Federal Maritime Commission v. City of Los Angeles, California

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

FEDERAL MARITIME )
COMMISSION, )
)
Plaintiff, )
)
v. ) Civil Case No. 08-1895 (RJL)
)
CITY OF LOS ANGELES, )
CALIFORNIA, et al., )
)
Defendants. )

~
MEMORANDUM OPINION
(April K, 2009) [Dkt. #3]

The Federal Maritime Commission ("FMC") has filed an unprecedented

motion for a preliminary injunction pursuant to the Shipping Act of 1984, as

amended, 46 U.S.C. §§ 40101 et seq., to enjoin certain discrete portions of the Port

of Los Angeles's ("POLA") and Port of Long Beach's ("POLB") (collectively, the

"Ports") respective Clean Truck Programs ("CTPs"). The CTPs are environmental

programs aimed at reducing the air pollution caused by the trucks used to transport

cargo to and from the Ports. The FMC alleges that an agreement between the

Ports to discuss and potentially coordinate their CTPs is likely, by a reduction in

competition, to cause an unreasonable increase in transportation costs and

decrease in transportation service, in violation of Section 6(g) of the Shipping Act.

Because the FMC has not made a sufficient showing of either a likelihood of

1
success on the merits or irreparable harm to warrant the extraordinary relief of a

preliminary injunction, the FMC's motion is DENIED.

BACKGROUND
A. The Ports' Clean Truck Programs

POLA and POLB are neighboring, and competing, ports in Los Angeles

County's San Pedro Bay which together form the largest port area in the United

States. l (Am. Compi. ~ 38 [Dkt. #46].) Approximately 40 percent of the United

States' import and export container traffic flows through the Ports, making them

critical components of the nation's economy. (Jd.; DecI. of John M. Holmes

("Holmes DecI.") ~ 41.) Containers unloaded and loaded at the Ports are

transported, or "drayed," by trucks to and from off-port terminals, rail yards, and

other locations outside of the Ports at the expense of the cargo's owners. (Am.

CompI. ~ 39.) Drayage services are provided by Licensed Motor Carriers

("LMCs") that either employ truck drivers or contract with independent truck

drivers, known as Independent Owner-Operators ("IOOs"). (Am. CompI. ~ 42.)

The drayage industry performs a critical function in the Ports' operations and

involves thousands of trucks and truck drivers.

The economic benefits provided by the drayage industry, however, are

offset, in no small part, by the considerable environmental and public health costs

it generates. The thousands of diesel trucks that provide drayage services at the

POLA and POLB are managed by their respective boards of harbor
commissioners, whose members are appointed by each city's respective mayor. (Am.
CompI. ~~ 9-10.)

2
Ports contribute significantly to the serious air pollution problem in the region.

(Decl. of Elaine Chang ~~ 7-12.) Indeed, emissions data provided by California's

South Coast Air Quality Management District reveals that in 2002 the Ports were

responsible for 24 percent of the total diesel particulate matter, 11 percent of the

nitrogen-oxides pollutants, and 45 percent of the sulfur-oxides pollutants emitted

in the surrounding air basin. (Jd. ~ 7.) Still other data indicate that a possible

consequence of drayage truck emissions are significantly higher cancer rates in the

affected areas. (Jd. ~ 10.) If such emissions are not abated, California state

authorities contend there is even a real potential for hundreds of premature deaths

between 2010 and 2014 and thereafter. (Jd. ~~ 11-12.)

In December 2007, the California Air Resources Board ("CARB")

promulgated new rules mandating restrictive new limits on emissions from diesel

trucks at California's ports. (Am. Compl. ~ 45.) POLA and POLB thereafter

crafted multi-faceted "Clean Truck Programs" to both reduce emissions associated

with drayage services and improve the Ports' safety and security.2 The Ports'

CTPs, while not identical, share many of the same components and were crafted,

in part, collaboratively. As part of their CTPs, both Ports adopted a tariff

amendment that imposes a "rolling truck ban" under which certain older trucks are

2
The CARB' s rules phase in limits on drayage truck emissions, requiring
ultimately that by the end of 20 13 all drayage trucks be equipped with engines that meet
or exceed Environmental Protection Agency 2007 emissions standards. (Am. Compl. ~
45; Declaration of Robert M. Blair ~ 44.) In response to the CARB's new rules, the Ports
collaboratively drafted the San Pedro Bay Ports Clean Air Action Plan ("CAAP"), which
set emissions-related goals for their operations. (Am. Compl. ~ 47.) The Ports' CTPs are
elements of the CAAP.

3
gradually prohibited from providing drayage services at each respective port,

beginning with a ban on pre-1989 trucks that commenced October 1, 2008 and

culminating January 1,2012 with a ban on all trucks that do not meet
3
Environmental Protection Agency ("EPA") 2007 truck emissions standards.

(Am. CompI. ,-r 52; Holmes DecI. ,-r,-r 12-13.) Both Ports also adopted a tariff

amendment instituting a Clean Truck Fee of $35 to be paid by cargo owners for

each twenty-foot container leaving each respective port on certain older trucks. 4

(Am. CompI. ,-r,-r 54, 87; Holmes DecI. ,-r 14.) The Ports intend to use the money

raised by their Clean Truck Fees, along with money received from the state, to

fund a subsidy program for the replacement, or retrofit, of older trucks that do not

meet EPA 2007 emissions standards. (Am. CompI. ,-r 54; Holmes Decl. ,-r 14.)

Finally, both Ports crafted a concession agreement into which all LMCs must enter

in order to continue (or commence) providing drayage services at each respective

port. (Am. CompI. ,-r,-r 57-60; Holmes DecI. ,-r 15.) The concession agreements set

forth certain safety and other requirements with which all trucks entering the port

must comply.5 (Am. CompI. ,-r 61.)

3
Intermediate junctures include: January 1, 2009, at which time all 1989-1993
trucks will become banned; January 1,2010, at which time all 1994-1996 trucks will
become banned; and January 1,2011, at which time all unretrofitted 1997-2003 trucks
will become banned. (Am. Compi. ~ 52.)
4
The Clean Truck Fee for forty-foot containers is $70.
5
For example, both Ports' concession agreements require LMCs to maintain
accurate information on each of their trucks and drivers in the Ports' Drayage Truck
Registry, to take responsibility for their drivers' compliance with the Ports' CTPs, and to
ensure that their drivers have valid Transportation Worker Identification Cards and that
their trucks have Radio Frequency Identification Devices. (Am. Compi. ~ 61.)

4
 The Ports' CTPs differ, however, in certain critical respects. First, POLA's

concession agreement phases in over five years a requirement that all LMCs

serving POLA use employee drivers, rather than 100s. (Am. Compl. 'i[56.) The

first deadline occurs in the fourth quarter of 2009, during which period an average

of twenty percent of drayage truck drivers serving POLA must be employees of an

LMC. (Am. Compl., Ex. B, POLA Concession Agreement 'i[ III(d).) POLB, in

contrast, did not adopt such an "employee mandate," instead allowing LMCs to

continue to utilize 100s for the foreseeable future. (Am. Compl. 'i[62.) Second,

the Ports crafted slightly different exemptions to their Clean Truck Fees. For

example, while POLA exempts from the fee all diesel trucks compliant with EPA

2007 truck emissions standards purchased without a CTP subsidy, POLB does not.

(Am. Compl. 'i[88.)

B. The Federal Maritime Commission

The FMC is an independent federal agency responsible for administering

the Shipping Act. Under the Shipping Act, the FMC has jurisdiction over the

rates, practices, and certain agreements of Marine Terminal Operators ("MTOs"),

such as the Ports. 6 46 U.S.C. §§ 40301(b), 4050 1(f)-(g), 41102(c), 41103, 41106.

In pertinent part here, the Shipping Act provides that agreements between MTOs

to "engage in exclusive, preferential, or cooperative working arrangements, to the

6
A "Marine Terminal Operator" is defined under the Shipping Act, in pertinent
part, as "a person engaged in the United States in the business of providing wharfage,
dock, warehouse, or other terminal facilities in connection with a common carrier." 46
U.S.C. § 40102(14).

5
extent the agreement involves ocean transportation in the foreign commerce of the

United States," must be filed with the FMC.? Id. §§ 40301(b), 40302. With such

filing, the agreement receives an exemption from the antitrust laws upon becoming

effective. 46 U.S.C. § 40307(a)(1). In exchange, however, the FMC reviews the

agreement for compliance with the Shipping Act and can deny or modify the

agreement as it determines necessary to ensure compliance with the Shipping

Act's enumerated prohibitions. s 46 U.S.C. § 41102(b)(1)-(2). In addition, the

Shipping Act provides a "general standard" in Section 6(g) under which the FMC

may seek to enjoin anti competitive conduct by MTOs who are parties to an

agreement within the FMC's jurisdiction. Section 6(g), codified at 46 U.S.C.§

41307(b)(1), provides in pertinent part:

If ... the [FMC] determines that the agreement is likely, by a
reduction in competition, to produce an unreasonable reduction in
transportation service or an unreasonable increase in transportation
cost, the [FMC] ... may bring a civil action in the United States
District Court for the District of Columbia to enjoin the operation of
the agreement.

The FMC's available remedies are set forth in Section 6(h) of the Shipping Act,

codified at 46 U.S.C. § 41307(b)(2), which provides that the Court may issue a

temporary restraining order, preliminary injunction, and, after a showing that the

7
An "agreement" under the Shipping Act is defined, in pertinent part, as "a written
or oral understanding, arrangement, or association, and any modification or cancellation
thereof." 46 U.S.C. § 40102(1).
8
For example, under the Shipping Act MTOs may not impose undue or
unreasonable prejudice or disadvantage with respect to any person. 46 U.S.C. §
41106(2).

6
agreement is likely to have the effect described in Section 6(g), a permanent

injunction. 9

C. FMC's Section 6(g) Determination as to the Clean Truck Programs

In June 2006, the Ports filed with the FMC an agreement entitled Los

Angeles and Long Beach Port Infrastructure and Environmental Programs

Cooperative Working Agreement ("Agreement No. 201170"). (Am. CompI. 'tl63.)

The agreement, which became effective on August 10, 2006, authorized the Ports

to confer, discuss, exchange information, and agree on a voluntary basis on the

funding, establishment, and construction of port-related transportation

infrastructure projects and environmental programs. (Id. 'tl'tl26, 63.) The Ports

subsequently began developing their CTPs, a process which included innumerable

public meetings and the receipt of public comment from interested stakeholders.

(Holmes Decl. 'tll0; see generally Decl. of Robert M. Blair ("Blair Decl.") at 3-

11.) As the CTPs took their final form, the FMC informed the Ports in May 2008

that Agreement No. 201170 did not adequately describe the Ports' coordination on

their CTPs for purposes of the FMC's review for compliance with the Shipping

Act. (Am. CompI. 'tl64.) On August 1,2008, the Ports responded by filing an

amended version of their agreement ("Agreement No. 201170-001,,).10 (Id. 'tl'tl64-

9
These enumerated equitable remedies are FMC's sole available remedies under
the Shipping Act for a Section 6(g) violation. 46 U.S.C. § 41307(b)(1).
10
The Ports also filed three additional agreements with the FMC related to their
CTPs. They included a Port/Terminal Operator Administration and Implementation
Agreement (No. 201178), a Marine Terminal Agreement (No. 201196), and a Port Fee
Services Agreement (No. 201199). (Am. CompI. ~~ 68-71; Blair DecI. ~ 99.) The
7
65.) The amended agreement provided that the Ports could "discuss, exchange

information, cooperate, and, to the extent each Port in its sole discretion deems

appropriate, coordinate" the adoption of drayage truck deadlines, a clean truck fee,

and concession programs with LMCs. (Id. ~ 66; id., Ex. D, Agreement No.

201170-001, Art. V.E.) The Ports began implementation of their CTPs soon

thereafter, beginning with imposition of the rolling truck ban on October 1,2008.

(Am. Compl. ~ 52.)

On October 29,2008, the FMC determined that Agreement No. 201170-

001 violated Section 6(g)'s general standard. Two days later, the FMC filed this

lawsuit against the Ports, the cities of Los Angeles and Long Beach, and the cities'

respective harbor departments and boards of harbor commissioners (collectively,

the "defendants"). (Id. ~~ 32, 82.) The FMC then moved for the instant

preliminary injunction on November 17,2008. Briefing was completed by the

parties on December 3,2008, and this Court heard oral argument on December 5,

2008. Supplemental briefs were filed December 17,2009. The FMC alleges that

POLA's employee mandate and the Ports' disparate Clean Truck Fee exemptions

and subsidies were developed collaboratively by the Ports under the auspices of

Agreement No. 201170-001 and are likely to cause an unreasonable increase in

transportation costs and an unreasonable decrease in transportation services. (Id.

~~ 94,97, 100.) Based on an analysis performed by the FMC's economist, the

FMC's challenge here, however, is based solely on Agreement No. 207110-001. (Am.
CompI. ~~ 93-101.)

8
FMC contends that these aspects of the Ports' CTPs could result in several billion

dollars in reduced net benefits by 2025 as compared with net benefits achievable if

the Ports restructure their CTPs to eliminate POLA's employee mandate and

harmonize their Clean Truck Fee exemptions. (FMC's Mem. In SUpp. at 29 [Dkt.

#3]; Decl. of Roy J. Pearson ("Pearson Decl.") ~~ 14,51.) The FMC further

contends that the CTPs, as currently structured, will transform the drayage market

from a competitive market to a severely constrained market in which surviving

LMCs will be able to increase prices above competitive levels while offering

inferior services. (FMC's Mem. In SUpp. at 35-36; Pearson Decl. ~ 13.) The

FMC, accordingly, seeks to enjoin the Ports from discussing, agreeing as to, or

implementing POLA's employee mandate and the Ports' disparate Clean Truck

Fee exemptions and subsidies. I I (FMC's Mem. In SUpp. at 45.) In addition, the

FMC seeks a novel standard for its motion for a preliminary injunction. For the

11
Notably, in July 2008 in the U.S. District Court for the Central District of
California the American Trucking Association, Inc. ("AT A") moved for a preliminary
injunction enjoining the Ports from implementing their CTP concession agreements. The
ATA argued, among other things, that the concession agreements are preempted under
the Federal Aviation Administration Authorization Act ("FAAA"). On September 9,
2008, Judge Snyder denied the ATA's motion, determining that the ATA had
demonstrated neither a substantial likelihood of success on the merits nor irreparable
harm and that the balance of hardships and public interest weighed against a preliminary
injunction. Am. Trucking Ass'ns, Inc. v. City of Los Angeles, 577 F. Supp. 2d 1110,
1125-28 (C.D. Cal. 2008). On March 20,2009, the 9th Circuit reversed Judge Snyder's
decision and remanded the case. Am. Trucking Ass 'ns, Inc. v. City of Los Angeles, ---
F.3d ----, 2009 WL 723993 (9th Cir. March 20,2009). The 9th Circuit held that it is
likely that many of the concession agreements' provisions are, in fact, preempted, id. at
*9, that the ATA has established a likelihood of irreparable harm, id. at * 11-12, and that
the equities favor a preliminary injunction, id. at * 12. At the time of this decision, the
district court in that case has not yet issued a decision on the AT A's motion for a
preliminary injunction on remand.

9
following reasons, the Court adopts the traditional preliminary injunction standard

and concludes that the FMC has not met its burden thereunder.

DISCUSSION
I. Legal Standard

In the 24 years since their enactment, the instant action is the first time the

FMC has sought a preliminary injunction pursuant to Sections 6(g) and 6(h) of the

Shipping Act. 12 As such, the standard to be applied is a question of first

impression. The defendants contend that, absent a clear indication from Congress

to the contrary, the Court must apply the four-part test traditionally applied in

preliminary injunction situations. That test, as recently articulated by the Supreme

Court, requires a movant to demonstrate: (1) that it is likely to succeed on the

merits; (2) that it is likely to suffer irreparable harm in the absence of preliminary

relief; (3) that the balance of equities tips in its favor; and (4) that an injunction is

in the public interest. Winter v. Natural Res. Defense Counsel, Inc., --- U.S. ----,

129 S. Ct. 365, 374 (2008); see also CityFed Fin. Corp. v. Office of Thrift

Supervision, 58 F.3d 738, 746 (D.C. Cir. 1995); Washington Metro. Area Transit

Comm 'n v. Holiday Tours, Inc., 559 F.2d 841, 843 (D.C. Cir. 1977). Under the

traditional test, the Court must balance the competing claims of injury, consider

the effect on each party of granting or withholding the requested relief, and pay

particular regard for the public consequences. Winter, 129 S. Ct. at 376-77.

Indeed, "[ a] preliminary injunction is an extraordinary remedy never awarded as

12
Indeed, this is the first time the FMC has invoked these provisions at all.

10
of right," id. at 376, and only where "the movant, by a clear showing, carries the

burden of persuasion" may the Court award such relief. Mazurek v. Armstrong,

520 U.S. 968, 972 (1997) (quotation marks and citation omitted) (emphasis in

original).

The FMC disagrees. It contends that the traditional four-part test should

not apply to actions brought pursuant to Section 6(g); rather, the FMC argues that

the Court need only assess whether the FMC has a substantial likelihood of

success on the merits. (FMC Mem. In Supp. at 20.) To support its position, the

FMC points to the text of Section 6(h), its legislative history, and purported

parallel case law addressing the enforcement authority of the Securities and

Exchange Commission ("SEC") and Commodities Future Trading Commission

("CFTC"). (Id. at 20-22.) For the following reasons, I disagree and hold that the

traditional four-part test applies to the FMC's motion for a preliminary injunction.

While "Congress may intervene and guide or control the exercise of the

courts' discretion," this Court must not, and will not, "lightly assume that

Congress has intended to depart from established principles" absent clear language

to that effect. Weinberger v. Romero-Barcelo, 456 U.S. 305, 313 (1982) (citing

Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944)). Indeed, "unless a statute in so

many words, or by a necessary and inescapable inference, restricts the court's

jurisdiction in equity, the full scope of that jurisdiction is to be recognized and

applied." Id. (quoting Porter v. Warner Holding Co., 328 U.S. 395,398 (1946));

see also Us. v. Oakland Cannabis Buyers' Co-op., 532 U.S. 483, 496 (2001)

11
("[W]hen district courts are properly acting as courts of equity, they have

discretion unless a statute clearly provides otherwise."). Here, neither Section

6(h)'s plain language nor its legislative history provide a clear indication that

Congress intended for this Court to set aside its traditional four-part preliminary

injunction test.

Section 6(h), as codified, states:

In an action under this subsection, the court may issue --
(A) a temporary restraining order or a preliminary injunction; and
(B) a permanent injunction after a showing that the agreement is
likely to have the effect described in [Section 6(g)].

46 U.S.C. § 41307(b)(2). While Section 6(h), as codified, provides a clear

indication as to Congress' intended standard for apermanent injunction - namely,

that the agreement "is likely to have the effect described in [Section 6(g)]" -

Section 6(h) does not indicate on its face any limitation on the Court's equitable

discretion nor prescribe a specific, limited standard for a preliminary injunction.

Id. In fact, FMC's proffered interpretation, applying the expressly-stated Section

6(g) standard for a permanent injunction to the separate preliminary injunction

provision, is, to say the least, a stretch. Provisions (A) and (B) stand alone and

nothing in the language of the statute indicates that the Court should conflate

them. I3 Moreover, a review of Section 6(g)'s legislative history does not provide

13
Section 6(h)' s language as enacted in the Shipping Act of 1984 similarly indicates
that Congress did not intend for this Court to apply the same standard when determining
whether to enter a permanent injunction versus a preliminary injunction. The Shipping
Act provides:

12
affirmatively, or by inference, that Congress intended for the courts to abrogate the

traditional preliminary injunction test when considering a motion for preliminary

injunctive relief under Section 6(h). See H.R. Conf. Rep. No. 98-600 (1984), as

reprinted in 1984 U.S.C.C.A.N. 283,287-293. Indeed, if any inference is to be

drawn, the Conference Report'sfailure to explicitly reject the traditional

preliminary injunction test indicates that the traditional standard in fact does apply,

given that the precursor to the compromise general standard adopted in Section

6(g) was added by the House Judiciary Committee, which expressly referenced the

(h) Injunctive Relief. The Commission may, upon making the
determination specified in subsection (g), bring suit in the United States
District Court for the District of Columbia to enjoin operation of the
agreement. The court may issue a temporary restraining order or
preliminary injunction and, upon a showing that the agreement is likely,
by a reduction in competition, to produce an unreasonable reduction in
transportation service or an unreasonable increase in transportation cost,
may enter a permanent injunction.
Pub. L. No. 98-237, § 6(h), 98 Stat. 67 (1984) (emphasis added). In addition,
while it is a recognized principle of statutory construction that when "Congress
includes particular language in one section of a statute but omits it in another
section ... , it is generally presumed that Congress acts intentionally and
purposely," Barnhart v. Sigmon Coal Co., 534 U.S. 438,452 (2002) (quotation
marks and citation omitted), I do not find a clear indication of Congressional
intent to strip this Court of its traditional equitable discretion by negative
inference from Section II(h) of the Shipping Act, as urged by the FMC. (FMC
Mem. In Supp. at 21, n.8.) Section 1 1(h), codified at 46 U.S.C. § 41307(a), grants
the FMC authority to seek preliminary injunctive relief in connection with an
ongoing FMC investigation for violation(s) of the Shipping Act other than a
violation of the Section 6(g) anticompetitive standard. While Section 1 1(h), as
codified, states "after ... a showing that the standards for granting injunctive
relief by courts of equity are met, the court may grant a temporary restraining
order or preliminary injunction," id., the Shipping Act's failure to include similar
language in Section 6(h) does not sufficiently establish an inescapable inference
that Congress intended for the Court to abrogate its traditional four-part test when
the FMC invokes Section 6(h) to seek preliminary injunctive relief.

13
traditional four-part test in its report. 14 H.R. Rep. No. 98-53(11) (1983), as

reprinted in 1984 U.S.C.C.A.N. 221, 230. Accordingly, the Court is not

persuaded that the FMC is entitled, absent explicit direction from Congress, to a

preliminary injunction standard that assesses only the FMC's likelihood of success

on the merits and disregards irreparable harm, the balance of equities, and the

public interest. ls Cf FTC v H.J Heinz, Co., 246 F.3d 708,714 (D.C. Cir. 2001)

14
The Judiciary Committee report provides:
With respect to [violations of the competition standard], the Commission's
sole remedy is to seek temporary or permanent injunctive relief in the
United States District Court for the District of Columbia. The burden is on
the Commission to show that the standards for injunctive relief are met. If
the Commission seeks preliminary injunctive relief, it must meet the
traditional preliminary injunction standards, offering proof on factors such
as a likelihood of success on the merits and a threat of irreparable injury.
H.R. Rep. No. 98-53(11) (1983), as reprinted in 1984 U.S.C.C.A.N. 221, 230. In
addition, the FMC's focus on the Conference Report's discussion of FMC's
relevant expertise and the need for prompt action to stop threatening conduct also
misses the mark. The Conference Report discusses these factors only in relation
to the Committee's decision to grant an exception to the principle of centralized
government litigation authority by giving the FMC litigation authority in the
District Court. H.R. Conf. Rep. No. 98-600, 1984 U.S.C.C.A.N. at 288. The
Court also notes that during the deliberation preceding Congress's enactment of
the Ocean Shipping Reform Act ("OSRA"), which amended the Shipping Act, the
FMC suggested that the 6(g) standard be incorporated into the prohibited acts
section of the Shipping Act so that the FMC could act upon anti competitive
agreements directly. The Senate Report for the OSRA states that the suggestion
was rejected and that the FMC would be required to continue to seek to enjoin
such agreements in federal courts. S. Rep. No. 105-61, at 17 (1997), available at
1997 WL 441767, at *17.
15
The Court does not find the "statutory injunction" line of cases involving CFTC
and SEC enforcement cited by the FMC controlling or persuasive here. See Commodity
Future Trading Comm 'n v. British Am. Commodity Options Corp., 560 F.2d 135, 141-42
(2d Cir. 1977) (affirming that the CFTC need not show irreparable injury in order to
obtain a preliminary injunction under Section 6c, 7 U.S.C. § 13a-l, ofthe Commodity
Exchange Act); SECv. Gen. Refractories Co., 400 F. Supp. 1248, 1254-55 (D.D.C. 1975)
(no showing of irreparable injury required where SEC seeks preliminary injunction under
Section 21(e) of the Securities Exchange Act, 15 U.S.C. 78u(e), where defendants were
engaged in conduct violative of the Act) (citing SEC v. Mgmt. Dynamics, Inc., 515 F.2d

14
(citing statutory text and explicit statements in legislative history to establish that

Congress intended for courts to depart from the traditional equity standard for

preliminary injunctions under Section 13(b) of the Federal Trade Commission

Act).

II. Application of the Preliminary Injunction Standard

Applying the traditional preliminary injunction standard, the Court finds

that the FMC has failed to demonstrate the necessary likelihood of success on the

merits and irreparable harm to carry its burden. How so?

A. Likelihood of Success on the Merits

Under the Section 6(g) standard, to succeed on the merits the FMC must

prove that (1) the agreement the FMC seeks to enjoin is likely to cause a reduction

in competition, (2) the reduction in competition is likely to cause an increase in

transportation cost or a decrease in transportation service, and (3) the likely

reduction in transportation service or increase in transportation cost is

"unreasonable." 46 U.S.C. § 41307(b)(l); see S. Rep. No. 105-61, at 14-15

(1997), available at 1997 WL 441767, at *14-15. Assuming for the purposes of

this decision that the FMC has jurisdiction over Agreement No. 201170-001 to

801 (2d Cir. 1975)). Merely because the FTC is a federal agency seeking to enforce a
federal statute does not per se require a departure from the traditional standard; this Court
must still look to whether Congress made a clear indication that it meant to displace the
traditional test. See, e.g., Gold v. State Plaza, Inc., 435 F. Supp. 2d 110,115-18 (D.D.C.
2006) (refusing to depart from traditional test for equitable relief in action brought under
Section lOG) of the National Labor Relations Act where agency had discretion to seek
preliminary injunction and Congress did not expressly or by inference limit the court's
equitable discretion (citing D'Amico v. Us. Servo Indus., Inc., 867 F. Supp. 1075 (D.D.C.
1994))).

15
pursue the relief it seeks, the FMC has not established, at a minimum, that it is

likely that Agreement No. 201170-001 is likely to cause the requisite reduction in
16
competition under Section 6(g)'s standard.

The FMC makes competing assertions as to which market is the relevant

market in which competition is likely to be reduced. In its Memorandum in

Support of its Motion for a Preliminary Injunction, the FMC asserts that the Ports'

requirements that LMCs execute the Ports' respective concession agreements will

give larger LMCs market power and thereby reduce competition in the drayage

market, concluding that "the concession plans reduce the number ofLMCs from

which cargo owners or other users of port drayage services may choose, which is a

predicate under [S]ection 6(g)." (FMC's Mem. In Supp. at 35-36.) Conversely,

the FMC asserts in its Supplemental Brief that the relevant reduction in

competition is that between the Ports themselves, asserting that "the attendant

reduction in competition between the ports themselves ... is the basis of the

[Section] 6(g) challenge" and that its economist's "analysis focused upon a

reduction in competition between the two Ports." (FMC's Supp. Br. at 6, 11 [Dkt.

#29].)

16
At the time of this decision the defendants' motions to dismiss the FMC's
Amended Complaint are pending. The motions argue, among other things, that the FMC
does not have jurisdiction under the Shipping Act to bring this action because the relevant
portions of Agreement No. 201170-001 do not "involve[] ocean transportation in the
foreign commerce of the United States," as required under § 4(b)(2) of the Shipping Act,
codified at 46 u.s.c. § 40301(b)(2). Because this decision applies only to the FMC's
motion for a preliminary injunction, the Court does not address the arguments advanced
in defendants' motions to dismiss.

16
 The FMC's arguments under both positions, however, suffer from critical

flaws. First, while the provisions the FMC challenges - the POLA employee

mandate, the Clean Truck Fee and its exemptions, and the Ports' subsidy programs

- may indeed cause some 100s and smaller LMCs to cease operation in their

current form or exit the drayage market, the FMC has not established that the

drayage market will suffer a reduction in competition. (Decl. of Joseph P. Kalt

("Kalt Decl.") ~~ 24,28.) Indeed, the FMC's economist concedes that as of mid-

October 2008 almost 800 LMCs had signed up for POLA concession agreements

(Pearson Decl. ~ 80; Holmes Decl. ~ 36),17 which results in an unconcentrated

market under the Herfindahl-Hirschman Index ("HHI,,).18 (Id. ~~ 26-27,33; see

also Decl. of Simon Goodall ("Goodall Decl.") ~ 15.) In addition, the FMC's

economist also concedes that barriers to entry in the drayage industry are low

(Pearson Decl. ~~ 55, 80), which means that even if the LMC market became

concentrated enough for certain LMCs to exercise market power and raise prices

while reducing services, other LMCs could enter the market and bid the price

17
As of November 26, 2008, POLB had similarly granted more than 700
concessions to concessionaires who control nearly 14,000 trucks. (Decl. of Robert G.
Kanter ~ 22.)
18
HHI is a market concentration measurement tool used by the Department of
Justice and the Federal Trade Commission to evaluate the impact of horizontal mergers
on market concentration and, in tum, the ability for firms to engage in anticompetitive
conduct, such as the exercise of market power to raise prices above competitive levels.
HJ Heinz, Co., 246 F.3d at 715-16, n.9 (assessing HHI of proposed merger to determine
whether government established prima facie case that merger would lessen competition).
HHI is calculated by summing the squares of the individual market shares of all the
participants in the market. U.S. Dep't of Justice & Federal Trade Comm'n, Horizontal
Merger Guidelines, § 1.5 (1992), as revised (1997). A market with an HHI below 1000
is considered unconcentrated. Id. § 1.51.

17
down. (Goodall Decl. ~ 16.) Accordingly, while the CTPs may marginally raise

the costs of shipping goods, the raise would appear not to be due to a reduction in

competition, but rather merely to the costs associated with complying with the

CTPs. (Kalt Decl. ~ 31.) Thus, the FMC's assertion that the remaining LMCs in

the market "will be able to substantially raise prices and increase profit margins

above previously competitive levels," (FMC's Mem. In Supp. at 35; see also

Pearson Decl. ~~ 19, 81), is wholly unsupported in the record.

Second, if the relevant reduction in competition is that between the Ports, as

parties to Agreement No. 201170-001, the FMC's allegation also falls flat. This is

because the aspects of the CTPs that the FMC alleges will cause an unreasonable

reduction in transportation service and increase in transportation cost - the POLA

employee mandate and the disparate Clean Truck Fee exemptions and related

subsidies - are areas in which the Ports disagree and thus are actually in

(Holmes Decl. ~~ 67-69; Kalt Decl. ~~ 11, 17, 21; Goodall Decl. ~
19
competition.

11.) Under Section 6(g) of the Shipping Act, the FMC bears the burden of

establishing a link between the alleged reduction in competition and the alleged

likely reductions in transportation service or increases in transportation cost. 46

U.S.C. § 41307(b)(1). Here, the record lacks any direct evidence that the

differences between the Ports' CTPs are anything but the result of divergent policy

views as to the most effective way to structure their respective CTPs, which

19
Given the FMC's failure on either ground to establish a reduction in competition,
the Court need not, and therefore does not, decide at this time which market is the
relevant market for purposes of Section 6(g).

18
require careful balancing of environmental, technical, fiscal, and commercial

considerations. 2o The FMC argues, nevertheless, that POLB's failure to adopt

identical Clean Truck Fee exemptions in order to secure a competitive advantage

over POLA is evidence that the Ports must have "harmonized" their decisions in

support of POL A's employee mandate, thereby reducing competition between the

Ports. (FMC's Mem. In SUpp. at 31; Pearson Decl. ~ 18, n.4). The FMC,

however, fails to offer any direct evidence to support this allegation or, for that

matter, any plausible motive for crafting divergent CTPs in a harmonious

fashion? 1 Indeed, keeping drayage costs as low as possible - and thus, keeping

drayage industry competition as fierce as possible - is in the Ports' interests. (Kalt

Decl. ~ 20). Accordingly, in the absence of any evidence of a reduction in

competition between the Ports as to the challenged aspects of the CTPs, the

FMC's costibenefit analysis of those provisions is not an analysis of the effect of a

reduction in competition between the Ports, but merely an analysis of the costs of

the Ports' different environmental requirements. Thus, the FMC has failed to

show that it is likely to establish the requisite reduction in competition required

under Section 6(g).

20
Ironically, the FMC's position in this case appears to be that the Ports should have
harmonized their CTPs more than they in fact did, thereby limiting even further
competition between the Ports. (Pearson Decl. ~ 67, n.S!.)
21
Moreover, while Agreement No. 201170-001 provides the Ports the authority to
coordinate their decisions as to their CTPs, it expressly denies either port the ability to
restrict the other port's ability to compete by providing that "[n]othing in this agreement
shall be interpreted to require a Port to obtain approval or consent from the other Port
before making any changes to its own Clean Truck Program." (Agreement No. 201170-
001, Art. V.I.)

19
B. Irreparable Harm

In addition to the FMC's weak showing on the merits, the FMC has also

failed to make a sufficient showing on irreparable harm. In order to secure a

preliminary injunction, a plaintiff must "demonstrate that irreparable injury is

likely in the absence" of such relief. Winter, 129 S. Ct. at 375 (citing Los Angeles

v. Lyons, 461 U.S. 95, 103 (1983)) (emphasis in original). Our Circuit has set a

high standard for irreparable harm, Chaplaincy of Full Gospel Churches v.

England, 454 F.3d 290,297 (D.C. Cir. 2006), and injunctive relief "will not be

granted against something merely feared as liable to occur at some indefinite

time." Wisconsin Gas Co. v. FERC, 758 F.2d 669,674 (D.C. Cir. 1985) (quoting

Connecticut v. Massachusetts, 282 U.S. 660,674 (1931)). The alleged injury must

be of such "imminence" that there is a clear and present need for equitable relief to

prevent irreparable harm. Id (citation omitted). In addition, in ordinary

circumstances economic loss alone will rarely constitute irreparable harm; the very

existence of a business entity must be threatened in order for the harm to be

irreparable. Id.

Here, the FMC's irreparable harm claims are based primarily on economic

harms the FMC's economist predicts IOOs, and the LMCs that employ them, will

suffer as a result of the POLA employee mandate. Relying on declarations from

several drayage market participants, the FMC alleges that even though the

employee mandate is scheduled to be phased in over five years, numerous IOOs

will be forced out of the market by the time the merits are decided because the

20
employee mandate will cause LMCs to begin restructuring their operations

immediately. (FMC's Mem. In Supp. at 42-44; FMC's Reply at 11-12 [Dkt.

#16].) The FMC further alleges that the CTPs' Clean Truck Fees and exemptions

will exacerbate this harm and force small LMCs out of the market because cargo

owners will shift their business to large LMCs that can afford to utilize cleaner

trucks that are exempt from the fees. (FMC's Supp!. Mem. at 15-16 [Dkt. #29].)

The FMC then ties these projected economic harms to the drayage market

generally, alleging that the progressive elimination oflOOs and the Clean Truck

Fees' effects on small LMCs will cause an immediate, anticompetitive, and

irreversible restructuring of the drayage market. (FMC's Reply at 11-12; FMC's

Supp!. Mem. at 15-16.) I disagree.

In my judgment, the FMC has failed to demonstrate that this alleged harm

to competition in the drayage market is sufficiently likely, or sufficiently

imminent, to establish the requisite irreparable harm to warrant a preliminary

injunction. While the FMC provides evidence that some 100s and some smaller

LMCs may be adversely affected by the employee-mandate and the Clean Truck

Fees and exemptions, the FMC has not established that these changes are likely to

result in irreparable harm to overall competition in the drayage market or to the

shipping pUblic. As discussed above, the record indicates that the drayage market

remains unconcentrated and the FMC concedes that barriers to entry in the

drayage market are low. In light of these conditions, even assuming the adverse

effects on 100s and small LMCs the FMC alleges will come to fruition, the FMC

21
has not established that it is likely that they will result in an anticompetitive

restructuring of the drayage market. Moreover, it remains that the first deadline

under the POLA employee mandate is not until the fourth quarter of 2009 and it

only requires that an average of twenty percent of LMC drivers be employees at

that juncture. (POLA Concession Agreement,-r III(d); see also Decl. ofRamses A.

Villavicencio,-r,-r 16-18.) Accordingly, given this gradual imposition of the

employee mandate, the Court is not persuaded that any resulting effects on the

drayage market are sufficiently irreversible or imminent to constitute irreparable

harm,z2

C. Balance of Equities & Public Interest

Finally, I find that the balance of equities and the public interest weigh in

favor of denying the FMC's motion for a preliminary injunction. As the Supreme

Court recently directed, it is imperative that this Court balance the competing

claims of injury and the effect an injunction would have on each party. Winter,

129 S. Ct. at 376,378 (reversing grant of preliminary injunction after assuming

irreparable harm and without addressing the underlying merits of the plaintiffs'
22 The Court notes that its irreparable harm inquiry in this case is distinct from that
made by the 9th Circuit in Am. Trucking Ass'ns, Inc., --- F.3d ----, 2009 WL 723993, at
*9-12. There, the 9th Circuit found that LMCs faced a "Hobson's Choice" between
complying with various provisions of the concession agreements that are likely to be
unconstitutional as preempted by the FAAA or giving up their business as drayage
service providers. Id. That case, however, differs from this case in two critical respects.
First, whereas the 9th Circuit focused solely on the alleged irreparable harm to LMCs,
whose interests are directly represented and advanced in that case, the alleged harm at
issue here is harm to competition in the drayage market broadly and its impact on
transportation costs and services. Second, the 9th Circuit's irreparable harm analysis
included as a given that the Ports' concession agreements include unconstitutional
provisions, which is a factor not applicable here.

22
claim). In addition, this Court must "pay particular regard for the public

consequences in employing the extraordinary remedy of injunction." Id. at 376-77

(quoting Romero-Barcelo, 456 U.S. at 312).

Like any new regulation that imposes new costs, the Ports' CTPs may

cause some LMCs to change their business practices, raise rates, or even exit the

market. In addition, the CTPs may cause some drivers to cease operating as IOOs

as the POLA employee mandate gradually phases in, thereby altering the existing

drayage market dynamic. Any such potential economic harms and changes to the

drayage market, however, must be weighed against the harm to the Ports and the

greater San Pedro Bay region if the portions of the CTPs the FMC challenges are

enjoined pending a decision on the merits. While the FMC argues that these

portions are not necessary for achieving a majority of the CTPs' environmental,

public health, and safety and security goals (FMC's Mem. In Supp. at 35; Pearson

Decl. ~ 16), the defendants counter that these provisions indeed are necessary to

the overall success of the Ports' respective CTPs and that to enjoin them now

would injure those LMCs and IOOs that are relying on them as well as stunt the

environmental and public health benefits the region will otherwise achieve,

(Holmes Decl. ~~ 31-34, 50-51). I agree.

First, it is important to note that the CTPs represent the judgment of the

cities' elected and appointed officials based on multi-year deliberative processes

that involved innumerable public meetings and the receipt and review of

comments from a wide range of stakeholders. (Holmes Decl. ~ 10.) The Ports'

23
boards of harbor commissioners consequently determined that the Clean Truck

Fee exemptions and funding mechanisms provide necessary relief for drayage

industry participants in connection with the costs associated with transitioning to

newer, cleaner trucks, as required by the rolling truck ban. (Holmes Dec!. ,-r,-r 14,

26-28, 53.) Without these provisions, the number of clean trucks currently serving

the Ports will decrease and significantly fewer clean trucks will enter into service,

thus reducing the environmental and health benefits gained to date and expected to

be gained the future. (Holmes Decl. ,-r,-r 28, 50-51.) In addition, POLA's board of

harbor commissioners determined that its employee mandate will promote

enhanced efficiency in the provision of drayage services at its port, as well as

better ensure compliance with its CTP requirements and enhance port security

both by providing POLA with enhanced access control and by ensuring LMCs are

accountable for their drivers. (Holmes Dec!.,-r,-r 15,31-34,39,46-47.) Given the

immediate impact enjoining these provisions could have on these aspects of the

CTPs, the success of which are critical to addressing the significant air pollution in

the area, the Court is not persuaded that they are outweighed by the speculative

harm to the drayage market alleged by the FMC.

In addition, for many of the same reasons, the public interest also weighs in

the defendants' favor. This case presents the unique situation wherein both parties

are acting to protect the public interest. On the one hand, the defendants are

implementing ambitious, multi-faceted programs to reduce high levels of air

pollution while also striving to improve the Ports' safety and security and to

24
enable future development. On the other, the FMC has a statutory responsibility

to take prospective action to protect the public from anticompetitive agreements

that it believes are likely to unreasonably raise rates and decrease services. See S.

Rep. No. 105-61, at 14 (1997), available at 1997 WL 441767, at *14. Ultimately,

the dispute at this juncture boils down to a request by the FMC that this Court

bless its chosen policy determination over that of the defendants prior to a full

briefing on the merits. Given the protracted and public deliberative process that

led to the development of the CTPs and the responsibility the defendants have for

improving the area's public health and managing the Ports' efficient operations,

the Court finds that the public interest, at this point, favors denying the FMC's

motion for a preliminary injunction.

CONCLUSION

Thus, for all of the above reasons, the Court DENIES the FMC's Motion

for a Preliminary Injunction. An appropriate Order will issue with this

Memorandum Opinion.
/
~
United States District Judge

25