THE PEOPLE, Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; CAL CARTAGE TRANSPORTATION EXPRESS, LLC, et al., Real Parties in Interest.
B304240
In the Court of Appeal of the State of California, Second Appellate District, Division Four
November 19, 2020
CERTIFIED FOR PUBLICATION; (Los Angeles County Super. Ct. Nos. BC689320, BC689321, BC689322)
ORIGINAL PROCEEDINGS; petition for writ of mandate. William F. Highberger, Judge. Petition granted.
Office of the Los
Gibson, Dunn & Crutcher, Joshua S. Lipshutz, Christopher D. Dusseault, Michele L. Maryott, Dhananjay S. Manthripragada for Cal Cartage Transportation Express, LLC, K&R Transportation California, LLC, and CMI Transportation, LLC.
Scopelitis, Garvin, Light, Hanson & Feary, Christopher C. McNatt, Jr. for CCX2931, LLC, CM2931, LLC, and KRT2931, LLC.
Altshuler Berzon, Stacey Leyton and Andrew Kushner for International Brotherhood of Teamsters as Amicus Curiae on behalf of Petitioner.
Xavier Becerra, Attorney General, Thomas S. Patterson Senior Assistant Attorney General, Tamar Pachter, and Jose A. Zelidon-Zepeda, Deputy Attorneys General for the Attorney General of California as Amicus Curiae on behalf of Petitioner.
Barbara J. Parker, Oakland City Attorney, Maria Bee, Erin Bernstein, Malia McPherson, and Nicholas DeFiesta for City of Oakland as Amicus Curiae on behalf of Petitioner.
Dennis J. Herrera, San Francisco City Attorney, Yvonne Meré, and Molly Alarcon for City and County of San Francisco as Amicus Curiae on behalf of Petitioner.
Horvitz & Levy, Jeremy B. Rosen for The Chamber of Commerce of the United States of America as Amicus Curiae on behalf of Real Parties in Interest.
Ellison, Whalen & Blackburn, Patrick J. Whalen for Western States Trucking Association as Amicus Curiae
Littler Mendelson, Richard H. Rahm for American Trucking Associations, Inc. and California Trucking Association as Amicus Curiae on behalf of Real Parties in Interest.
INTRODUCTION
Does the Federal Aviation Administration Authorization Act of 1994 (FAAAA) preempt application of California‘s “ABC” test, originally set forth in Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903 (Dynamex) and eventually codified by Assembly Bill 2257 (AB 2257), to determine whether a federally licensed interstate motor carrier has correctly classified its truck drivers as independent contractors? The FAAAA preempts state laws “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” (
FACTUAL AND PROCEDURAL BACKGROUND1
Defendants2 are federally licensed motor carriers that operate or have operated “trucking and drayage compan[ies] . . . in and around the Ports of Los Angeles and Long Beach.” Defendants utilize the services of independent owner-operator truck drivers — independent truckers who lease their
vehicles and services to a licensed motor carrier to move freight under the motor carrier‘s operating authority — to perform drayage (defined in the complaints as “the short distance transportation of cargo by truck to and from the ports“).
On January 8, 2018, the Los Angeles City Attorney, acting on behalf of the People of the State of California, filed complaints against the defendants in three related cases,4 alleging two
causes of action under the Unfair Competition Law (UCL),
worker be classified as an employee unless: (A) “the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact[;]” (B) “the worker performs work that is outside the usual course of the hiring entity‘s business[;] and” (C) “the worker is customarily engaged in an independently established trade, occupation, or business[.]” (Dynamex, supra, 4 Cal.5th at p. 964.)
In 2019, the Legislature passed and the Governor signed into law Assembly Bill 5 (AB 5). Effective January 1, 2020, AB 5 codified (as
On September 4, 2020, however, after the petition in these related cases was filed, the Legislature passed and the Governor signed AB 2257, which repealed and replaced the statutory changes enacted by AB 5. (Stats. 2020, ch. 38, § 2.) AB 2257 revised certain exemptions to the ABC test, including the business-to-business exemption, and created additional exemptions. (
standard applies to the People‘s misclassification-based UCL claims, the trial court permitted defendants to submit a motion in limine, before substantial discovery or filing of dispositive motions, addressing (1) whether Dynamex is preempted by federal law; and
The People petitioned this court for a writ of mandate directing respondent court to vacate its order or, at a minimum, to issue an alternative writ or order to show cause directing the real parties in interest to show cause why the writ should not issue. We summarily denied the petition. The California Supreme Court granted the People‘s petition for review and transferred the matter back to this court with directions to vacate our order
denying mandate and to issue an order directing respondent superior court to show cause why the relief sought in the petition should not be granted. We complied, issuing an order to show cause on July 10, 2020. Real parties in interest filed a return, and the People filed a reply. We also granted the applications of the International Brotherhood of Teamsters, the California Attorney General, the City of Oakland, and the City and County of San Francisco to file amicus briefs in support of the People, and The Chamber of Commerce of the United States of America, American Trucking Associations, Inc. and California Trucking Association, and Western States Trucking Association to file amicus briefs in support of defendants.
DISCUSSION
A. Standard of Review and Federal Preemption Principles
We review de novo a trial court‘s decisions regarding preemption and statutory construction. (See, e.g., Roberts v. United Healthcare Services, Inc. (2016) 2 Cal.App.5th 132, 142 [“Where, as here, preemption turns on questions of law such as the meaning of a preemption
“The United States Supreme Court has identified ‘two cornerstones’ of federal preemption analysis. [Citation.] First, the question of preemption ‘fundamentally is a question of
congressional intent.’ [Citations.] If a statute ‘contains an express pre-emption clause, our “task of statutory construction must in the first instance focus on the plain wording of the clause, which necessarily contains the best evidence of Congress’ pre-emptive intent.“’ [Citations.] ‘“Also relevant, however, is the ‘structure and purpose of the statute as a whole,’ [citation] as revealed not only in the text, but through the reviewing court‘s reasoned understanding of the way in which Congress intended the statute and its surrounding regulatory scheme to affect business, consumers, and the law.” [Citations.]‘” (Brown v. Mortensen (2011) 51 Cal.4th 1052, 1059-1060.)
B. The FAAAA
Our Supreme Court explained the history and purpose of the FAAAA in Pac Anchor, supra, 59 Cal.4th at p. 779-782. “In 1978, Congress ‘determine[d] that “maximum reliance on competitive market forces” would favor lower airline fares and better airline service, and it enacted the [Airline Deregulation Act (ADA)].’ [Citation.] ‘In order to ensure that the States would not undo federal deregulation with regulation of their own,’ that Act ‘included a pre-emption provision’ that said ‘no State . . . shall enact or enforce any law . . . relating to rates, routes, or services of any air carrier.’ [Citation.]” (Id. at p. 779.)
In 1980, Congress deregulated trucking with the adoption of the Motor Carrier Act of 1980 (Pub. L. No. 96-296 (July 1, 1980) 94 Stat. 793.) “‘In 1994, Congress similarly sought to pre-empt state trucking regulation[]’ [citation]” with the adoption of the FAAAA. (Pac Anchor, supra, 59 Cal.4th at p. 779.) In doing so, it borrowed language from the ADA and included the following express preemption clause: “Except as provided in paragraphs (2) and (3), a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, or other provision having the force and effect of
law related to a price, route, or service of any motor carrier . . . with respect to the
The defendants offered no evidence, and the trial court made no factual findings, concerning the impact, if any, of application of the ABC test on motor carriers’ prices, routes, and services.8 To the extent they had a burden to prove more than a tenuous or peripheral impact, rather than simply make arguments, the defendants did not carry it. If we were writing on a clean slate, that would end our inquiry and we would conclude defendants failed to demonstrate that application of the ABC test actually would impact prices, routes, or services. But we are not.
Instead, courts have taken to deciding similar issues on their own, based on something other than facts or expert opinion. For example, in Pac Anchor our Supreme Court decided whether an action under California‘s Unfair Competition Law was preempted by the FAAAA without a developed factual record (the defendants presented the issue in the context of a motion for judgment on the pleadings). (Pac Anchor, supra, 59 Cal.4th at pp. 775-777.)9 And so, we turn to the central issue: does the FAAAA preempt application of the ABC test?10
Defendants contend prong B of the ABC test makes it impossible for a motor carrier to contract with an owner-operator as an independent contractor, and thus the ABC test is preempted by the FAAAA under the clear terms of Pac Anchor. The People counter the ABC test is not preempted because it is a generally applicable employment law that does not prohibit the use of independent contractors, and therefore does not have an impermissible effect on prices, routes, or services. We agree with the People. Our conclusion is compelled by the California Supreme Court‘s decision in Pac Anchor, and the FAAAA‘s legislative history, as discussed below.
In Pac Anchor, the California Supreme Court held the FAAAA did not preempt a claim under the UCL premised on truck drivers being misclassified as independent contractors.11 The defendants argued the “People‘s UCL claim will significantly affect motor carrier prices, routes, and services because its application will prevent their using independent contractors, potentially affecting their prices and services.” (Pac Anchor, supra, 59 Cal.4th at p. 785.) They also contended “if the People‘s UCL action is successful, they will have to reclassify their drivers as employees, driving up their cost of doing business and thereby affecting market forces.” (Ibid.) After analyzing the legislative history of the FAAAA and relevant United States Supreme Court, Ninth Circuit, and other precedent, the Pac Anchor court rejected the defendants’ arguments. (Id. at pp. 782-784.) The
court reasoned that a “UCL action that is based on an alleged general violation of labor and employment laws does not implicate [Congress‘s] concerns” about “regulation of motor carriers with respect to the transportation of property[.]” (Id. at p. 783.) It further explained: “Defendants’ assertion that the People may not prevent them from using independent contractors is correct, but its characterization of the People‘s UCL claim is not. Nothing in the People‘s UCL action would prevent defendants from using independent contractors. The People merely contend that if defendants pay individuals to drive their trucks, they
Pac Anchor is dispositive. Like the labor laws examined in that case, the ABC test is a law of general application.12 The ABC
test does not mandate the use of employees for any business or hiring entity. Instead, the ABC test is a worker-classification test that states a general and rebuttable presumption that a worker is an employee unless the hiring entity demonstrates certain conditions. That independent owner-operator truck drivers, as defendants currently use them, may be incorrectly classified, does not mean the ABC test prohibits motor carriers from using independent contractors. The ABC test, therefore, is not the type of law Congress intended to preempt. (See Pac Anchor, supra, 59 Cal.4th at p. 787 [noting the congressional record showed “Congress disapproved of a California law that denied advantageous regulatory exemptions to motor carriers who used a large proportion of independent contractors[,]” but unlike that law, “the People‘s UCL action does not encourage employers to use employee drivers rather than independent contractors. Defendants are free to use independent contractors as long as they are properly classified[.]“].)
Pac Anchor also relied on the Ninth Circuit‘s discussion in Californians for Safe & Competitive Dump Truck Transp. v. Mendonca (9th Cir. 1998) 152 F.3d 1184 (Mendonca) of indirect evidence of Congress‘s intent when it enacted the FAAAA. In Mendonca, the court held California‘s generally applicable prevailing wage laws were not preempted by the FAAAA in part because several states Congress identified as not having laws regulating interstate trucking had prevailing wage laws in place at the time the FAAAA was enacted. (Pac Anchor, supra, 59 Cal.4th at p. 786.) Pac Anchor noted “[s]imilarly, eight out of the 10 jurisdictions identified in Mendonca had
identified,
Moreover, that the statutory scheme codified by AB 2257 is not one that prohibits motor carriers from using independent contractors (and therefore, does not have an impermissible effect on prices, routes, or services) is further supported by the business-to-business exemption in
First, defendants argue the licensing requirement of the exemption makes it impossible for independent owner-operators to qualify for the exemption: “If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.” (
Second, the business-to-business exemption applies only if the owner-operator is “providing services directly to the [motor carrier] rather than to customers of the [motor carrier].” (
Moreover, defendants offered no evidence demonstrating it would be impossible to meet the requirements of the business-to-business exemption. Indeed, the only evidence submitted in the trial court (attached to the People‘s counsel‘s declaration in support of their opposition to defendants’ motion in limine) indicates at least one defendant does not operate any of its own trucks, and instead contracts not only with independent truckers, but also with trucking companies. Those trucking companies, referred to as “outside carriers” or “outside brokers,” are legally organized business entities and appear to be among the kinds of businesses contemplated by the business-to-business exemption.
We therefore conclude defendants have not demonstrated, as they must under Pac Anchor, that application of the ABC test prohibits motor carriers from using independent contractors or otherwise directly affects motor carriers’ prices, routes, or services. Nothing in Pac Anchor nor the FAAAA‘s legislative history suggests Congress intended to preempt a worker-classification test applicable to all employers in the state.
DISPOSITION
Let a peremptory writ of mandate issue directing respondent court to vacate its January 8, 2020 order granting in part defendants’ motion in limine, and enter a new order denying that motion because the statutory amendments implemented by AB 2257 are not preempted by the FAAAA. We express no view on the two alternative arguments raised in
CERTIFIED FOR PUBLICATION
CURREY, J.
We concur:
MANELLA, P.J.
COLLINS, J.