On appeal from the Superior Court, Appellate Division, whose opinion is reported at 324 N.J. Super. 1 (1999).
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
The issue in this appeal is whether this State's annual hazardous waste transporter registration fees as assessed against out-of-state transporters violate the Commerce Clause of the United States Constitution.
The transporter registration fees must be paid only by transporters who collect or deliver hazardous waste in New Jersey. Those who merely travel across the State are not subject to the requirement. The DEP issues a decal for each cab, trailer or container, which allows the DEP to track the owners of an individual transporter unit.
Plaintiffs filed a class action complaint in the Tax Court challenging the validity of the hazardous waste transporter registration fee regulation on federal Commerce Clause grounds. On March 23, 1998, the Tax Court granted partial summary judgment to plaintiffs, finding that the fees discriminated against and unduly burdened interstate commerce, and enjoined the State from further collection of the transporter fees. The Appellate Division denied leave to appeal, but this Court granted leave to appeal and summarily remanded the matter to the Appellate Division for consideration on the merits.
The Appellate Division reversed the Tax Court's grant of partial summary judgment and directed the State to apply for a "fairness" ruling from the United States Department of Transportation (USDOT). The Appellate Division held that the Tax Court decision was no longer in effect, and made fees collected thereafter subject to refund depending on the outcome of further proceedings. As a consequence of this litigation, however, no fees have been collected from the plaintiff class since 1998.
This Court granted both parties' motions for leave to appeal, which challenge the reference to USDOT for a fairness ruling. The parties seek a ruling on the merits of the constitutional issues. Noting the existence of controverted issues of fact concerning the actual impact of the fee on interstate carriers of hazardous materials and the need for a well-developed record before deciding the constitutional issues, this Court remanded to the Tax Court for a plenary hearing on the allegedly discriminatory economic impact of the fees.
The parties set about proving and disproving discrimination under the Commerce Clause in two fundamentally different ways. Plaintiffs compared the cost per activity (fees per manifest or fees per ton of hazardous waste hauled) between intrastate and interstate transporter companies. The State compared the annual market shares in tons of hazardous waste hauled between New Jersey and non-New Jersey transporters.
On the remand, Judge Small, Presiding Judge of the Tax Court, found the evidence on both sides deficient. He found plaintiffs' analysis flawed because the data was compiled on a company level and not on a per-vehicle level, and plaintiffs' arbitrary definitions of out-of-state truckers v. in-state truckers. As to the State's analysis, Judge Small found that the failure to consider behavior before and after the fees were imposed, instead of during the period four years after they were imposed, had no basis in logic or scientific method.
Judge Small posited, as a beginning point, the rule of American Trucking Ass'ns v. Scheiner, 483 U.S. 266 (1987), that flat taxes or fees, i.e., impositions not related to activity, are unconstitutional. He held that the burden of proving that a flat tax does not discriminate is on the defender of the tax. Judge Small concluded that the State had failed to meet its burden. He found that the State's evidence - that no foreign carriers have withdrawn from New Jersey as a result of the transporter fee - was not only flawed, it was irrelevant as a matter of law. Since the State failed to prove that the fee does not discriminate, Judge Small determined that the fee is invalid.
With the completion of the remand proceedings, both the resulting Tax Court ruling of March 14, 2003, and the Appellate Division's judgment of June 15, 1999 (324 N.J. Super. 1), are before the Court for review.
The hazardous waste transporter registration fee mechanism as applied to plaintiffs and others similarly situated violates Commerce Clause standards.
1. The State's principal argument is that the transporter fee should be evaluated by the fairness standard of 49 U.S.C.A. § 5125(g) of the Hazardous Materials Transportation Act (HMTA), and that that standard effectively displaces Commerce Clause analysis. It further argues that plaintiffs have failed to prove the transporter fee is not 'fair" under the HMTA. Plaintiffs assert that a state tax that fails the internal consistency test (whether those engaged in interstate commerce must pay multiple fees to each state) is, as a matter of law, discriminatory and unconstitutional. According to plaintiffs, if a fee does not satisfy the internal consistency test, the actual impact of the fee need not be considered. (pp. 23-26)
2. The Court is not persuaded that the HMTA insulates hazardous waste transporter fees from Commerce Clause scrutiny. Nothing in the language of the statute makes it unmistakably clear that Congress intended to remove transport fees from such scrutiny. (pp 26-32)
3. The next question the Court must address bears on the State's argument that the transporter fee mechanism is not a tax and should be considered under the less stringent standards governing "user fees." Under prevailing caselaw, however, user fees must reflect a fair, if imperfect, approximation of the payors' level of use of the facilities or services that the fees were enacted to sustain. The unapportioned fees here are unrelated to activity in this State. The Court is in essential agreement with Judge Small's determinations for the reasons he stated. Plaintiffs have made a sufficient prima facie showing of discrimination against interstate commerce to shift the burden to the State to show that the fees pass constitutional muster. Because plaintiffs have demonstrated that the fee mechanism at issue is structurally discriminatory, they should not be compelled to prove the precise level of per-activity cost disparity. On the record developed, the State has not met its burden to establish that Commerce Clause standards have not been violated. An apportionment based on tonnage hauled or mileage would be a link to the level of activity that might render the fee constitutional. The State has not established the impracticability of implementing a fee with such a potentially permissible basis. (pp. 32-55)
Judgment of the Appellate Division is REVERSED, and the matter is REMANDED to the Tax Court for further proceedings on the reserved issues as may be necessary to conclude the matter.
CHIEF JUSTICE PORITZ and JUSTICES VERNIERO, ZAZZALI, ALBIN and WALLACE join in JUDGE KESTIN's opinion. JUSTICES LONG and LaVECCHIA did not participate.
The opinion of the court was delivered by: Judge Kestin (temporarily assigned)
Re-argued November 3, 2003
The issue before us in this appeal is whether this State's annual hazardous waste transporter registration fees (transporter fees) as assessed against out-of-state transporters can withstand federal Commerce Clause scrutiny. We hold, on the record developed herein, that they cannot.
This matter comes before us with a protracted procedural history. The case began with a class-action complaint filed in the Tax Court in October 1992. Plaintiffs, on federal Commerce Clause grounds, U.S. Const. art. I, § 8, cl. 3, challenged the validity of the hazardous waste transporter registration fee regulation promulgated in N.J.A.C. 7:26G-3.3(g) pursuant to N.J.S.A. 13:1E-18, a provision of New Jersey's Solid Waste Management legislation, N.J.S.A. 13:1E-1 to -223.
The State moved to transfer the matter to the Appellate Division. See R. 2:2-3(a)(2). In an order entered on January 3, 1994, the Tax Court denied the motion, and the Appellate Division denied the State's motion for leave to appeal. On August 3, 1994, the Tax Court denied the parties' cross-motions for summary judgment and, on October 14, 1994, certified the class.
In 1997, the parties, once again, each moved for summary judgment. The Tax Court, on March 23, 1998, granted partial summary judgment to plaintiffs, and denied the State's motion. In an oral opinion, Judge Dougherty ruled, based on the showings before her at the time, that the fees, as authorized by statute and implemented by regulation, "discriminate against interstate commerce and unduly burden interstate commerce." The State was "permanently enjoined from the further collection of the transporter fees."
The State moved before the Appellate Division for leave to appeal and a stay pending appeal; and it moved before the TaX Court for a stay of its decision, for a stay of proceedings on plaintiffs' claims for a refund and an award of counsel fees, and for an order certifying the March 23, 1998 order as a final judgment pursuant to Rule 4:42-2. The Tax Court denied the latter motions, and the Appellate Division denied the motions for leave to appeal and a stay. On June 30, 1998, however, in an order reported at 154 N.J. 604, we granted leave to appeal and summarily remanded the matter to the Appellate Division for consideration on the merits. Shortly thereafter, the Appellate Division stayed further proceedings in the Tax Court pending resolution of the appeal, but denied the State's renewed motion for a stay of operation of the Tax Court decision.
On full consideration, in an opinion reported at 324 N.J. Super. 1 (1999), the Appellate Division reversed the Tax Court's grant of partial summary judgment and directed the State to apply, on notice to plaintiffs, for a "fairness" ruling from the United States Department of Transportation (USDOT) pursuant to 49 U.S.C.A. § 5125(g). Id. at 18. The Appellate Division concluded, in the context of every state's authority to evaluate the interstate commerce impact of its hazardous waste hauling fees,
that a final judgment, and particularly summary judgment, should not issue in this State absent critical input from the United States Department of Transportation (USDOT), which has been charged by Congress with administration of the Hazardous Materials Transportation Act (HMTA), 49 U.S.C.A. § 5101 to 5127, to promote uniformity and to ensure fairness of hazardous waste hauling fees imposed by the respective states.
The Appellate Division remanded the matter to the Tax Court to "retain jurisdiction pending compliance with the directions[.]" Id. at 18. The panel observed, "[i]n light of the reversal and remand, and [its] prior ruling on the State's stay application,... that the Tax Court decision is no longer in effect. Fees hereafter collected shall be subject to refund, depending upon the outcome of further proceedings." Ibid.
In orders reported at 162 N.J. 124 (1999), we granted both parties' motions for leave to appeal. The requirement for reference to USDOT for a fairness ruling is challenged by plaintiffs and defendants. Both sides seek a ruling on the merits of the constitutional issues.
In an order reported at 164 N.J. 183 (2000), we noted the existence of "controverted issues of fact concerning the actual impact of the fee on interstate carriers of hazardous materials[,]" and the need for "a well-developed record" before deciding the ultimate constitutional issues, including "the proper role of the [USDOT.]" Ibid. We, therefore, "summarily remanded to the Tax Court for a plenary hearing on the allegedly discriminatory economic impact of the... fees," retaining jurisdiction. Id. at 184. Justices Long and Verniero dissented from that disposition, expressing the view that the Appellate Division's decision should be affirmed on the basis of Judge Landau's opinion because, while questions pended that were within the jurisdictional competence of USDOT, established principles of judicial restraint militated against addressing the constitutional issues. Id. at 184-86 (Long, J., dissenting).
On our remand, the matter was heard by Presiding Judge Small in the Tax Court. On full consideration of the evidentiary record developed, he found "the State ha[d] failed to prove that the fee does not discriminate." Applying a "presumption that a flat truck fee is violative of the Commerce Clause," he determined, based upon the facts as he found them, that the challenged fee is not valid.
The statute, N.J.S.A. 13:1E-18, provides in pertinent part:
a. The [State Department of Environmental Protection] may in accordance with a fee schedule adopted as a rule or regulation establish and charge annual or periodic fees for any of the services to be performed in connection with the "Solid Waste Management Act," P.L. 1970, c. 39 (C. 13:1E-1 et seq.), except that the annual or periodic fees charged by the department to cover the costs incurred by any State agency relevant to pre-licensing investigations, post-licensing compliance monitoring or related activities under the provisions of P.L.1983, c. 392 (C. 13:1E-126 et seq.) shall be based upon the size of the business concern. For the purposes of this subsection, "business concern" means any corporation, association, firm, partnership, sole proprietorship, trust or other form of commercial organization; "size" means the number of key employees or persons required to be listed in the disclosure statement, or otherwise shown to have a beneficial interest in the business of the applicant, permittee or licensee as defined in section 2 of P.L.1983, c. 392 (C. 13:1E-127); and "State agency" means any State department, division, agency, commission or authority.
b. The fee schedule shall reasonably reflect the duration or complexity of the specific service rendered, permit application reviewed, or registration statement or engineering design application approval sought.
The transporter registration fees must be paid only by transporters who collect or deliver hazardous waste in New Jersey. Those who merely travel across the State are not subject to the requirement.
The registration process requires transporters to provide the State Department of Environmental Protection (DEP) with the vehicle's license plate, the vehicle identification number assigned by the Division of Motor Vehicles, ownership and insurance information, and payment of the fee. The DEP then issues a decal for each cab, trailer or container bearing a unique identification number. The decal number allows the DEP to track the owners of an individual transporter unit. New Jersey law prohibits treatment, storage and disposal facilities from accepting waste from a transporter unless it has a decal affixed.
Judge Landau's précis of N.J.A.C. 7:26G-3.3(g), the challenged regulation, as it stood before the Appellate Division in 1999 was:
At the time the complaint was filed, the hazardous waste transporter fees were codified at then N.J.A.C. 7:26-4A.3(g)(1).
Effective October 21, 1996, the transporter fees were recodified at N.J.A.C. 7:26G-3.3(g). 28 N.J.R. 1693(a); 28 N.J.R.
4606(a). The rates were modified slightly, lowering the annual amounts due, but retaining the same structure:
(g) The fee schedule for hazardous waste transporters is as follows:
1. All hazardous waste transporters shall pay an annual registration fee. A State of New Jersey hazardous waste transporter registration decal will be issued for each hazardous waste cab and transport unit (as defined at N.J.A.C. 7:26G-4.2) for which a fee is paid. The fee registration year shall extend from October 1 through the following September 30. The fee shall accompany the submission of the annual registration application. All vehicles registered with the Department must be owned or leased by the applicant. If the vehicle is leased, a copy of the lease must be submitted with the registration application. The registration of a hazardous waste transporter is nontransferable and fees are not refundable. The annual registration fees are as follows:
i. Each hazardous waste cab: $21.00;
ii. Each hazardous waste transport unit, either detachable or with a permanently attached hazardous waste cab, having a capacity less than or equal to one ton (one ton = one cubic yard = 200 gallons): $85.00;
iii. Each hazardous waste transport unit without a hazardous waste trailer having a capacity greater than one ton (one ton = one cubic yard = 200 gallons): $191.00; and
iv. Each hazardous waste transport cab with permanently attached hazardous waste transport unit with a capacity greater than one ton (one ton = one cubic yard = 200 gallons): $212.00 [324 N.J. Super. at 6.]
Judge Small, in his opinion, also noted that the flat fees per vehicle had been somewhat higher before 1996. The regulation, as currently promulgated, has a biennial structure with rates that are, marginally, even lower on an annual basis.*fn1
As a consequence of this litigation no fees have been collected from the plaintiff class since 1998. The [DEP] has indicated its intention to collect those fees if and when it prevails in the litigation.
The DEP imposes other fees and regulations on transporters of hazardous waste. Under the A-901 program, individuals and corporations wishing to be licensed to transport hazardous waste in New Jersey must undergo extensive background checks at the substantial cost of $900. N.J.S.A. 13:1E-126 to -207. Under the hazardous waste transporter fee statute once the companies and individuals are licensed and their equipment is licensed and registered each pick-up or drop-off of hazardous waste in New Jersey must be documented by a multipart manifest. The fee for each manifest is $9 and is paid by the generators of hazardous waste. Neither the A-901 fee nor the manifest fees are challenged in this case, only the annual per vehicle registration fee is challenged.
With the completion of the remand proceedings mandated in our order of June 20, 2000, 164 N.J. 183, both the resulting Tax Court ruling of March 14, 2003, and the Appellate Division decision of June 15, 1999, on appeal from the earlier Tax Court order granting partial summary judgment to plaintiffs, 324 N.J. Super. 1, are now before us for review. Our order of June 20, 2000, summarily remanding "for a plenary hearing on the allegedly discriminatory economic impact of the hazardous waste transporter fees[,]" 164 N.J. at 184, was based on the need for "a well-developed record" in this "especially fact-sensitive" matter, to "better enable [us] to determine the proper role of the United States Department of Transportation under the provisions of the Hazardous Materials Transportation Uniform Safety Act of 1990, now codified in 49 U.S.C.A. § 5101 to 5127[.]"*fn2 Id. at 183. Jurisdiction was otherwise retained. Id. at 184. Thus, we are now called upon to evaluate the matter in the light of Judge Landau's opinion and the record upon which it was based, as well as Judge Small's findings and conclusions.
The showings of the parties in the initial Tax Court proceeding and the trial court's treatment of those showings were summarized in the Appellate Division opinion, 324 N.J. Super. at 6-9. ...