International Franchise Ass'n v. City of Seattle
803 F.3d 389
9th Cir.2015Background
- Seattle passed a staged minimum-wage ordinance with two schedules: Schedule One for employers in networks with 500+ employees nationwide (treated as "large employers") and Schedule Two for smaller employers; franchisees affiliated with large franchisors were classified as Schedule One.
- The International Franchise Association (IFA) sought a preliminary injunction to prevent enforcement of the franchisee-as-large-employer classification, alleging violations of the Dormant Commerce Clause, Equal Protection, First Amendment, Lanham Act preemption, and the Washington Constitution.
- The district court denied the preliminary injunction, finding IFA did not show likelihood of success on the merits or that injunction factors favored relief. IFA appealed.
- The Ninth Circuit reviewed denial of a preliminary injunction for abuse of discretion and reviewed underlying legal standards de novo.
- The Ninth Circuit affirmed: it held the ordinance is facially neutral, not shown to have discriminatory purpose or effects on interstate commerce, survives rational-basis equal protection review, does not target protected speech, is not preempted by the Lanham Act, and does not violate Washington’s privileges-and-immunities clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Dormant Commerce Clause — facial discrimination | Ordinance discriminates by singling out franchises (correlated with interstate commerce) | Classification is neutral (by business model and employee count), not based on geographic or interstate status | Not facially discriminatory; plaintiff failed to show discriminatory purpose or substantial discriminatory effects on interstate commerce; affirm denial of injunction |
| Dormant Commerce Clause — discriminatory purpose/effect | City’s record (emails, statements) shows anti-franchise motive and will burden interstate commerce | Text, structure, and legislative findings show legitimate local purposes (public welfare, ability of small businesses to absorb costs); emails and lobbyist statements have little weight | Evidence insufficient to prove an impermissible purpose or substantial discriminatory effect; district court did not clearly err |
| Equal Protection (state action) | Classification irrationally treats franchises worse than similarly situated businesses | Classification is rationally related to legitimate objective (franchisees better able to absorb faster wage phase-in) | Rational-basis review satisfied; classification upheld |
| First Amendment (speech/association) | Definition of franchise relies on marketing plans and trademarks—targets speech/association | Ordinance is an economic regulation of business structure and conduct; any expressive element is incidental | Not a speech-targeting law; First Amendment claim unlikely to succeed |
| Lanham Act preemption | Ordinance uses trademark-related criteria, conflicting with federal trademark policy | Lanham Act neither expressly preempts nor occupies the field; ordinance does not interferes with mark quality, use, or public confidence | No conflict preemption shown; ordinance not preempted |
| Washington Const. privileges & immunities | Treating franchises differently violates state clause | Clause protects fundamental citizenship rights; economic regulation differing businesses requires only reasonable ground | Plaintiff failed to show infringement of a fundamental right; classification has reasonable relation to subject matter |
| Irreparable harm & balance of hardships | Franchisees will suffer competitive injury, loss of customers/goodwill, closures | Harms speculative; public interest favors maintaining voter-enacted wage increases | Court erred in rejecting competitive-injury evidence but overall injunction denied because public interest disfavors injunction and plaintiff failed on merits |
Key Cases Cited
- South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82 (1984) (dormant Commerce Clause limits state laws that substantially burden interstate commerce)
- Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) (Pike balancing test for incidental burdens on interstate commerce)
- Exxon Corp. v. Governor of Md., 437 U.S. 117 (1978) (laws that disadvantage particular retail structures are not necessarily protected by Dormant Commerce Clause)
- Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013) (discrimination and burden standards under dormant Commerce Clause)
- Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008) (preliminary injunction factors and standard)
- F.C.C. v. Beach Communications, Inc., 508 U.S. 307 (1993) (rational-basis standard for economic and social legislation)
- Sorrell v. IMS Health Inc., 564 U.S. 552 (2011) (limits on First Amendment challenges to generally applicable economic regulations imposing incidental burdens on speech)
- Romer v. Evans, 517 U.S. 620 (1996) (animus-based equal protection invalidation)
- Arcara v. Cloud Books, Inc., 478 U.S. 697 (1986) (regulation of conduct that incidentally burdens speech does not always trigger First Amendment scrutiny)
- Mariniello v. Shell Oil Co., 511 F.2d 853 (3d Cir. 1975) (Lanham Act does not necessarily preempt state regulation affecting franchises)