The State of Illinois Upholds the International Registration Plan, Supports Uniform Truck Registration Policy -Decision Finds Additional Assessments by California in Violation

Green Bay, Wisc. (March 8, 2004) – In a recent decision with major implications for the United States trucking industry, the State of Illinois upheld the International Registration Plan (IRP) by ruling that trailer registration fees charged by the State of California violate the IRP and are therefore, illegal. The IRP is an interstate commercial vehicle licensing compact designed to streamline the licensing process for the national trucking industry. The ruling in favor of Schneider National, Inc., a national commercial trucking company, in its case against the California Department of Motor Vehicles, reinforces the status of the IRP as the uniform system governing the collection and distribution of truck registration fees.

Schneider filed its appeal in April 2002 in response to repeated assessments for additional trailer fees, charging that, as a member of the IRP, California cannot impose such fees without losing their IRP membership status, potentially costing California its ability to collect over $125 million in annual interstate truck registration fees.

California first issued an assessment to Schneider in March, 2002 demanding over $6 million in allegedly underpaid trailer registration fees. When Schneider appealed this assessment under the IRP, California issued a second assessment, this time demanding more than $10.7 million for the same time period. In response, Schneider again appealed under the IRP asserting that the $10.7 million assessment constituted a “punitive action” against the company. California claimed it was not required to follow the terms of the IRP. The state of Illinois, however, disagreed with California and ruled in favor of Schneider, finding that both assessments were improper.

“The ruling is a victory for the entire trucking industry, as it preserves the integrity of the IRP, ” noted Thomas E. Vandenberg, General Counsel of Schneider National. “The IRP was founded to ensure that trucking registration fees are collected and distributed in a uniform, equitable and efficient manner, and any threat to this system jeopardizes all commercial trucking companies, as well as the states they operate in. By electing to join the IRP, an individual state is governed by its provisions, and therefore cannot impose additional regulations outside its scope.”

The IRP establishes that a trucking company properly registered within their base jurisdiction may freely operate within other jurisdictions without additional registration requirements. The base jurisdiction collects registration fees, issues plates and distributes fees to member jurisdictions. Without such provisions, trucking companies would be required to register within each state they conduct business, and thereby subject to multiple taxes, fees and other regulations at the state level.

“Maintaining a system to uniformly enforce a set of standard regulations is of critical importance for the trucking industry,” said James Curtis of Seyfarth Shaw. “If California was allowed to ignore the IRP’s provisions, trucking companies could not rely upon the IRP as a single uniform system of administration and enforcement. Rather, they would be at the peril of the political whim of any given state. The ruling is grounded in common sense and establishes that California, like all member states, is bound by the IRP and must act in accordance with all of its provisions, as the state’s polticial climate cannot influence which parts of the IRP it wishes to follow. This ruling represents an important milestone for the entire trucking industry as well as for Schneider National.”

California and the IRP
California joined the IRP in 1984 with an “exception” which it argued allowed it to collect registration fees on trailers. This was highly unusual because the IRP was designed around tractors, not trailers, and very few jurisdictions required registration fees for trailers. Because accounting for and collecting California’s trailer fee was burdensome to other IRP jurisdictions, the IRP, in 1999, voted to eliminate such exceptions. California, however, failed to take any action to modify its registration fees. Rather, California didn’t get around to shifting its trailer fees to tractors until January 1, 2002, well after its right to collect such fees under the IRP had expired. In fact, on August 25, 1999, the California Legislative Counsel issued an opinion letter which concluded that IRP prevailed over California law and that the trailer fees could not be collected if challenged. Nonetheless, that opinion letter was largely ignored and California continued to collect its illegal fee.

California's Assessments Against Schneider
Despite the opinion letter from its own state Legislative Counsel that the trailer fee was unenforceable, in 2002, California assessed Schneider with $6,046,077 in additional apportioned trailer fees, penalties, and interest. Schneider paid the funds to its Base Jurisdictions (Wisconsin and Illinois) but also filed an appeal contesting California’s right to collect the trailer fee. In response, the State of California issued a “revised” assessment of $10,755,101 to Schneider for the same vehicles and the same period as the first assessment. Again, Schneider paid the assessment and appealed asserting that California’s trailer fee was illegal. On February 25, 2004, Illinois entered an order finding that California was not entitled to collect the trailer fee, that both assessments were improper, and that Schneider was entitled to the return of the two assessments it had paid.

About Schneider National
Schneider National Inc. is a premier provider of transportation, logistics and related services. Schneider National serves more than two-thirds of the FORTUNE 500 companies, offering the broadest portfolio of services in the industry. Schneider National’s transportation solutions include: One-Way Van, Dedicated, Expedited, Intermodal, Brokerage, Bulk and Specialized. Schneider Logistics, a wholly-owned subsidiary of Schneider National, provides supply chain management technology, managed services, engineering services and freight payment. Headquartered in Green Bay, Wis., Schneider National has a track record of providing expert transportation and logistics solutions. For more information about Schneider, visit www.schneider.com or call (800) 558-6767.

About Seyfarth Shaw
Founded in 1945, Seyfarth Shaw will now have approximately 600 attorneys located in nine offices throughout the United States – including Chicago, New York, Boston, Washington D.C., Atlanta, Houston, Los Angeles, San Francisco and Sacramento -- as well as Brussels, Belgium. Seyfarth Shaw provides a broad range of legal services in the areas of labor and employment, commercial litigation, business law, real estate, contracts, employee benefits, environmental, safety and health. American Lawyer recently ranked Seyfarth Shaw as the most prestigious labor and employment law firm in the nation.
Today, the firm’s practice reflects virtually every industry and segment of the country’s business and social fabric. Clients include over 200 of the Fortune 500 companies, financial institutions, newspapers and other media, hotels, health care organizations, airlines and railroads. The firm also represents a number of federal, state, and local governmental and educational entities.