studies or
expert testimony about the dangers of drug users or
felons with wrecker’s licences into evidence. The court
merely stated that “[i]t is difficult to imagine a
regulation with a more direct protective nexus or
peripheral economic burden.” Id. at 735.
The Eleventh Circuit has also recently confronted a
nonconsensual towing ordinance, in Miami Beach, which
required towing permits, business applications, written
authorization for towing, and storage within the city
limits. Galactic Towing, Inc. v. City of Miami Beach,
341 F.3d 1249, 1252 (11th Cir. 2003). The Eleventh
15
Circuit also specifically considered the evidence of
legislative intent present in the city’s ordinance and
the testimony of city officials about how the relevant
parts of the ordinance related to the city’s safety
concerns. The court upheld the ordinance.
Several other courts have also upheld similar
ordinances against preemption challenges, finding that
the state’s or municipality’s requirements fell within
the safety regulation exception. See Tillison v. City of
San Diego, 406 F.3d 1126, 1127 (9th Cir. 2005) (upholding
requirements of written authorization from the real
property owner or lessee and presence of that
owner/lessee or a representative at the time of the tow);
Tow Operators Working to Protect Their Right to Operate
v. City of Kansas City, 338 F.3d 873, 876 (8th Cir. 2003)
(upholding a rotation requirement and a solicitation
ban); Hott v. City of San Jose, 92 F. Supp. 2d 996, 999-
1000 (N.D. Cal. 2000) (upholding a requirement of
liability insurance, a criminal background check, display
of certain information, reporting, and record keeping);
Capitol City Towing & Recovery, Inc. v. Louisiana, 873
16
So. 2d 706, 711-13 (La. Ct. App. 2004) (upholding a
solicitation ban, drivers‘ uniform requirement, storage
facility requirements, and an oil-absorbent materials
requirement).
In a persuasive opinion, a California appellate court
has also upheld laws establishing licensing, reporting,
record keeping, credit card acceptance, and other
requirements. California ex rel. Renne v. Servantes, 103
Cal. Rptr. 2d 870, 880-81 (Cal. Ct. App. 2001), cert.
denied, 536 U.S. 939 (2002). The Servantes court cited
several previous cases in declaring that the unexpected
loss of the use of a vehicle directly affected the safety
of its operators. Id. at 878 (citing Berry v. Hannigan,
9 Cal. Rptr. 2d 213, 215 (Cal. Ct. App. 1992), and Crane
Towing, Inc. v. Gorton, 570 P.2d 428 (Wash. 1977)). The
court reasoned that the operator of a towed vehicle could
be left stranded and that legislation which assisted
members of the public in avoiding the loss of their
vehicles and reclaiming such vehicles once towed “fairly
and clearly promotes the safety and welfare of the
public.” Id.
17
The ruling most favorable to VRC’s position was
recently issued by the Second Circuit in light of the
Ours Garage decision. Loyal Tire & Auto Center, Inc. v.
Town of Woodbury, 445 F.3d 136 (2d Cir. 2006). It is,
however, readily distinguishable. Loyal Tire refines the
Second Circuit’s previous standard in safety exception
cases, which was established in Ace Auto Body & Towing,
Ltd. v. City of New York, 171 F.3d 765 (2d Cir. 1999).
Ace held that the regulations must be “reasonably related
to the safety aspects of towing disabled vehicles and
that the economic burdens thereby imposed are only
incidental.” Id. at 777.5 The Loyal Tire court modified
that rule in light of Ours Garage, and the facts before
it, to require in addition that a regulation be
5
The regulations challenged in Ace, which dealt
with the practice of “wreck chasing,” ranged from
licensing and record keeping to the maintenance of
storage and repair facilities, but the Second Circuit
did not engage in a detailed analysis. In fact, the
court said that “[m]ost of these requirements are so
directly related to safety or financial responsibility
and impose so peripheral and incidental an economic
burden that no detailed analysis is necessary to
conclude that they fall within the § 14501(c)(2)(A)
exemptions.” Id. at 776.
18
“genuinely responsive” to safety concerns. Loyal Tire,
445 F.3d at 145. The opinion holds that in making a
determination about whether a regulation is “genuinely
responsive” to safety concerns, the court must “consider
any specific expressions of legislative intent in the
statute itself as well as the legislative history, and
. . . must assess any purported safety justifications
asserted by the state or municipality in light of the
existing record evidence.” Id. In Loyal Tire, there was
significant record evidence and legislative history
indicating that the challenged ordinance had been passed
by the Town of Woodbury in order to discriminate against
out of town towing companies, particularly Loyal Tire.
Id. at 139-41, 146-47.6 There is no evidence of such a
discriminatory motive in the case at bar. Moreover, all
of the safety concerns purportedly addressed by the
6
Prior to passage of the ordinance, Loyal Tire had
been involved in a dispute with a town board member’s
family, and the police chief, over services rendered.
Id. at 140. In addition, the minutes of town meeting
discussions about passage of the ordinance were
“replete” with complaints about the service provided by
Loyal Tire and other out of town companies, but
contained no discussion of safety concerns. Id. at
146.
19
statute challenged in Loyal Tire were documented only
after litigation commenced. See id. at 141, 148. The
ordinance itself contained only a general statement that
towing regulations as a whole are in the interest of
public safety. Id. at 146 In contrast, the Dallas
ordinance challenged here contains a contemporaneous and
detailed declaration that the ordinance is responsive to
safety concerns. DALLAS, TEX. ORDINANCE 24175 (Jan. 20,
2000) (preamble).
VRC also cites two cases with slightly narrower
interpretations of the safety regulation exception, but
both were decided before Ours Garage and Cole. See
Northway Towing, Inc. v. City of Pasadena, 94 F. Supp. 2d
801, 803 (S.D. Tex 2000), abrogated by Stuckey v. City of
San Antonio, 260 F.3d 424, 443 (5th Cir. 2001); Whitten
v. Vehicle Removal Corp., 56 S.W.3d 293, 306 (Tex. App.-
Dallas 2001, pet. denied). In fact, in light of Ours
Garage, the Texas Court of Appeals in Dallas appears to
have withdrawn from its position in Whitten. See A.J.’s
Wrecker Serv. of Dallas, Inc. v. Salazar, 165 S.W.3d
444, 450 (Tex. App.–Dallas 2005) (“In light of the
20
Supreme Court's holding in Ours Garage, we conclude this
Court’s narrow reading of the safety exception in Whitten
is not controlling.”).
On this issue, the weight of the case law supports
the City’s broader interpretation of the safety exception
in the context of 49 U.S.C. § 14501(c). In addition, the
general rule that federal preemption is to be found only
where congressional intent is clear, particularly where
the traditional police power is at issue, also falls on
the City’s side.7 Beyond these basic legal rules, the
evidence shows that the Dallas City Council considered
the possibility of violent confrontation between unwarned
vehicle owners and tow truck drivers a safety issue and
found that a requirement that signs be placed and
maintained would help remedy the problem. Further, a
city administrator testified from his experience that
7
We recognize the wisdom, however, of the
admonition in New Hampshire Motor Transport Ass’n v.
Rowe, 448 F.3d 66, 76 (1st Cir. 2006), a Federal
Aviation Administration Authorization Act of 1994 case,
that an exclusion from preemption for all police-power
enactments “would surely ‘swallow the rule of
preemption,’ as most state laws are enacted pursuant to
this authority.”
21
there was a real problem with confrontation between
citizens and tow truck drivers and that the signs had
been helpful. Logically, the signs could prevent drivers
from parking where they were at risk of being towed, help
to defuse the anger of some who actually were towed, and
as the city administrator testified and the ordinance
preamble noted, reduce the drain on police resources
caused by false stolen car reports. Also, while it was
not a focus of the City’s argument, the California court
that decided Servantes had a point about the danger to
stranded motorists. The nexus between this ordinance and
public safety seems far less attenuated than many of the
ordinances upheld in the cases cited above, particularly
cases involving record keeping, reporting, liability
insurance, written authorization, and the presence of
property owners. Further, the economic burden on VRC is
apparently fairly minimal; testimony showed an average
compliance cost of $1.92 per property. And, as the City
points out, VRC could require that the property owners it
contracts with maintain the signs. $1.92 per property is
certainly less burdensome than regulations upheld in
22
cases discussed above, for example, maintaining storage
facilities in Miami Beach.
We recognize that VRC may have a point that
municipalities are accomplishing some economic
regulation, or more precisely consumer protection, while
making findings about safety in the preambles of their
ordinances. We note, however, that safety and consumer
protection are not mutually exclusive categories. And,
more importantly, we reiterate that in this case the
City’s safety concerns are real enough that the court is
convinced that they are both reasonably related and
genuinely responsive to safety concerns. Accordingly, we
need not inquire further.8
We conclude that the City ordinance is not preempted
by federal law and, therefore, VRC has not met the
requirements for a permanent injunction. The judgment of
the district court is AFFIRMED.
8
VRC did not make any showing about what illicit
economic regulation was hidden in this safety-related
regulation. This court recognized a similar failing in
Cole. 314 F.3d at 735.
23