Association of Independent Property Brokers and Agents, Inc. v. Foxx et al

Filing 12

ORDER: Defendants' Motion to Dismiss 8 is GRANTED. This action is DISMISSED with prejudice. The Clerk is directed to terminate any pending motions and close this case. Signed by Judge James S. Moody, Jr on 7/15/2015. (LN)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
OCALA DIVISION

ASSOCIATION OF INDEPENDENT
PROPERTY BROKERS AND
AGENTS, INC.,
Plaintiff,
v.

Case No: 5:15-cv-38-Oc-30PRL

ANTHONY FOXX, Secretary, United
States Department of Transportation,
et al.,
Defendants.
________________________________/

ORDER
THIS CAUSE comes before the Court upon Defendants’ Motion to Dismiss (Doc.
8) and Plaintiff’s response in opposition thereto (Doc. 11). The Court, having reviewed
the motion and response, and being otherwise fully advised in the premises, concludes that
Defendants’ motion to dismiss should be granted.
BACKGROUND
Plaintiff Association of Independent Property Brokers, Inc., is an independent,
non-profit trade group comprised of small- and mid-sized independent property brokers.
A property broker is an individual who “sells, offers for sale, negotiates for, or holds itself
out by solicitation, advertisement, or otherwise as selling, providing, or arranging for,
transportation by motor carrier for compensation.” 49 U.S.C. § 13102(2). In other words,

a broker acts as the link between a shipper and a carrier to facilitate the movement of goods.
To operate as a property broker arranging for shipment of property between state lines,
such broker must register and obtain a license from the United States Department of
Transportation Federal Motor Carrier Safety Administration (“FMCSA”). 1 See 49 U.S.C.
§ 13904. To qualify for registration, a property broker must either secure a surety bond or
establish a trust fund and file proof of the security bond or trust fund with the FMCSA.
See 49 U.S.C. § 13906(a)(2). The FMCSA will not issue a license for a property broker
who has not complied with this requirement. See 49 C.F.R. § 387.307(a).
Previously, a property broker was required to post a minimum of $10,000 in
security. However, on July 6, 2012, Congress signed into law the Moving Ahead for
Progress Act in the 21st Century, which, inter alia, increased the security requirement from
$10,000 to $75,000. See Moving Ahead for Progress in the 21st Century Act (“MAP-21”),
Pub. L. No. 112-141, sec. 32918, § 13906, 126 Stat. 405, 822-27 (2012). Any property
broker who failed to comply with this requirement by October 1, 2013, or failed to maintain
this minimum level of financial security, was subject to immediate suspension of his or her
license. See § 13906, 126 Stat. at 826 note (setting the effective date one-year after
enactment); 49 C.F.R. § 387.307(a).

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The FMCSA is authorized to regulate property brokers pursuant to a delegation of authority from
the United States Secretary of Transportation. See Interstate Commerce Commission Termination Act of
1995, Pub. L. No. 104-88, 109 Stat. 803 (codified at 49 U.S.C. § 13501) (abolishing the Interstate
Commerce Commission and vesting the Secretary of Transportation with jurisdiction over the procurement
of interstate motor carrier transportation); Motor Carrier Safety Improvement Act of 1999, Pub. L. No.
106-159, 113 Stat. 1748 (establishing the FMCSA). Defendant Anthony Foxx is the current Secretary of
Transportation.

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Prior to the enactment of MAP-21, Plaintiff’s members had licenses from the
FMCSA to operate as property brokers. The members paid the application fee, completed
all application requirements, and obtained the $10,000 bond or trust fund necessary to
obtain a license from the FMCSA. Although most of Plaintiff’s members have maintained
their licenses since the enactment of MAP-21, several members were unable to meet the
security requirement and are no longer licensed as property brokers.
By its complaint, Plaintiff alleges that the provision of MAP-21, 49 U.S.C.
§ 13906(b)(3), requiring security in the amount of $75,000 is arbitrary and not reasonably
related to a proper purpose. Plaintiff therefore seeks declaratory judgment that this
provision is unconstitutional because it violates the rights of Plaintiff’s members to
substantive due process under the Fifth Amendment. Defendants contend that Plaintiff is
not entitled to declaratory relief and its complaint should be dismissed because Plaintiff
has not established that no conceivable rational basis exists for increasing the security
requirement.
DISCUSSION
I. Standard of Review
Pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed
for failure to state a claim upon which relief can be granted. In considering a motion to
dismiss under Rule 12(b)(6), a court must accept the factual allegations of the complaint
as true and evaluate all inferences derived from those facts in the light most favorable to
the plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007). Conclusory allegations,
unwarranted factual deductions, or legal conclusions masquerading as facts, however, are
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not entitled to the assumption of truth. See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009);
Davila v. Delta Air Lines, Inc., 326 F.3d 1183, 1185 (11th Cir. 2003).
II. Analysis
A. Statutory and Regulatory Framework
Beginning in 1935, Congress saw fit to regulate property brokers in the
transportation industry in the interest of protecting “carriers and the shipping public from
dishonest and financially unsound middlemen.” Jeffrey S. Kinsler, Motor Freight Brokers:
A Take of Federal Regulatory Pandemonium, 14 Nw. J. Int’l L. & Bus. 289, 302 (1994)
(citing Milan Exp. Co. v. W. Sur. Co., 792 F. Supp. 571, 574 (M.D. Tenn. 1992)); see also
Motor Carrier Act of 1935, ch. 498, sec. 201-22, 49 Stat. 543, 543-67 (codified as amended
in scattered sections of 49 U.S.C.). In 1936, the Interstate Commerce Commission
(“ICC”), the now-defunct entity charged with implementing the Motor Carrier Act from
1935 until its demise, established a $5,000 surety-bond requirement for property brokers.
See Rules and Regulations Governing the Filing and Approval of Surety Bonds, 1 Fed.
Reg. 1156 (Aug, 20, 1936). In 1979, the ICC increased the security requirement from
$5,000 to $10,000. See Passenger Broker Entry Control, 44 Fed. Reg. 70167 (Dec. 6, 1979)
(to be codified at 49 C.F.R. pts. 1043, 1045B, 1046). For years, the security requirement
went unchanged. Then, in 2012, Congress enacted MAP-21, which increased the security
requirement from $10,000 to $75,000. See § 13906, 126 Stat. at 822-27.
B. Plaintiff’s Argument
Plaintiff takes issue with MAP-21’s increase of the security requirement from
$10,000 to $75,000, arguing that the increased security amount is arbitrary and
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unreasonable. Specifically, Plaintiff alleges that no data or findings of fact exist showing
that the $75,000 amount is more effective at combating fraud or that a lesser amount would
not be equally effective. Plaintiff highlights that the FMCSA previously considered
increasing the security requirement to $25,000 to adjust for inflation, but it concluded that
adequate justification was lacking to increase the amount any greater than $25,000. See
Brokers of Household Goods Transportation by Motor Vehicle, 75 Fed. Reg. 72987, 72992
(Nov. 29, 2010). According to Plaintiff, three entities, including the Owner Operator
Independent Driver’s Association, the Transportation Intermediaries Association, and the
American Trucking Associations, lobbied to increase the security requirement to curtail
fraud in the property-broker industry. Plaintiff contends, however, that these entities’ true
intention in seeking a higher security requirement is to drive new and smaller brokers out
of the broker industry. Thus, Plaintiff asserts that the $75,000 security requirement was
set based on anticompetitive collusion rather than appropriate findings of fact.
Plaintiff further argues that the $75,000 security requirement is not rationally related
to a legitimate government purpose because it runs counter to the statutory national
transportation policy, which aims to “encourage fair competition, and reasonable rates for
transportation by motor carriers of property,” “allow a variety of quality and price options
to meet changing market demands and the diverse requirements of the shipping and
travelling public,” and “promote greater participation by minorities in the motor carrier
system.” (Doc. 1 at 5 (citing 49 U.S.C. § 13101(a)(2)). Instead, Plaintiff proffers that the
increased security amount will limit the variety of options available to motor carriers,

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drastically increase rates for shipping property and cause a corresponding increase in
consumer prices, and adversely affect minority property brokers.
C. Substantive Due Process
The Due Process Clause of the Fifth Amendment provides that no person shall “be
deprived of life, liberty, or property, without due process of law.” U.S. Const. amend. V.
When a challenged law does not infringe upon a fundamental right, as in this case, a
substantive due process challenge is reviewed under the rational basis test. See Locke v.
Shore, 634 F.3d 1185, 1195-96 (11th Cir. 2011). Under rational basis review, a law will
be upheld as constitutional if it is rationally related to a legitimate government purpose.
Fresenius Med. Care Holdings, Inc. v. Tucker, 704 F.3d 935, 945 (11th Cir. 2013). In other
words, a statute is constitutional if “there is any reasonably conceivable state of facts that
could provide a rational basis for [it].” FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 313
(1993). The party challenging the statute bears the burden of establishing that the statute
lacks a rational basis. See Bah v. City of Atlanta, 103 F.3d 964, 967 (11th Cir. 1997) (citing
Beach Commc’ns, Inc., 508 U.S. at 314-15).
Plaintiff has failed to establish that the $75,000 security requirement lacks a rational
basis.

Economic legislation “come[s] to the [c]ourt with a presumption of

constitutionality.” Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976). “To prove
that a statute violates its due process rights, the aggrieved party must demonstrate that the
legislature has acted arbitrarily and irrationally.” Swisher Int’l, Inc. v. Schafer, 550 F.3d
1046, 1057 (11th Cir. 2008). But “if the government can show that the statute has a

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‘legitimate legislative purpose furthered by rational means,’ due process is satisfied.” Id.
(quoting Gen. Motors Corp. v. Romein, 503 U.S. 181, 191 (1992)).
As Plaintiff acknowledges in its complaint, Congress increased the security
requirement in order to combat fraud, which has long been recognized as a problem in the
property-broker industry. See Kinsler, supra, at 291 (discussing abuse perpetrated by
property brokers and its negative impact on domestic and international trade). Plaintiff
takes issue not with the increase itself, but with the amount of the increase, arguing that the
amount is unnecessary to accomplish Congress’s objective. In support of its argument,
Plaintiff highlights that the $75,000 amount is not supported by “facts, information or other
data to indicate that there was a justification for significantly raising the broker bond.” But
a law “is not subject to courtroom fact-finding and may be based on rational speculation
unsupported by evidence or empirical data.” Beach Commc’ns, 508 U.S. at 315. The
“precise coordinates” of legislative decision making is “virtually unreviewable.” Id. at
316.
Plaintiff also emphasizes that the FMCSA previously concluded that no justification
existed to increase the security requirement above $25,000, but the opinion of the FMCSA
is not relevant in determining whether a rational basis existed for Congress’s decision to
increase the security requirement to $75,000. Perhaps new evidence came to light that was
not presented to the FMCSA or perhaps Congress was more persuaded by the facts
presented where the FMCSA was not.

Regardless of the reason for Congress’s

disagreement with the findings of the FMCSA, it was Congress’s prerogative to determine

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the amount of the increase to accomplish its intended objective, and Plaintiff has not
demonstrated that its decision was arbitrary or irrational.
Plaintiff also argues that Congress’s true motivation in setting the security
requirement at $75,000 was anticompetitive collusion. But Plaintiff’s contention has no
bearing on whether Congress’s decision passes muster under a rational-basis inquiry.
Indeed, the true motivation of Congress is not probative of whether a rational basis exists
because the operative inquiry is whether any conceivable basis exists for Congress to
believe that the means they have selected will tend to accomplish the desired outcome. See
Beach Commc’ns, Inc., 508 U.S. at 315 (“[B]ecause we never require a legislature to
articulate its reasons for enacting a statute, it is entirely irrelevant for constitutional
purposes whether the conceived reason for the challenged distinction actually motivated
the legislature.”); see also United States v. Osburn, 955 F.2d 1500, 1505 (11th Cir. 1992)
(“When a legislative judgment is questioned, the court’s role must be restricted to the issue
of whether any state of facts either known or which could reasonably be assumed affords
support for it.” (internal quotation marks omitted)).
While Plaintiff may have impugned the wisdom of the increase, Plaintiff has not
demonstrated that Congress could not have possibly believed that increasing the security
requirement to $75,000 would accomplish its goal of alleviating fraud in the
property-broker industry. Increasing the security requirement was a rational means by
which Congress could accomplish its objective, and it is not for this Court to “judge the
wisdom, fairness, or logic of legislative choices.” Beach Commc’ns, Inc., 508 U.S. at 313.

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Accordingly, the Court concludes that § 13906(b)(3), increasing the security
requirement for property brokers to $75,000, survives rational-basis scrutiny.
CONCLUSION
Because Plaintiff has failed to overcome the strong presumption of validity accorded
to economic regulations, Plaintiff’s complaint should be dismissed.
Accordingly, it is therefore ORDERED AND ADJUDGED that:
1.

Defendants’ Motion to Dismiss (Doc. 8) is GRANTED.

2.

This action is DISMISSED with prejudice.

3.

The Clerk is directed to terminate any pending motions and close this case.

DONE and ORDERED in Tampa, Florida, this 15th day of July, 2015.

Copies furnished to:
Counsel/Parties of Record

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