9th U.S. Circuit Sets Challenge to Ferry Monopoly Adrift
Arlington, Va.—Today, the 9thU.S. Circuit Court of Appeals partly affirmed a lower court’s dismissal of a case brought by brothers Jim and Cliff Courtney seekingto sink a government-enforced ferry monopoly that operates on Washington state’s Lake Chelan. The Institute for Justice, which represents the Courtneys, said it will ask the U.S. Supreme Court to review the decision.
“Today’s decision leaves in place a nearly century-old, government-created ferry monopoly—a monopoly that hurts entrepreneurs and consumers alike,” said Michael Bindas, a senior attorney with the Institute for Justice, which represents the Courtney brothers. “We will ask the U.S. Supreme Court to address the constitutionality of that monopoly and are confident that it will be struck down.”
For 16 years, the Courtneys have tried to launch a competing ferry on Lake Chelan, only to have their efforts thwarted by Washington’s “public convenience and necessity” requirement. To provide ferry service on the lake, you must obtain a certificate of public convenience and necessity from the state. The state will only issue a certificate if the lake’s existing ferry company consents or the applicant can prove to the government, in a costly legal proceeding, that the public convenience and necessity require another ferry. The existing ferry company gets to participate in that proceeding and effectively veto your entry into the market.
“Washington’s public convenience and necessity requirement is fundamentally inconsistent with the American tradition of allowing consumers and entrepreneurs—not bureaucrats and existing businesses—to decide whether a new business is necessary,” Bindas said.
Jim Courtney applied for a certificate but was denied after the lake’s existing ferry company protested. He and Cliff then tried to launch services short of a full-service ferry—for example, a shuttle for patrons of Courtney-family and other businesses based in Stehekin, Wash.,—but the state required a certificate even for these services. In fact, since the certificate requirement was imposed in 1927, Washington has issued only one certificate for service on Lake Chelan.
Thwarted by the state and the existing ferry provider, Jim and Cliff filed a federal constitutional challenge to the certificate requirement in October 2011, seeking to operate either a full-service ferry on Lake Chelan or boat service for patrons of specific businesses. The certificate requirement, they argued, violates their “right to use the navigable waters of the United States”—a right the U.S. Supreme Court has held is protected by the Privileges or Immunities Clause of the 14thAmendment. That clause was adopted in the wake of the Civil War to protect the newly freed slaves, whose economic rights were still being routinely violated by Southern states.
The U.S. District Court for the Eastern District of Washington dismissed the Courtneys’ lawsuit in April 2012. In today’s decision, the 9thCircuit affirmed the district court’s dismissal of the Courtneys’ first claim, regarding a full-service ferry. Despite the Privileges or Immunities Clause’s clear concern with economic freedom, the Court held that the clause only protects “a right tonavigatethe navigable waters of the United States,” and “the Courtneys wish to do more than simply navigate the waters of Lake Chelan”; they “desire to operate a particular business using Lake Chelan’s navigable waters—an activity driven by economic concerns.”
“The court was wrong to hold that the right to use the navigable waters of the United States does not encompass their use in business,” said Bindas. “The Privileges or Immunities Clause was designed toprotect the right of all Americans to participate fully in the economic life of the nation.”
As for the Courtneys’ second claim, concerning boat service short of a full-service ferry, the 9thCircuit vacated the district court’s dismissal of the claim and remanded that portion of the case back to the district court. However, the 9thCircuit held that the district court should abstain from resolving the claim unless and until the Washington state courts hold that a certificate of public convenience and necessity is required for such service—this, despite existing statements from the Washington Utilities and Transportation Commission and the state courts making clear that a certificate is required.
“Government ought to welcome entrepreneurship, but instead, Washington state is prohibiting new businesses from forming—all for the sake of protecting an inefficient, government-enforced monopoly,” concluded Bindas. “Although today’s decision allows that monopoly to exist a bit longer, we are confident that its days are numbered.”
For more information about the Courtney brothers’ case, visit: www.ij.org/LakeChelan.