State Business Licensing System Challenged

HELENA, Mont. (CN) - A Montana law that gives the state "unbridled" authority to determine who can do business there and who can't is unconstitutional, an entrepreneur claims in Federal Court.

Tracie Pabst, who sued the state on Friday, says her intention to start a taxi company in her home town of Big Sky has run up against a roadblock that shields established companies from competition.

Under Montana law, a Certificate of Public Convenience and Necessity from the defendant Montana Public Service Commission is needed to set up a transportation company.

Pabst calls that unconstitutional discrimination, allowing established taxi companies to "veto" her business.

"The way the law reads right now, to transport passengers in Montana, before you advertise or perform that service, you must complete an application that goes to the commission," according to Nickie Eck, Business Operation Supervisor for the Montana Public Service Commission. "The application is noticed to the public and if the application is not protested, commission staff will bring it to the commission as uncontested."

Eck said that the public, which includes competing companies, can contest the application, bringing it to the commission for a hearing.

"There are some tests, if you will," Eck told Courthouse News, for instance, "statements from the public that indicate if your service is necessary and why, and if there is an existing carrier, why does that carrier not meet the public's needs. There is an opportunity for existing carriers who can say that they are ready, willing and able to meet the public's needs."

Operating a transportation company in Montana without the certificate brings steep fines.

Eck said she could not comment on the constitutionality of the law, but could only explain it as it exists on paper.

Anastasia Boden, an attorney with the Pacific Legal Foundation and one of Pabst's legal representatives, calls Montana's law "un-American" and said it is not the only one like it in the United States.

"We think it's even worse than that," Boden said, when asked if Montana's government is illegally suppressing competition and supporting monopolies.

"It makes entrepreneurs ask existing competitors if they can do business and, of course, they don't want competition," Boden told Courthouse News from her Sacramento office.

"We've challenged these types of laws in Oregon, Missouri, Kentucky and Nevada. They exist in the transportation industry in at least 31 states. It's un-American and goes against everything this country is supposed to be about; you know, the American dream."

Boden testified last week to Montana's House Transportation Committee, saying the law should be repealed. She says her firm's cases have caught the attention of other states, which have changed their own laws to deter litigation.

She added that some of the laws involve the railroad industry, dating back to the turn of the century, and are clearly not applicable today.

"There is a proposal in front of the House to repeal the law (in Montana). Hopefully they will vote the right way," Boden said of Montana's Legislature. "We recently won a case in Kentucky. These laws have been applied to hospitals and schools, and a few other industries, but primarily in transportation."

Pabst says Montana's law suppresses competition by allowing commissioners and existing businesses to act as gatekeepers, deciding who is in and who is out.

"I'm fighting back because these restrictions aren't fair to me or to the public," Pabst said in a statement. "I believe that this assault on free enterprise is unconstitutional."

Pacific Legal Foundation Principle Attorney Timothy Sandefur said the law unconstitutionally forces start-up businesses to justify their very existence.

"Montana has created a 'competitors' veto' system that allows established taxi and shuttle companies to run new businesses off the road," he said.

"By forcing new businesses to justify their existence, with no clear criteria for doing so, the state sides with well-connected, established commercial interests over potential competitors."

The result for consumers is higher prices and fewer choices, according to the lawsuit.

"The protest and hearing procedure ... allows existing motor carrier companies to prevent applicants from entering into or expanding their business and/or impose significant costs on applicants," the complaint states. "This reduces competition and creates an artificial scarcity of transportation services, which allows existing companies to keep prices artificially high to the detriment of Montana consumers."

Pabst sued Montana Attorney General Tim Fox and six members of the Montana Public Service Commission.

She alleges deprivation of liberty without due process, and violations of the equal protection and privileges and immunities clauses of the Fourteenth Amendment.

She seeks declaratory judgment, an injunction and costs.

She is represented by Quentin Rhoades, with Rhoades & Siefert, in Missoula; by the Pacific Legal Foundation in Sacramento.

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