Mackinac Island is accessible only by boat, and the City of Mackinac Island holds a unique special charter from the State of Michigan granting it the authority to license and regulate ferries to and from the island. For decades, three separate ferry companies operated on the island. However, in 2024, all three lines came under the common ownership of the Hoffmann Family of Companies. Following this consolidation, the ferry companies raised their fares and parking fees. The City, concerned about the lack of competition, passed Ordinance 629, which granted it complete power to regulate all rates, fares, and services, including parking. The ferry companies sued, arguing the ordinance breached their franchise agreements and exceeded the City's authority. The district court granted a preliminary injunction blocking the ordinance entirely, finding the ferry companies likely to succeed on claims that the City lacked authority over both rates and parking. The City appealed, arguing it retained the power to regulate fares.
The Sixth Circuit analyzed the case through the lens of a preliminary injunction, requiring a showing of a strong likelihood of success on the merits. The court addressed two distinct regulatory issues: parking fees and ferry rates. Regarding parking, the court affirmed the district court's injunction. It reasoned that the City's charter grants authority to regulate 'landings' and 'transportation of persons and property.' The court defined a 'landing' as a place for lading and unlading goods or passengers, noting that parking lots are distinct from landings. Furthermore, the parking lots in question are located on the mainland in St. Ignace and Mackinaw City, outside the City of Mackinac Island's territorial borders. The court held that the State of Michigan would not have granted extraterritorial authority over substantial land in other cities without explicit language, concluding the City lacks the power to regulate parking. Regarding ferry rates, the court vacated the injunction. The dispute centered on Section 9 of the franchise agreements, which allows the City to regulate fares 'in the event that no competition is found to exist.' The court found this provision ambiguous because the passive voice ('no competition is found') did not specify who must make the determination. While the ferry companies argued a third party was required, the City argued it retained the authority as the regulator. Because both interpretations were reasonable and the record lacked evidence of the parties' contemporaneous understanding, the court concluded neither party had a strong likelihood of success on this issue. Consequently, the preliminary injunction blocking rate regulation could not stand. The court also noted that the charter grants the City broad discretion to regulate charges and prices, supporting the City's position that it retains authority over fares pending further resolution of the ambiguity.
The City of Mackinac Island is permanently enjoined from enforcing Ordinance 629 regarding parking fees, meaning ferry companies may continue to set their own parking rates. However, the City is free to implement and enforce regulations regarding ferry fares, schedules, and other transportation services under Ordinance 629, provided it acts within the authority granted by its charter. The case is remanded to the district court to resolve the ambiguity regarding the 'competition clause' in the franchise agreements. Until that issue is settled, the City may regulate rates, but the ultimate authority remains subject to future litigation. The franchise agreements are set to expire in 2027, creating urgency for the parties to negotiate new terms.
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