Submitted January 13, 2017 Pasadena, California
from the United States District Court for the Central
District of California John F. Walter, District Judge,
Presiding Argued and
Michael M. Berger (argued), Matthew P. Kanny, and Maura
Kingseed Gierl, Manatt Phelps & Phillips LLP, Los
Angeles, California, for Plaintiff-Appellant Airline Service
Span (argued), and Douglas R. Painter, Steinbrecher &
Span LLP, Los Angeles, California; Douglas W. Hall, Ford and
Harris LLP, Washington, D.C.; for Plaintiff-Appellant Air
Transport Association of America.
Richard G. McCracken (argued) and Paul L. More, Davis Cowell
& Bowe LLP, San Francisco, California; Scott P. Lewis and
David S. Mackey, Anderson & Krieger LLP, Boston,
Massachusetts; for Defendants-Appellees.
Before: Richard C. Tallman and Michelle T. Friedland, Circuit
Judges, and William H. Orrick, III, [*] District Judge.
panel filed (1) an order (a) granting petitions for panel
rehearing with respect to the request that the court amend
its opinion to affirm the district court's denial of
leave to amend but denying the petitions for panel rehearing
in all other respects, (b) denying petitions for rehearing en
banc, (c) withdrawing the opinion, and (d) directing the
filing of a new opinion; and (2) a new opinion affirming the
district court's dismissal of an action brought by two
air transport trade associations asserting that the City of
Los Angeles, in its capacity as proprietor of Los Angeles
International Airport, may not require businesses at the
airport to accept a contractual condition concerning labor
new opinion, the panel wrote that airlines that operate out
of LAX hire third-party businesses to refuel and load planes,
take baggage and tickets, help disabled passengers, and
provide similar services. The City licenses those service
providers using a contract that imposes certain conditions.
One such condition, section 25, requires service providers to
enter a "labor peace agreement" with any employee
organization that requests one. The trade associations argued
that, because the City operates LAX, the contractual
conditions in LAX's standard licensing agreement are
effectively municipal regulations. The associations contended
that section 25, as one such "regulation, " was
preempted by the National Labor Relations Act, the Railway
Labor Act, and the Airline Deregulation Act.
panel held that the Airline Service Providers Association had
associational standing to pursue all of its claims.
panel held that the associations failed to state a preemption
claim. The panel concluded that the City was acting as a
market participant, and not a regulator, when it added
section 25 to its LAX licensing contract because, under the
Cardinal Towing test, the City was attempting to
avoid disruption of its business, and the decision to adopt
section 25 was narrowly tied to a specific proprietary
problem. The panel also concluded that the preemption
provisions of the NLRA, the RLA, and the ADA do not apply to
state and local governmental actions taken as a market
panel held that the district court did not err by denying
leave to amend the complaint.
in part and dissenting in part, Judge Tallman agreed with the
majority that the ASPA had standing to assert its claims.
Judge Tallman disagreed with the majority's conclusion
that, as is, the complaint failed to state a plausible claim
that the City enacted section 25 as a regulatory measure
rather than a proprietary one. He wrote that the complaint
sufficiently alleged that section 25 was an overly broad and
facially suspect regulation of labor relations that
contravened the delicate congressional balancing of national
labor relations policy affecting key facilities of interstate
petitions for panel rehearing are GRANTED
with respect to their request that the court amend its
opinion to affirm the district court's denial of leave to
amend but DENIED in all other respects. The
petitions for rehearing en banc are DENIED.
No future petitions will be entertained. The opinion filed on
August 23, 2017 is withdrawn and a new opinion is filed
concurrently with this order.
FRIEDLAND, Circuit Judge:
decide whether the City of Los Angeles, which operates Los
Angeles International Airport ("LAX"), can require
businesses at the airport to accept certain contractual
conditions aimed at preventing service
disruptions. Two air transport trade associations argue
that the conditions are, in effect, municipal regulations
preempted by federal labor law. We hold that the City may
impose the conditions in its capacity as proprietor of LAX
and thus affirm dismissal of the Complaint.
that operate out of LAX hire third-party businesses to refuel
and load planes, take baggage and tickets, help disabled
passengers, and provide similar services. The City licenses
those service providers using a contract that imposes certain
conditions. One such condition, section 25, requires service
providers to enter a "labor peace agreement" with
any employee organization that requests one. If such an
agreement is not finalized within sixty days, then the
dispute must be submitted to mediation and, if mediation is
unsuccessful, to binding arbitration. Any labor peace
agreement that results from this process must include
"binding and enforceable" provisions that prohibit
picketing, boycotting, stopping work, or "any other
might seem at first glance that a labor peace agreement would
be detrimental to employees' interests because it
deprives them of labor rights. In practice, however, if an
employer may not operate without such an agreement, the
employer may need to give benefits to its employees to induce
them to enter the agreement. Employees have an incentive to
trigger negotiations toward labor peace agreements to obtain
such benefits. Indeed, here, at least one organization of
service employees advocated for inclusion of section 25 when
the City was revising its standard LAX licensing contract.
trade associations who have members that operate at LAX
brought suit in the United States District Court for the
Central District of California to challenge section 25:
Airline Service Providers Association ("ASPA"), an
association of third-party service providers; and the Air
Transport Association of America ("Airlines"), an
association of American airlines. The associations argue
that, because the City of Los Angeles operates LAX, the
contractual conditions in LAX's standard licensing
agreement are effectively municipal regulations. The
associations contend that section 25, as one such
"regulation, " is preempted by two federal labor
statutes-the National Labor Relations Act ("NLRA")
and the Railway Labor Act ("RLA")-and by the
Airline Deregulation Act ("ADA").
district court dismissed the Complaint without leave to
amend. It dismissed the labor law preemption claims for
failure to state a claim and the ADA claim for lack of
City challenges aspects of Plaintiffs' standing, and, in
any event, we have an independent obligation to ensure that
we have subject matter jurisdiction. See, e.g., United
States v. McIntosh, 833 F.3d 1163, 1173 (9th Cir. 2016).
For the reasons that follow, we hold that the ASPA has
standing to pursue all of its claims.
association like the ASPA has standing if (1) its individual
members would have standing in their own right, (2) the
interests at stake in the litigation are germane to the
organization's purposes, and (3) the case may be
litigated without participation by individual members of the
association. Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs. (TOC), Inc., 528 U.S. 167, 181 (2000) (citing
Hunt v. Wash. State Apple Advert. Comm'n, 432
U.S. 333, 343 (1977)).
standing in their own right, an association's members
must have "suffered an injury in fact, " that
injury must be "fairly traceable to the challenged
conduct of the defendant, " and the injury must be
"likely to be redressed" by a decision in their
favor. Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547
ASPA has alleged a sufficient injury in fact. It alleges that
its members will be forced into unwanted negotiations that
must terminate in either an agreement or arbitral
award-something virtually certain to occur given that an
organization of service employees advocated for section 25,
suggesting that employees plan to make use of the provision.
We have recognized that "[t]he economic costs of
complying with a licensing scheme can be sufficient for
standing, " Mont. Shooting Sports Ass'n v.
Holder, 727 F.3d 975, 980 (9th Cir. 2013), even if
"the extent of [the alleged] economic harm is not
readily determinable, " Cent. Ariz. Water
Conservation Dist. v. EPA, 990 F.2d 1531, 1538 (9th Cir.
1993). Here, ASPA members will at least have to devote
resources, and thus incur economic costs, to participate in
negotiations, mediation, and possibly even binding
arbitration over a labor peace agreement, which they would
not otherwise be required to discuss. The time spent in those
negotiations is itself a concrete injury.
the ASPA has shown a sufficient "line of causation"
between the City's actions and this injury. See Allen
v. Wright, 468 U.S. 737, 757 (1984), abrogated on
other grounds by Lexmark Int'l, Inc. v. Static Control
Components, Inc., 134 S.Ct. 1377 (2014). The injuries it
claims are directly linked to the City's conduct: The
City has made section 25 a mandatory component of its
standard licensing contract for service providers at LAX, and
section 25 will force service providers to spend time
negotiating about a labor peace agreement. This is a
sufficient causal connection. See Cent. Ariz., 990
F.2d at 1538 (holding that economic injury caused by
contractual obligations that stemmed from compliance with a
regulation were sufficiently caused by the regulation to
Finally, the remedies the ASPA seeks would redress the harm
it alleges. See Spokeo, 136 S.Ct. at 1547. If, as
the Complaint requests, section 25 were enjoined on the basis
of preemption by federal labor law or the ADA, the ASPA's
members would not suffer any adverse consequences of
complying with it. See Cent. Ariz., 990 F.2d at 1538
("[The plaintiff's] economic injury is likely to be
redressed by a favorable decision since elimination of the
[rule in question] would necessarily eliminate the increased
financial burden the rule causes.").
ASPA's individual members would therefore have standing
in their own right, and the first prong of the test for
associational standing is satisfied.
second and third prongs are satisfied as well. The ASPA
alleges that it has an organizational interest "in the
consistent enforcement of unitary federal regulation of
airline industry labor relations." The association's
asserted purpose is therefore related to its legal claims in
this action- namely, that section 25 is preempted by federal
statutes that regulate airlines-satisfying the germaneness
prong. As to the third prong, the parties have identified no
reason that the ASPA's members must participate
individually in this case, and neither have we. The ASPA thus
meets all the requirements for associational
III. Lack of Preemption
concluded that the ASPA has standing, we now turn to whether
its preemption arguments state a claim on which relief may be
granted. We evaluate this question de novo. Associated
Gen. Contractors of Am. v. Metro. Water Dist. of S. Cal,
159 F.3d 1178, 1181 (9th Cir. 1998).
deciding whether a federal law pre-empts a state [or local]
statute, our task is to ascertain Congress'[s] intent in
enacting the federal statute at issue." Metro. Life
Ins. Co. v. Massachusetts, 471 U.S. 724, 738 (1985)
(quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85,
95 (1983)). The Supreme Court has emphasized, however, that
generally "pre-emption doctrines apply only to state [or
local] regulation." Bldg. & Constr.
Trades Council of Metro. Dist. v. Associated Builders &
Contractors of Mass./R.I., Inc. (Boston Harbor), 507
U.S. 218, 227 (1993). When a state or local government buys
services or manages property as a private party would, it
acts as a "market participant, " not as a
regulator, and we presume that its actions are not subject to
preemption. See id. at 229. Only if a statute
evinces an intent to preempt such proprietary actions by a
state or local government is the presumption overcome and the
action preempted. See Engine Mfrs. Ass'n v. S. Coast
Air Quality Mgmt. Dist, 498 F.3d 1031, 1041-42 (9th Cir.
reasons that follow, we hold first that the City was acting
as a market participant and not a regulator when it adopted
section 25. Second, because nothing in the NLRA, RLA, or ADA
shows that Congress meant to preempt states or local
governments from actions taken while participating in markets
in a non-regulatory capacity, we conclude that section 25 is
not preempted by those federal statutes.
A. The City Is Acting as a Market
decide whether a state or local government is acting as a
market participant or instead as a regulator, we apply the
two-prong test first articulated in Cardinal Towing &
Auto Repair, Inc. v. City of Bedford, 180 F.3d 686 (5th
Cir. 1999). See Johnson v. Rancho Santiago Cmty. Coll.
Dist, 623 F.3d 1011, 1023 (9th Cir. 2010); accord,
e.g., Engine Mfrs. Ass'n, 498 F.3d at 1041. First,
is the challenged governmental action undertaken in pursuit
of the "efficient procurement of needed goods and
services, " as one might expect of a private business in
the same situation? Johnson, 623 F.3d at 1023
(quoting Cardinal Towing, 180 F.3d at 693). Second,
"does the narrow scope of the challenged action defeat
an inference that its primary goal was to encourage a general
policy rather than [to] address a specific proprietary
problem"? Id. at 1023-24 (quoting Cardinal
Towing, 180 F.3d at 693). If the answer to either
question is "yes, " the governmental entity is
acting as a market participant. Id. at 1024.
offers an example of how this test works. There, a community
college district had sold bonds to fund construction
projects. Id. at 1016. As the City did here, the
college adopted an agreement governing labor conditions for
contractors working on those construction projects that
prohibited strikes, picketing, and similar labor disruptions.
Id. at 1017. The agreement also made those unions
the exclusive bargaining representatives for workers on the
project, required the use of union "hiring halls"