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Suburban Trails Inc. v. New Jersey Transit Corp.

argued: June 5, 1986.

SUBURBAN TRAILS, INC., AND SUBURBAN TRANSIT CORP., APPELLANTS
v.
NEW JERSEY TRANSIT CORPORATION, NEW JERSEY TRANSIT BUS OPERATION, INC., JOHN P. SHERIDAN, JR., JEROME C. PREMO, ALBERT R. HASBROUCK, III, GEORGE W. HEINLE, MARTIN BRODY, EDWARD BORRONE, DAVID LEHMKUHL, PRENTIS C. NOLAN, III, JOHN L. MCGOLDRICK, JEAN BOGLE, RICHARD B. STANDIFORD AND ROGER A. BODMAN



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY D.C. Civil No. 85-1398.

Author: Weis

Before: ADAMS, WEIS, and HIGGINBOTHAM, Circuit Judges

Opinion OF THE COURT

WEIS, Circuit Judge.

The issue in this case is whether a state regulatory agency may deny subsidies to plaintiffs, privately owned bus companies, because one of them competes with a state owned carrier on an interstate route. The district court determined that state regulation of commuter bus lines was not preempted by federal law and rejected claims of antitrust and due process violations asserted by plaintiffs. We conclude that the federal preemption and antitrust issues are not ripe for review because the state regulatory action is not final and more significantly is subject to modification by a federal agency providing the subsidies. We will remand for further factual development on one aspect of the due process claim as it may be affected by the ripeness issue.

Plaintiffs Suburban Transit and Suburban Trails service a number of bus routes in New Jersey. They are affiliated companies with common management as well as overlapping directorates and stock ownership. Defendant New Jersey Transit is the state agency charged with providing an efficient and coordinated public transportation system. N.J. Transit provides some transportation services directly through its wholly-owned subsidiary, New Jersey Transit Bus Operations, Inc., also a defendant here, which operates some 1800 buses carrying approximately 395,000 passengers daily. The individuals named as defendants are members of the governing boards of these two agencies. In addition to its regulatory function, N.J. Transit is the state's designated recipient of federal grants under the Urban Mass Transportation Act. 49 U.S.C. app. §§ 1601-18 (1982). These funds are in turn allocated by N.J. Transit to both private and governmentally owned companies for the purchase of buses and other capital equipment.

The underlying controversy here, a comparatively simple one, has led to complex constitutional challenges and administrative ramifications. Suburban Transit seeks participation in the federal grant program, but its application has not been accepted by N.J. Transit, whose staff has recommended that plaintiffs be declared ineligible for the program.

In June 1983, N.J. Transit submitted a proposal to the Urban Mass Transportation Administration (UMTA) seeking federal funds for replacement of aging buses in the fleets of privately-owned as well as state-managed carriers. Initially, the plan included an anticipated allocation of twenty-five buses to Suburban. In October 1984, however, N.J. Transit submitted a revised schedule to UMTA listing Suburban Transit and Suburban Trails as one entity and allocating it no buses.

In April 1984, Suburban Trails had acquired an Interstate Commerce Commission permit to operate bus service on Route 9 between points in New Jersey and New York City. Service on this line began in January 1985 and competed directly with a similar operation by N.J. Transit's subsidiary on one of its more profitable routes. This development prompted protests by N.J. Transit's staff over Suburban's failure to consult with the agency and the resulting disruption of the coordinated transportation plan for that area. Evidence in the record supports the plaintiffs' allegation of a connection between this competition on Route 9 and the recommendation that Suburban receive no new buses.

Plaintiffs filed their complaint in the district court in March 1985, alleging that N.J. Transit's action is preempted by federal legislation. Plaintiffs also maintain that the defendants' conduct violates the Sherman Antitrust act and is a denial of due process. The case arrives here as an appeal from the district court's grant of summary judgment in favor of defendants.

Plaintiffs asked for a declaration that the defendants' actions were unlawful, for preliminary and permanent injunctions, and for damages. Defendants moved to dismiss the complaint, asserting that the matter was not ripe for adjudication because UMTA had not disbursed the grant funds and N.J. Transit had not yet made a final decision on allocation. In October 1985, however, N.J. Transit formally notified plaintiffs that it contemplated "declaring Suburban Transit/Trails ineligible for the receipt of buses and other capital equipment."

The district court rejected the defendants' contention that the matter was not ripe for decision, stating that the threats of sanctions against Suburban for engaging in service on Route 9 and the potential for harm were sufficiently serious to allow adjudication of the plaintiffs' claims.

Plaintiffs contended that the defendants' actions were in conflict with the Interstate Commerce Act and its amendment, the Bus Regulatory Reform Act of 1982, 49 U.S.C. §§ 10101 et seq., and hence violated the supremacy clause. The district court disagreed, concluding that Congress had not intended those statutes to displace local regulation of commuter bus service. Moreover, the Urban Mass Transportation Act, "with its numerous provisions encouraging state and local planning in the commuter transit sphere, necessarily refutes any contention that Congress intended to oust state regulation in every area of the mass transit industry." Suburban Trails, Inc. v. New Jersey Transit Corp., 620 F. Supp. 1383, 1391-92 (D.N.J. 1985).

In the district court's view, plaintiffs failed to establish that the acquisition of a permit from the ICC barred N.J. Transit's attempts to regulate Suburban through denial of a subsidy. As the court phrased it, "while bus operations which are truly interstate in character might make a strong case for a finding of federal preemption, the inherently local nature of the commuter bus operations . . . counsels against giving undue emphasis to federal concerns here . . . The regulation of . . . commuter services . . . is best left largely to the expertise of officials located where those operations lie." Id. at 1393. The court therefore concluded that the defendants' actions were not preempted by a "federal occupation of the field."

Plaintiffs also argued that defendants had violated § 1 of the Sherman Antitrust Act by eliminating competition, not only on Route 9 but in other markets and territories as well. The court rejected this challenge, holding defendants immune from liability under the state action exemption. Defendants functioned as agents of the state in carrying out the explicit policy of the New Jersey Legislature to "avoid destructive competition." N.J. Rev. Stat. § 27:25-2 (1981). Consequently, the court concluded that the Parker v. Brown, 317 U.S. 341, 87 L. Ed. 315, 63 S. Ct. 307 (1943), exemption applied.

The district court also rejected the claim of deprivation without due process, finding that plaintiffs had no protectable property right in transportation subsidies. Since N.J. Transit had not denied the plaintiffs' right to operate on Route 9,but had only threatened to refuse to provide subsidies, the court found no deprivation of any entitlement.

On appeal, plaintiffs renew their contention that the issuance of an ICC certificate to operate on Route 9 demonstrates federal preemption of state power to regulate that service. According to plaintiffs, Congress determined through enactment of the Bus Regulatory Reform Act of 1982 that competition is desirable in the interstate bus transportation industry. N.J. Transit may not contravene that policy by forcing plaintiffs to discontinue competing service on Route 9. Plaintiffs also challenge the district court's finding that commuter service was outside the scope of the Bus Reform Act. They assert that the ICC considered the effect of Suburban ...


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