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Airline Service Providers Association v. Los Angeles World Airports

United States Court of Appeals, Ninth Circuit

October 16, 2017

Airline Service Providers Association, Plaintiff-Appellant,
v.
Los Angeles World Airports; City Of Los Angeles, Defendants-Appellees. and Air Transport Association Of America, Inc., DBA Airlines of America, Plaintiff, Airline Service Providers Association, Plaintiff, and Air Transport Association Of America, Inc., DBA Airlines for America, Plaintiff-Appellant,
v.
Los Angeles World Airports; City of Los Angeles, Defendants-Appellees.

          Submitted January 13, 2017 Pasadena, California

         Appeal 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 Providers Association.

          Robert 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.

         ORDER AND OPINION

         SUMMARY[**]

         Labor Law

         The 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 agreements.

         In its 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.

         The panel held that the Airline Service Providers Association had associational standing to pursue all of its claims.

         The 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 participant.

         The panel held that the district court did not err by denying leave to amend the complaint.

         Concurring 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 commerce.

         ORDER

         Appellants' 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.

          OPINION

          FRIEDLAND, Circuit Judge:

         We must 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.[1] 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.

         I. Background

         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.[2] 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 economic interference."

         It 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.

         Two 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").

         The 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 standing.

          II. Standing

         The 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.[3]

         An 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)).

         To have 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 (2016).

         The 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.[4]

         Second, 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 support standing).

          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.").

         The ASPA's individual members would therefore have standing in their own right, and the first prong of the test for associational standing is satisfied.

         The 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 standing.[5]

          III. Lack of Preemption

         Having 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).

         "In 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. 2007).

         For the 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 Participant

         To 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.

         Johnson 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" for ...


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