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Nationwide Freight Sys., Inc. v. Illinois Commerce Commission

United States Court of Appeals, Seventh Circuit

April 23, 2015

NATIONWIDE FREIGHT SYSTEMS, INC., et al., Plaintiffs-Appellants,
ILLINOIS COMMERCE COMMISSION, et al., Defendants-Appellees

Argued December 12, 2014

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 12 C 2486. James F. Holderman, Judge.

For NATIONWIDE FREIGHT SYSTEMS, INC., an Illinois corporation, STOTT CONTRACTING, LLC, an Illinois limited liability company, Leader U.S. Messenger, Inc., Plaintiffs - Appellants: Kurt E. Vragel Jr., Attorney, Glenview, IL.

For ILLINOIS COMMERCE COMMISSION, an agency of the State of Illinois, THOMAS BAUDINO, an agent of the Illinois Commerce Commission, ODIE CARPENTER, an agent of the Illinois Commerce Commission, LATRICE KIRKLAND-MONTAGUE, an agent of the Illinois Commerce Commission, Craig Baner, Defendants - Appellees: Clifford Berlow, Attorney, Office of The Attorney General, Chicago, IL.

Before ROVNER, WILLIAMS, and TINDER, Circuit Judges.


Page 368

Rovner, Circuit Judge.

 The appellants in this case are three motor carriers that were cited for engaging in intrastate operations in Illinois without a license from the Illinois Commerce Commission (the " ICC" or " Commission" ). When the ICC conducted a follow-up investigation of the carriers and requested documents relating to their operations in Illinois, the carriers refused to comply, reasoning that because the documents sought by the ICC would reveal their rates, routes, and services, the requests were " related to" those rates, routes, and services and therefore were preempted by the Federal Aviation Administration Authorization Act of 1994 (the " FAAAA" ), 49 U.S.C. § 14501(c). The ICC rejected the carriers' argument and fined them for their failure to comply with the document requests, prompting the carriers to file suit seeking a judgment declaring the ICC's enforcement efforts preempted. The district court granted summary judgment to the ICC, concluding that the document requests, although they might reveal the carriers' rates, routes, and services, had no significant economic impact on them. Alternatively, the court found that the ICC's efforts to enforce its licensing requirement, which serves as a means of verifying a carrier's insurance coverage, is exempted from federal preemption. Nationwide Freight Sys., Inc. v. Baudino, No. 12 C 2486, 2013 WL 5346450 (N.D.Ill. Sep. 23, 2013). We agree on both points and affirm.


Since 1953, Illinois has prohibited motor carriers of property from conducting intrastate operations without first procuring a license from the ICC. See 1953 Ill. Laws 933, 937-38; 625 ILCS 5/18c-4104(1)(a). Section 4104 of the Illinois Commercial Transportation Law currently deems it unlawful to " [o]perate as an intrastate motor carrier of property without a license from the Commission; or as an interstate motor carrier of property without a registration from the Commission." 625 ILCS 5/18c-4104(1)(a). Obtaining a license for intrastate operations in turn requires a carrier to carry appropriate insurance or surety coverage. 625 ILCS 5/18c-4901 & 4402(2)(b). Procedurally, a carrier complies with the licensing requirement by completing an application and submitting proof of its insurance or bond coverage

Page 369

along with an administrative fee. See id. ; 92 Ill. Admin. Code § 1301.30(a). A carrier is then issued a public carrier certificate which states, inter alia, that " [t]he holder of this license certifies to the Commission that it will perform transportation activities only with the lawful amount of liability insurance in accordance with 92 Ill. Admin. Code 1425." R. 49 at 11. See also Ill. Admin. Code § 1425.10 (" A license or registration issued by the [ICC] to a motor carrier of property has force and effect only while the carrier is in compliance with requirements for the filing of proof of insurance or bond coverage." ). Drivers must have a copy of the carrier's license with them at all times. See 625 ILCS 5/18c-4104(c). It is a Class C misdemeanor offense, punishable by imprisonment for up to 30 days and a fine of up to $1,500, for an operator not to produce proof of registration upon request ( id. ; 625 ILCS 5/18c-1704(1); 730 ILCS 5/5-4.5-65); and the ICC also has the authority to impose a civil penalty of between $100 and $1,000 per offense (625 ILCS 5/18c-1704(2)). Each day of continuous operation in violation of the licensing requirement constitutes a separate offense. 625 ILCS 5/18c-1701.

Each of the three appellants is a motor carrier engaged in the intrastate transportation of property in Illinois that was cited by the ICC police force for conducting such activity without a license. Nationwide Freight Systems, Inc. and Stott Contracting, Inc. were cited in May of 2010 and were each fined $750. Leader U.S. Messenger, Inc., which previously had obtained a license but had allowed it to lapse, was cited in March of 2011 and was subjected to a civil penalty of $200.[1] After those penalties were paid, the ICC opened investigations into each carrier in order to determine the extent to which the operator may have committed additional violations by conducting unlicensed, intrastate operations for hire prior to the occasion on which the operator was cited. Toward that end, each carrier was asked to produce, for a period of five or six months preceding the violation, documents (including, but not limited to, bills of lading,[2] driver logs, and invoices from any owner/operators leased to the carrier) that would show the dates of transport, a description of the cargo carried, the origin and destination of that cargo, and the revenues generated from the transportation provided. The authorization for these requests is supplied by section 1703 of the Illinois Commercial Transportation Law: " Authorized employees of the Commission shall have the power at any and all times to examine, audit, or demand production of all accounts, books, memoranda, and other papers in the possession or control of a license or registration holder, its employees, or agents." 625 ILCS 5/18c-1703(2)(b).[3] All three carriers refused to comply with the ICC's demand for such

Page 370

documents and were issued administrative citations for their refusals. See 625 ILCS 5/18c-4104(k).

The carriers filed motions to dismiss these citations with the ICC. They argued that the document requests were preempted by the FAAAA because they sought records that would reveal the rates, routes, or service of each carrier. " To the extent that the commerce commission's minions are asking for information about such things as bills of lading, owner-operator contracts, and any other documents concerning the origins or destinations of cargo, they are running afoul of clearly-stated federal law," they argued. " Their conduct should be barred and sanctioned." See R. 1-1 at 6-7 (Stott); R. 44-4 at 5-6 (Nationwide).

The enactment of the FAAAA extended the 1978 preemption of state regulation of air carriers to motor carriers. Pursuant to the FAAAA's preemption provision, neither a state nor its political subdivision may enact or enforce laws " related to a price, route, or service of any motor carrier ... with respect to the transportation of property. 49 U.S.C. § 14501(c)(1) (emphasis ours). The provision also contains a number of exceptions. As relevant here, the act specifies that the preemption provision does not displace " the authority of a State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements or self-insurance authorization." § 14501(c)(2)(A).

The ICC's chief administrative law judge (" ALJ" ), Latrice Kirkland-Montague, denied the carriers' motions to dismiss, found each in violation of its obligation to comply with the Commission's document requests, and ordered each of them to pay fines of $500 for the failure to comply. The carriers filed a consolidated petition for rehearing with the ICC, and Judge Kirkland-Montague issued a memorandum to the ICC's commissioners explaining why, in her view, the petition should be denied. First, the carriers had made no showing that the document requests might have anything more than an indirect, remote, or tenuous effect on their rates, routes, or services. The Commission had only asked the carriers to produce records already in their possession. Second, the statute exempts from preemption the state's power to regulate carriers with respect to minimum insurance requirements. Without the ability to demand the types of records that the ICC had sought from the carriers, Kirkland-Montague asserted, the state would be unable to ascertain whether a carrier was or is operating without a license or without the insurance coverage necessary to obtain a license. R. 44-3 at 45-46. The Commission denied the carriers' petition for rehearing.

The carriers turned to federal court, where they filed suit against the ICC and three of its officers and agents in their official capacities. (The ICC was dismissed from the suit on Eleventh Amendment grounds, and that decision is not challenged here.) The carriers sought a declaratory judgment deeming the ICC's document requests and its investigations preempted by the FAAAA to the extent they implicated the carriers' rates, routes, or services. " The fact is," the carriers alleged, " that the Interstate Commerce Commission is attempting to regulate--by investigating--a motor carrier's rates, routes, or services for purposes which are preempted by 49 U.S.C. § 14501. That it cannot do." R. 1 at 7 ¶ 27. They also sought an injunction barring the ICC from assessing penalties for their refusal to comply with the document requests and from making any further inquiry into any aspect of their operations other than their

Page 371

compliance with the ICC's insurance requirements or ...

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