John Kramer
John Kramer · June 2, 2014

Arlington, Va.—Today, in a blow to the economic liberty of all Americans, the U.S. Supreme Court declined to hear the appeal of a case challenging a nearly century-old, government-imposed ferry monopoly on Lake Chelan in central Washington state. The appeal, filed by the Institute for Justice on behalf of brothers Jim and Cliff Courtney, raised important questions concerning the scope of protection that the U.S. Constitution provides for the economic rights of ordinary Americans. The Court’s refusal to hear the appeal lets stand a terrible 9th U.S. Circuit Court of Appeals decision wholly dismissive of economic rights.

“Today’s decision leaves in place a nearly century-old, government-imposed 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. “It is unfortunate that the Supreme Court declined the opportunity to enforce the meaningful protections for economic rights that our Constitution guarantees.”

For 17 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.

“I am disappointed that the court has decided to not let our plea for economic liberty move forward to trial,” said Jim Courtney. “It amazes me that in America the state can create monopolies and eliminate opportunity. In so doing they have denied reasonable access to our mountain community for both residents and visitors.”

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 a 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 14th Amendment. 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. On December 2, 2013, the 9th Circuit affirmed the 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 to navigate the 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.”

In March 2014, the Courtneys petitioned the U.S. Supreme Court to review the dismissal of their first claim. Today, the Supreme Court denied that request.

“The Court’s decision to not hear the Courtneys’ appeal is an unfortunate one for all Americans,” said Bindas. “The Privileges or Immunities Clause, which was secured through the bloodshed of war, was designed to ensure that all Americans could participate fully in the economic life of the nation. Today, the Supreme Court declined the opportunity to honor that history and purpose.”

Chip Mellor, president and general counsel of the Institute for Justice, said, “The Institute for Justice will not rest until the Privileges or Immunities Clause is restored to its rightful place as the primary constitutional bulwark of economic liberty.”

The Courtneys still have the opportunity to pursue their second claim, concerning boat service short of a full-service ferry. The 9th Circuit vacated the district court’s dismissal of that claim and remanded it back to the district court with instructions to abstain from resolving it until the Courtneys secure an official ruling from the Washington Utilities and Transportation Commission (WUTC) or Washington courts that a certificate of public convenience and necessity is required for such service—this, despite existing statements from the WUTC and state courts making clear that a certificate is required. The Courtneys are now examining their options for pursuing that second claim.