Legal E-bulletin - May 2001


A.  Surcharges for Vehicle Tags Are Among the Most Litigated Disability Issues.

Among the most litigated disability rights issues is whether states may impose fees and charges for disabled parking placards or disabled vehicle operator tags and placards.  States customarily charge nominal fees for license tags, temporary window tags or permanent or renewable placards. Yet plaintiffs in several states contend that it is impermissible disability based discrimination to impose fees that apply principally to persons with disabilities and not to others.  The dispute tends to focus on the legality of the fees and charges, rather than on the financial burden of the fees.

B.  Surcharges Have a Discriminatory Effect.

One of the underlying principals in the ADA is that public and private providers of goods and services shall not establish surcharges on individuals with disabilities for the use of the accessible features or programs intended to assure equal access.  The simple reason is that special surcharges and fees that apply to persons with disabilities effectively treat persons with disabilities differently from similarly situated non-disabled persons.  If non-disabled persons are not charged a fee to enter a facility or otherwise enjoy access, then charging a person with disability a fee amounts to discrimination.  Also, charging fees and surcharges undermine the ADA's goals of barrier removal and integration because surcharges substitute economic barriers for physical barriers and perpetuate practices and attitudes that segregate individuals with disabilities from the larger society.

C.  ADA Implementing Regulations Prohibited Surcharges from the Beginning.

The principal prohibiting surcharges is incorporated in the regulations under both Title II and Title III.  The regulation for Title II provides that:

A public entity may not place a surcharge on a particular individual with a disability or any group of individuals with a disability to cover the costs of measures, such as the provision of auxiliary aids or program accessibility that are required to provide that individual or group with the non-discriminatory treatment required by the act or this part.  28 C.F.R. 35.130(f).

The meaning of this regulation is the subject of the cases challenging the legality of State motor vehicle rules that require a fee for the issuance of a disabled vehicle operator placard or other similar identification.  States have routinely charged a fee for the issuance of various vehicle licenses, certifications and registrations, including the operator with a disability placard.  Indeed, many states issued such placards and charged fees for them years before the adoption of the ADA. However, after the ADA set forth a national standard to prohibit disability-based discrimination, the legality of charging a fee to vehicle operators with disabilities for a placard came into question.

D. Survey of Circuit Courts on the Issue.

1.  Circuit and District Courts are Divided on the Issue.

Several United States Courts of Appeals and District Courts have already addressed this issue, but not all have agreed on the outcome.  Even among the courts that have reached the similar conclusions, they have not agreed on the reasoning to reach the conclusions.  The issue remains sharply divided.

    2.  States Have Enjoyed Some Success with Claims of Sovereign Immunity.

    Most courts of appeals addressing this issue have found that Congress exceeded its authority in imposing restrictions and liabilities on state governments.  The States rely on principals of sovereign immunity and the limits of Congressional authority under the 14th Amendment that enjoyed success before the Supreme Court in Board of Trustees, University of Alabama v. Garrett, 531 U.S. 356 (2001).

    In Brown v. North Carolina Department of Motor Vehicles, 166 F.3d 698 (4th Cir. 1999), the plaintiff sued to recover the fees paid for issuing a disabled parking placard and also to enjoin the state from charging fees for the parking placard in the future.  The State of North Carolina argued that the Congress lacked the Constitutional authority to barr surcharges by states.  The Fourth Circuit agreed with the State's reasoning and ruled that fees designed to allow a state to recover its costs are permissible.  Similar results were reported in Neinast v. State of Texas, 217 F.3d 375 (5th Cir. 2000) and in McGarry v. Director of Revenue, 7 F. Supp.2d 1022 (W.D. Mo. 1998).  Neinast and McGarry were decided on the grounds that states are immune to suit in federal court under the 11th Amendment and that the Congress acted beyond its constitutional authority in adopting the ADA.

    3.  Lack of Subject Matter Jurisdiction under the Tax Injunction Act.

    Other cases reached the some result of allowing states to charge a fee for an operator with a disability placard through a different line of reasoning.  Marcus v. Kansas, 170 F.3d 1305, 1311 (10th Cir. 1999) and Hedgepeth v. Tennessee, 33 F. Supp. 2d 668, 671‑73 (W.D. Tenn. 1998) relied upon the Tax Injunction Act.

    The States defending the charges for the parking placards on the basis of the federal Tax Injunction Act characterized the charges as a tax, and then claimed that the federal courts lacked jurisdiction over state tax matters under the federal Tax Injunction Act. The Tax Injunction Act provides in full that: "The district courts shall not enjoin, suspend, or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341.

    However, calling a sum a tax does not make it so.  Whether the sum charged by a State is a tax or fee depends on a number of factors, most especially the ultimate use of the funds.  If the sum is a tax, then the Tax Injunction Act applies.  If the sum is a fee, then the Tax Injunction Act does not apply.  The court in  Marcus v. Kansas explained that, the classic "tax" is imposed by a legislature upon many or all citizens to raise money that is contributed to a general fund and is spent for the benefit of the entire community.  The classic "regulatory fee" is imposed by an agency upon those subject to its regulation. A fee may serve regulatory purposes directly by discouraging particular conduct by making it more expensive. Alternatively, a fee may serve the purpose of raising money placed in a special fund to help defray the agency's regulation #8209; related expenses.

    Depending on what the State does with the money collected for operators with disabilities vehicle placards will often determine whether the sum is a fee or a tax ­ and accordingly whether the federal court is divested of subject matter jurisdiction to enjoin the charge.  In Hedgepeth v. Tennessee, the court concluded that the State of Tennessee directed the money collected for the parking placards to the general fund of the state treasury, and was therefore a tax under that state's revenue scheme.  As a tax, the federal court had no jurisdiction over the plaintiff's civil action which sought to enjoin the State from collecting the sum as a discriminatory surcharge.  In a similar case, the Tenth Circuit Court of Appeals held in Marcus that it could not determine the nature of the charge without further discovery of facts ­ particularly on the issue of how the funds collected were used.

    These cases did not directly hold that the States had a right to impose surcharges on persons with disabilities, nor did they hold that the parking placard surcharges were non-discriminatory.  Rather, the federal courts held that they did not have the authority to grant the injunctive relief requested because of the federal Tax Injunction Act.  Because the plaintiffs sought an injunction to prevent the state from continuing to charge persons with disabilities fees for operators with disabilities vehicle placards, the federal court could not grant the relief requested and the state courts were the appropriate forum.

    4.  The Minority Opinion holds that Parking Placard Fees are Unlawful Discriminatory Surcharges.

    A minority of courts have concluded that parking placard fees are unlawful discriminatory surcharges under the ADA.  In Duprey v. Connecticut, Dep't of Motor Vehicles, 28 F. Supp.2d 702, 708‑11 (D  Conn. 1998) and in Dare v, State of California, 191 F.3d 1167 (9th Cir. 1999), the courts took a different view.  The courts found that the ADA was not unconstitutional and that fees for disabled parking placards are unlawful surcharges on persons with disabilities and were prohibited by the ADA.

      (a)  The Ninth Circuit's View.

      In Dare v. California, 191 F.3d 1167 (9th Cir. 1999), the State of California raised two arguments.  First, the State of California argued that the fees were not within the scope of surcharges envisioned in the ADA regulations.  Second, the State argued that it was immune from suit under the 11th Amendment and that Congress had exceeded its 14th Amendment power when it enacted Title II of the ADA.  The Court rejected both arguments. However, after the Supreme Court's ruling in Alabama v. Garrett it is unlikely that the State's argument on 11th Amendment immunity may now have some merit.

      Nevertheless, the Ninth Circuit's analysis in Dare regarding which charges amount to surcharges gives insight into how to distinguish between lawful and unlawful charges.  The court held that whether a fee is discriminatory depends on two primary factors.  The first factor is whether the measure for which the fee is charged is required by the ADA.  The second factor is whether the fee is properly characterized as a surcharge.  If the measure for which the fee is charged is required by the ADA and a fee is not charged to non-disabled persons, then it is an unlawful surcharge. Dare, 191 F.3d at 1176.

        (i) Determining Whether a Measure Is Required by the ADA.

        Because 28 C.F.R. § 35.130(f) prohibits charges to ". . . cover the costs of measures . . . that are required to provide that individual or group with the non-discriminatory treatment . . .," the measure for which the fee is charged must be required in order for a fee to be considered an unlawful surcharge.  If the measure is not required for equal treatment, then the state is permitted to charge fees for such measures or services. Accordingly, the State of California contended that parking placards were not a measure required by the ADA, but were provided as a matter of convenience.  Because the State (according to its argument) was under no obligation to offer or issue placards, doing so was not a "requirement" within the meaning of the regulation and the State was free to charge a reasonable fee for the service.

        The court disagreed with the State of California's position because the United States Department of Transportation issued regulations shortly after Congress enacted the ADA (although not necessarily pursuant to the ADA) to establish a uniform system for accessible parking designed to enhance the safety of individuals with disabilities and to encourage adoption of such system by all the states.  The Department of Transportation regulations provided that States shall issue:

        • ..special license plates, removable windshield placards, or temporary removable windshield placards displaying the International Symbol of Access shall be the only recognized means of identifying vehicles permitted to utilize parking spaces reserved for persons with disabilities which limit or impair the ability to walk.

        The court concluded that although the regulation was not adopted specifically under the ADA, the regulation did require the issuance of placards and other identifying tags and therefore was a "requirement" within the meaning of 28 C.F.R. § 35.130(f).

        (ii)  Determining Whether Charges are Surcharges.

        The next issue in Dare was whether the charges were "surcharges."  The court defined surcharges as fees that were charged to persons with disabilities but were not charged to non-disabled persons.  On this point the State of California contended essentially that the charges were comparable to parking fees charged to non-disabled persons.

        According to the State, the placard could be used to park a vehicle in a metered parking space without paying the meter.  Also, the placard enabled a person with a disability to park without being subject to time limitations on that parking area.  The State contented that persons with disabilities were essentially paying for parking that non-disabled persons also paid for, but persons with disabilities were charged a lower rate.  According to the State the fee was not a surcharge applicable only to persons with disabilities, but a reduced rate for persons with disabilities.

        The court also rejected this argument.  In the court's view the placard was not limited only to use at metered parking spaces.  The placard was also used to park in spaces reserved for persons with disabilities in lots where no fee is charged for parking.  Extending the State of California 's reasoning to situations where no parking fee is customarily charged, the charge for the placard would be a charge on persons with disabilities for parking in lots where non-disabled persons were not similarly charged for parking.  The court concluded that the charges were surcharges because they imposed costs on persons with disabilities that similarly situated non-disabled persons did not pay.  Ultimately, the court concluded that the fee for the parking placard was a discriminatory surcharge because the placards were a measure required for equal access under the ADA and because the fee was imposed only upon disabled persons.

        (iii)  State Raises an 11th Amendment Sovereign Immunity Argument.

        The State of California also argued that it enjoyed 11th amendment immunity.  The court  rejected this position.  Dare, however, was decided years before University of Alabama v. Garrett, in which the Supreme Court held that Congress exceed its 14th amendment authority in providing for money damage remedies against states under the ADA.  The arguments that the Supreme Court accepted in Garrett are substantially similar to the arguments advanced by the State of California in Dare.  Garrett suggests that Dare is no longer good law on the 11th amendment immunity portion of the opinion.  However, Dare may still be viable on the 11th amendment immunity issue because the principal remedy sought in Dare was injunctive relief, not money damages.  Garrett expressly limited its holding to claims of money damages and preserved claims against states in federal court for injunctive relief.

          (a)  Another minority view from the District of Connecticut.

          Duprey v. Connecticut, Dep't of Motor Vehicles, 28 F. Supp.2d 702, 708‑11 (D. Conn. 1998) is another case where the court followed the ADA implementing regulations and found parking placard fees to be discriminatory surcharges.  The court in Deprey focused on fashioning a standard to determine when a fee or charge by a state was an unlawful surcharge.  Relying heavily upon the language of the regulation, the court established a legal standard for identifying impermissible and discriminatory charges.  A fee is unlawful if:

          (1)  The fee is a surcharge;
          (2)  the fee charged is imposed only on persons with disabilities; and
          (3)  the fee is used to cover the costs of an accessibility related measure that is required by the ADA.

          When offering evidence on these points, the state contended that the $5 fee for a parking placard was not a "surcharge" because it was not unusual, excessive or discriminatory."  The State was attempering to define "surcharge as an amount that was an extra or additional cost to the actual cost of providing the placard."  The court rejected this assertion on the grounds that limiting the definition of surcharge to additional or extra fees would be under inclusive and fail to include fees that were widely recognized as surcharges.  The state also argued that the $5 fee purchased the entitlement to park in certain areas without charge and without time limitation.  The state also argued that the parking placard was not limited to only persons with disabilities as defined in the ADA.  Rather, any person (the state argued) with a serious health condition may obtain a placard even though their condition would not meet the definition of a person with a disability under the ADA.  Therefore the charge was not only imposed on persons with disabilities.

          The court rejected the state's reasoning and found that the $5 fee for a parking placard was a discriminatory fee imposed by a state. Because the sufficiency of the claim passed the legal challenges, the case proceeded and the plaintiff sought to have the case certified as a class action on behalf of all other similarly situated persons. Duprey recently resolved by settlement in early 2001.  Not only did the State of  Connecticut agree to end charging fees for disabled parking placards, it also agreed to pay $100,000 in settlement.  The settlement fund is divided among several programs including a law school clinic for alternative dispute resolution, the Connecticut Governor's Committee on Employment of People with Disabilities, and to fund a continuing legal education seminar for lawyers on the ADA.  The plaintiff chose to receive only $2,500 of the settlement.

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