Ambiguous “No Competition” Franchise Clause Bars Preliminary Rate Injunction, but City Lacks Charter Power to Regulate Mainland Ferry Parking

Case: Shepler's Inc. v. City of Mackinac Island, Michigan (6th Cir. Mar. 12, 2026) (not recommended for publication)
Posture: Interlocutory appeal from a preliminary injunction concerning municipal regulation of ferry-related charges under franchise agreements and a city ordinance.

I. Introduction

This dispute arises from Mackinac Island’s unique geography and governance. The City of Mackinac Island—Michigan’s only remaining special charter municipality—depends heavily on ferry transportation because “no bridge connects it to the mainland.” The State granted the City authority, through its Charter, to “license and regulate ferries” and to “regulate and prescribe from time to time the charges and prices for the transportation of persons and property.”

Plaintiffs-appellees Shepler’s Inc. and Mackinac Island Ferry Company (Arnold Transit) (collectively, the “Ferry Companies”) operate ferry service to the Island under materially identical 2012 Franchise Agreements running through June 30, 2027. After 2024 consolidation placed all ferry lines under common ownership, the Ferry Companies increased fares and mainland parking fees. The City responded with a rate “freeze” and then enacted Ordinance 629, asserting “complete power” over ferry “Service Rate[s]” (defined to include parking fees and other charges). The Ferry Companies sued to enjoin enforcement; the City counterclaimed and sought to enjoin the increases.

The central issues on appeal were: (1) whether the City showed (or the Ferry Companies defeated) a strong likelihood of success regarding municipal authority to regulate ferry fares under Section 9 of the Franchise Agreements; and (2) whether “present law” (principally the Charter) permitted the City to regulate mainland parking fees as part of ferry “service.”

II. Summary of the Opinion

The Sixth Circuit affirmed in part and vacated in part the district court’s preliminary injunction. The court held:

• Ferry fares/rates: Section 9’s “no competition is found to exist” clause is ambiguous as to who decides whether competition exists. With no extrinsic evidence in the preliminary record, neither side demonstrated a strong likelihood of success on the City’s authority to regulate ferry rates at this stage.
• Parking fees: The Ferry Companies did demonstrate a strong likelihood of success that the City lacks authority—under the Charter and “present law”—to regulate mainland parking fees. Parking is not “transportation of persons and property,” does not fall within the historical meaning of ferry “landings,” and the lots are outside the City’s territorial borders absent an express extraterritorial grant.
• Resulting injunction: The City remains enjoined only from implementing/enforcing Ordinance 629 as to parking; otherwise, the City may proceed to regulate ferry rates and fares consistent with the Charter and this opinion while merits litigation continues.

III. Analysis

A. Precedents Cited (and How They Shaped the Decision)

1. Municipal status and the source/limits of City power

• Dooley v. City of Detroit: Used to explain why Mackinac Island’s special charter status matters. Unlike home rule cities, special charter cities are “granted and subject to amendment only by the state legislature” and exercise only powers “expressly granted.” This frames the court’s insistence that the City’s authority must be traced to the Charter’s text.
• Arnold Transit Co. v. City of Mackinac Island: Cited for the proposition that Michigan delegated the “exclusive power to franchise ferry boat operators” to the City, supporting the City’s general regulatory authority over ferry operations and fares—while leaving open the precise contractual trigger in Section 9.
• City of Niles v. Michigan Gas & Elec. Co. and People v. Collins: Support the characterization that when the state delegates sovereign power, the municipality acts as the state’s agent and exercises “legislative power.” This bolsters the City’s argument that it has discretion in administering delegated regulatory power.
• Brent v. City of Detroit and Veldman v. City of Grand Rapids: Stand for restrained judicial review of discretionary municipal regulation unless the City exceeds its lawful authority. The court uses these to reinforce that the Charter’s grant (“as they may deem proper”) implies breadth—yet still bounded by the Charter’s subject matter and territorial scope.
• Moran v. Leadbetter and Oshtemo Charter Twp. v. Kalamazoo Cnty. Rd. Comm'n: Cited for the idea that discretionary determinations under delegated authority are ordinarily not controlled by courts absent fraud or clear abuse of discretion—helping show why the City’s reading of Section 9 (that the City may make the competition finding) is plausible, contributing to ambiguity rather than resolution.

2. Contract interpretation and ambiguity (Michigan law applied in federal court)

• Sault Ste. Marie Tribe of Chippewa Indians v. Granholm: Provides the basic framework—if unambiguous, the writing controls; if ambiguous, extrinsic evidence is needed.
• Klapp v. United Ins. Grp. Agency, Inc. and Farm Bureau Mut. Ins. Co. of Mich. v. Nikkel: Define ambiguity as provisions “capable of conflicting interpretations” and require that contract interpretation give meaning to every provision. This is central to the court’s holding that Section 9’s passive-voice condition can reasonably be read in two different ways.
• City of Wyandotte v. Consol. Rail Corp. (quoting D'Avanzo v. Wise & Marsac, P.C.): Supplies the “two or more reasonable interpretations” formulation, which the court uses to conclude Section 9 is ambiguous.

3. Passive voice and “who decides” under Section 9

• Bryan A. Garner, Modern English Usage, Dean v. United States, and Kemp v. Allen: Used to rebut the district court’s inference that passive voice implies a third-party decider. These authorities support the view that passive voice can instead reflect focus on the event/condition rather than the actor, making the City’s reading plausible.
• Bartenwerfer v. Buckley: Cited for the notion that passive voice can signal agnosticism about the actor—again, reinforcing ambiguity rather than choosing a side.

4. “Present law,” the Charter, and the limits of ancillary regulation

• Graham v. Kochville Township: Cited by analogy to support that regulatory fees can be permissible when tethered to a valid regulatory scheme.
• Chilvers v. People and Champion's Auto Ferry, Inc. v. Michigan Pub. Serv. Comm'n: Cited for general propositions about ferries and “landings” and the “continuation of the highway” concept. The City relied on these to argue parking is part of ferry service; the panel found they do not extend to parking as such.
• In re Certified Question: Supplies interpretive method—use a dictionary from the relevant era to determine meaning of terms in older enactments (here, the City Charter’s late-19th-century context).
• City of St. Paul v. Chicago, M. & St. P Ry. Co. and Black’s Law Dictionary (2d ed. 1910): Used to ground the historical meaning of “landing/levee” as a place for loading/unloading passengers/cargo—not a parking lot.
• Frankenmuth Mut. Ins. Co. v. Marlette Homes, Inc.: Cited for the caution that if the state intended to grant broad extraterritorial authority, “it would have said so.” This supports the holding that the City cannot regulate mainland parking lots located in other municipalities absent a clear grant.
• North Carolina ex rel. Utils. Comm'n. v. Bald Head Island Transp., Inc.: The City invoked this “ancillary services” framing; the panel distinguished it because the Michigan Charter does not contain similarly explicit language encompassing ancillary services like parking.

5. Preliminary injunction standards and equitable factors

• Planet Aid v. City of St. Johns and S. Glazer's Distributors of Ohio, LLC v. Great Lakes Brewing Co.: Provide the four-factor preliminary injunction test and the Sixth Circuit’s emphasis that lack of likelihood of success can be dispositive.
• Munaf v. Geren and Winter v. Nat. Res. Def. Council, Inc.: Supply the “extraordinary remedy” principle and “clear showing” requirement, supporting the appellate court’s partial unwinding of broad injunctive relief where merits likelihood was not strong.
• Higuchi Int'l Corp. v. Autoliv ASP, Inc.: Cited for the proposition that likelihood of success is generally the most important factor.
• Stenberg v. Cheker Oil Co. and Overstreet v. Lexington-Fayette Urb. Cnty. Gov't: Used to frame irreparable harm as harm not fully compensable by money damages. The court found the Ferry Companies’ harms mostly monetary (and thus compensable), while recognizing governmental harm from being enjoined from effectuating law.
• Maryland v. King: Used to support the City’s claim of irreparable injury when a governmental entity is enjoined from implementing measures enacted by representatives of the people.

6. Issues expressly not decided

• Sveen v. Melin: Mentioned in a footnote in connection with the Contracts Clause, but the court declined to reach that constitutional issue.
• McPherson v. Kelsey: Cited for the rule that issues not briefed are not addressed on appeal.

7. The concurrence’s additional authorities (competition meaning and antitrust analogies)

• McGrath v. Allstate Ins. Co. and Exclusive Cap. Partners, LLC v. City of Royal Oak: Support using dictionary definitions for undefined terms and illustrate how “competitive” can be assessed by whether meaningful distinctions/choices exist.
• United States v. Grinnell Corp. and St. Luke's Hosp. v. ProMedica Health Sys., Inc.: Invoked to show antitrust “monopoly” is a multi-factor inquiry and not reducible to common ownership alone—underscoring that “competition” in Section 9 may not equal “antitrust competition.”
• Copperweld Corp. v. Indep. Tube Corp. and Directory Sales Mgmt. Corp. v. Ohio Bell Tel. Co.: Cited for the antitrust concept that parent/subsidiary entities may be treated as one for §1 conspiracy purposes; the concurrence notes the record does not show the parties intended to import those doctrines into Section 9.
• Jackson v. City of Cleveland: Cited for the general rule against appellate consideration of issues not passed upon below—reinforcing restraint at the preliminary stage.
• Raska v. Farm Bureau Mut. Ins. Co. of Michigan: Cited for the Michigan-law ambiguity standard (“reasonably be understood in different ways”), supporting the concurrence’s view that ambiguity exists in multiple dimensions (procedure, substance, and meaning of “competition”).

B. Legal Reasoning

1. The court’s bifurcated approach: fares vs. parking

The opinion separates two questions that Ordinance 629 attempted to collapse into one “complete power” regime: (i) whether the City can regulate ferry fares and schedules under the Franchise Agreements and Charter; and (ii) whether the City can regulate mainland parking fees as part of “ferry service.” This structure drives the outcome: ambiguity defeats a “strong likelihood” showing on fares, while the Charter’s textual/territorial limits produce a strong likelihood of success for the Ferry Companies on parking.

2. Section 9 ambiguity: passive voice plus municipal context

Section 9’s trigger—“In the event that no competition is found to exist”—is written in the passive voice and does not identify the finder of fact. The district court inferred that a third party must determine competition. The Sixth Circuit refused to treat passive voice as a decisive signal.

Crucially, the panel does not hold the City does have unilateral power to find “no competition”; it holds only that the City’s interpretation is reasonable given (a) the Charter’s broad regulatory delegation and (b) principles that delegated legislative discretion typically sits with the delegatee. Because both interpretations are reasonable, Section 9 is ambiguous under Klapp v. United Ins. Grp. Agency, Inc. and City of Wyandotte v. Consol. Rail Corp.. With no developed extrinsic record at the preliminary injunction stage, the court cannot find a strong likelihood for either side on ferry fares.

3. “Present law” is anchored in the Charter, not the 2012 regulatory status quo

The Ferry Companies argued that “present law” and Section 11’s reference to Ordinance 465 (the Ferry Boat Code) effectively capped the City’s power at the 2012 framework. The panel rejected that ceiling theory: Ordinance 465 itself incorporates the Charter’s rights and powers, and the Charter authorizes regulating ferry “charges and prices” for “transportation of persons and property” and imposing reasonable licensing terms, restrictions, and sums. Thus, the correct “present law” inquiry asks whether the Charter (and other applicable law) authorizes the challenged regulation—not whether the City is deviating from its 2012 ordinance design choices.

4. Why parking fails: definitional mismatch and extraterritorial overreach

Parking regulation fails on multiple, mutually reinforcing grounds:

• Subject-matter mismatch: Parking is not “transportation of persons and property” and is not required to ride the ferry. The fungibility-of-money argument (parking vs. ticket allocation) does not convert parking into “transportation.”
• Historical meaning: Using In re Certified Question, the court consults era-appropriate sources and concludes a “landing/levee” is a loading/unloading point (wharf, pier, or natural bank), not a parking lot.
• Territorial limits: The lots are in St. Ignace and Mackinaw City, beyond City borders. Under Frankenmuth Mut. Ins. Co. v. Marlette Homes, Inc., an extraterritorial grant of this magnitude would need to be explicit. The Charter contains no such clear statement.
• Distinguishing “ancillary services” authority: The City’s reliance on North Carolina ex rel. Utils. Comm'n. v. Bald Head Island Transp., Inc. fails because Michigan’s Charter lacks explicit ancillary-services language.

5. Equities and irreparable harm: government injury recognized, but not enough to save the broad injunction

On irreparable harm, the court finds most Ferry Company harms (lost revenue from constrained rates) would be compensable by money damages in contract litigation. The City, by contrast, benefits from the Maryland v. King principle that a state (or its delegatee) suffers irreparable injury when enjoined from effectuating public measures.

Even though the public interest and balance of equities favor the City (higher fares impact tourism and the local economy), those factors cannot justify a preliminary injunction where neither side shows a strong likelihood of success on the central fares issue. The court therefore narrows the injunction to the one domain where likelihood of success is strong: parking.

C. Impact

1. Drafting and litigation of franchise “competition” triggers

The decision signals that passive-voice “trigger” clauses—especially those conditioning governmental rate regulation on market structure (“no competition is found to exist”)—invite ambiguity findings and may prevent either side from obtaining decisive preliminary relief without extrinsic evidence. Parties negotiating public-utility-like franchises should expect pressure to:

• define “competition” (ownership, price rivalry, service differentiation, market share, etc.);
• specify who makes the finding and how (ordinance, resolution, hearing, notice); and
• define the evidentiary standard and review process.

2. “Present law” clauses: incorporating charters can expand, not freeze, authority

The panel’s treatment of Sections 9 and 11 underscores that referencing “present law” and incorporating a charter may operate as a moving authorization tethered to the charter’s scope—not as a promise to preserve a particular ordinance-era regulatory equilibrium. That reading reduces the force of “status quo” arguments where the core charter delegation is broad.

3. Clear boundary on extraterritorial, non-transport charges (parking)

The most concrete legal rule emerging is negative but potent: absent explicit authorization, a charter-based ferry franchising power does not carry with it authority to regulate optional, mainland, off-territory parking fees—even if parking is commercially associated with ferry travel. Future disputes over “ancillary” charges (parking, shuttle buses, hotels, bundled packages) will likely turn on:

• textual linkage to “transportation” or “property,”
• historical/ordinary meaning of the regulated subject, and
• territorial limits and the clarity of any extraterritorial grant.

4. Practical consequences for regulated transportation markets

By allowing the City (for now) to regulate ferry fares but forbidding it to regulate mainland parking, the decision may incentivize pricing shifts (e.g., lowering fares while increasing non-fare revenue) so long as those shifts remain outside the City’s lawful scope—unless future contract interpretation or legislative action addresses that gap.

IV. Complex Concepts Simplified

• Preliminary injunction: A temporary order meant to preserve the status quo and prevent harm before final judgment. Courts weigh likelihood of success, irreparable harm, balance of equities, and public interest.
• “Strong likelihood of success”: More than a plausible case; the movant must show a clear probability of prevailing on the merits. Where contract language is ambiguous and key extrinsic evidence is missing, that showing often fails.
• Condition precedent: An event that must occur before a contractual right arises. Here, the City’s asserted rate power depended on “no competition” being “found to exist.”
• Ambiguity (contract): If language reasonably supports two competing interpretations, the court may consider extrinsic evidence to determine intent; at early stages, missing evidence can prevent decisive relief.
• Special charter municipality: A city whose powers are set by a specific legislative charter, typically construed as limited to express grants (unlike broader home rule authority).
• Extraterritorial regulation: A city regulating conduct or property outside its borders; courts generally require a clear legislative statement authorizing it.
• Contracts Clause (not decided): A constitutional prohibition on states substantially impairing contractual obligations. The panel noted but did not reach this issue.

V. Conclusion

The Sixth Circuit’s decision produces a targeted rule for interim relief in public-franchise disputes: when a franchise agreement conditions municipal rate regulation on a passive-voice “no competition” finding and the record lacks extrinsic evidence, neither side will ordinarily show a strong likelihood of success at the preliminary stage. But the court simultaneously draws a firm boundary around municipal power: even broad charter authority to regulate ferry “charges and prices” for “transportation” does not extend to regulating optional, mainland parking fees—particularly where the lots lie outside the City’s borders and the charter lacks an explicit extraterritorial or ancillary-services grant.