The Port of Los Angeles' Clean Truck Case to Be Heard by the U.S. Supreme Court on Tuesday

Corporate America looks different today than it did 30 years ago.  Today, a company’s customers, insurers, shareholders, and risk consultants ask about a company’s “environmental footprint” domestically and abroad.  Consumers care about corporate sustainability initiatives and are willing to pay a premium for products that protect the environment.  Every boardroom has at least one executive who is charged with “greening” the company’s operations.  And leading business journals fill their pages with talk of “conscious capitalism.” 

The environment matters.  It’s not just on the minds of treehuggers and altruistic businessmen.  It matters to every CEO who works to manage risk, protect a corporate brand, and remain competitive. 

For the Port of Los Angeles, the link between protecting the environment and remaining competitive became clear in 2001 when the Port was enjoined from completing a lucrative terminal expansion project.  The injunction was issued after a state appellate court held that the Port had violated environmental laws by failing to analyze how its expansion plans would pollute the air and threaten the health and well-being of local communities.  In 2008, harbor-area communities suffered an average cancer risk from air pollution that was more than 60 percent higher than the average in the region.  For the seven years following 2001, community opposition to the Port’s polluting operations continued, effectively forestalling all major infrastructure development at the Port at a time when cargo shipments from Asia—the Port’s primary customer base—were steadily increasing.

The Port then responded, as any business owner would, to relieve the chokehold on its development.  In 2006, the Port adopted with the Port of Long Beach a joint Clean Air Action Plan, which includes a roadmap of how the two ports will reduce air pollution while growing their operations.  And in 2008, the Port of Los Angeles began implementing its Clean Truck Program.  This program sought to address a myriad of environmental, safety, and security challenges created by port-serving trucks, known as “port drayage.” 

The Clean Truck Program has been widely successful, with some estimating nearly a 90% reduction in truck-generated air pollution in three years.  Under that program, licensed motor carriers—the companies that haul port goods—must comply with the Port’s business standards if they want to do business at the Port.  That means using less polluting trucks, meeting the Port’s safety and security standards (e.g., making sure trucks are properly maintained and motor carriers have proper IDs and credentials), parking trucks in lots off of residential streets, and posting placards inside trucks that list a phone number that the public can call if a truck is driving unsafely or in an area it should not be. 

On April 16, 2013, the United States Supreme Court will hear oral arguments in American Trucking Associations v. Los Angeles and decide the fate of Los Angeles’ award winning Clean Truck Program. 

On the surface, the legal questions before the Court are quite narrow—whether the Port has the authority to require licensed motor carriers to provide off-street parking and post placards, and bar motor carriers that violate the Port’s standards from doing business at the port.  How the Court decides these questions, however, could have broad effects. 

The Court’s decision could impact the way ports across the nation remedy the public health impacts of port drayage, and whether they can preclude bad actors from private property.  It could also call into question the legality of other non-challenged aspects of the Port of Los Angeles’ Clean Truck Program—such as its requirement that motor carriers use less polluting vehicles.  Moreover, the Court’s ruling could impact the authority of other state and local government-owned facilities to place requirements on the trucking industry, including government-managed airports, universities, prisons, and hospitals.  As a result, the State of California, State of Washington, Airports Council International of North America, Los Angeles Area Chamber of Commerce, and a national organization of counties, cities, mayors and other government entities all filed briefs urging the Court to reject the trucking industry’s challenge to the Port’s program.

NRDC, a party to the case, also filed a brief.  We argued that the Port’s Clean Truck Program is protected under the “market participant doctrine.”  Although technical-sounding in nature, the doctrine is quite simple and is based on common sense.  The doctrine protects state and local government actions that are taken to further legitimate commercial interests.  The doctrine is rooted in the principle of “even-handedness;” it upholds the notion that government-owned businesses such as ports, airports, and other facilities should have the same proprietary powers as private companies so that they can compete in the marketplace. 

In 2010, MIT Sloan Management Review reported that 88 percent of business executives believe that “sustainability–driven strategies will be necessary to be competitive—if not right now, then soon.”   And Deloitte reports that the total spent on sustainable business programs by large companies (those with revenues of more than $1 billion) in Australia, Canada, the UK, and the U.S. will reach $60 billion this year. 

Why are companies investing so much capital in the environment?  To stay competitive.  Today, images of polluting power plants and toxic oil spills stream live on our smart phones and computer screens, and are shared around the globe in seconds—setting off a firestorm of Twitter feeds, instant messages, and blogs.  Companies that do not successfully manage their social and environmental footprint—that is, obtain an acute awareness of potential environmental or social breaches deep in their supply chain—risk losing their corporate reputation with a few clicks of a mouse.  The Port’s situation is no different.     

History shows that absent a strong commitment to reducing pollution and generating community goodwill, the Port will not grow, let alone have a shot at competing with other ports.  The community simply won’t allow it.  During the district court trial in 2010, former President of the Board of Harbor Commissioners, David S. Freeman, testified that when he led the Port his management objectives were to:

[D]eal with the twin problems of growth and pollution.  And we quickly realized that in order to grow the port, we had to abate the pollution because the people in San Pedro and Wilmington were not only angry and not only suffering from terrible air pollution, but they had learned that the law was there to protect them, and the NRDC and others had filed lawsuits, and they had stopped the port from growing.  So green growth which is what we called it was an absolute business necessity for us to grow. . . .  [T]he concerns we had [were] how we were going to continue to be Number 1 and have the jobs that came with that when we had a situation where the consumers nearby were, in effect, subsidizing the goods movements with their lungs, and everybody knew it, and they had legal power to stop us from going forward . . .

NRDC asserts that the market participant doctrine was created to protect precisely the program at hand.  The Port must have the authority to set business standards on its property for the benefit of its operations and to protect local communities.  The Clean Truck Program has dramatically reduced toxic air pollution from port trucking and has enabled the Port to grow “green.”  ATA’s legal challenge threatens this progress.

In the words of Mr. Freeman, “[i]f our name was Walmart, you wouldn’t even be having this lawsuit.  We’re operating like a private company.”  I couldn’t agree more.  However, the only opinion that matters now is the Supreme Court’s. 

We can expect a decision from them by the end of June.