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October 31, 1985


The opinion of the court was delivered by: SAROKIN

 Over the past thirty years, this nation's use of its mass transportation systems has undergone a steady decline as Americans have turned from public transportation to private automobiles. *fn1" The result has been a steady deterioration in mass transit systems, leading in some areas to the abandonment of individual lines or entire systems. *fn2" Since 1964, Congress has attempted to counteract this trend by means of the Urban Mass Transit Act (UMTA), 49 U.S.C. § 1601 et seq., which provides for the appropriation of funds in order to aid the states in the maintenance and improvement of their transit systems. More recently, Congress has addressed the problem in another way, by encouraging deregulation of private interstate carriers in the Bus Regulatory Reform Act of 1982, 49 U.S.C. § 10101 et seq.

 In this case, which involves a suit by a private carrier against the New Jersey Transit Corporation for withholding UMTA funds from that company because of its decision to commence operating a public transit route along a highway already serviced by New Jersey Transit's subsidiary bus company, the court is faced with motions to dismiss and for summary judgment which require it to determine whether the state agency's decision to place such a restriction on the allocation of UMTA funds conflicts with the goals of the Bus Regulatory Reform Act and thereby violates the supremacy clause, or whether such action violates the antitrust principles of the Sherman Act.


 1. The federal regulatory scheme

 When Congress passed the Urban Mass Transit Act of 1963, it declared:

. . . that the welfare and vitality of urban areas, the satisfactory movement of people and goods within such areas, and the effectiveness of housing, urban renewal, highway and other federally aided programs are being jeopardized by the deterioration or inadequate provision of urban transportation facilities, the intensification of traffic congestion, and the lack of coordinated transportation and other development planning on a comprehensive and continuing basis; and
. . . that Federal financial assistance for the development of efficient and coordinated mass transportation systems is essential to the solution of these urban problems.

 Pub. L. 88-365 § 2, 78 Stat. 302, codified at 49 U.S.C. § 1601(a)(2)-(3). As Congress further explained with amending language in 1970, it envisioned the Act "to create a partnership which permits the local community, through Federal financial assistance, to exercise the initiative necessary to satisfy its urban mass transportation requirements." Pub. L. 91-453 § 1, 84 Stat. 962, codified at 49 U.S.C. § 1601a. The remaining provisions of the Act set out the guidelines of the regulatory scheme to be used to implement these goals. Thus, 49 U.S.C. § 1602 authorizes the Secretary of Transportation "in accordance with the provisions of this chapter and on such terms and conditions as the Secretary may prescribe," *fn3" to make loans and grants to states and local public bodies for the acquisition, construction, and improvement of facilities and equipment for mass transportation services, "and the coordination of such service with highway and other transportation." With regard to dispersal of the funds at the local level, 49 U.S.C. § 1604(b) invokes state and local participation by establishing that the funds are to be received and dispensed by a "designated recipient" selected by state and local officials and approved by the Secretary. Local participation is further encouraged by 49 U.S.C. § 1604(g), which requires that the funding is to be made available only after the state or local community has established that it is to be used in the context of a locally developed long-range transportation plan or program, as defined in 49 U.S.C. § 1607. Finally, 49 U.S.C. § 1608 authorizes the Secretary of Transportation to prescribe further necessary rules to carry out the provisions of the Act, to sue and be sued, and to take "such actions as may be necessary" to require state and local agencies to comply with the terms of their grant applications. In sum, the thrust of UMTA is twofold; not only to make federal funds available to finance current revitalization, but also to use those funds as an incentive to encourage state and local bodies to exercise their "partnership" duties responsibly by implementing long-range mass transit planning and coordination.

 2. The facts of this case

 U.S. Route 9 is a major corridor used by highway traffic travelling from New Jersey to New York City. Plaintiff Suburban Trails is a private bus company which holds the right to transport passengers along that corridor under a certificate of public convenience and necessity issued by the ICC pursuant to the liberalized standards of the Bus Regulatory Reform Act. As a private company providing mass transit services, it is also within the class of entities potentially eligible for UMTA funding. 49 U.S.C. § 1609(e). Defendant New Jersey Transit is an agency established by the state of New Jersey to coordinate the state's transit services. To this end, it has been designated the state's "recipient" of UMTA funds under 49 U.S.C. § 1604. In addition, New Jersey Transit has two wholly-owned subsidiary corporations, New Jersey Transit Bus Operations, Inc., and New Jersey Transit Rail, Inc., which operate regular common carrier bus and rail passenger services.

 For a number of years prior to 1980, two private bus companies, Lincoln Transit Company and Transport of New Jersey, operated a coordinated commuter bus schedule along Route 9. In 1980, Transport of New Jersey was purchased by New Jersey Transit, and in 1983 Lincoln Transit declared bankruptcy, whereupon New Jersey Transit assumed responsibility for the entire service along the Route 9 corridor. Meanwhile, however, Suburban Trails had purchased Lincoln Transit's outstanding certificate of public convenience and necessity for operations along Route 9, and had thereafter received a renewal of the certificate from the ICC. By mid-1984 it had commenced plans to operate a Route 9 commuter bus service, and it actually instituted such service in December of 1984.

 According to plaintiffs, New Jersey Transit began to express strong opposition to their decision to commence Route 9 service almost immediately upon learning of the plan. New Jersey Transit's dissatisfaction was made most apparent when it informed Suburban Trails that the portion of the 1983 UMTA capital equipment grant that it had requested in order to fund the purchase of twenty-five new Suburban Trails buses would be withheld until Suburban Trails agreed in writing not to operate on Route 9 in competition with New Jersey Transit Bus. Plaintiffs then filed suit, claiming that in so penalizing Suburban Trails' exercise of its right to use its certificate of public convenience along Route 9, New Jersey Transit has violated the Interstate Commerce Act as amended by the Bus Regulatory Reform Act of 1982, 49 U.S.C. § 10101, the supremacy clause, U.S. Const. Art. III, the Sherman Antitrust Act, 15 U.S.C. § 1, and the due process clause of the fourteenth amendment. Plaintiffs' complaint further alleges that to the extent that defendants' actions were authorized by Title 16, Subtitle L of the New Jersey Administrative Code, such provisions are in violation of the same constitutional and federal statutory provisions. ...

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