225 Cal. App. 4th 846
Cal. Ct. App.2014Background
- San Francisco requires permits for tow truck drivers and firms via its Police Code, including application, fingerprinting, insurance, equipment, reporting, and annual license fees; operating without a permit is a misdemeanor.
- The California Tow Truck Association (Association) sued, alleging the City’s permit scheme is preempted by state law (Vehicle Code and Revenue & Taxation Code) and sought declaratory/injunctive relief; federal constitutional/preemption challenges were mostly rejected in prior federal proceedings and some issues were remanded to state court.
- The trial court upheld the City’s scheme but limited application to drivers/firms that conduct “substantial or consequential business” in San Francisco and invited amendment on tax-preemption claims; the Association did not amend and judgment for the City entered.
- On appeal, the state court independently reviewed the judgment on the pleadings and interpreted Vehicle Code section 21100(g)(1), which permits local licensing/regulation of tow services whose “principal place of business or employment is within the jurisdiction.”
- The court held that section 21100(g)(1) limits local regulatory authority to tow operators and drivers whose principal place of business or employment is in the regulating jurisdiction (not merely those doing substantial business there).
- The court also held local governments may collect fees to fund that regulatory scheme; Revenue & Taxation Code § 7233 bars local excise or license taxes on certain motor carriers but does not preclude regulatory fees designed to cover the cost of local regulation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether San Francisco may require permits from tow companies/drivers who do substantial business in the City | Statute’s plain text limits local regulation to those whose principal place of business or employment is in the jurisdiction; City’s broader scheme is preempted | Section 21100(g)(1) should be read to allow regulation wherever a tow firm does substantial business to prevent evasion of regulation | Held: Local regulation is limited to firms/drivers whose principal place of business or employment is within the jurisdiction; the City’s broader application is preempted |
| Meaning and application of “principal place of business or employment” | The phrase should be given its plain meaning and limit regulation to a single jurisdiction | City argues phrase could allow multiple principal places or be read to permit regulation where substantial business occurs to avoid absurd results | Held: Court adopts plain reading that contemplates a single principal place; it declines to adopt City’s “substantial business” test and does not define the precise test for “principal place” (left unresolved) |
| Whether Vehicle Code preempts San Francisco’s permit scheme entirely | Association: Scheme conflicts with uniform application of Vehicle Code and is therefore preempted | City: Legislature authorized local regulation under § 21100(g), so scheme is valid within statutory limits | Held: Scheme valid but only as to operators with principal place of business/employment in the City; other regulation is preempted by state law |
| Whether local permit fees are preempted as taxes by Revenue & Taxation Code § 7233 | Association: § 7233’s prohibition on excise or license taxes on motor carriers preempts local permit fees (they function as taxes) | City: § 7233 distinguishes taxes from regulatory fees; local fees to fund local regulation are permissible | Held: Fees that cover the cost of local regulation are permissible; § 7233 forbids local excise/license taxes but does not preclude reasonable local regulatory fees |
Key Cases Cited
- Rumford v. City of Berkeley, 31 Cal.3d 545 (discusses limits on city authority over vehicular traffic)
- California Tow Truck Ass’n v. City of San Francisco, 693 F.3d 847 (federal proceedings addressing federal preemption and constitutional challenges)
- People v. PKS, Inc., 26 Cal.App.4th 400 (describes § 21100(g) permitting local licensing/regulation when principal place is within jurisdiction)
- U.S. v. Clinical Leasing Serv., 925 F.2d 120 (5th Cir.) (interpretation of "principal place of business" in a different statutory context cited by parties)
- Sinclair Paint Co. v. State Bd. of Equalization, 15 Cal.4th 866 (distinguishing taxes from regulatory fees)